Thursday, November 30, 2006

BKC Incubator *)

Site Visit Report of Ritsumeikan BKC Incubator

My report will mainly focus on my question about the future of incubator businesses, especially those supported by universities. These phenomena are quite interesting, since Japanese working culture is usually regarded as "lifetime employment". It means that labor force tends to work in a one established company for a long time, rather than build a newly company. In the past, being an entrepreneur in Japan is a very rare case. Only those “big men” such as Konosuke Matsushita (National-Panasonic), Tokuji Hayakawa (Sharp) and Kiichiro Toyoda (Toyota) that could be categorized as a truly entrepreneur.

The World is Changing
Everything in the world is changing, including Japan. There are now more than 200 incubators within Japan. Japanese government took the initiative in government-university-industry collaborative research, especially in the case of national universities. As this collaborative research scheme matured, the private sector became active and small and medium companies began to participate actively.

In developing countries, the public sector often needs to take the initiative since the private sector is not so developed and since R&D activities largely take place in public sector. However, as a partnership programme matures or aims at commercialization, the private sector should take the initiative. Even in developed countries, a public-private partnership-involving basic research at universities – needs public initiative to some extent.

Similarly, high-technology companies have developed close links with universities. These links are important for developing and transferring new technology as well as the creation of new products and goods. Links with business firms are also an important source of revenues and new knowledge for some universities. Links with leading universities in particular serve other important purposes, such as improving a firm’s reputation and increasing its access to key sources of innovation.

These links can connect business firms to sources of information about new scientific discoveries. Though challenging, costly and time consuming, these links can give the firm important competitive advantages that improve their markets. Understandably, more and more companies have actively sought to establish links with universities. But, although these facts have enriched our understanding of the contributions of business–university links, some basic questions remain unanswered. Do these links improve the business firm’s performance? Do they enhance the firm’s ability to develop and introduce new products to the market? Do they increase its ability to obtain patents? How do these links impact a business firm’s spending on R&D?

The growing links between universities and businesses have attracted some scholarly attention. According to George et. al. (2002), researchers have examined the organizational and political challenges that companies and universities face in building mutually beneficial alliances. Researchers have also studied the obstacles to the effective transfer of technologies developed from these alliances.

If we look at the data collected in the 1992 National Business Incubation Association survey, it was found that technology incubators generally performed as well as other incubators when compared using a variety of measures. Technology incubators had a higher rate of tenant employment and tenant revenues, as well as a larger number of patent applications per tenants firm. However, costs appeared higher for technology incubators, and the average operating deficit was higher for technology incubators than for other incubators.

There were approximately 42 technology incubators focused on technology transfer and R&D sponsored primarily by universities in the United States as of 1993. Data collected by Rhonda G. Phillips from 10 managers from this group to gauge the level of technology transfer and commercial activity occurring in university incubators. It was found that considerable activity had occurred, ranging from half of the tenant activity involved in technology transfer to no tenants at all, although, in general, the level of technology transfer was lower than would be expected. Some of the differences in the level of technology transfer research may be attributed to varying legal structures, requirements, and conflict of interest policies. This implies a need to further investigate the barriers and problems hindering the technology transfer process, especially in light of the finding that most technology incubator programs state as their objective

Success Story of BKC Incubator
BKC Incubator currently has 19 incubatees, ranging from manufacturing (8), information technology (7), medical services (2), environment and energy (1) to trading company (1). This establishment started in 2004, with strong support from Shiga Prefectural Government and Kusatsu City Hall. Incubatees take advantages of all resources within Ritsumeikan Universities, including laboratories and libraries. In its remarkable history, only 1 company failed in continuing its business.

What next?
Partnerships and strategic alliances are quickly becoming a major differentiating factor in business incubators. Dr. Masayuki Kondo pointed this out by mentioning the important of public-private partnership in a national innovation system. Similarly, private-private partnership is also significant in an age of business without corporate boundaries.

Hansen et. al. confirms the need to build a portfolio of synergetic technologies in an incubator and developing network between graduates and spin-offs of the incubator. His study concluded that only in strategic partnerships and alliances could a business incubator ensure cross-pollination that is vital to its long-term success. Furthermore, it is vital to design a revenue generation model for an incubator that consists of several different streams/sources of revenue.

Incubator business needs continuous support from government. Even so, it should be treated as a business, even when it is not-for-profit since financially dependent operational models will not be sustainable in the long run. While additional research is needed to explore further the effectiveness of technology business incubators as technology transfer mechanisms, it appears that this approach holds potential, particularly those programs affiliated with universities, as a means of encouraging technology based economic growth and development.

1. Gerard George, Shaker A. Zahrab, D. Robley Woodc, “The effects of business–university alliances on innovative output and financial performance: a study of publicly traded biotechnology companies”, Journal of Business Venturing 17 (2002) 577–609.
2. Masayuki Kondo, Dr., “University-industry collaboration in Japan Public initiative, public-private partnership and private initiative”, Yokohama National University, TECH MONITOR Jul-Aug 2004.
3. Morten T. Hansen, Nitin Nohria, & Jeffrey A. Berger, “The State of the Incubator Marketspace”, Harvard Business School, June 2000.
4. Rhonda G. Phillips, “Technology business incubators: how effective as technology transfer mechanisms?” in Technology in Society 24 (2002) 299–316.
5., National Business Incubation Association.

*) International Technology and Management 3E (ITM) – 70674
Professor HIBARA Nobuhiko

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