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The Growth and Exit of University and Corporate Spinouts in the Medical Instrumentation Industry

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Garnsey, Elizabeth and Hwang, Paul P. and Stam, Erik (2008) The Growth and Exit of University and Corporate Spinouts in the Medical Instrumentation Industry. In: The 16th Annual High Technology Small Firms Conference : May 22-23, 2008 + May 21 Doctoral Workshop, University of Twente, Enschede, The Netherlands., 22 May 2008 - 23 May 2008, Enschede, The Netherlands .

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Event: The 16th Annual High Technology Small Firms Conference : May 22-23, 2008 + May 21 Doctoral Workshop, University of Twente, Enschede, The Netherlands., 22 May 2008 - 23 May 2008, Enschede, The Netherlands
Abstract:Incubator organizations are said to exert a long term influence on their spin-outs. However, there is a great diversity in the types of spin-outs (Druilhe and Garnsey, 2004) and in types of incubators (Clarysse, Wright et al., 2005). This diversity is likely to affect the influence of the incubator on the performance of the spin-out. To contrast the impact on (similar) spin out firms of their very different originating organizations we compare two instrumentation spin-outs, one from Cambridge University and one from a technology consultancy firm in the same region. We go on to examine the evolution of the business models of these spinouts, their growth experience and exit routes of founders and investors. The central question is how the incubator organization affects the development path taken in the early life course of their spin-outs. We find that although university or corporate origin exerts path dependent influence on the early development of these firms, the problems they face in scaling up are similar and largely unrelated to their origins. Critical problems arose from the shift in target market from technophile and early adopters to more mainstream customers as they moved from customized to standardized products, characterised by very different purchasing decisions of customers. Likewise the contrasting exit routes of founders and investors (trade sale and IPO) related to factors independent of the originating organization. We conclude that the business development of spin-outs can only be partly understood through a focus on their incubator organizations; their products and markets are of much greater impact on their development. However we found a shared set of influences on business model evolution, relationship with customers and exit pressures on the spin out companies, in that these were all shaped by knowledge networks and brokers of various kinds as the spinouts moved out of the orbit of their originators to create a network of new relationships on which their performance depended. The incubator organization undoubtedly exerts an influence. However, this influence is indirect, in shaping the networks that the founders have built up or have access to via the incubator organization. Over time the spin-out co-evolves with an expanding network of relationships. Especially in a knowledge-rich environment such as that surrounding Cambridge, the initial disadvantage of university spin-outs (due to less industry experience and networks) in comparison to corporate spinouts is less of a constraint. This shows that the direct influence of the incubator organization is relatively small, but that the networks that are developed from, and extended beyond those formed in the incubator organization are key enabling factors in the growth of these spin-outs.
Item Type:Conference or Workshop Item (Paper)
Link to this item:http://purl.utwente.nl/proceedings/95
Organisation URL:http://www.utwente.nl/bms/nikos/
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