Academic journal article Academy of Entrepreneurship Journal

A Success Factor Analysis of Public Research Institutions' Commercialization with Technology Investment as Equity: 'Research Institute Spin-Off Company' Programme in Korea

Academic journal article Academy of Entrepreneurship Journal

A Success Factor Analysis of Public Research Institutions' Commercialization with Technology Investment as Equity: 'Research Institute Spin-Off Company' Programme in Korea

Article excerpt

ABSTACT

As the technology innovation in a country is deemed as a source of economic growth, policymakers are focusing on how to commercialize the developed technologies and create economic values. In Korea, 'the research institute spin-off companies (RISCs)' are the commercial companies which universities or public research institutions (PRIs) invest technologies in-kind and, therefore, participate in founding and operating by holding their equity. As such, they are regarded as ways for these institutions to keep their non-profit status and, at the same time, pursue proactive commercialization of the technologies that they developed. In this analysis, we will review the theoretical background and characteristics of these spin-offs and show that they are outperforming technology start-ups with high R&D intensity with less than 5 years since their foundation, in terms of turnover and employment. Furthermore, by reviewing the case studies, we will show that the success factors are technologies, cohesive team works of the public research institutions, managerial support from the parent companies and constant support of the Innopolis system in Korea. Especially, it is emphasized that the investment of technologies in kind and the locations in Innopolis are the institutional framework which strengthens the cohesive team works between the spin-offs and PRIs. Finally, we propose the policies which can promote the spin-offs which are deemed as the very foundation of 'Creative Economy', the top agenda of President Park Geun Hye's administration in Korea.

Key words: technology commercialization, equity investment of technology, public research institution, research institute spin-off companies

INTRODUCTION

As the technology innovation in a country is deemed as a source of economic growth, policy-makers are focusing on how to commercialize the developed technologies and create economic values. Especially as the private companies are reluctant to solely bear the risks of R&D activities, the direct governmental investments on R&D as well as their supports on the private R&D are well justified. In this context, many researches have actively reviewed the role of the public research (for example, see OECD, 2013). It is shown through many researches (Adams, 1990; Cohen et al., 2002; Mansfield, 1991) that the public research can play very important role in national economies and their systems of innovation. Mansfield (1991) estimated that the 10% of the innovation activities would have been delayed without public research.

The ones who conduct public researches can be universities or public research institutions (PRIs). The PRIs can be defined as non-profit organizations which get government support for the public good. As such, they conduct R&D activities in basic sciences, public technologies in the area where the market fails (Laredo & Mustar, 2004; Senker & Balaz et al., 1999; Cho et al., 2007; Ha & Kim, 2009). Even though the studies on PRIs are relatively rare so far, Arnold et al. (2007) and Suzuki et al. (2014) have shown that these PRIs contribute to the system of innovation by complimenting the research capacities of the private companies and by sharing the risks that inevitably accompanies the innovation.

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Recently, however, policy concerns have been raised about the overall decline of results in patents and licensing of universities and PRIs. OECD (2013) pointed out that annual average growth of new patents declined from 11.8% during 2001 and 2005 to 1.3% between 2006 and 2010 in universities. For the same period, their annual average growth in PRIs decreased even more from 5.3% to -1.3%. The number of new patents and licensing in the PRIs in the USA which has the largest government R&D budget in the world just slightly increased during the period from 2008 to 2012 (NIST, 2014).

In this context, it is argued that public researches should be able to deliver bigger socioeconomic outcomes (OECD, 2013) and that PRIs can lose their relevance to innovation without fully utilizing their commercial potentials (Foray et al,. …

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