Policies To Stimulate Regional Innovatio

Policies to stimulate regional
innovation capabilities via

university-industry collaboration:
an analysis and an assessment
Bart Van Looy, Koenraad Debackere and Petra
Andries
KU Leuven, Faculteit ETEW, Naamsestraat 69, B-3000 Leuven, Belgium.
[email protected]; [email protected];
Petra.Andries @econ.kuleuven.ac.be
In this paper, we demonstrate how regional economic policies to stimulate entrepreneurship

and innovation, can lead to successes. More specifically, through a detailed theoretical and
empirical analysis, we discuss the critical ingredients that can lead to regional innovation and
economic success. These critical ingredients consist of a balanced mix based on the presence of
research institutes, a texture of endogenous knowledge-intensive start-ups coupled to larger
R&D-intensive incumbents, all of them embedded in a professional environment that supports
business advice and services. We illustrate the effects of this mix using empirical material from
various innovative regions around the world.
1. Introduction interest. Today almost every European region is

attemping to put together the ingredients neces-
S ince the arrival on the scene of Joseph

Schumpeter’s groundbreaking body of
thought, it has been clear that innovation and
sary for endogenous economic growth, based on
the innovative capacity and the enterpreneurial
dynamics that can be mobilised in a particular
entrepreneurship are closely interrelated. This region. The realisation of such endogenous
interrelation has become the point of departure growth does, however, necessitate a deeper in-
for a wide range of studies that make the link sight into the parameters and the dynamics upon
between innovation, entrepreneurship and eco- which it is based. That is the aim of this article.
nomic growth. In particular, in recent years the On the basis both of a study of the literature
interaction between innovation, entrepreneurship and of empirical data, we offer an overview of
and regional economic development has become and an insight into the manner in which knowl-
a central theme in many policy circles. Examples edge-driven entrepreneurship shapes regional
such as Cambridge UK and Cambridge USA, development. The results of this synthesis point
and, more emphatically, the phenomenon of to the necessity for a complex and guided
Silicon Valley, are the driving forces behind this interaction between insititutions of learning,
R&D Management 33, 2, 2003. r Blackwell Publishing Ltd, 2003. Published by Blackwell Publishing Ltd, 209
9600 Garrington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
B. Van Looy, K. Debackere and P. Andries
established businesses and new start-ups, with the presence of technological interdependencies
sufficient attention paid to the network of are outlined.
professional enterprises and infrastructure which
frames such interaction. Drawing on examples
from the USA, Europe and, more specifically, the 3. Current insights into regional
Leuven region, this synthesis will be further innovation systems
substantiated.
Recent literature has paid much attention to the
various factors that influence the creation and the
2. Positioning regional innovation systems success of high-tech start-ups. In general, it is
possible to distinguish three groups of factors
Innovation and the stimulation of innovation that facilitate this process. In the first place, there
requires interaction and connectivity between are general environmental factors, necessary for
multiple actors. Besides the corporate world and innovative starters to be able to establish
the knowledge centres present (including univer- themselves in a particular place and to develop
sities), (local) governments are also involved. successfully. Second, recent literature and empiri-
Over the last decade, there has been an increasing cal studies have further distinguished industry-
consensus on this point in the literature on related success factors. Finally, high-tech start-
technology and innovation policy. A particularly ups must themselves possess a number of
important contribution in this regard is the qualities and competencies in order to survive
influential work of Michael Porter (1995), as well and to grow. Each of these groups of factors will
as the notion of the ‘triple helix’, which rose to be further discussed below.
prominence during the second half of the 1990s
(Leydesdorff and Etzkowitz, 1996, 1998; Etzko-
witz and Leydesdorff, 1997, 1998). The ‘triple
helix’ model can be seen as a way of providing
General environmental factors
greater insight into the complex dynamics be- In their study on the innovation policy of the
tween three types of actors: government, business Malaysian government, Joseph Tidd and Michael
and knowledge centres. These dynamics influence Brocklehurst (1999) point to two important
the creation and the diffusion of knowledge, the dynamics: on the one hand, innovation implies
production of value added with its attendant endogenous growth while on the other hand,
market dynamics, and finally, regulation. collaboration with or investment by foreign
The explicit starting point is the notion of co- companies in a country is a highly necessary
evolution, in which the various actors influence complement to endogenous growth. Both endo-
one another, each with a particular role and genous and exogenous innovation appear only to
capacity along the innovation value chain. be successful when a country or a region has at its
Karnoe and Christensen (1999) have recently disposal a critical mass of research and produc-
added a contextualised perpective to this discus- tion competencies.
sion:1 the most relevant form and trait of Closely related to this, it can be stated that the
economic organisation – and thus of goal-or- access to knowledge centres – implying the pre-
iented policy as well – are partly function of the sence of such centres – is a crucial facilitating
specific institutional context of a country or a factor. This relation, cited in the models of the
region. In this sense, it is also possible to speak of authors already mentioned, has recently been
a more and more contextualised view on innova- empirically confirmed in a German study. Re-
tion policy. This observation is important for search into 18 technology regions in Baden-
reaching potential policy conclusions. ‘Best prac- Würtemberg and Nordrhein-Westfalen (Blind
tices’, such as those discussed below, always and Grupp, 1999) suggests a clear link between
imply a ‘translation’ to a particular situation the public institutions of higher education and
and context. Moreover, this observation fits learning and the technology-output in a particu-
perfectly into the models dealing with technol- lar geographical area or region.
ogy-development as described in the work of This conclusion can be complemented by
Nathan Rosenberg (1982), in which the role and further specifying the role of knowledge centres,
210 R&D Management 33, 2, 2003 r Blackwell Publishing Ltd 2003

Stimulating university-industry collaboration
including universities. The greater the ‘enterpre- institutions themselves, by major laboratories or
neurial’ character demonstrated by these institu- by special transfer companies set up for exactly
tions, the greater the positive impact on the this purpose.
development of a region in terms of its innovation A last important environmental factor, found
performance (Porter, 1995). Universities can in the literature, is the presence of well-developed
hereby play a crucial dual role, related to the financial markets. Starting a company often
dichotomy of knowledge-creation and knowl- requires considerable amounts of external finan-
edge-diffusion. This dual role provides the uni- cing. Once a company has successfully survived
versities with the status of preferred and natural the start-up phase, its continued growth is often
partners for high-tech innovation and venturing. only possible by an even greater injection of
Likewise, Tijssen and van Wijk (1999) underline new capital. Banks are often not well-placed to
the importance of collaboration between aca- assess a start-up’s chances of success: they are in
demic institutions and industry. The absence of general averse to risk, opting for relatively safe
interaction between scholarship and technology investments with an early return on invest-
is, according to these authors, one of the most ment. For this reason, the availability of venture
important reasons for the technological inferior- capital and the accessibility of more informal
ity of Europe compared with the USA and Japan. ‘business angels’ are of crucial importance for the
This is the so-called ‘innovation deficit’. Biblio- chances of success of a young high-tech firm
metric analyses show that Europe is very much (Van Osnabrugge and Robinson, 2000).
present in terms of scientific scholarship, but that Such investors are better able to assess the risks
European industry has only to a more limited and likelihood of success associated with a
degree been able to translate this knowledge into company based on their experience with risk
patented applications (Debackere et al., 1999 management at a portfolio level; this also puts
Debackere, 2000). This opinion is shared by them in a position to provide advice on financial,
Porter (1995). It is also confirmed by the recent strategic and commercial matters (Bygrave et al.,
innovation scoreboards developed and published 1999). In addition to the presence of capital, the
by the European Commission. notion of ‘networked incubators’ (Hansen et al.,
All of this would tend to suggest an increasing 2000) has been advanced as yet another critical
complexity in the collaborative relationships contextual success ingredient. Hence the
between the academic world, industry and emphasis on both capital and networking as
government. For instance, Cox et al. (2000) critical ingredients of a stimulating high-tech
mention that the nature of the relationship environment.
between the academic world and industry be-
comes increasingly diversified, a situation which
calls for a new balance between collaboration and
Industry-related ingredients
competition. Universities and companies are
partners in collaborative ventures, but they are Besides the general environmental factors, Tidd
at the same time also competitors, since uni- and Brocklehurst (1999) also identify several
versities are increasingly commercialising their sector-related supply and demand factors that
knowledge through licensing activities and stimulate innovation. The success of new high-
through spin-off companies. Universities compete tech ventures is partly dependent on the local
with one another for research funds (partially demand for their products and/or services. If the
provided for by companies) and for winning local market is too small, internationalisation will
companies’ sponsorship and financial assistance quickly appear on the agenda, adding to the
for training. Cox et al. (2000) emphasise the complexity of the total operation of the company,
importance of intermediary structures that influ- including the need for financing. An orientation
ence the interaction between research institutions to local, existing needs and markets will allow a
and industry, monitoring it in the ‘right’ direction company to progress more quickly along the
while balancing the need for academic freedom learning curve, with decreased risk and less
on the one hand and the industrial requirements financing needs.
of confidentiality and protection on the other On the supply side, a sufficient degree of
hand. This role can be performed by the competition appears to provide a stimulus for
r Blackwell Publishing Ltd 2003 R&D Management 33, 2, 2003 211

companies to innovate. As a result, an innovation unwillingly into the very different twenty-first
policy should not only aim towards the expansion century economy. It has to want entrepreneurs
of a few large firms, but ought also to allow for a and be willing to reorganize itself to allow
diversity of competing companies and even them to come into existence (pp. 97–98).
stimulate this diversity. Did not Bill Gates say
that ‘the problem in Europe is not the lack of Additional points of interest for an innovation
knowledge, it’s the lack of knowledge-based policy clearly include the degree to which and the
companies’? The number of software firms that rate at which young starting companies are
was created in the USA in the period 1980–1995 exposed to the market (cf. the notion of
was almost 6000. This is about tenfold what ‘protected niches’, as developed by Schot and
Europe produced in the same period (Second Rip, 1997). In this respect, it should be empha-
European Report on Science and Technology sised that the growth and the development of
Indicators, 1997). When ‘a thousand flowers or high-tech ventures must not be limited to ‘mak-
initiatives are allowed to blossom,’ the dynamics ing’ technology ready for the market. The
of competition, innovation and subsequent fail- development of the management experience in a
ure and success can more fully come into play. Or company is equally necessary. Here success
as Lester Thurow, the former dean of MIT Sloan demands a certain degree of equilibrium. Too
School of Management, aptly and provocatively much exposure to excessive competition can also
put it in his insightful book, Creating Wealth have a very negative influence on a high-tech
(1999): starter’s chances of continued growth, a fact
shown clearly in the work of Zahra and Bogner
But when it comes to generating billionnaires, (1999), who document the ups and downs of 116
the mystery is not in America, Asia, or Africa. software start-ups.
The mystery is in Europe. Why have the Also relevant in this respect are the observa-
Europeans been able to exploit neither the tions by Deeds et al. (1997). In their study on the
Asian-style developmental disequilibrium op- biotech industry in the USA, they looked at the
portunities that exist between Western and influence of various factors on the amount of
Eastern Europe nor the American-style tech- capital that IPOs (Initial Public Offerings)
nological disequilibrium opportunities that generated. These amounts give an indication of
exist because of new technologies? Why the value and thus the potential success of a start-
haven’t they invented some new sociological up. Geographical proximity was shown to be very
disequilibriums? (p. 36) y In the century influential in these cases: a geographical concen-
ahead the economic game will be played on tration of companies in the same sector leads to
three levels. If any nation wants all of its the competitive rivalry mentioned above but also
citizens to have first-world earnings, it has to to more collaboration between companies (see
ensure that each of its citizens is as well skilled also Stuart, 1998). Geographical clustering is
and educated as any in the world. If they are to thereby shown to have a positive effect on a
participate in the new man-made brainpower company’s market value and on its product-
industries of the future, their countries will development competencies. This phenomenon
have to be leaders in research and development will come to light again in our subsequent
and have the entrepreneurs to develop some of discussion on a number of specific regional
the big breakthrough ideas into actual pro- initiatives.
ducts. Companies will play the game based Moreover, in the context of high-tech ventur-
upon the skills they employ, the capital ing, this observation can be further developed.
investments they make, their technical pro- Innovation is stimulated not only by the geogra-
wess, and their ability to globally source and phical concentration of companies with similar
sell new products. Individuals will play the technologies, but also by a concentration of
game based upon their education and skills— companies that are active in different technology
and their willingness to change. There is no sectors. New technologies and even completely
reason to believe that Western Europe cannot new sectors of economic activity often arise out of
play this three-dimensional game. But it has to precisely this interplay and the convergence
want to lead change rather than be dragged between different knowledge disciplines and

technologies. A good example of this is the sector successful development and commercialisation
of bio-informatics, which originated from data- of new products, since it diverts attention and
mining/computer science know-how on the one time away from R & D. Counterexamples can,
hand, and bio-genetic/biomedical know-how on however, also be found in this regard. Rather
the other hand. The physical proximity that than a strict separation, it results in striking a
supports this kind of cross-fertilization is an suitable balance between technological (R&D)
important facilitating factor in such cases. ambitions and objectives – the effects of which
may be situated in the middle term – and the
short-term realisation of turnover and value
added. This twofold aim demands an evenly
Company-specific ingredients
composed management team; the same goes for
In addition to the above, it is obvious that high- the organisational structures that are implemen-
tech venturing implies a number of specific ted (see also Steyaert, 1995). Attracting experi-
challenges in the area of operational manage- enced, complementary management skills clearly
ment. Besides the relevance of experienced is an important factor (see also McGee and
management, a number of specific points of Dowling, 1994).
interest can be further underlined in relation to Finally, it should be noted that high-tech
successful high-tech venturing at the company ventures are in general confronted relatively early
level (Zahra and Bogner, 1999; Deeds, et al., on in their lives with questions of internationa-
1997; Griliches, 1990; Narin et al., 1987; Cox lisation. This observation is linked to the
et al., 2000; McCann, 1991; Bruno et al., 1992; increasing internationalisation so clearly mani-
Stuart, 1998). These relate to the availability of fested in the area of science and technology.
sufficient human capital and talent, to finding a Coupled with this is the observation that high-
balance between scientific/technical ambitions tech firms often occupy a niche position. The
and market developments and customer impera- realisation of a sufficient critical mass, in
tives and finally, to the development of a suitable particular in terms of turnover and margin,
internationalisation strategy (certainly in in- generally implies some form of internationalisa-
stances where home markets are small) including tion. In interviews with founders of successful
the appropriate handling of make-and-buy deci- companies in Northern California (Bruno et al.,
sions when teaming up with partners during the 1992), international expansion was identified as
search for and the development of complemen- one of the critical milestones in the growth of the
tary assets. Cox et al. (2000) emphasise the company. This milestone will be reached more
importance of well-trained employees in all these quickly when the entrepreneur/CEO has a posi-
respects: for high-tech ventures, this is the sine tive attitude towards internationalisation, as well
qua non for the further expansion of the firm. as sufficient access to the necessary competencies
Once again, the proximity of – and interaction within the firm (Preece et al., 1998). This study
with – knowledge centres (particularly universi- shows that a broad or all-inclusive internationa-
ties) is of vital importance here. lisation in the initial phase is a less appropriate
In addition, a balance needs to be found strategy. In order to implement an internationa-
between the technology- and the market-orienta- lisation strategy successfully, the company needs
tion of a high-tech venture in situations char- to have at its disposal a critical mass of knowl-
acterised by a high degree of uncertainty. In their edge, experience and resources. The greater the
1999 study, Deeds et al. state that the quality of extent to which this critical mass is lacking – a
the research team has an important influence on situation usually inherent in starting enterprises –
the product-development competencies of a the more appropriate the choice of a dedicated
company. These are then positively influenced international focus, which is then best limited to a
by the experience of the entrepreneurs/CEO with number of well-chosen regions in the world.
the management of product development. The However, if such competencies are successfully
authors further recommend that management acquired and developed early on in the lifespan of
and research functions be kept strictly separate. a firm, then the rapid seizure of the opportunities
In their opinion, the interference of scientists in of internationalisation seems to have a positive
the management of a company hampers the effect both on the growth of the firm and on the

motivation of the entrepreneurial team (Autio and of themselves a statistically significant yet
et al., 2000). negative main effect on the innovation-output
(dependent) variable being used (when no
interaction-effects with other local variables
The interaction between factors: a few are taken into consideration). As we shall see, a
recent empirical insights region’s university-level research only has a
positive effect on the innovation-output in that
The various studies mentioned above all empha-
region if there is sufficient interaction between
sise the importance for a high-tech start-up to
the academic research and the high-tech/
both think and act locally and globally. A
professional entrepreneurial environment. It is
successful internationalisation strategy can, how-
obvious that this calls for a sufficient presence
ever, only bear fruit if the local/regional environ-
of such a high-tech/professional environment;
ment offers the high-tech start-up enough
3. In contrast to the previous main effect (log
opportunities to build up its critical mass of both
(URD)), the interaction variable {log (Con-
technological and market-oriented competencies
centration high-tech ventures)* log (URD)}
(Debackere, 1998, 2000). The importance of this
does have a positive and statistically significant
local/regional embedding is further underlined by
effect on the dependent variable. In other
the empirical research recently carried out on 125
words, the interaction between the presence of
regional statistical entities (the so-called ‘Metro-
a flourishing texture of high-tech ventures/
politan Statistical Areas’ or MSAs) in official use
start-ups, coupled with the presence of a
in the USA (Varga, 1998). The main results of
strong basis in a region’s university-level
this research are given below in Table 1.
research, has a significant and positive impact
On the basis of this research, the following
on the innovation vitality of the MSA;
observations may be made concerning the stimu-
4. However, the interaction between academic
lation of the innovation-output in a particular
research and the high-tech entrepreneurial
MSA:
environment is not the only factor with a
1. R&D employment in the industry sector of a positive effect on the regional innovation-
particular region {variable: log (RD: industrial output as identified. The interaction between
RD employment)} has a positive main effect the presence of a sufficient degree of profes-
on the innovation-output (as measured in this sional entrepreneurial support systems (such
study) in the MSAs under consideration; as consultancy, venture capital and legal
2. The R&D expenditures in the universities of competencies) in a region and the degree of
the regions under consideration {variable: log academic research has a positive and statisti-
(URD: university RD expenditures)} have in cally significant effect on innovation-perfor-
Table 1. Regional location-factors promoting innovation.

Model OLS full OLS intermediate OLS final
Constant 0.230* (0.183) 0.315* (0.157) 0.381* (0.154)

Log (RD: industrial RD employment) 0.270* (0.056) 0.283* (0.054) 0.295* (0.054)
Log (URD: university RD expenditures) 0.302* (0.141) 0.190* (0.067) 0.186* (0.067)
Log (Concentration high tech)*log(URD) 0.185* (0.036) 0.184* (0.036) 0.188* (0.036)
Log (Presence business services)*log(URD) 0.081* (0.015) 0.085* (0.014) 0.088* (0.014)
Log (Enrollment)*log(URD) 0.026 (0.029) — —
Rank*log(URD) 0.033 (0.020) 0.035 (0.020) —
Log (% large established firms)*log(URD) 0.094* (0.025) 0.096* (0.025) 0.098* (0.025)
R2-adjusted 0.737 0.738 0.733
Dependent Variable ¼ Log(Number of innovations counted – specifically, patents and new product-introductions – on MSA
level).
N sample ¼ 125 US Metropolitan Statistical Areas,* ¼ Coefficents significant at p ¼ 0.01-level.
Standard deviation from the average shown in brackets.
Model: Ordinary Least Squares regression models.
Source: Varga (1999).

mance in the region {interaction variable: log These four factors are each scored on a scale from
(Presence business services)* log (URD)}; 1 to 4, where 1 represents ‘moderate’ and 4
5. Furthermore, the education-related variables ‘excellent’. The results of this analysis are shown
{log enrollment} as well as the interaction in Table 2.
between ‘ranking’ and university research In the following paragraphs, a number of
{rank* log (URD)} appear to have no statis- specific initiatives for venturing policy are further
tically significant effect on the innovation- discussed, while crucial ingredients concerning a
output at the regional level. An overly strong policy aimed at stimulating high-tech venturing
presence of large, established firms, in inter- are identified.
action with academic research {interaction
variable: log (% large established firms)* log
(URD)}, appears in turn to have a significant
German governmental policy
yet negative effect on the innovation-output in
the regions in question. Over the past 15 years, Germany encountered
some difficulties in launching ‘new’ high-tech
In short, the picture that emerges from studies
industries. The number of high-tech starters was
into the influence of regional embeddedness and
limited. According to Lehrer (2000), these pro-
location factors on regional innovation perfor-
blems were caused by missing links in the
mance demonstrates the need for sufficient
innovation chain, at the national, regional and
texture and critical mass in terms of the interac-
company/employee levels respectively.
tions beween university research on the one hand
At the national level, the absence of well-
and a high-tech, R&D-intensive industrial envir-
developed capital markets formed an obstacle to
onment on the other, whereby sufficient attention
starting up new technology firms. The German
is also to be paid to a professional support
financial system was characterised by the dom-
system.
ination of banks oriented to existing German
industries, with much less interest in – admittedly
riskier – investments in new technologies and
4. Findings regarding the establishment of
their related industrial sectors. Moreover, these
a high-tech venturing policy
existing industries were thriving in an institutio-
nalised environment characterised by sector-
High-tech venturing: a survey of several specific unions and employers’ organisations that
regions together with the government shaped economic
As mentioned earlier, high-tech venturing benefits policy, which again tended to be directed towards
from geographical proximity. This comes as no already existing sectors, rather than new indus-
surprise. The creation of new products and tries. At a regional level, Lehrer identified a clear
services, depending on new insights in both lack of the relevant structures and instruments
scientific and technological domains, implies necessary for creating and supporting high-tech
interaction and cross-fertilization. In discussions networks. At the level of individuals, finally,
with players actively involved with the develop- Lehrer observed a climate of risk-aversion and a
ment of such initiatives (Leuven, Cambridge, shortage of entrepreneurship, a situation encour-
Sophia Antipolis), this connectivity is repeatedly aged by a public university educational system in
cited as a necessary – yet often overlooked – which entrepreneurship was not stimulated.
condition for the creation of a successful breed- The German government recognised the need
ing-ground for high-tech venturing. In a qualita- for a technology and innovation policy. A Delphi
tive study published in Wired (August, 2000), a study was carried out in the early 1990s,
survey is made of regions that occupy a strong commissioned by the Federal Ministry of Re-
position in terms of high-tech venturing. The search. Various problem areas at the individual,
regions are scored according to four factors: the regional and national level were identified. The
presence and performance of universities and regions had, since the middle of the 1980s, taken
other knowledge centres, the presence of estab- on the role of technology stimulators. Regional
lished firms, the presence of high-tech start-ups technology parks and incubators were set up.
and finally, the availability of venture capital. Industrial networks were developed at a regional

Table 2. High tech venturing ‘hot spots’ (source: Wired, 2000).

Location Country Universities/ Established Starters Venture Total
research companies capital score
Silicon Valley California 4 4 4 4 16

Boston Massachusetts 4 4 3 4 15
Israël 4 4 4 3 15
Stockholm-Kista Sweden 3 4 4 4 15
Helsinki Finland 3 4 4 3 14
London England 4 3 3 4 14
Raleigh-Durham North Carolina 4 4 3 3 14
Austin Texas 3 4 4 2 13
Bangalore India 3 4 3 3 13
San Francisco California 3 3 3 4 13
Taipei Taiwan 4 3 3 3 13
Albuquerque New Mexico 4 3 3 2 12
Cambridge England 4 3 3 2 12
Dublin Ireland 3 3 3 3 12
Montreal Canada 3 4 2 3 12
New York City New York 3 3 3 3 12
Seattle Washington 3 4 3 2 12
Beieren Germany 3 3 2 3 11
Hsinchu Taiwan 3 4 1 3 11
Kyoto Japan 4 1 3 3 11
Los Angeles California 3 3 2 3 11
Malmö Sweden 3 3 2 3 11
Copenhagen Denmark 3 3 2 3 11
Tokyo Japan 3 2 3 3 11
Flanders Belgium 4 2 3 2 11
Baden-Wrttemberg Germany 3 3 2 2 10
Melbourne Australia 3 2 3 2 10
Oulu Finland 3 2 3 2 10
Paris France 2 2 3 3 10
Thames Valley England 3 3 2 2 10
Virginia 3 3 2 2 10
Chicago Illinois 3 2 2 2 9
Hong Kong 3 2 2 2 9
Queensland Australia 2 3 2 2 9
São Paulo Brazil 1 3 3 2 9
Campinas Brazil 4 3 1 0 8
Glasgow-Edinburgh Scotland 3 3 1 1 8
Inchon South-Korea 2 2 2 2 8
Kuala Lumpur Malaysia 2 3 1 2 8
Sachsen Duitsland 3 2 1 2 8
Salt Lake City Utah 3 2 2 1 8
Santa Fe New Mexico 3 2 2 1 8
Sophia Antipolis France 2 3 2 1 8
Singapore 1 2 2 2 7
Trondheim Norway 2 1 2 1 6
El Ghazala Tunesia 1 1 1 1 4
Gauteng South-Africa 1 1 1 1 4
level, while the establishment of new branches of initiatives to support the launch of new technol-
the Fraunhofer Institute, a highly successful ogy sectors. And yet there was – and is – a broad
centre for technology transfer, was stimulated base of knowledge present in the area of basic
by the Länder. The regional policy was directed research and applied scientific research. The weak
toward the improvement of regional systems of position of Germany in new high-tech industries
technology transfer in connection with existing was therefore rather to be found in the manner in
industries. There were, however, few if any which this scientific knowledge was translated

into commercialisation in new markets. In addi- Entrepreneurship in general and high-tech ven-
tion, there were few collaborative arrangements turing in particular are indeed increasingly seen
between public research organisations and com- as crucial for arriving at a more positive and
panies. Moreover, there was a clear lack of dynamic business climate.
entrepreneurial mindset.
In the middle of the 1990s, the Länder took a
number of steps aimed at improving the interac-
tion between scholarly work and industry, as well
Silicon Valley
as at stimulating entrepreneurship. For instance, The best known high-tech region – and the one
over the past five years alone, Bavaria has already that appeals most to anyone’s imagination – is
invested an additional DEM 5.5 billion in setting without doubt Silicon Valley. Firms such as
up a broadband IT infrastructure between Hewlett Packard, SUN Microsystems, Intel and
governmental bodies and research institutes, in Cisco were born there. However, Silicon Valley is
increasing the number of technology-oriented also a gigantic innovation and entrepreneurship
university programmes, in the development of laboratory. For every successful tech start-up
liaison offices to support the knowledge transfer there are at least ten that fail to realise their goals.
between universities and the business world and In other words, inherent in the success stories in
also between public research institutes and the Valley are the cases of failure. It has become
companies, and finally, in supporting entrepre- something of a cliché to point out that every
neurs. Silicon Valley entrepreneur has at least two
A number of auxiliary measures were further failures to his or her name before success comes
taken. German law – especially the strict rules (Nesheim, 2000). Furthermore, not all failures
concerning bankruptcy – was discouraging en- lead eventually to success. Some people never
trepreneurship. At the beginning of 1999, the law learn from their ‘mistakes’. This explains the
was relaxed in order to decrease risk aversion. considerable ‘failure rates’ in the Valley.
The universities attempted to counterbalance the However, the tolerance for failure and the
lack of entrepreneurial mindset by appointing culture of entrepreneurship, and the ability to
specialised professors and by implementing spe- learn from these failures has turned Silicon Valley
cialised courses. into a success story which today we all recognise,
Problems were being caused not only by the admire and to some extent envy. Today Silicon
lack of entrepreneurs, but also by the attitudes of Valley numbers several thousand high-tech firms.
those who were already active as entrepreneurs. The average salary in the region is twice the
German entrepreneurs seemed to be highly national average. Silicon Valley has the largest
control-oriented in comparison with their collea- concentration of companies in sectors such as
gues in the USA. The fact that they wished to computers, semiconductors, telecommunications
keep a firm grip on the financial control over their equipment, software and internet software and
start-ups sometimes had an inhibiting effect on hardware. In addition, it holds a strong position
further expansion as well as on attracting foreign in biotechnology and biomedical applications.
investors and venture capitalists. Since the mid- These accomplishments are the result of a
1990s, the German government has thus been process of development that had already begun
trying actively to finance entrepreneurship. Prizes before the Second World War and in which both
have been awarded in order to stimulate regional Stanford University and UCBerkeley played key
biotechnology centres, business plan competi- roles. Stanford University was founded in 1891.
tions have been organised and the promotion of Right from the beginning there was an openness
spin-off neworks around universities has been towards ‘technical venturing’. For example, the
encouraged. The government has also partially first president of the university, D.S. Jordan,
taken on the role of a venture capitalist via the made $500 available to Lee de Forrest, who used
creation of various funding mechanisms for start- it to develop the vacuum tube as a way of
ups, including R&D soft loan schemes. intensifying electrical signals (1908). In the 1930s,
Concurrent with all these regional and govern- with the arrival of Frederick Terman as a dean,
mental measures, the economic situation in this approach and attitude gained further
Germany after the unification also played a role. momentum. In particular, he encouraged Bill

Hewlett and David Packard, just before the important pioneers were the Varian brothers,
Second World War, to start their own electronics who started their work in the thirties, again with
company which concentrated initially on preci- the support of Stanford University.2 By the end
sion-measurement instruments and later diversi- of the decade they had invented the Klystron, one
fied very successfully into the direction of of the most important components of radar
computer applications and semiconductors. Ter- systems. In 1948, they started their own company.
man’s role was not limited to offering a stimulat- In this sense, it was possible to speak of a growing
ing work environment, but also involved but still small electronics centre by the end of the
networking, thereby creating new combinations 1940s. In 1943, some 25 Californian firms –
and collaborations. For example, he brought the including 13 from Northern California – united
starters Hewlett and Packard into contact with under the banner of the West Coast Electronic
Harold Black from Bell Labs, a specialist in Manufacturers Association, the precursor to
‘negative feedback’ for amplifiers in telecommu- what later would become the American Electro-
nications. This would result in the development nics Association.
of the audio oscillator, the first product from HP. In 1951, Stanford University made a decision
This ‘Terman effect’ – a reference to the unique for its time: it opened the Stanford
enterprising character of the staff and students Industrial Park, thus making available 234ha of
at Stanford – is perhaps the biggest difference university land for industial projects. The first
between Stanford and UCBerkeley. The latter company that set up there was Varian Industries,
university – with 20 Nobel Prize winners – too is a the second Hewlett Packard. Today this park
leading world centre of knowledge generation. numbers 150 firms active in the areas of electro-
However, researchers and professors at UCBer- nics, software, biotechnology, financing, strategic
keley seem to opt more exclusively for a career management consulting and venture capital.
within research, and are inclined to leave high- The presence of Stanford and UCBerkeley was
tech entrepreneuring to their alumni: here Andy not the only important element in this scenario.
Grove and Gordon Moore (the founders of Intel) The very early presence of Fairchild Semiconduc-
come immediately to mind. In addition, the tors (founded in 1957), itself a spin-off of Bell
region also boasts Santa Clara University and Laboratories, was also important. In this con-
San Jose State University, which together turn nection, it is interesting to observe that it was
out some 4000 new engineers each year. Frederick Terman who convinced William
It is important to note that in the pioneering Shockley, one of the co-inventors of the transistor
period the phenomen of ‘Silicon Valley’ as such within Bell Laboratories, to come back to the
did not yet exist. Even at the end of the 1960s, area where he was born, Palo Alto, in order to set
there was no reference to Silicon Valley as we up Shockley Semiconductors. Despite his bril-
know it today. Intel was founded in 1968, liance as a scientist, his performance as a manager
attaining a turnover of less than $600,000 in was less successful. Eight of his best engineers left
1970. By the mid 1980s, IBM sold its 20% to create Fairchild Semiconductors several years
participation in Intel because it had lost its belief later (Kenney and von Burg, 1997). The colla-
in the future of the company (Pugh, 1995). borators at Fairchild Semiconductors in their
During the War years, high-tech venturing turn laid the basis for a multitude of high-tech
activities on the West Coast remained relatively companies (the ‘Fairchildren’), among which we
insignificant, especially when compared with the count AMD and Intel. It is clear that besides
Boston area (MIT). In a region where agriculture ‘enterpreneurial universities’, the presence of
dominated, the only expertise worth mentioning companies and a professional support network
around 1940 was in the field of radio engineering – with its own knowledge and expertise – each
and a number of related sectors and technologies. took part in creating regional dynamics of
Since 1932, Litton Engineering Laboratories economic development and growth. The research
had been active as a specialised maker of vacuum laboratories set up by IBM (San Jose Laboratory,
tubes and instruments for glass processing. in 1952) and later the Xerox Palo Alto Research
Among their important customers were the Center (PARC) should also be mentioned in this
Manhattan project, led by Robert Oppenheimer, regard. In a similar way, regional knowledge-
and the Department of Defense ‘at large’. Other networks came into being, quickly becoming

recognised and legitimate nodes in a global innovation dynamic is to be maintained. A

network of knowledge and entrepreneurship healthy diversity in the regional technology-basis
(Van Dierdonck et al., 1991). In other words, is thus desirable and highly recommended. In its
the advantage of well-developed regional net- absence, there is a danger of becoming too
works of knowledge and entrepreneurship is that dependent on the ups and downs of one
they quickly become part of similar networks at a particular technological growth cycle, with all
global level. There is thus an evolution from an the possible negative consequences that this
isolated network to a network within and entails. Hence, if the diversity of the (regional)
between other networks. technology-base is poorly monitored (and here
In the sixties and seventies, Silicon Valley grew technology forecasts clearly prove their useful-
quickly. The number of start-ups in the period ness, Zimmerman et al. (2000)) by the actors in
1956–65 within the semiconductor industry was the ‘Triple Helix’, then the consequences can be
‘only’ ten. In the period 1966–76 there were dramatic whenever competing or new technolo-
already 60, while ten years later (1977–87) it gies take off.
amounted to 157. And yet the 1980s marked the What makes Silicon Valley so distinctive and
beginning of a difficult period for Silicon Valley. so competitive is the breadth of the knowledge
The semiconductor industry evolved more and and technology available as well as the fact that
more into a situation in which operational the region clearly possesses the skills to continue
excellence and mass production were making to develop, to reinvigorate itself and to diversify.
the difference when it came to a firm’s perfor- The presence of a sufficient critical mass across a
mance. In particular, a number of Japanese wide range of competencies, in combination with
companies emerged as leaders, and the conse- its geographical proximity, are seen by the
quences were felt all the way to Silicon Valley. Stanford Research Institute as key elements:
For example, in the eighties, Intel was forced to
lay off 8000 employees, pulling out of the The region possesses a special kind of infra-
memory market and devoting itself completely structure that has in effect institutionalized
to microprocessors. In this sense, the point of innovation in technical fields across the board.
view of Kenney and von Burg (1997) becomes The Bay Area is unrivalled in sheer variety of
clear, when they rightly point out that many companies and level of formal and informal
factors play a role when it comes to the creation networking among companies in technical
of a high-tech entrepreneurial region (see also fields. Hardware and software are closely
above). And we are here not only dealing with aligned. Prototype development and engineer-
‘cultural’ aspects such as entrepreneurial values ing is particularly strong. It is this cross-
or even organisational structures; the technolo- cutting strength – and economic infrastructure
gies themselves and their intrinsic paths of comprising strong technology, human re-
development (cf. the notions, inspired by Joseph sources, capital input, and numerous industrial
Schumpeter and Thomas Kuhn, of ‘technology synergies – that makes Northern California a
trajectories’ and ‘paradigms,’ Dosi (1984); see magnet for top engineering talent, innovative
also Nelson and Winter (1982), Arthur (1988) start-ups, and major breakthroughs in techni-
and David (1986)) equally play a role, in cal fields across the board (SRI International,
combination with the strategy of and its imple- 1988).
mentation by the dominant players.
In other words, the success of a number of This characteristic is also emphasised by Sax-
regions – and thus the relevance of a number of enian (1994):
competencies – cannot be separated from the life
cycle of the technologies implied (see also Most companies or stable regions pursue a
Langlois and Robertson, 1992, 1995). Equally, single technical option and, over time, become
this explains the need, on a regional level, to increasingly committed to a single technologi-
avoid the ‘Not-Invented-Here’ syndrome (De- cal trajectory. A network-based regional econ-
backere, 2000). A healthy high-tech region needs omy like Silicon Valley, alternatively,
a mix of technologies. Technological mono- generates and pursues a rich array of techno-
cultures are to be avoided at all costs if a regional logical and organisational alternatives.

Equally striking is the emphasis by many authors The resulting diversity once again helps to create
(see, among others, Collins & Porras (1994)) on the right kind of breeding-ground, suitable for
the management style on the one hand and the (international) high-tech venturing. In terms of
dynamics in the region on the other hand. In the work culture, a certain degree of homogeneity
terms of management, the role model of HP has is noted nonetheless: the region is characterised
set the tone within the literature. Particular by a ‘freedom of exchange of ideas’, an informal
attention is paid to the concept of participation style of collaboration, and a culture in which
within a non-hierarchical, informal management entrepreneurship is stimulated, even if it leads to
style, in which status differences are minimised. failure. This philosophy is shared by the academic
Within the region, there exists, besides competi- world, the business world and the government.
tion, a great deal of interaction, in the form of Complementary to this is the strong presence
meetings and discussions, both between company of venture capitalists and private investors: the
personnel and academic partners. These authors region accounts for a third of all the venture
also note a remarkable degree of openness in capital in the USA. A crucial element here is the
exchanges of information between experts and intensity of the collaboration between investors
‘juniors’, concerning both technical and com- and innovators/entrepreneurs. Collaboration and
pany-related matters. The region further is, as it guidance involve much more than financial
were, naturally bounded by the ocean on one side participation: the active contribution to the
and by the Santa Cruz mountains on the other. In development of a professional organisation, as
fact, we are dealing here with an area ‘only’ 80 well as networking and the elaboration of
kilometers long and a few dozen kilometers wide. strategic alliances all point into the same direction
Thus, physical proximity plays a role equal to (see also Hansen et al., 2000).
that of technical affinity. This facilitates the In addition, the USA possesses well-developed
necessary interaction between a diversity of capital markets which make it relatively easy to
actors and competencies, so important for creat- realise second and third rounds of financing
ing and nurturing innovative entrepreneurship. efficiently. Such markets form, moreover, a
This sort of interaction is characterised by an necessary (exit) condition for venture capitalists
openness and informal style that is in stark to pursue their goals. An additional virtue of
contrast to the more classic hierarchical company Silicon Valley is the region’s quality of life, both
organisations. The authors cited above point out in terms of its climate and its culture. Finally, the
that this more network-oriented style of organis- connection to the large American market is a
ing, in combination with an atmosphere and a crucial macro-economic factor: the extent of this
culture in which risk – and thus failure – are connection allows for faster growth on a larger
considered to be normal3 and even positive, scale.
allowed the Valley to survive the crisis of the
1980s and emerge strengthened. This is in marked
contrast to, for example, the less diversified
Route 128 region (Boston), where firms such as
DEC never quite recovered from their problems
Cambridge
in the 1980s. In 1954, the government of the region around
Hinoul (1999) goes on to list a number of these Cambridge made an explicit policy-planning
ingredients. As we have seen, the presence of decision to limit the flow of immigration into
knowledge centres (in this case Stanford and the region. There was a desire to maintain the
UCBerkeley) is crucial. Besides their technical historic character of the university city by keeping
expertise and know-how, these institutions also large-scale industry out of the region. Since these
provide other essential specialists, chief among measures greatly hindered the collaboration
which are people with management skills and between Cambridge University and industries
legal expertise. Silicon Valley is further charac- dependent on scholarship and research, a propo-
terised by its international orientation, according sal was worked out whereby certain forms of
to Hinoul. The continuous influx of people from growth – in particular, the establishment of high-
other regions of the USA as well as Europe and tech firms – would be allowed. The proposal was
Asia is seen as an essential, moderating element. approved in 1970 by the regional government and

has since then formed the guideline for develop- the resulting economic and social benefits close to
ment around Cambridge. home.
A number of high-tech spin-offs and consulting All these factors were advantageous for start-
firms emerged from the university’s competencies ing high-tech ventures around Cambridge Uni-
in the areas of electronics, instrument develop- versity. However, at the end of the 1980s, the
ment and computing. This resulted, in turn, in the successfully launched firms were confronted with
creation of new companies. The consulting firms increasing growth pains. In ‘The Cambridge
coordinated the collaboration between industry Phenomenon: the Growth of High Technology
and the academic world. Entrepreneurs from Industry in a University Town’ by Segal Quince
other parts of the UK choose to locate in the Wicksteed Limited (1990), the most common
university area and large multinationals, too, problems were identified to be the unwillingness
established small branch offices in the region. of company founders to allow their firms to grow,
In 1996, the population of Cambridgeshire was as well as a lack of support by large companies,
over 700,000. Of these, 28,000 were employed in financial institutions and the government for the
high-tech companies. In the period 1994–95, small company texture. There were also not yet
some 87 new firms were set up in high-tech large, successful endogenous firms in the area that
sectors. According to Jim Martin of the 3iGroup, could serve as role models for the small start-ups.
the success of the technology valley around Finally, there was a shortage of highly-trained
Cambridge is a result of the presence of several personnel and an increasing pressure because of
determinants: sources of innovation (knowledge), the demographic expansion, traffic problems,
possibilities for financing, a high quality of life in housing shortages and environmental problems.
the region, a sufficient critical mass of compe- The local population began to protest against the
tencies in terms of management and organisation, continual expansion of the industry zone. The
and finally the interaction between local initia- strain on the quality of life also made it
tives and international collaboration. increasingly difficult to attract top international
The first determinant is the presence of sources personnel. By the end of the 1990s, the ICT
of innovation. Cambridge University is one of the model (information and telecommunication tech-
most renowned universities in the world, with a nology) was proposed as a possible solution to
very strong knowledge base both in the scientific this problem. Concepts such as teleworking,
and management areas. It is worth noting that telegovernment, telelearning, telemedicine, e-
here, too, there was a conscious choice to become commerce and smart cards were embraced in
an ‘enterpreneurial’ university. A second factor order to facilitate the technology zone’s growth
are the numerous possibilities for financing start- with a minimal effect on the quality of life. This
ups: the proximity of London’s financial centre growth to the north and south is now well
guarantees sufficient venture capital of high underway.
quality. A third factor identified by Jim Martin
is the healthy fiscal and cultural environment. An
environment that guarantees a high quality of life
makes it much easier for a region and its
Sophia Antipolis
companies to attract the best international talent. Cambridge’s best-known European rival is Sophia
Specifically in terms of running a business, the Antipolis on the French Côte d’Azur. In 1962, an
author emphasises the importance of the manage- industry zone was created in Valbonne, where,
ment capabilities available and the general among others, IBM and Texas Instruments
marketing and sales skills of the companies located. In 1965, Sophia Antipolis University
around Cambridge. As a final factor, he points was founded in Nice. As an incubator for public
to the importance of a balance between endogen- and private, scientific, industrial and tertiary
ous and foreign investment (exogenous growth) in activities, the Sophia Antipolis science park was
the Cambridge area. Each time a foreign firm set up. From 1974 onward, various companies and
establishes offices in the region, the local high- educational institutions located on the site.
tech firms have an increased chance to learn. An By the beginning of 1999, 1164 companies had
over-concentration of foreign companies is, how- been located, of which more than 300 were active
ever, undesirable, since the region hopes to keep in the ICT, electronics and health sciences sectors.

Of the 20,530 people employed in all these situation locally, resulting in the establishment
companies, some 10,000 work in these three of new companies, both ‘new’ start-ups and spin-
sectors. More than 5000 researchers and students offs from larger firms. When these larger firms
work for public education and research institu- were reorganised, many of their employees
tions in the region. Foreign companies have also wanted to stay on living in the region. They
established themselves on the plateau: there are looked for new employment opportunities, lead-
110 foreign firms in Sophia Antipolis, of which 48 ing to the creation of new companies. Large
are European and 43 North American. concerns such as IBM and Texas Instruments
The evolution of the science park shows clearly realised the necessity of collaborative ventures in
the importance of a local scientific infrastructure order to cope with the crisis. Professional
and how slow and complex the establishment of a associations and clubs were set up in the region.
‘scientific conurbation’ is. Sophia Antipolis, Large and small enterprises started to work
hoping to become less dependent on seasonal together, sharing resources, which ultimately
tourism, was established in a region with no stimulated endogenous growth.
industrial tradition. The idea began as a private In contrast, activities in which no endogenous
project, led by Pierre Laffitte, director of the growth or diffusion of knowledge was created
‘Ecole Nationale des Mines de Paris’, but was and no local collaboration was undertaken, as in
quickly taken over by the public sector because of health sciences, have seen little success in Sophia
a lack of financial resources. Large firms such as Antipolis, despite the fact that a local market for
France Télécom located on site. Over time, two such activities does in fact exist. The present
main activities emerged: ICT (65% of the park’s success of Sophia Antipolis is thus due to the
employment) and life and health sciences (20%). presence of the set of factors previously described
The park’s progress was, in fact, stimulated only in this article, which in this case came into being
by the contribution made by the large firms that sequentially, rather than the multiplex, multi-
settled there. In the 1980s, a number of positive factorial environment encountered in Silicon
changes occurred. In the first place, the region’s Valley.
endogenous knowledge basis was broadened At present, the Sophia Antipolis region offers a
considerably. The University of Nice was ex- critical mass of knowledge and industrial activity.
panded, while schools of engineering, specialised Established companies as well as research institu-
in ICT, were established. Over time, all the major tions and universities have at their disposal the
French research institutions had a presence in the competencies crucial to develop and to grow in
park. All of this resulted in a generous local the areas of natural and health sciences and ICT.
supply of highly-trained talent and in an in- Public educational and research institutions have
creased interaction between research and indus- developed in such a way that they can meet the
try, via the students. requirements of (large) companies. Collabora-
A second positive factor was the arrival of tions and partnerships between public institutions
companies offering specialised services to estab- and companies have led not only to excellent
lished high-tech firms. A final positive evolution results for industry, but also the educational and
was the creation of spin-off companies out of the research programmes have as a result been
most important research institutions, and the validated and improved, much to the benefit of
creation of SMEs. Both groups were interested in the international reputation of these pro-
making use of the research potential in the area. grammes. The international character of the
However, the growth of Sophia Antipolis was still companies and their employees has tended to
overly dependent on the R&D departments of encourage this process.
large companies and not on the endogenous The presence of two international schools has
interactions and initiatives resulting from them. also contributed to this situation. The attractive
Only at the beginning of the 1990s, with the environment and the quality of life in the South
crisis in the computer industry, did this situation of France represent additional environmental
change drastically. The large firms had to tighten factors that have led to the success of Sophia
their belts and started to farm out some activities. Antipolis. This environment has made it possible
With the well-developed local knowledge basis, to attract high quality personnel, who are enticed
there was an opportunity to deal with this by both the working and living standards. The

region has an infrastructure able to support university’s many international and regional
international cultural, scientific and political contacts, its role in technology mediation
events. The advanced telecommunications infra- extends far beyond local boundaries.
structure and the proximity of the Nice airport Information exchange and training. This is
make it possible for companies to work inter- done through industrial collaborative pro-
nationally. Finally, the broad spectrum of ser- grammes and ‘‘on campus’’ or ‘‘residential’’
vices and relations between firms on the site also training programmes.
constitute an important success factor. Service Contracts for consultancy, research and devel-
and consulting firms, hotels and other facilities opment, in connection with new products,
provide the necessary support system for busi- production techniques and technologies. This
nesses. Perhaps even more important are the comprehends fundamental research, feasibility
many socio-professional associations, discussion and prototype studies, experiments and the use
groups and clubs, where business people can meet of equipment. Confidentiality, rights of own-
the partners they need for starting and success- ership, a realistic business plan and respect for
fully developing their activities. This dynamic of the objectives of all the partners form the basis
endogenous growth has, however, only taken of a successful collaboration.
place over the last ten years. All the necessary An active patenting and licensing policy. This
ingredients were in fact present before this, but a objective is pursued with regard to the results
shock to the business economy was needed in of the university’s research in order to generate
order to unleash the culture shock that legiti- funds for further scientific research and to
mated and stimulated ‘entrepreneurship’. create the necessary conditions for its success-
ful commercialisation by the business world.
Licensing and sublicensing agreements are
Leuven regularly concluded with Belgian and foreign
companies. The strategy, which aims to exploit
As early as the 1970s, a liaison office was created
the research, involved the creation of a patent
at the Katholieke Universiteit Leuven – KU
fund in order to facilitate and encourage the
Leuven R&D – geared to transferring scientific
general accessibility to patenting for the results
and technological knowledge to society-at-large
of innovative research.
and to the business world in particular. In order
The creation of new, research-oriented and
to support this transfer, many initiatives were
innovative companies. This is stimulated by
undertaken and several instruments were devel-
offering advice and support to entrepreneurs,
oped. This evolution was – and is – supported by
and offering them access to risk capital through
a university policy, one of the core elements of
the Innovatiefonds Gemma-Frisius I&II (since
which is also the concept of the ‘enterpreneurial
15/10/1997 with a first fund, since 3/7/2002
university’.
with a second fund). This venture fund was
K.U. Leuven R&D consists of a multidisci-
created by K.U. Leuven in partnership with
plinary staff of legal experts, economists and
two major financial conglomerates: Fortis
engineers/scientists, as well as specialised admin-
group and KBC group. The Gemma-Frisius
istrative and financial personnel. They offer
Fund I has financed the launch of 15 spin-offs.
advisory (legal, financial, technical), coordinat-
Gemma Frisius II has already invested in two
ing, administrative and information support in
new initiatives since the summer of 2002. This
the areas of:
brings the total number of spin-offs from the
Innovation advice and technology mediation. K.U. Leuven to 51 by mid 2002. Accommoda-
Innovation advisors help companies and uni- tion and management support are available
versity researchers to frame the possibilities of from the Innovatie- en Incubatiecentrum,
a potential collaboration. On an individual which, with its location on the campus,
basis, they attempt to coordinate the needs of stimulates close cooperation between the uni-
the industry with what the university has to verity laboratories and the research units. The
offer. Once this coordination has been worked success of a number of spin-offs enjoying
out, support is also offered for starting and international renown is the result of the
developing the collaboration. Based on the technology transfer policy which has developed

over the years and serves as a role model for Seeking sources of financing and industrial
new initiatives. partners. K.U. Leuven R&D and the Gemma-
The creation of business activities for national Frisius Fonds (together with the two financial
and international research-intensive firms in the partners) are able to contribute to a business’s
science park. New, innovative firms, spin-offs starting capital. Through an extensive national
from universities and research institutions, and and international network of relations, the
R&D departments of existing firms can take multidisciplinary team, together with the foun-
advantage of the science park’s location, close ders, considers whether participation by other
to the K.U. Leuven and IMEC, the Inter- commercial partners can offer value added. If
university Center for Micro-Electronics. This necessary, contacts can of course be established
creates a stimulating environment for the with external sources of investment and ven-
transfer of knowledge and technology between ture capital.
internationally renowned researchers and en- Protecting intellectual property. Protecting
trepreneurs. K.U. Leuven R&D and IMEC one’s own knowledge is a very important
created Leuven.Inc in 1999, in which the local element in the successful start and growth of
business environment, professional advisors a company. Elaborating an effective patent
and the university are undertaking a number strategy and defining collaborative and licen-
of joint initiatives aimed at increasing the sing agreements are essential in this regard.
development of the region. The ambition of Supporting company set-up. The formulation
this project, supported by the university, of statutes, as well as shareholders agreements,
IMEC, the local spin-off entrepreneurs, and and remuneration policies, are important ele-
the municipal and provincial governments, is ments of the advice offered.
to increase prosperity through endogenous and Supporting company management. Advice
exogenous creativity and through the growth concerning strategic decision-making in the
of knowledge-intensive companies in the re- area of international growth is facilitated by
gion. Besides providing the necessary infra- participation on the boards of directors, con-
structure, the project aims at stimulating tacts with K.U. Leuven R&D advisors and,
actively the exchange of ideas and the creation through involvement with the Gemma Frisius-
of networks (both formal and informal). This Fonds and its financial partners, the presence
networking is of vital importance for attracting of external, independent board members.
and supporting new firms and spin-offs. Providing infrastructure. In collaboration with
K.U. Leuven R&D, the Innovation and
To this end the multidisciplinary team at K.U. Incubation Center and the science parks, a
Leuven R&D is involved with the following suitable infrastructure is available for each
activities: spin-off. The Innovation and Incubation Cen-
ter of the K.U. Leuven offers premises and
Encouraging entrepreneurship. In cooperation services for use by research-oriented and
with the Faculty of Economic and Applied innovative start-ups, allowing them to concen-
Economic Science, courses on entrepreneurship trate on their core activities. Besides general
are offered to researchers and students, regard- infrastructure such as meeting rooms, a cafe-
less of their specialisation. Entrepreneurship is teria and a car park, the center provides
also continually stimulated through internal services such as the advice of an experienced
and external publications and presentations of manager, secretarial support and financial
success stories. management support. K.U. Leuven has at its
Elaborating a business plan. Researchers are disposal a science park in Haasrode (120 ha),
taken step-by-step through the process leading where many high-tech firms are located,
‘from idea to company’ with the aid of internal including the university’s own spin-offs, such
and, if necessary, external advisors. Consider- as LMS, ICOS Vision Systems and Materialise,
ing the highly innovative character of the but also important international firms such as
products and services offered, the elaboration Heraeus and ITCL (Philips). In total, over 5000
of a business plan is a complex and highly people work there. In the near future, the
individual undertaking for any spin-off project. Arenberg and Termunck science parks will be

made available, offering an additional surface routinized – and the subsequent spread of that
area of more than 50 ha. knowledge among the actors in the region.
It is precisely because of this duality that
The growing culture of entrepreneurship at the knowledge centres should occupy a central place
K.U. Leuven has already resulted in 51 spin-offs and a fundamental role in any regional innova-
over a period of 20 years, some of which are tion network; such institutions are indeed best
highly active on the international scene. Their able to give visible support to the dual challenge
combined turnover at the end of 2000 was BEF15 of local and global knowledge development. If
billion, with a workforce of more than 2000. this dual task fails to be a priority in regional
innovation policy, then the region can fall prey to
the threats inherent in the growth-stagnation-
5. High-tech venturing: some final decline model which characterises the technolo-
considerations concerning regional gical life cycle. A region’s adoption of a
dynamics ‘dominant technology model’ leads inevitably to
limitations in terms of diversity and thus to a
In order to continue to stimulate a region’s possible ‘lock-in’ phenomenon into the dominant
economic growth based on knowledge-intensive technological knowledge basis present in the
entrepreneurship, the technology portfolio of the region. This existing knowledge base is generally
region must maintain a balance between routine geared towards efficiency improvements, and can
technological activities (which are often oriented over the longer term lead to ‘less’ innovation. In
towards process innovation and incremental de- order to counterbalance this dominant logic
velopment as the technology’s life cycle matures) inherent in ‘technological trajectories’, we under-
and non-routine technological activities (which are line the pivotal role played by knowledge centres
often oriented towards products and more funda- when they pursue non-routine research activities
mental development). The local knowledge centers and when they emphasise their role in a supra-
– in particular universities and research institutes – regional context. Every regional innovation net-
can play a major role in this process. Those work thus clearly requires knowledge centres that
knowledge centres are more solidly embedded in are both regionally active and internationally
the local and supra-regional context than are the competitive.
young start-ups. This embeddedness can assume
both structural and non-structural forms. Table 3
presents a survey of the mechanisms that knowl- 6. Conclusion: ingredients for a policy
edge centers can adopt in order to support aimed at stimulating regional high-tech
sustainable technology transfer and its economic venturing
application on both local and supra-regional
levels. Of crucial importance is the exploration of It will be clear from the above analyses that high-
new domains of knowledge – often not yet tech venturing, and in particular the development
Table 3. Knowledge centers and supra-regional dynamics

Emphasis on local development Emphasis on supra-regional development
and embeddedness and embeddedness
Structural arrangements Incubators R&D collaborations

Research parks Affiliation programmes
Spin-offs Licenses
Education and training Consortiums
Non-structural Labour markets for Consulting and professional advice

arrangements researchers and technologists Publications
Seminars Seminars
Professional associations Professional associations
Local networking International networking

of a policy to encourage it, is a complex process, have extensive know-how and networks at their
implying a multitude of elements, instruments disposal.
and actors. Moreover, the development of a In addition, it must not be forgotten that
regional venturing process implies a long-term innovative or high-tech entrepreneurship calls for
approach: the seeds of today’s Silicon Valley solid management expertise. An entrepreneurial
phenomenon were sown before the Second World attitude and high-tech know-how need to be
War; Germany spent some 30 years developing a complemented by skills in professional manage-
(lasting) dynamic in this area; and the examples in ment. When dealing with new technology, those
Leuven and Cambridge also illustrate how their skills quickly gain an international dimension.
foundations were laid in the 1970s and how the The presence of both knowledge centres (uni-
effects that are now visible imply a genesis of versities/polytechnics with a curriculum oriented
several decades. towards business economics and law) and estab-
The dynamics of high-tech venturing presup- lished enterprises is an important facilitator in
pose active roles for government, the business this regard.
community and the available knowledge centres. When it comes to financing, the presence of
If governments can take supporting measures venture capital is essential. On the one hand this
in the interest of a favourable climate, a takes the form of risk-capital with all that this
more ‘entrepreneurial’ attitude is demanded implies: in particular, both the provision of
of the knowledge centres and the firms them- capital and the support – strategic/commercial/
selves. organisational – for the development of a
As has become clear, the presence of balanced and sustainable business. On the other
knowledge centres in a region is a primary hand, the accessibility of well-functioning finan-
pre-condition for developing high-tech ventures. cial markets is also important. The presence of
Both companies and knowledge centres can such markets – Nasdaq and Nasdaq Europe –
together provide the necessary critical mass of geared towards technological growth-firms is
knowledge and experience. In this respect it is crucial for generating a dynamic in the ‘early/
important that a broad spectrum of competencies first-stage investments’.
be available. Innovative entrepreneurship implies Finally, a number of socio-cultural elements
a process of cross-fertilisation, involving a are equally relevant. Regional cultures charac-
diversity of knowledge domains. This conclusion terised by openness, informal networks and
forms the clearest substantiation for the interactions, a willingness to take risks facilitate
importance of physical proximity: the creation innovative entrepreneurship. This ‘culture’ is of
of new entrepreneurial combinations involves course partly developed through concrete projects
interactions. and accomplishments. Complementary to this,
The ability to generate this dynamic assumes the general quality of life should not be under-
that the various actors make their expertise estimated when attracting, international, human
visible and accessible. Companies must be pre- capital.
pared to collaborate, while knowledge centres
need to play the role of ‘enterpreneurial uni-
versities’.
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Policies to stimulate regional

innovation capabilities via

In this paper, we demonstrate how regional economic policies to stimulate entrepreneurship

1. Introduction interest. Today almost every European region is

S ince the arrival on the scene of Joseph

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Table 1. Regional location-factors promoting innovation.

Constant 0.230* (0.183) 0.315* (0.157) 0.381* (0.154)

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Table 2. High tech venturing ‘hot spots’ (source: Wired, 2000).

Silicon Valley California 4 4 4 4 16

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recognised and legitimate nodes in a global innovation dynamic is to be maintained. A

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Table 3. Knowledge centers and supra-regional dynamics

Structural arrangements Incubators R&D collaborations

Non-structural Labour markets for Consulting and professional advice

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Varga, A. (1998) University Research and Regional Notes

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