Regional Innovation Ecosystems

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Regional Innovation Ecosystems

A Literature Reviewby

Floriano Bonfigli, MSc

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Index

● Corporate R&D labs● Educational Institutions● Investors● Service Providers




Corporate R&D labs

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Corporate R&D labs, how can you attract them?

R&D labs of large corporations, together with academic institutions, tend to be the most important seeds when you want to establish an innovation cluster (Moran, 2009). However, why such R&D labs are located here or there? How can policy makers attract them?

In fact, the Government-University-Industry Research Roundtable of the U.S. National Academies, commissioned a survey to find out the factors influencing the locations of R&D facilities, to base policy discussions upon a structured set of data rather than anecdote and case studies (Thursby, 2006).

Over 200 multinational companies, across 15 industries, were then approached. Moreover, when asking about location, questions were in terms of employees rather than mere money investment.





Finding the right strategy for the right location

The primary objective of the survey was to identify and rank the importance of factors that drive firm decisions on the location of R&D facilities. Factors included were:

(a) Sponsored research at universities or research institute(b) Research collaborations with other firms(c) Internet-based companies acting as a broker between

firms seeking R&D solutions and R&D researchers(d) Locating close to universities(e) Locating close to highly qualified R&D personnel(f) Locating close to competitors(g) Locating close to customers





There are not substantial differences between the responses of U.S. and Western European firms.

(e) Locating close to highly qualified R&D personnel

(g) Locating close to customers

(a) Sponsored research at universities or research institute(b) Research collaborations with other firms

(d) Locating close to universities

(c) Internet-based companies acting as a broker between firms seeking R&D solutions and R&D researchers (g) Locating close to competitors

Finding the right strategy for the right location





Factors in the selection of that site in that specific countryThe following statements were given to chose from:

(a) Highly qualified R&D personnel in this country(b) University faculty with special scientific or engineering expertise(c) Tax breaks and/or direct government assistance offered(d) It is easy to negotiate ownership of intellectual property (e) Tax breaks and direct government assistance(f) The regulatory environment conducive to spinning off/in businesses(g) It is easy to collaborate with universities(h) There is good protection of intellectual property(i) There are few regulatory and/or research restrictions(j) The Facility was established to support sales to foreign customers(k) This country has high growth potential(l) The R&D facility was established to support production to export(m) Having the facility a legal prerequisite for access to local markets

The survey procedure included comparisons, such as home country vs. sites outside the home country or sites outside the home country and in a developed economy vs. sites in an emerging economy.




In emerging economies

(k) This country has high growth potential

7 factors were equivalent

(c) Tax breaks and/or direct government assistance offered

In developed economies

(a) Highly qualified R&D personnel in this country(h) There is good protection of intellectual property

remaining factors were equivalent

Factors in the selection of that site in that specific country


Additional insight

The question is not playing at home or in a foreign country, rather in a developed economy versus an emerging economy.




Case History, Kendall Square in Cambridge, MA




● In 1976, Cambridge became the 1st city in the world to establish a local ordinance regulating research with recombinant DNA. The ordinance set guidelines for genetic research opening the city’s doors to biotechnology, providing agreement between city officials and scientists on how to practice genetic research.

● Till the 70s there wasn’t a lot of sex appeal to the address, to working and being anywhere near Kendall Square, except for the fact that MIT was here (Chu, 2011).


● A big turning point came in the late 1970s, when Boston Properties and MIT bought up land that was originally razed in the 1960s for a planned NASA facility.

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● In November 2011, representatives of MIT and Pfizer participated in a groundbreaking ceremony around what will become a 55000sqm research hub for Pfizer’s Neuroscience, Cardiovascular, Metabolic and Endocrine Diseases Research Unit.

● Novartis located in 2002, when they found that they got many more resumes for positions in Cambridge than in Basel.

● A professor at MIT remembers meeting with representatives from Novartis soon after it headquartered its Institutes for BioMedical Research. In 2007, the two formed the Novartis-MIT Center for Continuous Manufacturing. Even in the Skype era, there’s no substitute for being in proximity.

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Corporate R&D labs, Bibliografia

● Thursby, L. & Thursby, M. (2006) Here or There? A Survey of Factors in Multinational R&D Location -- Report to the Government-University-Industry Research Roundtable. [Online] Washington, D.C., The National Academies Press. Available from: http://www.nap.edu/catalog.php?record_id=11675#orgs [Accessed 25th November 2011].

● Moran, L. & Hudson, R. L. (2008) Clustering for Growth, How to build dynamic innovation clusters in Europe. [Online] Brussels, Science Business Publishing Ltd. Available from: http://www.sciencebusiness.net/OurReports/ReportDetail.aspx?ReportId=14 [Accessed 25th November 2011].

● Chu, J. (2011) Inside an innovation ecosystem. MIT. MIT News. [Online] Available from: http://web.mit.edu/newsoffice/2011/kendall-square-part1-1122.html [Accessed 25th November 2011].




Corporate R&D labs, References

● Thursby, L. & Thursby, M. (2006) Here or There? A Survey of Factors in Multinational R&D Location -- Report to the Government-University-Industry Research Roundtable. [Online] Washington, D.C., The National Academies Press. Available from: http://www.nap.edu/catalog.php?record_id=11675#orgs [Accessed 25th November 2011].

● Moran, L. & Hudson, R. L. (2008) Clustering for Growth, How to build dynamic innovation clusters in Europe. [Online] Brussels, Science Business Publishing Ltd. Available from: http://www.sciencebusiness.net/OurReports/ReportDetail.aspx?ReportId=14 [Accessed 25th November 2011].

● Chu, J. (2011) Inside an innovation ecosystem. MIT. MIT News. [Online] Available from: http://web.mit.edu/newsoffice/2011/kendall-square-part1-1122.html [Accessed 25th November 2011].




Educational Institutions




2010 Gross Domestic Product (GDP) of the first 10th economies# Nation GDP (current US$)

1 USA 14,580,000,000,000

2 China 5,880,000,000,000

3 Japan 5,500,000,000,000

4 Germany 3,310,000,000,000

5 France 2,560,000,000,000

6 United Kingdom 2,250,000,000,000

7 Brazil 2,090,000,000,000

8 Italy 2,050,000,000,000

9 MIT ecosystem 2,000,000,000,000

10 India 1,730,000,000,000

(The World Bank, 2011)




MIT Entrepreneurial impact

Selected statistics (1/3)

Active companies founded by MIT alumni

25,800

that employ about

3,3 million people

and generate annual world revenues of

US $2 trillion

producing the equivalent of the

9th largest economy in the world (Roberts, 2009).






International student contribution

Well over 50% of the firms created by foreign graduates are located in the USA and 50% of them are located in Massachusetts

Size matters

1 in 6 of the companies founded 15 years or less already has 100 or more employees; 1 in 32 has 1,000 or more employees, covering nearly 85% of the total jobs

Reputation matters

51% of the alumni entrepreneurs felt that their association with MIT helped in acquiring funding, 85% reported that it had significantly helped their credibility with suppliers and customers





● 85 start-up founded that created 2,500 jobs

● with a market cap greater than US$ 10 billions attracted US $600 millions in VC investments

● 90 projects granted with US$ 11 millions

● 26 spin-outs creating 400 jobs

● US $ 350 millions from outside investments including 12 VC firms

(The Deshpande Center, 2010)(Livada, 2007)





Educational intitutions, References

● Roberts, E. B. & Simons, E. (2009) Entrepreneurial Impact: The Role of MIT. [Online] Cambridge, Edward B. Roberts. Available from: http://www.kauffman.org/uploadedFiles/MIT_impact_full_report.pdf [Accessed 25th November 2011]

● The World Bank. (2011) GDP (current US$) : Data tables showing yearly indicators. [Online] Available from: http://data.worldbank.org/indicator/NY.GDP.MKTP.CD/countries?order=wbapi_data_value_2010+wbapi_data_value+wbapi_data_value-last&sort=desc [Accessed: 30th November 2011].

● The Deshpande Center. (2010) Deshpande Center By The Numbers. [Online] Available from: http://web.mit.edu/deshpandecenter/about.html [Accessed: 30th November 2011].

● Livada, V. (2007) Alternate modes for using venture creation/incubation and spinout to aid corporate business development. [Lecture] Massachusetts Institute of Technology, Fall 2007. Available from: http://ocw.mit.edu/courses/sloan-school-of-management/15-369-corporate-entrepreneurship-strategies-for-technology-based-new-business-development-fall-2007/lecture-notes/lec5.pdf [Accessed: 1st December 2011].




Investors

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Investors

Microseed

<500k

Prototype

Seed

<1M

Market test

A Round

<10M

Ok, go

B Round

<20M

Go, go, go!!!

-Incubators-Accellerators-Public funds

Venture capital Private Equity

Income

Cash

Business angels

4F: founders, family, friends and fouls

(Coppola, 2011)

Investors




Investors

DefinitionHigh net worth individual (up to $1M to invest) providing financing, advice, and networking to early stage companies.

Investment Criteria● Close to home• High growth industry● Growth potential of the venture• Personal attributes and track record of the entrepreneur● Personal attributes and track record of the team (Onetti, 2011)

Financing is not a central input of angel groups (Shoar, 2011)

Angels




Investors

DefinitionFinancial intermediaries providing to privately held enterprises equity, risk sharing, managerial expense, contacts and reputation.

Venture Capital Firms

Investment portfolio

Defaults 60%Breakeven 12%Fire sales 10%Zombies 8%IPO/M&A 6%Good IPO/M&A 4%Wild Ones (IPO) 0%

Financing process, funnel

1000 leads generated

150 meetings

70 pursued

8 financed

(Onetti, 2011)




Investors

DefinitionFinancial intermediaries providing to privately held enterprises equity, risk sharing, managerial expense, contacts and reputation.

Venture Capital Firms

Investment portfolio

Defaults 60%Breakeven 12%Fire sales 10%Zombies 8%IPO/M&A 6%Good IPO/M&A 4%Wild Ones (IPO) 0%

Financing process, funnel

1000 leads generated

150 meetings

70 pursued

8 financed

(Onetti, 2011)




Investors

Do Venture Capital Firms matter?

(Onetti, 2011)




● Coppola, A. (2011) What investors want, and how to successfully pitch them. [Presentation] InnovactionLab, Fall 2011. Available from: http://www.box.com/s/de6m57c03dvuyasyqzty [Accessed: 2nd December 2011].

● Onetti, A. (2011) Introduction to Entrepreneurship, from Startup to Venture Financing. [Presentation] Mind the Bridge Foundation, Spring 2011. Available from: http://www.slideshare.net/mindthebridge/mtb-italy-tour-2011-alberto-onetti [Accessed: 2nd December 2011].

● Schoar, A. (2011) The Consequences of Entrepreneurial Finance: Evidence from Angel Financings. [On-line] Available from: http://www.mit.edu/~aschoar/KLS-Angels-June2011.pdf [Accessed: 2nd December 2011].

Investors, References




Service Providers

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Regional Innovation Ecosystems