Spinoff Regions:
Spinoff Regions:
Entrepreneurial Emergence and
Entrepreneurial
Emergence and
Regional Development
Heike Mayer
H
ik M
Associate Professor
Urban Affairs and Planning Program
Co‐Director, Metropolitan Institute
Virginia Tech ‐ Alexandria Center
CISC|Galway|April 2009
Silicon Valley Perspective (Myths?)
Silicon Valley Perspective (Myths?)
• Entrepreneurship as a result of…
Entrepreneurship as a result of
– Culture
– Venture capital
Venture capital
– Flexible specialization
– World‐class university
W ld l
i
it
• Limited perspective: special case?
– Emerging second tier high‐tech regions in the US
– Moved from branch plant economies to innovative nodes in global networks (Portland, Boise, Kansas City)
Cluster Emergence: 2 Perspectives
Cluster Emergence: 2 Perspectives
• Agglomeration economies
Agglomeration economies
– “new business ideas will tend to bubble up within clusters because of the concentration of firms
clusters because of the concentration of firms, ideas, skills, technology, and needs there. Once an idea is perceived, the barriers to entry and growth are lower at cluster locations.” (Porter 2000, p. 269)
• Spinoffs
S i ff
– Spinoff processes facilitate cluster emergence (Klepper 2001 2007)
(Klepper 2001, 2007)
Firms as Source of Entrepreneurs
Firms as Source of Entrepreneurs • Firms as incubators/parents
– Genealogy of entrepreneurship (Cooper 1971, Klepper 2007, Mitton 1990, Neck et al 2004)
• Firms are heterogenous Firms are heterogenous (Maskell 2001, Taylor & Oinas 2006)
(Maskell 2001 Taylor & Oinas 2006)
• Theories of the firm
– Resource
Resource‐based theory (Penrose); Knowledge‐based theory (Kogut & Zander based theory (Penrose); Knowledge based theory (Kogut & Zander
2003; Audretsch & Lehman 2005): Internal conditions, structures, resources
– Behavioral theory (Cyert & March): decision making process in the firm
– Evolutionary theory (Nelson & Winter): routines, search, selection environment
Evolutionary theory (Nelson & Winter): routines search selection environment
• Firm building characteristics influence e’ship
– Corporate changes, Linkages and market connections, Product type, Nature of p
g ,
g
,
yp ,
production, Innovation, Corporate policies & culture, Assets, Labor
Firm Building & Entrepreneurship
Firm Building & Entrepreneurship
Firm Building
Entrepreneurship
Behavioral
h i l Theory
h
Corporate Change
Critical moments: Positive & Negative
Contractual Theory
Linkages
Business opportunities: Backward & Forward
Connections to Markets
y
Position w/in industry; Connections to other regions/markets
Product Type
Product variation: Customized, standardized, varied
Nature of Production
Flexible production; Mass production
Innovation
Type of Innovation: Process, product, radical
Corporate Policies & Culture
Human Resources; Entrepreneurship; Innovation/technology; Organizational structure
Capital Assets
Human assets; Physical capital
L b
Labor
IIndustry expertise; Technical; Managerial; d t
ti T h i l M
i l
Engineer‐Manager
Evolutionary
Theory
Resource‐
based/Knowledge
‐based Theory
Sources: Klepper 2001a, Cooper 1971, Romanelli & Schoonhoven 2001, Cooper 1985, Feldman et al 2005, Brittain & Freeman 1986, Klepper & Thompson 2005, Benneworth 2004,
Bhide 2000, Cooper 1971, Bresnahan et al 2001, Tappi 2005, Klepper 2001b, Klepper & Sleeper 2005, Klepper 1996, Glasmeier 1988, Chesbrough 2002, Saxenian 1994, Chesbrough
2002, Christensen 1997, Audretsch & Lehmann 2005, Staber 2005, Adlrich & Martinez 2001, West & Simard 2006
Emerging High‐Tech
Emerging High
Tech Regions
Regions
Pioneer & Emerging High‐Tech
Pioneer & Emerging High
Tech Regions
Regions
Methodology
• Case studies:
– Emerging high‐tech regions: Portland, Boise
– High‐tech center: Seattle
• Genealogy of entrepreneurship
• Online survey, interviews, descriptive statistics
Survey Descriptive Stats
Year Survey Conducted
Responses
Average Firm Age
Median Founding Year
Avg # of Founders
Serial Entrepreneurs
Portland
2007
204
10 Years
1997
2.38
51.9%
Boise
2007
135
8.2 Years
2002
2.17
53.9%
Seattle
2008
283
7 Years
2004
2.23
46%
Regional Comparison
Regional Comparison
Portland
Boise
Seattle
High‐Tech Economy
High‐Tech Employment (2005)
58,646
18,969
162,713
5 646
5,646
1 335
1,335
8 933
8,933
1.35
1.76
2.31
7%
9%
11%
75.8%
5.8%
64%
24
23
168
14.6%
18.7%
12.3%
VC Deals (per 1,000 people, 00‐05)
6.2
1.0
14.3
SBIR
SBIR grants
55
5.5
03
0.3
58
5.8
High Tech Establishments (2005)
High‐Tech
Establishments (2005)
LQ (2005)
HT employment share (2005)
R&D employment share (2005)
Entrepreneurship
Average # of HT firm births (98‐00)
Average # of HT firm births (98
00)
% Self‐Employed (2005)
Sources: County Business Patterns, US Small Business Administration, US Census From Low Cost to Innovation
From Low Cost to Innovation
1200
Patent Registrations in Second Tier Regions, 1975‐1999
Source: U.S. Patent Office, 1975‐1999
1000
800
600
400
200
Boise
Kansas City
Portland
19
99
19
98
19
97
19
96
19
95
19
94
19
93
19
92
19
91
19
90
19
89
19
88
19
87
19
86
19
85
19
84
19
83
19
82
19
81
19
80
19
79
19
78
19
77
19
76
19
75
0
Portland’ss Silicon Forest
Portland
Silicon Forest
# of Establishments
Intel set up branch plant
in Portland (1976)
Source: Portland Genealogy Project; Families include 1st and subsequent generation startups; N=645
Boise’ss Treasure Valley
Boise
Treasure Valley
# of Establishments
Micron Technology (1978)
Micron Technology (1978)
Source: Boise Genealogy Project; Families include 1st and 2nd generation startups; N=437
Genealogical Networks of Entrepreneurs in Portland, Oregon, in 2002
Source: Heike Mayer, 2002
©Heike Mayer
Portland & Willamette Valley
Update of Silicon Forest Poster in 2008
Update of Silicon Forest Poster in 2008
Genealogical Networks of Entrepreneurs in Portland, Oregon
24.04.2008
14
Source: Heike Mayer, 2008
N=approximately 930 nodes
©Heike Mayer
Genealogical Networks of Entrepreneurs in Boise, Idaho
Source: Heike Mayer, 2007
N=477 nodes
©Heike Mayer
Comparing Parent Firms
Comparing Parent Firms
Fertile Parent Firms
Tektronix
HP
Less Fertile Parent Firms
Intel
Micron
Industry
Measurement Instruments
Consumer Electronics
Integrated Semiconductor Memory Semiconductor
Corporate changes
Restructuring
Refocus on core products
Linkages
Restructuring facilitated entrepreneurial opportunities
Transformation from manufacturing to R&D and marketing
Disintegration facilitated contracting opportunities
Market Connections
Industry leader
Strong market connections
Industry leader
Strong market connections
Continued corporate expansion inside the region; focus on process development
focus on process development
Expansion induced clustering; stronger links with customers & suppliers (alliances, collab.)
Intermediary supplier
Corporate expansion mainly outside of region (Utah,
Virginia China)
Virginia, China)
Limited clustering; induced customer & supplier relationships
Intermediary supplier
Product Type
C stomi ed for ind str se
Customized for industry use
C stomi ed for cons mers
Customized for consumers
Standardi ed commodit
Standardized commodity
Nature of Production
Move toward integration of R&D and manufacturing
Move away from Vertically integrated
manufacturing to prototyping, Mass production
design, marketing
Standardized commodity
Standardi
ed commodit
“Just making chips”
Vertically integrated
Mass production
Innovation
Product innovation
Legacy of Tek
of Tek Labs
Similar to HP Way
Strong culture of talent development
“Welcome mat” for entrepreneurs
Divisionalization
Mix of human and physical assets; strong emphasis on talent development (Tek Uni)
Engineer, engineer manager
Product innovation
Break with “NIH” syndrome
Break with “NIH” syndrome
HP Way
Strong culture of talent development
“Welcome mat” for entrepreneurs
Divisionalization
Move away from physical assets to more human asset‐
based
Engineer manager
Corporate policies & culture
Assets
Labor
Manufacturing process innovation
Intrapreneurship
Limited local reach of Intel VC
Manufacturing process innovation
“Secretive”
“Frugal”
Limited divisionalization
(except for Micron PC)
Physical assets dominate
Strong IP focus
Physical assets dominate
Strong IP focus
Engineer
Production/technician
Technical
Production/technician 16
Seattle Entrepreneurship
Seattle Entrepreneurship
# of Establishments
90
80
Amazon.com (1994)
70
UW
60
Microsoft
McCaw Wireless (1982)
50
McCaw
40
30
20
Boeing/BCS
Microsoft (1975)
moved to Seattle in 1978
Aldus (1984)
Amazon.com
Boeing buys Heath`s shipyard in Seattle
(1910)
Ald /Ad b
Aldus/Adobe
Other
10
0
1883
1908
1927
1946
1951
1965
1969
1977
1980
1983
1986
1989
Source: Puget Sound Genealogy Project; Families include 1st and 2nd generation startups; N=990
1992
1995
1998
2001
2004
2007
Poster here
Poster here
Genealogical Networks of Entrepreneurs in the Puget Sound Region in 2009
Source: Heike Mayer, 2009
N=711
©Heike Mayer
Parent’ss Market
Parent
Market
"Is your company's product/technology/service in a similar or a new market compared to your parent firms?"
19
Parent Imprinting
Parent Imprinting
"Which of the following business practices are most similar to your parent firms? (Check all that apply)?”
20
Linkages with Parent
Linkages with Parent
"In what ways were or are the parent firms (the previous employer(s) of the founder(s)) involved with your firm?"
Links with Anchor Firms: Emerging HT
Links with Anchor Firms: Emerging HT
"In what ways does your company interact or has interacted with the following businesses in the region?"
Portland
l d
Not at all
Intel
55.8% (82)
Tektronix
80.0% (116)
Hewlett‐
Packard
64.6% (147)
Customer
22.4% (33)
11.7% (17)
17.7% (26)
8.3% (12)
Supplier
15.6% (23)
6.9% (10)
14.3% (21)
3.5% (5)
Competitor
0.7% (1)
0% (0)
0.7% (1)
0.0% (0)
R&D partner
5.4% (8)
1.4% (2)
2.7% (4)
1.4% (2)
N=204
Boise
Not at all
Micron
75.5% (74)
HP
68.4% (67)
Customer
13.3% (13)
15.3% (15)
9.2% (9)
( )
16.3% (16)
( )
0% (0)
1.0% (1)
2.0% (2)
1.0% (1)
N=99
N
99
Supplier
pp
Competitor
R&D Partner
ESI
86.8% (125)
Links with Anchor Firms: Seattle
Links with Anchor Firms: Seattle
"In what ways does your company interact or has interacted with the following businesses in the region?"
Microsoft Amazon
Not at all
32.39% 61%
(69)
(122)
Customer
30.99% 21%
(66)
(42)
S
Supplier
li
17 84%
17.84% 13%
(38)
(26)
R&D partner
15.02% 4%
((32))
((8))
Competitor
3.76%
1%
(8)
(2)
No answer
32.86% 41.5%
(70)
(83)
Valid N
213
200
Aldus/ Adobe
70.26% (137)
18.46% (36)
7 69%
7.69% 15)
2.05%
((4))
1.54%
(3)
45.12% (88)
195
McCaw M
C
Cellular/ Real AT&T
Boeing Networks Nintendo
82.81% 82.23% 84.21% 91.1% (159)
(162)
(160)
(174)
11.98% 8.12%
8.42%
4.19% (23)
(16)
(16)
8)
4 69%
4.69%
7 11%
7.11%
5 26%
5.26% 3 66%
3.66%
(9)
(14)
(10)
(7)
0.52%
2.03%
1.58%
0.52%
((1))
((4))
((3))
((1))
0%
0.51%
0.53%
0.52%
(0)
(1)
(1)
(1)
47.39% 43.65% 48.94% 48.16% (91)
(86)
(93)
(92)
192
197
190
191
23
Top 3 Support Factors
Top 3 Support Factors
Seattle
1. Informal local access to innovative people, ideas, technologies (4.31)
2. Attractive local quality of life for staff and management (4.27)
3. Local availability of managerial/professional staff (3.76)
Portland
1. Attractive local quality of life for staff and management (4.39)
2. Informal local access to innovative people, ideas, technologies (4.25)
3. Local availability of managerial/professional staff (3.89)
Boise
1. Informal local access to innovative people, ideas, technologies (4.37)
2. Attractive local quality of life for staff and management (4.3)
3. Local availability of managerial/professional staff (3.97)
Top 3 Constraint Factors
Top 3 Constraint Factors
Seattle
1. Shortage of local skilled labor (3.29)
2. Cost of premises locally (3.05)
3. Shortage of local marketing and sales skills (2.81)
Portland
1. Difficulty in accessing local sources of capital, financing (3.31)
2. Shortage of local skilled labor (3.13)
3. Shortage of local marketing and sales skills (3.08)
Boise
1. Shortage of local skilled labor (3.63)
2. Shortage of local marketing and sales skills (3.00)
3. Difficulty in accessing local sources of capital, financing (2.88) Portland: Industry‐University
Portland: Industry
University Links
Links
Since formation, which of the following types of relationships has your firm had with the following universities? (Check all that apply)
Boise: Industry‐University
Boise: Industry
University Links
Links
Seattle: Industry‐University
Seattle: Industry
University Linkages
Linkages
G d
Graduate hires
hi
University programs and outreach
Collaborative research project with depts or faculty
University consulting
Staff teaching at university
Donations
University training
University research consortia
Licensing or patenting
ce s g o pate t g
Part‐time faculty employees
Faculty board members
0
Washington State University
10
20
30
40
University of Washington
50
60
70
80
Role of Public Policy
Role of Public Policy
• Portland
– Reactive, starting with tax breaks/incentives
– Moving towards developing innovation system
Moving towards developing innovation system
– Signature research centers: ONAMI
• Boise
– Traditional, rural interests dominate
T diti
l
li t
t d i t
– Tax breaks for large firms (Micron)
– SMEs are organizing in Idaho Innovation Alliance
Conclusion
• High‐tech
High tech agglomerations emerge through agglomerations emerge through
entrepreneurial spinoff processes; limited role of policy
• Emerging high‐tech regions benefit from this process
g g g
g
p
– Do not have to conform to the Silicon Valley model
– Role of dominant firms as ‘surrogate universities’ (Mayer 2005)
• Firm building has a strong influence on e’ship
– Role of large, dominant firms as parents
– Organizational evolution, culture, structure of parent matter
• Putting the firm at the center of the analysis
• Silicon Valley = a special case?
Thank You!
Thank You!
Thanks to the various Thanks
to the various
industry assocations and entrepreneurs for their support with the research.
Heike Mayer, Ph.D.
Virginia Tech
E‐Mail: heikem@vt.edu
24.04.2008
32
Poster here
Poster here
Genealogical Networks of Entrepreneurs in the Puget Sound Region in 2009
Source: Heike Mayer, 2009
N=711
©Heike Mayer