Venture Development in Under-developed Entrepreneurial Environments

In a working paper, “Policies and Structures for Spinning Off New Companies from Research and Development Organizations”, Roberts and Malone (March 1995) developed a matrix of high and low levels of support and high and low levels of selectivity and showed the likely implications and results of the support and selectivity policies in terms of the technology licensing office’s role in the spin-off process. The authors observed that only the low support/low selectivity and high support/high selectivity quadrants of the matrix appear to be rational and viable. (Please see the Support and Selectivity Policy matrix below).

Matrix of High and Low Levels of Support and High and Low Levels of Selectivity

 

Low Selectivity

High Selectivity

High Support

Passive role in project discovery

High spin-off effort

Internal selection decision

Mixed source of venture funds

Moderate management involvement

Moderate spin-off rate

High cost per spin-off

Low return on input

Active role in project discovery

High spin-off effort

Internal selection decision

Internal source of venture funds

High management involvement

High spin-off rate

High cost per spin-off

High success rate

Low Support

Passive role in project discovery

Low effort per spin-off

External selection decision

External source of venture funds

Low management involvement

Low spin-off rate

Low cost per spin-off

High return on input

Active role in project discovery

Low effort per spin-off

External selection decision

External source of venture funds

Low management involvement

Low spin-off rate

Moderate cost per spin-off

Low return on input

Source: Policies and Structures for Spinning Off New Companies from Research and Development Organizations by Edward Roberts and Denis Malone, March 1995

Low support/low selectivity (many ventures but with little support for the ventures) reduces the cost of the spin-off operation but seek safety in numbers. Choice is left to external agencies (such as business angels and venture capital funds) that are generally felt to have greater experience and expertise in “picking winners. 


 “Policies and Structures for Spinning Off New Companies from Research and Development Organizations: Edward Roberts and Denis Malone, March 1995, MIT Sloan School of Management and Industrial Research Limited, New Zealand.


Roberts and Malone also argue that low support-low selectivity policies are more fitted to entrepreneurially developed environments. In entrepreneurially developed contexts, such as Boston or Silicon Valley, a strong entrepreneurial community has the capability to select the best entrepreneurial projects and allocate resources to them. Please see Figure 1 below:

High Support/Low Selectivity

 

 

 

High Support/High Selectivity:

Policy adapted to entrepreneurially under-developed environments (Singapore, ASEAN countries)

Low Support/Low Selectivity:

Policy adapted to entrepreneurial developed environments (Boston, Silicon Valley)

 

Low Support/High Selectivity

Figure 1: Academic spin-off policies and types of entrepreneurial environments (Roberts & Malone, 1995)

In underdeveloped entrepreneurial contexts that lack a strong entrepreneurial community to provide market selection and resource allocation functions, their research favour adoption of high selectivity and high support policy that are aimed at developing ventures capable of pursuing opportunities with high growth potential. High support/high selectivity (a few well-supported ventures) relies on picking potential winners and supporting them so that they have every chance of success.


Footnote: The EDB/SPRING SEEDS funding scheme, matching capital with business angels’ investment, is an example of the low support/low selectivity policy.

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