Spin‐offs' linkages to their parent universities over time: The performance implications of equity, geographical proximity, and technological ties

How does maintaining linkages with the parent university benefit academic spin-offs' performance over time?

University spin-offs are new ventures based on university-developed knowledge, either founded by academics or with an equity participation of the parent university, or both.

They represent an important form of technology transfer and are important entrants in many high-tech and high-value-added industries, like biotech, laser, or automotive industries. Hence, understanding the drivers of university spin-offs' market performance is a key issue for strategic management, innovation management, and entrepreneurship research and practice.

The available literature has shown that the performance of university spin-offs is rooted in the initial imprints of the parent universities, such as size, prestige, scientific performance, and entrepreneurial culture.

Despite high survival rates and some success stories, many university spin-offs struggle with low market performance. Some studies have explained this lack of performance by suggesting that parent universities' potential contributions to spin-offs' performance would mostly relate to the transfer of scientific competencies rather than business and market competencies. However, to date, it is not clear what is the impact of the different types of linkages between parent universities and their spin-offs over time, such as equity ties, geographical proximity, or technological relationships, beyond initial imprinting effects.

In this paper, we contribute to this neglected area of research by addressing the following question: How do university spin-offs’ linkages with their parent universities influence spin-offs’ market performance over time?

We build a dynamic panel dataset regarding 551 university spin-offs established by Italian universities between 2000 and 2008. We estimate a set of models using system generalized method of moments estimators, including instrumental variables to account for endogeneity. In addition, we corroborate the quantitative findings through interviews with founders of university spin-offs.

Our results show that the higher a university's equity ownership in a university spin-off, the better the spin-off’s market performance. This effect gets stronger for higher geographical proximity between the parent university and the university spin-off. These results suggest that the parent university's formal involvement in the spin-off, paired with access to physical resources, is conducive to better market performance.

On the contrary, we find a negative effect of technological ties between a university spin-off’s entrepreneurial team and its parent university on market performance. Further analysis suggests that this effect gets more pronounced for companies that are geographically proximate to their parent universities. The results seem to suggest that some university spin-offs may resemble “extended scientific labs” that lack the business focus needed to perform as commercial ventures.

Our study brings three sets of theoretical and practical contributions.

• First, our results are important for the strategic management literature, as they explain the performance implications of the relationships between parent institutions and their spin-offs over time. In practical terms, our study suggests university decision-makers and university spin-off managers to strategically manage the composition of university-companies linkages, to ensure a balanced access to resources over time and ensure market performance.
• Second, we extend research on strategic alliances in entrepreneurial firms, by examining the performance implications of equity-based partnerships and linkages with universities. In practical terms, our study suggests that maintaining formal equity ownership with their parent universities has a beneficial effect on spin-offs’ performances while maintaining strong technological ties has a detrimental effect. In addition, our results show that the positive effect of equity ownership on spin-off performance is amplified for those spin-offs located in geographical proximity to the parent university. Therefore, managers should also take into account that the themes related to physical presence are still very important aspects to consider.
• Third, this study extends the academic entrepreneurship literature, by providing insights about how universities can improve the quality of the spin-offs generated to commercialize research. In practical terms, this is important for university managers interested in displaying their impact and abilities as “entrepreneurial universities”.

As with any other study, we acknowledge that our work comes with some limitations, which can represent areas for future research.

First, we measure formal and informal linkages between the parent university and university spin-offs, but we do not measure actual resource and knowledge transfer. Therefore, there is still much to learn about the performance implications of different types of parent–child linkages, and more fine-grained studies of the benefits derived from each type of linkage clearly represent promising opportunities for further research.

Second, we have focused on the benefits and perils of linkages to the parent university derived from university spin-offs. Taking a wider perspective, there is still much to learn about the potential benefits or drawbacks for their parent universities, for instance, in terms of mutual, reciprocal, or asymmetric benefits of different linkages.

Finally, the main results of our study may hold across different contexts, but the role of different linkages and their interplay should be further generalized to other situations, for instance to corporate spin-offs and other countries.

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Authors at the Department of Management

Daniela Bolzani, Associate Professor

Daniela is an Associate Professor in Management at the Alma Mater Studiorum-Università di Bologna. She holds expertise in the fields of entrepreneurship and strategic management, and she teaches Business Planning, Business and Corporate Strategy. Her research concerns entrepreneurial decision-making with a focus on diversity (e.g., migration, culture, gender) and social inclusion. She is the Department of Management’s diversity, equity, and inclusion delegate.

Riccardo Fini – Full Professor

Riccardo is a Professor and Coordinator of the Ph.D. Program in Management at the University of Bologna. He is a Visiting Professor at Imperial College London, Nord Business School Bode, Ghent University, and Danish Technical University. He serves as Director of the Entrepreneurship Hub and of the Master in Entrepreneurship at Bologna Business School. He researched at Mines Paris, Case Western Cleveland, U. Bozen, and Imperial College. His research interests include entrepreneurship, science commercialization, and impact. He is a two-time recipient of the EU Marie Curie fellowship. He is also serving as Associate Editor for the Journal of Technology Transfer.