A Work Project, presented as part of the requirements for the Award of a Masters      Degree in Management from the Faculd...
BUSINESS INCUBATION IN PORTUGAL – THE ROLE OF COHABITATION FOR NETWORKING BETWEEN INCUBATED AND MATURE FIRMS IN A SCIENCE ...
Introduction:       Research on business incubation has evolved in the last three decades from aconcept of incubator that ...
Literature review        Business incubators (BIs) have emerged in the last few decades as a response tothe difficulty of ...
characteristic of S&T parks is that often firms are put in close proximity withuniversities and research centres. The link...
provision of business consulting assistance [15]. These services and resourcesrepresented an advantage for incubated firms...
Networked incubators acknowledge the importance of networks in the process offirm creation and development and take as the...
marketplace ahead of competitors, enabling them to stand on their feet after they leavethe protected environment of the in...
it’s situated. This concept involves the cohabitation of universities, R&D institutionsand S&T based Industries, in order ...
programmes available, according to the level of maturity of the firm or project, the typeand potential of the project and ...
representatives of mature firms established in the park. Data was collected throughsemi-structured interviews, both person...
Finally we’ll see that, while resources are fairly valued by most entrepreneurs,the networking that results from physical ...
The resources offered by the BI of Taguspark and the way it is organized differfrom one incubation program to another. In ...
from incubation resources that include discounts in the rents paid for their offices,support from the Intellectual Propert...
the main advantages from being in the incubator and in the park, in general, were theproximity with other entrepreneurs (a...
other hand, networking happens spontaneously, fostered by the close physical proximitybetween firms that share buildings a...
engine firms come to the central services of the park and ask for the sought after serviceor firm. However, the value of t...
When problems or challenges emerge, young entrepreneurs can walk across the corridorand knock on the door of another firm ...
In contrast, another interviewee argued that younger firms are mostly focused ondiscovering their first clients and not so...
to the resources provided by the incubator, allows faster problem solving, discussion ofideas and learning, accelerating t...
Park-level internal networking:        This dimension of internal networking represents the linkages between all theentiti...
As it has been discussed by Hansen et al. (2000) [38], the cooperation betweenstart-ups and mature firms is very likely to...
1) factors related to the construction of the incubator and 2) factors connected to theindividuals.       The first group ...
thinking it’s not worth spending time and energies on networking activities.Consequently, the success of networking betwee...
Among these criteria could be the industry in which the firms operate, the technologyused or the horizontal or vertical co...
aren’t clearly communicated, entrepreneurs will undervalue these resources and feel likethe incubator is not putting much ...
external networking, which has been considered by several authors to be as important asthe internal networking explored in...
References:1] Hansen, M. T., Chesbrough, H. W., Nohria N. and Sull, D., Networked incubators: hothouses of the new economy...
28] Op. cit. ref. 14.29] Op. cit. ref. 1, pp. 76.30] Op. cit. ref. 1, pp. 79.31] Op. cit. ref. 14.32] Autio, E., Klofsten,...
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Business incubation in Portugal: the role of cohabitation for networking between start-ups and mature firms in a Science&Technology Park, by Bruno Serrano

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A study about the importance of Networking in the early stages of a start-up. Factors that foster and hinder networking.

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Business incubation in Portugal: the role of cohabitation for networking between start-ups and mature firms in a Science&Technology Park, by Bruno Serrano

  1. 1. A Work Project, presented as part of the requirements for the Award of a Masters Degree in Management from the Faculdade de Economia da Universidade Nova de Lisboa.BUSINESS INCUBATION IN PORTUGAL – THE ROLE OF COHABITATION FOR NETWORKING BETWEEN INCUBATED AND MATURE FIRMS IN A SCIENCE AND TECHNOLOGY INCUBATOR BRUNO MIGUEL DA SILVA SERRANO 1 A Project carried out with the supervision of: Professor Stefan Meisiek JUNE 20081 Former student of the Master degree on Business Management at Universidade Nova de Lisboa. E-mail: serranobruno@gmail.com
  2. 2. BUSINESS INCUBATION IN PORTUGAL – THE ROLE OF COHABITATION FOR NETWORKING BETWEEN INCUBATED AND MATURE FIRMS IN A SCIENCE AND TECHNOLOGY INCUBATORAbstract: Business incubators (BI) have assumed an important role in fostering the growthand development of science and technology (S&T) based SMEs in Portugal in recentyears. Networking between entrepreneurs has been recognized by several authors as themost critical advantage that these organizations can offer to its firms, leading to thecalled Networked Incubator. This paper studies the cohabitation between incubatees andmature firms in the buildings of Taguspark, a S&T park in Lisbon, the factors thatfacilitate and hinder networking, in the light of social capital theory, along with thebenefits that incubatees can draw from it. Findings suggest that cohabitation, alone, iscrucial for networking, however, it can be enhanced or hindered by some factors relatedto the individuals and others related to the organization of the incubator.Key words:EntrepreneurshipBusiness IncubationNetworkingCohabitation 1
  3. 3. Introduction: Research on business incubation has evolved in the last three decades from aconcept of incubator that focuses on providing for the technical aspects of business,such as work space or funding, into the called networked incubator. This last type ofincubator focuses on including tenant firms in a wide network that will give themprivileged access to resources beyond those the incubator itself can provide, whilefostering their entrepreneurial drive and offering economies of scale and scope.Presently, researchers recognize that these are the main advantages that an incubator canoffer to its tenant firms, allowing them to establish themselves in the marketplace aheadof competitors, increasing their chances of long-term survival [1]. In the context of networked incubators, several authors have discussed theimportance of the interaction between entrepreneurs of incubated firms; however thepossible networking advantages in an incubator model that promotes the cohabitationbetween incubated and established firms seems to be insufficiently considered so far. This paper presents a study on the cohabitation of young and mature firms in aPortuguese business incubator (BI), aiming to explain “the role of cohabitation fornetworking between incubated and mature firms in a science and technology incubator”. We’ll start with a brief review on the literature on business incubation, leadingto the networked incubator. Then, the chosen BI will be presented as well as themethodology used is this study. The findings will then be presented and discussed,concluding with comments and suggestions about further studies in this area. 2
  4. 4. Literature review Business incubators (BIs) have emerged in the last few decades as a response tothe difficulty of young firms to successfully thrive during their first years of existence.Recognized as the hardest period of the life of a firm, this period poses a series ofobstacles to entrepreneurs, often suffocating the new born firm. BIs are organizationsthat offer a protected environment to these firms, providing a wide range of resources,in an attempt to address market failures, having proved to be efficient in acceleratingstart-ups growth and development [2]. According to Cutbill (2000) [3], firms thatstarted their activity in a supported environment such as a BI had an 87% chance ofsucceeding, contrasting with an 80% failure rate among start-ups outside an incubator intheir first 5 years of operation. BIs vary in objectives, services and resources offered, organizational models,sponsors and type of clients served, among others, ranging from public fundedorganizations focused on the creation of jobs in less developed regions [4], to privatelyfunded corporate incubators that focus on creating synergies between experiencedcompanies and the fresh entrepreneurial drive of new ones, leveraging both towardsinnovation [5], although the involvement of the public and non-profit sectorspredominates over the private sector [6]. In the last 15 years, BIs in science and technology parks have assumed anincreasingly important role in fostering the development of S&T based SMEs inPortugal. During this period the country saw the emergence of several S&T parks andtechnological centres nation-wide such as Lispolis, Taguspark, Madan Parque, MadeiraTecnopolo, Parkurbis, Beira Atlântico Parque, Tagus Valley, among others. Technologybased incubation aims to foster local innovation capacity and technology development,which has been held as increasingly important in the actual economy. One particular 3
  5. 5. characteristic of S&T parks is that often firms are put in close proximity withuniversities and research centres. The linkages with universities in S&T parks has beenconsidered very important by some authors [7], although it has been argued that its rolein the success of the business incubation process is less direct than generally assumedand that this physical proximity, alone, accounts little for fostering the technologytransfer that’s expected from this relationship [8]. During BIs’ first years of existence as a tool for business development, twotypes of BIs were identified: on one hand there were those focused on providing aphysical space, like multi-tenant commercial buildings, and on the other hand, thosefocused on business development [9]. The latter would often take the form of shared-services office networks, focused on the technical aspects of business, offering not onlyworkspace, but also other shared services that usually included secretarial support,telephone answering services, office equipment, such as photocopiers or informationsystems. In some cases, incubators helped new ventures with financing, whetherthrough direct investment in the ventures or by arranging contact with investors [10]. The provision of these important, time and resources consuming services, wouldallow entrepreneurs to concentrate efforts on their core businesses, increasing theirchances of survival by allowing a reduction of labour and operational costs [11]. Nevertheless, it has been argued that one of the main reasons why firms fail intheir early years are the lack of managerial skills of the entrepreneurs [12-13].Entrepreneurs often have the technical skills, acquired through formal education or fromprevious professional experience, but few have the necessary knowledge on how tomanage the firm effectively [14]. Thus, it became crucial that incubators offered notonly the technical services and resources to get the business started, but also on-site 4
  6. 6. provision of business consulting assistance [15]. These services and resourcesrepresented an advantage for incubated firms once it often represented a luxury thatnewly formed firms didn’t have access to or couldn’t afford at that initial phase [16]. In this way, incubators would not only help entrepreneurs by providing basicservices and facilities that allowed cost reductions during the venture’s early years, butby providing support services that complemented their existing talents and resources,incubators would allow the maximization of their entrepreneurial talent and potential[17], augmenting their chances of success. In addition to the provision of business support services, such as counselling andconsulting, another factor that has been considered increasingly important for aneffective incubation process was the networking advantage that these firms could getfrom being integrated in the incubator [18]. Social Capital theory argues that, in addition to purely economics-drivencontractual relationships, important socially driven dimensions also need to be takeninto account when explaining entrepreneurship [19]. As Aldrich and Zimmer (1986)[20] put it, entrepreneurship is “embedded in a social context, channelled and facilitatedor constrained and inhibited by people’s position in social networks”. These socialnetworks have three important functions for entrepreneurs: 1) to provide access to newideas and resources that support the entrepreneurial process; 2) as a means of gainingcredibility and reputability through the formation of alliances with reputable partners; 3)to exchange knowledge and to facilitate the generation of collective learning. [21-22-23]. In the early years of a business venture, these networks are particularly important totest ideas, gain feedback and gather relevant information [24]. This approach to entrepreneurship lead to the emergence of a new type ofbusiness incubator: the networked incubator. 5
  7. 7. Networked incubators acknowledge the importance of networks in the process offirm creation and development and take as their central role to help entrepreneurs formappropriate social and business networks, knowing that this is a crucial factor toleverage firms’ survival and growth [25-26]. In addressing the role of incubators in the formation of networks, two types ofnetworks must be taken into account: internal and external networks, considered asequally important in the whole process of entrepreneurship [27]. The internal networkrefers to the relationships between start-ups inside of the incubator, enablingentrepreneurs within the incubator to share resources, ideas, experience and expertise,while enhancing entrepreneurial spirit. The external network refers to the relationshipbetween incubated firms and other entities outside of the incubator, such as establishedfirms or universities. Such networks allow the access to resources beyond the incubatoritself, from potential partners to customers, business experts or local businesses [28]. According to Hansen et al. (2000) [29], the characteristic that differentiatesnetworked incubators from the commonly called BIs is the existence of mechanisms putin place to foster the creation of partnerships, not only between firms within theincubator, but also with external partners. According to the same authors, theinstitutionalization of networking allows benefits for the individual firms that surpasstheir individual ability to network, once there are different mechanisms and peoplebuilding a network on behalf of numerous firms. Besides, when the networking activityby an incubator is institutionalized through formal processes and mechanisms, it nolonger depends on the connections of a few people, guaranteeing equal access to thenetwork for all firms in the incubator [30]. The privileged access to the referrednetworks, and the benefits that result from it, help firms establishing themselves in the 6
  8. 8. marketplace ahead of competitors, enabling them to stand on their feet after they leavethe protected environment of the incubator, which can be defined as the ultimateindicator of success of an incubator.Methodology In this study I have employed a single case study methodology. The BI ofTaguspark was chosen for this study because it is recognized as one of the mostsuccessful cases of business incubation in Portugal, but also because it presents somecharacteristics that differentiate it from the commonly known concept of BI. At a givenstage of the incubation program, incubatees cohabit with established mature firms(firms that are not receiving any kind of incubation support) in the same buildings,which makes of this BI a special case in terms of the interaction between these twogroups of firms.Research site: Created in 1992 by governmental initiative, as a response to the awareness of thedelay of the Portuguese economy in terms of technological activity, and operating since1995, Taguspark has been held as the “flag” of S&T parks in Portugal. Tagusparque, S.A. is the entity responsible for the installation, promotion andmanagement of the park, which shareholders include both public and private institutionsin a rather even balance. Relying mainly on public initiative at the project’s early stage,the private sector has gained weight overtime, accounting now for 49% of the capital ofthis society. The vision of Taguspark is to foster the development of science and technologyactivity, working as an economical and social development engine for the region where 7
  9. 9. it’s situated. This concept involves the cohabitation of universities, R&D institutionsand S&T based Industries, in order to facilitate a market oriented transfer of knowledgeand technology. Presently, there are 4 Universities, 6 R&D Institutions and 130 S&T based firmsin the park, as well as complementary services firms, such as restaurants, banks,insurance companies and a child care institution, among others. Moreover, the conceptof the park also involves the creation of conditions beyond the productive activity itself,such as sports facilities, green areas or cultural and leisure related services. Furthermore, the park offers an array of services and benefits to all of its residentfirms, that include a congress centre, a library, business advisory, support in matters ofintellectual property, privileged access to national and EU R&D projects and the accessto relevant information from the park’s network of partners. In order to be admitted, firm must go through a selection process. Namely, onlyS&T based firms with non-pollutant activities are accepted. The applications receivedare analysed by the park’s administration and the Scientific Counsel. This process takesplace not only to mature companies that simply aim to open an office in the park butalso to entrepreneurs that intends to start their business there.The Incubator: The incubation activity in Taguspark is run by the administration, aiming tocommercialize the results of the scientific investigation and dissemination of newtechnical competencies to the market. The business incubator is not an independententity, but rather, it is like a service provided by the park to its firms. Potential “incubatees” are identified after processing the before mentionedapplications. Once pre-approved, they’re inserted in one of the 4 incubation 8
  10. 10. programmes available, according to the level of maturity of the firm or project, the typeand potential of the project and the entrepreneurs themselves. The incubationprogrammes offered by Taguspark are: 1) R&D projects; 2) incubator of ideas; 3)business incubator and 4) business development. The first program is designed to provide support in the investigation process ofR&D projects with market potential. The second program, the incubator of ideas, is designed to help entrepreneurswith a S&T based project or just-formed S&T based ventures in their very first steps. The third program, i.e., the business incubator program aims to provide supportto firms graduating from the incubator of ideas, or others that enter the park with asimilar maturity level. Firms can be in this program for up to 9 years. Finally, the business development program is aimed at more mature, providingsupport to firms’ internationalization process, namely through access to governmentprograms or institutes such as AITEC, IASP and ICEP. For the purpose of this study, I’ll focus on the second and thirds programs, i.e.,the incubator of ideas and the business incubator. Regarding funding of the young ventures, the incubator never provides initialfunding for incubatees under these programs. Having held small parcels of the capital ofsome incubatees in the past, its role is now limited to helping accessing other sources offunding (venture capitalists, banks or public funding programs such as “Finicia”).Data Collection: Aiming to study the proposed phenomena from the perspectives of the differententities involve, interviews were held with Taguspark incubator staff, CEOs ofincubated firms, representatives of ex-incubated firms (firms that have left the park) and 9
  11. 11. representatives of mature firms established in the park. Data was collected throughsemi-structured interviews, both personal and by telephone, and emailed questionnairesto less available informants, in a total of 21 interviews, as detailed below.Table 1: Number of interviews held, by type. Entity Incubator CEOs of Representa- Representatives staff incubated tives of mature of ex-Type of interview firms firms -incubated firms On site personal interviews 1 5 - - Telephone interviews - 4 1 2 E-mail questionnaires - 2 6 - The before presented collected information was transcripted and translated intoEnglish. The data collected from the different groups of interviewees was displayedinto tables to compare each topic directly, by question answered (see sample in Exhibit1). Once the data was collected through semi-structured interviews, where intervieweeswere given the opportunity to talk about issues that were not directly related to the pre-formulated questions, this method allowed a qualitative analysis of the trends of theanswers of interviewees for each topic discussed.Findings: In this section we’ll start by seeing how the BI of Taguspark is organized andhow it delivers value to its incubatees, through the resources it offers and how is thevalue of these resources perceived by entrepreneurs. Then we’ll focus on networking, tofind the different types of networking that take place in Taguspark, namely howorganized and spontaneous networking happen inside of the park, and how firms drawbenefits from it. 10
  12. 12. Finally we’ll see that, while resources are fairly valued by most entrepreneurs,the networking that results from physical proximity is commonly held as the mostcritical element in the incubation process, and is among the main advantages from beinginstalled in the park. Figures 1 and 2 give us a starting point to understand the organizational aspectsof the business incubation programs of Taguspark, as well as the internal networkingaspects, to which will come back further down this section. Fig. 1: First incubation program – incubator of ideas Fig. 2: Second incubation program – business incubator Taguspark Building Taguspark Building Building Building Building Building Incubator of ideas Incubator of ideas Established firms Incubated firms Universities and R&D institutions Connections between incubatees and Connections between incubatees established firms From the different types of entities present in the park, this study focuses on theS&T based firms, more specifically on the relationships between incubated and maturefirms. 11
  13. 13. The resources offered by the BI of Taguspark and the way it is organized differfrom one incubation program to another. In this study we’re focusing on the “incubatorof ideas program” and the “business incubator program” which, from now on will bereferred to as first and second incubation programs, respectively. In the first incubation program, incubated firms are installed in the samebuilding, as observed in Figure 1. Resources offered to incubatees in the first incubationprogram include workspace in a shared room, during up to 6 months, with services likeinternet access or telephone, at below-market rates, support and orientation fordeveloping a business plan and legal constitution of the firm, counselling and trainingfor entrepreneurs and help in accessing funding sources. In spite of accounting for only a small percentage of the duration of theincubation process (6 months out of a maximum of 9 years), the first incubationprogram and the support received during this period were the most valued by incubatedfirms, in terms of “tangible” support services. In the opinion of entrepreneurs, ingeneral, this support contributed to a faster and more successful start-up process, once ithelped setting the grounds for “building and planning the future of the firm” andallowed a “smoother start in terms of costs”. Firms graduating from this program are given the choice to move to the nextprogram. Unlike the incubator of ideas, firms in the second incubation program aren’tclustered in a specific room or building. Firms rent an office that fits its needs, whichcan be located anywhere in the park, as observed in Figure 2, according to a simplematching of space required and space available, being mingled with the other firms ofthe park, of different businesses, dimension, and maturity levels. In this phase, theincubator is no longer a defined physical space, but rather is like an entity that providesresources to incubatees. According to the incubator staff, firms in this program benefit 12
  14. 14. from incubation resources that include discounts in the rents paid for their offices,support from the Intellectual Property Office, if needed, free access to the resources ofthe Taguspark library and information received from the incubator partners’ network. Although for some of the entrepreneurs, including those from the ex-incubatedfirms, the support received on this program was fairly valued, for the majority of theinterviewees of incubated firms, no benefits were perceived in this phase. When asked ifthe firms had benefited from discounts on the rents of their first offices, entrepreneurshad a vague perception of these discounts and couldn’t measure the actual value of thisbenefit. Several authors had discussed that a gap often exists between the actual supportoffered by incubators and the way firms experience the value of that support. This hasbeen evident by the statements of the majority of the interviewees. Not being as tangiblea way of support as logistics or business advisory, benefits like discounts are not asvisible to firms when not clearly communicated. Entrepreneurs from incubated and mature firms, in general, felt that theincubator had a rather passive attitude in what concerns the provision of services tofirms. Firms on the second incubation program felt that the Incubator was distant fromthe firms. Moreover, it was referred by 3 interviewees that during the first months ofthe activity of the firms, managers spent most of their time gathering their first clients,suppliers and partners, not being able to focus on the core activity of the firm. Here,entrepreneurs felt a lack of support from the incubator as well. In spite of being commonly agreed that the resources offered by the incubatorhad a fairly important role in the first years of existence of incubatees, the aspects thatwere mentioned by all interviewees, from incubated, ex-incubated and mature firms, as 13
  15. 15. the main advantages from being in the incubator and in the park, in general, were theproximity with other entrepreneurs (and the favourable environment for networking thatcomes with it) and the recognition associated to the name of the park and to thepresence of firms with good reputation in the market. In other words, the networkingaspects were more valued than the actual support services. When addressing networking in Taguspark, some remarks must be made in whatconcerns the definition of internal and external networks, which result from theorganizational aspects of the incubator, especially the second incubation program. The fact that the incubator doesn’t present physical boundaries that wouldotherwise allow a clear distinction between the inside and outside of the incubator, andthe cohabitation of incubatees and established firms in the same buildings add somenew dimensions to the called internal networking. as given by Lyons (2000) [31] When referring to internal networking in Taguspark, we’ll not only consider therelationships between incubatees, but also the relationships between incubatees andestablished firms in the same building. An additional distinction will be made betweenbuilding-level internal networking (within the same building) and park-wide internalnetworking (between all entities in the park). The external networking that concerns the relationships between the firms of thepark and entities outside the park, despite being believed to have an equally importantrole in the development of young firms and in the process of transition of these firms tothe outside of the park, was left out of the scope of this study. Internal networking in Taguspark takes place under various forms. On the onehand, there are events organized by the park in order to promote the interaction betweenentrepreneurs and other entities at a park-level, either formally or informally. On the 14
  16. 16. other hand, networking happens spontaneously, fostered by the close physical proximitybetween firms that share buildings and corridors. As for the initiatives organized by the Incubator to promote the informalinteraction between the firms and other entities of the park, we’ve found that some havetaken place, either on a regular basis or in special occasions. Examples of these are theseminars and conferences, the “breakfasts at the park”, the “mini-feira”, the “Safari” inMafra or going to the Circus on Christmas. These events were opened to everyone inthe park and were seen as valuable opportunities for knowing more about the firms ofthe park and establishing contacts in an informal manner. Nevertheless, all intervieweesreferred that these initiatives were very sporadic, and should take place more regularly,while others mentioned that these events usually had little attendance, seeming apparentthat not all entrepreneurs were interested in engaging in such networking activities. In terms of organized events to promote formal interaction betweenentrepreneurs, one of the interviewees, whose firm was started in the Incubator in 1997,mentioned that the Incubator had a very important role in bringing firms into contact, byorganizing a meeting with all the incubated firms and a couple of other meetings withmature firms, considered potential partners. On the contrary, the firms formed morerecently didn’t benefit from this kind of formal mechanism of networking and neitherdid the ex-incubatees and mature firms interviewed. Apart from this example, mostinterviewees answered that there weren’t any formal mechanisms of networking, butrather networking depended on the entrepreneur’s initiative alone. Taguspark holds a database of all the firms of the park, which contains adescription of the firms, their industry, activity and contact details. The aim of thiscalled search engine is to serve as a tool for networking, allowing firms to know moreabout the firms established in the park and establish contacts. To access this search 15
  17. 17. engine firms come to the central services of the park and ask for the sought after serviceor firm. However, the value of this tool has been questioned. While some of theinterviewees had received useful contacts through the search engine, others saw it as asource of misdirected advertising. Conversely, a different type of networking seems to be assuming an increasingimportance. When incubatees move to offices in the various buildings of the park(figures 1 and 2) they are given the opportunity to interact directly with the more matureand experienced firms. The sharing of buildings and corridors, by itself, and thespontaneous networking that happens as a result of this proximity was unanimouslyheld as doubtlessly valuable to all firms in the park. While the interaction and cooperation among incubated firms have already beenfairly discussed [32], the cohabitation between incubatees and established mature firmsappears as a singular characteristic of the object of this study. This shift of environment has brought both negative and positive effects in termsof networking. On the one hand, it deteriorates the linkages between incubatees. On theother hand, it raises a discussion related to the synergies and networking advantages thatmight be derived from the cohabitation between incubatees and established firms. Findings regarding this topic reveal rather dissonant answers from incubatees.While some had experienced advantages from this cohabitation, others didn’t feel like itbrought any benefit. The first group stated that this interaction has been fundamental for the growthand development of the young firms, allowing entrepreneurs to share their experience,solve problems, debate ideas and receive advice from more experienced entrepreneurs. 16
  18. 18. When problems or challenges emerge, young entrepreneurs can walk across the corridorand knock on the door of another firm and seek help from more experienced firms. Conversely, those who didn’t feel any benefit from the cohabitation with maturefirms in the same building, argued that there wasn’t any effort from the incubator to putthese firms into contact, and that most buildings of the park lacked common areas wherepeople could meet informally. Firms in peripheral buildings argue that the areas thatpromote the interaction of people in the park and concentred in the central building(cafeteria, central services, etc), leaving firms installed in other buildings outside ofthese “centres of informal internal networking”. In the same way, the experiences of mature firms regarding the cohabitation withincubatees haven’t been unanimous. For some of the interviewees from mature firms, there actually exist mutualbenefits from the cohabitation of incubated and mature firms. The environment ofproximity stimulates the interaction and sharing of experience and knowledge betweenthese two groups of firms. For some mature companies, incubated firms constituted agroup of potential clients, while others see them as potential partners. According to oneinterviewee, “young entrepreneurs sometimes present interesting and innovativeprojects that allow leveraging the innovation potential of a mature firm and, at the sametime, supporting and leveraging these firms’ position in the market, which would bemuch more difficult to achieve without this relationship”. Another proof of theadvantages drawn from this closeness is the fact that one of the ex-incubated firmsinterviewed maintained commercial relations with firms of the park during the processof leaving the park and still, two years passed. 17
  19. 19. In contrast, another interviewee argued that younger firms are mostly focused ondiscovering their first clients and not so much on establishing partnerships with otherfirms, whose business may eventually complement its own. As a general overview of the findings just exposed, we’ve seen that, more thanservices and resources that allow a reduction of costs in the first years of existence of afirm, entrepreneurs value networking as an advantage to their firms, and here,networking with established firms in close physical proximity. Nevertheless, it seemslike physical proximity, by itself, is not enough to forge a kind of interaction that mayresult in partnerships between firms.Discussion: Pointed out as the most relevant distinguishing feature of the BI of Taguspark,the fact that incubated firms live next doors to mature firms raises a discussion about theexistence of synergies between these two groups of firms and how this can contribute tothe efficiency and success of networking in the incubation process. This feature appearsas an innovative approach towards the called networked incubator, as discussed byHansen et al. (2000) [33] and Bøllingtoft and Ulhøi (2005) [34], among others.Furthermore, it leads to a redefinition of the concept of internal and externalnetworking, as defined by Lyons (2000) [35]. Referring back to figures 1 and 2, the first incubation program is what resemblesthe most to the traditional concept of incubator (figure 1). Entrepreneurs are placed inthe same room for 6 months, where they forge relationships among them which, allied 18
  20. 20. to the resources provided by the incubator, allows faster problem solving, discussion ofideas and learning, accelerating the process of development and growth of these firms. This scenario takes a totally different appearance when firms move to the secondincubation program, which accounts for the longest part of the incubation process. On this transition, we observe that there is a significant variation in the conceptof internal networking as previously defined by Lyons (2000) [36], in a simple way, asthe linkages between incubatees inside of an incubator. In the described situation, thereare some factors that add to the complexity of this concept: in the incubator ofTaguspark there are two levels of internal networking. Therefore, when addressingnetworking in this S&T park, 3 dimensions must be considered: 1) externalnetworking; 2) “park-level” internal networking and 3) “building-level” internalnetworking.External networking: As for the concept of external networking, here defined as the linkages betweenentities of the park and entities outside the park, in terms of physical location, littlechange is seen in the transition from the first incubation program to the second (figures1 and 2). In other words, whether incubatees are gathered in one place or mixed withmature firms, external networking, as a concept, remains the same. However, a discussion is raised concerning the extent to what do incubateeshave privileged access to external networks as a result of their relationship with maturefirms in the buildings of Taguspark. Yet, such discussion will not be further explored inthe present paper. 19
  21. 21. Park-level internal networking: This dimension of internal networking represents the linkages between all theentities within the park, regardless of the building they’re settled in. These include thelinkages between incubatees that were once under the same roof and are now in separatebuildings and other linkages involving incubatees, mature firms, universities and R&Dinstitutions installed in the park.Building-level internal networking: Considered the most relevant in terms of its potential impacts on the networkingadvantages to incubatees, this dimension has been given the central position in thispaper. Unlike the traditional concept of internal networking in an incubator, here agiven incubatee is not only surrounded by other incubatees, but also by establishedfirms, usually bigger and more experienced. According to social capital theory, applied to the entrepreneuring process,entrepreneurs need to get in contact with other people who can provide complementaryknowledge and resources [37]. Moreover, this theory states that such activities as theexchange of advice and information and access to resources are influenced by therelative position of these actors within social networks. Having more experienced firms within the same building, increases the potentialbenefits incubatees can draw from this network. In this situation, not only incubatees areplaced in the center of a network (a group of firms under the same roof), but also thisnetwork is enriched by the presence of mature firms. The resources that these maturefirms have to offer incubatees are potentially greater than those offered by anotherincubatee, who struggles with similar obstacles. 20
  22. 22. As it has been discussed by Hansen et al. (2000) [38], the cooperation betweenstart-ups and mature firms is very likely to bring mutual advantages. On one hand, start-ups benefit from mature firms’ experience and knowledge of a certain market, businessor technology, while the latter benefit from the fresh entrepreneurial drive of the first.As confirmed by two of the interviewees from mature firms established in Taguspark, itrepresents a win-win situation, where both mature and young firms benefit from thisenvironment of close proximity, which reveals that some of the established firms doexperience these synergies in Taguspark. The potential for deriving advantages from this cohabitation between young andmature firms in Taguspark has been recognized by both of these groups of firms.Nevertheless, the dissonant findings regarding these benefits reveal that there may besome ingredients missing, which prevent this potential to be fully explored. As can also be seen in figures 1 and 2, the transition from the first to the secondprogram affects the relationships between firms. On the one hand, young firms that hadspent their first few months of existence in close proximity with other incubatees in theincubator of ideas are then scattered throughout the park, weakening their links ofcommunication and cooperation, and even causing them to lose contact with each other.On the other hand, incubatees are given the opportunity to create new links with moreexperienced firms. The way individuals value these two types of linkages and thebenefits that they actually draw from each one cause individuals to perceive theadvantages of this new environment differently. Furthermore, social capital theory gives a valuable contribution in explainingwhy are some entrepreneurs benefiting from this cohabitation, and others are not. Usingthe framework created by Bøllingtoft and Ulhøi, (2005) [39], the factors that facilitateor hinder networking between incubatees and mature firms can be divided into 2 types: 21
  23. 23. 1) factors related to the construction of the incubator and 2) factors connected to theindividuals. The first group of factors is concern the way the incubator is organized. Amongthese is the number of firms in a given building. On the one hand, it seems to be moredifficult to establish social relationships with 60 individuals than with 15. On the otherhand, as the number of firms increase, individuals tend to undervalue their role in thiswhole process, reducing their efforts towards networking. Another factor that may explain the success of networking at a building-level inTaguspark is the criteria used to place firms in the buildings. Bøllingtoft and Ulhøi(2005) [40] state that, in general, potential synergies come from complementarity ofskills and competencies. Thus, the higher is the complementarity of skills andcompetencies between firms in a given building, the greater will be the potential fordrawing benefits from cohabitation. The existence of common areas within each building where entrepreneurs canmeet spontaneously and the implementation of initiatives that foster the encounter ofpeople of the same building are examples of ways of fostering the creation of socialrelationships that overtime may turn into business relationships. While these factors can explain, to some extent, why is or isn’t networkingtaking place, they do not explain why, in the same conditions, some people do benefitfrom this networks and some not, once these factors are imposed equally to all firms.Thus we must take a look at the factors that are related to the individuals. One important characteristic of networks that stands out is that they are notgiven, but created by individuals. Moreover, individuals understand and value networksdifferently. As a consequence, given the same set of conditions, it is possible that oneentrepreneur builds a solid and useful network, while other just sits in his office 22
  24. 24. thinking it’s not worth spending time and energies on networking activities.Consequently, the success of networking between mature and incubated firms withinthe same building depends much on how individuals are motivated to establish linkageswith each other. Furthermore, a solution-driven kind of interaction cannot be established byimposition, but rather by the initiative of entrepreneurs. According to social capitaltheory, the actual forces behind this interaction are not the economics-driven orcontractual relationships, but rather the social relationships and trust between people,which will lead an entrepreneur to walk across the corridor and ask for advice andcooperation from another one when a problem arises.Conclusion: This study has allowed confirming some of the early assumptions, and raisingother discussion topics. Physical proximity between incubatees and mature firms, by itself, represents animportant advantage to both groups of firms, for the advantages it brings in terms ofspontaneous networking. Nonetheless, the incubator should have a proactive role inincreasing the chances that these firms actually come into contact. Having in mind that not all the variables are manageable by the incubator, someissues have been identified as possible determinants of the success of networkingbetween firms of the same building, which can be used by the incubator of Taguspark. The attribution of offices to incubated firms in the park seems to be solely basedon a criterion of space needed/ space available, “like any Real Estate project” in theopinion of some of the interviewees. However, in order to increase the probability offirms that share buildings to become partners, some logical criteria should be used. 23
  25. 25. Among these criteria could be the industry in which the firms operate, the technologyused or the horizontal or vertical complementarity of its businesses, skills andcompetencies. This requires that the incubator knows very well the firms that are in theincubation programs and in the park as a whole. Besides, the incubator should use thisknowledge to identify possible opportunities for synergies, and put the firms in contact– entrepreneurs are too busy with their day-to-day activity to take a look around and dothis work themselves. A solution-driven spontaneous interaction requires the existence of social linksand trust between entrepreneurs. The creation of common spaces in all buildings wouldbe one of the ways to improve the conditions for entrepreneurs to create this type ofnetworks. Such common areas would allow people from the whole building to meetover coffee or a meal, creating an environment of actual closeness, where people knowthe faces behind the firms established in the building. Additionally, mechanisms of organized networking need be implemented inorder to foster the interaction betwen firms. As discussed by Hansen et al. (2000) [41],and confirmed by Bøllingtoft and Ulhøi (2005) [42] and Mcadam (2006) [43], theimplementation of mechanisms of organized networking is crucial for the success ofnetworking in an incubator. Moreover, the initiatives that have been organized so far byTaguspark, namely the “breakfasts at the park”, were highly valued by most of theentrepreneurs interviewed, which reveals a fair openness to this kind of initiatives. Concerning the resources offered by the incubator, a few remarks should bemade. It is important that the incubator works on eliminating the gap that was identifiedbetween the actual support offered by the incubator and the way firms experience thevalue of that support. If the different programs and the resources provided to each firm 24
  26. 26. aren’t clearly communicated, entrepreneurs will undervalue these resources and feel likethe incubator is not putting much effort on supporting them. Still on the resources and services offered, the incubator should use itsexperience in incubating firms to anticipate the challenges faced by the firms, and offerits help actively rather than waiting for the firms to come ask for it. In futures studies, other dimensions of networking should be explored, namelythe relationship between firms and the universities installed in the park. Some authorshave stated that this relationship hasn’t had the expected effects in terms of synergies.These statements were confirmed by the data collected for this study. Only 3 of theinterviewees felt there were real benefits from the proximity with universities in thepark, which usually came from the fact that students were often recruited for part-timejobs. However, one entrepreneur mentioned that there have been initiatives by one ofthe universities to have students participating in projects with the firms of the park,which shows that some efforts are being made in order to explore the potential of thisproximity between firms and universities. Studies should be undertaken on this subjectin order to understand the factors that facilitate and hinder this relationship and in whatways could it be enhanced. Another important dimension that should also be given attention is the externalnetworking. It was found that the park, through its “competence centre”, maintains anetwork of contacts which is composed of research institutes, universities, businessincubation associations, companies, among others. In order to establish the connectionbetween the firms of the park and this network, the competence centre disseminates theinformation received from this network, which is considered interesting for the firms inthe park. Apart from this mechanism, it seems like little more is done concerning 25
  27. 27. external networking, which has been considered by several authors to be as important asthe internal networking explored in this paper. Still concerning external networks, this paper raised a discussion about the roleof cohabitation with mature firms in giving incubatees privileged access to externalnetworks. We suggest that this topic should be explored in future studies. Furthermore, comparative studies between incubators should be carried out, inorder to understand how networking takes place in different Portuguese businessincubators. On the research process for this study, contacts were established with 6other business incubators of S&T parks nation-wide; however, the progress of theresearch process lead to focusing on Taguspark alone, leaving this comparison outsidethe scope of the study. 26
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