Assessing The Needs Of Ntbfs

Int Entrep Manag J (2006) 2:173–187 DOI 10.1007/s11365-006-8683-1

Assessing the needs of new technology based firms (NTBFs): An investigation among spin-off companies from six European Universities Paul Kirwan · Peter van der Sijde · Aard Groen

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Springer Science + Business Media, LLC 2006

Abstract New technology based firms (NTBFs) play a major role in the development and commercialisation of new technologies and the development of national economies. Using an entrepreneurship-in-networks approach, this paper examines the early stages of the development of these companies, i.e. from opportunity recognition through opportunity exploration. Case study data was collected on 22 NTBFs from six European universities. The findings highlight specific needs related to five functional areas of importance to NTBFs, namely: R&D, market development and sales, organisation and governance, finance and administration, and production/operation. These needs are reported for both the pre- and post-foundation phases and can thus be utilised by both entrepreneurs and support agencies to guide the development of NTBFs. Keywords Entrepreneurship . High tech companies . University Spin-off . Networking . Need assessment New technology based firms (NTBFs) have a major role to play in the development and commercialisation of new technologies (Elfring and Hulsink, 2001; Hulsink and Elfring, 2004), which in turn have a major impact on the development of national economies. New business creation and entrepreneurial “churning” are increasingly recognised as being among the most important drivers of a country’s economic development and growth (During et al., 2001; Reynolds and White, 1996). Indeed, technology based ventures contribute disproportionately compared to non-tech based ventures with respect to job and wealth creation (Kirchhoff, 1994). Madsen et al. (2004) suggest a relationship between a country’s ability to exploit opportunities created by technological advances (e.g., in information technology, telecom, bio/life sciences, Microsystems/nano technologies) and its wealth. P. Kirwan ()· P. van der Sijde · A. Groen Nikos, University of Twente, P.O. Box 217, 7500 AE Enschede, The Netherlands e-mail: [email protected] P. van der Sijde e-mail: [email protected] Springer

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The increased recognition of the importance of NTBFs is reflected in the various support mechanisms created by national, regional and local government agencies to assist these companies in their development and growth. These support agencies and initiatives are easily identifiable in practice and in the literature (see e.g., Kirwan et al., 2005). NTBFs and their entrepreneurs have to deal with the usual problems associated with the launching of a new venture, such as accumulating resources, building reputation, finding partners and attracting customers (Autio et al., 1997; Brush et al., 2001; O’Farrell and Hitchens, 1988). Given that the market for the majority of these firms is international these problems, although inherent in most newly established ventures, are possibly perceived even stronger by NTBFs. There are several reasons for this. First, their high tech nature often implies that significant investments have to be made in R&D, in order to create high quality, innovative applications that meet international market needs. These resources cannot be used for other purposes, like marketing or establishing a distribution channel. Furthermore, initiating global activities often means extensive travelling abroad to obtain information about specific markets. Such travels take up not only financial resources, but also time. Often the entrepreneur cannot dedicate sufficient time to this, as he/she has to take care of other issues. Also, setting up international activities requires knowledge of international markets and an international network that, usually, has not yet been established at this early stage in the firm’s development. These activities all require substantial resources (Diamantopoulos and Inglis, 1988) and NTBFs are notoriously resource-poor and may lack the necessary time, capital and capabilities to prepare international markets adequately (Doutriaux, 1992). These problems can be overcome through effective networking e.g. the network provides the entrepreneur with support, contact and credibility (Ostgaard and Birley, 1996; Welter and Kautonen, 2005) and early stage high tech firms with limited resources employ “hybrid” structures in order to obtain leverage from external resources (Saarenketo, 2003). However, while problems associated with starting a new venture have been outlined in the literature, what is lacking is a study into the specific needs of these high tech start-up firms. In a literature search only one limited study (14 interviews with Dutch techno-starters) Groen et al. (2005) was found; this paper aims to bridge that gap. Using a specifically created case protocol, some 22 case studies have been collected in 6 European countries by the consortium members of the European Union project GlobalStart.1 The subject of these case studies is high technology spin-off companies with global potential. These case studies were analysed using an ‘entrepreneurship-in-networks’ (EiN) approach to assess the needs of the high tech companies, especially those needs over the starting phase of the company, i.e. from opportunity recognition to opportunity exploration. This research has both theoretical and practical implications. From a theoretical perspective it deals with an area that has been relatively neglected in the past and from a practical viewpoint the findings of this research will be informative for organisations providing support to high tech academic spin-offs.

1 The authors would like to acknowledge the participation of the GlobalStart consortium members in conducting the case studies. The GlobalStart consortium consists of: Brno University of Technology (Czech Republic), Katholieke University Leuven (Belgium), Universidad Miguel Hern´andez (Spain), University of Salamanca (Spain), University of Tartu (Estonia), University of Twente (the Netherlands), Wales Spinout Programme (Wales, United Kingdom) and the University of Warwick (England, United Kingdom). For further information on the GlobalStart project see www.globalstartups.org.

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Entrepreneurship-in-networks approach Entrepreneurship can be seen as the process in which actors interact in such a way that opportunities are recognised, preparatory steps are taken in order to exploit the recognised opportunity, and, subsequently value is created (Shane and Venkataraman, 2000, 2001; Singh, 2001). Van der Veen and Wakkee (2004) used this process approach to structure their review of more than 100 articles. In the first stage of the entrepreneurial process, opportunity recognition, the discovery and evaluation of opportunities are the key elements. Initial ideas are developed into fully-fledged business opportunities. The second step is to match necessary resources and perceived market needs in order to enable exchange with the market. This preparation leads to the translation of the business opportunity into a concrete business concept. The opportunity exploitation results in value creation when the concrete offering is absorbed by the market in the third stage of the process. The entrepreneurial process, as depicted in these three stages, is not a linear process. Changing circumstances may require the entrepreneur to alter or come back to decisions made in an earlier stage. The course of action is influenced by the environment and sensitive to a range of variables. And although this model of the entrepreneurial process is opportunitybased, the entrepreneur is the driving force throughout the process. Yet, the entrepreneur is not an independent actor. Rather, we regard the entrepreneur as being embedded in a social context; the entrepreneur needs to interact with other actors to exchange information and resources to exploit the opportunity and create value. Recognising that the entrepreneurial process includes multiple-actors and multiple levels of aggregation, where actors interact and construct new technologies into new business, a multidimensional framework inspired by the work of Parsons on social systems theory (e.g., Parsons, 1951, 1977; Groen, 1994; Groen et al., 2002) is used here. A basic axiom is that entrepreneurs act purposefully in interaction with other actors (see also Granovetter, 1985, 1992). Originally, a social system was defined by Parsons as follows: “. . . a social system consists in a plurality of individual actors interacting with each other in a situation which has at least a physical or environmental aspect, actors who are motivated in terms of a tendency to the “optimisation of gratification” and whose relation to their situations, including each other, is defined and mediated in terms of culturally structured and shared symbols” (Parsons, 1964, pp. 5–6).

Four mechanisms are embedded in this definition: (1) interaction between actors; (2) striving for goal attainment; (3) optimisation of processes; and (4) maintaining patterns of culturally structured and shared symbols. Each of these mechanisms produces its own type of processes, with its own specific type of capital needed. Each mechanism can be related to a specific “capital.” Striving for goal attainment (mechanism 2) is associated with the scope dimension, and deals with strategic goals strived for and the strategic capital needed. Optimisation of processes (mechanism 3) refers to the efficient organisation of entrepreneurial processes and is in that sense related to the scale dimension with money as the basic resource, i.e. economic capital. Skills and values, related to pattern maintenance and institutionalisation of shared symbol (mechanism 4), are embodied in cultural and human capital, as they can be found in organisations, values, knowledge, skills, experience, and technology. Interactions between actors (mechanism 1), finally, is related to the social network capital. The central assumption in this theoretical framework is that enterprises will need sufficient ‘capital’ to be sustainable over time, implying that starting entrepreneurs need to have sufficient capital in all four areas to establish a viable enterprise. Springer

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Cultural Capital

Opportunity Recognition

Strategic Capital

Economic Capital

Opportunity Exploration

Opportunity Exaploitation

Social Capital

Fig. 1 The entrepreneurship-in-networks approach (Adapted from Van der Veen and Wakkee, 2004)

Proposition development From the central assumption of the EiN approach, it can be seen that start-up entrepreneurs need to acquire a ‘certain’ level of capital to be sustainable over time, therefore it can also be said that starting enterprises need to cover these four dimensions in order to establish a viable enterprise. This concept is similar to Klofsten’s (1992, 1998) business platform, where starting enterprises need to reach the ‘highest’ level on eight core cornerstones to establish a viable enterprise. From previous research into the starting processes of NTBFs and their networking activities (Kirwan et al., 2005; Wakkee, 2004), it can be seen that these firms often rely on a relationship with a key partner or partners (multiple) key partner(s)2 that provide the firm with both desirable capitals and/or access to these capitals. This leads to the first proposition: Proposition 1. The initial capital contributions of the starting entrepreneur and the key partner(s) will provide a sufficient core base of capitals to establish the venture. However, the EiN approach is a dynamic process, so having reached a base level the firm continues to grow and as it does so new capitals are required to address the firm’s growth and development needs. The existing ‘base’ capital will continue to grow through everyday business activities; however, these are not always sufficient to cover the development of the company. This leads to the second proposition: Proposition 2. Post foundation companies have needs in those areas where specific capitals are lacking.

Methodology Following a specifically created protocol a series of case studies was conducted among the consortium members of the European Union project GlobalStart. The case studies explored 2 Key partner(s): In her dissertation Wakkee (2004) proposes that the presence of a domestic or international partner with international contacts is a critical success factor for global start-up firms. In this paper we refer to that partner as the “key partner,” i.e. that partner who contributes most to the development of the firm. Yli-Renko et al. (2001) studied the effects of key customer relationships examining the effect of the largest customer, i.e. the one that accounts for the highest proportion of sales revenue, on knowledge acquisition and knowledge exploitation. In this paper the key partner relationship is viewed in similar terms, however, its relevance is focused on the acquisition of further “capitals.”

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Table 1 Overview of the case companies Industry Consortium partner

Nano/MST

Biotech

Laser

Telecom software & IT

Catholic university of leuven (Belgium) Spinout wales (Wales) University De Salamanca (Spain) University of Tartu (Estonia) University of twente (Netherlands) University of warwick (England) Total (22)

2 0 0 0 2 0 4

3 0 1 3 0 1 8

0 0 0 1 0 1 2

1 3 0 1 2 1 8

the specific problems encountered during the development of the firm, from pre-venture to the present day, and the key factors which have helped them succeed based upon available university and regional support. The method employed was interviews with the founding entrepreneurs, supported by document analysis of secondary sources. The current analysis includes 22 technology firms representing different industry sectors based in 6 different countries (Table 1). The consortium members selected their case studies based on the expert opinion of the directors of their respective technology transfer offices.3 These people are deemed as being best placed to judge the global potential of the companies as they have regular contact with the spin-off companies. All of the interviews were reported in English and in a universal manner. The analysis of the case studies was conducted by a central source, which communicated with the individual partners the need to collect further data to ensure the homogeneity and comparability of the case studies. Results To assess the needs of the companies, the case studies were analysed with respect to five critical functional areas: research and development; production/operation; market development/sales; organisation and governance; finance/administration. The specific needs identified in each area were then related to the capital requirement which they address; these results are reported in Tables 2–6. Identified needs from the case studies The analysis of the cases focuses on five functional areas of relevance to starting entrepreneurs menioned above. The following section gives a general overview of the needs as related to each of these functional areas. 3

The Twente case companies were taken from the list of TOP (www.utwente.nl/top) companies formed after the 1st of January 2000. This gave a possible sample of 56 firms. Following discussions with the two directors of the TOP programme this list was reduced to 11 firms, which because of their technology/product offerings and their knowledge of the companies and their business plans, the directors deemed to have global potential. To further assist in the selection process the authors used the 12 propositions as to what constitutes a global start up (see Wakkee et al., 2004) to further examine the global potential of these firms; this was completed using company websites and other available public information. As this published information did not in all cases provide sufficient to assess the global potential of the firms it was decided to carry out preliminary telephone interviews to ascertain the necessary information. Following these interviews four companies with global potential were chosen for in-depth study. Springer

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Int Entrep Manag J (2006) 2:173–187 Table 2 Specific research & development needs related to the ‘capitals’ Specific needs identified

Capital addressed

Performing of technological due diligence (assessing how unique the company’s technology is in the world/on the market) Creating an appropriate IP strategy (global) Developing a balanced innovation strategy (including R&D roadmap, balanced portfolio of short, medium and long term R&D objectives) Identifying and providing access to specialised R&D equipment and facilities Identifying and relating to (global) networks of “world-class” scientists, experts, technical and/or industrial partners

Cultural Strategic Strategic Cultural Social

Table 3 Specific market development/sales needs related to the ‘capitals’ Specific needs identified

Capital addressed

Screening and selecting target markets/market segments (market intelligence) Identifying lead customers Defining and implementing the appropriate marketing mix for targeted market segments: products, price, distribution and promotion Developing an appropriate sales strategy and structure (including aftersales and service) Developing adequate contractual arrangements related to IP/liabilities, (with customers and distributors)

Strategic Strategic Strategic Strategic Strategic

Research and development For early stage high tech firms, knowledge is possibly the single most important resource (Arenius and Autio, 2002). Acquisition of valuable know-how, learning and keeping up to date with the newest evolutions in the field are essential ingredients for success in these firms. It is important, therefore, that the founding team consists of people who are authorities in their fields of research as they provide scientific excellence, reputation and networks of scientific and technical partners to the firm. The majority of the case study companies are based on university knowledge or knowledge gained by the founder(s) while working at a university research group. For some of the case companies, especially in the biotech firms, the global network of “world-class” scientists, partners, etc. are already in situ as the founding Table 4 Specific production/operation needs related to the ‘capitals’ Specific needs identified

Capital addressed

Assisting/supporting the “make or buy” production decision Setting-up production facilities abroad Setting-up logistic infrastructure Selecting the appropriate location of facilities (taking into account local legislation related to industry, environment, etc and local support/incentive schemes) Identifying and selecting relevant partners for outsourcing Developing adequate contractual arrangements related to IP/liabilities (with production partners)

Strategic Strategic Strategic Strategic

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Strategic Strategic

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Table 5 Specific organisation and governance needs related to the ‘capitals’ Specific needs identified

Capital addressed

Formation of a Board of Directors with international management experience Formation and development of a senior management team with international experience Recruiting and selecting “foreign” employees Developing adequate HR administrative procedures and arrangements (incl. tax/legal aspects) Identifying and developing appropriate arrangements (VAT, legal issues, etc) Developing management capabilities

Cultural Cultural Cultural Cultural Cultural Cultural

Table 6 Specific finance/administration needs related to the ‘capitals’ Specific needs identified

Capital addressed

Identifying, selecting and convincing investment/finance partners during the –pre-seed phase –seed phase –growth phase Identifying and accessing grants/subsidies for export, R&D, etc Identifying, developing and installing accounting/administrative/legal procedures pertaining to (global) activities (VAT, legal, import/export regulation, etc)

Economic

Economic Cultural

entrepreneurs are these experts. From the cases the other identified needs related to logistical and strategic implementation of research and development issues (see Table 2). Market development/sales The case studies revealed that marketing, and especially international marketing, is a problem area for the start up companies (see Table 3). Developing adequate sales and marketing strategies can be problematic for all start up firms. The firm must be able to see possibilities on the market related to customers’ needs and desires and have the capacity to exploit them within the firm’s current context (Klofsten, 1998). This is especially true for high tech firms whose domestic market is limited because of their technology offering; therefore these firms need to gather information on both foreign and domestic markets, customers and competitors. Rialp-Criado et al. (2002) claim that market knowledge and market commitment are important ingredients for a new venture’s success. Oviatt and McDougall (1995) have suggested that one way in which new ventures might overcome the liability of smallness and newness is by being the first to market with a distinctively valuable product or service; there is ample evidence of this in the case companies. Production/operation Little is written or known about the production decision of NTBFs in the international entrepreneurship literature. The literature suggests that internationalisation is more focused on commercialisation of products and services rather than production (Burgell and Murray, 2000). From the cases it can be seen that production requirements differ among start-ups Springer

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depending on the technology used. Many companies spend their early years focused solely on research, product development and testing, with no requirement (yet) for large production facilities. The data shows several companies with manufacturing requirements in their early stages and that these companies have employed several different solutions to tackle their needs with respect to both technical and product development and design and also with regards to manufacturing decisions. Some of the methods employed by the case companies include outsourcing to partner companies; licensing the technology in; contracting university staff; and, entering into OEM (original equipment manufacturing) agreements with international companies. Some of the more specific problems relating to these decisions are outlined in Table 4. Organisation and governance Many early stage high tech firms, especially university spin-offs are started by technically skilled and motivated researchers, who are generally young and lack business and management experience (Luostarinen and Gabrielsson, 2002). In the case findings, the entrepreneurs, especially the first time starters and academic entrepreneurs, expressed that they had some deficiencies in dealing with organisational issues, and also especially the academic entrepreneurs intimated that they were lacking with respect to some managerial capabilities. To make up for this the entrepreneurial team should consist of people with complementary expertise across the various functions required in the venture (Rialp-Criado et al., 2002; Oviatt and McDougall, 1995). Another way in which early stage high tech companies supplement their lack of managerial and organisational skills is through the support of advisory boards (Luostarinen and Gabrielsson, 2002) and boards of directors. Boards of directors have been shown to assist start up companies with their organisational development, providing credibility to the company as well as providing advice and counsel, and playing stewardship and monitoring roles (Hambrick and D’Aveni, 1992; Keasy et al., 1994; Deakins and Boussouara, 2000). Many of the case studies provide examples of the arrival of new management members with complementary capabilities to those already existing in the firm. The case studies also clearly illustrate the evolutionary nature of boards of directors as new members are added and the ventures experience new organisational challenges. The specific needs relating to organisation and governance are illustrated in Table 5. Finance/administration New ventures traditionally begin with limited financial resources. Also, in the early stages, and especially for high tech firms which require heavy research and development investments, revenue flows from sales are often weak or nonexistent. Therefore, attracting sufficient financial resources is a prerequisite. A distinction can be made between three types of capital required at different stages in the firms’ development. Pre-seed capital is the capital required at the very early stage, i.e. before the foundation of the company; seed capital is required to perform further research and development and to develop the product after the establishment of the company; while growth capital is required for the production and/or the commercialisation of the company’s product and/or services. All of the cases highlight the need for funding at all stages of the company’s development and illustrate that the case companies look for funding from all available avenues, both public and private, e.g. international, regional and local venture capitalists; government backed funds; university funds, e.g. through technology transfer offices; national enterprise organizations; private equity; and, grants and Springer

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loans. Several companies also emphasised the need for having at least one cash generating product or service to help overcome the lack of funding at seed phase. The specific needs with respect to financing are outlined in Table 6. Summary of the needs The tables highlight the needs of the spin-off companies with respect to the five functional areas of importance to NTBFs. When matched to the capitals it can be seen that the needs address all four of the capitals. In three of the five functional areas there is a direct link to a specific capital: production/operation and market development/sales relate directly to strategic needs and organisation and governance relate to cultural needs. With respect to finance/administration and research and development there is evidence of multiple capital requirements: finance/administration highlights economic and cultural needs, while research and development has the most diverse requirements with strategic, cultural, and social needs reported. Form the case data it appears that social needs are under reported, with only one problem area highlighted, namely identifying and relating to (global) networks of “world-class” scientists, experts, technical and/or industrial partners. However, from previous research it is clear that these firms are embedded in social networks and through their relationships with their key partner(s) have access to both local and international networks, which are necessary for acquiring the required capitals (Kirwan et al., 2005).

Needs and the four capitals: Testing the propositions To test the propositions the following methods were employed. Table 7 reports on the capital contributions as identified in the cases. The first three columns, i.e. capital contribution of the founding entrepreneur(s), capital contribution of the key partner(s), and desirable resources introduced by contacts of the key partner(s) all relate to the pre start up phase and can be used to test the first proposition. The fourth column, capital contributions of other partners post founding, identifies those needs that arise as the company develops, which cannot be met by the capital contribution of the founding entrepreneur(s) and the key partner(s). Table 7 shows that in every case the entrepreneur(s) at least contribute cultural and social capital; these are the knowledge and experiences gained throughout their careers and their personal networks.4 Proposition 1 states that the initial capital contributions of the starting entrepreneur(s) and the key partner(s) will provide a core base to establish the venture. In 15 of the 22 cases it can be seen that the starting entrepreneur(s) and their key partner(s) provide a contribution to each of the capitals which proved sufficient to launch the venture. However, in seven of the cases there is evidence of the absence of a specific capital in the pre venture phase: in five of the cases economic capital is lacking and in one of these there is also a want for cultural capital and in the other two cases there is a deficiency in strategic capital. This would suggest that there is no support for the proposition and that the central assumption of the entrepreneurship in networks approach is flawed. With respect to the cases where strategic capital was lacking it can be seen that strategic input came post foundation from, amongst others, participation in a university spinout 4

Personal Network: Here the personal network of the entrepreneur includes all those family, friends, and acquaintances with whom the entrepreneur relates to primarily on a social level (Szarka, 1990) and those network contacts the entrepreneur has from his educational and work experience prior to starting the enterprise. Springer

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Cultural, Social Cultural, Social Cultural, Social, Economic Cultural, Social Cultural, Social Cultural, Social, Economic Cultural, Social, Economic Cultural, Social, Economic, Strategic Cultural, Social, Economic, Strategic Cultural, Social, Economic Cultural, Social Cultural, Social, Economic Cultural, Social Cultural, Social, Economic Cultural, Social, Economic Cultural, Social, Economic Cultural, Social, Economic Cultural, Social, Economic Cultural, Social, Economic, Cultural, Social Cultural, Social Cultural, Social

#∗

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

Social, Economic Strategic, Social, Cultural Strategic, Economic, Social, Cultural Cultural, Strategic Strategic, Social, Cultural Strategic, Social, Cultural Social, Strategic, Cultural, Economic Cultural, Social, Financial Cultural, Social, Financial Cultural Cultural, Economic, Social, Strategic Cultural, Strategic, Social Social, Strategic, Cultural Cultural, Strategic, Social Cultural, Strategic, Social Strategic, Social Cultural, Economic, Strategic, Social Cultural, Social, Strategic, Economic N/A N/A Cultural, Economic, Strategic Cultural, Social Economic, Strategic

Capital contribution of the Key Partner (KP)

Strategic Strategic Economic

Economic Economic Economic Cultural, Economic

Strategic Economic

Strategic Social, Economic Economic Economic

What’s missing? Desirable resources introduced by the KP∗∗ Economic Social, Economic, Strategic Economic Economic Economic, Strategic Economic Cultural, Economic Economic, Cultural Strategic, Economic Economic, Strategic, Cultural Strategic, Economic Economic Strategic, Social, Cultural, Economic Strategic, Social Economic, Strategic, Social Economic, Strategic Cultural Cultural, Economic, Strategic Economic, Strategic Strategic, Economic, Social Strategic, Economic, Social Strategic Strategic, Cultural, Economic

Capital contributions of other partners (post founding)

Post foundation

∗∗

were assigned numbers to protect the confidentiality of the case companies. The ‘what’s missing’ section is reported in italics and reports on the capital not present at the pre-venture phase. The desirable resources introduced by the key partner reports those resources gathered through contacts initiated by the key partner in the pre venture phase.

∗ Companies

Capital contribution of the founding entrepreneur

Pre venture phase

Table 7 Capital contributions pre and post foundation

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programme. Further, with relation to the five cases where the economic capital was missing, analysis of the cases reveals that economic capital was present at founding and it was even referred to as the start capital. In these cases the founding entrepreneurs were continuing their work in research groups during the pre venture phase. These firms were financed from a variety of sources, including venture capital funds (in three of the five cases the founding entrepreneurs were among the shareholders as, they did not have enough economic capital to start the venture) hence the official foundation occurred only once this outside finance was secured. The economic capital is reported therefore in the foundation rather than the pre venture phase. In the instance where there was a deficiency in cultural capital, this related to a transfer of intellectual property (IP) from the university, which occurred once the economic capital was secured and the company founded. These results suggest that a refinement of the proposition is necessary as the initial capital contributions of the starting entrepreneur(s) and the key partner(s) provide a sufficient core base to attract the necessary capitals to establish the venture. Proposition 2 states that post foundation companies have needs in those areas where specific capitals are lacking. As the company develops, so too does its store of capitals. New responses in strategy, development and implementation have to be addressed (Karagozoglu and Lindell, 1998), which require increased management capabilities such as skills, attitude, knowledge and behaviour. Increased management capabilities were seen to be realised through the recruitment of additional staff, and the appointment of new board members provided strategic support. The firms can further develop their own store of capitals through training, coaching and networking (Kirwan et al., 2005). However, the case companies do not produce enough capitals to be self-sufficient and in all cases there is evidence of other partners meeting the needs of the company at different stages after foundation. In 20 of the cases there is evidence of the need for economic capital post foundation. This comes from a wide variety of sources including, for example, both government supported and commercial venture capital funds, existing shareholders and research subsidies. This striking need for economic capital is to be expected as most of the firms were still in a development phase at foundation and were not generating income from sales. The second most reported need post foundation were strategic needs. This is not surprising as most of the starting entrepreneurs had academic backgrounds and generally lacked business and management experience, supporting the earlier observation of Luostarinen and Gabrielsson (2002). These needs were again met by a variety of sources including networking organisations, relationships with established industrial partners, government agencies and continuing cooperation with the university as a key partner. Cultural capital is reported as a need in only seven of the cases. Cultural needs are most often addressed with the recruitment of new staff and six of the firms report hiring in experienced staff, from new CEOs to technical staff, at different stages of development to improve the know-how within the company. A pertinent reason why cultural capital is underreported as a need is because the firms under observation are high tech firms that, for the most part, conduct their own research and technological development. One of the cases does outsource its technical development to the university, while another relies on development teams from outside the company. Social needs are again the least reported, only arising in six of the cases. Firms report joining networking organisations and taking part in European projects to gain access to potential customers and knowledge which they do not possess themselves. As mentioned earlier, one of the possible reasons why social needs are underreported is because these firms are already embedded in networks and their key partner(s) have provided access to the capitals or contact with organisations that have been able to provide the necessary capitals. Springer

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Another reason could be that because network development is organic the entrepreneurs do not report it as a need or even perceive it to be a need. The network evolves through everyday business dealings and only when a specific contact outside the network is required does the entrepreneurial team, realise that a need is present. All in all these findings provide support for the second proposition. It is quite clear that post foundation companies have needs in those areas where specific capitals are lacking.

Conclusion This article set out to examine the starting needs of NTBFs, specifically high technology spin-off companies with global potential, in their early development stages, i.e. from opportunity recognition to opportunity exploitation. The needs of these firms were first assessed with respect to five critical functional areas: research and development; production/operation; market development/sales; organisation and governance; finance/administration. These needs are summarised in Tables 2–6 where their relationship with the four capital areas of the EiN approach is shown. Needs in strategic, economic and cultural capital were well reported across the five functional areas, with social needs appearing to be underreported. This can be attributed to several factors including the presence of established international networks of the start-up entrepreneurs, through their previous work and life experiences, their relationships with key partner(s) providing access to both local and international networks, and the organic nature of network development, i.e. sometimes the problem is not identified until a particular contact from outside the network is required. Using an EiN approach two further propositions were examined relating to the accumulation of resources by NTBFs during their pre-venture (i.e. opportunity recognition and opportunity preparation) and post venture (i.e. opportunity exploration) phases. The central assumption of the EiN framework is that enterprises will need sufficient ‘capital’ to be sustainable over time, implying that start-up entrepreneurs need to have sufficient capital in all four areas to establish a viable enterprise. The first proposition stated, therefore, that the initial capital contributions of the starting entrepreneur(s) and the key partner(s) will provide a core base to establish the venture. Based on the case analysis it was found that the founding entrepreneur(s) and their relationships with key partner(s) did not provide sufficient resources to start the firm suggesting the following refinement to the proposition—‘the initial capital contributions of the starting entrepreneur(s) and the key partner(s) provide a sufficient core base to attract the necessary capitals to establish the venture.’ There was strong support for the second proposition, i.e. post foundation companies have needs in those areas where specific capitals are lacking. This result shows that although NTBFs continue to develop their own store of capitals post foundation, these are insufficient to be self sustainable and again the firms rely on relationships with other partners for their continuing development. NTBFs need to maintain and develop relationships with national and international organisations which provide access to stores of capitals or partners who can provide contact with such actors. These findings highlight the importance of networking activities for NTBFs, an area which has been under researched in both the entrepreneurship and international entrepreneurship literatures. The article has implications for both theory and practice. From a theoretical perspective little was previously known about the actual needs of NTBFs. The article has addressed these needs with respect to five critical areas to the firm across its early development stages, thus it adds to the body of knowledge in this area. However, the article also contributes to the development of the theoretical framework, i.e. the EiN approach, as it illustrates the Springer

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applicability of the framework for use in empirical research. From a practical perspective this article benefits both start-up entrepreneurs and support agencies, by providing a checklist for assessing needs at various stages of development. It also raises awareness of the importance of network partners for developing such firms and as such should encourage entrepreneurs to engage in active network development and support organisations to increase their network ties to provide optimal support. The study is not without its limitations, however, and one of them is that it includes just a subset of NTBFs, i.e. university spin-offs and two corporate spin-offs, whose parent companies originated from a university environment. Given the strong links with the university inherent in these firms it may be that the nature and importance of the relationship with the key partner, especially if it is a university research group or TTO, may be exaggerated. Further research is needed on a wider sample of firms to establish if this relationship holds for other types of NTBFs. Further research could also be conducted with respect to the needs of other start-up firms. Many of the needs highlighted are not specific to NTBFs and perhaps the study needs to be replicated with a group of non-technology based new firms to see which needs are shared, and what differences there are pre- and post- foundation and with respect to the range of organisations helping meet these needs. The highlighted importance of networking as a means for acquiring capitals also warrants further research. This research should longitudinally investigate the network development of different types of firms from multiple industries, over the course of the entrepreneurial process, in order to discover whether there are differences in the network development and if so how these differences impact on performance and overall success.

Acknowledgments The authors specifically acknowledge the contribution of Bart van Looy, Cathy Lecocq and Edwin Zimmermann of the Catholic University of Leuven (Belgium) with regard to their input to Deliverable 1.3 ‘Plan for Global Start-up Support’ of the GlobalStart project.

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