A Place to Grow

Innovation Related Links
A PLACE TO GROW

How Research Parks Facilitate the Creation, Development, and Success of Entrepreneurial, Technology-Based Growth Companies

Report from a think tank Convened by the
Center for Entrepreneurial Leadership of the Ewing Marion Kauffman Foundation (CEL/EMKF)
and the
Association of University Related Research Parks (AURRP)

As of December 1993, 4,000 companies were located in 133 research or science parks nationally, employing 225,000 workers in over 100 million square feet of space. These numbers increase dramatically each year.

As technology-based growth companies seek to reduce the risk of surviving in a volatile and highly competitive, international marketplace, the unique support services offered by university-related research parks are being perceived as critical to their success. Increasing numbers of entrepreneurial growth companies are discovering that an affiliation with a research park-linked to the incomparable resources available at a nearby prestigious university or medical center reduces potential and actual pitfalls that can cause companies to fail, opens doors and special opportunities, and gives them a decided advantage over competitors not so advantageously situated.

For their part, the nation's universities and medical schools increasingly view investment in a research or technology park as a way of having a dynamic impact on the economic development of their communities and regions, and of bringing the worlds of theory and practice closer together for the benefit of students and faculties.

Clearly, the research park phenomenon which is actually little more than 15 years old is assuming a more pivotal role in the development of America's high-technology start-up and growth companies. In fact, the explosive growth among these university- related parks suggests that they themselves are becoming a new American "industry".

With these overriding considerations in mind, the Center for Entrepreneurial Leadership of the Ewing Marion Kauffman Foundation (CEL/EMKF) requested that the Association of Related Research Parks (AURRP0 convene a distinguished panel of research park experts and managers to explore specifically how research parks facilitate the creation, development, and success of entrepreneurial technology-based companies and to develop a framework for further original research on this topic.

The ultimate outcome of this research holds great potential for helping research park directors, and the research park industry, to understand, incorporate and improve existing planning strategies and evolve new strategies that support America's technology-based growth companies. In short, the research park phenomenon is here to stay; it is time to systematize our understanding of how they do what they do so well.

It is entirely appropriate that the Center for Entrepreneurial Leadership of the Ewing Marion Kauffman Foundation (CEL/EMKF) involve itself in a project of this kind. The CEL/EMKF's mission is to :

Be a catalyst in stimulating entrepreneurial leadership in both the for-profit and not for-profit sectors;
Research, identify, and teach the critical skills and values that enable entrepreneurs to succeed;
Introduce young people to the excitement of entrepreneurship; and,
Encourage others to support entrepreneurism.

The Ewing Marion Kauffman Foundation itself was established by one of the legendary entrepreneurial geniuses of the American Midwest.

The Think Tank is just one example of the outstanding support CEL/EMKF is providing, in the form of technical assistance and strategic grants in undergraduate and graduate education, applied academic research, incubator and research park operations, and venture capital networks.

The Think Tank was co-convened by Dr. Jana Matthews of the CEL/EMFKF, formerly an AURRP board member, and Dr. Stuart Takeuchi, Vice Chancellor for Administration at the University of Colorado at Boulder, the 1993-94 AURRP Board President, who facilitated the discission.

Think Tank panelists were

	Dr. Rick Finholt, Missouri Research Park in St. Louis, MO
	Tom Parkinson, Evanston Business Investment Corporation in Evanston, IL  			
	Tripp Peake, Science Park Associates in New Haven, CT
	Dr. Averett Tombes, New Mexico State University in Las Crucas, NM
	Michael Wacholder, Rensselaer Polytechnic Institute in Troy, NY

Other participants included:

	Trish Costello, CEL
	Chris Boettcher, AURRP

The intended outcomes of the two-day meeting were:

1. To provide a descriptive report with specifics on how research parks support technological start-up companies.

2. To evolve a basic framework for a research design which would test the theses developed against the actual experiences of a wide cross-section of research park tenant companies that are using their parks as a place to grow.

HOW RESEARCH PARKS SUPPORT GROWTH COMPANIES

At the outset, the panel refined the phrase entrepreneurial technology-based start-up companies to growth companies so that the discussion could focus not only on the creation stage of a company's life, but also on the subsequent stages of company development and success. The group defined a growth company as one that either has the potential for significant increases in the sales or employees, or has had significant increases in sales and/or employees, in the last three years. Thus, the firms were either newly created entities or more mature, just as long as they had experienced real and recent growth.

The panel identified seven significant ways- all equally important in which research parks facilitate growth companies creation, developments, and success:


REAL ESTATE

A university-affiliated research or technology park could be considered a real estate venture with a difference. The difference is critical.

It goes without saying that a successful research park must offer all the amenities available in a premier real estate operation. Since most parks compete against conventional real estate options, they must be more or less competitive economically and in terms of amenities: they must offer an attractive, healthy environment or physical location with an appropriate infrastructure to support tenant companies and there employees.

But most research parks go far beyond this. Since the university or medical institution affiliated with each park or major stake in the success of the park-that its prestige is "on the line," in effect-the infrastructure (buildings, roads, utilities, landscaping) will usually be the very best available. More often than not, the university will create a campus-like setting that is conductive to research and development activities, as well as to encourage the exchange and knowledge. A research park setting tends to make employees more productive and satisfied in their work, which in turn lowers employee turnover and makes it easier for a company to recruit top-quality employees.

A research park's physical attributes are usually governed by Covenants, Conditions,
And Restrictions (CC&Rs) that follows a comprehensive master plan outlining the type of development that can take place at the park. Building design and quality are strictly controlled and monitored to ensure a long-term, high-quality work environment for all tenants.

Since, in many cases, the land is owned by the university, the property is not sold but leased to tenants-which might be perceived by some companies as a disadvantage. But in fact, this contributes to stable conditions in the park and is a distinct advantage to tenants. Leasing puts control of the park's environment in the hands of the university or park sponsor and their designated officers, and guarantees That the tenant companies can count on a stable work environment without having to worry about deterioration of the surrounding real estate or business environment. And because of its proximity to the university or medical institution, the land on which the company locates will continue to grow in value-like a piece of waterfront property.

Also, research parks often have unique facilities that very few other locations can provide-these include shared clean rooms, wet labs, scientific equipment, manufacturing space, and incubators. Research parks provide growth companies with a high-quality work environment and a high-profile address, giving them a unique opportunity to develop their resources within a cluster of similarly high-powered companies.

A traditional real estate operation collects rent and performs maintenance. A research park, on the other hand, enters into a partnership with its tenants that goes far beyond real estate and is detailed in the following sections.

CAPITAL

Growth companies need all the help they can get-especially in the critical early stages of development when survival is precarious. These companies need to access all appropriate and available resources. One of the important-perhaps the most important of these resources-is seed capital or working capital.

Capital is the life blood of young growth companies. Access to sufficient capital often spells the difference between a quick "take off" and an early demise. One of the critical advantages of research parks-as opposed to conventional real-estate is the fact that many research parks and incubators associated with research parks can expedite tenant companies access to seed capital or working capital funds. These funds can flow more readily to growth companies located in a research park. There are no guarantees, but most research parks have anticipated the need-given the volatile environment in which young growth companies operate

Here is how such capital originates. University-affiliated research or science parks can form major partnerships for economic development with the regions and municipalities in which they locate. The more progressive local governments are looking for innovative ways to encourage economic growth. Some governments in cities fortunate enough to have a research park are starting to focus on providing not just the physical infrastructure as well, in the form of funds that provide seed capital to selected companies.

In these regions, a company's selection of a university-related research park as a place to grow becomes a kind of "foothold" that facilitates consideration for these seed capital or working capital funds. In selecting the park, the company has placed itself in the most advantageous position possible to succeed. The municipality and its government, for their part, want to see such companies prosper and sink permanent roots in the community Thus as in other instances, the research park itself becomes the conduit for essential business services and advantages that can spell a critical difference for new growth companies.

Research parks also often work with local banks and local investors in forming seed funds for growth companies. Once again, a young company's selection of a research park tends to prequalify it for serious consideration. An address in a research park almost always draws the attention and positive interest of investors.

VALUE ADDED

The single advantage that most distinguishes research parks from conventional real estate environments is the availability of incomparable technical and management support through the affiliated university or medical school. This is the major "value added" aspect of a research park.

Park managers are absolutely critical in opening up these extraordinary resources to the young growth companies located in the park. University faculties, students, laboratories, libraries, and other facilities can represent a wealth of practical business expertise and experience. Yet historically, universities are not structured to make these resources available to for-profit entities. Fortunately, the research park manager bridges both worlds and acts as an efficient connector between, for example, a company facing a unique marketing problem and a marketing expert on the faculty, or a specialist in international trade and a firm that has uncovered lucrative potential markets a continent away. The park manager enjoys high visibility and credibility in both the business community and the campus community and is a highly efficient facilitator working at the interface between two distinct but complementary worlds.

Usually a company has the choice of whether or not to participate in accessing the resources of the university (although some research parks go so far as to require park tenants to agree to develop a relationship with the university at some level before they are allowed to become tenants). Resources that universities can make available to tenant companies include:



Additionally, since all or most of the companies located in a research park are technology-based growth companies, a sense of community and common interest soon grows up between park tenants. They frequently interact and help one another solve problems ranging from software to telecommunications. A good park manager recognizes this potential for synergy and facilitates it.

Needles to say, universities sponsoring research parks have a great deal to gain by involving themselves in the success of tenant companies, including, in addition to the advantages listed above, a stake in the economic development of the surrounding community and region.

ACCESS TO NETWORKS AND ALLIANCES

A young growth company struggling to survive can waste valuable time trying to uncover and access resources and support.

An experienced technology park manager, on the other hand, can with a series of timely and well-placed phone calls, assemble around one table a wealth of expertise and support from many different sources and put them at the disposal of the company.

Numerous networks and financial support mechanisms are dedicated to helping growth companies. These include local, county, state, and federal economic development agencies, state-funded economic development fund programs, regulatory offices, and others. The problem is : many of these resources are dispensed by offices that are part of larger organizations and are not immediately accesible to people outside the state and local government structure. Spending time searching for the appropriate resource is decidedly not an efficient use of time for a company officer who needs to devote full time to getting his or her enterprise off the ground.

In addition, a research park management office can facilitate strategic alliances between park companies and outside firms, or alliances among park tenants. Park management offices also often run programs in which tenent companies gather over breakfast or lunch to discuss common business problems and share solutions; university representatives frequently attend these meetings.

Overall, a research park manager must include among his or her strongest qualifications a detailed and working knowledge of regional networks and alliances and the people who led them, and take a special pride in putting this knowledge to work for the park's tenant companies. (A traditional real estate manager generally has neither the responsibility nor the inclination to provide such services.)

To summarize, research park managers might act as a bridge between tenant companies and outside resources, including the university, in some or all of the following ways:


CREDIBILITY AND IMAGE

University-related research parks maintian a highly visible image in their communities and are invariably seen as extremely desirable real estate locations. The prestige associated with the university, transfers readily to the university's research park. Countless companies are benefiting from the high visibility and reputaion for quality and stability built up by the university over years of service to education and research.

Image is extremely important to success in business, but a positive image is difficult to establish in the early years of a company's existence before it has a solid list of accomplishments to its credit. An affiliation with prestigious, university related research or science park can help solve this early image problem and the credibility and acceptance necessary to help a young company grow soon follow.

RISK ASSUMPTION

A strong case can be made for risk assumption as another important "value-added" aspect a research park provides, compared to traditional real estate environments.

In a typical real estate venture, there is little or no assumption of risk, in terms of the success or failure of tenants. In a conventional real estate enterprise, the motivating premise is profit,and risk assumption jeopardizes profit levels.

A research park is not so narrowly focused. Parks have a direct stake in the success of their tenants and must assist them--responsibly--when problems develop.

Parks understand that in selecting technology and research as their market place--a relatively small subset of the huge domestic industrial-commercial marketplace--they have entered a specialized market characterized by extreme voltility. Growth companies by extreme volatility. Growth companies ride a business cycle that sometimes resembles a roller coaster and they often live or die according to the monthly cash flow.

The reality is painfully simple: Months in which a company's cash flow drops, the park may not receive its rent. The issue for the park manager is whether or not the negative cash flow is temporary and whether there is enough solid promise in terms of future cash flow to warrant taking a risk in that company. (It's not uncommon for the park management to review the company's books, sales, and marketing strategy in making this determination.)

So research parks as a matter of course assume substantial risk in their tenant companies--but it is calculated, measured, and carefully monitered risk, based upon a thorough familiarity with the company. The fact is that may not have survived and succeeded had their research parks not assumed more risk than is conventionally defined as real estates venture's responsibilty.

INCUBATION

Research parks and incubators go hand in hand. Incubators create an environment thet nurtures start-up companies. University related research parks research parks create an environment that supports growth companies.

The park industry has reached a point where most parks are actively marketing their services to small startup companies that possess the strong potential for growth. Research parks have established technology incubator/innovation center facilities, on-site or near the park, and programs that help startup companies grow and succeed. Over 40 research parks in the US have established some form of incubator program. Technology incubators tend to offer companies the following types of resources and services:


Technology incubators represent a unique aspect that sets research parks apart from conventional real estate operations. Furthermore, an incubator facility enables synergy among tenants, as well as support groups.

Clearly it is in the best interest of parks to provide services for both startups and growth-oriented companies, since companies can grow out of the incubator and then into the park as bona fide growth companies. (In a sense, one could view the research park as a large incubator, maximizing resouces available to meet particular tenant needs, such as financing, staffing, or training.)

Turkish Incubator Projects


RESEARCH DESIGN

The Think Tank concluded that developing and implementing a qualitive body of information about specifically how research parks support growth companies--and then testing it against the experiences of actual park tenants--would be extremely valuable in increasing the understanding and furthering the progress of the research park industry.

To marshal the support of the AURRP membership, as well as promulgate the information developed by the Think Tank, the panel suggests the following framework for a research project that will test, verify, and clarify the information dicussed and developed.

1. The Think Tank Report should be circulated to the AURRP membership and other selected and influential audiences that have stake in job creation, technology development,and economic growth.

2. Recipients of the report should be encouraged to provide feedback through a convenient response form.

3. Respondants who represent a university-affiliated research park would be asked to supply the names of three to five companies that fit the definition of a technology-based growth company. Approximately 100 to 200 of the most successful of these companies would comprise a test group.

4. AURRP would then develop and circulate to the test group an appropriate survey instrument that would determine accurately and comprehensively the specific services research parks are or are not providing that contribute to the creation, development and success of growth companies. The survey would make allowance for individual impressions, criticisms, and suggestions.

5. Once the data is collected and analyzed, a full report would be produced and distributed to research parks and their supporters.

CONCLUSION

Based on their individual and collective experiences in operating research parks, the Think Tank panelists srtongly concluded that research parks do contribute in significant ways to the creation, development and success of growth companies.

The future development and implementation of a comprehensive survey of technology-based growth companies will reveal more about this phenomenon, including how research park tenants perceive the support they receive and how that support is associated with the company's creation, development, and success. AURRP will develop such a research vehicle and will seek funding support.

AURRP expresses its sincere appreciation to CEL/EMFK for recognising the need, convening the Think Tank Panel, and significantly advancing our knowledge and understanding of the research park industry.

This REPORT was
Produced by the:	
Association of University Related Research Parks
4500 South Lakeshore Drive, Suite 475	Tempe, Arizona  85282 (602) 752-2002
In association with:	Wordwrite D. Michael Ross, President
	1128 Van Curler Avenue	Schenectady, NY  12308
		(518) 372-1826 and special assistance from the staff 
at:	Rensselaer Technology Park	100 Jordan Road	
		Troy, NY   12180	(518) 283-7102

 
Start Page News Projects Links About Feedback
Last updated December 16, 1999
© 1997, Egetek Foundation