Knowledge Transfer, Entrepreneurship and Economic Growth: Some Reflections and Implications for Policy in the Netherlands

This paper provides an overview of the relationship between entrepreneurship university spin-off activity and economic growth. It suggests the need for a diversified university structure, and that spin-offs are a misleading measure of the most important activity for technology transfer which remains the training and education of highly qualified scientists and technologists. It argues that a linear approach to the innovation process positioning basic science at one end of a chain and commercialization at the other is misleading. The reality is more complex and incorporates important areas of activity where consideration of use and the pursuit of basic science go hand in hand.University spin-offs, Technology Transfer, Entrepreneurship, Productivity, Economic Growth

R&D and Patenting Activity and the Propensity to Acquire in High Technology Industries

In this paper we investigate the incidence of high technology acquisitions using a large international sample of acquisitions by public high technology firms. Controlling for firms’ financial characteristics, we examine the impact of the following innovation-related factors on the propensity to acquire: R&D-intensity as a proxy for R&D inputs; the citation-weighted patent-intensity as a proxy for R&D output; the stock of citation-weighted patents as a proxy for the accumulated stock of knowledge generated by past R&D efforts. The following conclusions can be drawn with respect to the characteristics of acquirers of non-public targets - mainly private firms and former subsidiaries. First, we find support for the view that the propensity to acquire new knowledge-related assets through acquisitions is driven by declining returns from the exploitation of a firm’s existing knowledge base. Second, we find evidence in favour of the make-or-buy theory that acquisitions are a substitute for in-house R&D activity. Third, our results are in accordance with the theoretical argument that a large stock of accumulated knowledge enhances a firm’s ability to absorb external knowledge through acquisitions. These results suggest that smaller acquisitions can be seen as part of an innovation strategy by acquiring firms with relatively low levels of internal R&D which seek to offset low R&D productivity by exploring a range of potential innovation trajectories in new and smaller business units. Interestingly, we find that these interpretations cannot be made for acquirers of the larger public companies.Mergers and acquisitions, acquisition likelihood, R&D, patents

Takeovers after "Takeovers"

We review five decades of takeover actively in the UK. We assess the relative characteristics of acquiring and acquired companies and the performance impacts of merger using both accounting and share price based measures. We conclude that the fundamental conclusions reached by Ajit Singh about takeovers and the market for corporate control in his seminal contributions of the 1970s remain true in the light of subsequent work.Takeovers, Natural Selection, Market for Corporate Control

The revealed preferences of high technology acquirers: an analysis of the characteristics of their targets

In this paper we investigate the motives of high-tech acquieres by analysing their revealed preferences in terms of the high-tech companies they acquire.mergers and acquisitions, acquisition likelihood, R&D patents

What's in a name and when does it matter? The hot and cold market impacts on underpricing of certification, reputation and conflicts of interest in venture capital backed Korean IPOs

This article analyses the impact of the participation of venture capital (VC) firms on underpricing in 372 businesses brought to IPO during the period 1999-2001 in KOSDAQ. Korea's second-tier stock market, KOSDAQ, has grown dramatically since 1999 and about half of the firms listed in KOSDAQ during this period were VC-backed, thus providing a good testing ground for empirical analysis. We measure VC participation in terms of pre IPO share-ownership by VC firms and attempt to differentiate IPO impacts between VCs grouped in terms of their reputation (measured by their dominance of the VC market, and by their affiliation in terms of ownership by banks and security companies). In estimating impacts we control for a wide range of variables which may affect the extent of underpricing. These include uncertainty inducing factors such as the age, size, profitability, leverage, and technical riskiness (measured by sector and R&D intensity) of the firm brought to IPO. We also control for market conditions using proxies for hot and cold market effects based on the numbers of contemporaneous IPOs, underpricing trends and market price movements. Finally in addition to allowing for the impact of underwriting quality we control for share overhang and price revision effects. We find that, controlling for other relevant factors, pre-IPO ownership by VCs has an insignificantly negative impact on underpricing in both hot and cold markets. However in cold markets reputational effects within the VC group do matter. In those conditions the top 3 VCs and those owned by or affiliated with banks are significantly associated with lower underpricing. The same is true for the quality of underwriting. However in hot market conditions none of these effects are present.Initial Public Offering; Underpricing; Venture Capital; Certification; Conflict of Interest, Informational Advantage

The stigma of failure: An international comparison of failure tolerance and second chancing

It is commonly asserted that high rates of entrepreneurship and superior economic performance in the United States is linked to a higher cultural tolerance of business failure. After reviewing cross country patterns of entrepreneurship we develop in this paper a measure of cultural attitudes towards failure which has two components. We term these failure tolerance which captures attitudes towards the risk of a business failing and second chancing which measures the degree of agreement with the proposition that those who have failed should be given a second chance. Using a unique dataset on attitudes to failure for a sample of 9,500 individuals drawn from 19 economies for the year 2002 we show that respondents in the USA appear to have relatively high levels of failure tolerance. However, they are less willing to grant a second chance to those who have tried and failed. We find that having relatively high levels of failure tolerance is not positively correlated with GDP growth. Having a relatively positive attitude towards second chancing across countries is positively related to GDP growth. Taken together these results suggest there is a link between attitudes to failure and economic growth, but it is not the one conventionally assumed in current policy rhetoric which argues that relatively favourable attitudes towards second chancing in the USA explains its more entrepreneurial activity.Attitudes to failure, Entrepreneurship, Cross-country comparisons

The Revealed Preferences of High Technology Acquirers: An Analysis of the Characteristics of their Targets

In this paper we investigate the motives of high-tech acquirers by analysing their revealed preferences in terms of the high-tech companies they acquire. Using a large sample of acquisitions involving publicly traded firms from various countries we ask whether high technology acquisitions are best understood in terms of acquirers seeking to source externally special innovation-related assets by acquiring firms with “superior” innovative performance; or acquirers seeking to acquire firms with “inferior” innovative performance in order to turn them around. We find evidence that acquisition is a very noisy phenomenon and that economic and innovation related variables explain only a modest part of the probability of becoming a target. We do however find that, compared to non-acquired firms, high-tech targets tend to be somewhat larger, to have poorer profitability, lower Tobin’s q and liquidity. In relation to their innovative profile, targets, in general, seem to have a relatively larger stock of accumulated knowledge (stock of citation-weighted patents), relatively higher R&D inputs (R&D-intensity), but they are more likely to generate no R&D output (citation-weighted patent- intensity) before they are acquired. We conclude that high technology acquisitions reflect a process which is primarily driven by acquirers wishing to exploit the potential for turning around firms which, despite a good past record, appear to be innovatively and economically inefficient before they are acquired.Mergers and acquisitions, acquisition likelihood, R&D, patents

R&D and Patenting Activity and the Propensity to Acquire in High Technology Industries

In this paper we investigate the incidence of high technology acquisitions using a large international sample of acquisitions by public high technology firms. Controlling for firms’ financial characteristics, we examine the impact of the following innovation- related factors on the propensity to acquire: R&D-intensity as a proxy for R&D inputs; the citation-weighted patent-intensity as a proxy for R&D output; the stock of citation-weighted patents as a proxy for the accumulated stock of knowledge generated by past R&D efforts. The following conclusions can be drawn with respect to the characteristics of acquirers of non-public targets – mainly private firms and former subsidiaries. First, we find support for the view that the propensity to acquire new knowledge-related assets through acquisitions is driven by declining returns from the exploitation of a firm’s existing knowledge base. Second, we find evidence in favour of the make-or-buy theory that acquisitions are a substitute for in-house R&D activity. Third, our results are in accordance with the theoretical argument that a large stock of accumulated knowledge enhances a firm’s ability to absorb external knowledge through acquisitions. These results suggest that smaller acquisitions can be seen as part of an innovation strategy by acquiring firms with relatively low levels of internal R&D which seek to offset low R&D productivity by exploring a range of potential innovation trajectories in new and smaller business units. Interestingly, we find that these interpretations cannot be made for acquirers of the larger public companies.Mergers and acquisitions, acquisition likelihood, R&D, patents

Industrial policy for the medium to long-term

This report reviews the market failure and systems failure rationales for industrial policy and assesses the evidence on part experience of industrial policy in the UK. In the light of this, it reviews options for reshaping the design and delivery of industrial policy towards UK manufacturing. These options are intended to encourage a medium- to long-term perspective across government departments and to integrate science, innovation and industrial policy