Journal of Science and Technology Policy Management
Strategy map for Chinese science parks with KPIs of BSC
Guixia Wang J inbo Wan Lanxiang Zhao Article information: To cite this document: Guixia Wang J inbo Wan Lanxiang Zhao , (2014),"Strategy map for Chinese science parks with KPIs of BSC", J ournal of Science and Technology Policy Management, Vol. 5 Iss 2 pp. 82 - 105 Permanent link to this document: http://dx.doi.org/10.1108/J STPM-01-2014-0003 Downloaded on: 01 October 2014, At: 05:39 (PT) References: this document contains references to 111 other documents. To copy this document: permissions@emeraldinsight.com The fulltext of this document has been downloaded 14 times since 2014* Users who downloaded this article also downloaded: Yee#Ching Lilian Chan, (2009),"How strategy map works for Ontario's health system", International J ournal of Public Sector Management, Vol. 22 Iss 4 pp. 349-363 Robert S. Kaplan, David P. Norton, (2001),"The strategy-focused organization", Strategy & Leadership, Vol. 29 Iss 3 pp. - Nopadol Rompho, (2012),"An experiment in the usefulness of a strategy map", Measuring Business Excellence, Vol. 16 Iss 2 pp. 55-69 Access to this document was granted through an Emerald subscription provided by 559421 [] For Authors If you would like to write for this, or any other Emerald publication, then please use our Emerald for Authors service information about how to choose which publication to write for and submission guidelines are available for all. Please visit www.emeraldinsight.com/authors for more information. About Emerald www.emeraldinsight.com Emerald is a global publisher linking research and practice to the benefit of society. The company manages a portfolio of more than 290 journals and over 2,350 books and book series volumes, as well as providing an extensive range of online products and additional customer resources and services. Emerald is both COUNTER 4 and TRANSFER compliant. The organization is a partner of the Committee on Publication Ethics (COPE) and also works with Portico and the LOCKSS initiative for digital archive preservation. *Related content and download information correct at time of download. D o w n l o a d e d
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( P T ) Strategy map for Chinese science parks with KPIs of BSC Guixia Wang, Jinbo Wan and Lanxiang Zhao Institute of Policy and Management, Chinese Academy of Sciences, Beijing, Peoples Republic of China Abstract Purpose The purpose of this paper is to present a structural evaluation methodology to link key performance indicators (KPIs) into the strategy map of the balance scorecard (BSC) for Chinese science parks (CSPs). We establish the visualized strategy map with the logical links to improve the science parks (SPs) performance. Design/methodology/approach Corresponding to the four BSC perspectives (fnance, customer, internal process and employee learning and growth), KPIs for CSPs are synthesized and screened in the relevant literature. The application for Zhongguancun Science Park (ZSP) is provided as an example. Findings The research results show that the presented approach is an objective and feasible way to construct a more justifable strategy map. The proposed framework can be applied to non-proft organizations, such as SPs. Originality/value This work provides a systematic method to establish strategy maps for SPs (non-proft organizations), based on the consideration of the intricate causal relationships among KPIs, and the analysis of the important strategic improvement paths and proposes the model of assessment of emphasizing the processes rather than outcomes. Keywords Strategy map, Balanced scoreboard (BSC), Chinese science park (CSP), Key performance indicators (KPIs), Strategic performance, Zhongguancun Science Park (ZSP) Paper type Research paper 1. Introduction One of the objectives of establishing science parks (SPs) in most countries is to provide an infrastructure of technical, logistic and administrative support that a young frm needs in the process of struggling to gain a foothold in a competitive market (Guy, 1996). It is particularly important to those industrialized and emerging economies because the expectation is that SPs can act as development catalysts driving new business start-ups and exploring the path for existing frms to process and product innovations. An SP is a network organization, which must place more emphasis on improving internal operational performance to outperform the numerous competitors. SPs must develop an effective way to align their strategies with organizational goals on the basis of performance analyses. Thus, the organizations can effciently reach their goals by prioritizing their actions for the organizational visions and by incorporating effective performance management. The balance scorecard (BSC) is an adequate evaluation methodology for achieving these goals (Davis and Albright, 2004). Through the BSC, managers can not only communicate well with their employees but also control the progress of strategic development to improve the organizational performance and increase the competitiveness. The current issue and full text archive of this journal is available at www.emeraldinsight.com/2053-4620.htm JSTPM 5,2 82 Received 16 January 2014 Revised 1 April 2014 Accepted 2 April 2014 Journal of Science & Technology Policy Management Vol. 5 No. 2, 2014 pp. 82-105 Emerald Group Publishing Limited 2053-4620 DOI 10.1108/JSTPM-01-2014-0003 D o w n l o a d e d
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( P T ) In the early stage, the expected output of SPs was the development of new products, manufacturing processes and engineering techniques. The criteria used to evaluate their output were well-defned and consolidated, derived from the best practices of private research evaluation. SPs extended their scopes to the regional territories, becoming an instrument of innovation policy implementation for the deployment of technology transfer programs (OECD, 1987, 1997). Mian (1997) proposed an integrated framework for the university technology business incubator (UTBI) performance assessment. Previous literature on the performance measurement of SPs tended to emphasize the assessment of SPs outcomes. Some common features can be elicited with regard to the literature on SPs, especially the mission statements, i.e. promoting the interaction between industrial and academic research structures, promoting the generation of academic spin-offs, promoting the founding of start-ups, carrying out re-industrialization, technology transfer and training programs and providing management services. Such a wide range of mission statements can potentially inspire the strategic behavior of SPs. Therefore, SPs need to completely reassess their performance measurement to adapt to the constantly changing needs and requirements of tenant frms. To achieve more effcient performances, SPs must align their goals with those of their tenant frms services. However, most of the studies on assessing an SPs performance have focused mainly on performance measures. Only a few papers have explored the creation of a mechanism that distinguishes causal relationships among KPIs for the purposes of the strategy implementation. The strategy map is the most important procedure in building a BSC systembecause it can be viewed as the causality of hypothesis among strategic objectives (measured by KPIs) in the main structure of a BSC system (Kaplan and Norton, 2004a). Therefore, establishing a strategy map with clear causal/logical links leads to the establishment of strategic pathways throughout the organization (Evans, 2007). In the related studies, there is a lack of articulation of the cause-and-effect relationships among KPIs in the BSC in assessing SPs performances. The main theme of the current study is to propose a methodology to establish the BSCstrategy map and provide a profound analysis of the complicated interactive relations among the KPIs. Chinese science parks (CSPs) are complex network organizations, which are directed by the Ministry of Science and Technology (MOST), the local governments and the administrative committees. Therefore, their strategies and missions have complexities. The key problems are how to effectively monitor and measure their performance and achieve their goals. There has been a lot of successful experience from business organizations adopting the BSC. The BSC has been adopted by nearly half of the Fortune 1000 organizations. As a public sector study funded by the Sloan Foundation indicated, 70 per cent of the respondents agreed that their governmental entities had been better off since the implement of performance measures. The City of Charlotte, North Carolina, has been using the system for several years and accredits it with focusing employees on the strategy and improving the overall city results. The BSC is a communication tool and a systemwhich can implement effective performance measures and evaluate the implementation of strategies. This approach presents a causal model which can simplify and facilitate the transmission of complex systems and help decision-makers overcome the cognitive challenges (Vera-Muoz et al., 2007). This tool 83 Chinese science parks D o w n l o a d e d
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( P T ) can improve the performance on the decisions which require complex judgments (Lipe and Salterio, 2002; Dilla and Steingbat, 2005). The strategic performance measurement methods on SPs previously described cannot provide a clear prescription as to what the organization should measure to balance the fnancial perspective. The complexities of CSPs strategies, missions and contexts inspire the strategic performance evaluation to include heterogeneous variables (i.e. technological, economic, social and political, innovation, tenant frms and management organizational structure variables). The strategy map enables an organization to clarify its vision and strategy. It also enables a supervisor to explore the causes and effects of the strategy. The BSC provides feedback about both the internal organization processes and external outcomes to continuously improve the strategic performance and the results. When fully deployed, the BSC transforms the strategic planning from an academic exercise into the nerve center of the organization. In real-world applications, the assessed performance indicators are not strongly related with the strategy of the organization. Therefore, they cannot provide a proper orientation for the management about what should be developed for the successful implementation of business strategy. A well-constructed strategy map can eloquently describe the strategy of an organization, and a well-constructed BSCcan make the vague and imprecise world of visions and strategies come alive through clear and objective performance measures. The purpose of this research is to organize suitable KPIs for the evaluation of SPs performances based on the BSC perspectives to explore the complex causal relationships among KPIs, to identify the critical central indicators of the strategic steps, to construct the strategy map for the improvement of SPs performances and to provide suggestions fromthe analytical results and references for the management of associated organizations as well as for future research. The remainder of this paper is organized as follows. In Section 2, the literature related to BSC, strategy map and performance measurement of SPs are reviewed. In Section 3, the proposed conceptual framework of constructing a strategy map is described. In Section 4, the research design and research methods were introduced. In Section 5, we illustrate an empirical example of constructing a strategy map for CSPs, including the selection of the KPIs of BSC performance measurement, the construction of the strategy map and the resulting analyses and discussions. Finally, in Section 6, some of the important managerial implications and suggestions for future research are proposed. 2. Major fndings from literature 2.1 Balance scorecard The BSC, proposed by Kaplan and Norton (1992), has been widely adopted in the evaluation of the organizational performance fromfour perspectives: fnance, customer, internal business process and learning and growth. Its central concept is balance (Kaplan and Norton, 1996a, 1996b, 1996c; Kaplan, 2012), specifcally those related to three areas: (1) Balance between fnancial and non-fnancial indicators of success. (2) Balance between internal and external constituents of the organization. (3) Balance between lag and lead indicators of performance. JSTPM 5,2 84 D o w n l o a d e d
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( P T ) The measures selected for the scorecard represent a tool for leaders to communicate with employees, external stakeholders, the outcomes and performance drivers by which the organization will achieve its mission and strategic objectives (Kaplan and Norton, 1992). The BSC can be defned as a management system inspired by the cycle plan-do-check-act and has generated enormous interest in academic and industrial communities (Barnabe and Busco, 2012; Kraus and Lind, 2010; Norreklit et al., 2012; Salterio, 2012). Recent studies have been conducted on BSC application in various felds, including organizational and IS performance evaluation. Lee et al. (2008) proposed an approach based on the fuzzy analytic hierarchy process (FAHP) and BSC processes for evaluating an IT department in the Taiwanese manufacturing industry. Huang (2009) suggested the use of an analytic hierarchy process (AHP) to prioritize the measures and strategies of a BSC framework. Wu et al. (2009) suggested a fuzzy multiple criteria decision-making (FMCDM) approach for banking performance evaluation based on the four perspectives of BSCs. Asosheh et al. (2010) adopted an integrated use of BSC and DEA. Velcu (2010) use the BSC approach to analyze business performance. The BSC has three major advantages, namely, communication and teamwork, commitment and feedback and learning. It enables a senior manager to clarify the vision, develop the strategy, setup the teamwork and foster the commitment to a customer focus across the organizations. It helps employees and stakeholders better understand how they contribute to the overall achievement of the organization. Therefore, it is crucial to demonstrate the links between the measures by displaying how the performance indicators in one area affect those in another. The BSCadded non-fnancial strategic performance measures to traditional fnancial metrics and gave managers and executives a more balanced viewof the organizational performance (Kaplan and Norton, 1992, 1993). The BSC has evolved from a tool of performance measurement (Kaplan and Norton, 1992) to one for implementing strategies (Kaplan and Norton, 1996), and to a framework for building the alignment of human, information and organization capitals with the strategies (Kaplan and Norton, 2004a). Strategy maps are the causal maps that depict the relations between BSC performance measures and overriding strategic objectives. They help managers understand the relative importance of the measures for the accomplishment of strategic goals (i.e. linking to strategy), and thus they provide clues to weight and aggregate BSC measures when formulating the overall decisions. Kaplan and Norton (2000a, 2004a, 2006a, 2006b) instructed managers to communicate with strategy maps and BSCs and several companies tried this new methodology (Mair, 2002; Kaplan and Norton, 2004a, 2006a; Urrutia and Eriksen, 2005). With the popularization of strategy maps with BSCs in the business world, commercial scorecard applications have been developed, such as Oracle Hyperion Performance Scorecard, which can even produce strategy maps for users[1]. Research on information systems and management has long recognized the value of causal maps for complex problems (Axelrod, 1976; Eden et al., 1992; Fiol and Huff, 1992). Causal maps can help individuals construct more accurate mental models of complex systems. Experimental research implies that decision-makers perform better when their mental models are similar to the external systems they represent (Wyman and Randel, 1998; Davis and Yi, 2004; Capelo and Dias, 2009). The social orientation of these organizations is the essential difference between government, non-proft and business organizations. Public and non-proft organizations play the important roles as service providers. The government and non-proft 85 Chinese science parks D o w n l o a d e d
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( P T ) organizations have no proft motives, thus there is not a single indicator of performance that is comparable with business enterprises in the bottom line. Yeung and Connell (2006) took into account the non-proft organizations distinguished characteristics in Hong Kong using the Nivens BSC model. Kaplan (2001d) argued that, though the fnancial perspective provided a clear long-run objective in the private sector, it should be considered as a constraint rather than an objective for non-proft organizations. According to the characteristics of government and non-proft organizations, Niven (2003) redesigned the original BSC model, giving more emphasis to the organizations mission. He developed the modifed BSC approach for public and non-proft organizations considering the following aspects presented in Figure 1: the organizations mission perspective is moved to the top, whereas strategy stays at the core of the scorecard system; the customer perspective is elevated and is given emphasis on who are defned as customers and how the organization may create value for them; the fnancial perspective is moved to a minor position, and the question attached becomes: how do we add value for customers while controlling costs? Financial measures in the public and non-proft sector scorecard model can best be seen as either enablers of customers success or constraints within which the group must operate; and the internal business perspective is focused on business process excellence to satisfy customers while meeting budgetary constraints. The processes chosen to focus on will normally fow directly from the objectives and measures chosen in the customer perspective. Customer Whom do we define as our customer? How do we create value for our customer? Mission Financial How do we add value for custom rs while controlling costs? Internal Processes To satisfy customers while meeting budgetary constraints, in which business processes must we excel? Strategy Employee Learning and Growth How do we enable ourselves to grow and change, meeting ongoing demand? Source: Niven (2003, p. 32) Figure 1. BSC framework for the public and non-profts JSTPM 5,2 86 D o w n l o a d e d
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( P T ) Using the BSC for CSPs, it can provide a framework to assess and develop a strategy. It develops strategic objectives and performance measures to translate the strategy into actions. It provides a way to measure and monitor the performance of key performance drivers that can lead to the successful execution of the strategy. It is an effective tool to ensure continuous improvement for the systems and processes of CSPs. However, the studies on how to analyze the causal relationships among evaluation criteria, distinguish infuential factors and create an effective mechanism for the strategic implementation of the evaluation criteria are still scarce (Malina et al., 2007). Consequently, managers of CSPs are challenged by the delineation of the strategies that can both analytically and organizationally link together the performance indicators that contain outcome measures and the performance drivers while allowing for the implementation of the BSC process. 2.2 Strategy map Astrategy map expresses the causal relationships between BSC performance measures and overriding strategic objectives (Kaplan and Norton, 2000b, 2001a, 2001b, 2001c, 2004, 2008a, 2008b; Kaplan, 2009; Kaplan and Wisner, 2009). Kaplan and Norton (2004a, 2004b, 2004c) proposed that BSCs refect dynamically the change of strategies and indicate how organizations create their value, and the chains of cause-and-effect in strategy maps connect all the factors (i.e. performance indicators) through the four perspectives of BSCs. A strategy map is an illustration of the organizations strategy. Derived from the vision and strategy of the organization, it provides a visualization frame for an organizations strategic causal relationships. Its main purposes are to facilitate the translation of the strategy into operational terms and to communicate with employees how their jobs relate to the organizations overall objectives. Strategy maps are intended to help organizations focus on their strategies in a comprehensive yet concise and systematic way. Strategy maps provide a way that it is possible to visualize how different parts of the organization contribute (directly or indirectly) to the organizations overall performance. They connect organizational assets to internal business processes, which in turn enable the organization to succeed from both customers and shareholders points of view. Each theme in a strategy map consists of a vertical chain of cause-and-effect relations linking objectives, measures and initiatives that span the four BSC perspectives. The aggregation of strategic themes articulates how business and support units can work together to create the synergies necessary to realize the organizations mission. Strategy maps can help managers identify KPIs associated with the objectives, distinguish the performance indicators whether they ft in a cause-and-effect relationship and may be important to an organizations strategy, and facilitate the selection of KPIs. There have been published case studies refecting the strategy map in the private sector (Wu, 2012), but few have been identifed which consider the use of this technique in the public sector. In the public sector, the clarity of a fnancial bottom line does not exist, but it is equally essential that everyone in the organization has a clear understanding of the strategy and their roles to achieve it. 87 Chinese science parks D o w n l o a d e d
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( P T ) 2.3 Knowledge management Alavi and Leidner (2001) consider knowledge management systems supporting the creation, transfer and application of knowledge in organizations, collect these abilities and the know-how sustaining the foundations of distinctive activities. Therefore, Knowledge Management Practices (KMP) are considered organizational routines (Nelson and Winter, 1982) oriented toward its exploitation. Alegre et al. (2011) consider two main KMP: knowledge dissemination and storage practices. The former deals with the applications, whereas the latter entails the systems to retrieve relevant knowledge in the organization. Firms use routines to gather, process and interpret export market information, and they distribute relevant information to export decision-makers (Morgan et al., 2012). Knowledge management facilitates effective information exchange and cost benefts. It is one of the main forms of lowering uncertainties when reforming technical systems (Carrillo and Gaimon, 2004; Nonaka and Takeuchi, 1995). The enhancement of knowledge management yields improvements in innovation performance (Arikan, 2009; Belso-Martinez et al., 2011; Casanueva et al., 2013; Koskinen et al., 2003; Nonaka and Takeuchi, 1995). Therefore, knowledge management and innovation activities share a relationship. Industrial clusters enhance the depth and breadth of cooperation and competition, and bring together various industries to form cluster relationship networks (Kotler, 2000; Olson, 1998; Porter, 1990). Positive interaction is a key factor for frms to maintain their competitive advantage (Bell et al., 2009). Industry clusters can strengthen frms innovation performance (Gnyawali and Srivastava, 2013; Phelps, 2010; Zhang and Li, 2010). KMP reinforces cluster relationship effects, which, in turn, affect the corporate innovation performance. Through the formation of clusters, frms can lower their investment costs, access common suppliers, cultivate a professional work force and develop a spillover effect for techniques and knowledge (Tallman et al., 2004). The structure of an organizations alliance network can be strengthened through sharing the knowledge (Lissoni, 2001). In highly competitive industry clusters, some important skills in business management, or techniques to do with knowledge, are necessary for the industry cluster to support the activities of the industry (Leonard and Swap, 2000). Networks provide critical access to information, and knowledge acquisition shares a positive correlation with knowledge exploitation in innovation performance (Yli-Renko et al., 2001) 2.4 Organizational learning At the most fundamental level, organizational learning is the development of new knowledge or insights that have the potential to infuence behavior (Slater and Narver, 1995). Organizational learning consists of a series of sub-processes, such as knowledge acquisition, knowledge sharing and knowledge utilization (Nevis et al., 1995). Networks gather the information and knowledge of different node frms to ensure that the frms meet their diverse information and knowledge needs (Uzzi, 1997); networks lead to information fow and knowledge transfer (Dyer and Singh, 1998). Organizations learning through interaction with other organizations in networks can improve their structures, processes, strategies and performance (Knight, 2002). It focuses on acquiring and using knowledge from networks (Knight, 2002; Schildt et al., 2012). JSTPM 5,2 88 D o w n l o a d e d
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( P T ) Organizational learning is a process by which the organization enhances its capacity to act (Huber, 1991). It is also a dynamic process creating knowledge and transferring it where it is needed and used (Kane and Alavi, 2007). Organizational knowledge creation entails making knowledge created by available individuals, amplifying it in social contexts and selectively connecting it to existing knowledge in the organization (Nonaka and von Krogh, 2009). It has long grappled with the analysis of individual and organizational knowledge creation and the relationship between them (Minbaeva et al., 2012; Nonaka and Konno, 1998). The 4I model of Crossan et al. (1999) identifes four processes of learning: intuiting, interpreting, integrating and institutionalizing. Knowledge institutionalization contributes in building competitive advantage by converting learning into practice (Flores et al., 2012). Zietsma et al. (2002) presented an improvement proposal of the 4I model by adding two processes: attending and experimenting. Castaeda and Fernndez (2007) added to the group level of the 4I model of Crossan et al. the concepts of conversation and social modeling. Merad et al. (2014) propose a characterization of the four stages, including punctual learning, constrained learning, comparative learning and deep learning. 2.5 Performance measurement of SPs The development of SPs in many countries clearly received its early impetus from the successful experience of the Silicon Valley in the USA (Storey and Tether, 1998). Mainland China is not an exception. Chinese Government has engaged in the establishment of SPs as a critical policy for developing high-tech industries. The initial objective is to reduce its dependence on high-tech product imports and build its domestic innovation capacity. Through years of investment and effort, China has 90 SPs. Some have already been qualifed to carry on the strategic adjustment and promotion. Meanwhile, the government has also begun to focus on evaluation of the SPs. Therefore, there are many papers about the performance evaluation of SPs. In practice, the torch center of the MOST is carrying out this task. The literature does not offer complete and suffciently tested methodological approaches on evaluating the performance of SPs. Nonetheless, it is possible to extract information that can help develop an effective way to appraise the performance of SPs. Hodgson (1996) pointed out the causes for complexity of the evaluation problem. The births of SPs are by now usually favored by local governments, universities, professional associations, companies, banks, etc. For example, CSPs are managed by the MOST, local governments and administrative committees. The goal of the MOST is to improve the capability of independent innovation; the goal of the local government is to speed up the regional economy development and increase employment and fnancial revenue; the goal of the administrative committee of an SP is to maximize its own operation management beneft, while meeting national and local objectives. These three goals intertwine with mutual infuences. The main action bodies of CSPs are local birth and reproduction of private technological enterprises, branches of multinational corporations (R&D institutions or branch factories), enterprises launched by the overseas returnees, R&D institutes of universities, research institutions, banks, venture capital companies and other intermediaries, etc. Therefore, their demands are widely divergent and complex. 89 Chinese science parks D o w n l o a d e d
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( P T ) The current literature on the appraisal of SPs can be sorted into three classes. (1) The institutional perspective focuses on whether the SPs confer competitive advantages to the tenant frms and positive spillover effects to the frms located in its vicinity and the regional economy. For example, Mian (1996) assessed the value-added contributions of UTBIs to the new technology-based tenant frms. Bergek and Norrman (2008) developed a framework serving for identifying the best practices of incubator models. (2) The economic geography perspective considers the relationship between SPs and regional economy and inter-frm linkages and agglomerative effects. Some empirical studies provided evidences for their driving forces for the growth of industrial cluster and the research on cluster policies (Sun et al., 2009). (3) The performance assessment perspective proposes an integrated appraisal framework. Mian (1997) proposed an integrated framework for the UTBI performance assessment. In this model, three sets of variables are identifed: performance outcomes, management policies and their effectiveness and services andtheir addedvalue. This approachis usedto analyze the comparative characteristics of different UTBI programs. Lindelf and Lfsten (2003) assessed the performance of new technology-based frms (NTBFs) located in and off the SPs in nine Swedish SP organizations between 1994 and 1996. Another empirical study is to compare the R&D productivity of NTBFs located inside and outside SPs (Yang et al., 2009). However, the method does not specify the consequent possible mission areas (Chen and Ouyang, 1996; Zhang et al., 1997), performance indicators for each factor or focus on monitoring the business process of SPs. 3. Conceptual framework Corresponding to the four BSC perspectives, the information and indications that emerge from the literature made it possible to design a performance evaluation system for CSPs based on the following elements: It seems to be essential to identify the real mission and strategy of CSPs. These elements are often hidden by the formal documents of the organization and can thus be identifed solely by considering actual behaviors (e.g. the organizations decisions and actions). For example, an innovation network of technological entrepreneurship frms is loose in its initial stage (i.e. isolated island phenomenon), thus the knowledge and technology spillovers are scarce; the synergy of innovative networks is relatively low at the early stage; and the innovation performance of tenant frms in SPs are relatively poor. This indicates the real mission and strategy vary widely in different stages. The decisions and actions of SPs must be explained and justifed by the concurrence of the stakeholders interests. What is often is that CSPs institutional efforts come from the primary stakeholder. In China, the stakeholders of a CSP mainly include the MOST, the local government and the administrative committee. A CSP must achieve the MOSTs goal which is to improve the capability of independent innovation, realize the local governments goal which is to speed up the regional economy development and increase employment and the JSTPM 5,2 90 D o w n l o a d e d
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( P T ) fnancial revenue and, simultaneously, achieve the administrative committees objective which is to maximize its own operation management beneft while meeting national and local objectives. Contextual conditions, legal structure, existing technical and profession cultures provide a distinguishable infuence factor to identify the real objectives of CSPs; it is important to consider the contextual conditions in which CSPs operate. These conditions often represent the needs for the economic development in the specifc territories where they belong. The regional economic development is unbalanced, which will result in the differences among the special objectives of different SPs. Moreover, the majority of universities and institutes which have high levels of technical competence gather in Beijing, Shanghai and Xian, the differences in technical ability accumulation, innovation performance and technology spillover effects are enormous, thus the real missions and strategies cannot be identical. Tenant satisfaction must be considered to identify the real objectives. Tenant frms satisfaction is also an important infuencing factor. It was pointed out that the interactions among incubator companies (i.e. technology frms), the local universities and other companies in SPs were rather limited (Bakourors et al., 2002). They were usually restricted in commercial transactions and social interactions. In the course of trade and investment promotion of each administrative committee, it is emphasized that the analysis of the investors from other regions is very necessary. In light of local industry characteristic and local economic development stage, the administrative committee determines if it will attract the investors for the achievement of the real mission and strategy of an SP. To sum up, as can be seen in Figure 2, the performance evaluation system is directly infuenced by the real mission and strategy of CSPs which are determined by the contextual conditions, life cycle, legal structure, tenant satisfaction and the commitment of its stakeholders. According to the four perspectives of the BSC, the appropriate information and indication of the strategic performance measurement are synthesized and screened from the relevant literature. Then, consider the synthesized generic evaluation indicators of SPs strategic performance and target a case SP, our study conducts a causal relationship analysis on KPIs. Finally, a strategy map of the BSC is developed based on the qualitative analysis. - Contextual conditions - Life cycle - Stakeholders commitment - Legal structure - Tenant satisfaction Real mission and strategy SPs performance Causal relationships analysis of key performance indicators Establishing strategy map of the BSC Figure 2. Proposed framework of constructing a strategy map of the BSC 91 Chinese science parks D o w n l o a d e d
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( P T ) 4. Research design and the method used This paper presents a structural evaluation methodology to link KPIs into the strategy map of the BSCfor CSPs. We establish the visualized strategy map with the logical links to improve the SPs performance. The following research questions were used: Is it true that the determinants of a performance evaluation system for SPs basically draw from a parks real mission and resulting real mission? Is it true that the aforementioned real mission and strategy derive from an SPs development cycle, legal structure, tenant satisfaction, stakeholders commitment and the conditions of the context the park is a part of? Is it true that the determinants are based on the four BSC perspectives? The research was carried out using a case study methodology. We establish the visualized strategy map with the logical links to improve the SPs performance. Zhongguancun Science Park (ZSP) is used as the illustrative example. Referring to the proposed strategy map, construction framework depicted in Figure 2, the four perspectives of the BSC are used to establish the KPIs skeleton. According to the BSC structure, we address an exploratory research to analyze the cause-and-effect relationships among the theoretical indications and other emerged factors and construct the strategy map and the strategic evaluation index system of ZSP. 5. An empirical example of constructing a strategy map for CSPs A brief history of CSPs in Mainland China, an analysis of the real mission and strategy, the KPIs selection of the BSC performance measurement, the construction of the strategy map and the analysis and discussion of ZSP with proft agencies were described in the section. 5.1 A brief history of CSPs in Mainland China Although neither Silicon Valley nor Route 128 came into existence by a blueprint, countries around the world, developed or developing, have tried to emulate their success by offering policy incentives to encourage high-tech frm formation in the designated locations (Hu, 2007). Not only affected by the international infuence but also lit up by Chen Chunxians entrepreneurial venture in 1980 and the founding of Lenovo in 1984, China launched the National Torch Programwhich was carried out by the State Science and Technology Commission in 1988. Its purpose was to construct science and technology industry parks and incubate new start-ups for China. Since then, Chinese Government has established science and technology industry parks in 56 metropolises. The state hopes that the R&D institutes, universities and start-ups could closely cooperate to promote the technology transfer and diffusion. CSPs offer various policy incentives to encourage investment and formation of new frms. For example, new frms are exempted from corporate income tax for two years. The inspection of licenses for import can be waived as long as the imported materials or parts will be used in export production. Their revenues from technology transfers are tax-free for the frst 300,000. Intangible assets such as intellectual properties can be factored into their registered capital. To gain entries to the parks and be qualifed for these policy incentives, frms are required to have the high-tech and new-tech nature for their technologies and products, which will be certifed by government agencies (MOST, JSTPM 5,2 92 D o w n l o a d e d
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( P T ) 2001). Another criterion is that frms have to spend at least 3 per cent of their sales on research and development. This high-tech status test is to be repeated every year, in which the failed ones will be disqualifed for enjoying the policy incentives provided by the government. Some of these technology-oriented ventures, such as the Founder Group of Peking University, Ziguang Group and Tongfang Group of Tsinghua University and the Legend Group (or Lenovo Group, as it is later renamed) of the Institute of Computer Technology of CAS, Huawei Tech. Co. Ltd. and ZTE Corporation, have grown into the leading industrial organizations in China. Preferential government policies lead to the rapid growths of the CSPs. Now, CSPs have entered the second venture stage, facing new missions and urgently requiring strategic adjustments and innovations to improve their strategic executive forces. The ideal destiny of CSPs is to become an innovation cluster (Wang et al., 2010). The potential importance of CSPs as a mechanism for generating technological spillover is well-recognized, but there are important issues, like how to improve the environment of CSPs so that the frms located inside really enjoy higher innovative productivity than observationally equivalent off-park frms, how to change CSPs to innovation clusters and how to make strategic adjustment to pave the way for the tenants innovation and development when facing enormous changes, such as environment protection, increasing land and labor costs and the latter-fnancial crisis times. Adapting to constantly changing needs and requirements of their tenants in the new stage, CSPs need to completely reassess their performance measurement. To achieve more effective performance, CSPs must align their goals with those of their tenants and stakeholders. Through the BSC, managers can not only communicate well with their tenants, stakeholders and employees but also control the progress of strategic development to improve organizational performance and enhance the organizational execution. The common objective of CSPs is to build concentrations of high-technology companies through policy incentives, such as tax holidays, expedite technology adoption and diffusion, and create synergies among the academic and fnancial institutions and corporations within or near the parks. They have been growing at astonishing paces. From 2000 to 2007, the share of CSPs industrial added value in that of the whole nation had increased from 7.79 to 9.15 per cent[2]. The number of frms in CSPs in 2010 was 2.5 times that in 2000; the number of jobholders at the end of 2010 reached 8.59 million, which was 3.4 times that for 2000; and export earnings at the end of 2010 achieved $24,7630 million, which was 13.3 times that for 2000[3]. CSPs have been widely recognized for their importance for the development of high-tech industries and regional economic growths. Therefore, the model of CSPs has been closely watched and emulated by other transitional economies. For their signifcance in economy, there have been many articles on the evaluation of CSPs in Mainland China. But most of them have ignored the strategic performance measures. Nowadays, after 20 years development, CSPs have entered the second venture stage. To improve their strategy executive forces, they are facing new missions and urgently requiring strategy adjustment and innovation. The Mission statements on CSPs in the second venture stage emphasize more in the following aspects: promoting the generation of academic spin-offs, carrying out technology transfer programs to strengthen tenant frms and carrying out training programs aimed at developing and 93 Chinese science parks D o w n l o a d e d
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( P T ) managing new technologies. Strategy maps and BSC evaluates the alignment of goals, objectives and strategies with structures, resources and activities and the communication of the network organization. Therefore, they are suitable in applying to assess the network organization of CSPs. 5.2 An analysis of the real mission and strategy ZSPs mission is rather manifold. It is developed in three different directions, i.e. the international path, the national path and the local path. About 200 branches and R&D centers of the worlds top 500 companies have set their offces in ZSP. As a national public body, as many as 32 highest educational institutions are located near the park, including Peking University and Tsinghua University, so do 200 national (municipal) scientifc institutions such as the Chinese Academy of Social Sciences and the Chinese Academy of Engineering, 67 state-level laboratories, 27 national engineering research centers, 28 national engineering and technological research centers. ZSP has played such an important role in the local economic development that its economic growth contribution rate to Beijings economic growth achieves 24 per cent. ZSP is the home of a wide range of competences, among which the most signifcant areas are aerospace, equipment, new material, new energy, emerging cultural and creative and new energy, energy conservation and environmental protection, electronic information, new energy vehicle and biology. Although ZSP is growing into an innovation cluster, rich human resources have played a very important role. ZSP is one of the regions with the most intensive talents and educational resources in China[4]. By August 2011, among the 418 talented working staff members in Beijing who were enrolled by the nations One Thousand Talents Program, 80 per cent are fromZhongguancun, where ZSP belongs. There are 15,000 overseas returnees, who have established more than 6,000 enterprises in ZSP, which has become a region with the most enterprises founded by overseas returnees in China. ZSPs venture capital is relatively rich. The amount of investment per year is about one-third of the national total, which has laid a solid economic basis for achieving the goal of the innovation cluster. Today, the number of listed companies in the zone adds up to 189, including 113 domestic and 76 overseas companies[5]. As many as 38 enterprises have been listed on the Chinese Growth Enterprise Market. It has been planned to establish a national S&T fnancial innovation center in ZSP that involves government and social funds, industrial and fnancial capitals and direct and indirect fnances. ZSP is in its second venture stage and requires strategic adjustment. In 2011, its enterprise gross income grew 23.2 per cent and reached 1.96 trillion, approximately one-seventh of the national total for all high and newzones[6]. The number of companies in the park listed on NASDAQaccounts for one-third of that for the nation. The number listed on NewYork Stock Exchange accounts for one fourth of that for the nation[7]. On March 13, 2009, the State Council announced the construction of the Zhongguancun independent innovation model district, which refects the goal to build an innovation cluster with a global infuence. Therefore, the vision statement of ZSPinvolves the goals of growing into an innovation cluster with a global infuence and improving the bottom line performance, rather than improving shareholders value, which is the goal for proft-seeking enterprises, but not for a public or non-proft organization (including CSPs). JSTPM 5,2 94 D o w n l o a d e d
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( P T ) 5.3 KPIs selection of BSC performance measurement Based on this mission and strategy statement, the indications found in the literature and from the specifc characters of ZSP are solicited and synthesized for determining the KPIs. We have seen that the vision statement of ZSP involves the goal of being an innovation cluster with a global infuence and improving bottom line performance. For example, from the Customer perspective of the BSC, to achieve ZSPs mission, the SP institutions must make the most of their intrinsic advantages and resources to incite the innovativeness of the cluster and generate an infuence in a global scale. Consequently, Tenant retention rate, Tenant increasing rate, Number of new start-ups, New venture mortality and Number of multinational enterprises cultivated are set as the strategic objectives to attract more technology-based frms to ZSP. Correspondingly, fromthe other three BSCperspectives, the remaining KPIs can be derived by the same way. For further commentary on the detailed procedure generating KPIs associated with BSC perspectives for the strategic objectives derived from the vision and mission of the organization, see Quezada et al. (2009) (Table I). 5.4 Construction of the strategy map for ZSP The priorities of the strategy mappings can help managers concentrate on the most important areas, and setup the plans more effectively and effciently. The strategy map for ZSPis constructed, as shown in Figure 3, and the strategy corresponds to the logical links (causal relations) among KPIs. The strategic improvement paths are the strategic steps which link KPIs. The study reveals that the Customer perspective plays the central role as the main effect-factor and cause-factor among the four BSC perspectives. In addition, the two most important KPIs of the C: Customer perspective, C1 and C5 are the most critical lagging indicators used to measure ZSPs performance at the same time. C1 can be determined by many other indicators, i.e. C2, C3, C4 and C5. The effects of F3 on C2, C3, C4 and C5 is strong. In the internal process perspective, P1 and P6 are found to be the most crucial indicators, with strong infuences on C1, C2 and C5. They have moderate infuences on C3 and C4. In addition, P5 has weak infuences on C1 and C3, and it has a strong infuence on C5. Its infuences on C2 and C4 may be negligible. In the Learning and growth perspective, L2 is found to be the most crucial indicator, with strong infuence on C1 and C2 and moderate infuences on C3, C4 and C5. L1 has positive effects on C3 and C5. In other words, R&Dspillover is advantageous to the generation of new enterprises and the promotion of the competitiveness of multinational enterprises cultivated in the SP. 5.5 Discussions and comparisons with proft agencies This research constructs a strategy map of ZSPs performance by extensively synthesizing the relevant literature and by objectively analyzing of ZSPs characters and strategy in the second venture stage. It is favorable for the managers of ZSP to understand the cause-effect relations among the strategic objectives (or performance indicators) by building strategy maps from the four BSC perspectives. ZSP is a public and non-proft organization, which has a large number of internal and external stakeholder relationships. Simultaneously, ZSP is also a technical innovation network organization, and the nodes of this organization are very complicated, 95 Chinese science parks D o w n l o a d e d
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( P T ) Table I. Description of the KPIs selected for ZSP Number KPI Description C: customer C1 Tenant retention rate Capability of keeping existing tenants C2 Tenant increasing rate Growth rate of new tenants C3 Number of new start-ups Active degree of innovation and entrepreneurship C4 New venture mortality Degree of support the small- and medium-sized enterprise (SME) development C5 Number of multinational enterprises cultivated in SP Capability of global resource leveraging F: fnance F1 Growth rate of turnover Growth of turnover for services/royalties F2 Growth rate of funding Access to venture capital funding, banking facilities, other funding sources F3 Revenue per unit of land area Capability of the economic development of cluster enterprise in SP P: internal process P1 Level of pooling resources Organizing staff training and development activities, marketing events, exhibitions, press conference P2 Cost of consulting services Provision of legal, accounting, business and technical advices at low cost (or free-of-charge) P3 Management performance Simplifcation of moving into SP P4 Maturity of talent agency Number and type of talent agency above-scale P5 Number of scientifc publications Number of scientifc publications of the period with the relative impact factor P6 Performance of knowledge innovation and diffusion Number and type of new product prototypes launched by frms and established labs in SP P7 Convenience of sharing resources Sharing laboratory facilities, offce equipment, testing equipment and administrative support (e.g. meeting room, library and reception area) P8 Aggregation of industry New products and/or processes adopted by local frms and developed by the collaboration with the SP L: learning and growth L1 Number and type of new R&D labs hosted Important point of promoting innovation network development and innovation performance L2 Responses of tenant service Number of suggestions provided by tenant frms about the synergy of innovation network L3 Tenant satisfaction Tenant satisfaction about both hardware and software provided by SP L4 Organization competence Policies to attract talent, management capacity of venture capital by SP and improvement of strategic project management L5 Professional training Number of professional certifcations or training programs per employee in SP JSTPM 5,2 96 D o w n l o a d e d
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( P T ) including tenant frms, the MOST, Beijing Government, Administrative Committee of ZSP, banking institutions, venture capital companies, human resources companies and other intermediaries. The three management departments for ZSP have very different objectives, so their interests are intriguing. Therefore, to achieve the goal of building an innovation cluster with a global infuence, tenant frms represent the core of this network organization. In the strategy map for ZSP, the customer perspective is elevated, and tenant frms turn into the real customers. To accomplish the mission, Administrative Committee of ZSP focuses on the tenant frms, investigates and grasps their demand attentively and serves them fast. It plays more the role of a service provider rather than a manager to pave the way for sharing resources, public image, networking, funding, venture capital, talent accumulation and industrial agglomeration. Strategy remains at the core of the strategy map for ZSP. The vision statement of ZSP is solicited and synthesized for determining the KPIs (i.e. the performance indicators of the most relevant and important attributes with respect to strategic objectives of each BSC perspective). Following the mission is the customer perspective (tenant frms), not fnancial stakeholders. To achieve its mission, fscal responsibility and stewardship are not Customer Perspective Mission & Strategy Growth into an innovation cluster with a global influence, and improving the bottom-line performance Learning & Growth Perspective Internal Process Perspective Finance Perspective Customer value proposition Tenant Enterprises C1 C2 Start-ups Multination Enterprises C3 C4 C5 Turnover Growth Founding Growth Land Returns F1 F2 F3 Financial Operations Management process P2 P3 P8 Innovation Process P5 P6 Tenant management & Social Process P1 P4 P7 Intangible Assets Information & Service Capital L1 L2 L5 Organizational Capital L3 L4 Internal Processes Figure 3. A strategy map of the four BSC perspectives for ZSP 97 Chinese science parks D o w n l o a d e d
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( P T ) enough. ZSPmust determine whomit aims to serve and howtheir requirements can best be met. All the activities regarding fnancials, revenues, funding and others are to support the tenant frms. Under a deep understanding the activities and needs of tenant frms, based on knowledge and sharing information, we propose the strategy map and KPI for ZSP. If we get this right, the outcome will be not only effective processes but also a clear understanding of what need to be provided to fulfll tenant frms needs effectively. Seeing the relation between fnancial measures and quality service delivery or mission accomplishment needs deeper considerations. If services are performed with less cost or more effciency, more attention and more investments can be attracted from funders. Therefore, successful operation of ZSP will attract more venture capitalists and create a capital environment of higher quality for tenant frms. Internal processes can produce value for tenant frms. The processes we choose to focus on will normally fow directly from the objectives and measures chosen to the tenant frms perspective. It is not hard to see the importance of the internal processes perspective from the eight KPIs of BSC for it. Employees learning and growth perspective provides the foundation for ZSPs BSC. ZSP is a mission-based organization, which is a non-proft, public-sector and networking agency, and relies heavily on the skills, dedication and alignment of their staff to achieve their socially important goal, i.e. becoming an innovation cluster with a global infuence. Success in driving process improvements, operating in a fscally responsible way and meeting the needs of all tenant frms depends to a great extent on the ability of employees, the policy and other tools to support ZSPs mission. The employees needs to be motivated and have the right mix of skills and tools. The organizational climate needs to be designed for sustaining improvements. We promote that not only administers but also tenant frms, particularly others in the network organization, as well as the business support network understand our strategy very clearly. The detailed strategy map is exceptionally helpful in explaining our strategy, particularly when we were able to showhowthe building blocks fell into place. The strategy map helps overcome the internal divisions. It demonstrates that all members in network organization are working to a common agreed objective. It allows us to take decisions on the allocation of resources which staff can see as a response to a logical process of assessing tenant frms needs rather than because we value one activity more than another. And it provides a common language by which we can explain our strategy to external stakeholders. It will seem that this approach has been effective in ensuring that everyone understands where we are going and what we are trying to do. 6. Conclusions This work provides a systematic method to establish strategy maps, based on the consideration of the intricate causal relationships among KPIs, and the analysis of the important strategic improvement paths. The BSC with four perspectives is used in the strategy map construction framework. It should be pointed out that though the generic theory works for any organization, each manager still needs to identify the specifcs of the BSC and choose the suitable performance indicators for his own organization. The empirical analysis takes ZSP as the example to more thoroughly JSTPM 5,2 98 D o w n l o a d e d
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( P T ) address the issue of performance evaluation of SPs and get a better insight for approaching this problem. In our study, it is empirically verifed that some factors are determinant in the strategic performance measurement system. They are identifed as the conditions of context, i.e. where the SP is located and operated, the real stakeholders interests and the life cycle. They determine the real mission and the consequent strategy for the SP. Beside these determinant factors, two other important factors need to be highlighted from the judgment and statement of the real mission. They are identifed as the legal form of the SP and the availability of the technicalscientifc knowledge from the cooperation with universities, research centers or other professional institutions. Notes 1. www.oracle.com/appserver/business-intelligence/hyperion-fnancial-performance- management/hyperion-performance-scorecard.html 2. Source: authors own calculation on China Statistical Yearbook 2008 and Chinese torch statistics yearbook 2010. 3. Source: authors own calculation on Chinese torch statistics yearbook 2010. 4. Source: http://en.zgc.gov.cn/2011-12/16/content_14089530.htm 5. Source: http://en.zgc.gov.cn/2011-11/14/content_14025989.htm 6. Source: www.zgc.gov.cn/sfqgk/56261.htm 7. Source: http://en.zgc.gov.cn/2011-12/16/content_14089530.htm References Asosheh, A., Nalchigar, S. and Jamporazmey, M. (2010), Information technology project evaluation: an integrated data envelopment analysis and balanced scorecard approach, Expert Systems with Applications, Vol. 37 No. 8, pp. 5931-5938. Alavi, M. and Leidner, D.E. (2001), Review: knowledge management and knowledge management systems: conceptual foundations and research issues, MIS Quarterly, Vol. 25 No. 1, pp. 107-133. Alegre, J., Sengupta, K. and Lapiedra, R., (2011), Knowledge management and the innovation performance in a high-tech SMEs industry, International Small Business Journal, pp. 1-18. Arikan, A.T. (2009), Interfrm knowledge exchanges and the knowledge creation capability of clusters, Academy of Management Review, Vol. 34 No. 4, pp. 658-676. Axelrod, R. (Ed.) (1976), Structure of Decision: The Cognitive Maps of Political Elites, Princeton University Press, Princeton, NJ. Bakourors, Y.L., Marda, D.C. and Varsakelis, N.C. (2002), Science park, a high tech fantasy? An analysis of the science parks of Greece, Technovation, Vol. 22 No. 2, pp. 123-128. Barnabe, F. and Busco, C. (2012), The causal relationships between performance drivers and outcomes: reinforcing balanced scorecards implementation through system dynamics models, Journal of Accounting & Organizational Change, Vol. 8 No. 4, pp. 528-538. Bell, S.J., Tracey, P., Jan, B. andHeide, J.B. (2009), The organizationof regional clusters, Academy of Management Review, Vol. 34 No. 4, pp. 623-642. Belso-Martinez, J.A., Molina-Morales, F.X. and Mas-Verdu, F. (2011), Clustering and internal resources: moderation and mediation effects, Journal of Knowledge Management, Vol. 15 No. 5, pp. 738-758. 99 Chinese science parks D o w n l o a d e d
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( P T ) Chan, Y.C.L. (2004), Performance measurement and adoption of balanced scorecards: a survey of municipal governments in the USA and Canada, International Journal of Public Sector Management, Vol. 17 No. 3, pp. 204-221. Chan, Y.C.L. (2007), St. Thomas University: which balanced scorecard to use?, Accounting Perspectives, Vol. 6 No. 4, pp. 399-414. Chan, Y.C.L. (2009), Howstrategy map works for Ontarios health system, International Journal of Public Sector Management, Vol. 22 No. 4, pp. 349-363. Eden, C. (1992), On the nature of cognitive maps, Journal of Management Studies, Vol. 29 No. 3, pp. 261-265. Niven, P.R. (2002), Balanced Scorecard Step-by-Step: Maximizing Performance and Maintaining Results, Jon Wiley and Sons, New York, NY. Schalock, R.L. and Bonham, G.S. (2003), Measuring outcomes and managing for results, Evaluation and Program Planning, Vol. 26 No. 3, pp. 229-235. Singh, J.C.A. and Mirchandani, P. (2006), Performance measurements for not-for-proft organizations, The Chartered Accountant, June, pp. 1754-1758. About the authors Guixia Wang is a PhD candidate at the Institute of Policy and Management, and University of Chinese Academy of Sciences, Chinese Academy of Sciences, China. She has worked for several years in a management advisory corporation, focusing primarily on ZSPs strategy, organizational innovation and industry research. Her research interests include public support to early-stage ventures, strategy management, organizational innovation and innovation policy. Jinbo Wan is an Associate Professor at the Institute of Policy and Management, Chinese Academy of Sciences. His research interests are in the areas of technology strategy and planning, green innovation and sustainable development. Lanxiang Zhao is a Professor at the Institute of Policy and Management, Chinese Academy of Sciences. Her research interests are in the areas of innovation strategy and planning. She is the Executive Director of the Strategic Research Center of CAS. Lanxiang Zhao is the corresponding author and can be contacted at: ipm@vip.163.com To purchase reprints of this article please e-mail: reprints@emeraldinsight.com Or visit our web site for further details: www.emeraldinsight.com/reprints 105 Chinese science parks D o w n l o a d e d