TMSD 9 (3) pp.

175193 Intellect Ltd 2010

International Journal of Technology Management & Sustainable Development Volume 9 Number 3

Intellect Ltd 2010. Article. English language. doi: 10.1386/tmsd.9.3.175_1

ANTONIO JOS JUNQUEIRA BOTELHO Innovastrat Consultoria MARIZA ALMEIDA Augusto Motta University Center UNISUAM

Overcoming institutional shortcomings for academic spin-off policies in Brazil

ABSTRACT
This exploratory study discusses the evolution of university spin-off policy in Brazil. Technology transfer and entrepreneurship infrastructures to support spin-off ventures were weak until early 2000. However, in 2004, the government passed an Innovation Law to establish a legal infrastructure and nancial mechanisms to promote innovation. In its aftermath and in response to the law, a few universities sought to evolve their spin-off policy. Data collected from seven spin-offs from six universities allows an exploration of spin-off policy as a factor underpinning the growth potential of business ventures. The results discussed in this article are consistent with earlier ndings for Belgium. The article concludes that in the absence of proper orientation and incentives in the unfolding policies and mechanisms underpinned by the Innovation Law, even universities that tried to take advantage of the law did not change their spin-off policies to proactively select growth-oriented spin-off ventures.

KEYWORDS
spin-off technological innovation entrepreneurship public policy

INTRODUCTION
The process by which the results of research, or a technical idea with potential value developed in a university, are converted into one or more commercially

175

Antonio Jos Junqueira Botelho and Mariza Almeida

successful products through the generation of a spin-off company is highly complex, poorly documented, and little studied in emerging countries, including Brazil. Still, the spin-off process is one important means of transferring and commercializing technological innovations (Djokovic and Souitaris 2008; Shane 2004). Over the past decades, academic institutions all over the world have been increasingly associated with high-tech rms (Upstill and Symington 2002). One of the main contributions of universities is spin-off ventures in which academic researchers alone, or in partnership with their universities, form a company to exploit and commercialize R&D results (Webster and Etzkowitz 1998). Twenty years ago, universities in few countries, particularly in the United States, began to encourage the emergence and growth of spin-off rms as an alternative route for technology commercialization (Bray and Lee 2000). Over the past decade, spinning off new ventures from universities was adopted in Europe in a signicant departure from their established traditional view that technology transfer and commercialization were outside their mission (Owen-Smith et al. 2002) However, an OECD survey suggests that outside the United States, spinning off new ventures from academic and research institutions remains a process of technology transfer with minimal impact (Callan 2001). The OECD study concludes that barriers and obstacles to spin-off formation are not well understood yet. Further, Goldfarb and Henrekson (2003) suggest that even though academic entrepreneurship is an effective means of technology transfer, it may not be the best in all circumstances and environments. Thus, it is necessary to gain a better understanding of the spin-off venture mechanism in different environments in order to be able to employ it effectively and appropriately. There are several models of the academic spin-off formation process. Ndonzuau, Pirnay and Surlemont (2002) divide it into four main stages: (1) idea generation from research results; (2) new business project denition from ideas; (3) launching of spin-off and (4) strengthening of new rm. Different variables and aspects have been put forth as shaping the spin-off generation process (Djokovic and Souitaris 2008). A singular characteristic of Brazils innovation system is that the university, rather than the rm as in OECD countries is the locus of innovation, particularly in high-tech areas (Pvoa 2008). Fernandes et al. (2010) suggest that despite recent advances, Brazil still lags behind with respect to the development of its national system of innovation (NSI) as the Brazilian path is slow and shows a relatively small productivity at the nexus of scientic and technological production (Ribeiro et al. 2009). Although the scientic side of the system has made impressive gains, there is a lingering mismatch with production technology. Furthermore, it is understood that NSI constitutes a precondition for overcoming underdevelopment, as it produces solutions to problems faced by the economy and society (Suzigan, Rapini and Albuquerque 2009). Although universities and public research institutes represented about 1.6% of patent deposits in Brazil by residents, they accounted for 56.3% of the deposits in the area of biotechnology and 45% in organic chemistry. Pvoa (2008) and Rapini et al. (2006) suggest that because of the weak involvement of rms in R&D activities in an immature NSI, universities relationships with rms have a dual role. They are either a complement to or a substitute for the rm as a developer of technology. This is in part due to the industrial structure and competitive dynamics of the Brazilian economy, which is characterized by strong variations across sectors. It is also in part due to the

176

Overcoming institutional shortcomings for academic spin-off policies in Brazil

concentration of researchers in universities. Further, incumbent rms have a much lower absorption capacity, strengthening the argument for the generation of university spin-offs to bring high-tech innovations into emerging country markets. Despite the promise of their many patents, Brazilian universities are characterised by a weak and incomplete academic infrastructure, which inhibits the development of spin-off ventures. By contrast, many Brazilian universities have developed alternative channels of innovation. Incubators have become a popular means to create and support technological ventures in their initial stages. The creation of each incubator and the growth of incubator numbers are the outcome of an associative strategy rather than the result of an explicit government policy. Although incubator policy was launched as far back as 1988, it was not supplemented with the provision of enough resources that would help expedite the process of evolution. However, each incubator had to make do with own resources available to support spin-off rms. In the event, the number of incubators in Brazil mushroomed from 2 in 1986 to 60 in 1998 and to 454 in 2010. In 2010, incubators had 6300 rms and generated 33,000 jobs. Over the period, 1500 rms have graduated from the system. Degroof and Roberts (2004) analysed the characteristics of academic spinoff policies in environments outside of high-tech clusters and where technology transfer and entrepreneurship infrastructures have been weak. The study looked at nine spin-off policies in the 8 largest academic institutions and in 47 rms in Belgium. They concluded that spin-off policies in academic institutions signicantly affect the growth potential of ventures. In addition, both in Brazil and in Europe (Degroof and Roberts 2004), the stigma of failure is high and entrepreneurship takes the form of creating small- and medium-size enterprises (SMEs) which do not have a growth orientation (Botelho and Jonathan 2006). Degroof and Roberts (2004) conclude that the issue is not only lack of growth in most ventures but also lack of growth orientation of entrepreneurs. In this regard, the challenge for the academic institutions in their sample was how to raise the interest of academics in spin-off initiatives. Degroof and Roberts (2004) suggest that existing entrepreneurial cultures that represent structural and cultural obstacles often require a very long time to impact spin-off emergence and growth. Therefore, the study of spin-off policies to generate spin-off ventures is an ideal vehicle to examine sources of the problems of lack of growth and growth orientation. Degroof and Roberts (2004) argue: Indeed, new ventures are typically resource-poor and the academic institutions, from which they originate, along with their sponsors, are major resource providers whether it is early stage funding, space and facilities, intermediation with outside parties, or legitimacy. This dependence is particularly true in regions where there is a weak entrepreneurial community. Their hypothesis is that processes involved in spin-off policies shape the ventures they generate. They thus argue: Academic spin-off rms are extreme examples of this genetic interpretation of organization formation and of entrepreneurship. From the point of view of the growth potential of spin-off ventures, it is important to focus on the spin-off process and on the early phase of rms because venture development is path-dependent and initial stages strongly imprint future developments (Boeker 1989).

177

Antonio Jos Junqueira Botelho and Mariza Almeida

The objective of this article is to test this hypothesis against the case of Brazil, addressing the same research question: what characteristics of academic spin-off policies could explain the lack of growth potential of university spin-off ventures? This exploratory research probes the determinants of the dynamics underlying the emergence and early evolution of university spin-off companies in emerging countries like Brazil. It is based on the analysis of a sample of case studies of spin-off activities from six Brazilian universities. It follows the original exploratory research methodology used by Degroof and Roberts (2004) and thus includes questions about the phases of spin-off process: the origination phase, the concept-testing phase and the start-up support phase. The article aims to contribute to the existing knowledge on the state of academic spin-off policies in emerging countries, in general, and Brazil, in particular. The remainder of this article is divided into ve sections. The rst section discusses the small, albeit growing, study of spin-offs in Brazil. The second section makes a selective review of the literature on spin-offs and develops the analytical framework of the study. The third section describes the methodology employed and the data obtained from the sample survey conducted. The fourth section tackles three tasks: rst, it introduces and discusses eight spin-off case studies and their institutional environment at the time of their creation, with a focus on university spin-off policies; second, it presents the policy components aimed to foster spin-off ventures in the 2004 Innovation Law in particular and assesses the inuence of the law on university spin-off policy; third, it discusses the changes in this policy before and after the law and the evolution of the rating of academic spin-offs in these institutions in terms of selectivity and support. Finally, in the conclusion, the article discusses systematic gaps in sources of nance, types of research required, the culture of trust between innovators and investor/managers and the need for a broader institutional support framework for early phase of spin-off formation and for future growth.

LITERATURE REVIEW: SPIN-OFFS IN BRAZIL

There are to date only few studies on spin-offs in Brazil. These few studies derive from the recent literature on science and innovation policy, which largely focuses on the university (Rapini 2007), universityindustrygovernment relations (Dagnino and Velho 1996; Etzkowitz, Mello and Almeida 2005) or, generally, science and technology interactions (Bernardes and Albuquerque 2003). Federal and state government surveys on innovation, patterned after the European Unions Community Innovation Survey, are also important data sources for studies of inter-sector differences in interaction and science and technology indexes (Fapesp 2010; IBGE 2010). Brazils Innovation Law dates from 2004 and its main nancial and regulatory mechanisms did not begin to be implemented until 2006. One of the laws main provisions which impacts the spin-off policy framework allows researchers from federal public universities to hold equity in a spin-off venture or temporarily become entrepreneurs, while keeping their retirement benets from their public sector jobs. Further, new innovation support programmes were established to give grants directly to rms as a result of the law, thus beneting spin-offs. In 2009, a grant programme (PRIME) was established, specically targeted at spin-offs. A recent study by Renault (2010) analyses the academic spin-off formation process in COPPE/UFRJ, one of the countrys major federal public universities, based on the institutional perspective developed by Mustar et al. (2006). The

178

Overcoming institutional shortcomings for academic spin-off policies in Brazil

sample included ten spin-offs created between 1994 and 2006. The study shows some differences in the resources available to the spin-offs in relation to the originating university research group, and it points out that university resources did not include nancial support, after all. In another study by Costa and Torkomian (2008), it was observed that the majority of the 33 spin-offs covered in the sample were created after 2001; that partners and employees were middle-aged (3050 years) with strong academic qualications (holding doctoral and masters degrees); and that the spin-offs were established in high-tech sectors, had a domestic market orientation and, surprisingly, did not have patents either developed or licensed from university. The three main problems identied by spin-off entrepreneurs presented in their results were the entrepreneurs own weak managerial capability; excessive taxes; and lack of funding for the creation of spin-offs, as 80% launched their rms with their own resources. Pereira and Muniz (2006) studied four spin-offs from a single public research university to identify obstacles to the generation of university spinoffs. Their study suggests the following to be the main structural obstacles: the prevalence of weak intellectual property (IP) protection, weak university structure for technology transfer and the lack of seed capital. Respondents also noted that the large amount of capital required for some discoveries to be developed stopped them from pursuing the creation of spin-offs. The objective of the study carried out by Vasconcelos and Salerno (2010) was to build a product development process model integrated into strategic planning for academic spin-offs by identifying key process variables and their relationships and developing an understanding of the process of a spin-off initial planning. The two academic spin-offs studied were selected from an initial convenience list of ten. Their denition of spin-off follows that of Rappert, Webster and Charles (1999) which is also employed in this article. Their selection was based on the following criteria: relevance; stage of product and business development; and technological base. A relevant result obtained by the study is that researchers who founded spin-offs recurrently returned to their initial activities in order to make improvements to the product development process and adapt it to new sets of business opportunities. The descriptive study conducted by Tatiane do Santos and Pinho (2010) addresses the development of technology-based rms (TBFs) as spin-offs from universities and corporations, by exploring the rms degree of consolidation, market insertion and public policy support. The relatively large sample used in the study (including 38 rms selected from a list of 102 rms) yielded results, which, among other things, exhibit a high growth rate (median, 15.3%) in spite of great variance, and this growth is not related to the intensity of public policy support. Further, corporate spin-off TBFs (nineteen rms) posted higher growth rates than academic spin-off TBFs (eleven rms; 26.7% and 22.2%, respectively) and had much larger average revenue (60% larger) than academic spin-off TBFs. Finally, the authors conclude that because TBFs (both corporate and university spin-offs) focus on niche markets with a limited size (under USD 30 million), they face a low ceiling for growth and, thus, are generally forced into a diversication strategy. Maia de Oliveira and Velho (2010) present an overview of patenting activities carried out by Brazilian public universities (federal and state).1 One of their main ndings shows a signicant increase in the number of patent applications led by Brazilian public universities. During the period 19702007, 90 universities led applications for 2099 patents. During the period 199099, they

In 2007, there were 96 public universities: 58 public and 48 state (INEP 2007).

179

Antonio Jos Junqueira Botelho and Mariza Almeida

The leadership of the south-eastern region and of the state of So Paulo largely reects the regional concentration of academic institutions and graduate enrollment, number of researchers and volume of nancial resources for scientic and technological research activities.

led 334 patent applications, and the number of applications led during the period 200007 increased almost vefold to reach 1644. The study also shows a geographic concentration of academic patents in the south-eastern region (80% of patent applications during the period 19792007), mainly in the So Paulo state (50% during the same period).2 Further results of the study show the diversity of licensing strategies adopted by universities, the high level of academic maturity of the inventors and the low rate of commercialisation of IP through licensing during the period 200007 for the leading public universities of So Paulo state. The two highest licensing rates were found at Unicamp (6.6% of 394 patent applications) and at the Federal University of So Carlos (13.3% of 45), and the other three had no licensing over the period (University of So Paulo (USP), State University of So Paulo and Federal University of the State of So Paulo). Surprisingly, although the studys research methodology was based on interviews with university decision-makers and directors of technology transfer ofces (TTOs), spin-off formation was apparently not cited as a possible strategy for academic IP commercialization. Along this line, Pvoa (2008) argues that the sharp increase in academic patenting in the most recent period is due, among other things, to changes in the legal IP framework, growth in scientic productivity driven by an increase in volume of nancial resources for graduate education and a rise in the number of doctorates awarded. He also suggests that a shift in the attitude of academic researchers towards IP motivated the establishment of university TTOs and new rules for IP revenue sharing. Takaki et al. (2008) produced a consulting report on innovation in ten Brazilian institutions, including three public universities (Unicamp, Federal University of Minas Gerais (UFMG) and USP), which was based on patent applications in Brazil from 1990 to 2006. One result for this sample is that the growth of foreign patent applications follows the pattern of national applications, albeit at a slower rate, with an acceleration following the 1996 revision of the Industrial Property Law. A recent study of universityindustry links in Brazil by Fernandes et al. (2010) explores the benets derived from the interactions between rms and university researchers. The following points are observed. First, the study shows the bidirectional relationship channels to be particularly relevant, yielding both innovative and productive benets for rms, and intellectual and economic benets for the universities. Second, the study conrms the dual role of the universities interactions with rms substituting for and complementing with rms own R&D versus a more focused one for the research institutes. Finally, the study nds a negative correlation between investment in internal R&D and productive benets for the rms, seemingly indicating that the expected benets of these investments are not generating innovation. An empirical nding of particular relevance to this article relates to the analysis of channels of interaction and the degree of importance of universityindustry relationship to innovative activities of rms namely, that 50 out 326 respondents (15.3%) were spin-offs from university/research institutions.

THEORETICAL FRAMEWORK

Denitions
According to Steffensen, Rogers and Speakman (2000), a spin-off venture is a rm that emerges from another organization. For these authors, a spin-off

180

Overcoming institutional shortcomings for academic spin-off policies in Brazil

can be a planned or a spontaneously created business venture. The former is a rm that results from voluntary efforts by the initiating organization. The latter is a rm that results from the effort of the academic entrepreneur, who functions subject to little or no encouragement by the organization which creates the spin-off rm. Following Rappert, Webster and Charles (1999), we dene an academic spin-off as a rm with products or services developed from a technological idea or scientic/technical knowledge originated by a member of the university who creates the spin-off rm. Shane (2004) denes academic spinoff as a rm created to exploit IP derived from a research activity developed at an academic institution.

Analytical framework
This article adopts the analytical framework proposed by Degroof and Roberts (2004), who divide the inductively identied process of proactive spin-off policies into three phases that follow the Shane and Venkataraman (2000) entrepreneurship theory, which is predicated on the opportunity nexus: the origination phase, the concept-testing phase and the start-up support phase. The origination phase, the rst selection point, includes the genesis of the spin-off process or highlights how the opportunity was identied, either by the individual initiative of an entrepreneurial researcher or by a proactive search for a technology opportunity within a research institution. In the concept-testing phase the opportunity is tested from a technical and a business point of view. It is completed by the conrmation of the business opportunity and a new round of funding. Finally, the start-up support phase begins and the business opportunity is exploited. The Roberts and Malone (1996) framework is then adopted to examine academic spin-off policies based on the level of selectivity and the level of support of academic institutions. Roberts and Malone (1996) identify two academic spin-off strategies that work along the following policy dimensions: either as high selectivity and high support strategies (a policy adapted to entrepreneurially underdeveloped environments) or as low selectivity and low support strategies (a policy adapted to entrepreneurially developed environments such as the Silicon Valley). They then use these to inductively establish a typology of spin-off policies: (1) absence of proactive spin-off policy; (2) minimal support and selectivity; (3) intermediate support and selectivity; (4) high support and selectivity. From the analysis of the data, they develop a set of four archetypes of spin-off policies, summarized in Table 1.

METHODOLOGY AND DATA

Methodology
Given that the phenomenon of spin-offs is quite recent in Brazil, it is not surprising that there are few empirical studies on the subject. This study, which is based on the experiences of a sample of spin-off rms, is, therefore, essentially of exploratory nature. In order to enhance the robustness to the sample data, the criteria employed here for selecting spin-off rms comprised universities with different research capabilities and from different regions of the country, thus accounting for the countrys large geographic extension and academic diversity. In the nal sample of seven spin-offs from six universities, three

181

Origination phase

Concept-testing phase

Start-up support phase |Venture creation at an early stage No institutional support

Archetype 1: Absence of proactive spin-off policies No institutional support Performed by researchers. Minimal: simple extension of consulting or R&D work performed for industry within university

No institutional support Individual initiatives of researchers often resulting from interaction with industry

Archetype 2: Minimal support and selectivity

Opportunity identication: Individual initiatives of researchers + public relations campaign of universities Opportunity selection: Focus on encouraging spin-offs rather than on selectivity Nascent IP capability Very limited capability for business opportunity selection

IP protection: Nascent IP capability not always relevant because many cases without IP transfer Business concept testing: Minimal Selection: Minimal encouragement rather than selectivity

|Venture creation at an early stage Internal advising capabilities: None or limited Network support: Some at isolated institutions through nancial partner. Otherwise insulation from industry

Archetype 3: Intermediate support and selectivity IP protection: Growing IP capability Business concept testing: Market researchproduct development within university structure Selection: Emerging selectivity through more extensive concept testing

Opportunity identication: Attempts at proactive opportunity search Opportunity selection: Growing selectivity; pressure founders to submit more ambitious business projects

|Firm creation at a later stage of concept testing Internal advising capabilities: Unclear Support network: Structuration of nascent local entrepreneurial community and establishment of external links Through nancial partners

Archetype 4: Comprehensive support and selectivity IP protection testing: Strong IP capability Business concept testing: Market researchproduct development with help of outside consultants Selection: Strong selectivity: target venture capital funding

Opportunity identication: Proactive opportunity search Opportunity selection: Strong IP capability-very selective-specic criteria for transfer of technology via spin-off strategy versus licensing

|Venture creation at a later stage with comprehensive proof of concept Internal advising capabilities: Research collaborations of research institute with spin-offs Support network: Local network + strong international network of the research institutions and their partners Firms management, board advisors, shareholders

Source: adapted by the authors from Degroof and Roberts (2004).

Table 1: Spin-off policy archetypes.

Antonio Jos Junqueira Botelho and Mariza Almeida

Firm Opto Eletronica Bematech Phoneutria Akwan Pharmacos da Amaznia Gavea Sensors Endeeper

Founding Originating year university 1985 1987 1994 2000 2001 2003 2004 USP CEFET-PR UFMG UFMG UFAM PUC-Rio UFRGS

Capital 1 1 1 1 1 1 1

Ownership structure 1 1 1 1 1 1 2

Management 1 1 1 3 2 1 1

Indicators of growth orientation 3 3 1 3 1 3 1

Table 2: Coding of founder characteristics of spin-offs.

http://www.inovacao. usp.br/institucional/ historico.php

were well-studied cases and four were object of presence and/or telephone interviews for the purpose of this research. The data obtained from the survey was coded in line with the scheme proposed by Degroof and Roberts (2004): founding year, originating university, capital, ownership structure, management, indicators of growth orientation and types at the date of founding.

Spin-off rms
The data for classifying the six universities spin-off policies in the proposed selectivity and support framework presented earlier is summarized in Table 2.

Universities
The data obtained from the selected universities presented allows for a comparative contextual analysis to be conducted in terms of graduate courses, researchers with Ph.D., doctorates awarded and patent applications (Table 3). The state-run USP is in the countrys most developed state in the southeastern region. It has the sixth largest student enrolment, and it alone is responsible for one-fourth of Brazils scientic production. Its main campus is in the state capital, So Paulo, the countrys richest and largest city. However, it also has six other campuses throughout the state. Entrepreneurship and spinoff promotion activities are decentralized among its departments. Altogether, in its seven campuses, there are six incubators geared to different economic sectors. The largest, CIETEC, was created in April 1998 in the main campus. Since then, institutional efforts to promote spin-off creation have been strengthened. In 2005, the USP Innovation Agency was created to manage its innovation policy, including IP, technology transfer, industrial cooperation, incubators and technology parks and entrepreneurship training.3 UFMG, one of countrys largest in student enrolment, is in the southeastern region and has a main campus in the capital city of Belo Horizonte and two smaller ones (CGEE 2010). Entrepreneurship is an isolated activity at UFMG and depends on a handful of professors and academic units that promote entrepreneurial activities and have forged partnership with external

184

Overcoming institutional shortcomings for academic spin-off policies in Brazil

University USP UFTPR UFMG UFAM PUC-Rio UFRGS

Number of graduate courses 608 9 69 42 27 79

Number of Ph.D. researchers 8677 335 2902 n.a. 745 2798

Number of doctorates awarded (19962008) 23,372 n.a. 3,303 n.a. 1,498 4070

Cumulative number of patent lings (2005) 190 n.a. 100 n.a. n.a. 39

Cumulative number of patent lings (2010) 544 n.a. 310 n.a. 36 105

n.a., not available. Source: CGEE, 2010, except for UFTPR: http://www.pg.utfpr.edu.br/dirppg/ppgep/dissertacoes/arquivos/83/ Dissertacao.pdf and for Federal University of Amazon (UFAM) graduate courses: http://propesp.ufam.edu.br/modules/ tinyd4/

Table 3: Characteristics of spin-off originating university.

institutions and rms.4 In spite of this, some units have been able to create successful spin-offs. Its computer science department was a pioneer in offering undergraduate entrepreneurship courses to its students from 1993 onwards (Silva and Colenci Jr 2002). In 2003, two existing incubators merged to form a new one, Inova-UFMG. The universitys research development foundation (Fundep), which was created in 1974, assists researchers with project submission and industrial cooperation contracts and supports the incubator. In 1998, UFMG established an IP unit with the aim of promoting entrepreneurship and assisting researchers in developing IP (Takaki et al. 2010). The Technological Federal University of Paran (UFTPR) was created in 2005 from the middle and higher technical professional school CEFET-PR, founded in 1978. Located in Curitiba, the capital of the state of Paran in the southern region, the university has eleven campuses spread throughout the state. Entrepreneurship and spin-off creation activities are fragmented and dispersed. The UFAM is located in the northern region, which is the poorest and least populated region in the country. UFAM created an incubator in 2008. Entrepreneurship teaching is also quite recent, being offered in a few undergraduate areas through general-purpose seminars and workshops. Although a TTO was created in 2006, the university does not have a spin-off creation policy. The Pontical Catholic University of Rio de Janeiro (PUC-Rio) is located in the south-eastern region. It is the countrys most important private, nonprot, research university. In response to external budgetary pressures, the university has embraced entrepreneurship since the late 1990s. It pioneered the establishment of a comprehensive undergraduate entrepreneurship curriculum (with a bent in behavioural psychology) and the establishment of an incubator. Yet, its science and engineering school universityindustry cooperation unit was short-lived (Guaranys 2003). In 2007, the school created an IP ofce, which became the universitys Innovation Agency in 2009, charged also with technology transfer.5 The Federal University of Rio Grande do Sul (UFRGS), located in the southern region, established an IP and industrial cooperation ofce in 1998,

Ronaldo Tadeu Pena, Dean of UFMG, presentation at XVII Seminrio Nacional da Anprotec, Belo Horizonte, 18 October 2007.

http://www.agi.pucrio.br/?pag=inst accessed on 3 November 2010.

185

Antonio Jos Junqueira Botelho and Mariza Almeida

http://www.tecpar.br/ appi/seminario/ Palestras3/Marcus %20J%20Zanon%20 %20Rede%20de%20 PI.pdf accessed on 2 November 2010.

which by 2004 had led 34 domestic patents and licensed three of them (Brasil 2004). It has ve incubators in different academic units which make up a technological incubator network, REINTEC/UFRGS. In 2000, it established a university-wide technological development unit (SEDETEC-UFRGS), to manage, generate value and transfer the universitys research results. At the same time, it began to offer elective entrepreneurship courses (Leite 2004).

DISCUSSION AND PRESENTATION OF RESULTS

The previous section showed that the universities originating spin-off rms had started off with different spin-off promotion policies and also had different evolutionary paths. This section discusses the data relating to the spin-off rms in terms of spin-off policies classied under four archetypes and stages of growth of spin-offs observed over the period between the date of spin-off creation and mid-2010. The results of analysis for each university are discussed below. USPs initial spin-off policy came with the foundation of the rm known as Optoelectronic in 1985. It was the rst rm to be hosted by the incubator created in 1986 at the USP campus in the city of So Carlos, staffed by a coordinator and a secretary. The rm was created through the entrepreneurial initiative of university researchers with university support limited to space and basic facilities. There were no other support elements such as early-stage funding, intermediation with outside parties and legitimacy (Oliveira et al. 2001). USPs spin-off policy at this period is classied as Archetype 1. The UFTPRs spin-off policy was based on the well-studied case of the rm called Bematech, founded by two postgraduate engineering students in 1990. They sought the support of a Paran state technological institute, Instituto Tecnolgico do Paran (TECPAR), to develop the results of their masters dissertations into a new business venture. TECPAR was created in the same year, and Bematech was its rst incubator tenant, since there was then no incubator at the UFTPR institutional predecessor, CEFET-PR, a professional technical school. The new venture received support in the form of interns, consulting services by the local Sebrae (Brazils quasi-public agency for micro and small enterprise support) ofce and, most importantly, access to its technological research laboratories. So, support afforded to Bematech at foundation included provision of space and facilities and intermediation with outside parties. However, no other types of support such as early-stage funding and legitimacy were offered (Oliveira et al. 2001). Thus, UFTPRs initial spin-off policy can also be classied as Archetype 1. UFTPRs TTO (Ncleo de Transferncia de Tecnologia) was created later in 2005.6 Today, UFTPR has six business incubators and six so-called project hotels for the pre-incubation of research results. In spite of these initiatives, the university has yet to contend with the challenge of providing adequate capacity building support for start-ups in terms of business conception and management. The offer of entrepreneurship courses at undergraduate level has not produced viable ideas for the institutions pre-incubation programme by its students and professors (Santos 2008). Not surprisingly, UFTPR still remains in Archetype 1 category. UFAMs spin-off policy derived from the rm Pharmacos D Amazonia, which was founded in 2001 by a professor to produce phytocosmetics and phytotherapeutics. UFAM does not have either an incubator or any other spinoff support mechanism. The entrepreneurial founder visualized the business opportunity. However, the rm took part in the incubation programme of a

186

Overcoming institutional shortcomings for academic spin-off policies in Brazil

local multi-stakeholder organization, Centro de Incubao e Desenvolvimento Empresarial. This would qualify UFAM to be classied in Archetype 1. Endeeper, the spin-off rm which was the analytic nexus for the UFRGS case, develops solutions for information and knowledge management for petroleum exploration and other knowledge-intensive domains.7 The rm was created based on the research results of a ten-year PetroGrapher Project at the universitys informatics institute research group on intelligent databases. The rms creation catalyst was a grant awarded to the research group by Pappe (Programa de Apoio Pesquisa em Pequenas Empresas), a joint programme to fund innovation research in micro and small enterprises established by the federal government innovation agency, FINEP, and the local state foundation for research support, Fapergs . Endeeper was incubated in the institutes own incubator.8 Once the product development was completed, the rst sale was made to the Brazilian state oil company, Petrobrs, for which the entrepreneurial founders did consulting work. It is the only spin-off in the sample created in the context of the cultural and institutional changes engendered by the 2004 Innovation Law. Therefore, among the support components available, one can cite space and facilities, intermediation with outside parties and legitimacy, since the incubator had been in existence for several years at the period of founding and acted as intermediary of support for spin-off creation. The nancial resources granted to the university to assist the rm did not originate in the university; nor did they result from a specic spin-off creation policy, but rather from a programme which was a forerunner to the major corporate innovation support grant programme created by the Innovation Law that is, the Economic Subsidy Programme. Therefore, UFRGS is classied in Archetype 2. In this research sample, two spin-offs originated from UFMG. A group of computer science professors founded the search engine rm, Akwan Information Technology, in 2000. The rm received angel investment. In 2005, Akwan was bought by Google which turned it into its Latin America lab (Deutsche, Renault and Ziviani 2005). Phoneutria was created by molecular biology and microbiology researchers to develop biotechnology products and services. The rm received nancial grants from the innovation support programmes established as a result of the 2004 Innovation Law. UFMGs incubator was not geared to biotechnology-related rms, but the city then had a pioneering biotechnology incubator, Biominas, with which Phoneutria was associated. That is, it does not make use of Biominas space but receives consulting assistance in several areas.9 The absence of a central innovation promotion unit at UFMG allowed considerable exibility in the creation of an entrepreneurial environment, albeit without a formal institutional commitment. Thus, Fundep assisted the sale of Akwan to Google. University support for spin-off creation included provision of space and facilities, intermediation with outside parties and legitimacy, which qualied it to be classied in Archetype 2. The results discussed earlier are mapped in Figure 1. The analysis of archetypes of spin-off policies in the six sampled universities is centred on the rst period of the spin-off life cycle, portrayed on the left of Figure 1. The second period, mid-2010, is portrayed on the right of Figure 1. Three universities are classied as Archetype 1 in the rst period. This period is characterised by the absence of proactive spin-off policies at the time the spin-offs were created. The fact that no support was provided by these universities led them to venture spin-off at a very early stage of development when the main asset was just the scientic knowledge of the founders. At this

http://www.endeeper. com/index.php. Interview with Mara Abel, founder of Endeeper, in July 2008 and May 2009. Interview with Evanguedes Kalapothakis, founder of Phoneutria, in August 2008 and May 2009.

187

Antonio Jos Junqueira Botelho and Mariza Almeida

Figure 1: Rating of academic spin-off in terms of selectivity and support. Source: based on Figure 12 in Degroof and Roberts (2004).

early phase, the viable business model of the rm was not dened because the founders had no concrete idea as to how to commercialize it. As a consequence, the founders would generally adopt a very simple business model based on performing contract-based work, often in the form of consulting, which bears strong similarity with the work they performed in their lab. Over the next few years, the founders would complement their scientic and technological expertise with market knowledge, rene product, select market niche and nd a viable business model for their venture. They would thus need to undergo a gestation period. Also in the rst period, three universities were classied as Archetype 2 Minimal support and selectivity. Again, these universities spun off ventures at a very early stage. In the second period, a few institutions had sought to expand their spin-off creation policy, thus evolving from one archetype classication to another: USP, PUC-Rio and UFMG moved to Archetype 3 and UFRGS moved to Archetype 2. UFAM, however, remained in Archetype 1, since no major changes were observed in its spin-off creation policy.

CONCLUSION
The results presented here converge with those of Degroof and Roberts (2004) for the spin-off policy of Belgian universities that in an environment with weak entrepreneurial culture and infrastructure, policies that provide little or no selectivity and support have signicant impact on the growth potential of spin-off ventures. There are in effect two impacts. First, as with Roberts and Malone (1996), low selectivity implies a low average potential quality of the ventures being spun off. Second, in line with what the research by Roberts and Malone (1996) suggests, even though universities developed spin-off policies, these policies offered little support, pushing most of the burden of concept testing to be considered after the spin-off founding. Our own results in Brazil bear out three additional conclusions. First, the fact that the government innovation policy shapes mostly public university spin-off policies has given these policies a narrow and misguided orientation towards technological innovation and IP creation. Second, it has also pushed spin-off founders away from opportunity identication and business model analysis after spin-off creation. Third, the need for survival has forced spin-offs to move towards contract

188

Overcoming institutional shortcomings for academic spin-off policies in Brazil

work, ignoring, as it were, necessary tasks and thereby to adopt diversication strategy. This coupled with the lack of entrepreneurial growth orientation of founders generally nds rms in a low-equilibrium trap, turning potential high-tech start-ups into traditional SMEs. Yet, a few ventures were spun off from specialized labs which previously had industry connection. Thus, product development often occurred within the university structure. One spin-off venture originated from an opportunity identied by founders. Two others were the outcome of opportunities identied in the course of a specialized university lab research undertaken for rendering consulting service to a large rm, which subsequently led to licensing contracts to the spin-off rms. It was observed that, in general, university spin-off creation support policy was limited to the provision of incubating facilities, and, to a lesser extent, some entrepreneurial training centred on behavioural aspects. Thus, Brazil now appears to be in a stage similar to where the OECD countries were one and a half decade ago. Indeed, there is good ground to surmise that the conclusions of the OECD study (Callan 2001) would aptly apply to Brazils current position: The rms size, growth rates, revenues, and product generation are modest, at least in the rst decade of their existence. While a small percentage of spin-offs do blossom into large high-tech rms, a large proportion survives without growing considerably. Their failure rate is signicantly below national averages. Not all academic disciplines equally generate new rms. Academic spin-off ventures are mainly in the biomedical and information technology elds. Spin-off rms tend to come from a small number of top research institutions. The support structures on which public spin-offs rely are expensive and not worth developing if an institution does not generate enough intellectual property to justify a professional technology commercialization staff. The low growth orientation of spin-offs in Brazil may be attributed in part to the fact that they generally have limited or unclear IP rights. This, in turn, may be related to the fact that at spin-off founding time, universities lacked IP legal structure and IP policy, and therefore, researchers opportunistically pursued individual appropriation strategies of university lab-developed research. In Brazil, most support structures, particularly IP protection units and TTOs, began to be created just from the late 1990s onwards in few, albeit not always the leading, research universities of the country.10 It was only over the past couple of years, following the 2004 Innovation Law and the subsequent approval of its main funding mechanisms and instruments for the promotion of such structures in public universities and research institutes, that they became more widely diffused and began to function somewhat better.11 Still, the small amount of resources granted to each TTO, the lack of specialized human resources and, more importantly, the absence of performance incentives to ofcers of TTO and the general lack of institutional support to them have limited their impact on spin-off creation. Moreover, the focus of the current innovation policy on IP does not appear to substitute for the much-needed opportunity analysis at the time of spin-off foundation. Although the top research universities mainly in the state of So Paulo public university system have developed a strong support structure in their spin-off policies, the selectivity component is still sorely lacking. At this point, we can only venture that this is in part due to the lack of the right incentives in

10

For a different assessment, see Santos and Rebolledo (2008). The most important business incentive policy instrument related to the Innovation Law was Law of Fiscal Incentives for Technological Innovation and a few provisions in the so-called Good Law which regulated the Innovation Law, which allowed the government to give research grants directly to rms. Some states further approved their own Innovation Law in order to be able to capture resources disbursed through this and other new decentralized federal government programmes. The law in addition promotes the participation of university research in innovation processes, funds the creation of the technological innovation units at federal public universities and research institutes (to draw an innovation policy, raise funds for innovation, facilitate the transference of technology to the enterprises and promote spin-off founding) and promotes investment in innovative enterprises.

11

189

Antonio Jos Junqueira Botelho and Mariza Almeida

the 2004 Innovation Law. Besides leaving out other public and private research universities from its provisions, the 2004 Innovation Law did not provide the right incentives for universities to develop the selectivity component and to make changes in their organizational culture, institutional ethos and spin-off policy orientation towards opportunity analysis and venture growth. By just funding unilaterally the establishment of innovation units, the 2004 Innovation Law does not encourage universities to pursue on their own these other muchneeded changes. In the Brazilian experience, university spin-offs are the object of technological innovation, albeit with little or no business opportunity analysis at creation. The fact that this perspective is reinforced by public and university policies for spin-offs seriously limits the potential economic impact of these spin-offs. Market selectivity tends to produce spin-offs with higher growth rates and larger revenues than spin-offs based solely or predominantly on innovation support policy. A policy recommendation that ows from this study is that university spinoff policies in Brazil have to move towards selectivity, emphasizing the analysis of business opportunities arising from technological innovation. This analysis offers an alternative understanding of spin-offs in Brazil, in particular, and in emerging countries, in general. As Tatiane dos Santos and Pinho (2010) has argued, it can be concluded that the low-growth perspective of Brazilian spinoff rms is essentially due to a poor entrepreneurial strategic choice towards small niche markets and incremental innovations rather than radical ones. This concurs with our conclusion that lack of market selectivity, aimed at highlighting business opportunities, has hitherto played havoc with the growth of spin-offs in Brazil.

REFERENCES
Bernardes, A. and Albuquerque, A. (2003), Cross-over, thresholds and the interactions between science and technology: Lessons for less-developed countries, Research Policy, 32: 5, pp. 86787. Boeker, W. (1989). The permanence of organizational strategy, Academy of Management Proceedings, 48, pp. 26. Botelho, A. J. J. and Jonathan, E. (2006), High-tech entrepreneurs perceptions and attitudes towards venture capital, International Journal of Entrepreneurship and Innovation Management, 6: 4/5, pp. 35668. Brasil, C. (2004), A questo das patentes. O Brasil e as patentes acadmicas. http://www.universia.com.br/materia/materia.jsp?materia=4223. Retrieved 23 April 2009. Bray, J. and Lee, J. N. (2000), University revenues from technology transfer: licensing fees vs. equity positions, Journal of Business Venturing, 15: 5/6, pp. 38592. Callan, B. (2001), Generating spin-offs: Evidence from the OECD, Science Technology Industry Review, 26, pp. 1356. CGEE (2010), Quadro de atores selecionados no Sistema Nacional de Cincia, Tecnologia e Inovao - Universidades brasileiras. Srie Documentos Tcnicos 05-10. Braslia DF: Centro de Gesto e Estudos Estratgicos. Costa, L. B. and Torkomian, A. L. V. (2008), Um Estudo Exploratrio sobre um Novo Tipo de Empreendimento: os Spin-offs Acadmicos, Revista de Administrao Contempornea, 12: 2, pp. 395427.

190

Overcoming institutional shortcomings for academic spin-off policies in Brazil

Dagnino, R. and Velho. L. M. S. (1996), Universityindustrygovernment relations on the periphery: The University of Campinas, Minerva, 11: 1, pp. 22951. Degroof, J. and Roberts, E. B. (2004), Overcoming weak entrepreneurial infrastructures for academic spin-off ventures, Journal of Technology Transfer, 29, 32752. Deutscher, J. A., Renault, T. and Ziviani, N. (2005), A gerao de riqueza a partir da universidade: O caso da Akwan, Inteligncia Empresarial, 24, pp. 28. Djokovic, D. and Souitaris, V. (2008), Spinouts from academic institutions: A literature review with suggestions for further research, Journal of Technology Transfer, 33, pp. 22547. Etzkowitz, H., Mello, J. M. and Almeida, M. (2005), Towards MetaInnovation in Brazil: The evolution of the incubator and the emergence of a triple helix, Research Policy, 34: 4, pp. 41124. Fapesp (Fundao de Apoio a Pesquisa do Estado de So Paulo) (2010), Indicadores de Cincia, Tecnologia e Inovao em So Paulo 2008. So Paulo, Brazil: Fapesp. Fernandes, A. C., Campello de Souza, B., Stamford da Silva, A. et al. (2010), Academyindustry links in Brazil: Evidence about channels and benets for rms and researchers, Science and Public Policy, 37: 7, pp. 48598. Freeman, C. (1988), Japan: A new national system of innovation? in G. Dosi et al. (eds), Technical Change and Economic Theory, London: Pinter, pp. 33048. Goldfarb, B. and Henrekson, M. (2003), Bottom-up versus top-down policies towards the commercialization of university intellectual property, Research Policy, 32: 4, pp. 63958. Guaranys, L. R. (2003), De universidade de pesquisa a universidade empreendedora: O papel do Empreendedorismo e da incubadora tecnolgica na transformao da PUC-Rio Anprotec, XIII Seminrio Nacional, Annals. IBGE (Instituto Brasileiro de Geograa e Estatstica). (2010), Pesquisa de Inovao Tecnolgica PINTEC 2008. Leite, E. P. C. (2004), A Disseminao da Cultura Empreendedora Atravs de Programa de Extenso Universitria em Empreendedorismo e Inovao. Anais do 2o Congresso Brasileiro de Extenso Universitria Belo Horizonte 12 a 15 de setembro de 2004. http://www.ufmg.br/congrext/Tecno/Tecno3. pdf. Retrieved 3 November 2010. Maia de Oliveira, R. and Velho, L. M. L. (2010), Patentes acadmicas no Brasil: Uma anlise sobre as universidades pblicas paulistas e seus inventores, Parcerias Estratgicas, 14: 29, pp. 173200. Mustar, P., Renault, M., Colombo, M. G., et al. (2006), Conceptualizing the heterogeneity of research-based spin-offs: A multi-dimensional taxonomy, Research Policy, 35: 2, pp. 289308. Ndonzuau F. N., Pirnay, F. and Surlemont, B. (2002), A stage model of academic spin-off creation, Technovation, 22: 5, pp. 28189. Oliveira, G., Turolla, F. A., Ribeiro, M. P., et al. (2001), Empresas Tecnolgicas. Estudo de caso: Bematech, Biobrs e Optoeletronica, http://www1.fee.uva.nl/toe/content/people/content/poplawski/download ablepapers/FUNDAPFINAL.pdf. Retrieved 23 April 2009. Owen-Smith, J., Recabonni, M., Pamolli, F. et al. (2002), A comparison of U.S. and European university-industry relations in the life sciences, Management Science, 48: 1, pp. 2443.

191

Antonio Jos Junqueira Botelho and Mariza Almeida

Pereira, B. L. and Muniz, R. M. (2006), Obstculos inovao: um estudo sobre a gerao de spin offs universitrias na realidade brasileira, XXIV Simpsio de Gesto da Inovao Tecnolgica, 13 pp. Pvoa, L. M. C. (2008), A crescente importncia das universidades e institutos pblicos de pesquisa no processo de catching-up tecnolgico, Revista de Economia Contempornea, 12: 2, pp. 273300. Rapini, M. S. (2007), Interao Universidade-Empresa no Brasil: Evidncias do Diretrio dos Grupos de Pesquisa no Brasil, Estudos Econmicos, 37: 2, pp. 21233. Rapini, M., Albuquerque, E. M., Silva, L., et al. (2006), Spots of interaction: An investigation on the relationship between rms and universities in Minas Gerais. Belo Horizonte: UFMG/Cedeplar. (Texto para Discusso n. 286). http://www.cedeplar.ufmg.br/pesquisas/td/TD%20286.pdf. Accessed 12 October 2010. Rappert, B., Webster, A. and Charles, D. (1999), Making sense of diversity and reluctance, Research Policy, 28: 8, pp. 87390. Renault, T. (2010), The creation of academic spin-offs: The case of Coppe/ UFRJ, Ph.D. thesis, UFRJ, Brazil: Production Engineering Program. Ribeiro, L. C., Albuquerque, E, Franco, L. M., et al. (2009), The scientic and technological trajectories of four Latin American countries: Mexico, Costa Rica, Argentina and Brazil (draft paper). Belo Horizonte, Brazil: Cedeplar, UFMG. Roberts, E. B. and Malone, D. E. (1996), Policies and structures for spinning off new companies from research and development organizations, R&D Management, 26: 1, pp. 1748. Santos, L. A. C. (2008), Transferncia de tecnologia dos mecanismos de cooperao escola-empresa: da UTFPR para o CEFET-SE. Masters dissertation presented at Engineering Production Program at Universidade Federal Tecnolgica do Paran. Santos, M. E. R. and Rebolledo, J. L. S. (2008), Management of technology transfer ofces: Lessons for Brazilian universities, in H. Etzkowitz and M. Roest (org.) Transforming University-Industry-Government Relations in Ethiopia, Malm: IKED, pp. 27897. Shane, S. (2004), Academic Entrepreneurship: University Spin-offs and Wealth Creation, Northampton, MA: Edward Elgar. Shane, S. and Venkataraman, S. (2000), The promise of entrepreneurship as a eld of research, Academy of Management Review, 25: 1, pp. 21726. Silva, N. C. D. and Colenci Jr, A. (2002), Procedimentos para a valorizao da formao da cultura empreendedora dentro da universidade: estudo de caso: UFMG. Anprotec, X Seminrio Nacional, Brazil. CD ROM. Steffensen, M., Rogers, E.M, and Speakman, K. (2000), Spin-offs from research centers at a research university, Journal of Business Venturing, 15: 1, pp. 93111. Suzigan, W., Rapini, M. S. and Albuquerque, E. (2009), A changing role for universities in the periphery: Notes about a tricontinental research project (draft paper). Belo Horizonte, Brazil: Cedeplar, UFMG. Takaki, A., Camargo, H., Mendes, R. and Sennes, R. (2008), Propriedade intelectual e inovao: Uma anlise de dez instituies brasileiras, Parcerias Estratgicas, 26, pp. 179224. Tatiane dos Santos, D. and Pinho, M. (2010), Anlise do crescimento das empresas de base tecnolgica no Brasil, Produo, 20: 2, 21423.

192

Overcoming institutional shortcomings for academic spin-off policies in Brazil

Upstill, G. and Symington, D. (2002), Technology transfer and the creation of companies: The CSIRO experience, R&D Management, 32: 3, pp. 23339. Vasconcelos Gomes, L. A. de and Salerno, M. S. (2010), Modelo que integra processo de desenvolvimento de produto e planejamento inicial de spinoffs acadmicos, Gesto da Produo, 17: 2, pp. 24555. Webster, A. and Etzkowitz, H. (1998), Toward a theoretical analysis of academic-industry collaboration, in: Henry Etzkowitz, Andrew Webster and Peter Healey (org), Capitalizing Knowledge: New Intersections of Industry and Academia, Albany: State University of New York Press.

SUGGESTED CITATION
Botelho, A. J. J. and Almeida, M. (2011), Overcoming institutional shortcomings for academic spin-off policies in Brazil, International Journal of Technology Management and Sustainable Development, 9: 3, pp. 175193, doi: 10.1386/tmsd.9.3.175_1

CONTRIBUTOR DETAILS
Antonio Jos Junqueira Botelho holds a Ph.D. in Political Science from MIT and is currently CEO of Innovastrat Consulting; he was president of the business angel network, Gvea Angels (www.gaveaangels.org.br); Brazil Member of the Regional Dialogue on Information Society (DIRSI; www.dirsi.net) and Assistant Professor at PUC-Rio, Rio de Janeiro, Brazil. He is also Brazil Country Correspondent for Erawatch Networks European Union projects Research Inventory and Country Report and consultant to several international organizations, including United Nations UNESCO, ECLAC and ILO; IDRC (Canada) and IDE-JETRO (Japan). He has published several articles, books and book chapters on entrepreneurship, innovation policy, technology-based rms, venture capital, local innovation systems, institutions and development, the computer, software and telecommunications industries and mobiles and development. Contact: Innovastrat Consultoria, Rua Osrio Duque Estrada 63 casa 3, Gvea, CEP, 22451-170 Rio de Janeiro, RJ, Brazil. E-mail: ajjbotelho@gmail.com Skype: ajjbotelho. Mariza Almeida holds a Ph.D. in Production Engineering and is currently a Adjunct Professor on the masters course in Local Development at the Augusto Motta University Center UNISUAM, Rio de Janeiro, Brazil. She is the author of numerous articles on incubators, entrepreneurship, local development, triple helix of universityindustrygovernment relationship and actor-network theory. Contact: Augusto Motta University Center, Rua Paris, 72, Bonsucesso, Rio de Janeiro, RJ, Brazil, CEP 21041-020. E-mail: Almeida.mariza@globo.com

193

Copyright of International Journal of Technology Management & Sustainable Development is the property of Intellect Ltd. and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use.