The Incupportive Model for Technological Spin-Offs: Insights from Three Research Centers in France

Introduction

We discuss the complementary of the incubator and supportive models by considering knowledge as a process and capability. Our results demonstrate that all three research centers failed to fit into the supportive or incubation models. Instead, they combined both models. We have named this new model the incupportive model — a blend of the incubator model (offering an inward focus) and the supportive model (offering an outward focus). This hybrid protects the spin-offs in their interactions with other stakeholders, ensuring their access to appropriate funding and other intangible resources, their market identification, the insurance of their technical continuity, and equipment with the right set of intellectual property rights. This incupportive model benefits from a solid absorptive capacity and rich knowledge transfer from external stakeholders. Benefiting from an inward and outward perspective, the incupportive model differs from the incubator and the supportive models, providing proven unique benefits (such as a lower dependence on public funds and a more fruitful spin-off creation mechanism). It also ensures a better survival rate, a greater emphasis on R&D jobs, and a superior pace of intellectual property right creation.

The incupportive model’s positive impact on spin-offs

The resource pool can engineer and constrain the firm’s growth. Research centers can leverage existing technologies from the available unused stock of knowledge by implementing mechanisms transferring knowledge as a capability and a process. Academic startups’ main relative strengths reside in the lower initial funding gap and increased investments in technical activities. But they also bear the weakness of lacking commercial knowledge. Academic startups suffer from wider initial rifts in the targeting field and face substantial obstacles in implementing effective strategies to close them.

Academic startups suffer from wider initial rifts in the targeting field and face substantial obstacles in implementing effective strategies to close them.

The incupportive model could leverage the incubation and supportive model’s strengths and mitigate the weakness in the traditional models. In the incupportive model, research centers offer an integrated mechanism’s supportive and incubation functions. Spin-offs benefit from complementary knowledge capabilities and knowledge processes through such procedures. Knowledge capabilities include advising, coaching, training, entrepreneurship education, awareness of opportunities, access to experimental knowledge from indirect experience, and idea stimulation.
During incubation, research centers can identify remote market segments influencing knowledge sharing and guiding spin-offs. Such a capability is cumulative, experience-based, and path-dependent. Small firms are not fully equipped for this approach initially. It enables spin-offs to develop products and capture new opportunities. Thus, spin-offs must assess the commercial potential of technologies, manage intellectual property rights, establish a realistic business plan to raise funds, and arbitrate between projects based on a thorough analysis of resources.

During incubation, research centers can identify remote market segments influencing knowledge sharing and guiding spin-offs.

Spin-offs often need to partner with other companies through strategic alliances to seize these opportunities. To this end, research centers’ familiarity with partnerships encourages spin-offs to develop routine knowledge sharing based on prior knowledge, facilitating understanding. While benefiting from a strong alliance capability, most spin-offs can identify and acquire new knowledge externally through alliances (including vertically) with large companies, suppliers, and joint ventures.
These alliances bring valuable knowledge to the organizational knowledge base, serving as the building blocks of alliance capability by continuing exploitation in complementary activities. We discovered research centers use the same knowledge stock and multiply industrial applications (telecommunication, multimedia, security, microelectronics, housing, transportation, etc.).
Besides knowledge capabilities, spin-off companies also benefit from transferring knowledge regarding intellectual property rights, such as patents, trademarks, copyrights, and trade secrets. Spin-offs gain first-mover advantage, increase international growth potential and capture better innovation opportunities by evaluating the complementarity of knowledge capabilities developed before knowledge processes. Spin-offs enjoy significant benefits over others through the complementarity between the support and incubator models because knowledge tends to be idiosyncratic and path-dependent.

The incupportive model’s hidden advantage

But the incupportive model is not free from criticism because some spin-offs may fail. Research centers can offer various resources to spin-offs, depending on their particular needs (including funds, human resources, access to clean rooms, etc.), to increase spin-offs’ capabilities. Spin-offs, typically suffering from limited time and resources, could also profit from research centers’ support. And they are tempted to seize all identified commercial opportunities. Spin-offs get intensive knowledge capabilities to identify many market segments and benefit from intensive knowledge transfer. We found that the effect of the incupportive model is also context dependent. Intensively using the incubator and support models can sometimes be counterproductive.

Spin-offs, typically suffering from limited time and resources, could also profit from research centers’ support.

The trade-off between different growth paths encourages the spin-off to conduct intensive exploratory activities. As the core activity of the research center, investigative pursuits are always supported. But such aspects of knowledge capability may hinder innovation, which is the outcome of the exploitation stage. So, knowledge becomes increasingly vital. Knowledge is an object (manipulable information access) and a process (knowing by acting through expertise). And it is an ability (potential future action and experience). New knowledge acquisition leads to achieving a sustainable competitive advantage in an international business. Knowledge is the most critical source of competitive advantage, but spin-offs studied often neglected the collateral costs of developing knowledge capabilities. We argue that the cooperation between research centers and spin-offs has deployment and maintenance costs; the greater the spin-offs’ organizational learning from research centers’ knowledge spillovers, the greater the cost. For spin-offs, this mechanism raises the question of whether the learning outcomes (from a monetary perspective) outweigh the costs of knowledge management and ACAP. Sometimes, developing a high knowledge capacity may be financially irrelevant and entail the risk of unprofitability.

The incupportive model holds an incubator facet and a supportive facet in an incupportive model. The incupportive model’s primary advantages are business opportunity identification, sound resource management, strategic alliance development, complementary activity development, and societal impact. The primary limitations (related to inward and outward aspects) are limited resources to address opportunities, overwhelming exploration focus, underestimated costs, and technological lock-in.

Methodology

We adopted the multiple case study methodology. We considered 74 spin-offs from three different categories for our research: 56 spin-offs operating individually, 12 spin-offs that failed and went bankrupt, and six spin-offs acquired by other companies or turned into joint ventures. We approached 36 spin-offs across the three categories; 19 spin-offs agreed to contribute to our study. We examined 12 spin-offs from LETI, four from LIST, and three from LITEN.  We conducted 22 interviews with laboratory heads, department heads, and salespeople from the three research centers. We also conducted 19 interviews with the founder, owner, C.E.O., senior managers, and senior researchers from 19 spin-offs.

Applications and beneficiaries

Our empirical study explored the unique case of a T.R.D. support model that provides an incubator function guiding the growth of spin-offs by developing knowledge capabilities and providing a support function supplying knowledge transfer through I.P.R. The T.R.D. implemented a solid appropriability regime. They developed intellectual property rights by establishing strong knowledge appropriability. The appropriability regime may work for larger firms in a supportive model but not necessarily for spin-offs with limited knowledge capabilities. A substantial knowledge transfer can be counterproductive if it does not fully meet the spin-off’s needs or if the spin-off remains locked into an appropriability system. The beneficiaries of our research are policy makers, research center and spin-offs companies.

Reference to the research

Scaringella, L., Xiong, J., Hao, S. and Chakraborty, S. (2024), “The “incupportive model” for spin-offs’ governance: Bringing the incubator and the supportive models together”, IEEE Transactions on Engineering Management, 71, 4835-4847.

Consult the research paper