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News Article

UK spin-out failures

Too many UK universities are failing to capitalise on the rewards to be gained from creating entrepreneurial spin-out companies, according to Nottingham University Business School research. While universities are increasingly keen to create spin-out companies, far too few of these become successful businesses.
Too many UK universities are failing to capitalise on the rewards to be gained from creating entrepreneurial spin-out companies, according to Nottingham University Business School research. While universities are increasingly keen to create spin-out companies, far too few of these become successful businesses.

Researcher Professor Mike Wright comments: "Universities are tending to focus on creating businesses rather than creating wealth. The proportion of university spin-out companies (USOs) that succeed is tiny. Unless universities are prepared to back their spin-outs with appropriate resources, most will continue to fail."

As evidence of the failure, Wright point to the fact that few spin-outs in the UK have been sold or floated on a stock market. He adds: "While venture capitalists expect 10-15% of the new businesses they back to generate wealth, the proportion of successful USOs is currently much lower."

The success rate could be greatly increased, Wright insists, if universities were more aware of the factors and processes that promote successful spin-out activity. Following a study of technology transfer in 98 leading UK academic institutions, the research team identified five phases as central to the development of a spin-out company - research phase, opportunity phase, pre-organisation phase, re-orientation phase and sustainable high-growth phase.

"It is evident that each venture needs to pass through the previous phase in order to progress to the next stage of development," Wright explains. "But progress is not automatic and can be halted by deficiencies in social capital, other resource weaknesses and inadequate internal capabilities."

Poor resources impeding spin-out activity include seed funding, staffing, infrastructure, incentives and rewards. Lack of seed funding from the university is viewed as the greatest impediment to the creation of spin-out companies. Universities need to create a more accommodating culture for those academics that are entrepreneurially-orientated. The most important infrastructure related impediment is the availability of suitable space on a science park for spin-out companies.

Wright concludes: "Our research clearly indicates that successful spin-out activity is not about the quantity of ventures initiated but the commitment shown by universities to achieving successful technology transfer outcomes. At present there is a mismatch between the aims espoused and universitiesÕ ability to deliver. Universities must consider the skills, resources and networks they need and begin to put these in place."

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