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Growth of academic spin-offs from 0 to 1
Li Jizhen, Li Xiaohua, Chen Cong, Gao Xudong
2020, 41(6):
139-148.
To grow and survive, new ventures needed to be perceived as legitimacy. For academic spin-offs who originally embedded in academia network, they must meet the expectations of evaluators from industry network and finish boundary spanning activities. In this article, we investigate how spin-offs′ social network evolve in their life circle and then acts on ventures performance? what kind of legitimacy constrains does spin-off face at different growth phase? And how to choose their legitimacy strategy? In order to answer these questions, we employ a qualitative methodology by using 14 academic spin-offs from China and America as our samples to illustrate the mechanism of academic spin-offs′ growth from the perspective of social network and legitimacy theory. All the spin-offs are from new material industry, biotechnology industry and electronic information industry, and firm age is no more than 6. Firstly, we divided the growth of academic spin-off into four stages, which is innovation disclosure and intellectual property protection stage, team building stage, commercialization mechanism selection stage, and commercialization stage, respectively. As such, we attempt to clarify spin-off′s network evolution and the key players′ expectation that spin-offs should meet at different stages.
Secondly, we propose the concept of "disadvantage of identity transition", defined as the disadvantage results from academic entrepreneur′s identity whose values, norms and beliefs conflict with their evaluators from industry network. Specifically, academics believe in science logic that pursuits advanced technology and industrialists appreciate "cost-benefit" logic aiming at profit maximization (Merton, 1968; Sauermann & Stephan, 2013). In addition, the legitimacy of academics′ identity in academia network cannot be transferred to the industry network equivalent. In the absence of financial performance evaluation criteria, resources providers tend to take founder′s identity as the primary criterion of venture legitimacy (Fiol, 1991). And thus, spin-offs with academic founder would be perceived as lower legitimacy.
Social network is an important approach to acquire legitimacy ((Aldrich & Fiol, 1994; Zimmerman & Zeitz, 2002) because they can provide spin-offs with information, resources and reliability. Further, legitimacy is another kind of "resource to" acquire other resources, which may eventually promote venture growth. We focus on the question "how can academic spin-offs grow from 0 to 1", so we first have to define what is "1". According to the data provided by interviewers and existing literatures, we define 1 as spin-off getting the first venture capital investment. On one hand, the acquisition of venture capital represents they gain credibility from the industry which is also a kind of legitimacy (Zimmerman & Zeitz, 2002). On the other hand, the acquisition of venture capital means spin-offs have finished boundary spanning from academia to industry.
Thirdly, we code the legitimacy constrains of academic entrepreneurship into three categories, including regulatory legitimacy, normative legitimacy and cognitive legitimacy. And focus on the differences throughout spin-off′s whole life circle. Specially, legitimacy constrains faced by spin-offs in the first two stages mainly comes from academia field, that is, the discussion on whether it is legal for academics to start a business. This is called regulatory legitimacy. A professor told us that, academic entrepreneurship is a "sensitive topic" or "pseud-proposition". Although Chinese government enacted lots of polices to encourage academic′s participation in entrepreneurship, there is still lots of debate on this issue. When spin-offs reach the third stage that involves boundary spanning activities, the normative legitimacy constrains and regulatory legitimacy constrains becomes the key factors affecting spin-off′s growth. In the commercialization stage, academics also face challenge of their identity from the industry field, namely, cognitive legitimacy constrain.
Then it comes to how to overcome spin-offs legitimacy constrains resulting from academic entrepreneur′s disadvantage of identity transition. Some studies generally divide the legitimacy strategy into internal strategy and external strategy according to their locus (Oliver, 1991; Suchman, 1995; Jiang Wei & Shiao Wang, 2017). We code spin-off′s legitimacy strategy as direct strategy and indirect strategy based on approach a spin-off employed to span network boundaries. Indirect strategy is to seek legitimacy by third party, such as star scientist, government, and incubator, in which authorizing and buffering are the two main sub-strategies. The direct strategy emphasizes spin-offs′ self-growth, aiming at obtaining the credibility of the industrialist. It can be divided into three sub-strategies, which is imitation, choice and communication.
Previous studies believed that market status, organizational status and firm′s development stage are the three key factors determining firm′s selection of legitimacy strategy (Human & Provan, 2000; Wei Jiang & Wang Shixiang, 2017). However, we found that spin-off′s legitimacy choice is more influenced by the diversity of academic entrepreneur′s network they are embedded in and the novelty of their technology. Moreover, academics with higher network centrality are more likely to obtain legitimacy by indirect strategy, because they have social capital that links with government, venture capital and talented person who can endorse them. While those "peripheral academics" tends to employ direct legitimacy.
In summary, we discussed the legitimacy constraints faced by spin-offs in their whole life circle, mechanism of "disadvantage of identity transition" and contextual conditions of different legitimacy strategy choices. Results show that academics′ "disadvantage of identity transition" will bring serious legitimacy constraints on their spin-offs, based on the case coding, two strategies including direct strategy and indirect strategy can be effectively used to alleviate their legitimacy constrains. Moreover, choice of spin-offs legitimacy strategy depends on the diversity of academic′s network, its technical novelty and the embeddedness of academics in their network. The possible contributions of this paper include the following aspects: First, our study investigate academic spin-off′s growth from the perspective of social network and legitimacy, providing a new perspective and theoretical base for academic entrepreneurship. Second, it enriches the mechanism of academic spin-off′s growth path, previous studies generally regarded firm′s external founding environment as homogeneous, we distinguish it according to their original network (academic field) and their target network (industry field), and explore their influence on venture growth. Notwithstanding its contributions, our study presents some limitations, which offer opportunities for the further investigation. The relationship between identity, legitimacy and venture growth is fairly complex, we only explore the relationship between the disadvantage of identity transition and legitimacy, lacks of dynamic evolution, future research should focus on this point.
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