ISL456U-TECHNOLOGY AND INNOVATION MANAGEMENT
Chapter 8: Technology Entrepreneurship
Introduction
Entrepreneurship veteran Drucker underlines that the economic development in the middle of the 20th century stemmed from new technologies. Today, science and technology policies are accepted as policies that directly affect the welfare level of countries, direct the social and political conjuncture, and reveal the conditions for development and change all over the world. Because of this effective function of technology, all countries have made efforts to produce technology, and to capture, use and spread technologies produced by other countries.
In today’s world where technology and information are at the highest level, investments in entrepreneurship, specialized in the field of technology, focus on technology entrepreneurship that produce innovative products or services since technology entrepreneurship plays an important role in the development and commercialization of technologies and innovations worldwide (Tekin, 2018).
The Concept of Technology Entrepreneurship
Technology is to discover the unknown by innovating and to create new designs and processes by developing the known. Every new technology can be turned into innovation if it can be applied economically. At this point, we have established a direct link between technology and industry and businesses. Each innovation and its underlying technology, enables businesses to reach their low cost, new market and new customer focus while increasing the production and efficiency of nations (Eren, 1982)
Technology Entrepreneurship is a tool that provides wealth for individuals, businesses, territories, and nations. Therefore, the study of technology entrepreneurship serves an essential purpose over and above satisfying intellectual curiosity.
Factors like “changing and increasing competition”, “emerging new sectors” and “superior innovative technologies” reveal technology entrepreneurship.
Traditional entrepreneurship is formed by innovative entities that take all the risks and come out for commercial gain. On the other hand, technology entrepreneurship is a business that can transform its technology and innovation- focused business ideas into internationally competitive and techno-innovative high-tech products and processes.
Technology entrepreneurship is not defined as general management practices used to operate small businesses owned by engineers or scientists or technology-oriented small businesses. (Bailetti, 2012). Bailetti claims that large-sized companies can also be technology entrepreneurs because technology entrepreneurship is not only about recognizing technology or market opportunities, but also investing in companies’ projects and running them.
Technology entrepreneurship has had different definitions since the past. The definitions in the literature suggest that technology entrepreneurship covers the following subjects (Bailetti, 2012):
• operating small businesses owned by engineers or scientists, • finding problems of or applications for a particular technology, • starting new ventures, introducing new applications or seizing opportunities based on scientific and technical knowledge, • working with others to produce technology change.
The chapter provides you with further technology entrepreneurship definitions in chronological order in Table 8.1. Technology entrepreneurship is a bridge between the worlds of technology and business. Technology entrepreneurship has different characteristics from other types of entrepreneurship. It mostly differs from traditional entrepreneurship by these characteristics:
• (High-tech) Innovation Processes • (Techno-Innovative) Project-Idea-Product-R&D- Commercialization Processes • (Intensive) Risk Taking • Global Competition
Technology entrepreneurship is a process of transforming science and/or technology into economic value. It investigates all questions related to the successful formation, exploitation and renewal of products, services and processes in technology-oriented firms (Spiegel and Marxt, 2011). In this business, material and non-material resources are brought together to create innovative products, services or processes that the market needs. Those activities are carried out through the experience of creating a technology-oriented new firm with risks and decisions or transforming the existing one (Banger, 2015b).
Technology Enterprises and Technology Entrepreneurs
Technology enterprise is an entrepreneurial initiative that aims to provide technology or research-based innovative products, applications and services to the market; creates, develops and commercializes them, and is led by the founding team or one of these teams. (Banger, 2015a). They are seen as an important source of new employment and an important engine of technological change and innovation for the economies. They also help the diffusion of new technological knowledge and commercialization of innovations.
There are different terms used synonymously with technology enterprise, such as start-up or new venture. One of the characteristics of successful technology enterprises is that they manage to act locally while thinking globally. According to Bailetti (2012),
technology enterprises differ from other enterprise types by “the collaborative experimentation and production of new products, assets, and their attributes, which are intricately related to advances in scientific and technological knowledge and the firm’s asset ownership rights”. Technology enterprises;
• invest more in R&D activities, • employ a higher number of engineers and scientists, • offer technologically advanced innovative products with complex designs and configurations, • are dynamic and easily changing, • have short product development cycles, • usually have short and volatile lives, • often lack resources although they are rich in ideas, • mostly need operational capital for the steps in the process until the launch of an idea.
Entrepreneurs are people who identify and pursue solutions among problems, opportunities among needs, and opportunities among challenges (Byers, Dorf & Nelson, 2011). A technology entrepreneur differs from a traditional entrepreneur in terms of entrepreneurial intention, entrepreneurial processes, and supports needed in the transition from the idea to commercialization. Technology entrepreneurs have a number of characteristics that stand out different from other entrepreneurs such as the passion for success, control and risk, creativity, individuality, attractivity and sociality. Some traits that correlate positively with technology entrepreneurship are professional experience, high fluid intelligence, high openness, and moderate agreeableness. Three key factors that characterise the performance of technology entrepreneurs are motivation, technical management skills, and business management skills (Oakey, 2003). Some other features motivating technology entrepreneurs are independence and control, high need for success, self-efficacy, setting goals, and egoistic passion.
According to a study conducted by the Founder Institute, the majority of the founders of successful technology enterprises fit into six main “personality profiles” (see Figure 8.4).
Technology Entrepreneurship Ecosystem and Key Concepts
When the concept of technology entrepreneurial ecosystems or technology entrepreneurship is analyzed at many levels and with different interdisciplinary perspectives, the most important elements of this ecosystem are components such as the newly established technology enterprises, communities, universities, companies, capital and investments, markets, different sectors, government professionals, consultants, incubators, accelerators, and hubs (Roja ve Năstase, 2014). This
ecosystem is formed by the combination of three different areas:
• Research and Development (R&D) of Innovations • Producers of Innovations • Supporters of Innovations
Research and development (R&D) is defined by the Organisation for Economic Co-operation and Development (OECD) as “creative and systematic work undertaken in order to increase the stock of knowledge – including knowledge of humankind, culture and society – and to devise new applications of available knowledge.”
R&D has three types of activity according to OECD Frascati Manual (2015), which are basic research, applied research, and experimental development.
• Basic research is the experimental or theoretical work undertaken primarily to acquire new knowledge of the underlying foundations of phenomena and observable facts, without any particular application or use in view. • Applied research is an original investigation undertaken in order to acquire new knowledge. It is, however, directed primarily towards a specific, practical aim or objective. • Experimental development is systematic work, drawing on knowledge gained from research and practical experience and producing additional knowledge, which is directed to producing new products or processes or to improving existing products or processes
The R&D stage covers the process from the idea stage to the production of innovations. Researchers, inventors, universities and organizations play a major role in this process. Researchers can be defined as “professionals engaged in the conception or creation of new knowledge, products, processes, methods and systems” (OECD, 2020). Researchers can work within an institution or organization or on a freelance basis. An inventor is a person who creates or discovers a new method, form, device or other useful means that becomes known as an invention. Universities can carry out R&D activities at different levels according to their own strategic plans and preferences. It can be the transfer of knowledge at the lowest level, or it can also be structured as a science and technology center that continuously brings new products to the society and produces new technologies at the highest level (Erden, 2015). R&D is not only carried out within universities. Organizations can also engage in R&D activities for reasons such as commercialization of innovations, survival in increasing competition, and keeping up with the transformation brought about by technology. Some businesses establish R&D departments within their own organization, while others (especially technology-intensive enterprises) establish R&D centers on a larger scale.
The producers of the innovations realized by the commercialization of the products resulting from R&D are part of the technology entrepreneurship ecosystem. These producers include technology enterprises of all sizes. Start-ups/spin-offs and large-scaled high-tech companies can be counted among them. Spin-offs, are new companies that emerge from the departure of a relatively small part of a company or a university. Purpose of incubation programs at research institutes or universities is mostly forming a spin-off. Although small-scale technology companies form the foundations of technology entrepreneurship, large-scale companies play a major role in the production and transformation of technology into innovation. In fact, these companies are also the most valuable companies in the world. Some of the most recognizable companies in the world are Microsoft, Apple, Amazon, and Alphabet (Google) followed, rounding out the top five.
The final area of the ecosystem is the supporters of innovations. In the technology entrepreneurship ecosystem, governments, angel investors, venture capitalists, accelerators, technology transfer offices, educators and mentors provide technology entrepreneurs with support in areas such as financial, technical and managerial issues.
Countries provide a large number of support, especially in terms of financial support, during the development and commercialization of innovations with high added value. In Turkey, Republic of Turkey Ministry of Industry and Technology, TÜBİTAK, KOSGEB and Regional Development Agencies support technology entrepreneurship in various areas such as financial, managerial and growth issues.
Angel investing is a special investment technique which provides capital, invests, and transfers experience to entrepreneurs in need of financing, with projects involving risk and growth potential. Angel investors are people who invest in entrepreneurial businesses that are at the starting point of their establishment phase, and provide capital (funds) for the growth and development of businesses. In Turkey, it is called “Participation of Individual Investors’”.
Venture capital can be defined as the meeting of companies seeking capital or entrepreneurs who have new ideas with “risk taker” capitalists who are looking for entrepreneurs and companies with new ideas to invest in. The basic process in venture capital is to meet the capital requirement in the period starting from the research and development (R&D) stages of an innovative idea or invention until its commercialization.
Mentoring is a relationship in which a more experienced or more knowledgeable person guides a less experienced or less knowledgeable person. The mentor may be older or younger than the person who is the mentor, but must have
a specific area of expertise. In a broad sense, the mentor is a consultant, a guide, and a role model.
Incubators are places where business support services are provided to new companies from a single source, usually established at universities or public research institutions. The support package provided includes providing office support with low rent as well as infrastructure facilities and office support.
Besides, there are academicians/educators who contribute to the technology entrepreneurship ecosystem in the field of education. They provide educational support to technology entrepreneur candidates and technology entrepreneurs at universities, various educational institutions or online platforms. They also take part as evaluators in national and international innovative projects.
Finally, technology transfer offices are structures managed by professionals who are experts in their fields. They activate and manage the flow of information and technology between universities, R&D institutions, companies and the market in order to be successful; promote the establishment and growth of companies based on innovation by providing support for incubators and “spin-offs”; and offer high value-added services with their high-quality workspace and facilities. They increase the welfare level of the region they are located in by increasing their competitive power.