University spin-offs have better long-term productivity

University spin-offs tend to have superior long-term productivity than other companies, researchers from the Universitat Autonoma de Barcelona in Spain reported in the journal Technovation.

Pere Ortín Ángel and Ferran Vendrell Herrero researched the financial data of two samples of companies that had been founded between 1994 and 2005. One sample consisted of 104 university spin-offs, while the other was made up of 73 non-university technology-based firms.

They wanted to determine whether there was any difference in the average total factor productivity between the two samples.

According to the researchers, “Total factor productivity is a technical term economists use to refer to the greater production systematically obtained by some companies when compared to their competitors even when using the same levels of factors of production (resources such as labor or capital).” Most management journals use the word ‘capacity’ with the same meaning.

University spin-offs are usually technological inventions developed at university research centers that would probably remain unexploited otherwise. Examples of the most successful university spin-offs are:

University spin-offs
The number of university spin-offs founded each year is growing rapidly.
  • Genentech Inc.
  • Crucell
  • Lycos inc.
  • Plastic Logic.

University spin-offs fare worse at first

The authors found that university spin-offs tend to have, on average, inferior productivity during their first year of life compared to other companies. However, after two to three years productivity is about the same, and by the end of the fifth year total factor productivity in the university spin-offs is higher.

Previous studies have compared university spin-off companies with other firms and found that the former had poorer economic results. However, the majority of them only looked at the first year of a company’s life.

This is the first study to measure the differences in dynamic capacities between companies over the long term. It demonstrated that university spin-offs have higher dynamic capacities after a five-year period.

Academic entrepreneurs are better learners

Ortín and Vendrell suggest that university spin-offs end up with superior productivity because their founders are academic entrepreneurs and have a greater capacity to learn as they go along.

Ortín, who works in the Department of Business, said:

“One of the possible knowledge transfers between university and business management would be to provide academically created learning tools, such as statistics, experimentals, data treatment, etc. and therefore systematise and improve learning processes within the business sector.”

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