Enterprise and Small Business Principles

The technical entrepreneur

In considering the resources necessary to establish a technology-based firm, labour, capital and land are important, but the key ‘input’ is the entrepreneur. Successful entre­preneurs of their day include Henry Ford, Alan Sugar and Bill Gates; however, while high-profile founders grab popular attention, the road to business ownership is less glossy for most technical entrepreneurs. Individuals require a combination of skills and expertise to accept the entrepreneurship challenge. Some learn ‘by doing’ while others adopt a systematic approach, developing the skills and knowledge base, culminating in the entrepreneurial step. Earlier contributions have considered aspects of the defini­tion of what constitutes an entrepreneur. Definitions of the ‘technical entrepreneur’ range from that adopted by Jones-Evans (1995), where a technical entrepreneur is ‘the founder and current owner-manager of a technology-based business, i. e. primarily responsible for its planning and establishment, and currently having some management control within the organisation’, to that of Smith (1967) who suggests that an entre­preneur is an individual who is responsible for the setting up of a new venture but is not necessarily involved in its subsequent management.

In his early research focusing on the technical entrepreneur Cooper (1973) identified a number of influences on the entrepreneurship process including the founder herself, the organisation for which she worked previously and external factors relating to the locality of the new firm (see Chapter 7 for a fuller discussion of the entrepreneurial process). These elements interact to create a climate which is more or less favourable to entrepreneurial activity. In this highly dynamic environment the technical entre­preneur is the catalyst and leader (Collins and Lazier, 1993). Given that high degrees of uncertainty surround technology development, especially sectors with a scientific base such as biotechnology, the technical entrepreneur has to tolerate risk. In leading- edge technology firms he has to generate support for a technology about which few people know, imparting his philosophy, spirit, vision and enthusiasm for his enterprise to all concerned with it. Surrounded by uncertainty, financiers are persuaded to place their money over a ‘black hole’ capable of swallowing thousands or millions of pounds with no guarantee of a return, and personnel are recruited, often from positions within other organisations. Thus, the technical entrepreneur is a risk taker required to per­suade others to put their faith, finance and careers in his hands. Risk may decrease as the sector matures, as the underlying knowledge base increases, thus improving the quality of decision making.

13.6.1 Motivations of technical entrepreneurs

Setting up a firm can be highly risky and it is logical to ask why entrepreneurs jeopar­dise their and their families’ future stability to risk everything. Roberts (1991a) considers that a disproportionate number of technology-based firm founders had self-employed fathers and have, therefore, grown up in an enterprising environment. Some founders start their firm as a part-time activity while still employed; this provides the opportun­ity to judge whether the business is viable. A number of technology areas are charac­terised by long lead-times, meaning that significant time and resources are invested in research before any saleable result is produced. The part-time method of market entry means business ideas are developed in parallel with other employment. The ideas and concepts on which the firm is based evolve until research advances to the stage of pro­ducing workable product or service ideas - at this point the founder formally resigns and moves into business full-time.

A variety of ‘pull’ and ‘push’ factors stimulate technical entrepreneurs, whether act­ing on their own or in groups. The most commonly reported stimuli tend to fall into the ‘pull’ category with the desire to be one’s own boss rating highly, followed by the wish to exploit a market opportunity (Oakey et al., 1990; Roberts, 1991a; Oakey, 1995; Cooper, 1998; Harrison et al., 2004). Market entry of a new firm implies that oppor­tunities exist, either as a result of the technology-based sector being ‘new’ and, thus, competition less severe, or because the company is operating in a niche unattractive to larger firms. Start-up opportunities are dependent upon barriers to entry including capital requirements and the extent of large-firm domination (Oakey, 1995). Techno­logical advances open up new business opportunities where small, research-intensive companies are able to flourish. Those reporting a negative or push stimulus have often become disgruntled and frustrated in their existing job, which prompts them to ‘go out on their own’; others have little choice and are forced, as a result of redundancy and difficulty finding alternative employment, into being entrepreneurial (Harrison et al., 2004). Principal motives are frequently supported by secondary factors; founders harbour latent thoughts of self-employment but do not explore it until redundancy converts it from a good idea into a solution to unemployment. It may take such a pre­cipitating event to trigger this action.

The life-cycle stage of the sector may influence the formation stimulus (Cooper, 1998). A comparison of new firms in the electronics and software sector reveals greater numbers of founders in the relatively youthful software sector reporting, during in-depth interviews, the desire to work for themselves or exploitation of market/product oppor­tunities as the primary motivator. The relatively mature electronics sector is affected by greater economic fluctuations, resulting in redundancy being a more common stimulus than in the software field. The pace and nature of change within a sector will influence the opportunities in the market suitable for exploitation by the new firm.

Self-employment offers entrepreneurs the opportunity to take control of their own destiny, and to control the direction and growth of their firm. Frequently, however, founders have little desire to grow their enterprises significantly, particularly when they have worked for large firms and in founding their own are trying to get away from that environment with its hierarchies, impersonality and lack of meaningful involve­ment (see Chapter 6 for a fuller discussion of business growth). Thus, many firms remain relatively small, limiting their contribution to employment generation. The optimal firm size will vary but a characteristic of the software sector is the strong representa­tion of small firms. While there are high-profile firms such as Microsoft, employing thousands, the majority of software firms are small, occupying small niches, founded by people who have left other enterprises to capitalise on their skills and expertise; there is often little need to employ large numbers of staff, each with a different skill; and, as will be explored in more detail later, software founders commonly possess a composite of required skills. In addition, small firms often collaborate with each other if contracts are larger than one can manage on one’s own.

13.6.2 Age and the technical entrepreneur

Bill Gates and Richard Branson both demonstrated entrepreneurial abilities at an early age, but there is no optimal age for ‘going it alone’ and some founders wait until they are in the twilight of their career. In general, however, new-technology firms tend to be established by relatively young entrepreneurs and a number of research studies have indicated that while technical entrepreneurs may range in age from their twenties to seventies when founding their firm, the median tends to be in the mid-thirties (Cooper, 1973; Roberts, 1991a; Cooper, 1997b). Roberts (1991a) suggests that the pattern of young high-technology founders is a result of the ‘youthful age structure of the technical organisations at which they previously worked’, pointing towards a self-perpetuating pattern. The entrepreneur makes numerous sacrifices, sinking significant amounts of time and money into a venture; younger individuals tend to have fewer financial and family commitments than those in their mid-forties and have greater flexibility to focus on a business. Increased age brings with it a maturity of approach and a greater depth of experience, but a potential drawback is that older people may be more set in their ways, a major barrier in a dynamic and rapidly changing environment. Someone who has been with an employer for a long time thinks seriously before moving from a job offering pension and other benefits; for older entrepreneurs redundancy is a more com­mon stimulus than the desire to be self-employed as difficulties securing new employ­ment result in their starting their own firm.

The sector or activity of the firm imposes certain constraints, for example the experience and level of skills that the founder requires to set up within it, and the con­sequent length of time required to acquire that grounding. A long period of study and work experience can help establish credibility. An electronics founder may study to degree level, followed by a long period of work experience in order to develop a thorough understanding of electronics in an applied environment; this scenario con­trasts with that of a computer science graduate who works in a product development role with much client contact and is able to set up after a relatively short period of paid employment. The age of the founder influences the length of time which they have had to develop skills and expertise on which to draw in their own venture. Some sectors require higher levels of funding and prospective founders wait until they have amassed sufficient resources of their own in order to minimise borrowing from external sources. In software, for example, people are becoming entrepreneurs at an earlier age; those with the right skills are identifying opportunities and the relatively modest levels of investment required mean that financial barriers to entry are low. In other sectors, such as electronics and biotechnology, funding proves a greater barrier for potential founders who need to gather experience and finance; thus, some sectors offer a swifter route to entrepreneurship.

13.6.3 Education and the technical entrepreneur

Bill Gates is perhaps one of the best known Harvard ‘drop-outs’ but his is not the standard educational route. Many new-technology based sectors are highly competitive and a firm’s competitive advantage is usually based upon the knowledge and expertise of the founder. Contrasting patterns are evident among the results of a number of studies. However, when the qualifications of technical entrepreneurs are compared with those held by non-technical entrepreneurs the level of attainment in the latter group tends to be more modest. Fewer than 5% of founders of non-high technology firms in Storey’s (1982) study in Cleveland, UK, had a degree compared with high-technology science-park firms where 58% had a first degree and 38% a higher degree (Monck et al., 1988). This relative position may change with an increasing number of people going on to further and higher education prior to moving into employment of all types. The majority of high-technology entrepreneurs hold degrees in science or engineering disciplines and most founders hold Bachelors and Masters degrees with a lower pro­portion having a PhD. Roberts (1991a) attributes the generally high 70-80% survival rate of new technology-based firms to the level of education of their founders.

While differences are apparent between high-technology and non-high-technology entrepreneurs, the pattern is not uniform between high-technology sectors. The propor­tion of degrees is higher in science park-based than off-park firms (Monck et al., 1988), possibly as a result of the majority of science-park firms being at the R&D-intensive end of the spectrum. In addition, sectoral variations exist with founders of science - based firms in biotechnology commonly having a Masters degree and frequently a PhD (Oakey et al., 1990). Vocationally orientated qualifications are more widespread in electronics with founders undertaking practical, technically based training within firms, backed up by study at local colleges. Hisrich and Peters (1992) consider that an important aspect of education is that people develop the ability to deal with people and communicate clearly.

The education system plays a role in mobilising entrepreneurial capital. Taking a degree or further education qualification frequently means moving away from home to attend university or college; thus, institutions attract bright individuals into their locality, a minority of whom spin off directly from university. Technology-based firms seeking able employees are drawn to university cities and towns to feed off the stream of graduates, as has happened in the Cambridge area. Ultimately, some employees spin off and set up their own firms in the locality, aiding the development of agglomera­tions of related firms.

13.6.4 Work experience and the technical entrepreneur

An entrepreneur needs to understand the environment within which his business oper­ates, a process helped when he establishes his firm in a field with which he is familiar (Chandler, 1996) - see Chapter 21. Most entrepreneurs in technology-based start-ups work for other organisations prior to establishing their own enterprise and studies regularly report in excess of 80% of founders setting up within a similar market or using similar technology (Roberts, 1991a; Cooper, 1998). There are two aspects of the previous work environment that are relevant to the technical entrepreneur - the task environment, related to the market in which the firm operates, and the skills and abilit­ies developed by the founder (Timmons, 1994).

A high degree of risk is associated with new venture creation; however, knowledge of the target sector helps to reduce some of that risk. Sectoral familiarity makes it eas­ier to recognise opportunities offered by a technology and also the limitations which it can impose on firm development. The technological complexity of many sectors makes this aspect very important if the technical entrepreneur is to avoid jeopardising the future of their business by making elementary mistakes. Timmons (1994) considers that being able to recognise an opportunity is an important advantage of having worked in a sector previously. Sector knowledge facilitates the identification of small, viable niches and competitor-free areas of the market, and results in the entrepreneur having a broad understanding of the customer and supplier environment. Prior know­ledge and experience, particularly commercial experience, are of key importance in the development of the entrepreneurial venture, particularly during the process of opportunity recognition (Shane, 2000; Shane and Venkataraman, 2000). The technical entrepreneur is better placed to understand aspects of the competition, allowing them to adopt a stronger position for their firm within the market-place. Knowledge of the task environment, resulting from business similarity, enables the entrepreneur to make more informed decisions.

Roberts (1991a) emphasises the role that the experience of the key founder plays in the business start-up since there is a strong dependence on him to lead the organisa­tion in a highly competitive market-place. The lead entrepreneur may surround him­self with capable managers and directors but there will be heavy reliance upon him to provide direction and motivation to those in the organisation. When persuading sceptical customers and financial backers of the viability of the business, technical and previous experience in the sector proves important in establishing credibility. In gen­eral, venture capitalists prefer technical entrepreneurs with experience in the field in which they intend to set up their own enterprise. Experience can be equated with the number of years spent in the sector; however, experience does not necessarily translate into success in the new venture (Chandler, 1996).

Time spent working within a similar field enables individuals to enhance their tech­nical and managerial skills, depending on the positions they hold. Some entrepreneurs have held positions where they have developed specific skills similar to those required in their new business; useful skills include the ability to plan, organise and manage, all of which help an entrepreneur in the strategy implementation process. Oakey’s (1984) entrepreneurial matrix represents the balance between business acumen and technical ability in which different entrepreneurial types are identified depending on the degree of business and technical experience that they possess. Technical skills are important in the early stages of the business development process but a lack of supporting man­agement skills frequently proves a drawback in the longer term, implying that evolu­tion of the management team is required to progress the business beyond the start-up and early growth stages.

The degree of sectoral similarity between the previous employer and the new enter­prise may vary depending on the size and age of the sector. For example, most elec­tronics spin-offs are generated from other electronics firms, while in a younger sector like software or biotechnology some new-starts originate from within the sector but a sizeable proportion come from organisations that share aspects of the underlying science/technology but are less closely related. At a practical level this implies that the number of related spin-offs generated within a particular sector is influenced by the profile of ‘incubator’ organisations. Recent work in Ottawa, Canada, highlighted that it is not only the organisation that the founder(s) worked for immediately prior to start-up that plays an important role in the development of a new venture. Many founders work for more than one organisation during their ‘pre-entrepreneurial career’ and draw upon this wider spectrum of knowledge and network connections when embarking on the creation of their own venture (Harrison et al., 2004).

The type of organisation for which the founder has worked may influence the breadth of knowledge that they develop (Harrison et al., 2004). Common source organisations are other firms, both large and small, and public sector institutions such as universit­ies and government research establishments. Most provide a reasonable ‘incubator’ environment, allowing entrepreneurs to establish firms built upon their research and technical experience; what varies is the degree of exposure to commercial issues. Most entrepreneurs have experience primarily in technical areas since many have held mainly research and technical positions, providing limited management training; only a small minority have experience of functions such as finance and marketing. Cooper (1997b) revealed sectoral variations in expertise with the majority of founders in the electronics sector having mainly technical expertise, whereas, predominantly, software founders had a combination of technical and administrative/commercial skills. Many founders in the software sector had previously held technical/sales/commercial posi­tions, involving product and service development, which resulted in their gaining a broad understanding of their sector and developing a wide range of skills. Electronics founders tended to have worked in relatively strict, usually technical, functional roles and so were less exposed to commercial issues. One area in which most technical entrepreneurs lack experience is marketing (Shanklin and Ryans, 1988; Oakey et al.,

1993) . This is most extreme where academic entrepreneurs set up in business; while strong on the technical side, they usually lack a strong commercial base to grow a busi­ness beyond the start-up stage. Some faculty members do not sever links totally with their universities but take on a part-time commitment to a new spin-off enterprise. Many ‘academic’ entrepreneurs have strength in project management and, from coordinating research teams, have relevant people-management skills (Jones-Evans, 1996a).

The commercialisation of public sector technology from universities and other research laboratories is a valuable way of exploiting and obtaining a financial return on the resources invested in its development (Cooper, 2001b; Smailes and Cooper, 2004). It is likely that the number of university and research centre spin-offs will increase over time as universities place more emphasis on the commercialisation of their knowledge base. Staff are being encouraged to identify licensing opportunities for in-house developed technology and, thus, are working more closely with commercial firms, gaining greater insights into the commercial world. In the long term a minority may be tempted into heading up a spin-off team or into taking part-time directorships with spin-off com­panies. Given their relative lack of commercial expertise the appropriate long-term role of academic entrepreneurs in the firm may be questioned.

13.6.5 Technical entrepreneurs: an occupational typology

Earlier in this chapter brief definitions of technical entrepreneurs were presented, indicating their general nature. In the context of the above discussion it is clear that technical entrepreneurs take a variety of routes when progressing along the path to self-employment. Founders differ in their educational, employment and skill base and yet all set up their firm alone or in consort with others. Each has a unique background which makes general classification difficult. It appears, however, that the occupational/ work background is important for a number of reasons; the founder gains important sectoral and market knowledge and his occupation influences the extent of commercial and business expertise that he acquires. Authors have developed various entrepreneurial typologies. For example, Jones-Evans (1996b) divides technical entrepreneurs into four different types based on their occupational background; ‘research entrepreneurs’, ‘pro­ducer entrepreneurs’, ‘user entrepreneurs’ and ‘opportunistic entrepreneurs’. Brief pen - portraits capture the essences of these entrepreneurial types, indicating the importance of occupational experience and educational background. Consideration of these types, in the light of the earlier discussion of broad influences on the technical entrepreneur, provides useful insights into the firms developed by these contrasting ‘types’.

Research entrepreneurs

These have a knowledge-oriented, science and technology development background having worked in higher education/academia or in a non-commercial laboratory. They have relatively little management experience but are experienced in the management of research programmes and possess good personnel management skills. Most have a high level of technical expertise and experience coming from doctoral backgrounds and only a few have experience in a production environment, and even then only in a research capacity. Due to his technical strength the research entrepreneur provides the technical vision for the business; however, his lack of experience will often result in his forming a firm with others possessing commercial management skills. His level of links to suppliers, customers and other external parties is extremely limited. His long-term role in the firm is likely to be in the technical development area.

Producer entrepreneurs

These come from an industrial background having worked in production and develop­ment. They benefit from having direct commercial experience, combining both technical and management skills, often within the context of a large organisation. The majority of producer entrepreneurs have been educated to degree level, with a minority having served apprenticeships in technical subjects and moved into management later in their career, before themselves becoming entrepreneurs. Immediately prior to start-up some have worked in the technical environment while others have gained experience in management-intensive fields such as marketing. The producer entrepreneur is perhaps the best placed of all four types to found a business on her own as she has the most highly developed all-round skills. Her company-based experience makes it likely that she has extensive business-related contacts, enabling her to build upon relationships with suppliers, customers and service providers when establishing her firm. Her all­round perspective makes her the most able of all four types to retain a central role in the management of the business.

User entrepreneurs

This type have been users of technology but have not been involved in its design or manufacture. Some have worked in technical sales or marketing, selling technology, but their direct experience of technical design aspects is peripheral. The user entrepreneur is poorly placed to set up a firm on his own due to his lack of technical design and development expertise. His sales experience is highly valuable to the new enterprise and means that he is at ease working closely with customers.

Opportunist entrepreneurs

These entrepreneurs have no technical background but have spotted a gap in the mar­ket. They have little or no previous experience in the field and are entering into rela­tively unknown territory. Opportunist entrepreneurs are in the minority. Their lack of sectoral experience makes it important for them to team up with others to develop a business. Their knowledge of the market, of customers and suppliers is either acquired from their business partners or developed ‘on the hoof’.

Technical entrepreneurs are acknowledged as playing an important role in economic development. It is apparent from this classification that entrepreneurs bring to the start-up situation a wide variety of skills. By considering these entrepreneurial types it is possible to see how an individual’s background dictates the form and location of the enterprise which emerges. Such profiles also point to areas where entrepreneurs lack core skills and knowledge; many cooperate with others to compensate for their short­comings but there are ways in which the development of technical entrepreneurship can be encouraged. Some implications for policy and practice arising from the above discussion are considered in the final section.

13.6.6 Developing the entrepreneurial team within technology-based firms

Many high-profile figures are known for their individual entrepreneurial actions; how­ever, while some like Alan Sugar start a firm on their own many others establish a found­ing team. Even the lone entrepreneur usually draws on the support and expertise of others in respect of production, financial, commercial and marketing advice (Oakey et al., 1988, 1990). The founder who builds a firm with substantial levels of support from others compensates for any shortcomings in their own skill and knowledge base. Given that only a minority of technical entrepreneurs have both technical and commercial experience the assistance of those with complementary skills is very important in many start-ups.

Entrepreneurial teams are important in helping to compensate for major weaknesses present in individuals and many technology-based firms result from such collective actions (Cooper, 1973; Roberts, 1991a; Cooper, 1997b). Team members perform a valu­able psychological function providing mutual support and encouraging management to take the next step. Collins and Lazier (1993) stress that the development of a real team is essential to prevent the development of disparate agendas. Instances of institu­tional self-advancement are highly detrimental to the young firm as they smother the innovative spark that is vital in giving the organisation its competitive edge.

A variety of factors influence the composition of the start-up team. One is the need for particular sets of skills; the specialist knowledge on which products and services are based usually comes from the technical entrepreneur but the need for administrative, financial and marketing input causes the founder to seek collaborators. For this reason founding team members usually bring contrasting skills and expertise to the team. Cooper (1998) identifies sectoral variations in the size and composition of start-ups with the number of single founders being much higher in the software sector than in electronics. Founders in the software sector typically possess a range of skills, includ­ing programming and technical knowledge and market awareness, developed through direct client contact, that provides them with a sound base on which to found their own business. In addition, the capital investment required in software is relatively modest and is more readily raised by one person. An electronics start-up often requires a range of skills that are less commonly possessed by an individual and the greater level of capital investment frequently necessitates pooling financial resources. Oakey (1995) reveals that firms established by teams exhibit higher levels of growth; how­ever, this does not imply a lack of business ability on the part of lone founders as some set up their own firm to escape from large organisations and have no major growth aspirations.

The previous workplace provides a fertile environment in which to identify pos­sible business partners (Harrison et al., 2004). It presents an opportunity to see how potential cofounders function within the business environment and means that team members bring appropriate skills and expertise, since the majority of technology-based start-ups are established within the field in which the lead entrepreneur has worked previously. Teams comprising former work colleagues tend to set up locally as, in all but the most extreme cases, it is uncommon for several households to relocate to estab­lish a business. Lone founders have fewer constraints and are, thus, more footloose. The nature of the local, professional and social networks of potential entrepreneurs influences the composition of the start-up team; where networks are highly developed, aspiring entrepreneurs come into contact with potential entrepreneurial colleagues outside their workplace and immediate social circle (see Chapter 16 for a fuller discus­sion of networks). Highly developed networks in the Cambridge areas are considered responsible for high numbers of non-work-related start-up teams (Cooper 1997b). A small minority of teams comprise family members, for example a father with years of experience in a sector who teams up with a younger member of the family who has completed a university education and brief period of work. Wider aspects of family enterprise are discussed in Chapter 11.

13.6.7 Location and the technical entrepreneur

The processes of spinning off and the inward movement of entrepreneurial capital into an area govern the level of local new firm formations and, in turn, the size of the pool of firms from which future firms are generated. The in situ expansion of indigenous firms leads to industrial growth and increased sectoral employment in an area. These processes combine to result in the development of high-technology agglomerations like those that emerged in the US along Route 128, near Boston, in Silicon Valley, California, and in the UK along the M4 (Hall et al., 1987) and M11-Cambridge cor­ridors (Segal Quince and Partners, 1985) and in Scotland’s Silicon Glen. Development agencies want to know where entrepreneurs come from, spatially, in order to ascertain the whereabouts of potentially enterprising types who can be targeted and encouraged into entrepreneurship.

Entrepreneurs setting up small firms are frequently influenced by the environmental quality of a region (Keeble, 1987; Harrison et al., 2004)) and are attracted by the desire to live in a quiet and pleasant location, yielding not financial but psychic benefits (Tiebout, 1957). The location of customers and suppliers exerts a degree of influence on firms, particularly those collaborating closely over development and contract-based work. Some need to be in close proximity to suppliers and locate as near as possible to their key service or materials provider; others with input needs that can be serviced by post or carrier can locate at a greater distance from their suppliers (Oakey and Cooper, 1989). In a similar way some firms, such as sub-contract electronics component manu­facturers, need to be located in close proximity to their main customers (Oakey, 1984; Oakey et al., 1993). Other firms, such as those producing sophisticated specialised equipment, where potential customers are located in any part of the world, are not sub­ject to such strong external influences on their location, so a degree of footlooseness is possible.

The principal founder’s previous work-place frequently influences the start-up loca­tion, with inertia resulting in the entrepreneur not moving from his current location. Research indicates that the majority of entrepreneurs (often in excess of 70%) set up firms in the locality where they previously worked (Oakey et al., 1988; Cooper, 1997b). Setting up in a location with which the founder is familiar reduces some of the risk, and the benefit of moving has to outweigh significantly the disadvantages. Anecdotal evidence points to an emphasis on minimising disruption to domestic life; starting a business is stressful enough without uprooting the family unnecessarily. Much informa­tion is required when establishing a business and setting up where the founder has been living and working means that numerous local contacts already exist and new ones are easily developed due to local knowledge. Some parts of the UK, especially agglomerations such as that around Cambridge, attract employees in to work for innovative organisa­tions from which they spin off to form indigenous firms.

Studies examining the childhood home and previous work location of technical entrepreneurs indicate that many people are not native to the region in which they set up their firm (Oakey et al., 1988, 1990; Cooper, 1998). They are drawn in to work for local firms from which they spin off, contributing to local economic development. The strong pattern of local spin-offs helps to increase the size of the agglomeration of related enterprises and intensifies the technology profile of a locality as many new-starts are in the same technological sector. The emergence of new firms supplying goods and ser­vices improves the quality of the local supply infrastructure. The rich supplier pool acts not only as a stimulus to enhance local spin-off activity but also as a magnet to attract footloose entrepreneurs from elsewhere into the area.

Entrepreneurial mobility may be related to the sector of activity, for example an electronics entrepreneur may be more likely to remain within the same locality than a software founder. Some electronics firms need to become highly integrated with local customers and/or supplier firms providing components and sub-contract services. As a consequence, the founder is reliant on their knowledge of the complex local inter - organisational network. The software founder trades information in its broadest sense and is less dependent upon the local environment. Knowledge of local suppliers and potential customers is, therefore, more important to new electronics than software firms, rendering the electronics start-up less mobile than the portable, software new-start.

To minimise costs many founders start up in their garage or spare room, with firms such as Apple and Hewlett-Packard growing from such humble beginnings. The home - based start is feasible where the process is ‘clean’, such as in software and some elec­tronics firms. In sectors such as biotechnology the need for bespoke laboratory and factory space necessitates a rapid move into specialist facilities. These contrasting requirements pose differing barriers to start-up. In the longer term, even clean businesses need physical and ‘emotional’ space, as entrepreneurs find that synonymous home and work locations become too stressful; the temptation not to ‘leave’ work or to keep going back risks ruling and ruining families’ lives. These sharply differing premises need to be addressed by private or public sector agencies attempting to encourage the development of technology-based entrepreneurship.

13.6.8 Continued entrepreneurial involvement and growth

For many founders of technology-based firms the organisation is their life. It develops from their idea, is based on their expertise, absorbs significant quantities of their per­sonal and professional time, and allows them to pursue their interest and passion for a particular field of technology. Smith and Jones-Evans’ definitions of the technical entrepreneur differ in respect of his ongoing business involvement. For those involved with the firm from the start it is often difficult to consider, with a rational eye, what their long-term role and level of involvement should be; from their perspective they are crucial to the continued existence of the business. It is sometimes the case, however, that the long-term involvement of the technical founder in a controlling position within the enterprise is detrimental to the sustainability of the firm.

The extent to which some technical entrepreneurs lack an understanding of com­mercial issues at start-up has been discussed; few entrepreneurs attempt to gain a detailed knowledge of management concepts as their firm develops and consequently learn only ‘by doing’. In some cases the continued involvement of a technical entrepreneur in a key decision-making role risks thwarting the development of the organisation and jeopardising its future. Some entrepreneurs recognise their shortcomings as ‘managers’ and adopt a central role in research and new product and service development, acknow­ledging their technical strengths. Many are happy to exchange the grey suit of manage­ment for the white coat of the laboratory, handing over to those more skilled and able to move the business onto a strong commercial footing. Reflecting this, Rubenson and Gupta (1990) conclude that technical entrepreneurs tend to stay in control of their businesses for shorter periods of time than entrepreneurs in other activities.

Some technical entrepreneurs possess all of the required skills but make a conscious decision not to pursue a strategy of rapid business growth. Many set up their own business expressly to distance themselves from large, bureaucratic, mechanistic and impersonal organisations. The prospects for employment growth in many technology - based businesses may, consequently, not be as great as at first sight due to some entre­preneurs being economic satisficers rather than maximisers.

13.3 Chapter summary

Technology-based sectors have attracted the attention of policy makers because they are viewed as sunrise industries, capable of compensating for declining traditional activities. The emergence and growth of new sectors is inextricably linked with issues of entrepreneurship since the business founder drives the enterprise development process; thus, the encouragement of entrepreneurship has become a major focus for attention by development organisations. A first step towards a greater understanding of ways to encourage entrepreneurship is to learn from those already in business. All have followed a slightly different path and had varying needs; while it is not possible to develop an individual support programme there are some differences that agencies need to appre­ciate, which may influence the rate and direction of enterprise development. Oakey and Cooper (1991) caution politicians and government planners eager to capitalise on ‘opportunities offered by emergent key technologies’ not to assume automatically that ‘the encouragement of any new technology will result in rapid and sustained industrial growth’.

A high proportion of technology start-ups result from positive stimuli, but a sizeable number still occur due to the entrepreneur being pushed by redundancy or frustration. There are numerous niches suitable for small firms and setting up a business should be encouraged as a positive action rather than a response to a negative occurrence. Most people spin off locally, suggesting that initiatives to increase levels of entrepreneurship will be more effective if they are targeted predominantly at local people. The use of local role models will encourage those with ideas to appreciate that not all technical entrepreneurs are like Bill Gates.

A large proportion of firms are established in the same field in which the founder worked previously. Given the preponderance of local spin-offs the strong pattern of indigenous new-starts results in the intensification of a region’s technology profile. The prevalence of local spin-offs assists the development of agglomerations of businesses, adding new firms, potential new suppliers, customers, contractors and service providers, increasing the visible presence of the agglomeration, which in turn encourages the inward movement of entrepreneurs. For a location to remain attractive firms have to continue to innovate and adopt new techniques, otherwise the vitality of the agglom­eration is reduced and competing clusters develop to become innovative centres, gen­erating spin-offs and attracting inward investment.

Some organisations act as better entrepreneurial incubators than others and agencies need to analyse the composition of their indigenous organisations in order to ascertain the likely level of local spin-offs and innovative potential of an area. Traditionally, large organisations have not acted as major generators of entrepreneurs but more firms are organising their activities into smaller product/service based units, attempting to replicate the ‘feel’ of the small firm environment. This is likely to encourage the cre­ation of more spin-off teams as communication between employees increases and indi­viduals from different functional areas identify opportunities and skill synergies. Areas lacking in local spin-offs need to attract more technical entrepreneurs from elsewhere in order to establish an innovative base on which to build. Stimulating entrepreneur­ship in areas which are under-represented is a challenge for development agencies. The creation of centres based around particular technologies, similar to the technopole con­cept in France, might encourage entrepreneurship. The provision of appropriate support infrastructure and incentives or concessions might kick-start the process of encourag­ing predominantly local, latent, aspiring entrepreneurs into business ownership.

While a minority of entrepreneurs move some distance to set up firms the majority spin off in the local area, aiding the development of agglomerations of technology-based firms. Many entrepreneurs are embedded within professional and social networks that influence the decision on where to locate; once established, the firm becomes a node within a complex arrangement of organisational and personal relationships. Those who have worked in an area previously, in broadly the same field, possess local/market knowledge and are some way up the knowledge curve; remaining within the known environment reduces risk. Subsequent spin-offs increase the stock of firms and improve the attractiveness of an area to mobile entrepreneurs seeking a new location. A small minority of founders seek a location offering a high quality of life, and remote locations are viable if firms are able to operate at a significant distance from customers, suppliers and other service providers. The extent of local linkages in the short term might not be great so firms will use distant contacts, but in the long term peripheral areas have the potential to develop self-sustaining clusters of indigenous expertise. Improvements in information technology are making remote locations increasingly viable for certain firms. While many entrepreneurs still choose a non-peripheral location, anything that relieves pressure on existing industrial/commercial centres is beneficial.

Many founders in technology-based sectors have little business background and there is a danger that some potential entrepreneurs lack an appreciation of the opportunities offered by self-employment; others lack the management know-how and confidence to found a business. A two-pronged approach could raise business awareness and whet the appetite of bright scientists and engineers. Both aspects revolve around education; one addresses the student while the other focuses on the prospective entrepreneur who is at a later stage in their career.

Many schools offer students the opportunity to study management subjects, and greater integration of business and enterprise into both the school curriculum and higher education programmes may prove fruitful. Gorman et al. (1997) advocate putting elements of entrepreneurship into formal education programmes, considering that entrepreneurs drive the economy. Courses socialise individuals into the idea of entrepreneurship as a viable and acceptable career path. Programmes incorporating entrepreneurship are relatively new in Europe, and until recently many ‘would-be’ technical entrepreneurs took a science/engineering degree that offered little exposure to management issues. Accreditation boards of professional institutes, such as those in civil and mechanical engineering, require that students on accredited degree programmes are exposed to management. Thus, management, accounting and legal concepts are becoming core elements in many college and university courses, ensuring that science and engineering graduates develop an understanding of the importance of management in organisations. In addition, increasing numbers of courses are incorporating indus­try placements. Hynes (1996) considers that ‘non-business students have the talent of conceptualising new and original ideas’. This, promoting ideas of entrepreneurship and business by putting them into the syllabi of science and engineering courses, as has been happening in the UK context since 1999 through the Office of Science and Technology’s Science Enterprise Challenge initiative, should reap benefits in the longer term.

In some technology-based fields a long ‘apprenticeship’ is not always required; the route to entrepreneurship is relatively swift. For example, in software, graduates are well placed to establish firms straight out of university. In other sectors prospective founders need to gather financial, intellectual and human resources on which to base their business. The lead time in some sectors is long and the provision of patient money will enable founders to start firms at an earlier stage in areas where significant devel­opment funding is required. To support the increased level of management exposure in education and work, specialist courses targeted at more mature prospective tech­nical entrepreneurs would enable them to gain a general understanding of business management. Once convinced of the merits of self-employment, those with specific business ideas would work up their concept into a formal business plan; those requir­ing external funding would receive help to develop proposals for investors. Such ini­tiatives might encourage entrepreneurs to start their firm proactively rather than as a response to a negative stimulus.

Technical people tend to remain in technical positions but through education may appreciate the pivotal role of business strategy and seek positions in which they can gain practical management experience. Ultimately, this may result in increased spin-off levels as founders develop a wider appreciation of the management function, making them better prepared for their role as founder. For those already running their own firms, communication of the benefits of expanding the management team to maximise growth potential and share the burden may increase the number willing to grow their enterprises, maximising their contribution to wealth and employment generation.

The technical entrepreneur is an important economic actor and the dynamic nature of most new-technology based fields means that there are numerous opportunities to further our understanding of what influences them to take that ‘one small step’.