Report on workshop "Economic Development Promotion" - Impediments and promotion of technology-based business start-ups in Greater Seattle - Stefan Lilischkis, 16 September 1998 ___________________________________________________________________________ 1. Objective and participants of the workshop On Friday, 11 September 1998, a workshop on economic development promotion took place in the Department of Geography of the University of Washington in Seattle. The workshop was part of the scholarship project "Structural Change on the Ruhr" run by the Initiative Group Ruhr. The workshop's objective was to discuss the findings of the two scholars located in Seattle doing research on economic development promotion, Frank Osterhoff and Stefan Lilischkis. Frank Osterhoff's subject is economic development policy, especially technology policy; Stefan Lilischkis is working on impediments and promotion of technology-based business start-ups. The discussion on business start-ups was attended by the following experts and representatives: Prof. James W. Harrington, University of Washington, Department of Geography Volker Heck, RWE, Essen Prof. Dr. Helmut Karl, Universität Jena, Fakultät fuer Wirtschaftswissenschaft Prof. Dr. Günter Krumme, University of Washington, Department of Geography Dr. Uwe Stoklossa, Initiative Group Ruhr (IR), Essen Roland Waniek, Rhine-Westfalia Institute for Economic Research, Essen Furthermore, the following researchers sponsored by the Initiative Group Ruhr took part: Britta Busse, Patrick Dufour-Bourru, Stefan Lilischkis, Frank Osterhoff, Oda Sans, Petra Seitz, Alexander Ziesemer. Guest: Stefan Spiegel, Ruhr-Universität Bochum (RUB), Geography student. 2. Minutes of the discussion on technology-based business start-ups Introduction Roland Waniek introduces the discussion by stating that the Ruhr Area is lagging behind in terms of business start-ups. The questions to be answered are "why?" and "how can we improve the situation?". Particular emphasis should be on start-ups out of universities. In the USA, the MIT is a well-known example. It is worth while searching for reasons why the Ruhr Area does not perform a notable start-up activity although having large and good universities. The term "spin-off" The term "spin-off" is discussed. The group agrees that spin-offs are mainly start-up businesses out of a research facility. Microsoft cannot really be considered a spin-off, because Bill Gates and Paul Allen did not do any specific research on computing at university; in fact "they left Harvard disgusted" (Prof. Krumme) and were much more influenced by their High-School than by university. Setting up initiatives Volker Heck states that in the Ruhr Area, everything tends to be decided in consensus, and that this is one of the impediments for economic development in the Ruhr Area. Bringing decisionmakers together to set up initiatives and organizations, as proposed by Stefan Lilischkis, was not successful in the Ruhr Area. Stefan Lilischkis suggests to bring together decisionmakers for certain, fairly small projects, for example for an "Alliance of Angels" in the telecommunication sector. Prof. Harrington adds that in Greater Seattle in the past years public issues were "talked to death". However, private issues were not necessarily talked down. Distinguishing start-up activity Prof. Harrington points out that there are different possibilities of entrepreneurship in different regions. In Greater Seattle, barriers to entry (individually and technically) are generally small. However, in the high-tech businesses there are barriers to entry, and start-ups are not easily possible in all sectors. Start-up statistics Roland Waniek states that according to the time series on new businesses in Greater Seattle presented by Stefan Lilischkis, one out of 100 inhabitants start a business each year. Compared to Germany that is a very high figure. Prof. Krumme says that the statistic presented is a good start, but not very meaningful for a thorough analysis of start-up activity. Start-up promotion at the University of Washington (UW) Prof. Krumme mentions several aspects related to start-up activity at the UW: - At the UW, many professors start a business, and many have consulting firms. - The UW tries to keep the technology found in UW research in the region. - The UW has a Royalty Fund, distributing grants to researchers in a competitive way. - The Office of Technology Transfer actively promotes start-ups. Volker Heck adds that a comparison of technology transfer would be very helpful. In Germany, offices of technology transfer are the most bureaucratic organizations at the universities. Technology transfer is also an important aspect for the final conference of the IR. Role of universities in start-up promotion Prof. Karl points out that the specific role of universities in start-up promotion needs to be identified, as a normative question. If universities are meant to promote start-ups, they had to teach specific skills, and they might have to establish a specific "spirit of competition" at the university. In that context, Prof. Krumme points out that universities in the USA have an approach to teaching that is different from Germany. The "Berufsschulen" in Germany are quite famous in the USA. Many universities in the USA offer a kind of vocational training, and they go to Germany to study the "Berufsschulen". Roland Waniek poses the question if German universities - the system and the way knowledge is produced and used - impede business start-ups or if they help. Start-up activity in Greater Seattle Patrick Dufour-Bourru refers to the fact that in Greater Seattle start-ups do not mainly come out of universities, but out of existing companies. Those starters have experience and some of them are already very rich. Prof. Krumme adds that many skilled workers came to Boeing from outside the region and created their own business after some years. So the region profited from a brain-drain. Start-up activity in the Ruhr Area Roland Waniek raises the question what can be done to promote start-ups on the regional level, and why - for example - people do not start businesses out of the RWE. Volker Heck says that the best way to motivate people to start a business is through market forces. The challenge is to create a market-driven economy. Furthermore, the opportunities of starting a business have increased, because now knowledge-assets are more important than physical assets. Prof. Krumme mentions the problem that big firms are not inclined to motivate their best people to start a business. Petra Seitz and Britta Busse state that security and risk-adversity are important values of Germans and that this impedes start-ups. Transformation of university knowledge to start-ups Roland Waniek raises the questions how knowledge created at the university can be transformed to start-ups. Volker Heck says it should be found out if the "knowledge clusters" in Greater Seattle are different from the ones in the Ruhr Area in terms of willingness to learn and the ways of learning. He asks if the clusters in Greater Seattle are "learning organizations". Issues for comparing start-up activity in different regions Prof. Harrington points to three issues to be considered when comparing start-up activity in Greater Seattle and the Ruhr Area: (1) What are the specific firms' advantages in different sectors? What do employees or students get out of firms in the two regions? (2) Financing is important, and the availability differs. Often financial resources are found through sources of recommendation. It is an important question where the money comes from. (3) Markets are important. There might be major differences between the industry hubs making use of starters as suppliers. 3. Conclusions for further research The most important outcomes of the workshop, nurturing further research in Seattle, are: - The study should best be confined to start-up promotion by the University of Washington. The role of universities in start-up promotion needs to be clarified - in positive and in normative terms, in the USA and in Germany, and in particular at the UW and the RUB. The definitions and the conceptualization of the study need to be targeted towards these subjects. - Technology transfer from universities to start-up businesses is an important issue that should be of major importance in the further study. - Motivation to start a business and "entrepreneurial culture" should not have a major emphasis in the study, because the outcome would probably be quite heuristically. - Start-up activity needs to be analyzed in a distinguished way. This means of course distinguishing between the two regions that are compared, and it means distinguishing between kinds of impediments and promotion, economic sectors, and industry clusters. - Recommendations need to meet the specific conditions in the Ruhr Area. For example, it should be clarified why certain initiatives like the Alliance of Angels do work in Seattle and how they would have to be implemented in the Ruhr Area in order to work. Recommendations could be subdivided in ones implying institutional changes, and ones that could be realized in the existing institutional framework. With these outcomes, the author's intentions for the further study were mainly confirmed and refined. ______________________________________________________