Science-Based Entrepreneurial Firms as Real Options: Assessing the Outcomes of the Norwegian Firm Population from 1995 to 2012

Abstract

Science-based entrepreneurial firms (SBEFs) that are set up to commercialize knowledge created in universities and other public research institutions typically face long development paths. They develop new products and services associated with high levels of technological, market, and organizational uncertainties. Despite strong interest from policy makers and universities to promote the creation of SBEFs, there is little systematic evidence on the value creation patterns and potential impacts of these firms. By using a real options approach, this study provides a detailed assessment of the portfolio of all 471 SBEFs supported by technology transfer offices, incubators and science parks in Norway from 1995 to 2012. By following an entire portfolio of firms over an extensive period of time, we overcome some of the shortcomings of prior spin-off research. The findings reveal that 97 firms in the portfolio had reached what could be considered a successful outcome, 126 had failed, while the remaining 251 may still be considered as real options with an uncertain outcome. Acquisitions appear to be an important mode of successful outcomes for these ventures; an outcome currently underexplored in the literature. The chapter concludes with implications for policy makers seeking to maximize the value creation potential of spin-offs from academic institutions.