Venturing in the dark: tech transfer in regenerative medicine.
While most major research universities promote entrepreneurial approaches, few provide the resources, training, or career support to sustain a productive start-up environment and drive regional economic development.
These challenges are especially evident in regenerative medicine. Stem cell technology development is primarily driven by university-led research, and a disproportionate number of regenmed start-ups are directly tied to university research. Like all entrepreneurs, academic entrepreneurs with stem cell innovations must acquire scarce resources and connect to critical partners. In the field of regenerative medicine, however, uncertainty about regulation, distribution, and IP rights make decision-making more difficult. This isn’t about risk-taking, it’s about how entrepreneurs cope with “unknown unknowns.” A good example was the unexpected exit of industry pioneer Geron in 2012, which dramatically changed the landscape right down to the availability of start-up funding.
For the past two years, we’ve been studying Scotland’s entrepreneurial ecosystem in this important, global healthcare field. We conducted and analysed in-depth interviews with entrepreneurs, academics, support entities, and government. Some of our findings aren’t surprising. For example, regenmed entrepreneurs become consummate storytellers. They build narratives to sway investors and partners, and adjust those narratives as the industry evolves. But these stories do more than communicate information. Creating and telling stories shapes how entrepreneurs understand their own technologies.
But story-telling alone doesn’t explain entrepreneurial behaviour. Participants in Scotland’s regenmed ecosystem also engage in both problem-focused and emotion-focused coping strategies. Problem-focused coping seeks knowledge to reduce uncertainty; emotion-focused coping accepts and adapts to uncertainty. Each strategy has strengths and pitfalls. Problem-focused coping often leads regenmed actors to partner for market knowledge. But some regenmed outcomes are currently unknow-able. New regenmed ventures are expensive; investigating multiple commercial outcomes can be expensive and lead to fatal delays in technology development.
Emotion-focused coping, including denial and distancing, can be effective strategies in the face of uncertainty. Rather than waste resources seeking unavailable information, these entrepreneurs and ecosystem actors put aside unanswered questions and focus on what they have. It may seem counterintuitive, but regenmed isn’t like web commerce or retail where customer feedback is instantly available. Our prior research on world-leading Cellular Dynamics (in Models of Opportunity: Cambridge) emphasized that regenmed ventures can make effective strategic decisions based primarily on what works within the organisation.
The real challenge for both these strategies arises from collaboration. Partnering in regenmed creates tensions, because ventures must share critical knowledge in a rapidly changing IP environment that differs dramatically across national borders. Problem-focused actors face high transaction costs associated with revealing critical information due to technology sophistication and contracting complexity. Emotion-focused coping strategies, however, may be especially vulnerable during collaboration processes. Managers may not be willing to risk sharing core knowledge, protected or not. In these cases, ventures with mistaken beliefs about technology potential or market development are likely to partner with other firms with the same mistaken beliefs. Here, story-telling leads entrepreneurs and firms to believe information based not on facts, but on what other industry participants want to hear.
This leads to three questions. First, what drives regenmed managers to be problem-focused or emotion-focused? Second, how do entrepreneurs avoid coping strategy pitfalls? Third, what can be done to facilitate Scotland’s entrepreneurial activity in this important sector?
The primary driver for regenmed coping strategies appears to be the entrepreneurial culture of the research universities generating foundational technologies. When universities and technology transfer offices create administrative spin-out hurdles and burdensome licensing terms, academic and professional entrepreneurs become defensive. The apparent lack of control may drive entrepreneurs towards emotion-focused coping strategies. This kind of organisational imprinting is a common phenomena. In regenmed venturing, which lacks a community of large mature firms, the role of the parent institution may be disproportionately powerful. Rather than making such ventures stronger, an adversarial environment may hinder the firm’s ability to function cooperatively, limiting how much collaborative knowledge it creates and absorbs.
The best way for entrepreneurs to avoid coping strategy pitfalls is to find established, experienced mentors to identify new venture flaws. There are relatively few of these in the stem cell sector in Scotland; regenmed entrepreneurs may need to seek such resources in larger ecosystems until the Scottish ecosystem matures.
Finally, there are no easy solutions to creating entrepreneurial culture at large institutions. The idiosyncrasies of university commercialisation context emerge from decades or centuries of embedded culture. Some general lessons may be gleaned from successful ecosystems such as Stanford and MIT: transparency, consistency, even-handed processes, top-down leadership and department-level champions. But the most challenging drivers are highlighted in Ruth Graham’s MIT/Skoltech report on entrepreneurial ecosystems: trust-based relationships with the broader E&I community and creating a market for university entrepreneurial activity (tinyurl.com/MITentrepEco). These hallmarks of a vibrant and supportive entrepreneurial culture remain foreign to most large-scale research universities.
Our own studies continue—we recently launched a cross-national comparison between the regenmed venturing ecosystem in Scotland and a comparable stem cell commercialisation ecosystem outside the UK. We expect to share our findings in early 2015. The study may shed light on global challenges to regenmed venturing, while pointing to specific opportunities to improve entrepreneurial activity around Scotland’s world-class research universities.
Dr. Adam J. Bock is Senior Lecturer of Entrepreneurship at The University of Edinburgh Business School. He is the co-founder of three university spin-outs, including a regenmed venture. He is the co-author of Models Of Opportunity:
How entrepreneurs design firms to achieve the unexpected (2012 Cambridge).
David Johnson is a doctoral student at the University of
Edinburgh Business School. His research focuses on
regenmed venturing, knowledge exchange, and entrepreneurial coping strategies.
Posted on Tuesday, 28 October 2014