[Exerpt from thesis entitled “Key decisions in the start-up phase of successful software companies” by Roderick van Cann (roderickvancann@gmail.com), in submission]

Universities are starting to play a major role in entrepreneurship, not the least due to the fact that courses in entrepreneurship can be found in most of the universities, and majors in entrepreneurship are common in the majority of business schools (Kolvereid & Moen, 1997). Besides universities, education in general also influences entrepreneurship. Backes-Gellner and Werner (2007) studied the differences in educational level among German founders of innovative and traditional companies. They found that 47 percent of entrepreneurs who started an innovative company completed a university education, compared to 39.7 percent of entrepreneurs in traditional companies. Besides completing a university education, the length of the study also influences the entrepreneurial activities of the founder, especially in the case of innovative companies. When the innovative entrepreneurs have studied faster than the average student, it becomes easier to obtain credit from a bank.

Finishing a major in entrepreneurship is “positively associated with new firm formation” and also increases the entrepreneurial intentions among students (Kolvereid & Moen, 1997, p.157). That entrepreneurial intention, just as an entrepreneurial attitude, is increased when entrepreneurship courses are added to the curriculum is also found by Souitaris, Zerbinati and Al-Laham (2007). Inspiration is responsible for the biggest influences on students of entrepreneurial courses to wanting to start their own company. The study of Souitaris et al. (2007) has however not found a relationship between the entrepreneurial intentions of people and actually becoming an entrepreneur.

Differences in educational levels among entrepreneurs appear to be, at least partially, influenced by sex. Roper and Scott (2009) identified in their study that there are significantly more male entrepreneurs with a university degree, while school-level qualifications are significantly more common among women entrepreneurs.

Entrepreneurship course

In a technical report discussing the results of the course ‘ICT Entrepreneurship’, taught at Utrecht University in the year 2005-2006, ter Berge, Nab and Brinkkemper (2006) included the results of surveys that asked the students participating in the course about how their entrepreneurial qualities have developed. This study was not only done to report on the effects that an entrepreneurship course can have on master students, the results have also been used to improve the course in the following years that it was taught. During the ICT Entrepreneurship course, students work in teams to develop a start-up company, that is part of a virtual parent company called Netherware. Although these start-ups are part of Netherware, they are independent companies, owned by the students. This structure provides the opportunity for students to work on their own company on one side, and working together to run the Netherware company on the other side. Besides only working on a small start-up during the course, this setup also provides the opportunity to let students experience how it is to work in a larger company (ten Berge et al., 2006).

During this specific course, seventeen student teams formed companies, of which nine (almost 53 percent) continued their company after finishing the course (ten Berge et al., 2006). The students that participated indicated that during the course, a number of qualities have increased, of which the ability to write a business plan has had the most impact, since the students indicated to be lacking this skill at the start of the course. The other qualities that students have increased during the course are working on a project basis, developing the need to achieve, improving their ability to take initiative, their confidence, and their marketing skills (ten Berge et al., 2006).

The paper of Nab, Pilot, Brinkkemper and ten Berge (2010) discusses the same results of this entrepreneurship course. This paper focuses more on the development of the course than the actual influence it has on the students that participate in the course. Some of the principles that are used in developing this course, and that are needed for entrepreneurial education are: letting the working atmosphere resemble that of a small ICT company as closely as possible; let the students play “the role of problem solver of real-life problems”; creating realistic problems and activities for the students; having the instructor “resemble the behavior of a professional entrepreneur”; provide adequate facilities and infrastructure; let the assessments be performed by people with experience in entrepreneurship; and let students participate in multiple roles, on different levels of the organization (Nab et al., 2010, p.25).

The paper of Nab et al. (2010) states five recommendations for improvement made by the instructors of the course. In making these recommendations, the instructors have used both their own view on the source as well as the student feedback that was given after the course. The first recommendation is to make the development of the start-up company the main activity, this can, for instance, be done by promoting the student ownership of the company. Second, the activities should be focused more on the market to increase the feeling of reality. The third recommendation is that the social aspect of the course should be improved. This can be realized by increasing the involvement and communication between the different student teams. Fourth, the instructors believe there should be more involvement from entrepreneurs from outside the university, since they make good role models for the students. Finally, students should be stimulated to organize their own processes that are required for starting their company autonomously and responsibly (Nab et al., 2010).

Incubators

While Nowak and Grantham (2000, p.130) have stated that four out of five companies fail, they also mention that incubators provide new companies “with a supportive network, infrastructure and physical facilities”. As a result, incubators can turn these numbers around, meaning that four out of five companies succeed instead of fail. Peña (2002) describes the benefit of incubators to new start-up companies as providing both tangible and intangible support. Tangible support that is usually provided by incubators includes office space, furniture and equipment. The intangible support of incubators consists of providing the entrepreneurs with technical assistance, business courses, networking possibilities, etc. Another intangible aspect that entrepreneurs benefit from within an incubator is the contact with other entrepreneurs (Peña, 2002). The successful entrepreneurs highly value the opportunity to “share experiences and discuss business issues with other entrepreneurs hosted by the same center and living under the same roof” (Peña, 2002, p.194). The intangible services provided by the incubators are valued higher by successful entrepreneurs compared to their less successful counterparts. This suggests that the ability to benefit from the intangible services that an incubator can provide is a useful skill for entrepreneurs to possess.

In studying four different university incubators from the United States, Mian (1997) found that, on average, companies experienced a 177 percent growth in sales and a 53 percent growth in employment. These high growth numbers were realized in the four years that the companies have spent in the university incubators. The most critical downside of the university incubators that were studied by Mian (1997, p.271) is that there were “no written intellectual property rights protection policy for tenants” at that time. In an earlier study, Mian (1994) found that there is usually a high degree of trust with regard to intellectual property rights between the incubator management and employees and the tenants. He also found that no real problems with regard to intellectual property have been encountered by any of the incubators.

From the literature described above, we can conclude that both universities and incubators can have a significant, although different, effect on entrepreneurs. Where an entrepreneurship major or entrepreneurship courses in university increase entrepreneurial intention and affects the entrepreneurial activities of students and graduates, incubators can greatly improve the chances of success for a start-up, especially when the entrepreneur can benefit from the intangible services provided by the incubator.

References

Backes-Gellner, U., & Werner, A. (2007). Entrepreneurial Signaling via Education: A Success Factor in Innovative Start-Ups. Small Business Economics, 29, 173-190.

ten Berge, H., Nab, J., & Brinkkemper, S. (2006). Netherware: analyse van de opzet, resultaten en succes- en faalfactoren (Technical report No. Rapportage EMP-project 2005-2006). IVLOS, Universiteit Utrecht.

Kolvereid, L., & Moen, O. (1997). Entrepreneurship among business graduates: does a major in entrepreneurship make a difference? Journal of European Industrial Training, 21(4), 154–160.

Mian, S. A. (1994). US university-sponsored technology incubators: an overview of management, policies and performance. Technovation, 14(8), 515–528.

Mian, S. A. (1997). Assessing and Managing the University Technology Business Incubator: An Integrative Framework. Journal of Business Venturing, 12, 251-285.

Nab, J., Pilot, A., Brinkkemper, S., & ten Berge, H. (2010). Analyzing the design of an authentic task in higher education: teaching entrepreneurship for software products in a virtual company. International Journal of Entrepreneurship and Small Business, 9(1), 20-35.

Nowak, M. J., & Grantham, C. E. (2000). The virtual incubator: managing human capital in the software industry. Research Policy, 29(2), 125–134.

Peña, I. (2002). Intellectual capital and business start-up success. Journal of Intellectual Capital, 3(2), 180–198.

Roper, S., & Scott, J. M. (2009). Preceived Financial Barriers and the Start-up Decision: An Econometric Analysis of Gender Differences Using GEM Data. International Small Business Journal, 27(2), 149-171.

Souitaris, V., Zerbinati, S., & Al-Laham, A. (2007). Do entrepreneurship programmes raise entrepreneurial intention of science and engineering students? The effect of learning, inspiration and resources. Journal of Business Venturing, 22(4), 566–591.