Cluster organizations and their facilitating role in the development of successful high-tech start-ups

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Cluster organizations and their facilitating role in the

development of successful high-tech start-ups

By Yolanda Hut

S2165325 y.hut@student.rug.nl

Master’s Thesis Msc BA: Strategic Innovation Management

University of Groningen

Faculty of Economics and Business

15th of January 2016

Word count: 14.713

Supervisor: P.M.M. (Pedro) de Faria

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Abstract: This study examines how cluster organizations can facilitate the successful

development of high-tech start-ups. To investigate this phenomenon a multiple case study has been used, where eight high-tech start-up communities have been studied. The dynamic capability view is used to elaborate on the successful development of the start-ups by focusing on the improvement of their asset positions, distinctive processes and paths. This study contributes to the literature on strategic and small business management by providing insights in what the success factors for cluster organizations are in optimally stimulating the development of high-tech start-ups. Furthermore, it identifies the differentiating factors of high-tech start-up communities in relation to general start-up communities. From the in-depth analysis based on literature study, documentary data and interviews it is proposed that cluster organizations should focus on the networking opportunities, coaching aspects, building a strong community and overall credibility of the community to help the high-tech start-ups in developing their dynamic capabilities in the best possible way. Moreover, especially for high-tech industries, it is extremely important to have a clear industrial focus and adapt the way of financing, specialized equipment and business support to this focus.

Keywords: high-tech start-ups, innovation, business incubation, high-tech industries,

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LIST OF TABLES

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1. INTRODUCTION

Small business research provides indications that start-ups have higher failure rates

relative to their older counterparts (Chesbrough & Weiblen, 2015; Choi & Shepherd, 2005).

Reasons for this are often related to the liability of newness (Stuart, Hoang, & Hybels, 1999;

Stinchcombe, 1965; Baum, Calabrese, & Silverman, 2000) and the death-valley that high-tech

start-ups face by having a lack of enough funding to proceed from product development

towards a successful innovation (Hudson & Khazragui, 2013). To overcome this valley of

death and increase the successful introduction of innovations, Gilbert, McDougall and

Audretsch (2008) claim that new ventures can increase their innovation and growth

performance by locating in geographical clusters. Clusters are defined as a geographically

proximate group of interconnected companies and associated institutions in a particular field

linked by commonalities and complementarities (Porter, 1998, p.197). Locating in

geographical clusters will give start-ups the opportunity to absorb more knowledge (Gilbert et

al., 2008). Moreover, the aspects of proximity and regional connectedness positively

influence firm performance because of social interaction possibilities and the access to a

common resource base (Inkpen & Tsang, 2005; Lechner & Leyronas, 2012; Harrison, 1992).

Since start-ups often lack access to resources, knowledge and dynamic capabilities

(Chesbrough & Weiblen, 2015; Haeussler, Patzelt, & Zahra, 2012; Stuart et al., 1999), it may

especially be beneficial for them to locate within geographical clusters because of the access

to shared resources and a valuable pool of knowledge possibly leading to increased firm

performance (Alcacer & Chung, 2014; Li, de Zubielqui, & O'Connor, 2015).

Clusters can become more organized when an overarching cluster organization gets

involved in facilitating the cooperation between partners. Cluster organizations especially

designed for start-ups are known as business incubators (Bøllingtoft & Ulhøi, 2005; Hansen,

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offices, services, business support, and network opportunities to early stage ventures (Bergek

& Norrman, 2008). Therefore, business incubators can be recognized as cluster organizations,

since they help start-ups by providing all varieties of services, locating them all together

through providing office space, and providing connection opportunities with other firms

(Bøllingtoft & Ulhøi, 2005; Hansen et al., 2000). A lot of research on the offerings of these

incubators and cluster organizations already exists (e.g. Bøllingtoft & Ulhøi, 2005; Bergek &

Norrman, 2008; Grimaldi & Grandi, 2006). However, the focus has always been on start-ups

in general, and what those cluster organizations offer for these start-ups, without focusing on

differentiating characteristics of specific industries such as the high-tech industries.

Differentiating among industries might have big implications, as high-tech start-ups may have

different needs compared to normal start-ups. As already identified, high-tech start-ups often

face a valley of death, which means they do not have enough money and resources to advance

from the technology development phase to the commercialization phase (e.g. Hudson &

Khazragui, 2013; Frank, Sink, Mynatt, Rogers & Rappazzo, 1996; Ford, Koustky & Spiwak,

2007; Harris, 2013). Therefore, the goal of this study is to identify in which way cluster

organizations can help high-tech start-ups to become successful companies.

To study this phenomenon, the theoretical framework concerning the dynamic

capabilities proposed by Teece and Pisano (1994) is used. According to their study, dynamic

capabilities are necessary for becoming a successful firm by creating a competitive advantage

over other firms. Firms that possess dynamic capabilities can react timely responsive and are

able to have rapid and flexible product innovations, coupled with the management capability

to effectively coordinate and redeploy internal and external competences (Teece & Pisano,

1994). Consequently, when high-tech firms become able to improve their dynamic

capabilities, they can increase their competitive advantages over other firms and thus might be

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rates. Accordingly, the research question of this study is: How can cluster organizations

facilitate the successful development of high-tech start-ups?

By studying this question, the research not only investigates the services and tools that

cluster organizations offer towards the high-tech start-ups, but also investigates the dynamics

on how those offerings influence the successful development of high-tech start-ups by

improving their dynamic capabilities.

A multiple case study approach is used to answer this research question. First, eight

high-tech or technology-based start-up communities across the Netherlands were visited and

their managers were interviewed to get a deeper understanding of their offerings and services

and how they facilitate the successful development of the high-tech start-ups. These results,

together with the dynamic capabilities theory (Teece & Pisano, 1994), have led to final

propositions and answered the defined research question.

This study contributes to the small business and strategic management literature by

connecting the facilitating role of cluster organizations in the successful development of

high-tech start-ups with the dynamic capabilities perspective of Teece and Pisano (1994). These

fields of research may learn from this study by gaining better insights in concepts related to

high-tech cluster organizations, high-tech start-ups, and increased firm performance based on

the development of dynamic capabilities. General research on business incubators mainly

focused on which services and tools cluster organizations should offer (e.g. Bøllingtoft &

Ulhøi, 2005; Bergek & Norrman, 2008), but not on how these offerings impact the

development of dynamic capabilities and thus the development of a competitive advantage

over other start-ups. This study closes this gap in the literature by connecting the facilitating

role of cluster organizations with the dynamic capabilities framework. Moreover, research

regarding business incubators has mainly focused on the needs of start-ups in general (e.g.

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characteristics of industries such as the high-tech industries. However, as already argued,

focusing on the high-tech industries may lead to the identification of differences in needs by

high-tech start-ups compared to start-ups in general. This study specifically focuses on the

high-tech industries and might therefore lead to other results than studies focusing on general

start-up communities. In addition, since this subject is a new field in research, the case study

approach helps identifying important future research topics surrounding dynamics between

cluster organizations, high-tech start-ups and the dynamic capabilities view.

From a managerial perspective, this research will be of interest for cluster

organizations, universities and other knowledge institutions considering collaborations with

high-tech start-ups. This study will provide them with insights on how they can design these

types of collaborations in the most effective way. Additionally, policy makers concerned with

the governmental support of start-ups may receive insights in how to support those cluster

organizations and high-tech start-ups in their best way. Lastly, high-tech start-ups themselves

may also learn from it, by learning which differentiating aspects cluster organizations should

have to stimulate their own successful development.

The findings of this study suggest that the high-tech start-ups need a different

approach than that the general incubators offer. Especially the way of financing the start-ups,

the offerings of specialized equipment and the provision of business support need to be

adapted based on the specific high-tech industrial focus of the cluster organization. Moreover,

next to the basic offerings such as office space, business support and shared assets, the case

studies showed that network opportunities, coaching facilities, community building and

having a well-known and credible community are extremely important for the high-tech

start-ups to help improving their dynamic capabilities and thus their successful development.

The remainder of this study is organized as follows. First a review of the relevant

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provided. After that, the methodology including information about the research design, the

data collection, data analysis and the research quality will be presented. Then the cases will be

described, followed by the results based on the interviews and secondary data. Building on

these results and existent literature, propositions will be presented and discussed. The paper

concludes with discussing the theoretical contributions, managerial implications, limitations

and lastly the directions for future research.

2. THEORETICAL FRAMEWORK

Since this study encompasses the interaction between two specific parties; the

high-tech start-ups and the cluster organizations, this chapter will take a broader look into them and

their interactions. The main objective of this part is to identify all the relevant and existing

literature concerning the high-tech start-ups, clusters and start-up cluster organizations. All

these identified literature is of great importance for determining the sub-questions related to

the identified research question: How can cluster organizations facilitate in the successful

development of high-tech start-ups?

The theoretical framework is divided in separate parts. First, an introduction about

high-tech start-ups will follow. It will be identified what high-tech start-ups exactly are, what

they do and what they need. After all this has been identified, the theoretical framework will

proceed towards literature about clusters, followed by a section about cluster organizations

and their facilitating role in helping start-ups. Based on all the described literature, the

theoretical framework ends with the defined research question and the sub-questions.

High-tech start-ups

Most research on start-ups has used the term start-ups without providing a clear

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exactly meant by start-ups and especially high-tech start-ups. Luger and Koo (2005) reviewed

a substantial amount of literature regarding start-up definitions and formed a definition for

general start-ups based on these different definitions. Therefore this study will use their

definition as main guidance: “A start-up is a business entity which did not exist before during

a given time period, which starts hiring at least one paid employee during the given time

period, and which is neither a subsidiary nor a branch of an existing firm.” In this definition

three main aspects are highlighted: newness, being active and independency (Luger & Koo,

2005). Since the high-tech industries are characterized by fast changing products and

processes, close to science and driven by engineers, have high rates of innovation and

possible high government subsidies (Boutellier & Heinzen, 2014), these important aspects

will be considered for conceptualizing high-tech start-ups. Moreover, the Dutch Ministry of

Economic Affairs defines a techno-starter as “a legal entity that drives or is planning to set-up

a business, based on a new technological invention or a new application of an existing

technology. The main aim of the business is to sell and supply products, processes or

services.” Furthermore, the company should exist for less than seven years (SEED Capital,

2015). Based on these definitions a high-tech start-up can be defined as “a business entity that

does not exist longer than seven years, which starts hiring at least one paid employee during

these seven years, and which is an independent legal entity based on a new technological

invention or new application of an existing technology active within the high-tech industry.”

Start-ups in general are known for their innovativeness and aspirations for high growth

(Chesbrough & Weiblen, 2015). For start-ups the new product development is of great

importance in order to become a successful company (Stalk & Hout, 1990). However, many

start-ups encounter difficulties when trying to bring new products to the market. This shows

up in the fact that start-ups in general have higher failure rates relative to their older

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failure rates, only a fraction of the developed technology by high-tech start-ups will end up in

the commercial market (Harris, 2013). As identified by the literature there are two main

underlying reasons why these high-tech start-ups may encounter difficulties during their first

phases. First, most start-ups are highly vulnerable for the liability of newness, arising from

both internal organizational shortcomings as well as from external processes (Stuart et al.,

1999; Singh, Tucker, & House, 1986). The liability of newness means that the start-ups are

too dependent on the cooperation with external partners, have low levels of legitimacy and

have difficulties to compete with established organizations (Stinchcombe, 1965). The new

firms are not able to compete with these established organizations, when they are unable to

create a competitive advantage over these established firms. According to Teece and Pisano

(1994), firms can create a competitive advantage through developing dynamic capabilities.

Dynamic capabilities are necessary for becoming a successful firm by being timely responsive

and being able to have rapid and flexible product innovations, coupled with the management

capability to effectively coordinate and redeploy internal and external competences (Teece &

Pisano, 1994). As the high-tech industries are characterized by fast changing processes and

products (Boutellier & Heinzen, 2014), the dynamic capabilities are even more important for

these specific industries, as they help being responsive to fast changing environments and

processes (Teece & Pisano, 1994). The dynamic capabilities rest in three important factors:

distinctive processes (e.g. knowledge and managerial and organizational routines), asset

positions (e.g. current endowments of technology, customers and resources) and paths (e.g.

strategic alternatives and technological opportunities) (Teece, Pisano, & Shuen, 1997;

Rosenbloom, 2000). Consequently, to decrease the relatively high failure rates of high-tech

start-ups and being able to compete against other firms, these high-tech start-ups should

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high-tech start-ups often lack the possession of these important asset positions, distinctive

processes and paths.

Second, the important issue is that high-tech start-ups often face the ‘valley of death,’

which occurs during the phase between research and the successful innovation (Hudson &

Khazragui, 2013). Frank et al. (1996) defined the valley of death as “the situation in which a

technology fails to reach the market because of an inability to advance from the technology’s

demonstration phase through the commercialization phase.” For this valley of death the most

cited reason is lack of money and resources (e.g. Hudson & Khazragui, 2013; Frank et al.,

1996; Ford et al., 2007; Harris, 2013). However, research has found a lot more insufficiencies

that high-tech start-ups face.

An identification of the most recognized deficiencies of high-tech start-ups follows.

The most cited need of high-tech start-ups is resources in general (e.g. Chesbrough &

Weiblen, 2015; Stuart et al., 1999; Haeussler et al., 2012). Other identified shortcomings are

financial or economic capital (e.g. Stuart et al., 1999) experience and production routines

(Chesbrough & Weiblen, 2015; Sørensen & Stuart, 2000; Baum et al., 2000), technical,

environmental and market knowledge and capabilities (Haeussler et al., 2012; Stuart et al.,

1999; Stinchcombe, 1965), power, scale and size (Chesbrough & Weiblen, 2015; Baum et al.,

2000), great uncertainty about the quality of the products and legitimacy (Stinchcombe, 1965;

Stuart, 1999) and lastly, alliances and equity relationships with an experienced evaluator

(Stuart et al., 1999).

A short overview of all these needs and shortcomings, their consequences, and their

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Table 1 – Integrative table with details about shortcomings of high-tech start-ups Shortcomings of high-tech start-ups Consequences Dimension dynamic capabilities Literature (Specialized) assets

and resources • Not being able to run the business model efficiently. • Vulnerable to partners’ potential

opportunism.

• Inability to build necessary capabilities to gain a competitive advantage. • Lack of united complementary assets

resulting in technical and marketing capabilities.

Asset position _• Chesbrough

& Weiblen, 2015 • Haeussler et al., 2012 • Stuart et al., 1999 Financial/economic

capital • No access to set of resources that are needed in exchange relationships between company and environment. • Not being able to fund early-stage and

speculative product development projects.

• Not able to withstand periods with poor performance.

Asset position _• Stuart et al.,1999 • Groen et al., 2008 Production experience, scale and routines

• Not being able to run the business model efficiently.

• Lack of production experience results in immature and unrefined routines.

Distinctive

processes • Chesbrough, & Weiblen, 2015 • Sørensen, & Stuart, 2000 Technical knowledge and market/environment insights

• Being less able to mitigate risks regarding new product development. • Being less able to mitigate risks

regarding new alliances.

Distinctive processes / path dependency / • Stinchcombe, 1965 • Haeussler et al., 2012 Credibility and public confidence and in the products

• Lack of uncertainty about the quality of the company. Asset position / Distinctive processes • Stuart, 1999 • Stinchcombe, 1965 Alliances and equity relations with experienced evaluators

• Lack of confidence in organizational integrity and managerial ability by investors, employees, customers, suppliers and collaborators.

Asset position / Distinctive processes / path dependency • Stuart et al., 1999

As can be seen in table 1, all the identified shortcomings are related to the high-tech

start-ups’ asset positions, distinctive processes and paths, as identified by Teece and Pisano

(1994). As already explained in the introduction, locating in geographic clusters can help

overcoming these shortcomings by having the opportunity to absorb more knowledge (Gilbert

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become interconnected (Porter, 1998, p.197) and start interorganizational collaborations,

which positively influences the innovation performance of companies (Faems, van Looy and

Debackere (2005), and thus also increases the possibility to survive in the competitive world.

Clusters

A cluster is a geographically proximate group of interconnected companies and

associated institutions in a particular field, linked by commonalities and complementarities

(Porter, 1998, p.197). In these clusters, the regional connectedness, where the entrepreneurial

firm can access the resource base of a cluster in its home region, is found to significantly

contribute to the firm performance (Lechner & Leyronas, 2012). As found by Alcacer and

Chung (2014), clusters can help in creating a competitive advantage because of the access to

major pools of skilled labour, specialized suppliers and knowledge spill-overs, which

consequently may have a beneficial impact on the asset positions, distinctive processes and

paths of the firm. When the start-up locates in an already well-developed cluster the

geographical proximity is found to be of even greater significance value (Presutti, Boari, &

Majocchi, 2013). The survival of start-ups located within well-developed clusters can be

enhanced with the help of three mechanisms: first, since clusters attract a higher number of

skilled employees, the recruitment may become easier; second, by having access to a larger

number of specialized suppliers to work with, it allows them to focus mainly on their own

core activities; and third, it may be easier to form initial customer relationships since a large

number of customers may already be attracted to the cluster (Pe'er & Keil, 2013).

Also, if more firms from similar industries are located in the same area it will become

easier to identify promising opportunities and to assess market conditions (Sorenson, 2005),

thus improving the distinctive processes and paths of the start-ups. Sorenson (2005) found

that industries cluster because entrepreneurs may find it difficult to access the information and

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industries mostly involve highly sophisticated technological knowledge that also concerns

tacit knowledge. The more tacit knowledge involved, the higher the need for spatial proximity

to stimulate the exchange (Maskell & Malmberg, 1999). Physical proximity is needed since

the transfer of this type of knowledge needs frequent interaction (Kogut & Zander, 1992),

personal contact (Smith, Dickson, & Smith, 1991) and mutual trust and understanding

(Maskell & Malmberg, 1999). Additionally, technological advanced firms favour locations

with high levels of academic activity and avoid locations with sole industrial activities

(Alcacer & Chung, 2007), which might indicate the importance of connecting the cluster and

thus the start-up community to a knowledge institution. This may come from the fact that the

high-tech industry has close relations to science (Bouttelier & Heinzen, 2014).

To conclude, start-ups can have considerable advantages when locating within

geographical clusters, since it will give them access to shared resources (asset positions) and a

valuable pool of knowledge (distinctive processes and paths). This will lead to improved

dynamic capabilities and thus result in an increased competitive advantage (Teece & Pisano,

1994) and also increased firm performance (Alcacer & Chung, 2014; Li et al., 2015).

Cluster organizations and start-up communities

For start-ups a specific type of clusters is recognized: the business incubators. Cluster

organizations in the form of business incubators help start-ups by arranging distinct types of

services such as locating them all together, providing office space and offering connection

opportunities with other firms (Bøllingtoft & Ulhøi, 2005; Hansen et al., 2000). The services

that these cluster organizations offer are specifically designed to facilitate the development of

new businesses (Caiazza, 2014). Bergek and Norrman (2008) identified three components to

differentiate among the incubators: selection method, programme or business support type

and mediation method. Selection refers to determining which start-ups are accepted to the

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of the ‘picking-the-winners’ method. However, the organization can also choose to have less

strict selection by using a ‘survival-of-the-fittest’ approach. Moreover, the organization can

decide to base their selection on the idea or on the entrepreneurial team. Secondly,

programme type refers to the coaching and training activities initiated to support the

development of the start-ups. Here a distinction between a pre-specified program, major

involvement and loose involvement can be made, where the cluster organizations vary in their

active involvement. Lastly, mediation refers to how the start-ups are connected to each other

and the outside world. Here we can distinguish between three types: the Regional Innovation

Systems (RIS), where the focus is mainly limited to a specific region; the Technological

Innovation Systems (TIS), where the focus and mediation activities are more directed towards

the technological field; and a combination of both RIS and TIS. Based on these three

components different types of incubators can evolve (Bergek & Norrman, 2008).

Next to these three dimensions, literature has identified four types of services that

these incubators often provide to start-ups: space, shared resources, business support and

access to networks (Ratinho, Harms, & Groen, 2013; Bergek & Norrman, 2008). By

specifying these dimensions further, a clear distinction between the provision of tangible and

intangible resources and opportunities can be made (Bøllingtoft & Ulhøi, 2005). Table 2 gives

an overview of the services offered by general start-up communities based on the articles by

Bergek and Normann (2008), Ratinho et al. (2013) and Bøllingtoft & Ulhøi (2005).

Table 2 - Services offered by general start-up communities (Bergek & Normann, 2008; Ratinho et al., 2013; Bøllingtoft & Ulhøi, 2005).

Tangible resources and opportunities Intangible resources and opportunities

Space: Physical environment to work in and provision

of offices.

Network access and mediation: Created environment

with peers, possibility to obtain legitimacy, opportunities to come in contact with established organizations.

Shared resources: Communication services, facilities

and equipment, financial capital.

Business support: Social services and psychological

support.

Business support: Business services such as legal

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Especially the intangible opportunities provided by the network access and mediating

role are found to be of great importance in helping start-ups to beat their competitors (Hansen

et al., 2000). As argued by Hansen et al. (2000) most incubators provide the basics such as

office space, business support, funding and other basic services, but only a quarter of the

incubators offer the networking possibility, even though they found that network access was

the most important benefit for start-ups. The network access for start-ups is twofold; (1) the

networking opportunities with more established organizations and (2) the networking

opportunities with peers. First, networked incubators have the possibility to combine two

diverse worlds: the scale and scope of the large and established organizations with the

entrepreneurial drive of the ups (Hansen et al., 2000). Specifically, for high-tech

start-ups it will be interesting to investigate whether network opportunities are optimally provided

within the cluster organizations, as high-tech start-ups especially need to get access to these

scale and scope opportunities provided by larger corporations (Hansen et al., 2000) for the

production and development of their products and technologies. Moreover, entrepreneurial

firms have the inventive capabilities while larger firms have the organizational capabilities.

These complementary resources together can create additional economic value (Alvarez &

Barney, 2001). Second, the created environment with easy access to peers provides

opportunities for knowledge transfer and experience sharing among start-ups (Bergek &

Norrman, 2008).

Research question

In sum it can be concluded that extensive research on the needs of high-tech start-ups

and the offerings of general incubators already exists. These offerings should be able to help

the start-ups in their successful development. As Teece and Pisano (1994) argue, firms should

develop dynamic capabilities to become successful in the long run. Therefore, it will be of

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capabilities. These specific asset positions, distinctive processes and paths are needed to

create a competitive advantage over other firms and being able to survive in the highly

changing and competitive world (Teece & Pisano, 1994). However, as has been identified in

table 1 on page 14, high-tech start-ups miss a lot of resources, knowledge and capabilities

needed to create these dynamic capabilities and the subsequent competitive advantage (Teece

& Pisano, 1994). Therefore, to overcome these deficiencies, cluster organizations and

incubators already offer a lot of services in trying to improve the asset positions, distinctive

processes and paths of the start-ups. However, since the high-tech firms may have different

needs compared to normal start-ups based on their specific industrial characteristics

(Boutellier & Heinzen, 2014) and their high risk of running into a valley of death (Harris,

2013) it will be interesting to examine whether cluster organizations that help high-tech

start-ups, should have different offerings than the cluster organizations aiming to help all type of

start-ups.

Therefore, this study aims to take a specific look on the high-tech start-ups and how

high-tech cluster organizations are different from normal cluster organizations, and what the specific success-factors in setting up such a high-tech start-up community are. Moreover, this

study aims to find the rationales behind those offerings and why those offerings help in

making the high-tech start-ups successful based on the dynamic capabilities theory.

Consequently, the research question and its sub-questions will be as follows: How can

cluster organizations facilitate the successful development of high-tech start-ups?

• What are the differentiating aspects of high-tech start-up communities in relation to the normal start-up communities?

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3. METHODOLOGY

This section elaborates on how the research is designed and how the data is collected

and analysed. Furthermore, the last part of this chapter discusses the quality of this research

method by considering the reliability and validity aspects.

The purpose of this study is to investigate how high-tech cluster organizations can

facilitate the successful development of high-tech start-ups. As this research involves a

business phenomenon that is not explained in academic research yet, the study is based on a

theory development process (van Aken, Berends, & van der Bij, 2012). The research question

uses an investigative approach by asking ‘how,’ and therefore it is advised by Yin (2014,

p.11) to use a research method based on a case study. As Yin argues, case studies are able to

deal with a full variety of evidence without a manipulation of the behaviour. Most important

for this study is that the case study, in this case related to the high-tech start-ups and cluster

organizations, is able to investigate a contemporary phenomenon in-depth, and within its

real-world context (Yin, 2014, p.16).

Research Design

To investigate the dynamics between high-tech cluster organizations and high-tech

start-ups, a multiple-case study design is used; resulting in a benchmarking study between

high-tech cluster organizations. This type of case study is used since it increases explanatory

power and also the generalizability of the research (Miles & Huberman, 1994, p.172). The

research adopts the eight steps developed by Eisenhardt (1989) that help inducting theories

from case study research: (1) getting started, (2) selecting cases, (3) crafting instruments and

protocols, (4) entering the field, (5) analysing data, (6) shaping hypotheses, (7) enfolding

literature and (8) reaching closure. By following these steps a structured research from

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The selection of the cases is based on theoretical sampling, as this gave the

opportunity to identify the most interesting and valuable cases for this study. To fulfil the

purpose of this study in its best way, all the high-tech start-up communities in the Netherlands

were identified, which resulted in a list of eleven start-up communities that were invited to

participate. A total of eight cluster organizations responded positively and were willing to

participate in the research. The unit of analysis in this study is therefore the high-tech cluster

organizations that facilitate in the development of high-tech start-ups.

Data Collection

The data collection involved several data resources to work towards a converging line

of inquiry (Yin, 2014, p.120). The main data sources are the interviews with the community

managers. High-tech start-ups themselves are not included in the research, since they are

found to lack time to participate in the research as they already lack time and resources to

bring their products efficiently to the market. For this study, the views of these cluster

organization managers are considered as more than sufficient, as this study builds on the

efforts of the cluster organizations to facilitate the successful development of high-tech

start-ups. The used questions also partly incorporated the view of the starters as some questions

specifically asked for the demands of starters and how the communities responded to these

demands. Documentary information such as announcements and general information about

the start-up communities is used to complement the interviews and case analyses. To guide

the research always to the intended goal and to increase the reliability of the research, a case

study protocol has been used (Yin, 2014, p.84). The case study protocol, including the

interview questions, can be found in Appendix A.

The interviews are based on the semi-structured interview approach. This means that a

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to give his or her own perspectives and to add other relevant issues; resulting in a more

in-depth investigation.

During the data collection all the information was stored in the case study database.

This database contains an orderly compilation of all the gathered data per case and improves

the reliability of the study (Yin, 2014, p.105). Based on all the gathered information a case

study report per cluster organization is made that only contains all the applicable data about

the communities necessary for coming to propositions about the high-tech cluster

organizaitons.

Data Analysis

The case study report for each case has been the start for the within-case analysis. As

Eisenhardt (1989) argued, the within-case analysis can immediately start after the field has

been entered. To help external readers to understand the reasoning of this study, a chain of

evidence has been followed during the whole analysis. This means that it will be possible to

follow the derivation of all the evidence from the initial research questions to the final

conclusions, with for instance the use of citations and having the theoretical framework, the

research question and sub-questions as guidance during the case analyses (Yin, 2014, p.105).

After all the single cases had been studied and verified by the participants (Koelsch,

2013) the next step was the cross-case synthesis (Yin, 2014, p.165). As argued by Eisenhardt

(1989) it is important to check the data in many divergent ways in order to prevent

information-processing biases. The strategy adopted in this study was using a list of identified

dimensions and themes based on the within-case analyses, where is checked for within-group

similarities as well as differences between the cases based on the dimensions developed

during the within-case analysis. With the help of this strategy it was possible to derive theory

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started after the cross-case analysis; shaping propositions, enfolding literature and reaching

closure. The results found in the cross-case analysis have led to propositions that have been

compared and added to the existing literature. These final steps, where the propositions have

been compared with the existing literature, have led to answers on the sub-questions and main

research question on how high-tech cluster organizations can facilitate the successful

development of high-tech start-ups.

Reliability & Validity

During this study, several steps have been followed to increase the reliability and

validity of the research. Yin (2014, p.45) considers four tests for assessing the quality of the

study: reliability, construct validity, internal validity and external validity.

According to van Aken et al. (2012), reliability is achieved when the measurement can

be repeated with the same results as outcome. The use of a case study protocol and a case

study database increase the reliability of this study (Yin, 2014, p.105). The reliability can be

put at risk because of personal characteristics of the researcher (van Aken et al., 2012).

However, the use of an interview guide (Blumberg, Cooper & Schindler, 2005, p.387) and the

case study protocol incorporate a certain amount of standardization and therefore decrease

this risk. The construct validity is addressed by using triangulation (interviews and external

data), and by the establishment of a chain of evidence. Moreover, the verification by the

interviewees (Koelsch, 2013) also contributes to the construct validity. Codes and patterns are

used to ensure a close fit between the gathered data and the developed theories. This

positively influences the internal validity. Lastly, external validity is addressed by using the

replication logic (Yin, 2014, p.60) in multiple case studies. It remains difficult to completely

generalize the results since this study mainly focuses on high-tech start-ups. However, as this

study is a case study and the main goal is to find emerging theories, the lack of

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4. RESULTS

This chapter will elaborate on the found results during the case studies. First, a short

description of the cases will be presented, followed by four sections that elaborate on the

findings based on the gathered information by the interviews and documentary data.

Description high-tech start-up communities

In a period of one month, eight start-up communities have been visited and their

managers have been interviewed. An overview with characteristics of each community can be

found in appendix B. The appendix shows that there is a clear mix of different high-tech

communities with distinctive characteristics.

Six of the eight communities have clear identified high-tech industries on which they

focus, whereas the other two do not have a clear industrial focus. Further, it can be observed

that most communities are related to a university and therefore have a non-profit institutional

mission. The three communities that are not linked to a university are profit-oriented. All

those profit-oriented communities have a clear technological oriented mediation type,

whereas all the non-profit oriented communities also have a regional focus. Moreover, both

selection methods are used equally, however profit-oriented communities tend to use

picking-the-winners, whereas the non-profit oriented communities mostly use the

survival-of-the-fittest method. Lastly, all the communities offered all the four basic services as identified by

Ratinho et al., (2013) concerning space, shared resources, business support and network

access. Even though, as can be found in the table in appendix B, differences in the way of

providing those services exist.

To sum up, it can be concluded that all the start-up communities fulfil the general

standards of a business incubator by providing the four generic services to the start-ups.

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high-tech start-up communities in the Netherlands. The next sections will elaborate on the results

found during the interviews, where more (dis) similarities between the communities are

presented. These sections elaborate on the most noteworthy and remarkable findings, which

are also important for answering the research questions. The subjects that are discussed are:

(1) the differentiated needs of high-tech start-ups, (2) differentiating among starter types, (3)

the three dimensions selection method, programme type and mediation type, and lastly, (4)

the most crucial offerings and services.

Differentiated needs of high-tech start-ups

As the cluster organizations in this study exclusively involved communities that have

a connection with the high-tech industry, it could be observed whether they offer different

services and tools than the general incubators that were already analysed in the literature. As

said by one of the managers, high-tech start-ups need more than just a computer. The cluster

organizations indicated the need for more specialized facilities to help the high-tech start-ups

with their research and product development. The high-tech industries on which some

communities focus such as the nanotechnology, med-tech and industrial solutions have

long-lead times and need high investments before a well-working product can be developed.

Therefore, the need for financing is bigger in those advanced high-tech industries and thus

those cluster organizations offer several possibilities to finance the businesses. Some

communities have incentive money and favourable loans up to 50.000 euro, while others

(also) have a network of investors who are familiar with the high-tech industry and are willing

to invest in those risky companies.

Moreover, the communities offer specific workplaces for the high-tech start-ups where

they can further develop their products. The designs of these special workplaces depend on

the technical focus of the cluster organization. Therefore, they are offered in all different

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3D-printing material, wind tunnels and other specialized equipment. These shared facilities can be

used and/or leased by the start-ups, since they often do not have money to buy this equipment,

and also do not need the full capacity of the machine, which makes it convenient to share

them with other start-ups.

However, not only the tangible resources such as financial capital and specialized

equipment need to be adapted to the high-tech start-ups; also the business support is offered in

different ways. Some communities recognized the clear difference between researchers and

entrepreneurs as an important factor that highly influences the success of a new business.

Students and researchers with a technical background may know a lot about the technology,

but not per se about how to run a business efficiently and how to commercialize the

technology on the market. Therefore, those technical skilled people need more guidance in

business development compared to entrepreneurs who do not have this technical background

but have a more business-oriented background.

Lastly, the belief in the quality of the concept and product is also identified as more

important for high-tech firms. Since they need high investments and have long development

times, it can be more risky to invest in those start-ups than in start-ups that do not need those

investments. Being backed by a credible community can therefore help to attract the right

investors. The communities with a focus on a specific industry all acknowledged that the

high-tech start-ups, investors and other companies recognize and value them because of their

specific focus and their specialized knowledge.

Thus, high-tech start-ups clearly need different supporting facilities in both the

tangible and intangible resources and opportunities. However, next to these observations

specifically related to the high-tech industries, more noteworthy issues are found and are

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Differentiating among starter types

Most of the communities differentiated between three distinct types of starters: the

pre-starter, the starter and the grower. Or as said by one community: “first you have the

stand-up, then they can move on to start-up and finally they can become a scale-up.”

Clearly, all communities majorly focus on the middle group; starters. However, most

cluster organizations have a broader focus and also include the pre-starters and/or growers.

Overall, they defined the three groups the same, where the stand-ups are seen as potential

entrepreneurs who have an idea but do not know yet if the idea is feasible. After this phase

they may move on to become a starter, which is the middle phase. The scale-ups are a step

further again and include companies that face increasing demand and therefore need major

increases in investments and production.

Some communities recognized the need to make specific programmes for the

stand-ups, where potential starters can check and research whether their idea is feasible. One of the

managers of the programme said: “During the programme of the stand-up, potential

entrepreneurs can investigate their idea and see whether it is feasible. This decreases the

drop-out rates at our start-ups, as these companies started with a thorough market research and thus

have a better idea whether the product can be profitable or not.”

On the other side, there are the scale-up companies, which are the starters that have

developed towards more established companies. Five communities actively try to include

these growers and mature companies within their campuses and buildings. However, mostly

there is not a specific programme for them, but they are just included within the community

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Selection method, programme type and mediation type

As has been described in the theoretical framework, Bergek and Norrman (2008)

identified three important dimensions to differentiate among business incubators. All the three

dimensions and its implications regarding this case study will be shortly discussed below.

First, regarding the selection method, all communities provided clear arguments why

they picked a certain selection method. One of the managers said: “For investors it is already

difficult to pick the winners after two or three years, why should we be able to pick the

winners in the beginning phase already?” However, other communities indicated the

importance of selection criteria even though they did not have them yet: “Since our

community is not full yet, we do not feel that we are in the position to apply strict selection

criteria up to now.” The cluster organizations that decided to apply strict selection methods

mostly acknowledge that their status and popularity among start-ups made them able to have

strict selection criteria. The selection criteria always included two types of selection: the idea

selection and entrepreneur selection. Both the idea and the entrepreneur together with its team

must be classified as potential winners. Five of the eight communities signalled that the most

prevalent problem with starters is the fact that they can be stubborn, unconscious incompetent

and hardly wiling to take advices from their coaches and partners within the community.

Therefore, as argued by one of the community managers, one of the most important aspects

during the selection therefore should be if the team is coachable and willing to take advice.

By assessing this on beforehand, the conflicts between the starters and the communities that

can occur in a later phase may decrease.

Second, the programme type appears in three different types within the eight

communities: loose involvement, where the initiative to ask for help is at the entrepreneurs

themselves; major involvement, where the cluster organizations follow guidelines and

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programme where the services and advices are initiated based on a strict pre-specified

programme without great possibilities to deviate from the programme. Communities that see

themselves as majorly involved, acknowledge that the biggest problem that starters face is

that they are not able to set the right priorities, because they are unconsciousness incompetent

and hardly willing to take advice. Therefore, they observe that major involvement, especially

by coaches, is needed to overcome this problem and can help in developing the dynamic

capabilities of the start-ups.

Third, the mediation type refers to how the start-ups are connected to each other and

the outside world based on their type of focus: the technology innovation system (TIS) or the

regional innovation system (RIS). The TIS is apparent in all communities with a clear

industrial focus, whereas the RIS is apparent in all communities that are connected to a

university. This results in three mixed communities with both RIS and TIS. The technology

focus allows the community to gain specialized knowledge in their field, because start-ups

can share this particular knowledge easier among their peers and thus increase the overall

level of the specialized knowledge. Several managers underscored this specialized knowledge

as an important factor to increase their status and recognition towards investors and starters.

The most crucial offerings and services

The table in appendix B shows that all the cluster organizations facilitate in the four

types of services as identified by Ratinho et al. (2013): space, shared resources, business

support and access to networks. However, differences in the way of offering those services

can be observed. Almost all start-up communities ask money for rent, for using the shared

resources, or to create a certain degree of commitment. In all these cases the fees are against a

reduced rate or supported by governmental subsidies. Only one start-up community takes

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organizations use majorly external partners to provide the services such as housing or

business support, while other organizations provide most of the services by themselves.

By these four offerings and services the cluster organizations are able to fulfil a lot of

the identified shortcomings and needs of the high-tech start-ups in as summarized in table 1

on page 14. The shortcoming of specialized assets and resources are in most communities

fulfilled by the availability of cleanrooms, analysis facilities, working spaces, wind tunnels

and other shared facilities such as Internet access, coffee machines etc. Next, to overcome the

lack of economic and financial capital almost all cluster organizations have a big network of

investors that are willing to invest in the risky start-ups. Moreover, some communities, offer

favourable loans and incentives up to €50.000 to support the initial development of the

start-ups. To overcome the shortcomings related to production experience, scale, routines,

technological and market/environmental insights, the business support services and the

network access can help. All communities included business support services such as legal

advice, help with funding, IPR advice, accounting, administration advice etc. Moreover, all

communities have a big network with for instance corporate partners that can help with those

business services and offer access to other specialized knowledge for a reduced or favourable

fee. Lastly, the lack of public confidence in the start-ups and the lack of alliances and equity

relations can partly be overcome based on the cluster organization their network.

To sum up, together all those four general services and offerings help in overcoming

all the identified shortcomings as identified in table 1 on page 14, and thus positively

influence the asset positions, distinctive processes and paths of the firms. However, most

cluster organizations emphasized three types of services and offerings as extraordinary

important to stimulate the successful development of the high-tech start-ups even more: (1)

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Coaching

Almost all cases emphasized a specific kind of business support, namely coaching by

objective outsiders. Within these communities coaches are used for distinct aspects such as

monitoring the development of the start-ups, defining focus points and goals for the start-ups,

help finding specific or general knowledge and adequate experts, guiding in personal

development and general support, commercialising the product, making decisions, and help in

setting the right priorities for the start-ups. The coaches can have different origins such as

being experienced entrepreneurs, researchers, corporate partners, employees of the cluster

organization, and alumni of the community.

As diverse communities identified and already explained earlier, the biggest problem

with start-ups is that they are unconscious incompetent, stubborn and not always able to set

the right priorities. Coaching can be a great instrument to overcome these issues. However,

since coaching is mostly on a voluntary basis, starters are not always willing to take the

advice from coaches because of their stubborn attitude. Therefore, some communities started

to make coaching obligatory, since coaching is a great instrument to help in accessing

knowledge and setting priorities, which may positively influence the distinctive processes and

paths of the high-tech start-ups.

Network access

Network access is already included in the four basis services as described above,

however, all the cases within this study emphasized network access as extraordinary

important. The network opportunities can be with different kind of partners such as investors,

corporate partners, (knowledge) institutions and other relevant SMEs or companies. The

network is an important access point for business support from corporate partners such as

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agreements with such corporate partners to help the high-tech start-ups for free or for lower

fees for a certain time period, since they are expected to become their real clients in the

future. Moreover, the network is important for finding investment opportunities. Almost all

communities have their own network of investors who have confidence in the community and

their start-ups.

Network access is mostly facilitated via network events where different parties are

invited and thus can come in contact with each other. As one of the managers said: “Network

events are the best instrument to inspire and share knowledge among peers and other

companies. Events that host interesting speakers, or facilitate other collaboration

opportunities, easily bring coaches, experienced entrepreneurs and starters in contact.” The

network opportunities help greatly in sharing and accessing new knowledge, establishing

exchange relationships, and starting new alliances. Therefore they can positively impact the

asset positions, distinctive processes and strategic opportunities (paths) of the high-tech

start-ups.

Community-building

Lastly, active commitment and participation within the community was emphasized as

being extremely important: “The start-ups have to be enthusiastic, willing to bring in their

own knowledge and they must have the drive to help other start-ups.” These requirements for

active commitment are never written down as strict agreements, but the process of building a

community must happen naturally, as emphasized by all the involved cluster organizations.

The role of the cluster organization is to facilitate in this community-building process, by

offering certain services such as shared space where start-ups can meet and/or work on their

business. Other facilities that were named to facilitate this natural community building are the

organized events and workshops, having one coffee-machine and organizing monthly

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interest among each other, which will make the start-ups willing to support each other and

share experiences.” The main objective of this community building is to establish interactions

with each other and have informal and personal contact, which makes it easier for them to

share knowledge and resources and thus develop their positions, processes and paths.

For the community building, two types of interactions are needed. First, the interaction

among ups themselves was emphasized. However, also the interaction between the

start-pus and more experienced and mature firms was highlighted. One of the managers explained

the difference between those interactions: “Start-ups understand what other start-ups are

going through and therefore they are able to simulate and support each other. Based on their

friendships they can move mountains together. However, when the start-ups collaborate and

team-up with the more established organizations, they can receive guidance, recommendation

and advice. The combination of these two types of collaboration is extremely important.”

Some cluster organizations include those experienced companies in the community by

locating them within their buildings or campuses, while others actively invite those

companies for their events. The approach to come in contact with those experienced

companies may differ, however, all communities see the importance of bringing those

companies into the community: “Experienced entrepreneurs are of great importance for the

start-ups to learn from and to provide insights in their experiences” and “For the community it

is important to create a mix of companies. However, it is important that they all have the same

industry since this enables them to deliver specialized services to each other.” Moreover, the

communities think that those collaborations will not only be beneficial for the start-ups, but

also for the maturing companies: “Creativity of the start-ups will be mixed with the market

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To sum up, community building helps building the dynamic capabilities, since the

close interaction opportunities give the optimal possibility to share relevant knowledge and

get access to each other’s compatible resources.

Together all those insights and observations gave deeper insights in how cluster

organizations try to optimally design their community and facilitate in the successful

development of high-tech start-ups. It can be concluded that the cluster organizations not only

see the offering of generic services as necessary, but also try to deliver even more value for

the high-tech start-ups via the internal processes of the community by offering coaching,

network opportunities and stimulate the establishment of a committed community. All these

services, offerings and processes help in the development of the asset positions, distinctive

processes and paths of the high-tech start-ups.

5. DISCUSSION

This chapter will elaborate on the found results in relation to the research question and

the already existing literature. The research question aimed to answer how high-tech cluster

organizations can facilitate the successful development of high-tech start-ups. Moreover, the

two sub-questions concerned the differentiating aspects of high-tech start-up communities in

relation to normal start-up communities and what the success factors of the start-up

communities are.

As has been identified in the literature, firms need to develop dynamic capabilities in

order to survive and become successful in the highly competitive world, since these

capabilities help to deal with fast changing environments and make it possible to have rapid

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industries that involve fast changing processes and products (Boutellier & Heinzen, 2014),

and therefore, the development of dynamic capabilities will be especially important for the

high-tech firms. These dynamic capabilities are based in the asset positions, distinctive

processes and paths of the companies (Teece & Pisano, 1994; Rosenbloom, 2000). Cluster

organizations can help the high-tech start-ups to develop these capabilities by offering

different types of services and tools. Based on the case studies and literature it can be

concluded that several aspects are found to be of great importance in facilitating the

successful development of high-tech start-ups by improving their dynamic capabilities. The

next sections will elaborate on the findings and accordingly present propositions based on

these findings in combination with existent literature.

Differentiating aspects of the high-tech start-up communities

First, as has been presented in the results section, high-tech cluster organizations

indeed focus on different aspects than general cluster organizations. High-tech firms are

concerned with fast changing products and processes, where high rates of innovations play a

big role (Boutellier & Heinzen, 2014). Since dynamic capabilities help firms to deal with fast

changing environments and make rapid product innovations possible (Teece & Pisano, 1994),

cluster organizations should do extra efforts for high-tech start-ups to help them developing

those dynamic capabilities.

The communities with a clear high-tech industrial focus recognized the long-lead

times and the requirement of high investments as the most differentiating factors that

influenced their offerings for these high-tech start-ups. To overcome these problems, the

cluster organizations have specific offerings in relation to financing, specialized resources and

business support. These specific offerings regarding financing and specialized resources help

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support advances the start-ups their knowledge fields and thus also positively influence the

processes and paths of the start-ups.

One of the most important aspects related to those differentiated services is the need

for a clear high-tech industrial focus that the cluster organization should have. Oakey and

Cooper (1991) amplify this finding by arguing that small high tech firms cannot be seen as all

similar firms with the same needs. The specific industrial focus of the firms will influence the

requirements in terms of assistance. Thus, the starting point at the initiation of a new

high-tech start-up community should be the determination of a clear industrial focus. This

industrial focus will lead to a differentiated offering of services in financial capital,

specialized equipment and business support. Moreover, it also helps to increase the credibility

the community receives, since most cluster organizations acknowledge their specialized

knowledge as an intangible asset that helps to increase their status and credibility among

start-ups, (potential) investors and other companies.

Therefore, it can be concluded that high-tech start-ups clearly need different support

facilities in both the tangible and intangible resources and opportunities. To offer the best

service and tools, the cluster organization should focus on a specific high-tech industry and

adapt the services and tools to this industry. Accordingly, the better the fit of the offerings

with the specific needs of the high-tech start-ups, the better these start-ups can improve their

asset positions, distinctive processes and paths.

Cluster organizations and their facilitating role in the development of successful high-tech start-ups