Master Thesis The Role of University Business Incubators

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Master Thesis

The Role of University Business Incubators

The Incubation Supports of University Business Incubators in Indonesia to Develop the Growth of their Tenants: The Moderating Role of Collectivism Characteristic

by Abdul Jabbar S3278492 Email: a.jabbar@student.rug.nl Word count: 12627 University of Groningen

Faculty of Economics and Business

June 2018

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1 “When you support small business to achieve their goals, you are supporting a dream of

many people.”

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1. Abstract

This paper aims to contribute to business incubator literature by empirically testing the issue of incubation supports and the effect of collectivism characteristics in the university business incubator in Indonesia. It is essential to study this because the empirical evidences for the most critical incubation support to enhance the growth of the entrepreneurs in university incubator is still limited. Furthermore, the study in Indonesia context may provide different results from previous research since the collectivism characteristic of the tenants could also influence the relationship between university business support and the tenant’s growth.

In this research, the following four components of support are proposed to influence the high sales and employment growth – human resources support, financial support, technological support, and organizational support. Furthermore, horizontal and vertical collectivism are introduced as moderating variables. The hypotheses are analyzed by fuzzy set qualitative comparative analysis (fsQCA) to analyze the causal configuration of all variables regarding the high growth performance in terms of sales and employment. The result shows that there are several causal configurations with a different combination of supports that differs based on the level of education, entrepreneurial experience, the foundation of the company and the types of industry. Moreover, the collectivism characteristic is not related to high growth performances of the tenants.

However, it should be noted that the result could only limitedly supported due to the very small sample size. Finally, as a preliminary study of business incubators in Indonesia, this paper puts forward important suggestions for future research in the field of business incubator, especially in Indonesia context.

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Table of Contents

1. Introduction ... 4

2. Theoretical Background ... 6

2.1 The Resource-Dependence Theory ... 6

2.2 University Business Incubators (UBIs) ... 7

2.3 The Growth of Tenants (New Ventures) ... 8

2.4 The UBIs Supports for Tenants ... 9

2.5 Collectivism Culture ... 13 3. Methodology ... 16 3.1 Data Collection ... 16 3.2 Measurement ... 17 3.2.1 Dependent variable ... 17 3.2.2 Independent variable... 17 3.2.3 Moderator variable ... 18 3.2.4 Control Variable ... 19 3.3 Analysis ... 20 4. Results ... 23

5. Discussion and Conclusions... 29

5.1 Theoretical and managerial implications... 36

5.2 Limitations and further research ... 38

References ... 39

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1. Introduction

The university business incubators (UBIs) have a successful history in provision of location, human and financial capital, innovation and commercialization while the involvement of industry incubators is deficient (Chandra et al., 2012). Similarly, Salem (2014) promotes that university incubators play a very crucial role in nurturing entrepreneurial skills among students, the universities support new opportunities to ensure local customization of products, the creation of new employment opportunities, and to link talented students to various industries for economic development. Mainly the infrastructure, networking support, managerial and policy recommendations, seminars and education, financial capital, a collaboration between university and industry, human and technical support, and institutional reputation are provided as the success factors of UBIs (Shane & Gregorio, 2003; Somsuk & Laosirihongthong, 2012; Mian 1996; Bøllingtoft & Ulhøi, 2005; Peters et al., 2004; Culkin, 2013; Chandra et al., 2012; Mumtaz et al., 2017).

Since the number of UBIs is increasing, the study for UBIs is essential. However, the current literature on business incubator is mostly explained about kind of services that should be provided by successful business incubators to the entrepreneurs, but empirical evidence regarding how these services could enhance the growth performances of the entrepreneurs still limited. The intriguing question about what are the most important support that empirically proven can lead to high growth performance of the tenants remain unanswered yet.

The knowledge about the relationship between UBIs services and growth is crucial for the incubators to confirm that the supports they provided are indeed relevant for the higher performance of their tenants. Furthermore, it can help the incubators to decide a strategic plan for choosing the programs which are applicable and give the highest benefit for their tenants. In particular, for a new established UBIs, this information will be beneficial because as an early phase organization, new established UBIs have limited resources and capabilities to provide comprehensive support for their tenants. In this context, the new established UBIs can use the result of this research to focus on the most critical support that will give the highest benefits to their tenants.

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5 entrepreneurs interact with one another, with management, supplier or customer. In this paper, I will look more deeply into the unique characteristic of social culture in Indonesia which is the level of collectivism that potentially moderating the relationship between the UBIs supports and the growth. Based on the data of Individualism Index Value (IDV) for 76 countries and regions in IBM database (Hofstede, 2010, p.97), Indonesia is one of the lowest individualism characteristics among the 76 countries. Research has shown that in societies in which people on average hold fewer individualist values, they also on average hold more collectivist values (Hofstede, 2010). Collectivism itself is characterized by people from birth onward are integrated into strong commitment, cohesive in-groups, that throughout people’s lifetime continue to protect their group with loyalty (Hofstede, 2010). In the collectivist culture, the attachment is very strong characterized by strong ties relationship. (Triandis, et, al., 1988; Bejanyan, et.al., 2015). The collectivism culture might affect the relationship between the UBIs support and the growth of tenant. The effect could be positive or negative effect since there are a debatable arguments related to the effect of the collectivism culture. Therefore, in this paper, I also build on explanation regarding the effect of the collectivism characteristic of tenants to the growth of tenants.

To sum up, based on the identified literature gaps and the goals of this research, the primary research question proposed is to understand,

“What is the role of UBIs services (human resources, financial, technological and organizational support) and the moderating role of collectivism on the growth performance

of the tenants?”

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6 This research also crucial in a specific context of university business incubators in Indonesia. A shortcoming of existing research in incubators is the result mostly country-specific and limited scope; as a consequence, it is hard to generalize the findings to all countries (European Commission Enterprise Directorate General Report, 2002). Local policies, environments, and culture in which incubators operate vary from one location to another. For example, the Danish government has a strong focus on supporting small and medium-sized enterprises (SMEs), while France and Germany have strong cluster programmes to deal with human capital and innovation issues, and China has implemented policy-related science parks to enhance innovation objectives (Sopoligová, Pavelková, 2017). Moreover, whereas some incubators have job creation and reduce unemployment as a central objective, others may not and focus on innovation development if they are located in areas with low unemployment.

Therefore, the study in Indonesia context may provide different results from previous research especially in this case; the collectivism issue is including as the moderator variable that may influence the relationship between UBIs support and the tenant’s growth. Currently, the government of Indonesia takes attention to the development of incubators from University to enhance the number of high-quality of entrepreneurs. This initiative is directing Universities to build a business incubator under the supervision of the government. However, there is still no research regarding university business incubators in Indonesia, so applying the concept of business incubators in a specific context in Indonesia, would add a new insight in academic literature and also a significant practical benefit for the university incubators in Indonesia.

2. Theoretical Background

2.1 The Resource-Dependence Theory

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7 In the context of University Business Incubator, the tenants (the company who are incubated by incubator) are not independent organizations but rather constrained by interdependencies with the incubator since the most of the tenants are in the early stages of development and have a lack of resources and capabilities. The actors who lack essential resources will seek to establish a relationship with others to obtain resources (Hillman, et, all, 2009). Hence the tenants come to the incubator to get support to reduce environmental uncertainty and to invite incubators as the solution for their source of constraints such as financial, managerial, or networking. The emphasis on power is the benchmark of the RDT that distinguishes it from other approaches (Davis & Coob, 2010). One of the fundamental stories of the exchange-based power of this theory is about the power of A over B comes from control of resources that B values and that are not available elsewhere. In this account, B is dependent on A to the degree that A has power over B (Davis & Coob, 2010).

Therefore, we expect that the university business incubator could help their tenants to growth since the incubator provides specific resources to support them which make the tenants have a dependent relationship with the incubator. The resources provided included tangible assets such as financial or physical asset, or intangible resources such as technology, reputation, culture, and human resources. More specifically, the intangible resources also include skills/know-how, motivation or capacity for communication or collaboration (Grant, 2010).

2.2 University Business Incubators (UBIs)

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8 are organizations designed in university to accelerate national economic development by assisting start-up firms, especially new technology-based companies during their growth and development phase (Somsuk et al., 2013). UBIs also described as a strategy employed for promoting the development of new research or technology-based firms (Mian, 1996).

Moreover, UBIs are different from other public or private incubators, the private incubators mainly provide rent space to start-ups and seldom address further advice or support to the firms. They have lack of relationship with the university and its complementary assets and service and also focus on the profitability of the related company (Lendner, 2007). On the other hand, UBIs usually provide collaboration between university and industry because they want to transfer inventions and innovations to commercialization through building up start-ups (Chandra et. al., 2012). The start-ups in UBIs will benefit from the variety of resources and support services with the advantages of an academic environment until they become strong enough to spin off as SMEs (Somsuk et al., 2013). UBIs provide their tenants with physical facilities such as a working space and also various services to strengthen the tenants’ capabilities in the early stage. The services provided by the incubators help the tenants to enjoy the added value of the financial investment and access to expert networks with the prospect of venture capital (Ayatse et al., 2017). The tenants that graduate from incubation programs perceived as a successful growth venture or business.

2.3 The Growth of Tenants (New Ventures)

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9 In this paper, I used two dimensions for growth measurement of the tenants which are sales and employment. Sales and employment are most likely to be used by entrepreneurs since sales are applied to virtually all businesses, and the number of employees is easy to generate because entrepreneurs do not usually see it as confidential information (Storey and Greene, 2010). Sales growth is crucial for developing new ventures to fund future operation, and it indicates the acceptance of customer to products or services offered by the companies (Robinson, K, 1998). Also, when sales growth occurs, new ventures can also reinvest their revenue into resource expansion or capability development (Gilbert, et. al, 2006). However, since sales growth is dependent to the number of product and service available to sell, some industries such as biotechnology, may take several years to develop and subsequently sell their product (Storey & Greene, 2010; Gilbert, et, al, 2006). Thus, another measurement is necessary to overcome this issue. The growth of employment indicates the resources of the business. (Storey & Greene, 2010). The increasing number of the individuals working in the company represent the expansion in the scope of the firm operations because they have human capital needed to execute the objective of the firm (Gilbert, et, al, 2006). Furthermore, employment generation also perceived as one indicator of economic development of the entrepreneurs for the country (Praag & Versloot, 2007).

2.4 The UBIs Supports for Tenants

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10 Since there are a lot of resources and capabilities of UBIs that differ in many kinds of literature, I use the classification from Somsuk (2012) that generates all resources could potentially be an important determinant of UBIs into four main categories which are human, financial, technological and organizational resources (Somsuk, et al. 2012). This article has proven that these four groups support the successful of UBIs to help their tenants.

Figure 1: Enabling Factors Influencing the Business Incubators’ Success (Somsuk, et, al., 2012)

a. Human Resources Support

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11 accounting, marketing, networking or business plan preparation from incubator will provide a crucial help and give value added for the tenants to solve their problems (Mian, 1996).

b. Financial Resources Support

The tenants would not survive only with the assistance of management team. The other crucial aspect of the emerging companies is the capital. The access to working capital, equity or debt financing considered as most important for the tenant companies (Smilor, 1987). Somsuk (2012) divide three dimensions of financial resources which are access to financing and capitalization, financial support and consulting, and in-kind financial support. The financial capital is essential for growth because it provides entrepreneur’s opportunity to execute strategic objectives successfully, enables entrepreneurs to exploit more ambitious strategies or perhaps change their direction and encourages merely the entrepreneurs to meet the financing demands that are essential to sustain the growth (Gilbert et al., 2006). In this case, UBIs help the tenants by providing the financial support such as evaluation of financial report, access to grants and loans, or introducing venture capital to tenants.

c. Technological Resources Support

Another essential support for tenants is the physical infrastructure includes co-working space, equipment/laboratories, administrative facilities like fax, phone, internet lines, conference facilities, and other technical facilities (Smilor, 1987; Mian, 1996; Peter et al., 2004, Culkin, 2013, Somsuk, et al., 2012). The technical supports might help the tenants to reduce the cost of infrastructure that leads to more efficiency and effectivity and also increase their productivity. According to Somsuk, et al., (2012), these support refers to the technological support that also includes the process of know-how, and the assessment of technology development and protecting that technology through patent or copyright services. This technological support creates an excellent environment to innovate because the tenants are encouraged by the availability of technology-specific knowledge and the protection of that knowledge. Without the protection of patents, the tenants would be less likely to innovate since obtaining patents involve a fixed cost to the inventor (Storey and Green, 2010).

d. Organizational Resources Support

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12 of the UBIs (Mian, 1996). It is necessary for incubators to have a clear policy for their tenants. For example, a clear criterion for tenant selection or graduation is essential as a consideration to ensure the successfulness of incubation program. This regulation aspect is associated with organizational support from the incubator (Somsuk et al., 2012). This organizational support including selection process for tenants, concise program milestones with clear policies and procedures, and mutual trust and respect (Somsuk et al., 2012)

Overall, based on the previous explanation, I hypothesize:

H1a: Human resources support provided by UBI’s have a positive relationship with the growth of their tenants

H1b: Financial resources support provided by UBI’s have a positive relationship with the growth of their tenants

H1c: Technological resources support provided by UBI’s have a positive relationship with the growth of their tenants

H1d: Organizational resources support provided by UBI’s have a positive relationship with the growth of their tenants

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13 significant in the context of UBIs since this area is too subjective and different for each incubator.

Thus, I hypothesize:

H2: Human and financial resources are the most critical supports while technological and organizational resources are the less significant supports for growth

2.5 Collectivism Culture

Cultural differences could be a matter to influence the performance of the company because cultural differences can affect innovation input, process and the commercialization of innovations (Rosenbusch, et, al, 2011). Hofstede in his book of Culture and Organizations-Software of the Mind, introduce the theory of cultural dimensions as a framework for cross-cultural communication (Hofstede, 2010). He defined the culture as the collective programming of the mind that creates a distinction between people and provides six dimensions of national culture. Based on the data of Individualism Index Value (IDV) for 76 countries and regions in IBM database (Hofstede, 2010, p.97), Indonesia is one of the highest collectivism characteristics over the 76 countries. Thus, in this paper, I will focus on one dimension which is collectivism as the unique characteristics of the society in Indonesia that could potentially moderate the support of UBIs and the growth of the tenants.

Collectivist culture refers to people who have a strong commitment, cohesive in-groups, tolerance and harmony with others, trustworthiness, solidarity, and loyalty in their particular groups (Hofstede, 2010). Since organizational culture is embedded in national culture (Pothokuchi, et, al., 2002), collectivism at the social level is likely to influence the organizational culture of the tenants. In comparison to large businesses, start-ups are less likely to be influenced by several national cultures since many smaller companies do not have an international relationship that could impact their organizational culture. Therefore, the influence of collectivism of the home culture can be expected to be particularly strong in SMEs. This collectivism may influence the support of UBIs and the growth of the tenants positively or negatively.

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14 emphasizing on quality while vertical patterns are emphasizing on hierarchy (Triandis & Gelfand, 1998).

Triandis and Gelfand (1998) proposed two kind of collectivism which are horizontal collectivism (HC) and vertical collectivism (VC). In HC, people perceived themselves as being similar to each other and emphasize common goals with others, interdependence and sociability but do not submit easily to authority (Cozma, 2011). The essence of this pattern is in the equality and self-interdependency with others. Therefore, people in HC have a general trust and the same vision with their peer network. One benefit of this relationship is the cooperation and teamwork. A high level of this horizontal collectivism may reinforce the internal and social interaction through collaboration among entrepreneurs and improve firm-level innovation capabilities in generating new products or processes (Caiazza, 2015).

Moreover, a peer network relationship in horizontal collectivism could help the entrepreneurs to reduce the cost of monitoring the activities of others in the network because of higher overall trust, and also it reduces the likelihood of others acting “opportunistically” (Storey and Greene, 2010). The nature of the collectivism culture also positively influence the performance in terms of providing more opportunities for communication among members regarding new product introductions that increase the efficiency of the communication process and accelerate product’s rate diffusion (Dwyer, et, al, 2005). Knowing that communication could promote the innovation process, collectivism is more appropriate to enhance performance in a business requiring innovation (Hung Lin, 2009). Therefore, the benefit of HC characteristics could strengthen the effect of UBI’s services to the growth of the tenant. Hence, I expect that horizontal collectivism (HC) could positively moderate the relationship between UBIs support and the tenant’s growth.

H3a: Horizontal collectivism culture will positively moderate the positive relationship between UBI’s services and the growth of the tenants.

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15 accepted, sacrificing for the group is also crucial. The characteristic of VC impedes the value of individual freedom, internal locus of control, personal objectives and accomplishment to achieve the group interest. Since the group objectives are more important than the individual value, people have less motivation to compete with each other with creativity, independence, and autonomy (Jones and Davis, 2000). The competition derived from the individual creativity may inspire the entrepreneurs to contribute more and become more innovative by engaging in radical innovation activity (Herbig and Miller, 1992). In the societies characterized by strong VC, in general, they focus on imitative strategies and refrain from exhibiting innovative behavior, so the only fewer number of SMEs pursuing innovation and leads the competition in the market of innovative products and services is reduced (Rosenbusch, et, al, 2011).

Additionally, the group orientation of VC could reduce the entrepreneurial orientation of individual characterized by autonomy, proactiveness, competitive aggressiveness, innovativeness, and risk-taking (Lee and Peterson, 2000; Mueller and Thomas, 2000). Wiklund, Patzelt, and Shepherd (2009) argued that risk-taking, proactiveness, and innovativeness are influential factors that explain the growth of SMEs. Furthermore, the company that engages in a compelling combination of this entrepreneurial orientation can achieve competitive advantage (Lumpkin, Dess, 1996). Reducing this entrepreneurial orientation of individuals’ means reducing the opportunity to achieve competitive advantage.

Therefore, I expect that vertical collectivism (VC) could negatively moderate the relationship between UBIs support and the tenant’s growth.

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Conceptual Model

Figure 2: Conceptual Model

3. Methodology

3.1 Data Collection

In this study, based in Indonesia, the government has initiated to develop the role of a business incubator to enhance national economic growth by increasing the number of high-quality entrepreneurs. (Regulation of President of Republic Indonesia, number 23, 2003). Since the establishment of this regulation, the government provides incubator services from the ministry of research, technology, and higher education and also directing universities to form business incubator to raise the number of start-ups from students. In this study, the sample for testing the hypotheses consist of all tenants of university business incubators in Indonesia. The incubators in this study are active members of the association of business incubators in Indonesia (AIBI). They are public universities which participated in the government development program for the incubator. A quantitative approach is used in this paper; the data will be gathered from primary data through survey and questionnaire. This questionnaire has been sent out to 50 university business incubators, but only 15 incubators responded to the questionnaire.

The study is a cross-sectional study within the specific time frame of the research starting from May to June 2018. The data are collected from tenants in each incubator and the

Degree of Collectivism - Vertical Collectivism - Horizontal Collectivism

The Growth of Tenants (Sales & Employment)

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17 respondents are the owners or board of directors of the studied tenants. The owners were asked to identify the supports they obtained from the incubator and their collectivist behavior. The result will be analyzed to look at the relationship between these supports and growth, the role of collectivism, and the most critical supports that could help the growth of the tenants.

3.2 Measurement

The questionnaire from Somsuk article (Somsuk et al., 2014) is used to measure UBIs support while for collectivism characteristics, the questionnaire from Triandis & Gelfand (1998) is used. More precisely, each variable consist of two or more statements, and for each statement a 1-7 Likert scale has been used to access the level of agreement, where 1 is strongly agree, 2 is agree, 3 somewhat agrees, 4 nether agrees nor disagree, 5 somewhat disagrees, 6 disagrees, and 7 is strongly disagreed (Vagias, Wade M, 2006). The only exception is related to the control variables.

3.2.1 Dependent variable

The growth of tenants is measured based on sales growth and employment growth. Hence, all the dependent variables that lead to the success of the company will be associated with the growth of the company regarding the rate of sales and employment. The growth will be measured within two years period of incubation. Initially, I used absolute sales and employment growth (actual measure increase in sales and employment) of the tenants. However, since I used qualitative comparative analysis to analyse the data, I made a grouping for growth between 1 for high growth tenants and 0 for low growth tenants.

3.2.2 Independent variable

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18 Company obtained extensive support from incubator” and “We have talented incubator manager who understands how to develop a business”.

Regarding financial resources support, the measurement is based on three factors which are; access to financing and capitalization; financial support and consulting; in-kind financial support. This support has Cronbach alpha of 0.697. The scale contains, for example, the following items: “The Incubator helps us to coordinate and communicate with other financial institutions (i.e., Venture Capitalist/Business Angels) that help us to gain financial capital” and “Our company obtained financial support (i.e., grants, financial management training) from the incubator to help us for development and commercialization plans”.

Technological resources support with Cronbach alpha of 0.767 consist of four factors; technology transfer and R&D; technology/ideas; know-how; infrastructure. Example of items used are “Our company obtained technological support (i.e., transfer of knowledge, technology-based ideas or research result) from the incubator for the promotion or improvement of materials, devices, products or processes” and “Our Company received thought or suggestions from the incubator for application of science, especially to industrial or commercial objectives”.

Furthermore, regarding organizational resources support, there are three factors; selection process for tenants; concise program milestones with clear policies and procedures; mutual trust and respect. This support has Cronbach alpha of 0.688. The scales contain, for example, “The selection process to be the tenant is always evaluated by incubator to ensure the success of the tenants” and “Our Company received a clear milestone management plan from the incubator.”

3.2.3 Moderator variable

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19 Sumatra and Java Islands. Basically, Indonesia has more islands, but most of the UBIs are located only in Sumatra and Java islands.

The horizontal collectivism has Cronbach alpha of 0.903. Item measuring the construct is, for instance, “If my team/employees get a prize, I would feel proud” and “The well-being of my team is essential to me.” Furthermore, vertical collectivism has Cronbach alpha of 0.692 with the scales contain, for example, “Our team must stay together as much as possible” and “It is my duty to take care of my team; even I have to sacrifice what I want.”

3.2.4 Control Variable

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3.3 Analysis

Initially, this research chooses SPSS program to analyze the data with regression analysis to test the hypotheses. However, since the data collected is really small (only 33 respondent), the regression cannot be conducted because all variables measured have not significant results (with R2_{values above 0.05). Therefore, this study uses a nonparametric method which is}

qualitative comparative analysis (QCA) to analyze the data.

The analysis has been made in the following three steps: a construct validity check, a reliability analysis, and qualitative comparative analysis. The first step was to implement a construct validity check, which had been done using confirmatory factor analysis (CFA). CFA is conducted to confirm whether all the questions in the questionnaire empirically reflect the variables measured. If the question does not correlate with the variable, that question will be deleted. The questions are valid if Keyser-Meyer-Olkin (KMO) value and component metrics value is higher or equal to 0.5 (≥ 0.5) (Malhotra and Briks, 2006).

Secondly, the reliability analysis is performed to the items that remained after the factor analysis. Reliability means the data shows consistent results if the measurement is repeated many times. Each variable is measured by Cronbach alphas to ensure that measurement scales are reliable. According to Blumberg (2005), if Cronbach alphas are higher than 0.70, then the variable is reliable. Then if the reliability is higher than 0.70, the average of the questions belonging to one variable is calculated, and the sum variables are made. In this study, all questions are passed the validity and reliability test. Lastly, to test the hypotheses, QCA is conducted to look at the causal conditions of each variable with the growth.

Analysis the data using Qualitative Comparative Analysis (QCA)

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21 The first step is constructing the property space which is specified by the variables in the research model. The second step is calibrating each construct in the data by transforming the collected values into the values ranged from 0 (full non-membership) to 1 (full membership) with a cross-over point of 0.50. The set of membership scores from this transformation (from 0 to 1) are not probabilities, but instead a transformation of interval scales into the degree of membership in the target set. In this case, membership can be defined as “covering 95% of the data” and non-membership as “covering 5% of the data” (Ragin, 2008). The next step is to construct the data that have been transformed into a “truth table solution.” Each row of this table is associated with a specific combination of attributes, with some rows containing many cases, some rows just a few, and some rows containing no cases if there is no empirical instance of the particular combination of attributes associated with a given row (Fiss, 2011). The number of rows is then reduced in line with two conditions: the minimum number of cases required for the solution to be considered and the minimum consistency level of solution (Fiss, 2011). “Consistency” here refers to the degree to which cases correspond to the set-theoretic relationships expressed in a solution, according to Ragin (2006), the lowest acceptable consistency for solutions is ≥ 0.80, and the minimum acceptable solution frequency was set at three.

However, the data of 33 respondents are not satisfied these requirements. After transforming the data into set membership scores in the truth table, they only provide one case for a solution which is below the threshold (three cases). To deal with this issue, I made a more prominent grouping of dependent variables and control variables with scores 0 and 1. Regarding growth, most of the respondents shows sales and employment growth after two years of the incubation period. In this case, I divide the growth into two groups which are high growth and non-high growth. The threshold of high growth and non-high growth is defined by calculating the means of the growth where high growth is mainly above the means, and the non-high growth is below the means.

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22 and hospitality; agriculture; education; fashion; creative) and high tech industry (medical and health; IT; technology and engineering).

Table 1. Control Variables Grouping

Scores Variables Frequency Percent Total

Educational background

0 Pre-University (High school, diploma) ₇ _26.9

26 (100%)

1 University (Bachelor, master, doctoral) 19 73.1

Entrepreneurial Experiences 0 No experiences 17 65.4 26 (100%) 1 Experiences ₉ _34.6 Firm Ages 0 Start-up (0-2 years) ₁₉ _73.1 26 (100%)

1 Non Start-up ( >3 years) ₇ _26.9

Industry Types

0 Non-High Tech (food and hospitality,

agriculture, fashion, creative, education) ₁₂ _46.2

26 (100%) 1 High-Tech (medical and health, IT,

technology and engineering) ₁₄ _53.8

After conducted this grouping, the data still not satisfied the minimum acceptable solution frequency of QCA because it only provides a maximum of two cases for high sales or employment growth. In order to obtain the minimum solution frequency, I deleted in total seven respondents who have zero sales in the first year and the second years assuming that the respondents do not seriously answer the questionnaire. In the end, with only 26 respondents are measured in this study, the data satisfied the two requirements of QCA. Table 1 shows the calibration of each variable to set the membership or non-membership scores of the 26 respondents.

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23 Table 2. Calibration of Qualitative Comparative Analysis

Variable Mean Min Max

Non-membership 5-percentile Cross-over point 50-percentile Full-membership 95-percentile Human resources 2.44 1 4 1.42 2.33 3.71 Financial resources 2.36 1 5 1 2.33 4.2 Technological resources 2.54 1 5 1 2.25 4.48 Organizational resources 2.42 1 5 1.2 2.4 4.32 Horizontal collectivism 1.77 1 4 1 1.75 3.65 Vertical collectivism 1.85 1 3 1 2 3.25

Sales growth (Rupiah) 275600769.23 500000 2999970000 1375000 77500000 2299980500

Employment growth 2.38 -2 11 -1.65 2 10.65

The last step, an algorithm based on Boolean algebra is used to reduce the truth table rows to simplified combinations logically. There are three solutions derived based on the different treatment of the remainder combinations, complex, parsimonious and intermediate. The complex solution shows more complicated combinations while parsimonious solution generates a logically simpler solution and intermediate solution shows combination between complex and parsimonious (Ragin, 2017). This study only focuses on the parsimonious and intermediate solution.

Configuration analysis is done separately for two cases: solutions associated with high growth sales and employment with control variables and UBIs services, and another case is by adding moderator variables to check whether the moderator variable provides different results for the data.

4. Results

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24 distinguish combinations of conditions that are consistent subsets of the outcome and from those that are not, that is among the combination, the solutions exhibiting acceptable consistency (0.80) (Fiss, 2008). On the other hand, the combinations that are in the intermediate solutions are those that are also present in the cases that consistently display the outcome but that require difficult counterfactual to remove, so these conditions are “complementary” in the sense that they still part of contributing factors but can be removed from the solutions (Fiss, 2008).

In terms of sales growth, the intermediate solution indicates that six combinations of conditions are linked to having high sales growth. These six combinations linked to high sales growth are similar in that they all include university background (bachelor, master, or doctoral) and most of the case include entrepreneurial experiences (previous experiences for running a business). Generally, the results reject the hypotheses 1 that not all services are linked with high sales growth but there is one intermediate solution that support hypothesis 1. Furthermore, regarding to intermediate solution, human resources and financial support could be the most important support for high sales growth, so it partially support hypothesis 2.

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Table 3

Configuration for Achieving High Sales Growth a

Control Variables – UBI’s Services

Configuration Solution

1 2 3 4 5 6

Control Variables

Education (University level) Entrepreneurial Experiences Firm Ages (3 years or more) High tech Industry

UBI’s Services

Human Resources Support (HR) Financial Resources Support (FR) Technological Resources Support (TR) Organizational Resources Support (OR)

Overall solution consistency 0.944882

Overall solution coverage 0.440529

a_{Black circles show the presence of a condition, and circles with “X” indicate its absence. Large circles indicate}

core conditions (parsimonious solutions); small ones, peripheral conditions (intermediate solutions). Blank spaces indicate “don’t care.”

Table 4 shows the results of my fuzzy set analysis of high growth on employment. Regarding employment growth, the intermediate solution indicates that six combinations of conditions are linked to having high sales growth. From these six combinations, there are four main configurations (solution 1-4) based on parsimonious solutions. Similar to sales, most of the combinations include university background and entrepreneurial experiences for high employment growth. In contrast with sales that only have organizational support contributing to high sales growth, there is more combination of UBIs services related to high employment growth.

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26 Solution 1 indicates that the presence of university background and the absence of entrepreneurial experiences and firm ages as peripheral conditions combining with financial support and non-human resources support as core conditions are sufficient for achieving high growth employment. Additionally, the presence of technological support and the absence of organizational support are also part of this causal configuration as peripheral conditions. Subsequently, solution 2 shows that the presence of university background, entrepreneurial experiences, and the high tech industry as peripheral conditions combining with non-financial support and organizational support as core conditions will lead to high employment growth. In this case, non-human resources support and non-technological support are part of the combination of peripheral conditions.

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27

Table 4

Configuration for Achieving High Employment Growth a

Control Variables – UBI’s Services

1 2 3 4 5 6

Control Variables

UBI’s Services

Table 5 and 6 shows the result of my fuzzy set analysis of high sales growth and high employment growth with the presence of moderator variables: horizontal and vertical collectivism. The intermediate solution indicates five combinations are linked to having high sales and employment growth, but in terms of core condition, we only have two main combinations (solution 1 and 2) for sales and three main combinations (solution 1,2,3) for employment. In general, the result reject the hypotheses 3a and 3b that collectivism characteristics are not related to high growth performances.

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28 In terms of employment growth, the absence of horizontal and vertical collectivism take part as core causal conditions. It means that the presences of horizontal and vertical collectivism do not correlate with UBIs services and also has no effect on high employment growth. However, we can confirm that the presences of entrepreneurial experiences and high tech industry could lead to high employment growth for all three core solutions.

Table 5

Configuration for Achieving High Sales Growth a

Control Variables – UBI’s Services – Moderator Variables

1 2 3 4 5

Control Variables

UBI’s Services

Moderator Variables

Horizontal Collectivism (HC) Vertical Collectivism (VC)

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29

Table 6

Configuration for Achieving High Employment Growth a

Control Variables – UBI’s Services – Moderator Variables

1 2 3 4 5

Control Variables

UBI’s Services

Moderator Variables

Horizontal Collectivism (HC) Vertical Collectivism (VC)

5. Discussion and Conclusions

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30 econometric methods such as regression analysis because of the small number of sample. Therefore, this study employs a fuzzy set method of Qualitative Comparative Analysis (QCA) to make sample representativeness less of an issue.

To answer the main question of the growth is measured by two criteria which are sales growth and employment growth. Note that the model divide growth as high growth and non-high growth. So basically if the result does not show a non-high growth value it does not mean that the variables are not related to growth, probably it is related to growth but not for high growth because the data are showing that each respondent experiences a growth whether for sales or employment.

a. High Sales Growth

University background and entrepreneurial experiences are highly related to high sales growth. These findings agree with previous literature that shows characteristics such as educational experiences, and prior experience has a relation with sales and employment growth of the firms (Sapianza & Grimm, 1997; Box et al., 1993; Baum et al., 2001; Gilbert et al., 2006). Educational background and entrepreneurial experiences are valued since they enable the entrepreneurs to know where to obtain relevant information and also how to manage the resources they have (Kirzner, 1983). Additionally, the prior experiences would help to access the relevant knowledge for making the managerial decision faster because the entrepreneurs do not need much time to observe or study a specific activity before making a decision (Cooper et, al., 1994). Presumably, entrepreneurs with a university background and entrepreneurial experiences could make better decisions to lead their company to high sales growth.

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31 Turn to UBIs services; the result shows several causal configurations. Specifically for non-high tech tenants, the core solution to achieve high sales growth is organizational support and not financial support. The organizational support is positively related to high growth sales because the support such as selection process for tenants, concise program milestone with clear policies, and annual evaluation performance allows the potential start-ups to fully evaluate their idea and get a preliminary approval that their idea is viable (Somsuk et al., 2012). This knowledge will help them to create a favorable business strategy and evaluate their performance regularly. Interestingly, the absence of financial support is linked with high sales growth for the non-high tech industry. Possibly this is because the non-high tech industry is not capital intensive industry, so they do not need a significant number of financial capital to run their business. Therefore, the absence of financial support would not affect much to their high sales growth.

However, still in non-high tech tenants, there is another causal configuration from intermediate solution that shows human resources, technological and organizational support but not financial support are linked to high sales growth of newly established tenants. Human resources and technological support also take apart as causal combination since these supports might help the company to solve their managerial problem such as lack of capabilities. The infrastructure, process of know-how, and the assessment of technology development from technological support also could enhance efficiency that leads to more productivity. This statement rejecting the hypotheses 1 and 2 that in the context of non-high tech tenants, organizational support is the most critical support for high growth sales, followed by human resources, technological and organizational support while financial support is not related to high sales growth.

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32 Regarding intermediate solution, UBIs can provide all services (human resources, financial, technological and organizational) for newly established tenants and only human resources and financial support for non-start up tenants to achieve high growth sales.

b. High Employment Growth

Employment growth indicates that a change has occurred in the organizational composition or strategy of the company because of expansion in the scope of firm operations or perhaps a significant increase in business (Gilbert et al., 2006). Regarding high employment growth, the level of education of the entrepreneurs, whether university or pre-university background is related to high employment growth depending on the industry context. Here, the result shows that if the tenants are in the non-high tech industry, they can achieve high employment growth with only pre-university background while in the high tech industry, university background will lead to high employment growth. The argumentation behind this finding is the high tech industry requires more intense innovative activities and need more specific knowledge on the product development than non-high tech industry. This knowledge can be obtained more at the university level.

If the intermediate solutions are taking to account, generally university background and the entrepreneurial experiences have a higher possibility for high employment growth. This finding agrees with Cooper et al. (1992) finding that the education and prior experiences are highly related to knowledge, skills, problem-solving ability, discipline, motivation, and also self-confidence that affect the performance and survival of the companies. These skills lead the entrepreneurs to have better capabilities to accelerate their business expansion, hence increase their workloads and finally the company needs more human resources to help the founders deal with more complicated works.

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33 will increase the capability of the founder to manage internal organization and survive by achieving minimum requirement of economic production. Therefore, they do not need more employees to help them.

On the other hand, if we take into account the industry types there are several solutions. Firstly, for non-high tech tenants, UBIs should only provide organizational support. However, if the tenants have the pre-university background, all support except financial support is relevant to achieve high employment growth. The notion agrees with previous literature (Somsuk et al., 2012; Smilor, 1987) that organizational support is crucial because it provides the cooperative environment, clear objectives, and detailed performance measures. Mutual trust and respect between UBIs and tenants create a pleasant environment that may lead the tenants to have more productivity and workloads, in the end, they might need more employees. However, this is not the case for financial support from UBIs. Similar to high sales growth, providing financial support for non-high tech industry probably not relevant for high employment growth because this industry is not capital intensive compared to the high tech industry. Their business seems not too complicated with a variance of the job description, they have simple financial planning, accounting and not necessarily need to communicate with a venture capitalist. It means that providing financial support will not lead to more employment in their company.

Secondly, for high tech tenants who established more than three years, UBIs should not provide technological support, but in this case, human resources and financial support still take apart to contribute high employment growth. The explanation is that presumably, the high tech tenants who established more than three years have specific knowledge and experiences for their particular products, in this case, the idea or suggestions from incubator regarding the technological development of their product does not help too much. Prior entrepreneurial experiences and specific knowledge play a vital role for these tenants. Additionally, infrastructure might not be an issue for these companies because whether perhaps they already have their workplaces or they do not need any specific place for work since the industry like IT are quite flexible in their business. Human resources support is needed for these tenants in order to assist them to manage their business in other particular issues such as business strategy, marketing, or networking. Financial support also crucial since they are currently in the growth stages and need more capital to expand their business.

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34 validate their product in the market and develop their technology. Therefore, technological support is the most appropriate support for them to help the company in developing their technology. Since the founders only have the pre-university background, it is necessary for them to employ more people when they obtained more knowledge about how to develop their product. In this case, perhaps they will hire people with higher level of education. The organizational support is essential to create a good business environment for technological development. Furthermore, financial and human resources support is not relevant since they are a new start-up that still focuses on developing ideas and technology instead of creating a product and make a mass production.

c. Adding the Collectivism Characteristics

Interestingly, as core solutions, the result shows that there is no relation between the presence of horizontal and vertical collectivism to UBIs services whether in high sales growth or high employment growth. This finding indicates that non-collectivism or individualistic characteristic might have more effect on UBIs services to help the company achieving high growth sales or employment, and thus reject the hypotheses of 3a and 3b.

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35 -

+ +

To sum up, the main findings of this study shows that educational background and entrepreneurial experiences are linked to high growth performances of UBI’s tenants while collectivism is not related to high growth performances in terms of sales and employment (figure 3).

Figure 3: New Conceptual Model (1)

Furthermore, the role UBIs services to enhance the high growth performances is dependent on the presence or absence of the demographic characteristic of the tenants which are educational background, entrepreneurial experiences, firm ages and type of industry (Figure 4). The relationship between UBIs services and high growth performances might be positive or negative for different configuration of each construct. This study shows that as a core solution, the results reject all hypotheses (H1, H2, and H3) but regarding to intermediate solution, some hypotheses are partially supported. For high sales growth, hypothesis 1 is partially supported (not as core solution) that in the context of the high tech industry, all UBI services have a positive relationship with high growth sales of newly established tenants. Furthermore, human resources and financial support are the most critical support for high sales growth, but only in the context of non-start up (more than three years) tenants. In terms of high employment growth, hypothesis 2 is partially supported that human resources and financial support could be the most critical support for high employment growth, but for only the tenants who have university background, entrepreneurial experiences, established more than three years and running their business in high tech industry.

Figure 4: New Conceptual Model (2) Degree of Collectivism - Vertical Collectivism - Horizontal Collectivism High Growth Performances of UBI’s tenants Demographic Background of tenants - Entrepreneurial Experience - Educational Background - Types of Industry - Firm Age Entrepreneurial experiences UBIs Services

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36

5.1 Theoretical and managerial implications

This research has implications for researchers and manager of UBIs. By using fuzzy set analysis, the results emphasize that there are several elements of a configuration that is relevant for high growth sales and employment and how these elements combine to achieve the outcomes. Specifically, these findings carry direct implication for UBIs literature on how to achieve high growth performances of their tenants. This study applied the measurement from Somsuk (2014) to measure UBIs services. However, the result of this study contains different story from Somsuk (2014). The result of Somsuk (2014) explained UBIs performances based on the perception of success from manager incubator that generates fourteen factors of services and in conclusion, he divides those factors into four main categories (human resources, financial, technological, and organizational support). On the other hand, this study provides an empirical view from the tenants’ perspective regarding how the support from UBIs using four categories of Somsuk (2014) could help them to achieve high growth performance in terms of sales and employment.

University background and entrepreneurial experiences are highly related to high sales and employment growth. In this case, industry context is matter because the sales and employment growth are industry sensitive that may vary across the industry (Storey and Greene, 2010). The years of foundation also related to the services provided by UBIs. If the tenants are newly established, they might need more assistance to achieve high growth performance because they are lack of experiences in their current business. Generally, the result suggests that UBIs should not provide the same support of all UBIs services (human resources, financial, technological and organizational support) for their tenants without considering the level of education, entrepreneurial experiences, firm ages, and type of industry of their tenants. Each support is context dependent and not all support relevant for achieving high growth performance of the tenants.

In conclusion, the incubator manager can consider several specific findings of this study regarding UBIs services for the tenants to help them achieve high growth performances. Additionally, I also add some findings from low growth performances to provide a more comprehensive view of the UBIs services. These findings are:

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37 2. For newly established high tech tenants, the core solution is only not providing technological support while other services take apart as an intermediate solution. However, technological support still crucial for high tech tenants but only for achieving low sales growth.

3. For non-high tech tenants, UBIs should only provide organizational support to achieve high employment growth while if the tenants only have the pre-university background, all support except financial support is relevant for high employment growth as an intermediate solution. However, financial support still crucial for pre-university background tenants to achieve low employment growth.

4. For high-tech tenants who established more than three years, UBIs should not provide technological support, but human resources and financial support still take apart as a causal combination for high employment growth as an intermediate solution. However, technological support still essential to achieving low employment growth.

5. Horizontal and vertical collectivism is not related to high growth performances. Individualism character seems more beneficial to achieve high growth performances since it helps to foster innovation activities and entrepreneurial orientation. However, horizontal collectivism has a core contribution to low sales growth.

Based on these findings, therefore, it is difficult to say that all services provided by UBIs guarantee the high growth performances or only human resources and financial support are the most critical support for tenants. Hence, providing all services to the tenants is not effective to help them achieve high growth performances. The result confirmed that all of UBIs support is highly dependent on the background of the tenants.

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38 Furthermore, the result also emphasizes that the collectivism characteristic is not related to high growth performance. Otherwise, the manager could strengthen the individualism characteristic of the tenants because it can foster innovation activities and the entrepreneurial orientation of the tenants that may help to enhance the high growth performance. In this case, the incubator can encourage the individualism characteristic by setting a goal-oriented vision, risk-taking behaviour, collaboration with other institutions and build a better network for their tenants.

5.2 Limitations and further research

As with many research, this study also has certain limitations, which can be taken into account for further research. Firstly, the size of the sample in this study was very small. From 70 respondents of university incubator’s tenants only 33 respondents are incubated in 1-2 years period

,

and from 33 respondents, seven respondents are deleted because the data cannot satisfy minimum solution frequency for qualitative comparative analysis, so at the end, this study only measures 26 respondents. The rest of tenants are new tenants entering incubator below one year, and thus cannot be studied. Basically, we need more data for this research model, probably ten times of variables which is 80 respondents to have a minimum requirement to get appropriate data. Therefore, with a limited dataset, all variables measured did not have significant results with statistical measurement. To deal with this limitation, I use fuzzy set qualitative comparative analysis that can be addressed for smaller sample. Furthermore, I also group some variables into a larger group in order to obtained significant result.

This limited information shows us that mostly the tenants of University Business Incubators (UBIs) are newly established. Therefore, UBIs do not have an appropriate number of sample of tenants who are incubated for more than one years, so what we expect from this study is the pattern of causal configuration from each variable that could become a predictor of tenant’s growth in Indonesia for the future study. Moreover, the study of university business incubator in Indonesia is indeed essential for the future research since clear empirical evidence in the context of Indonesia is still narrow

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39 study in the next one or two years when the tenants are incubated for more than two years by combining regression and QCA method so we will have more comprehensive images about the UBIs services and the growth.

Lastly, based on the finding of collectivism culture, the additional suggestion is also to include the individualism characteristic and compares the effect of individual and collectivism characteristic to the UBIs services in order to achieve high growth performances.

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