ENTREPRENEURSHIP (Prof.ssa Zucchella)

Analyzing the signals of academic spin-offs: some insights from Italy

CIRO TROISE - ELENA CANDELO - DIEGO MATRICANO - MARIO SORRENTINO

Objectives. The number of academic spin-offs has increased considerably over the years (Netval, 2018). Concerning Italy, currently the number of these companies is 1,972 (https://www.spinoffitalia.it/). Academic spin offs are well-known examples of the commercial exploitation of academic research (Mansfield and Lee, 1996; Chiesa and Piccaluga, 2000; Leitch and Harrison, 2005; Fini et al., 2009, 2017). These new ventures (mainly registered as “innovative start-ups”) face several typical hurdles of new businesses such as the scarcity of financial resources and the absence of track records to show to third parties (e.g. initial lack of financial statements or first economic results) (Vohora et al., 2004; Sleptsov e Anand, 2008; Sorrentino, 2008; Matricano, 2015).

Academic spin-offs traditionally can leverage low initial capital endowments and therefore do require external support for their initial growth and subsequent development stages (Troise et al., 2019). As highlighted by Gubitta et al. (2016, p. 368) these companies “operate in a context characterized by marked information asymmetries that limit their chances of obtaining financing”. In this uncertain and challenging scenario, signals about the quality and the potential value of academic spin-offs could play an important role in capturing the attention of third parties and in influencing their judgment on, for example, investment decisions in these companies or their acquisition. Given the frequent absence of initial performance measures or other observable quantitative parameters, academic spin-offs therefore have to resort to other types of information (or alternative indicators of future business performance) (DiMaggio and Powell, 1983; Podolny, 1993)

The signaling theory (Spence, 1973) represents a renowned framework for investigating the observable signals on the quality of the company that can be sent to third parties to reduce information asymmetries and positively influence their investment decision or acquisition process (Cosh et al., 2009; Connelly et al., 2011; Robb and Robinson, 2014).

In the specific case of academic spin-offs, the founders of the company – and in some cases also the Technology Transfer Offices (TTOs) of Universities – are the informed parties that can send signals to the less informed parties to increase their knowledge about the company. The latter may have limited capability to assess the underlying qualities of these initiatives and, at the same time, face high due-diligence costs. In this uncertain scenario, founders of  academic spin-offs need to find ways to clearly signal the value of their initiatives to third parties. In these cases, the well-known signaling theory has often been used to explore useful information to alleviate information asymmetry.

Signaling theory is used in many marketing studies to explain the behavior of parties when they have access to different information (Price and Dawar, 2002; Mavlanova et al., 2012, 2016; Troise, 2020).

#Academic spin-offs #entrepreneurship #Investors #Signaling Theory #Technology transfer offices #Universities