Wanqiu Long
The higher education massification leads to large amount of increase in university graduates (Hua, Li, and Ren, 2012). The unemployment of university students has become a prominent social problem in China. The growing number of university graduates has created tremendous pressure in labor market. The graduates have reached nearly 700 million in 2013, 190,000 graduates more than 2012. Because of the difficulty in finding a job, start-up business has become the forth option for students besides finding job, continuing study, and study abroad. However, due to a skill mismatch between university and business, the Chinese university students have relatively low intention in entrepreneurship, the survival rate of students' start-up remain low (Hua, Li, and Ren, 2012). Facing abovementioned problem, government encourages students Start-up Company as one way to solve the employment issues. Start up is an organization formed to search for a repeatable and scalable business model (Blank, 2006). This study focuses on start-ups that initiated and managed by university graduate students.
In the national policy "Long-term Science and Technology Development Plan (2006-2020)", high technology is the key area to enhance national and regional innovation capacity. Beijing, as the capital city of China, possesses rich resource in technology development, such as Zhongguancun National Demonstration Zone, widely known as the China "Silicon Valley". It is also one of the important cities to implement new initiatives. Therefore, facing the employment pressure of university graduates, central and local government, universities, and business have started a non for-profit organization called "Zhongguancun University Graduates Innovation Entrepreneurship Employment Promotion Association" as a joint effort to promote entrepreneurship in students. There has not yet research been done in finding what facilitation of this organization has for students entrepreneurship and the affects on university business relation. Therefore, this research is going to identify the type and function of this organization in open innovation environment.
There are a mismatching in Chinese university education and entrepreneurial skills for business practice. University does contribute in encouraging entrepreneurial attitude. The contribution can be found in many ways, such student entrepreneurs establish initial willing together for start-up business through studying the same major or different major, or through university hold entrepreneurial competition. The university education provides the foundation for student’ entrepreneurship. However, the down side of university entrepreneurial education is less adaptation of market because of lack of communication between university and business.
The communication barriers exist among three parties, namely students, university, and business, to solely provide available the options for students to encompass the vast range of possible entrepreneurial activities. Students with new ideas to for business usually have trouble to implement due to lack of entrepreneurial knowledge, skills, channels, resource, and network. University has trouble to keep up pace with business due to its long research cycle and basic research focus. Business needs fast solution for market while the demands is difficult to be fulfilled by university due to the same reason.
Open innovation provides a solution for this gap. Open innovation has become a widely accepted concept in the changing knowledge paradigm nowadays. It is defined by Chesbrough as an innovation paradigm under which ideas can emerge both inside and outside an organization and have parallel paths to market (Chesbrough, 2003). Chesbrough has coined the concept of open innovation and has made the groundbreaking research on the shifting process from close innovation paradigm to open innovation paradigm. The difference between invention and innovation require close relation between innovation and market. The innovation on innovation is to upgrade the approach of innovation faster in innovation cycle and wider in participants. One prominent characteristic of close innovation is exclusiveness. It is discussed by Chesbrough as in the “strong self-reliance” in research and development (R&D) covering the whole process from original idea to market occupation, intellectual property right, and so on. The main contribution to distinguish two paradigms is to show us the way to maximize the utilization of innovation ideas. This is also the main difference between two paradigms. Two approaches can rule out ideas that is “false positive” but open innovation can save “false negative” by sharing those idea through the permeable organization boundaries. In doing so, “false negative” in this organization might turn out to be right idea for other companies. There are three key actors in the open innovation paradigm: Industry, Government, and University. Among which, it is worth discussing the respective contribution that industry, government and university make to the breaking down of the innovation isolation.
To solve the mismatching, university, students, and business need to devote effort jointly. There are plenty of researches have been done on the main actors – university, industry, and government – in the field of industry-university cooperation in open innovation (European Commission, 2009; D’Costa, 2006; Reinhard, Osburg, and Townsend, 2007; UIIN, 2013), in different country context in Europe and Asia (European Commission, 2009; D’Costa, 2006, Jiang, Harayama, and Abe, 2006), in national innovation system and regional/local innovation system (Jiang, Harayama, and Abe, 2006). However, seldom has done to explore the role of innovation intermediaries in industry-university cooperation.
It is important to locate "Zhongguancun University Graduates Innovation Entrepreneurship Employment Promotion Association" (Hereinafter refers to as Z-park for Graduates) in open innovation environment. As an innovation intermediary agency, research has not been done on what type of innovation intermediaries Z-park for Graduates is and what the role of Z-park for Graduates is in the innovation process.
The research question in this study is:
How does Z-park for Graduates promote students’ start-up in Beijing China?
The research question can break down into two sub-questions:
1) What type of innovation intermediary agency Z-park for Graduates is?
2) How does Z-park for Graduates facilitate innovation between university and business?
Open innovation is beneficial for students’ entrepreneurship as discussed. As two key actors to promote students entrepreneurship, university and business are lack of mutual understanding. Innovation intermediaries as being the middle bridge solve this problem. However, what is the role of IIMs in facilitating this process, this chapter continues the discussion from knowledge perspective: innovation intermediaries as learning infrastructure to facilitate knowledge transformation between university and business.
The knowledge transformation cycle involving explicit knowledge and tacit knowledge in the innovation ecosystem. Knowledge is of the most essence in the process of innovation, and is underlined in the era of knowledge economy. Many researches have been done on the function of innovation intermediaries in knowledge dissemination (Howell, and more). Knowledge intermediation is one important role of innovation intermediaries to facilitate knowledge co-construction by stakeholders (Yang et al., 2014). However, less attention is paid to the contribution of innovation intermediaries in knowledge transformation, while the “absorptive capacity” of tacit knowledge is particular important in university-industry linkage (Kodama, 2008). The role of innovation intermediaries in assisting knowledge exchange between university and business community is confirmed (Yusuf, 2008). Nevertheless, there left a blank which type of knowledge is transferred and how. This framework is built intending to answer this question.
The first and foremost challenge for IIMs is lack of trust from multiple stakeholders due to the difference in organization culture and goals. The fundamental problem of cooperation is that individual has only partial interests that are overlapping (Ouchi, 1980). As the coordinator among diverse participants in the open innovation process, the main task of IIMs is to match knowledge and facilitate the cross-sector cooperation. The knowledge matching is explored as one general function of IIMs in previous research. However, the discussion can go deeper to specify the type of knowledge that IIMs facilitate.
The adopted theory in this theoretical framework is Scharmer’s learning infrastructure theory. By using this framework, it is intend explain how IIMs facilitate knowledge transformation as three levels learning infrastructures. Furthermore, it is to locate which type of learning infrastructure Z-park for Graduates is in this framework. Because Scharmer’s learning infrastructure theory is built based on three other theories – Polanyi’s two types of knowledge (explicit and tacit knoweldge), Nonaka’s knowledge spiral model, and Scharmer’s theory U – it is necessary to first introduce these theories and analyze how it is related to IIMs.
The relation of these three theories with learning infrastructure framework is briefly introduced here:
Polanyi divides knowledge generally into two types, the explicit knowledge and tacit knowledge (Polanyi, 1966). In Scharmer’s learning infrastructure, knowledge is further divided into three types, including explicit knowledge, tacit-embedded knowledge, and tacit-not-yet-embedded knowledge. Based on these three levels of knowledge, Scharmer develops three type of learning infrastructure to facilitate knowledge transformation process (Scharmer, 2000).
Nonaka’s knowledge spiral model explains how different knowledge interacts with and transform from one to the other, i.e. tacit to tacit knowledge, tacit to explicit knowledge, explicit to explicit knowledge, and explicit to tacit knowledge (Nonaka, 1991). Different type of knowledge transform and the way of knowledge transformation are two criteria to distinguish different levels of learning infrastructure (Scharmer, 2000). The activities on different level of learning infrastructures are important to analyze different facilitations of IIMs between university and business.
Scharmer’s theory U analyzes knowledge transformation in organization innovation through interaction with outside environment. It emphasizes on the role of tacit-not-yet-embedded knowledge in the knowledge transform process (Scharmer, 2009). The theory U support the analysis on type III learning infrastructure.
The thesis aims to examine the emerging phenomenon of innovation intermediaries in facilitating industry-university cooperation in the open innovation paradigm in China, by looking at the process of innovation, at the key actors and their interactions, as well as at the role of innovation intermediaries in this development. It also aims to investigate how innovation intermediaries help with university graduates start-up companies in Beijing regional level, against the backdrop of knowledge economy and increasing interests from university to cooperate with local innovation actors.
Because this study is done in Finland during limited time, it is difficult to collect first hand data by conducting large scale of questionnaire or survey. Therefore, this study chooses the direction of qualitative methodology based on existing literature and individual interview. The research methods employed in this study include literature review, secondary statistic analysis and interview to form a qualitative analytical approach. Among which, literature review is the main method to identify research problem and to build up theoretical framework, while the data to support case study is collected through interview of Z-park for Graduates.
The literature review is done on two resources: academic publication and national/regional policies. The method of literature review is used to build up knowledge foundation from four aspects. First, literature is reviewed on open innovation, including the closed innovation, the driving force for shifting closed innovation to open innovation, and university business cooperation in the context of open innovation.
Second, literature is reviewed on innovation intermediaries. As the open innovation encourage cross sector collaboration, IIMs play more and more important role in bridging, networking, matching actors from different sectors. This part is consisted of previous literature on defining IIMs, the functions of IIMs, the feature of start-up in company lifecycle, and the function of IIMs for start-up companies.
Third, literature is reviewed on innovation intermediaries as learning infrastructures in knowledge transformation. Because Scharmer’s learning infrastructure theory is built upon the foundation of three other theories, it is necessary to include the review on these three theories to clarify the learning infrastructure framework. These three theories are Polanyi’s explicit knowledge and tacit knowledge, Nonaka’s knowledge spiral model, and Scharmer’s theory U.
Fourth, literature is reviewed on open innovation and innovation intermediaries in China. This part starts with national and local (Beijing) policy review on innovation policy and innovation intermediaries’ policy, following the historical perspective and highlight outstanding initiatives. At the same time, academic papers and reports are the main source to detect achievement and challenges in open innovation and IIMs in China.
The secondary statistic analysis is another research approach in this study. In order to have overall understanding on open innovation in China, statistics related to innovation is collected from government reports, i.e. National Bureau of Statistics, Science and Technology Statistic Center in Ministry of Science and Technology of the People’s Republic of China, Institute of S&T Statistics and Analysis Chinese Academy of S&T for Development, Beijing Statistic Information Net, etc. and international database i.e. OECD StatExtracts, Eurostat, UNESCO UIS Stat.
The statistics related to open innovation are collected on three innovation actors – university, business and government, such as in high-tech industry scale, Gross Domestic Expenditure on R&D, R&D funding, R&D human resource in different sectors. Statistic analysis is done on the activities of the abovementioned three actors in manufacturing and high-tech industry in China. IT industry is emphasized to support the Beijing case study. The IT industry is one of the priorities of the Zhongguancun National Demonstration Zone for Graduate Students’ employability, innovation, and entrepreneurship (hereinafter refer to as Z-park for Graduates), as it is embedded in Zhongguancun National Demonstration Park, the leading IT industry cluster in China.
Based on literature review and statistic collection, quality analysis is done on the following aspects: to crystallize IIMs’ facilitation for start-up companies, to establish the connection between IIMs with learning infrastracture theory, to categorize the typology of IIMs in China between university and business.
The method of interview is employed to get insight from IIMs between university and business in Finland and in China. The interview case in Finland is Demola, an open innovation platform in Tampere, Finland to establish connection between students and companies. Interviews were based on observation in Demola spring semester project “Be a little Noksu” and regularly taking part in Demola pitching and other relevant events.
The interview case of Demola Tampere was conducted in March 2014 face-to-face with two Demoal facilitators, one for 40 minutes, one for 20 minutes. The observation and participation of Demola activities started from January 2014 to May 2014. The interview case of China is conducted in May 2014 through international calling and skype for 20 minutes and 30 munites respectively, to one association officer and one association manager in Beijing Zhongguancun National Demonstration Zone for Graduate Students’ employability, innovation, and entrepreneurship association. Due to the geographical distance between author’s location in Finland and Beijing China, the interviews were done through skype and telephone other than face-to-face.
The interviewees of Demola were approached by author through taking part in Demola open events. The interviewees of Z-park for Graduates were contacted through Email, QQ chatting tool, preliminary calling through cellphone. Please see the interview details below:
|
Interview Case |
Interviewee |
Interview Method |
Discussion Topic |
|
Demola |
Two Facilitators in Tampere Demola |
Face-to-face |
Open innovation platform facilitation between students and companies, multidisciplinary communication, model copy in other European countries |
|
Z-park for Graduates |
one association officer and one association manager |
Skype and Telephone |
Driving force and background of establishment, main activities, the way of cross sector cooperation, role of Z-park for Graduates, current barriers of being an intermediary agency |
This research is aiming to study on the type and function of Z-park for Graduates in open innovation under the Chinese context between university and business. Open innovation as the concept raised up by Chesbrough has drawn attention into the need for innovation reform from closed innovation to open innovation. The organization boundary should no longer be the reason to stop innovative ideas to share with others. The permeable organization boundary has enabled the possibility to maximum the utilization of scientific research.
The main findings of this research on research question – How does Z-park for Graduates promote students’ entrepreneurship in Beijing China?— contain the finding on typology and function of Z-park for Graduates to answer two sub-research questions:
1. What type of innovation intermediary agency Z-park for Graduates is?
2. How does Z-park for Graduates facilitate innovation between university and business?
Finding 1: Typology of Z-park for Graduates
The establishing of innovation intermediaries topology in China is supported by the review on open innovation in China. China has been undergoing the transformation from manufacture-oriented to innovation-oriented country. The government has taken initiatives in enhancing indigenous innovation capacity through policy and implementation. The policy to promote innovation started from “Open Door” policy in 1978 until the recent important national policy of "Long-term Science and Technology Development Plan (2006-2020)". The reforms in innovation can be seen from the changes of policy and new policies. The achievement of the efforts in innovation capacity building is apparent with research and surveys done domestically and internationally. However, there are many problems left in current promising success. The problem cannot be solved only by more effective implementation, but a profound change in national and regional innovation system. The resource of university and business should be better integrated by building up an innovation-friendly environment. What’s more, as the entrepreneurial start-ups and SMEs are also one diving force to improve the overall innovation capacity, traditional social value is the fundamental factor to be changed.
There are difficulties in defining what are innovation intermediaries. Different criteria have been adopted to illustrate a wide range of intermediaries. One of the most recognized categorization is done from the innovation process perspective. However, the typology adopted in this study is categorized based on the efforts that university and business devoted in innovation intermediaries to promote students’ entrepreneurship. There are three types of IIMs between university and business: university-oriented IIMs, open innovation joint efforts, Business-oriented IIMs. The open innovation joint effort is the most important platform to link cross sector cooperation in open innovation environment. The benefit of close innovation is to enhance core competitiveness inside a company, which is necessary to exist. Organization resource can be effectively utilized on promising research instead of waste on false positive ideas. This helps an organization to build the foundation of core technology in research. However, there are downsides and social changing factors that force organization to change the existing model. The closed innovation requires large investment in research and development. The concept of “Not Invented Here” is formed through doing all R&D inside one organization only. It leads to the question of how to balance building research capacity and optimizing finance investment. Because one organization has particular vision and planning, many the research results are put on the shelf or given up before it turn into application. The whole package of research and development in both basic research vertically and applied research horizontally is time-consuming and costly. What’s more, it not only creates waste in organization resource, but also harms researcher’s accomplishment and loyalty.
The open innovation environment is the key for university-business cooperation. The public funding reduction in higher education institutions and research institutes are pushing universities to diversify the funding resource. A complementary cooperation between business and university is formed based on two elements: knowledge and resource. By cooperating with university, business can focus on more applied research, market study, customers, and so on. By cooperating with business, university can achieve faster technology transfer and multiple funding resources.
However, because of different interest and organization inherent nature, there are obstacles exist in cooperation, for example, two sectors are incompatible in working because business need fast solution for market while university concentrate on long-term basic research. To tackle these problems, many kinds of intermediaries provide services to smooth cooperation during the innovation process. Therefore, to better facilitate university business cooperation, the joint effort in open innovation environment should be equally devoted from two sides. The innovation intermediaries oriented from one party can lead to unequal in motivation, resource allocation, outcome distribution, and so on.
It is clear to tell the initiatives taken by university and business in promoting students’ entrepreneurship. Z-park as the joint efforts from central and local government, key universities in China, and well-known enterprises, it performs as an open innovation joint efforts to facilitate university-business cooperation.
Finding 2: the Function of Z-park for Graduates
The theoretical framework of learning infrastructure contribute the most in identify which type of learning infrastructure Z-park for Graduates is in this study. The type I infrastructure is to facilitate explicit knowledge dissemination. The type II infrastructure is to facilitate sharing experience to through exchanging tacit knowledge among members. It is a process of reflection on action. Type III infrastructure is to build up a common ground for different parties to reflect, to reach common will, and to give guidance for the future planning. It is easy to be confused with type II. Type III is different from type II on two aspects. First, type III includes the activities of type II. Type II infrastructure only provide a common ground for members to come together and share experience. However, in type III, a common will is established based on shared experiences. This “common will” will guide members to move on the next phase of cooperation. In the new cooperation, similar process of reflection on action and common will are done again. Thus, type III is a repeated process. Second, type II includes embodied know-how level. Whereas type II focus on both tacit knowledge embodied and self-transcending knowledge.
As previously discussed, the function of innovation intermediaries is two fold. It can both facilitate knowledge transfer and strengthen the effectiveness of knowledge network (Yusuf, 2008). According to Yusuf, the university-industry linkage is suitable to disseminate codified knowledge and also to create tacit knowledge. The transformation from idea to commercial use can be done through these two parties working together with the assistance from innovation intermediaries.
Z-park for Graduates is transferring both coded knowledge and tacit knowledge to customers and partners. The customers of Z-park for Graduates are students. The partners of Z-park for Graduates are university and business. On the customer level, coded knowledge and tacit knowledge are disseminated to students through teaching. In this sense, Z-park for Graduates has the function of type I learning infrastructure. In addition, students gain knowledge also from take part in on-job internship, learning by doing. Tacit knowledge is accumulated in this process. Therefore, Z-park for Graduates also function as type II learning infrastructure. On the partners’ level, Z-park for Graduates focus more on tacit knowledge. University and business can reach common will through jointly taking part in training and incubation activities. However, Z-park for Graduates cannot be totally categorized as learning infrastructure type III, because of the barriers between university and business in communication and participation due to such as different organization interests, goals in university business cooperation, social and cultural understanding on start-ups, social economic innovation environment.
Therefore, the function of Z-park for Graduates is identified in this study as a mix of type I, type II and type III learning infrastructure according to the type of knowledge it facilitate for students, university and business.
Based on the review of national and local policy of innovation and students start-up in China, there are policy implications can be drew from this study:
On the start-up policy level, government should comprehensively coordinate in the following aspects: detailed policy explanation, concrete implementation, supporting service among government offices and social service support (Cui et al., 2010). The open information resource platform and management team can provide students with shared resource for better resource integration. Innovation intermediaries need to provide diversified services such as accountant, audit, asset evaluation, technology evaluation, patent, legal consultancy, advertisement, and so on (Qiu and Liu, 2013).
On the facilitating level, because of the difficulties in policy and implementation, it should promote facilitate service such as IIMs in implementation of government policy as part of the startup supporting system, including incubator, association, start-up training, improving students entrepreneurial quality in startup planning risk, evaluation system, trust and friendly environment, publicity in public media, finance, expanding network, simplify application process in government for students. A service platform should be built to connect university technology transfer with students’ start-up (Hua, Li, and Ren, 2012). Government should provide enough support for intermediaries to support college students’ start-up in funding, taxation, and policy. A financial supporting system should be built consisted of venture capital and multiple funding source channels, such as YouthBusinessChina (YBC) (Qiu and Liu, 2013).
On the regulation level, besides policy and financial support, government needs to take the responsibility in regulatory. Industry regulatory and associations need to be established to fulfill the function of supervision, evaluation, and arbitration (Qiu and Liu, 2013). Establish performance evaluation criteria of incubated companies in the following aspects: finance, customer, and internal operation. Finance aspects include current assets, asset turnover, inventory turnover and so on. Customer is a meaningful evaluation indicator that should take into consideration of market share, market position, market performance and so on. Students’ start-up is different from social entrepreneurial start-up especially in management in market experiences. Thus, company management is one important indicator to evaluate performance as well (Wang, 2013).
There are limitations of this study in aspects. First, due to long distance between Finland and China, the first hand empirical data is difficult to collect in large scale. Although interviews were done to support the arguments, there should be large-scale of questionnaire and survey to verify the results in this study. When conducting the interview of Z-park for Graduates, the limited results provided by interviewees also shows the insufficient open innovation environment in China. Future study can explore the reason for this problem and how to build up a friendly open innovation environment in China as the contribution for better university-business cooperation. The theoretical framework adopted in this study is utilized to analyze IIMs for the first time. Therefore, more study by using this theory can help to verify the significance of this theory. What’s more, this theoretical framework can also be utilized to analyze other type of IIMs outside the field of university-business cooperation.
As open innovation is the trend for innovation activities in company, between organizations, regional development, and national innovation system building, it is necessary to further explore the function of innovation intermediaries have in facilitating knowledge creation and transformation with more empirical in-depth case study and large-scale survey. The validity of the learning infrastructure framework needs to be further improved by testing in other different contexts, such as other cities or other country. In addition, Z-park for Graduates is a newly founded organization and its activities only started from the end of 2012. As such, it is hard to collect valid data and give evaluation on its performance. Follow up research on Z-park for Graduates and other similar type of organizations should be analyzed. This is beneficial to monitor effectiveness of this type of organization in bridging cross sector cooperation and to give policy recommendation for future improvement as the foundation for integration with overall national innovation system building.
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