Conference papers
The University's role in assembling resources to establish and develop a Science Park
D.N.E. Rowe, Director, University of Warwick Science Park, UK
Abstract
There are few recorded occurrences of truly successful Science Parks which are not linked to the University or other institutes of Higher Education. However, Science Parks require a major input of capitol and careful planning and while Universities may have many of the skills necessary to oversee such a project, few have the financial resources to initiate and develop a major Science Park venture alone. The paper identifies how Universities in the UK have met the challenge for launching Science Park ventures, including the raising of the initial capitol for the development of land and buildings and management.
Introduction
Creating a successful and significant Science Park is costly in capitol and management time. It is also an established fact that a key ingredient in a successful Science Park is a strong University, or other Institute of Higher Education, to which the companies on the Science Park can relate for technological know-how, new graduate staff and specialist facilities. And in addition to these benefits the Science Park becomes, in part, an extension of campus life. Clearly then, there is a powerful argument for any Science Park to have its roots in a University that can meet these needs.
From a University point of view a Science Park can be an important added dimension in its relationships with the world of Industry and Commerce, a pathway for it own staff to take ideas into the commercial world and, for some Universities an immediate way of putting their technology and expertise to work to the benefit of the local economic community. These are powerful reasons for Universities to contemplate becoming involved in Science Parks. Science Parks may not be in the Universities main stream activities of teaching and research, but the potential for interplay with industry to the benefit of both significant.
However, as stated at the beginning, the capitol required for a Science Park is large. Even a small Science Park occupying say 2-4 hectares would involve buildings and infrastructure of £5-11m or more and most of the more successful Science Parks in the UK have aspirations of achieving 5 to 10 times this size. Cambridge Science Park, the largest in the UK, is about 55 hectares. The total investment in Science Parks to date in the UK is approximately £650m in 51 Science Parks. i.e. an average of nearly £13m per Science Park. Investment in the 8 largest Science Parks in the UK accounts for 60% of this total. This suggests that many of the smaller Science Parks have a considerable potential for further investment.
Although capitol for property is the most visible cost, there is another important component of cost - the management of the Science Park. The management function involves:-
Securing resources for the development of the Science Park;
Promoting the Science Park and identifying and securing the tenant companies;
Providing the all important links between Tenant's companies and University enterprise;
Assisting young and start-up high technology companies with business plans and problems as they arise;
Management of the land and buildings on the Science Park;
Planning the Science Park and its strategy and making investment decisions
Against the preceding background this paper examines the principal strategies used in the UK for securing the capitol and management effort needed for a Science Park and the strengths and weaknesses of those strategies.
Strategies for financing Science Parks in the UK
This paper examines the 3 main strategies used financing Science Parks within the UK. They will be described as strategies A, B and C with the following definitions.
1. Strategy A - the University led and financed venture
In this strategy a University establishes the Science Park on its own land and raises the finance to start development of the site, which at a minimum requires constructing roads and other services on the land and also frequently includes the construction of one or more buildings. The University also has to provide for all management functions. Examples include: Cambridge Science Park, Brunel Research Park, St. John's Innovation Centre and Surrey Research Park.
2. Strategy B - a joint venture company between the University and Local Authorities or others
The intrinsic significance of this strategy is that a separate legal entity is created to carry the Science Park project forward involving other parties in addition to the University. It provides a vehicle through which a University can exercise a significant measure of control and leadership while not necessarily having to contribute all (or even most) of the financial resources. The balance struck in these types of joint venture can vary considerably. Typical examples are the University of Warwick Science Park, Aston Science Park, Birmingham Research Park, Merseyside Innovation Centre and Manchester Science Park. A interesting variation on this theme is the Oxford Science Park developed by Magdalen College. The College formed a joint venture with Prudential Assurance (a private sector insurance company) to develop its first University based Science Park in the Oxford area. In this case no local Authority or Development Agency was involved and the interests of the parties were driven more by profit than by economic development gains, which is the usual motivation for the Public Authorities.
3. Strategy C - a co-operative venture between a University and Development Agencies andlor Local Authorities
Co-operative ventures have proved to be highly popular for many UK Science Park ventures. The co-operative venture does not involve a legal entity and it is frequently a Development Agency or Local Authority who takes the lead in the project establishing the physical premises and providing much of the on-site property management and, some times, the business development functions to assist Tenant companies as well. The University's principal input is frequently made through Industrial Liaison Officer who may have an office on the Park to help him in establishing the links between the Tenant companies and the University. The University may also play an important role in bringing companies onto the Science Park, particularly academic spin-outs from the laboratory. Examples of this category of the Science Park includes: Bradford Science Park, Aberystwyth Science Park, Sheffield Science Park and Highfields Science Park. In a more complex example Durham Mount Joy Research Park started out as a strategy C Science Park, but later the University bought its premises from the Development Agency, effectively turning the venture into a strategy A Park.
The Choice of Strategy
The balance between control and expenditure implications of the different strategies are illustrated in Table 1, as seen from a University view point. In the UK, the extent to which the University has any real option in its strategy is to some extent dictated by the strength of its regional economy. It is only in the economically depressed regions and cities of the UK that the Local Authorities and Development Agencies see the powerful regenerative benefits of a Science Park. Therefore it is only in these same areas that they are motivated to join forces with a University to establish a Science Park. However, where these joint ventures have been attempted a major benefit has been the focusing point of University and Local Authority energies to create new wealth and employment in a locality through the ability of a University to attract research based industry. In this way these relationships can prove to be highly constructive and worthwhile for both sides of the venture.
By contrast strategy A, the go-it-alone strategy is only open to a University which either has a considerable private endowment of funds at its disposal or where its land value is intrinsically high. At the more exalted levels of land value the University owning such land can afford to sell a few hectares to an appropriate owner/occupier and use the receipts to finance the costs of infrastructure and also have sufficient funds to initiate a building programme. It is high rents that generate these high land values and a further consequence of high rents is a good financial return.
Therefore to reiterate; to a significant extent the choice of strategy is frequently dictated by local economical circumstances. However, it is perhaps important to stress that to achieve success a University needs to welcome and pro-actively support a Science Park in a determined and single-minded way. This is equally important to the scientific and technological capabilities of the University which needs to be of a high standing if it is to attract industry.
Sources of Capitol for Developing a Science Park
Table 2 identifies the main sources of capitol for initiating and constructing Science Parks in the UK. From the foregoing discussion it will come as no surprise that the joint venture strategies result in very large inputs of capitol from the involved Local Authorities and Development Agencies. Nor will it be a surprise that the Universities themselves are major providers of funds where they elect to establish a Science Park by themselves using Strategy A.
However, the Table also analyses two other sources of capitol. These are:
Owner/occupiers, which are companies who use their own capitol to build a building for themselves on a Science Park and
Private investors who put up buildings speculatively on a Science Park to rent to appropriate tenants other than themselves.
At present this letter group is the smallest investment element on Science Parks but it is nevertheless very important, particularly for the future success of many Science Parks regardless of strategy. While several Universities, Local Authorities and Development Agencies have been prepared to "pump-prime" their Science Parks from their own resources, far fewer expect to be able to continue supplying new capital as their Science Parks expand. Constraints placed upon public expenditure by Central Government, together with the other priorities these organ isations have will limit the supply of public sector capitol for the development of Science Parks. Therefore, at many Science Parks considerable attention is being focused on ways of using public funds constructively to encourage more private sector involvement.
Choice of Development Strategy and Success
Table 3 examines two parameters of success for Science Parks compared to the three developments strategies identified in this paper. These are:
The number of Tenant companies resident on the Science Parks normalised to the number of operational Science Park years within the strategy category.
The total investment in the Science Parks again normalised as above.
The figures tend to suggest that all theses strategies produce the same average rate of increase in tenants but that strategy A parks (the go-it-alone) strategy produces (on average) developments which are physically much larger strategy B which is in turn much larger the strategy C Science Parks. There is no obvious reason for this difference in scale other than the fact that most strategy A Science Parks have economically favoured locations where it is easier to secure private sector interests. i.e. Science Parks tend to grow fastest where the economic conditions are the most favourable. However there are a number of notable exceptions to these trends which show that in some "difficult locations" it is also possible to achieve well above average rates of growth.
Science Park management structure and financing the management activities
The capitol expenditure needed to develop a Science Park is the most obvious outgoing, but this type of development is also management intensive. In its definition of a Science Park the UK Science Park Association indicates that in addition to the necessary formal relationship with an Institute of Higher Education there should be
An active Technology Transfer function to develop the links between Research and know-how of parent University and the tenant companies;
An on-site management support capability to provide business services and advice to smaller new-start Tenants.
These operations, together with the general site management and promotion are costly. Most Science Park start off with a single individual (a Manager or Director) to run all aspects of the operations. But as a Park grows this soon becomes inadequate and a small team of people is more likely to be required.
Under the different development strategies identified earlier, these resource requirements tend to be funded in different ways and the organisational structures are significantly different.
Funding the Management Operations
(1) Strategy A
Under strategy A, the go-it-alone approach, a University finds that it is solely responsible for all management functions as shown in Figure 1 but examination of several case histories show that there has been a tendency for Universities to concentrate on the site management and technology transfer functions, leaving to one side business support activities for the smaller companies. However, it must be added that there are some well conceived schemes on some of these parks which brings the business support activities into the park through the presence of one or more tenants who provide consultancy, venture capitol and other relevant business services.
(2) Strategy B
Under a Strategy B regime, the typical management organisation form is as shown in Figure 2 with the Science Park company providing all the management functions. However, in many cases the technology transfer function is a co-operative activity with the University. In the early years of this type of organisation, while the number of tenants and the built floor space is small, the company's income will almost inevitably need supporting form grants or other soft loans provided by the company's backers i.e. the University and Local Authority or Development Agency partners.
(3) Strategy C
The principal characteristics of the management function for Science Parks is adopting the strategy C approach is that the management is unlikely to be derived from a single source. As clearly illustrated in Figure 3. Most frequently the Local Authority or Development Agency in the partnership will nominate a manager for the site who will have general supervisory responsibility for promotion and site management while the University will usually nominate a liaison officer to provide the linkages between the University and the Science Park's tenants. It is not unusual for the site manager to have responsibility for other developments in addition to the Science Park from his position with Local Authority or Development Agency.
Similarly, the business support services are frequently provided by the Development Agency or Local Authority from within specialist groups who are able to offer advice or consultancy or equity investments, However, a major difference to strategies A and B is that these support groups are not usually resident at the Science Park and are not necessarily tailored specifically to the needs of the Science Park tenants.
One variation of organisational form for this type of strategy which does seem to have been more successful as shown in Figure 4. In this case a company is formed (as for strategy B) which carries out all the functions apart from investment in the buildings of the Science Park and the day to day management of the Science Park. The advantage of this structure is that it provides a mission oriented organisation on the Science Park who brings all the Business Support and Technology Transfer Activities together and which is seen as the key organisation heading the initiative. Given the right leadership and funding, such a group can be major stimulus to the overall success to the Science Park notwithstanding that investment decisions governing growth, ultimately lie in another quarter.
Conclusions
The analysis above is not intended to identify a "best buy" Science Park strategy or its organisational structure. Nor is the analysis wholly comprehensive. For example, the Southbank Technopark in London won wide a claim for many years, as a successful venture that was the result solely of a private sector funding of the building by the prudential (the UK's largest insurance company). Nevertheless, the analysis does suggest some important conclusions for Universities contemplating an involvement in a Science Park.
Decisions by a University to "go-it-alone" and develop a Science Park presumes that they have land available for their use and also substantial capitol resources.
There does seem to be some evidence in the UK that, on average, Science Parks developed by Universities on their own to tend to grow larger than those Parks developed by other strategies. However, those Science Parks are also, on average, to be found in locations in the UK which are economically favoured and which also have a large indigenous population of high technology business.
The most popular strategy for developing a Science Park in the UK is the co-operative venture managed by a lead partner but usually with an advisory committee involving the University. This strategy holds the least financial risk for a University but also it affords a University the least opportunity to shape the direction and policies of its Science Park.
Creating a Science Park involves securing a substantial amount of capitol for buildings. It also requires marketing to attract the appropriate types of company and an active management to appraise and select appropriate tenants. The management must also be able to support and work with entrepeneurs and companies on the Science Park, providing them with a business support services and creating opportunities for worthwhile interaction with the University. Undoubtedly bringing all these activities together, including the management of the environmental aspects of the Science Park, is more effectively achieved where single mission oriented organisation is established.
Table 1
The Financial Cost and Control Implications to a University of Different Developments Strategies
Development
Stategy Financial Cost
to University Stength and Nature of Control over Science Park Policy Involvement in Tenant Selection
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A High
(averages £8.0m per University to date) High
University has complete Control over policy High
B Medium
(averages £0.5m per University to date) Negotiable with partners but potentially strong where University takes a lead Usually High
C Low
(Virtually nil cost) Usually only moderate influence Basic letting policy usually dictated by Building finder but University partner frequently introduces some tenants and may be involved in vetting process
Table 2
Sources of Investment Capitol by UK Science Parks for Infrastructure and Buildings
Development
Stategy University
(£MILLION) Local Authority
Development Agency
(£MILLION) Tenant Company
(£MILLION) Other Private Sector
(£MILLION)
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A 70 7 58 26
B 3 32 8 6
C - 48 1 10
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TOTAL 73 87 67 42
Source - UKSPA
Table 3
Comparison of Different Development Strategies of UK Science Parks
Development
Strategy Average No. of New Tenants per Year Average Amount of Floorspace Built per Year (000sq.ft.) Average Investment in Infrastructure and Buildings/year (£million)
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A (9 Science Parks) 44 27 2.6
B (6 Science Parks) 4.3 17 1.2
C (17 Science Parks) 4.1 12 0.7
Note: In calculating these figures only tenants, floorspace and investment since 1982 have been counted for Cambridge and Heriot Watt
Source - UKSPA
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