science parks and the development of ntbfs— location, survival and growth

Science Parks and the Development of NTBFs—

Location, Survival and GrowthRichard Ferguson1

Christer Olofsson2

ABSTRACT. This study investigates survival and growth of

NTBFs located on and off two Swedish science parks. We find

that firms located on science parks have significantly higher

survival rates than off-park firms. However, we observe

insignificant differences in sales and employment. Wider

variation in the growth rates of firms located on parks

together with the better survival suggests that the science

parks may be providing favorable locations for NTBFs in a

range of development phases. The image benefit associated with

a science park location is not helpful in explaining growth,

whereas a location benefit associated with cooperation with

universities is positively associated with growth.

JEL Classification: D92, L25, L32, O32

1. Introduction

The formation, survival, and growth of newtechnology-based firms (NTBFs) has been a policyissue for some time now. Firms exploiting emerg-ing technologies are seen as a means to realizereturns on academic research, and are recognizedfor their high-growth potential as significantcontributors in the general economy. This percep-tion has motivated national and local policyinitiatives aimed at supporting the growth anddevelopment of NTBFs. Establishing science parksis one such local action.

Science parks have been defined as property-based ventures with clear links to university or

other research institutions, where firms can beoffered well-suited facilities from which to conducttheir business (Monck et al., 1988). While inpractice the services offered to tenants by differentparks ranges from full-time management consult-ing to not much more than one might expect fromany business hotel, science park initiatives sharethe idea that a special location environment willsupport the development of NTBFs.

Clear evidence of exactly what and how firmdevelopment is being supported through a sciencepark location, however, has been difficult to find.The science park rhetoric asserts that parklocations offer firms distinct advantages over off-park locations. Yet, research has found fewconsistent benefits beyond a ‘‘prestigious address’’(Westhead and Storey, 1994), ‘‘social signaling’’(Felsenstein, 1994), or ‘‘image effects’’ (Ferguson,1999). Other claimed science park advantages—such as proximity to research and access tomanagement support services—have not beensubstantiated.

If we give science parks the benefit of the doubt,the so-called image effects may indeed be support-ing firms’ development: In providing firms with ahigh-image place of business, science parks maycontribute to firms’ legitimacy, helping them toattract new customers and establish new networkties. If this is the case, we might expect to see animpact from these image effects on firms’ survivaland development.

In 1995, we conducted a survey of a populationof Swedish NTBFs located both on and off scienceparks in two city areas. With the aim of learningmore about the role science parks play in thedevelopment of NTBFs, we asked firms for theirreasons for locating where they did and whatbenefits they perceived in their choice. Findingsshowed few conclusive differences between sciencepark and off-park firms with the significant

1SLU, Department of Economics

Swedish University of Agricultural Sciences

Box 7013

S-750 07 Uppsala, Sweden

E-mail: [email protected], Department of Economics

Swedish University of Agricultural Sciences

Box 7013

S-750 07 Uppsala, Sweeden

E-mail: [email protected]

Journal of Technology Transfer, 29, 5–17, 2004

# 2004 Kluwer Academic Publishers. Manufactured in The Netherlands.

exceptions that firms on science parks were onaverage younger and slightly smaller, and reportedreceiving greater ‘‘image benefits’’ from theirlocation (Ferguson, 1999; Ferguson and Olofsson,1998).

In a deeper qualitative study of some of thesurveyed firms, we learned that there were twodimensions to the firms’ perceived image benefits.On the one hand, image benefits were realizedthrough external social signaling, where the firmsfelt that potential customers and other actors inthe environment perceived the firm in a moreadvantageous light due to their science parklocation; and on the other hand, firms reportedan internal image benefit, where by being locatedin a high standard, ‘‘real’’ place of business, firmfounders and employees from academic andresearch backgrounds felt more encouraged toplay the part of the business entrepreneur (Fergu-son, 1999).

Based on these findings, we hypothesized thatthe image factor could be of particular value toNTBFs: With both their young age and newtechnology, these firms face a particularly high‘‘liability of newness’’. If firms receive a positiveimage benefit from their location, we reasoned, itcould help them to gain legitimacy in the market-place and thereby contribute to their survival andgrowth.

To test this posit, we have gathered data on thelocation, survival, sales, and employment over thecourse of 1991 through 2000 for the group ofNTBFs who participated in our 1995 survey. Thisdata allows us to compare the survival and growthof the studied firms over a 10 year period.

Our results show that the firms located onscience parks have a significantly greater rate ofsurvival, though only a marginally greater, andwider ranging rate of growth than comparablefirms located off of science parks. This indicatesthat firms in different phases of development arefinding ways to meet their survival needs in sciencepark locations.

In the remainder of this section, we will developtwo hypotheses which support the science parkand NTBF literature. We follow this with asection that presents our methodology andincludes a description of the study sample. Wethen present our analysis in three parts, coveringfirm survival, firm growth, and correlations

between claimed location advantages, and survivaland growth.

NTBFs and science parks

Storey and Tether (1998) raise four criteria thatresearchers may include in defining NTBFs: age,size, independence, and technology. Some NTBFstudies follow quite closely the definition proposedby Little (1977), where NTBFs are said to beindependent firms founded not more than 25 yearsago, that are based on the exploitation of aninvention or technological innovation, implyingsubstantial technological risk. Many studies ofNTBFs, however, show varying rigidity in theadherence to these criteria. For example, neitherRickne (2000) nor Storey and Tether (1998)include the criterion of independence. Autio(1994) and Klofsten (1994) open the technologycriterion to include all firms with advancedtechnological know-how that is exploited inproducts and services. Finally, we can see varia-tion in the criterion of size, where some researchersassume NTBFs to be a subset of small andmedium-sized enterprises (e.g. Oakey et al., 1988;Storey and Tether, 1998), where as others clearlystate that size is not a criterion (e.g. Rickne, 2000).

We use the term NTBFs here to indicaterelatively young, small firms whose core technol-ogy is dependent upon a high degree of state-of-the-art knowledge.

Monck et al. (1988) define science parks basedon four criteria: Science parks are (1) property-based ventures, (2) with links to university or otheracademic research institutions, (3) designed toencourage the formation and growth of knowl-edge-based businesses, and (4) have managementfunctions to support the transfer of technologyand business skills to tenant firms. As with theNTBF definition, however, researchers haveemphasized each of these criteria in varyingdegrees.

Of the four criteria identified by Monck et al.(1988), the science park managerial functions showa particular variation from park to park. Grayson(1993) identifies three types of management agree-ments: informal teams, single on-site managers,and on-site management companies. Parks work-ing with informal teams provide management

6 Ferguson and Olofsson

services to tenants by offering guidance in findingappropriate third-party business support actors. Incontrast, parks with single on-site managers or on-site management companies directly provide man-agement support to tenants.

Parks operating under these latter two types ofmanagement agreements have been referred to as‘‘managed science parks’’, whereas park withinformal teams have been referred to as non-managed science parks (Westhead and Batstone1999; Westhead and Storey 1994). The distinguish-ing characteristic between the managed and non-managed science parks is whether in-house devel-opment services are offered to tenants, as opposedto management services being provided by third-party actors.

There is some evidence suggesting regionaldifferences in the management approach scienceparks take. Westhead and Batstone (1999)reported a greater share of managed science parksin northern U.K. than in the south. Bengtson andLowegren (2001), in a comparison of Swedish andFinnish science parks, found that Finnish parksworked from a ‘‘competence center approach’’,offering their tenants substantial in-house businessadvice, whereas Swedish parks more often used an‘‘agent approach’’, helping tenants find suitablenetwork partners rather than providing directdevelopment support.

Both Westhead and Batstone (1999) andWeathead and Storey (1994) found that businessclosure rates were lower in non-managed scienceparks than in managed science parks. Theysuggested that this could be due to differentselection criteria used by park management inselecting tenant firms, with managed parks beingmore willing to accept weaker firms as tenants. Insupport of this explanation, they noted that thetenants on managed science parks tended to besmaller and younger—factors that have beennegatively associated with survival (further dis-cussed below),

We use the term science parks here to indicateproperty-based ventures, with links to universitiesand/or other academic research institutions, thataim to support technology-based businesses andthe transfer or development of new technologythrough the provision of a high quality, full servicebusiness location. As science parks in Sweden—where our study was conducted—tend to provide

business and technology development services totenants through third-party actors (Bengtson andLowegren, 2001), we further limit our use of thescience park term in this study to include only so-called ‘‘non-managed’’ science parks.

NTBF survival

The fact that NTBFs are small and new suggeststhat they face a ‘‘liability of newness’’ (Stinch-combe, 1965). Stinchcombe used this term toexplain the higher rate of failure among youngfirms, which he attributed to the difficulties newfirms have in securing the resources they need forsurvival. This liability arises at least in partbecause young firms have less of the legitimacyneeded to gain trust and support from other actors(Singh et al., 1986).

To develop legitimacy, firms need to gainrecognition as actors who follow the prevailingnorms of the system (DiMaggio and Powell, 1991).NTBFs may face a particular challenge in thissense, as they are not only new players in the game,but come with new ideas and/or products. Theyneed to prove themselves to be worthy businesspartners, just as any new firm must do, but theyalso need to teach the environment the meaningand value of their new products and/or services.

A number of science park studies have foundthat one of the most distinguishing attractions ofscience parks is an image benefit or prestigiousaddress (Ferguson, 1999; Westhead and Storey,1994). Felsenstein (1994) discusses a ‘‘socialsignaling’’ associated with science parks, wherescience parks are perceived as ‘‘enclaves ofinnovation’’. If other actors in the environmentshare these perceptions of science parks, we mightexpect NTBFs to gain legitimacy through a sciencepark location, easing the liability of newness, andthereby having a greater chance of survival.

Hypothesis 1: Firms located on science parks willshow higher survival rates that firms located offscience parks.

NTBF growth and science parks

Researchers have sought to identify key under-lying issues in small firm growth, and a number offactors have repeatedly been linked to firms’

Science Parks and the Development of NTBFs 7

performance. Storey (1994) makes the distinctionbetween ‘‘firm-specific’’, ‘‘founder-specific’’, and‘‘external’’ factors that have been found in variousstudies to influence growth. Of the factors thatStorey lists, firm age and size, ownership, foun-ders’ background/skills, industry sector, andregional location have been found to be useful inmodeling business growth (Almus and Nerlinger,1999; Davidsson et al., 2002; Evans, 1987).

With regard to firm-specific growth factors, firmsize (usually in combination with firm age) hasbeen one of the more significant and consistentfactors in explaining firm growth (Almus andNerlinger, 1999; Davidsson et al., 2002; Evans,1987). This has been explained by the need forsmall firms to grow to certain minimum sizes inorder to survive (Almus and Nerlinger, 1999;Audretsch, 1995; Geroski, 1995).

Many science park studies based on a compar-ison of on- and off-park firms have found thatfirms located on science parks tend to be youngerand slightly smaller (Ferguson, 1999; Lofsten andLindelof, 2001; Westhead and Storey, 1994). Inlight of the fore-mentioned growth research, wemight therefore expect the on-park firms to showbetter growth than off-park firms.

With regard to founder-specific growth factors,technical and business competencies have beenfound to be significant in business development.Klofsten found that, though the balance of skillsdiffer between different types of small firms, bothtechnical and business skills are needed toestablish a stable business platform for continuedgrowth and development (Klofsten, 1994; Klof-sten et al., 1988). Almus and Nerlinger (1999)included an aspect of founders’ competence orskills in their growth model, considering bothtechnical skills and business skills. Oddly, Almusand Nerlinger found a positive growth effect frombusiness skills and technical skills independently,but no effect when they were combined. Whetherthis is an anomaly of their data set or a reflectionof focused management attention (business devel-opment or technical development) leading tomore aggressive behavior is a question for furtherresearch.

A number of comparative science park studieshave found that founders of firms located onscience parks tend to have a higher degree ofeducation than off-park firm founders, and that

the science park firm founders are less likely tohave prior business experience (Lofsten andLindelof, 2001; Westhead and Storey, 1994). Thissuggests that the firms located on science parkshave a higher technology competence, but mayneed support in business competence. Applyingthe line of reasoning in Klofsten et al. (1988), ifscience parks help firms with ‘‘management func-tions to support the transfer of technology andbusiness skills to tenant firms’’ (Quintas et al.,1992), then we might again expect to see strongerdevelopment and growth.

Hypothesis 2: Firms located on science parks willtend to have higher growth rates than firmslocated off science parks.

Westhead and Storey (1994) report some evidenceof better growth in firms located on science parks.They conducted a follow-up study of Monck et al.(1988), comparing firms located in science parks tofirms located off-park in the United Kingdom.They found that a park location did not seem toinfluence firm survival, though the group ofsurviving firms located in science parks showed agreater average growth rate over the course of thestudied six years. However, Westhead and Storeynote that the average growth (as indicated bygrowth in employment) in both the on- and off-park groups was significantly influenced by thevery strong performance of relatively few firms.

Lowegren (2003) found that different types ofmanagement teams explained some ‘‘perceivedgrowth’’ differences. Firms being managed byfounders tended to report weaker perceivedgrowth than firms with recruited managementand firms with parent-company management. Thissuggests the need for considering different sciencepark effects in different tenant sub-groups wheninvestigating firm growth.

Olofsson and Wahlbin (1993) studied thegrowth patterns of firms started by universityresearchers in Sweden. Many of these firms staysmall, showing very moderate growth over the 10years studied, yet continued in existence. Thisweak growth reflects a large share of ‘‘part-time’’firms, where founders continue to hold universityemployment and thus reducing the need forincome from the firm. In contrast, firms showingstrong growth were found more often to be run by


entrepreneurs who made a full-time commitmentto develop successful businesses.

Olofsson and Wahlbin (1993) found that uni-versity spin-offs, in spite of their frequent slowgrowth, made significant contributions in theresearch and development of their customers.This may explain why the firms continued tosurvive in lack of better growth performance: Theimmediate economic value created by the aca-demic spin-offs may be quite small compared tothe value generated once the products or servicesare put into use by customers. This latent valuemay provide customers with the incentive to buildand maintain relationships with the academic spin-offs despite their weak business performance.

Lindstrom and Olofsson (2002) note thattechnology-based firms may prolong an ‘‘estab-lishing phase’’ of development to continue thedevelopment of the technology and/or businessconcept before entering a commercial growthphase. To survive this extended establishingphase—where there is little generated revenues—firms gain the support of actors who are willingto provide the necessary resources in exchangefor a share of anticipated future returns. Thus,some NTBFs may show extended periods ofrelatively weak commercial growth, eventuallyfollowed by relatively high growth in thesuccessful cases.

The findings of Lindstrom and Olofsson (2002)and Olofsson and Wahlbin (1993) make clear theneed for treating survival and growth indepen-dently. While literature on small firm growth (e.g.Almus and Nerlinger, 1999; Audretsch, 1995;Geroski, 1995) and Stinchcomb’s (1965) ‘‘liabilityof newness’’ suggest a need for strong early growthin order to reach a minimum size to assure survival(linking survival to growth), some potentiallysuccessful firms may survive for many yearswithout showing significant growth.

To summarize then, our knowledge of thegrowth of NTBFs and the character of firmslocated in science parks suggests that we shouldsee higher growth in firms located in science parkscompared to off-park firms. At the same time, wefind evidence in the literature that some NTBFsmay survive for extended periods with little growthby gaining support from actors who are willing toprovide the resources necessary for the firm tocontinue its development. Thus, commercial

growth is not the only means of overcoming theliability of newness.

2. Methodology

To test the hypotheses that NTBFs located onscience parks have a greater rate of survival and astronger rate of growth than NTBFs in off-parklocations, we examine a group of 66 NTBFs whoparticipated in a 1995-survey study (Ferguson,1999). The firms are from two Swedish ‘‘universitycities’’ in south-central Sweden. Both the city areashave dynamic technology-based industries, andeach has an established, ‘‘non-managed’’ sciencepark. The survey sample was drawn from localbusiness address registers owned and maintainedby NTBF support actors in each city. Theseregisters are used to target business developmentactivities and disseminate information to localNTBFs. Postal codes were used to ensure selectedfirms were from within the metropolitan areas, andstratified sampling was used to attain similar sizedgroups of firms located on and off of science parks.

This method of compiling a sample shouldprovide a better basis for the comparative study oflocation effects on firm development than theoften-used matched sampling (where one sampleof science park NTBFs is ‘‘matched’’ to anothersample of NTBFs taken from a different sourceusing criteria such as firm size, age, and industry.See, for example, Lofsten Lindelof, 2001; Moncket al., 1988; Westhead and Storey, 1994). Whilematched-sampling can provide good generalrepresentativeness of the individual comparativegroups (a representative sample of firms on scienceparks and a representative sample of firms locatedoutside parks), there is a risk of differing samplingbias. It is difficult to know whether observeddifferences between the groups being compared areassociated with the issue being studied, or a resultof different samplings.

While the nature of the address registers wedrew our sample from most likely means that verynew firms are under-represented, and that devel-opment-oriented firms are over-represented, thesebiases should be independent of the sub-groups,thereby giving our results high reliability. Anysimilarities and differences we find between thesub-groups should reflect genuine differences


within NTBFs. At the same time, the generalvalidity of our findings extends only to the relativecomparison of the sub-groups we study. Theactual survival and growth values reported inthis study will reflect any biases in the populationfrom which our sample was drawn.

The study sample

Seventy-six firms replied to the 1995 survey, whichwas 58% of the final sample population. Of these,71 had a legal business form requiring them tosend their annual report to the Swedish Patent andRegistration Office (partnerships and corpora-tions), providing us with access to archival survivaland growth data.

Of the 71 firms, seven reported zero employeesat the time of the survey. Of those seven, five werestill reporting zero employees in 2000. As ourinterest lies in the survival and development of‘‘genuine’’ businesses, and extended periods ofzero employment suggest more ‘‘convenience-oriented’’ firms (tax shelters, holding companies,etc.), we have removed these firms from oursample. The result is a study sample of 66 firms,30 of which were located on science parks at thetime of the survey, and 36 who were located off-park.

The survey administered in 1995 was firstreported in Ferguson (1999). The purpose of thesurvey was to study the role that science parkswere playing in the development of NTBFs.Respondents provided information on their per-ception of the location benefits they were receiving.

Operationalization of firm survival and growth

Both firm survival and firm growth can beinterpreted and measured in different ways. Wehave chosen here to base ‘‘survival’’ on thecontinued legal existence of the firm, and to base‘‘growth’’ on changes in employment and grosssales. While this approach ignores the fate of thebusiness ideas and other resources of non-surviv-ing firms, and does not consider other measures ofgrowth (such as research and development, capitalasset growth, or returns on investment), similarindicators have been used by others (Almus andNerlinger, 1999; Davidsson et al., 2002; Evans,

1987; Lofsten and Lindelof, 2001; Westhead andStorey, 1994), and provide a readily obtainableand highly comparable measure. These measuresalso directly reflect the underlying political goals ofpublic science park policy, namely business andjob creation, and economic activity.

We obtained our survival and growth data fromthe Swedish Patent and Registration Office. Thisagency collects annual reports from all incorpo-rated business in Sweden, and maintains statusand address information. We extracted grossannual sales and number of employees from thefirms’ annual reports as submitted. While thesefigures will reflect any ‘‘creative book-keeping’’that firms may engage in for tax reasons or otherpurposes, they accurately represent what the firmsare officially presenting to the public.

3. Results

The firms located on science parks in our studytended to be both younger and smaller in numberof employees and sales than their off-park counter-parts (see Table I). This is consistent with theresults of other comparative studies (e.g. Lofstenand Lindelof, 2001; Westhead and Storey, 1994),and with the way our sample has been drawn,strongly supports the notion that science parkstend to house firms that are younger and smalleroff-park locations.

It is also quite clear in our sample that firmslocated on science parks report a greater imagebenefit than the off-park firms (see Table II).

We also have compared the firms who werelocatedon scienceparks in 1995 to the off-parkfirmswith regard to industry (IT, biotech, ‘‘other’’, and‘‘multiple’’), the background of the founding group(‘‘business’’, ‘‘research/technical’’, and ‘‘other’’),and type of majority product (‘‘services’’ and‘‘goods’’), and found no significant, or evenmargin-ally, noteworthy differences between the locationgroups. This supports our assumption that thegroups of NTBFs located on parks and off parks inour sample are from a common larger population.

Firm location

Firm location is a dynamic variable in this study.In our data set, we have location information at


three different times: at the start-up of the firm(which is not the same point in time for differentcases); in 1995; and in 2002. Firms indicated thetype of location they had ‘‘at start-up’’ and‘‘currently’’ in the 1995 survey. We verified firms’postal code to be a reliable indicator of a sciencepark location, as both of the parks in the studyhave their own unique code, and used SwedishPatent and Registration Office address informa-tion to determine location in 2002.

As shown in Figure 1, in 1995 the sample wasfairly evenly divided between science park and off-park locations (30 and 36 firms, respectively). Athird of the sample had started their business in ascience park location, the remaining two-thirdsstarting off-park. Of the firms who started onscience parks, nearly three-quarters remained in1995. Fourteen of the original 22 start-ups werestill in their park locations in 2002. Of the 44 firmswho started off-park, two-thirds were still in off-

Figure 1. Firm location and relocation.

Table I

Sales, employment and age in 1995, by location

Location in 1995

Science park Off-park

Sales in 1995** Mean 4.33 MSEK 10.24 MSEK

Median 0.24 MSEK 5.41 MSEK

Std Dev. 4.26 11.75

n ¼ 29 36

Employees in 1995* Mean 6.5 11.4

Median 4 7

Std Dev. 10.0 11.8

n ¼ 30 36

Age in 1995** Mean 6.1 9.9

Median 6 9

Std Dev. 4.3 5.4

n ¼ 30 36

Notes: *Significant difference, p� 0.1; **Significant difference,

p� 0.01.


park locations in 1995, all remaining off-parkthrough 2002.

In 2002, there were a total of 17 firms located inscience parks, and 35 firms located off-park. Theother 14 of the 66 studied firms had closed by theend of 2002 (reported in more detail below).

Firm survival

Businesses in Sweden are required to report allchanges in legal status to the Swedish Patent andRegistration Office. This includes changes betweensole proprietorship, partnership and corporatebusiness forms, as well as notice of formalinactivity, merger or acquisition, liquidation, andbankruptcy. Based on this reported information,we defined surviving firms in this study as thosefirms who were still in operation under their 1995entity number. Non-surviving firms include firmsthat have ‘‘failed’’, ending in liquidation or bank-ruptcy, as well as those that have ‘‘succeeded’’,ending in merger or acquisition. We will call thenon-surviving group of firms that has ended inliquidation or bankruptcy closures, and the groupthat has ended in merger or acquisition M&A.

Of the 66 firms in our 1995 sample, 14 were nolonger registered as operating businesses, resultingin a 79% overall survival rate. Of the 30 firmslocated on science parks in 1995, 28 firms (93.3%)were still in operation in 2002, compared to only24 of the 36 off-park firms (66.7%). Kaplan-Meiersurvival analysis shows this difference in survivalto be statistically significant at the 99%-level(see Table III).

It is also noteworthy that half of the non-surviving firms from the science park group are inthe M&A sub-group, compared to only a third ofthe non-surviving off-park firms. Though the actual

number of firms is very low, the pattern suggeststhat the firms on science parks are more apt todevelop a commercially attractive business idea.

We can note that all five of the M&A firms areconsidered to be success cases in the local businesscommunities. These firms had all successfullydeveloped a product or services with strongmarket potential, which was transferred togetherwith personnel and other production resourcesinto another business for marketing and/or con-tinued development. We followed up on four ofthe nine closures, and confirmed that they hadfailed to develop an economically attractiveproduct. For example, one firm developed anexpensive scientific instrument with a highlyspecific and limited use in basic research. Whileits technical merit was unchallenged, its marketwas insufficient in both size and ability to pay.

If we consider the non-surviving firms’ startinglocation, we can see in Figure 1 that three of theclosed firms started in a science park location(13.6%), though all three had moved off-park by1995. Eleven of the non-surviving firms started inoff-park locations (25.0%), though two had movedinto science parks by 1995. With the relativelysmall numbers, this difference does not have highstatistical significance, though it again suggestsbetter survival for firms in science parks.

We can also note that all of the 16 firms whostarted in science parks and were still in scienceparks in 1995 survived through 2002, whereas onlythree of the six firms who started in science parksand moved off-park by 1995 survived. Thisindicates that firms tend to move from sciencepark locations prior to ultimate closure. While thismight explain some of the science park group’sbetter survival, the fact that 12 of the 14 firms whomoved into science parks after a start off-parksurvived, versus 21 of the 30 firms who started off-

Table II

Number of firms (percent of location group) reporting image benefits, grouped

by firm location in 1995

Location, 1995

Science Park Off-park Total

Reported image benefit Low 7 (25.0%) 22 (62.9%) 29 (46.0%)

High 21 (75.0%) 13 (37.1%) 34 (54.0%)

Total 28 (100.0%) 35 (100.0%) 63 (100.0%)

Note: x2 ¼ 8.97; d.f. ¼ 1; significant level ¼ 0.003.


park and were still off-park in 1995, thoughstatistically marginal, again suggests a survival�advantage in a science park location.

Firm growth

Our data set included sales and employment datafrom firms’ annual reports for the years 1991,1993, 1995, 1998, and 2000 (at the time ofcompilation in 2002, 2000 was the last year withrelatively full data). These years where chosen tobalance our interest in capturing the early growthof entering firms with the time and cost involved inextracting the data from the archive. The seriesresults in up to four periods in which we cancalculate annual average growth for each firm by

dividing the change in sales during the period bythe sales in the first year of the period, and thendivide this by the total number of years in theperiod:

ðsales2 � sales1Þ=sales1yrs in period

:

And likewise for employment:

ðempl2 � empl1=empl1Þyrs in period

:

Firms founded after 1991 naturally had missingvalues for some of the years, as did some firms whodid not submit annual reports as required. Thecalculated annual sales growth rates ranged from0.50 up to 5.72, with one exception.1 Thecalculated annual growth in employment rangedfrom � 0.50 to 3.25. Firms’ growth in sales andgrowth in employment are highly correlated in allperiods, with the cumulative averages showing aPearson correlation of 0.702 ðp< 0.10Þ.

Looking at the growth rate differences inlocation group means shown in Table IV, we cansee a marginal tendency for better growth in firmslocated on science parks. This holds true for all ofthe measured periods for both growth in employ-ment and growth in sales, except for the 1995–1998period, where the off-park group shows marginallybetter growth. This marginal difference becomeseven less if we look at the median growth rates,indicating that the possible better performance in

Table III

Firm survival analysis, 1995–2002, grouped by location in 1995

(number of firms and percent of location group)

Location, 1995*

Science Park Off-park Total

Surviving** 28 24 52

93.3% 66.7% 78.8%

M&A 1 4 5

3.3% 11.1% 7.6%

Closed 1 8 9

3.3% 22.2% 13.6%

Total 30 36 66

100.0% 100.0% 100.0%

Notes: *Table x2 ¼ 7.065; d.f. ¼ 2; significant level ¼ 0.029.

**Kaplan-Meier, log rank ¼ 6.68; d.f. ¼ 1; significant

level ¼ 0.009.

Table IV

Range and average of annual growth in employment and sales in science park and off-park firms for measured periods

Science park Off-park

Min. Max. Mean Median Min. Max. Mean Median

Employment 1991–1993 n ¼ 16 � 0.41 0.50 0.07 0.00 n ¼ 18 � 0.25 0.38 0.06 0.00

Employment 1993–1995 n ¼ 22 � 0.38 2.00 0.41 0.26 n ¼ 21 � 0.25 3.25 0.29 0.11

Employment 1995–1998 n ¼ 25 � 0.33 1.33 0.16 0.00 n ¼ 24 � 0.33 3.08 0.30 0.13

Employment 1998–2000 n ¼ 23 � 0.50 2.69 0.18 0.00 n ¼ 23 � 0.50 0.83 0.11 0.10

Sales 1991–1993 n ¼ 17 � 0.25 5.72 0.56 0.13 n ¼ 19 � 0.21 0.93 0.12 0.03

Sales 1993–1995 n ¼ 24 � 0.42 3.93 0.61 0.23 n ¼ 21 � 0.13 3.03 0.54 0.29

Sales 1995–1998 n ¼ 27 � 0.33 1.17 0.24 0.23 n ¼ 24 � 0.18 2.98 0.45 0.17

Sales 1998–2000 n ¼ 26 � 0.50 37.24* 1.81 0.07 n ¼ 24 � 0.50 0.77 0.25 0.21

Notes: *See footnote 1 for details. No mean differences are statistically significant at the 0.10-level or better (Mann–Whitney test for

independent samples).


the science park group is due to a few high-performing firms. Westhead and Storey (1994)noted a similar pattern in their study population.

In all of the measured periods, the science parkgroup showed greater variation. This can beclearly seen in the differences in standard deviationshown in Table V. Much of this variation is due tohigh-performing outliers among the science parkfirms, however the science park group also oftenincluded the weakest growers in the differentmeasured periods. The greater range and variationin growth performance together with the greaterrate of survival in the firms located on scienceparks suggests that these firms are in some way lessdependant upon growth for their survival.

Reported location advantages and firm growth

In the 1995 survey, firms reported their perceivedbenefits of location on a one-to-five scale for anumber of different aspects. In comparing theresponse of all 66 sampled firms to those of onlythe 52 surviving firms, we can note some differ-ences.

First, there is a general decline in the share offirms reporting a ‘‘high’’ or ‘‘very high’’ benefit innearly all of the categories, in both the sciencepark and off-park groups. This indicates that thenon-surviving firms generally reported greaterbenefits from their location.

Second, the relative difference between thelocation groups in the reported location benefitin cooperation with universities increases, becom-ing statistically significant at the p� 0.1-level.Similarly, the relative difference in the reported

unique location benefits (the general benefitvariable) also increase, again with firms in scienceparks reporting the greater benefit.

In checking for association between the possiblebenefits of location and firms’ growth, five of thebenefits included in the survey, ‘‘recruiting’’,‘‘cooperation with universities’’, ‘‘access to newcustomers’’, ‘‘positive image’’, and ‘‘unique advan-tages’’, are noteworthy.

Firms that found a high recruiting advantage intheir location showed weakly significant bettertotal average growth in sales ðp � 0:10;eta2 ¼ 0:063Þ. This relationship is even morepronounced in firms’ earlier growth, though highvariation in the data leads to only a marginalimprovement in the test scores. This makes logicalsense, as firms who can recruit the necessary newemployees, especially when they are young, canthen grow. At the same time, while Table VI showsthat firms on science parks reported higherrecruiting advantages in their location than off-park firms, the difference is not significant at eventhe 0.10-level.

Firms reporting benefits from their location incooperation with universities tended to havehigher average annual growth ratesðp � 0:10; eta2 ¼ 0:062Þ. This relationship wasmuch less apparent in firms’ early growth in salesðeta2 ¼ 0:027; 0:10 < pÞ.

Growth rates do not vary significantly withfirms’ perception of location benefits associatedwith access to new customers, nor image. Neitherdoes the general benefit variable show a significantrelationship with growth.

We can see in Tables VI and VII that, of all thelocation benefits measured, only ‘‘cooperation

Table V

Total average annual growth rates in science park and off-park firms

Science park Off-park Total

Average annual growth in employment

n¼ 27 24 51

Mean 0.2662 0.2070 0.2384

Std Dev. 0.5555 0.3814 0.4778

Median 0.14 0.10 0.12

Average annual growth in sales

n ¼ 27 24 51

Mean 0.5254 0.3475 0.4417

Std Dev. 0.6841 0.3674 0.5599

Median 0.37 0.23 0.25


with universities’’ is both significantly differentbetween the science park and off-park groups andshows a significant relationship with growth. Inother words, firms located on science parks aremore apt to report strong benefits in cooperationwith universities from their location, and firmsthat claim such benefits tend to have bettergrowth. While we should be cautious in assumingcausality, firms located in science parks appear tobenefit from greater cooperation with universities,leading to stronger growth, than off-park counter-parts.

4. Conclusions

Our results show that the firms located on scienceparks in our study had a better rate of survivalthan the off-park firms between 1995 and 2002. Atthe same time, growth in employment and salesduring 1991–2000 was not significantly different inthe firms on and off of the parks. This isparticularly noteworthy considering that the firmson science parks tended to be smaller and younger:Recent research on growth in NTBFs shows thatsmaller, younger firms tend to have higher growth

Table VII

Average annual growth in sales for different perceptions of location benefits

Average annual growth in sales

Location benefit N Mean Std dev. Median

Recruiting benefits*

Low benefit 27 0.3287 0.4648 0.1778

High benefit 21 0.6161 0.6627 0.4181

Cooperation with universities*

Low benefit 28 0.3356 0.4286 0.1945

High benefit 20 0.6209 0.7059 0.4180

Access to new customers

Low benefit 40 0.4459 0.6043 0.2391

High benefit 9 0.5049 0.3744 0.5338

Image benefits

Low benefit 22 0.3195 0.4356 0.2133

High benefit 27 0.5686 0.6401 0.3953

Advantages from location

Low benefit 22 0.3212 0.4146 0.1945

High benefit 25 0.5769 0.6774 0.3658

Note: *Significant difference at the 0.10-level.

Table VI

Percent of firms reporting high or very high advantages of their location

All 66 firms (n ¼ 58–63) Surviving 52 firms (n ¼ 47–50)

Reported high location benefits Sci. pk (%) Off-park (%) Sci. pk (%) Off-park (%)

Access to research 20.0 34.3 13.0 25.0

Recruiting benefits 55.6 42.9 52.0 33.3

Cooperation in R&D 43.5 40.0 38.1 29.2

Cooperation with university 57.7 40.0 54.2* 29.2

Access to new customers 32.1** 8.8 30.8** 4.2

Access to equipment 22.2 8.6 24.0 8.3

Image benefits 75.0*** 37.1 73.1** 37.5

Unique location benefits 65.4* 42.9 66.7** 37.5

Notes: * significant location group difference, p � 0:1. ** significant location group difference,

p � 0:05. *** significant location group difference, p � 0:01.


rates, reflecting their need to increase in size tooffset their liability of newness (Almus andNerlinger, 1999; Audretsch, 1995; Geroski, 1995).If the smaller, younger firms in science parks aresurviving better than their larger, older off-parkcounter parts without showing significantly bettergrowth, we need to turn to other factors to find apossible explanation.

Before discussing explanations of the patterndescribed above, we should recall that the group offirms in science parks had greater variation in theirgrowth rates than the off-park firms, reflecting thatparks host both high growth firms and firms thatare showing weak growth: There are both morehigh-growth outliers, as well as more weak-growthfirms. This suggests that the firms located inscience parks are in a wide range of developmentphases and are apt to have different needs. At thesame time, the higher survival rate of the firms onscience parks suggests that the range of needs isbeing met.

Of the location benefits firms report receiving,the greater benefits in cooperation with universitiesreported by firms in science parks may besupporting the firms in ways that offset the needfor early growth, and at the same time bed the wayfor subsequent high growth. To test this, we needto investigate more closely how firms are cooperat-ing with universities, and what the fruits of thecooperation are.

The firms located on science parks also reporteda higher image benefit. Though we hypothesizedthat such a benefit would help firms overcome theliability of newness, and thereby improve thechances of survival, we found no clear relationshipbetween perceived image benefits and survivaland/or growth. This suggests that an image benefitneeds to be accompanied by other factors if it is tobe realized by the firm, and that it is not aguarantee to overcoming a liability of newness inand of itself.

Our findings in this study confirm some of theprevailing understanding of firms located onscience parks with a sampling method that offershigh reliability: Firms located on science parkstend to be younger and smaller than off-parkcounter parts, and science park locations are moreoften perceived to offer an image benefit to firms.Our finding also show that the firms on scienceparks have a greater rate of survival, despite a

greater range—though not significantly higher onaverage—of growth in sales and employment. Thisindicates the need for further study to increase ourunderstanding of firm survival independent ofgrowth. The studied firms show that small youngfirms do not necessarily need to grow more rapidlyto overcome the liability of newness.

Acknowledgments

The authors would like to thank the two anony-mous reviewers, editor Donald Siegel and MikeWright for their helpful comments on earlierversions of this paper.

Notes

1. One firm reported exceptional sales in 2000, resulting in a

3,724% average annual growth rate for the 1998–2000 period.

This was preceded by three periods of negative growth. Further

investigation showed that this very high rate was attained after

business restructuring, when another business gained ownership

in the firm. After this restructuring, the firm began marketing

the new owner’s product. Though the sales in 2000 appear to be

related to the firm’s earlier activities, the unusual pattern

reflects extenuating circumstances that cannot be said to

represent normal NTBF development.

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