Jerome S. Osteryoung

A Comparison of Critical Success Factors for Effective Operations of University Business Incubators in the United States and Korea

Research Background The university business incubator (UBI) is an innovative system designed to assist entrepreneurs, particularly entrepreneurs in technology, in the development of new firms. By providing a variety of services and support to startup and emerging companies, the incubator seeks to link talent, technology, capital, and know-how effectively to leverage their talent, to accelerate the development of new companies, and thus to speed the commercialization of technology (Smilor, Gibson, and Dietrich 1990). The present study suggests that there are critical success factors for effective operation of business incubators. And it compares the perceived importance of them between managers of U.S. and Korean firms. Numerous countries promote business incubator programs to revitalize their local economies, to increase employment, and to nurture high-technology industries. Recently, a number of business incubators have been established and are operated with the goal to help Korea adapt to the changing environment and to increase economic competitiveness. Initially, we reviewed the existing literature on operations and management of business incubator system. Smilor (1987) investigated the critical success factors related to managing incubator system effectively and suggested the following: on-site business expertise, access to financing and capitalization, in-kind financial support, community support, entrepreneurial network, entrepreneurial education, perception of success, selection process for tenants, tie to a university, and concise program milestone with clear policies and procedure. Lumpkin and Ireland (1988) investigated the screening practices of incubators and identified unique groups of incubators. The screening practices were found to relate to sponsorship but not to physical characteristics or objectives. Allen and McCluskey (1990) investigated the relationship among incubator structure, policy, services, and performance. From this research, it is determined that only one other structure, policy, or services variable is required to explain business development outcomes. Mian (1994) examined the cases of six incubators in the United States that are sponsored by universities. He found that university incubators share similar characteristics but also have some unique features, which can be summarized along three dimensions (Bruton 1998). The first involves the characteristics of the incubators themselves, such as technology transfer and involvement of the private sector with the incubators. The second dimension of unique characteristics of university-sponsored incubators was the profile of the client firms of the incubators and how the incubators management interacted with those clients. He found that university-sponsored incubators typically conducted performance reviews of the tenants to ensure that they were performing as planned. Finally, Mian (1994) examined the nature of the entrepreneurs starting the businesses. The average age of entrepreneurs starting businesses was 40 years, and most of the entrepreneurs were university graduates. In addition, Mian (1997) suggested a conceptual framework for assessing and managing the university technology business incubator (UTBI) as a tool for new venture creation. University technology business incubator performance assessment framework is drawn from a combined survey of the existing body of knowledge in the areas of business incubation, the universitys involvement in technology and business development support, and the commonly accepted approaches to organizational assessment that provide the necessary building blocks for the integrative framework. Sherman (1999) examined the effectiveness of business incubation programs on helping startup businesses to survive and to grow. The results can be summarized with four implications. The first is that incubator managers and sponsors need to reach consensus regarding realistic outcomes their programs are trying to achieve. …

Do Venture Capitalists Add Value to Small Manufacturing Firms? An Empirical Analysis of Venture and Nonventure Capital-Backed Initial Public Offerings

We examine a set of small, venture capital (VC)‐backed manufacturing firms and compare it to a control sample of nonVC‐backed manufacturing firms going public between 1990 and 1996. We use the degree of underpricing, three‐year sales growth, three‐year cumulative stock return, and three‐year survivability as measures of success. First, we test if the presence of VC backing results in significant differences in success between the two samples. Next, we test if certain VC and deal characteristics are discriminators within the VC‐backed sample of firms. Despite previous literature, which argues for either inferior or superior VC post‐initial public offering (IPO) performance, these tests indicate no significant differences between VC‐ and nonVC‐backed firms. Additionally, it is found that VC and deal characteristics are not discriminating factors within the VC sample.

Asset-Based Financing and the Determinants of Capital Structure in the Small Firm

Small firm debt financing differs from large firm debt financing. Most studies of the determinants of capital structure examine large, publicly owned and traded firms that rely on the issuance of bonds for their debt fmancing. This study examines the determinants of capital structure in small, privately owned firms that rely heavily on secured commercial loans (Asset-Based Loans) for their debt financing. The results of the empirical analysis indicate that a small firm’s asset structure is the most important determinant of the use of debt financing.

A Comparison of Determinants for Business Start-Up in the U.S. and Korea

This study compares Korean and U.S. small businesses in terms of (1) owner/manager and firm characteristics and (2) the relative importance placed on determinants of business start-up. The U.S. and Korean firms were each further divided in terms of the type of business (that is, general/opportunistic or technical/craftsman) to see whether this distinction influenced the importance placed on start-up factors. Prior studies in Korea have shown a significant difference in the behavior of these two types (Lee 1998). Research Background The literature regarding international comparisons of entrepreneurship practice is limited. To help fill this gap, this study compares factors in Korea and the U.S. that are essential for the successful small business. Most of the prior studies were based on the experience of small firms operating either in North America or in European countries (Luk 1996) and concluded that business success is the result of a web of factors (Hills and Narayana 1990; Duchesneau and Gartner 1990; Keely and Roure 1990; Hatton and Raymond 1994). Steiner and Solem (1988) investigated factors crucial for success of small manufacturing firms in the U.S. and found that relevant managerial background and experience, flexibility in operations, availability of labor, and possession of identifiable competitive advantages are factors significant to determining success. When Huck (1991) investigated competency factors for small business success in Jamaica, he found that 12 competency areas (starting a business, planning and budgeting, management, marketing/selling, advertising and sale promotion, merchandising, financing and accounting, personnel relations, purchasing, production, facilities and equipment, and controlling risk) are needed for small business success. Yusuf (1995) discussed critical success factors that are perceived by South Pacific business operators as being necessary for successful operation of small business. They found that business operators believe both individual factors, such as possession of certain skills and good character, and env ironmental factors, such as governmental support, political and traditional demands, and the need for balancing these demands with business concerns are considered critical to small business success. Ibrahim and Goodwin (1986) identified entrepreneurial behavior and managerial skill as key success factors in small business. In this study, the determinants that U.S. and Korean business operators consider necessary for a successful start-up are identified. Because factors to be considered in starting a new business are many trying to establish a priority list is difficult. However, Grieco (1975) suggested the following: (1) determining the capital requirements; (2) obtaining legal assistance; (3) researching the market; (4) locating the business enterprise; (5) securing personnel; (6) providing physical facilities; and (7) creating a profit plan. Lee (1998) suggested and validated the determinants to be considered for successful start-up businesses in Korea by querying 87 Korean consultants to small businesses. Table 1 shows the determinants of successful start-up businesses in Lees study. Research Method After a pilot survey in the U.S. and Korea, a four-page questionnaire was prepared and randomly sent to 240 business operators in each country. The names of the operators were drawn at random from the membership in the Jim Moran Institute in the College of Business at Florida State University, the Korea Productivity Center (KPC) entrepreneurship school, and the University in Korea. Sixty-two responses from the U.S. and 53 from Korea were received, for a total of 115 responses, yielding an average return rate of 23 percent. Surveys were discarded if they were not complete (n = 18). Characteristics of respondents and their firms. In a categorical format, respondents were asked to indicate their sex, age, major at college, education level, previous job field, previous position, and years of experience with the current business. …

The Determinants of Successful Micro‐IPOs: An Analysis of Issues Made under the Small Corporate Offering Registration (SCOR) Procedure

In this article we extend the existing IPO literature to the case of micro‐IPOs by analyzing a sample of Small Corporate Offering Registration (SCOR) documents from the U.S. state of Washington. Through theory, we identified variables that should impact the probability of success or failure in a SCOR offering and then empirically tested them. Empirical support was found for the relevance of (1) marketing mechanisms and expenses; (2) ownership and governance factors; (3) business life cycle stages; and (4) signaling factors consistent with our theoretical predictions.

Analysis of Financial Leases

In recent years, leasing as a means of financing, has grown at an annual rate of 15% [5]. Parallel to this expanding impact of leasing, has been a similar increase in the techniques for lease analysis [See, for example, 1, 2, 4, 7, 8, 9]. The rapid proliferation of these techniques, however, has produced methods of analyzing financial leases which overlook critical elements in the evaluation of alternatives.

Pricing Minority Discounts in Closely-Held Corporations

The purpose of this research is to investigate the pricing of minority discounts in small private finns. An option pricing model is developed that allows the specification of the minority discounts. With this model the computation of the minority discount can be computed without having the option actually exist.