Editor’s note: The RTP Product Pipeline is designed to help entrepreneurs, business leaders, educators and inventors better understand the product commercialization process. Montie Roland and Tom Vass are co-founders of the RTP Product Development Guild, Inc. Their column appears weekly.
MORRISVILLE – The economic idea that undergirds the RTP Product Development Guild is that there is a relationship between technology innovation and economic growth. Investment in innovation within the firms and startups in RTP’s industrial clusters will lead to the creation of jobs, income, exports of products produced by local firms.
The economic agents who undertake innovation investments in startup companies are generally called entrepreneurs, which raises the question: from where do entrepreneurs come?
The Canadian government asked this same question several years ago in its policy effort to raise the rate of new venture creation. In an experiment to stimulate entrepreneurial initiatives, they created the Inventor’s Assistance Program (IAP) at the Canadian Innovation Centre (CIC) in Waterloo, Canada.
Part of their idea looks like part of our idea at the RTP Guild. In their case, product development analysts in the IAP evaluate a specific product idea or invention on 37 dimensions before it reaches the market. The analysts are primarily university staff or other types of government-funded specialists.
In our case, the members of the Guild who provide project oversight on a new product idea are drawn from private consulting firms in the RTP who have a financial interest in product innovation and investments.
We suspect that there is a population of independent inventors and latent entrepreneurs who operate outside of the large established corporations. Part of their competitive strength is that they do not suffer from the decision-making process of biases often associated with product development in established firms. Most of the supply of entrepreneurs come from the established firms in the regional economy and they bring with them their knowledge from the established firms when they start their new venture.
The new products offered to the market by independent inventors may be somewhat different in their features from those offered by larger corporations, providing the greatest opportunities to commercial radical or disruptive innovation, the kind that creates the greatest number of jobs and wealth.
The Canadian style of helping these independent entrepreneurs in an Inventor Assistance Program would probably not work well in the American setting. We suspect that attaching the inventors to private consultants who have a financial interest in the outcome will lead to a greater rate of successful new ventures.
Which raises another question: How do you plug independent entrepreneurs into the RTP’s innovation networks, that are usually part of the knowledge flows in the universities and large corporations?
Paul Romer (1986) developed the idea of “endogenous growth theory,” which makes technological innovation the primary cause of economic growth. Romer suggests that the interactions between firms in the regional economy will affect the region’s stock of new product ideas. His main idea is that the quality of human capital and the size of the labor force engaged in the production of ideas are key factors in innovation and hence regional economic growth.
The secret sauce in Romer’s theory is the region’s knowledge base. We believe that the broadest access by the greatest number of potential entrepreneurs to the RTP’s common knowledge base is the major factor that provides regional economic competitive advantage to start up firms.
In general, Romer’s major focus is on the way in which firms within the region’s industrial clusters and their spatial proximity enhance knowledge creation through interactive learning and innovation.
Many economists have called this same idea about a region’s knowledge base the region’s innovation networks. Our Guild is a part of a not-very-well-defined RTP innovation network that operates outside of the university and large corporation network, and focuses on new product development. We rely on local private consultants because we suspect that they understand the localized patterns of knowledge sharing, innovation, and learning that helps entrepreneurs create new ventures.
We have noticed in our first six months of existence that the potential supply of independent entrepreneurs is great, but that their ideas are not so great when they first seek outside help. We believe that there needs to be another component added to the RTP’s fledgling innovation network, a type of precursor peer support group that helps latent entrepreneurs better conceptualize their ideas.
We have been calling this new component the “RTP Monthly Deal Mapping Meetings,” a type of business social networking event that teaches entrepreneurs and local sources of capital about the type of investment ideas that would work well, given the RTP’s existing economic structure. The outcome of the monthly meetings would be to from the inventors’ peer support groups for specific product areas to allow them to talk about their ideas before they seek product development help.
While we like Romer’s theoretical emphasis on knowledge networks, we think he missed the boat on the implications that he draws about the most successful economic growth model. He believes that regional economic specialization leads to the greatest rates of knowledge creation. He would therefore, probably support the RTP’s current economic concentration of large firms and region’s reliance on a more centralized university tech transfer model.
We happen to agree with Jane Jacobs, (1969), who suggests that maximum economic diversity and the greatest access to knowledge networks creates the greatest rates of economic growth.
In the great economic debate between economic specialization and economic diversity, we are squarely on the side of maximum diversity that leads to the greatest creation of knowledge and maximum upward occupational mobility.
Which raises another question: How is knowledge created and diffused? A topic for a future column.