Competitiveness Through Knowledge Based Entrepreneurship Role of Institutions of Higher Learning A paper proposed to be submitted to the International Conference

e on emerging Competitiveness Paradigms By DR. R. JAGADEESH Professor - Production and Operations Management SDM Institute for Management Development No. 1, Chamundi Hill Road, Siddarthanagar PO Mysore 570011, Karnataka, India Ph.No: 0821-2429722, 2420490, Fax: 0821-2425557 URL:www.sdmimd.net e-mail: jagadeeshraja@gmail.com

Knowledge Based Entrepreneurship - Role of Institutions of Higher Learning DR. R. JAGADEESH Professor - Production and Operations Management SDM Institute for Management Development Mysore - 570011, Karnataka, India ABSTRACT Teaching entrepreneurship to students at graduate and post-graduate levels of education in various course particularly at engineering and management programs, has been widely debated. The question can entrepreneurship be taught? continues to haunt academicians and practitioners and the debate seems to be inconclusive. The institutions of higher learning are continuously creating a rich pool of talent and intellect which quite often is underutilized or improperly utilized. Activities like obtaining patents, enabling technology transfer and technoinnovations are continuously encouraged and widely publicized. In this paper the high academic talent of educators and the students available in institutes of higher learning is explored to discover the potential for commercializing the same towards developing additional revenue models. This presupposes the existence of a research based curiosity among the teachers and the taught. The paper examines how such a culture can be created and sustained. The institutional support required and the efforts to be coordinated are discussed. The conventional models of developing entrepreneurs are investigated to suit the development of new breed of entrepreneurs who create wealth by knowledge resources as against physical assets. INTRODUCTION Institutions of higher learning are presently the much sought after institutions as more and more students are pursuing their graduate and post-graduate education in professional courses. Among the various disciplines, engineering and management seems to be in greater demand as seen by the increasing number of students coming out of these courses over the past couple of years. While most of them try to get into jobs across various industries and sectors, very few think of starting their own enterprises. According to Agarwal (2005), Higher Education Institutions (HEIs) are not only a source of qualified manpower for the job markets of the new economy but are now sowing seeds for new enterprises in the new and emerging areas of economy. It is further stated that for many institutions of higher learning, patents, technology transfer and technology incubation are an important third stream of revenue source, other than Government grants and fee income. Their new role of cultivating the spirit of entrepreneurship and contribution towards society and nation is being recognized and appreciated widely. Some of these institutions have also started functioning in entrepreneurial style and utilizing their hitherto untapped resources which include expertise, know-how and facilities to their full potential. In many of the graduate and post-graduate programs, entrepreneurship is offered as a subject in several courses to instill an interest among the students so that they become job creators and not job seekers. Rapid changes occurring in business and industries have thrown open many opportunities for commercial exploitation. Further, the new ways of operating the business operations have created ample scope for starting new ventures and enterprises. It is interesting to note here that while entrepreneurship to a large extent focused on product creation in the past, it is now concentrating on offering new services as the booming service sector clearly demonstrates. Business Process Outsourcing (BPO) is a classic example of the new trend that is undergoing fast expansion in number and variety. With the service sector becoming a significant part of the

new economy, the focus on need for land, labor and capital has been substituted by ideas that work. With the delivery of many services possible through remote provision, new enterprises can be set anywhere in the outsourcing mode. Emergence of new enterprises is therefore not confined to physical locations where the economic activity takes place. In fact such enterprises are now possible where there are people to offer quality services at competitive prices. In this paper first the entrepreneurship as a subject of study is discussed and how the new knowledge based economy is driving the entrepreneurial activities is discussed. The role of higher education institutions is emphasized in promoting the culture of entrepreneurship. The paper also cites some examples to highlight the real life illustrations. The related issues like changes to be brought in and the challenges involved are also discussed. PROMOTING ENTREPRENEURSHIP IN INSTITUTIONS OF HIGHER LEARNING AN OVERVIEW Teaching entrepreneurship is now regarded a regular feature in the academic institutions. Bordogna (2003) presents a good picture of the importance of entrepreneurs to the countrys economy. It is said US economy grew strongly due to the numerous entrepreneurs that came out of the institutions. Rawabdeh and Strong (2003) argue that the most fundamental problem in less developed countries seems to be a lack of entrepreneurial leadership, especially among the engineering and other highly technical graduates of the universities in these developing countries. If entrepreneurial leadership were present, the problems of skilled labor, capital, and infrastructure would disappear as the entrepreneurial leaders train others, change the infrastructure, and instill confidence in capital providers who would see their abilities. In a very interesting paper Howell (2003), describes a new Engineering Entrepreneurial Program at Lawrence Technological University (LTU), USA. LTUs Engineering Entrepreneurial Program is integrated into its undergraduate Bachelor of Science in Engineering degree. This program is designed to prepare students to be business leaders and entrepreneurs as well as engineers. The program includes a total of 17 entrepreneurial semester credits integrated throughout the civil, computer, mechanical, and electrical engineering curriculum. These one unit modules include topics such as: technical communication, writing a business plan, marketing technical products, financing the emerging enterprise, strategic planning, project management, business law, intellectual property, and starting new ventures. Industry experts and entrepreneurs in the Detroit area teach these non-traditional modules providing undergraduate engineering students direct exposure to practitioners. The culmination of the program is a multi-disciplinary practical experience in which they participate in a student run company including writing a business plan, design, producing and marketing a technical product. The student run companies include participation by business majors with oversight provided by a multi-disciplinary advisory council comprised of both faculty and business leaders. In a similar paper, Taylor (2003) describes the Mississippi State University Engineering Entrepreneurship Program. As far as MBA programs are considered Cruikshank (2002) states that questions like, Can entrepreneurship be taught? If so, should it be treated as a specialized interest within a broader MBA curriculum? Or should it be at the very heart of the curriculum? are raised quite often. He adds that these are the questions with which the Harvard Business School has been wrestling for at least a half-century. Tracing the history of teaching entrepreneurship it is said that over time, answers to these questions have cropped up at many places. One place is the second year of the MBA Program, where an elective course, first called Management of Small Enterprises (MSE),

has consistently immersed students in the perils and prizes of entrepreneurship since 1947. It is heartening to note that the entrepreneurship program at Harvard Business School won the top award for MBA programs nationwide from the United States Association for Small Business and Entrepreneurship in the year 2004. According to Acs, et al. (2005), entrepreneurial activity depends upon the interaction between the characteristics of opportunity and the characteristics of the people who exploit them. The idea that opportunities are objective but the perception of opportunities is subjective has a long history in the theory of entrepreneurship. Research on entrepreneurship was thoroughly examined by Busenitz, et al. (2003) in their exploratory study of literature on entrepreneurship. They report that a total of 5,291 articles were published in the seven management journals during the timeframe of this study and the number of entrepreneurship articles by management journals for the years 1985-1999 was only 97 (1.8%). They comment that since entrepreneurial activity is increasingly relevant to economic output and labor employment in both developed and developing nations, new knowledge about entrepreneurship can speed the outcomes desired by enterprising individuals, firms, and societies. Evidence of a growing body of entrepreneurship articles in management journals could lend support to the view that entrepreneurship is emerging as a distinct domain. They argue that the domain of the entrepreneurship field is fundamentally at the nexus of opportunities, enterprising individuals or teams, and mode of organizing within the overall context of wider environments. KNOWLEDGE AS A SOURCE OF ENTREPRENEURIAL OPPORTUNITY While the prevalent view in the entrepreneurship literature is that opportunities are exogenous, the most prevalent theory of innovation in the economics literature suggests that opportunities are, in fact endogenous. The model of the knowledge production function, formalized by Griliches (1979), assumes that firms exist exogenously and then engage in the pursuit of new economic knowledge as an input into the process of generating endogenous innovative activity. Thus, according to this strand of literature opportunities are not exogenous. Rather, entrepreneurial opportunities are created endogenously; they are more prevalent in some industries than in others. They operate more strongly in some parts of the economy than others and so there are particular characteristics that tend to be associated with locations - such as high tech industries - where opportunities are found. High-technology opportunity is more, not less, prevalent than low-technology opportunity. Most innovations take place in high technology opportunity industries and not in low technology opportunity industries. The extent to which the results of innovation can be appropriated by incumbent firms also varies among industries. ROLE OF INSTITUTIONS OF HIGHER LEARNING Institutions of higher learning basically start off to provide specialized education in select areas of different disciplines. Fundamentally these institutions are driven by demand patterns and hence may be more concentrating on meeting the societal requirements. However it is to be noted that such institutions need to be frontiers of research and publications so as to advance the knowledge substance of the courses taught in house. Weete and Lorince (2004) have come out with a report that clearly demonstrates the commitment on the part of the institutions of higher learning. According to them, universities contribute to economic development in many ways through their tripartite mission of teaching, research, and service. Traditionally universities contribute to local economies include providing jobs, generating revenues and procurement through its students and research enterprise, and producing a highly educated workforce. But universities also strategically influence economic development through a wide range of programs and their research enterprise from agriculture, to high technology to manufacturing to service. Universities work with business to raise

income, become more efficient, produce and improve products, re-tool or re-direct resources, and find new markets that help them to create and retain jobs. They also provide training and certifications for helping employees of businesses to remain current and competitive. Research universities add another dimension to economic development as sources of innovation and as magnets for attracting high technology businesses to the state, and creating and commercializing intellectual properties that generate jobs and improve the quality of life. Further, the report states that we are in the knowledge age and our future depends on our innovation and ability to use it to gain a competitive edge. In the evolving knowledge-based global economy, the role of universities in providing cutting-edge, commercially viable science and technology as well as highly trained professionals is essential to economic growth and is expected to increase. Duderstadt (2002) comments that we have entered a period of significant change in higher education as our universities attempt to respond to the challenges, opportunities, and responsibilities before them. Much of this change will be driven by market forces-by a limited resource base, changing societal needs, new technologies, and new competitors. But we also must remember that higher education has a public purpose and a public obligation. It is possible to shape and form the markets that will in turn reshape our institutions with appropriate civic purpose. Further he asks how to balance the roles of market forces and public purpose in determining the future of higher education. Can we control market forces through public policy and public investment so that the most valuable traditions and values of the university are preserved? Or will the competitive and commercial pressures of the marketplace sweep over our institutions, leaving behind a higher education enterprise characterized by mediocrity? What should be the role of the research university within the broader context of the changes likely to occur in the higher education enterprise? Should it be a leader in change? Or should it simply strive to protect the important traditions and values of the academy during this time of change? These issues of access and opportunity, equality and justice, private economic benefits and public purpose, freedom and accountability, all are part of a broader public debate about the future of our societies and our world. They provide the context for any consideration of the future of the university in a knowledge-driven global economy. As reported by Agarwal (2005), at present there are nearly 4000 incubators of various types operational in the World. In USA, there are more than 1000 incubators including about 200 Internet incubators. Europe has nearly 1000 incubators including 300 in Germany. Among the developing countries, China has shown exponential growth in the incubators and over a period of ten years has set up almost 400 incubators. Most of them are linked to HEIs. Korea too, is reported to have about 300 Incubators, while, Japan, Malaysia and Singapore are catching up. Indian scenario is quite interesting with several premier institutes like IITs and IIMs starting exclusive centres for promoting entrepreneurship culture. As quoted by Agarwal (2005), India has a huge and diverse system of higher education and large R & D Lab system (particularly in the Govt. Sector)- 310 university level institutions, 15000 colleges, 400 National laboratories. This has helped in the growth of scientific and technological culture and creation of a vast pool of science & technology manpower. Yet, the impact of these institutions in creation of new enterprises has been rather limited. In most cases, R&D output is not getting commercialized for want of initial investment, the needed enabling environment and networking. Recent initiatives of the Department of Science and Technology, Government of India on focusing its attention to plug the existing gaps and starting with several institution-based programs like Entrepreneurship Development Cells (EDC), Science & Technology Entrepreneurs Park (STEP) and Technology Business Incubator (TBI) have some successes.

CHALLENGES FACED BY INSTITUTIONS OF HIGHER LEARNING According to Duderstadt (2002) first, how should the institutions respond to the diverse educational and intellectual needs of a knowledge-driven, global economy, as human capital becomes more important than physical and financial capital? While the educational needs of the young will continue to be a priority, there is a demand to address the sophisticated learning needs of adults in the workplace while providing broader lifetime learning opportunities for all. From this perspective, it is important to understand that the most critical challenge facing most institutions will be to develop the capacity for change. As noted earlier, universities must seek to remove the constraints that prevent them from responding to the needs of a rapidly changing society. They should strive to challenge, excite, and embolden all members of their academic communities to embark on what should be a great adventure for higher education. Only a concerted effort to understand the important traditions of the past, the challenges of the present, and the possibilities for the future can enable institutions to thrive during a time of such change. In a research paper Witt and Zellner (2004) have elaborated on the process of transferring knowledge from academic institutions to entrepreneurial ventures. Accordingly, in the context of knowledge-based entrepreneurship, the key role is played by those scientifically trained researchers who are about to migrate from academia to the commercial sphere. As one alternative, they are offered (non-entrepreneurial) employee positions, preferably in R&D, as catalysts of the knowledge transfer. As another alternative, these migrating researchers can, by using their technological knowledge and capabilities, develop an own business conception and consider realizing it as entrepreneurs. In this case, they would found an own technologyoriented start-up enterprise and try to attract the complementary resources. Hence two ways of organizing the transfer have been start-up firms run by former scientists as entrepreneurs and large, incumbent firm organizations with specialized R&D staff. Both compete for the human resources needed to realize the knowledge transfer. Start-up firms have to find measures to cope with the decay of the founders knowledge as time elapses. The large, incumbent firms have to find ways to make migrating scientists decide in favor of becoming employees and to stabilize at later stages. Therefore, an essential part of entrepreneurial activity here is the organization of the knowledge transfer from academic research to commercial production and marketing activities. Peterson (2003) reports that the criteria developed by Accreditation Board for Engineering and Technology (ABET) of USA, can be followed in promoting the entrepreneurial spirit. These criteria include the following qualities to be developed among the Entrepreneurial Engineer, as follows: An ability to apply knowledge of mathematics, science and engineering An ability to design and conduct experiments, as well as to analyze and interpret data An ability to design a system, component, or process to meet desired needs An ability to function on multi-disciplinary teams An ability to identify, formulate, and solve engineering problems An understanding of professional and ethical responsibility Engineer An ability to communicate effectively The broad education necessary to understand the impact of engineering solutions in a global and societal context A recognition of the need for, and an ability to engage in lifelong learning A knowledge of contemporary issues An ability to use the techniques, skills, and modern engineering tools necessary for engineering practice Thus it should be possible for the institutions to develop comprehensive course content to facilitate these desirable characteristics.

Example from West Virginia University, USA The 2004-2010 Strategic Plan for Economic Development is a detailed expansion of goal #3 of the 2004-2010 Strategic Plan for Research and Economic Development, and outlines the initiatives that will be taken by the university, implemented by the WVU Research Office, to take a proactive role in growing and diversifying the economy of West Virginia. The goals for the next five years are to: Achieve a highly coordinated effort among units within the university for providing economic development support to the citizens of West Virginia and, working with state and local economic development officials, provide the leadership for generating new and relevant economic development initiatives Increase the number of license agreements and start-up companies based on intellectual properties developed by faculty and students Achieve at least 50% occupancy of the WVU Business Incubator by the end of 2004 and at least 90% occupancy by the end of 2005 Complete Phase I of the WVU Research Park by 2006 and attain at least 50% occupancy within five years Attract businesses to West Virginia and the region by working with local, state, and regional economic development entities Improve the climate for research and economic development in West Virginia by working with state and local economic development officials and policy makers

TRANSFERRING THE PASSIVE KNOWLEDGE TO ACTIVE USE In the institutions of higher learning a number of academic activities regularly take place stimulating interest in diversified topics. These usually result in documents in the form of reports which are periodically generated. These reports quite often are evaluated because of mandatory regulations and later quietly moved to library or other storage places. Some of them will also be converted to journal or conference publications. It is this passive knowledge that needs to be tapped as many of the ideas generated can successfully be commercially exploited. To make the students themselves to think on those lines several additional exercises can be conducted. These include: Developing business plans Conducting field surveys Market research Feasibility studies Sponsorship opportunities By encouraging these activities, the students will come to know the possible gains and at least few of them would like to implement the plans towards building an enterprise. Further, the institutions should offer courses on patents and intellectual property law, venture capital, joint ventures, foreign investments, collaborative ventures and such new topics to propel the interest towards entrepreneurship among the students. Faculty should be directly in contact with the industries and business houses besides the typical R & D establishments and other governmental agencies to enlighten themselves about possible opportunities. They should cash the benefits of their research work by promoting the output from that research towards commercial exploitation. In house business incubation units need to be set up. This automatically boosts the entrepreneurial sprit.

CONCLUSION It is still a long way to go to promote entrepreneurship through our institutions of higher learning. This is perhaps the only way to ease pressure on the already tight job markets and create new opportunities for the large population that we have in this country (India). This is also a sure way to keep the country on high growth rate for a long period and to make an economically strong nation. Higher Education Institutions will have to play a more proactive role in promoting entrepreneurship. In India, University Grants Commission (UGC) has therefore partnered with the National Science and Technology Entrepreneurship Development Board under the Department of Science & Technology (Govt. of India) for promoting mechanism of developing knowledge based enterprises through the institutions of higher learning. Suitable mechanisms for supporting Entrepreneurship Development Cells, Technology Business Incubators and Knowledge Processing Units jointly with DST / NASSCOM would be explored. These initiatives go a long way in building a strong entrepreneurial base that can raise the standard of living in this country. This paper has examined the various issues related to promoting entrepreneurship through institutions of higher learning and has provided real life examples to follow the success models. It is hoped that the further education offered by these institutes will result in creating more opportunities through entrepreneurial activities and would be able to generate wealth for the benefit of the society. REFERENCES 1. 2. 3. Acs, Zoltan J., Audretsch, David B., Braunerhjelm, Pontus and Carlsson, Bo. (2005) The Knowledge Spillover Theory of Entrepreneurship, CEPR Discussion Paper No. 5326. Available at SSRN: http://ssrn.com/abstract=873614 Agarwal, P. (2005) Promotion of Knowledge Based Enterprises through Institutions of Higher Learning - A Concept Note. Available at www.university Grants Commission.htm Bordogna, Joseph. (2003) "Importance of Entrepreneurs to the U.S. Economy" in "Teaching Entrepreneurship to Engineering Students", Eleanor Baum and Carl McHargue Eds, ECI Symposium Series, Volume P2 (2003). Available at http://services.bepress.com/eci/teaching/3 Busenitz, Lowell., West, G. Page., Shepherd, Dean., Nelson, Teresa., Chandler, Gaylen N., and Zacharakis, Andrew. (2003) Entrepreneurship Research In Emergence: Past Trends And Future Directions, Journal of Management's Special Issue on Entrepreneurship. Cruikshank, Jeffrey L. (2002) A Half-Century of Teaching Entrepreneurship, Excerpted from The Rule Breakers. Available at http://www.hbs.edu/entrepreneurship/ Duderstadt, James J. (2002) The Future of Higher Education in the KnowledgeDriven, Global Economy of the 21st Century, Symposium celebrating the 175th anniversary of the founding charter of the University of Toronto, October 2002. Griliches, Zvi, (1979). "Sibling Models and Data in Economics: Beginnings of a Survey," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages S37-64, October Howell, Steven K. (2003), "The Engineering Entrepreneurial Program at Lawrence Technological University" in "Teaching Entrepreneurship to Engineering Students", Eleanor Baum and Carl McHargue Eds, ECI Symposium Series, Volume P2 (2003). http://services.bepress.com/eci/teaching/26 Peterson, George. (2003) "The Role of ABET Criteria in Creating the Entrepreneurial Engineer" in "Teaching Entrepreneurship to Engineering Students", Eleanor Baum and Carl

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