In the Global Competitiveness Index 4.0 issued by the World Economic Forum in 2018, Germany ranked third behind the USA and Singapore as a top location for world-class research. In terms of innovative capacity, Germany was in fact the undisputed leader of the 140 countries evaluated. Nevertheless, spin-offs from scientific institutions are relatively rare. The rate is just 5%, whereas it is 19% in Estonia (32nd place overall).

A research project sponsored by the Joachim Herz Foundation and carried out at the Entrepreneurship Research Institute of the Technical University of Munich (TUM ERI) has now looked into the reasons why German academics are apparently reluctant to set up companies. In an initial preliminary result, the researchers found out that the problems often lie in three essential factors for success. Namely: team spirit, pragmatism and soft skills.

Over the course of their study, the research team is spending several months overseeing more than 100 entrepreneurial teams. This involves experts from universities and companies working together, some of them at the Entrepreneurship Research Institute at the TU Munich. Participants provided information in weekly online questionnaires and interviews on the challenges they faced when setting up a spin-off.

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Teamwork important for success

Expertise is not enough when it comes to starting a business. Not even when you’ve completed your degree summa cum laude. And innovative technology isn’t enough either. At least as important, is a good working knowledge of the market in order to be able to gauge which idea has the potential for commercial success. Which is precisely what scientists tend to lack after graduation. That’s why, according to experts, it’s important for academics to start a company with people who have industry and start-up experience.

In addition to this lack of familiarity with the market, the results of the study show that there is another major obstacle that often stands in the way of young entrepreneurs. Nicola Breugst, Professor for Entrepreneurial Behavior at the TUM School of Management, explained during the presentation of the preliminary results that many start-up teams find it difficult to find a common and straightforward path. This lack of consensus concerns the decision as to what the product is supposed to be able to do. As well as the question of how this vision can best be implemented. “The start-up teams begin by discussing various ideas over and over. Without being able to commit themselves to one course of action. So, eventually they fail,” she said. “Therefore, university and other start-up funding institutions should not be limited to just providing technology and knowledge of the market. They also have to offer soft skills training, e.g. team-oriented coaching.”

Less perfectionism, more pragmatism

Another major hurdle for entrepreneurs in Germany found in the results of the study, is the “German virtue” that is appreciated worldwide. Perfectionism. Under the motto ‘fail fast and early.’ start-up teams are required to present potential customers with prototypes early on that are not completely finished. That’s with the aim of finding out whether there is a market for their products. However, this testing and obtaining feedback at such an early stage contradicts the scientific mindset. That is, incomplete findings do not provide a basis for decisions and communication with others. For this reason, academics must learn to think less scientifically and in a more ‘pragmatically enterprising way.’

Prof. Breugst presents the preliminary results © Bert Willer / UnternehmerTUM, October 2019

“The preliminary results of the study show that even interdisciplinary academic start-up teams with similar initial situations and challenges are pursuing very different directions in terms of development. Teams that listened less to the expert tips from our incubator and who lost themselves in their decision-making processes have generally not been successful,” explained Prof. Dr. Dr. Holger Patzelt, Professor of Entrepreneurship, also at the TUM ERI. Scientists should dare approach possible target audiences and important stakeholders even with prototypes that are still works in progress. However, he stressed that they all had some things in common: curiosity, willingness to take risks and openness to new ideas. “After all, even if in the worst case they do not produce any results, scientists should engage in research projects as this is an important prerequisite for spin-offs”.

Three-year study

In this three-year research project, the researchers want to find out how scientists become entrepreneurs, which factors support or inhibit this process, and which ‘fundamentally relevant but often neglected psychological processes’ take place within academic spin-offs. A further goal is to understand how interdisciplinary start-up teams work together successfully, find compromises and develop common core values for their companies. They also want to see why some university chairs produce more start-ups than others.

Dr. Nina Lemmens from the Joachim Herz Foundation said that the education system and funding opportunities in Germany are ideal for entrepreneurs. Nevertheless, there are still very few people who dare to start a company or who give up too soon. “What is the reason for this? Is it the mindset? Lack of willingness to take risks? Or the fear of failure? How can we scientists be encouraged to experiment more?” she asked. The final results of the study will be presented at the start of 2021 in Berlin.

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