Applying the stewards of place model: integrating teaching, research and service through entrepreneurship education.

ABSTRACT

Entrepreneurship Education provides fertile ground for a higher education model that promotes the importance of university outreach and public engagement and the integration of teaching, research and outreach in service to a regional and state community. This paper suggests that many of the current problems facing entrepreneurship education--limited supply of qualified faculty coupled with a seemingly limitless supply of opportunities--may translate into a significant opportunity for the discipline to create a new model for education. In this paper the authors describe an example of how an outreach project may be translated into the classroom and into scholarly output. The project included the creation of an assessment model for early stage entrepreneurs that was designed for use through a program funded by the Commonwealth of Kentucky. The program is described and plans for how the project will be utilized in the classroom and shared via academic publication are outlined.

INTRODUCTION

According to Timmons and Spinelli, (2003 p. 3) "America has unleashed the most revolutionary generation the nation has experienced since its founding in 1776." Increasingly, this new generation of entrepreneurs has called for an emphasis on academic programs in the field. Today there are over 1,800 colleges, universities and community colleges with entrepreneurship classes, programs and initiatives (Timmons and Spinelli, 2003). In 1971, there were only 16 schools who reported teaching entrepreneurship (Fiet, 2001). Furthermore, an analysis of a 1995 Gallup poll by Kourilsky and Walstad (1998) reported 72% of high school males and 62% of high school females indicated a desire to start a business of their own. Ninety percent (90%) of these students said more schools should teach the skills associated with entrepreneurship.

While the resulting interest and demand for entrepreneurship education has led to tremendous opportunities for university entrepreneurship programs and centers, the increasing desire for entrepreneurship education has caused some challenges for the discipline. As is common in most subjects, entrepreneurship educators are called on to contribute with a mix of teaching, research and service. A mix of productivity in these three areas of education has long been supported as important for a well-rounded academic career. In the field of entrepreneurship the opportunities for service contributions are often much greater and are frequently viewed as more critical to the success of the entrepreneurship center programs and curriculum than in other disciplines. As an applied field, entrepreneurship students and classes not only benefit from, but require the involvement of, business leaders who have gained experience with new ventures from start-up to growth and harvest. In addition, entrepreneurs are often more willing to engage the consulting services offered by entrepreneurship centers and give back support for the programs.

Added to the significant increase in demand and opportunity is a limited supply of academically qualified faculty. "Lack of faculty at every rank is the number one limiting factor of the growth of the (entrepreneurship) field" (Katz, 2003, p. 297). Today there are more than 20 vacant endowed chairs and only a handful of Ph.D. programs to prepare faculty (Katz, 2003). Furthermore, Ph.D. students are often discouraged from the study of entrepreneurship because of the historical debate regarding its legitimacy as an academic discipline. Young faculty members at some of our best research institutions fear they will not be tenured if they attempt an academic career in entrepreneurship. Despite tremendous opportunity, young faculty opt for "safer" careers in management, marketing and finance.

How can the discipline respond to the challenge of increasing interest and demand for entrepreneurship education with a limited supply of qualified faculty? One solution is more Ph.D. programs. A second is to find ways to help faculty integrate service with teaching and scholarly output. In other words, junior faculty could benefit from more examples that demonstrate how to integrate the outcome of service projects into the classroom and create scholarly output from that same service project.

STEWARDS OF PLACE THEORY

Universities are aggressively building capacity for public engagement as they are being called upon to serve their communities at increasing rates. Many community leaders have recognized an engaged university as a vital component for growth in today's knowledge-based economies. Traditionally, research universities have been the source of innovations in thinking and in products and services. In contrast, it is less clear how non Ph.D. granting institutions benefit their communities.

Traditional structures and strategies have made it difficult, if not impossible for universities to adequately and appropriately serve the economic development needs of communities. The rhythm of the university does not move with the rhythm of business (White, 2004). Business leaders must move quickly to exploit innovative ideas and opportunities. Universities typically operate on academic calendars and in very distinct and methodical ways. These behaviors are very much consistent with the scientific method of discovery and the shared governance model of decision-making. It is unlikely either business or academic values will change or that a common paradigm will drive both forms of organization. As a result of these disparate styles, business leaders do not look to universities for help with solving their business problems.

The authors of this paper do not suggest that either traditional university or business models change. Both provide value. Businesses must move quickly to exploit market opportunities and because of their scientific approach to information, universities can provide an objective ground for the study of timely business problems. However, entrepreneurship education can serve as a bridge linking the best of both approaches.

Some progressive universities have effectively moved to identify and address issues associated with developing institutions that are fully engaged in the vitality of their communities. As an example, outreach has been defined as "... a form of scholarship that ... involves generating, transmitting, applying and preserving knowledge for the direct benefit of external audiences in ways that are consistent with university and unit missions"(Michigan State University, 1993 p.1). Moreover, an American Association of State Colleges and Universities (AACSU) task force on public engagement developed a model and guide for becoming Stewards of Place. The focus of this report and the model it suggests sets forth important criteria for the development of "two-way partnerships between America's colleges and universities and the publics they serve."

In their guide for universities who wish to become Stewards of Place an AASCU task force identified five overarching themes. Universities are encouraged to "address the future of the region/community as well as the future of the institution, recognize that communication is key and that information is key to communication, approach involvement systematically--aligning institutional and intra-institutional efforts as well as institutional and community efforts, build engagement into the normal processes of the institution, understand that leadership matters, (and) recognize the importance of shaping the external environment" (AASCU, 2002). Figure 1 illustrates this approach to university outreach.

[FIGURE 1 OMITTED]

A faculty model for public engagement must build on the traditions of the university culture while creating opportunity to re-calibrate to the approach of the business community. We suggest a model (figure 2) for entrepreneurship educators that will serve the needs of students, faculty and business "clients."

[FIGURE 2 OMITTED]

Entrepreneurship education provides an excellent opportunity for applying these principles. If the university is focused on public engagement as part of its mission, entrepreneurship provides the most meaningful place to begin. Entrepreneurship education is, by its very nature, the most broadly focused program in business colleges. In addition, the challenges facing entrepreneurship lend themselves to solutions that engage faculty in research, teaching and service simultaneously. The intersecting space results in projects that provide teaching, research and service opportunities that have the capability to benefit both university and business constituencies.

THE THREE STAGE ENTREPRENEURIAL ASSESSMENT TOOL[C]

In 1998, the Kentucky Long Term Planning and Development Commission concluded that "entrepreneurship is Kentucky's most neglected resource." (Childress and Smith-Mellow, 1998, p.1). Based on that study and others that reported the dismal levels of state support for entrepreneurship, Kentucky established the Office for the New Economy (ONE). ONE's mission is to create a globally competitive innovation system resulting in a continuously higher standard of living for all Kentuckians. "The Commonwealth plans to achieve these goals by re-engineering government policies and operations to promote a culture that 'recognizes and rewards innovation and entrepreneurship wherever [it] might take root." As a result, the Office for the New Economy created a statewide program to encourage innovation and to prepare qualified entrepreneurs for capital markets.

ONE's program established six Innovation and Commercialization Centers (ICC) throughout the state. .In addition to the ICCs, the Commonwealth is adding 16 rural Innovation Centers (ICs). The ICC and IC programs are overseen by the Innovation Group of the Kentucky Science and Technology Corporation, a non-profit private corporation that seeks to encourage entrepreneurship among Kentucky scientists and engineers. The ICC and IC programs assist nascent and early stage entrepreneurs who have businesses or business concepts that are considered to be potential high growth companies. The entrepreneurs of these companies are led through a series of programs and assessments to prepare them for equity markets.

After only a year of operation, it became apparent that the program needed to have a model for assessing entrepreneurs and their businesses and for determining their readiness for seeking equity funds. It was envisioned that the assessment tool would provide consistency for the ICC and IC programs on a statewide basis. In response to this need, the Fifth Third Bank Entrepreneurship Institute at Northern Kentucky University (NKU) was commissioned, via a grant, to create the assessment model.

The Entrepreneurship Institute at NKU was selected based on its reputation for effective public engagement. As a comprehensive, metropolitan university comprised of approximately 14,000 students served by 1,700 faculty and staff on a campus located in the Northern Kentucky Greater Cincinnati, Ohio metropolitan area, NKU has a singular mission within the Commonwealth of Kentucky. This mission is to serve as a metropolitan and regional institution offering baccalaureate, graduate, and professional programs addressing the educational needs of a large and diverse population. Situated in the Ohio River Valley, NKU is just seven miles southeast of Cincinnati, Ohio. The location of the University places it in the largest metropolitan area of all the state universities in Kentucky: Greater Cincinnati has a population of nearly 1.75 million.

THE PROJECT

In order to achieve the objectives of the project, a team of students and faculty was formed. The team was initially charged with revising a document previously used in the state of Oklahoma. After some initial research, it became apparent to the team that a new set of assessment tools was needed. Based on these assumptions, the project was directed toward that effort.

Stage One--Literature Review

The first stage of the project involved a review of the academic literature. The team found eight key studies that examined the characteristics considered important by venture capitalists making investment decisions. Table 1 outlines the methodology used in these eight studies.

Following this review, a content analysis of two books and one assessment instrument was conducted. The characteristics from the journal articles and books are summarized in Table 2.

Tyebjee and Bruno (1984) divided the investment process into five stages. These stages included: deal origination, screening, evaluation, deal structuring and post investment activity. This research concluded that venture capitalists were primarily interested in the market attractiveness, product differentiation, managerial capabilities, and the cash-out potential of a prospective venture.

Macmillan, Seigel and Narsimha (1985) identified the most important criteria used by venture capitalists, classifying them into the following five categories: the entrepreneur's personality, the entrepreneur's experience (which included both startup experience as well as relevant industry experience), the characteristics of the product or the service, market characteristics and finally, the liquidity potential of the proposed venture They also studied the importance of a business plan, and concluded that the business plan should reflect the entrepreneurs' abilities.

Macmillan, Zemann and Narsimha (1987) went a step further by doing a follow up study of the Macmillan, Seigel and Narsimha (1985) paper. In this effort they studied both successful and unsuccessful ventures, and concluded that the most important characteristics for success were management staying power coupled with the industry experience of the management team.

Dubini (1989) sought to understand which managerial team characteristics would be useful in determining the potential for success of a new venture given the venture's product and market characteristics. He concluded that different managerial team characteristics were important for different product and market environments.

Research conducted by Shepherd (1999) examined investment decisions made by venture capitalists in Australia. This research concluded that Australian based companies deem the entrepreneurs' relevant industry experience, and startup experience as most important.

After analyzing the content of more than sixty-five investment portfolios, Per Stromberg (2003) concluded that a strong management team and the entrepreneur's personality, coupled with significant references were the main characteristics of a business that was likely to receive equity financing. Unlike other studies, Stromberg specifically identified positive attributes that were likely to lead to an investment as well as the negative attributes that might deter an investment.

Timmons' model divides the entrepreneurial process into three categories. These consist of: the opportunity (which contains the market demand, structure and size and the potential for growth of the product and market); the entrepreneurial team (which includes the entrepreneur and the management team, their qualities and experiences); and, resources (those resources that the new business might possess, such as intellectual property (patents and strategic alliances/partners). (Timmons, 2003).

Stage Two--Focus Group Research

Focus group research is designed to obtain perceptions on a defined area of interest from a group of qualified individuals. For the purposes of the current project the objective was to facilitate a discussion of the decision-making criteria utilized by equity investors. The group consisted of a mix of venture capitalists, angel investors (both institutional and private), entrepreneurs, consultants, intermediaries and commercial lenders. Cumulatively, the participants constituted the lead investors in over fifty separate companies. As part of the exercise, these individuals were encouraged to share their ideas, experiences and perceptions. Two facilitators led the group through the exercise that was audio taped for future reference. The consensus among group members, ranked in order of importance was as follows: importance of the entrepreneur in regards to passion, persistence, risk averseness and leadership qualities; the importance of a well rounded management team which would help make up for or enhance any of the qualities that the entrepreneur lacked; prior experience in a successful venture; and relevant alliances within the industry

Stage Three--Exploratory Survey Research

Based on the information gathered during stages one and two, twenty-two characteristics were identified as being essential attributes of new ventures seeking equity funding. The results of the analysis were tested by way of a survey instrument distributed at a meeting of the Greater Cincinnati Venture Association. The sample consisted of one hundred twenty participants that included entrepreneurs, venture capitalists and angel investors from the Greater Cincinnati, Northern Kentucky area. Fifty-eight of the participants responded to the survey representing approximately 50% of the group. The respondents were asked to rank each of the attributes set forth in the survey, and to provide any additional criteria they considered relevant. Participants were also asked to identify the five most important factors they consider when making investment decisions.

Stage Four--Development of a Model

The final stage required the research team to adapt their findings to the ICC process. The resulting product was a three stage assessment tool. The entrepreneur and the new venture are evaluated at three distinct stages of development: pre-seed, seed or pre-commercialization and venture.

At the seed stage individuals develop and explore the viability of their business ideas. During this stage, the entrepreneur or researcher would be involved in building a business idea, a strong team, and in the acquisition of resources that they feel would be necessary in the functioning of their business.

The Seed or Pre-commercialization stage is the period during which the entrepreneur seeks financing to conduct research and product development; e.g., proof of concept preoccupation. The venture may not yet have fully established commercial operations. During this stage, the entrepreneur or researcher would generally require small amounts of capital ($25,000 to $250,000) for research and product development, and also to develop prototypes, evaluate market potential, protect intellectual property, develop business plans, and build management teams.

At the venture stage, the entrepreneur is ready to explore equity markets. Sales and commercial operations would be fully established. The amount required by the entrepreneur at this stage is usually in the excess of $1 million. The business plan should be completely developed by this stage.

As an ICC client, an entrepreneur preparing his or her company for the equity markets is evaluated by the ICC Director utilizing the new assessment tool. After completing the process at each stage, the entrepreneur receives feedback that provides strategies for improvement and steps to assist with moving to the next stage. Once the entrepreneur has reached the third, or venture stage, the company is considered ready to seek funding from equity markets.

CURRENT STATUS

Once the assessment tool was developed, the research team conducted a training seminar to explain the use of the tools to the ICC Directors. Following this program, the product was tested by the Kentucky ICC Directors for a six month period. At the end of the six months, a focus group was held with the directors to determine whether revisions were needed. Based on this discussion, a task force of ICC Directors and the research team has been formed to address the necessary changes.

A decision has been made to follow up with additional testing and input via a national focus group research process. Once this series of focus group sessions are complete the decision will be made whether to proceed with survey research or whether the product is ready for full-scale use.

CONCLUSION--INTEGRATION WITH TEACHING AND SCHOLARSHIP

The project engages students in several ways. First, the project was initially designed to be planned and implemented by a team that included both students and faculty members. As members of the design team, students where involved in the literature review, the focus group and survey research projects. Team members learned research design and implementation as well as specifics about the content--e.g., assessing entrepreneurial ideas. Other less tangible outcomes included the opportunity to interact with business leaders and enhance communication skills such as writing, listening and public speaking. Student members of the team were also vitally involved in the development of the computer program that ran the assessment tool.

Second, the assessment tool was used in a MBA level Business Policy class to evaluate students' investor presentations. Working in teams, students using business simulation software made presentations to six investors each with 5 million dollars to invest. During each groups' presentation, data was entered into the assessment tool resulting in a "cumulative score". In a test of the assessment tools capabilities, one investor used the assessment tool's scoring of the proposals in making his investment decision.

A third application will include the revision of the tool for use in the classroom. The team plans to create a product that can be used in the Senior Portfolio: Writing the Business Plan class and in the graduate business plan writing course.

Fourth, because the assessment tool is an interactive, computer-based program, it is also a perfect fit for on-line learning programs. Whether utilized as a method for teaching students about successful entrepreneurial attributes or as a method to evaluate student performance, the assessment tool lends itself perfectly to the on-line environment.

This project is also rich with opportunities to share the findings with other scholars via academic publication. Both the process and the content of the research provide interesting academic discussions. The goal of this project is to provide research and publication opportunities for both the students and faculty involved in the process.

In sum, this project provides a rich example of how to simultaneously combine outreach, teaching and scholarship. The project included the creation of an assessment model for early stage entrepreneurs that was designed for use through a program funded by the Commonwealth of Kentucky. As argued, the research team also generated a number of learning opportunities for students and the chance to produce meaningful scholarship. This project serves as an example of how entrepreneurship faculty can blend traditional measures of academic success with the expectations and opportunities created by an emerging and growing field.

REFERENCES

AASCU Task Force on Public Engagement. (2002) Stepping Forward as Stewards of Place: A guide for leading Public Engagement at State Colleges and Universities, Washington, D.C.: AASCU

Childress, M.T. & M. Smith-Mellow. (1998) Entrepreneurs and Small Business- Kentucky's Neglected Natural Resource, Kentucky Long-Term Policy Research Center.

Dubini P. (1989). Which Venture Capital Backed Entrepreneurs have the best chance of Succeeding? Journal of Business Venturing. 4(2), 123-132.

Kaplan, S. N. & Stromberg, P. (2003). Characteristics, contracts, and actions: Evidence from venture capitalist analyses, Journal of Finance, forthcoming. 1-43

Katz, J.A. (2003) The Chronology and intellectual trajectory of American entrepreneurship education 1876-1999, Journal of Business Venturing, 18(2): 283-300.

Kumar, V. & M. Kaura. (2003) Venture capitalists' Screening Criteria. Vikalpa, 28(2), 49-59.

Kuratko, D. F. & Hodgetts, R. M. (2001). Entrepreneurship--A Contemporary Approach. (5th Edition.) Florida: Harcourt College Publishers.

Lumma, H.. (2001). Venture Capitalists' criteria for selecting high technology investments. Institute of Strategy and International Business Proceedings, 1-34.

MacMillan, I. L., R. Siegel & P. N. S. Narasimha. (1985). Criteria used by venture capitalists to Evaluste New Venture Proposals, Journal of Business Venturing, 1(2),119-128.

MacMillan, I. L., L. Zemann & P. N. S. Narasimha. (1987) Criteria distinguishing successful from unsuccessful ventures in the venture screening process, Journal of Business Venturing, 2(2), 123-137.

Shepherd, D.A.. (1999). Venture Capitalists' Assessment of New Venture Survival Management Science, 45(5), 621-632.

Siegel, R., E. Siegel & I. C. MacMillan. 1993. Characteristics Distinguishing High-Growth Ventures, Journal of Business Venturing, 8(3),169-180.

Timmons, J. A. & S. Spinelli. 2003. New Venture Creation: Entrepreneurship for the 21st Century. Boston: McGraw Hill--Irwin.

Twelve Q's- A series of twelve questions used to evaluate potential business ventures by the Madison e-Zone (a hi-tech business incubator) in Northern Kentucky.

Tyebjee, T. T. & A.V. Bruno, (1984). A model of Venture Capitalist Investment Activity. Management Science, 30(9), 1051-1066.

Wells, W. (1974). Venture Capital Decision-Making. Unpublished doctoral dissertation. Pittsburgh: Carnegie Mellon University.

White, R. J. (2004). The Academic Trilogy: Resolving Challenges for Meaningful Engagement between Business and Academics, KERC Working Paper.

Rebecca J. White, Northern Kentucky University

Giles T. Hertz, Northern Kentucky University

Rodney R. D'Souza, Northern Kentucky University

Table 1: Research Methodology

        Study                      Participants and Data
                                     Collection Process

Wells (1974)              8 VC's--Personal Interviews

Tybebjee & Bruno(1984)    46 VC's--Telephone Survey (More than 50%
                          were Small Business Investment
                          Companies or SBIC's)
                          41 VC's--Questionnaire via mail

MacMillan (1985)          14 VC's Interviewed
                          102 VC's--Questionnaire via mail

MacMillan (1987)          150 portfolios by 67 VC's--Questionnaire
                          Follow up of study in 1985
                          62 VC's evaluated 1 successful investment
                          and 1 failed venture that had been
                          funded by them.

                          5 VC's rated 3 successful & 3 unsuccessful
                          venture investments.

Dubini (1989)             Used database of MacMillan (1987) 150
                          portfolios by 67 VC's

MacMillan (1993)          2 Pools of companies

                          1. Reynolds data base: 1,600 Pennsylvania
                          companies, which were relatively small
                          (Average revenue $1,350,000)

                          2. Price Waterhouse data base: 105
                          Companies through out the US, which were
                          relatively large (Average revenue
                          $10.7 million)

Shepherd (1999)           47 Australian VC's Questionnaire

Per Stromberg (2003)      67 Portfolios by 11 VC's

Table 2: Investment Criteria Findings

                            Wells     Tybebjee     Mac-      Mac-
                            (1974)     & Bruno    Millan    Millan
                                       (1984)     (1985)    (1987)

Opportunity

Market/ Customers              X          X
Value Added                    X          X          X         X
Product Life
Competitive Advantage                     X
Timing                                    X
Potential or Growth            X          X          X
Competition                                          X         X
Management Team
Entrepreneurs Startup
  Experience
Entrepreneurs Relevant                               X
  Industry
Experience
Management Team                X          X          X         X
Entrepreneurs Personality                            X
Resources/Financials
Intellectual Property          X                     X         X
Technology
Capital Requirements           X          X
Strategic Alliances/           X
Partners/References
Exit Strategy

                            Dubini      Mac-       She-      Kura-
                            (1989)     Millan     pherd       tko
                                       (1993)     (1999)

Opportunity

Market/ Customers              X                               X
Value Added
Product Life                                         X
Competitive Advantage
Timing                                    X          X         X
Potential or Growth                                            X
Competition                                          X         X
Management Team
Entrepreneurs Startup                                          X
  Experience
Entrepreneurs Relevant                               X         X
  Industry
Experience
Management Team                X          X                    X
Entrepreneurs Personality
Resources/Financials
Intellectual Property                                          X
Technology
Capital Requirements                                           X
Strategic Alliances/                                           X
Partners/References
Exit Strategy

                             Per      Timmons     Twelve Q's
                            Stromberg  (2003)

Opportunity

Market/ Customers              X          X          X
Value Added                    X          X          X
Product Life                              X
Competitive Advantage          X                     X
Timing                         X
Potential or Growth                       X
Competition                    X          X
Management Team
Entrepreneurs Startup                     X
  Experience
Entrepreneurs Relevant                    X          X
  Industry
Experience
Management Team                X          X
Entrepreneurs Personality      X          X
Resources/Financials
Intellectual Property          X          X          X
Technology                     X          X
Capital Requirements                      X          X
Strategic Alliances/           X
Partners/References
Exit Strategy                  X