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Information Technology Landscape in Nations

Financial Aspects of Technology Parks: In this section a financial perspective of the university will be looked at with view of the technology park as a source of income.  An example of a technology park's start up is also presented.

Public and/or private money is the main sources of support for a technology park. Government investment can be done as a social investment, a fee-for-service basis to create a self-sustaining park, or a public-private partnership, whereby the state meets capital and initial (3 to 5 years) operations, on the premise that private investors will eventually take-over the entity.  Private enterprise can and has set up a technology park as for-profit, real-estate based undertaking or as a non-profit organization.¹

A technology park has significant financial benefit for a research-based university as a method of "academic capitalism" and as a real estate investment.

First benefit is as a part of academic capitalism. According to S. Slaughter and L.L. Leslie in Academic Capitalism: Politics, Policies, and the Entrepreneurial University², since the end of World War II, corporations in western countries have increasingly turned to research universities for science-based products, processes, and services to market in the emerging global economy in order to compete with the growing and emerging corporations of eastern countries.  The authors write that, "The shift occurred because the corporate quest for new products converged with faculty and institutional searches for increased funding."

Academic capitalism exists when institutions and faculty members engage in market behaviors, such as:

• launching spin-off companies
• building endowments
• patenting
• royalty and licensing agreements
• raising tuition and
• entering into business-education partnerships.

As well as market-like behaviors that involve competing for funding whether it means:

• seeking external research grants and contracts
• service contracts
• partnerships with industry and government or
• technology transfer.

Academicians still consider basic research the bedrock of science, but they see entrepreneurial research forming a new opportunity. Merit is no longer defined as being acquired primarily through publication, but includes successful market and market-like activities.³

Science and technology parks tied to research-based universities seem to form a mix a both market behaviors (engaging in for profit activities such as rental income) and market-like behaviors (entering partnerships with government and industry).  A technology park can also serve as a source of future partnerships for the university and a means of technology transfer (see discussion on technology transfer). 

Secondly, income for the university may come as a real estate investment, depending on how the park is setup. The investment is similar to an office park and is subject to the same supply and demand issues.

According to the Institute of Real Estate Management, there are 12 fundamental criteria for classifying office buildings: location (discussed separately), ease of access, prestige, appearance, lobby, elevators, corridors, office interiors, tenant services, mechanical systems, management, and tenant mix. To illustrate, a prestigious building will have attractive appearance, an impressive lobby, and quality tenants.

The key factor in demand for office park space is the level of office employment needed.⁴ Typical technology park activities such as research and development activities and other high-tech activities most often are office-based activities. Also, a desire for close proximity to others with similar interests/activities helps to create a need for such space.

Technology parks can gain the same advantages as on office park. For example, long-term leases when signed with quality tenants are relatively secure; most leases today are indexed for inflation; and office space is increasingly subject to "net leases" that shift much of the operating risk directly to tenants.⁵

One potential and key drawback to technology park management is the degree of expertise a property management company has.  For example, a poorly negotiated contract could have negative effects on the cash flow of the property.  Other drawbacks are costs to fit the facilities to the needs of the tenant; changing technological needs and improvements could render a building obsolete in a short period of time; and trends in office employment (i.e. telecommuting, hoteling, reduction in space needed per employee) have made the market more volatile.⁶

Like many investments, there are degrees of risk involved in the park. Also, the goal is for a park to become self-sustaining. Income is gained through fee-for-services to tenants, rent and possibly utilities. Related costs include maintenance of buildings and infrastructure, security, utilities, management salaries, and advertising.⁷

Below is an example of a technology park's efforts to start up.  This example is for the  Research Triangle Park in North Carolina. (8)

The non-profit Research Triangle Committee was formed in September 1956, to explore the idea of creating a research park. In April 1957, an investor, Karl Robbins, was found who agreed to provide funds to acquire options on land. By the end of 1957, 3,559 acres had been optioned or purchased (441 acres were pending) at a cost of approximately USD $700,000. In September 1957, a for-profit company called "Pinelands" was formed with Robbins as the sole stockholder. In August 1958, the chairman of the Research Triangle Committee, Robert Hanes, asked Archie Davis of Wachovia Bank to find other possible investors from North Carolina for the Pinelands Corporation. Davis made two suggestions: that the non-profit Research Triangle Committee be renamed the Research Triangle Foundation of North Carolina (RTF), and that his effort would be to solicit contributions for RTF rather than to sell stock for Pinelands. By December 31, 1958, Davis had raised $1.25 million in contributions from individuals and businesses from all across the State of North Carolina. This amount enabled the non-profit entity to purchase all of the shares of Pinelands stock, enabling the develop of Research Triangle Park as a non-profit entity.

Examples of Other Financing Options

• Multi-lateral organizations such as the World Bank
• Domestic corporate investment
• Foreign direct investment

References

1. Lalkaka R., Technology Business Incubators: Critical Determinants of Success, Ann. NYAcad. Sc. 978, 270-90, 1996.

2. Slaughter, S. and Leslie, L. L., Academic Capitalism: Politics, Policies, and the Entrepreneurial University,

3. Bourouche, Myriam A, "Review of 'Academic Capitalism: Politics, Policies, and the Entrepreneurial University," Journal of Research Administration, Washington, 2001.

4. Corel, John B., Real Estate Perspectives,  Boston, Irwin McGraw-Hill, 177

5. Corel, Real Estate Perspectives.

6. Corel, Real Estate Perspectives.

7. Petree, Rick, "Technology Parks - Concept and Organization", East West Institute, June 1999.

8. Research Triangle Park History. "History". http://www.rtp.org/about/history1.html. Visited on December 13, 2001.