J Knowl Econ (2012) 3:90108 DOI 10.

1007/s13132-011-0081-4

Measuring Regional Innovation and Entrepreneurship Capabilities

The Case of Taiwan Science Parks
Yuan-Chieh Chang & Ming-Huei Chen & Yuan-Po Lin & Yu-Shiang Gao

Received: 22 May 2011 / Accepted: 19 December 2011 / Published online: 10 January 2012 # Springer Science+Business Media, LLC 2011

Abstract With the rise of internationalization and rapid industrial transformation, the maintenance of regional innovation and entrepreneurship has become an important issue, in the strategic planning of science parks. However, the measurement and prioritization of regional innovation and entrepreneurship capabilities has been largely neglected. Having reviewed four theoretical building blocks: (1) creative class, (2) intellectual capital, (3) regional innovation systems, and (4) industrial clusters, this paper develops an integrated FIEC framework, with four dimensions (financing, innovation and cluster, entrepreneurship and culture) and 15 indicators to measure regional innovation and entrepreneurship capabilities. Based on a dataset of 46 completed questionnaires, an overall 46% response rate, these dimensions and indicators were prioritized using AHP (analytic hierarchy process) analysis. The results show that: (1) the innovation and cluster dimension is the most important of the four dimensions; (2) the top three indicators Completeness of upstreamdownstream industries, Assistance of incubators and Abundance talent pools are the most important of the 15 indicators; (3) within each dimension, abundance of venture capital is the most important indicator in the financing dimension, completeness of upstreamdownstream industries is the most important indicator in the innovation and cluster dimension, assistance of incubators is the most important indicator in the entrepreneurship dimension and self-employed culture is the most important indicator in the regional culture dimension. These results show the importance of maintaining healthy regional innovation capabilities, for Science Park Administrations, on the island of Taiwan and elsewhere.
Y.-C. Chang (*) : Y.-P. Lin Institute of Technology Management, National Tsing Hua University, Hsinchu, Taiwan e-mail: yucchang@mx.nthu.edu.tw M.-H. Chen (*) : Y.-S. Gao Graduate Institute of Technology and Innovation Management, National Chung-Hsing University, Taichung, Taiwan e-mail: mhchen@dragon.nchu.edu.tw

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Keywords Regional innovation and entrepreneurship . Resource-based view . Creative class . Regional innovation systems . Intellectual capital . Industrial clusters . Integrated framework . Analytic hierarchy process

Introduction For the last two decades, it has become widely accepted that innovation and entrepreneurship are the main drivers for regional development and growth [2, 14, 16, 18, 41, 42]. Since the re-emergence of the resource-based view in the early 1990s [4], enterprises possessing rare, hard-to-imitate and non-substitutive resources demonstrate higher profit margins and sustain longer competitive advantages [3, 4, 5, 30]. There have been many attempts to apply the resource-based view to regional development and growth. Regions that have rare, hard-to-imitate and non-substitutive capital [2, 3, 9, 16], innovative capabilities and culture [14, 16, 18, 24], a range of knowledge assets and infrastructure [12, 29] and knowledge-based clusters [8, 18, 22, 31, 34] tend to sustain their regional competitive advantages [12, 24, 41]. Following the same argument, the new growth theory claims that regional innovation and entrepreneurship could become endogenous variables, contributing to regional economic growth [38]. It becomes very clear that regions with specific innovative and entrepreneurial endowments, resources, capabilities, knowledge and capital can outperform other regions, with respect to their economic development and growth. There are four emerging building blocks, or theories, accounting for regional endogenous development: creative class [21], intellectual capital in regions [6, 7, 10], regional innovation systems (RIS) [11, 13, 14], and industrial clusters [26, 31, 33, 35, 36, 41]. Creative class theory argues that regions can create more ideas, high-technology industries and regional growth if they can attract more individuals in the creative class (professionals). These regions can develop their cultural tolerance, talent pool and technology-intensive industries, in order to attract creative class individuals [28]. Studies of intellectual capital in regions examine the regional development in terms of regional human capital, process capital, market capital and renewal and development capital [6, 7]. Intellectual capital studies provide very comprehensive lists, which allow measurement of regional capitals. RIS determine financial capacity, institutional learning and productive culture, which facilitate systemic innovation at the regional level [14]. Finally, industry cluster theory argues that the geographic proximity of interconnected companies and institutions facilitates collective innovation and entrepreneurship [35, 36]. Although regional innovation and entrepreneurship have become the main sources of regional development and growth, the development of a holistic, integrated framework to measure and prioritize regional innovation and entrepreneurship capabilities has been largely neglected. These four theoretic building blocks for the development of suitable regional innovation and entrepreneurship capabilities are complementary rather than substitutive. Creative class theory mainly focuses on creative human capital, from the social and cultural environments, to attract talents. It might be more profitable to apply creative class concepts to the development of creative and cultural industries and

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metropolitan cities. Intellectual capital concepts are advantageous to the measurement of various kinds of regional capitals. However, the key constituent of regional intellectual capital that sustains regional growth has not been identified by prior studies. RIS explain how regional actors, networks and institutions jointly determine the regions innovational capabilities and pay less attention to regional entrepreneurship development. Finally, industry cluster theory allows us to examine the interconnectivity of enterprises and institutions, but the measurement of industrial clusters has been, so far, neglected. This paper aims to integrate these four theoretic concepts to propose a comprehensive method of measurement, to analyze regional creativity, entrepreneurship, culture, capital, innovation and clusters. This report intends to identify indicators important to regional development of innovation and entrepreneurship and the priorities associated with these indicators. By integrating the four building blockscreative class, intellectual capital, RIS and industrial clustersthis report develops an integrated FIEC (financing, innovation, entrepreneurship and culture) framework, using 15 indicators to measure regional innovation and entrepreneurship. The first dimension, the financing dimension has three indicators. The innovation and cluster dimension has five indicators, The entrepreneurship dimension has three indicators, and the culture dimension has four indicators. Using empirical AHP (analytic hierarchy process) analysis, the relative importance of four dimensions and their indicators is ranked by experts, such as academic researchers and professors, corporate R&D managers and science park directors and administrators. The results have crucial policy and managerial implications in the maintenance of science parks long-term innovation and entrepreneurship. In this paper, Section 2 reviews literature relating to creative class, intellectual capital in regions, RIS and industrial clusters. An integrated framework for the measurement of regional innovation and entrepreneurship capabilities is proposed. Section 3 details the AHP questionnaire design, data collection and AHP analysis. Section 4 presents the AHP results. Section 5 discusses the similarities and differences between these results and those of previous studies. Finally, some managerial and policy implications are outlined.

Measuring Regional Innovation and Entrepreneurship Capabilities Creative Class Florida [21] charts the growth in people who are involved principally in creative work. These are the scientists, engineers, artists, musicians, designers and knowledge-based professionals, who are collectively called the Creative Class. The distinguishing characteristic of the Creative Class is that its members engage in work whose function is to create meaningful new forms. Florida [21] defines the Creative Class as consisting of two components: the super-creative core includes scientists and engineers, university professors, poets and novelists, artists, entertainers, actors, designers and architects, as well as the thought leadership of modern society; nonfiction writers, editors, cultural figures, think-tank researchers, analysts and other opinion-makers. Whether they are software programmers, or engineers, architects, or filmmakers, they fully engage in the creative process. The creative

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professionals are people who work in a wide range of knowledge-intensive industries, such as the high-technology sector, financial services, the legal and health care professions and business management. These people engage in creative problem solving, drawing on complex bodies of knowledge to solve specific problems. Doing so typically requires a high degree of formal education and thus a high level of human capital. A place with a flourishing creative economy often also gathers creative talent, high-technology industry clusters and demonstrates tolerance. A place that wants to attract creative people, generate innovation and stimulate economic growth that must have talent and technology and must show tolerance [21]. Tolerance: The creative class is attracted to tolerant places, places with a diversity of people and an environment that is open to new people and ideas. A tolerant environment is attractive to the creative class, primarily because of its intrinsic values: it is perceived as cool. Another equally important factor is that tolerance allows for a diversity of the local population and culture, offering new and fresh outlooks, which often serve as an inspiration to the innovation processes of the creative class. Talent: The creative class transforms the society surrounding it. The right employees have become so critical a competitive parameter that companies are willing to relocate to where such talented people are found. Technology: This is a critical requirement for high tech companies and other types of companies with an urgent need for highly skilled developers. The creative class performs an important economic function especially with respect to technological development. Lee et al. [28] developed three sub-measures of the creative class in various regions: (1) The Talent index, which includes the creative class index, the human capital index (the percentage of the population with a bachelors degree or above) and the scientific talent index; (2) the technology index, which includes the innovation (e.g., patents per million people) and R&D index (R&D expenditure); and (3) the tolerance index, which includes attitude, values and self-expression. Lee et al. [28] concluded that both innovation and high-technology industry are strongly associated with the location of the Creative Class and of talent in general. Moreover, social diversity and human capital have positive and significant relationships with regional innovation, as measured by per capita patent production [28]. Intellectual Capital in Regions Much of the current academic literature concerning intellectual capital (IC) and its accompanying frameworks, constructs and measures stems from an accounting and financial perspective, focusing on firm-level intangible assets and resource analysis rather than tangible measures [6]. More research is required, in order to better understand the value drivers of regions and countries and for the better management of IC, at regional and national levels, in order to add value. Indeed, there is a general lack of tools, both for the existing statistical reporting and for policy making. From the IC perspective, intangibles become key drivers for outside the box thinking, for policymakers. It is self-evident that the same corporate IC framework [20, 44, 45] can be applied to nations, regions and cities [6, 7, 10]. Bounfour and Edvinsson [7] were the first of several researchers to examine the applications of IC, to measure nations, regions and

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cities. Bontis [6] developed the National Intellectual Capital Index, to assess the IC of Arab nations. Chang and Kan [10] used a similar national IC framework to measure IC in Panama. The national index includes four sub-components: national human capital, national process capital, national renewal capital and national market capital. With reference to Edvinsson and Malones [20] structure of IC, there are four major types of IC: (1) human capital, (2) process capital, (3) market capital and (4) renewal and development capital. Human capital includes knowledge, wisdom, expertise, intuition and the ability of individuals and labor to realize a citys or regions tasks and goals. This focus also includes the values of the culture and the philosophy of the city and region. Human capital is the property of individuals and labor, not the region. Process capital represents cooperation. The flow of knowledge requires structural intellectual assetsinformation systems, hardware, software, databases, laboratories, an organizational structure and a management focuswhich sustain and amplify the output of human capital. Such structural capital is the capital that remains in the city/region, after the employees go home. Market capital measures the intellectual assets of the organization and relates market capital to customer capitalthat is to say, the same assets that are embedded in the relationships with the organizations customers. When we discuss the measurement of a regions intellectual assets, the customers consist of those markets with which the region maintains national and international contacts. Market assets reflect the general assets embedded in a regions relationship with the international market. The assets in this concept include customerregion loyalty, the satisfaction expressed by strategic customers, the value of brands, and so on. Renewal and development capital reflects the citys capabilities and actual investment in its future development and renewal, through the exploitation of its competitive strength in future markets. Renewal and development assets include investments in research and development, patents, trademarks, start-up companies, and the like. Regional Innovation Systems Innovation is a ubiquitous learning and searching process, defined as the transformation of knowledge into novel, wealth-creating technologies, products and services. This definition makes it clear that innovation is not solely technological, but is a social process, within the space of an economy. It has become clear that it is a fruitful basis for analysis and policy formulation, at the regional level, by virtue of the idea of RIS [14]. The region is seen as the key jurisdiction for innovation, because of the social and often tacit (i.e., uncodified/unwritten) nature of innovation, animated as it is by the agglomeration of specialized and localized skills, knowledge, learning, public and private institutions and other resources that make up the region [1]. It has been argued that information can be transmitted over long distances, but not knowledge, which is often tacit and sticky, requiring face-to-face interaction and frequent and repeated contacts, for its transference [17]. RIS examine how various elements, actors and networks influence regional success in innovation. These concerns reflect the complexity of the innovation process, its dependence on organizational capabilities, untraded interdependencies [14, 19], knowledge spillovers [1, 25], knowledge

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integration through open systems architecture [5], and the potentially important influence of regional innovation policy [11]. The RIS is an open system, in constant interaction with its national, super-regional (e.g., EU, NAFTA) and international innovation nodes and networks. Cooke et al. [14] suggested three key institutional formsfinancial capacity, institutional learning, and productive culturethat facilitate systemic innovation at the regional level. The boundaries of RSI depend on the range of untraded interdependence. Consequently, the size and boundaries of RSI are vague. Regional systems of innovation also reinforce the concept that geographical and cultural proximity to advanced users and a network of institutionalized relationships are important sources of innovation. Cooke et al. [14] provided some crucial cultural features for successful RSI. They are (1) a culture of cooperation; (2) an associative culture; (3) the ability and experience to carry out institutional change; (4) coordination and public/private consensus; (5) a productive culture with sub-elements of labor relationships, cooperation at work, company responsibility for society, and productive specialization; and (6) existing interface mechanisms in the scientific, technological, productive, and financial fields. Industrial Clusters In many industries, inter-organizational networks are geographically concentrated in the form of clusters, which are considered a source of regional competitiveness [26]. Porter [35] defined a cluster as a geographic concentration of interconnected companies and institutions in a particular field. The model helps understand the comparativeness of a nation in global competition. However, the model can also be applied to explain the competitive position of geographic regions and, ultimately, also that of regional clusters. Traditional national or regional advantages have been attributed to the existence of factors such as land, location, natural resources, labor, and local population size. Saxenian [41] used the concept of industrial clusters to determine how the dynamics of production networks or inter-firm partnerships have helped to account for prosperous regional economies in Silicon Valley, California. Many theorists propose advantages of networks that are presumably explanations for the existence of clusters [35, 41]. Many studies of economic geography and agglomeration economics have argued that the central propositions, concerning the importance of dense inter-firm and social networks, are not supported by strong empirical evidence [23, 3133, 43]. Most researchers have treated social networks, in one way or another, as a central ingredient of successful clusters [9, 27]. Some have considered the regional cluster an integrated network entity, by definition, characterizing it as a production system that contains a degree of coherence in virtue of the nature of (localized) interaction constitutive of it [27]. The problem with this view is that, it considers the cluster, a priori, a trust-based system of closely interacting firms. Other researchers have suggested that a cluster is successful to the extent that it is well integrated [9]. Most research on clusters has adopted Porters [35] definition of a cluster, focusing on interdependencies and complementarities in exchange relations. Literature reveals a tendency to interpret the competitive advantage of clusters with respect to the benefits obtained from a coherent and stable collective order, sustained by interfirm behavior that is oriented to building interpersonal trust, sharing tacit knowledge

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and institutionalizing exchange, based on a common standard. Clusters are not unique, however; they are highly typicaland therein lies a paradox: the enduring competitive advantages in a global economy lie increasingly in local thingsknowledge, relationships, motivationthat distant rivals cannot match. Resolving the paradox of location in a global economy reveals a number of key insights about how companies continually create competitive advantage. What happens inside companies is important, but clusters reveal that the immediate business environment outside companies plays a vital role, as well. The role of locations has been long overlooked, despite striking evidence that innovation and competitive success in so many fields are geographically concentrated [36]. The balance between competition and cooperation applies particularly to the strategic interactions between firms operating in a geographically concentrated region [36]. Measuring Regional Innovation and Entrepreneurial Capabilities: An Integrated Framework Based on four building blocks, this paper proposes an integrated FIEC framework to measure regional capabilities, with respect to innovation and entrepreneurship. The integrated FIEC framework summarizes four dimensions for the measurement of regional innovation and entrepreneurship: (1) the financing dimension, (2) the innovation and cluster dimension, (3) the entrepreneurship dimension, and (4) the culture dimension. The respective indicators in each dimension are developed below. The financing dimension provides risky innovative grants and enough information and communication infrastructure expenditures to support creative, innovative and entrepreneurial ideas, products and businesses. It is well documented that the availability of regional venture capital and business angels is positively correlated to the number of start-ups, for various regions [2, 8, 9, 14, 29, 34, 37]. Venture capital provides a high-risk fund to support innovative and emerging creative ideas and technologies, by providing loans that the start-ups or innovators may not have received loans from commercial banks. To facilitate firms innovation, local governments and science parks can provide grants or awards, to encourage and recognize the firms R&D activities and achievements. It is widely accepted that government innovation/entrepreneurship grants/awards are good indictors of governmental support of local R&D activities [2, 14, 18, 29]. Finally, the upgrading of local ICT (information and communication technologies) is a local governments financial responsibility, in order to ensure renewal of the local knowledge infrastructure. The ICT infrastructure facilitates new ideas and the dissemination of innovation, among local agents and organizations [12, 14]. Consequently, there are three indictors in the regional financing dimension: (1) availability of regional venture capital, (2) government innovation grants/awards, and (3) the renewal expenditure of regional ICT infrastructure. Secondly, the innovation and cluster dimension represents the capability of interaction between universities, research institutes and firms, which facilitates regional clustering and innovation [12, 14]. The interaction capability of the firmuniversity research institute forms one of cornerstones of knowledge infrastructure [12], knowledge centers [29], or knowledge collaboration [16, 18]. Supported by the concept of creative class, human capital and industrial clusters, the abundance of talent pool is one of the key factors facilitating regional clusters and innovation. Previous studies

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[2, 8, 9, 12, 17, 29, 34] suggest that the high quality and availability of human resources supports labor mobility and boundary blurring. Factors affecting regional development have many dimensions, which are complex and may be conflicting. With reference to the literature, we selected four dimensions, as key elements of regional development, and 15 indicators (Table 1). To support regional innovation and entrepreneurship, many technology intermediary agencies (e.g., technology transfer offices, intellectual property firms) [8, 12, 1618, 29, 34] and supportive services for innovation and entrepreneurship (e.g., patent or intangibles valuation, firm registration, market research, consultancy, trade unions) should be available
Table 1 Measuring regional innovation and entrepreneurial capabilities: an integrated FIEC framework Dimensions Financing Indicators Abundance of venture capital References Audrethsch and Keilbach [2], Braunerhjelm and Helgesson [8], Casper [9], Cooke et al. [14], Looy et al. [29], Munnich [34] Audrethsch and Keilbach [2], Cooke et al. [14], Doloreux [18], Looy et al. [29] Cooke [12], Cooke et al. [14], Rogers and Larson [37] Braunerhjelm and Helgesson [8], Cooke [12], Cooke et al. [14], Cornett 16], Doloreux [18], Looy et al. [29] Audrethsch and Keilbach [2], Bontis [6], Braunerhjelm and Helgesson [8], Casper [9], Chang and Kan [10], Cooke [12], Desrochers [17], Florida [21], Looy et al. [29], Munnich [34] Braunerhjelm and Helgesson [2], Cooke [12], Cooke et al. [14], Cornett [16], Desrochers [17], Doloreux [18], Looy et al. [29], Munnich [34] Cooke [12], Cornett [16], Doloreux [17], Looy et al. [29] Cornett [16], Desrochers [17], Doloreux [18], Looy et al. [29], Porter [35] Bontis [6], Cornett [19], Looy et al. [29], Munnich [34] Looy et al. [29], Munnich [34] Audrethsch and Keilbach [2], Braunerhjelm and Helgesson [8], Casper [9], Looy et al. [29], Munnich [34], Porter [35] Florida [21], Munnich [34], Rogers and Larson [37] Cooke [12], Cornett [16] Audrethsch and Keilbach [2], Cornett [16] Audrethsch and Keilbach [2], Casper [9], Cooke [12], Doloreux [17], Florida [21], Munnich [34], Rogers and Larson [37]

Government innovative/ entrepreneurial grants/awards Regional information and communication infrastructure expenditure Innovation and cluster Interaction capability among regional universities, research institutes and firms Abundance of regional talent pools

Availability of technology intermediary agencies

Availability of supportive services Completeness of upstream downstream industries Entrepreneurship The entrepreneurship education and trainings Assistance of incubators No. of start-ups

Culture

Self-employed culture Risk-taking culture Lifelong learning culture Cultural inclusiveness

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within regions [12, 16, 18, 29]. Finally, it is obvious that the completeness of upstreamdownstream industries in a region is one of the core elements in initiating regional innovation and clusters [12, 16, 18, 29, 35]. Therefore, there are five indicators for the measurement of regional innovation and clusters: (1) the capability of interaction between universities, research institutes and firms; (2) the abundance of talent pools; (3) the availability of technology intermediaries; (4) the innovation supportive services; and (5) the completeness of upstreamdownstream industries. Thirdly, in the entrepreneurship dimension, it is important for regions to provide entrepreneurship education and training, to cultivate regional entrepreneurial human capital [16, 21, 29, 34]. The education and training program provides nascent entrepreneurs with the necessary business and managerial skills to guide their new ventures. When the nascent entrepreneurs need to create start-ups, they usually become the tenants of local incubation centers. The incubation centers allow new ventures to minimize their operating costs and to provide services necessary to new venture, such as diary administration and special services such as patent filing. Consequently, the assistance of incubation centers for nascent entrepreneurs is one of the key indicators for measuring regional entrepreneurship capability [29, 34]. Once, the new ventures become sustainable, the entrepreneurs normally start-up companies outside incubation centers. It is well accepted that the number of start-up firms is the most frequently used indicator for the measurement of regional entrepreneurship [2, 8, 9, 29, 34]. Consequently, there are three indicators in the regional entrepreneurship dimension: (1) entrepreneurship education and training, (2) assistance of regional incubation and (3) number of start-ups. Finally, the regional culture dimension represents the regional cultural factors that facilitate innovation and entrepreneurship. These cultural factors include selfemployed culture, risk taking culture, lifelong learning culture and the culture of tolerance of different races, nations and people. Some regions with more small- to medium-sized enterprises tend to have a greater self-employed culture than those having big firms [34, 41]. Innovative and entrepreneurial activities tend to involve risk-taking. The risk-taking culture facilitates regional innovation and entrepreneurship capabilities [12, 16]. However, innovation and entrepreneurship are not one-shot activities but a sustained, dynamic and reflective process. The lifelong learning culture provides resilient support, when innovators and entrepreneurs failed in their new ventures [2, 16]. Finally, cultural inclusiveness can encourage international ideas, which attract the creative class to stay in regions [2, 9, 12, 18, 21, 34, 37]. The integrated framework for the measurement of regional innovation and entrepreneurship capabilities is shown in Table 1.

Methods Questionnaire Design and Data Collection Based on the research framework (Table 1), an AHP questionnaire was designed. The first part of the AHP questionnaire is its principal element, providing pairwise comparison of the four dimensions; It has five sections: the first section deals with the relative importance of the four dimensions, with six questions, demanding

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4 comparisons (C2 6); the second section deals with the relative importance of the three indicators in the financing dimension, with three questions, demanding compar3 isons (C2 3); the third section deals with the relative importance of the five indicators in the innovation and cluster dimension. There are ten questions, demand5 ing comparisons (C2 10) within the innovation and cluster dimension. The fourth section addresses the relative importance of the three indicators in the entrepreneur3 ship dimension. There are three questions, demanding comparisons (C2 3). The fifth section addresses the relative importance of the four indicators in the culture 4 dimension. There are six questions, demanding comparisons (C2 6). The second part contains the basic information about respondents, including locations, affiliation and position. The authors interviewed two experts (one is a professor, the other is a senior researcher in Hsinchu Science Park Administration) in order to verify reliability and validity of the AHP questionnaire. Based on these interviews, the wordings and structure of the AHP questionnaire were modified. The experts in the AHP questionnaire survey were categorized as belonging to five kinds of organizations: government administrations, universities, research institutes, firms and industrial associations. In total, 100 questionnaires were sent by email, or by post, to 20 government officers, 40 university professors, 30 corporate managers, ten researchers in research institutes and ten leaders of industrial associations.

Analytical Hierarchy Process AHP allows effective decision-making about complex issues, by simplifying and expediting our natural decision-making processes. It also provides an effective structure for group decision-making, by imposing discipline on the groups thought processes [39]. AHP is a useful model for solving problems quantitatively [15]. It incorporates judgments and personal values in a logical way. To define a complex problem and to develop sound judgments, AHP must be repeated over time. It provides a framework for group participation in decision-making, or problem solving. Finally, the process can be applied to real problems and is particularly useful for allocating resources, planning, analyzing the impact of policy and resolving conflicts [39]. The details of definitions and analytic processes are given in the Appendix. In this research, we used the decision-making software Expert Choice 2000 to analyze the data.

Results Respondents After a two-wave AHP survey, 46 questionnaires were collected, representing an overall response rate of 46%. In terms of location, Hsinchu (37%) provided the lions share (17) of the respondents, Central Taiwan (26%) provided 12 respondents, Southern Taiwan (20%) provided nine respondents and Northern Taiwan (17%) provided eight respondents (Table 2). In terms of affiliation, 19 respondents (41%) were from universities, 11 respondents (24%) were from industry, nine respondents (20%) were from governments, five respondents (11%) were from research institutes and two respondents

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Table 2 Demographics of
respondents

Demographics Details Location Northern Taiwan Hsinchu Central Taiwan Southern Taiwan Total Affiliation Government University Firm Research institute Industrial association Total Position R&D Manager Project Manager Manager of Incubation Center Dean R&D Researcher Professor Others Total

Number Percentage 8 17 12 9 46 9 19 11 5 2 46 6 5 3 4 3 10 15 46 17 37 26 20 100 20 41 24 11 4 100 13 11 7 9 7 21 32 100

(4%) were from industrial associations. In terms of position, professors constituted the major share of respondents (21%), while the other positions, each position (R&D manager, project manager, etc.) each constituted about 10% of respondents. Weighting Analysis At dimension level (Table 3), the results indicate the order of dimensional importance leads by D2, the innovation and cluster dimension (45%), followed by D3, the entrepreneurship dimension (24.9%), D4, the culture dimension (15.1%), and D1, the financing dimension (14.9%). The principal eigenvalue of this matrix is lmax 04.0149, with the consistency ratio (CR)00.0055<0.1, indicating that expert opinions for the dimensions are consistent [39].
Table 3 Matrix for comparison of dimensions Dimension D1: Financing D2: Cluster & innovation D3: Entrepreneurship D4: Culture D1 1 2.8615 1.7973 0.9874 D2 0.3495 1 0.4674 0.3759 D3 0.5564 2.1396 1 0.5503 D4 1.0128 2.6602 1.8172 1 Relative weight 0.1494 0.4505 0.2493 0.1508 Rank 4 1 2 3

lmax 04.0149, CI00.0049, RI00.9, CR00.0055

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At the indicator level, there are three indicators for the financing dimension (Table 4). The relative weights of F1, F2 and F3 are 0.3717, 0.3616 and 0.2666, respectively. Hence, F1, Abundant Regional venture capital, is the most important indicator for this dimension, followed by F2, Government innovation/entrepreneurship grants/awards, slightly lower than F1. The principal eigenvalue of this matrix is 1max 03.0073, with CR00.0062<0.1, indicating that expert opinions for the three indicators are consistent [39, 40]. The innovation and cluster dimension has three indicators (Table 5). The relative weights of I1, I2, I3, I4 and I5 are 0.1657, 0.1881, 0.1637, 0.1379 and 0.3445, respectively. Thus, I5, Completeness of upstreamdownstream industries, is the most important indicators for this dimension. The principal eigenvalue of this matrix is 1max 05.0262 and the consistency ratio (CR)00.0058<0.1, indicating that expert opinions for the five indicators are consistent [39, 40]. There are three indicators for the entrepreneurship dimension (Table 6). The relative weights of E1, E2 and E3 are 0.2709, 0.4224 and 0.3068, respectively. Hence, E2, Assistance of incubators, has the highest weighting of the three indicators for this dimension. The principal eigenvalue of this matrix is 1max 0 3.0034, with CR00.0029<0.1, indicating that expert opinions for the three indicators are consistent [39, 40]. The culture dimension embraces four indicators (Table 7). The relative weights of C1, C2, C3 and C4 are 0.3167, 0.2931, 0.2240 and 0.1661, respectively. Therefore, C1, Self-employed culture, has the highest weighting for this dimension. The principal eigenvalue of this matrix is 1max 04.0545, with CR00.0202<0.1, indicating that expert opinions for the four indicators are consistent [39, 40].

Discussions The innovation and cluster dimension is the most important dimension, of the four dimensions, for the measurement of capabilities with regards to regional innovation and entrepreneurship. This result supports the idea of an RIS [12] and industrial clusters theory [35, 36] that the industrial clusters and regional actors and networks provide the most important impetus to facilitate collective innovation in a region. The dominance of both the innovation and cluster dimension and the entrepreneurship dimension over the financing and culture dimensions confirms that collective innovation and entrepreneurship is the key to a regions competitiveness [2, 35, 41].

Table 4 Matrix for comparison of indicators, for the financing dimension Indicators F1: Abundance of venture capital F2: Government innovation/entrepreneurship grants/awards F3: ICT infrastructure expenditure F1 1 0.8932 0.7813 F2 1.1196 1 0.6771 F3 1.2799 1.4769 1 Relative weight 0.3717 0.3616 0.2666 Rank 1 2 3

lmax 03.0073, CI00.0036, RI00.58, CR00.0062

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Table 5 Matrix for comparison of indicators, for the innovation and cluster dimension Indicators I1: Interaction capability among firmuniversityresearch institute I2: Abundance of talent pools I4: Innovation supportive services I5: Completeness of upstream downstream industries I1 1 I2 I3 I4 I5 Relative weight Rank 0.1657 0.1881 0.1637 0.1379 0.3445 3 2 4 5 1

1.1184 0.9523 1.0496 0.4612 1.3815 1.4404 0.5462 1.2200 0.5228 0.3793

0.8941 1

I3: Innovation intermediary agencies 1.0501 0.7239 1

0.9528 0.6942 0.8196 1

2.1681 1.8307 1.9129 2.6366 1

lmax 05.0262, CI00.0065, RI01.12, CR00.0058

However, the financing and culture dimensions play supportive and complementary functions, facilitating the innovation and entrepreneurship dimensions interdependently. Within the innovation and cluster dimension, the completeness of upstream downstream industries is ranked as the most important capability, of the five capability indicators. This result is consistent with the concept that inter-firm collaborative innovation is the center of an RIS [14]. The result also supports the industry cluster theory that industrial value chain integration is the heart of an industrial cluster [16, 29, 35]. Within the entrepreneurship dimension, the assistance of incubators is ranked the most important capability, of the three entrepreneurship capability indicators. It is well documented that the support of incubators facilitates entrepreneurship, because it reduces the cost of new venture creation and provides fundamental business administration services [29, 34]. In the financing dimension, abundance of regional venture capital is ranked as the most important capability, of the three financing capability indicators. In the same vein, the availability of regional venture capital is conductive to regional innovation and new start-ups [8, 14, 29]. Finally, the self-employed culture is ranked as the top capability, of the culture capability indicators, which supports the finding that SME-dominant industrial structure in regions outperforms large firm-dominance [21, 34, 41].

Conclusions For the last two decades, there has been an increasing interest in the study of regional development and growth, as a consequence of innovation and entrepreneurship. Such
Table 6 Matrix for comparison of indicators, for the entrepreneurship dimension Indicators E1:Entrepreneurship education and trainings E2: Assistance of incubators E3: No. of start-ups E1 1 1.6527 1.0684 E2 0.6051 1 0.7698 E3 0.9360 1.2990 1 Relative weight 0.2709 0.4224 0.3068 Rank 3 1 2

lmax 03.0034, CI00.0036, RI00.58, CR00.0029

J Knowl Econ (2012) 3:90108 Table 7 Matrix for comparison of indicators, for the culture dimension Indicators C1: Self-employed culture C2: Risk-taking culture C3: Lifelong learning culture C4: Cultural inclusiveness C1 1 0.7209 0.7604 0.6266 C2 1.3872 1 0.5798 0.5820 C3 1.3150 1.7249 1 0.6047 C4 1.5959 1.7183 1.6537 1 Relative weight 0.3167 0.2931 0.2240 0.1661

103

Rank 1 2 3 4

lmax 04.0545, CI00.0182, RI00.9, CR00.0202

study defines innovation and entrepreneurship as endogenous resources for the growth of knowledge-contributing regional economies. Using a resource-based view of regions, this paper primarily examines the intangible capital, knowledge, capabilities and cultures that facilitate regional innovation and entrepreneurship. By integrating four theoretical blocksthe creative class, intellectual in regions, RIS and industrial clustersa holistic FIEC framework is constructed for the measurement of regional innovation and entrepreneurship capabilities. The main contributions of the paper are twofold. Firstly, it provides comprehensive dimensions and indicators for the measurement of regional innovation and entrepreneurship capabilities. Previously, few studies have attempted to measure innovation and entrepreneurship at the same time. Secondly, it provides a priority weighting for dimensions and indicators of regional innovation and entrepreneurship. This allows the regional policy makers to establish their policy priorities and guidelines for resource allocation, based on these prioritizing weights, for dimensions and indicators. The findings suggest that the key to regional growth is not only reducing costs but also attracting the creative class and high quality human capital. Science Park Administrations should focus not only on physical infrastructure but also on the support of regional innovation, entrepreneurship, finance and culture to attract talented people, entrepreneurs and innovative firms and industries. In addition, the regional agencies should provide entrepreneurial education and training, to cultivate regional entrepreneurship. In terms of regional innovation and clusters, Science Park Administrations should continue building, expanding and restructuring industrial clusters, to encourage the evolution of technologies and industries. Finally, it is crucial that governments maintain the individuality, competitiveness and integration of science parks and selectively invest in the regional innovation and entrepreneurship capabilities that each science park needs. This prioritization of regional innovation and entrepreneurship capabilities is Taiwan-specific. It will be interesting to examine the weighting values for other developed countries and emerging economies. This paper treats each dimension independently, but it may be very productive to examine the relationships between the dimensions and indicators and the causality between regional capabilities and regional growth. Finally, there is a possibility for further studies to investigate how regional innovation and entrepreneurship capabilities vary, at the different phases of regional developmentthe embryonic, growth and mature phases.

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Acknowledgements An earlier version of the paper was presented at the Portland International Conference on Management of Engineering and Technology (PICMET) 2011, 1822 July, Phuket, Thailand. We thank Dr. Tugrual Daim, the Guest Editor of this special issue of the Journal of Knowledge Economy, for his kind invitation to submit the paper. The authors also express their sincere thanks for the financial support of the Central Taiwan Science Park Administration and the National Science Council, Taiwan (Project Nos.: CTSP1-A990329; NSC95-2416-H-007-002). The help of invited experts, with the AHP questionnaire survey and interviews is much appreciated. Finally, the insightful comments of two anonymous reviewers deserve grateful acknowledgement. All material errors in the paper are the responsibility of the authors.

Appendix AHP Analysis AHP enables us to make effective decisions on complex issues by simplifying and expediting our natural decision-making processes. It also provides an effective structure for group decision making by imposing discipline on the groups thought processes [40]. Let C1, C2,, Cn be the set of activities. The quantified judgments on pairs of activities Ci, Cj are represented by an nn matrix. A aij ; i; j 1; 2; . . . ; n The entries aij are defined by the following entry rules. Rule 1. If aij 0, then aij 01/, 0 Rule 2. If Ci is judged to be of equal relative importance as Cj, then aij 01, aji 01; in particular, aii 01 for all i. Thus, the matrix A has the form: 1 6 1=a12 6 A6 . 4 . . 1=a1n 2 a12 1 . . . 1=a2n 3 a1n a2n 7 7 . 7 ... . 5 ... . ... 1

Let us assume first that the judgments are merely the result of precise physical measurements. In this ideal case of exact measurement, the relations between the weights wi and the judgments aij are simply given by: wi aij wj And w1 =w1 6 w2 =w1 6 A6 . 4 . . wn =w1 2 for i; j 1; 2; . . . ; n 3 w1 =wn w2 =wn 7 7 . 7 . 5 . wn =wn

w1 =w2 w2 =w2 . . . wn =w2

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In the ideal case relations, it appears reasonable to require that wi should be equal to the average of these values. However, the more realistic relations for the general case take the form: wi the average of ai1 w1 ; ai2 w2 ; . . . ; ain wn More explicitly, we have wi Or
n X j1 n 1X aij wj n j1

i 1; 2; . . . ; n i 1; . . . ; n

aij wj nwi

Which is equivalent to

Aw nw

Clearly, in the consistent case, n is the largest eigenvalue of A. Four Basic Stages of AHP AHP was created by Thomas Saaty to structure complex judgments. The four basic stages are as follows: (1) Systematizing the judgments into a hierarchy or tree The AHP process is hierarchical and its hierarchy is structured from the top down, much like relevance trees. This stage allows a complex decision to be structured into a hierarchy descending from an overall objective to various criteria, sub-criteria, and so on until the lowest level. According to Saaty [40], a hierarchy can be constructed by creative thinking, recollection and using peoples perspectives. (2) Performing elemental, pairwise comparisons People can judge between two items more easily than they can make composite judgments of multiple items all at once. Therefore, AHP uses pairwise comparison among each relevant pair of items as the basic judgments. The preferences are quantified by using a 9-point scale and the meaning of each scale measurement is explained in Table 8. (3) Synthesizing those pairwise judgments to arrive at overall judgments The stage is to synthesize the judgments within a given matrix (for local priorities) and then across matrices (global priorities). The method of calculating the eigenvalue is usually used by AHP to evaluate the vectors of priorities of parameters. The vector of priorities of the parameters in the lower level in the hierarchy is first calculated and then it progresses to get the overall priority vector. There are four methods for approximating the solution: (a) The NRA (normalization of row average) method sums the elements in each row and normalizes by dividing each sum by the total of all the sums. In mathematical form: Xn Xn Xn aij = a i; j 1; 2; . . . ; n wi j1 i1 j1 ij

106 Table 8 The scales of preference between the two elements Preference weights/ level of importance 1 3 5 7 9 2, 4, 6, 8 Reciprocals Definition Explanation

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Equally preferred Moderately preferred Strongly preferred Very strongly preferred Extremely preferred Intermediates values Reciprocals for inverse comparison

Two activities contribute equally to the objective Experience and judgment slightly favor one activity over another Experience and judgment strongly or essentially favor one activity over another An activity is strongly favored over another and its dominance is demonstrated in practice The evidence favoring one activity over another is of the highest degree possible of affirmation Used to represent a compromise between the preferences listed above

(b) The NRC (normalization of the reciprocal sum of columns) method is to take the sum of the elements in each column and form the reciprocals of these sums. Then normalize by dividing each reciprocal by the sum of the reciprocals. In mathematical form:   n P 1= aij wi n  i1n  P P 1= aij
i1 i1

i; j 1; 2; . . . ; n

(c) The ANC (average of normalized columns) method is to divide the elements of each column by the sum of that column (i.e., normalize the column) and then add the elements in each resulting row and divide this sum by the number of elements in the row (n). This is a process of averaging over the normalized columns. In mathematical form, the vector of priorities can be calculated as: wi
n 1 X aij n n j1 P aij i1

i; j 1; 2; . . . ; n

(d) The NGM (normalization of the geometric mean of the rows) method is to multiply the n elements in each row and take the nth root. Then normalize the resulting numbers as follows: !1=n !1=n n n n Y X Y wi aij = aij i; j 1; 2; . . . ; n
j1 i1 j1

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In practice, NGM is the most commonly applied method, which is adopted in the study. 1max can be calculated as:   1 w01 w02 w0 n lmax wn n w1 w2 (4) Checking that the judgments combined are reasonably consistent with each other Collections of pairwise judgments are apt to show inconsistencies. These may reflect crude scaling. Besides, raters may just be flagrantly inconsistent. AHP provides a helpful indicator to signal the degree of inconsistency in a matrix of judgments: consistency ratio (CR), defined as: CR CI RI

where CI is called the consistency index and RI is the random index. Furthermore, Saaty [39, 40] provided average consistencies (RI values) of randomly generated matrices. CI for a matrix of order n is defined as: CI lmax n n1

Saaty [40] suggests that the acceptable value of CI should be less than or equal to 0.1. In general, Saaty suggests that CR should be 0.1 or less; sometimes up to 20% may be tolerated.

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