ENTERPRISE MATURITY IN THE MIDI TECNOLÓGICO INCUBATOR

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1 ENTERPRISE MATURITY IN THE MIDI TECNOLÓGICO INCUBATOR Charles Cristian Facchini de Souza (UFSC) Janaína Renata Garcia (UFSC) Álvaro Guillermo Rojas Lezana (UFSC) The objective of this paper is to identify the relationship between the period of incubation and the stage of the life cycle of the company according the Greiner Model of Organization Life Cycle. Research was conducted at MIDI Tecnológico EEnterprise Incubator from Florianópolis, state of Santa Catarina in the South of Brazil. The MIDI Tecnológico incubator assists 20 technology-based start up companies and has an average period of incubation about three years. Research findings show that the phase of the company life cycle in the Greiner Model has no relationship with the period of its incubation time. Palavras-chaves: Enterprise life cycle, technology-based enterprise, enterprise incubator, Greiner Organization Life Cycle Model

2 Introduction The word entrepreneur and entrepreneurship is used since century XVI for designate a people or individual initiatives related to innovation, status quo changing and economic growth and development. Data from SEBRAE, Brazilian agency for entrepreneurship assistance, show a high mortality rate for the new business in the first years of operation (SEBRAE, 2007). One of the ways to decrease those mortality rates was the development of Organizations that aims to develop new businesses or new companies, that is, Enterprise Incubators. The first Enterprise Incubators started in the USA in 1950 and get in Brazil in 1985 (DORNELAS, 2000). From 1985 on the number of Brazilian Incubators has grew up and the mortality rates has been decreasing reaching the European mortality rates, a success of 93% for the companies that started in an incubator (ANPROTEC, 2004; ANPROTEC 2005; ANPROTEC, 2006). Typical enterprises that start their activities inside enterprise incubators are the technologybased companies, it is a specific kind of enterprise that has high-qualified employees and works in a very specific market area with specific products or services. There are several Technology-based Company Incubators in Brazil. They have different ways to operate each one with its rules and management style, but most of them has a period of incubation of about 4 years. Entrepreneurs have a process of skills development while their companies are in the incubation time. Consulting, training, workshops are some examples of development programs that enhance their competences in order to make them able to develop their business and get product and market share development as well as management skills. The life cycle of the organization, most of the time, starts before the incubation period, but it becomes more intense during that period. Greiner (1997) developed an organization life cycle model based in evolution and revolution phases of the organization. This research aims to evaluate the relationship between the incubation time and the maturity of the enterprise in the Greiner Model. 2. Entrepreneurship Lima (apud PEDRO, 2003) shows that the origins of the word entrepreneur come from French language, derivates from the verb entrepreneur that means to be in charge of or to undertake something. In the beginning of the XVI century the term were used to military explorers and late it was used to designate people hired by the army to make specific tasks. Then economists started using the term to designate people who run the risk to open new ventures, new business or people who made some kind of innovation. In the XVII with Adam Smith and late with Jean Batist Say, entrepreneurs were considered innovator people who challenged the status quo and made the economy moves forward. For Schumpeter (1997) vision, in the twenties, entrepreneurs were people with specific behaviors who facilitate the economic regional development and advance. 2

3 According Pedro (2003, p.24) entrepreneur definitions are associated to behavioral traits like: innovation, opportunities creation and identification, undertaking risks and implementation and achievement capacity. In the GEM (Global Entrepreneurship Monitoring) report (MACHADO et al., 2010) Brazil is between the countries with the highest entrepreneurship initial rate, and values are above of some European countries. Pedro (2003) says that entrepreneurship programs like EMPRETEC, developed by UN, and Young Entrepreneur, both operated in Brazil by SEBRAE, contribute in the entrepreneur competence development enhancing the success levels of the new Brazilian business. Data from a SEBRAE (2007) research regarding the period from 2000 to 2002, indicates that 49,4% of the small and micro Brazilian enterprises go to bankrupt before the second year of its foundation. Indicator rises to 59,9% until the fourth year after the foundation. The same research shows that indicators are getting better and the mortality rates decreased from 49,4% for the period to 22% for the period The indicator for the first four years decreased from 59,9% to 35,9%. To avoid high level of mortality, incubation programs offered by enterprise incubators comes to increase the successful rates. 4. Enterprise Incubators Enterprise Incubators came out in 1950 in New York, USA. The first enterprise incubator in Brazil started activities in São Carlos, São Paulo state, in 1985 (GALLON, 2006). According Bridi (2004, p.42), enterprise incubators are programs to aid micro and small start up companies. Their objectives are to make viable projects, creating new products, processes, services, generating new enterprises that after the incubation period are able to survive in the market environment. Quadros (2004, p.25) defines incubators saying that they offer a flexible and supportive environment where several facilities are offered to the birth and growth of new enterprises with a low cost compared to the market, because many of the costs are shared or come from grant. There are many kinds of incubators that are characterized according their type of incubated enterprises or projects. For Gallon (2009) there are some requisites to categorize incubators: by sector; by kind of incubated enterprises; incubation style. Gallon (2009) describes between incubator types: commercial incubator; regional incubators; incubators associated to Universities; intra-companies incubators; virtual incubators. SEBRAE (apud GALLON, 2009) classifies incubators as follows: technology-base incubators; traditional sector incubators; mixed incubator; virtual incubator; agribusiness incubator; cooperative incubator; cultural companies incubator. Details about incubators are narrowly described in Gallon (2009). According ANPROTEC, National Association of the Entities that Promote Innovative Enterprises (2009) data, 40% of the Brazilian incubators are technology-based incubators, that is, work enterprises whose products, processes or services are generated from applied research which technology represents high added value and that are specially related to computer science, electronics, biotechnology, fine chemistry, precision mechanics and new materials (SEBRAE, 2010). 3

4 5. MIDI Tecnológico Incubator This research was conducted at MIDI Tecnológico, a Technology-based Incubator, located in Florianópolis, Santa Catarina state, south of Brazil. MIDI Tecnológico Incubator started its activities in 1998 with support and participation of SEBRAE/SC and ACATE (Santa Catarina Association of the Technology Enterprises) (MIDI, 2010). MIDI Tecnológico is maintained by SEBRAE/SC, managed by ACATE and associated to RECEPET (Santa Catarina Network of Entities that Promote Technology Enterprises) and ANPROTEC. The Incubator has a total area of 1.000m 2 and capacity to incubate physically, via formal analyses process, 15 resident enterprises, that is, enterprises physically installed in the Incubator facilities. MIDI has another modality of incubation, the virtual incubation. The enterprise in that modality of incubation, does not use the facilities of the incubator building, but has all support and benefits of consulting and the whole advantages offered to the residents enterprises. Average period of incubation is about 3 years, but this period can varies from company to company. After the period of incubation enterprise is supposed to live without the aid offered by the incubator (MIDI, 2010). MIDI Tecnológico was elected the best technology-based incubator of Brazil in The award was promoted by ANPROTEC (MARQUES, 2009; MIDI, 2010). When this research was conducted (end of 2009) the MIDI Incubator had 15 resident and 5 virtual incubated enterprises. 6. Organization Life Cycle Aspects related to the entrepreneur behavior are among the main contributors to the enterprise success. Such behaviors are supposed to evolve according the enterprise evolution or maturity, because new challenges, new needs and new skills are necessary to overtake the difficulties with the evolution of the business. Thus one can observe the importance of studying the organization life cycle. Studying the organization life cycle make easier to analyze the needs and skills necessary to overtake the evolution of the enterprise so that it is possible to work for the success of the enterprise (Pedro, 2003). There are some models or approaches for the study of organizations life cycles, among them Adizes Model (ADIZES, 1990), Scott and Bruce (SCOTT & BRUCE, 1987), Churchill and Lewis (CHURCHILL & LEWIS, 1983) and Greiner (GREINER, 1997). This research worked with Greiner model, which is described in the sequence. The model proposed by Larry Greiner (1997) takes into account the evolution and revolution of the enterprise. For Greiner (1997, p.398) the term evolution is used to describe prolonged periods of growth where no major upheaval occurs in organization practices. And the term revolution refers to to describe those periods of substantial turmoil in organization life. According to the enterprise maturity in the Greiner model, evolution periods make revolution phases that will develop the enterprise. There are 5 evolution phases with a revolution phase between each two phases according Greiner (1997) (Figure 01). 4

5 Figure 01 Greiner model (1997). Evolution and revolution phases are described according Greiner (1997) in the sequence: Phase 1: Creativity This phase is characterized for the almost exclusive dedication of the entrepreneur in the creation and sale of the products and services. Communication among the employees is frequent and informal. Management is reactive and based in the market feedback. This phase presents the first crisis, or the first revolutions phase called Leadership Crisis. With the evolution of the company there is a growth of the number of employees so that the entrepreneur cannot communicate frequently and informally anymore. So, employees do not motivate anymore only for the work on the product or service of the company. It starts in this phase the need for a professional management and an administrative manager. Phase 2: Direction Enterprise that survive in the first phase go in the phase with following characteristics: it is started an internal structure formalization and the work become more specialized instead of generalist; budget and standard operational procedures are adopted; and a more formal hierarch structure and communication start to become stronger. The autonomy crisis also characterizes this phase. Because of the company growth, tasks and responsibilities are decentralized but the decisions are still in entrepreneur hands. Thus people starts complain for more autonomy to make decisions. Phase 3: Delegation When the companies pass the two phases described before, the next one is the Delegation Phase. This phase is characterized for a good level of profits used to stimulate people motivation. Decentralization and delegation are also characteristics of this phase, managers have responsibilities to decision making. This delegation makes the entrepreneur lose control over the company and that lost of control will be the trigger of the Control Crisis. High management of the company will try to get the total power and 5

6 control generating a series of conflicts. Phase 4: Coordination This phase is characterized for a period dominated by formal structures. Planning procedures and revisions are established, each new project is seen as a new business and it is analyzed carefully its economic and technical feasibility. Tasks, activities and coordination among different departments are more specialized generating the called Red-Tape Crisis. Trust between the managers is in constant falling. Bureaucracy dominates even the problem solution what makes fade the innovation capacity. Organization has become too large and complex to be managed through formal programs and rigid systems (GREINER, 1997, p.405). Phase 5: Collaboration If the company got to this phase, it has already became a big company with many formal and structured departments that work together in teams even within differences and interpersonal conflicts. This phase is characterized by the search of an agile problem solution formula. There is an effort for the constant search of the entrepreneur spirit and innovation. Crisis in this phase is related to stress and work overload. It is centered in the employees psychological saturation because they are strongly pressed to generate innovative solutions. 7. Methodology The objective of this research is to investigate the relation between the incubation period and the company maturity. Enterprises incubated in the MIDI Tecnológico Incubator (described in section 5) are analyzed. Research used a survey developed and validated by Lezana & Grapeggia (2006 apud GRAPEGGIA, 2008). Authors developed and validated a tool that identifies, in the Greiner Model, the stages or development phases of the organization, identifying thus the predominant Evolution and Revolution Phase where the company is. There were 20 enterprises incubated at the researched incubator when research has been conducted (December 2009). From those 20 companies, 15 were considered residents and 5 were virtual companies. All incubated companies partners have been invited to participate the research. The first contact was via and afterwards personally. Survey was submitted to 17 manager partners and 14 have been answered. Those 14 surveys represented 10 resident companies (66,67% of the resident companies) and 1 virtual company (20% of the virtual companies). Thus, from the 20 incubated companies, 11 companies participated the research, that is, 55% of participation. The predominant Evolution and Revolution Phase of each enterprise have been identified from data analyses diagnostics. It was considered a predominant Evolution and Revolution Phase because it is not possible to reach only one specific phase. Any kind of enterprise will present always characteristics of several phases during its life cycle, so that there is no an absolute phase and instead predominant phases, but always with some characteristics of the others phases simultaneously. As the companies have different foundation and incubation dates, we tried, crossing data, to observe the relationship between Evolution and Revolution Phases and the incubation period of the enterprise. 8. Results 6

7 Survey results revealed the following data related to Evolution and Revolution Phases of the companies: Enterprise Evolution Phase (average) Revolution Phase (average) Incubation period (years) A 1,75 2 0,4 B 2 1,5 2,2 C 2 2 0,9 D 3 2 3,6 E 3 1,5 1,7 F 2 2 2,6 G 3 1 1,0 H 3 2 1,3 I 3 2 1,3 J 2 0 0,8 K 3 2 0,6 Table 01 Analyzed data. To safeguard the confidentiality of information, company s names were codified with letters (A to K). The sequence follows the answered surveys reception. Figure 02 presents the same results in a bubble graphic, identifying the period of incubation with the bubble diameter (value in years in the center of the circle). Evolution 5 4 D E G H I K 3 3,6 1,7 1 1,3 1,3 0,8 B C F J Incubation period (years) 2 A 2,2 0,9 2,6 0,8 0,4 1 0 enterprise Figure 02 Evolution Phases graphic representation. 7

8 Figure 03 presents the Revolution Phases of the enterprises. Likewise Figure 02, circles represent the period of incubation (value in years in the center of the circle). Revolution A 0,4 B C D 0,9 3,6 1 F 1 E 2,6 H 1,3 1,3 I K 0,8 Incubation period (years) 2,2 1,7 G enterprise J 0,8 9. Data Analyses Figure 03 Revolution Phases graphic representation. It is observed that 55% of the companies (6 enterprises) present predominance in Phase 3 for Evolution. The others 4 enterprises (36%) are in the Phase 2 and only 1 company (9%) in the transition from Phase 1 to Phase 2 (Figure 02 and 03). The same way, as we can see in the Figure 04, 64% of the companies (7 enterprises) are in the Phase 2 Crisis of Revolution, 18% (2 companies) are in a transition from Phase 1 to Phase 2 and only 1 company is in the Phase 1 Revolution Crisis. One of the survey respondents did not answer questions regarding Revolution Phase, what made not possible to identify its company revolution phase. 8

9 Greiner Model Phases XVI INTERNATIONAL CONFERENCE ON INDUSTRIAL Phase 3 55% Transition 2 to 3 Phase 2 36% 64% Revolution Evolution Transition 1 to 2 9% 18% Phase 1 9% 0% 10% 20% 30% 40% 50% 60% 70% enterprises % Figure 04 Evolution and Revolution Phases. Results show that there is a uniform distribution between Evolution Phases 2 e 3 (Figure 02), but there is no relationship between the period of incubation and the evolution phase. As we can note, there are 2 of the 3 companies with more incubation time (B, D and F companies have more than 2 years of incubation) that are predominantly in the Evolution Phase 2. The same occur in the Revolution Phases, that is, companies with longer periods of incubation and companies with less than 1 year of incubation present the same Crisis Period or Revolution Phases (Figure 03). But we should highlight the concentration of the companies between the Phases 1 and 2 (Figure 04). 10. Final Considerations Data reveal that companies are in the Evolution Phases 2 and 3. A management for efficiency and market share growth characterizes those phases. Enterprises have already won the initial phase and are now establishing internal procedures aiming profits and market share expansion. Because of the most companies present Revolution Phase 2 and Evolution Phase 3, it is showed that the predominant stage is a transition between Phases 2 and 3. But as we can see, companies are in a more advanced Evolution Phase and still living a Revolution Phase of the past. This can indicate a resistance of the entrepreneurs to overcome the Autonomy Crisis, that is, entrepreneurs have difficult to delegate activities to their employees. It was supposed that companies with longer periods of incubation could present stages of evolution and revolution more advanced than the companies with less periods of incubation. Data results showed that there is no relationship. That proves the maturity of the enterprise is related to its entrepreneurs and not only to the time. Thus as we can see in the results, it is possible that a young company be more mature than an older company even the incubation period of the older be higher. 9

10 For a conclusive confirmation it is necessary a qualitative approach trough interviews with the respondent entrepreneurs in order to validate the results. Data and results also can direct the resources of the MIDI Tecnológico Incubator to promote training and consulting to the entrepreneurs in order to develop their skills according the needs of the phase companies are. According Greiner Model, each phase requires specific skills of the entrepreneur. The objective of the research has been reached so that it was possible to verify that there is no relationship between the period of incubation and the phase of evolution and revolution in the Greiner Model. References ADIZES, I. Os ciclos de vida das organizações como e por que as empresas crescem e morrem e o que fazer a respeito. São Paulo, Pioneira, ANPROTEC Associação Nacional de Entidades Promotoras de Empreendimentos Inovadores. Panorama Nacional ANPROTEC Associação Nacional de Entidades Promotoras de Empreendimentos Inovadores. Panorama Nacional ANPROTEC Associação Nacional de Entidades Promotoras de Empreendimentos Inovadores. Panorama Nacional BRIDI, J. V. Infra-estrutura necessária para que uma incubadora de empresas suporte o ensino do empreendedorismo para alunos de graduação: estudo da visão discente em Blumenau-SC Dissertação (Mestrado em Administração) Curso de Pós-Graduação em Administração, Universidade Regional de Blumenau, Blumenau, CHURCHILL N.C., LEWIS V.L., The five stages of samll business growth. Harvard Business Review, May- June, DORNELAS, J. C. A. Empreendedorismo: transformando idéias em negócios. Rio de Janeiro: Campus, GALLON, A. V. Metodologia Multicritério para Auto-avaliação do Microdistrito Industrial (MIDI) Tecnológico com vistas a alavancar seu desempenho e de suas EBT s incubadas. Tese de Doutorado do Programa de Pós-Graduação em Engenharia de Produção da Universidade Federal de Santa Catarina. Março, GRAPEGGIA, M. Habilidades Empreendedoras à Luz do Ciclo de Vida Organizacional. Tese de Doutorado do Programa de Pós-Graduação em Engenharia de Produção da Universidade Federal de Santa Catarina. Agosto, GREINER, L. E. Evolution and revolution as organizations grow: A company s past has clues for management that are critical to future success. Family Business Review, vol 10, n.4, MACHADO, J. P. Empreendedorismo no Brasil Curitiba, MARQUES, J. S. Boas Práticas, como promover a Incubadora através dos Prêmios Nacionais. Incubadora de Empresas MIDI Tecnológico, MIDI Tecnológico PEDRO, A. M. Características Comportamentais dos Empreendedores no Modelo do Ciclo de Vida das Organizações de Greiner. Tese de Doutorado do Programa de Pós-Graduação em Engenharia de Produção da Universidade Federal de Santa Catarina.Outubro de QUADROS, F. Z. Plano de negócios e a pequena empresa de base tecnológica: um estudo de caso na incubadora de empresas MIDI Florianópolis Dissertação (Mestrado em Engenharia de Produção) Programa de Pós-Graduação em Engenharia de Produção, Universidade Federal de Santa Catarina, Florianópolis,

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