Tecnológico de Monterrey Technology Park Initiative

From 2004 to 2015, the Mexican government’s ambition to diversify the economy and increase the number of higher-wage jobs helped inspire several other efforts to bring universities, government, and business together. At the same time that the state of Nuevo León launched its Monterrey Knowledge City program, the Monterrey Institute of Technology and Higher Education (Instituto Tecnológico y de Estudios Superiores de Monterrey), known as Tec de Monterrey, created a technology park at its Monterrey campus—the first in a network throughout the country. Of 21 Tec de Monterrey collaboration experiments, 5 showed strong signs of success by 2013. The Tec program faced some of the same core challenges PIIT had encountered. Those challenges spurred further learning about how to use collaboration to promote economic development.

The link between PIIT and the Tec experiments was Arturo Molina Gutiérrez, a computer scientist who had become dean of the School of Engineering and later rose to become the university’s vice president. Molina took seriously the Mexican government’s concern for improving labor productivity, raising incomes, and diversifying the country’s economy. In his view, Tec could serve an important role in building the strength of the Mexican economy. It was the largest private university in the country, with 31 campuses and more than 90,000 students. Tec also had strong ties with the business community, and its emphasis on active learning created an opportunity to forge the specific kinds of partnerships new national policies encouraged.

The question Molina faced in his leadership roles at Tec—as director of the Ciudad de Mexico campus, rector of Mexico City campuses, dean of engineering and architecture at Monterrey, and vice-president for research, graduate studies and continuing education—was how best to create a virtuous circle that linked research and training to business development and job creation.

Framing a Response

The first conversations took place in 2000–2001, when the university began to create business incubators on its campuses, according to Luis Miguel Beristain, a Tec professor involved in the university’s entrepreneurship program since the 1990s and a leader at the Ciudad de México life sciences campus.

Molina wanted to go beyond a simple incubator concept. He sought to link education and business in new ways. In the words of Carlos Ibarra, a professor who became director of the Querétaro (Monterrey) park in 2014, the aim was to create “an ecosystem of entrepreneurship”: networks and opportunities for students and a source of skill and insight for corporations.

Molina appointed Monica Breceda, who had a background in entrepreneurship and engineering, to manage day-to-day planning. The two toured technology parks in China, India, Spain, and the United States. They decided that the University of California, San Diego, Science Research Park and the University of Barcelona offered promising models in which the university built lab facilities and shared access with companies and with its researchers. Molina and Breceda first wanted to create an innovation center in Monterrey to provide proof of concept and then expand the model to Tec’s other campuses.

During 2004 and 2005, Tec began to construct a facility on the edge of its Monterrey campus in an old shopping mall to help develop small, high-technology, high-value companies that were in the idea phase and needed help with patenting, scaling up, or marketing. The main requirement for private sector participation was that a company had to have a high-value technology product.

Financial support came from the university—which covered the cost of the infrastructure—and from government grants for small and medium-size enterprises. Breceda assembled support services to help tenants with legal contracts and immigration services and devised a plan to bring companies to the campus and link them with researchers and students.

Breceda said the planners encountered early problems. “The dream didn’t quite fit with the reality” at first, she said. The project was understaffed. It was hard to work out agreements with the university because the building was outside the campus and the university did not want to extend security and other services off campus. It also was important for the tenants to have access at all times, and an around-the-clock-access policy departed from the campus norm.

Two companies that were part of a preexisting university center for innovation were the first to join. Breceda and Molina identified three additional companies, and in early 2006, the park opened with those tenants. Almost immediately, Sasken Communication Technologies, an Indian company, requested space for up to 100 engineers, and the university mobilized to improve accommodation and infrastructure.

The new Center of Innovation and Technology Transfer, dubbed CIT2, was off to a promising start, and the publicity generated by Sasken’s arrival drew other Indian firms to the project.

Getting Down to Work

With proof of concept in hand, Molina made a bold proposal. He had just become Tec’s vice president of research and technological development and was newly responsible for all Tec campuses, which numbered 24 at the time and would rapidly rise to 31. He felt strongly that Tec could promote economic development in the states where the university operated.

Molina developed an agreement with the federal government to create 21 technology parks on Tec campuses. Heriberto Félix Guerra, undersecretary of small and medium-size companies, signed the agreement; and Molina and Breceda plunged into the task of making the idea a reality. They built state-level support by inviting governors from relevant states to tour the flagship park in Monterrey.

Creating models

Molina realized that one approach would not work everywhere. Therefore, he and Breceda outlined three models that other campuses could consider. One model simply provided space near a campus, where high-tech companies could locate. The proximity to the university would lower the costs of hiring students, who would gain work experience and job opportunities. The companies might learn from researchers on the campus.  “It was good for our engineering schools, good for our information technology schools,” Molina said. The second model helped people with ideas—including students—build new companies or enabled companies to improve and expand in ways that would enhance their revenues and increase jobs. The third model added research collaboration to the functions offered. [i]

Each campus could identify the model and the kind of substantive specialization that would best match localeconomic strengths, campus research and teaching capacities, and market opportunities. 

Tec de Monterrey agreed to cover the costs of initial operations on each campus, and the flagship campus negotiated support from the state and federal governments to share facility construction costs. Campus tech park directors, once chosen, would be responsible for creating operational budgets, for developing long-term financing strategies, and for applying for government research grants and funds for small and medium-size enterprises. Breceda’s office had to supply advice on a continuing basis because creating medium-term revenue models was not easy. “To create the financial models for the parks was a challenge,” Molina said.

To qualify as a tenant of a Tec technology park, a company had to be able to link students, researchers, and corporate activities. If a company just wanted to rent space, the park director had to refer the company’s managers to other business parks nearby.  This rule helped to keep the program true to its aims. 

Planning and preparing

Molina and Breceda conducted a series of market analyses (1) to identify each state’s economic capacities and relative competitiveness in several sectors and (2) to highlight clusters of activities that could strengthen each other. “So, really, you build around the competence of the region,” Molina said. “Everybody wants to do IT, but it doesn’t make any sense. Instead ask, ‘IT applied to do what?’ If you have the automotive industry, then you develop IT applied to the automotive industry.” They also identified some of the support services, such as hotels, that would be necessary to attract and retain new business.

The Ciudad de México campus technology park exemplified the kind of focus needed. The director decided to concentrate on life sciences because in 2006 the campus was in the middle of the largest biomedical cluster in Latin America. Within a five-kilometer radius were 11 of the country’s 13 national institutes of health and the facilities of 15 of the 20 largest pharmaceutical companies in the world. Students at the park could help conduct or replicate preclinical trials and develop technology. “You have to very clearly understand the innovation process of your technology or your industry,” said Beristain.

Each participating campus appointed three people to manage the project. These new managers participated in a training program Molina and Breceda had developed. The program shared advice about models and strategies and highlighted the best park experiences.

Providing landing services was an important first step in attracting the participation of companies. Such services included help in looking for homes and schools for workers, assistance in recruiting management, and help in installing technology.

The parks also had to offer around-the-clock support for the facilities. Even when the buildings were at the edges of the campus, as they usually were, the university had to provide electric power, for example. Campuses were accustomed to limiting electricity and other services during holidays or peak periods of use. For the companies, such disruptions were potentially damaging, and the university had to adjust its policies.

The three-person management team also built relationships between companies and local governments, and it worked with the university to recruit students and researchers. Breceda said Tec’s network of trusted business consultants, lawyers, and other professionals played an important role in attracting tenants.

Negotiating

Attracting firms and negotiating collaborative arrangements also presented challenges. For example, big companies sometimes would sometimes seek special deals. No matter how attractive an investment a big company would bring, Breceda urged park managers to adhere to the same terms for all tenants. To lure and retain smaller, vibrant start-ups, it was important to avoid giving concessions to larger companies that had deep pockets.

All agreements between Tec and the companies included a clause binding the company to collaboration. Without that clause, the parks would risk attracting companies that sought services and rental space but did little to develop new products and train or hire students.

Although Tec provided facilities and access to professional networks, researchers, and students, each tenant agreed to a contract that stipulated prices for water, electricity, security, and other services. Each also had to purchase a telephone landline to help it establish a legal address.

Maintaining the parks at about 85% capacity proved possible in most instances—and was about what most of the park managers could reasonably handle, Breceda said.

Collaboration

“Once you have the building, you have to make it alive,” Molina said. To succeed, each park would have to have a strategy for matching companies with the interests and capacities of professors, researchers, and students. “There has to be a living environment to really sustain a technology park. It is not like you’re renting an office,” he said. It took time and strong leadership to meet that goal. Molina’s team created opportunities for park managers to visit each other and learn from one another’s experiences.

One way to create an effective partnership in, for example, the IT field was to use a tenant’s software as a vehicle for instruction in a university class. Students would learn general concepts while also becoming familiar with the company’s product or system. For the company, that approach lowered training costs. Companies could simply hire students who had performed well, and they would be assured that the students already knew how the software operated. In turn, the students appreciated that the skills they had learned in class would be useful in their careers, and they invested themselves more heavily, which also improved faculty morale. Molina said, “Everybody wins.”

Molina wanted all students to participate in this kind of interaction at least once before graduation. The program collaborated with companies to create summer opportunities for students to intern, apprentice, or take part-time jobs.

To make the approach work required some other steps as well. For instance, park managers learned they had to invite the companies to give conferences and play active roles in helping connect the professors with the students and the companies. Gradually, some of the park directors took other steps to facilitate collaboration among businesses. They sponsored social events and networking sessions at which people talked about recent failures. If one company hosted a conference, the other tenants received invitations. The university also joined the International Association of Science Parks and Areas of Innovation and started to participate in the association’s events, borrowing ideas about ways to foster collaboration from other countries.

To ensure that the parks truly inspired innovation and acted as incubators or accelerators for new enterprises, Tec de Monterrey initially limited the tenancy agreements to four years. Molina said, “We want them to move—establish, grow, and then move out.” That policy was consistent with the ambitions of the government’s program for small and medium-size enterprises as well as with the Tec’s philosophy.

 Later, the university eliminated the four-year limit, though all leases remained short-term in order to avoid problems with evictions or contract violations. It experimented with awarding points to tenants when they hired students as employees, allowed students to do projects, provided professional practicums, or participated in classes. Those that failed to accumulate a specified minimum number of points at year-end were asked to leave. Some of the companies that fell behind would race to accumulate points in the month before the annual evaluation, and increasingly, the program leaders found that as well as the total points, they had to look at the pattern of activity throughout the year.

Obstacles

Because of its size, the initiative required considerable coordination by the dean’s office. When Molina became head of the Monterrey campus, he lacked the time to follow up, and his bold plan for technology parks on every campus lapsed. The parks initiative required more supervision. On some campuses, talented leaders made up for the deficit, however, keeping the vision alive.

Breceda, too, learned that timing mattered in ways that hadn’t been obvious at first. Government funding cycles created several challenges. For example, construction projects and other activities often continued for more than one year and one budget cycle, but government accounting required that all objectives be met within the fiscal year the money was appropriated. The leadership team had to develop workarounds.

Further, grants often did not materialize on time, and Tec had to devise a system for smoothing the revenue or funding for park partners. Breceda guided park tenants through funding applications to minimize interruptions, and Molina persuaded the university to provide temporary funds for applicants that the applicants would repay when government grants were released.

A second kind of timing problem sometimes arose in connection with the university’s course schedule. When a project couldn’t be completed within a term, it was hard to evaluate student performance or manage student participation. Park directors worked with companies to align their projects to fit the academic calendar.

Results

At Molina’s direction, the university kept track of basic information about each park’s performance. As a result, it could monitor and compare investments, projects, and performance. According to Ibarra, the university began to evaluate the success of the parks according to four metrics: the percentage of tenants that met the academic linkage requirements (90% had to do so), external accreditations as business incubators or accelerators with the Ministry of the Economy, number of companies started by recent graduates, and financial capacity to be self-sustaining.

By the end of 2013, of the technology parks Tec de Monterrey was able to launch, 5 were working very well in the view of administrators, 6 had mixed records of success, and 3 were failing. In 2014, 13 parks remained. The 152 resident businesses had created 2,000 jobs, according to Beristain—about a quarter of them at the Ciudad de México campus. Tec had spent roughly 300 million pesos (US$22 million), according to Joaquín Guerra, a professor and former campus president. Although the university had had to invest more than it initially anticipated (roughly 50 to 60% of the actual cost), this expenditure helped make the concept a reality, Guerra stressed. “If we had seen this project as one about earning money, it wouldn’t have worked,” he said.

The five successful parks attracted companies and generated jobs for Tec graduates and students. The initiative also changed teaching at Tec: curriculum developers focused on industry needs and the practical application of knowledge rather than on pure theory.

The first years of Tec’s experiment generated several lessons: The parks had no shared operations manual because each tenant was supposed to tailor its activities to the local economy. Nonetheless, had a manual and a compilation of standard practices existed, some of the parks would have performed better—in Molina’s view. A more gradual rollout might have eased the problem because each new park could have learned from the others.

Those who participated in the parks project agreed that strong and effective leadership was a key element in the project. Guerra said, “The most important factors are the commitment and engagement of the people involved: the board of trustees, campus administrators, professors, private sector authorities, and students.”

The mix of tenants also influenced levels of success, as did proximity to certain kinds of businesses or services at a park’s edges. Getting the right focus was important too, but identifying clusters of related enterprises that could link to existing supply chains proved a challenge for park managers at many campuses. Beristain said, “The parks that haven’t worked didn’t have clear business models.” Expanded analytic support for this function would have increased the probability of success. It also helped to have one large anchor business—and to have banks nearby, as was the case in Querétaro, one of the most successful parks.

Third, the model would not work at all universities, Molina concluded. At some, it was highly successful. One of the university’s technology parks grew to occupy a nine-floor building, with 120 companies in its incubator program (many more than it could house physically), an information technology cluster, and two floors devoted to graduate study and continuing education.

Guerra underscored the observation that it takes time for technology parks to realize their potential. “You have to build confidence,” he said. Companies had to see to be convinced, but as they saw the parks growing, they wanted to be part of them. It also took time to convince faculty members to move away from traditional ways of working and to think about how their research could help create a business.

Nonetheless, the Tec experiment was timely and had promise. In Molina’s view, it was important to “send a message to the community that we were doing something” to help, and technology parks were the best vehicles.