New International Science Center: A Tale of Two Cities

At a groundbreaking celebration last fall in Kyoto, Japan, officials of the Kyoto Research Park Corp. and Philadelphia’s University City Science Center (UCSC) watched as a Shinto priest blessed the construction site. Several months later, in March of this year, the Japanese officials visited Philadelphia and planted a symbolic cherry tree on the Science Center’s grounds. Both ceremonies were held in honor of an unprecedented agreement, formally announced at the Philadelphia tree-planting The two corporations had joined to create Science Center International. The agreement calls for development of a 23-acre, $600 million scientific research park in Japan’s Kansai region to serve as an incubator for new high-tech business enterprises. Osaka Gas—the official parent company of Kyoto Research Park—is contributing 70% of the capital needed for the international science center. UCSC—a nonprofit corporation promoting technology development—is providing 30%. The developers plan 30 buildings for the site—to be completed by 1996—which they hope to fill with small and midsize startups focusing on biotechnology, computer hardware and software development, and other science-based products and technologies. The park eventually will be a full community of business offices, research and development laboratories, lodgings, supermarkets, restaurants, and sports facilities. Tenants who sign up with the center will be supplied with office space and will also have access to an array of services ranging from marketing assistance and secretarial help to business and financial consultation, expert technical advice on products, and venture capital contacts. The new corporation will get fees from tenants for space and services. But more important, it expects to receive long-range payoffs through participation in royalties, licensing agreements, equity shares, and other benefits of profitability as the fledgling businesses prosper. The venture follows the model of other real estate developments catering to new businesses, both in the United States and Japan, but this park will be the first designed for an international mix of tenants. “We hope it will be a model for other scientific joint ventures,” says UCSC marketing manager Gordon Carlisle. From the beginning, Osaka Gasset out to find a development partner with a good record of nurturing small businesses. Five years ago, the company hired a consulting firm to choose a successful U.S. research park that could serve as a model and as co-developer for a similar park in Japan. UCSC was the winner. The Philadelphia center, is jointly owned by 28 colleges, universities, and research hospitals and is headquartered near the campuses of the University of Pennsylvania, Drexel University, and Temple University in the heart of the city’s buzzing academic community. For 25 years, UCSC has played a nurturing role, leasing space to sci-tech entrepreneurs and offering them financial and other support services until they established firm footing. Under this arrangement, the park has helped establish more than 100 small companies in such fields as computer science, robotics, and medical imaging. The plan for the new partnership calls for UCSC to leverage its reputation and credibility in promoting the Kyoto center worldwide. The goal, of course, is to attract a range of international occupants, assist in negotiating contracts that are mutually beneficial to the occupants and the center, and to provide the new occupants with sound advice on matters involving special technical facilities that they may need. The Japanese, according to Gordon Carlisle, “have not done that much speculative office development before. We [UCSC] have done this for science-based companies and we know the difficulties of setting up laboratories.” The joint venture will set up an international venture capital fund to help capitalize new and growing technology-based companies. Although venture capital as an industry is more established in the U.S. than in Japan, “There is such a high level of interest among the Japanese in the idea of venture capital that I wouldn’t be surprised to see them doing it grander and better in a very short amount of time,” says Peter Sears, a member of SCI’s board. In time, UCSC officials feel, largely untapped Japanese venture capital could fuel considerable development that would stand to benefit the Philadelphia center and the business and research communities with which it traditionally has been connected. “Both parties expect that the arrangement will result in the growth of their local economies,” says Charles Dilks, senior vice-president of the U.S. center and a member of the new science park’s board. “Through this center, companies in the tri-state region [Delaware, Pennsylvania, and New Jersey] will be able to meet directly with a number of potential business partners in Japan,” says Timothy Weckesser, director of Worldwide Services at UCSC. “Conversely, the same is true for Japanese companies seeking business opportunities in the tri-state region in the U.S.” Akihito Yamamoto, director of the new project’s marketing division, sees the project primarily as a “technology transfer” between the U.S. and Japan, “not just in the biotechnology area but in other industries as well.” The partners expect other benefits from the arrangement. Japan is interested, for example, in observing how UCSC cultivates alliances with entrepreneurial scientists. Negotiating business arrangements with scientists is different from negotiating with business representatives, says UCSC spokesman Al Dorof. “For example,” he notes, “scientists aren’t always motivated by profit.” Meanwhile, UCSC is looking forward to observing Japanese R&D management. The country has a better track record than the U.S. in getting products from the R&D stage to the point where they are ready to be marketed. It remains to be seen, of course, how completely the different goals of the project will be met, including the intent to set up a venture capital fund. As Peter Sears notes, “the concept of a manager yielding substantial control over his business to a board of venture capitalists is something American managers have an easier time living with than a typical Japanese manager. The Japanese manager feels a much stronger obligation to look out for his employees. To lose control over his company is very frightening.” There is also the intangible risk of expecting too much too fast. “Relationships can take a long time to build,” says UCSC’s Dilks. Roberta Shell is a Philadelphia-based journalist.

New International Science Center: A Tale of Two Cities

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