Business incubator

From Wikipedia, the free encyclopedia

Business incubators are organizations that support the entrepreneurial process, helping to increase survival rates for innovative startup companies. Only entrepreneurs with feasible projects are admitted into the incubators, where they are offered a specialized menu of support resources and services. The resources and services open to an entrepreneur include: provision of physical space, management coaching, help in making an effective business plan, administrative services, technical support, business networking, advice on intellectual property and sources of financing. The incubation process is intended to last around 2-5 years.

Business incubators can be private or public. Private incubators are for-profit firms that take equity or receive a fee for the business services they provide to their clients. In essence, they are a consulting firm that is specialized in new firm creation. In the last twenty years, many developed and developing countries have started large systems of public business incubators to encourage and assist entrepreneurship. In many cases, public incubators are designed to stimulate the development of new products and services in high-tech industries. For science-based business incubators, an effective collaboration with universities and research institutions can motivate researchers into taking the risk of initiating a company.

Incubators have many partners in addition to universities. Since new firms require finance to grow, incubators have close relationships with many kinds of investors. Seed capital and venture capital funds, business angels, and banks provide most of the seed and start-up capital for incubated companies. Since business incubators are powerful economic development tools, they collaborate actively with regional and national government agencies, from which they often receive financial grants. In many countries, business incubators have national associations to represent their interests and organize meetings where best practices are disseminated.

Evaluations of business incubators in Europe and the U.S. suggest that 90% of incubated startups were active and growing after three years of operation, which is a much higher success rate than that observed in startups launched without assistance. Science-based business incubators are thought to be particularly useful from a policy perspective because they can simultaneously promote knowledge diffusion, technology transfer and high-tech firm creation.

1 History
2 References
3 See also
4 External links

[edit] History

The formal concept of business incubation began in the USA in the 1960’s. It later developed in the UK and Europe through various related forms (e.g. innovation centres, pépinières d’entreprises, technopoles/science parks) during the 1980’s. In 1997, research carried out for the UK's Her Majesty's Treasury identified around 25 incubation environments in the UK. This number has increased dramatically in the last 10 years: UKBI’s most recent mapping survey (2005) identified around 270 incubation environments across the country . A study funded by the European Commission in 2002 identified around 900 incubation environments in Western Europe (“A Benchmarking of Business Incubation”. EU, 2002). The NBIA estimates to 1,500 the number in the US.

Recent research and projects by UKBI show that this rapid increase in incubation activity can be attributed to a number of factors, not least to a growth in policy interest and associated funding in recent years at local, regional and national levels. The process of business incubation (i.e. helping start-ups to grow) has been identified as a means of meeting a variety of economic and socio-economic policy needs which are often represented in incubators’ strategies (mission statement, objectives, business plan’s targets) and dictated by sponsors and other main sources of funding. These policy needs may include:

Employment and wealth creation;
Support for small firms with high growth potential;
The transfer of technology;
Promoting innovation;
The growth of small technology-based and knowledge driven firms;
Enhancing links between universities, research institutions and the business community;
Industry cluster development.

The incubation activity has not been limited to developed countries; incubation environments are now being implemented in developing countries and raising interest for financial support from organisations such as UNIDO and the World Bank. ^[1] Research by UKBI^[2] for instance, demonstrates that business incubation environments form part of economic re-structuring strategies in many of the transitional economies of the world. The scope, range and roles of incubators are therefore wide and varied.

Early incubation environments tended to be of general business usage. However the business incubation industry is dynamic and can be fast changing: over time increased focus on sectors, stage of development of client businesses, types (e.g. physical or virtual) and scope have produced a much more diverse industry and led to a number of research studies to classify business incubation environments according to their legal status, partners, sponsors, client base, organisational structure, etc.

[edit] References

A.C. Cooper, "The role of incubator organizations in the founding of growth-oriented firms", in Journal of Business Venturing, 1985 (1) no. 1, pp. 75-86
M.G. Colombo and M. Delmastro, "How effective are technology incubators? Evidence from Italy", in Research Policy, 2002 (31), pp. 1103-1122 [1]
"Research study by Suffolk ACRE", http://www.suffolkacre.org.uk/Business%20Co-operative%20Employment%20Report.pdf

^ e.g. http://www.infodev.or
^ "UK Incubators: Identifying Best Practice". 2001; "Innovation and Entrepreneurship in Developing Countries: Impact Assessment and Lessons Learned from infoDev's Global Network of Business Incubators". 2006