What is a Business Incubator?

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Offline rahim2008

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What is a Business Incubator?
« on: June 08, 2013, 04:09:30 PM »

“The business incubator seeks to effectively link talent, technology, capital, and know-how in order to leverage entrepreneurial talent and to accelerate the development of new companies” (1987).
This definition, however, classifies organizations such as chambers of commerce as incubators thus widening the field of incubator-incubation research to a nearly unmanageable point. Meanwhile, Rice provides a narrower definition by stating that
“Business incubators…nurture and grow start-ups in the Internet economy. They offer fledgling companies…office space, funding, and basic services such as recruiting, accounting, and legal advice—usually in exchange for equity stakes” (2002).
While this definition makes the analysis of incubators more feasible, it is insufficient in two ways. First, it limits business incubators to those that incubate Internet-related firms. Second, it reduces the incubator to a provider of shared services. However, similar to a corporation not being merely composed of a building, the incubator is also not limited to the physical facility and its shared services. Instead, it is composed of a group of people working together to improve the probability of success of new firms. Thus a more useful definition of the incubator-incubation concept might be the one by Hackett and Dilts:
“A business incubator is a shared office-space facility that seeks to provide its incubatees with a strategic, value-adding intervention system (i.e. business incubation) of monitoring and business assistance. This system controls and links resources with the objective of facilitating the successful new venture development of the incubatees while simultaneously containing the cost of their potential failure…when discussing the incubator, it is important to keep in mind the totality of the incubator…[it is] also a network of individuals and organizations” (2004a).
Hackett and Dilts (2004a) also graphically depicted the incubator-incubation concept as being composed of four inter-dependent levels: community, incubator, incubation process, and incubatees (See figure below).
It is worth noting how this concept has significantly evolved from the archetypal incubators of the 1950s. In this conceptualization, more attention has been paid to the interaction between the community and the incubator. First, the community has been recognized to have a significant role in shaping the types of services that should be provided by the incubator. Second, the community is also seen as a major source of the value provided by the incubator to its incubatees. This value may come in the form of professional services, laboratories and equipment from universities, early market feedback, a quality pool of potential employees, as well as partnership opportunities from external firms (including those that have “graduated” from the incubator). Third, launching a new firm requires a considerable amount of resources, monetary or otherwise. An incubator is based on the idea that gathering these resources in one place will help achieve economies of scale for the community. Finally, more than just savings provided by resource pooling, an incubator may also be a useful means for a local economy to channel valuable resources from areas of less productivity to areas of high productivity and with higher probability of success. Thus, in this new conceptualization, the incubator is no longer seen as an independent entity, but rather, as an organization whose success largely depends on the degree of its integration with the community.