From Wikipedia, the free encyclopedia

Business incubators are organizations that support the entrepreneurial process, helping to increase survival rates for innovative startup companies. Entrepreneurs with feasible projects are selected and admitted into the incubators, where they are offered a specialized menu of support resources and services. Resources and services open to an entrepreneur might include such diverse elements as

• provision of physical space (offices, labs)
• management coaching
• help in preparing an effective business plan
• administrative services
• technical support
• business networking
• advice on intellectual property and
• help in finding sources of financing.

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. Since the 1980s, many developed and developing countries^[1] have set up systems of public business incubators to encourage and assist entrepreneurship. In many cases, public incubators are focused on high-tech industries. For science-based business incubators, an effective collaboration with universities and research institutes can motivate researchers into taking the risk of initiating a company.

Incubators can 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 generally 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. (This discrepancy may partially be to the thorough selecting process of firms that are allowed entry to an incubator.)

The formal concept of business incubation began in the USA in the 1960s. It later developed in the UK and Europe through various related forms (e.g. innovation centres, pépinières d’entreprises, technopoles/science parks) during the 1980s. 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.

This rapid increase in incubation activity can be attributed to a number of factors. Business incubation has been identified as a means of meeting a variety of economic and socio-economic policy needs, which may include:

• employment and wealth creation;
• support for small firms with high growth potential;
• transfer of technology;
• promoting innovation;
• enhancing links between universities, research institutions and the business community;
• industry cluster development.

A study funded by the European Commission in 2002 identified around 900 incubation environments in Western Europe ^[2]. The NBIA estimates the current number in the US to be around 1500. 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^[3].

• 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
• National Business Incubation Association- List of Resources, http://www.nbia.org/

1. ^ "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.
2. ^ “A Benchmarking of Business Incubation”. EU, 2002
3. ^ e.g. http://www.infodev.org

• Science park
• Kitchen incubator
• Virtual Business Incubator