Multi-Factor Assessment of Service Delivery in Business Incubators: Perspectives from Incubator Tenents

IntroductionBusiness Incubators (BIs) encourage the growth and development of start-up firms by providing a network of controlled conditions, including various support systems and external networks (Smilor, 1987a). Typically, clients are most attracted to BIs because they provide work spaces on accommodating financial terms, but BIs offer much more (Lalkaka, 1999). They allow access to networking resources (through internal and external relationship building opportunities); financial resources (through finance, accounting and contacts to investors); technological resources (through Internet and computers); and organizational resources (through counseling in planning, management, human resources; and legal services) (Aernoudt, 2004). According to the National Business Incubation Association (NBIA), approximately 1,200 BIs were operating in North America in 20 1 0 (Needleman, 20 1 0). Five typical incubator types are included within this number. First, for-profit property development incubators primarily seek to capture real estate appreciation (Nyrop, 1986). Second and third, are non-profit incubators comprising two different incubator types, govemmentally supported and private ownership, and both of these focus on creating jobs and on enhancing the entrepreneurial climate (Pacholski, 1988). Fourth, academic incubators seek to commercialize university technology, while simultaneously providing local economic development (Smilor, 1987b). The fifth category, forprofit seed capital incubators, represents the physical manifestations of seed fund managers who create portfolios of firms in a single location - the better to attend to them. The most common business types found in BIs are light manufacturing, technology, service firms and those businesses developing new products or engaged in research and development (Business Incubation, 2009). A significant portion of research in this area has been devoted to determining the value of BIs within the economy. This often includes rehabilitation of old buildings, creation of new jobs, and promotion of technology transfers (Sternberg, 1990). However, the most important goal of a BI is to grow firms that become financially successful enough to leave the incubator and contribute to the economic environment through job growth (Adkins, Sherman, & Yost, 2002). To succeed, the BI should consider having firms stay in the incubator environment for as long as possible, as the longer they stay the better chance they have of succeeding once they graduate (Steinkuhler, 1994). Of the five BI types, non-profit incubators have the highest number of graduates due to subsidized rates provided by state funding; this allows client budgets to be directed to other profit-centered areas (Peters et al, 2004). Many researchers question the financial success and degree of economic development impact of graduated firms. Although past studies concluded that BIs do improve the profitability of survival for new business ventures after graduation, this advantage is not significant as compared to firms who did not participate in an incubator (Allen & Bazan, 1990). Further, Roper (1999) points to some individual successes of graduating firms, but states that there is little conclusive proof that the BI adds value to local economic development. However, there may be limitations in measuring the effect of BIs on the economy. Bergek and Nonnan (2008) note that BIs have different objectives based on location and type; therefore, economic impact may not be the central concern for some BIs. Furthermore, there is no agreement by researchers as to the relevant variables for BI economic impact, making it difficult to develop rigorous evaluation approaches (Bigliardi, Donnino, Nosella, & Petroni 2006). Regardless of the questions sunounding economic impact, to examine BI graduation rates and the degree of success after graduation as a comprehensive picture of BI performance is insufficient. …