# **Annex 7  Technology Incubators**

Most of the existing incubators in transition countries are little more than custodial care centers. They are primarily controlled work spaces designed initially to help fledgling firms survive in the midst of a hostile environment – one in which land is difficult to rent, utility connections are difficult to organize, and petty harassment (or worse) from bureaucratic inspectors is an unfortunate but common fact of life. Once a firm enters one of these incubators, it is under no pressure to leave. Many Russian high tech SMEs, for example, have remained in these incubators for ten or more years. These custodial incubators may have served a useful purpose during the early phase of the transition process. But today, their custodial function is best served by eliminating the administrative barriers hampering the emergence of new SMEs and the growth of existing SMEs. This sort of incubator, in other words, should be supplanted by the rule of law and clear, transparent and sensible business regulations.<sup>76</sup> At the same time, Latvia should support the development of the type of commercially oriented incubators found for example in Israel, Europe and the US.<sup>77</sup> These incubators can be defined as “A location in which entrepreneurs can receive _pro-active, value-added_ support, and access to critical tools, information, education, contacts, resources and capital— _that may otherwise be unaffordable, inaccessible or unknown._ A technology incubator’s management team facilitates the interaction between each business and these resources, and coaches each business through a development process such that the resulting venture provides all participants with an acceptable rate of return on their investment.”<sup>78</sup> More specifically, a well structured incubator provides (i) links to industry, universities and research institutes, (ii) business support services to enhance and develop business, (iii) daily hands-on managerial mentoring (general management, finance, accounting, marketing, production, R&D), (iv) technological advice and assistance with intellectual

> 76 Footnote to FIAS report ...

> 77 For a description of the Israeli incubator system, see <u>http://incubators.org.il .  The EU has a very</u> progressive and comprehensive incubator development program for 2001-2005.  The legal framework for this program and other documentation can be found at <u>http://europa.eu.int/comm/enterprise/smie/overviewmenu.cfm . The legal foundation for this program</u> can be found in COUNCIL DECISION of 20 December 2000 on a multi-annual programme for enterprise and entrepreneurship, and in particular for small and medium-sized enterprises (SMEs) (2001-2005) (2000/819/EC), <u>Official Journal of the European Communities,</u> 29.12.2000.  For a discussion of European incubators, see European Commission, Enterprise Directorate General, Final Report, Benchmarking Business Incubators, February 2002, Prepared by the Centre for Strategy and Evaluation Services.  For a recent analysis of best practices in US incubators, see <u>A National Benchmarking Analysis of Technology Business Incubator Performance and Best Practices, US</u> Department of Commerce, April, 2003, available at

<u>http://www.technology.gov/reports/TechPolicy/NBIA/2003Report.pdf</u> .

78 <u>Technology Innovation Centers: A Guide to Principles and Best Practices, Report prepared for the US</u> Department of Commerce by Claggett Wolfe Associates, December 1999, p. 1.

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