Business Incubator

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What is a Business Incubator?

A Business Incubator is an innovative, supporting organization designed to accelerate the growth and success of typically Start-up Companies or entrepreneurial firms at the beginning of their existence. They can be seen as a special form of Outsourcing, supporting a Virtual Business.

They may be for-profit (private incubators) or non-profit (public incubators) and may specialize in a particular industry or not.

Normally a client company resides in the incubator facility. But most incubators also serve virtual clients such as home-based businesses or early-stage companies that have their own premises, but still want to benefit from certain incubator services.

In most countries, incubation programs are funded or supported (infrastructure) by local, regional or national governments as part of their economic development strategy.

Common Business Incubator Services

Incubators can offer a broad spectrum of services to entrepreneurs with a feasible idea, including:

• Office space and facilities.

• Assistance in making a business plan.

• Legal services (regulatory compliance, Intellectual Property, etc.)

• Technical and IT support, Internet access.

• Advisory board, management support services, mentoring, coaching.

• Marketing support services.

• Financial assistance. Accounting. Administrative services.

• Access to angel investors and venture capital.
• Access to various bank loans, loan funds, etc..

• Networking activities with various organizations and people.

  • Strategic partners.

  • Other incubators.

  • Universities and research institutions.

  • Consultancy firms.

  • Seed capital, venture capital funds, business angels, banks.

  • Government agencies.

Using Business Incubation as a Strategy for Existing Firms

In order to stay competitive, existing organizations also need to respond to the challenges and changes of “the new economy”, the “network economy” and the “knowledge economy” so as to take advantage of new opportunities arising from them. Nevertheless, there are many companies that haven’t restructured their strategies and operations in reaction to these dynamic economic changes yet.

According to Eshun (2009), companies need to radically change their organizational culture so as to be able to discover and take advantage of new opportunities that arise from the dynamic economic transformations: a so-called “business-incubation” strategy must be adopted. What exactly does such a strategy mean?

A business incubation strategy refers to the processes, projects, actions and events that diagnose and analyzes new and emerging opportunities with the goal of restructuring and improving organizations existing product/services, technologies and operations and creating new ones. Eshun mentions three reasons why such a strategy is critical:

1. The emergence of business incubators – organizations that aim to spur the growth and the success of starting entrepreneurial companies (start-ups) through business support resources and services, such as coaching and the provision of shared offices- have been indicative of the revolutionary changes in the economic structure since the 1970s.
2. A business incubation strategy requires multidimensional resources, skills and technologies that help creating and maintaining useful networks both internally and externally. These networks are important to produce and share new ideas, knowledge and information, which are critical elements in the changed economic environment.
3. Business incubators are organizational forms that have large potential. They can be adapted to different organizational conditions and are able to bring about useful interventions for governments for example (business incubators often require external, public support; therefore they play an important role in both fostering local economies as well as in channeling government resources). Furthermore, they can be both stand-alone facilities as well as being related to certain programs or researches.

With these advantages it is not surprising that business incubators have been exploited and leveraged by multiple entities such as financial institutions, research institutions and governments.

Source: Eshun, J.P. (2009) “Business Incubation as Strategy” Business Strategy Series Vol. 10 Iss. 3 pp. 156-166.

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