The study examined business incubation programs throughout the United States and across industry sectors, and identifies which program goals, management practices, services, operational structure, advisory board composition and other incubation activities contribute most to incubator client success. The research was funded by the U.S. Department of Commerce Economic Development Administration (EDA).
David Lewis, associate professor in the Department of Geography and Planning, is co-developer of a new Web-based toolkit for business incubators and lead author of the associated study, Incubating Success.
The Web-based toolkit enables incubator managers to compare their practices with the industry best practices identified in the study and receive feedback about how their program's operations and performance can be improved. The toolkit presents 23 questions covering incubator features ranging from goals, mission statements and marketing plans to application/screening processes, rental fees, and graduation policies. Based on the answers provided, the toolkit offers recommendations and links to additional resources.
"This study builds on prior work and is unique in its scale and depth. It provides an empirical understanding of the key practices that matter most in business incubation, what works and what does not," said Lewis, who has had extensive experience in regional economic development planning and implementation.
The study team used statistical analysis of data about established U.S. incubators, as well as a closer examination of the 49 top-performing programs, to determine specific relationships between how an incubator operates and how its client companies perform, as measured by a number of outcomes.
Among the key findings of Incubating Success are:
The most important goals of top-performing incubation programs are job creation and nurturing entrepreneurial climate in the community. Other key goals include diversifying the local economy, building or accelerating new industries and businesses, and attracting or retaining businesses.
No one incubator practice, policy, or service is guaranteed to produce incubation program success. Instead, it's the synergy among multiple practices, policies, and services that produces optimal outcomes.
Top-performing incubation programs often share common management practices, such as having a written mission statement, effective entry and exit criteria, and a payment plan for rents and service fees. Top programs showcase clients to the community and potential funders, and provide pre- and post-incubation services.
Incubator advisory board composition matters. Having an incubator "graduate" firm and a technology transfer specialist on an incubator's advisory board correlates with many measures of success. In addition, accounting, intellectual property (patent assistance), and general legal expertise on the incubator board often results in better-performing programs.
Neither the size of an incubator facility nor the age of a program is a strong predictor of client firm success. The research underscores that it is the incubator's programming and management that matter most.
High-achieving incubators collect client outcome data more often and for longer periods of time than their peers.
Most high-achieving incubators are not-for-profit models; all but one of the top-performing incubators in the study was nonprofit, as were 93 percent of those which responded to the study survey.
Public sector support contributes to program success. Only three of the top-performing incubation programs in this study operate without public-sector support from local government agencies, economic development groups, colleges or universities, or other incubator sponsors. On average, nearly 60 percent of an incubator's budget is accounted for by client rent and service fees.