Restructuring business
incubators and accelerators
towards positive economic
impact.
Executive Summary 3
1. Introduction 3
1.1 Aims of this report 3
1.2 Methadology 3
2. De ning Incubators and Accelerators 3
2.1 Startup 3
2.2 Business Incubation 4
2.3 Incubators 5
2.4 Accelerators 5
4. Incubatee Expectations 6
4.1 Importance of Incubatee Satisfaction 6
4.2 What is Incubatee Satisfaction 7
4.3 Incubatee Expectations 7
4.4 Measuring Incubatee Success 7
4.5 Incubatee Success | Business Incubator Context 7
5. Services Provided By Successful Incubators 7
Business Incubator Service 7
5.1 Incubator Service Performance * 7
5.2 Education Service * 7
5.3 Business Service * 7
5.4 Intra Networking Service * 7
5.5 Extra Networking Service * 7
6. Conclusion 7
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References 8
Executive Summary
1. Introduction
1.1 Aims of this report
Accelerators and incubators assist edgling rms in their early and vulnerable stages of development. In
principle, this assistance can help them avoid other people's mistakes, save time and money, and
improve survival rates. As a result, job generation, regional development, innovation, and economic
growth are all a ected.
1.2 Methadology
The goal of this study is to de ne the resources for doing a literature review in order to locate a suitable
article and scienti c journal, as well as academic journal references, based on the research question of
what are impacts of a business incubator on early businesses, to learn about the incubator's business,
incubator services, supplementary services, their capabilities and characteristics in terms of form and
content, and to establish a link between incubator services and incubatee performance using several
online journal platforms such as Google Scholarly, Science Direct, Semantics scholar and Queens
University Library Journal Database using the keywords "Business Accelerators ", "Incubator",
"Incubation" "Business Incubation", "Incubator- Incubatee", "Angel Investors" And "Venture
Capitalists”.
2. De ning Incubators and Accelerators
2.1 Startup
The word "startup" refers to young, inventive businesses with growth ambitions that are frequently
operating in risky environments, such as with unproven technology or a novel business strategy.
Startups are typically considered a subset of SMEs in this context, however the words are not
interchangeable. This is an essential di erence to make since policies and e orts targeted at
encouraging creative startups and potential high-growth companies are likely to di er from those aimed
at assisting existing small businesses (Gale and Brown 2013).
Startup development stages may also require clari cation because to the imprecise nature of commonly
used terminologies. The ‘pre-startup' phase is de ned as the time when entrepreneurs may have little
more than an unproven idea, and hence the focus of assistance is mostly on the entrepreneur or
founder, with an emphasis on testing the idea and determining product-market t. Companies are in
the process of forming in the ‘startup' phase. 'Early-stage' enterprises may have initial market
momentum, but they will likely require further capital for commercial manufacture and will not yet be
pro table. The viability, expansion, and future pro tability of ‘late-stage' companies are frequently
demonstrated (Dee et al., 2015).
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Various support programs are available for various stages of startup development. Some programs, for
example, welcome entrepreneurs who are in the early stages of their business. Other programs are
aimed at later-stage businesses with a multi-million pound valuation and a proven product or service.
The majority of them fall somewhere in the middle. We use the word ‘startup' loosely in this research,
except where the development stage is clearly indicated, to cover enterprises at various phases of
development.
2.2 Business Incubation
Business incubation is a one-of-a-kind institutional arrangement that focuses on cultivating an
entrepreneurial culture in a community. However, it is the entrepreneur’s responsibility to ensure that
the company survives, as they are more likely to su er from "incubator syndrome," according to experts
(Levakova, 2012). The entire concept of incubation is to fosters a community attitude by supporting and
encouraging emerging start-ups to succeed, with success being determined by three key factors: "an
entrepreneurial and learning environment, ready access to monitors and investors, and marketplace
visibility." (Enterprise Directorate General, 2002).
The notion of business incubation is based on the belief that establishing systems that ensure the early
discovery of businesses with tremendous potential for success but limited resources would increase
their survival and growth. The idea guarantees that enterprises overcome what is known as the liability
of newness and the liability of smallness, resulting in inventive, lucrative, and long-term businesses
(Salvador and Rolfo, 2011). In general, the incubation concept aims to achieve a number of fundamental
goals, including the creation of new jobs and businesses, the promotion of entrepreneurship, the
commercialization of technology, the diversi cation, revitalization, and acceleration of industry and
local economies, the reduction of company mortality, the reduction of unemployment, the increase of
university-incubation interaction, and the promotion of technology development (Mutambi et al.,
2010).
Early incubation researchers, such as Campbell (1985), are credited as being the rst to establish a
business incubation process model. The Campbell model identi es four fundamental "services" or
"value-added activities" that incubators may help with. The value-added activities begin with a
requirements assessment that is applied to new company concepts submitted by prospective
incubatees. After a successful diagnosis, the viable rms chosen for incubation (known as incubator
tenants) are supervised. Incubatees also have access to extra value-added activities like as capital
investment and specialist networks, as well as the possibility of venture nancing. After that, the
tenants become successful growth initiatives or enterprises after completing the incubation phase.
Criticizing the model, Moreira et al. (2012) and Hackett (2004) point out that the approach is built on
the premise that all incubated businesses would survive. The Campbell model is also con ned to private
incubators exclusively, as it ignores potential entrepreneurs' talents, environmental constraints, and a
lack of a selection criterion in the selection of possible incubatees.
Smilor (1987) expanded on Campbell's concept by emphasizing the external environment (incubator
a liation and support systems) at the expense of the internal processes that occur within the incubator.
He sees the incubator as a mechanism that provides incubatees with "structure" and "credibility" while
also regulating a collection of supportive resources. With a liations to the corporate industry,
institutions, government, and non-pro t, the incubator runs a network of support ‘services' or value-
added activities. Internal support ‘services' or value-added activities are provided by the incubator in
four main ways: secretarial, administrative, business knowledge, and facilities. Economic development,
technological diversity, job creation, pro tability, viable rms, and successful products are all goals that
both the external and internal support systems aim to achieve. Hackett (2004) created a model of
company incubation based on the notion of a "black box." The method focuses on what happens inside
the incubator (internal dynamism) and how it interacts with its surroundings. According to the Hackett
model, business incubation is de ned as the selection of incubatees from a large pool of potential
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candidates who "enter" the black box of incubation. Screening performance (even though it is a
component of choosing potential incubatees), supervising and business aid intensity, and resource
bene cence are three methods in which incubatees get value addition activities. The incubatees are
then graduating rms with a success or failure outcome from the incubation's "black box." The
population size, condition of the economy, incubator size, and incubator degree of development are all
control variables in the Hackett model.
In summary, their business incubation process model consists of three basic activities: able to select
frail but promising businesses for admission to the program, supervising and aiding those who will
succeed, and nally collection of resources to help them develop and graduate from the incubation
program as nancially viable and self-contained businesses. The outcome of the incubation process,
according to Hackett and Dilts, is de ned as ve mutually incompatible end states that are "measured
in terms of incubatee growth and nancial performance at the time of incubatee leave". The incubatee
is surviving and starting to gain pro tably, the incubatee is surviving and increasing and is on a
direction to pro tability, the incubatee is surviving and that is not growing and is not nancially viable
or only fractionally pro table, incubatee operations were revoked while still in the incubator but losses
were minimized, and interventions that improve operations were terminated while still in the incubator
but losses were mitigated.
2.3 Incubators
Business incubators, according to study researchers, are institutions dedicated to accelerating the
development, nancial, and operational stability of entrepreneurial start-ups by providing specialized
services and assistance (Levakova, 2012). A business incubator is a shared o ce space facility that aims
to give its incubatees with a strategic, value-added monitoring and business aid intervention
[Link] system manages and connects resources with the goal of assisting incubatees in
developing successful new ventures while also limiting the cost of their possible failure (Finer and
Holberton, 2002). Incubator is more than just an o ce building, articles of incorporation, and
infrastructure. Rather, the incubator is a network of people and organizations that includes the
incubator manager, industry contacts, incubatee companies, local universities and professional services
providers like accountants, angel investors, marketing specialists, consultants, lawyers and venture
capitalists.
Weinberg (1991), who adds a network dimension to the idea, sees incubators as inter-organizational or
social partnership organizations concerned with achieving "socially important" aims by combining the
strengths of many organizations. Ulhoi (2005) and Mian (1996) advocated for the creation of a network
incubator based on “territorial synergy, physical proximity, relational symbiosis, and economies of scale,”
with the goal of trying to leverage entrepreneurship and innovation initiative and expertise in the
creation and operation of successful businesses. Incubators, according to Brooks (1988), Phan et al.
(2005) and Lalkaka (2001), are authorised institutions that would provide a ordably priced coworking
space while also providing focused support and services with the primary intention of fostering small
newly established businesses into healthy businesses.
2.4 Accelerators
Accelerators, as a unique type of innovation intermediary, are a newer phenomena. Y Combinator, the
rst accelerator, was formed in 2005, only 14 years ago. Nonetheless, they have had a signi cant
in uence on the development of entrepreneurial ecosystems and the nurturing of innovation
communities (Drori and Wright, 2018). Since 2005, Y Combinator has invested in over 450 companies,
with a total valuation of approximately $7.8 billion (Cohen, 2013). By 2016, there were over 3000
accelerators globally (Hochberg 2016), with over 7,000 start-ups receiving investment by 2018. (Seed-
DB 2018). While some studies classify accelerators as a subset of incubators (Gliedt et al., 2018), others
see them as a separate organizational form with their own set of characteristics based on the services
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they give to their startup clients (Pauwels et al. 2016). Furthermore, unlike incubators, accelerators have
a considerably shorter time frame for their assistance programs (Cohen 2013). They are not meant to
provide physical resources or o ce space for startups for an extended period of time, are much less
concentrated on venture capitalists seems like the next step of funding, and strive to stimulate business
development through rigorous time-limited assistance. They are not meant to provide physical
resources or o ce space for startups for an extended period of time, are much less concentrated on
venture capitalists seems like the next step of funding, and strive to stimulate business development
through rigorous time-limited assistance (Pauwels et al., 2016).
Despite the fact that the accelerator phenomenon is relatively new, there is a wealth of research
examining accelerators (Cohen 2013), including two systematic literature reviews that also refer to
business accelerators, one on entrepreneurial proxies (Hausberg and Korreck 2018) and the other on
innovation proxies (Gliedt et al. 2018). However, there is a growing recognition that more systematic
research is needed to help comprehend what accelerators are, how they continue operating, and what
responsibility they perform in promoting the development of their enrolled start-ups, as well as shaping
the innovation entrepreneurial landscape more broadly (Drori and Wright, 2018).
4. Incubatee Expectations
To address the study question, "Which services lead to satisfaction and in turn for Business
Incubatees?" A better knowledge of the client satisfaction construct is required. As a result, this section
of the literature study delves deeper into the subject, beginning with the signi cance of customer
happiness.
4.1 Importance of Incubatee Satisfaction
Incubatees are the most crucial component of every business since it is reliant on them (Drucker, 1994).
There is no income and hence no return on investment if there are no incubatees. They also have an
impact on the acquisition of new tenents through word-of-mouth referrals. As a result, getting a
thorough understanding of incubatees is of critical management importance. Many major rms across
the world have modi ed their strategic thinking in the previous two decades. Whereas before the focus
was mostly on market share and client acquisition, the attention has shifted to customer happiness and
sustainability. The most signi cant motivation is the possibility of earning a long-term competitive
edge. Whereas the previous o ensive approach of growing market share was solely concerned with
acquiring a short-term competitive advantage, it was di cult to consolidate, making gaining a long-
term competitive advantage almost impossible (Matzler, 1998). New client acquisition expenses are
estimated to be around ve folds better than customer retention costs (Matzler, 1998). The
defensive approach of client retention, on the other hand, was created solely to gain a long-term
competitive edge. It is assumed that customer pleasure in uences customer loyalty in a favorable way.
This means that when customer pleasure is high, client loyalty is strong as well. Furthermore, customer
satisfaction is regarded as a leading indication of product and service performance, as well as the best
predictor of a company's future (Kotler, 1991).
Incubatee satisfaction and loyalty are linked to a strong cash ow, lower transaction costs, and lower
price volatility, according to research (Anderson, et al., 1994.). Furthermore, with a high level of
customer satisfaction, the cost of acquiring new consumers is reduced, as a result of fewer negative
customer statements and an increase in good customer referrals (Anderson, 1998). As a result, the
customer satisfaction construct's signi cance is exaggerated. According to Matzler and Hinterhuber
(1998), the strategic goal is to achieve a high degree of customer satisfaction rather than capturing
greater market shares than rivals. Matzler (1998) stated the strategic aim is to establish a high degree of
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customer happiness and loyalty in order to acquire a lasting competitive advantage, rather than
capturing greater market shares than competitors.
4.2 What is Incubatee Satisfaction
The necessity of the customer satisfaction construct for any rm is underlined above. It may be used to
evaluate the success of products and services, as well as serve as a key indicator of the company's future
prospects (Kotler, 1991) and as a result, it is of great management importance. But, exactly, what does
"customer satisfaction" imply? To address this question, the customer satisfaction construct must rst
be split into two parts ‘incubatee as customer' and ‘their satisfaction.' Every person who purchases
goods or services from businesses is referred to as a customer (Parasuraman, 2000). Although the
phrases client and consumer are sometimes used interchangeably, there is a minor but signi cant
distinction between the two. A customer can be a consumer, but not everyone who buys anything is a
customer. A customer is the person who pays in exchange for an o er made by an organization with the
goal of exceeding expectations and maximizing satisfaction, whereas a consumer is the one who
consumes the goods in the end (Marshall, 2016).
Customer satisfaction, according to Kotler, Armstrong, Saunders, and Wong (2002), is de ned as the
amount to which a product's or service's performance meets the purchasers' expectations. Or, as
Schi man and Kanuk (2014) de ne it, “an individual's assessment of a product's or service's
performance in respect to his or her expectations” (p. 14). As can be seen from the examples above,
assumptions play a signi cant part in practically every de nition of customer satisfaction.
4.3 Incubatee Expectations
4.4 Measuring Incubatee Success
4.5 Incubatee Success | Business Incubator Context
5. Services Provided By Successful Incubators
Business Incubator Service
5.1 Incubator Service Performance *
5.2 Education Service *
5.3 Business Service *
5.4 Intra Networking Service *
5.5 Extra Networking Service *
6. Conclusion
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