Frame of Reference
This section presents the theoretical part, which then helps to comprehend and analyze the results obtained in the empirical part and allow to make comparative analysis
Business incubators and their goals
Starting new business young entrepreneurs need advice or consultation from people or institutions who have experience in order to avoid errors when creating and developing a business or start-up (Guzmán-Cuevas, Cáceres-Carrasco and Soriano, 2009). Moreover, Milliken (1987) states that new entrepreneurs are faced with uncertainty as they understand that they do not possess enough information needed to start and run companies. And one of such institutions which provide support services is business incubator. Currently there are approximately 7,000 incubators all over the world, most of which are supported by local or national governments (Weele et al., 2017). According to Bøllingtoft and Ulhøi (2005) business incubators vary “in their purpose, organizational structure, operating policy, and institutional affiliation” (p.271). Incubators also differ in structure, how they offer and deliver their services and with what kind of clients they work, through paying attention on the main goal of creating and development freestanding companies (Aernoudt, 2004; Karatas- Ozkan et al., 2005).
Scholars defines business incubators in different studies as innovative tool that support the development of enterprise and create new companies (Smilor and Gill, 1986; Lalkaka, 1997; Erikson and Gjellan, 2003). Peters et al. (2004) consider business incubators as a mean for the development of enterprises, and developing innovative organizational and legal form. Moreover, Aernoudt (2004) mentions that business incubators encourage the growth and development of young firms when they are most assailable through the help of surviving and growing during the start-up period.
The American National Business Incubation Association defines business incubation is a dynamic process of the development of new companies, that supports and accelerates companies for successful development of start-ups in a way of providing recourses and services for them (NBIA, www.nbia.org). According to Adkins, Sherman and Yost, 2001 business incubation is a process of company development, where workers of business incubators help and nurture young entrepreneurs in special conditions to grow and survive in the start-up phase.
Regarding economic side, companies which are developing and flourishing stimulate economic activity, equity growth, employment growth and moreover speed up regional economic development (Greenwood, 1996; Matlock, 1996; Bøllingtoft and Ulhøi, 2005). So, business incubators in some way contribute to economic development of each country.
Albert and Gaynor (2001) made a chronological review of the definitions of ‘incubation’ and ‘incubators’ where is shown how the definition has been changing and has supplemented over times. A big debate is about the exact definition of business incubator exist between a lot of scholars (Duff, 1994; Tornatzky et al.,1996; Kumar and Kumar, 1997; Sherman and Chappell,1998; Rice, 2002) for many years, but my point of departure is that the most suitable definition for business incubation is provided by Sherman and Chappell (1998). According to Sherman and Chappell (1998, p.315) “Business incubation is an economic development tool primarily designed to help create and grow new businesses in a community by providing flexible space, shared equipment and various support services, such as assistance in developing business and marketing plans, building management plans, obtaining capital and access to a range of other more specialized professional services”. The definition of business incubator from my point of view is best demonstrated in British Council (2001, p.61) and determined as “any organization that helps start-ups develop in an accelerated fashion by providing them with a bundle of services, such as physical space, capital, coaching, common services and networking connections”. Definitions of business incubator and business incubation were provided and now key resources of business incubator will be highlighted
Key resources and support measures of business incubaton
After clarifying what business incubator and business incubation is, it is important to mention what business incubator provide. Major distinctive features of business incubators consist in provision of managed workspace for carefully selected start-up companies, shared objects, practical management assistance, business environment, education, access to finance, commercial and technical support needs and access to mentors and investors (Lalkaka, 1997; Cassim, 2001). According to NBIA incubators provide management recommendations, technical support, consulting and coaching for star-up companies, funding support, equipment, basic business services.
Major opportunities and key resources of business incubators are summarized in the study of Bøllingtoft and Ulhøi (2005) and consist in providing an environment that is protected for growing and developing companies (Allen and Rahman, 1985); helping start-ups indirectly by putting them in the business environment by providing resources (network), and also psychological support; on the other side helping start-ups directly through office space, services, and equipment, also helping start-ups with obtaining legitimacy, moreover business incubator increase visibility and credibility of start-up company and also helping with financing by investing in start-ups or by providing investors Bøllingtoft and Ulhøi (2005).
Different types of support measures provided by business incubator besides space and equipment include such services as “assistance in developing business and marketing plans, building management teams, obtaining capital and access to a range of more specialized professional services” (Grimaldi and Grandi 2005, p.116). So, business incubators play the role of support, assistance and advice services for young companies, and these services company on early stage can not afford (Bøllingtoft and Ulhøi, 2005; Karatas-Ozkan et al., 2005). According to Aernoudt (2004) business incubators not only provide services but give an opportunity to enter new markets and access to know-how.
Peters et al. (2004, p.85) claim that “the role of the incubator in the entrepreneurial process has changed from being just a business center with office facilities to one offering training, networking and consulting in all areas of expertise to startup firms”. Karatas-Ozkan et al. (2005) agree with that claim, when mention in their study that “business incubators are not the concept of a shared office and workspace facility but business incubators strength entrepreneurship skills, give access to business services, can improve operating environment and opportunities for business networking” (Barrow, 2001, p 5).
Main Goals of Business Incubator
Scholars assume that primary goals of business incubators are creation of enterprises and stimulating growth, culture of entrepreneurship, job creation, economic development, innovation and commercialization of technology; to secondary goals scholars include empowering the diversification of economic base of a region, using an existing or available funds, generating income for the incubator, create business reputation in the community and institutional cooperation (Allen and McLuskey, 1990; Cassim, 2001). Aernoudt (2004) summarize and conclude that the main-general goal of business incubators is “to produce successful firms that will leave the incubator financially viable and free-standing within a reasonable delay” (p.128).
Measurement of BI success
Aernoudt (2004) states that good business incubator can be measured by the “number of new, young enterprises with growth potential, an optimal rotation rate, a high survival rate of graduates, a positive impact on the perception of entrepreneurs and on the creation of an entrepreneurial culture, a positive impact on the perception of entrepreneurs and on the creation of entrepreneurial culture, strong links with industry, R&D centers and universities and finally a structure facilitating access to financial markets” (Aernoudt, 2004). But Peters et al. (2004) claim that the graduation of young entrepreneurs depends on the level of income, incubators ‘deadlines and rent payment that incubators increase for start-up companies that are not active to leave the incubator. Scholars consider that the average time for start-up companies to grow up is about 3 years when they become independent and self-sustaining businesses (Aernoudt, 2004; Peters et al., 2004; Grimaldi and Grandi, 2005).
As it was mentioned earlier business incubators services consist in infrastructure coaching and networking and each factor affect the graduation rate of start-up teams in the business incubators, but the number of graduation also depends on the type of business incubator (Peters et al., 2004).
Stages of regular business
Before we will analyze the needs of start-ups, first we will consider what are the stages of regular business and find out on which stages start-up can have problems and need support. A lot different opinions of business scholars exist about how many stages are in business, but it always varies from 3 to 6 stages. According to Markova and Petkovska-Mircevska (2009) four main stages that every company has on its path are presented in Table 1.
- The first stage is start-up stage when company is not formally existing and entrepreneurs should persuade people in a way of demonstrating their ideas to potential human resources and prove that the company will be successful in business.
- The second stage is seed stage when entrepreneurs make plans, sketches and prototypes but production has not been started, so in this stage the company just enter the market.
- The third stage, early stage is when company began to expand and their products or services are produced and delivered but the company can be not yet profitable.
- And the last stage is expanding stage when firm is still growing but it is profitable and mature and it can become public.
All of these stages are presented in the business and young entrepreneurs at all of these stages may need support and such support can be taken from business incubators. In next section start-up needs will be discussed
Start-up needs and support of business incubators
Start-up companies do not possess the same resources as official company, so the resource base of startups is incomplete and still evolving, which promotes “liabilities of newness” of such firms that was mentioned in background part (Weele et al.,2017). Business incubators in terms of resource based view, are considered as a solution to “liabilities of newness” as they provide resource-rich environment that allows start-ups to complete their resource base (McAdam and McAdam, 2008). So, incubators or incubator’s networks can provide all resources that start-up companies need. Weele et al. (2017) lists the most important resources that are necessary for startup’s surviving, developing and growing (Table 2). Weele et al. (2017) distinguishes two types of recourses: tangible resources and intangible resources. Tangible resources include physical capital and financial capital, and intangible resources include knowledge, social capital and legitimacy
1.2 Problem statement
1.3 Research Purpose
2. Frame of Reference
2.1 Business incubators and their goals
2.3 Start-up needs and support of business incubators
2.4 Conclusive picture
3.1 Summary of Methods
3.2 Research philosophy
3.3 Research Approach
3.4 Types of study
3.5 Research strategy – Case study
3.6 Research Methods
3.7 Time horizons
3.8 Data collection
3.9 Data analysis
3.11 Research Ethics
4. Empirical Findings
4.1 Plekhanov Business Incubator in Russia
4.2 Residents and Graduates of the Business Incubator Plekhanov
4.3 Business Incubator in Sweden- STING
4.4 Residents and Graduates of the Business Incubator
5.1 Comparative analysis
5.2 Problems of business environment development
5.3 Goals of business incubators
5.4 Needs of start-up companies
5.5 Interaction between start-ups and business incubators in two different countries
5.6 Analysis conclusion
6. Conclusion and Discussion
6.1 Practical Implications
6.2 Limitations and recommendations for future research
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