Technology and Small Business Incubators
Technology and small business incubators have become a very popular instrument of start-up business promotion especially in the developed but also in some of the "richer" developing countries. Whereas in 1980, not more than 10 incubators existed world-wide, today, according to estimates, there are around 1.100. The model is Silicon Valley, where several of the first firms in the microelectronics and computer industry were founded as spin-offs of Stanford University.
An incubator offers a series of services to either technology oriented or otherwise promising small companies which are not yet "mature" enough to stand on their own feet. Very often, the owners of these companies have excellent business ideas but need assistance when turning the idea into a viable product. The range of services offered by incubators includes
office and/or light manufacturing space to below market lease rates,
basic office utilities such as the use of copy machines and fax, audio and visual machines, receptionist service, access to internet and so forth,
access to technology information services and to technology oriented universities,
assistance with business planning, accounting, marketing, quality control and product development,
legal consultancy services,
stimulation of contacts with other entrepreneurs and
facilitation of access to credit lines focusing on the support to technology oriented and/or other types of start-up businesses.
Incubator centres work usually within local boundaries. Very often, they are jointly owned by different institutions such as local government, chambers, banks, universities and research institutes. Some of them are run under the heading of Economic Development Agencies, representing several local stakeholders.
Whether business incubators really contribute to a significant degree to the local economy to become more dynamic, is a question that needs to be left open. Many centres are quite young and many developed countries do not take monitoring and evaluation of development programs in their own countries as seriously as the monitoring of technical cooperation projects outside their national boundaries. Observers concluded for the German Federal State of North Rhine-Westphalia, that an investment of around 500 million EUR had resulted in a net creation of 2.000 to 4.000 jobs (Jörg Meyer-Stamer/Frank Wältring: Behind the Myth of the Mittelstand Economy, Duisburg, 2000; page 50). Taking this information as a point of reference, one might conclude that incubators are a quite expensive tool of local economic development.
The success or failure of technology-oriented promotion centers is evidently highly dependent on their specific environment, i.e. both on the general national environment (growth conditions for new firms; performance of potential demanders, i.e. usually national industry at first; general economic- and technology-policy framework conditions) and on the environment specific to a center (presence of efficient R&D institutions, specialized suppliers, and other specific services). If the framework conditions are on the whole favorable, an incubator can lower the threshold of independence. If they are unfavorable, an incubator will be able to achieve little.
Recent research (2001) in the state of North Rhine-West- phalia, Germany, found key success factors for technology incubators, which are summarized in Table 1.
Still, there might be local authorities interested in this instrument, especially those who see a competitive advantage of their local area in the development of technology based industries, who have the basic necessities at their disposal (for example a technical university or a research institute within/near the local area) and who may be able to source funding from central/regional government agencies, development banks and so on.
If this is the case, what may then be the role of a GTZ project?
The project may provide know-how as to the functions, organisation, costs and conditions of success of technology incubators, making use of the experience gathered in Germany. As a first step in sourcing information, one may get in touch with the website of the Association of Technology Incubators in Germany that is representing 193 centres all over Germany.
Another possibility is to organise a study tour to German technology incubators. A proper preparation of the partners in Germany would seem absolutely necessary, in order to convey a realistic picture of the achievements and difficulties related with the centres.
Depending on the specific situation, the project may also play the role of a moderator bringing together different stakeholders and serving as an initiator of the idea of founding an incubator. In order to ensure that the advisory services are sustainable, the activities must be incorporated within an appropriate institution, preferably represented by or with the involvement of the democratically elected local government. Local ownership must be strengthened parallel to the phasing out of the GTZ contribution.
next chapter: small business estates
last chapter: CEFE
the target group
SME
support
SME promo-
tion
investment
promotion
entrepreneur-
ship
promotion