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How Best Can Incubator Managers Help Tech Companies?

February 24, 2010

Being located within an incubator can provide tech startups help beyond low-rent space. Networking opportunities and direct counseling and technical assistance can play important roles toward the firms' success. Or do they? A recent study published in the journal Technovation finds the interactions incubator managers have with their tenant firms may not be as helpful as the metrics would suggest.

Most incubators use a variety of measures for interactions with tenants as indicators of their contribution to the companies' success. Increasing the number of hours counseled, number of meetings held, types of assistance provided, etc., generally would suggest more value to the company. Joanne Scillitoe and Alok Chakrabarti, the authors of The Role of Incubator Interactions in Assisting New Ventures, say not so fast.

Scillitoe and Charabarti surveyed U.S. and Finnish young technology firms affiliated with business incubators to determine the role of both counseling and networking activities on the types of assistance firms received. The results suggest the amount of personal counseling by incubator management impacts new tech firms' business knowledge, but not their technical knowledge. Alternatively, the amount of new networking contacts offered by incubator management has an impact on firms' technical knowledge, but not their business knowledge. As a result, the staff of business incubators may need to tailor their assistance depending on the specific needs of their incubating companies.

For example, the authors found the number of times personal counseling was provided by incubator staff was aligned with tech firms' developing business knowledge, defined by the extent a firm learns about buyer preferences in the market. This same measure of personal counseling by incubator staff, however, was not connected to the advancement of technical knowledge, defined by learning about trade secrets, sourcing technology, and integrating new technologies.

Alternatively, this same measurement of technical knowledge growth was linked to the networking opportunities, specifically the number of new contacts presented to firms by incubator staff. In addition, the number of new contacts provided was not shown to influence the business knowledge of tech firms.

The authors' model found the location of the firm, whether in the U.S. or Finland, had no impact on advancing firms' technical or business knowledge. Similarly, the number of employees within the incubating firms had no impact on the development of knowledge.

The research suggests the best way for the managing staff of business incubators to help their tech companies is dependent on identifying their companies' needs and providing specific services. In this study, networking helped more with technical knowledge, and counseling provided more business knowledge. While incubator staff is often concerned with marketing firms and filling incubator space, incubators that provide tailored assistance to firms may have a greater impact on the economic growth of their community.

Additionally, tech firms in general business incubators — as opposed to incubators specifically tailored to technology startups — likely were to spend considerable time educating the incubator managers about the companies' technologies and the different needs of tech startups compared to retail/service businesses. The direction of the information flow and knowledge gained was reversed as the incubator manager needed to come up to speed before being able to find or offer the appropriate technical assistance.

From the perspective of a young technology-based firm looking for a location, business incubators tailored to science and technology needs and with strengths in counseling and networking opportunities likely may be able to help the company succeed.

"The Role of Incubator Interactions in Assisting New Ventures" can be accessed at: http://linkinghub.elsevier.com/retrieve/pii/S0166497209001734.

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