• Become an SSTI Member

    As the most comprehensive resource available for those involved in technology-based economic development, SSTI offers the services that are needed to help build tech-based economies.  Learn more about membership...

  • Subscribe to the SSTI Weekly Digest

    Each week, the SSTI Weekly Digest delivers the latest breaking news and expert analysis of critical issues affecting the tech-based economic development community. Subscribe today!

Recent Research: Impacts of accelerators and incubators on economic development

April 20, 2023
By: Conor Gowder

A study titled Incubators, accelerators and urban economic development,[1] published in the Urban Studies Journal last year, found positive impacts on employment and access to capital for participants. The study examines the impacts of accelerators and incubators on urban economic development through a systematic review of Organization for Economic Co-operation and Development (OECD)-wide evaluations, making use of policymaker and academic consultations, finding that both accelerators and incubators raise participant employment while accelerators have the additional benefit of aiding access to finance.

The authors define an accelerator as a cohort-based program that provides intensive support to early-stage startups with the aim of helping them rapidly grow and scale their businesses, typically over a short period of time. An incubator, on the other hand, provides a physical workspace along with entrepreneurial development services, business support resources to early-stage companies, with the goal of helping them develop and launch their businesses, often over a longer period of time.

Key findings from the review of 14 studies:

  • Both accelerators and incubators have positive impacts on employment (three evaluations find positive effects for accelerators, two find positive effects for both pooled).
  • Accelerators aim to improve their participant’s access to external finance from sources such as angel investors and venture capital firms (five evaluations find positive effects, one finds no effect).[2] Suggestive evidence further explored the type of accelerator (e.g., private for-profit), with one study finding public non-profit accelerators, and five studies finding for-profit accelerators, to be successful at increasing a firm’s employment and funding.
  • Participating in an accelerator has slightly negative or no impact on business survival (one evaluation found a positive relationship, one mixed, one no and two negative).[3] The authors note that the negative outcomes can be explained in terms of accelerator design.
  • Firms in high-tech industries, such as biotechnology and university startups, benefit the most from the support provided by incubators (supported by three evaluations).
  • Industry mix is not a significant factor for accelerators, instead, human capital (one evaluation) and founder’s social networks (one study) were identified as important factors for accelerators.
  • The surrounding location was found to have an impact on the success of a program; one evaluation found accelerators located in areas with higher density entrepreneurship to be more likely to increase employment and gain funding, while one evaluation for incubators found no overall impact on employment or funding, but instead a negative relationship between density of entrepreneurial networks and survivability.

The authors from the London School of Economics and Political Science, University College London and DIW Berlin performed a systematic review (a structured literature review using pre-determined rules and parameters, read more here), using an established five-stage approach developed by the What Works Centre for Local Economic Growth in 2016 to evaluate and score each studies’ methodological robustness and relevance. Studies that scored a two or higher were included. All included studies use quantitative methods, cover incubators, accelerators, or both, studied exclusively OECD nation(s) and are from any time up to 2018.

After the final screening and scoring stages, the authors produced a sample of 14 impact evaluations that met their criteria, listed in Appendix B, seven of which examine only accelerators, four examine only incubators, and the remaining three covering both in an indistinguishable manner. The results of these were framed within the authors’ conceptual framework, informed by interviews with policymakers and experts, to identify causal effects.

 

[1] Madaleno, M., Nathan, M., Overman, H., & Waights, S. (2022). Incubators, accelerators and urban economic development. Urban Studies, 59(2), 281–300. https://doi.org/10.1177/00420980211004209

[2] No evaluations examined the relationship between incubators and external finance, but the authors note that this is not unexpected when considering the objectives of incubators.

[3] Participating in an incubator was examined by only one selected evaluation, which found an overall weak negative impact on business survival (within the evaluation of five German programs, there were three negative cases and no effect on the remaining two)

recent research, accelerators, incubators