Global Business Review
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Business Incubators: Findings from a Worldwide Survey, and Guidance for the GCC
States
Hanadi Mubarak Al-Mubaraki and Michael Busler
Global Business Review 2010; 11; 1
DOI: 10.1177/097215090901100101
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Business Incubators: Findings from a Worldwide
Survey, and Guidance for the GCC States
Hanadi Mubarak Al-Mubaraki
Michael Busler
Business incubators can help young firms to survive and grow during their start-up years, and can play a key
role in the economic development of a community or region. In developing countries, like Kuwait and the
other Gulf Cooperation Council (GCC) member states, business incubators can be particularly valuable in
helping to develop local economies, promote technology transfer, create new enterprises and generate jobs.
There is potentially a wealth of information available about the characteristics of and services offered by business incubators in the US and other countries, which can be used to inform the development of incubator programmes within these countries. To tap into this information, an Internet-based survey was conducted with
a sample of business incubators worldwide. The survey results are used to make recommendations about how
to maximize the success of incubators, including matching services offered to the needs of clients and involving
a range of community stakeholders in the development of their programmes. A number of options are proposed
for developing and expanding the business incubator concept in Kuwait and the GCC member states.
Keywords: Business incubation, entrepreneurship, economic development, Gulf Cooperation
Council (GCC)
Introduction
A business incubation programme can be
described as a dynamic process of developing
emerging commercial entities. The National
Business Incubation Association (NBIA) in
the US describes the functions of business
incubators as:
Business incubators nurture the development of entrepreneurial companies, helping
them survive and grow during the startup period, when they are most vulnerable.
These programmes provide their client
companies with business support services
and resources tailored to young firms.
The most common goals of incubation
Hanadi Mubarak Al-Mubaraki teaches at Kuwait University, Nuzha, Kuwait. E-mail: pro5383526@yahoo.com
Michael Busler is Associate Professor at The Richard Stockton College, USA. E-mail: michael.busler@stockton.edu
GLOBAL BUSINESS REVIEW, 11:1 (2010): 1–20
SAGE Publications Los Angeles/London/New Delhi/Singapore/Washington DC
DOI: 10.1177/097215090901100101
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2 Hanadi Mubarak Al-Mubaraki and Michael Busler
programmes are creating jobs in a community, enhancing a community’s entrepreneurial climate, retaining businesses in a
community, building or accelerating
growth in a local industry, and diversifying
local economies (National Business Incubation Association 2007).
Although the concept of business incubation originated in the US, business incubators can now be found all over the world.
They can potentially play a particularly valuable role in developing countries such as
Kuwait and the other Gulf Cooperation
Council (GCC) member states, where small
companies are often struggling to compete in
local, national or international markets with
relatively few resources and limited technical
or business expertise.
However, there is little systematic information and guidance available to these developing countries to enable them to establish
or promote the development of business incubators. This study aims to help fill the gap by
providing research-based data on business
incubator programmes from a literature review and a worldwide survey. The information is intended to provide information and
guidance to the governments, private entrepreneurs and other actors, particularly in developing countries, who wish to establish
business incubators to help meet the business
and economic development needs of their
countries.
intended to create a collegial climate for the
training, support, and development of successful small entrepreneurs and profitable
businesses. These characteristics may include
the initial selection of early-stage or startup entrepreneurial firms with potential for
growth; designated work spaces provided for
each tenant; shared facilities necessary to
operate the business; shared support such as
communications and administrative assistance; a small management team which can
train, develop and assist the new entrepreneurs; access to critical professional services
such as legal and financial assistance and
affordable rent and fees for services.
Incubation programmes work to achieve
various goals, such as commercializing new
technologies from universities, diversifying
local economics, serving minority entrepreneurs and creating jobs. Increasingly,
incubators are being established to help companies grow for particular markets, which
might be as diverse as gourmet foods, biotechnology or the arts. They can play a central
role in the development and growth of a local,
regional or even national economy by facilitating business development and expansion,
helping to develop markets and creating jobs.
Research in business incubators in the US
indicated that around 70 to 90 per cent of incubator graduates, on average, remain successfully in operation following graduation
from the incubator programme (Molnar et al.
1997).
Functions of Business Incubators
Types of Business Incubators
A business incubator programme consists of
a controlled work environment distinguished
by particular characteristics that are all
The National Business Incubation Association
classifies incubator programmes in various
ways, with the primary distinction between
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Business Incubators: Findings from a Worldwide Survey 3
non-profit and for-profit organizations. In the
US, non-profit incubators were estimated to
account for about 85 per cent of the total US
incubator population of around 950 in 2002
(Linder 2002). These are further split into
three categories: (i) stand-alone incubators;
(ii) incubators that are programmes or departments of larger tax-except entities and operate
within their tax status such as university or
government-run incubators and (iii) incubators that work closely with other organizations whether for-profit or not-for-profit, to
achieve their missions.
Whereas non-profit incubation programmes generally have missions that focus
on economic development outcomes, most
for-profit programmes are set up to obtain a
sizeable return on investments for their
shareholders.
The NBIA recognizes three major types of
for-profit incubators, which are further categorized according to how investors anticipate obtaining a return on investment (Temali
and Campbell 1984). The first type anticipates
return on investment from rents and service
fees. This type of incubator generally adds a
few company development services to what
is basically a package focused on office services and flexible real estate, completes the
job and leaves. The second type of for-profit
programme treats the incubator as a portfolio
of investments and seeks returns on equity
holding in start-up companies. Corporate incubators, the third type, seek benefits primarily from spinning out technologies or
spinning in mental or medical innovations
with strategies. Additionally, new hybrid
models have married some of these elements.
NBIA also classifies business incubators
by other characteristics including geography
(urban, suburban and rural), sponsoring
entity (for example, university or college, government, economic development organization and corporation) and industry sector
(technology, mixed-use manufacturing, services and ‘other’) (Molnar et al. 1997).
The range and types of services offered by
an incubation programme depend on the
types of clients served. Thus, the services
offered to emerging technology companies
fostered in a university incubator, for example, will usually differ from those offered
to entrepreneurs developing non-technology
companies in distressed inner-city neighbourhoods. The former group of companies might
have highly educated and technically-skilled
staff but require expertise on marketing and
promoting a fast-growth company. In the
latter case, on the other hand, clients may possibly lack both basic business literacy skills
and technical expertise and need support in
both these areas.
Economic Development Goals
Business incubators can play an active role
in local, regional and national economic development efforts. A business incubator, however, cannot transform an economy and must
be integrated into the broader economic policy reform, infrastructure investment and
financing. Business incubators can be used for
one or more of the following economic development purposes:
New business formation: New business
formation is the most common economic development focus of business
incubators around the world. These
programmes focus on supporting
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4 Hanadi Mubarak Al-Mubaraki and Michael Busler
entrepreneurs from business concept development to product launch. Their purpose is to nurture businesses until they
are stable enough to operate without the
day-to-day support of the incubator.
Business stabilization: A number of countries around the world have started
investigating ways in which business
incubators can be used to help existing
small-to-medium sized enterprises that
have become unstable, perhaps as a
result of labour problems, new government regulations or policies, new competitors, market changes or pressures
associated with rapid growth. The purpose of these programmes is to provide
business support services and guidance to help stabilize the business and
reduce the chances of failure.
Business expansion: A number of countries have also started using business
incubators to help the existing small-tomedium sized enterprises to expand.
These programmes provide services to
help business owners improve operational efficiency, to identify and access
new markets, expand production capabilities, hire and manage labour and
secure capital. The purpose of these programmes is typically to help businesses
with one to five employees expand into
businesses with 10 to 20 employees.
Growth and Numbers of Incubators
Although the first formal business incubator
is believed to have been established in the
US in 1959, followed by a limited number of
others opening over the next few decades, the
concept really took off in the US in the mid1980s. At this time, the Small Business
Administration (SBA) released a study that
concluded that a majority of the new jobs
were being created by the small businesses,
creating a boom in incubator development
and resulting in the creation of the National
Business Incubator Association (NBIA) in
1995.
In the 20-year period since the concept of
business incubation programmes began to
take root in the US, the industry has grown
rapidly and matured considerably, and it has
been estimated that at present, there are more
than 1,400 business incubators operating in
North America and an estimated 5,000 worldwide (NBIA 2007). It is expected that the number of business incubators throughout the
world will continue to increase over the next
few decades as more and more communities,
countries and private investors recognize the
value of this effective tool for supporting new
business formation and for facilitating economic growth.
Business Incubators in
Developing Countries—China and India
China and India represent examples of two
developing countries where business incubators are playing an important role in economic development. In the case of China, it
has been observed that the business incubator
programmes have played a key role in facilitating the country’s transition from a socialist
to a market economy, by enabling the commercialization of technological developments
and by promoting a culture of innovation
across the country (Lalkala 2003). Before the
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Business Incubators: Findings from a Worldwide Survey 5
economic reforms which began in the late
1970s, science and technology research was
not commercially driven and there was little
incentive to adopt new technologies. From the
late 1980s onwards, however, there was a
need to provide an environment which was
more conducive to R&D, and business incubators were seen as the solution. Sponsored
by the Chinese government, with support
from the United Nations (UN), business incubators were first implemented in the early
1990s, under the Ministry of Science and Technology’s Torch Program. The programme
developed rapidly and by 1999, China reportedly had the third largest business incubator programme in the world, with 127
incubators located throughout the urban and
rural areas of the country by 1999, and an additional 64 ‘software parks’ which had similar
functions. Over time, government sponsorship and administration of business incubators has been delegated to lower levels
such as County and District Science and
Technology Commissions, and a number of
university-sponsored and public-private partnership incubators have also appeared.
University incubators and university science
and technology parks have been among the
fastest growing areas of business incubator
development in recent years. Overall, a majority of the business incubator tenants in China
have been offshoots of universities, research
institutes and government enterprises that
continue to be financed and owned by their
parent institutions. Although most business
incubators in China are not-for-profit, there
are a number of for-profit privately sponsored
incubators (Lalkala 2003).
A very high proportion of China’s business
incubators have been technology-focused,
with the primary aim of bringing technology
development to the market. A wide range of
specialist technology areas have been covered
including information technology, biotechnology, pharmaceuticals and aerospace.
Additionally, a number of more specialized
incubators have been created with other types
of objectives including the International
Business Incubators, which assist both foreign and Chinese companies to enter the
Chinese as well as the international markets.
In many areas of China, incubator networks
have come up which link incubators in a
single region and allow for sharing of resources and support. Another reported development has been the establishment of a small
number of non-technology incubators with
social as well as economic objectives, such as
facilitating business start-ups by laid-off
workers, including women (Lalkala 2003).
An analysis of data available on 77 incubators sponsored under the Torch Program
(Lalkala 2003) indicates that they are likely
to provide a good return on investment, with
the investment for the year of 1998 likely to
be covered by tax receipts alone in the following five years. Also, additional benefits are
provided in the form of job creation, taxes
payable by suppliers and customers of the
incubator tenants and other values associated
with promoting innovation and marketing
technology. Although China’s business incubator programme is generally seen as being
very successful, its reported weaknesses include its over-emphasis on technology enterprises, inadequate business expertise on the
part of public sector managers and insufficient ‘ownership’ of the incubators within
the communities in which they are located
(Lalkala 2003).
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6 Hanadi Mubarak Al-Mubaraki and Michael Busler
Business incubators have also played a
major role in India’s recent economic development, according to a UN report (n.d.). In
India, like China, business incubators have
formed an important part of the government’s
science and technology policy. In contrast to
China, there has been a longer-term emphasis
in India on the use of science and technology
in promoting national economic development. However, although India is further
forward in terms of its technology culture,
shortcomings in the business infrastructure
and support systems have reportedly formed
barriers to the more rapid commercialization
of R&D in India. In response, the Ministry of
Science and Technology has implemented a
number of programmes to improve the business environment for small businesses and
start-up firms, including a Technology Business Incubator scheme. This was introduced
with assistance from UNDP’s Technology
Management Programme Support (TMPS)
sub-component Nurturing Technological
Entrepreneurship through STEPs and TBIs,
under which two TBIs are being established.
It is expected that the use of TBIs in India will
improve the likelihood of business success for
tenant organizations, as well as in forming
an economic development tool and means of
generating jobs, income and taxes.
This brief overview of business incubator
development in China and India demonstrates the ways in which business incubators can make an important contribution to
the economic development by improving the
business and cultural environment for the
commercialization of science and technology.
It also highlights the availability of external
sources of support to developing countries,
notably from the UN, to facilitate the development and implementation of business
incubator programmes. The available evidence on China’s business incubator programme, in particular, demonstrates the
potential that business incubators offer developing countries in terms of economic
development, cultural transformation, job
creation and income generation.
Business Incubators in the GCC States
In the GCC member states, efforts to support
entrepreneurship through business incubators and similar facilities are on the increase.
In Manama, in the Kingdom of Bahrain, The
Bahrain Development Bank and the United
Nation Industrial Development Organization
have established the Business Incubator Center to support new business formation in the
country, in cooperation with the Commercial
and Industry Ministry’s Industrial Affairs.
The programme has been built around an
entrepreneurial trading programme that
includes classroom inputs with counselling
and support services. The services offered include business opportunity identification and
selection, organization of market information,
business plan preparation, raising financial
resources, obtaining approval clearances from
the government and technology sourcing
from other countries.
The Emirate of Dubai in the United Arab
Emirates (UAE) has recently established the
Dubai Internet City to foster the development
of technology ventures involving the Internet,
information technology and other related
technology sectors. In the Kingdom of Saudi
Arabia, the King Fahd University of Petroleum
and Minerals is investigating the development of a business incubator in Dammam,
and several organizations are investigating
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Business Incubators: Findings from a Worldwide Survey 7
opportunities for developing a business incubator in Riyadh.
Aims and Methods
In developing countries, including Kuwait
and the other GCC member states, business
incubators might be particularly valuable in
helping to develop local economies, promote
technology transfer, create new enterprises
and generate jobs. There is potentially a
wealth of information available about the
characteristics and services offered by business incubators in the US and other countries,
which might be used to inform the development of incubator programmes within these
countries.
In order to tap into this information and
to find out about the actual experiences of
business incubators, an Internet-based survey
and a number of electronic interviews were
conducted with the members of NBIA with
the survey representing a wide range of countries worldwide. Data were collected by
means of an electronic survey questionnaire
and an interview schedule administered to
NBIA members via the World Wide Web. The
survey questionnaire and electronic interview
schedule were designed and uploaded to an
online survey website. The survey questionnaire was intended to provide quantifiable
information on the characteristics of business
incubators around the world, including geographical location, area of residential accommodation for businesses, sponsoring entities,
goals of the programme, services offered, services required by clients, barriers and obstacles encountered and financial data. The
electronic interviews were intended to collect more in-depth information about the
operation and impact of incubators by drawing on the views and experiences of their
managers.
After receiving permission from the NBIA
to contact its members and ask them to participate in the survey, the researcher compiled
a list of 711 NBIA members who were business incubators, and sent them e-mail invitations to take part in the survey. The e-mails
contained a link to a questionnaire on Survey
Monkey, an online survey website. Participants were told about the purpose of the project and were given specific instructions for
completing the questionnaire. The survey was
made available at the SurveyMonkey portal
beginning on 1 April 2006 for 30 days, at the
end of which, the survey was closed and the
hosting company collected the data and returned it to the researcher. The data did not
include any identifiable information on those
who had taken part in the survey. Ninety-two
interview invitations were sent out to incubator managers at the same time when the
survey invitations were being sent.
Of the 711 survey invitations that were
e-mailed to the NBIA members, 43 were returned as undeliverable, leaving a sample
frame of 668. The total number of survey
responses was 105, representing a response
rate of about 16 per cent. However, only 45
were completed in full, so data are available
for less than 105 respondents on many of the
variables.
Additionally, six business incubator managers responded to the interview invitations
and subsequently completed the interviews.
Relevant comments from these interviewees
have been incorporated into the following
sections on the survey results.
Overall, the relatively low survey response
rate means that the results cannot be regarded
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8 Hanadi Mubarak Al-Mubaraki and Michael Busler
as representative of all the NBIA business
incubator members. However, respondents
did represent a wide range of countries and
organizations and, as such, can be regarded
as a diverse sample providing a good overview of the types and characteristics of business incubators and the range of services that
they provide.
Results
Location of Incubators
Table 1 shows the countries in which the
respondents’ incubators were located. A total
of 78 respondents answered this question, of
which 66 per cent (N = 52) were from the US
Table 1
Location of Incubators
Country
Number of Respondents
Australia
Belgium
Canada
Cyprus
Finland
Hong Kong
Jamaica
Mexico
Mongolia
N. Ireland
New Zealand
Oman
Pakistan
Palestine
S. Africa
Singapore
Taiwan
Tunisia
USA
Total
4
1
3
1
2
1
1
1
1
1
1
1
1
1
3
1
1
1
52
78
Source: Authors’ own.
and the rest were broadly distributed over the
globe. Twelve (23 per cent) incubators were
located in developing countries.
Client Catchment Areas
Of the 45 respondents, who reported where
they drew the majority of their clients from,
the largest percentage (40 per cent, N = 18)
said that they came from urban areas, whereas
31 per cent (N = 14) said that they drew their
clients from suburban areas. Around 22 per
cent (N = 14) said that most of their clients
came from rural areas, 15.6 per cent (N = 7)
said that they served a national catchment
area, but very few (4.4 per cent, N = 2) indicated that they were multinational in scope.
One interview respondent commented
that their organization could not afford to be
too narrowly focused in terms of the catchment
area, since they were based in a sparselypopulated area. Another respondent also
highlighted the importance of having a wide
base of prospective tenants, indicating that
incubators may need to draw their clients
from a fairly wide geographical area in order
to be able to survive economically.
Age of Incubators
A total of 79 respondents provided information on the time period when their incubator
was founded. Nearly three-quarters (73 per
cent) had been founded in the period since
1996, with more than half (53 per cent)
founded between 2001 and 2006. However,
nearly 14 per cent (N = 11) of the respondents
said that their incubators had been founded
before 1990. Moreover, two of the interview
respondents reported that their business
incubators had been established more than
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Business Incubators: Findings from a Worldwide Survey 9
20 years ago. One interviewee observed,
when asked about the history of the incubator,
that it had been through several distinct
stages, from an initial very active phase, followed by a period of disinterest and decline
and a recent revitalization. These states
seemed to be largely dependent, according to
the respondent, on the particular leadership
of the incubator at different times.
Overall, these results indicate that many
business incubators are very well-established,
and it can be inferred from this that they are
likely to be contributing value to the economies and communities in which they are
based, although the extent of their success in
doing so is likely to be dependent on a range
of factors including leadership styles.
Sponsoring Entities and Stakeholders
Table 2 shows data about the sponsoring
entities of the sample. Seventy-five out of the
79 respondents indicated that they had a
primary sponsoring entity, with academic
institutions accounting for a third of all
sponsors, followed by government agencies
(25.33 per cent, N = 19). Economic development organizations also accounted for a significant number (21.33 per cent, N = 16) of
sponsoring entities (Table 2).
The interview respondents were asked a
number of questions about their stakeholders
and customers. When asked about who they
considered as the incubator’s ‘customers’,
most respondents indicated that these were
defined fairly broadly to include their tenant
companies, members of their Boards of Directors and stakeholders, such as the city
council’s economic development officials. All
the interview respondents reported that their
Table 2
Primary Sponsoring Entities
Number of
Respondents
Type
Academic
Government
Econ. Dev. Org
For-profit
Hybrid
Tech. CG
Other
Total
25
19
16
4
2
0
9
75
Per cent
of Total
33.3
23.3
21.3
5.3
2.7
0.0
12.0
100.0
Source: Authors’ own.
tenant companies were considered as customers or stakeholders of the incubator.
Business incubator managers were also
asked to explain how oversight and advice is
provided to the programme and whether
there is a Board of Directors or Advisors. It
became clear that most did have Boards of
Directors and that these played a leading role
in managing the incubators. Often, the board
was seen as the main mechanism by which
the incubator’s stakeholders represented their
interests and influenced the incubator’s programme of work. Several explained that the
board was responsible for functions such as
approving the budget, setting policy and reviewing applications for tenancy. All of the
interviewees indicated that regular reports are
submitted to stakeholders, either on a monthly,
weekly or a bi-weekly basis, although one
noted that there are no formal mechanisms
for communicating with stakeholders other
than the Board. However, two interview respondents did remark that they also had close
links with the local community organizations,
including economic development and small
business development organizations, and
said that they were proactive in promoting
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10 Hanadi Mubarak Al-Mubaraki and Michael Busler
awareness about the incubators’ role and
developing community linkages.
Primary Functions and Priority Goals
Figure 1 shows the distribution of respondents by their incubators’ primary programme
function. Just under half (43.96 per cent,
N = 40) indicated that the primary purpose
of their incubator was to foster technology
companies, followed by more than a third
(36.26 per cent, N = 33), who indicated that
their programme could best be described as
supporting a mixture of businesses (mixed
use). The rest described their programmes
as service-business oriented (4.4 per cent,
N = 4), web-related (3.3 per cent, N = 3),
manufacturing and community revitalization (2.2 per cent, N = 2) or other (7.69 per
cent, N = 7).
Figure 1
Description of Programme a
Source: Authors’ own.
Note: aN = 91.
Table 3 shows the distribution of responses
regarding the priority goals of incubators for
the 45 survey respondents who answered this
question. Respondents were asked to rate the
importance, on a five-point scale, of a number
of listed goals from ‘very high’ to ‘very low’.
Of the items listed, ‘creating jobs in the local
community’ was rated ‘very high’ by the
largest percentage of respondents (58 per cent,
N = 26), closely followed by ‘enhancing the
community’s entrepreneurial climate’, ranked
as a ‘very high’ priority by 56 per cent
(N = 25). Other goals which were ranked as
‘very high’ by more than a quarter of all respondents were ‘commercializing technologies’ (42 per cent), ‘building or accelerating
growth in local industry’ (38 per cent),
‘diversifying the local economy’ (31 per cent)
and ‘supporting other entrepreneurs and the
community’ (27 per cent). The survey results
show that ‘revitalizing distressed neighbourhoods’ and ‘moving people from welfare to
work’ were not regarded as important goals
by incubators, with more than half of the respondents giving each of these a ‘low’ or ‘very
low’ priority in total, and a further third indicating that they were neither high nor low
priority.
The interviewees were asked what they
understood as the purpose of business incubators and about any gaps between the goals
and the reality in this picture. Job creation was
the most popular response, while some also
cited affordable business assistance for new
or emerging businesses, and one stressed the
goal of economic development. Only one respondent commented on the gap between the
goals and the reality, remarking that their
incubator is currently focused on the provision of space rather than services. Another
noted that the goals of their incubator are
currently ill-defined. Although it is not
known how representative the latter respondent is of incubator managers generally, it is
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Business Incubators: Findings from a Worldwide Survey 11
likely that incubators that do not have welldefined goals are not performing as effectively as they might, if their efforts were more
focused. The fact that a majority of the survey
respondents were able to answer the question
about their incubators’ goals, however, suggests that most incubators do have fairly welldefined objectives, whether or not these are
formalized in writing.
Provision of and Demand for Services
Table 4 shows the numbers and percentages
of respondents whose business incubators
offer particular types of services. Forty-four
respondents answered this question. The
results indicate that most of the incubators
offer a wide variety of services, with the majority offering business help, networking,
shared administrative/office services, linkages to strategic partners and the like. Very
few offered funding (N = 8) or loan guarantee
programmes (N = 2).
Table 5 reports the numbers and percentages of respondents who believed that their
incubator clients were in need of various
listed services. A total of 41 replied to this
question. All respondents indicated that their
clients needed marketing assistance (100 per
cent), while a vast majority reported that they
need help with business (98 per cent), linkages
to strategic partners (95 per cent) and networking activities (90 per cent). Overall, the
results indicate that incubator clients are seeking help with a very wide range of business
activities. With the exception of childcare services, which were apparently not sought by
any clients, at least a quarter of all respondents in each case said that their clients were
in need of each of the listed services.
The interviews provided little evidence
that feasibility studies had been conducted
to identify the needs of entrepreneurs and
their start-up firms, although it was generally assumed by respondents that these included services such as financing, financial
Table 3
Priority Goals of Incubatorsa
Very High
Per cent
Goal
Creating jobs in local community
Enhancing community’s entrepreneurial climate
Retaining business in local community
Building/accelerating growth in local industry
Diversifying local economy
Identifying potential spin-in/spin-out opportunities
Commercializing technologies
Supporting other entrepreneurs and the community
Generating benefits for the sponsoring organizations
Revitalizing distressed neighbourhood
Moving people from welfare to work
58
56
22
38
31
20
42
27
16
2
2
High
Neither High
Low
Per cent nor Low Per cent Per cent
38
36
36
51
33
42
29
56
22
9
9
2
9
29
9
31
29
16
16
42
33
31
0
0
13
2
2
4
9
2
11
22
9
Very Low
Per cent
2
0
0
0
2
4
4
0
9
33
49
Source: Authors’ own.
Note: a N = 75.
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12 Hanadi Mubarak Al-Mubaraki and Michael Busler
Table 4
Services Offered a
Service
Number of Respondents
Help with business networking activities
Shared administrative/office services
Linkages to strategic partners
Marketing assistance
Internet access
Linkage to higher education resources
Help with accounting/financial management
Linkages to angel or venture capital investors
Business assessment
Intellectual property management
Help with presentation skills
Shadow advisory boards/mentors
Help accessing commercial bank loans
Personal development/training
Specialized equipment/facilities
Commercializing technology
Human resources
General legal services
Management team identification
Help accessing specialized non-commercial loans
Help with business etiquette
Comprehensive business training programme
Assistance with product design and development
Assistance with manufacturing practices
Federal procurement assistance
International trade
Assistance with e-commerce
Services/inventory/management
Economic literacy training
In-house investment funds
Loaned executive to act in management capacity
Loan guarantee programmes
Child care/services
Other (please specify)
44
43
42
39
38
36
35
34
34
32
31
31
30
30
28
28
24
24
22
21
21
20
18
17
15
14
13
12
8
8
6
2
2
2
Per cent
100
98
95
89
86
82
80
77
77
73
70
70
68
68
64
64
55
55
50
48
48
45
41
39
34
32
30
27
18
18
14
5
5
5
Source: Authors’ own.
Note: a N = 44.
management, technical support and accommodation. When asked about the type of
entrepreneurial training currently offered, the
interview respondents mentioned basic business skills, business planning, financial management and small projects. Cost was the
factor mentioned by almost all the interview
respondents as the reason for offering or not
offering particular types of services, while one
or two mentioned that the services were just
not available in their area, for example in a
rural area. When unable to offer the services
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Business Incubators: Findings from a Worldwide Survey 13
Table 5
Services Neededa
Service
Number of Respondents
Marketing assistance
Help with business
Linkages to strategic partners
Networking activities
Internet access
Help with accounting/financial management
Linkages to angel or venture capital investors
Help with presentation skills
General legal services
Shared administrative/office services
Business assessment
Personal development/training
Intellectual property management
Shadow advisory boards/mentors
Help accessing commercial bank loans
Comprehensive business training programmes
Management team identification
Commercializing technology
Human resources
Specialized equipment/facilities
Help with business etiquette
Help accessing specialized non-commercial loans
Assistance with product design and development
Assistance with e-commerce
Services/inventory/management
International trade
Federal procurement assistance
In-house investment funds
Assistance with manufacturing practices
Loaned executive to act in management capacity
Economic literacy training
Loan guarantee programmes
Child care/services
41
40
39
37
35
35
35
34
34
33
33
32
32
31
30
28
28
27
26
25
23
22
21
20
19
19
18
15
14
14
13
11
0
Per cent
100
98
95
90
85
85
85
83
83
80
80
78
78
76
73
68
68
66
63
61
56
54
51
49
46
46
44
37
34
34
32
27
0
Source: Authors’ own.
Note: a N = 41.
themselves, one incubator manager reported
that they referred tenants to other agencies
such as the Small Business Development
Centre, the local community college or the
university.
Several of the incubator managers interviewed stressed that they saw it as their own
responsibility to adapt to the existing programmes or services to meet new needs and
shifting priorities as their own, with input from
other key stakeholders and approval from
their Boards of Directors and by keeping in
close contact with tenant firms. However,
others offered no evidence of any specific
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14 Hanadi Mubarak Al-Mubaraki and Michael Busler
processes or procedures for updating their
range of services to meet changing needs.
Client Performance
Figure 2 shows the most likely reasons for
clients graduating from respondents’ incubator programmes. A total of 45 respondents
answered this question, and could give more
than one response. The most common reasons
for graduation were—outgrowing the space,
spending the maximum time allowable and
having reached mutually agreed on milestones (N = 30), followed by the growth rate
exceeding the limits of the programme and
achieving a liquidity event (N = 16). Acquiring an experienced management team
(N = 9) and attracting another source of funding (N = 6) were the least common reasons
for graduating.
Table 6 shows how often incubator clients
encounter various types of obstacles in their
performance, according to the survey
respondents. Respondents were asked to rate
how frequently these were encountered by
their clients. Lack of financing was rated as
an obstacle experienced either ‘almost always’
(44 per cent, N = 19) or ‘frequently’ (35 per
cent, N = 15) by the respondents. This was
followed by the lack of expertise in entrepreneurship and lack of personal economic resources. Lack of personal financial resources
was a problem 65 per cent of the time; inadequate management was also reported to
be a frequent problem by 56 per cent (N = 24).
The interview respondents were asked
how they know when and how a firm is benefiting from its being in the incubator. Interestingly, a number of respondents could not
Figure 2
Reasons for Graduating from Programmea
Source: Authors’ own.
Note: a N = 91.
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Business Incubators: Findings from a Worldwide Survey 15
Table 6
Perceived Frequency with Which Incubator Clients Encounter Specified Obstaclesa
Almost Always
Per cent
Obstacle
Lack of financing for company
Lack of expertise in entrepreneurship
Lack of customer acceptance
Incomplete/inadequate management team
Limited market potential
Lack of personal economic resources
Lack of business literacy or education
Unwilling to accept advice
Distance or access to networks
Lack of technology literacy
44
19
9
16
5
21
5
0
2
2
Frequently Sometimes
Not Very
Never
Per cent
Per cent Often Per cent Per cent
35
47
12
40
26
44
33
19
21
16
19
28
67
37
49
23
33
44
37
30
2
7
9
7
21
9
26
35
37
37
0
0
2
0
0
2
5
2
2
14
Source: Authors’ own.
Note: aN = 43.
answer this question. Others cited factors
such as business growth, profits and outgrowing their incubator space. When asked about
the types of firms which were being helped
by the services provided by the incubator,
most respondents cited the technology firms;
some also mentioned manufacturing firms.
Incubator Performance
and Management Styles
When asked about the incubator ’s financial situation, all the incubator managers
interviewed, noted that their incubator was
currently profitable. In one case, the management by the incubator of two additional
government-owned buildings was reported
to be a model, which was proving to be successful and this respondent noted that financial self-sufficiency gave the incubator more
flexibility. When asked about how the managers measured their own performance and
that of the incubator, the most commonly cited
response, given by nearly all the respondents,
was—not profit but successful graduation of
tenant firms. However, profit along with the
proportion of space occupied and graduation
rates, were the types of factors used in setting
performance goals and objectives, monitoring performance and reporting to the Board
of Directors. Some interview respondents expressed a recognition that as they grow, they
would need to define their goals and objectives more clearly and be more sophisticated
in their monitoring of these.
A majority of the interviewees reported
that their own professional background and
training was in management or economic
development, and stressed that it was their
high level of training in these areas which
qualified them to provide the type of business
counselling and other support services required by their tenants. When asked about
their specific style of management, those who
gave a response were most likely to stress
strong communications or a hand-on management style. This was also reflected in their
responses to a question about the kind of
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16 Hanadi Mubarak Al-Mubaraki and Michael Busler
relationship that they try to establish with
entrepreneurs and their companies, which
was described by most interviewees using
terms such as ‘supportive’, ‘cooperative’ and
‘involved’. Hardly any claimed to have experienced any forms of tension in their various roles as incubator managers, although
one respondent did emphasize that they
sometimes had to be direct and assertive to
ensure that the incubator rules were followed
by the tenants.
Developing Countries
Table 7 provides an overview of the characteristics of the 12 incubators in the survey
sample that are based in developing countries. Of these, three were located in South
Africa, while the rest were sole respondents
from nine other developing countries. Developing country incubators were diverse in
terms of their client catchment areas, with two
being multinational in scope (Singapore and
Cyprus), while others either served a national
client base or drew clients from an urban area.
Most developing country incubators were
technology-focused. More than half (N = 7)
of the developing country incubators for
which information was provided (N = 11),
were sponsored by academic institutions,
with the remainder divided among economic
development organizations (N = 2) and forprofit entities (N = 2).
Table 7
Characteristics of Developing Country Incubatorsa
Country
Geog. Area
Jamaica
Urban
Mexico
Mongolia
Urban/
National
Urban
Pakistan
Gross Sq. F.
When Founded
Type of Sponsor
Description of Programme
Tech./Service/Web
23,000
1991–1995
538,195
1991–1995
1,100
1991–1995
Urban
12,000
1991–1995
South Africa
Urban
21,527
1991–1995
South Africa
Urban
6,135
1991–1995
Tunisia
Urban
4,305
1996–1999
Cyprus
Palestine
Singapore
Multinational
National
National/
Multinational
National
National
4,305
1,000
20,000
2001–2006
Before 1981
Before 1981
Academic
Institution
Academic
Institution
Academic
Institution
Academic
Institution
Academic
Institution
Acad./Econ.
Dev. Org.
Academic
Institution
For-Profit Entity
Econ. Dev. Org.
For-Profit Entity
5,382
43,056
1991–1995
–
–
–
South Africa
Oman
Source: Authors’ own.
Note: a N = 12.
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Tech./Service
Technology
Technology
Mfg
Technology
Mixed-use
Technology
Technology
Mixed-use
Tech./Mfg.
Tech./Web
Business Incubators: Findings from a Worldwide Survey 17
A majority (N = 9) of the developing country incubators had been founded before 1995;
only one had been founded within the last five
years, so most were already well-established.
The gross square footage of the developing
country incubators ranged from a high of
538,195 sq. ft (Mexico) to a low of 1,000 sq. ft
(Palestine), with a median area of 9,068 sq. ft,
and this was identical to the range of all incubators in the sample.
Discussion and Recommendations
Small business incubators are business assistance centres that provide start-up companies
with a supportive and affordable environment and a range of administrative, consulting and networking services. Fundamentally,
these programmes, which may be managed
by economic development agencies, local
governments, for-profit businesses or colleges
and universities, function as ‘nests’ in which
to hatch and from which to fledge new companies. Incubators offer advantages such as
low cost space, shared equipment and services, and the friendship and support of other
entrepreneurs. Incubators usually provide
space to a selected group of tenants, who remain for two to three years and then graduate
to commercial space.
The results of the survey and interviews
show that small business incubators vary
widely in size, sponsorship and budgets.
Most incubators serve a locally or nationally
based clientele and are primarily directed at
fostering small technology businesses for the
primary purpose of encouraging employment
growth and economic development in the
areas that they serve. Also, most incubators
offer a variety of services to entrepreneurs.
A comparison of the survey results regarding
the services commonly provided by incubators, with the perceived needs of clients, reveals that while incubators are meeting the
needs of entrepreneurs in several important
ways, a number of them are also failing to
meet the needs of these small companies in
other respects. This is also reflected in the
findings regarding the commonly encountered obstacles of incubator clients, which
were perceived by respondents to include lack
of financing, lack of expertise in entrepreneurship, lack of personal economic resources
and inadequate management. Given entrepreneurs’ pressing needs for capital (both
business and personal) and management
know-how, it would appear that the provision
of space and office services, while helpful,
should not be the primary concern of incubator clients.
To succeed, small business incubators need
to help their clients succeed. This can be accomplished by bringing the services that they
provide in alignment with the needs of the
entrepreneurs who are their clients. However,
as was noted earlier, most survey respondents
identified the primary purpose of incubators
as providing a base for economic development and job creation. This suggests that incubators also need to take into account the needs
of the community as well as those of the clients if they are to succeed, as reflected in one
of the interviewee comments, that the incubator ‘must have community buy-in or it will
not succeed’. Although the immediate goal
of small business incubators is to support the
growth of small businesses, therefore, it is
recommended that their ultimate goal should
be to foster economic development and job
growth, by enabling small businesses to
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18 Hanadi Mubarak Al-Mubaraki and Michael Busler
become big enough to be significant tax
payers, market makers and employers. The
implication of this is that business incubators
will have multiple stakeholders including the
sponsoring entity, economic development
organizations and other community groups,
all of these would need to be involved in and
consulted on the incubator programme, for
it to succeed.
Another element in the success of incubators is the success of clients. One way to align
the interests of incubators and clients is to
give the former a stake in the latter. For example, the incubator can receive an equity
stake in the small business in exchange for
office space, cash and business support. That
is, incubators can become the venture capitalists that their clients need while having full
visibility in the small business by being on
site to help get the business started.
As noted by the interviewees, incubators
themselves can have business problems, just
like any other business. These include the
failure to define goals of the incubator, failure
to get community buy-in and occupancy/
cash flow issues. It is, therefore recommended
that incubator managers and incubator sponsors, like the clients they serve, should perform
a feasibility study, formulate a comprehensive
business plan and monitor their performance
against this plan, evaluating the results and
re-aligning their goals if necessary. Stakeholders also need to buy into the business
objectives of the organization.
Despite the NBIA’s position asserting the
importance of operating incubators as enterprises that should become self-sufficient,
profit-oriented organizations, many publicly
funded incubators are not earning profits
(Bearse 1998). Financial dependency forces
incubators to operate in a politically charged
environment where they must constantly
demonstrate the ‘success’ of the incubator and
its clients in order to justify continued subsidization of incubator operations with public
funds. Such a politically charged environment
can tempt incubator industry stakeholders to
under-report incubator failures and overreport successes. Open communication between stakeholders and clearly defined
shared goals including financial goals, are a
prerequisite for the success of business
incubators.
Recommendations for Kuwait
and the GCC Member States
When assessing the viability and likely longterm effectiveness of the business incubator
programme in Kuwait and the GCC member states, the following factors must be
considered:
1. Does a city or region has a sufficient
level and diversity of value-added services (for example, business coaching
and mentoring from experts in the field,
access to professional services, access to
capital) suited to stimulate the formation and growth of businesses in one or
more target industry sectors, or can
these services be established as part of
the programme?
2. Are there sufficient resources and time
allocated to the market for an incubator
to develop if a sufficient market does
not already exist? It may be necessary
to grow the number of entrepreneurs
in a specific industry sector (for example, chemical and chemical product,
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Business Incubators: Findings from a Worldwide Survey 19
advance manufacturing communications technology, precision tooling and
matching).
3. Is the catchment area likely to be able to
generate a sufficient level of new business activity to provide a new group of
businesses three to five years, depending on the time needed to properly incubate client businesses?
4. In the formative stages of development,
many incubators rent space to larger
established companies in the industry
sectors targeted for development by the
incubator. These companies, commonly
referred to as ‘anchor tenants’, can provide valuable resources to the incubator
in the form of mentoring and strategic
alliances with incubator clients in addition to paying market rate rent. Kuwait
and the GCC member states might,
therefore consider this option.
5. Are there suitable indubitable business
sectors that are prone to clustering
(typically located in close proximity to
each other) and amenable to sharing
business and business coaches or
mentors? This may be challenging in
Kuwait due to the historic practice of
keeping business information private.
It is proposed that Kuwait and the other
GCC member states might consider adopting
an expanded version of the incubator concept
tailored to their local environments and economic development needs. This might take
one of the following forms:
1. Incubation systems: An incubation system would integrate multiple incubator
programmes located in strategic cities
throughout Kuwait. This is a model that
could likely be used in Kuwait to link
major academic and industrial centres,
established programmes such as the
Kuwait Institute of Scientific Research
and the Kuwait Foundation for Advancement of Science and Academic
Partners, and incubators in the US and
GCC.
2. Incubators without walls: With this incubation model, services are delivered
to businesses wherever they are located
rather than in designated facilities. Services are offered via a pool of experts
who visit businesses and/or through
communication and information disseminated via the Internet. This model
may serve as a precursor to developing
facility-based incubators in other cities
within Kuwait, with a central incubator
being identified as a repository of services and information.
3. Concept incubators: These incubators
foster the creation of business ideas or
products and then build a managerial
and operational framework around
them to create viable businesses. Essentially, they start the incubation process
earlier than is normally the case, when
a concept for a business can be identified but the earliest formative processes
and ongoing business concerns have not
yet occurred.
4. International trade incubators: An international trade incubator model would
provide assistance to small development teams from established foreign
businesses seeking to do business
within Kuwait. Such incubators would
provide a specific type of support to
firms seeking to find a foothold in new
markets.
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20 Hanadi Mubarak Al-Mubaraki and Michael Busler
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