This set of posts is devoted to Business Incubator Models. Business Incubation is a concept which involves multiple stakeholders, dozens “building blocks”, various types of resources and several service categories (around 100 specific services in total). Consequently, it requires high level of conceptualization for better defining, analyzing, designing, calibration, performance evaluation and thinking about business incubation. I will use modeling and models to do so, trying to stay as simple as possible. It’s also important to highlight that researchers, consultants and practitioners have been developing models of business incubators, incubation processes, etc. since 1985 and created around 20 different models.
Main purpose of this series of posts is to review existing Business Incubator Models, and provide short assessment of their historical applicability, key contribution, performance and efficiency for business innovation purposes.
The end goal is to provide practitioners with new synthesized Generic Model of Business Incubation Program which incorporates best practices from models developed before and can be applied in real life. Furthermore, it should be applied to a Framework of Virtual Business Incubation Program (will be described later).
Let’s start by saying several words about models, how and why they could be used, and some principles we will use for analysis of existing models of business incubators, their structure and processes.
“Model is an abstraction of a system, aimed at understanding, communicating, explaining, or designing aspects of interest of that system.” (Dori, 2002)
According to SeBOK models usually used for:
- Characterizing an existing system
- Mission and system concept formulation and evaluation
- System design synthesis and requirements flowdown
- Support for system integration and verification
- Support for training
- Knowledge capture and system design evolution
Before analysis of existing models of business incubation we need to clarify several issues – to establish a viewpoint.
Issue # 1. “All models are wrong but they are useful” (G. Box). Keep that in mind while we will progress with this section. This means that there is no perfect model which can describe all aspects of business incubation and behavior patterns of stakeholders.
Issue # 2. There are special languages for systems modeling which are usually used for models description. They came from software engineering and widely used in systems engineering. One of the most famous systems modeling language is SysML. We will not complicate this section by introducing a new domain of knowledge connected with models of models (meta-model). But we will use some principles from it.
Issue # 3. These several principles of models description are:
- Purpose of a model (any good model should have a purpose with which it was created)
- Theoretical background for a model
- Viewpoint (“a pattern or template from which individual views by establishing the purposes and audience for a view and the techniques for its creation and analysis”): Incubatee, Incubator Management, Sponsor (governmental body or private investor)
- Abstraction technique:
- black-box or external (“exposes the features of the system that are visible from an external observer and hides the internal details of the design”)
- white-box or internal (“shows the internal structure and displays the behavior of the system”)
- mixed (combines both approaches)
- Type of model (a model could be characterized by its type):
- structure (shows architecture of a system) vs. process (shows dynamic performance)
- model of development (how to design and establish a business incubator) vs. model of operation (how to carry out operations)
Issue # 4. Framework for analysis of a model will consist of the following dimensions:
- Purpose of a model
- Type of a model (structure vs. process, stage-gate vs. iteration)
- Abstraction technique (black-box, white-box, mixed)
- Theoretical background (if available)
- Resources (capital, human, land, networks)
- Processes and practices (what is value chain? life cycle?)
- Efficiency and effectiveness (outcomes? process viability?)
- Linkages Entrepreneur – Business Incubator – Innovation Ecosystem
- Source (Author, literature, year)
20 Models of Business Incubators
As it was mentioned before 20+ different models were published by academics, practitioners and consultants since 1985 where first efforts of conceptualization were undertaken. We will try to give a review of 10 main models with evolutionary development. The sources for these models are knowledge databases provided by Scopus and open public resources. We also highly appreciate any new model that could be added to the list coming from practitioners, academics and consultants. Send information to vryzhonkov(at)gmail(dot)com.
Figure 1 – Business Incubation Models – Comparison Matrix
However, in the beginning of this set of posts we would like to present several conceptualizations that have been made by Hackett & Dilts (2004). These conceptualizations will help to understand the overall view on a typical business incubator and it’s operations. Authors used different lenses to formulate these conceptualizations:
a) theoretical lens for data analysis, such as, social network theory, dyadic theory, real option-driven theory or the resource based view;
b) conceptual constructs linked to specific bodies of literature (such as the new venture creation literature) to develop definitions and / or models;
c) philosophical implications of new theoretical conclusions such as the line of argument a game or rational choice theorist would use.
“These conceptualizations are as follows:
- Incubation as a mechanism for new venture creation- a step-by-step / staged process that awards legitimacy, opens network access and heightens community support for entrepreneurs.
- Incubation as a mechanism for resource allocation – a mechanism of awarding a stock of tangible and in-tangible resources to client firms that results in, in addition to other benefits, client firm growth.
- Incubation as a socio-political game- a socio-political mechanism of creating an environment and perception of reduced risk and security within a boundaried physical space.
- Incubation as a co-product of incubator-incubatee dyads-a process of co-producing developmental assistance in independent incubator-client dyads.
- Incubation as an outcome of network behaviour- a system of increasing client firms’ network density.
- Incubatee selection as a predictable and controllable process- a process of selecting “weak but promising” firms for incubator induction.”
So below we will analyze each model, provide a short explanation of it and raise some unanswered questions, put comments, criticize in order to synthesize a generic model of typical business incubator.
 Dori, 2002
 Guide to the Systems Engineering Body of Knowledge, 2013
 Hackett & Dilts, A systematic review of business incubation research. Journal of Technology Transfer, 29, 55-82, 2004
Model 1 – 1985, Campbell, Kendrick & Samuelson, white-box, process, operations
|Source (Author, Year):||Campbell, Kendrick, Samuelson, 1985|
|Purpose of a model:||To show what are the key value-adding activities of incubator|
|Type of a model:||Process model|
|Theoretical background:||No information provided|
|Resources:||Venture capital, business incubator staff|
|Processes and practices:||
4 key value-adding activities:
2) the selection and monitoring of the services provided to the firms,
3) the investment of capital, and
4) the access to the working, network of the incubator
|Efficiency and effectiveness:||Business development of a venture is the main function and main reason for existence. In other words, to grow valid business ideas and entrepreneurs into real business.|
|Linkages “Entrepreneur – Business Incubator – Innovation Ecosystem”:||No links to external environment, no link to the entrepreneurship process apart diagnosis of needs|
|Key contribution:||The incubation process is of key importance|
Figure 2 – Campbell, Kendrick & Samuelson’s incubation model (1985)
Campbell, Kendrick, & Samuelson among the first introduced this model in 1985 in order to illustrate 4 key practices that “value-added incubator” should provide:
- the diagnosis of business needs,
- the selection and monitoring of the services provided to the firms,
- the investment of capital, and
- the access to the working, network of the incubator.
The model stresses on process functions of incubator as main business development tool that can transform idea into a real business. Incubation process is of key importance. This is main outcome of the model.
However, authors didn’t clarify some points:
- Incubation process. How should it happen (iteratively or stage-gate model or chaotic)? What resources does it require?
- Viability of entrepreneurs and their competences. The model also fails when considering that all potential entrepreneurs or early-stage startups are potentially viable and does not take into account the lack of capabilities of potential entrepreneurs.
- No linkages to the entrepreneurial life cycle and external environment. There are no linkages between the life cycle of entrepreneur, incubation process and external environment. There could be environmental barriers that can arise during the process that might doom the new venture to failure.
- 4 key activities are not explained explicitly. For instance, the model is not explicit about selection proposal for potential incubates. What criteria to adopt when selecting a business to support? Would not a bad or incorrect selection process influence (negatively) the feasibility and future growth of a potential new business? Following this line of thinking,
There is an addition made to this model by Merrifield (1987). He created a selection proposal for potential incubatees. That approach consisted of three main questions being the first two based on the potential incubatee:
- Is this a good business in which anyone could be involved?
- Is this a business in which the (incubated) firm has resources and competences to successfully compete?
- What is the best approach for the firm to enter the business arena and grow?
 Campbell, C.; Kendrick, R. & Samuelson, D.(1985). Stalking the Latent Entrepreneur. Economic Development Review, Vol. 3, No. 2, pp. 43-48.