Review of 20 Business Incubation Models – Nijkamp & Smilor’s Generic Incubator Model 1988 (Part 3 of 20)

In the second part of a Business Incubation Models series I discussed Smilor’s model (1987). It was said that business incubator could be viewed as a transformation mechanism which provides links between industry, government, university. Smilor clearly stated outcomes of business incubator for entrepreneur: credibility development, the shortening of the learning curve, faster troubleshooting, and access to the network of entrepreneurs.

Today I would like to introduce new model  of business incubation  – Nijkamp & Smilor’s Generic Incubator Model (1988).

Nijkamp & Smilor model (1988)

Source (Author, Year):

Nijkamp, 1988

Purpose of a model:

  • Interpretation of generic business incubator.
  • To reveal main structural components.

Type of a model:

Structure model

Abstraction technique:

Black-box

Theoretical background:

Number of studies in the literature, see Nijcamp (1988)

Resources:

Sources of entrepreneurs, venture capital, private&public infrastructure, business network

Processes and practices:

Sources of entrepreneurs -> opportunity recognition -> demand for business incubator services.

Linkages “Entrepreneur – Business Incubator – Innovation Ecosystem”:

Links to external environment: government, business network, financial sources, universities

Key contribution:

There is a need in incubator if there is a demand coming from entrepreneurial community. Model highlights importance of entrepreneurial culture.

All building blocks are important as well as business network and trust in it.

This model is the combination of two. Firstly, Smilor introduced his model and then it was extended by Nijkamp. Nijkamp’s (1988)[1] model is the interpretation of a generic business incubator. He argues that any  business incubator acts as a mediator between entrepreneurs and community. Thus, successful implementation of the incubator requires combintation of at least these elements:

  • Sources of entrepreneurs (universities, corporations, the general community, the public sector, research laboratories and inventors being the most likely sources).
  • Recognition of opportunities by entrepreneurs.
  • Demand for business incubation services.

Nijkamp distinguishes several sources of entrepreneurs. They are university, inventors, public sector, corporations, research labs and community. Therefore, demand for an incubator’s services usually appeares after opportunity recognition by entrepreneurs. Needs of entrepreneurs could be solved in several ways. Thus, there are two main types of business incubation programs that may be established:

  • formal (“physical building that houses and assists the small business clients through services and counseling.” (Smilor, 1987)[2];
  • informal (“limited more to a consulting role, and businesses are not housed in a central facility. The informal type of business incubators are today also known as virtual incubators or ‘without walls’.”).
Nijkamp & Smilor’s Generic Incubator Model (1988)

Nijkamp & Smilor’s Generic Incubator Model (1988)

Smilor (1987) added  2 blocks to the model:

  • the building blocks necessary for an incubator. These range from presence of venture capital in the community, to pre-existing business networks and an entrepreneurial base. All of the listed items are necessary for the successful implementation of an incubator program;
  • the possible sources of funding and/or legal status (local  government, universities, state/provincial or the private sector).

Additionally, I would like to highlight some important points of this model:

  • Authors believe that the presence of a local entrepreneurial base or culture is perhaps the most important factor. Without it there is no need in incubators at all. But it is the most underestimated variable in the success of the business incubator.
  • The presence of both debt and equity financing is highly desirable and should be complimented with a pool of ‘patient investors’.  The findings in the  literature indicate that the most significant contributing factor to attract ‘patient investors’  is a sound legal and regulatory framework and high levels of trust, which are interestingly brought about by the other building block – the business network. The network should include a variety of formal ties with local institutions, the educational system and business associations as well as in formalities with local clubs, organizations and individuals thus extending the channels of information flow. The public and private infrastructures, as the names imply, refer to the supportive network of physical facilities (eg., vacant buildings and lots with adequate access) and technological capabilities (eg., high-speed internet connection), which would both reduce the costs of starting the  business incubator and facilitate the growth of the tenants.” (Smilor, 1986)
  • Lastly, authors consider an incubator as a mediator which transforms demand coming from entrepreneurial community for services into viable businesses.

[1] Malecki E J, Nijkamp P, 1988, “Technology and regional development: some thoughts on policy” Environment and Planning C: Government and Policy 6(4) 383 – 399

[2] Smilor, R.W., 1987b, ‘Managing the Incubator System: Critical Success Factors to Accelerate New Company Develop-ment,’IEEE Transactions on Engineering ManagementEM-34(4), 146–156.

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