Opening Up the Incubator’s Black Box

Tales Andreassi, Professor of Entrepreneurship and Vice-Dean of FGV-EAESP, Brazil, opens up Part 2 of his research into incubators and start-up survival. What key factors enable incubators to foster successful start-ups?

From the paper: Being flexible through customization The impact of incubator focus and customization strategies on incubatee survival and growth. Johanna Vanderstraeten, Arjen van Witteloostuijn, Paul Matthyssens, Tales Andreassi.

Sole music

A common tune among policy-makers and practitioners alike was that if an incubator focused on a single-industry – for example, digital applications – the chances of survival for a young start-up with an idea in this field would dramatically increase. Typically, incubators either offer offices and communication services, business services, or facilities and equipment services. As the number of incubators grew from the 1980s onwards, it was only natural for them to begin to compete, ever-increasingly, with other organisations in the incubation industry to attract start-ups. And as a consequence, academics and practitioners shifted their attention from merely listing incubator services to highlighting best practices and strategy formulation, viewing them much in the same way as they would true companies together with their internal processes, identity, administration and external communication. This accounts, in large, for the view that industry-specific focus worked best.

Not so much turning a blind eye as single-focus

It’s not what you do but the way that you do it

Surprisingly, Andreassi et al found no evidence that opting for a specific industry directly enhances incubatee performance. Indeed, incubators offering diversity of both services and diversity in industry-specific incubatees seemed to fare as well as, or even better than, those without diversity. Moreover, they state that it is not the type of services being offered that creates incubatee value, but rather the way such services are offered that ultimately defines the incubator’s value proposition. Moreover, both diversified and specialized incubators may be able to attain a competitive advantage – but it is not as much the what but the how that is necessary for an incubator’s industry focus to actually result in higher incubatee performances.

Diversity: a wrenching issue

As such, it was found that in cases where incubators pursued a service customization strategy for their start up incubatees, regardless of whether they focused on a specific industry or housed young companies from various industries, it had a positive influence on their performance. For difference and diversity in an incubator’s service offer means two key things: start-ups benefit by gaining access to novel resources and they also see a whole new, and diverse, network opportunity open up before them. This in turn creates ideas, innovation and ultimately value creation for the products or services the start-ups sell. This is news for those who believe industry-focus is essential: focused incubators can only increase incubatee survival and growth when they also follow a service customization strategy. Incubator managers and incubator support organizations might use this information to simultaneously decide upon the incubator’s scope and its service offering strategy. For practitioners and policymakers alike, offering the “right” assistance is pivotal for increased incubatee survival and growth rates.

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