A Systematic Review of Business Incubation Research

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A Systematic Review of Business Incubation Research
  A Systematic Review of Business IncubationResearch Sean M. Hackett 1 David M. Dilts 2 ABSTRACT. This article systematically reviews the literatureon business incubators and business incubation. Focusing onthe primary research orientations—i.e. studies centering onincubator development, incubator configurations, incubateedevelopment, incubator-incubation impacts, and theorizingabout incubators-incubation—problems with extant researchare analyzed and opportunities for future research areidentified. From our review, it is clear that research has justbegun to scratch the surface of the incubator-incubationphenomenon. While much attention has been devoted to thedescription of incubator facilities, less attention has beenfocused on the incubatees, the innovations they seek todiffuse, and the incubation outcomes that have been achieved.As interest in the incubator-incubation concept continues togrow, new research efforts should focus not only on theseunder-researched units of analysis, but also on the incubationprocess itself. JEL Classification:  M13, O2, O31, O32, O38 1. Introduction Incubator-incubation research began in earnest in1984 with the promulgation of the results of  Business Incubator Profiles: A National Survey (Temali and Campbell, 1984). Underscoring theenthusiasm of early researchers, only three yearspassed before two literature reviews were gener-ated (i.e., Campbell and Allen, 1987; Kuratko andLaFollette, 1987). However, since these earlyefforts to synthesize and analyze the state of incubator-incubation science, and despite the factthat the body of research has grown considerablyin the intervening years, a systematic review of theliterature remains conspicuously absent.The primary objectives of this article are tosystematically review the incubator-incubationliterature and to provide direction for fruitfulfuture research. Ultimately 38 studies wereincluded in our review. We included a study inour review if it viewed the incubator as anenterprise that facilitates the early-stage develop-ment of firms by providing office space, shared-services and business assistance. When examiningthe literature chronologically, five primaryresearch orientations are evident: incubator devel-opment studies, incubator configuration studies,incubatee development studies, incubator-incuba-tion impact studies, and studies that theorizeabout incubators-incubation. While these orienta-tions are not necessarily orthogonal, we employthem as classifications of convenience that we hopewill facilitate a discussion of the literature.We have limited the review in several ways.First, we confine our coverage of the literature tostudies devoted explicitly to incubators and/orincubation. Although the locus of the incubator-incubation concept is the nexus of forces involvingnew venture formation and development, newproduct conceptualization and development, andbusiness assistance (each of which has an estab-lished body of research), to expand the scope of the review beyond research explicitly focused onincubators-incubation would make this researchproject impossible to complete on a timely basis.Second, although practitioner literature has influ-enced academic research, we center our review onthe academic literature, except in cases where thepractitioner literature has proven especially influ-ential and has some intrinsic academic facevalidity. Third, with our long-term researchinterests in mind, we selected literature thatconceptualizes incubators-incubation as a strategy 1 Vanderbilt UniversityManagement of Technology ProgramBox 1518, Station B, Nashville, TN 37235 USAE-mail: sean.m.hackett@alumni.vanderbilt.edu 2 Vanderbilt UniversityManagement of Technology ProgramBox 1518, Station B, Nashville, TN 37235 USAE-mail: david.m.dilts@vanderbilt.eduJournal of Technology Transfer, 29, 55–82, 2004 # 2004 Kluwer Academic Publishers. Manufactured in The Netherlands.  for facilitating new business development ratherthan as a strategy for developing real estate.While this review is primarily intended forresearchers who are considering potential researchtopics, we also believe that it will be of use toincubation industry stakeholders who are inter-ested in understanding the epistemological evolu-tion of the incubator-incubation concept. Ourcontribution is a synthesis and analysis of con-cepts, empirical findings, and problems related toextant incubator-incubation research, as well as anidentification of potential areas for futureresearch.In this section, we have noted the need for asystematic review of the literature, provided aworking definition of the incubator-incubationconcept, and delimited the scope of our review.The remainder of the article is organized in thefollowing manner. First, we describe the method-ology we employed in identifying and selectingarticles for review. Second, we provide a formaldefinition of the incubator-incubation concept,place incubator-incubation literature in its histor-ical context and review the research along the fiveprimary research orientations described above.Third, we identify several challenges within extantresearch and suggest new avenues for futureresearch. Specifically, we note the need for futureresearch to address the lack of convergence in theterms and concepts of discourse related toincubators-incubation, the lack of theoreticallymeaningful incubator classifications, the lack of abusiness incubation process model, and the long-standing challenges in the definition and measure-ment of incubator-incubatee ‘‘success’’. We con-clude by emphasizing the need to identify andunpack the variables of business incubation with aview toward developing theories that help toexplain how and why the incubation process leadsto specific incubation outcomes. 2. Methodology for identifying articles for review To identify the population of publications forreview, we conducted an electronic journal data-base search of ProQuest-ABI/Inform, ScienceDirect and UMI Dissertation Abstracts using thesearch terms ‘‘incubator’’ and ‘‘incubation’’. Ourobjective was to conduct a census of all publishedresearch on incubators-incubation written inEnglish between 1984 and early 2002. Afteridentifying and retrieving all articles archivedelectronically in the databases identified above,we read the bibliographies of these articles toidentify other articles on incubators-incubationpublished prior to electronic archiving or notarchived in the electronic databases, and subse-quently retrieved those articles. We reviewed thosearticles’ bibliographies and found yet more articlesdealing with various aspects of incubators-incuba-tion and repeated the process of retrieving articlesand reading through the bibliographies. Reason-ably confident that all extant articles on incuba-tors-incubation had been identified and retrieved,we then checked all of the retrieved articles againsta bibliography created by the National BusinessIncubation Association (NBIA) in 2001 that listsall (peer-reviewed, non-peer reviewed and popularpress) articles related to incubation in order toensure to the best of our ability that the entirepopulation of articles on incubators-incubationhad been collected. The articles considered forreview appear in the following journals:  AmericanJournal of Small Business, Economic DevelopmentQuarterly, Economic Development Review, Entre- preneurship Theory and Practice, Harvard BusinessReview, IEEE Transactions on Engineering Man-agement, Journal of Business Research, Journal of Business Venturing, Journal of Developmental Entrepreneurship, Journal of Product InnovationManagement, Journal of Property Management,Journal of Small Business Management, PolicyStudies Journal, Public Administration Quarterly,Regional Studies, Research Policy, TechnologyManagement,  and  Technovation . 1 Ultimately 35 articles (26 empirical studies andnine non-empirical studies), two dissertations andone national survey were included in this literaturereview (a complete listing of the studies reviewed isincluded in Appendix A). The distribution of articles among journals was highly skewed toward journals with an economic development perspec-tive: Six articles appeared in  Economic Develop-ment Quarterly  and another four articles appearedin  Economic Development Review . Considering thehigh number of often-cited publications appearingin these two periodicals, it is clear that theeconomic development perspective has influencedthe field of published business incubation studies.56  Hackett and Dilts  The complete distribution of research perspectivesapplied to business incubation studies is detailed inAppendix B. 3. Primary research orientations In this section, we offer a formal definition of theincubator-incubation concept. Next we brieflydescribe the historical context in the United Statesin which incubator-incubation research hasevolved. Then we review the literature, using thefive primary research orientations mentionedabove as our organizing principle. When reportingkey findings of each research orientation, westratify the results based on their relevance tothree different units of analysis: community,incubator, or incubatee. What is the incubator-incubation concept?  Based on insights gleaned from reviewing theliterature as well as from conducting fieldwork inAsia and North America, we offer the followingdefinition: A business incubator is a shared office-space facility that seeks to provide its incubatees(i.e. ‘‘portfolio-’’ or ‘‘client-’’ or ‘‘tenant-compa-nies’’) with a strategic, value-adding interventionsystem (i.e. business incubation) of monitoring andbusiness assistance. This system controls and linksresources with the objective of facilitating thesuccessful new venture development of the incu-batees while simultaneously containing the cost of their potential failure. 2 Additionally, we offer thefollowing corollary: When discussing the incuba-tor, it is important to keep in mind the totality of the incubator. Specifically, much as a firm is not just an office building, infrastructure and articlesof incorporation, the incubator is not simply ashared-space office facility, infrastructure andmission statement. Rather, the incubator is also anetwork of individuals and organizations includ-ing the incubator manager and staff, incubatoradvisory board, incubatee companies and employ-ees, local universities and university communitymembers, industry contacts, and professionalservices providers such as lawyers, accountants,consultants, marketing specialists, venture capital-ists, angel investors, and volunteers. Figure 1graphically depicts the incubator-incubation con-cept defined here. Historical context of incubator-incubationdevelopment in the USA It is generally accepted that the first incubator wasestablished as the Batavia Industrial Center in1959 at Batavia, New York (Lewis, 2002). A localreal estate developer acquired an 850,000ft 2 building left vacant after a large corporationexited the area (Adkins, 2001). Unable to find atenant capable of leasing the entire facility, thedeveloper opted to sublet subdivided partitions of the building to a variety of tenants, some of whomrequested business advice and/or assistance withraising capital (Adkins, 2001). Thus was the firstbusiness incubator born.In the 1960s and 1970s incubation programsdiffused slowly, and typically as government-sponsored responses to the need for urban/Mid-western economic revitalization. Notably, in the1960s interest in incubators-incubation was piquedby the development of University City ScienceCenter (UCSC), a collaborative effort at rational-izing the process of commercializing basic researchoutputs (Adkins, 2001). 3 In the 1970s interest inthe incubator-incubation concept was furthercatalyzed through the operation of the NationalScience Foundation’s Innovation Centers Pro-gram, an effort to stimulate and institutionalizebest practices in the processes of evaluating and Figure 1. Incubator-incubation concept map. A Systematic Review of Business Incubation Research  57  commercializing selected technological inventions(Bowman-Upton  et al. , 1989; Scheirer, 1985).In the 1980s and 1990s the rate of incubatordiffusion increased significantly when (a) thepassage of the Bayh-Dole Act in the U.S. Congressin 1980 decreased the uncertainty associated withcommercializing the fruits of federally fundedbasic research, (b) the U.S. legal system increas-ingly recognized the importance of innovation andintellectual property rights protection, and (c)profit opportunities derived from the commercia-lization of biomedical research expanded. In thisenvironment several incubator developmentguides 4 as well as non-academic reports andarticles 5 with a geographic and normative focuson current or potential business incubation effortswere generated. This surge in report-generatingactivity in the early 1980s and the formation of the NBIA  in 1985 underscore the growth in popularinterest in business incubation in the 1980s.Concurrent to these and other local efforts atstudying and unleashing the potential of businessincubation to foster economic development, aca-demic incubation studies began in earnest. Muchof this early research addresses the questions‘‘What is an Incubator?’’ and ‘‘What do we needin order to develop an effective incubator?’’ Business Incubator Profiles: A National Survey (Temali and Campbell, 1984), a ground-breakingsurvey of 55 business incubators, is the firstacademic attempt to address these questions bydescribing in detail the incubators operating in theUnited States. It is comprehensive in scope, takingthe incubator, the incubator manager, the incuba-tees, and the services provided by the incubator asvarious units of analysis. Although this surveydoes not test hypotheses or attempt to buildtheory, its rich descriptive data and insightfulperspective established a platform upon whichmuch subsequent incubator development researchis based.In the late 1990s, fueled by irrationally exuber-ant stock valuations of several for-profit incuba-tors and/or their incubatees, the mediapopularized a fantasy of business incubators asinnovation hatcheries capable of incubating andtaking public ‘‘infinitely scaleable, dot-com e-business start-ups’’ less than a year after enteringthe incubator. This fantasy and the incubator-incubation concept were largely abandoned andleft for dead by the popular press after the collapseof the United States’ stock market bubble. 6 However, rumors of the demise of the incubator-incubation concept are ‘‘greatly exaggerated’’. Themedia reached its negative conclusions regardingincubators-incubation while fixated on for-profit incubators, a relatively small segment of the total incubator population. 7 The vast majorityof incubators are non-profit entities that continueto incubate below the ‘‘radar screens’’ of most journalists.Since the establishment of the first businessincubator, most incubators have been establishedas publicly funded vehicles for job creation, urbaneconomic revitalization, and the commercializa-tion of university innovations, or as privatelyfunded organizations for the incubation of high-potential new ventures (Campbell and Allen,1987). The fact that most incubators are publiclyfunded is not trivial. Despite normative incubationindustry association positions asserting the impor-tance of operating incubators as enterprises thatshould become self-sufficient, profit-orientedintentionality has not been translated into profit-ability for the majority of publicly funded incuba-tors (Bearse, 1998). Financial dependency forcesincubators to operate in a politically chargedenvironment where they must constantly demon-strate the ‘‘success’’ of the incubator and itsincubatees in order to justify continued subsidiza-tion of incubator operations with public funds.Such a politically charged environment can temptincubator-incubation industry stakeholders tounderreport incubator-incubation failures andover-report successes. 8 For the researcher inter-ested in understanding, explaining and buildingmodels of incubator-incubation phenomena, thepolitically charged environment and the state of subsidy-dependency in which many non-profitincubators operate cannot be ignored. Overview of research orientations We review the literature along the following fiveprimary research orientations: incubator develop-ment studies, incubator configuration studies,incubatee development studies, incubator-incuba-tion impact studies, and studies theorizing aboutincubators-incubation. These orientations, their58  Hackett and Dilts  key topics, and main research questions arepresented in Table I. Incubator development studies The goal of early incubator-incubation researcherswas to accurately and/or normatively describeincubators. Key themes in incubator developmentstudies include efforts at defining incubators-incubation, incubator taxonomies, and policyprescriptions. These themes are addressed below. Defining incubators-incubation.  Most researchassumes that incubators are economicdevelopment tools for job creation whose basicvalue proposition is embodied in the shared belief that operating incubators will result in more start-ups with fewer business failures (Fry, 1987;Kuratko and LaFollette, 1987; Lumpkin andIreland, 1988; Markley and McNamara, 1995;Rice, 1992; Udell, 1990). Despite the existence of this shared baseline assumption, definitionalambiguity  vis-a `-vis  the terms ‘‘businessincubator’’ and ‘‘business incubation’’ plaguesthe literature. This is problematic because,without precise definitions, it is difficult toascertain the actual size of the incubatorpopulation to which systematic research effortsseek to generalize their findings. There are severalsources of definitional ambiguity. First is thediffusion and repeated adaptation of the srcinalbusiness incubator concept in order to fit varyinglocal needs and conditions (Kuratko andLaFollette, 1987). Second is the interchangeablemanner in which the terms ‘‘Research Park,’’‘‘Technology Innovation Center,’’ and ‘‘Business Table IOverview of incubator-incubation literature ResearchstreamsCharacteristicsIncubatordevelopmentstudiesIncubator configurationstudiesIncubatee developmentstudiesIncubator-incubationimpact studiesStudies theorizingabout incubators-incubationResearch period 1984–1987 1987–1990 1987–1988 1990–1999 1996–2000 Main topics  . Definitions  . Conceptual  . New venture  . Levels and units of   . Explicit and implicit . Taxonomies frameworks development analysis use of formal theories . Policy prescriptions  . Incubatee selection  . Impact of planningon development . Outcomes andmeasures of success(transaction costeconomics, networktheory, entrepreneur-ship, economicdevelopment throughentrepreneurship) Researchquestion(s) . What is an incubator? . How do we developan incubator? . What life cycle modelcan be extracted fromanalysis of businessincubators? . What are the criticalsuccess factors forincubators-incubation? . How does theincubator-incubationconcept work in practice? . How do incubators selectincubatees? . What is the process of new venturedevelopment in anincubator context? . What is the role of planning and thebusiness incubatormanager? . Do incubatorsachieve what theirstakeholders assertthey do? . How can businessincubation programoutcomes beevaluated? . Have businessincubators impactednew venture survivalrates, job creationrates, industrialinnovation rates? . What are theeconomic and fiscalimpacts of anincubator? . What is thesignificance of relationships andhow do they influenceentrepreneurship? . What are the criticalconnection factors tosuccess, e.g., settings,networks, foundercharacteristics, groupmembership,co-production value,and creationprocess?’’ . What constitutes amodel for a virtualincubator? . Is the network thelocation of theincubation process? A Systematic Review of Business Incubation Research  59
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