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09 Chapter 2
09 Chapter 2
09 Chapter 2
Business incubators originated in the United States of America and the first incubator
came into being in an abandoned Massey Ferguson manufacturing plant in Batavia in
1959. A number of initiatives were undertaken between 1985 and 1995 to strengthen
the incubation movement and as a result, it evolved into an ecosystem with a plethora
of models ranging from public to private incubators.
China also has a well-developed incubation market space, with the government
playing a predominant role to accord with its mandate of high technology led
economic growth. Although the creation of small businesses through the incubation
model started only in late 1980s, it has been able to develop about 400 variants in a
short span. These incubators have helped bridge the gap between research and the
marketplace, fostered entrepreneurial attitudes, and facilitated the re-entry of scholars
abroad. Between 2002 and 2006, the number of client firms increased from 20993 to
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41434, and their real value added increased from 41 billion to 133 billion Yuan (at the
2000 price).4
National Business Incubation Association (NBIA) estimated that in 2005 alone, North
American incubators assisted more than 27,000 start-up companies that provided fulltime employment to over 100,000 workers and generated annual revenue of $17
billion. Another study in the mid 1990s found that 87 per cent of all firms that had
graduated from NBIA member incubation programs were still in business and about
84 per cent of them remained in the incubators community.5 A 2008 study conducted
by consulting firm Grant Thornton for the US Department of Commerce Economic
Development Administration found that business incubators produced new jobs at low
cost to the government.6
Over the last 12 years, United Kingdom Business Incubation (UKBI)7 has measured
the impact of incubators on local economy and workforce. The research proved that
an incubator's client firms provided an average of 167 jobs (full time equivalents) per
incubator and were home to roughly 30 entrepreneurial companies at any one time.
About 60 per cent of them also operated "outreach" services and were able to support
150 additional ventures. Most importantly, businesses had an average success rate of
98 per cent when they were located in the incubator as compared to a national average
of less than 30 per cent and around 87 per cent of them survived beyond five years.
Thus, business incubation centres have not only grown in numbers and geographic
spread, but also in terms of its impact on promoting entrepreneurship, job creation and
economic development across the world.
So far as the Indian scenario is concerned, the National Science and Technology
Entrepreneurship Development Board (NSTEDB) launched the Science and
Technology Entrepreneurs Parks (STEP) in the early 1980s, and the Technology
Business Incubators (TBI) in the beginning of 2000.8 Our country has nearly 120
incubators and science parks which have nurtured over 1150 entrepreneurs up to
2008.9 NSTEDB has so far created 53 TBIs in collaboration with premier academic
and research institutes with an investment of Rs. 100 crores and the cumulative
revenue generated by these incubated enterprises now stands at Rs. 595 crores.10
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Although no comprehensive study has been carried out to measure the impact of these
mechanisms put together, the estimates are that all these incubators help to graduate
about 500 enterprises every year and out of these, 60 per cent are technology based
startups.11 The report of the Working Group on science and technology for small and
medium scale enterprises for the Eleventh Five Year Plan (2007-2012)12 recommends
that a total of 170 Technology Business Incubators and 50 Technology Innovation
Centres should be set up with a total outlay of Rs. 1100 Crore.
Though the origin of Incubation Centres in India is recent, they have played a
significant role in promoting entrepreneurship which could be reviewed from the
unique contribution of few Business Incubation Centres.
Founded in 2000, SIDBI Innovation & Incubation Centre (SIIC), set up by Indian
Institute of Technology, Kanpur has incubated 15 startups, of which 5 have already
graduated.
SIIC
incubates
ventures
in
technology,
engineering
and
all
Technology Business Incubator, National Institute of Technology, Calicut, (TBINITC) was established in 2003 and has completed incubation of 4 out of the 17
ventures that have been admitted so far.
Vellore
Institute
72
With a focus on serving poor farmers of the semi-arid tropics through business
incubation approach, Agri Business Incubator-ICRISAT has incubated 17 companies
out of which 5 have left after fulfilling the purpose of incubation. These firms have
created employment for 543 individuals till date.
Launched in 2004, Society for Innovation and Entrepreneurship, SINE, a broadspectrum technology business incubator, focuses on promotion of entrepreneurship at
IIT Mumbai. Of the 32 Companies admitted so far, 10 have generated employment
for more than 200 people.
The Life Science Incubator - ICICI Knowledge Park, Hyderabad which came into
existence in 2005 is structured as an independent centre within ICICI Knowledge Park
(IKP). The incubator was the joint recipient of the Best TBI award from DST for the
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year 2007. It has incubated 9 firms of which 3 have exited successfully after attaining
the desired level of growth.
Amity Innovation Incubator (AII) was founded in March 2006. AII has chosen to
focus on nurturing enterprises in the domains of ICT & Bio-Informatics. Of the 25
ventures that have been incubated by AII, 3 have graduated after becoming
freestanding businesses.
IITMs Rural Technology and Business Incubator was set up in 2006 and focuses on
nurturing enterprises, building rural inclusive business ventures through designing
products and services for rural needs which have a technology component. RTBI has
incubated 12 companies of which 2 have accomplished the purpose of incubation.
An upcoming incubator, Krishna Path Incubation Society (TBIKIET) was established
in 2007 with a focus on ventures in the ICT, electronics and mechanical engineering
domains. It has incubated 11 companies.
Established five years ago with a thrust on VLSI design and an embedded system,
TBI-BITS has incubated 9 ventures of which 2 have made an exit after reaching their
milestones. All the current incubatees have developed their products through virtual
incubation and created 127 jobs and generated revenues of about Rupees 10 million.
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Thus, on the basis of above description, we may summarize that the business
incubation centres in India are growing in numbers steadily over the years and have
started contributing to job and business creation. Although most of them have focused
on information technology, emerging industries like ceramics, space, biotechnology,
telecommunications, and bioinformatics are also being targeted.
Research Design
The present research is exploratory cum descriptive in its nature. It is exploratory in
the sense that very little research work has been done on the role of business
incubation centres in promoting entrepreneurship in India and abroad. It is descriptive
because the practices followed by business incubation centres to promote
entrepreneurship, which have already been identified and studied by earlier scholars
were also analyzed in the present research endeavour. Moreover, the observations
made by the scholars have provided base for the formulation of this research project.
Survey population
We employed a simple validation process to determine whether each individual
business incubation centre qualified for inclusion in the survey population, and
included only those incubation centres which have a physical facility and housed
incubatees. Thus, based on the criterion, the survey population is confined to only 34
business incubation centres and their incubatees.
Survey Sample
The survey sample consists of 10 business incubation centres and 42 incubatees.
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A state wise list of Business Incubation Centres existing in the country during 2009
was obtained from the National Science and Technology Entrepreneurship
Development Board, Department of Science and Technology, Government of India. A
total of 37 Business Incubation Centres were indicated in the list (Please refer: Table
2.1) which served as a sampling frame for the survey.
TABLE 2.1: State Wise List of Business Incubation Centres in India During 2009
S.No
State
Andhra Pradesh
Delhi
Gujarat
Haryana
Karnataka
Kerala
Maharashtra
Orissa
Rajasthan
10
Tamil Nadu
11
Uttar Pradesh
12
West Bengal
Total
37
The study followed a two step sampling procedure to gather data from Incubators and
the Incubatees. The first step involved the selection of Business Incubation Centres.
Since their exact numbers were not known, the researchers searched various websites
and directories and sought references from experts in the field. However on
establishing contacts based on these references, in most of the cases, they were
informed that either the business incubation centres did not exist or were not
operational. It was, therefore, decided to follow the list provided by the DST. Given
our interest in the subject, the small number of respondents and anticipated low
response rate, we decided to include all the Business Incubation Centres in our study.
However, given that four of them were established only in late 2008 or early 2009 i.e.
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just when the data collection for this study was about to begin, it was decided to
exclude them and the sampling method in that respect can be considered to be
judgment sampling.
Year of Establishment
2000
2001
2004
2007
Total
10
77
Number of incubatees
2004
2005
2006
2007
2008
15
2009
12
2010
Total
42
Nature of business
Healthcare
Information Technology
21
Electronics
Manufacturing/Mechanical/Engineering
R&D
BPO
IPR
NGO
Fashion
Telecom
Design Solutions
Robotics
Total
42
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JSSATE, NOIDA
The JSS Mahavidyapeetha has established the Science and Technology Entrepreneurs
Park in the campus of the JSS Academy of Technical Education, Noida. It is a
registered society under the Society Registration Act 1860. This initiative is one of the
first instances of such a Park being established in the initial years of an Engineering
Institution to provide value added programmes and services for the students,
unemployed youth, working professionals and aspiring entrepreneurs in the National
Capital Region. The Science Park has been established drawing from the rich
experience of the host institution in successful implementation of similar programmes
in its other institutions at Bangalore and Mysore. SJCE-STEP, located at the Sri
Jayachamarajendra College of Engineering, Mysore is one of the 14 STEP's
established by the Department of Science and technology (DST), Govt. of India.
promote
entrepreneurial
leadership
across
all
disciplines,
facilitate
entrepreneurial activity amongst students, and invite entrepreneurs to use TBI services
so as to develop end products for commercialization.
80
To assists the units to identify and evaluate the technology and know-how.
81
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addition, low cost project technologies required for setting up new small business
enterprises are displayed in working condition.
Krishna Path Incubation Society TBIKIET
TBI-KIET was established in 2007 jointly by National Science & Technology
Entrepreneurship development board (NSTEDB), Ministry of Science & Technology,
Government of India and Krishna Institute of Engineering & Technology. It provides
support for commercialization of any innovative idea by way of startup firms through
development strategies, linkages and consultancy in the relevant field. TBI-KIET has
a dedicated five storied state-of-art and energy efficient building to accommodate 35
incubatees. 8 incubatee companies have received SEED fund support of Rs. 50 Lacs.
Data Collection
Secondary Data
To identify the sources of relevant data, we conducted an electronic search using key
terms
associated
with
business
incubation.
After
retrieving
all
relevant
Primary Data
Initial contacts were established with the incubator managers even before the research
was started. They were informed of the research and most of them showed a high
level of enthusiasm and expressed their willingness to participate in the survey. Their
response to the pre notification was very positive and they stated that the study was
timely and needed.
The researchers initially planned to visit the incubators where observations could also
be made. However, this proved to be difficult because of long-distances between the
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incubators and the time it could take to execute all the visits. The research was,
therefore, conducted using a survey approach and most preferred strategy for
collecting the information proved to be through the self administered questionnaires
supplemented by interviews. The researchers, however, managed to visit four
incubators. Our data analysis plan included factor wise and item wise analysis of the
role of business incubation centres in promoting entrepreneurship and, therefore, an
arbitrary five point likert type response scale was found to be most suitable.
10.0
N of Items = 82
41 Items in part 1
41 Items in part 2
R E L I A B I L I T Y A N A L Y S I S - S C A L E (A L P H A)
Reliability Coefficients
N of Cases =
10.0
N of Items = 82
Alpha = .9586
A Cronbach alpha value of above .70 is considered acceptable. In the present case, the
high reliability coefficients: Cronbach alpha (r = .95), Spearman Brown (r = .96) and
Guttman split half (r = .96) reveal that the test halves are highly correlated and the
questionnaire has high reliability.
questionnaire was reviewed with incubation experts and they revealed that the
questionnaire was exhaustive and possessed validity.
Data was gathered using two separate self administered questionnaires, one for
incubator managers and another for incubatees. At the time of the survey being
conducted in 2009, information about the precise number of operating incubators in
85
India was not available. Therefore, the list of business incubation centres provided by
Department of Science and Technology, Government of India was considered as a
sampling frame. There were a total of 37 business incubation centres in the list, out of
which 4 were excluded as they were established only in late 2008 or early 2009 i.e
just when the data collection for this study was about to begin. Given our interest in
the subject, the small number of respondents and anticipated low response rate, we
decided to include all of them in our study. Therefore, the questionnaire was mailed to
33 business incubation centres and 330 incubatees. After follow up, a total of 12
questionnaires from business incubation centres and 45 questionnaires from
incubatees were returned. Out of these, 10 and 42 responses respectively were
considered valid for analysis.
The self administered questionnaire for the incubator managers is divided into
following parts. The first part is devoted to collect the demographic information of the
respondents. The second part consists of 25 statements pertaining to the role of
business incubation centres in promoting entrepreneurship. 57 statements related to
the practices followed by business incubation centres to promote entrepreneurship
constitutes the third part of the questionnaire. The last part comprises of open ended
statements providing the respondents an opportunity to express their view point and
give suggestions since all the other parts included structured statements where this
opportunity was denied. The respondents were requested to indicate their level of
agreement with each statement on an arbitrary five point likert type response scale.
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In the present study, 25 incubator services were classified into four main groups:
Physical infrastructure, Business Assistance, Management guidance and consulting,
and Enabling environment services. In addition to this, 57 incubation good practices
followed by the business incubation centres to promote entrepreneurship were
classified into 7 categories namely: Management practices, Promotional practices,
Networking practices, Tenant Management practices, Human Resource practices,
Assessment practices and Host Institution Involvement practices. How these roles and
practices are linked to the Questionnaire A (For Incubators) and Questionnaire B
(For Incubatees) is indicated below:
time
required
to
develop
marketable
products/services
Assessment Practices
1. Exploiting business opportunities- Questionnaire A, question 26
2. Transforming innovation into products/services- Questionnaire A, question 27
3. Creation of job opportunities- Questionnaire A, question 31
4. Regenerate public confidence in entrepreneurship- Questionnaire A, question
32
5. Periodic assessment of entrepreneurial market- Questionnaire A, question 78
6. Adapts quickly to change- Questionnaire A, question 79
7. Periodic assessment of performance- Questionnaire A, question 80
8. Well defined criteria for measuring success- Questionnaire A, question 81
9. Self sustainability of incubation centre- Questionnaire A, question 82
incubator managers, who in turn, and where possible, distributed the questionnaire for
incubatees/ entrepreneurs. Where it was not possible to collect information on
incubatees through incubator managers, the incubatees were contacted personally for
information through e-mail, meetings and over the telephone. The respondents were
requested for an early response without setting a deadline for the return of the filled in
questionnaires. One day after sending the questionnaires, a confirmation e-mail was
sent to all the respondents. Follow up e-mails were then sent as a reminder to those
who had not responded. Telephone calls were also used to follow-up until a
satisfactory number of responses were received.
Even though some of the questions could be regarded as sensitive, the incubator
managers did not have any difficulty answering them mostly because the initial trust
had already been established. In most cases, respondents just completed and returned
the self administered questionnaires in the provided self addressed stamped envelope.
At four of the incubators where the researcher made personal visits, the responses
were collected by hand. After receiving all the responses, telephone calls were made
to a couple of respondents in order to verify the correctness of the responses both
from incubators and incubatees.
Analysis Pattern
Identified Variables:
Independent variables
1. Physical Infrastructure services
2. Business Assistance Services
3. Management Guidance and Consulting services
4. Enabling Environment services
Dependent Variable
Promotion of Entrepreneurship
92
Item
No
Description of Items
(5)
15
10
11
12
13
14
16
(4)
(3)
(2)
(1)
17
94
and, therefore, the maximum score obtained by one respondent on account of physical
infrastructure services is 20, whereas the minimum score is 4 and neutral score is 12.
Response
Weight
Neutral (I)
Disagreement (D)
Agreement (A)
14
95
This respondent has a total score of 14 out of 20 maximum possible score on account
of physical services which indicates that incubators services are highly significant for
the entrepreneur.
Response Categories
S.No
Item
No
SA
Description of Items
Management Practices
Feasibility study was conducted
before establishment of
1
33
Incubation Centre.
Incubation Centre has a formal
2
34
business plan.
Incubation Centre is managed by
3
35
an Advisory Board.
Incubation Centre has
implemented a suitable
Management Information System
4
39
(MIS).
Lack of funding is a major
impediment to the success of
5
67
Incubation Centre.
Decision making process of
Incubation Centre is long with
6
69
multiple decision points.
7
77
Promotional Practices
Incubation Centre conducts
entrepreneurship programmes
1
25
such as workshops/trade fairs etc
Incubation Centre has a well
2
36
maintained website.
Incubation Centre carries out a
well designed advertising
/promotion plan for promoting the
3
37
Incubator
96
SD
66
Networking Practices
Incubation centre provides
business assistance to existing
1
28
Small & Medium Enterprises (SME)
Incubation Centre shares
information with other incubators
2
38
on a regular basis.
Incubation Centre has support
from the local industry for its
3
40
activities.
Incubation Centre has a poor
4
68
understanding of industrial needs
Tenant Management Practices
Incubation Centre continues to
provides assistance to tenant
companies even after graduation
1
24
(i.e. exit from the incubator)
Incubation Centre has a formal
policy for admitting tenant
companies to the Incubator.
2
41
Tenant selection is determined by
a Selection Committee for your
3
42
Incubation Centre.
Incubation Centre has a formal
policy for graduating tenant
4
43
companies from the incubator.
Incubation Centre periodically
collects information on key
business parameters like
employment, revenue etc from
5
45
the tenant companies.
Incubation Centre makes a
periodic assessment of tenant
companies progress in the
6
47
Incubator.
Incubation Centre makes a
periodic assessment of tenant
7
48
companies needs in the Incubator
Differences between Incubation
Centre and tenant companies in
8
49
terms of expectations.
Differences between your
Incubation Centre and tenant
9
50
companies priorities.
97
10
51
11
52
12
53
12
63
13
64
14
65
Assessment Practices
Incubation Centre has created
successful businesses by
1
26
exploiting opportunities.
Incubation Centre has
transformed innovations into
2
27
marketable products/services.
Incubation Centre has created
3
31
direct job opportunities
Incubation Centre has helped
regenerate public confidence in
4
32
entrepreneurship.
Incubation Centre makes periodic
assessment of the entrepreneurial
5
78
market.
Incubation Centre adapts quickly
6
79
to the changing conditions.
Incubation Centre makes periodic
7
80
assessment of its performance.
Incubation Centre has well
defined criteria for measuring its
8
81
success
Incubation Centre is self
9
82
sustainable.
Host Institution Involvement Practices
Host Institution (Institution
establishing the Incubator) has
integrated the objectives of
Incubation Centre into its
1
70
strategic planning.
Host Institution has provided
adequate land & building for
2
71
Incubation Centre.
Host Institution shares its
facilities/ expertise with
3
72
Incubation Centre.
Host Institution promotes an
4
73
entrepreneurial culture.
Host Institution periodically
reviews the activities of your
5
74
Incubation Centre.
99
75
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Within each category, we have isolated various practices and these practices are
further translated in statements and for each statement we have assigned five response
categories which are SA for Strong Agreement, A for Simple Agreement, I for
Indifferent/Dont Know, D for Simple Disagreement and SD for Strong
Disagreement. If the nature of the statement is positive, then the maximum weight
assigned to Strong Agreement is 5, Simple Agreement is 4, Indifferent is 3, Simple
Disagreement is 2 and Strong Disagreement is 1. However, in case of negative
statements, the weights are reversed and the maximum weight assigned to Strong
Agreement is 1, Simple Agreement is 2, Indifferent is 3, Simple Disagreement is 4
and Strong Disagreement is 5.
For perusing the Networking Practices, four statements have been isolated and
incorporated.
The Tenant Management Practices were assessed through twelve statements that have
been assimilated in the questionnaire.
100
Item
Response
Weight
Neutral (I)
Disagreement (D)
Disagreement (D)
22
-------------------------------------------------This respondent has a total score of 22 out of 35 maximum possible score on account
of Management Practices which indicates that these Practices are perceived to be
effectively implemented by the business incubation centre.
We may summarize that the present study is exploratory cum descriptive in its nature.
The choice of the research design is justified because very little research work has
been done on the role of business incubation centres in India and abroad, and the
practices followed by them which have already been identified by earlier scholars
have provided base for the research project. The data was gathered during 2009
2010 using self administered questionnaire which contained 82 questions. While the
survey population consisted of 34 business incubation centres, the sample comprised
of 10 business incubation centres and 42 incubatees. The research team employed
both descriptive as well as standard statistical tools for data analysis.
---------------X---------------
References
1. http://www.nbia.org/resource_center/bus_inc_facts/index.php
2. Government of India, Conceptual Document on Technology Business
Incubators-Developing Eco System for Knowledge to Wealth Creation,
Department of Science & Technology, National Science and Technology
Entrepreneurship Development Board, , Chapter 1, p. 10
3. http://www.cabi.ca/CABI_Report_07_Final.pdf
4. Haiyang Zhang and Tetsushi Sonobe, Business Incubators in China: An
Inquiry into the Variables Associated with Incubatee Success, Economics ejournal, 5, 2011 accessed from www.economics-ejournal.org
5. http://www.nbia.org/resource_library/works/index.php/ Construction Grants
Program Impact Assessment Report
102
6. http://www.nbia.org/resource_library/works/files/EDA_study_PR_FINAL.pdf
7. http://www.ukbi.co.uk/about-ukbi/business-incubation.aspx
8. Government of India, Status Report on Technology Business Incubators
Department of Science & Technology, National Science and Technology
Entrepreneurship Development Board, Chapter 1, p. 3
9. Government of India, Conceptual Document on Technology Business
Incubators-Developing Eco System for Knowledge to Wealth Creation,
Department of Science & Technology, National Science and Technology
Entrepreneurship Development Board, p. 39
10. Ibid., p. 6
11. Ibid., pp. 10-11
12. http://www.dst.gov.in/about_us/11th-plan/rep-subsme.pdf
103