A Study On Indian Higher Educational Institute Based Business Incubators

Journal of Enterprising Culture
Vol. 21, No. 2 (June 2013) 199–225

DOI: 10.1142/S021849581350009X
A STUDY ON INDIAN HIGHER EDUCATIONAL

INSTITUTE BASED BUSINESS INCUBATORS
RANA BASU* and DHRUBES BISWAS

School of Engineering Entrepreneurship
J. Enterprising Culture 2013.21:199-225. Downloaded from www.worldscientific.com
Indian Institute of Technology, Kharagpur, India

*rbasu004@gmail.com
by RYERSON UNIVERSITY on 02/03/15. For personal use only.
The purpose of this paper is to identify and explore the various range of business
incubation services being provided to the nascent entrepreneurs which is based on
comprehensive compilation and subsequent analysis of literature followed by
case based approach in context to Indian higher educational institute (HEI) based
business incubation centres. The objective behind this research is to critically
assess the assistance services and to prioritize the service dimensions provided by
the business incubation centres. Data has been collected from various business
incubation centres to capture the experience of the incubated clients and other
stakeholders who are directly and indirectly attached to the business incubation
centres. The novelty of this paper is that there is no available literature that has
followed a similar approach in measuring most influential business incubation
service parameters taking different HEI based Indian incubation centres. Statis-
tical analysis has been deployed for investigation of service dimensions and
prioritized it accordingly as well as a model has been proposed with the identified
service dimension that influences the creation of the new ventures. The findings
suggests that HEI based business incubation centres are providing services to
emerging economies by leveraging talent and thus creating value. The findings
have both entrepreneurial and managerial implications for decision makers in
universities, industry and government. The management of incubators, entre-
preneurs as well as researchers can take input from this study in order to ac-
complish effective service management for scalable ventures.
Keywords: Innovation; entrepreneurship; business incubation; science parks; emerging

economies; HEI; PCA.
INTRODUCTION
To encourage entrepreneurship and innovation, business incubation plays

an important role and has gained colossal recognition in India. Business
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R. Basu & D. Biswas
incubators are organizations which provide conducive environment and all

types of support services to the start ups (Rice and Mathews, 1995). The
concept of business incubators or incubation programmes has been devel-
oped since 1990’s as a major strategy for the enterprise development in both
developing and developed nations (OECD, 1999; UN 2000). Understand-
ing the attributes of business incubator performance always being central to
the point of incubator researchers (Mian, 1997; Udell, 1990; Voisey et al.,
2006). The principal aim of the business incubator is not only limited to
improve quality of services to the new firms but also move towards the
sustainability (Aernoudt, 2004; Hackett and Dilts, 2004). To measure the
success rate of the incubators the researchers often take the variables such
as incubator occupancy rate, tenant survival as well as growth of the tenant
(EC, 2002; Schwartz and Göthner, 2009). As like in other countries the
establishment of business incubators has been growing rapidly and the
process of entrepreneurship is on the threshold of exponential growth in
India, which opens up new ways to the ecosystem to take shape. In India
most incubation centers are being hosted by institutions of higher learning
centres and the activities of the centres are funded by the government
agencies.
Higher educational institute based business incubators have become
accepted as they seek to provide unique opportunity to the entrepreneur to
benefit from the talent and resources that are located in the university (Lee
and Osteryoung, 2004; Rothaermel and Thursby, 2005). However, the
overall advantages that incubation centre of higher educational institution
depend on various factors such as their capacity to absorb technology,
institutional support structures, degree of involvement of the university
talent, type of commercial opportunity that exists and the role of the nascent
entrepreneur. Evidence also suggests that firms located in HEI based
business incubators face reduced risk of failure.
The various literatures available on business incubation focuses mainly
on the influence of incubator’s organizational characteristics, more partic-
ularly on the types of services offered. Researcher’s tend to subdivide the
incubator’s support services into logistic, administrative, business assis-
tance and networking services (Bergek and Norrman, 2008) in order to
examine the impact of each of these services on tenant development,
functioning or growth (e.g. Colombo and Delmastro, 2002; Rothaermel
and Thursby, 2005a,b; Fang et al., 2010). Now a day the incubator
researchers have started shifting their attention from more objective lists of
services to service positioning differentiation strategies. Although there is
no consensus on the ground, but the output of the result specify that
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A Study on Indian Higher Educational Institute Based Business Incubators
business incubation provides value added services (Mian, 1996), which

having strong impact on tenant performance such as survival (Sherman,
1999), creation of job and opportunities (Löfsten and Lindelöf, 2002) and
sales - growth (Löfsten and Lindelöf, 2001).
In the strategy literature the differentiation of key service positioning
mechanisms are “service customization” and “service focus” (Skaggs and
Huffman, 2003). Academics are of the opinion that services pertaining to
incubation such as network stimulation are more effective in specialized
incubators (Phillimore, 1999). The primary objective of the paper is to
review the various aspects of business incubation service literature so as to
enable the entrepreneurship process through incubation activities and also

attempts have been made to focus on various Science and Technology parks
of developing economies. There had been many researches on Business

incubation as well as on Science Parks in both developed (OECD, 1997,
1999; EC, 2002) and developing countries (Cabral and Dahab, 1998;
Al-Sultan, 1998; Kihlgren, 2003; Watkins-Mathys and Foster, 2006;
Vaidyanathan, 2008), but very little research has been done on incubation
process and its service delivery towards the start ups pertaining to mea-
suring the service parameters of business incubation. Researchers are of
opinion that service customization have some customer value (Treacy and
Wiersema, 1993) which is equally important for service quality (Fornell
et al., 1996). It is also of the opinion that meeting and satisfying the needs
of the customer demand is more imperative to service firms rather than
manufacturing sector (Anderson et al., 1997). Inspite of so many efforts and
the government initiatives for the growth of business incubation the liter-
ature also witnessed the failure of many business incubation centres around
the world for providing poor quality service. Therefore there is a need to
assess and measure the various service parameters that the incubation
centres are providing to their clients or incubatees. As such there has been
no study being reported in the literature that has adopted this similar
approach in order to operationalize the incubation service in context to
Indian business incubation centres which leads this paper an attempt to
measure the clients’ response on various issues pertaining to the Indian
incubation service parameters based on subsequent analysis and compre-
hensive compilation of literature in context to Indian incubation centres.
Data has been collected to capture the experiences of the incubator clients
from different incubation centers in India on various service issues and
statistical analysis has been deployed for further analysis by using principal
component analysis. Furthermore the researchers proposed a conceptual
model to depict the enterprise creation by means of ICT (Information and
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R. Basu & D. Biswas
Communication Technology) and to assess the most influential service

dimensions which affect the successful creation of small businesses/start ups.
REVIEW OF LITERATURE
In context to both developed and developing countries substantial number of

researches have been conducted in order to explore the critical factors of
service assistance being provided by business incubators to their clients
(Dowling, 1999; Gardner and Kenyon, 1994; Temali and Campbell, 1984;
Tornatzky et al., 1996). These researchers are of the opinion that services
being provided by the business incubation services spans a wide range of
facilities from tangible services to intangible services which includes men-

toring and emotional support. Such services have been adopting a holistic
mechanism keeping in view the requirements of start-up businesses for
solving entrepreneurial issues (Rice, 1992). It is reported in the literature that
organizations operating in budding markets often have to deal with under-
developed institutional context. So one of the pillars in influencing country’s
institutional setting is entrepreneurship-related knowledge and skills pos-
sessed by new business initiators (Busenitz et al., 2000). This section of the
theoretical framework reviews the various roles of facilitating services in
context to business incubation and Science Parks of developing countries
within the higher educational institution based business incubators.
Role of Business Incubation as Service

A Business Incubation is a process which is being aimed so as to support
the development and scaling of growth-oriented, early stage venture. The
means for providing services by business incubators is due to the fact
that most of the startup business do not have all the necessary capital or
critical factors to make the business success (Sheperd and Shanley, 1998;
Scarborough and Zimmerer, 2000). So they have to struggle with number of
critical problems during their early stage of development (Kazanjian, 1988;
Cromie, 1991; Terpstra and Olson, 1993). Services pertaining to building
facilities include conference as well as meeting rooms, cafeteria and lunch
rooms and other amenities to do with physical infrastructure and real estate.
The following services offered by the business incubation centres have
received major attention which includes shared office space, pool of shared
support services to reduce overhead costs, business support and networking
(Brooks, 1986; Smilor, 1987; Allen and McCluskey, 1990; Rice, 2002;
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Colombo and Delmastro, 2002; Collinson and Gregson, 2003; Nolan, 2003;
Hackett and Dilts, 2004; Chan and Lau, 2005; Clarysse et al., 2005).
Besides the preceding services the other services also includes counseling
or mentoring, strategic planning, financial assistance, sales & marketing,
legal advice as well as intellectual property assistance, educating the
entrepreneurs on government rules and regulations, product development
and job opportunities. A survey by DST (Department of Science & Tech-
nology, Govt of India) has revealed that such types of incubator-incubatee
facilitating services are being provided by the TBI’s which consists of
infrastructure support, laboratory and testing equipment, mentoring based
support and facilitation of funding support (NSTED, 2009). TBIs also

endow with some post-incubation period support by creating a linkage
between graduated firms and the new start ups and thus facilitates for future
mentoring throughout via means of networking.
Science Parks
Today Science Parks play an important role as promoters of regional growth
(Massey et al., 1992; Quintas et al., 1992; Amirahmadi and Saff, 1993;
Castells and Hall, 1994). Knowledge based ventures are considered as
engines for the growth of a nation today. So it is imperative for the gov-
ernment to promote and facilitate the growth of business incubation in the
countries and should be given a priority area for the upliftment of entre-
preneurship and innovation. Science Parks were generally established with
two major objectives. The first objective being to be seedbed and enclave
for technology as well as to play for technology and also to lead the role of
incubator in order to nurture and in development and growth of new venture
firms, whereas the second objective is to act as catalyst for the regional
economic development and to promote economic growth. The literature on
science parks falls under two broad areas of study which we call as (a)
Institutional perspective and (b) technology district being originated from
economic geography or regional science field. Most of the science parks in
India are attached to higher educational institution. From the institutional
point of view the propensity to analyse and endorse science parks as spe-
cific physical infrastructure to house technology based organizations has
led to a particular focus on the direct and tangible contribution of science
parks as well as the institutions and mechanisms within which includes
creation of job and quality of employment, contribution to R&D investment
and output, venture capital being raised, and the roles of higher educational
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R. Basu & D. Biswas
institute with the science parks. Another focus is on the challenges of

enterprise formation (Löfsten and Lindelöf, 2003; Bakouros et al., 2002).
The single most critical determinant for Science Park’s long term sus-
tainability is its ability to foster the creation of new ventures, in both
existing and emerging sectors so that it can able to continuously renew itself
and has been asserted by Lee et al. (2000) as the most influential factor for
silicon valley’s success. With regard to capacity utilization many science
parks have replicated this process with the establishment of incubators as
well as colocation of venture capital firms in order to accelerate the process
of entrepreneurship. The synergistic effect of Science Park and cluster of
technology based startups stimulate job creation and regional growth as

new firms as well as talented labors which in turn small firms can have
access to greater number and varieties of suppliers and technical expertise

and potential business partners those who are located in the close proximity.
With the continuation of preceding discussions on sustainability issues of
science parks it is being found in context to European science parks,
agglomerative effects were important considerations for their establishment
and long term sustainability. Now day science parks have become an in-
ternational phenomenon. With time there has been a transformational
change of traditional science parks to ICT based science parks. From
the literature it can be viewed from the perspective of entrepreneurs and
incubation process that science parks can be recognized as distinct orga-
nizations within the technological entrepreneurial value chain. Such value
chain in context to technology based science parks comprises the set of
organizations whose activities are linked by the successive transformation
of resource and knowledge inputs to marketable outputs in the period
leading to and shortly after the creation of new firm. Pertaining to the
delivery of services it can be seen in practice that science parks also provide
the social environment, technological and organizational resources, and
managerial expertise for the transformation of technology based ideas into
an effective economic organization. Thus in order to foster entrepreneurship
based research and development science parks need to understand their vital
role pertaining to value chain (Phan et al., 2005). However, science parks
are policy driven; government sponsored initiatives whereas others origi-
nate from spontaneous clusters (Huang et al., 2012). Today Science Parks
are being perceived to be beneficial for high tech small and medium sized
enterprises which are considered as the new engine of growth. In context to
providing service science parks are property based initiatives that provide
resources and services in logistical, administrative, marketing and financial
areas most of which are difficult in order to access high tech-oriented small
204
firms (Dierdonck et al., 1991; Westhead and Batstone, 1998). From the
perspective of developing countries it is reported in the literature that
science parks location and university links have only minor role in pro-
moting innovation (Felsenstein, 1994). It is also being concluded that
locating science parks is for image building, which is also confirmed in
many other developing countries (Westhead and Batstone, 1998; Phillips
and Yeung, 2003; Ferguson and Olofsson, 2004).
Role of HEI-Based Business Incubators

Higher Educational Institution (HEI) based business incubators are regar-

ded as special type of business incubators which are located within the
university or academic campus. It was observed by Mian (1994a,b) that

HEI based incubators possess the same characteristics to general incubators
and they were marked as unique characteristics and as such the unique
characteristics obtained are: participation of private sector, regular moni-
toring on the performance of the firms and it is observed that most of the
owners of these start ups are the graduates of the academic institute con-
cerned. University based incubators plays an important role in providing
better incubation services to the start ups. The prerequisite of inimitable
resources which includes licenses, knowledge, as well as technology to new
scalable businesses which considerably reduces the chances of failure of the
start ups. It is likely that HEI based business incubators are mostly of
assistance to technology-based start-ups due to knowledge spillovers (Jaffe
et al., 1993).
In order to understand how the HEI based incubators have become
popular, it is necessary to look at the current business environment and the
required ecosystem in which the universities or educational institutions of
higher learning operates. The focal purpose of higher educational institution
is to act as centre for higher learning in various fields and to build academic
foundation. Now a day higher educational institutes as well as other uni-
versities of repute are under demands from government, and the industry to
help in economic development. Higher educational institutes and Univer-
sities of repute being instrumental in providing best quality of service and
have also played significant role in establishing linkages with the industry
so as to provide their faculty a platform to conduct research and an
opportunity for their students to seek jobs (Huffman and Quigley, 2002).
The HEI based business incubators are involved in assisting students who
seek jobs, these HEI also run business incubators to support students
starting their own ventures and such practices were mostly common in
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R. Basu & D. Biswas
developed countries. Lately, Indian higher educational institutions and

Universities of repute are following the similar HEI based business incu-
bators model in providing incubation services in encouraging enterprise
development by using research leading to start-up and technology transfer,
which is easily facilitated by a university based incubators. The HEI based
incubators link both the higher education and private sector initiatives for
wealth creation. They not only create new products but simultaneously
reduce the associated risk. In this research study the researchers have taken
into account the case of India, which is a large emerging economy. The
process of incubation facilities is growing rapidly. In India, the HEI based
business incubators are established in order to provide business assistance

services to new knowledge based ventures. The principle focus of such
business incubators on creation, commercialization as well as transfer of

scientific and technological understanding from universities to companies
(Grimaldi and Grandi, 2005) and an outlet for commercialising academic
institute research (Allen and McCluskey, 1990). The HEI based business
incubation centres have access to technology, capital, and know-how that
new knowledge-based start-ups can exploit and commercialise their offer-
ings more rapidly (Kessler et al., 2012). In order to strengthen the regional
economies the higher educational institution based business incubators are
developing ties with the industry and the government.
RESEARCH METHODOLOGY
Based on the comprehensive compilation of literature and subsequent

analysis a questionnaire has been prepared taking the various service
parameters and further case study method has been undertaken to capture
the more relevant real life service dimensions/variables and later incorpo-
rated in the questionnaire. To collect the data the researchers contacted
other Indian technology business incubation centres which are attached to
the institutions of higher learning so as to get the clients perceived response
as per the format of the questionnaire. This paper adopts a survey based
research questionnaire which is based on 5 point Likert scale to measure the
service parameters through the judgement of the incubatee and other
personnels directly or indirectly attached to various STEP/TBIs of impor-
tance within the academic ecosystem in India. A small case study has been
depicted to show the entrepreneurial ecosystem of Science & Technology
Entrepreneurs’ Park of IIT Kharagpur in order to operationalize the facil-
itating services provided by the incubators towards the new venture
206
creation/start-ups and principal component analysis has been deployed for

further analysis of data.
Case Study Instrument

For the purpose of this paper, an interview protocol has been developed
outlining the interview guidelines relating to the objectives and the service
parameters identified from the literature review. A case study protocol
contains the instrument, procedure and general rules to be followed during
each interview which is also necessary to increase the reliability of the case
study research and also to guide the researcher in undertaking data col-
lection (Yin, 2003). Questions in the interview schedule were designed in
order to engage responses at the incubator and start up firms’ manager

level. The constructs being identified from the review of literature were
tentative, but flexible enough to allow new research themes to emerge for
theory building purposes (Yin, 2003).
A case study is an ideal methodology when a holistic and in-depth
investigation is needed (Feagin et al., 1991). Following storytelling logic, it
seeks a deep understanding of a single organization by analyzing its social
context (Dyer and Wilkins, 1991). In order to describe a rich story case
researchers approach the field as closely as possible and apply theoretical
constructs in ongoing social settings. It can also be said as a backward
tracing of artifact history and an analytical conceptualization of the artifact.
In other words it can be said to be an act of taking an artifact’s history and
reassembling it within the contextual frame. Through these processes the
researchers identify the intricacies of a particular context.
In this study we did a case study as a qualitative method because it is
more relevant to capture the business incubation process within a particular
organization (i.e. Business Incubator of IIT Kharagpur), identify the various
incubation based services provided by the incubators to the incubatee and
in exploring the ICT based business incubation process leading to the new
enterprise creation.
Case Study of IIT Kharagpur Entrepreneurship Ecosystem

The researchers in this research have chosen to conduct more qualitative
case based approach in order to identify, visualize and observe the facili-
tating services being provided by the business incubators towards the
creation of new venture/start-ups (Merz et al., 2010). This paper adopts the
case study method as suggested by Yin (2003), Eisenhardt (1989) and
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R. Basu & D. Biswas
others as the suitable methodical approach given the sample parameters to

know the process of incubation process of Science & Technology Entre-
preneurs Park (STEP) at Indian Institute of Technology (IIT), Kharagpur.
IIT Kharagpur is a strategic knowledge partner for indiviual innovators and
entrepreneurs. Technology Business Incubation (TBI) has both student and
faculty representatives from the schools amongst several disciplines of
engineering, management, information technology, medical science and
law and thus creates a synergy of people, process and technology. Today it
is imparting an entrepreneurial knowledge and skills related to new enter-
prise creation and management to meet the trends and opportunities pre-
sented by modern technologies, re-engineering, increased competition and

downsizing as well as globalization. Technology Business Incubation at IIT
Kharagpur strives to demystify entrepreneurship by exposing students and

interested general public to the issues faced by budding entrepreneurs and
growing companies by providing a rich set of tools for addressing those
challenges. The researchers did a case based study by interviewing with
the general manager and other supporting staff. Presently STEP of IIT
Kharagpur has about 46 innovators under various schemes being supported
by Govt of India. The purpose of the case study is to identify the various
services the incubation centre is providing to their clients. The clients those
are being served by the STEP, i.e. the start-ups are contacted personally as
well over telephone. In some cases telephonic interview had been con-
ducted. More precisely the case study attempts to get insight about the
various schemes and to investigate the services of the centre which is
further analysed later by adopting statistical measures.
As observed from the case study the various activities being provided by
Technology Business Incubator (TBI) includes:
(a) Infrastructure facilities includes:

. Entrepreneur infrastructure: Common computation facilities for the entre-
preneurs have been set up. Physical infrastructure like offices, workshop, and
space on an affordable basis is made available to the entrepreneurs.
. Multimedia facility: Dedicated multimedia facilities for remote board
meetings and video conferences are fully running. Regular meetings are held
with Global venture lab partners, i.e. JYU, Finland through videoconfer-
encing. This is to keep pace with developing technologies in other countries.
. Separate cubicles: For companies which are incubated under STEP are
given separate cubicles which provide facilities basically of two kinds:
test/measurement and design. During their prototype development they
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use the centres design tool simulation package. The incubated companies
can access these cubicles and avail the facilities for their design and
testing.
. Separate administrative complex: Separate administrative complex has
been created for the proper functioning of TBI.
Value Added Services Offered by TBI

Start-ups are being counseled, mentored, given technical and business
advices by experts as well as respective faculties of the institution. As of
today STEP/TBI along with supporting agencies and programs at IIT

Kharagpur supports innovators by:
(a) Mentoring & Technical Support

(b) Financial Support which includes seed support, innovation, refinement &
commercialization grants.
(c) Legal advices are given with the help of Rajiv Gandhi School of Intel-
lectual Property Law, IIT Kharagpur for patent regimes, corporate law.
(d) Information about market
(e) Knowledge diffusion and day to day activities for networking with
research laboratories.
Finally, to sustain and consolidate the unique entrepreneurship ecosys-
tem at IIT Kharagpur, Rajendra Mishra School of Engineering Entre-
preneurship (RMSoEE) has been set up as a revolutionary step forward
by integrating the academic and practice aspects of entrepreneurship
education. Co-located with this is for the first time that a Higher
Education Institution of Technology has established such a kind of school
in India where the output instead of only a degree, will be an entrepre-
neur and a potential world class enterprise, with experiences enriched by
mentors.
There are many funding process available for the entrepreneurs sup-
ported by various Government agencies like DSIR, DIT, TIFAC, DST and
others. The various support programs are as follows:
(a) Technopreneur Promotion Program (TePP)
(b) Technology Refinement and Marketing Programme (TREMAP), TCFA
Center
(c) Micro, Small and Medium Enterprises (MSME) Center
(d) Technology Incubation and Development of Entrepreneurs (TIDE)
Center
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R. Basu & D. Biswas
(e) Technology Incubation and Entrepreneurship Training Society (TIETS)

(f) Technology Development Board (TDB)
Apart from the other benefits this case study observed a yawning insights
about the technology based facilitating services being offered to the client
incubatees. This technological (Information and Communication Technol-
ogy, ICT) based innovation ecosystem of IIT Kharagpur incubator has
mainly two labs i.e. Innovation Lab and Incubation Lab as well as Global
Venture Lab (GVL) as a set of programs that strive to develop an en-
trepreneurial ecosystem. These labs enable the innovators and entrepreneurs
with the ability to develop concepts, design, develop and test products.
These labs also play an important role to support the research and devel-
opment activities of innovators, entrepreneurs and researchers. Platform

based benefits have been critically visualized and observed. Inference can
be drawn based on the observation as such the Indian entrepreneurs can
access the common resource creation platform which would help the
economy in promoting innovation and nurturing entrepreneurs. These
platform based benefits include the following: (a) Venture Resources,
(b) Business Model Validations, (c) Mentoring and (d) IPR facilitation. This
ICT based platform would help innovators and motivated entrepreneurs at
their different stages of lifecycle providing the common resources including
the testing and characterization facilities. This platform would provide the
base for knowledge exchange by the individual innovators and entrepre-
neurs. In support of the above discussion this paper attempts to concep-
tualize an ICT based knowledge creation platform that would lead to the
creation of new venture. A conceptual framework of the same has been
depicted in Figure 1.
Data Collection
For the purpose of this study we have identified, through review of liter-
ature and more specifically from the real life case study, 18 variables of
business assistance service parameters, which are being typically provided
by the business incubators for facilitating the creation of new venture which
are being selected for further analysis. The 18 facilitating service variables
include in this study are: affordable space and building facilities, office
equipment, shared office services, assistance in gaining govt loans and
support, Education & training, Mentoring, R&D support, Legal advices and
Intellectual property rights (IP), Peer networking, Conducting business with
other clients, Financial Services, Product Development, support in human
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Figure 1. A Knowledge based Innovation Platform for Venture Creation.
resource practice, govt regulations and procurement, sales and marketing

practice, business planning assistance, employment assistance and referral
services. The importance and effectiveness of those services were assessed by
investigating clients’ perception on five point likert based scale where 1
represents “not important” and 5 represents “extremely important”. While
during the questionnaire survey the incubator clients were asked to indicate
the perception of importance of the types of assistance service provided by
incubators being listed in the questionnaire. It is also of critical importance
that the client perception is based on quality of service which is provided by
the business incubation centre.
Regarding collection of data the researchers contacted those organiza-
tions that are relevant for the study. The respondents were briefed about the
scope and purpose of the question that is contained in the questionnaire and
the feedbacks were obtained. Data was collected through a detailed survey
instrument and in depth interviews. However in some cases the question-
naire were distributed with a covering letter explaining the scope and
purpose of the study and sent via e-mail.
The following are the incubation centres from where the relevant data
has been collected:
(1) Indian Institute of Technology, Kharagpur, STEP
(2) Vellore Institute of Technology, Vellore
(3) PSG College of Technology, Science & Technology Entrepreneurial
Park, Coimbatore
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R. Basu & D. Biswas
(4) SIDBI Innovation and Incubation Centre, Indian Institute of Technol-

ogy Kanpur
(5) IIT-M, Rural Technology and Business Incubator, lIT Madras
(6) Centre for Innovation and Incubation, IIM, Ahmadabad
(7) Amrita Technology Business Incubator, Amrita Vishwa, Vidyapeetham
In some cases the incubation service centres forwarded the ques-
tionnaires directly to their clients on behalf of the researchers. Overall 90
responses were obtained for further analysis. It was deliberate attempt on
the part of the researcher not to collect any response in his presence so as to
minimize the chance of any biasness.

DATA ANALYSIS
This research paper follows an exploratory endeavor towards focusing on

exclusive service segment which is presently being the focus of academi-
cians and practitioners in the promising area of business incubation pro-
grams at the global level in recent times (Lalkaka, 2003). The data for this
study were collected following a survey method using a structured ques-
tionnaire and entered for statistical analysis with the application of Statis-
tical Package for Social Science Version 17. The first step in order to
analyze the data is to identify the salient items that explain the correlations
among a set of variables. For this purpose factor analysis with principal
component method has been conducted on decision making style scale
items. We have conducted factor analysis on the explanatory variables with
the primary objective to determine minimum number of factor explaining
the maximum variance in data (Harman, 1967). Initially we performed the
factor analysis on SPSS with principal component method using varimax
rotation technique and to validate our result we recheck the result with the
help of SAS using PROC factor method with same varimax rotation
technique. Factor analyses were performed on 18 variables leading to the
extraction of six variables. Harman’s one factor test has been performed to
detect common method variance. All the variables in the study were entered
into the exploratory factor analysis. Six service dimensions with Eigen
values greater than one were extracted from all the measures in this study
and in total it accounted for 72.29% of the variance which shows that good
factor analysis has been done. Table 1 shows the results of exploratory
factor analysis. In this study we follow the Kaiser criterion (Kaiser, 1960),
which suggests the selection of those service variables whose Eigen values
are greater than 1.
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Table 1. Total variance explained.
Initial Eigenvalue Extraction Sums of Squared Loadings Rotation Sums of Squared Loadings
Component Total % of Variance Cumulative % Total % of Variance Cumulative % Total % of Variance Cumulative %
1 3.967 22.041 22.041 3.967 22.041 22.041 3.252 18.066 18.066

2 2.572 14.291 36.332 2.572 14.291 36.332 2.587 14.371 32.437
3 2.077 11.537 47.869 2.077 11.537 47.869 1.924 10.686 43.124
4 1.806 10.033 57.903 1.806 10.033 57.903 1.854 10.298 53.422
5 1.407 7.815 65.718 1.407 7.815 65.718 1.797 9.984 63.406
6 1.184 6.575 72.293 1.184 6.575 72.293 1.600 8.888 72.293
7 0.974 5.409 77.702
8 0.849 4.718 82.420
9 0.702 3.901 86.321
213
10 0.558 3.098 89.419
11 0.488 2.709 92.128
12 0.384 2.132 94.260
13 0.322 1.791 96.050
14 0.256 1.425 97.475
15 0.226 1.256 98.731
16 0.105 0.584 99.315
17 0.080 0.442 99.757
18 0.044 0.243 100.000
R. Basu & D. Biswas
Table 2. Rotated component matrix.
Component
1 2 3 4 5 6
Affordable space and 0.377 0.029 0.168 0.544 0.389 0.354

building facilities
Mentoring 0.900 0.085 0.040 0.103 0.184 0.108
Shared office services 0.848 0.023 0.153 0.081 0.058 0.042
Assistance to gain govern- 0.112 0.078 0.067 0.825 0.110 0.057
ment grants/loans
Employment assistance 0.363 0.663 0.354 0.149 0.051 0.125

Office equipment 0.554 0.556 0.060 0.108 0.040 0.272
R&D support 0.162 0.083 0.336 0.155 0.113 0.736
Legal & IP 0.132 0.863 0.042 0.122 0.172 0.022

Peer networking 0.652 0.411 0.332 0.234 0.012 0.105
Conducting business with 0.513 0.155 0.048 0.535 0.013 0.063
other clients
Govt regulations and 0.016 0.249 0.098 0.076 0.700 0.138
procurement
Product Development 0.102 0.186 0.012 0.604 0.047 0.607
Human Resource 0.065 0.827 0.061 0.063 0.248 0.059
Govt regulations & 0.442 0.148 0.686 0.104 0.127 0.020
procurement
Sales and Marketing 0.371 0.016 0.628 0.084 0.419 0.002
Financial Services 0.196 0.059 0.766 0.000 0.260 0.008
Education & training 0.059 0.142 0.084 0.129 0.851 0.113
Referral 0.084 0.227 0.194 0.192 0.111 0.638
Table 1 represents the initial Eigen values in decreasing order of mag-

nitudes for all eighteen service dimensions of business incubation services.
In this study we extracted six most influential service dimensions.
Table 2 represents the rotated component matrix. Rotation is a method
which simplifies the interpretation of factor analysis. In the rotated matrix
the variables with higher factor loading are considered most important.
Reliability Analysis
To test the reliability for each service measures a conventional technique
called Cronbach’s alpha was used. Alpha is an estimate of the correlation
between random samples of items from a universe of items and is
considered as an appropriate index of equivalence. For internal consis-
tency it was decided that an acceptable level of reliability coefficient
should not be below 0.5, the minimum level recommended by Nunnally
214
Table 3. Priority table for incubator services.
Service Dimensions Factor Loading Priority
Mentoring 0.900 1
Legal advice & IP 0.863 2
Financial Services 0.766 5
Education and training 0.851 3
Assistance to gain govt grants & loans 0.825 4
R&D Support 0.736 6
(1967). In our case Chronbach’s alpha is 0.658 which validates the

reliability of our study.
Results
Component 1 represents the mentoring support service being provided by
the business incubation centres, Component 2 represents the support ser-
vices leading to legal advices and Intellectual property rights, Component 3
represents Financial Services, Component 4 represents the support services
provided by the business incubators pertaining to assistance to gain gov-
ernment grants/funds, Component 5 represents education and training
facilities and Component 6 represents R&D support. Table 3 below
represents the prioritized service parameters which influence the business
incubation services in terms of venture creation.
A PROPOSED MODEL BASED ON ANALYSIS
The advisory and entrepreneurial support services being provided by

incubators are directly related to creation and growth of small businesses.
Accordingly most of the incubators provide their clients with a package of
services at an affordable price. As per the results obtained in Table 3, The
six service parameters are related to the formation of small businesses
specially the start ups. Understanding how the independent variables as
services offered by business incubators obtained from the above analysis
have the influence on the formation of small businesses. The variables
drawn from the recent body of works including mentoring, legal and
intellectual property advices, Education & Training, Government assistance
for grants and loans, financial services and R& D support. Here we develop
a model hypothesis taking the six most influencing factors as independent
variables which can lead to the formation of new ventures/small businesses/
start-ups (dependent variable).
215
R. Basu & D. Biswas
S Mentoring
E H1
Legal Advice
R & IP H2
V Financial H3
Services Venture
I H4 Creaon
Educaon &
C Training
H5
E Govt grants
H6
& loans
R&D support
Figure 2. A Proposed Model and Hypothesis.
FINDINGS
This study provided a partial support for the explanation of incubator ser-
vices being provided to the start ups by the university based incubation
centres located in various regions of India. As per the proposed framework
the six service dimensions influences the creation of new ventures which has
been depicted in Figure 2. Thus we propose a hypothesis showing the
relationships between the predictor and the outcome of the variables of six
hypotheses based on the grounded theory approach (Charmaz, 2001, p. 245).
Mentoring: The managers play an important role in all the incubation
centres as being observed. The mentoring falls under the advanced incu-
bator management and is another advanced stage of human resource
management slightly differs from core HR practices. It is an important
avenue for the assistance and is being analyzed as one of the skills to help
the entrepreneurs.
Thus, in formal terms we hypothesize:
Proposition 1. Proper and effective mentoring leads to the formation of
new ventures.
Legal advices & IP: Business incubators are ideally meant to assist the
start ups to manage effectively their innovation and to use their IP system to
their advantage. University based business incubator as already been seen
from the preceding case studies of IIT Kharagpur, where the nascent
entrepreneurs are being given legal advices with the help of Rajiv Gandhi
School of Intellectual Property Law, IIT Kharagpur for patent regimes,
216
corporate law. Innovation research or any business idea which can be

protectable using the IP system, are often the most valuable assets the
business start ups have and thus such dimension as obtained has positive
impact on the formation of new ventures.
Proposition 2. Legal advices & IP support service influences the creation

of small business ventures.
Education & Training: Entrepreneurial education and training can be

considered as the practical applications as well as widespread sense of

approach in order to expand the necessary skills to develop a business
successfully. It is being seen from the literature that there is a general

concurrence among the researchers that more and more emphasis should be
given to entrepreneurial education instead of business incubation. To
develop an entrepreneurial capacity education and training plays an in-
strumental role promoting and developing the mindset of entrepreneur. As
observed from Science & Technology Entrepreneurs Park (STEP) of IIT
Kharagpur, the business incubators along with the entrepreneurship depart-
ment are actively involved in providing entrepreneurial skills and support
to the nascent entrepreneurs. In order to meet the growing need for trainers
in entrepreneurship Faculty Development Programme is being conducted
every year to train faculties from technical institutions, R&D institutions
so that they can function as resource person in motivating students and
teaching them the intricacies of entrepreneurship. Various training pro-
grams now a day are being organized by the business incubators to the
nascent entrepreneurs for their business growth. Quality education is a
significant resource enabling individuals to take advantage of entrepre-
neurial opportunities.
Proposition 3. Entrepreneurial training and education impact positively

on small business formation.
Assistance from government on loans/grants: The government assistance

in the form of loans and grants to the nascent entrepreneurs through the
business incubation centres are of paramount importance. IIT Kharagpur
entrepreneurship ecosystem and the Science & Technology Entrepreneurs
Park (STEP) acts as a centre for disbursing the various grants and loans
provided by the government to the nascent entrepreneurs. With the support
from the government the indiviual having business idea can able to create
217
R. Basu & D. Biswas
new venture and as such the innovators can be able to commercialize their
product through the support of those grant facilities. The various grants and
loans scheme facilitates the entrepreneurs for the creation of new business
and development.
Proposition 4. The government grants and loans scheme have positive

impact on small business startups formation.
Financial services: Seed loans are provided through the incubation centres
and funding scheme of various governments is helping the startups to

sustain at the initial stage of their venturing. This soft loan strengthens them
to productize their idea according to market compatibility. One year

monetarism period help them to grow steadily without the fear of payback
or loan repayment.
Proposition 5. Financial services affect the creation of new ventures.
R&D support: As observed from the case study the research based edu-
cational institution support plays an important role for scaling up the in-
novative small business start up firms. The technology business incubators
provide various R& D support in connection with higher educational in-
stitute. It has been found from an assortment of research studies that R&D
expenditures represent the most influencial variable in small firms to in-
novate (Dosi, 1988; Freeman and Soete, 1997). New firms get support of
the laboratory infrastructure facilities from the incubation centres for their
product development etc. It seems that there is a positive interrelation
between higher educational institution, R&D and growth of business.
Proposition 6. R&D support service influences the formation of small

business venture.
CONCLUSIONS
From the empirical evidence it has been hypothesized that the six service
dimensions such as mentoring, legal advices and IP, financial services,
entrepreneurial education and training, govt grants & loans and R&D
support influences the formation of new ventures/start-ups. The result of
this study offers valuable new insights in context to the incubation process
218
and the service system of the incubators around India. The aim of this
paper is to ascertain the service parameters that affect the formation of new
venture. The sample size for the study was limited and being restricted to
Indian Business Incubation Centres. However enough information has been
gathered in order to successfully investigate the most influential incubation
oriented service parameters that affect the formation of new ventures. It is
being increasingly felt while conducting this research that the single most
critical factor for incubation centres is its long term sustainability and its
ability to foster the creation of new firms, in both existing and emerging
sectors, in order to continually renew itself. Many business incubators have
sought to enhance their capabilities in this process with the establishments

of incubators and colocation of venture capital firms to accelerate the
entrepreneurial process. Science Parks (SP) and Business Incubators (BI)

have been established in all over the industrialized and the emerging
economies as a pledge for economic development. In this research study
pertaining to India in context to both SP and BI have positive role in
promoting innovation if being managed in an organized way and have
effective university linkages. In this research scenario an overview of
higher educational institution based business incubation centres have been
discussed and its impact on the formation of small business or start ups.
However, the review of literature and contemporary business milieu clearly
shown the enormous opportunity for the HEI based business incubators in
job creation and employment generation which leads to economic growth
of the country. It is evident that HEI based business incubators are not only
beneficial in developed countries but also in developing countries too. Such
HEI based business incubators would play a considerable role in creation
of job as well as in economic development by supplementing the activities
of government.
In context to this study it is being realized that the future of building and
sustaining an innovation ecosystem enables participants across the enterprise
boundaries to focus on value creation for entrepreneurs and accelerate the
transition from research to production using the out of box thinking. The
main novelties for today’s innovation ecosystem compared with earlier times
can be found in the use of ICT platforms for building broad level designs.
The role of Information and Communication Technology platform also
makes it possible for the innovators to develop a good relationship with
consumers. This platform would provide a common base to all the inter-
acting organizations by providing them an information system in order to
improve the functionality, patenting and IP protection. An innovation eco-
system model encompasses more than knowledge input and incorporates all
219
R. Basu & D. Biswas
relevant factors and stakeholders that generate value to the customers. In

knowledge based economy like India, the generation and utilization of
knowledge will surely contribute significantly towards economic growth and
wealth creation. The cultural pluralism in India makes the immediate
requirement for a knowledge platform to address the issues, which can be
accessed by the participants of larger unified innovation ecosystem beyond
geographical and cultural boundaries. It demands the specific resources and
capabilities as well as commands its space for incubating scalable,
sustainable and inclusive innovation. The nature and the structure of the
platform would be addressing the purpose of innovation in terms of maxi-
mization of efficiency and optimization of capacity. The outline of the

knowledge platform exhibits the innovation converging multi-culture, multi-
disciplinary, multi-domain approach to address the issues of sustainability,

scalability, inclusiveness of innovation. The higher education institution
(HEI) like IIT Kharagpur apparently fit to conceptualize the elevated space.
A specific case in IIT Kharagpur suggests the potential of ICT based
incubation platform built on the facilities and capabilities of the ecosystem.
The above discussion implies that HEI based business incubators are
being admired a lot and it is imperative to expect a reasonable scaling up of
several activities in coming days. It is therefore indispensable to make out
suitable areas and products that are significant to socio-economic per-
spective and thus can be considered as critical issue when considering about
HEI based business incubators. Advancing the perception of entre-
preneurship and incubation with high growth potential is crucial regarding
the little research has been undertaken into its specificities. From the pro-
posed conceptual model the six service dimensions have its significant
influence on creation of small business. Implications for entrepreneurial and
management practice are numerous and our findings may be useful for the
practitioners involved in new ventures, such as venture capitalists, bankers
and also for the public authorities. Focusing on the incubation and the
service assistance provided by the HEI based business incubator and its
configuration will draw attention to the underlying causes of new venture
development in the university — incubation — incubatee ecosystem which
has opened new directions in order to carry out future research. To com-
prehend the convolution of the survival and achievement of new ventures in
the emerging sectors like ICT, there is a scope to enhance this study which
may be based on broader empirical samples by integrating as well on the
agglomerative effects on the outcome of new high technology based start
ups. Future research may be taken up by considering the issues pertaining
to quality dimensions from the service oriented perspective with more
220
multiple level designs and further by incorporating mathematical modeling.

The managers of business incubation centres can assist the technology
based start up firms for their venture creation (Nareatha, 2006). This study
will be of interest to business incubation providers and entrepreneurial
researchers in identifying valid and achievable service parameters measures
and should inform development in this field. However, this paper also
indicates wide diversity of significant positive impacts of the incubator
oriented services towards venture creation with business incubation prac-
tice. From the practice point of view this study would be beneficial to both
academic research and business incubation providers in the design and
measurement of their practices. There is a possibility as being observed

from the proposed conceptual model in Figure 2 above which may prove to
be the initial point for more methodical approach to the research area of
performance measurement of small businesses or start ups and to identify
the critical success factors which need to be managed by the small business
to achieve the operational excellence and success. Therefore, we conclude
that the conceptual framework being proposed is a good basis for devel-
oping more refined models of service delivery towards creation of new
venture.
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A Study On Indian Higher Educational Institute Based Business Incubators

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Journal of Enterprising Culture

Vol. 21, No. 2 (June 2013) 199–225

A STUDY ON INDIAN HIGHER EDUCATIONAL

RANA BASU* and DHRUBES BISWAS

Indian Institute of Technology, Kharagpur, India

Keywords: Innovation; entrepreneurship; business incubation; science parks; emerging

To encourage entrepreneurship and innovation, business incubation plays

incubators are organizations which provide conducive environment and all

business incubation provides value added services (Mian, 1996), which

enable the entrepreneurship process through incubation activities and also

of developing economies. There had been many researches on Business

Communication Technology) and to assess the most influential service

In context to both developed and developing countries substantial number of

facilities from tangible services to intangible services which includes men-

Role of Business Incubation as Service

support and facilitation of funding support (NSTED, 2009). TBIs also

institute with the science parks. Another focus is on the challenges of

technology based startups stimulate job creation and regional growth as

access to greater number and varieties of suppliers and technical expertise

Role of HEI-Based Business Incubators

Higher Educational Institution (HEI) based business incubators are regar-

university or academic campus. It was observed by Mian (1994a,b) that

developed countries. Lately, Indian higher educational institutions and

business incubators are established in order to provide business assistance

business incubators on creation, commercialization as well as transfer of

Based on the comprehensive compilation of literature and subsequent

creation/start-ups and principal component analysis has been deployed for

Case Study Instrument

order to engage responses at the incubator and start up firms’ manager

Case Study of IIT Kharagpur Entrepreneurship Ecosystem

others as the suitable methodical approach given the sample parameters to

sented by modern technologies, re-engineering, increased competition and

Kharagpur strives to demystify entrepreneurship by exposing students and

(a) Infrastructure facilities includes:

Value Added Services Offered by TBI

today STEP/TBI along with supporting agencies and programs at IIT

(a) Mentoring & Technical Support

(e) Technology Incubation and Entrepreneurship Training Society (TIETS)

opment activities of innovators, entrepreneurs and researchers. Platform

Figure 1. A Knowledge based Innovation Platform for Venture Creation.

resource practice, govt regulations and procurement, sales and marketing

(4) SIDBI Innovation and Incubation Centre, Indian Institute of Technol-

minimize the chance of any biasness.

This research paper follows an exploratory endeavor towards focusing on

Table 1. Total variance explained.

1 3.967 22.041 22.041 3.967 22.041 22.041 3.252 18.066 18.066

Table 2. Rotated component matrix.

Affordable space and 0.377 0.029 0.168 0.544 0.389 0.354

Employment assistance 0.363 0.663 0.354 0.149 0.051 0.125

Legal & IP 0.132 0.863 0.042 0.122 0.172 0.022

Table 1 represents the initial Eigen values in decreasing order of mag-

Table 3. Priority table for incubator services.

Service Dimensions Factor Loading Priority

(1967). In our case Chronbach’s alpha is 0.658 which validates the

A PROPOSED MODEL BASED ON ANALYSIS

The advisory and entrepreneurial support services being provided by

Figure 2. A Proposed Model and Hypothesis.

corporate law. Innovation research or any business idea which can be

Proposition 2. Legal advices & IP support service influences the creation

Education & Training: Entrepreneurial education and training can be

considered as the practical applications as well as widespread sense of

successfully. It is being seen from the literature that there is a general