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Business support infrastructure
Business support infrastructure encompasses a variety of different institutions, including business incubators, science parks and accelerator programs. It can play a critical role in the success of innovative new ventures, as it may provide a wide range of support in the form of advice, networking, finance and accommodation. Yet evidence related to the impact of business support infrastructure is rare and often ambiguous. The concentration of specific types of business infrastructure varies widely between different countries. The success of such infrastructure critically depends on a good administrative framework for entry and growth, the existence of markets for technology and a suitable intellectual property (IP) system that can strengthen the infrastructure’s contributions to the successful performance of innovators. Public policy can help innovative entrepreneurs by providing financing for business support infrastructure.
- An application process that is open to all, yet highly competitive. Generally, a much larger proportion of applicants are turned down than in conventional business incubation.
- Provision of pre-seed investment, usually in exchange for equity. Most accelerator programmes are directly linked to seed finance.
- A focus on small teams, not individual founders.
- Time-limited support comprising programmed events and intensive mentoring. Accelerator programme support typically lasts a number of months, compared to conventional business incubation where start-up companies stay in the incubator for a number of years.
- A process that is designed for cohorts or “classes” of start-ups, rather than individual companies. Start-ups are accepted and supported in cohort batches or classes. The peer support and feedback that the classes provide are considered important for the success of these programs.
- Advice: Sources of advice are particularly important in innovation, since there may be a need for technical advice related to licensing and patents, as well as connections with universities and research institutions. Business support infrastructure may provide such advice or help entrepreneurs locate it. There is also a need for more basic business advice and support. Services may also include directing entrepreneurs to specific sources of expertise.
- Networking: Co-location of similar companies allows them to share ideas and perhaps trade with each other. It is easier to succeed if complementary companies are within a short distance. In addition, this allows staff to transfer between small (and large) companies.
- Finance: All start-up businesses have difficulties with finance and especially innovative companies, since they appear more risky and could put investment at risk if the enterprise fails. The capital investment required by innovative start-ups may be higher than that required by non-innovative start-ups, since the former typically need to invest in R&D and in other innovation-related activities. Business support infrastructure can provide assistance by locating sources of financ, through actual investment and through indirect subsidies (e.g. reduced rents).
- Accommodation: Innovative enterprises may well require accommodations for specialised equipment, which may not be easy to find in local property markets. Science parks and incubators typically have accommodation designed for new enterprises in a specific sector, and therefore help reduce the costs of finding, adapting and renting suitable premises.
- The average number of employees in an incubator was six and the median number was four. A small staff of one to three employees ran half of the existing business incubators and 90% of them employed less than ten people.
- The average number of tenant start-up firms in an incubator was 25 and the median number was 18. The large majority of incubators supported less than 30 tenant firms.
- Some 48% of the existing incubators were publicly sponsored, 12% were privately sponsored and 38% had mixed sponsorship. In addition, 70% of business incubators were non-profit institutions while 30% were for profit.
- The bulk of incubator tenant firms (76%) were based at the incubator facilities. The rest were located off-site in rented space or in industrial or science parks. The minimum incubator space required for efficient operation was estimated at around 3,000m².
- The study showed that 70% of the incubators offered all or most of the services and business support required by start-ups, while 50% of incubators also hired external business service providers. In addition to business services proper, many business incubators assisted tenant firms in raising early stage financing from external sources.
- Start-ups obtained public support both through the incubator itself and independently. According to the survey, 64% of incubator-based SMEs enjoyed support from the national programmes for SMEs, 58-59% from regional development agencies and national programmes for innovative firms, and 45% benefited from the support of local authorities.
- Most incubators (73%) applied standardised entry criteria and procedures, while 43% used such criteria for exit. It is generally considered that tenant firms should not need more than four years in the incubator to graduate (some firms graduate earlier). The incubators estimated the survival rate of firms reared in their environment at 80-90%, which was significantly higher than the average survival rate for start-up firms operating in an open market environment.
- Science and technology parks were situated mostly in urban environments, and 36% of the parks were located on a university campus or adjacent to one.
- Some 45% of parks had relatively small territories (less than 200,000 square metres). On the other hand, 33% of parks had territories exceeding 600,000 square metres, of which 22% occupied territories of over 1 million square metres.
- Nearly 60% of parks reported having hosted up to 100 resident companies, and 23% more than 200 companies. Middle-size parks (101 to 200 companies) represented 19% of the total number.
- Publicly owned science and technology parks prevailed (54% of the total), while 16% of parks were entirely private and 30% reported mixed (public-private) ownership.
- Most science parks received public financial support of some sort. The most widespread forms of such support were grants (45.4% of parks), subsidies (40.3%), tax incentives (27.3%) and subsidized loans from governments and public administrations at the national, regional and local levels (20.8% of parks).
- Business incubators are established by local authorities and regional development agencies as part of their economic development activities. Normally this would be part of a local development strategy. Finance may come from national sources.
- Universities establish science parks as part of their policy for encouraging spin-outs, developing better linkages with industry and as a revenue stream. Again, finance may come from national sources.
- Business incubators are established by non-profit organisations typically through some local or national subsidy. Such non-profit organisations usually have social objectives (e.g. combating unemployment and poverty) and therefore may establish incubators in locations which would not be seen as optimal from an economic point of view. National policy may be to subsidise such organisations . Some business incubators work on a purely commercial basis, based on the idea that defining a building as an incubator will make it more attractive to rent. In general, such projects offer minimal business support services.
- Accelerator programmes are likely to be private-sector dominated, with funding coming from potential investors. Objectives will be keenly commercial and related to return on investment rather than job creation and social objectives.
- Amezcua, Alejandro S. (2010), Boon or Boondoggle? Business Incubation as Entrepreneurship Policy.
- Batra, Geeta and Syed Mahmood (2003), “Direct support to private firms: Evidence on effectiveness” (World Bank Policy Research Working Paper 3170).
- European Commission (2002), Benchmarking of Business Incubators (particularly Chapter 2).Goddard, J.G. and H. Chouk (2006), First Findings from the Survey of European Business Incubators.
- M’Chirgui, Zouhaïer (2012), Assessing the Performance of Business Incubators: Recent France Evidence, Business and Management Research.
- Miller, Paul and Kirsten Bound (2011), The Startup Factories: The Rise of Accelerator Programmes to Support New Technology Ventures, Nesta.
- Mole, Kevin F., Mark Hart, Stephen Roper and David S. Saal (2009), “Assessing the effectiveness of business support services in England: Evidence from a theory-based evaluation”, International Small Business Journal 2009 27: 557.
- Phan, Phillip H., Donald S. Siegel, Mike Wright (2005), “Science parks and incubators: Observations, synthesis and future research”, Journal of Business Venturing 20 (2005) 165–182.
- UN (2012), Fostering Innovative Entrepreneurship: Challenges and Policy Options, pp. 49-56.

What Countries are Doing
- Policy intervention on innovative entrepreneurship
- Policy rationales and objectives for innovative entrepreneurship
- Policy-making contexts for innovative entrepreneurship
- Supply-side policy instruments for innovative entrepreneurship
- Demand-side policy instruments for innovative entrepreneurship
- Connectivity policy instruments for innovative entrepreneurship
- Provision of knowledge services for businesses
- Models and contributions for innovative entrepreneurship
- Metrics and evaluation for innovative entrepreneurship
- Regulatory framework for innovative entrepreneurship
- Market environment for innovative entrepreneurship
- Access to labour for innovative entrepreneurship
- Firms' access to knowledge for innovative entrepreneurship
- Access to finance for innovative entrepreneurship
- Entrepreneurial capabilities and culture