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Looking High and Low

In Europe and in the United States, business incubator trade associations such as EBN and NBIA calculate that the survival rate of companies created and supported within the incubation industry is a figure between 80 and 90 percent. This figure goes a long way in demonstrating the success of business incubators as organizations capable of providing sustainable jobs for given territories. This success is achieved through the application of serious selection processes such as this which have been highlighted by both Nicolas Rouhana and Olivier Tomat in past issues of this magazine.

I have few doubts that this figure is realistic. In the EU we can refer to the annual survey EBN undertakes with the aim of assessing the EC-BIC quality mark criteria, while in the U.S. the “2012 State of the Business Incubation Industry” prepared by Linda Knopp for NBIA offers insight into this issue. Therefore, it may be interesting to fully understand this figure and what it means for the industry itself. Indeed, this indicator, or any indicator you choose, may assume various meanings and will read differently whether you are an incubatee, a stakeholder or an incubator.

As an incubatee this indicator should provide you with a decent degree of comfort as your assessed and accepted-in-the-programme business idea has passed the test! It means that most likely you have got it right, that you have come up with something that will have both a good impact in the community where you are basing your company and a very high probability of providing you with a decent living. Hard work? Undoubtedly, but it will most likely pay off as you are in the right place at the right moment!

As a stakeholder you will probably feel comfortable that your investments will most likely pay off. As incubated companies tend to stick around you should have the satisfaction of seeing the economic life in your community thriving; after all incubated companies tend not to be fly-by-night operators. You will have the assurance that the jobs are there to stay and that a virtuous circle has spun from the investment made in your incubator. However, are you happy with the total number of jobs created by the incubator? That is a completely different question which may very well lead to a certain degree of discomfort, as the average employment by incubated companies viewed from a mere political perspective (definitely not from a technical one) is on the low side. Average employment by tenants in a BIC in 2011 was 151, while NBIA reports 137 as the average full-time employment by an incubator resident and its affiliate clients.

As an incubator you are facing a trade-off. You may look at the survival rate as your comfort zone, one of the main indicators of success, and decide to continue operations as always. Certainly, you are shaping the life of people and you don't want to mess about with any of that! But on the other hand you might view a 90 percent success rate as an indication that you are not much of risk-taker. Is it possible that accepting a lower level of survival rate might, in the end, bring a higher number of jobs created and if so, how many jobs? How much can a lower survival rate impact job creation?

I don't know. Academics and researchers, maybe you have the answers for this!
Published on 27-02-2013 12:37 by David Tee. 1046 page views

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