In the third approach, Mian (1996) identifies that UBIs offer their tenants two mam categories of services (a) typical incubator services including shared office services, business a[r]
(1)Ho^ng Van Hai Tsp chi KHOA HOC & CONG NGHE I ( ) -
O V E R V I E W O F B U S I N E S S I N C U B A T O R S A N D U N I V E R S I T Y B U S I N E S S I N C U B A T O R S
Hoang Van Hai College of Economic! A Business Adminislralion - TNU S U M M A R Y
Business incubator is a special firm type set up with the aim at assisting young firms through support services, such as infrastructure, capital access, employee recruitment and training, during start - u p periods when they are most likely to get failure Therefore, it is considered as an engine of regions' development in terms of economic value and job creation and has become deeply respected institutions The concept of business incubators becomes familiar with communities around the world in recent years, especially in developed countries like United States, western European countries, Australia, and Japan In contrast, the concept is still a new one and remains virtually unfamiliar with communities in Vietnam In Ihe attempt of providing an overview of business incubators, in this paper, we first introduce basts knowledge ofthe special firm type and then briefly describe one of its existences in practice, university business incubators
Key words: Business incubators; University business incubators; Incubatees; Knowledge: Development
I N T R O D U C T I O N
Business Incubators (Bis) made its first appearance in Vietnam in 2004 with the establishment of a business incubator affiliated with Hanoi University of Science and Technology Currently, Vietnam has 47 technology incubators Overall, the incubators have achieved s o m e initially encouraging results in terms of n u m b e r of scientific and technological enterprises incubated Some typical examples can be mentioned are the business incubator of C R C - T O P I C nurturing 22 enterprises, centre for high-tech business incubation (HBI) nurturing enterprises and support over 20 businesses, centre for software business incubation of Q u a n g Trung (SBl) nurturing 10 enterprises, and cenler for high-tech business incubation of Hoa Lac nurturing 25 enterprises T h u s , in some extent, this firm type has gradually proved its importance in r e g i o n s ' e c o n o m i c growth alongside the other forms of enterprises Basic information of business incubators, like the definition, the history of development, or the characteristics can be found in existing literatures corresponding However, the information is scattered in many papers instead of one Based on the fact, this paper is a
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collection o f t h e basic informalion of business incubators drawn from corresponding literatures thus providing readers with an overview of what a business incubator might be within a reasonable amount of time In the paper, we first introduce basis knowledge of the special firm type and then briefly describe one of its existences in practice, university business incubators
B U S I N E S S I N C U B A T O R
So far, in existing literature, there is no single definition of business incubators considered as standard A definition, which is widely accepted, is defined by Hackett and Dills According lo Hackett and Dills (2004: p 57): "A business incubator is a shared office space facility that seeks lo provide its incubatees ('portfolio-', 'client-' or 'tenant-companies ') -with a strategic, value-adding intervention system (i.e business incubation) of monitoring and business assistance [ ] with the objective of facilitating the successful new venture development of the incubatees while simultaneously containing the cost of their potential failure.[ ] Furthermore the incubator i.s not simply a shared-space office facility, infrastructure and mission statement, [ ] it is also a network of individuals and organizations"[3 ]
(2)Hoang Vdn Hai Tgp chi KHOA HQC & CONG NGHE 105(05); 81 -Aiming al providing a clear view of whal
business incubators might be, these following definitions arc worth consulting
At the 1998 Helsinki workshop, a business incubator was defined as'
'"A place where newly created firms are concentrated in a limited space Its aim is to improve the chance of growth and rale of survival of these firms by providing them with a modular building with common faciHlie.\ (telefax, computing facilities, etc.) as well as with managerial support and hack-up services The main emphasis is on local development and job creation.^'
However, the definition seems focusing loo much on physical aspects of incubator operation (Benchmarking of Business Incubators, 2002) [2] An alternative definition concentrates on other services offered by business incubators are provided by the US National Business Incubation Association (NBIA):
"Business incubation is a dynamic process of business enterprise development Incubators nurture young firms, helping them lo survive and grow during the start -up period when they are most vulnerable Incubators provide hands-on management assistance, access lo financing and orchestrated exposure to
critical business or technical support services They also offer entrepreneurialfitrms shared office services, access to equipment, fiexihle lea.ses and expandable space - all
under one roof'' '"*
Broadening the definition of NBIA by including some aspects like entrepreneur training, mentoring and visibility, UK Business Incubation (UKBI) defines business incubators as:
''Business incubation is a dynamic business development process Il is a term which covers a wide variety of proces.ses which help lo reduce the failure rate of early stage companies and speed the growth of companies which have potential to become substantial generators of employment and wealth A business incubator is usually a property with small work units which provide an instructive and supportive environment to
entrepreneurs at start-up and during the early stages af businesses Incubators provide three main ingredients for growing successful businesses - an entrepreneurial and learning environment, ready access to mentors and investors, visibility in the marketplace."^ The first incubator was established as the Batavia Industrial Cenler (BIC) in Batavia, New York, in 1959 However, the concept of providing business assistance services to early-stage companies is familiar with communities in the late 1970s The business incubator concept was generally accepted in the 1980s, when the importance of small firms regarding innovation and growth began lo be recognized in economic planning By early 1990s, there were about 200 incubators v\orIdwide Today, according lo an estimation of NBIA, there are about 7000 business incubators in the world In 2011 alone North American incubators nurture about 49 000 start-up companies, providing fijll-time employment for nearly 200000 workers and generating annual revenue of almost $ 15 billion
Although there are differences among varied incubators, the following characteristics are typically shared among better ones (Nohria et al., 2000):
• They maintain a spirit of enlrepreneurship by enabling their incubatees (tenants) to have significant ownership and by prevenfing them from strategic, bureaucratic and organizational impediments,
• They offer preferred rates and terms from leading service providers, through allowing member companies to enjoy economies of scale For example, business incubators help start-up managers reduce opportunity costs spent for selling up basis infrastructure, finding, negotiating and contracting for each service needed,
They offer preferential access to a network of companies For instance, a tenant can establish linkages with companies in its incubator's network under the help of the incubator to obtain advice, or recruit talented employees [5]
(3)Hoang Vdn Hai Tap chi KHOA HOC & CONG NGHE 105(05): 81 -86 2004)[4] They are selection, infrastructure,
business support, mediation and graduation Selection refers to decision on whether a venture is accepted in the incubation program Each incubator generally has its own criteria to select its incubatees They may include work experience and technical expertise of the entrepreneur or the management team, the properties of the venture's target market, the properties of the product or ser\'ice and the venture's potential profit.'" From reviewed literature, Bergek and Norrman (2008) indentify four selection strategies which vary in different incubator's portfolios of incubatees "Survival-of-the-fillesl and idea", the portfolio will presumably contain a considerable number of idea owners (or upcoming entrepreneurs) with immature ideas relevant to a wide range of fields, • "Survival-of-the-fillesl and entrepreneur", the resulting portfolio will be diversified, and contains entrepreneurs/ management teams who have strong driving force and represent a broad set of ventures,
• "Picking-the-winners and idea", results in a highly suitable portfolio which consists of thoroughly screened ideas within a quite narrow technological area-often stemmed from the research of highly ranked universities, » "Picking-the-winners and entrepreneur", the portfolio includes a few handpicked and thoroughly evaluated entrepreneurs, commonly with ideas relaled to research areas of a nearby university.[8]
Infrastructure includes localities, office facilities and administrative service (Bergek and Norrman, 2008) [8]
Business support regards coaching/ training activities aiming at developing the incubatees (Bergek and Norrman, 2008) [8] The business support services generally contain entrepreneurial training and business development advices The service also includes general business matters such as accounting, legal matters, advertising and financial assistance (Bollingtoft and Ulhoi, 2005; Chan and Lau, 2005; Laikalka, 2003, Lyons and Li, 2003; Mian,
1996)'"-Mediation concerns on how the incubator connects the incubatees to each other and to the outside world (Bergek and Norrman, 2008) [8] Mediator is one ofthe important roles of incubators (Peters et al., 2004) "•'.When a firm is in the incubation program, il is allowed lo be involved a network ofthe incubator which include potential customers, partners, employees, university researchers and financiers (cf Bollinglofl and Ulhoi, 2005; Clarysse et al., 2005; Hackett and Dilts, 2004b)''' From the network, incubatees can access resources which are vital for the survival of newly startup firms, such as knowledge and technology, financial capital, market related resources and human capilal (Begley et al., 2005; Bollingtoft and Ulhoi, 2005; Hindle and Yencken, 2004; Mian, 1996a; Rice, 2002; Rickne, 2000, Collmson and Gregson, 2003)"" This compensates for a shortage of established entrepreneurial networks of incubatees and reduces the uncertainty that incubatees experience (Peters et al., 2004; Smilor, 1987, von Zedwitz, 2003)'^'
Graduation refers to decisions regarding what circumstance incubatees should leave oul the incubation program (Bergek and Norrman, 2008) [8] It's difficult to find out the most reasonable answer to the question: When is a company ready to graduate? According to a report in 2002 of European Commission Enterprise Directorate General, a company can remain as a tenant in the duration from to years depending on how special an incubatee might be For example, some specialist types of tenants, such as biotech tenants, high-lech R&D and high-tech manufacturing can remain in the incubation program more than year because of the longer product development In the same subject, another method worth consulting since it provides a clear view on what the graduation process might be In the method, a set of existing criteria is created based on factors such as having enough investment lo run business in next stages, requiring space beyond the incubator's capacity, or creating a complete management team (Cammarata and Kathleen, 2003) [1] Two following examples are used to illustrate for the method
(4)Hodng van Hai T9p chi KHOA HQC & CONG NGHE 105(05):; Example
According lo Charles D'Agoslino, executive director of the Louisiana Business & Technology Center (LBTC) in Baton Rouge, Louisiana, when evaluating graduation process ofthe clients, his incubator bases on a number of factors:
Have they followed their business schedule Have they added the necessao' employees to meet wilh growth objectives ofthe company?
Have Ihey completed a network of advisors and professionals (eg , attorneys and accountants)?
Have they started generating revenue from sales?
Do they have adequate capilal lo run the company for the next six months to a year?
Is the management team able to run the company without incubator guidance? Example
In the Center for Innovation in Grand Forks, North Dakota, a tenant is ready to graduate once it achieves two of the following condilions:
• Reaches $ million in annual sales • Makes a successful public or private stock of more than $500,000
• Exceeds the incubator's capability • No longer has a tie wilh universities lo be in a university incubator
A conclusion drawn from incubators' graduation process is that whatever the time for graduation is, the key is lo have a strong rationale for deciding when a company should run a business on its own and that rationale should be in line wilh an incubator's mission and focus (Cammarata and Kathleen, 2003).[ ] We have provided basic knowledge of business incubators In the remaining of the paper, we briefly introduce one of its existences in practice named university business incubators (UBIs)
UNIVERSITY BUSINESS INCUBATORS In the existing literature regarding university business incubators (UBIs), there is no standard definition of the concept of UBIs
We can gel out here three ways to describe whal university business incubators might be:
In the first approach, Evans and Klofslen (1998), Radosevic (1995) '"" indicate that UBIs are set up by universities ready to accept a directly entrepreneurial role in generating and spreading scientific and technological knowledge
In the second approach, I ieydebreck et al (2000), Grimaldi and Grandi (2001)'"' mention that UBIs are institutions aiming*! nurturing new knowledge-based ventures through provision of services including space, infrastructure, communication channels, and information about external financing opportunities, etc However, stemming from their educational function, UBIs focus more on the transfer of scientific and technological knowledge from universities lo companies In the third approach, Mian (1996) identifies that UBIs offer their tenants two mam categories of services (a) typical incubator services including shared office services, business assistance, access to capilal providers, access to business networks, and rent breaks; (b) university - relaled services like faculty consultants, employment of students, improvement of reputation, library service, labs/ workshops, and equipment, computers, relaled R&D activity, technology transfer programs emplo>ee ducation and training, sports, and other social activities [7] Besides common characteristics sharing among business incubators UBIs have distinctive ones As indentified by Mian (1996), UBIs have fundamental characteristics as following:
• UBIs' objectives come from interest of those who are states, local governments, or private sectors
Most UBIs are physically situated on or close to their respective sponsonng-universi^ campuses Being near university campuses offers UBIs advantages such as access to library facilities, student labor, technical equipment, and experts (Smilor and Gill,
1986) [10],
(5)Hodng Vdn Hai T^p chl KHOA HOC & CONG NGHE 105(05)'81 -86 university, stale, local government, and private
sector These boards make overall direction, • Tenant performance Review- Formal and Informal tenant performance reviews are implemented periodically at UBIs This process is based on criteria of dropouts, annual sales, and employment growth
Institutional Support- Various UBIs programs get benefit from their respective university technology transfer programs, research centers, and technology and business development assistance centers
Staffing - UBIs employ different number of administrative/elerical and professional staff, depending upon the size, which is reliant on the number of its tenants and nature of each operation According lo a research done by European commission in 2002, a key efficient ratio between an incubator's staff and its tenants is 1: or 1: Concerning the nature of operation, a statistics of National Council for Urban Economic Development (1985), Washington, DC, can be served as an example The statistics indicates that business incubators employ 1.9 and 2.10 staffs in average for administrative and consulting work, respectively
• UBIs get funds from stale and support from sponsoring university for both their operation and mission of supporting the growth of tenant firms,
• Technologies and Entrepreneur targeted -the type of technologies targeted for development is generally reliant on the available resources at a particular facility The types of targeted entrepreneurs such as university related (students, professors, alumni) or others, depend on incentives and recruiting efforts Incentives mean UBIs focusing on the characteristics of managers which are in line with a particular facility like entrepieneurs with technology idea relative to the research area of respective universities Recruiting efforts refers to the UBIs' endeavor to seek talented entrepreneurs
Strategic Operational Policies-tenant selection policy, tenant graduation policy, intellectual property safeguards for tenant firms, and the linkage with graduated firms
are considered key elements for a successful university business incubator
Services and Their Valucd-Added-There are two main categories of services: (a) typical incubator services, such as shared office services, business assistance, access to capilal providers, access to business networks, and rent breaks; (b) university -relaled services like faculty consultants, students' employment, improvement of reputation, library service, labs/ workshops, and equipment, computers, related R&D activity, technology transfer programs, education and training,
• Survival and Growth of Tenant Firms- The survival and growth of tenant firms are measured based on criteria like dropouts, annual sales, and employment growth.[6] The great advantage of being in UBIs' incubation program is tenant firms are more likely to access universities' knowledge, which may be in forms of patent, publications, meetings or conferences, licenses, joint ventures, contract research, consulting and personal exchange (Rothaermel and Thursby, 2005) [9] Nevertheless, since the knowledge is not free, tenant firms have to make payment for using the knowledge, and paying forms are reliant on contractual agreements between both parties (Thursby, 2002, Zucker and Darby, 1996, 1998)"''
CONCLUSIONS
Business incubator is the special firm type set up wilh the aim at assisting young firms through support services, such as infrastructure, capital access, employee recruitment and training, during start -up periods when they are most likely lo gel failure Each incubator has its own incubation program which is different in terms of nurturing strategies; however, the program must include four main components including selection, infrastructure, business support, mediation and graduation University business incubator is one of BGs 'existences in practice Besides sharing common characteristics as a business incubator, knowledge transfer is a typical feature of UBIs due lo its close relationship wilh universities Business
(6)Hodng Vdn Hal T^p chl KHOA HQC & CONG NGHE 105(05): 81 - 86 incubators and university business incubators [6] Mian, S (1996)" The university business both are regarded as main engine in regions' incubator: a strategy for developing new economic growth rescarch/technology-based firms", 7(2) 191 -
RI 1-l-RFNCFS ' ^ ' ^ ' ^ ' ^' ''^"^^ "Assessing value-added contributions [1] Cammarala, Kathleen, St'//-/;iv//;(f//(()// Workbook
for liiisineis Incubators, NBIA Publications, 2003
of university technology business incubators to tenant firms" Research Policy: 325 - 335
[HI Norrman, C, & Bergek, A (2008)"lncubator best [2] European Commission FInlerprise Directorate practice A framework", Technovation, ' - r : ? : l ' ! : t r ^ ^ ' " ^ -' '^^'"^^^ [9,Phi.lips,R.,2002,"Teehno.ogybusinessincubato.: Incubators", February 2002
[3] Grandi A and Grimaldi, R (2005)"Busincss incubators and new venture creation: an assessnn
how effective as technology transfer mechanism?", Technology in Society, 24 9 -
ofincubaling models" Tcdiiiovation, 25 111-121 [10] Rolhaemiel F., Thuby, M (2005) "University [4] Hackett, S , Dills, D (2004)"A Systematic incubalor firm knowledge flows: assessing their impan Review of Business Incubation Research", Journal of on incubator firm performance", Research Policy, Technology Transfer, 29: 55 - 82 34(2005), 305-320
[5] Hansen M Cliesbrough,H Nohria,N and Sull [11] Smilor, R., Gill, M.D Jr (1986) 'The New D (2000) "Nctu'drkcd Incubations Hothouses of the Business Incubator: Linking Talent, Technology and New Economy", Harvard Business Review, 74-84 Kow-How", Lexington Books, Lexington, MA
TOM TAT
TONG QUAN \ I \ ION UOM DOANH NGHIEP VA VUON UOM DOANH NGHIEP DAI HQC
Hoang Vin Hai Trudng Dai hoc Kinh te & Quan in Kinh doanh - DH Thdi \giiyen Vuon u-om doanh nghiep la mot cong ty ddc biet diroc lap vai muc dfch Id giiip da cdc cong ty mdi lap Ihong qua cdc djch vu ho Ira chang h^n nhtr ca sa lang, tiep can von dao tao va tuyen nhan vien giai doan dau von dirge coi la giai doan ma doanh nghiep de that bai nhal Do no diroc col la dong ca cua su phat trien cua viJng dual goc gia tri kinh vd lao cong dn viec lam vd Iro Ihdnh cong ty nhan dugc sir ton trgng Khdi niem vuon uom doanh nghiep tra nen quen thupc vcri cgng dong tren the gioi nhCfng nam gan day, dac biet la tai nhO'ng quoc gia phat trien nhu N 1\ cac quoc gia Tay Au, Uc, Nhal Ban Ngugc lai d Vietnam, khai niem van mdi va gan nhir khong quen thuoc vdi cong dong Vdi CO gang cung cap mgi cai nhin long quan ve vijon irom doanh nghiep, bai bdo nay, chiing toi truoc tien gidi thieu nhCTng kien thirc ca ban ve lo^i hinh doanh nghiep ndy va sau mieu ta ngdn ggn mgi Irong nhiing dang ton tai cua n6 Iren thuc te, vuon uam doanh nghiep dai hgc,
Tir khoa: ) iron uam doanh nghiep Vudn uam doanh nghiep dai hgc doanh nghiep uam lao, Kien thirc Phdt li ien
\iiie:
' " ' See in Benchmarking of Business Incubators, 2002' p 4-5
•"•*''' See in Norrman, C and Bergek, A (2008)"lncubalor best practice: A framework", Technovation, : -
"••' See in Norrman, C and Bergek A (2008)"lncubator best practice: A framework", Technovation, 28: -
'"' " See in Grandi, A and Grimaldi, R (2005)"Business incubators and new venture creation: an assessment of incubating models" Technovation, 25: 1 -
'• See in Rothaermel, F., Thuby, M, (2005) "Univeisity-incubator firm knowledge flows: assessing their impact on incubator firm performance" Research Policy, 34(2005), 305-320
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