Toward a grounded theory of effective business incubation

Abstract

Business incubators are found all over the world. Yet, to date, no viable integrative theory of effective business incubation exists. This essay outlines a grounded theory of incubation, driven by case studies, empirical results, and field work, based on three main principles that generalize across countries and cultures. They are:

The paradox of market emulation: Successful incubators both emulate market conditions and shield their ‘infants’ from them. Managing this paradox is fraught with difficulty, not the least because it is often not explicitly recognized.

Resolving the key make-or-break constraint: In every country, there are many constraints that hinder ultimate business success of incubator projects, but there is one key constraint that always ‘resonates’, i.e., that dominates the attention and concern of project managers. In India, this constraint is funding. In Israel, where the VC industry is mature and liquid, funding is not a major constraint (though as always and everywhere, raising money is a major challenge), but experienced managerial capacity is the resonating factor. Hence, a theory of incubation should include principles that guide identification of the key ‘resonating’ constraint and provide direction toward reducing or eliminating it.

Alignment with local and national cultures: Culture is a shared, learned, symbolic system of values, beliefs, and attitudes that shapes and influences perception and behaviour. Culture is how values drive behaviour. In national studies of incubation, it is strongly evident how powerfully national culture acts as a mediating variable between, for instance, incubator operations and processes and the national and global business environment. Hence, a theory of incubation should include answers to the following question:

How can incubator processes align well with elements of national and local culture, in order to:

reinforce those aspects of the culture that act positively to help incubator projects attain success

mitigate or eliminate those aspects of culture that act negatively, and lead to failure?

It is hoped that this work will stimulate other scholars to seek even more important general principles, leading to a powerful general theory of business incubation.