Using Business Incubators for Economic Development

The United States, Europe and Asia are trying to spark their economies by encouraging national development. A paper by Al-Mubaraki and Busler (2013) explores the concept of how business incubation supports diverse economies, commercialization of new technologies, improves the job market, and creates local wealth. They further discuss how local decision-makers can foster new economic activity in their regions to develop future sustainable wealth. 

Business incubation is part economic and part social. The goal is to encourage start-up businesses to find economic and social footing among like minded individuals to leave them free standing and viable. It is a seeding process that eventually leads to higher levels of local innovation and growth oriented companies that further the economic and social needs of the area. It is through local development that national interests can be secured.

Economic development is a process of wealth generation that takes into consideration the human, capital, financial, physical resources, and natural resources of an area. It uses these resources in combination to spur economic buzz that manifests into new products, services, and jobs. The secondary benefits can include improved social living, better communities, and viable government. As areas become financial secure they can impact the economic vines around them.

Business incubation centers for sponsoring organizations. Helping to develop small businesses that produce new products and services for their sponsor can create higher levels of corporate growth. It provides the freedom and resources for small companies to develop ideas but also allows larger companies to turn those ideas into mass products and services. To do this well will require the buy in of local stakeholders including local parties, government and corporations.  

The author contends that to develop these economic incubation hubs it is necessary to have power to create action. This power can come through money, force, persuasion or information. Secondly it is beneficial to have theory which understands the cause and effect of economic events while simplifying reality for shared understanding. Third it is beneficial to integrate theory into human understanding and perception in order to encourage people to see those things beyond their narrow perception. Fourth, it is required that people have mediation which pushes them to act upon the environment through specific beneficial behaviors. 

Another way of viewing these concepts is to say that there must be force to act through power, a clear path of cause and effect, a new awareness of community members, and finally beneficial action. The economic and social sides work together to create economic synergy. As environment forces encourage people to seek change, people look to their leaders who can propose solutions, create new understandings, and motivate others to act in their best interest along new lines of thinking. During a time of crisis they are most open to solutions. 

How incubators lead to further economic growth can be seen in its three stages of incubators stage, post incubators stage, and extension stage. In the incubators stage start-up concepts are supported by the incubator and this helps to create new jobs. In the post incubators stage new companies move into self-reliance and grow the job market. In the extension stage the graduated companies use their business knowledge, entrepreneurship, and job growth to contribute to local economic development.

Countries have found that the development and use of incubators encourages economic growth. With over 7,000 incubators in the world China leads the world in its implementation. This may be associated with China’s higher level of growth and new businesses that enter the market every year. As a nation seeking to expand and grow the U.S. should also consider their benefit in economic suppressed areas. The report doesn’t indicate this concept but one must build new economic and social platforms based on the foundations of the past. Where manufacturing of equipment was once plentiful the manufacturing of new technology products becomes possible. Reaching too far beyond the culture of a location may limit the successful social adaptation of people.

We could further postulate that urban cores are natural places to develop business incubation programs. Buildings are plentiful and city centers naturally draw the bohemian crowd of artists and the creative class. The nation appears to be suffering from a declining urban core and incubators may be one possible solution to regenerating these core areas. We can wonder what the 5 to 10 year impact would be on a nation that fostered such incubators throughout major cities and offered help in connecting small to large and local to international investors to the ideas and businesses they incubators produce. Would there be synergistic growth in national revenue?

Al-Mubaraki, H. and Busler, M. (2013). Business incubation as an economic development strategy: a literature review. International Journal of Management, 2 (30).