On Business Incubation

王 楠

（中国联合网络通信有限公司烟台市分公司，山东 烟台264003）

0 Introduction

Generally speaking,business incubator is a project that can provide office space,shared administrative services,and the use of facilities necessary for enterprises.It’s originated in the US during 1950s,and developed together with the third industrial revolution.Since then,this industry has gone through over 50 years of development.

1 History of Business Incubation

1.1 The Way It Came into Being

Faced with the rise of the trend of new technology revolution,large American enterprises had been challenged by economic rise of the Western Europe,and they adapted only slowly.Not only that,very few small enterprises could finally achieve success and many of them were developing in an extremely difficult way.Research shows that the failure of small businesses is mainly due to the lack of funds,which shows that small businesses do not have a good developing environment.Business Incubators were born for this kind of social need.The world’s first business incubator,"Batavia Industrial Center",was created in the year 1959 by an American called Joseph?Mancuso.It is located in Batavia,New York,and one of its first clients was said to be a poultry producer.Inspired by that,he called the organizations that gave support to those who wanted to start a business"incubators".

1.2 Periods of Development

The development of incubators can be divided into three separate periods.In 1970s,the US government began to focus on business incubators in order to encourage unemployed people to start new business.The period of 1980s was a starting point of the development for business incubation.And then the year 1990s saw a rapid development of incubators for small companies.

After a long period of struggle since its creation in 1959,business incubation was still not acknowledged by people throughout the world.It did not become popular until the late 1970s.During that time,being influenced by the recession of traditional industries and in order to spur unemployed people to start new businesses,the USgovernment began to help create enterprises through business incubators.And in the late 1970s,the first incubators of the kind were established in Europe.

The year 1980 saw only about 12 business incubators in the US.Most of them were set up by government direct funding,and were basically non-profit and mixed typed ones.They were equipped with basic management functions,and mainly concentrated on the provision of areas and basic facilities.All of them were created in northeast of the US,which had previously been the industrial center of the country and had been hard hit by business closures during 1970s.Instead of concentrating on expanding large corporations,many far-sighted entrepreneurs began to see the value of fostering new businesses to help quicken the growth of local economies.Therefore,the growth of business incubators was quite stable during 1980s.In mid-1980s,the Small Business Administration began to push the development of business incubators.During this period,Japan and Canada began to start business incubators.And in late 1980s,business incubators developed rapidly in the US,the European Commission provided support for the creation of incubators,and the concept of incubation was spread to China,Brazil,Nigeria and other developing countries(Rustam,2001).

Business incubators experienced worldwide development in 1990s,and they were further introduced to Poland,Israel,Korea and other countries.The operation of incubation became much more common and it began to conceive obvious features of networking.

2 The Three Generations

Nowadays the features,aims,functions and forms of business incubation are all constantly adjusting so as to meet the changes of economic environment.It’s a truth that business incubators are moving toward diversification.Dinyar (2001)puts forward that business incubators have developed from the first generation to the present third generation.The functions of three generations of business incubators are shown as follows：The first generation refers to the ones in 1980s which focus mainly on providing incubation space and shared facilities for small enterprises.The second generation belongs to 1990s in which incubator space,shared facilities,together with business consulting,specialized services are available.The third generation begins from the year 2000,and besides incubator space,shared facilities,they also provide business consulting,specialized services,combined with capital,profit-making,and risk investment.

3 The Present Situation

The new century sees a high-speed development of business incubation.Incubators are more closely combined with venture capitals,and enterprise accelerators start to emerge.Also in this period,profitmaking incubators develop rather rapidly,which become more and more industrialized.

As an emerging industry,the rapid development of business incubators is playing a very important role in the development of these countries’economy,especially for those high-tech industries.In 2005 alone,North American incubation programs assisted more than 27,000 companies that provided employment for more than 100,000 workers and generated annual revenues of$17 billion(Linda,2007).

Today,there are nearly 5000 incubators throughout the world,of which more than 2 300 are in European,nearly 1000 in the U.S.,and more than 100 in China (Wang,2001).According to the NBIA,about 90%of the 1,000 incubators in the UStoday are non-profit organizations focused on economic development.And approximately 10%of North American incubators are for-profit ones,organized to attain returns on shareholders investments.A data from the NBIA shows more：

47%of incubators are mixed use,catering to a variety of companies in the early stages of development

37%are designed for technology industries

7%are designed for manufacturing companies

3%are focused on community development/revitalization projects or serve niche markets44%of incubators acquire their clients from urban regions,31%from rural regions,and 16%from suburban regions

Nearly 9%of all incubator programs acquire clients from outside their region or from outside the U.S.

4 Conclusion

Growing from the initial form to the present phase,business incubators have helped quite a few business managers to achieve their goals.The form of business incubation has brought a positive impact on both social and economic development of a country.It creates employment opportunities,helps develop the local economy,and promotes the commercialization of new technology.It has become a policy tool and effective means of economic development to help create new businesses.Furthermore,it provides a lot of valuable facilities to the runners and can guarantee them not only space for operation but also some technical support and other sources to reduce business costs and improve commercial efficiency.But not only that,it also connects venture capitals and start-ups to reduce asymmetric information remained in both.Through policy guidance and money in-put,it helps the newly founded and relatively weak companies to develop,and enhance their competence in surviving and developing in the market.Therefore,it’s quite obvious that it has made remarkable achievements in economic practice throughout the world.

［1］Rustam Lalkaka.Making Internet Incubators work in Developing Countries[C]//in Session Handouts of 15th International Conference on Business Incubation.USA,2001,5：207-208.

［2］Dinyar Lalkaka.New Economy Incubation in Advanced Developing Countries[C]//in Session Handouts of 15th International Conference on Business Incubation.USA,2001,5：193-198.

［3］Linda Knopp.2006 State of the Business Incubation Industry[C].Athens,Ohio：National Business Incubation Association,2007.

［4］Wang Jianwei.The Theoretical Review and the Recent Focus of Study on the Business Incubators[J].Journal of Xi’an Jiaotong University,Volume 35.Supplement.pp.72-76.Dec.2001.

［5］NBIA.What is Business Incubatior[EB/OL].2011-04-24.