Measuring economic benefits of business incubation

Absolute measures of incubation are impractical, but performance indicators are useful. Given the relatively small number of studies and the lack of comparability between them, any conclusions should be treated as indicative at best.

The UK has approximately 300 business incubators supporting around 12,000 businesses (UKBI). Estimates of the direct impact of business incubation by industry associations include between 25-40 supported businesses and between 44-91 jobs per incubator. Many incubators (~60 per cent) also have outreach programmes to support businesses not resident in the incubator.

Indirect incubator effects, e.g. additional jobs and wealth generation from providing products/services to incubator and incubatees, globally range between 0.48-1.5 times the direct impacts of incubation.

Few studies capture the full impact of business incubation, for example taking a measure of incubation impact over the incubation period rather than longer term, and ignoring entrepreneurial learning and subsequent venturesome activity as a result of business failure.

Job creation, while a popular metric used to evaluate incubation, is not generally considered a useful measure of incubator value. An emphasis on job creation also contradicts the advice of many investors who are acutely aware of the need to control spending by investee firms, which often means delaying recruitment.

Further work is needed to develop appropriate performance indicators for incubation.

Taken from the report:

Incubation for Growth: A review of the impact of business incubation on new ventures with high growth potential.  Nicola J. Dee, Finbarr Livesey, David Gill and Tim Minshall September 2011