Business incubator
What is a business incubator?
A business incubator is an institution that supports young companies and start-up businesses by providing premises, infrastructure and services. The main aim is fostering the growth and increasing the chance of survival of young developing businesses. Since the local economy profits from the establishment and the growth of new and innovative companies, the municipality usually supports business incubators by financing them with public funds. Whereas business incubators generally include different branches, there are also specific business incubators for certain pioneering areas like biotechnology, nanotechnology, information technology, creative industry, environment technique and automotive or aerospace engineering.
Features of a business incubator
- Start-up support: A business incubator supports new and innovative companies to overcome typical obstacles of the foundation phase.
- Background support: Business incubators provide new companies with the infrastructure and the know-how required for successful development, which includes providing the building, various services and consulting.
- Financing: Business incubators are usually publicly established by institutions such as municipalities. However, there are also some which are privately funded. In many cases, funding programs of the council or the federal government provide additional capital.
Aims of business incubators
- Fostering of business formation: Supporting young companies with infrastructure, know-how and funds, business incubators foster the development of new, innovative businesses, which has positive effects on the local economic growth.
- Support in the early stage: Especially in the early stage start-up business have to overcome various obstacles and often depend on external support to become successful. Therefore, one main aim of business incubators is improving the chance of growth and the augmentation of the survival rate of start-up companies.
- Creation of networks: Networking helps start-up businesses develop and profit from each other’s experience. Business incubators facilitate the creation of networks and the exchange of knowledge between different branches.
- Creation of high quality jobs: Encouraging the formation of new companies, business incubators are jointly responsible for economic growth and the creation of high quality jobs.
Differentiation from other terms
Gathering start-up businesses in order to foster innovation and to support them in their initial phase is a concept which is not only characteristic for business incubators but also for similar establishments. Even if there are a lot of different terms for urban innovation hubs, they essentially share a lot of characteristics and cannot be distinguished satisfactorily. However, the German manager magazine differentiates the notion of business incubator from other related concepts:
- Technology Centre: Whereas business incubators support businesses from various branches, technology centres are specialised in fostering research- and technology-oriented companies. However, technology centres and business incubators both support young companies in their development phase.
- Science or Technology Park: Contrary to business incubators and technology centres, science or technology parks are locations for companies after their development phase. Characteristic for companies in science or technology parks is their high research- and technology-orientation.
- Innovation Centre: This wide-ranging notion includes all kinds of innovation hubs like technology and science parks or centres and business incubators.