Technology Business Incubators in India

Structure, Role and Performance

M H Bala Subrahmanya, H S Krishna

• Publisher: De Gruyter
• Year: 2021
• Print ISBN:
  9783111109183
• eBook ISBN:
  9783110705300
• Topic: Business
• Subtopic: Business Development
• Index: Business

Why do Technology Business Incubators (TBIs) emerge rapidly as an instrument of start-up promotion in emerging economies like India? In what forms? What role do they play in start-up promotion? What are their major achievements? These questions have been answered empirically in this book. Accordingly, this book explores the nature, structure and process of incubation resulting in start-up generation and in the process, R&D contribution emerging from TBIs comprising accelerators, incubators and co-working spaces in three of the leading start-up hubs, namely, Bangalore, Chennai and Hyderabad, in India. It describes typology, objectives, sponsors, and facilities provided by these TBIs. It further explores the process of selection, incubation and graduation of start-ups as it exists in these TBIs. Thereafter, it makes an assessment of R&D contributions that have emerged from the TBIs in the form of R&D inputs comprising personnel and capital expenditure, and R&D output in the form of new products/services developed, patent applications filed and revenue generated.

Policy makers, researchers, engineering and management students, technology and business mentors, angels, venture capitalists, and MNC executives will find this book informative, revealing and a source of valuable insights on the new, emerging India.

Chapter 1 Introduction

1.1 Backdrop

Incubating new ventures is a part of a wide range of initiatives aimed at stimulating and promoting innovative entrepreneurship and economic growth (Grimaldi and Grandi, 2005; Corsi and Berardino, 2014). Technology Business Incubators (TBIs) constitute one of the vital components of an entrepreneurial ecosystem for technology-based start-ups in modern economies (Bala Subrahmanya, 2017). The objective of TBIs is promoting technology transfer and diffusion of products, thereby developing local innovative firms (EU, 2010). TBIs are seen as a mechanism that could create supportive and entrepreneurial environments for technology-based start-ups, helping them to increase their survival rates (Aerts, et al., 2007).

TBIs can be viewed as a mechanism (i) to support regional development through job creation (Thierstein and Wilhelm, 2001), (ii) for new high tech venture creation, technological entrepreneurship, commercialization, and transfer of technology (Mian, 1997; Phillips, 2002), (iii) an initiative to deal with market failures relating to knowledge and other inputs of innovative process (Colombo and Delmastro, 2002). Some empirical studies have revealed that one third of new firms do not survive the third year and about 60 per cent do not survive the seventh year (European Commission, 2002). This number considerably falls to 15 to 20 per cent among TBI based tenants (Adegbite, 2001; Lalkaka, 2002). According to some estimates, incubated start-ups grow much faster than their non-incubated counterparts and their survival rate is also 40% higher, at 80% (Startupindia, 2017). For these reasons many countries have increasingly been engaged in establishing TBIs in various forms (Akcomak, 2009).

TBIs are designed to offer start-ups the technological support and services, and a solution in bridging the knowledge gap to help them to develop their own viable businesses, by providing a resource base necessary for supporting their development in early and critical stages (Somsuk et al., 2012). TBIs support start-ups during their vulnerable early years and enable them to graduate from the programme as viable companies capable of operating independently. TBIs are known by different names such as technology/business incubators, innovation/technology centres, science/research/technology parks, and business/seed accelerators. The terminology reflects scope of function as well as location (Mian, et al., 2016). In emerging economies like India, they include co-working spaces as well which provide common space, facilities and support for nurturing start-ups (Bala Subrahmanya, 2017).

Thus, TBIs play a unique role, particularly with respect to promotion of innovation, technology commercialization and facilitating the emergence of technology-based start-ups. Given this, their performance and contribution to national R&D efforts in the form of creating R&D personnel, R&D infrastructure and R&D outputs including patent grants and new products/services – at the TBI level as well as at the start-up level – are hardly investigated, nationally or internationally. These are important as they play a major role in creating/strengthening the National Innovation System (NIS) through the formation of innovative firms and therefore decisive for accelerating the rate of economic growth of nations. The proposed study aims at filling up this research gap by resorting to such an assessment of TBIs in the Indian context comprising accelerators, incubators and co-working spaces located in three of the leading start-up hubs, namely, Bangalore, Chennai, and Hyderabad.

1.2 TBIs: Concepts, characteristics and importance

In its generic sense, the term “incubator” is often used to describe a wide range of organizations that, in one way or another, help entrepreneurs develop their ideas from inception through to commercialization and the launching of a new enterprise (Caiazza, 2014). The concept of ‘‘incubator’’ is often used as an overall denomination for organizations that constitute or create a supportive environment that is conducive to the ‘‘hatching’’ and development of new firms (Chan and Lau, 2005; Lindholm-Dahlstrand and Klofsten, 2002).

Generally, an incubator can be viewed as a support environment for start-up and fledgling companies (Peters et al., 2004). In its generic sense, the term “incubator” is often used to describe a wide range of organizations that, in one way or another, help entrepreneurs develop their ideas from inception through to commercialization and the launching of a new venture (Caiazza, 2014). In summary, TBIs are property-based initiatives (Phan et al., 2005) providing their tenants with a mix of services encompassing infrastructure, business support services and networking (Bergek and Norrman, 2008; Hansen, et al., 2000; Peters et al., 2004).

A broad definition of the term “incubator” embraces science and technology parks, as well as organizations which have no single physical location and concentrate instead on managing a network of enterprise support services (Lindelof and Loftsen, 2004). They can also be found in institutions that do not perform basic research, but which have strong links with the infrastructure of science and technology and the commercialization of technologies (Breschi and Lissoni, 2001). Business incubators are popular tools to accelerate the creation of successful entrepreneurial companies. TBIs typically support new ventures in the hope they will later develop into self-sustaining, thriving companies. This support encompasses several dimensions such as office space, shared resources, business support, and access to networks (Bruneel, et al., 2012).

They include a diverse set of sponsors and stakeholders such as governments, local development agencies, universities, science parks and non-profit organizations (Westhead, 1997; Westhead and Batstone, 1999). Incubators are promoted in a variety of ways with different sponsors resulting in different programs, as given in Table 1.1. Though incubators might be of different types with different kinds of sponsors, they all have the same objective – find viable companies and get them to early-stage financing by offering specific services and/or initial funding.

Table 1.1:Incubators: Varieties and sponsors.

Incubator Types		Incubator Sponsors
Non-profits	94%	Economic Development agencies	31%
Mix use	54%	Government	21%
Technology	39%	Academic Institutions	20%
Service/Specialty	4%	For Profit	4%
Manufacturing	3%	No Sponsors	8%
		Combination	8%
		Others	8%

Note: Incubators types do overlap with one another, but incubator sponsors do not.

Source: State of the Business Incubation Industry (2006)

According to Bollingtoft and Ulhoi (2005), TBI is an umbrella term for any organization that provides access to affordable office space and shared administrative services. The key characteristics of incubators are low rent, shared services, the existence of entry/exit policies and the university networking and support (Al-Mubaraki and Busler, 2011). A business incubator is a shared office space facility that seeks to provide its incubatees (i.e. ‘‘portfolio-’’ or ‘‘client-’’ or ‘‘tenant-companies’’) with a strategic, value-adding intervention system (i.e. business incubation) of monitoring and business assistance. This system controls and links resources with the objective of facilitating the successful new venture development of the incubatees while simultaneously containing the cost of their potential failure (Hackett and Dilts, 2004a).

TBIs provide a mechanism for technology transfer and commercialization. The incubation programmes help start-ups to emerge, survive and grow through the provision of supportive environments (Wonglimpiyarat, 2014). TBIs are a venture of universities, public research institutes, local government and private players to promote and bolster a new technology intensive enterprise. In this type of incubation, the targeted talent consists of innovative, mostly technology oriented or knowledge-intensive enterprises. Interactions with academic institutions and public research are almost always a substantive element of the incubation process in such TBIs (The Centre for Internet Society, 2015).

Thus, TBI role is of two kinds, which are as follows:

• They foster innovative start-ups; thus, the process of incubation is strongly intertwined with the innovation process that occurs in the supported enterprises, bolstering research, and
• They help develop certain local economic development goals in their region by stressing on a knowledge driven economy where risk taking is encouraged.

Therefore, such incubators have become a ubiquitous phenomenon in many parts of the world. Policy makers on national and local levels have come to view them as a tool for promoting economic development, innovativeness through the promotion of new technology-based growth firms. TBIs are an effective and innovative tool i...

Table of contents

• Title Page
• Copyright
• Contents
• Chapter 1 Introduction
• Chapter 2 Technology business incubation: A global perspective
• Chapter 3 Research questions and methods
• Chapter 4 Technology business incubators in India: Structure and characteristics
• Chapter 5 Role of technology business incubators in India: Incubatee selection, incubation and start-up graduation
• Chapter 6 Technology business incubators in India: An assessment of performance
• Chapter 7 Summary and conclusions
• Index