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SES821S - Small Enterprise Support - 2nd Opp - June 2022 |
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nAmlBIA unlVERSITY
OF SCIEnCE Ano TECHn OLOGY
FACULTY OF COMMERCE, HUMAN SCIENCESAND EDUCATION
DEPARTMENT OF MANAGEMENT
QUALIFICATION: BACHELOR OF BUSINESS MANAGEMENT HONOURS
QUALIFICATION CODE: 08BBMH
LEVEL: 8
COURSE CODE: SES821S
COURSE NAME: SME SUPPORT
SESSION:
JULY 2022
PAPER:
THEORY
DURATION:
3 HOURS
MARKS:
100
EXAMINER(S)
SECOND OPPORTUNITY EXAMINATION PAPER
MS. ESTHER OLIVIER
DR. CHRIS VANZYL
MODERATOR: MS. A TJIUEZA
INSTRUCTIONS
1. This examination is an open-book assessment.
2. Study the attached articles and answer the questions.
3. Answer ALL the questions and in essay format.
4. Write clearly and neatly.
5. Number the answers clearly.
PERMISSIBLE MATERIALS
1. Study Notes
THIS QUESTION PAPER CONSISTS OF 2 PA.G'ES(fnduding thts front page)
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QUESTION 1
[100Marks]
How do the following five theories, as presented by Ahmad (2014), influence the [a] Namibian
entrepreneurial ecosystem(s) development; [b] the current innovation and technology development
challenges as contained/described in the current Namibian MSME National Policy, and [c] the current
incubator's performances in Namibia?
• New venture creation theory
• Resource-based theory
• Social network theory
• Dyadic theory
• Real options theory
TOTAL MARKS: 100
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Thecurrentissueand fulltextarchiveof thisjournalis availableat
www.emeraldinsight.com/1355-2554.htm
A mechanisms-driven theory
of business incubation
Mechanisms-
driven theory
Ali Junaid Ahmad
Universityof Warwick,Coventry,UK
375
Abstract
Received20 November2012
Purpose - Followingrecommendationsby scholars for further research on the business incubation
Revised 12July 2013
process,the purpose of this paper is to build new theoryon incubationusing the social mechanisms
approach- a well-developedbody of theory on socialprocesses.
Design/methodology/approach - A criticalreviewof dominanttheoreticalapproachesin the area
highlightedthat researchers in the past have not studied incubationas a social "process."In order
to study a socialprocesssuch as incubation,a case is made for the valueof socialmechanismstheory.
25 October 2013
17January 2014
26 March 2014
16 April 2014
Accepted23 April 2014
In order to study incubation as a social mechanism,an inductive-qualitativeresearch design based
on ethnography was used. Data were collectedover six months each at t:\\voDublin-Ireland-based
business incubators.
Findings - Results highlight the significantroleof a positiverelationalbond between the incubator
manager and client entrepreneurs.Incubationis triggered in a sophisticatednormative environment
under the prevalence of ground rules, subtle signals and the interplay of personal histories. These
contribute to the incubation mechanism'snon-linearity,thereby,making the prediction of outcomes
difficult.
Originality/value - A contributionof this researchcomesin the form of a new conceptualizationof
incubationbased in mechanismsreasoning.The mechanismsapproach was found to be versatile and
helpedin extending the work of previous researcherswho proposedadvancementsin the area based
on dyadictheory,socialcapital theoryand socialnet:\\vorktheory.Further,a new,and it is argued,more
fruitful directionfor incubationprocess-relatedresearchis also highlighted;one which takes on board
the often glossed over idiosyncrasiesof incubationas a social mechanismfor promoting early stage
entrepreneurship.
Keywords Ethnography,Theory, Business incubators,Socialmechanisms
Paper type Researchpaper
1. Introduction
According to Gaiiner (1985),new venture creation is the organizing of new organizations.
There is growing awareness that new venture creation is a multi-dimensional
phenomenon, where aspects relating to the entrepreneur, the new firm and the
environment interact in complex ways within the dynamic system of new enterp1ise
development (Lichtenstein et al, 2006; Davidsson and Gordon, 2010; Shepherd, 2011).
Public policy directives require the accelerated creation of new ventures through a vaiiety
of interventions designed to curb new venture failure rates. Out of a my1iad of such
interventions, it has been suggested that business incubation most comprehensively
resolves the issues surrounding the venture a·eation process (Aernoudt, 2004; Hackett
and Dilts, 2004a; Phan et al, 2005).
The focus of much research on incubators to-date has been on understanding their
social and fiscal contributions to various facets of government policy and vice versa
(Hannon and Chaplin, 2003; Hackett and Dilts, 2004a; Phan et al., 2005; Patton et al,
InternationaJlournalof
EntrepreneuriaBleliaviour&
2009;Warren et al.,2009). The problem with such research is that the "true" impact of
Research
incubators cannot be gauged in a simplistic manner (Roper, 1999; Sherman, 1999;
Vol.20 No.4, 201'1
pp. 3i5-405
Tamasy, 2001, 2007; Rudy, 2004;Sofouli and Vonortas, 2007).Incubators are useful for
curbing entrepreneurial risk and the promotion of new ventures (Hongyi et al, 2007;
iD EmeraldGroupPublishinLgimited
1355-2554
00110.1108/l)EBR-11-2012-0133
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I]EBR
20,4
376
Hughes et al, 2007; Cooper and Park, 2008; Ndabeni, 2008), however, evaluating their
impact, which would be an attempt to draw a straight line between specific incubator
interventions and specific instances of new venture success, is fraught with difficult
methodological challenges (Sherman and Chappell, 1998).
The above over-emphasis on evaluation research has been recognized as a problem
by scholars who believe that theory development and advancement of knowledge in
the area has been stymied (Hannon and Chaplin, 2003; Hackett and Dilts, 2004a; Phan
et al.,2005). To advance theory and to assist practice in achieving accelerated firm
growth, scholars suggest that researcher focus must shift away from "incubators"
toward "incubation," or incubators' underlying and/or internal processes. Such
research will help in highlighting the conditions under which incubation is most likely
to positively influence new venture creation.
Not much attention has been devoted to studying the process of incubation (Hackett
and Dilts, 2004a;Patton etal.,2009;Warren etal, 2009).A review of incubation-process
literature indicates that previous researchers have favored new venture creation theory,
the resource-based view (REV), social network theory, dyadic theory and real options
theory for conceptualizing incubation. While application of the above theoretical
frameworks has been meaningful and adds richness and variety to our understanding;
none of these are fully concerned with the "process-miented" nature of incubation. This
has resulted in a "black-box" view of incubators, which is problematic (Hackett and
Dilts, 2004b, 2008),since frameworks from organizational and social theory utilized in
the past are not fully concerned with the true nature of incubation - a social process
that enables human action. What seems to be missing is explanatory theory describing
the underlying social or other (such as financial or legal) mechanisms that enable
human action and behavior in the context of incubation. Developing a mechanisms-
based understanding would require linking the real causes, antecedent events or
necessary conditions impacting the dynamics ofthe process (Hedstrom and Swedberg,
1998). Hence, conceptualizing incubation as a social mechanism would require the
development of a satisfactory explanation where we are able to specify the social "cogs
and wheels" that have brought about specific relationships inside an incubator which
aid in accelerated new venture creation.
Following on from the above, in this exploratory research, the overall aim is to
advance a new and empirically grounded social mechanisms-based conceptualization
of business incubation. This is achieved through an inductive-qualitative approach
deployed within an interpretive and ethnographic research design; thereby, allowing
research findings to emerge from the frequent, dominant or significant themes inherent
in raw data, without the restraints imposed by structured methodologies. As a result,
light is shed on: first, aspects of an incubator's normative environment and the often
unsaid "rules of engagement" between the parties in incubation that help create a
positive incubation link; and second, how developmental assistance is h·iggered for
facilitating incubation activity. In this manner, the paper is able to shed light on how
incubation "occurs" inside incubators, and contributes to theory by presenting a new
mechanisms-based conceptualization of the incubation process.
The paper is organized as follows: first; in the theoretical framework section,
previous research in the area is allocated to five different frameworks and critically
reviewed where gaps in understanding are utilized for clarifying this research's aim.
This is followed by a section on research design which highlights the data collection
and analysis techniques used to meet the requirements of the research's aim. Next,
results from the empi1ical work are presented, shedding light on normative conditions
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and trigge1ing mechanisms. The Discussion section pulls together the major
contributions of the research and presents a conceptual model that describes the
conditions under which incubation "success" is most likely to occur. The paper ends
with a reflection on limitations and recommendations for further research.
2. A review of business incubation process literature and theoretical
framework
In this section, previous incubation process-related literature is critically examined for
the purpose of assessing the relevance of a variety of theoretical approaches when
studying social processes such as incubation. Following Hackett and Dilts' (2004b)
approach, who in developing a "real options-based theory of business incubation"
considered a variety of theories[l] as alternatives for grounding their incubation
process model, in this section, a similar result is achieved by assessing the viability of
new venture creation theory, the RBV, social network theory, dyadic theory, real
options theory and finally, in the synthesis section, a case is made for the suitability of
social mechanisms theory. While Hackett and Dilts (2004b) confined their discussion to
general definitions and possible conceptual outcomes, this review goes further and
explains the merits and drawbacks of specific applications of theoretical frameworks
to understand business incubation.
This review has been prepared following a number of c1ite1ia.First, the coverage
of literature is confined p1imaiily to the incubation process. Although the locus of the
incubation concept is the nexus of forces involving new venture formation and
development, new product conceptualization and development and business assistance,
each of which has an established body of research, to expand the scope of the review
beyond reseai-chexplicitly focussed on incubation would make it impossible to complete
given the constraints of this paper. Second, although practitioner literature has influenced
academic reseai-ch,the review is centered on academic literature, except in cases where
practitioner literature has proven especially influential and has some intiinsic academic
validity. Third, an effort is made to include studies with an empirical component and
those that employ a rigorous reseai-ch methodology. Finally, only those studies have
been included which have been published in recognized peer-reviewed journals. Thus,
23 papers (three non-empi1ical and 20 empilical) were selected[2]. The Appendix
highlights the pai·ticulai·conceptualization of incubation the selected articles present, their
selection rationale and context.
2.1 New venturecreationtheory
Campbell et al. (1985), Brooks (1986), Smilor (1987), Hisrich (1988), Lumpkin and
Ireland (1988),Allen and McCluskey (1990),Weinberg et al. (1991),Peters et al. (2004),
Aerts et al. (2007) and Bergek and Norrman (2008) draw on the new venture creation
and entrepreneurial process literature and generally view incubation as a rational
process that awards legitimacy, opens network access and heightens community
support for entrepreneurs.
Under this view, reseai-chers desc1ibea number of mutually exclusive components or
stages of the incubation process such as: diagnosis of needs; selection and monito1ing;
capital investment; and access to expert networks (Campbell et al.,1985;Brooks, 1986).
Typologies or models are proposed such as: not-for-profit; university based; corporate;
high-tech, and these are compared and contrasted on the basis of a number of
chai-acteristicsasc1ibed to the model's paiticular method, or style of incubation (Lumpkin
and Ireland, 1988;Allen and McCluskey, 1990;Weinberg et al.,1991).
Mechanisms-
driven theory
377
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IJEBR
20,4
378
A number of problems emerge when conceptualizing incubation as a step-by-step/
staged process. First, while it is useful to propose incubation's ath·ibutes for
definitional purposes, these do not on their own help us understand how the process
unfolds to either award credibility, open network access or heighten community
support. What emerges is an instrumentalist desc1iption of "what incubators ought
to do" which does not show "how incubators function," since in the latter, models of
incubation must present a picture of internal management practice and the normative
and structural milieu that allows incubator organizations to perform its functions.
These aspects of incubation are undoubtedly impacted by both the micro-level context
of human relations, and the wider macro-context of regional economy, public policy,
entrepreneurship culture and other environmental drivers.
Further, research which highlights incubator archetypes and associated attributes
of incubation practice is divorced from contextual variables and by many researchers'
own admission, not really applicable to any one incubator organization. Arguably,
any particular style of incubation is dependent on a myriad of subjective, dynamic
and context-bound attributes and behaviors of incubator managements, as well as a
particular client-mix.
It seems that previous researchers have ignored what Gartner (1985)has identified
as key to understanding the new venture creation process. Gartner (1985)suggests that
any new venture is a gestalt of variables from four dimensions:
(1) individual(s)-the person(s) involved in starting a new organization;
(2) organization - the kind of firm that is started;
(3) environment - the situation surrounding and influencing the new organization;
and
(4) new venture process - the actions undertaken by the individuals to start the
venture.
Therefore, no new instance of venture creation can be comprehensively described, nor
can its complexity be adequately accounted for, unless all of its four dimensions are
investigated and an attempt is made to discover how aspects from each dimension
interact with one other. Latest research on new venture creation (Lichtenstein et al.,
2006;Davidsson and Gordon, 2010;Shepherd, 2011)re-affirms Gartner's (1985)view.
The problem it seems is that the body of theory within new venture creation is not
developed enough to provide adequate tools to undertake the sort of sophisticated
multi-dimensional analysis that Gartner (1985)and aforementioned contemporaries
recommend.
To summarize, the major drawback that emerges as a result of the application of
new venture creation theory to incubation is a lack of understanding of new venture
creation as a gestalt of a number of dynamically interacting aspects. Therefore, further
research needs more sophisticated research designs that trace the dynamics of
incubators' internal venture creation processes in time, taking into account the impact
of associated variables such as the role of the enh·epreneur,the incubator manager (IM),
the client cohort, the internal normative environment, the external context and the
sh·uctural properties of the incubator organization.
2.2 The REV
A number of researchers (including: McAdam and McAdam, 2008;Patton et al.,2009;
Todorovic and Moenter, 2010),by drawing from the RBV of the firm (Penrose, 1959),
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view incubation as a mechanism of awarding a stock of tangible and in-tangible
Mechanisms-
resources to client finns that results in, in addition to other benefits, client firm growth.
Resources here are not just tangible resources, but other intangibles including
driven theory
proximity to markets, sources of knowledge (universities) and clustering effects similar
to that of a Community of Practice. The impact of these resow-ces on the client firm,
it is argued, results in access to new knowledge, expertise and networks, ultimately
leading to growth.
This is a very appropriate view of incubation, after all, what is the real point of --------
379
incubation but a system to make resources available in a cost effective and timely
manner to new firms. However, on deeper scrutiny, a number of problems emerge,
especially regarding the classical assumptions behind the RBV. These assumptions,
emerging from neo-classical economic theory, underline the real applicability of the
RBV.For instance, on the issue of exchanges between the firm and its environment, the
RBV places primary emphasis on economic as opposed to social or political exchanges.
Further, it assumes rationality and views organizational actors as rational beings
assessing choices and making decisions which maximize their self-interests (Fahy,
2000).These assumptions have not only been challenged by behavioral economists in
the past but also researchers in the discipline of entrepreneurship and small business
(Bernheim and Stark, 1988;Karra et al.,2006).
The basic logic behind the RBV is for the firm to develop sustainable competitive
advantage (SCA) allowing the earning of economic rents or above-average returns.
Hence, RBV would dictate a three-tired (and interlinked) role of incubators:
"how" to help client firms develop SCA and superior peiiormance; "what" are the
characteristics and types of advantage-generating resources; and "influencers"
of strategic choices by client firm managements. It is suggested that the role of
incubators lies in the second tier only, i.e. in identifying firm resource needs
and aiding in resource deployment. This is so since in the first tier the inherent
competitiveness of the client firm's offer comes into play and in the third tier,
"influencers" of strategic choice are usually environmental variables which lie
outside the control of both client firms and incubators. Even in the second tier,
a problem is encountered; McAdam and McAdam (2008)found that the most crucial
factor determining the ability of firms to use incubator resources is an "effective
management team." Thus, is an incubator organization designed to infuse resources
to build effective entrepreneurial teams? As McAdam and McAdam show through
their review of past literature, effective team building is mostly dependent on
personal capabilities and personality traits - aspects seemingly beyond the scope
of incubator organizations to practically influence. This problem brings into question
the appropriateness of the RBV for studying incubation simply as mechanism for
resource allocation.
In summary, the problem encountered when applying REV-based theorizing on
incubation is that, first, the base assumptions of the RBV have been over turned,
bringing into question the value of analytical insights previously presented; and
second, for developing an understanding of the client firm's capacity and willingness to
absorb resources it would be important to consider aspects of the internal environment
of an incubator (such as the nature of the relationship with the IM). The RBV does not
provide the tools to scrutinize these important aspects. For a process orientated
understanding of incubation to emerge, further research must attempt to unearth micro
processes and institutionalized patterns governing the rules of incubator-client firm
interaction.
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2.3 Socialnetworktheo1y
Incubator-incubation researchers have utilized social network theory to investigate the
impact of internal and external network connections on incubatee development and
growth (Totterman and Sten, 2005;Evald and Eager, 2008;McAdam and McAdam,
2006;E0llingtoft and Ulh0i, 2005;Hughes et al.,2007;McAdam and Marlow, 2007)and
view incubation as a system for increasing client firms' network density.
There are a number of interesting findings which emerge from the work of the above
researchers; first, the physical space and the company mix of an incubator play an
important role in increasing the network dynamic of an incubator. In other words, it is
suggested, that two aspects promote active client networking inside incubators:
(1) some unique features of the architectural design and configuration of the
incubator space; and
(2) the type of companies inducted - some types of companies network more
readily than others.
Researchers, however, do not go any further, therefore, there is no understanding
of what types of design ath·ibutes promote active networking and what types of
companies more readily network and the underlying reasons for such behavior.
Second, researchers discuss the impmiance of internal networks, as opposed to
external, in incubation success. Drawing from network and social capital theory
(Podsakoff et al., 2000)researchers agree that incubators facilitate the creation of
entrepreneurial networks. They argue that a very useful indicator for gauging the
quality of incubation is firm "network density," i.e. new and live network nodes that
client firms create as a result of the strategic involvement of the incubator management.
Arguably, the higher the network density, the greater the client satisfaction with
incubator services. The assumption here is that the more firms network, the more likely
it is that they will "succeed" post-incubation. Howeve1~according to recent research, the
argument that networking opp01iunities between client firms leads to synergies, R&D
agreements and innovation, does not hold (McAdam and Marlow, 2007;Evald and Eager,
2008).Further, research assumes that networking is an activity that incubating firms
actively engage in on their own initiative. This is not always the case since common
organizational values, leadership behaviors and other factors can significantly impact
firm and individual network behavior (Podsakoff et al, 2000).
Third, researchers also highlight disadvantages of client networking in incubators
(Evald and Eager, 2008;McAdam and Marlow, 2007),which they suggest can lead to
problems in the development of social networks. Investigations based on 1ich
qualitative approaches suggest that the internal environment of the incubator is
punctuated by the presence of power sh·uggles, shifting coalitions, self-interest, secrecy
and even lying. A degree of inevitability is assumed when it comes to disharmony and
political tension in an incubation setting where two rationales are presented for these
problems: first, is the issue of close physical proximity of firms with comparable
att1ibutes involved in similar lines of business (McAdam and Marlow, 2007);and,
second the multi-tiered structure of incubators with competing stakeholders leads to
shifting organizational objectives and p1iorities which leads to conflict (Evald and
Eager, 2008).The role of incubators is then to create a collaborative culture by reducing
political rivalries and self-interest.
In summary, although researchers have made a number of very useful contributions
to our understanding of incubators' internal dynamic, we unfortunately have little
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understanding on what types of architectural design attributes increase network
density at incubators; and what types of companies more readily network, and why.
It is clear that networking opportunities do not always lead to benefits for clients and
that clients do not actively engage in networking on their own initiative at homogenous
levels across the board. To develop a process-orientated understanding of incubation
we must focus on questions such as in what ways and under what (pre)conditions is
networking among client firms promoted?
2.4 Dyadictheory
Researchers (including Rice, 2002; Warren et al., 2009) suggest that incubators and
entrepreneurs operate in an inter-dependent "co-production dyad" where business
assistance is co-produced between the IM as the regular producer and the incubator
company as the consumer producer. Viewed through the lens of dyadic theory,
incubation would be a process of co-producing developmental assistance in
independent incubator-client dyads.
This is a very intuitive approach, to argue that the readiness of the entreprenew· to
engage in co-production of business assistance impacts the incubation process's
outputs. Such mutual co-production of incubation assistance is primarily driven by the
nature of the relationship between the IM and the entrepreneur (Ahmad and Ingle,
2011). Further, this conceptualization of incubation overturns an important
assumption in previous research; that the incubator is the initiator and orchesh·ator
of incubation, while the incubatee is a passive recipient. Instead this approach views
incubation as occurring in an inter-dependent "co-production dyad" between the IM
and the incubating firm.
Researchers argue that by customizing co-production to fit the readiness profiles of
entrepreneurs, Il\\lls can enhance the aggregate impact of co-production on their
portfolios of incubator companies. This is the aspect most ignored in previous research
on mapping the incubation process and business incubator performance evaluation.
Previously, the focus of incubator evaluation has been on measuring the effectiveness
of services delivered to client firms or to match incubator missions or goals with
targeted outputs (Allen and McCluskey, 1990;Markley and McNamara, 1995;Sherman
and Chappell, 1998; Colombo and Delmash·o, 2002; Bhabra-Remedios and Cornelius,
2003; Wynarczyk and Raine, 2005; Lendner and Dowling, 2007). However, such an
approach neglects a fundamental constituent of the incubation process, the clients and
their valuation of the usefulness of incubation to firm development and growth. What
Rice's work has done is that it laid the foundation for future more client-cenh·ic
incubator assessments (Abduh et al.,2007; Hughes et al.,2007).
In summary, the quality, quantity, frequency, intensity, scale, scope and ultimately
the output of incubation are all dependant on a variety of relationship specific factors
in the dyad (Ahmad and Ingle, 2011).Therefore, researchers should have proposed the
conditions and variables that would promote the development of effective dyadic
relations. Further, research in the area must aim to understand h·iggering behavior in
the incubator-client dyadic co-production unit and investigate the impact of dyadic
norms and incubators' sh·uctural properties on how incubation process evolves and
unfolds in time.
2.5 Realoptionstheory
Perhaps the most explicit and sophisticated theorization on the incubation process has
been attempted by Hackett and Dilts (2004b,2008),who use real options theory derived
Mechanisms-
driven theory
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--------
from the domain of finance and investments to suggest that incubatee selection is the
creation of an option whilst subsequent resource infusions and monitoring and
assistance are option exercises. In the domain on non-financial investments, the real
options methodology was initially proposed for the evaluation of technological assets,
such as R&D, typically a very structured and rationalized activity (Cave and Minty,
2004).Though it seemed possible that the options logic might equally be relevant to the
venture decision making of entrepreneurs, it is evident that the process is not as
structured or rational as investment in R&D projects (Grant and Perren, 2002). The
question to therefore consider is: can a firm, which has applied for incubation, be
considered a "real option" by an incubator, as Hackett and Dilts suggest, since, shictly
speaking, such an "option" does not in fact create any avenues for the incubator to
make subsequent larger financial investments and neither does this "call option" gives
the incubator any 1ight to cash-in on subsequent increases in option value? In other
words, in order for a new client to be a real option for an incubator, the incubator must
have a stake in it. This scenario is not applicable for not-for-profit incubators.
Furthermore, the bodies that have established incubators, usually universities and
governments, are also not-for-profit. Hence, standard economic explanations or
assumptions, such as those of real options including arbiti·age free market and
continuous interest rates (Black and Scholes, 1973), become invalid or in need of
substantial modification.
Further, Hackett and Dilts assume that successful incubation outcome states can be
equalled with successful option exercises. This would be just one measure of business
incubation peiformance or success. We know from the literature that incubator
programs have other goals which are weighed in equally important terms and that
incubator evaluations account for other variables also. These include internal incubator
network fonnation (Lichtenstein, 1992), incubator-indush1' network and incubator
support services network density (Nowak and Grantham, 2000), IM and client
relationships (Autio and Kloftsen, 1998),incubator effectiveness (Sherman and Chappell,
1998)and client selection process (Kuratko and Lafollette, 1987).
In summary, real options' assertion that clients can be rationally selected from a
pool of available options by employing "selection criteria" (based on the atti·activeness
and fit of firm proposal to incubator sti·ategy) is problematic. It is not possible to
develop a universally applicable set of selection criteria or the capabilities firms ought
to develop for marketplace success. This is because there are considerable differences
between incubators, their client firms and the markets they service.
2.6 Synthesisand theoreticaflrameworlz
Overall, the review indicates that most research in the area is descriptive in nature and
not explanatory where researchers have not presented a theoretical ti·eatment of
incubation as a social process. Why has this been the case?
There are two reasons for the above: first, although a number of previous literature
reviews in the area (Hackett and Dilts, 2004a; Phan et aL,2005) highlight the diversity
of disciplinary foundation in the area; such diversity does not automatically lead to
a diversity of underlying meta-theoretical assumptions (Burrell and Morgan, 1979;
Gergen, 1994).Within incubator-incubation literature, a lack of diversity in researchers'
meta-theoretical assumptions has led to the dominance of instrumentalist ideals
guiding research designs. This becomes apparent from some of the research questions
that have been investigated in the past[3] and choice of predominantly positivist
methodologies (see research context column in the Appendix). Instrumentalists regard
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theories not as attempts to describe the world but as instruments for making
predictions (Eldridge, 1998). Thus, the "black-box" analogy is an appropriate one for
instrumentalism. The researcher inserts (intrinsically value-free) information
regarding observed background conditions into a model black-box and the box then
generates predictions regarding what one will ultimately observe (Newberry, 2007).
Of no concern, therefore, is the mechanism inside the box - it can be anything "as long
as it works." There is no particular requirement that the black-box and its mechanism
depict the way the world really is (Bird, 1998). The instrumentalist's focus on
inputs-outputs without any real concern for mechanisms is precisely what Hackett and
Dilts (2008)lament. They conclude that in order to truly understand incubation there
is a need to move away from "black-box" approaches designed to simply predict
incubation outcomes to understanding how incubation works in practice. No doubt, the
prediction of incubation outcomes is an important aspect of interest to both researchers
and practitioners, however, the lack of models that can make accurate predictions
is clear testimony that value- and context-free black-box approaches are simply not
enough.
Second, the review in this paper along with that of Hackett and Dilts (2004b)
suggests that theoretical frameworks assessed and deployed in the past are not wholly
adequate for explaining incubation's processual dynamic. This is primarily because
these frameworks are not concerned with the study of social processes or mechanisms
like incubation. It is suggested that mechanisms-based theorising can help us
understand incubation's true nature. What is meant by mechanisms-based theorising?
Social mechanisms are "sometimes-true theories that provide an intermediary level of
analysis in-between pure description and storytelling, on the one hand, and universal
social laws, on the other" (Coleman,1964,p. 516).If a regression tells us about a relation
between two variables - for instance, if you turn the ignition the car will start -
mechanisms-based reasoning would require that one lifts the bonnet, take apart the
machinery inside and show how (Davis and Marquis, 2005). Mechanisms describe
"a set of interacting parts - an assembly of elements producing an effect not inherent
in any one of them. A mechanism is not so much about "nuts and bolts" as about "cogs
and wheels" - the wheelwork or agency by which an effect is produced" (Bernes, 1998,
p. 74). They come in three varieties:
(1) cognitive mechanisms - operating through alterations of individual and
collective perception;
(2) relational mechanisms - which alter connections among people, groups and
interpersonal networks; and
(3) environmental mechanisms - which exert influences on the conditions
affecting social processes.
There is emphasis here on time and place, in particular to ways in which social
mechanisms can incorporate institutions, and understandings and practices that have
accumulated historically (Hedstrom and Swedberg, 1998).
Davis and Marquis (2005) give a number of examples of social mechanisms
including: framing (the use of metaphors and symbols that organize perceptions of
issues and cue courses of action by linking problems and actions to prevailing cultural
conceptions), translation (how ideas that diffuse are modified and implemented to work
in specific local contexts), bticolage (recombining elements, often borrowed from
other contexts, to create a new configuration of social activity), commensuration (the
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institutional process by which entities become comparable and thus competitors, as
firms in an industry) and evangelism (the reverse of diffusion, where adopters or their
agents eagerly spread organizational practices). There are many more examples, but
these should give a sense of the shape of the domain.
Mechanisms-based theorising can aspire to explain but not predict. We may be
confident that actors will respond to particular pressures, but uncertain what direction
any response may take. This means that it may be possible to explain afterward but
not predict prospectively. The point is not to accumulate findings about what is
generally true about organizations - this proves to be a fruitless endeavor - but to use
organizational mechanisms to explain social phenomena (Davis and Marquis, 2005).
Hence, for incubation researchers, a mechanisms-based investigation would be
concerned with, for instance, how are the incubator and client firm linked, based on
what relational aspects?, how do these aspects impact the link between the incubator
and client firm? and, how incubation is triggered? Such a methodological outlook has
been missing; and, it is being adopted in this paper for deeper, more direct and
fine-grained explanations to emerge.
3. Methodology
The primary aim of this research is to advance a new and empirically grounded social
mechanisms-based conceptualization of business incubation. Achieving this aim is
conveniently possible in a pragmatist philosophy. Scholars regard pragmatism as an
interpretivist approach (Benton and Craib, 2001;Bj0rn, 2004)that is not committed to
any one system of philosophy and reality, the focus is on the research problem and all
available methods to derive knowledge about the problem (Creswell,2009).The spirit
behind the study was to present an insider's account of the lived experiences of the
research's participants, thus, the study was subjective and non-experimental in nature.
The approach was exploratory where the overall purpose was to provide insight into a
complex and dynamic incubation process.
An ethnographic methodology was employed where data was collected using
semi-structured interviews and non-participant observation. Ethnography proved to
be a useful means since the method allowed for the capturing and recording of social
complexity; provides the opportunity to unearth new and unexpected dimensions;
and allows the use of an emergent research design (Hammersley and Atkinson, 1983).
Moreover, the ethnographic approach was especially suitable, since the incubator
allows convenient observation of, and in-depth engagement with, the parties of
incubation in a boundaried physical space.
To undertake the empirical work, a six-month access period was negotiated with
two Dublin, Ireland-based business incubators including first, a university campus
incubator, hereinafter referred to as IncuWorlzsa;nd second, a community enterprise
center, hereinafter referred to as Dublnc. In justifying the choice of the above
organizations, it is suggested that inter-model differences diminish when it comes to
their internal processes since in order to qualify as an incubator, any model must
capture the original ethos of business incubation in its incubation delivery
mechanisms. To illush·ate, the goal of campus incubators is "to support the creation
and growth of its client firms during the start-up years through value-added
contributions - the incubation process" (Mian, 1997,p. 257).This definition, in essence,
of what incubators do (incubate), is the same when university campus-based
incubators are compared with community enterprise centers, not-for-profit hi-tech
incubators or corporate incubators.
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Tables I and II present details on the interview subjects at Dublncand IncuWorl?s,
respectively. A client numbering system is developed which places Dublncclients in
the range of one to 20 and IncuWorl?sclients in the range of 21-39. This allows the
tracing of specific quotes used in the analysis back to particular respondents.
Data were collected over a period of approximately six months at each case
organization during weekly visits. A research plan was drawn up in coordination
with the IM, the point of contact, which contained scheduling details on a series of
semi-structured, face-to-face interviews with both clients (business founders) and
members of the incubator organization. The purpose of these interviews was to obtain
an understanding of participants' perception of the incubation process, how it unfolded
for their firm and the internal normative environment of the incubator. With support
from the IM, e-mails were sent to clients to confirm the schedule. In addition to
interviews, the research plan included the attendance of the researcher at a number of
up-coming "incubation" events taking place in the incubator.
A total of 68 interviews (11 with members of incubator managements and 57 with
clients) were conducted, recorded and transcribed, each lasting 35-45 minutes. An
"interview guide" was prepared using previous literature and keeping in mind the
major aim of the research. The approach to interviewing was semi-structured and was
informed by Patton (1990). In addition to semi-structured formally arranged
interviews, more informal exchanges during numerous chance encounters with clients
also occurred, for instance, at the incubator's cafeteria or at the reception desk.
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Incubator management
Clients
Industry
1. Enterprise manager
2. Previousenterprisemanager
3. A memberof the board of directors
4. Enterprise officer
5. Facilitiesassistant
6. Receptionistsupport staff
Nature
Team size
Stage
Client 1
Client2
Client3
Client4
Client 5
Client 6
Client 7
Client 8
Client9
Client 10
Client 11
Client 12
Client 13
Client 14
Client 15
Client 16
Client 17
Client 18
Client 19
Client20
Ex-Client
Energy/power
Design
>5
Year 3
Energy/power
Equipment manufacture
>5
Year 3
Energy/petroleum Projectmanagement
4
Year 4
General
Social entrepreneur
3
Year 3
General
Medicaldiagnostics
2
Year 1
General
Bespokestitching
4
Year 1
General
Health/therapy
1
Year4
General
Consultingand training
4
Year 4
Food
Web portal
1
Year 3
Food
Processingand sales
1
Year 2
Food
Processingand sales
1
Year 1
Food
Processingand sales
1
Year 1
Construction
Recruitment
1
Year 2
Insurance/energy Consulting
2
Year 2
Software
Sales
1
Year 3
Hi-tech/knowledge Consulting
3
Year 1
Publishing
Design/printing
2
Year4
Property
Management
2
Year 3
Optical
Web sales
2
Year 1
Optical
Testing/sales
4
Year4
ICT
Internet and web dev.
5
Table I.
Dublnc interview
subjects
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Table II.
!11cWu orksinterview
subjects
Incubator
management
Client
Industry
1. Director
2. Managerenterprise development
3. Manager communications
4. Managertechnologytransfer
5. Facilitiesmanager
Nature
Route Occupancy
Stage
Client 21
Client 22
Client 23
Client 24
Client 25
Client 26
Client 27
Client 28
Client 29
Client 30
Client 31
Client 32
Client 33
Client 34
Client 35
Client 36
Client 37
Client 38
Client 39
ICT
Consulting,design,testing
ICT
Product design
!CT
R&D
ICT
Internet technologies
ICT
Internet technologies
ICT
Internet technologies
ICT
Misc.
ICT
Software development
ICT
Internet technologies
!CT
Internet technologies
Telecom
IP commercialisation
General/hi-tech Consulting
General/hi-tech Consulting
Bio-Tech
Fuel
Bio-Tech
Engineering R&D
Bio-Tech
Clinicaltrials, drug testing
Bio-Tech
Drug testing/development
Bio-Tech
R&D
Bio-Tech
ClinicalR&D
Spin-in
CCDP
Spin-out
Spin-in
CCDP
Spin-in
Spin-in
Spin-in
CCDP
Spin-in
Spin-in
Spin-in
Spin-in
Spin-in
Spin-out
Spin-out
CCDP
Spin-out
Spin-in
Incubation
Desk Space
Associate
Incubation
Incubation
Associate
Desk Space
Desk Space
Associate
Incubation
Incubation
Desk Space
Incubation
Incubation
Incubation
Incubation
Associate
Incubation
Year 2
Year 1
Extended
Year 3
Year 1
Year 3
Year 1
Year 1
Year 1
Year 2
Year 1
Year 1
Year 1
Year 2
Year 3
Year 3
Year 1
Year 2
Graduated
Any notable points arising out of these discussions were duly recorded in a field diary.
This diary was also used to record observations and to chronicle thoughts, feelings,
experiences and perceptions of the researchers throughout the research process.
In addition, a field log was also utilized providing a detailed account of the various
ways in which time was spent when on-site. During each visit, in addition to the
scheduled face-to-face interviews with clients and other members of the incubator
organization, there was a 30-minute meeting with the IM also arranged. The purpose
was to factor-in perceptions from both IMs and clients which allowed the researchers
to juxtapose data and draw more nuanced conclusions.
Eisenhardt and Graebner (2007) suggest that theory building from qualitative
research is an inductive process. The focus was to exh-act meaning in complex
qualitative data through the development of summary themes or categories from raw
data through a process of data reduction. In order to induct meaning from case data,
the qualitative data analysis rules recommended by Miles and Huberman (1994)were
followed. These authors point out that careful descriptions of events, people and
settings is one of the most important contributions of qualitative research. This
requires an interpretive and analytic effort to illuminate the constant, influential and
determining events which shape the course of events. Hence, qualitative data analysis
would be a formalized yet creative process (Miles and Huberman, 1994).
4. Analysis of data
4.1 Thesignificanceof norms
An assumption being made in this research is that there is significant variability in the
responsiveness of entrepreneurs to engage in incubation activities. It is suggested that
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this vaiiability is related to the nature of IM-client relations. IM-client relations take
place at a nwnber of levels, including a person-to-person relationship between
the IM and client entrepreneur(s), or a business-to-business relationship between the
incubator organization and client firm. In the management of IM-client relations, a
myriad of IM-client identity-related aspects including those that deal with personality,
background and experience, work to create, what is being called, a state of positive
"incubation-click":
[Client 4] [ ... ] why do we work so well with XYZ (the IM)? [ ... ] I suppose we have really
clicked [ ... ] you know when there is rapport, we share a common goal and I can see (gender
ref. removed) is genuinely interested in our business [ ... ] I can't see myself working with
someone I don't get along with on a personal level[ ... ].
The "click" that the above client describes is a state where both the IM and a client
develop a mental bond based on a nwnber of key elements: first, a shared awareness by
both the IM and entrepreneur of the firm's gaps in knowledge, competencies, and
resources:
[Client2] [... ] we had a number of meetings with XYZ (the IM)on our funding proposal [... ] it
is quite important that this goes through at this stage [ ... ] and both of us are now on the same
wave length[ ... ].
[Client29][ ... ] I have not participated in a business plan competition before [ ... ] it is great for
public relations and the prize money is very welcome[ ... ] and yeah XYZ's (the IM) input is
invaluable [ ... ] I can see (gender ref. removed) has a lot of experience [ ... ].
Second, a mutual willingness to engage in incubation activities:
[Dublnc IM] [ ... ] There is really not much you could do with a client who doesn't ask for
assistance or doesn't need it [ ... ] we try to engage with them but it is not our policy and nor in
our interest to [ ... ] .(pauses to think) [ ... ] I suppose to impose ourselves where clearly no help
is needed [ ... ].
[Client 26] [ ... ] The sort of support we need at this stage is very focused and requires a lot of
sector expertise and contacts [ ... ] I am not sure that we can get this here [ ... ].
Third, a recognition that the IM (and associated networks) can help fill the knowledge,
competency and resource gaps:
[Client 12] [ ... ] I know XYZ (the IM) has been able to help a few other clients here with
government grant applications [ ... ] cash flow is likely to become a serious issue for us so this
is something that we must work on [ ... ].
[Client 10][ ... ] For me it was difficult to imagine all that goes into writing up a business plan
[ ... ] you know for the bank loan [ ... ] I really value XYZ's (the IM) input, (gender ref. removed)
knowledge and expertise in the food sector is really helping put it all together [ ... ].
Fourth, the capacity of the IM to commit sufficient time in order to implement the
breadth of incubation activities and to achieve a level of intensity required for impact: ·
[Dublnc IM] [ ... ] Would like to spend more time with clients but as you can see I wear a
number of different hats [ ... ].
[IncuWorks IM][ ... ] My role here is quite well defined[ ... ] there are annual targets to be
achieved and clients' peiiormance influences my KPis (key peiiormance indicators)[ ... ].
There is a flip-side scenario to the "incubation click." Clients may subliminally signal,
or even overtly communicate, no particular need for developmental assistance.
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This could be due to a number of factors such as: first, entrepreneur confidence in
personal abilities:
[Client 32] [ ... ] I have substantial experience working in the industry which is why my
clients value my advice [ ... ] consulting is a very peculiar field [ ... ] it is about clients being
convinced of your technical and professional abilities [... ] so I don't really see how IncuWorks
can help[ ... ].
[Client ll] [ ... ] I have a fixed daily routine[ ... ] I come in 7, prepare the fish and leave it to
cure[ ... ] then on with the deliveries for the day [ ... ] back in the afternoon, prepare the
catering orders and then close shop at 6 or sometimes 7 [ ... ] this has been working and there
is growth [ ... ] but it is slow [ ... ].
Second, allied to the above is a summary image of the IM as not competent enough to
advise:
[Client 15][ ... ] they don't really have expertise on web-based marketing here, yeah for regular
products and services I could go for advice to the IM but I doubt that there will be any point in
raising the question of search engine optimisation downstairs [ ... ].
[Client 25] [ ... ]Weare working on content management and data mining systems [ ... ] from a
core technical standpoint I don't think XYZ (the IM) can be expected to be of much assistance
[ ... ] there are other areas where I see (gender ref. removed) involvement[ ... ].
Third, uncertainty about what particular business related problems to bring to the IM's
knowledge. This could be due to the perceived risk of either a negative self-image, or
disclosing business details to a third-party. For the client, uncertainty about engaging
with the IM could also be due to a lack of awareness that the IM is actually capable of
solving a particular business problem and/or the client's own assessment of their
business problem's worthiness of the IM's time:
[Client 34] [ ... ] when we were starting off there were all sorts of teething issues [ ... ]
after those came problems of strategic market orientation, then financial management and
finally I would have to say legal [when we were being assessed by a VC][ ... ] they were not
predicted to be occurring in our business plan which we shared with XYZ (the IM) [ ... ] and
frankly I am not sure if we could have been assisted since we needed very specific technical
input[ ... ].
[Client 17] [ ... ] we do know that XYZ (the IM) is always available to help, what does this
mean always available [emphasis added][ ... ] always available for what particular help[ ... ]
I am not sure [ ... ] do I have to pay for it?
Fomih, no genuine need for assistance, where a client does not really need incubation but
chooses to locate in an incubator facility due to the non-developmental conveniences
offered:
[Dublnc IM] [ ... ] One of the things we try to do in the selection interview is to judge why a
client has applied [ ... ] now consider the case of ABC (a client) [ ... ] it is a special arrangement
under circumstances which are not in (gender ref. removed) control[ ... ].
[IncuWorks IM] Yes, there are a number of clients who don't participate as much in our
workshops or make use of the surgeries (walk-in sessions with experts)[ ... ] it takes a while
for both us and the client to understand what it is that is required [ ... ] and sometimes
a hands-off approach is all that is needed[ ... ].
·
In this negative "click" scenario, the IM is faced with the peculiar task of judging the
nature of the incubation relationship. The IM, usually with experience over the years,
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comes to this judgment in the first few meetings with a prospective client at the
pre-incubation stage:
[Dublnc IM] [ ... ] I have worked at enterprise cenb·es for a long time and with time and
experience you can tell after a few months if a client will want to engage or not [ ... ] if they
stop and talk and that is more then a hello [... ] that is a good_sign [... ].
There are also instances where a potentially positive "incubation click" turns into
negative one. For instance at Dublnc,the IM through a chance conversation with a
colleague from a public authority came to know of a client's previous financial and
legal history. This client was availing of rent holidays and was held in high-esteem due
to linkages with the local community. The client, according to the IM, had not
highlighted past legal and financial problems, where such problems, could follow the
client to Dublnc (such as "pushy creditors" or "angry landlords"), thereby, tarnishing
Dublnc'sorganizational identity and reputation. As a policy, clients at Dublnc were
required to declare such details at the time of the selection interview. With this
new knowledge, the nature of the dyadic relationship changed. The focus, rather than
a tacit and positive awareness of client health, became more calculated, cautious
and withdrawn. As per the IM's assessment, the client, despite past problems, had
sufficient business turnover to meet financial obligations to Dublnc.Ultimately, this
issue was resolved through a formal process which took several months. During this
time, according to information related by both the IM and client, there was little or no
developmental assistance-related co-production activity.
The "click" dynamic is also impacted by explicit and implied ground rules of client
behavior. A number of important written and un-written ground rules established
at the very onset of the relationship by the IM act as the base-bonds for the dyadic
relationship. For instance, at Dublnc,a number of such stated and unstated ground
rules acted as dictates to the dyadic relationship, these were hinted at by the IM:
[Dublnc IM] [ ... ] We are a community enterprise center [ ... ] we don't expect a lot from clients
but the way this place is run is very much like a business, we have to ensure financial
sustainability and that there is a positive level of engagement with the local community [ ... ]
it is made very clear to all clients that payment of their monthly rental is crucial [ ... ] we b-y
to keep them involved in our community oub·each efforts and where there is the odd
complaint or something which is against stated policy then we consult with clients
professionally [ ... ] a lot of hard work has gone into building our image and the Board takes
this matter seriously [ ... ].
At IncuWorlzs,ground rules were also prevalent which were hinted to by the IM:
[IncuWorks IM] [... ] When clients sign a conb·act with IncuWorks a number of things are
cJai;fied at the onset [ ... ] it is important that there is participation in our 6-monthly review
process [ ... ] it is helpful in keeping everyone informed and creates an opportunity for us to
step-in formally if there is a need [ ... ] (a clarification is sought) [ ... ] it is crucial that we
assess whether there are opportunities for a spin-in to engage with the University, either in
terms of a research collaboration or there maybe an opportunity for the University to licence
out IP, sometimes it doesn't happen but a potential must exist [ ... ] naturally, other elements
cannot obviously be a part of conb·act but as stakeholders in client businesses there is an
expectation here that IncuWorks is associated with hi-tech and leading edge work [... ].
The relationship dynamic rapidly changes when those clients, who in the IM's
judgment, are found to overlook or break established ground rules. For instance, a very
senior client (Client A) at Dublnc started to use unlocked vacant units for ad hoc
meetings. The IM claimed that Client A, without making formal bookings, used the
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conference room at their leisure for long meetings. Another aspect of the client's
operations that particularly concerned the Il'vl was their own foray into training,
especially in areas where Dublncitself specialized. Client A on the other hand, as senior
clients, felt that it was appropriate to use unutilized facilities for business purposes.
Thus, the Il'vl-ClientA relationship, due to a conflict of interest and the perceived
negation of incubation ethos, became "business like." Opportunities for the parties
to engage in developmental assistance, thereby, reduced due to diminishing trust and
lack of confidence.
To conclude, the "click" between the Il'vland a particular client enables positive
incubation activity. It also reveals the true scale and scope of the level of assistance
needed, and the purposes of a client's strategic motives for joining the incubation
program.
4.2 Triggei-ingof incubationactivity
A social relationship, such as the one between an Il'vland a client, naturally has a time
dimension, forming; evolving and dissolving over time (Burt, 2000; Cummings and
Higgins, 2006). An Il'vl-clientrelationship's intensity changes in time from dormant
to active when projects are mutually initiated. This initiation, which leads to the
relationship status changing to active, can be triggered by either the Il'vlor a client.
In the case of Dublnc,one way the Il'vltriggers mutual projects is by sending out
personalized e-mails informing clients of potential leads or sources of grant funding.
In addition, the Il'vlalso creates "triggers" to engage with those clients who, according
to the Il'vl'sjudgment, are either facing, or about to face, difficulties in doing business:
[Dubinc IM] [ ... ] Over so many years in this role I have developed a system of monitoring
clients without giving the impression that they are being monitored [ ... ] monitoring is not
something that we here are meant to do in the strictest sense [ ... ] the clients have not signed
up for this [ ... ] but naturally I am responsible for ensuring our financial sustainability and
also to help clients keep buoyant[ ... ].
From the above quote it becomes clear that the Il'vlmust ensure that clients remain
stable enough to be able to meet their financial obligations to Dublnc.The Il'vl'stask is
made quite complicated since there is little or no access to client financial data. Hence,
the Il'vldevelops and relies on subtle client-specific indicators that "as a matter of
coincidence" allude to client business performance. Such a system of gauging client
performance complements the nature of the complex and nuanced Il'vl-clientdyadic
relationship at Dublnc.
Depending on the type of client business, the Il'vl,through watchful awareness, is
able to link specific client activities and behaviors with the overall health of their
operations and if there is instability foreseen, the Il'vlproactively attempts to trigger an
episode of developmental assistance. For instance, the Il'vlnarrated an account of a
particular client involved in waste recycling:
[Dubinc IM][... ] I did not see their truck move an inch from its parking space for three weeks
and they were hardly getting any telephone enquiries [ ... ] now for a business that depends on
income generated by collecting recyclable waste [ ... ] for them not moving their truck for so
long and not getting any phone calls either [ ... ] rings warning bells [ ... ].
These subtle indicators triggered an event of developmental assistance. The Il'vl
called over to the client's office and had a "chat" about internal affairs, showed
empathy, and offered advice and support in the form of deferred rental payments
or rent "holidays."
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Subtle client-specific indicators, apart from non-interventionist monitoring and
helping the IM trigger incubation assistance, can also be used for negotiating with
clients. For instance, at Dublnc, when a client requested a rental holiday for an
extended period the IM was able to effectively negotiate down the holiday time period
on the basis of a subtle client-specific indicator, observations on the number of the
client's walk-in customers. With a large number of walk-ins, it was difficult for the IM
to believe that the client was facing financial difficulties.
The role of subtle client-specific indicators had little or no impact on triggering
incubation activity at IncuWorlzs.This was due to higher levels of transparency
facilitated by regular disclosures of financial and operational performance during the
six-monthly review process. The IM did not have to use stealth to gauge clients' status.
At the review meetings, any adverse circumstances that clients faced were mutually
diagnosed in an open environment and sb·ategies were discussed and agreed upon to
counter negative impacts:
[IncuWorksIM] [ ... ] The reviewmeetingis not meant to be a monitoringexercise[... ] weare
ve1ycarefulto not give that impression[... ] we want to showclientfirms that IncuWorksis a
real stakeholderand partner. Duringthe meetingsthe clientsmake presentationsabout their
progress and present plans for the next review period. Our effort is to see where we can
contributetowards the realizationof their plans [... ].
In fact, the review meetings were the greatest source of incubation triggers. For
instance, at IncuWorlzsd, uring one review meeting, it became clear that a Desk-Space
client was struggling to meet the firm's cash flow requirements. The IM recommended
that they work on entering several local and international competitions for innovative
hi-tech firms where, as per the IM's assessment, the struggling client had a chance of
winning substantial prize money. This strategy for raising capital was agreed upon
and the client started to work under the guidance of the IM to prepare and submit
documents and presentations according to the requirements of various competitions.
The IM gave substantial input to the client on preparing submission documentation
and the client firm was nominated for a high-profile EU level competition. The IM
worked with the client to hone the final presentation and to prepare for its delivery and
subsequent Q&A. The IM went one step further and actually flew with the client
abroad to oversee the presentation delivery, to help make last minute adjustments and
to provide moral and emotional support. This mutual agency led to the client being
placed in the competition's top tier and not only winning substantial prize money, also
benefitting from press coverage, networking and general exposure. The IM was able to
ensure that IncuWorlzsbenefitted from the hype and publicity associated with winning
a high-profile competition.
Incubation triggering mechanisms and dynamics are complex and our
understanding of these fields is likely to remain limited because, methodologically,
there is probably no viable sb·ategy to capture the incubator's entire social environment
in totality. Incubation can be triggered by random events such as hearsay, chance
meetings and casual conversations between the IM (or other members of the incubator
organization) and a particular client at any point in time inside or outside the
incubator organization. However, true for any incubation environment; IM-client
relational quality would be the real denominator for developmental co-production
quality (i.e. trust and rapport between two professionals and individuals).
In the following section, a theoretical reflection on the five frameworks analyzed
in Section 2 is presented along with the major contributions of the research.
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--------
These contributions extend and build-on the valuable work of previous scholars.
In addition, a new mechanisms-based direction for incubation process research is
also proposed.
5. Discussion
5.1 Contributionto literature
In the review of business incubation process literature presented in Section 2, it was
highlighted that our understanding of incubation needed further development due to
base assumptions-related limitations of earlier theoretical frameworks. New ventw-e
creation theory, the RBV,social network theory, dyadic theory and real options did not
present much value in the study of social processes. The study of social processes has
been the focus of mechanisms theorists; and, aligned with an interpretivist-pragmatist
worldview, in this research; mechanisms theory provided the epistemological
flexibility and methodological adaptability to conveniently focus the enquiry on the
hidden mechanics inside the "black-box" of incubation. Assumptions behind new
venture creation theory, the RBVand real options, based on rational choice theory, were
not found to be valid. Much action within the research sites typically involved no
conscious weighing of means and ends. As assumed in most rational choice models,
means and ends were not always given priority over action - action was often
disconnected from an "instrumental rationality" and was initiated on its own allowing
actors to become attached to problem-solutions they could not have imagined
previously. Furthermore, although the merits of linear models to describe the
"incubation system" - as a number of new venture creation theorists have done - are
obvious (e.g. ease of elucidation, evaluation and replication); the drawbacks, however,
as this research has highlighted, include reductive over simplification and a gross
glossing over of important socio-cultural idiosyncrasies that introduce non-linearity,
volatility and subjectivity to the process's dynamics.
Despite the above problems, previous research has indeed contributed valuable
understanding; our knowledge of business incubators-incubation since the early 1980s
when the first pioneering articles appeared, has come a long way. The endeavor in this
paper was to build on previous research to advance theory and for this purpose the
mechanisms approach was found to be quite versatile. For instance, Rice's (2002)
research based on dyadic theory suggests that incubators and entrepreneurs operate in
an inter-dependent "co-production dyad" where business assistance is co-produced
between the IM and the enh-epreneur.This research contiibutes to Rice's (2002)model
by highlighting the mechanisms through which the IM and the client trigger
incubation co-production. These include: first, proactive general initiative by the IM -
such as mass e-mails to clients advising them of available services in-house or
externally; second, proactive specific initiative by the IM where stealth may be used to
gauge a client's latent assistance needs; third, structured processes - such as periodic
review meetings to assess client progress; fourth, chance and/or serendipitous
meetings or discussions; and fifth, proactive initiative by clients. Instances of proactive
client initiative were very few, even though IM interview quotes highlight a great
degree of reliance on clients themselves when it comes to h-iggering incubation co-
production (after all, clients are in the best position to judge what existing and
foreseeable problems they need assistance with).
In this research, it has been shown that a dynamic inter-change exists between
the parties involved in incubation, and it is through these ties or relationships that
incubation activity is facilitated. Previous researchers have also investigated
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relational inter-changes within incubators; for example, Aaboen et al. (2008),
drawing from social capital theory, examined the role of counseling and networking
inter-changesbetween the incubator management and clientfirms. Frequent inter-changes
with incubator management are deemed to be beneficial where the venture can
get direct assistance and access to recommended programs (Aaboen et al., 2008).
We know from previous research that frequent inter-changes between incubator
management and client firms and between client firms can in fact lead to power
sh·uggles, shifting coalitions, self-interest, secrecy, lying and enh·epreneurs trying to
hide the fact that their businesses are based in incubators (McAdam and Marlow, 2007;
Evald and Bager, 2008).Through the identification of IM-client relational ground
rules in this research, it becomes possible to highlight the normative conditions
under which frequent inter-changes could "safely" occur minimizing the extent of
problems identified above. Identified ground rules and norms include clients adopting
the ethos or spirit guiding the incubator, conhibuting to incubator reputation,
adhe1ing to rules of tenancy, and participating in their own development by periodically
disclosing progress details.
In previous research, a number of factors are identified that contribute to the
development of positive incubation relationships; including, the types of businesses,
their stage of development, the personal characteristics of the entrepreneurs, critical
mass, the incubator space, forums, norms and attitudes, the actions of the IM and
time (Lichtenstein, 1992).Through this research, it becomes possible to induct three
additional variables:
(1) psychological compatibility and degree of vision commonality between IM and
client;
(2) IM leadership style; and
(3) trust.
From a professional practice standpoint, it is foreseen that a psychomeh·ic tool
or system can be developed based on these variables for matching clients with IMs.
The purpose would be to increase the chances of building positive incubation
relationships, thereby leading to more higge1ing behavior and increased co-production
activity.
Using social network theory, previous researchers suggest that certain types
·of client firms network more readily within an incubator than others, thereby,
improving their "network density" - an important criteria for incubation success
(Totterman and Sten, 2005;B0llingtoft and Ulh0i, 2005;Hughes et al, 2007;McAdam
and Marlow, 2007).Further, researchers argue that bringing together similar clients in
a specialist incubator improves client interpersonal contact (Schwartz and Hornych,
2008).Findings in this research suggest that, overall, the client-mix does not have
a well-defined relationship in terms of boosting client networking. IncuWorl,s- being a
specialist incubator with more similar clients when compared to Dublnc- a mixed use
incubation facility, did not show significantly high levels of client-client interaction
that h·iggered the development of economically beneficial relationships. The
interesting finding here is that clients of a certain type at IncuWorks (ICT-based)
had comparatively higher levels of interaction when compared to other types
(Bio-Tech).The explanation is that increased levels of client-client interaction depend
on the nature of clients' business and industrial affiliation and not entirely on an
incubator's "specialist" or industry-specific focus.
Mechanisms-
driven theory
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IJEBR
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5.2 Towarda new mechanisms-basedconceptualizationof businessincubation
It was highlighted that mechanisms come in three varieties (Schwartz and Hornych,
2008 - Section 2.6):
(1) cognitive mechanisms;
(2) relational mechanisms; and
(3) environmental mechanisms (Hedstrom and Swedberg, 1998).
In line with the scope and aim in this research, two important relational mechanisms
were identified - norms and ground rules and triggers of incubation. Distilled
outcomes allow us to progress a new theoretical basis for studying incubation based in
social mechanisms theory, one which is distinct from bases reviewed in the analytical
framework section. Thus, defined, incubation is: a more or less general sequence or set
of social events or processes initiated from inside an incubator organization analyzed
at a lower order of complexity by which (in certain circumstances) some cause X tends
to bring about some effect Y in the realm of IM-client social relations. This sequence
may or may not be analytically reducible to the actions of the parties in incubation,
may underwrite formal or substantive causal processes, and may be observed,
unobserved or in principle unobservable.
Although, it may seem that the above definition is quite reductive, in that it merely
places emphasis on causal factors impacting the nature of X-Y relationships; under
the pragmatist-interpretive worldview, however, it is much more: the search for
mechanisms is the search for historically embedded deep causes operating in variable
combinations, circumstances and sequences with consequently variable outcomes.
The above task of searching for embedded deep causes would not be easy, and this
would be a limitation of the mechanisms-based approach. To illustrate; when an
episode of incubation co-production is triggered, the ensuing process does not have a
repeatable pattern. The process follows a random sequence of interactions and events,
is non-linear, not wholly controllable and its outcomes are difficult to predict. For
example, a maj01ity of clients, when asked about how they started-up operations at
either Dublncor IncuWorksand indeed found out about incubation support, recalled
the important role of chance conversations or meetings, and randomly coming across
signage or information online. Most clients could not foresee what their support needs
were going to be in the medium to long term because of unpredictable outcomes of
present strategy. Clients also suggested that important turning points in their
businesses came when they pursued opportunities for which they did not originally
plan for. Chance meetings and introductions to other clients in the cafeteria led to a
number of informal alliances. Hence, from a methodological standpoint, it becomes
quite difficult to track incidents occurring inside the incubator organization with a
degree of precision to be able to accurately identify cause-effect type relationships.
Despite the above limitation, there may be opportunities to further enrich
knowledge on incubation using the mechanisms approach. To further research in the
area, and on social mechanisms in general, an important question must first be posed:
what should be the primary points of analysis (or the factors that bring about the
causal relationships) when analyzing social mechanisms? Following Gross (2009),
people's responses to certain situations are limited by a repertoire of behaviors to
which they have exposure and those that seem suitable to the problem at hand. Thus,
social mechanisms can be understood as chains of actors, problem situations and
habitual responses, coming together with varying degrees of efficacy with the
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assumption that a novel response to actors' problem would emerge. For each, our goal
would be to understand why and how, when confronted with a problem situation and
endowed with habits of cognition and action, along with other resources, certain
responses become the most likely. In other words, the focus of future research enquiry
in this area should be in uncovering why and how the parties in incubation develop
responses to certain problem situations through the habits of cognition and action.
Notes
1. They briefly describe and attempt to operationalize (in the context of incubation)
behavioural theories, economic theories (neo-classical economic reasoning and transaction
cost economics), the resource- and knowledge-based views, the dynamic capabilities
perspective, agency theory, institutional theory, structuration theory, scaffolding theory and
finally the real options theory from the domain of financial economics.
2. It was felt that 23 articles was a sufficient-enough number considering that Hackett and Dilts
(2004a) in their systematic review of the entire incubator-incubation area with five different
research orientations (where process studies were merged with "incubatee development"
studies) had a total of 35.
3. For example: what are the core services of start-up incubators, and how can they be managed
best? (vonZedtwitz and Grimaldi, 2006);what role does the incubator play in supporting the
new firm in its development as represented by the lifecycle model? (McAdam and McAdam,
2008); what is the role of incubators in the entrepreneurial process? (Peters et al, 2004); and
how business incubators can support entrepreneurs, in their efforts to build up networks
for the benefit of their own company, by focusing more on social capital? (Totterman and
Sten, 2005).
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Further reading
Dixit,A.K.and Pindyck, RS. (1994),InvestmentUnderUncertaintyP,rincetonUniversityPress,
Princeton, NJ.
Wolff,K. (1964),The Sociologyof GeorgSimmel,Free Press, Glencoe,IL.
Corresponding author
Dr Ali Junaid Ahmad can be contacted at: alijunaidahmad@gmail.com
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gi ~;;;i
a.-. 8;o:;:-.l.g8"?'-"l.'0c~..r (D
-·n
0::, -(1)
"' rn_
ib
0
0
,.j::,..to
Article and
No. conceptualization Selection rationale
New venturecreationtheory
1. Campbell et al
One of the earliest articles on
(1985)
incubators; describes the business
incubation process and presents a
model of the incubator
2. Brooks (1986)
An important early article which
presents a staged
conceptualization of the incubation
process. The process is seen as
transcending the walls of the
physical incubator facility
3. Merrifield (1987) First published study that focuses
on an important component of the
incubation process: client selection
4. Smilor (1987)
One of the first published studies
to have a strong empirical
component; highlights the impact
of incubator ownership on the
incubation process
i
(I)
Research context
5~. -
1. Practitioner study quantitative with survey
2. Incubation as a business development process consisting of four mutually
exclusive components: (1) diagnosis of needs; (2) selection and monitoring;
(3) capital investment; and (4) access to expert networks
3. Emphasis on the problem of locating potential entrepreneurs suitable for
incubation
1. Practitioner study
2. Incubation is the process of heightening community support for the
entrepreneur; hence, it is a process that ought to transcend the walls of an
incubator to include all incubators within a community working communally to
incubate nascent firms
3. The primary components of the incubation process include the incubator support
network, the pooled support services and a university linkage
4. Incubation as a two-stage process where at the first stage stait-ups enter an
"economic growth incubator" in order to gain access to primary support
components. At the second stage, with greater maturity, they can move into a
"real estate incubator" which provides office space and shared services
1. Practitioner study
2. Only those firms that are "weak but promising" should be admitted whilst the
firms that cannot be helped through business incubation and those that do not
need incubation, should be screened
1. Practitioner study triangulation with data from national survey, interviews,
analysis of case studies, and observation
2. Incubation as a process of opening new network access while controlling a set of
assistive resources: "secretarial support, administrative support, facilities
support, and business assistance"
(co11tinued)
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Article and
No. conceptualization Selectionrationale
Research context
5. Hisrich (1988)
6. Lumpkin and
Ireland (1988)
7. Weinberget al
(1991)
8. Peters et al.
(2004)
VerifiesBrooks (1986)- see
no. 2 - conceptualizationof an
incubator without walls and the
incubation process as spatially
dispersed across various
"incubating" institutions
Builds on Merrifield's(1987)- see
no. 3 - work that new firms or
incubatees can be rationally
selected from a pool of available
options. Very rigorous
methodologyand analytical
process employed
Prolificincubation researchers; this
is a seminal publication building
on and collating the results from a
number of previous studies by
David Allen - one of the study's
co-authors;also first to bring a
human relations perspective to
incubation research
Usefularticle since it draws on new
venture creation literature and
discuss the entrepreneurial process
inside incubators
1. Case study with triangulation
2. Incubation is seen as one component of an integrated strategy to promote
intrapreneurship. Others being venture capital exchange, intrapreneurship
center,innovationcenter,small business developmentcenter,student/education/
entrepreneurship developmentcenter
1. Quantitative with survey
2. Screeningpractices and emphasis differsbetween differentgroups of incubators
3.Specificcharacteristics of incubator archetypes influencethe way they selectand
incubate nascent firms
1. Triangulation with secondary data from multiple practitioner-orientedcase
studies (incubator programme evaluations)
2.Their modelviews incubationas a cooperativeprocess between the incubator,its
clients and field-levelpartners. Incubation occurs within the internal and
external interorganisational fields that connect these entities in a network that
channels the flow of resources to and from incubating firms to entities in the
environment
1. Mixed methods research design with secondary data analysis using published
statistics and face-to-faceinterviews
2. Focuson the impact of the servicesofferedby incubators,namely infrastructure,
coachingand networks,on the graduationrates of the respectiveincubators'clients
3. They suggest that if a deeper understandingof the entrepreneurialprocess,
incubationstrategies and approachescan then be designedto facilitatethe
entrepreneurat oitical junctures with tangibleresourcesand other forms of
support
(continued)
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Article and
No. conceptualization Selection rationale
9. Aerts et al (2007) Important study that looks at the
client selection processes of
European business incubators
using a wide ranging survey
10. Bergek and
Norrman (2008)
Study looks at an important
component of the incubation
process - client selection
Resource-basedview
11. McAdam and
McAdam (2008)
Useful article which uses the
resource-based view (RBV) to
study the relationship between
stages of growth of new ventures
inside incubators and incubator
resource consumption
Research context
1. Quantitative with survey
2. Incubators can be categorised according to their screening profiles: (1) financial
screener, (2) team screener, (3) market screener, and (4) balanced screener
3. Incubator screening practices vary across European nations and Europe's
screening emphasis as a whole differs considerably from the USA. Whereas, in
the USA, financial criteria dominates screening, in Europe the more "soft"
criteria to evaluate the management team and market fit are employed
1. Quantitative with secondary data from incubator application forms
2. Any incubator selection strategy would use criteria to assess either the "business
idea" or the "entrepreneur/management team"
3. What really differentiates any incubator selection strategy is either the flexibility
or strictness in the application of assessment criteria
1. Exploratory and longitudinal multiple case study with primary data from
interviewing, non-participant observations and informal discussion
2. Incubation is not a static process or simply a menu of services. The nature of
incubation changes according to (a) the varying resource needs of the client firm
over the duration of the incubation period; and more importantly (b) as it
becomes clear from the comparative nature of their research, the client firm's
industrial affiliation drives aspects of resource needs
3. There are a number of stages in the growth of the entrepreneurial hi-tech firm
where each successive stage represents increasing levels of (a) complexity in
firm coordination, control and strategy; and (b) the need for additional resources
4. High-tech firms' propensity to make use of the incubator resources and support
increases as the lifecycle stage of the firm increases
(continued)
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Article and
No. conceptualization Selection rationale
Research context
12. Patton et al
(2009)
13. Todorovic and
Moenter (2010)
Dyadic theoiy
14. Rice (2002)
15. Warren et al
(2009)
A unique study in that it looks
specifically at a number of aspects
that strengthen the incubation
process at hi-tech university
incubators
Latest article that studies an
important aspect of the incubation
process; using the resource-based
view the article looks at what
incubator resources are most
valued by client firms
A significant study which for the
first time describes incubation as
occurring within independent
co-production dyads
Study looks at the knowledge
acquisition processes of client
firms in the incubation process
1. Case study of a high tech university incubator
2. Incubation is seen as a process by which business assistance is deployed. The
timing of such deployment is derived from a tacit understanding of the founder
and associated business proposal that the incubator director develops
3. The emphasis is on the imp01iance of the IM and client relationship
1. Qualitative study based on 30 in-depth interviews
2. The incubator must provide a resource that the client firm cannot find elsewhere.
Once the incubator client firm relationship reaches a point where the only
resource it is providing is the subsidy of physical space, then the incubator space
can be better utilised by another client firm
3. No evidence was found to suggest that certain industry sectors have one
emphasis as opposed to the other
1. Triangulation with multiple case studies where data were collected via both a
structured questionnaire and in-depth interviews
2. The readiness of the entrepreneur to engage in co-production of business
assistance impacts the incubation process outputs
3. Rice overturns the implicit assumption in previous research which assumes the
incubator to be the initiator and orchestrator of incubation whilst the incubatee
as the passive recipient. Instead, according to Rice, incubation occurs in an
inter-dependent "co-production dyad" between the IM and the incubating firm
1. Case study of a hi-tech university incubator
2. Describe incubation as a process of knowledge acquisition by client firms. The
process is seen as two-staged: (a) knowledge gained through the incubator
director; and (b) knowledge gained via external networks
3. A tipping point occurs when clients begin to wean themselves away from the
Director and start to leverage social capital themselves
(co11ti11ued)
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Article and
No. conceptualization
Socialnetworlltheo1y
16. B0llingtoft and
Ul110i(2005)
17. Totterman and
Sten (2005)
18. McAdam and
McAdam (2006)
19. Hughes et al
(2007)
Selection rationale
Only article found which uses
ethnography to investigate the
functioning of a new "networked
incubator" model
The article uses social capital
theory to focus on how business
incubators can support
entrepreneurs
Useful qualitative study that looks
at entrepreneurial networking
within a technology incubator in
Ireland
Relevant study which looks at an
important aspect of incubation
process - client networking
behaviour inside incubator
organizations
Research context
1. Qualitative with ethnography
2. Focused on the mechanisms connected to individuals and their relations with
each other and mechanisms related to the construction of the incubator
1. Triangulation with multiple case studies where data were collected via both a
structured questionnaire and in-depth interviews
2. Incubators facilitate the creation of entrepreneurial networks and the higher the
firm network density in an incubator the greater the level of client satisfaction
with incubator services
3. Business incubators should carefully consider what kind of tenant mix and
industry focus would most effectively stimulate the existence of synergies and
commitment among tenants
4. In-depth longitudinal study using semi-structured interviews
5. Incubator placement enhances the development of entrepreneurial networks
which provide support during the vital stages of firm foundation
6. Networks have a key role in facilitating the design and implementation of firm
growth strategies
1. Quantitative with survey
2. Physical space and the company mix of an incubator play an important role in
increasing the network dynamic of an incubator
3. Incubation outcomes can be classified and predicted based on the network
behaviour of client firms
(continued)
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Article and
No. conceptualization Selection rationale
Research context
20. McAdam and
Marlow (2007)
21. Evald and Bager
(2008)
Realoptionstheory
22. Hackett and Dilts
(2004b)
23. Hackett and Dilts
(2008)
Study is based in an Irish empirical
setting; the internal dynamic of a
business incubator (linked to a
university) is explored to suggest
dis-advantages that may arise as a
result of incubator placement
A unique piece of research since it
looks at venture team activity
inside "corporate incubators" -
which remain quite under-studied;
the study focuses on political
rivalries within venture teams
Very relevant article; for building
new theory on the incubation
process, the article assess the
appropriateness and fit of
numerous theoretical frameworks;
explicit theorisation on client
selection using real options theory
Imp01iant article which
operationalises the real options
framework proposed in Hackett
and Dilts (2004b)to investigate the
client selection process
1. Longitudinal in-depth case study using qualitative data collected via
interviewing, participant observation and informal discussion
2. Critical of the incubator's role in the establishment of management teams and
awarding credibility to client businesses
3. Mental notions of credibility change as the firm matures with incubator
placement as initially being perceived as a valuable mechanism of achieving
greater levels of market integrity. However, in later years, residing in an
incubator premises was, according to entrepreneurs, perceived as amateurish,
vulnerable and inexperienced
1. Longitudinal research design with triangulation. Both qualitative (interviews)
and quantitative (questionnaires) data collected in two rounds spread over two
years
2. Due to competing priorities and objectives between high-tech venture teams, IMs
and corporate managers, is open to discreet political games. These political
games tend to become institutionalised patterns of rivalry and power struggle,
trapping leaders of venture teams
1. Theoretical paper
2. Real options theoretical reasoning is used to map the incubation process. They
suggest that incubatee selection is the creation of an option whilst subsequent
resource infusions and monitoring and assistance are option exercises
3. The performance of any incubation programme is a function of and positively
related to (1) incubatee selection performance, (2) monitoring and business
assistance intensity, and (3) resource munificence
1. Quantitative with survey
2. Real options theoretical reasoning is used to map the incubation process. They
suggest that incubatee selection is the creation of an option whilst subsequent
resource infusions and monitoring and assistance are option exercises
3. The performance of any incubation programme is a function of and positively
related to (1) incubatee selection performance, (2) monitoring and business
assistance intensity, and (3) resource munificence
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nAm I BI A un IVERSITY
OF SCIEnCE Ano TECHnOLOGY
FACULTYOF COMMERCE, HUMAN SCIENCESAND EDUCATION
DEPARTMENT OF MANAGEMENT
QUALIFICATION: BACHELOR OF BUSINESS MANAGEMENT HONOURS
QUALIFICATION CODE: 08BBMH
LEVEL: 8
COURSE CODE: SES821S
COURSE NAME: SME SUPPORT
SESSION:
JULY 2022
PAPER:
THEORY
DURATION:
3 HOURS
MARKS:
100
EXAMINER(S)
SECONDOPPORTUNITYEXAMINATION PAPER
MS. ESTHEROLIVIER
DR. CHRISVANZYL
MODERATOR: MS. A TJIUEZA
INSTRUCTIONS
1. This examination is an open-book assessment.
2. Study the attached articles and answer the questions.
3. Answer ALL the questions and in essay format.
4. Write clearly and neatly.
5. Number the answers clearly.
PERMISSIBLEMATERIALS
1. Study Notes
THIS QUESTION PAPER CONSISTS OF 2 PAGES (Including this front page)
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QUESTION 1
[l00Marks]
How do the following five theories, as presented by Ahmad (2014), influence the [a] Namibian
entrepreneurial ecosystem(s) development; [bl the current innovation and technology development
challenges as contained/described in the current Namibian MSME National Policy, and [c] the current
incubator's performances in Namibia?
• New venture creation theory
• Resource-based theory
• Social network theory
• Dyadic theory
• Real options theory
TOTAL MARKS: 100
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