Business incubators to promote entrepreneurship

Entrepreneurship is fashionable in Spain, and it is not for less: the activity carried out by entrepreneurs, emerging companies (startups) and business incubators, organizations that promote and accelerate the development of emerging companies, promote economic growth and serve to modernize, especially rural areas.

Habitat of entrepreneurs

And entrepreneurship ecosystem It is made up of the set of interconnected business actors (both potential and existing): business organizations (eg companies, venture capital, investors, banks) and institutions (such as universities, public sector agencies, financial bodies).

These actors interact in measurable business processes: start-up rate, number of high-growth companies, levels of successful entrepreneurship, number of entrepreneurs, degree of sales mentality within the company (shareholders and investors among them) and levels of business ambition.

In addition, formally or with an informal union, they connect, mediate and govern the results in a local business environment.

to the warmth of the nest

Within a business incubator, the entrepreneur receives the following services:

1. Assistance. This includes services included in the rate, furniture, facilities, air conditioning and heating, conference room, parking, internet, consulting service, project monitoring and seminars and workshops.

2. Advice. Understood as the support provided by business incubators, either directly or through collaborating entities in: internationalization, financing, legal advice, talent search and relations with the media.

3. connections. With agents interested in business incubated. For example, universities, the technology industry, potential investors –both public and private–, business angels, venture capital, press agencies, consultancy. Together, we call them interest groups.

4. Support for strategic objectives. Defined these as job creation and regional development, technology transfer, compliance with the sustainable development goals (SDG), obtaining benefits, corporate social responsibility and innovation.

The interaction between these variables creates a business ecosystem that, in turn, transforms companies into graduated. Thus, this business approach generates business intentions that benefit the region in which the incubator is located, and the incubator itself, since there will be new companies interested in being incubated.

Entrepreneurship Taxonomy

We have developed a taxonomy for business incubators:

Paso 1. It is the moment in which the incubated companies – the entrepreneurs – get in touch and interact with business actors, including interest groups and target groups. In this phase, while receiving assistance and advice and feeding the network of contacts offered by the incubator, they seek public and private financing. In other words, this is the moment in the process in which the managers of the incubator develop trust between the incubated companies and, once achieved, the projects of said companies look for ways of financing. Alternatively, if the geographical location of the incubators supports the creation of a business network among the surrounding companies, we can conclude that we have a business ecosystem.

Paso 2. The graduation of companies, that is, their launch into the real economy, also favoring regional development in the area where the incubator is located.

Paso 3. In this last step, confidence in the incubator is revealed; In other words, if a region is very active in business, new companies will appear that require the services of the incubator to start up. Therefore, it feeds back and causes the appearance of new entrepreneurs.

Analysis by Spanish regions

In Spain there are business incubators in all the autonomous communities. We have compared the benefits that entrepreneurs receive in incubators in six Spanish regions (Madrid, Catalonia, Castilla y León, Aragón, the Basque Country and Galicia):

• In Madrid, the Basque Country and Aragon, the incubators focused on assisting and advising entrepreneurs.

• The incubators in the Basque Country, Aragon and Galicia focused on finding financing.

• The incubators in Aragón received more public funding than those in other communities.

• Galicia finances its start-ups mainly through universities.

The keys to success

The final step of our study was to develop a survival model for hatcheries with the goal of establishing the key characteristics that lead to their success.

Thus, we determine that the probability of success for firms graduated it is multiplied by three when emphasis is placed on public financing and innovation as a strategic objective.

Therefore, the application of policies focused on supporting public financing for the development of innovative companies guarantees the survival of companies after graduating from a business incubator.

Ana Isabel Rosado Cubero, Professor of Economics, Complutense University of Madrid; Adolfo Hernández, Director of the Department of Financial and Actuarial Economics and Statistics, Complutense University of Madrid, and Francisco Jose Blanco Jimenez, Head of Applied Economics. entrepreneurship, King Juan Carlos University

This article was originally published on The Conversation. Read the original.