Gimme Shelter - A Discrete Choice Experiment on how entrepreneurs choose an incubator

Abstract

Technology-based start-ups often experience substantial resource constraints due to the so-called ‘liability of newness’. One increasingly popular way to overcome these resource constraints is through the use of incubators. While choosing a suitable incubator is of major importance for the development of a start-up, little is known about the choice process of entrepreneurs for a particular incubator and the heterogeneity amongst their preferences. I address this gap by using a Discrete Choice Experiment (DCE) to study the influence of resources provided by an incubator in the choice of entrepreneurs for a particular incubator. A DCE allows to test for heterogeneity amongst preferences of entrepreneurs by identifying latent classes. These latent classes are grouped on the basis of similar choice behaviors across entrepreneurs. A total of 935 entrepreneurs are surveyed from across Europe and North America. The results demonstrate that heterogeneity of entrepreneurs’ preferences indeed exists and that different latent classes of entrepreneurs can be identified. The three identified latent classes base their choice predominantly on 1) the reputation of an incubator, 2) the type of incubator and 3) financial capital. Notably, human capital is relatively unimportant in the choice, whereas this is often emphasized by incubators to attract entrepreneurs. Future studies, policies and incubator initiatives should take heterogeneity into account in order to improve the alignment with the needs of entrepreneurs. Better alignment with these needs enables tailoring the services to the specific needs, which can benefit the performance of incubators, start-ups and policy measures.