Unpainting the black box: exploring mechanisms and practices of start-up incubators

Abstract

Although incubators have become one of the most prominent instruments to stimulate the emergence and growth of start-ups, questions are being raised about their effectiveness. One major obstacle to evaluate the effectiveness of incubators is that the incubator remains a ‘black box’: the extant literature focuses on the inputs and outputs of the incubator, while neglecting the process in between. This dissertation aims to ‘unpaint’ the black box by exploring the practices and mechanisms that underlie the incubation process. This dissertation starts with a series of qualitative studies to inductively identify practices through which incubators facilitate access to resources, learning and networking. Data consists of a total of 281 interviews with entrepreneurs and incubator managers. To explore the role of the incubator’s context, data was collected in different regions (Europe, Silicon Valley, Australia, Israel and the greater Boston area). After these qualitative studies, this dissertation tests which of the three incubation mechanisms (i.e. access to resources, learning and networks) are most important in the incubation process. First, the importance of these mechanisms as perceived by entrepreneurs perceive is explored through a Discrete Choice Experiment. Then, the influence of these mechanisms on start-up performance is tested. Overall, the findings identify networking a key, yet underappreciated, mechanism of the incubation process. The incubator’s networks contribute to start-up performance by enabling start-ups to access missing resources, to efficiently acquire market, business and technological knowledge, to gain legitimacy and to overcome challenges in the entrepreneurial ecosystem. Incubators use a variety of practices to facilitate such networks, both between start-ups and between start-ups and other actors in the entrepreneurial ecosystem. Paradoxically, entrepreneurs may not perceive the value of these networks. Entrepreneurs may be ‘unconsciously incompetent’, as they are not aware of the gaps in their start-up’s resource base that the incubator’s networks can address. Further, building networks takes time; entrepreneurs may prioritize activities that yield immediate value. This creates a mismatch between the services that start-ups want from an incubator and the services that start-ups need to succeed. Policy makers should be careful to see that inexperienced entrepreneurs make poor policy advisors since they are unable to adequately recognize their needs. Incubator managers need to actively stimulate entrepreneurs to take advantage of the incubation process; they can use the practices outlined in this dissertation as a practical guideline This dissertation challenges the dominant discourse on the incubation process. Incubators are often seen as a ‘safe haven’ that protects start-ups when they are most vulnerable. This dissertation shows that incubators not only act as a safe haven, but also as a ‘pressure cooker’. Incubators provide pressure to stimulate entrepreneurs to make use of the incubator’s resources, to provide the shock that is necessary to trigger higher order learning and to create peer pressure in the networks of the start-up community.