Gimme shelter? Heterogeneous preferences for tangible and intangible resources when choosing an incubator

Abstract

The rapidly growing and diversifying incubator population has led to increasing efforts to understand why entrepreneurs prefer one incubator over another. Scientific studies suggest that entrepreneurs should prefer incubators that provide startups with intangible resources, such as business knowledge or networks to enhance performance. Yet, studies show many entrepreneurs prefer incubators that provide tangible resources, such as funding and office space. The heterogeneity in preferences for resources from incubators is poorly understood. We do not know whether there are patterns in this heterogeneity nor what factors explain this heterogeneity. Thereby, we do not know the extent to which a one-size-fits-all model of incubation is sufficient to attract and support startups or whether incubators need to tailor themselves to the perceived resource needs of different groups of startups. Hence, this paper aims to identify and explain the heterogeneity in preferences for resources offered by an incubator to startups. We conducted a discrete choice experiment to determine how the attributes of an incubator influence incubator choice by different latent classes of entrepreneurs. The data comes from 935 entrepreneurs in North America and Western Europe. Our results reveal three latent classes of entrepreneurs: “ambitious, balanced spinoffs,” who consider all the incubator’s attributes when making a decision; “innovation-driven funding seekers,” who base their choice on funding availability; and “self-made individualists,” who disfavor networking, training, and coaching. The ambitious, balanced spinoffs class based their choice on the attributes highlighted in the literature, while the innovation-driven funding seekers and self-made individualists fit more with empirically observed preferences for tangible resources. The classes show that systematic heterogeneity exists in the preferences for resources provided by an incubator. We advise incubator managers how to better tailor their support to the preferences and needs of classes of startups.