Sie sind auf Seite 1von 66

DISSERTATION REPORT

ON
SCENARIO OF BUSINESS INCUBATOR IN INDIA

Batch (2009-11)

Submitted to: Submitted By:Prof. P.K. Ghosh Vivek Pratap (Director) MBA-IVth sem

DECLARATION

DECLARATION

I, hereby declare that the research report on Scenario of business incubators in India carried out by me for the partial fulfillment of the course requirements of MBA from IIMT Management College, Meerut It is the original work done by me and the information provided in the study is authenticated to the best of my knowledge. The report has not been submitted to any other University or institution for the award of any other degree.

Place: Date:

Vivek Pratap

ACKNOWLEDGEMENT

ACKNOWLEDGEMENT

Research work is a combined effort, so one should be thank all that have helped in making report purposeful. Hence I take this opportunity to thank all that have been instrumental in helping me to prepare this report. It is great honor to be assigned this topic. This token of gratitude that firstly goes to the Director, Prof. P.K.Ghosh, IIMT Management College, Meerut. I am immensely grateful to Mr. Farzan ahmed for his benevolent guidance, heart full encouragement and constructive counseling that helped me immensely for the execution of this project. I also reserve my special thanks to our H.O.D,Mr.Aftab Ahmed, I have benefited a lot from his suggestions. I also want to thank all teachers, the staff member and library members for their valuable advice and guidance which helped me to make this report purposeful.

I specially wish to thank all other people directly or indirectly related with my research and my friend as without their valuable support this report would not have been possible. Hope you will appreciate this effort of mine

Vivek Pratap

PREFACE

PREFACE

Management ideas without any action based on them mean nothing. That is why practical experience is vital for any management students. Theoretical studies in the classroom are notsufficient to understand the functioning climate and the real problems coming in the way of management. So, practical exposures are indispensable to such courses. Thus practical experience acts as a supplement to the classroom studies. It offers exposure to real problems of management in various organization It exposes invaluable treasures of expenses to student. I have done my Dissertation Research report in a very healthy atmosphere. I learn a lot of things which I could never been learnt from my theory classes. In the forthcoming pages, an attempt has been made to present a comprehensive report concerning different aspect of my report. I got a lot of valuable information about the topic, the overall knowledge gained by me will reflect in the report itself.

Vivek Pratap

CERTIFICATE

TABLE OF CONTENTS

TABLE OF CONTENTS
1) HISTORY 2) INTRODUCTION 3) THE INCUBATION PROCESS 4) INCUBATOR TYPES, GOALS, AND SPONSORS 5) INDIAN ECONOMIC SCENARIO 6) SME S IN INDIA: PRESENT SCENARIO 7) CHALLENGES AHEAD OF SSI SECTOR: 8) SICKNESS IN SMALL-SCALE SECTOR: 9) FUTURE VISION ON INDIAN SME SECTOR 10) CHANGE IN THE TECHNOLOGICAL REQUIREMENT 11) GLANCE AT ENTREPRENEURSHIP DEVELOPMENT IN INDIA 12) DOMINATING AND INFLUENTIAL FORCES TO NURTURE TECHNOENTREPRENEURSHIP 13) TECHNOLOGY BUSINESS INCUBATION (TBI) MECHANISMS 14) BUSINESS INCUBATORS AND FACILITATORS IN INDIA 15) LIST OF BUSINESS INCUBATORS IN INDIA 16) FOSTERING ENTREPRENEURSHIP THROUGH BUSINESS INCUBATION 17) WHAT BUSINESS INCUBATORS DO 18) REVENUE MODELS FOR BUSINESS INCUBATOR 19) FACTS & FIGURES OF SECONDARY RESEARCH DONE ON BUSINESS INCUBATOR 20) STRATEGY: IMPROVEMENT IN INPUT BY FACULTY: 21) CONCLUSION: 22) EXAMPLE OF BUSINESS INCUBATOR IN INDIA 23) SOME EXAMPLES OF SMALL BUSINESSES IN INTERNATIONAL INCUBATOR 24) CONCLUSIONS AND SUGGESTIONS 25) REFERENCES

10

INTRODUCTION

11

HISTORY The formal concept of business incubation began in the USA in 1959 when Joseph Mancuso opened the Batavia Industrial Center in a Batavia, New York, warehouse.[8] Incubation expanded in the U.S. in the 1980s and spread to the UK and Europe through various related forms (e.g. innovation centres, ppinires d entreprises, technopoles/science parks). The U.S.-based National Business Incubation Association estimates that there are about 5,000 incubators worldwide. As of October 2006, there were more than 1,400 incubators in North America, up from only 12 in 1980. Her Majesty's Treasury identified around 25 incubation environments in the UK in 1997; by 2005, UKBI identified around 270 incubation environments across the country. A study funded by the European Commission in 2002 identified around 900 incubation environments in Western Europe. Incubation activity has not been limited to developed countries; incubation environments are now being implemented in developing countries and raising interest for financial support from organisations such as UNIDO and the World Bank. On November 3, 2010, New York City broke ground on its sixth business incubator and the first in the Bronx called the Sunshine Bronx Business Incubator[10] which is a joint venture between the New York City Economic Development Corporation and Sunshine Suites. INTRODUCTION Business incubators are programs designed to accelerate the successful development of entrepreneurial companies through an array of business support resources and services, developed and orchestrated by incubator management and offered both in the incubator and through its network of contacts. Incubators vary in the way they deliver their services, in their organizational structure, and in the types of clients they serve. Successful completion of a business incubation program increases the likelihood that a start-up company will stay in business for the long term: Historically, 87% of incubator graduates stay in business.

12

Incubators differ from research and technology parks in their dedication to start-up and early-stage companies. Research and technology parks, on the other hand, tend to be large-scale projects that house everything from corporate, government or university labs to very small companies. Most research and technology parks do not offer business assistance services, which are the hallmark of a business incubation program. However, many research and technology parks house incubation programs. Incubators also differ from the U.S. Small Business Administration's Small Business Development Centers (and similar business support programs) in that they serve only selected clients. SBDCs are required by law to offer general business assistance to any company that contacts them for help. In addition, SBDCs work with any small business at any stage of development, not only startup companies. Many business incubation programs partner with their local SBDC to create a "one-stop shop" for entrepreneurial support. In 2005 alone, North American incubation programs assisted more than 27,000 companies that provided employment for more than 100,000 workers and generated annual revenues of $17 billion.

THE INCUBATION PROCESS Most common incubator services: y Help with business basics y Networking activities y Marketing assistance y High-speed Internet access y Help with accounting/financial management y Access to bank loans, loan funds and guarantee programs y Help with presentation skills y Links to higher education resources y Links to strategic partners y Access to angel investors or venture capital y Comprehensive business training programs y Advisory boards and mentors
13

y y y y y

Management team identification Help with business etiquette Technology commercialization assistance Help with regulatory compliance Intellectual property management

Unlike many business assistance programs, business incubators do not serve any and all companies. Entrepreneurs who wish to enter a business incubation program must apply for admission. Acceptance criteria vary from program to program, but in general only those with feasible business ideas and a workable business plan are admitted. It is this factor that makes it difficult to compare the success rates of incubated companies against general business survival statistics. Although most incubators offer their clients office space and shared administrative services, the heart of a true business incubation program is the services it provides to start-up companies.

More than half of incubation programs surveyed by the National Business Incubation Association in 2006 reported that they also served affiliate or virtual clients. These companies do not reside in the incubator facility. Affiliate clients may be home-based businesses or early-stage companies that have their own premises but can benefit from incubator services. Virtual clients may be too remote from an incubation facility to participate on site, and so receive counseling and other assistance electronically. The amount of time a company spends in an incubation program can vary widely depending on a number of factors, including the type of business and the entrepreneur's level of business expertise. Life science and other firms with long research and development cycles require more time in an incubation program than manufacturing or service companies that can immediately produce and bring a product or service to market. On average, incubator clients spend 33 months in a program. Many incubation programs set graduation requirements by development benchmarks, such as company revenues or staffing levels, rather than time in the program.

14

INCUBATOR TYPES, GOALS, AND SPONSORS Industry sectors intentionally supported by incubation programs y Technology y Computer software y Services/professional y Manufacturing y Internet y Biosciences/life sciences y Electronics/microelectronics y Telecommunications y Computer hardware y Medical devices y Creative industries y eBusiness and eCommerce y Wireless technology y Healthcare technology y Advanced materials y Defense/homeland security y Energy y Environment/clean technologies y Media y Nanotechnology y Construction y Arts y Aerospace y Kitchen/food y Retail y Fashion y Wood/forestry y Tourism More than half of all business incubation programs are "mixed-use" projects; that is, they work with clients from a variety of industries. Technology incubators account for 39% of incubation programs.

15

Business incubation has been identified as a means of meeting a variety of economic and socioeconomic policy needs, which may include Creating jobs and wealth Fostering a community's entrepreneurial climate Technology commercialization Diversifying local economies Building or accelerating growth of local industry clusters Business creation and retention Encouraging women or minority entrepreneurship Identifying potential spin-in or spin-out business opportunities Community revitalization About one-third of business incubation programs are sponsored by economic development organizations. Government entities (such as cities or counties) account for 21% of program sponsors. Another 20% are sponsored by academic institutions, including two- and four-year colleges, universities, and technical colleges. In many countries, incubation programs are funded by regional or national governments as part of an overall economic development strategy. In the United States, however, most incubation programs are independent, community-based and resourced projects. The U.S. Economic Development Administration is a frequent source of funds for developing incubation programs, but once a program is open and operational it typically receives no federal funding; few states offer centralized incubator funding. Rents and/or client fees account for 59% of incubator revenues, followed by service contracts or grants (18%) and cash operating subsidies (15%). As part of a major effort to address the ongoing economic crisis of the US, legislation was introduced to "reconstitute Project Socrates". The updated version of Socrates supports incubators by enabling users with technology-based facts about the marketplace, competitor maneuvers, potential partners, and technology paths to achieve comeptitive advantage. Michael Sekora, the original creator and director of Socrates says that a key purpose of Socrates is to assist government economic planners in addressing the economic and scioeconomic issues (see above) with unprecedented speed, efficiency and agility.
16

Many for-profit or "private" incubation programs were launched in the late 1990s by investors and other for-profit seeking to hatch businesses quickly and bring in big payoffs. At the time, NBIA estimated that nearly 30% of all incubation programs were for-profit ventures. In the wake of the dot-com bust, however, many of those programs closed. In NBIA's 2002 State of the Business Incubation survey, only 16% of responding incubators were for-profit programs. By the 2006 SOI, just 6% of respondents were for-profit. Although some incubation programs (regardless of nonprofit or for-profit status) take equity in client companies, most do not. Only 25% of incubation programs report that they take equity in some or all of their clients. INDIAN ECONOMIC SCENARIO India has made considerable achievements during its sixty years of independence. Economic reform and liberalization measures over the last decade have led to strong economic growth, increased exports, reduced inflation and a positive impact on social indicators. Today, India is the fifth largest economy and second most popular country in the world. Indian Economy has significantly grown in the recent years. Both social and economic indicators have reflected their respective positive impact for the development of the Economy. In the Social sector the best example today is 108 million children attend primary schools in India by making the country s education system the second largest in the world after China. In the economic sector Gross Domestic Product (GDP) in nominal terms of US$692 billion in 2004, has made the country the world s tenth largest economy. Real GDP grew by 6.9 percent in 2004 05 compared to 8.5 percent a year earlier. Prospects for real GDP growth for 2005 06 is 6.5 to 7 percent. External position of the economy is becoming significantly stronger. Exports have grown, especially exports of services, which grew by 105 percent in 2004 05. Growth in services has largely been fueled by the information technology boom in which India is emerging as a world leader and is helping in building a strong economy.

17

SME S IN INDIA: PRESENT SCENARIO: In India, small-scale industry is the potent way by which generates maximum employment with comparatively low investment and helps in removal of regional imbalance. Even in developed countries, like USA, employment by small firms contributed 53 percent of total employment during the period 1976-1990 (SBA Report). Birch Birch, 2001)] in his seminal research showed how SSI sector had created 80 % of the new jobs in the United States from 1969 to 1976. Small scale sector has emerged as the most dynamic and vibrant sector in recent times. It currently contributes about 40% of industrial production, 35% of total exports and provides employment to over 18.6 million persons in India (Prasad, 2001). According to the 7th five-year plan, growth of SSI s has been constrained by different factors like technological obsolescence, imperfect knowledge of market conditions, constraint of infrastructure facilities etc, deficient managerial and technical skills etc. SSI Units were operating in sheltered markets and paid little attention to technology up-gradation, quality improvement, and cost reduction during last several decades. This resulted in large number of units being sick with little scope for any improvement in future. The changing economic environment has posed challenges to the Small-Scale Industrial Sector. To face these challenges, an entrepreneur has to adopt innovative product process, productivity improvement techniques, and effective technology management for sustainability of the unit. In today s competitive world, the technology drives the economy. Since engineers create this stuff, they are the real masters of the society. Therefore, development of an effective engineer with entrepreneurial approach is a need of hour for sustenance of small-scale sector. CHALLENGES AHEAD OF SSI SECTOR: Contemporary transformation of the business environment, due to liberalization, privatization, and globalization has increased competitive pressure on the small-scale enterprises in India. Small-scale enterprises are facing an entirely new paradigm of competitive threats i.e. Major shift in product and process technology; Changes in preference from customer segment etc.

18

Entrepreneurs, who engaged up in the day-to-day matters of production and management of their units, and find it difficult to keep themselves abreast of various technological developments. Under the changed circumstances, ability to generate and utilize knowledge is the only way to sustain one self. Technological innovation is a key to survival and growth for small-scale enterprises in India (Wani, Garg, Sharma, 2002). Technopreneur can be useful in industrial development through product/process innovations, increased productivity, production process and systems with application of knowledge he gained (Wani, Garg, Sharma, 2003). Basic accent of India s policy for small-scale sector has been defensive to protect it from dynamics of the competitive growth. New environment for this sector consists of challenges emerging from the ongoing process of economic reforms confirming to the WTO agreement and technological and information environment. Challenges are in the form of increased competition; reduced protection. Opportunities have come in the form of access to better technology, availability of variety of raw materials and components, impetus to quality, efficiency and opportunity to restructure and diversify (Raje, 2000). To accept the challenge and sustain growth of SSI sector, entrepreneur is to be creative, innovative, well acquainted with new technology, sophisticated machines/equipments with its application to compete in this competitive market. SICKNESS IN SMALL-SCALE SECTOR: In spite of growth and development, it is a fact that this sector is beset with a number of problems, which have impeded its development. Sickness in industrial sector results in locking up of resources, wastage of capital assets, loss of production and increasing unemployment. The Small Industries Development Bank of India in its annual report (SIDBI Report, 90-91) analyzed the causative factors for sickness among the small industries with the investment range of 1000- 1500 thousands as technological obsolescence; Inadequate marketing efforts and facilities; Lack of infrastructure; Paucity of working capital; Management inadequacies and Delay in settlement of receivables. Even for the small industries with higher investment, there is only variation in

19

intensity and not the kind. The genuine reasons for sickness of industries are technological obsolescence, lack of planning, and failure in timely modernization, and loss of market (Mukharjee, 1998). Raju has given certain indicators for sickness to SSI sector viz.: shortfall in projected turnover, withdrawal of stocks and reduction in capacity utilization, raw material/ finished goods stocks pile up, erosion in margins, return of bills/ cheque, poor maintenance of account books/ stock registers, arrears of loan installments and interest more than two quarters consecutively (Raju Yerram, 1999). No doubt by this indicators, the number of probable sick units would increase substantially, but that will bring into sharp focus the need to take corrective measures at an early stage for bringing potentially viable units back to health (Kapoor, 1998). According to the report of Reserve Bank of India, no. of causes, internal and external, often operating in combination are responsible for sickness of industrial sector. RBI report mentions change in government policy as one of the external factor (Kapila Uma, 1999). Report highlighted the magnitude of the causes of sickness in terms of percentage as follows: Mismanagement 52% Faulty Planning: 14% Marketing Difficulties: 23% Shortage of inputs 09% Labour strikes 02% Causes of sickness in SSI unit are internal as well as external (Juneja, 1999). External factors are increased competition, technological obsolescence, labour problems, changing government policies, power cuts etc. Internal factors are inherent financial weakness, diversion of funds, technological obsolescence, inadequate management competence, and inept marketing strategies.

20

Main factors for sickness magnitude in terms of percentage are as follows:

S No 1

2 3 4 5 6 7 8 9 10

Reasons for sickness Marketing problems/ inadequate product demand Managerial incompetence/ failure Dispute among partners/ directors Diversion of working funds Poor quality of product Change in government policy Delayed payment from customers Technological obsolescence Non availability of raw material Labour problems

% of sick units 19

35 4 11 21 1 4 3 1 1

In nutshell, 86% of sick units are sick due to internal factors. FUTURE VISION ON INDIAN SME SECTOR In the present scenario dynamic world change is the only permanent thing. The process of change has accelerated in most recent years due to macroeconomic transformation both in house as well globally. In the present situation the two big global economic forces which are competing for world attention are (a) the advent of a new economy due to information and communication technology and (b) due to globalization increased instability and uncertainty. With the formation of WTO, a new trade environment is emerging and a large number of items are now under Open General License (OGL). In the recent times there has been reduction in import duties. These have thrown a
21

challenge before the SME sector which warranted them to be more competitive and efficient to face the international competition successfully. Further, consumer s choice, preference and their quality are varying a lot. To cope up with these changes, the SME sector will have to undergo many internal and external transformations. CHANGE IN THE TECHNOLOGICAL REQUIREMENT The competitiveness of any economy depends on how efficiently all the resources in the process of production are utilized and how efficiently these are marketed, hence the entire chain of production and marketing has to be efficient. Many of the items produced in the small-scale sector are becoming redundant because of the change in consumers choice, preferences and also due to change in new technology. The entry of foreign products/services has given consumers a wide choice of hi-tech and good quality products at competitive prices. This means that the process of production has to be cost efficient and meet quality needs of the consumers. This improvement can come through the use of latest technology. Hence, the need for change in technology is more relevant for SME s than large units. Sourcing of technology - products, processes, designs, machinery, tools, testing, equipment, technical training, consultancy, upgradation, etc. which depend on technology is considered one of the most important factor of industrial process. In the SME sector, technology is mainly sought in the form of processes and product know-how. The different sources from which technology flows into the SME s are government institutions, local suppliers, foreign suppliers, R&D institutions, industries etc. Recent studies on sources of technology for SME s have found that the entrepreneurs obtained technological knowledge mainly from local suppliers. Technology identification, acquisition, transfer, adoption and upgradation are some of key issues in relation to technology management relevant to SME s. Monitoring and Measuring SME s - Small Industries Development Organization (SIDO) under Ministry of Industry formulates and monitors policies and programs, provides business services, establishes product-cum-production development centres for SME s. Small Industries Development Bank of India (SIDBI), a special financial Institution offers long term credit facility as well offers assistance in
22

marketing and export promotion to SME s etc., like this many institutions and organizations have offered assistance and advices and at the same time measure and monitor for effective and efficient functioning of SME s.

GLANCE AT ENTREPRENEURSHIP DEVELOPMENT IN INDIA Entrepreneurship is a global and multifaceted phenomenon with significant difference between countries. It has positive relationship between entrepreneurship and economic growth that contribute towards the wealth and social development of a nation under the given technological, industrial and political framework. The government support for the small firm sector like funding infrastructure and protection from competition has been withdrawn. Social and cultural norms in India favour stability and security. Capital investment, particularly for early stage development, is a major hurdle faced by most of the entrepreneurs in India. Growth is hampered due to the scarcity working capital, financial institutions do not appreciate the specific nature of entrepreneur s needs [6]. The infrastructure in the country is better but inadequate, as is the supply of professional and commercial services. There is a short fall in skill-based learning and the principles of the market economy in education. While government agencies and educational institutions carry out quality research and development, there is little focus on the commercial aspects of business. Industry investment in research and development is low.

DOMINATING AND ENTREPRENEURSHIP

INFLUENTIAL

FORCES

TO

NURTURE

TECHNO-

In India, the Government has identified the need to support and nurture entrepreneurship through successful methodologies used world over but adapted those which suit local environment and conditions. Among them some of them are discussed below National Science and Technology Entrepreneurship Development Board (NSTEDB) - NSTEDB, established by the Government of India in 1982, is the nodal
23

government agency promoting various mechanisms to promote gainful selfemployment in the country and to link idle S&T manpower with the under-utilized institutional credit facilities. The Board is being serviced by a government organization named Department of Science and technology (DST) with major objectives being; Promoting and developing entrepreneurship through the use of S&T. Facilitating various informational services relating to entrepreneurship development. Networking central, state government agencies and NGO s in entrepreneurship and self-employment development. As an advisory body to the Government agencies in regarding entrepreneurship. These programs have created awareness among Science and technology persons to take to entrepreneurship as a career. The academicians and researchers have started taking keen interest in such socially relevant roles. There are around more than 100 organizations, most of which are academic institutions and agencies, who have taken the task of entrepreneurship development and employment generation. More programs are being evolved to suit the changing economic scenario and the available scope for entrepreneurship development. STEP Science and Technology Entrepreneurs Park. EDC Entrepreneurship Development Cell. EDP Entrepreneurship Development Program. OLPE Open Learning Program in Entrepreneurship. EAC Entrepreneurship Awareness Camp. STEDS Science and Technology Entrepreneurship Development Scheme. FDP Faculty Development Program. TEDP Technology-based Entrepreneurship Development Program. Science and Technology Entrepreneurs Park (STEP) - The Science Park and similar initiatives in the developed countries are the latest in the evolutionary line to create an atmosphere for innovation and entrepreneurship; for active interaction between academics and industries; for sharing ideas, knowledge, experience and facilities for the development of new technologies and their rapid transfer to the end user. STEP provides a reorientation in approach to innovation and entrepreneurship involving education, training, research, finance, management
24

and government. It has been promoted jointly by the DST, state government, financial institutions and the host institutions. The prime objectives of STEP s are to: Link between universities, academic and R&D institutions. Promote entrepreneurship among science and technology persons. Provide R&D support to the small-scale industry. Promote innovation based enterprises The NSTEDB, jointly with all India financial institutions, has so far catalyzed 15 STEP s in different parts India which have promoted nearly 1000 units generating annual turnover of about more than Rs 150 crores and employment nearly 7,000 persons. More than 100 new products and technologies have been developed by the STEP s promoted entrepreneurs. STEP has taken the privilege in setting the TBI nomenclature to discuss social and economic prospects. The following aspects are concentrated by STEP to accomplish the proceedings of TBI. TECHNOLOGY BUSINESS INCUBATION (TBI) MECHANISMS Various enabling factors crucial for the success of incubating mechanisms in a country are R&D expenditures, new technologies, R&D, Resources, Technology, Production, Costs and Socio-economic conditions. Start up entrepreneurs need various support services like marketing, business facilitation, technical expertise, resources for financing and business management during their initial phase to enhance its survival. Incubators provide a conducive atmosphere and a range of critical support services and needed facilities to nurture and support a start-up. Various mechanisms like science parks, technology parks, innovation centres, technology business incubators are being experimented world over to catalyze growth of technology based new enterprises. Some of the Indian experiments on Technology Business incubation are presented below. Technology Business Incubators (TBI) A TBI helps in incubating knowledgebased start-ups into commercially viable products/services by providing specialized guidance, critical support services, innovative financing and networking support within a conducive environment. World scenario on TBI - At present, there are around 3,000 incubators of various types operational in the world. In the United States, there are over 800 incubators
25

including about 200 Internet incubators. Europe has about 1,000 incubators including 300 incubators in Germany. Among the developing countries, China leads with about 100 incubators. Among the industrializing countries, Republic of Korea is reported to have about 300 incubators. Earlier (1980s) incubators were essentially offering affordable space and shared facilities to carefully selected entrepreneurial groups . Thereafter, the incubators started varying widely in key respects such as objectives, sectoral focus, and business modes, etc. In some countries the incubators were set up for empowerment, while in others for technology commercialization. In the 1990s, workspace and shared facilities were supplemented with counselling, skills enhancement and networking services to access professional support and seed capital. With the technological progress, the incubators are intended to mobilize information and communication technology (ICT) and provide a convergence of support, towards creating knowledge-based ventures. An incubator combining technology with business is a technology business incubator. Virtual incubator or incubators without walls have also emerged recently, which offers need-based services by networking with the relevant agencies. Indian scenario on TBI The techno entrepreneurship initiative was started by the Department of Science and Technology (DST) in 1985 through the establishment of Science and Technology Entrepreneurship Parks (STEP s). The concept revolved around the creation of STEP in academic institutions / research lab of excellence with an objective of opening doors of self employment for young Science and Technology graduates. With the maturity of STEP s in changing economic scenario, the DST established TBIs in the year 2000. Today there are more than 40 STEP s / TBIs promoted by DST and in addition several other ministry s and private players have established TBIs which today totals to 100. The TBI s are aimed at achieving the following objectives: Enterprise and entrepreneurship development: An appropriate tool for economic development by promoting technology/knowledge-based businesses, culture of technopreneurship and creation of value added new jobs;

26

Technology commercialization: To provide a platform for speedy commercialization of the technologies developed in the institutes to reach the end-users; To provide an interfacing and networking mechanism between academic, R&D institutions, industries and financial institutions; To provide value addition through its services provided to its tenants as well as to the existing technology dominated SMEs; To provide R&D for industry: It also enables small industry to take up R&D activity and the technology upgradation activities. Working mechanism of TBI - The working mechanism of a typical TBI is shown below.

The various aspects in the successful operation of a TBI are its location, preferably to a knowledge source with some formal links. A well-structured business plan should include the identified focus areas, a good management team, plan for arrangement of financial resources including cash inflow and outflow. It should provide a sophisticated array of services and devise well-defined tenant selection and exit mechanisms. It should be properly networked with the relevant agencies as shown below.

27

TBI mechanism for India Experiences show that a single model does not exists to all locations. Suitable models are being developed keeping the local needs, climate and the objectives in view. India being diversify in nature, a single and a uniform model may not be suitable. For each local need different models are worked out after examining the local infrastructure availability and overall framework of objectives to be achieved. TBI s initially targeted academic institutions/R&D institutions of excellence with areas of focus being information technology, biotechnology, Materials management, agriculture, design, instrumentation and much more. The services rendered by TBI s involve:Managing business and professional services necessary for nurturing and supporting early stage growth of technologies and technology-based enterprises. Providing workspace, communication facilities, phone, fax, Internet and other shared services including secretarial assistance. Business skill development, Business planning and development. Business management and networking with stakeholders. Other specialized services like Design, R&D, testing, legal, etc. A TBI is also expected to assist the start-up firms with financial support such as venture capital, funding from angel investors and other financing mechanisms and equity participation.
28

Venture Capital funders in India In India the impact of venture in the new enterprises are low. The first origin of modern day venture capital in India can be traced to the setting up of a Technology Development Fund (TDF) in the year 1987-1988, through the levy of a cess on all technology import payments. In 1988, Technology Development and Information Company of India (TDICI) [presently known as ICICI (Industrial Credit and Investment Corporation of India) Ventures] and Gujarat Venture Finance Ltd, (GVFL) were formed. In 1996, Stock Exchange Board of India (SEBI) came out with guidelines for venture capital funds, which paved the way for foreign venture funds to enter India. Some of the Venture Capital funding currently in practice includes; private equity funds; raising funds through public; regional VC funds; Incubators. With the outburst in IT boom, the Venture Capitals are focusing mainly on biotechnology, telecommunication, entertainment, education and new materials sectors, etc. At present, there are more than 100 established VCs operating in India at the national level as well at state level mainly from the Government (financial institutions) and private sector. The total pool of Indian venture capital today, stands over Rs 50 billion. BUSINESS INCUBATORS AND FACILITATORS IN INDIA

A Business Incubator is a facility designed to assist businesses to become established and sustainable during their start up phase. Typically, they do this by providing- shared premises, business advice, business services, access to investor, market and international networks, mentoring and a full-time, hands-on management team. Business incubators are programs designed to accelerate the successful development of entrepreneurial companies through an array of business support resources and services, developed and orchestrated by incubator management and offered both in the incubator and through its network of contacts. Incubators vary in the way they deliver their services, in their organizational structure, and in the types of clients they serve. Successful completion of a business incubation program increases the likelihood that a start-up company will stay in business for the long term.

29

The main goal of most business incubation programmes is to produce companies that create jobs and wealth in their communities. Business incubators nurture the development of entrepreneurial companies, helping them survive and grow during the start-up period, when they are most vulnerable. Business incubators provide their resident companies with business support services and resources such as guidance, assistance with business planning and help obtaining financing. Incubators usually also offer companies rental space with flexible leases, shared basic office services and access to equipment all under one roof. What makes a business incubator successful? Incubator developers must first invest time and money in a feasibility study to lay the groundwork for a successful incubation programme. An effective feasibility study will help determine whether the proposed project has all the factors crucial to an incubator's success - a solid market, a sound financial base and strong community support. Once established, model business incubation programmes commit to industry best practices such as structuring for financial sustainability, recruiting and appropriately compensating management with company-growing skills, building an effective board of directors, and prioritising management's time to place the greatest emphasis on resident assistance. How do incubators help start-ups get funding? Incubators help resident companies secure capital in a number of ways, including: y Connecting companies with angel investors (high-net-worth individual investors). y Working with companies to perfect venture capital presentations and connecting them to venture capitalists. y Assisting companies in applying for loans. y Assisting companies in accessing government agency (e.g. NZTE, Technology NZ) business assistance grant programmes.

30

List of Business Incubators in India Name Contact Person Address Contact Information Centre for Mr. Kunal Indian Institute of 91-79-26324203 / Innovation, Upadhyay - CEO Management, 079 26308357 Incubation and Vastrapur, kunal@iimahd.ernet.i Entrepreneurship Ahmedabad- 380015 n www.iimahd.ernet.in (CIIE) /ciie Society for Prof. N.L. Sarda- IIT Bombay, Powai, 91- 22- 25767072 Innovation and Professor in Mumbai - 400076 Direct: 25767710 Entrepreneurship Charge nls@csc.iitb.ac.in (SINE) www.sineiitb.org TBI ON EMBEDDED Prof.S, Birla Institute of 91-1596-245073 SYSTEMS AND VLSI Gurunarayanan Technology and Extn: 252 DESIGN Co-ordinator, Science, Pilani - sguru@bitsTBI 333031 Rajasthan. pilani.ac.in www.bits-pilani.ac.in TBI for Composites Dr.R. Gopalan, CompositesTechnolog 91-80-56997605, Executive yPark, 205, Bande 56681005 Director Mutt, drgopal@blr.vsnl.net. KengeriSatelliteTowns in hip Bangalore-560060 Centre for Dr. S. Centre for 91-44-22350772, Biotechnology Meenakshisunda Biotechnology, 9840348173 ramBusiness AnnaUniversity meenakshi@annauni Manager Chennai - 600025 v.edu www.annauniv.edu/b iotech MITCON Mr. Kulkarni - MITCON 91-20-66289451 Biotechnology Chief Executive Biotechnology Centre, kulkarni@mitconbt.c Centre BAIF Campus Mr. om Manibhai Desai Nagar www.mitconindia.co m Pune - 411052 National Design Mr. Mahesh. K National Institute of 91-79-2662 3692 Extn Business Incubator Rovvidi - Chief Design (NID), Paldi, 5001 Operating Ahmedabad - 380007 ndbi@nid.edu
31

Officer www.ndbiindia.org Vellore Institute of Mr. A. VITTBI, Vellore 91-416-2243097 Technology Balachandran, Institute of Direct Manager- TBI Technology, Vellore- vittbi@vit.ac.in 632014 www.vittbi.com National Institute of Mr. A.V. Francis, National Institute of 91-0495Technology, Calicut Officer on Technology, Calicut - 2286162,Direct Special Duty, TBI 673601 kerala 2286604 avf@nitc.ac.in J.S.S. Prof. R. J.S.S.Academy of 91-120-2401442 Mahavidyapeetha Raghunanadan - Technical Education, ce@jssstepnoida.org Chief Executive C-20/1, Sector -62 www.jssstepnoida.or g Noida 201301 ICRISAT Mr. S. ICRISAT, 303 Bldg, 91-040-30713222 Karuppanchetty Patancheru 5023224 karuppanchetty@cgia - Deputy COO, r.org Mr. Abdul Rahman Ilyas COO KonguEngineeringC Prof. S. KonguEngineeringColl 91- 4294 220562, ollege Balamurugan- ege, Perundurai - 220171, Direct Executive 638052, Erode, Tamil 226650 Director - TBI Nadu. balamurugan@kongu .ac.in Advance Materials Mr. Sanjay International Advance 91-40-24457104-7 Technology Bharadwaj - Co- Research Centre for Incubator ordinator Powder Metallurgy & New Materials RCI Road, Opp. Ballapur Village, Hyderabad 500005 Center for Prof. M. Suresh S.P. Jain Institute of +91-22-2623 7454 / Entrepreneurship Rao - Program Management & 0396 / 2401 Ext: 211 SPJIMR Co-ordinator Research, Munshi msrao@spjimr.org Nagar, Dadabhai www.spjimr.org/cen Road, Andheri (West), tre_entrepreneurship
32

Mumbai - 400 058.

/hom e.asp

FOSTERING ENTREPRENEURSHIP THROUGH BUSINESS INCUBATION Through business incubation-a strategy to foster community development by nurturing the development and growth of new small firms-community development agencies, universities, two-year colleges, and a combination of sponsors seek to promote entrepreneurial talent and jobs, revitalize local economies, and assist in the development of technology. Thus, in collaboration with the National Business Incubation Association (NBIA), a national survey of business incubator managers and clients was conducted to develop a shared understanding of entrepreneurship development in business incubation, and to identify opportunities for two-year colleges to develop entrepreneurship as an alternative career path for individuals with diverse backgrounds. Survey results were consistent with previous research on business incubation (Campbell, 1987; Lichtenstein, 1992; National Council for Urban Economic Development, 1985; Smilor & Gill, 1986). The results showed a limited contribution of two-year colleges in business incubation and suggested a number of implications for improvement of these connecting activities. Two-year colleges appeared to be providing primarily commercial space at low cost and clerical support to entrepreneurs rather than consulting services and strategies aimed at fostering entrepreneurship. Limitations in management arrangements (e.g., managers' spending considerable time in fundraising activities and building maintenance) seemed to prevent managers from focusing on the broader mission of business incubators, that is, to provide an environment conducive for development of entrepreneurship through consulting services, and through education and training activities. Further, although two-year college-sponsored incubators appeared to be supporting a slightly more diverse population of entrepreneurs in comparison to university-sponsored incubators, both managers and in-house clients were predominantly represented by Caucasian males. Minorities and women continue to be disproportionately represented, both as entrepreneurs and in incubator management positions. Five entrepreneurial characteristics were identified by managers and entrepreneurs. These include personal characteristics (intrinsic motivation, hard work values), technical preparation, business and management skills, the capacity to utilize available resources and information to take advantage of business opportunities (entrepreneurial vision), and interpersonal skills to communicate
33

effectively with others and to understand the social impact of business development. Also, entrepreneurs and incubator managers recognized the need for education and training opportunities to assist in business development and growth. However, the contribution of two-year colleges to the business and technical preparation of entrepreneurs was disproportionately low in comparison to the contribution of four-year colleges and graduate schools. Two-year community college faculty and resources appeared to be underutilized in comparison to university faculty who contributed to a greater extent in incubators sponsored by universities and other organizations in the community. Several opportunities to improve services provided during the start-up, survival period, and expansion and growth stages were identified. Business and technical services, and access to information systems and technology are but a few of the opportunities to support entrepreneurs through their business development. The implications for two-year community colleges lie in the revision and implementation of an expanded role to prepare students for a productive schoolto-work transition, help individuals ease the transition to business owners, support the needs of the established local industry, and become proactive players in the development of the community. In the context of current education reforms, the implications are presented in four areas: (1) integration of entrepreneurship content into two-year curriculum activities, (2) opportunities for exposure and exploration of entrepreneurial environments, (3) connecting activities with secondary institutions, and (4) integration of entrepreneurship content in secondary curriculum activities. A business incubator is not about chickens, but it has everything to do with hatching hatching the dreams of entrepreneurs into stable businesses.

34

N. N. Shreejith nominated by a leading business publication, as one of India s Most Promising Entrepreneurs is a shining example of well-hatched dreams. In an interview, Shreejith states that challenges of starting an innovative venture were overcome only because his venture ROPE was incubated at Rural Technology and Business Incubator (RTBI) located in IIT, Chennai. Business incubators like RTBI provide resources to young companies, helping them survive and grow through the vulnerable start-up period. According to Poyni Bhatt of Society for Innovation and Entrepreneurship (SINE), IIT Mumbai, A business incubator plays the role of an accelerator to start-up ventures . While 4000 incubators exist worldwide, the incubation model is adapted to meet a variety of needs from fostering commercialization of university technologies to increasing employment in economically distressed communities to serving as investment vehicles. Bhatt, Chief Administrative officer of SINE, one of India s major incubators, notes that, Various incubators have different focus areas as a value addition- some focus on high quality physical infrastructure, some on technology support, some have higher strength in providing academic and research inputs and so on. At SINE we try to focus both on infrastructure as well as soft support like business advisory and mentoring, access to business network, facilitation for funding, and also experience sharing between the incubates . Before we get into the depths of the role of business incubators, let us step back to the 1950 s Watertown city in New York, where it originated. An exodus of manufacturing industry to the South and the West coast of the US made this city face considerable job loss. An incubator serving local poultry-growers closed down too. This vacant building was refurbished by then Mayor Frank Mancuso, to encourage entrepreneurs to use the building as a place to get their businesses started. To encourage entrepreneurial activity at any cost, Mancuso, now known as the father of business incubators charged minimal rent for this warm workspace and provided access to a telephone. Even with such limited resources, a number of new start-ups emerged from the building, and the program was successful enough to attract the attention of the local press. When asked, What is going on here? by a media person, Mancuso replied, I don t really know what to call it we used to incubate chickens in here, and now I guess we re incubating businesses . With focussed efforts to beat downsizing today, the US President Obama symbolises the modern-day Mancuso. Obama s recent announcement to fund a

35

national network of business incubators to the tune of $250 million has brought the spotlight back on business incubators. India has over 40 business incubators as per 2007 figures compiled by the National Entrepreneurship Network (NEN). Commenting on their potential to spur economic growth, Pravin Gandhi of SeedFund and governing board member of SINE, points out that, It is necessary to raise awareness amongst the entrepreneurial community about What Business incubators Do and What Incubators Don t Do . What Business Incubators Do? Today, these facilities don t just offer affordable rental space, but also, onsite support services and technical assistance (including financial and legal advice) until the entrepreneur eventually graduates or leaves. The attributes of a good incubator , as Bhatt of SINE mentions, are a combination of infrastructure, process and people designed to nurture start-up (with potential of high growth) businesses. Also, the totality of the incubator makes it a network of individuals and organizations from which one sources technologies. That is why you find most incubators associated with academic and research institutes, although there are some private incubators backed by VCs or industries too . Key elements of a successful business incubator I Innovation & Entrepreneurship N Networks and collaboration C Competitiveness U Understanding the Roles: Public-Private B Buy-In A Access to resources T Technologies O Outreach R Review: Monitoring and Evaluation Source: infoDev Asia Regional Workshop 2006 Bhatt summarizes the role of business incubators as, A shared office-space facility that provides its incubatees with a strategic, value-adding intervention system through mentoring, business assistance and monitoring. Thus new

36

venture development process is facilitated, while simultaneously making ventures aware of major risks and minimizing the cost of potential failures . Leo Mavely, founder & CEO, Axio Biosolutions, agrees. He recalls, I joined NirmaLabs right after my graduation as I wanted to know what it really takes to be an entrepreneur. This much-needed awareness was provided through the 7month grooming program offered by the incubator. It introduced me to the basics of marketing, finance, legal, technology and team building. This experience came handy when I started Axio Biosolutions after spinning off from the incubator in 2008 . Leo s Axio Biosolutions was started to provide quality and affordable lifeenhancing medical solutions and he is convinced that, The initial seed fund provided by NirmaLabs to develop a proof-of-concept gave the much needed financial security to carry out product development. And, access to a wide network of entrepreneurs, technocrats, academicians, suppliers helped me build my initial core team to raise further rounds of finance and find other associates for the company . Before summing up the role played by the incubator, Leo reveals that Axio s first product-a medical device dressing to stop profuse traumatic external bleeding- is going to be a first-of-its- kind in India. Dot points to summarize the incubator s role for me would include Awareness & knowledge about running a start-up, Mentoring, Validation of idea, Funding, Space to operate and Network , Maveli addsAnaxee Technologies Pvt. Ltd. is another incubated company, which features in the list of Nasscom IT Innovators 2008 for a new biometrics technology based on vein pattern recognition. Anaxee Technologies has its hands full now developing a product in the Access Control and Security industry. Founder of Anaxee, Govind Agarwal recollects the advantages of being an incubatee, A committed seed fund from Day 1 built a financial safety net during the initial year of our venture. NirmaLabs helped us concentrate on product development and we weren t wasting precious time planning for office furniture and arranging basic infrastructure. We just got started! Agarwal lays a great emphasis on the business incubator ecosystem, saying, We were working, living, eating with fellow entrepreneurs. There are similar stage companies around you and although each venture is unique in its own right, most of the early stage problems are similar if not the same. You learn from each other s mistakes. And finally, Agarwal avers that, the backing of a corporate group like Nirma gave the venture a lot of credibility-it helped a lot in getting co-founders for my venture .

37

In five years, NirmaLabs has incubated 8 projects, spun off 7 companies of which three have received VC funding. Dr. Madhu Mehta, former Chief Architect of NirmaLabs has valuable tips for incubator managers alike, as he explains, NirmaLabs had a unique model. The goal was to seek out technically or managerially qualified people with entrepreneurial aptitude and help them become entrepreneurs. We had six months of grooming, to help them understand the nuances of technology entrepreneurship, followed by three months of work put in by them - to explore fertile ground of their expertise, to identify a very good value proposition, build a team with diversified skill set, and develop a full blown business plan (with our help) for a review by independent body of experts, for selection for incubation. Selection implied support for 12 to 18 months, with progress review every six months, full project funding up to Rs 20 lakhs to develop the value proposition to bring it to proof of concept, and association with mentors. Beyond proof of concept, our model expected teams to spin off through external funding , he says. Dr. Mehta also candidly shares that, One lacuna we identified was the need for bridge funding to get the project to production ready state with proven beta customers, so that chances of VC funding could be at attractive terms. What Business Incubators Don t Do? Applying the rule of elimination, we asked the two graduate clients to look back at their experience to help deduct what other entrepreneurs like them should not expect to get from business incubators. Agarwal succinctly shared the following self-explanatory pointers: 1. Idea 2. Spoon-feeding on product development 3. A free flow of funds 4. Guarantee for success 5. Solution to all problems 6. Future venture funding 7. Responsibility for any kind of failure Dr. Mehta observes that, We in India sometimes have a tendency to operate out of wishful thinking which can be a cause of mismatched expectations. For example, we expect that since we have enrolled in a reputed school, we must get highly paid jobs. Some incubator clients get confused thinking, now that the incubator has selected us, it will make us succeed . While setting expectations right, I often draw a parallel with the US constitution, which guarantees only the
38

pursuit of happiness- not happiness. Similarly, NirmaLabs does not make you an entrepreneur, nor does it guarantee you success. I repeatedly have to say that we facilitate the pursuit of technology entrepreneurship and hence pursuit of success-not success . Bhatt of SINE has a similar observation to share. Important thing for incubator graduates to understand is that an incubator will not substitute their core founding team or the executing team. At the end of the day, it is the company, their core team and other functional employees who have to run their businesses . Asked if a formal orientation program can tackle this expectation mismatch, Bhatt replies, SINE does not have a written menu of its offerings, and therefore we do not have any one-time formal orientation programme. We address these issues as a process, which begins at the time when a founding team approaches SINE to discuss their ideas/ technologies. Depending on their clarity about their potential start-ups and their expectations from SINE, we address various issues on a caseto-case basis. That said, our message to them is very clear- execution of business plan and running a venture is the entrepreneur s job. Start-ups alone will be responsible for making and selling their products/ services. SINE s role is to act as a facilitator- provide them business advice or put them in touch with the right set of the people who will help them in their venture, but SINE can not manage their businesses . Reflecting on his past experience as an incubatee, Leo Mavely sets the record straight on three counts. You have to have a feasible idea and a team in place. You cannot expect those from an incubator. Referring to the seed funding received, Mavely carefully spells out a caveat, Most incubators provide initial seed fund for product development. They don t provide you the next round of funding required for commercialization. They will, however, connect you to potential investors who might be interested in your project . MYTHS ABOUT BUSINESS INCUBATORS .AND THE REALITY

A combination of factors such as quality of By going to an incubator, the people, products/ solutions or services success for the venture is and the market segment that graduates ensured target coupled with their execution capability
39

will ensure the success. Incubators accelerate the process of the new venture development On incubation, funding does not happen by default. The maturity of the team and their Incubators will provide the business strategy alone will get them funded. funding that they need Incubators facilitate (directly or indirectly) the funding process in deserving cases Incubators role is that of a facilitator. They Incubators are supposed to provide guidance or direction, business provide solutions to all the support and access to business network in business problems faced addition to office space. It is the company that has to deal with various business by companies situations And with his initial product development in the life-sciences domain requiring specialised facilities, Mavely tries to make prospective incubatees aware of limited facilities, which most university-based incubators compensate by providing access to university infrastructure resources. Besides wet-lab workspace, we needed a common facility of basic testing/characterization/ formulation equipment. And to get regulatory approval, the product has to be manufactured in a pilot clean room facility. These infrastructure requirements are so specific that, most incubators do not invest in creating such facilities unless they have a priority sector of operation. These were not available at the NirmaLabs incubator, but we managed to pull it off by utilizing the infrastructure at Nirma University campus with its technology, life science, pharmacy labs. So we used that workspace for our initial product development. Following that, we relied on contract manufacturing facility of established biotech companies for regulatory purposes. These observations were effectively wrapped up by Bhatt as she busts a few myths about business incubators. Making the right match:

Incubators screening prospective clients must not be a one-way process, according to the National Business Incubation Association (NBIA). Urging
40

entrepreneurs to meticulously screen incubators too, NBIA has worked out a punchy checklist to help prospective incubatees identify the right incubator program. N. N. Shreejith, Govind Agarwal and Leo Mavely found the right match in their incubators. When it comes to dreams, the three have the unique advantage of counting their chickens before they hatch! With her rich media background, Irawati Gowariker has led strategic communications for the IT arm of HSBC and ANZ in India. Irawati now dares to go beyond large multinationals to tell the story of some Indian entrepreneurs. Philip Anderson is INSEAD Alumni Fund Professor of Entrepreneurship, Director, Rudolf and Valeria Maag International Centre for Entrepreneurship and Director, 3i Venturelab Broadly speaking there are 3 revenue models for business incubation environments: revenue from incubated enterprises; revenue from equity; and external donors. Most business incubation environments will combine elements of each, and this article highlights the pros and cons of each and provides guidance in choosing the right mix. REVENUE MODELS FOR BUSINESS INCUBATOR

Revenue Model

Key Features

1. Revenue from tenants and other Financially self sufficient, given: clients:  "free" buildings Rent (40 to 60+ %) is the most common,  Minimum economies of scale but fees for the business support  Often with anchor tenants offered (business incubation fees) and other fees for use of facilities and services can be just as important. Hot desking fees (renting a desk and on-line computer by the hour can be important for broader incubation models) 2. Revenue from sharing in client success by way of small equity positions
41


Stakeholders with deep and patient pockets it takes up to 10

or royalty agreements on gross sales and brokerage fees on raising finance.




years to develop the revenue streams in a way that they can sustain operations into the future. At the leading edge of business incubation environment development and relatively rare. Needs management sophistication, a well developed business environment (so as to be able protect and to from an investment) and, for brokerage fees on finance raised, capital markets.

3. On-going government or donor funding The first two models may be expected to be self-sufficient over time, perhaps with the only ongoing support for the first model being free buildings . A proportion of ongoing government funding is likely to be particularly relevant for SIDS, especially if the social and economic return on investment is greater than for other BDS-like activities. The indebtedness of many SIDS however, may make it very difficult for Governments to afford long term funding or necessitateor necessitate rigorous cost benefit analyses to compare incubation to BDS and other business development support mechanisms before committing to long term support. Taking a small proportion of equity, or a royalty on gross sales for a period can be a very good way to receive payment for a business incubation environment s value-adding services once the company being assisted has succeeded, rather than up front when the company is short of cash; sharing in success and aligning the business incubator s mission with that of its clients. More and more technology business incubation environments take a small equity position, or negotiate royalty agreements as a condition of entry to the business incubation environment. Taking equity only realistically applies to high growth and generally IP driven companies, in situations where there are clear exit mechanisms (e.g. IPO or trade sale) and does not make much sense with most
42

service companies or where exit mechanisms are not clear, where royalties may be a better approach. Business models reliant upon success sharing with client companies have proven to be somewhat problematic, if returns from the equity position, royalties and brokerage on finance are to be relied upon for financial sustainability in the short term, because it takes up to 10 years to realize returns and a portfolio of at least 20 companies is required to spread the risk, not to mention the high level of management expertise that is required. New Zealand is a good example where this model is being followed, in a strategic way. The Government provides annual funding for a 10 year period, after which the business incubators are expected to replace this financial support with returns from small equity positions (up to 5% typically), royalty arrangements on gross sales for a negotiated period (typically 2% for a 3 year period) and finance brokerage (only possible if there are capital markets, although government funds are applicable as well). Other business incubators, which rely upon rent and other revenue streams for their self sufficiency, still enter into these arrangements as a way of sharing in the success of the companies they assist, but not as the main strategy for financial self sufficiency. Business incubation environments reliant upon rent and client fees as their main revenue sources cannot, as a general rule, be financially self sustainable in commercially leased accommodation or where they pay the capital costs of a building, without other forms of substantial ongoing support. Generally this is ongoing financial subsidies by a third party, which can be unreliable and unpredictable. It is very hard for a business incubation environment to achieve adequate margins in commercially rented accommodation and business incubation environments that attempt this run the risk of either failing financially, or having to cut costs so that they end up as nothing more than real estate operations. More commonly, business incubation environments access buildings at a peppercorn rental (e.g. $1.00 per annum), or secure funds to purchase or construct their own facilities, both of which are more reliable ways of securing ongoing support. With these models there are minimum economies of scale that allow financial self sufficiency, ranging from 1,500m2 in countries like Australia to 3-4,000m2 in Europe and the USA and more than 10,000m2 in China. Some of the best business incubation environments combine elements of all three of the models outlined above; arguably the best strategy.
43

Another strategy used is to generate revenue from non-business incubation activities such as consulting. This runs the risk of taking time and focus from the important task of assisting client companies, but on the other hand leads to an entrepreneurial approach. The Jamaican Technology Innovation Centre is an example of an entrepreneurial approach, generating additional revenue from consulting, training, facility rental, ID services, document processing for businesses and study tours. As the business incubator is repaying the substantial loan for construction of the building they have little choice. Busy Internet in Ghana is an innovative example of a very different business model which involves revenue from hot desking , internet caf, ISP, training facilities and restaurant, as well as the more traditional income streams.

FACTS & FIGURES OF SECONDARY RESEARCH DONE ON BUSINESS INCUBATOR NECESSITY IN DEVELOPING ENGINEER AS ENTREPRENEUR: In fast changing technological environment, role of technical entrepreneurship assumes a centralplace. The science based entrepreneurial engineer aims, by means of technical intervention(invention, innovation, planning & management organization) to exhibit to produce newproducts/services or market that can recognize as valuable by society (Carmo, Pimenta, et.al.,1997). The necessity of developing creative design, methodology, or several of them to suitindividual idiosyncrasy is unquestionable. Its usefulness for developing creativity in students hasverified by many teachers. The methodology of creative thinking alone cannot turn engineer intoan entrepreneur, unless he has the required amount of insight. To develop necessary insight, it isonly one method of presenting the principles from known to unknown, from old concepts to newone, involving several laws. This will give the students right insight and develop his confidencein meeting uncertainty with initiative and originality (Karune, 1987).Educators has to overcome the traditional disciplinary barriers for what it is a multi-disciplinary approach with heavy emphasis on economic, business and entrepreneurial skills (Farr &Merino,2003). Engineer who learns sufficient science and engineering acquire capabilities to know whyand how of various theories and can design products and services based on their knowledge andskill competencies (Baburao,

44

1999). High technology entrepreneurs have received increasedattention over the past decade as it is now recognized that these entrepreneurs are able to build companies that generate high wage employment and high levels of wealth (Kathleen Allen &Timothy Stearns, 2003). A technologically vibrant, internationally competitive SSI sector shouldbe encouraged to emerge, to make a sustainable contribution to national income, employmentand exports (Bala Subramanya, 2005). A close relationship exists between enterprise andentrepreneurship. While not exactly the same, they merge significantly in an educational contextwith respect to the specific learner attributes they pursue and the development of which they treatas key objectives. Major divergence between the two exists in, on the part of entrepreneurshipeducation, the reliance on venture creation (Breen John, 2004). The task, therefore, is to create an"employer culture" where increasingly S&T people will seek to create employment not only forthemselves but also for others by starting industrial ventures in new and emerging areas. PROBLEM FORMULATION: Objective of the investigation was to analyze the prospects of small-scale engineering units in thecontext of liberalization, privatization, and globalization as follows: i) Study and analyze the factors responsible and affecting the performance of SME S; ii) Study & analyze entrepreneurial characteristics & capability of engineering students; iii) Study and analyze faculty input in developing engineer as effective entrepreneur. To identify as to how the entrepreneurial capability of engineering student is dependent on the qualitative and quantitative input of faculty. For this hypothesis were set as follows:

45

Hypothesis No. 1: Performance of an industrial unit in small-scale industrial sector is dependenton the factor viz. managerial, technical, financial, and personal capability of an entrepreneur. To test hypothesis a questionnaire was prepared incorporating factors affecting the performanceof SSI unit. In the questionnaire, entrepreneur was to give his opinion about the significance offactors responsible for starting unit, running unit, success of unit and sickness to his unit. Hypothesis No. 2: Engineering. Students possess entrepreneurial characteristics & capabilities. To test the hypothesis a questionnaire was prepared incorporating the checks for measurement ofentrepreneurial attributes. In the questionnaire, students were to mention their choice overvarious entrepreneurial attributes. Hypothesis No. 3: Teacher does have the knowledge, skill, and understanding of theentrepreneurial education to engineering students. To test hypothesis a questionnaire was prepared incorporating the various factors for assessmentof knowledge of the faculty, input by faculty for developing effective engineer, learning attitudeand receptive mind of faculty, and entrepreneurial awareness as well as the industrial exposure ofthe faculty. In the questionnaire, teachers were to provide their views over various factors. TESTING OF HYPOTHESIS: To test the hypothesis, a survey was carried out among entrepreneurs, engineering students, andfaculty of engineering institutions. In this response received is as follows: a) Questionnaire was send to total 400 entrepreneurs. 91 entrepreneurs given response. Inwhich, 56 were with technical background and rest without technical background

46

b) Questionnaire was distributed among students at each institution. After thorough discussionwith students, total 450 students responded from 11 engineering institutions c) Thorough discussions were held with faculty of each institution. In which, Faculty of the 11engineering institutions responded Hypothesis No.1: Response of Entrepreneurs having Technical background Response analysis of the entrepreneurs having technical background is categorized in facilitatingfactors leading to entrepreneurship; factors for success of the unit; factors posing difficultieswhile running the unit; factors responsible for sickness in the unit are as detailed in table follows

Entrepreneurs (Technical) Response Analysis

Factors Responsible for unit


Facilitating for starting the unit Factors for Success of unit Factors causing difficulties in unit Factors causing sickness in unit

Technical
0.8036 0.8616 0.7902 0.7723

Personal
0.8021 0.8465 0.7545 0.7678

Managerial Motivation
0.7946 0.7731 0.7485 0.7617 0.6999 0.7678 --0.7499

Response of Entrepreneur not having Technical background The response analysis of non-technical entrepreneur was categorized as Factors: leading toentrepreneurship; for success of the unit; posing difficulties while running the unit; responsible for sickness in the unit are as detailed in table follows: Entrepreneurs (Non-Technical) Response Analysis
47

Factors Responsible for unit


Facilitating for starting the unit Factors for Success of unit Factors causing difficulties in unit Factors causing sickness in unit

Personal 0.8738 0.8960 0.9476 0.9063

Motivational 0.8114 0.8571 0.8679 0.8232

Managerial
0.7643 0.8286 0.7690 0.6929

Technical 0.6238 0.7482 --0.6429

Hypothesis No. 2: The institute wise engineering students were categorized as students opting the self-employmentas career option, and students opting wage-employment as career option. Hypothesis No. 3 In this, the knowledge of the faculty; receptive mind/ learning attitude of the faculty; Input byfaculty in developing effective engineers, Industrial exposure and input by faculty for developingengineer as entrepreneur was tried to find out.

OBSERVATIONS: 1.For non-technical background entrepreneur s technical, financial, and then managerial are themost important inhibiting factors affecting the growth of a SSI unit. Whereas, technicalentrepreneurs financial, personal, and managerial are the most important inhibiting factors.Thus, for sustainable growth of the SSI sector, a technical entrepreneur can be more effective.Technical person needs to be developed in entrepreneurial fold with managerial, financialknowledge for development of SSI sector. 2.Engineering students do have the entrepreneurial concept and capability. The entrepreneurialcapability of student can increase by appropriate input. This will enable student for betterunderstanding of science and technology and its application for socio-economic development. 3.There is scope for improvement in the two factors namely: learning attitude/ receptive mindand industrial exposure / entrepreneurial awareness among
48

faculty. Improvement in thesefactors will enhance the entrepreneurial capability of the students.

METHODOLOGY FOR DEVELOPING THE MODEL: From above, it is clear that the technical entrepreneur can be appropriate choice for sustainablegrowth of SSI unit. Students do possess entrepreneurial capability and can to be developed asentrepreneur through proper input in engineering education. Faculty input affects theentrepreneurial capability of the students. The entrepreneurial characteristic of a student is aninherent characteristic, the entrepreneurial capability of the student selecting self-employment ascareer option can improve by proper input. The input of the faculty depends on its qualification knowledge, learning attitude, input for developing engineer, and entrepreneurial awareness plus industrial exposure of the faculty. These are the factors affecting qualitative input in theengineering education. Entrepreneurial capability of student is directly proportional to the facultyinput. Therefore, efforts were made to identify the relation as to how entrepreneurial capability of student is dependent on faculty input. For assessment of the input by faculty, its knowledge,learning attitude/receptive mind, efforts in developing engineer, and industrial exposure /entrepreneurial awareness was taken into consideration.

49

STRATEGY: IMPROVEMENT IN INPUT BY FACULTY: Improvement in industrial exposure as well as entrepreneurial awareness, and learning attitude offaculty can achieve by effective industry-institute interaction. Newly launched ventures in Brazildeveloped linkage with university, research centers, secured broad based support from private/public sector and met the expectations of the stakeholders (Rustam Lalkaka & Daniel Sheffer).Likewise, student s exposure to open end industrial problems through projects, in-plant trainingand developing problem solving approach etc. can be the effective means, as discussed below: A. For Entrepreneurship awareness: 1) Entrepreneurship awareness camps should be arranged at various institutes to enlightenthe students as well as faculty about avenues in self-employment sector. 2) Effective interaction with the industrial development agencies. This will make studentsaware about the steps in enterprise launching. The different steps are:
50

i) Industrial potential survey for identification of feasible industries in particular area; ii) Market survey for product demand trend analysis; iii) Preparation and vetting of techno-economic feasibility project report; iv) Role & working of different agencies involved in industrial development. B For Industrial exposure to students and faculty: i) The industry institute interaction needs to be improved; ii) Project of final year engineering students should be based on real industrial problems; iii) In the in-plant industrial training, the faculty should be involved with a group of students to have effective coordination and training; iv) Research in the academic institutions should be industry oriented.

CONCLUSION: In the small-scale engineering industry, the entrepreneurial success and failure depend not onlyon what entrepreneurs know, but also on what they can do with what they know. Since they oftendeals with uncertainty and change, their comfort and insight with intuitive judgments and actionare as important as their deliberative decisions and implementations. Due to the protection from the government, there is significant growth of small-scale sector in India in past several decades.Changing environment demands this sector to be competitive for its sustenance. For this, unitshave to response to the changing technological advancement, customer demands, and changingproduct life cycle. For this engineer as entrepreneur can be the viable alternative. Engineering educators have to give emphasis on developing engineer as entrepreneur forsustenance of small-scale units in India. Faculty has to spend their time on preparation beforeand through the semester considering the application orientation of the subject. For example, theengineering faculty has to learn to appreciate and be sensitive to the changing trends such as tostudy the past, analyze the present and forecast the future and preferences of the market.
51

EXAMPLE OF BUSINESS INCUBATOR IN INDIA Indiaco a Business Incubator with a Difference Indiaco was established in 2001 as a private equity investment firm that invests in hi-tech start-up s in India that can access global markets. ndiaco's mission is to assist entrepreneurs plan, prototype, market, launch innovative products and services and therein build successful companies. By 2004, IndiaCo was recognized by various multilateral agencies and won support from the World Bank and the Department of Science & Technology, Government of India Indiaco's investment strategy hinges on its ability to invest value added capital through providing early stage hi-tech start-up ventures with operational support and infrastructure, management support and coaching, and access to a network of service providers, vendors, customers and next stage investment capital resources. Indiaco has build its core competencies in supporting web-based eServices, enterprise software and hardware products, as well as in bio-medical devices, drug development and delivery, bio-informatics as well as other technology based growth areas whereintellectual property is a key measure of competitive advantage. Indiaco is a symbiotic constellation of start-ups, R&D organizations, investors and service providers to the Hi-Tech sector. Indiaco functions as a venture creation engine in addition to being a resource center and incubator for high-tech startups and early stage companies, Indiaco helps translate lab research into consumer products and provides an infrastructure and network to support entrepreneurs. Indiaco marries entrepreneurs and technology to build companies and commercial products, and provides a mechanism for major corporations and government laboratories to spinout technology.

52

Indiaco operates a series of incubating clusters (Indiaco iCenters) that help entrepreneurs reduce their costs, exposing them to a network of industry and academic contacts, providing advisory support and a structured business growth roadmap. Achievements After the First Two Years in Operation
y y y

Presently located in India, US, Australia, and Chile Invested in 37 tenant companies 40,000 SqFt of commercial space, with internet bandwidth, plug and play offices. Helped tenant companies raise over Rs.35 crores (US$7 million) in private equity

Venture Financing Process Generated over Rs.200 crores (US$40 million) in market capitalization y Provided employment to over 800 professionals y 1 IPO, 4 acquisitions Services Provided To Tenant Companies y Milestone-based e-mentoring y Virtual programs available consisting of the full gamut of coaching and advisory services, including the use of all conference rooms, equipment, and temporary office space. y Office space available at one of our Indiaco facilities y Mentoring and advise from a team of experts in the Indiaco's Advisory Program. y Unmatched referral network of high-level Silicon Valley resources to help you make the right connections to achieve your goals Personnel services y In-house general counsel and law group y In-house Marketing Communications services including the creation and maintenance of: o Company and product branding o Logo and corporate style guides o Marketing collateral design and copywriting websites o Public relations and media assistance
y

53

y y

y y

Advertising campaigns o Direct mail and email marketing campaigns. Use of any of conference rooms Programs to ramp up your development or launch: Venture Showcase - helps you fine-tune your presentation before experts from the industry. Referral Program - introductions to the right people & services. Free Legal Clinics - get the advice you need. Venture Fairs - meet with potential investors. Founders Forum - exchange ideas with local CEOs. Student Interns
o

Background Information y Private business incubator, funded by the founder's family y Established in January 2001 y Corporate mission to assist entrepreneurs plan, prototype, market, launch innovative products and services and therein build successful companies. Key to Success
y

y y

Entrepreneurial experience of the Founder Rahul Patwardan, CEO & President of Indiaco, established 8 firms and 2 venture capital funds in India and the United States. Visionary leadership Rahul Patwardan, CEO has a great vision going beyond the borders of his incubator; he also conducts theoretical research in the field high-tech entrepreneurial development and constantly benchmarks Indiaco against other best incubation practices in the world. Advantageous location a wealth of IT and biotechnology talents Milestone-based e-mentoring Indiaco established an Intranet for its tenants and developed a milestone-based e-mentoring tool that guides tenants companies through various stages of their start-up venture development process. Provides tenant companies with access to venture funding o Indiaco invests in its tenants through buying 5% of their stock at par value o Indiaco established a club of business angels and venture capital firms from India and the United States and interfaces between its tenant companies and investors Most promising technologies are patented in the United States.

54

Standardized communication interfaces external communication.

facilitates convenient internal and

Holistic Approach to Building Companies Creating an Ecosystem Helping Tenants to Excel Indiaco's approach works like 5 basic elements of nature: y Earth functions as the root, ground, or source within each phenomenon, solidity y Water entails flow, continuity, penetration y Fire entails life, heat, activity, clarity of the mind y Air depicting change, movement, maturity, life supporting y Space intelligence, communication, formlessness, and creative potential Selecting Tenants: Considerations for Entry y Is the technology compelling? y Is there a large and growing market for the technology? y Is the founder/team committed and capable? y Is the lead entrepreneur "coachable"? y Does the incubator have the capability to help the company?

Some examples of small businesses in international incubator

Within our business incubator, we have supported quite a diverse range of ideas that became successfully growing businesses, though their size and requirements vary considerably. Here are some examples: Isambard Digital Media a digital media and film company which offers the full suite of services from Concept development to Storyboarding, scripting to Postproduction and Editing. Isambard Digital Media evolved from a talented young media expert based at home into a professional organisation based in our incubator and grown to a position where extra hands are being hired. We began our relationship with Isambard by providing the core essentials required for growing the business in this case a desk with internet, and some sound advice and have since focused on securing a 55

strong and steady growth, backed by providing services to other businesses in the incubator. (http://www.isambard-dm.com/srv.htm) The Edge Partnership of Schools in Birmingham Charity a social enterprise that is the Charitable wing of a group of 10 very different schools with a breadth of expertise and experience, whose mission is to support the improvement of teaching and learning in Birmingham through supplying top quality coaching and mentoring from current Head Teachers and Senior Leaders. As a member of our incubator the Edge Partnership has grown in its successful delivery and significantly increased market income, and now also delivers projects to further the aims of the organisation. Our relationships has been ongoing and included the control of regulatory functions, business process improvement and brand strengthening. We are proud to have played a part in the development of a true social enterprise success story. (www.edgepartnership.org)

One of our inspirations Barcelona Activa

In searching for how incubators might work, we sourced many pieces of research, but almost certainly the best example we have learnt about, and spent time at, was Barcelona Activa who focus on promoting entrepreneurship, employment and business competitiveness.

WHAT IS BARCELONA ACTIVA?


Barcelona Activa is:
     

a highly successful business incubator grew through the bottom up model of development has highly significant impacts on employment and entrepreneurship has excellent methodologies emphasises innovation is an exceptional example of public-private cooperation

56

Impressions of Barcelona Activa


BA is very active in Barcelona and touches an impressive proportion of its population, it is able to do so because of its good reputation and close connection with the populace. As visiting professionals we were exposed to the outfacing areas of the organisation, being able to define how each of us perceived the experience allows us to deconstruct their offering and describe those parts which we believe could help in projects of our own.

What impact does BA have?


BA has an unquestionably positive impact on Barcelona reducing unemployment, promoting and supporting the blossoming entrepreneurship and actively reaching problem groups within the community. Their accessibility gives them scope to impact anyone and their commitment to technology will continue to drive their catchment both within Barcelona and on an international scale.

What does Barcelona Activa do?

The primary focus of the work at BA is encouraging entrepreneurs and improving employability in Barcelona. They do this in a highly supportive and technologically orientated environment that is available to all. There is a trend towards training as it has been seen to increase in quality and diversity recently, this may be an area of corporate growth for BA in the near future.

57

BA are involved with a number of foreign partners, their role as international consultants is one that will expand as the move to multi-lingual services is completed.

How does Barcelona Activa work?


BA has six activity lines:


Entrepreneurship support in the creation of quality and future-oriented businesses Business ideas are converted into successful companies with the help of coaches, on and off site support, online resources and training activities. Between 50 and 60 percent of businesses become a company by the end of year one and each company creates an average of 2.4 jobs.


Businesses to facilitate the future of recently created businesses by creating cooperation networks and contributing to their growth Companies formed at BA are much more worthwhile if they have the potential to grow, this growth will be made a lot easier with the help of business coaches. Therefore the advice and support of the coaches remains present even when the businesses have been formed Human Capital Talent grows thanks to the new occupations and emerging economic sectors A free space is available for the public to use in order to find jobs. It uses modern technology to link the skills of an individual to certain career paths. The professional development of the individuals is improved through seminars, workshops, online exercises and debates.
 

Employment Advancing towards a labour market with cohesion that takes into account the groups with the most difficulties Employment is a necessary factor for personal development and social cohesion. Work experience, training and inclusion programs are provided by BA


Cibernarium Access to and the use of new technologies, the condition for expanding opportunities of professional and personal development

58

The access, use of, and mastering of new technologies is a key and necessary factor for putting into practice any action that leads to professional improvement. Cibernarium is a place to grow with the internet and a local reference centre for technological skills. Training activities in the Cibernarium are characterised by their practical nature and short duration making them simple to understand and useful to future projects. It is safe to say that Technology underpins the work that is carried out at BA. Promotion of Innovation Innovation can be defined simply as a new way of doing things. BA promotes innovation as a characteristic beyond technology to include a wide range of aspects of personal and professional life. This leads to more dynamic and unique businesses within the incubator which in turn leads to success and the creation of more jobs.


Summary
BA has followed a well devised and flexible plan, its evolution has kept it effective and relevant and a leader in its field. Their key values can be reproduced in any environment and with considered tailoring have a similarly impressive impact. They have consistently provided solutions to the challenges of deindustrialisation, worklessness, youth disaffection and the new demands for skilled labour. This practical approach is evidence that a clear vision, a determination to make things work, patience, trust in bottom up solutions and a real understanding of market needs can lead to sustainable community cohesion solution contributions which span social, economic, environmental and political dimensions. There are many lessons which can be taken from our time with BA, and a great deal of hope and confidence. The mechanisms they have used are simple ones applied carefully with deserved success. The control BA has over its development and subsequent effect on Barcelona is impressive but only arrived at after decades of hard work and reaching of goals. Click here to visit Barcelona Activas website.

A brief history of the Incubator Movement (Re. Reese, 2008)

59

Small business incubators have a long history as socio-economic development tools. Indeed, business incubation emerged as an economic development tool in the early and mid 1980s, initially in the USA and Europe, subsequently spreading around the world. The formal concept of business incubation began in the USA in 1959 when Joseph Mancuso opened the Batavia Industrial Centre in a Batavia, New York, warehouse and this was followed in the United Kingdom in the early 1970s as artist cooperatives, often located in historic buildings, developed as effective commercial as well as community orientated enterprises. Incubation expanded in the U.S. in the 1980s and spread through the UK and Europe through various related forms (e.g. innovation centres, ppinires dentreprises, and techno poles/science parks). In many countries incubators have been used to help redevelop blighted inner city neighbourhoods, to foster scientific innovation (e.g., the National Science Foundations grant programs for promoting University/entrepreneurial Partnerships in the USA), and to provide a proving ground to groups of entrepreneurs attempting to extend their expertise to other small business owners (Campbell and Allen, 1987). While incubators began on a small scale in the US about 40 registered business incubators in 1985 their numbers grew to at least 600 in 1995, in large part spurred by the many attractions of incubators as a sustainable development tool (NBIA, 1996). Currently, there are over 1,400 incubators in North America: 1,115 in the US, 191 in Mexico and 120 in Canada (www.nbia.org). Business incubation programs have been developed around the globe and are in operation in a host of countries ranging from Eastern Europe (www.wtec.org), to the Middle and Far East (www.ssl.gov.cn; www.infodev.org ), and to Australia (www.businessincubation.com). Incubators continue to make an impact such as the November 3rd, 2010 opening of New York Citys sixth business incubator and the first in the Bronx called the Sunshine Bronx Business Incubator. In the UK the incubator movement is, perhaps, underestimated, including a strong university base (eg. Bradford, The Unit at Leeds College and Innospace at Manchester Metropolitan University), innovative local government (eg. Craigmillar in Edinburgh), social enterprise orientated (eg. Bridging to the Future) and technology based (eg. The Sussex Innovation Centre). 60

Business Incubators and all about them

The idea of organisations or individuals helping smaller organisations or individuals to develop and flourish in a business sense is not a new one and has been seen informally for centuries. However, the concept of incubators as entities in their own right with a clear purpose and role is relatively recent. What are business incubators and what do they look like?

As with most things, they come in all shapes and sizes. There are some large scale ones such as Barcelona Activa and Palo Alto, California (where General Electric and Facebook are based for example) to micro ones such as Bridging to the Future in Birmingham and university based ones such as ThinkBusiness@Bradford. At their simplest business incubators are venues which provide businesses with:


Assistance services in shared office facilities. As physical entities, a business incubator might be housed in a former factory, school or other change of use building or might be in modern, purpose built facilities there are no particular set forms. For example, Barcelona Activa started in a single derelict factory, Batavia (New York) in a warehouse whilst others, such as on Route 128 in Massachusettes are more hi-tech and purpose built. A form of mentoring in which coaching and support services are provided to entrepreneurs and early-stage businesses at a free or reduced cost.

What are the main characteristics of a Business Incubator?

61

Low price of free premises which allow micro businesses, small businesses and start-ups to trade.  Support services including telephone, internet, cleaning and receptionist services are provided under the same roof.  Often there is intensive and pro-active business support advice and coaching.  Many incubators have a selective entry and exit policy not everyone who asks will be allowed into the incubator.  There is an emphasis placed on start-ups and SMEs being supported through the challenges of early stage development and growth, with specific advice often focussed on marketing, finance, business planning and management skills.  Local Authorities and Universities can and do play a significant role in the development of incubators and in the growth of new businesses. (Source: Chief Economic Development Officers Society, 2007 report by CEDOS)


Why are incubators important? The current interest in the role of incubators lies, in part, in the current Coalitions belief in the Big Society and localism as levers for socio-economic development and community cohesion, and partially in the often underestimated role small business plays in most local economies. In 1993, 53.7% of US employment was in firms with less than 500 employees (Reese, 2008). There is more to the concept of localism than cost cutting and those who argue that localism, social enterprise and community based solutions do not work, might be reminded that small firms have been credited with 55% of all innovations in products and services (Sherman and Chappell, 1998). 1. Local, small has proven benefits and sustainability Small, locally owned businesses seem to be more innovative and can be developed in greater numbers more quickly than larger, often non-local businesses. Because the small businesses typically aided by incubators are owned and operated by local entrepreneurs, they build the local economic base and are more likely to remain in place than are foot-loose multi-national firms. (Reese, 2008) 2. Young entrepreneurs Support for local scale business creation can aid in keeping young entrepreneurs in place, helping to avoid the loss of skills and education experienced in some more isolated regions.

62

3. A cautionary note There is one cautionary note about focusing on local small businesses for economic development, however. This is that 52.7% of all small businesses fail within their first four years of trading (Sherman and Chappell, 1998). 4. Local economic development, local social advantage These realities have several implications for local economic development:  Small, local businesses are desirable because they can employ local residents and foster indigenous entrepreneurs;  Small businesses often operate in areas of technological innovation or in artistic or creative areas where relatively few resources are required for business operation;  Small business development creates new local and regional economic capital; However, significant efforts must be made to ensure that businesses are not created only to fail. (Reese, 2008) The public sector has the potential to be innovators for success, though may themselves have to undergo a shift in mind set from deliverers and regulators to supporters, enablers and quality assurers. A partnership between market orientated social enterprises and incubators and the public sector could be a remarkably strong force for good but the public sector may have to travel towards an approach that will release the local energy. Though their focus was initially economic, the social benefits and impacts of incubators as started to emerge and thus the socio-economic benefits of incubators are now closely followed. In Barcelona Activas case, the socio-economic impacts are both clear and the key driver to the continued expansion and activity of the incubator. 5. Value for money Incubators offer the potential of value for money solutions: the cost per job created in the USA for incubated jobs is about $6,580, while the cost per job of other types of firm relocation and attraction efforts ranges from $11,000 to $50,588 (Markley and McNamara, 1995).

63

CONCLUSIONS AND SUGGESTIONS In next 10 years, knowledge-based industries are likely to acquire greater prominence and SME s are likely to come up in the industry. The role of the Government is to facilitate support to SME s in the era of globalization and to focus on providing human resource development support along with establishment of suitable support mechanisms and nurture technology oriented enterprises. Some of the suggestions where there is a need to cater includes; Availability of Technology database. Panel of experts and consultants for guidance and assistance for SME s. Organizing workshops, exhibitions and seminars to increase SME awareness of new technologies. Periodical assessment of SME sectors.
64

Strengthening interaction between SME s with R&D sectors and academic Institutions. Increase Venture Capital funding and facilitate access to venture capital scheme and other innovative financing mechanisms. Effective networking with other R&D institutions for making the TBI a focal point for technology. Define roles and responsibilities of TBI s and Host Institutions. Identify key drivers and inhibitors of the Technology Business Incubation Eco system. Establishing an analytical model as an aid for the TBI s to self evaluate their performances in accelerating the growth of start up companies, Incubators and entrepreneurs.

REFERENCES Agrawal, S.P. Strengthening Technology Incubation System for Creating High Technology-based Enterprises in Asia and the Pacific 2001. Bischoff, J. An overview of successful international technology business incubator programs , paper presented at the First International Workshop on Technology Business Incubators in India, Bangalore, 29-31 January 2001 Gupta, A. and B.K. Jain Technology business incubators: Opportunities and challenges for India , Asia Pacific Tech Monitor, vol. 19, No. 4, July-August 2002.

65

Menon, P.K.B Technology business incubation systems In India , paper presented at the First International Workshop on Technology Business Incubators in India, Bangalore, 29-31 January 2001. NBIA, Proceedings of the National Business Incubation Association s 16th International Conference on Business Incubation: Explore Your World, Enrich Your Community, Toronto, 28 April 1 May 2002. Raetz, Gerhard Technology incubation: An instrument to support new enterprises , Asia Pacific TechMonitor, Jan-Feb 2001. Global Entrepreneurship Monitor 2001 Executive Report (London, GEM). Woo-Geun Song Report of the Regional Consultative Meeting on Strengthening Technology Incubation System for Creating High Technology-Based Enterprises in Asia and the Pacific , in Strengthening Technology Incubation System for Creating High Technology-based Enterprises in Asia and the Pacific 2001. WWW.WIKIPEDIA.COM WWW.EBIZ.COM WWW.REVENUEMODELS.COM

66