Whats the point of in-house incubators?

Incubators are all the rage, with anyone with a bit of spare of serviced office space proclaiming themselves an incubator. Phrases such as "hubs for innovation and entrepreneurship, providing office and laboratory space for early-stage companies" are common place.

The original idea of business incubation was begun in 1959 by Joseph Mancuso the USA when he opened the Batavia Industrial Center. Incubation expanded in the USA and spread to the UK and Europe. It is now estimated that there are more than 7,000 incubators worldwide.

Incubation is not just about providing a desk and a mail box, it’s about providing support. Some of that support comes from other occupants of the incubator: Cross fertilization, as well as practical services including accountancy and legal advice. Sometimes, just being accepted into an incubator gives the nascent company significant advantage, having a London E14 or SE1 postcode can significantly enhance your access to venture capital.

Running an incubator to develop a local areas economic prospects can have significant benefits. Whilst significant debate continues as to the spark that triggered The Cambridge Phenomenon, all agree that Trinity Colleges decision to found the Cambridge Science Park had a pivotal effect. However, Cambridge had much going for it already:

  • The presence of a large population of highly educated young people
  • Large established businesses including Pye and Marshalls as training grounds
  • Excellent communication links, but most importantly:
  • It’s a nice place to live

  • If no one wants to live there, an incubator will be doomed to fail.

    Incubators as commercial enterprises can also make sense, provided they are correctly positioned. The holding company can make money on rent and the provision of services. The practice of taking a shareholding in tenants seems to be declining, but did offer an attractive upside.

    Incubation must therefore be regarded as a positive thing for developing new technologies and companies, but why have so many corporates decided to create their own can be unclear?

    Whilst there is considerable academic literature covering a wide range of corporate venturing units, to make strategic sense an incubator must achieve one of three things:

  • Take internally developed non-core technology into commercial reality to enable it to be sold at a profit.
  • Enable internal networking within an organization outside of the traditional corporate structure to allow cross fertilization of ideas.
  • Enable insourcing of ideas, products and technologies which enhance the corporate capacities.

  • Incubating externally generated ideas and concepts which have no direct impact on the larger organization is a flawed concept for a corporate incubator.

    About the Author

    David worked in Cambridge UK during the 1980’s and 90’s, and experienced first hand the explosive growth of the Cambridge Economy. Since the late 90’s, he has been working in the north of England to encourage innovation and economic growth. His views on the creation and growth of innovation "clusters" have been summed up as "If you can't cycle across it, it isn't a cluster."

    He also has strong views on the "build it and they will come" approach to science parks and innovation centers. He believes people make innovation, so innovation occurs where people want to be. If you want to build an innovation culture, you first need to establish an environment where people are happy to live, with affordable housing and appropriate amenities.