Abstract
Business incubators are organisations that support the growth of small companies, including start-ups, by providing various resources and services. The aims of this article were to assess the characteristics of business incubators in non-hub cities located in Georgia and South Carolina and to describe the major differences between incubators located in non-hub and hub cities. We surveyed 5 non-hub incubators and visited and analysed qualitatively 10 incubators, 5 in hub cities and 5 in non-hub cities. Results showed that incubators in non-hub cities have less focus and less access to funding capital compared with incubators in hub cities. The implementation of a mesh network among incubators in non-hub cities may help sharing resources, know-how, talents and investments with the goal of being able to compete with incubators in hub cities. While currently incubators in non-hub cities cannot offer the same services to their members, they can still play an important role in giving the people in their communities an opportunity to start a new business, find jobs and increase their income. Business incubators in non-hub cities can ultimately positively impact the overall quality of life of the population they serve. Finally, we proposed that a focus on public health innovation may help incubators in non-hub cities to be successful.
Business incubators are organisations that provide start-ups and small companies with preset resources and services, such as physical infrastructure, education and coaching and networking connections (Bergek & Norrman, 2008; Theodorakopoulos et al., 2014). Business incubators help create and grow young businesses by providing them with necessary support, financial and technical services until the businesses leave the incubator and become successful and sustainable on their own.
von Zedtwitz (2003) classified incubators as independent commercial incubators (with a for-profit objective), regional business incubators (supported by local governments or agencies), university incubators (promoted by universities and existing technology campuses), company-internal incubators (for projects that are not part of the company’s main business, but are still profitable) and virtual incubators (with an online network of support and advice with no physical workspace attached). Business incubators also differ in terms of their focus and their field (e.g., agriculture and technology) (Al-Mubaraki & Wong, 2011). Mixed-focus incubators also exist (Qian et al., 2011).
Business incubators create jobs, innovation and opportunities for the communities where they are located. Business incubators support technological, scientific and social innovations, and thus improve local and national economies (Theodorakopoulos et al., 2014). Business incubators close the gap in resources for new businesses, helping to promote sustainable growth and long-term success (Schwartz, 2009). In addition, incubators offer a psychologically protected environment for new companies by providing social support to help manage stress (Cooper et al., 2012). Sometimes, companies ready to leave the incubator choose to stay within the incubators to enjoy the benefits of the reputation they derive from being members (Studdard, 2006).
While the various benefits of business incubators are clear, their success is not easy to quantify. Some incubators perform better than others, and this may be due to size, types of services, focus, source of sponsorship and locations in non-hub areas with fewer resources for success (Haynes et al., 2012). A previous research study estimated that there were 2,200 incubators worldwide, 75 per cent of which are located in the United States. (Giudici, Reinmoeller, & Ravasi, 2018). Among the incubators located in the United States, estimates of the percentage of business incubators located in rural and non-hub areas vary between 28 per cent (Knopp, 2007) and 50 per cent (Schaeffer et al., 2011). Most incubators in rural and non-hub areas tend to cluster in zones that have previously experienced or are still experiencing an industrial decline (Schaeffer et al., 2011). Business incubators are a known way to pool local resources to spark economic growth in non-hub cities (Schaeffer et al., 2011).
The aims of this study are (a) to assess the characteristics of business incubators in non-hub cities located in Georgia and South Carolina and (b) to describe the major differences between incubators located in non-hub and hub cities.
Methodology
This study employed a quantitative-dominant subsequent mixed method design (Leech & Onwuegbuzie, 2007). The quantitative research used a survey of incubated businesses located in non-hub incubators to address the first aim. The qualitative research was observational and addressed the second aim focusing on business incubators located in hub and non-hub cities.
For the quantitative phase, an exploratory survey was developed using Qualtrics (2018). The survey included a total of 52 items addressing participant demographics, characteristics of the incubators and characteristics and needs of the incubated business. The population for the survey was composed of 323 employees of small businesses located in five incubators in five non-hub cities in the Southeast region of the United States: four in Georgia (Athens, Augusta, Columbus and Rome) and one in South Carolina (Myrtle Beach). We selected the two largest cities by population in Georgia after Atlanta (Augusta and Columbus), two cities in Georgia with a strong university presence (Athens with University of Georgia and Rome with Shorter University and Berry College) and one coastal touristic city, Myrtle Beach, in South Carolina.
The owners of the incubators provided the email addresses of the employees of the incubated businesses for a total of 323 emails: Athens (31), Augusta (85), Columbus (53), Rome (19) and Myrtle Beach (135). To assess feasibility and functionality of the survey instrument, a pilot invitation email was sent to a random subsample of 50 participants. Following the evaluation process, the survey was distributed via email to the remaining 273 participants. Participants were allowed to take the survey only once and to skip questions. To increase the return rate of the survey, two reminder emails were sent at 2 and 4 weeks to participants who had not yet completed the survey. In total, the survey was kept open for 8 weeks.
For the qualitative phase, 10 business incubators were considered (see Table 1). For research purposes, data included observations of visits to the incubator (one visit per incubator) and document analysis of the incubators’ websites. Visits ranged from 60 to 90 min, according to the availability of the incubator spokesperson or community relations manager. Two researchers visited the incubators and used an ethnographical perspective to make their observations. At the end of the visit, the researchers debriefed and produced a report of the observations collected. A third researcher analysed the websites for the incubator and examined the report to identify thematic patterns and differences between the incubators.
Summary of Participating Business Incubators
Quantitative Characteristics of Incubators and Incubated Businesses in Non-hub Cities
A total of 60 out of 96 questionnaires received were considered valid: Athens (2), Augusta (17), Columbus (19), Rome (13) and Myrtle Beach (9) and 36 were deemed invalid since the participants had responded to <15 per cent of the survey. More than half of the respondents were men (62 per cent, n = 37). The age brackets 25–34, 35–44 and 45–54 were the most represented in the sample, with 23 per cent (n = 14), 22 per cent (n = 13) and 27 per cent (n = 16) of the sample, respectively. There were 6 (10 per cent) respondents younger than 25 and 11 (18 per cent) older than 54. The majority of the sample had a 4-year college degree (40 per cent, n = 24) or a master’s degree (27 per cent, n = 16). One respondent (2 per cent) had a professional degree. Two (3 per cent) respondents had a high school/General Education Development (GED) degree, 10 (17 per cent) did not finish college and 7 (12 per cent) had 2 years of college studies. Ethnicity of the sample was 82 per cent (n = 49) white, followed by 7 per cent (n = 4) black/African American and 7 per cent (n = 4) mixed race. There were two (3 per cent) Asian/Pacific Islanders and one (2 per cent) Hispanic. Most respondents lived within 15 miles of the incubators (77 per cent, n = 46). The remaining respondents lived between 15 and 20 miles (13 per cent, n = 8) or more than 20 miles (10 per cent, n = 6) away from the incubator.
Characteristics of the Incubated Businesses
Of the 57 participants who answered the question about their role in their business, 32 participants reported being owners (56 per cent), 6 being partners (11 per cent) and 19 being employees (33 per cent) of businesses in the business incubators. Of the 50 participants who responded to the question on ownership, there were 19 businesses with a single owner (38 per cent), 14 businesses with two partners (28 per cent); the incubated businesses with three partners or more accounted for 34 per cent (n = 17) of the participants. Of the 31 participants who answered the question about the amount they personally invested in the business, 12 (39 per cent) participants reported less than US$10,000, 11 (35 per cent) reported between US$10,000 and US$50,000 and 4 (13 per cent) reported between US$51,000 and US$100,000. Investments of over US$100,000 were limited to four (13 per cent) participants. Of the 46 participants who answered the questions about how their business was funded, 38 participants reported that capital was self-investment (83 per cent), while 8 (17 per cent) reported that they were able to secure outside investments.
The incubated businesses were relatively established, with 37 per cent (n = 22) being 5 years old or older, 37 per cent (n = 22) between 1 and 5 years and 17 per cent (n = 10) less than a year. A small minority (10 per cent, n = 6) of the businesses were already in the incubator while in the process of being formally established. Half of the respondents reported that the business they own, or work for, was already profitable (50 per cent, n = 30), with an additional 20 per cent (n = 12) forecasting profitability within a year, 13 per cent (n = 8) between 1 year and 5 years and 2 per cent (n = 1) in >5 years. Nine (15 per cent) participants were unsure when their businesses would be profitable. Of the 59 participants who answered the questions about their type of business (service- or product-oriented), the incubated businesses offered services (41 per cent, n = 24) and products (14 per cent, n = 8), with nearly half the businesses providing a combination of both (46 per cent, n = 27).
Participants were asked to identify the three areas where their businesses needed additional help the most. The areas were marketing (55 per cent, n = 33), the identification of new customers and business opportunities (38 per cent, n = 23) and the access to talent (32 per cent, n = 19).
Open questions were asked about challenges, and all participants mentioned lack of resources, in terms of capital or human talent, specifically marketing activities (e.g., visibility and segmentation).
Characteristics of the Incubators
Almost half of the respondents (43 per cent, n = 26) had been within the business incubator for 1–3 years, while almost one-third of the sample had been a part of the business incubator for <6 months (30 per cent, n = 18). Other respondents had been with the business incubator for 3–4 years (3 per cent, n = 2), 4–5 years (8 per cent, n = 5), >5 years (2 per cent, n = 1) and from 6 months to 1 year (13 per cent, n = 8). Respondents spent a very short time every week in the incubator. Only a few people used the space for >30 h/week (12 per cent, n = 7), with 58 per cent (n = 35) of the sample using the incubator space for <5 h/week and with 30 per cent (n = 18) from 6 to 25 h/week.
Of the 59 participants who answered the question about the type of office they have at the incubator, 33 (56 per cent) participants occupied a shared room and 12 (20 per cent) had a private office. The remaining participants (24 per cent, n = 14) indicated that they make use of other spaces within the incubators (e.g., garden and classroom) or have a specific, allocated space in a designated area. The fee for using the incubator was waived/free for almost one-fourth of the respondents (23 per cent, n = 14). The other incubated businesses reported paying less than US$25 per month (18 per cent, n = 11), between US$25 and US$50 per month (25 per cent, n = 15) and between US$51 and US$75 per month (3 per cent, n = 2). Higher fees (more than US$75 per month) accounted for 30 per cent (n = 18) of the sample. Table 2 provides a detailed list of the services included with the membership.
Services Offered by the Business Incubators
Participants reported being members of the incubator because they wanted to be able to share their projects with others, use specific tools (e.g., 3D printers and laser cutters), rent space and have access to mentorship opportunities. Participants had positive views of the atmosphere of the incubator, which they considered to be important for sharing ideas and improving collaboration. The aspect of being part of a community of like-minded people was also important to the members who seek innovation and creativity, as well as networking and membership opportunities. When asked about the perceived challenges faced by the incubators, members reported that the physical environments could be nicer and with more comforts (e.g., more conference rooms and air conditioning), and that the incubators did not provide a long-term, structured environment for the incubated business.
Collaboration
Less than half of the incubated employees were not collaborating with other businesses present within the incubator (42 per cent, n = 25), while some were considering internal collaborations (22 per cent, n = 13). The rest of the sample (37 per cent, n = 22) had already established collaborations within the incubator. Table 3 shows a detailed list of currently available collaborations inside and outside the business incubators. Technology was mentioned the most, with Information and Communications Technology (ICT) at 25 per cent (n = 15) and robotics at 17 per cent (n = 10). The second most mentioned collaboration was in the arts and crafts (25 per cent, n = 15), followed by education and training (18 per cent, n = 11). Respondents reported that most incubated businesses have current collaborations with other businesses outside the incubators (73 per cent, n = 44). Active collaborations outside the incubators were in the ICT field (27 per cent, n = 16), education and training (25 per cent, n = 15) and arts and crafts (23 per cent, n = 14).
Currently Available Collaborations Inside and Outside the Business Incubators
More than half of the respondents (72 per cent, n = 43) were aware that their incubator fosters collaboration with academic institutions (e.g., universities, colleges or research centres). However, almost one-third of the respondents (27 per cent, n = 16) reported that they did not know about the opportunity given to reach out and collaborate with local academic institutions. One respondent (2 per cent) reported that their incubator did not offer any collaboration with academic institutions.
Potential collaborations mentioned were in the fields of research, education and training (with the incubated business offering mentoring or other educational opportunities to students), technology development and participation in grant applications. Most respondents stated that they already collaborate with academic institutions (27 per cent, n = 16), they would be interested in collaborating with academic institutions (62 per cent, n = 37) or they had no interest in pursuing such collaboration (12 per cent, n = 7).
Engagement with a Network
A question on the survey was asked about the possibility to create a network between different incubators in non-hub cities. Knowledge sharing was the primary reason that respondents were interested in such a network concept (65 per cent, n = 39), followed by the opportunity to forge new collaborations (57 per cent, n = 34). Only few participants (13 per cent, n = 8) reported that a network could not help their business.
After answering the question earlier, participants had the opportunity to read a short definition of what a mesh network is. The definition stated:
A mesh network is a distributed network in which each point acts as a collaborative node and is connected directly to multiple other nodes. A mesh network increases the number of connections presented by the network, amplifying its value by enabling greater access to resources across the full network instead of concentrating all values at one central point, which has to be considered as a single point of failure to be eventually avoided. A mesh network could improve connections between mid-size communities with similar market demographics in order to share resources and market knowledge with the goal of improving start-up businesses.
After reading the definition of the mesh network, respondents reported the features in such network that most interested them: event calendar (67 per cent, n = 40), member communication and skill tracking (61 per cent, n = 37), regional marketing and public relations (58 per cent, n = 35) and project collaboration tools (55 per cent, n = 33). Also access to investors (53 per cent, n = 32) was among the most requested features (see Table 4).
Most Requested Features for the Mesh Network
Public Health Opportunity
The majority of the respondents (82 per cent, n = 49) stated that they are not involved in the health/medical field, but they believed that their products or services could surely (n = 16) or possibly (n = 18) be adapted for this purpose. The remaining 15 respondents did not believe that the health/medicine field would be a good fit for their business. Among the 16 respondents who thought that their businesses could surely be involved in health/medicine, 10 (62 per cent) respondents envisioned services or products directed towards community health concerns (e.g., food accessibility, emergency transportation and wellness tracking), 1 (6 per cent) was not sure yet and 5 (31 per cent) did not answer. Among 50 respondents, only 17 (34 per cent) showed interest in expanding to the health/medical field if there was a new collaborator that could bring relevant experience, while 13 (26 per cent) were definitely not interested in this opportunity and 20 (40 per cent) were not sure.
Qualitative Comparison of Incubators in Hub and Non-hub Cities
From the analysis of the interviews and the internet research on 10 business incubators (see Table 1), we identified six areas of interest for comparison of incubators in non-hub cities with those in hub cities. For each area, we present the associated results.
Name and focus
Incubators in non-hub cities have names that make explicit reference to the town in which they are located (n = 2) or that suggest that the incubator is a community of some kind (n = 3). In contrast, incubators in hub cities have names that evoke ideas of technology, innovation and building a new business. The choice of names clearly reflects the focus of the incubators. Non-hub incubators are mixed incubators that gather all types of small businesses, rather than focusing on a specific field. In contrast, hub incubators are specifically tailored to businesses and start-ups within a specific business market. While the taglines for the non-hub incubators clarify that they help small businesses and start-ups, they also market themselves as innovation centres for the area in which they are located, or as co-working spaces or makerspaces without a specific business focus.
Investment
Another emerging difference between non-hub and hub incubators is the level of involvement in the members’ businesses. Two out of five incubators in hub locations have equity (around 6 per cent) in their members’ businesses and provide different levels of funding to members according to their stage of development. This was explicitly stated both during the onsite visits and on the incubators’ websites. For the other incubators in a hub location, less clear information about funding and equity was provided. Incubators in non-hub locations do not have equity in the small businesses they host, and their level of support is limited to pitch contests and small monetary awards (around US$5,000), as stated on their websites (n = 3).
Support structure
In three out of five incubators in hub locations, small-to-medium enterprises and start-ups can enter dedicated programmes to develop their businesses. Various programmes were offered according to each incubated business’s stage of development and corresponding needs. Each programme offers specific services and support to the incubated businesses. Non-hub incubators either do not mention any incubation/acceleration programme on their websites or mention programmes with no clear stages or services for potential incubated businesses. All of the websites for the incubators in non-hub locations have links to the membership pages and material available on-site for applying to the incubator. Membership fees are clearly stated. Two out of five incubators in hub locations, on the contrary, require a vetting process for entering the incubator, implying that not all applicants will be granted access to the incubator/accelerator programmes and funding.
Sponsorship and partnership
Another clear difference between incubators in hub cities and those located in non-hub cities is the visibility given to partners and sponsors both in the incubator space and on their websites. In incubators in hub cities, sponsorships and partnerships with universities, private companies and government institutions are advertised. In addition, the relationship between these organisations and the incubators is clearly stated, identifying financial support to the incubator or members, mentorships provided, etc. In incubators in non-hub cities, such relationships are mentioned only in passing and no names of related programmes are provided, with the exception of one case in which a relationship with a university accelerator programme is directly stated.
Visibility of incubated businesses
Three out of four incubators in non-hub locations claim that a benefit of paid membership is the members’ presence on the incubator’s website and social media. However, exploration of these incubators’ websites revealed that the members’ visibility is often non-existent or difficult to find. In contrast, hub incubators clearly spotlight their members’ logos on their websites and often feature a webpage describing the business venture. In one of the hub incubators, one wall even featured the logos of all the companies that were present within the incubator.
Digital and physical environment
There are distinct differences in both the physical and digital environments of the incubators. While all the websites look professional, the non-hub incubators’ websites offer outdated information on events, news and/or appear to be updated sporadically. The only sections of the websites that seem active are the calendar sections, where events organised by the incubators are advertised. Descriptions of services are minimal. In contrast, the hub incubators’ websites offer more detailed information about the incubator and the activities and services offered. The websites of non-hub incubators appear to be seeking to establish themselves and reach out to potential members and the community, while those of hub incubators showcase the results of their activities and services. The physical office spaces give a similar impression: non-hub incubators are often located in buildings that are being renovated and feature outdated facilities. While all incubators offer private office spaces and conference rooms, the spaces in non-hub incubators often appear to lack care and planning. Hub incubators present well-designed, curated spaces and welcoming facilities with state-of-the-art equipment. During the visits, based on the visual assessment, non-hub incubators had a small number of people utilising the available spaces, while the hub incubators bustled with activity and people.
Discussion
Incubators in hub and non-hub cities differ drastically. Business incubators in hub cities have more resources both in terms of available funding for themselves and for their members. While the surveyed members of non-hub incubators have reached a certain degree of success in their local communities and enjoy some of the benefits of their membership, these incubators are generally still a work in progress. In addition, members of non-hub incubators do not take full advantage of the space the incubators offer, thus failing to fully develop possible synergies with other members. The inability of non-hub incubators to meet more of their members’ needs is likely due to the fact that they are mixed incubators and therefore cannot offer specialised services to their members.
A mesh network stimulates progress and innovation among all network nodes by enabling each of them to share resources, human talent and money across the entire network in the ways that are traditionally available only to a central hub, as suggested by the concept of the networked incubator based on ‘territorial synergy and relational symbiosis’ (Bøllingtoft & Ulhøi, 2005). Being able to combine the resources, know-how, talents, investments and interests among business incubators located in non-hub cities that belong to a mesh network may help create enough momentum to help small businesses compete more fairly with their counterparts located in hub cities. The results among the businesses in non-hub cities show an interest in being part of a mesh network. However, until the implementation of such a network becomes operational, there is no proof that a mesh network of incubators located in non-hub cities can become comparable with the incubators in hub cities.
The Southeast region of the United States which includes the Carolinas, the Virginias, Tennessee, Kentucky, Georgia, Alabama, Mississippi and Florida suffers from poorer health outcomes than the rest of the country. Several primary public health concerns, including issues with the physical environment (e.g., air and water conditions, housing and transit), clinical care (access and quality of care) and health behaviours (e.g., tobacco and alcohol use, sexual activity, nutrition and physical activity) are more prevalent in the Southeast region suggesting that socioeconomic and cultural factors are at play. In 2018, a report by the Robert Wood Johnson Foundation and the Urban Institute identified factors such as education, income levels, employment, family and social support and community safety.
Exploring public health needs in non-hub cities could lead to the discovery of business opportunities. For example, the Women Infant Children (WIC) programme is a federally funded health and nutrition programme managed by state health departments with a focus on providing health, food and nutrition counselling to underserved infants and children, as well as pregnant, breastfeeding and postpartum women. Previous research studies have shown that the WIC programme is not always effective in reaching out to the entire eligible population leaving a large amount of state funding unused (Birkett et al., 2004). A small business, in collaboration with an incubator in a non-hub city, could consider partnering with a local health department to offer innovative ideas for increasing the number of participants in the WIC programme, in exchange for a service fee. It is important to highlight that these steps can be successful only when there is an accurate understanding of what public health is, the ramifications of public health outcomes on society and the different factors that affect public health. Therefore, we recommend that owners of the incubators partner with local universities or research centres to provide specified training on each of these topics. Some academic institutions are currently considering the possibility of offering degree programmes in public health entrepreneurship (Hernández et al., 2014), and business incubators in non-hub cities could be important partners.
The focus on incubated businesses and their needs differentiates this study from previous research, which mainly focuses on the success of the incubators and does not consider the perspective of the incubated businesses. This research has limitations. First, our quantitative research has a small sample that is limited to only a few business incubators in non-hub cities in the Southeast region of the United States. Our quantitative research is based on the observations. Future studies should reach out to other business incubators in the non-hub cities we selected and also should identify a grow progression of businesses incubators in non-hub cities.
Conclusion
The Southeast region of the United States is largely isolated both geographically and economically from hub cities. Regions outside hub cities experience small markets and significant distances from major consumers and suppliers (Schaeffer et al., 2011). Business incubators in non-hub cities have characteristics different from incubators in hub cities, and ultimately they cannot offer the same services to their members. However, they can still play an important role in giving the people in their communities an opportunity to start a new business, find jobs and increase their income. The County Ranking model (Remington, Catlin, & Gennuso, 2015) suggests that social and economic factors such as employment and income have a 40 per cent impact on the quality of life of individuals. Business incubators in non-hub cities can ultimately positively impact the overall quality of life of the population they serve. This study also suggests opportunities for future collaborations between business incubators, their incubated businesses and local public health agencies with the common goal of improving the health of local communities while creating new business ideas and job opportunities.
Footnotes
Declaration of Conflicting Interests
The authors declared no potential conflicts of interest with respect to the research, authorship and/or publication of this article.
Funding
This work was supported by The Robert Wood Johnson Foundation [grant numbers 74184, 2016-2018].