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Incubator Firm Failure or Graduation - The Role of University Links

Thursday, April 1st, 2010

Technology incubators are a special form of business incubator. They focus on new enterprises whose operations are based on novel technological ideas that are likely to lead to a marketable new product. They provide common services as well as financial, legal and business support to these newly formed enterprises. The incubation process ends after a limited period of time, either with the “graduation” of successful start-ups that move outside the incubator, or with the termination of incubation arrangements for one reason or another.

Technology incubators are a growing part of the institutional infrastructure for university-industry technology transfer, and indeed practitioner publications tout the benefits of incubation for technology commercialization.

Research shows that university-linked incubator have a greater edge when compared to incubators that are not university linked. One of the most important benefits is the availability of experts (mentors) who are equipped with the latest research in specific fields and can provide consulting advice on a product. Other important factors include access to specialized laboratories and facilities, access to knowledge based assets that are often needed for technology-based start-ups and intellectual property rights.

The involvement of a university faculty member as an advisor to a startup firm or as part of its managing team reduces the chances of a firm’s failure. On the other hand, a faculty member’s engagement with a firm sometimes slows down the firm’s graduation process due to the faculty member’s dual roles; one as a researcher in a university and the other as a member of a startup firm.

Entrepreneurs and incubator managers need to be aware of the trade-off they might encounter when incubating a new venture that relies on a strong university link either through a technology license and/or having one or more university faculty members as part of the management team.

Incubators that are linked to science parks have a major advantage in creating an image and credibility with customers and suppliers. Thus, the incubators that have strong links with universities and are located within science parks are likely to get the most benefits.

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