Incubator doesn't guarantee your company success

Oct 28, 2010

Business incubators are supposed to work like incubators for chicks or babies. The idea is that subsidized costs and business advice for entrepreneurs will help keep nascent companies alive. A new study finds success can be elusive for small businesses that start in incubators.

We covered the research for NPR's business desk:

JACOBS: Now 29, [Brent] Angeline operates out of a spacious office in the Greater Binghamton Innovation Center. He has no customers yet because his product's still in development. But in about a year, he's expected to be financially ready to leave the incubator and go it alone.

Mr. ANGELINE: By that time, we'd certainly be able to tell one way or the other. But we're definitely in good shape for that. It's not like it's impossibility.

JACOBS: But here's the catch - and it's a big one for an incubator like this one that's funded by half a million dollars in state and federal economic development money: The first study to try and compare incubated companies to businesses on the outside finds companies like Angeline's housed in incubators aren't actually performing better.

Mr. ALEJANDRO AMEZCUA (Researcher): The data showed that being in an incubator actually hurts your long-term survival in the economy.

Jacobs: Alejandro Amezcua conducted the research with funding from the Kauffman Foundation. He was surprised to find that drop off. He's not sure yet whether incubators are propping up businesses that would fail on their own, or if maybe access to expert advice convinces failing entrepreneurs to get out early. But he also found that only three percent ever tried to make it on their own. Amezcua's study looked at 18,000 businesses in 950 incubators

You can read more and listen to the story here.