Business incubator, a solution for startup’s challenges. A qualitative look at business incubator’s support for startups to overcome the liability of newness and smallness

Abstract

Purpose - This thesis aims to study how business incubators support new ventures and how they help their tenants handle the liability of newness and smallness. Specific metrics have chosen to examine the external and internal liability of newness and smallness of new ventures. Design/methodology/approach - After presenting earlier theoretical findings related to incubators, liability of newness and smallness, networking and social capital, this thesis uses a qualitative approach in order to obtain a two-dimensional perspective of incubator supports. This is done by evaluating three incubators from three cities in Norway. The manager/director of each incubator were interviewed as well as six entrepreneurs who still have their companies at the premises of the incubators. Findings - Our findings show that the incubated firms studied suffer from both the liability of newness and smallness. The external liability of newness was found to be more of an issue than internal. This implies that incubators need to help entrepreneurs convince external stakeholders about the potential of the new venture and overcome their lack of a track record and legitimacy. Incubators in this study have been moderately successful in helping startups overcome the liability of newness and smallness. Technical and business assistance, recruitment, networking services had more of an effect than other services in respect to LoN and LoS. We suggest that this can be improved by providing networking services, creating specialist incubator that focuses on specific industry, and using experienced, competent and connector team at incubator staff. Research limitations/implications - The findings provide a better understanding of incubator’s services regarding helping entrepreneurs to overcome liability of newness and smallness. Originality/value - Prior research has suggested that a strong financial position, possession of a bootstrapping approach, partnerships with other organizations (alliance), high level of communication skills, previous start-up experience, virtual organization and embeddedness, entrepreneurship education, supporting entrepreneurial processes and giving them the access to essential resources may lead to help entrepreneurs to overcome liability of newness and smallness. The present study advances these suggestions by showing how incubators as a public or private organization can contribute to this process and decrease mortality rate of new ventures to let them to have a chance to realize their potential.