**Abstract**

This chapter aims to (i) understand the functioning and importance of incubators in supporting the creation of new business and local economic development, as they help locally engage young entrepreneurs and thus retain expertise, for example, in regions farthest from large urban centers, (ii) realize the importance of incubators and science parks in the development of start-ups, (iii) understand the role of education in promoting entrepreneurship, and (iv) understand the competitive environment as it becomes more complex and dynamic, as there are opportunities to serve customers who are dissatisfied; thus the threats that large companies experience offer small business opportunities.

**Keywords:** incubators, start-ups, small business, economic development, education

## **1. Economic importance of incubators**

An incubator is a way for the community to help entrepreneurs who have good ideas but do not have the resources to start their activities independently.

Small business incubators are a way of boosting economic development, whose practice began in the United Kingdom since the 1970s as artists' cooperatives, often being located in historic buildings. In the USA, incubators have been used, for example, to (i) assist the recovery of ruined and impoverished neighborhoods, (ii) promote scientific innovation by linking partnerships between universities and business, and (iii) help entrepreneurs who want to expand their specialist knowledge through interaction with other small business owners [1–3].

#### **1.1 The role of small businesses in the local economy**

Interest in incubators lies partly in the role that small businesses play in most local economies, for example, in the jobs created and the innovation generated. Furthermore, small businesses can be developed in greater numbers faster than the larger companies often not local.

Incubators are a vehicle of aid to local entrepreneurs as they constitute the local economy and are more likely to maintain their activity locally than multinational enterprises. In addition, supporting the creation of small local businesses can help locally engage young entrepreneurs by avoiding the loss of specialized skills in some geographical regions of the interior. However, there is a risk that 50% of small businesses will fail in the first 4 years of operation. This reality has diverse implications for local economic development, in the following aspects [4–6]:


A brief note to mention is that start-ups usually fit into the reality of a small business.

#### **1.2 Objectives of incubation programs**

Start-up incubators support the creation and growth of business through organizational and technical assistance, which at the same time contributes to the reduction of entrepreneurial failure. The three most common objectives of incubation programs are the following [5, 7]:


The incubation can be physical or virtual. Virtual incubation does not consist of a work space, but it is included in a credible address destined to the market for professional contacts, including the holding of work meetings. We can affirm that an incubator is constituted by a common space of which a space (like office) is made available that is used for the beginning of activity of a new business. The price of rents may be lower than the market price due to public subsidies to promote entrepreneurship.

In addition to lower incomes, location sharing, or coworking among start-ups with similar activities, the incubator includes a set of support services to serve the technical and operational needs of start-ups, often owned by inexperienced entrepreneurs. In turn, coworking constitutes a physical space that fits a transversal work model for entrepreneurs with similar activities at the level of operational resources. It is a functional structure that allows entrepreneurs to have an office as reference location and professional contacts, enjoying a series of services shared with other entrepreneurs.

#### **1.3 Physical installations**

The physical facilities provided by the incubators may take different forms depending on the sector of activity of the start-ups to be incubated. For example,

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*Business Incubator and Economic Development DOI: http://dx.doi.org/10.5772/intechopen.88562*

**1.4 Benefits offered by incubators**

ers, and Internet access

other incubators

legal support

accounting

tor operations.

subsections.

**2.1 Small business financing**

the service start-up incubator may consist of individual offices with shared common areas (reusing a residential or commercial space), while incubators for high-

Business incubators offer tangible and intangible benefits to start-ups [7, 8].

• Shared use of equipment such as photocopying machines, telephones, comput-

• Shared conference spaces and meeting rooms and informal interactions with

• Shared services for start-ups, such as secretarial, accounting, marketing, and

• Technical assistance in marketing plan, business plan, financial system, and

• Joint acquisition to suppliers and links between incubated start-ups relative to

The intangible benefits derive from the ability of entrepreneurs to act as a support system among incubated start-ups. Intangible benefits are more likely to occur among start-ups with similar activities. For example, incubated high-tech start-ups can share the development of ideas and innovation. Biotech start-ups can support each other in the development and commercialization of innovative products.

Even in incubators with start-ups operating in distinct sectors of activity, entrepreneurs can share their experience, ideas, and knowledge on certain subjects such

Following the above, we can briefly state that the main objective of incubators is to support the development of start-ups, which leave the incubator when they increase in size or become sufficiently stable to operate without specific benefits offered by the incubator. This makes room for other start-ups to start their incuba-

There are several economic development tools that can be used in conjunction with the incubation of start-ups, which will be addressed in the following

For entrepreneurs, money is a resource but not an end in itself. It is true that an innovative idea needs capital to subsist. It is also true that a large number of businesses fail due to lack of adequate funding. However, other resources are equally vital to entrepreneurial success, such as specialized work teams and sales and

operating factors upstream and downstream in the value chain

• Assistance in obtaining funding in the start-up phase

as marketing, product development, recruitment, and accounting.

**2. Economic development instruments**

tech manufacturing start-ups require larger spaces (industrial buildings).

Tangible benefits often include the following operational aspects:

*Intellectual Property Rights - Patent*

residents.

business.

fail.

business.

**1.2 Objectives of incubation programs**

tion programs are the following [5, 7]:

3.Diversification of the local economy

1.The creation of employment in the community

2.The creation—or acceleration of growth—of a local industry

• Small businesses are important because they can generate employment for

• Small businesses often carry out activities in areas of technological innovation or artistic or creative areas that do not require many resources to operate the

• The development of small businesses contributes to the creation of local and

• Significant efforts must be made to ensure that the companies created will not

• Because of the risk of small business failure, incubators should not be seen as the cornerstone of an economic development strategy but rather as a contribution of efforts to promote the development of SMEs in a given community.

A brief note to mention is that start-ups usually fit into the reality of a small

Start-up incubators support the creation and growth of business through organizational and technical assistance, which at the same time contributes to the reduction of entrepreneurial failure. The three most common objectives of incuba-

The incubation can be physical or virtual. Virtual incubation does not consist of a work space, but it is included in a credible address destined to the market for professional contacts, including the holding of work meetings. We can affirm that an incubator is constituted by a common space of which a space (like office) is made available that is used for the beginning of activity of a new business. The price of rents may be lower than the market price due to public subsidies to promote

In addition to lower incomes, location sharing, or coworking among start-ups with similar activities, the incubator includes a set of support services to serve the technical and operational needs of start-ups, often owned by inexperienced entrepreneurs. In turn, coworking constitutes a physical space that fits a transversal work model for entrepreneurs with similar activities at the level of operational resources. It is a functional structure that allows entrepreneurs to have an office as reference location and professional contacts, enjoying a series of services shared with other

The physical facilities provided by the incubators may take different forms depending on the sector of activity of the start-ups to be incubated. For example,

regional economic capital (specialized knowledge and brands).

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entrepreneurship.

entrepreneurs.

**1.3 Physical installations**

the service start-up incubator may consist of individual offices with shared common areas (reusing a residential or commercial space), while incubators for hightech manufacturing start-ups require larger spaces (industrial buildings).
