by Sally Hayhow
Thanks to the annoyingly memorable American Express ad, we've heard "membership has its privileges" about a zillion too many times. Even decades after the campaign's supposed demise, typing the phrase into an Internet search engine turns up 600-plus hits. Organizations still use the phrase to herald their discounts, special programs and member services.
Thinking of benefits as giveaways and specials can overshadow the purpose of having benefits at all: to help members do their jobs better and easier. Over the past year NBIA exposed itself to a litmus test on this score. It conducted a State of the Industry Survey of North American incubators, which in itself is nothing new. NBIA has done similar, periodic surveys since 1989. Except for methodological refinements, this survey was akin to previous incarnations, with one major difference. In the data analysis, we compared the performance of members to nonmembers to see if members had an edge.
The results are clear. NBIA membership has its privileges. When the data were crunched, NBIA member incubators outperformed nonmembers in every category. What could be a better benefit! For instance, member incubators served, on average, twice as many client companies and nearly twice as many graduates as nonmember incubators did. The average member incubator's client companies created one-third more jobs than client companies in nonmember incubators. Concentration of services was higher among members. Member incubators were larger. All this is in spite of the fact that member and nonmember incubators are about the same age.
Even in areas where performance was not an issue, there were interesting differences. Half the member incubators were located in urban areas and about a quarter were rural. The pattern was reversed for nonmembers; 50 percent were rural and about a third were urban. Mixed-use incubators dominated among nonmembers (55 percent), and only 13 percent were technology. Almost equal numbers of member incubators were mixed use (37 percent) and technology (33 percent).
Since 1989, when the first State of the Business Incubation Industry report came out, NBIA has continued to survey incubators every few years. It published studies in 1991 and 1995. This latest report provides a decade of perspective, and although not all the questions are the same in each version, a lot can be safely inferred. The trends in incubation so far are what you would hope to see in an economic development strategy establishing itself for the long run. They're evolutionary, not revolutionary or erratic. Numbers of client companies and graduates have steadily climbed. The operating budgets have done the same. Incubators are offering more services to their clients. The types of incubators have shifted slightly, with more technology incubators than in 1989 and a new class of industry-specific incubators, which we called "targeted." Yet the shifts have been gradual.
To arrive at the figures in the 1998 state of the industry survey, NBIA made several changes over past studies (see A changing methodology below). In most cases, the adjustments meant we'd be reporting lower figures. The resulting pool of questions is smaller but, we believe, more representative of the industry. "Our caution makes the good outcomes even more significant,” says NBIA Executive Director Dinah Adkins.
The incubators in this study have added some 19,000 viable companies and 245,200 jobs to the North American economy. The average member incubator opened in 1991 and serves 24 client companies now and 53 since inception. Operating budgets averaged about $280,000 annually (though they were all over the map). The average established member incubator has graduated 20 companies.
Most incubators make available a wide range of business assistance services – including specialized ones. For instance, 43 percent of member incubators offer international trade assistance and 62 percent help connect their companies to investors and strategic partners. This assistance is orchestrated by well-educated senior managers: 55 percent have post-graduate educations.
A very respectable number of incubators answered what NBIA calls its Core Survey, which made it possible to compare members and nonmembers. Director of Member Services Susie McKinnon spent a year trying to track down every incubator possible. "We mined the data we had on our database, searched for information on the Web, took leads from magazine and journal articles that mentioned incubators, asked for referrals from members and sent out letters to every state association," McKinnon explains. Although members understandably made a stronger showing, a very significant percentage of nonmember incubators participated – 56 percent. Altogether, 67 percent of the 587 identified incubators answered a survey.
There is no reason to think that the nonmember incubators would be inherently low performers – in fact, their motivation to answer the questions suggests just the opposite. They received no compensation for answering and, not being members of NBIA, had no particular vested interest in taking part.
If there's any bias, it has to do with the type of people who join an organization, says researcher Don Grimes. "The people who are more likely to join may be the ones who are bound for success. … They may want to be more knowledgeable about the field," Grimes says. In other words, their membership did not necessarily cause them to be better performers – their quest for better performance caused them to become members.
Either way, the "privilege" of membership was soundly related to performance. "It's something we felt, hoped for, dared to assume," McKinnon says. "But it was still surprising and gratifying to see it."
Not only is the information gratifying, but it should cause incubator stakeholders to take note. "If an incubator's management is not availing itself of industry contacts and best practices, the sponsors should be a questioning the return on their investment," says Adkins.
The study contains 67 charts and graphs to make the information easily accessible. Since the first state of the industry survey, we've learned incubation professionals and many others in the community at large clamor after these results. It helps everyone understand what you can expect from this ever- growing industry.
NBIA too finds the results very useful, but we also gained as much if not more from the process. "Although arduous, it was wonderful. Over the year, we talked to many of the respondents personally and gained a great deal of new information about what programs are doing and what goals they have," McKinnon says. "Enthusiasm is high all across the continent for the concept of business incubation."
In this latest state of the industry survey, NBIA made the following shifts in how and what it collected:
More stringent screening
NBIA defines an incubator as a program that has management on site, a full array of business assistance services and a graduation policy. Incubators that did not fit any of these basic criteria were cut from the sample.
The Impact of Incubator Investments study, which was completed during the beginning stages of the Core Survey, added understanding about what questions were yielding good data. Some questions repeated from earlier surveys seemed straightforward enough but weren't getting straightforward answers. We dropped several questions and altered others.
Less on graduates
In former studies, we'd asked managers to report such things as revenues of all graduates. Although many keep graduate stats, they don't all keep the same ones and it's tough to reconstruct information after the fact. So we dropped a number of such questions about graduates. With the Toolkit NBIA is developing, we'll offer managers a reasonable way to collect that data from graduates firsthand on an ongoing basis in a uniform way.
Keywords: research -- incubation, NBIA programs
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