Purpose: This research has been undertaken with the purpose of understanding the impact of Business Incubators on survival of Saudi starts-up within last three years (2016 and after 2016). It has a purpose of highlighting the impact from Saudi’s starts-up perspectives and serving three major objectives. First objective is to study the role of business incubators in survival of new business firms or starts-up. Second is to understand the types of starts-up, which are likely to experience greater benefit from business incubators in Saudi Arabia. Third is to examine the effectiveness of business incubators in meeting the basis needs of Saudi Arabian starts-up
Design/Methodology/Approach: The research adopt exploratory design and makes use of deductive approach for investigating the research question. For the purpose, data have been collected from 30 starts-up, which were founded in and after 2016. The primary data have been collected through survey method with the help of a questionnaire. The data have been analyzed with the help of percentage method and are shown with the help of graphical representation that include table, chart and graph.
Findings: The research finds that more 61% of the respondents feel that Business Incubation program has significantly helped them grow as company to the next level of maturity. The primary data also suggest that 57% of the starts-up think that their chances of survival have improved due to association with BIs.
Keywords: Business Incubators (BIs), Starts-up, survival and success, Financial Support, Facilities and Infrastructure, Networking and Mentoring, Technology Support and Training
There has been an increase in research studies related to the topic of ‘business incubators’ over the past two decades, as data suggest 7610 hits on Google Scholar since 2018 – 16000 since 2015 1610 in 2019. The concept has attracted ample attention due to its vital role in generating economic growth and promoting new businesses. The relationship between sustainability of new businesses and economic growth has been discussed substantially in academia and most of the studies have found a proportional relationship between both of them (Shalaby, 2007). However, one thing is very clear from existing literature that growth of a firm is not only a complex, but also a multi-dimensional phenomenon (Scillitoe & Chakrabarti, 2010). The issue of complexity combined with multi-dimensional phenomenon makes it hard to find a comprehensive theory that may embrace all aspects of a firm growth.
Many studies suggest that entrepreneurs and start-ups face a number of challenges during initial phases of launching a business. These challenges are mostly related to financial challenges, lack of market access, lack of managerial skills, lack of institutional supports, low product, lack of credit, and lack of interest by employees. These challenges are not only detrimental from a firm point of view, but are also a matter of concern for policy makers (Shepard, 2013). In order to overcome these challenges, various mechanisms, policies and strategies have been developed and one such mechanism is the concept of ‘business incubators’. The term has been defined differently, but one of the most common definitions can be identified as ‘business incubators are locally based institutions that provide share facilities for young and new firms in terms of physical space and business support services’ (Grimaldi & Grandi, 2005). They help in creating a positive environment, which is conducive for the growth of new businesses or start-ups.
Over the years, the roles of business incubators have become more critical as it also include reducing the risks of failure and increasing the long term sustainability of start-ups. Business incubators focus on providing entrepreneurs with assistances, which are essential for filling the knowledge gaps in terms of core business model/strategy; require skils and training (Bergek and Norrman, 2008). In addition, they also assist in presenting their ideas in a logical and feasible way that allows decreasing their early operational costs and increasing their chances of sustainability. The critical importance of business incubators has been acknowledged around the world and their roles have been appreciated for new business formation, preventing business failures, and increasing the chances of business survival during early stages of its foundation (Erlewine & Gerl, 2004).
The governments around the world have been devoting considerable amount of resources for establishing and operating business incubators. For example, China and the USA are the home of more than 2,400 and 1,500 incubator respectively and they contribute towards success of start-ups (Sharma, 2017). The numbers of business incubators in India grew up by 40% in 2016 and it increased the numbers of incubators to 140 (Sharma, 2017). According to a report published by Global Accelerator Report 2015, it has been reported that about $191MM was invested into more than 8,800 start-ups in different parts of the world. The major reasons that attracted this investment encompass of the USA and Canada, Middle East Region, Europe, Latin America, and Asia and Oceania (UBI, 2019). One thing is worth pointing here that among the incubators around the world, 50% of incubators in the Middle East region are non-profit as against of 25 to 35% of incubators in different parts of the world (Rose and Grof, 2016). This is because; a large number of incubators in Saudi Arabia are sponsored by national government.
The numbers of incubators have gone u p in developed and developing nations as a mean to achieve competitive economies at the national and international level. One such economy, which attempts to create a vibrant growth and join the global list of global economic powers is, Saudi Arabia. This research examines the impact of business incubators on enterprise growth of Saudi Arabian start-ups. It examines how business incubators of Saudi Arabia like Monshaat, Takamol, Endouver, 500 startups, and 9/10ths have affected the growth and sustainably of start-ups in the KSA (Nawito, 2017).
A number of studies have been conducted to understand the impact of incubators on success of a new firm and most of them have found a positive relationship. However, a few studies have questioned the actual impact of incubators on start-ups and have raised the issue of lack of evidence from long run perspectives. It is argued by researchers that the longer of a firm’s incubation period, the higher the risk of failure. This is because; an incubated firm is more likely to depend on supports from incubators. In a recent study on the USA’s new firms, it was found that incubated firms outperformed their in terms of sales growth and employment, but they also failed sooner in comparison to non- incubated firms. The study suggested that incubators did not contribute significantly to the survival of new firms within the USA (Hanadi Al-Mubaraki, 2011). In a similar type of study that was conducted on German firm’s survival performance, it was found that there are no significant differences in the performances of five firms, which are located inside incubators and outside incubators (Schwartz, 2011). The study shows that three incubators firms have lower chances of survival in comparison to two firms, which were outside incubation. This study based on empirical evidences collected from 371 on-incubators German firms.
On the contrary of above findings, another study shows that 80% of incubated firms in Brazil and 90% of incubated firms in Germany have survived incubation period. This strengths the belief that incubated firms have better chances of survival (Moraru & Rusei, 2012). Despite its controversial roles and impact on success of new firms, the essence of incubators is worth investing from start-ups point of view. This is because; a large part of researches have indicated towards positive relationship between incubated firms and their chances of survival.
The Kingdom of Saudi Arabia (KSA) has experienced a new decade of entrepreneurship efforts and innovations in order to minimize its dependency on oil-based economy. In spite of controlling the largest share in GCC (Gulf Cooperation Council) in terms of population and consumer spending, Saudi Arabian start-ups ecosystem is relatively very small and nascent in comparison to its vast oil sector (Shepard, 2013). The contribution of SMEs in this region is only about 20% of the GDP that is well below in comparison of first world nations, which enjoy an up to 70% of SMEs contribution to the GDP. Besides this, SMEs in the KSA tend to bear the burden of complex administrative procedures coupled with funding challenges. It is worth pointing here that only about 5% of start-ups are funded by financial institutions in the KSA (Alshathry, 2017). This shows the challenges of new business firm in the KSA and makes an interesting question to explore that how start-ups are affected by Saudi business incubators in this region. Thus, the study is guided by following research question:
Research Question: What is the impact of business incubators on enterprise growth of Saudi Arabian start-ups?
This research question has been further divided into following sub-questions:
RQ1: What are the major challenges of Saudi start-ups?
RQ2: What is the level of awareness among Saudi start-ups about most important (key) services to be provided by business incubators?
RQ3: How business incubators have affected the growth perspectives of Saudi start-ups in last 2 years?
The study aims at examining the impact of business incubators on survival and success of Saudi Arabian start-ups. It focuses on exploring the growth of new firms, which came into existence since 2016. The purpose of this study is to identify and highlight the major challenges of new start-ups in the KSA and discover how business incubators have been helpful in addressing the identified challenges. The study is guided with the purpose of identifying the linkage between incubated firms and their chances of survival in terms of positive, negative or neutral within the specific context of Saudi Arabia. In order to attain aforementioned aims, below objectives have been formulated:
- To study the role of business incubators in survival of new business firms or start-ups
- To understand the types of start-ups, which are likely to experience greater benefit from business incubators in Saudi Arabia
- To examine the effectiveness of business incubators in meeting the basis needs of Saudi Arabian start-ups
Despite the growing attention and increasing efforts to measure the impact of business incubators on young firms or start-ups, there is no standard methodology that is applied universally for measuring incubator performance (Schwartz and Hornych, 2008).. It is evident from study of existing literature that answering a direct question “does business incubators have a positive impact on survival of start-ups” is in fact a very complex and challenging task. This complexity and challenge arises from a number of reasons including availability of limited data, difficulty in assessing the incubation period, and establishing a direct relationship between incubated firms and their chances of survival and success (Brown, Earle, & Lup, 2005). This is because; outcomes for a business firm may take many years to materialize. This is because; different industries have different lifecycles – for example the oil industry takes years to set up but a cake baking company would only take a few weeks (Shepard, 2013).
A timeframe of about 3 to 4 years are taken into consideration for incubating a successful enterprise (Ratinho and Henriques, 2010). This makes the measurement process even more complex, as one has to wait for at least another three to four years to measure the impact of business incubators on start-ups. Besides the issues of incubation time frame, the problem is also associated with measuring the growth rate of incubated enterprises, as industry benchmark may not be clear to assess the performance of an incubated firm (Rothaermel & Thursby, 2005). These problems have been intensified due to addition of one of issue, which deals with completion for fund raising among business incubators. This trend may force many incubators to constantly ‘demonstrate success’ leading to over-reporting of success and under-reporting of failure cases (Hanadi Al-Mubaraki, 2011).
Incubators are regarded as an essential part of the technological development in the specific context of Saudi Arabia and they are said to play an important role in encouraging innovation. The incubators in Saudi Arabia are driven with the purpose of helping the Saudi society in being more knowledge based, which would help in reducing its dependency from oil-based economy and making it knowledge- based economy. It should be noted that establishment of business incubators in this nation is relatively a new phenomena, as the first technology incubators was established only a decade ago. BADIR-ICT (Badir) was the first technology incubators that were opened in 2008 and it works as a part of national studies organization at King Abdul Aziz City for Science and Technology (Binsawad, Sohaib & Hawryszkiewycz, 2017). In addition, Oqal, a not-for-profit online platform, which was incepted in 2011, has helped more than 50 entrepreneurs for founding companies. All these initiatives in Saudi Arabia indicate towards rising importance incubators, as a mean of encouraging entrepreneurs and foundation of new firm (Alshathry, 2017).
Although a number of studies have been conducted to address the above issues and efforts have been made by policy maker and government authorities to offer a solution, a limited progress has been made in this direction. These researches are also focused at perspectives of government and policy makers and ignore the perspectives of incubatee firms or start-ups. In addition, most of the studies are focused on examining and reporting the trends of business incubators and new business initiatives within developing nations (Dee, et al. 2011). A further investigation of literature indicates towards a dearth of adequate information on how business incubators affect the enterprise growth of Saudi Arabian start-ups. There is a scarcity of studies in the KSA that are dealing with the topic of business incubators and their impact survival and success of start-ups. This study is an attempt to bridge the aforementioned knowledge gap and contribute to the exiting literature.
This research consists of five chapters, which are interrelated and interdependent. These chapters are entitled as Introduction, Literature Review, Research Methodology, Data Analysis and Discussions, and Conclusion and Recommendations. A precise detail about each of the aforementioned chapters can be observed as following:
Introduction: The first chapter is entitled as ‘Introduction’ and it aims at setting the purpose of the research. It provides information about rationale of the research along with major aims and objectives. It presents the background to the research, problem statement, research questions and sub-questions. In addition, it also includes details about limitations of the research.
Literature Review: The second chapter covers and explains concept of business incubators (BIs) and its role for survival and success of start-upss. The chapter develops a theoretical framework for understanding the impact of business incubators on survival of start-ups.
Research Methodology: The third chapter is concerned with offering justification regarding selection of research methods, tools, techniques, and sample for the collection of primary data. It provides adequate information and justification for ensuring the reliability and validity of data collection. The study collects primary data with the help of interview method and its purposes and limitations would be discussed in this chapter.
Data Analysis and Discussion: The fourth chapter ‘Data Analysis and Discussion’ focuses on analysis of primary data with the help of ‘Grounded Theory’. It aims at conversion of raw data into meaningful information. It also covers discussion about implications of research findings.
Conclusion and Recommendations: The last chapter of conclusion and recommendations captures the key findings and results against the aims and objectives of the study. The section of recommendations intends to provide specific measures for betterment of concerned audience.
The major limitation of this study can be identified as selection of start-ups as it is hard to identify and select all the start-ups or new ventures in Saudi Arabia. In addition, it is also difficult to mark the field of start-ups that should be given priority to others. For this purpose; the study selects only those start-ups that have been founded in 2016 and afterwards. It implies that start-ups with a maximum of 3 years of age have been selected for the study. It is also not feasible to include each and every field of entrepreneurship. Hence, five different sectors have been selected for collection of data and these include education, healthcare, information technology, media and ecommerce. A total number of 40 start-ups would be consulted for fro primary data collection.
chapter covers adequate and appropriate details about background of the study,
aims and objectives and major purposes for undertaking the research. It helps
in establishing the need of the study and setting the direction of the
research. It is evident from above discussion that most of the existing studies
are concerned with highlighting the contribution of incubators from BIs
perspectives, but ignores the perception of start-ups firms of new ventures
(Schwartz, 2011). This study captures the perception and views of start-ups
firms or new ventures and highlights the impact of BIs on survival and success
of new ventures. In this context, the study brings new observations about role
and impact of BIs on survival and success of start-ups and how it can be
further improved. The information about structure of dissertation tends to
bring clarity about the organization of the study and its logical sequence. The
chapter also discusses about limitations of the study, so that its scope and
implications can be marked.
The chapter of literature review allows reviewing secondary information in such a way that tends to improve understanding about the existing researches, with regard to a particular topic Cohen, Manion and Morrison (2011). It helps in building knowledge and theoretical premise for a specific topic. The focus of the current review is to understand the impact of business incubators on enterprise growth. The literature investigates that how business incubators help new businesses during the survival period and subsequent growth. In addition, it sheds light on impact of business incubators on survival and success of start-ups and attempts to understand that whether the impacts are positive, negative, or neutral for business. The research discovers the perception of the incubator from the businesses perspective – rather than a government – legislation – policy perspective.
The concept of business incubators has been attracting substantial attention from researchers and policy makers’ perspectives due to its critical importance towards formation and survival of new business entities (Bergek and Norrman, 2008). According to Mufaddy et al. (2017) the first business incubator was launched about seven decades ago in 1959 as the Batavia Industrial Center in New York. During early 1970s, the strategy of business incubators was adopted by the United Kingdom and the same small business nurturing strategy was adopted in different part of the world including China, Taiwan, Indian, and so on. The evolution of business incubators can be described as a process of establishing a community inside the community (Mufaddy et al., 2017).
According to Lalkaka (2001) business incubators have been playing a critical role in generating new economic opportunities and promoting new business initiatives around the world. The author argues that new firms are both vital and fragile during their initial years. Therefore, it is important for policy makers to develop a mechanism that may help new firms in survival and success (Lalkaka, 2001). In another study Lalkaka (2002) notes that the primary purpose of business incubators is to help new business in such a way that creates nurturing business environment. It creates a positive business environment that assist in transformation of new ideas into commercially viable products and services. Business incubators have emerged as an increasingly recognized approach for creating new business opportunities and accelerating the growth of new businesses (Aernoudt, 2004).
It aims at generating critical sources of restrictions and opportunities through a network that supports new businesses. The network may include accessibility or availability of funds, help with business basics, market research and market assistance, intellectual property management, regulatory compliance, and so on. The author posits that incubators may differ widely with regard to a number of factors. These factors encompass of their types of sponsorship such as economic development groups, business firms, universities, and venture capitalists (Lalkaka, 2002). In this context, the National Business Incubation Association (NBIA) has classified their members’ incubators into five major categories including venture capitalists, academic institutions, non-profit development corporations, for-profit development ventures, and combination of the above (Ratinho and Henriques, 2010).
Lesakova (2012) has examined the role of business incubators and has found that incubators cannot replace personal efforts, business initiatives, and resourcefulness. Most common incubators services are likely to offer in the relation with basic need of a business, networking activities, help with accounting and financial management, access to funds or bank loans, access to angel investors or venture capitalists, access or link to strategic partnership, technological assistance, comprehensive business training, and links to higher education (Lesakova, 2012). However, it should be noted that incubators do not serve any and all companies. A business needs to enter incubation program is required to meet the specific criteria, which vary from program to program. In general, only those businesses are selected or admitted that comes with feasible business ideas and workable business plans (Lesakova, 2012).
According to Regmi, Ahmed, and Quinn (2015) the amount of time a firm spends in incubation period tends to differ significantly and it depends on a number of factors including types of business and level of business expertise of an entrepreneur. The firms with long research and development cycles are more likely to stay in incubation period for a long time than those with manufacturing and service companies. This is because; manufacturing and service companies can immediately start producing goods and services and get involved in commercial activities. The evidences and trends from Europe tend to suggest that high tech and knowledge-based business are more likely to find business incubators. The statistics show that 18.6% Hi-tech sector and 18.2% IT sectors have got support of business incubators (Regmi, Ahmed, and Quinn, 2015). Besides this, economic development organizations in Europe have sponsored about one third of business incubation programs (Regmi, Ahmed, and Quinn, 2015).
As per Pijl, Lokitz & Solomon (2016) different types of incubators are growing from past several years and this can be classified on the basis of leading institution establish, governing methods or by monitoring their activities. However, most of the incubators are governed and managed by institutions like research institutes, governmental organizations, non-profit organizations, universities, consortiums and other communities in the USA and Europe (Pijl, Lokitz & Solomon 2016). Klonowski (2014) defines two models of business incubators and this includes for-profit and non-profit business incubators. Among these two models, non-profit incubators are typically managed by the government agencies and universities (Klonowski 2014).
Particularly, the non-profit incubators are used by the entrepreneurs who are not planning to start an internet company or who starts business with an idea of dividing their large amount of equity. Non-profit incubators usually charge no equity or less equity in return for their services, while for-profit incubators take as much as 70% of their services (Klonowski 2014). There is a huge distinction between the for-profit and non-profit incubators. Some of past research also suggest that university based incubators are different from other and this distinction is based on the business models typically used by universities (Klonowski 2014).
On the basis of governance structure and business models, Phillip, Sarfraz & Wadid (2016) suggested three different types of incubators; where first is a non-profit also known as small business incubator because it is focused towards local economy diversification. Second is university linked incubators and third is for-profit incubators that basically associated with private organizations (Phillip, Sarfraz & Wadid 2016). Klonowski (2014) the grouping of incubators is based on the types of their sponsors, which further cited these incubators into four categories such as, property development incubators or For-Profit incubators, development corporation incubators or Non-Profit incubators, Academic incubators and business development or for-profit seed capital incubators (Klonowski 2014).
On the basis of sponsoring institutions and their business goals, Phillip, Sarfraz & Wadid (2016) argued that business incubators consists with small management team that helps to develop micro-environment by providing them shared office facilities, physical work-space, counseling, training and access to finance, information sharing and other professional services at an affordable cost. Incubators vary in terms of their state, business venture capital, economic development group, and universities. Variation is also based on the objective of start-ups, location preferences (Urban, rural, and international), business model (profit and non-profit), and sectorial focus (such as technology or mixed). Thus, business incubators can serve variety of businesses and technology incubators are preferred to use in developing countries for commercializing innovations (Phillip, Sarfraz & Wadid 2016).
According to Pijl, Lokitz & Solomon (2016), there are five types of business incubators including technology incubators, traditional incubators, cooperative/social incubator, private incubator, and corporate incubator. Technology incubators primarily associated with the state/federal government, universities, and other related industries along with students and professors works as a founder of business. Traditional incubator is used to work with the social problems of society such as unemployment and other such problems that provides goal to regional and local development (Pijl, Lokitz and Solomon, 2016). Cooperative or social incubator is a series of initiatives taken by universities or other concerned citizens, who attempted to combat ills of society by creating jobs and growth with the help of their social sphere. Private incubator focused towards the area of information technology by providing business development services with the help of founding partners. Here, BIs works in the context of large companies that focused towards new ventures selectively to reap the benefits of innovation (Schwartz, 2013).
According to Pettersen and Tobiassen (2016) a few of the significant benefits about using incubators program by start-ups can be identified and analyzed in terms of access to finance, idiosyncratic (non-generic) knowledge generation, development of organization reputation, and market access. The authors have focused at two major factors; internal networking with other incubator firms and facilitation of external network as a mean of incubation program (Pettersen & Tobiassen, 2016). Zheng and George (2010) posit that incubators shorten and accelerate learning of a start-up firm though giving an access to external network. It is very important for start-ups to develop a network with other firms in order to capture the emerging opportunities, as social identify is equally important as the economic identify of the firm, at the early stage of foundation (Zheng & George, 2010).
According to Cooper et al. (2012) incubators also help a start-up to focus on its core activities rather than making arrangements for mundane tasks. It offers intangible resources like guidance and mentorship to entrepreneurs, who may use the experience of incubators in establishment of a successful firm. They also offer tangible resources like accounting assistance, office space, and legal guidance to support the basis requirements of the start-ups. The authors have also emphasised on the role of incubators as a facilitator of internal and external networks. Due to their vast experience and strong network, a start-up firm can get advantage of marketing and PR activities, which in turn strengthen the chances to scout leads and exploit new opportunities. The benefits of marketing advice and subsequent benefits on demands of the products and services have been highlighted in a number of studies (Cooper et al., 2012).
Azzam and Musa (2010) have investigated the role of business incubators in success and survival of new business firms and economic growth in Jordan. Their study found that there was a significant impact of the administrative and technical services on success of an enterprise in terms of income growth, job creation opportunities, and growth of the firm (Azzam and Musa, 2010). In addition to this study, several other studies have indicated towards positive outcomes for incubatees firms as a byproduct of business incubation. It is suggested by evidences that new ventures that interact with incubators show positive outcomes in terms of learning and success rates.
In 2002, CSES estimated that business incubators in the European Union assisted in creating about 40,000 jobs through 900 incubatees firms. There is a strong network of around 300 business incubators in the United Kingdom that supports 12,000 high growth technology businesses in industries like information technology, biomedical and creative industry (Gine and Ghazala, 2011). It is evident from literature that in 2011 alone, North American incubators assisted around 49,000 start-ups companies, which generated about 200,000 employments opportunities and overall revenue of almost $15 billion (Dee et al, 2011). The evidence from AusIndustry shows that 3500 incubators have graduated from Australian incubators that tend to generate $785 million of sales and 10,500 jobs (Dee et al, 2011).
The evidence from other parts of the world tends to reflect towards the same pattern. The New Zealand Trade and Enterprise Incubator Support Programme are regarded as one the best incubation programmes around the world. The programme reports that over the period of a decade about 250 ventures graduated from an incubator. Among these new ventures, 69% have increased their external environment, 71% of the ventures are still trading, and 57% of the ventures have started exporting. These ventures have been able to create 1100 high values jobs (Business Innovation & Incubation Australia, 2008).
In a repot published by the World Bank Information for Development Program (InfoDev’s) when this trend is analyzed in the specific context of developing nations, it is found that business incubation network consists of around 300 incubators in more than 80 developing nations. These 300 incubators assisted 22,000 enterprises and helped in creating 220,000 jobs in 2010. According to another study, which was conducted by Anprotec (2011) in association with the Ministry of Science, Technology and Innovation (MSTI), the numbers of total operating incubators in Brazil is about 384. These incubators have helped 2,640 companies and have created opportunities of 16,394 jobs (McKenzie and Woodruf, 2012). The same study also indicates towards the trend that 98% of incubated companies are involved in innovation and creation. Among these companies 28% innovate at local level, 55% at the national level, and 15% innovate at the global level (McKenzie and Woodruf, 2012). It implies that that most start ups are not just repeating a business that already exists, so not only are they new and creating jobs – and creating economic wealth – they are also potentially creating new industries All these studies indicate towards a positive impact of incubators on new ventures. However, one thing is common in these studies that they consider the perspectives of government, policy makers, and incubators rather than incubatees firms. Therefore, it is important to explore the other evidences that may suggest towards different directions and different outcomes.
According toLasrado et al. (2016), when it comes to survival of firms after graduation period, there is a limited literature that covers this topic. Most of the literature is concerned with failure rates during incubation period. The authors argue that it has been assumed that business supports are not supposed to be extended after graduation period and failure of a graduated firm does not depend upon its previous incubation period. The critical success factors a firm’s survival in post graduation period has been identified as attributes and skill of entrepreneurs and top management, access to finance, and market related factors (Lasrado et al., 2016).
According to Mas-Verdua, Ribeiro-Soriano and Roig-Tierno (2015) the ultimate objectives of incubator firms can be identified as creation of a successful firm. It implies that incubators tend to provide successful firms and firms can leave the incubators, once they achieve independence in their operations and become financially viable. This moment is known as a firm being graduated from the incubation period. In this regard, the authors attempt to answer a fundamental question that how the survival and success of a firm is influenced after graduation period. The authors have also acknowledged the difficulties in measuring the survival and success of a firm, once they graduate (Mas-Verdua, Ribeiro-Soriano and Roig-Tierno, 2015). They indicate towards absence of an adequate theoretical framework for systematic review of firm’s survival.
According to Schwartz (2013) technology- based firms have better chances of survival in comparisons of other firms, which are non-technology based. This is because; policymakers are likely to place more emphasis on the creation of technology based firms. Such firms enjoy basic elements of competitive advantages. The author has taken different positions to understand the phenomena of firm survival with regard to two different factors; the size and the sector. In the specific contexts of these two factors; the study finds that a firm’s life cycle has profound impact on firm’s subsequent survival (Schwartz, 2013).
In a similar type of study Wagner (2013) argued that survival of firm also depends on the sector within which a firm is operating. If the familiarity of a firm is higher in a specific sector and if the firm enjoys higher experience, it is more likely to survive after incubation period (Wagner, 2013). Iacono and Nagano (2017) have presented a list of factors that influence the survival for firms during post-incubation period. These factors can be listed with the help of following factors:
Figure: Post Incubation Period Indicators and Group of Variables
(Source: Iacono and Nagano, 2017)
It is very difficult to measure the impact of financial and non-financial support for business startups and its growth, as it is critical to decide that which type of incubator benefit the startup and how support define the subsequent success of the business. Stephens & Onofrei (2012) argue that the impact of business incubation depends upon the portfolio of incubator. The growth of the startup is based on the incubator tools available on the basis of new venture characteristics. Measuring the growth or performance of a new venture is a challenge for an industry because business is assessed on the basis of gross profit and share-holder’s value, where new companies rarely present. Furthermore, the period of incubation is shorter than the life cycle of a new startup, due to which, assessing performance at incubation period oversight its long-terms effects. Though, it is stated that measuring the performance of early stage firms is a challenge (Stephens & Onofrei 2012).
Access to finance is the critical component that helps to create an economic environment for the business growth. Lack of capital, imperfect financial markets, and other credit constraints are treated as restrains for the growth of new enterprises. According to Pompa (2013), new enterprises or SMEs, especially of developing countries face various constraints in accessing finance due to high cost of capital, lack of experience with different financial intermediaries and high collateral requirements. Various studies find that lack of financial collateral significantly affects financial growth of the firm, and availability of finances positively associated with the growth of start-ups (Pompa 2013).
According to Berge (2011) business training also plays a vital role in the growth of small enterprises across the world, as training services are generally provided by government organizations, NGOs, and micro-finance business centers (Berge, 2011). Premand (2012) argues that the main challenge in measuring the impact of training on business varies in what ways the training is offering and training methods adopted at different locations and organizations. It consist a high level of heterogeneity as it makes it difficult to compare training programs in terms of its purposes, goals to achieve, and success criteria. Another challenge in measuring the impact of training is the person to whom business training is given, as training content differs as per the location and individual difference makes the comparison difficult (Premand 2012).
Another challenge is associated with mentoring as various literatures consistently reports the benefits of this valuable tool that works in both: business growth as well as personal development of the employees. The major challenge associated with mentoring is its qualitative nature, which is more packed in training and support programs rather than in quantitative research. According to Vivarelli (2012) mentoring has various positive impacts on the growth of business as it benefits the mentee by providing them improved knowledge and skills, which in turn improve performance and productivity of the employees. Mentoring includes benefits to mentor, as it helps to enhance knowledge and ideas’ generation which in turn, increase sales, networking, and business activity. They both contribute to benefits of enterprise as a whole because it facilitates partnerships and support other strategic change such as innovation (Vivarelli, 2012). The research discovers the impact of incubators on Saudi Arabian start-ups, and this requires an investigation about Saudi Arabian Context.
The above discussion about impact of incubators on new ventures tends to suggest that incubators have a certain impact on survival and success of a start-ups. The contribution of incubators towards economic development has been supported with empirical evidences. The KSA cannot be an exception, when it comes of identifying the impact of incubators on new ventures. Salem (2014) argues that business incubators in Saudi Arabia play a very important role as there are lots of startups and small and medium enterprises that are emerging regularly, but there are so many policies and regulations laid down by the government in the developing country like Saudi Arabia. So these new ventures and other companies need someone’s assistance with proficient knowledge, who knows everything and here comes the role of an incubator (Salem 2014).
According to Elmansori (2014), Business incubators are useful by providing knowledge about the market and business environment for new firms. It assists them by providing them tools, advanced technologies, shared spaces, and through training programs that help in moving ahead on the path of business. Business incubator programs also have a strong financial backing, legal knowledge. So they are the one stop destination for the entrepreneurs, who are trying to establish themselves in this competitive world (Elmansori, 2014).
As per Al-Mubaraki & Busler (2012), start-ups and SME’s lacks experience and they face the challenge in properly distributing their finances in administration, salaries, and market research. Business incubators come in the market to rescue new firms from such situations that can hamper their growth in future. Most of the start-ups and SME’s do not have specialized skills to deal with the startup risk and also they don’t have that kind of manpower, who are able to deal with such situations. In these kinds of scenarios, business incubators help entrepreneurs with their financial, managerial, marketing knowledge and help them to deal with any kind of adverse situation (Al-Mubaraki & Busler, 2012).
According to Alshumaimri, Aldridge & Audretsch (2010), technology advancement is the key to success for business enterprises now days. People are now focusing on proficient use of technology and new inventions, as this makes the country more focused towards new business start- ups, but SME’s would not get much finances to backup these inventions, as this requires a huge investment. Thus, business incubators come in picture by providing financial help so the companies would not lag behind due to any financial problems (Alshumaimri, Aldridge & Audretsch, 2010). In this reference, the government of Saudi-Arabia is making new policies and improvisation is being done on rules and regulations, which is leading towards the betterment of the country. Government also promoting the use of business incubators as it is contributing a lot to increase the economy and creating many jobs.
Elmansori, (2014) states that the most important goal of business incubator is to create successful companies in terms of finances, tools and technology, business environment, capabilities, and infrastructure. It makes any firm strong and provides capabilities to stand firmly in order to face any kind of problems. Business incubators works as a support system for a company (Elmansori, 2014). Most of the Arab countries are facing many obstacles like less amount of material, labor; less advancement of technology, unstable financial market and business incubators are helping these countries in this kind of crisis. (Hamad & Arthur, 2011). Rao & Kalyani (2017), argues that Saudi Arabia’s main income is through oil. In this work mostly men are involved as compared to others. Though, women, youth and elderly don’t get the chances, but with the emergence of startups and many SME’s in a wide range of open market. Business Incubators helps in providing office spaces, shared meeting space, kitchen, common reception area and so much more to their services that works like a boon to new ventures in emerging nations (Rao & Kalyani, 2017).
Globalization, technology advancement, and changes in demographic trends accelerate the need of improvement at the entrepreneurship level. Start-ups and new ventures is a key to economic development in any country because it creates jobs for new aspirants. Entrepreneurship creates employment opportunities, which-in turn facilitates in reducing poverty and helps in improving the living standard and general well-being of the society. As per Salem (2014), Business incubators play a vital role in economic development programs by providing an assistance of resources in entrepreneurial drives of new ventures. Business incubators add value in the business drive by commercializing technologies and other resources that are required by the new start-ups. It has contributed a lot in economic development of Saudi-Arabia, as the country’s economic agenda is based on innovations and high growth business projects (Salem, 2014).
According to Salem (2014) Saudi Arabia is showing a new pattern of entrepreneurship efforts and technological innovations in their business enterprises from the past few decades. This has placed the country at the top of economic competitive nations across the world. In this context, entrepreneurship is a key its development and economic growth. Various researches states that small and medium enterprises of the developing countries employee up-to 80% of their workforce and make approx. 92% of business. Due to this reason business incubator initiatives carried out by Saudi Arabia helps entrepreneurs in nurturing talents and provide entrepreneurial training and skills development programs to promote new businesses that eventually come-up with new job opportunities and enhanced economic growth (Salem, 2014).
Al-Mubaraki & Busler (2012), states that the business incubators programs can be classified as the most dynamic facility that helps in developing young firms by providing support at their startup stages. Most importantly, startup stage is important in any business and incubators works on the fact that new firms are more susceptible to collapse at initial stage (Al-Mubaraki & Busler, 2012). Elmansori, (2014) argues that through incubators, entrepreneurs can translate their ideas into highly and sustainable business investments through their guidance at development and growth stages. This ensures reduction in failure rate of new startups, especially during their initial process. Therefore, business incubators assists new ventures through their management practices, orchestrated exposure to business strategies, technical support and other necessary resources needed for business success. The government of Saudi Arabia initiates business incubators to reduce the failure of new business ventures and to promote economic growth of the nation (Elmansori, 2014).
Khorsheed, Al-Fawzan & Al-Hargan (2014) argue that business incubators is not only important for business growth, but also integration of business incubators with economic policy reforms is a broader standpoint of economic development and has great significance. Business incubators are crucial in transforming community, regional and national economy. Business incubators can also combine with other reforms like investment in infrastructure and financing, which ensures speedy development that leads to sustainable economic growth. It requires a clear understanding about business requirement and objectives of business incubator programs in order to evaluate the necessary measures of capital for business startups, networking and expertise assistance, tools and required set of technologies. Business incubators also help in developing a successful business environment that further help in wealth creation and commercialization of technology (Khorsheed, Al-Fawzan & Al-Hargan, 2014).
clearly suggests that role and importance of business incubators have been a
point of debate form opposing views. Many of the studies show a positive
relationship between incubation program and survival of start-ups in long run.
On the other hand, other studies do not see any linkage between incubation
program and survival of start-ups. Despite the opposing views, most of the
studies have acknowledged the importance of BIs for assistance to new
businesses. The next chapter deals with Research Methodology, which covers the
information related to collection of data and sample sizes.
The section of Research Methodology is followed by the chapters of introduction and literature review, which have already identified the background of the study, its purposes, and have reviewed existing literature on the topic. This section is regarded as crucial part of the study as it allows materializing the aims and objectives of the study (Fink, 2015). The section helps in providing basic information regarding methodology of the research and offers step-by-step explanation on how data have been collected, analyzed and, a reliable and valid conclusion has been drawn (Fowler, 2012). The chapter offers an important insight on why a specific research philosophy, method, approach, technique, and tools have been preferred to others.
The term ‘research, in the simplest meaning refers to “search again”, but while searching again, it is important to ensure that search is based on scientific investigation. Besides this, the search should also be supported by empirical evidences and authentic sources, in order to ensure the reliability and validity of the study. In the specific context of social science problems, research refers to a systematic effort to conduct and academic enquiry, which is guided by standard procedures and rules (Gravetter & Forzano, 2011). It implies that a researcher is supposed to use a specialized technique to explore and match the expectations of social world and academic enquiry. The section is processed with the objective of developing a procedural framework within which the research is conducted. One of the commonly used procedural frameworks is known as Saunders’s Onion Model. The study makes use Saunders’s Onion Model for guiding the current section.
Saunders et al. (2007) has presented the Onion Model, which demonstrates metaphorically that different elements of a research are related and what needs to be examined in order to derive research design. The image of this model can be presented as below:
Figure: Onion Model Proposed by Mark Saunders, Philip Lewis and Adrian Thornhill
(Source: Bryman and Bell, 2015)
The model is based on identification and development of sequential stages of a research problem. It is evident from the above figure that each layer is based on effective progression and peeling off one outer layer helps in identifying and reaching out to second layer (Bryman and Bell, 2015). A gradual progression of layer can be identified and classified under five headings; research philosophy, methodological choice, research strategy, time horizon, and technique and procedures.
According to Saunders’ (2007) onion model, research philosophy is the can be seen as the first step to orient a research question. It should be noted that philosophy is not selected rather it is identified on the basis research questions and problems. The nature along with the purposes of a research is taken into account, while identifying the philosophy of a study. The model clearly shows that there are four types of philosophical branches, which tend to define the presence of a research entity. These include positivism, realism, interpretivism, and pragmatism. Each of this philosophical knowledge is based on certain assumptions and tends to satisfy any particular type of knowledge.
The positivism philosophy considers the world to be extrinsic and believes that there is just one unbiased truth, regardless the judgement and outlook of the researcher. According to Carson et al., (2011) this philosophy is primarily based on arithmetic and numerical methods in order to derive a singular and impartial reality. This philosophy is used for providing generalisation, which are independent of situation and duration. Another philosophy, realism, is quite similar to positivism philosophy and it is also related to scientific enquiry. One of the primary differences between realism and positivism can be identified as existence of reality. Realism asserts that reality and outer world is not dependent on the mind and the senses of a researcher is likely to show the truth, in spite of the fact that past experience and world views have a remarkable influence on the researcher (Bergh and Ketchen, 2009).
In the specific context of present research question that focuses on investigating the impact of business incubators on enterprise growth of Saudi Arabian starts-up, a generalization would be required. However, this generalization is marked by the complexities evaluating the impact in terms of positive impact, negative impact, and mixed impact. It implies that aims of objectives of current study can be well-served with the help of realism philosophy, which offers the flexibility of either quantitative or qualitative data or both. Therefore, the study is guided by realism philosophy that asserts the application of arithmetic and numerical methods for collection of primary data (Jackson, 2008)
In the contrary to positivism and realism, interpretivism philosophy is based on assumptions that reality is numerous and proportionate. It is not feasible to collect data independently and impartially. This is because; the knowledge and experience of a research tends to influence the results and permanent realities (Brewster, 2012). This philosophy is driven with the purpose of finding a narrative to explain a social phenomenon within a natural environment. The orientation of interpretivism philosophy is qualitative in nature. Pragmatism philosophy combines the merits positivism and interpretivism philosophies.
Once the philosophy of a research is identified, it becomes easier to move in the further direction as discovering an outer layer automatically gives access to an inner layer. According to Babbie (2010), research approach is used for identifying the foundation of a research and provides direction for the selection of research methods. The selection of a research approach allows identifying and recording the interaction between observation and logic. Research approach can be broadly classified into two major categories; inductive and deductive.
Deductive approach is mostly based on existing theories and flows from general to specific. It starts with examination of general statement, theories and models and explores the possibilities to reach a specific, logical conclusion (Rubin and Babbie, 2010). The current study is based on deductive approach, which allows examining the specific data and information, collected from respondents against general theories and models of business incubations. This approach allows expressing the data in terms of numerical values and expressions. On the other hand, inductive approach has an orientation from specific to general. It implies that inductive approach helps in proposing new theories and observation on the basis of specific cases and context (Ugwuegbu, 2011). The basis purpose of applying inductive theory can be identified as collecting and facilitating realistic information for devising new theories.
The focus of next layer of onion model is to select a research method, which is in the line of research philosophy and research approach. There are different ways that are taken into account for selection of research methods. These include mono method and multi-method. Mono method is allows selection of single data collection technique; quantitative technique or qualitative technique (Poggenpohl, & Sato, 2009). The research makes use of mono method for selecting appropriate method. The research questions of this study are driven with the purpose of investigating the impact of business incubators on Saudi Arabian starts-up. This question can be better responded with the help of empirical evidences and numeric data, such as how many incubators have been able to survive, what is the change in development rate of the business, and how incubation services have affected employment rate of the incubated firms.
In order to collect the most meaningful and suitable data, this research adopts quantitative research method. This method allows examining the relationship between variables McBurney & White, 2009). The variables in this study are business incubators and starts-up firms. The method helps in establishing a relationship between variables and represents the relationship mathematically through use of statistical tools.
The information regarding sources of data need to be disclosed, so that reliability and validity of data can be ensured. The sources of data collection can be broadly classified into two categories; primary sources and secondary sources.
Primary data refer to all those kinds of data that have been collected for the first time and these are fresh in nature. Primary data are collected for addressing specific research questions. These types of data are collected with the help of survey, interview, observations, and focus-group studies (McNabb, 2008). Among these methods of data collection, current study makes use of survey method. This method allows collecting data with the help of a questionnaire. The questionnaire consists of close-ended questions that are driven with the purpose of capturing demographic, behavioural and attitudinal information with the help of participants.
This research collects primary data with the help of 40 respondents, who are working with starts-up, established in and after 2016. These respondents have been consulted through my direct and indirect personal and professional contacts. Before sending the questionnaire to the participants, prior permission has been taken from them. A written confirmation has been obtained from owners and employees of the starts-up to conduct a survey. The survey has been designed and administered with the help of SurveyMonkey.
The survey method is regarded as one of the most used methods for collecting primary data. It offers many advantages in comparison of other methods like interview and observations. It brings a number of advantages including time, cost, access to respondents, and participation of respondents. A survey provides opportunity to collect primary data quickly and gives access to a large numbers of respondents at any given point of time (Denzin & Lincoln, 2010). The online survey can be sent simultaneously to a large number of audiences through email. It generally takes less than 30 minutes to fill and survey and send back. Therefore, participants are more likely to show an interest when primary data is collected through survey method. In addition, the cost of surveying each participant is very low or almost negligible.
The use of survey method brings one more advantage to the data collection method and it can be identified as quality of responses, which are candid in nature. The factor of anonymity of surveys allows people to feel more confident about their response and they are more likely an actual response than an expected one. The likelihood of getting an honest response increases, when data is collected with the help of survey method. The survey brings flexibility of time for both the parties; researchers and respondents and information sharing becomes easier (Creswell, 2013). The survey has been used to approach a large number of participants in this study so that the impact of incubators on their survival can be identified and recorded.
It has helped in saving time and acquiring timely responses from the participants. Anonymity of respondents also has a positive impact on the quality of responses, as they are more likely to register a neutral response than a biased one (Creswell, 2013). In the absence of a survey, it might have been very difficult to contact 40 starts-up and seek primary data from each and every of them. Other data collection methods like; interview and observation might have required relatively large amount of time for collection of similar types of primary data. In this regard, it would be reasonable to state that survey method has allowed collection of primary data in the quickest possible time. Besides this, the method has also helped in reaching out to 40 starts-up at a given point of time.
Although survey brings a few advantages in comparison to other methods of primary data collection, it has few disadvantages too. These can be identified in terms of sample choice, rigidity, low response rates, and not appropriate for low literate audiences. In this regard, it should be noted that if samples are not identified correctly, survey may cause errors related to accuracy (Gillham, 2010). The format of survey tends to be rigid, which requires a researcher to identify the all possible answers for a close ended question. In the absence of all the possible responses, a respondent may not be able to register his/her responses. This method is not suited to low literate audiences. Despite the limitations of survey method, it is best studied for current study as it allows participants to fill the questionnaire within 15-20 minutes and encourage them to participate in the study.
The ultimate purpose of survey would not be served without accounting and participation from respondents, who were aimed at. Samples are selected from general population, which represents the entire size of a given population. It is a collection of events, objects, and individuals that are the main focus of a scientific investigation. The research population has common characteristics (Gillham, 2010). However, it is not feasible and even in a few cases not possible to identify the entire population or contact them for the purpose of data collection. For example, the present study is focused at role of business incubators in survival of Saudi’s start-ups. It may be feasible to identify starts-up within a certain period of time, but it is very difficult to contact each of them for the purpose of collecting data. In order to overcome this limitation, sample is selected.
A sample represents the subset of a population, which shares the similar characteristics, as shared by the entire population. The process of selecting a sample from the entire population is known as ‘sampling’. There are two categories, which are taken into account while selecting samples for a study. These include probability sampling and non- probability sampling. The present study makes use of probability sampling technique, which offers equal chances to each and every member of the population to become a part of the study (Gliner & Morgan, 2012). It is based on random sampling method. The sampling technique allows each starts-up to become the part of this study and participate to serve the ultimate objective of this research.
In order to collect primary data, a sample size of 40 respondents has been selected. These respondents are working with different types of starts-up and operating in different industries including education, healthcare, information technology, media and ecommerce. While setting the samples it has been ensured that the starts-up have been are founded in and after 2016. These respondents have been approached with the help of personal and professional contacts. A list of 40 starts-up has been created for this purpose and a separate e-mail has been sent to each of these starts-up. The email address from these starts-up have been taken from their official websites. A proposal for participation in this study has been sent to each of these newly founded companies. The proposal captures detail about the purpose of study and consent of the participants to participate in this research. Once the approval was granted by these starts-up, a survey link has been sent to them. The link has been created with the help of SurveyMonkey tool. It allows distribution of questionnaire to the respondents and submission of online responses.
The survey questionnaire for this study has 23 questions, which are driven with the purpose of collecting different types of information from respondents. These questions attempt to collect three types of information including demographic information, behavioural information and attitudinal information. Demographic information tends to understand the variation of sample respondents and highlight the differences among respondents in terms of their ages, years of experience, industry of respondents (Campbell, Kyriakides, Muijs and Robinson, 2013). The collected information against these questions show that data have been collected from a diverse group and it is capable enough to showcase the similar characteristics of the entire population.
The inclusion of behavioural and attitudinal information is driven with the purpose of understanding the perception of respondents regarding usefulness of Business Incubation for survival and success of starts-up. In order to collect attitudinal information, data is collected with the help of a Likert scale. The questionnaire consists of eight (8) attitudinal questions that are based o Likert scale of 5 ranking. The ranking goes as 1 for Strongly Agree, 2 for Agree, 3 for Neutral, 4 for Disagree and 5 for Strongly Disagree. The respondents have asked to register their responses on this scale and their responses have been analyzed with the help of quantitative method. The last question, which is numbered as 23 is open ended in nature and tends to know any additional comments by the respondents.
It is important for a researcher to identify and address the ethical issues, which may affect the overall reliability of the study. It is import to conduct a research within ethical guidelines for improving the reliability and authenticity of research results. Besides this, it also helps in encouraging respondents to participate in a study. The ethical issues in a research are mostly related to the factors of anonymity, confidentiality, informed consent, researchers’ potential impact on the participants. Among these issues, present research needs to address the issues of anonymity, confidentiality, and informed consent (Campbell, Kyriakides, Muijs and Robinson, 2013). It is essential from current study point of view that anonymity and confidentiality of the respondents are protected. In order to respond to this issue, the study does not seek information about the names of the respondents. In addition, the position and profile of the respondents have not been asked by the respondents. The ethical issue of participant consent has been addressed through taking a prior approval from respondents for participation in this study.
In order to protect the confidentially of the data, encoding method has been used while sending the questionnaire. Once the data is collected, it has been kept confidential and out of access from a third party. The findings of the questionnaire have been kept secret through password and it has been ensured that no third party has access the data related to this study. In order to ensure the confidence of respondents in the study, a consent letter was sent to them and their approval was found before sending questionnaire to them (Karami 2007). No en-route modifications have been made to the data for changing the actual responses of the participants. The data sheet has been attached in appendixes for the purpose of reference and cross-verification (Kimmel 2007). It has also been ensured that secondary data are authentic and reliable. For this purpose,
research methodology section acquires a holistic approach to collect primary
data and it makes use of Saunders’s Onion Model for guidance related to
identification and adoption of research philosophy, research design, research
approach, research method, and sampling technique. The adoption of Onion Model
has allowed understanding different layers of a research and brings clarity
about why a particular method has been preferred to other methods. It is
evident from research methodology section that random sampling method has been
used for collection of data and questionnaire was sent to 40 starts-up that
were founded in and after 2016. The next chapter is concerned with analysis of
data and presentation of results for the purpose of finding a solution to the
The data analysis starts with the process of separating data into manageable parts for producing final results in order to interpret meaningful information. This section covers the interpretation of data collected through survey method (Gravetter and Forzano, 2011). The analysis is performed on the conversion of raw data into meaningful information that has been collected with the help of 40 respondents. However, it should be noted that out of these 40 respondents, whom the questionnaire was sent, 30 participants have sent their dully filled questionnaire within the specified time frame. Therefore, the analysis chapter presents responses of 30 respondents. The analysis has been done with the help of quantitative method and MS Excel software, which allows performing mathematical operations with the help of percentage method.
The information derived on the basis of collected data has been presented with the help of fact sheet table and bar graphs. While conducting the survey, questionnaire was sent to 30 starts-up, which started their business in last 3 years. After receiving their consents through e-mail, questionnaire was sent to concerned people in these starts-up. As sample size was relatively smaller, all the respondents sent the dully filled questionnaire within the specified time frame, but few of the respondents skipped some specific questions while responding. Thus, the below section presents the response of 30 participants and perform analysis of the data collected through them. The interpretation of the data have been performed on the basis of questions presented in the questionnaire, as it covers two section, where Section A include close-ended questions and Section B include open-ended questions.
As per the demographic information, it is evident that 60% of the respondents were male and 40% of the respondents were female.
It is evident from the data presented in the table that the primary data is collected through participants belongs to different age group. The percentage of respondents below than 24 years was equal to 10%. It should be noted that the respondents between the age group of 25-34 years were the highest, i.e., 60%. The respondents who belong to the age group of 35-44 years were 20% and the respondents’ ranges between the age group of 45-54 years were only 10% and there was no respondent above 55 years old. It shows that the young generation has actively participated in the survey and the age group of 25-34 years significantly recorded their response that indicates that most of the questions were answered by actively working population. It should be noted that most of the entrepreneurs, employees and start-up volunteers are belongs to this age group.
As per the views of selected starts-up, BIs have a critical importance in the growth of entrepreneurial companies through support services and other resources such as physical space, networking connections, capital, training and other common services. The main objective of business incubators is to provide help to create young businesses through necessary support in terms of technical and financial services. It provides numerous benefits to start-up companies. In this context, the next question of the questionnaire focuses to investigate that how many respondents have used this facility. It is observed that 60% of the respondents have knowledge about incubators and also used this facility at their work place. On the other hand 40% respondents have recorded their negative response towards the use of business incubators in Saudi Arabia along with the reason. Only one respondent have skipped this answer, which indicates that majority of the population of Saudi Arabia have used incubators in their business and have more knowledge about how its functions for entrepreneur and start-ups. The primary data obtained in reference to this people, highlights that the use of business incubators is growing and certainly can more percentage in this category.
|Access to a community||19.05%||4|
|Other (please specify)||9.52%||2|
In order to understand the main benefits associated with the use of incubators in businesses, the selected respondents were asked that if they ever used this facility then what benefits they expect from the incubators. In response of this question almost all 60% of the respondents have provided their reason and expectation from incubators. Among these respondents, 37% believes that incubators provide expertise while 24% stated that they used it for financial support, which supports the fact that incubators provides much needed expertise in terms of marketing plans and fund to developing business.
Further, 9% of respondents states that they used incubators as a facility to reduce operational costs and other production equipment expenses, while 19% believes that incubators helps to provide access to desired community that is essential for business at its initial phase. Only 9% respondents marked other, which states these respondents choose incubators as per their specific requirement of space, equipment, human resource and others to nurture their startups with best possible chance for success. From the obtained data, it can be inferred that most of people in Saudi Arabia uses business incubators as a catalyst tool for developing their business through management training, technology, finances through potential investors, office spaces, administrative support and expert advices.
|Food and Beverages||20.83%||5|
|Media and E-commerce||8.33%||2|
|Other (please specify)||8.33%||2|
The next question emphasizes on investigating that to which industry respondents belongs to, for doing business in Saudi Arabia. It is evident that most of the respondents i.e. 50% belong to technology and approx. 20% was from food & beverages. In addition to this, 12% respondents are from marketing and there is no respondent from education. It must be noted that only 9% of respondents are from media and E-commerce 9% are from other industries. The primary data obtained through the survey method, highlights the facts that business incubators are mostly used in technology based start-ups.
In this reference, it can be said that business incubators provide necessary support and other technological developmental support that entrepreneurs needs to develop and grow into a mature business. Empirical studies state that the primary goal of business incubator is to support business environment through assisting in technology, mentoring, marketing, hand-on-management and business development plans. Moreover, it provide exposure to institution capital, venture capital and other business and finance related operations that needs to be involved in starting a technology firm. Though, it is observed from the primary data, that business incubators are mostly need in technology firms and finance related operations.
|Very Useful||Useful||Not Applicable||Poorly Useful||Not Useful||1||Total|
|Facilities and Infrastructure||8.70%||2||60.87%||14||17.39%||4||4.35%||1||0.00%||0||8.70%||2||23|
|Networking and Mentoring||26.09%||6||56.52%||13||4.35%||1||4.35%||1||0.00%||0||8.70%||2||23|
|Access to a community||26.09%||6||60.87%||14||0.00%||0||4.35%||1||0.00%||0||8.70%||2||23|
|Other (please specify)||1|
The significance of business incubators in almost every business operation is well known. It has been widely discussed that use of business incubators provide financial support, infrastructure support, networking or mentoring support, technology support, training, access to community support and so on to entrepreneurs in their start-ups. In order to gather primary data, it was enquired that how much benefit or help each of these services provided.
In this context, 23 respondents have answered this question and substantial percentage of respondents found business incubators useful in the category of access to a community and facilities related to infrastructure. On the other hand, the usefulness of business incubators are also found positively in networking and mentoring, technology support, training and financial support. It reflects that business incubators supports all business related activities and respondents also found it useful as per their experiences. Even, some of the respondents found it very useful in almost all categories. The significant response is achieved by networking and mentoring and access to community. It was noted that some of the respondents found it not useful in the technology support and training. Very less respondents found it poorly useful in providing support related to finances, networking, infrastructure and access to community.
|Other (please specify)||16.67%||4|
As per the research on identifying and analyzing the major support provided by incubators to entrepreneurs for their start-ups in Saudi Arabia, the researcher finds it important to ask respondents about their experiences about what they think that the incubators are missing in providing skills, motivation, guidance, expertise and other. In reference to this question, around 38% of the respondents found incubator are lacking in providing guidance to new start-ups. 25% of the respondents have found that incubators are missing in providing motivation and 21% feels that incubators does not provide expertise as they expect from them in terms of support. Whereas, no one finds that the business incubator support was lacking in terms of skills and only 17% of the respondents have marked other, which indicates that there are other categories also, in which business incubators support are lacking.
The response indicates that there was a strong disparity between the responses of people towards support provided by incubators to new start-ups in Saudi Arabia. Every respondents have analyzed incubator differently as per their experiences, but it must be noted that no respondent believe that incubators are lacking in skills. Though, it is worth mentioning here that business incubators provides skills that helps start-up companies to get over from initial hurdles through their resources, experience, and networks. Business incubators may lack in providing motivation, expertise and guidance, but not in skills.
|If yes (please specify)||8.33%||2|
As a part of research study, it is necessary to identify and analyze other sources other than business incubators that help business start-ups and entrepreneurs in Saudi Arabia. In this reference, the researcher find it vital to ask respondents that did they use someone other than incubators to start their businesses and in response 24 respondents have answered this question, while 6 have skipped this. As per their response, 62% of the respondents use business incubators for their start-ups whereas, 29% of the respondents use someone other than incubators and 9% have also given reason of using other sources.
The response indicates most of the respondents used incubators for their startups as the concept of business incubators are gaining popularity and most of entrepreneurs are adopting it to fulfill the gap in knowledge of entrepreneur and their lack of prior experience. Most of respondents found incubator useful to translate their idea or concept into reality. On the opposite end, some respondents got help from their friends, family and other crowd sourced investors for their start-ups, but this cannot be same for every entrepreneur.
|Less than 6 months||18.18%||4|
|More than 12 months||13.64%||3|
|Other (please specify)||2|
The present question is used by researcher to investigate the time-frame of business incubator, in which it actively contributes to accelerate the growth of new enterprises in Saudi Arabia. As per the primary data collected through the respondents underlines that 32% of participants said that they took assistance of business incubators for the period of 6 months and other 32% found that business incubators have contributed to their success till 12 months. Moreover, around 14% of the respondents stated that business incubators helped them more than 12 months and 18% mentioned this period less than 6 months. Whereas, only 4% participants experienced the use of business incubators till 9 months.
As per the literature review the primary goal of business incubators is to provide support to new entrepreneurial units in order to improve their survival and growth. The time frame given by the respondents regarding their usage of business incubators evident the fact that business incubator provides incubates at the initial phase of business enterprises with operations that equipped with supportive environment through services like mentoring, networking, management assistance, financials and other related needs.
|Other (please specify)||1|
The above question was linked with the previous question of the research. It aims at identifying whether the startup or the incubator ends the relationship in the process of accelerating development of young enterprises. While responding to this question, 45% of the participants said that startups ended the relationship and 55% participants said that incubator ended the relationship. It implies that incubators help startups during their survival phase only and once they switched to development phase, they became able to make own sources of assistance, which in turn, reduces the usefulness of business incubators. After switched to a development phase, startup ended their relation with incubator or either incubator switched to new start-ups.
|Not at all||17.39%||4|
|Other (please specify)||0|
This question is also linked with the previous question to know that how often startups or entrepreneurs in Saudi Arabia refer back to business incubators. Among all the participants, 7 respondents have skipped this question and only 23 have provided their response in this regard. As per this, the significant percentage was achieved by monthly category, as around 48% of the respondent said that they refer to incubators on monthly basis.
Whereas, 17% said that they refer back on weekly basis, 17% was not able to gather data in terms of monthly and weekly basis, so they were not quite sure and said that they visited sometimes when they feels the need of their involvement. While responding to the same question, it was found out that 17% of the participants claimed that they never refer back to incubator after ended their relationship. It implies that most of new start-ups feel the need of assistance of business incubators even after they reached at the development phase and take help from incubators in conducting operational activities.
Table 12: What role do you have with startups?
|Other (please specify)||0.00%||0|
In order to understand the view of respondents for the assessment and effect of incubators, the selected respondents were asked about the role they play in their startups. In response to the question, a majority of the respondents that is 79.17 per cent said that they were playing the role of a founder in the startup. They were the main founders of the company and performed a number of functions that involved critical decision making. Further, 16.67 per cent were the employees in the startup while 4.17 per cent were investors.
Moreover, there were no respondents that were playing the role of a mentor or advisor or any other roles. There were 6 people who skipped this question and did not choose from any of these above. From the obtained that it can be said that majority of participants in research play role as startup founders and employees.
Table 13: Do you agree with the statement that you changed your core business or operating model/ strategy substantially as a result of services provided by incubators?
The operating business model or core strategy of a business play important role in meeting strategic goals and direction. There are a variety of services that are provided by incubators to support business growth and assist in core activities. This question was asked to the respondents to know, if use of incubators arises the need to change core business or operating model/ strategy. In response to the question above, majority of the respondents around 39% were neutral. This means that they did neither agree nor disagreed about the statement. Contrary to this a good amount of people that is 26% disagreed and 17% agreed.
Looking further, it can be seen that only 4.35% that is only one respondent strongly disagreed with the statement. From the obtained response, it can be said that the results are equal and hence one answer cannot be found.
Table 14: Do you agree with the view that your core client profile/ strategy improved significantly as a result of incubation program?
Literary research has laid emphasis on the fact that incubation programs are beneficial for firms especially for improving the strategy formation and client profiles. In order to test the same through primary sources, it was asked from respondents to state if they agree with the view that core client profile/ strategy improve significantly due to incubation program. In response to this question, the results obtain depict that majority of respondents, that is, 41.83% agree with the use of incubation program for enhancing their client profile and strategy. In support, 21.74% strongly agree to this view. Further, 21.74% did not present their opinion on this question and 4.35% disagree to this view. The answers given by the respondents presented a positive sign that incubation programs helps firms to enhance client profile and overall strategy as large number of respondents agree and many strongly agree to this view.
Table 15: Do you think that the business was the management team’s sole source of income during the incubation program?
According to research scholars and business scholars, incubators and accelerators help to a large extent in making money. These incubation programs are mainly sponsored by private companies to help in growth of young businesses. In order to find the view of respondents regarding whether business was the management team’s sole source of income during the incubation program this question was asked. The results of the survey show that majority of respondents around 57% did not choose any dimension about this question. On the other hand, 30.43% felt that business was the only source of income during the incubation program. In support 8.70% strongly agreed while 4.35% respondents disagree and strongly disagree. Thus, the primary data obtained in reference to the research work highlights that business is sole source of income for management at the time of incubation program.
Table 16: Do you agree with the statement that the program significantly helped grow the company to the next level of maturity (concept to pilot, pilot to post-revenue, post-revenue to growth)?
The next question in this research laid emphasis on investigating if the use of incubation helps the company to grow from the bottom to the top level. In relation to this respondents were enquired if the incubation program significantly helped in growth of the company to next level of maturity. These maturity levels are specified as concept to pilot, pilot to post-revenue and post-revenue to growth. Most respondents that are 60.87% agreed with the information. 13.04% strongly agreed while 21.74% were neutral. Moreover, 4.35% disagree with this information and said that the program did not help the business to mature significantly. From the obtained records, it can be concluded that majority of population believes that use of incubation program helps businesses to grow towards next level of maturity. More people must use these programs to increase their business growth and stay ahead from the competitors.
Table 17: Please rate the following business incubators services as per your experience (from 1 to 5, where 1 is the least important and 5 is the most important)
|Facilities and Infrastructure||18.18%||4||13.64%||3||18.18%||4||36.36%||8||22.73%||5||9.09%||2||22|
|Networking and Mentoring||4.55%||1||9.09%||2||31.82%||7||22.73%||5||18.18%||4||22.73%||5||22|
|Other (please specify)||1|
With regard to the perception of entrepreneurs and new established companies on the activities developed by the business incubators, respondents rated business incubators services as per their experience particularly in financial services, facilities & infrastructure, networking and mentoring, technology support, training and others. It can be seen from the figures that the previous information from the perspectives of survey participants is true. Incubators are important and beneficial in providing support in building business network and administrative infrastructure. Moreover, the significance of business incubators was considered good in providing financial support, technology support and training. The above data suggests that most of the respondents have given priority to financial support, and facilities and infrastructure.
Table 18: Do you think that your chances of survival and success have increased due to association with incubation program?
The above question was driven for the purpose to whether incubation programs have some connection with the success and survival of the firms or not. It helps in developing an understanding between the significance of incubation program in helping the firms to reach higher levels of growth and subsequent impact. As per the data collected from the respondents, it has been found that highest that is 56.52% agree to the information. Also, 17.39% strongly agree with success results given by use of incubators program.
The percentages of respondents that were neutral and strongly disagree to this question were 22% and 44% respectively. On the basis of these data, it can be stated that around 56% witness a close connection between role of incubators in increasing success and survival chances. These findings can be linked with the observations made by a researcher, who advocates the use of incubator program for success.
Table 19: Do you think that you would highly recommend this program to pre-revenue enterprises or startup firms?
The next question of the survey was designed to with the purpose to ascertain an opinion of respondents regarding the use of program for pre-revenue enterprises or startup firms. This will help to understand whether the features of the program fit suitably to meet the needs of these types of enterprises. In response to the question, most respondents around 52% recommend the use of the incubators program to pre-revenue enterprises or startup firms. Also, 26% strongly recommend the use of these.
The respondents’ recorded neutral responses about this information were 21.74%. Surprisingly, none of the respondents disagree with this information. Based on this information, it can be concluded that more than 50% of the population recommend using program incubators to pre-revenue enterprises or startup firms to increase chances of growth. This also means that program incubators meet the requirements that are essential for growth of startups.
Table 20: According to your view business incubators has enabled faster access to critical stakeholders (Supplier, customer, professional support, etc)
According to empirical researches, stakeholders are the most important asset of an organization and decide the growth and future of a business. With this respect, it is essential for a business to have fast access to relevant suppliers. In order to assess whether use of incubators enabled this process of finding stakeholders we asked this question. In response to the question, majority of the respondents that is 60.87% feel positive about the view that business incubators enables faster access to critical stakeholders. 26% supported this view and strongly agree with the statement. While responding to the same question it was found that 8.70% and 4.35% were neutral and disagree to this information. Based on this information, it can be concluded that more than 60% people used business incubators as enabler for quick access to important suppliers.
Table 21: Do you think that your company will survive after graduating from business incubation?
The present research study is directed to assess if company can survive after graduating from business incubation. In this reference, the primary data collected through survey emphasizes that majority of respondents that is, 56.52% feel that use of incubators help the company to survive after graduation, while 26% respondents strongly felt this as a critical factor. 17.39% of the respondents were neutral and did not choose to agree or disagree on this statement. Based on this primary data, it can be believed that more than 50% of participants support that use of incubators ensures the growth of company after graduation. The next question with respect to additional comments is dismissed in this study as 22 respondents skipped the question. Moreover analysis of rest 8 answers might create biasness in study or even lead to unreliable information that is not supported by others.
It is evident from data analysis that starts-up from Saudi Arabia that use Business Incubator (BI) programs are relatively moderate in numbers. It is found on the basis of primary data that only 60% of the starts-up, which have been founded in last 3 years, use incubation services. One of the major trends, which have been discovered by the primary data, is related to use of use of expertise by most of the respondents. It should be noted that Saudi starts-up look for expertise from BIs as the most primary assistance rather than finance, which stands at second position. It implies that skilled and expertise are primary concerned for newly formed starts-up. In the line of literature review, it is found that about 50% of the respondents belong to technology based industry. It is found that only about 30% of the respondents see a change in business strategy and operating model due to services provided by incubators. On the other hand, more than 60% of respondents see a positive difference with regard to access of better network due to association with BIs. Overall, the primary data indicates that starts-up perceive the role of incubators as crucial and beneficial one. The primary data also finds that 57% of respondents believe that their chance of survival goes up due to association with BIs.
4.3 Limitations of Data Analysis
One of the major limitations that need to be taken into account while using the results of this study can be identified as a small sample size. It should be noted that business starts-up are inherently a big area of study and requires a large population size in order to understand their specific implications with regard to a particular topic. It important to understand that reaching out to each and every starts-up is not a feasible task and in order to collect the most suitable data, the scope of participants was narrowed. The questionnaire was originally sent of 40 starts-up. However, only 30 of them have respondents within the specified time line. A sample size of 30 respondents can be seen as one of the major limitations of this study. Besides this, while responding, a few of the respondents have left out specific questions under different categories. This has further narrowed down the quantity of responses.
his limitations, attempts have been made to collect data from a sample size
that truly reflects the characteristics of a large population. In addition, a
lack of prior study on this topic has also acted as a limitation to understand
the actual implications of data for final result. It should be noted that a
number of studies deal with incubators impact on start-ups, but most of them
are either concerned with government initiatives of incubators perspectives,
but do not approach the topic from start-ups point of view. This has limited
the availability of secondary data against which primary data is compared and
validated. These two limitations should be taken into account while using the
findings of this study for any specific purpose or objective.
On the basis of study and data collected from primary and secondary sources, it can be concluded that business incubators play a vital role in conducting operational activities of new business firms or start-ups. On the basis of primary data it can be stated that starts-up believe that BIs brings required expertise and financial support for starts-up. In addition, BIs also help in getting access to community that is the key of serving the needs of customers in the marketplace. The literature review also indicates that financial supports and access to markets are the most important supports, extended by the business incubators and this argument has been approved by primary data of this study too.
It is found that business incubators play a positive role in survival of new business, as 80% respondents have agreed with the statement. It is found from the primary data collected from entrepreneurs that 38% assisted with business incubators in terms of expertise and 23.81% have gathered financial support through the help of business incubators. 19.5% participants assisted by business incubators in order to build their network of operation through required access to community. While, other respondents agreed that they used business incubators in getting different facilities.
It is evident from the analysis of primary data that BI helped new business ventures in becoming fully operational and sustainable enterprise and researchers supports that fact that all the new business enterprises that were open to accept business incubators have performed better than their counterparts. As per the literature review business incubators offer mentorship to new business enterprises and also provide means to improve the feasibility of startups for investors by finding a most qualified team or employees for them. This is also evident from the response of entrepreneurs participated in the survey program that business incubators have contributed to the growth of their enterprises. Business incubators offer help to new ventures during their survival period and guide them for subsequent growth. However, the study finds that major challenges of Saudi start-ups are to get a high quality technological support along with professional training and mentoring.
The respondents have indicated towards this challenge and literature also shows that technology based firms face a problem in Saudi Arabia due to lack digital exposure and required skills. On the basis of above study, it is also reasonable to say that Saudi starts-up have a moderate level of awareness about services to be provided by business incubators. This is because; only 60% of the respondents have said to use incubator programs. The data from primary and secondary sources confirm that business incubators have positively affected the growth perspectives of Saudi starts-up in last 3 years and 56% of the start-ups which have used incubation program are confident of their survival in long run (in next five years and more).
In order to understand the types of starts-up, which are likely to experience greater benefit from business incubators in Saudi Arabia it has been found that technology based firms get more advantages. The research finds that technological starts-up are likely to get most of the benefit from business incubators. It is found from the research that various technological enterprises are established in Saudi Arabia in recent years as compared to the previous years. However, new businesses face various difficulties in initial years due to lack of resources, finances, knowledge to deal with the obstacles of early stage like weak administrative control, incapable marketing infrastructure and long procedures for funding. Business incubators offer facilities and other resources to support digital technologies like video conferencing and accessing huge number of experts for entrepreneurial training.
Business incubators also provide institutions for business support irrespective of geographical locations. As per the research, it is found that the kingdom of Saudi Arabia also provide support to business incubators and accelerators for the growth of technology start-ups. Business incubators assist in technology transfer and localization that help technology business start-ups with advanced materials and other resources, which they find difficult to access. It also helps with technology leader programs in order to provide training to personnel working for these start-ups. Business incubators also provide expertise to new technology enterprises that further help them to establish themselves into the market.
It is known from the literature review that network development is important for technological firms in order to capture the emerging opportunities of the market that helps in building its social image as well as economic identity. In this regard, business incubators assist start-ups in making arrangements for upcoming business opportunities. Other than tangible benefits, it also offers intangible resource like guidance and mentorship to enterprises that further help them to succeed.
The section of recommendation is driven with the purpose of suggesting reasonable and logical measures to improve the performance against the identified problems. On the basis of findings in this study following recommendations can be given to Business Incubator organizations in Saudi Arabia and Saudi Government.
The incubator firms should improve their services related to core business or operating model/ strategy for starts-up firm, as 22% of the respondents were neutral in their views about likely benefits on this dimension. It should be noted that designing an incubation program with a specific focus on core business or operating model/ strategy is likely to increase the overall satisfaction level. For example, BADIR Biotechnology Incubator has established different fields of operation in order to keep a focus on core areas of starts-up firm (Al-Mubaraki and Busler, 2011). The firm has classified its field of operation in different categories including Health, medicine and pharmaceuticals, Environment, Agriculture, and Biotechnology. An incubator with separate field of operations is more likely to help starts-up with regard to their core-business or operating model/strategy (Chamber, 2017). This model of business should be encouraged by other incubator firms too as it is likely to help them on concentrate of core business practices for starts-up firm.
The starts-up should also focus on improving the output or source of income during the incubation period too. The study also finds that about 50% of the starts-up do not think that their core business was source of income during incubation period. Therefore, it is important for BIs to ensure that incomes of starts-up are increased during incubation period rather than post incubation period. It should be noted that technological supports has been one of the primary expectation of starts-up, yet only 9% of the starts-up firm are satisfied with the technological support provided by incubators. The data also indicates that experience with network and mentoring services should also be improved by incubator firms. Therefore, it is advised to incubator firms to focus on improving the quantity and satisfaction level of starts-up with regard to three services, technological support, networking and mentoring, and training.
The literature review section mentions the importance of starts-up in order to achieve 2030 Vision of Saudi Arabia. The nation looks forward to decrease its dependency from oil-based sources (Medium, 2017). This makes the roles of starts-up even important as they are regarded as a contributor to economic development. However, it is important for the Saudi Government to ensure that starts-up survive in long run. In this context, it is important of the Kingdom to focus on diversity of starts-up and their core industry. The primary data collected from respondents suggest that 50% of the participants belong to technology based industry. It implies that the numbers of tech starts-up are increasing rapidly and their specific demand for growth needs to be served by incubators from a long run survival and success point of view.
However, only 9% of the respondents have a positive experience about the incubator services related to technology. Therefore, the government should focus on developing a Saudi’s tech starts-up ecosystem for encouraging new entrepreneurs and protecting the interest of existing ones. The Saudi government is advised to encourage incubators, business networks to build a robust infrastructure for technological advancement. It should be noted that the government has already announced its program for building a strong tech eco-system with the help of $500 billion investment (Al-Sahhaf). However, it is advised to the government to make required changes in policies and regulations that deal with adopting and usage of different technology and e-commerce platform. The literature review finds that Saudi has been a late adopter of the Internet and it has affected its technological growth in a negative way. However, after adoption of the Internet and development of infrastructure, the Kingdom has been able to show positive growth toward technological advancement. Therefore, it is important for the government to pay equal focus on rules and regulations in addition to development of infrastructure. This should be done through encouraging participation of right talent from different parts of the world and inspiring them to contribute to Saudi’s starts-up in association of incubation program.
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