What Makes Business Incubation Work? Measuring the Influence of Incubator Quality and Regional Capacity on Incubator Outcomes

To optimize public investment in business incubator programs, it is crucial to distinguish the effects of the program from the effects of the host region's economic environment. This study measures the influence of incubator quality and regional capacity variables on incubation outcomes using survey data from program managers across the United States. Results suggest that incubator quality variables have a stronger causal influence on successful incubation outcomes than regional capacity variables. While regional capacity is a stronger predictor for graduate-firm outcomes than for tenant-firm outcomes, incubator quality matters more overall. Results suggest that quality incubation may compensate for deficiencies in regional innovative capacity, which is often associated with entrepreneurial success. This research is expected to help policy makers more effectively use business incubators to hatch innovation-based entrepreneurial development.