evaluating business incubation services a case study of business incubation program (bip) in nepal...
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University of Wales Trinity Saint David
Dissertation
MBA SBMA7049-L
“Evaluating Business Incubation Services : A Case Study of Business Incubation
Program (BIP) in Nepal”
UWL MBA Entrepreneurship
Submitted by
Submitted to
Dr. Stanley Lees
Declaration
ii
This dissertation is submitted in fulfillment of the MBA Entrepreneurship of
University of Wales Trinity Saint David at College of Technology London.
I hereby declare that this dissertation is result of my own research and inputs ,all
sources are duly acknowledged and no portion of the work referred to in this
dissertation has been submitted in support of any application for another degree
or qualification of this or any other university or institute of learning.
…………………………………………………
Uran Joshi
UWL MBA Entrepreneurship
26th October 2010
Acknowledgment
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I would like to take this opportunity to express my appreciation to my Supervisor Dr. Stanley
lees for attention, guidance and insight.
My gratitude also goes to Ms. Rakshya Aryal, Mr. Rabindra Kumar Neupane, Er. pradeep
Jha for support and valuable suggestions during research. I would also like to express
special appreciation to Ms. Heema Rai, Mr. Harish Bhusal ,Mr. Shashi Bhattari and all
Participant Incubatees of BIP for their full support in this research.
I would also like to thank specially to Mrs. Simona and Mr. Adeel for full support in my
study.
Lastly, I sincerely would like to thank my Parents, my Family and Friends , Mr. Saurav Joshi,
Ms. Mamta Amatya, for motivation and support during my study period.
Uran Joshi
London,United Kingdom
26th October ,2011
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Abstract
Government from both developed and developing countries has recognized the
mechanism of business incubation as way to support the development of micro, small and
medium enterprises. A business incubation service is an appropriate tool for economic
development which helps in job creation on one hand and less business failures on the
other hand. Selection, Infrastructure, Business Support, Mediation ,Graduation are found to
be the main incubator model components of business incubation
This research aims to focus on evaluating the selection process , infrastructure services
provided, business support provided, mediation and networking provided and graduation
policy of ―Business incubation Program(BIP)‖ operated by Government of Nepal. The
research also aims to examine and identify the problems of growth facing by new start up
firms in Nepal. The methodology consisted of data collection by questionnaire with selected
key-informant from incubator and participant incubatees.
Selection of clients was found to be based on strict criteria that are in alignment with the
available resources and reasonable cost for development. The users of physical
infrastructure provided by Business incubator was seen low. The major reason for not using
was being enterprises located in different places of country.
The business support was found to be reactive and episodic. The leadership training,
financial management ,marketing management Accounting and taxation, business
registration services were provided to all where as other business services were provided
according to individual need. The mediation service provided by incubator was found to be
rated highly by incubator (provider side) but was perceived less by incubatees side. All the
mediation service was provided according to individual need of incubatees. The graduation
policy was found to be flexible. After a certain period , with mutual agreement between
incubator and incubatee ,the firm was graduated.
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List of Figures Figure 1- Stages of Business Growth ( Greiner 1972) ......................................................... 4
Figure 2 -Stages of Business Growth, (Churchill and Lewis, 2007) ....................................... 4
Figure 3- Campbell,Kendrick,and Samuelson framework(Campbell et al.,1985) ................... 8
Figure 4 - Business Incubation Framework for Research (incorporating Churchil and Lewis
Growth Stage, 1983 ............................................................................................................ 11
Figure 5-Age of Incubatees ................................................................................................. 22
Figure 6-Gender ratio .......................................................................................................... 22
Figure 7-Educational background........................................................................................ 23
Figure 8-Importance of Selection criteria as perceived by Incubator ................................... 24
Figure 9-Importance of Selection criteria as perceived by Incubator ................................... 24
Figure 10-Infrastructure users ................................................ Error! Bookmark not defined.
Figure 11- Perceived Quality of Infrastructure service by Incubator .....Error! Bookmark not
defined.
Figure 12-Perceived Quality of Infrastructure service by Incubatees ...Error! Bookmark not
defined.
Figure 13-Perceived Quality of business Support by Incubator ......................................... 25
Figure 14-Perceived Quality of Business Support by Incubatees ........................................ 25
Figure 15-Perceived Mediation by Incubator .......................... Error! Bookmark not defined.
Figure 16- Perceived Mediation by Incubatees....................... Error! Bookmark not defined.
Figure 17-Incubatees Views on Mediation statements ........... Error! Bookmark not defined.
Figure 18-Incubatees Views on Mediation Statements ........... Error! Bookmark not defined.
Figure 19-Important criteria for Graduation as Perceived by Incubator ..... Error! Bookmark
not defined.
Figure 20-Important criteria for graduation as Perceived by Incubatees ............................ 27
Figure 21-Financial resource problem as perceived by Incubator..........Error! Bookmark not
defined.
Figure 22-Financial resource problem as perceived by Incubatees .......Error! Bookmark not
defined.
Figure 23-Marketing resource problem perceived by Incubator .............Error! Bookmark not
defined.
Figure 24- Marketing resource problem perceived by Incubatees .........Error! Bookmark not
defined.
Figure 25-operational/production problems perceived by Incubator .................................... 28
Figure 26-operational/production problem perceived by Incubatees ......Error! Bookmark not
defined.
Figure 27-General management Problem perceived by Incubator ....................................... 28
Figure 28-General management Problem perceived by Incubatees .................................... 29
Figure 29 -Owner related problems perceived by Incubator ................................................ 29
Figure 30-Owner related problems perceived by Incubatees ............................................... 30
Figure 31-Perceived Effect of Business Incubation on Incubatees ........Error! Bookmark not
defined.
Figure 32-The success of business incubation perceived by Incubator .Error! Bookmark not
defined.
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Figure 33- measure of success of incubatee as perceived by Incubatees ... Error! Bookmark
not defined.
List of Table Table 1- Business Incubation Program Board Members,source (BIP, 2007) ....................... 20
Abbreviations
I/NGO International/National Governmental Organization
ITPF Information Technology Professional Forum
DoCSI Department of Cottage and Small Industries
BIP Business Incubation Program
FNCCI Federation of Nepal Chamber of Commerce & Industry
KUSoM Kathmandu University, School of Management
NAST National Association of Science & Technology
ITPF Information Technology Professional Forum
MoEST Ministry of Environment, Science & Technology
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Table of Contents
Acknowledgment ................................................................................................................ ii
Abstract .............................................................................................................................. iv
List of Figures ..................................................................................................................... v
List of Table ........................................................................................................................ vi
Abbreviations ..................................................................................................................... vi
Chapter 1 . Introduction ..................................................................................................... 1
1.1 Background............................................................................................................. 1
1.2 Research Strategy .................................................................................................. 1
Chapter 2. Literature Review .............................................................................................. 3
2.1 Business Growth ........................................................................................................ 3
2.1.1 Factors Related to Business Growth .................................................................... 6
2.2 Business Incubation: Tool for Business Growth ........................................................... 6
2.3 Business Incubator ...................................................................................................... 7
2.4 Business Incubation .................................................................................................... 8
2.4.1 Selection ............................................................................................................... 8
2.4.2 Infrastructure ......................................................................................................... 9
2.4.3 Business support.................................................... Error! Bookmark not defined.
2.4.4 Mediation ............................................................... Error! Bookmark not defined.
2.4.5 Graduation ............................................................................................................ 9
2.5 Measure of Incubator Success .................................................................................... 9
2.6 Measures of Incubatee success. ............................................................................... 10
2.7 Business Incubation Framework for Research ........................................................... 10
Chapter 3. Methodology ................................................................................................... 12
3.1 Research Philosophy ................................................................................................. 12
3.1.1 Positivism ............................................................................................................ 13
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3.1.2 Realism ............................................................................................................... 14
3.1.3 Phenomenology .................................................................................................. 14
3.2 Purpose of Research ................................................................................................. 15
3.2.1 Exploratory Studies ............................................................................................. 15
3.2.2 Descriptive Studies ................................................ Error! Bookmark not defined.
3.2.3 Explanatory Studies ............................................... Error! Bookmark not defined.
3.3 Research Strategy ..................................................................................................... 15
3.3.1 Experiment .......................................................................................................... 15
3.3.2 Survey ................................................................................................................. 15
3.3.3 Case Study ......................................................................................................... 16
3.4 Research Conduct ..................................................................................................... 16
3.4.1 Primary Data Collection....................................................................................... 16
3.4.2 Secondary Data Collection .................................................................................. 17
3.5 Methodology in practice ............................................................................................. 18
Chapter 4: Findings .......................................................................................................... 20
4.1 Business Incubation program (BIP) ........................................................................... 20
4.2 Summary of Data Collection Experience.................................................................... 21
4.3 Findings ..................................................................................................................... 21
4.3.1 Incubatee Background Information ..................................................................... 22
4.3.2 Selection Policy ................................................................................................... 23
4.3.3 Infrastructure ....................................................................................................... 24
4.3.4 Business support................................................................................................. 24
4.3.5 Mediation ............................................................................................................ 26
4.3.6 Graduation Criteria .............................................................................................. 26
4.3.7 Problems of Growth ............................................... Error! Bookmark not defined.
4.3.8 Perceived Effect of Business Incubation on Incubatees ..................................... 30
4.3.9 Measure of Success of Business Incubation by Incubator. ....Error! Bookmark not
defined.
4.3.10 Measure of Success of Incubatee firm as perceived by Incubatees................. 30
Chapter 5: Discussion and limitations ............................................................................ 30
5.1 Discussion ................................................................................................................. 30
5.2 Limitations ................................................................................................................. 30
Chapter 6: Conclusion and Recommendation ................................................................ 32
6.1 Conclusion ................................................................................................................. 32
6.2 Reflections ................................................................................................................. 32
6.3 Recommendations ..................................................................................................... 32
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6.4 Contribution ............................................................................................................... 32
Bibliography ...................................................................................................................... 33
APPENDIX A- Key-Informant (Incubator) Survey Questionnaire ................................... 36
APPENDIX B- Participant Incubatee Survey Questionnaire .......................................... 44
APPENDIX C- List of Key- Informant ............................................................................... 48
APPENDIX D - List of Participant Incubatee .................................................................... 49
APPENDIX E -Records of Meeting ................................................................................... 50
APPENDIX F-Introduction Letter ..................................................................................... 55
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Chapter 1 . Introduction
1.1 Background
There have been some isolated and uncoordinated activities for enterprises promotion services in Nepal for past few decades. According to Nepal (2006), Notably ,the activities targeted for enterprise development are under government programs or through donor assisted projects. The programs ranges from technical and management training, counseling, information providing, credit facilities, infrastructure facilities through public sector. In year 2003, Information Technology Professional Forum (ITPF) initiated to assess the enterprise environment and design. The environment and need assessment study suggested about possible Business incubation program. In 2004-2005 ,with grant assistance by infoDev Incubator Initiative ,project of The World
Bank, ITPF conducted a study named as Business Incubation Initiative in Nepal Project . the objective was to study the feasibility of Business Incubation Center (BIC) concept and identify possible stakeholders, and network for nurturing the economic growth of Nepal. The study suggested some models for BIC development . one was suggested as Business incubation center in Kathmandu under Department of Cottage and Small Industries, Government of Nepal. other one was suggested as Information Technology Park at Banepa , which would run under fund from Government. According to Incubator Initiative Planning Grant (2006) the Business Incubation Center, Kathmandu was established in 2007 under the lead role of Department of Cottage and Small Industry, Government of Nepal. It was administered by Government Development Committee Act, 2013 with a governing board comprising representation from the government, Academic Sector, Business Sector, Technical and Research Centers, I/NGOs and experts in the field of incubation. The initiation was taken by preparing a business plan to operate ―Business Incubation Program‖ (BIP) under the DoCSI. Since then, the one and only Business Incubation Program in Nepal, is running in DoCSI premises located at Kathmandu, Nepal. The objectives of initiating the Business Incubation Program are to:
To graduate successful enterprises providing incubating facilities.
To improve and upgrade system and process in the areas of small and micro industries through innovation and new technology.
To create demand for further business incubation services in other parts of Nepal through the demonstrative success of new enterprises.
To create and enhance network of experts & mentor in management, marketing, finance, Communication and other technical skills to be utilized by clients.
To create and enhance network of resource (laboratories, libraries, incubating space, finance, etc.) in the country for the possible use by clients.
1.2 Research Strategy
This study aims to evaluate Business incubation services and analyze the service provided
with focus on case study of Business Incubation Program running in Nepal .The objectives of
this study mainly are :
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-To critically review the literature on incubation and business growth
-To develop a instrument for evaluating the business incubation services in Nepal
-To explore the challenges and opportunities to incubator organization and tenant
companies
-To recommend conditions in which business incubation services can provide greater
benefit towards promoting successful enterprises in Nepal and other developing
countries.
The study first aims to review the literature with focusing on business growth and the factors
related to business growth of small business. The study will also study working framework
models and success measures of business incubation suggested by various authors .
The methodology incorporates interview administered questionnaire for Primary data
collection with selected key–informants from Incubator and Participant Incubatees of
Business Incubation Program.
Chapter 4 consists of findings from data collection which are interpreted and evaluated with
weighted factor analysis. Further analysis and discussions over the issues around the
literature review and in practice seen are discussed with limitations of study in chapter 5.
Lastly, chapter 6 summarizes the study with conclusion and some recommendations as
thought important.
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Chapter 2. Literature Review
2.1 Business Growth
Freel (1999) as cited by Beaver, 2002 states that the person or entrepreneur that enters
small business ownership can be classified as the one who go into self-employment to
pursue their own interest and the one who go into small business ownership with desire to
develop business, achieve growth ,increase employment and grow into a medium-sized or
large firm. The former are predominantly lifestyle businesses ( Burns and Dewhurst,1996).
They don‘t display any aspiration to grow or develop beyond a certain size and complexion
and mainly concerned with survival and maintenance of lifestyle. The latter type will be
concerned with growth and expansion.
Those small firms who desire to achieve growth and enterprise development will be affected
by different factors related opportunity sets, managerial abilities and resources. Storey
(1994) as cited in Beaver (2002) mentions the background and access to resources, nature
of firm, and the strategic decisions taken by firm are three key influence on growth rate of
small independent firms.
Growth models are useful in benchmarking and draw lessons for survival and growth of firms
characterized with similar business features and operating in similar business climate
(Poutziouris, Binks and Bruce, 1999). Much of early theoretical work on business growth and
development of small firms are attempted in terms of stage , or life cycle ,models of firm
growth. There are common problems which arise at similar stages of business development.
These common problems can be organized into a framework which helps to deeper
understanding of nature ,and problems of businesses.
Such an understanding of growth pattern of small firms and the factors that trigger growth
aspirations or conversely hamper growth can aid in assessing current challenges. It can help
in anticipating the key requirements at various points, during the start-up period and the
need for delegation and changes in their managerial roles (Churchil and Lewis, 2007).
The most commonly cited stage models of business growth are those developed by
Greiner(1972) and Churchill and Lewis(1983). Greiner (1972) offers a five-stage framework
for business development but considering the managerial changes faced by founder. The
phases are Growth through Creativity, Growth through Direction, Growth through Delegation,
Growth through Coordination, and Growth through Collaboration.
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Figure 1- Stages of Business Growth ( Greiner 1972)
Fig. 1 represents the stages of business growth of Greiner model. Each growth phase is
followed by crisis that shows need of changes in way of managing business if it has to
continue to grow. If crisis cannot be overcome then there is possibility of failure. The length
of time in each phase depends on nature of firm and industry.
Figure 2 -Stages of Business Growth, (Churchill and Lewis, 2007)
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Churchill and Lewis (1983) model Fig 2 link marketing, people and financial management
issues. The five stages are Existence, Survival, Success, Take-Off, and Maturity. The key
factor which affects the success or failure in different stages of its life is developed as
attributes of Owner-manager and Resources.
Stage I: Existence
In this stage the problem faced by business is obtaining customer and delivering of product.
The company‘s first strategy is to remain alive. the owner is the one who performs the entire
important task and makes decision. If company is unable to get sufficient customer
acceptance or cannot deliver product ,owner closes the business as capital runs out . those
companies who can remain in business become stage II survival business.
Stage II: Survival
In this stage ,the business is now a workable business entity. The business provides and
satisfies the customers sufficiently with products or service. now the key problems have
shifted to relationship between revenue and expenses than mere existence.
In this stage, the company grows in size, the profitability also increases and moves to stage
III. Most of companies remain at survival stage, earns marginal returns on invested time and
capital , and eventually leave business after the owner retires or gives up.
Stage III: Success
There are alterative options for owner in this stage. The owner can either exploit the
company‘s achievements and expand or keep the company stable and profitable.Thus, a
key issue is whether to use the company as a platform for growth—a sub stage III-G
company—or as a means of support for the owners as they completely or partially
disengage from the company—making it a sub stage III-D company.
In this stage, the company has very good economic condition. The size and product market
penetration is above average and earns profit. The company can stay in this stage for long
time unless the external business environment changes, and reduce its competitive abilities.
In success –growth sub stage the owner assesses the resources and decides for growth of
company. The owner arranges cash using borrowing power and risks for financial growth.
The owner is thus far more active in all phases of the company‘s affairs than in the
disengagement aspect of this phase. If it is successful, the III-G company proceeds into
Stage IV. Indeed, III-G is often the first attempt at growing before commitment to a growth
strategy. If the III-G company is unsuccessful, the causes may be detected in time for the
company to shift to III-D. If not, retrenchment to the Survival Stage may be possible prior to
bankruptcy or a distress sale.
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Stage IV: Take-off
In this stage the key problems are how to grow rapidly and how to finance that growth. One
problem may be owner faces problem in delegating responsibility to others in a fast growing
and increasingly complex enterprise, controlling the performance and managerial
effectiveness. Other problem may be to satisfy the demand growth in cash and cash flow.
There is needed to be competent to handle organization (divisionalized-usually in either
sales or production) in a growing and complex business environment.
In most cases, the business who are in success stage finds hard to achieve success in
stage IV .they find problems in cash management, or finds the growth rate was too fast.
They are unable to delegate effectively.
Stage V: Resource Maturity
The priority of the company in this stage is to get control over the financial success due to
rapid growth .it also gets advantage of small size with flexibility and entrepreneurial spirit .
The need of professional services arises. The company can upgrade its motive by using
tools like budgets, strategic planning .all changes should not stifle its entrepreneurial
qualities. (Churchil and Lewis, 2007)
Notably, Storey (1994) and Burns and Harrison(1996) has acknowledged some criticisms.
Most small business experiences little or no growth and therefore never reaches stage 3,4,5
described in the models. Gray (1993) also states that these models do not provide an
explanation of why the firm was founded in the first place and what relation there is between
the founding motivations and objectives and subsequent development. The models do not
allow for a backward movement along the continuum or for the skipping of stages depending
on the operating context of firm. The models do not permit firms to exhibit characteristics
from one or more stage to become hybrids. The classifications of various stages do not
reflect the operational and strategic realities and capabilities of firms in relation its chosen
market and sector. Although highly critical, Gray (1993) acknowledges that if they are used
with some selectivity, they are capable of shedding some lights on aspects of the small
business growth.
2.1.1 Factors Related to Business Growth
2.2 Business Incubation: Tool for Business Growth
Business incubation models assume the philosophy that when there is guidance and support
from fellow business experts and mentors, it creates positive environment for entrepreneurs
to thrive their business. Like a real Incubator for hatching chickens from eggs, the business
incubation houses can act as an incubator machine that provide essential environment to
knowledge and resource constraint entrepreneurs for growth.. (Nepal, 2006).
McAdam and Marlow, (2008) has emphasis that , durability and growth of new small firms
overcoming problems can be ensured via business incubators as they provide managed
business facilities , attract external investors and professional support advisors.
Most researcher like Kuratko and LaFollette (1987); Lumpkin and Ireland (1988); Markley
and McNamara (1995);Rice (1992); as cited in Hackett and Dilts, (2004b) assumes that
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business incubation services can be appropriate tool for economic development which will
help in job creation on one hand and less business failures on the other hand.
Lalkaka (1997) explains the government from both developed and developing countries has
recognizing the mechanism of business incubation as way to support the development of
micro, small and medium enterprises.
(Monkman, 2009) has reported that there are various motivations for establishing business
incubation services around the world. It shows that the motivations have been:
Creating local jobs
Fostering entrepreneurial climate
To Commercialize technology
To diversify local economies
To accelerate local industry growth
To retain firms in community to encourage minority or women entrepreneurship
To generate revenue
To identify potential spin-ins or spin-outs
To generate benefits for sponsors
Revitalize distressed neighborhood
To move people from welfare to work
2.3 Business Incubator
While defining Incubator ,a large number of detailed and in many ways similar definitions
have been put forward. Hackett and Dilts, 2004b states that:
―A business incubator is a shared office space facility that seeks to provide its incubatees
(i.e. ‗‗portfolio-‘‘ or ‗‗client-‘‘ or ‗‗tenant-companies‘‘) with a strategic, value-adding intervention
system (i.e. business incubation) of monitoring and business assistance‖.
Peters et al., 2004, p. 83 mentions generally an incubator can be viewed as ―… a support
environment for start-up and fledgling companies‖.
Zimmerer and Scarborough, 2005 defines business incubator as, ―A business incubator is
an organization that combines low-cost, flexible rental space with a multitude of support
services for its small business residents.‖
From various authors‘ attention on business incubator, we can conclude that following
components are the particular key elements;
Shared office space which are for creating favorable condition to incubates
A shared business support services
Professional advice, mentoring and coaching
Networking with external and internal business environment
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Moreover (UKBI, 2010) focuses incubator as not only a mission statement ,shared office
facility,infrastructure but is also a network of individuals and organization which includes
incubator manager ,staff ,incubator management board,incubatees,industrial contact and
service providers. It states that incubator can significantly reduce cost for start up to achieve
growth by reducing the time span that it often takes.
Norrman and Anna, 2008 has tries to identify the business incubator concept as different
from science parks ,technology parks . They are distinguishable. They are generally
designed for supporting mature firms . But business incubator are the ones who helps the
ventures on early stages ,immature potential ideas to develop into viable companies.
2.4 Business Incubation
From the reviewed literature, Selection, Infrastructure, Business Support, Mediation
,Graduation seems to be the main incubator model components ( Hackett and Dilts, 2004b;
Peters et al., 2004).
2.4.1 Selection
Selection refers to decisions concerning which ventures to accept for entry and which to
reject. (Hackett and Dilts, 2004) describes it as challege to differentiate firms which are
promising and need business incubation.It requires good understanding of market and
process of new business creation.
(Holovnia et al., 2008) states that incubator should have clear vision for screeening of client
.There should be early evaluation of company for prospective succesful business. It is worth
while to carefully consider about selection criteria as it may have later on effect upon the
resources and reputation as well.
Campbell et al. (1985) as cited in Hackett and Dilts, 2004b emphasis the value of diagnosis
of business needs and the selection and monitoring application of business service is
important for provision of financing and access to incubation network as well. The effect can
be seen ultimately in growth of business of tenant or incubatee as shown in figure 3
Figure 3- Campbell,Kendrick,and Samuelson framework(Campbell et al.,1985)
Norman and Anna (2008) have suggested appropriate selection criteria as two approaches:
Idea –focused approach and Entrepreneur-focus approach.
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For an idea-focus approach, incubator managers should be able to evaluate the viability and
feasibility of idea. Relevant technological knowledge and knowledge regarding product
,market and profit potential is a must.
For entrepreneur-focus approach, it is required to evaluate the experiences, skills,
characteristics and driving forces of entrepreneurs. The ability to judge personality as well
as knowledge of more general business development is also sought.
As discussed by Clarisse et al. (2005) cited in Norrman and Anna, (2008) other two
approach: ―picking-the-winners‖ approach and ―survival-of-the-fittest‖ approach are other
selection criteria. In the ―picking-the-winners‖ approach, incubator managers try to identify a
few potentially successful ventures . In the ―survival-of-the-fittest‖ approach, incubator
managers apply less rigid selection criteria, take on a larger number of firms and rely on
markets to provide the selection processes that over time will separate winners from losers.
Combination of these two types of approaches of the selection component gives four
―selection strategies‖., which are likely to result in very different incubator ―portfolios‖ of
incubatees.
Survival of the fittest & idea. This strategy will gather a large no of idea owners with
immature ideas which may be from wide range of fields.
Survival-of-the-fittest & entrepreneur. This strategy will collect diverse ventures
consisting of entrepreneurs/teams with strong driving forces.
Picking-the-winners & idea. This strategy will select highly screened ideas mostly
within a narrow technological area and are found commonly started from institutions.
Picking-the-winners & entrepreneur. This strategy will gather handpicked and well
evaluated entrepreneurs and generally the idea is linked with research.
2.4.2 Infrastructure
The infrastructure covers all the business premises, office facilities and administrative
services that an Incubator provides. Most incubators seems to supply or provide generally
same set of administrative services including office space, amenities, equipments as well as
office services like reception and clerical. (Rice, 2002); (Lalkaka, 1997)
2.4.5 Graduation
Graduation is related to exit policies, i.e. decisions concerning under what circumstances
incubatees should leave the incubator. Most incubators have formal exit rules requiring
incubatees to leave the incubator after 3-5 years selection. Monkman (2009) mentions that
Graduation policies have become more sophisticated over the years. Graduation polices
have been based on business-related benchmarks rather than time limits. Clients achieving
milestones, outgrowing space, spending maximum time etc have been some of factors
guiding graduation policies.
2.5 Measure of Incubator Success
Framework developed by National Business Framework (NBIF) recognizes that there is no
single model or template for running and structuring of business incubation .The combination
of internal and external factors to each business incubation service are different so it is
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problem to have common ‗one size fits all ‘ Framework for benchmarking of business
incubation environments. (UKBI, 2010)
Previous research has been found to focus primarily on identifying suitable criteria and
indicators to measure outcomes. However , the fact is that ―no two incubators are alike‖
(Allen and McCluskey, 1990, p. 64).
Incubators articulate objectives differently depending upon their sponsor‘s interests‖ (Mian,
1996b, p. 194) or at least make ―different priorities‖ within the same basic goals, and that
―goals vary from one organization to another‖. Incubator performance can be defined as the
extent to which incubator outcomes correspond to incubator goals (Norrman and Anna,
2008).
According to (Hackett and Dilts, 2004b),Incubator goal may be set on following basis:
The incubator‘s primary financial sponsorship – Public/non-profit/university/privately
Whether incubatees are spin-offs or start-ups- spin-off/ start-up
The business focus of the incubatees - Product development/Manufacturing/Mixed-
use
The business focus of the incubator – Property Development/Business Assistant.
The Indicator of measure of success may be different for different goals .for example ,the no
of employees may be good indicator if the goal is to create jobs while growth in sales may
be indicator for measuring success of incubator whose goal is to commercialize new idea.
The fact is that the incubator most of time has multiple stake holders with different interests
and goal ,so incubator may have multiple goals according to stakeholders.(OECD, 1997).
Campbell and Allen (1987) has set ‗‗milestones‘‘ for measures of incubator success as
creation of a strong and responsive business consultation network, participation of financial
institutions in capitalization of incubatees, and trade relation development of incubatees.
2.6 Measures of Incubatee success.
One of simple measure of incubatee success is graduation from incubator with developed
sustainable business setup. The growth and development seen also can be applied as
measure of incubatee success. The growth measure may include increase no of jobs
,increase in sales over time,etc. one measure concern shown is while examining the
incubatee survival rate ,it may no t be meaning full to compare with non incubated ventures .
the use of selection criteria over incubatee result in selection bias.(Hackett and Dilts, 2004b)
2.7 Business Incubation Framework for Research
This literature review has identified selection, infrastructure, business support, mediation and
graduation (Hackett and Dilts, 2004b) as main incubator model components for business
incubation. . The incubators have objective and goals depending upon the sponsors and
stakeholder‘s interest. The ultimate goal of business incubator is to help the start ups to
achieve its growth and result in more start-ups with fewer business failures. This support can
be very crucial for start up and growing a new business. The performance and success of
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different incubators is related to their incubator models, i.e. How they organize and
manage the incubation process .however, the success of incubator tenants is not only
dependent on the nature of these services, but also on how they are supplied.
This research aims to focus on evaluating the selection process , infrastructure services
provided, business support provided, mediation and networking provided and
graduation policy of ―Business incubation Program(BIP)‖ operated by Government of
Nepal. The research also aims to examine and identify the problems of growth facing by
new start up firms in Nepal. Business incubation Program (BIP) is the only non profit-mixed
type Business incubator in Nepal which is nonprofits and run under lead role of Department
of cottage industries.
Figure 4 - Business Incubation Framework for Research (incorporating Churchil and Lewis Growth Stage, 1983
Above literature review can be concluded in following notes and Business incubation
framework (Fig-4) will guide for methodology and finding for this research .
In different growth stages of a firm, there are several problems of growth which is developed
as attributes of owner-manager and resources. General management,
operations/production, finance and marketing are the known common growth constraints.
Various authors have endorsed emphasis that overcoming of these problems can be
ensured via business incubator as they provide managed business infrastructure, business
support, and mediation and networking. Incubator can be measured as successful according
to measured outcome .However the criteria and indicator may depend upon goal and
objectives, incubator models. The criteria may be creation of job, growth in sales of
incubatee ,creation of business network. Similarly ,the criteria like graduation from
incubation, development of sustainable business structure, increase in number of jobs or
12
sales over time, product innovation, and incubator manager-incubatee relationship are the
measure of incubatee‘s success.
Chapter 3. Methodology
3.1 Research Philosophy
With purpose of finding a solution or answer to a specific problem ,business research is
conducted. It is organized ,data-based ,critical and does a scientific inquiry or investigation
of problem. (Sekaran, 2003).
Even the purpose is answering a specific problem; it is a development of new knowledge so
research philosophy is associated with development of knowledge and nature of that
knowledge
There are some important assumptions about the way of viewing world which research
philosophy adopts. These assumptions govern the research strategies and methods. There
has to be some practical considerations of philosophy as well.
the major influencing factor is the relationship between knowledge and process of
development of knowledge (Saunders, Lewis and Thornhill, 2007) The major ways of
thinking about research philosophy are as follows:
Epistemology
Ontology
Axiology
Epistemology
i.Epistemology
Epistemology is related with what is considered acceptable knowledge in field of study. The
researcher who is more interested with finding facts is likely to have different approach and
view on the way a research is to be performed than with the researcher who is interested
with knowing feeling and attitudes. (Saunders, Lewis and Thornhill, 2007)
ii.Ontology
Ontology. Is more related with nature of reality. The questions of assumptions researches
make about the way world operates and the commitment held to specific opinion.
iii. Axiology
Axiology studies about the judgments about values. Heron(1996) (as cited in Saunders,
Lewis and Thornhill, 2007) states that researcher can show axiological skill by being
13
compentent to demonstrate their values as foundation of making judgemnt aobut what
research is being conductio and how they are doing it.
There are mainly three branches of research philosophies in practice;
Positivism
Realism
Phenomenology
3.1.1 Positivism
This approach is based on philosophy of science and the approach is called as positivist
approach. Robson(1993)as cited in (Saunders, Lewis and Thornhill, 1997)has listed five
sequential stages through which positivist research goes:
Deducting a hypothesis from theory
Expressing the hypothesis in operational terms
Testing operational hypothesis
Examining the specific outcome of the inquiry. It will either tend to confirm theory
or indicate the need for modification.
If necessary ,modifying the theory in the light of findings. science
Easterby-Smith et al.(1991) as cited in Saunders, Lewis and Thornhill, 1997 has listed
eight features of positivism:
Independence- The viewer is independent of what is being seen.
Value-freedom-.the objective criteria are more deciding factor rather than human
beliefs and intrests for choice of ways of studying .
Casuality-.the motive of social science should be to find out the casual explanation
and basic laws that explain regularites in human behaviour.
Hypothetico-deductive - The final outcome of observations will point out truth or
falsity of hypothesis.
Operationalization - The concepts are needed to be worked in such a way that
enables the facts to be measured quantitatively.
Reductionism –.The problems can be well understood and can have better view if it
is reduced to simple possible elements.
Generalization- The regularities in human social behavior can be generalized if
sufficient size of sample is selected.
Cross-sectional analysis- By making comparisons of differences across the samples
,regularities in human social behavior can be easily identified.
Positivism research philosophy is not quite applicable for my research as my research focuses on the evaluation of which cannot be scientifically proved as this philosophy supports . My research deals with tangible and intangible services, policies, problems facing, measure of success which are hard to prove by scientific basis. So, I reject this research philosophy.
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3.1.2 Realism
Realism is another epistemological position which relates to scientific enquiry. Realism is
branch of epistemology which is similar to positivism in that it assumes a scientific approach
to the development of knowledge. This assumption underpins the collection of data and the
understanding of those data and the understanding of those data. The meaning becomes
clearer when two forms of realism are contrasted. (Saunders, Lewis and Thornhill, 2007)
Direct realism and Critical realism are two parts of Realism. Critical realist views that the
experiences we have are sensations, and points out that our senses often deceive us. The
direct realist on the other hand views as illusion; they are actually due to insufficient
information. In order to be able to understand what is going on in social world, the social
structures are to be understood which created the phenomena. Researcher can find what is
not seen through practical and theoretical processes of social sciences.
Dobson.2002 as cited in Saunders, Lewis and Thornhill, 2007 further clears the critcal
realist‘s position that knowledge of reality is a result of social conditioning and cannot be
understood independently of the social actors involved in the knowledge derivation
process.Another important point is direct realist perspective would suggest the world is
relatively unchanging: that it operates in the business context. The critical realist on the other
hand,would recognize the importance of mulit-level study.Each of these levels has the
capacity to change the researcher‘s understanding of that which is being studied (Saunders,
Lewis and Thornhill, 2007).
My research is to explore and evaluate on business incubation and business growth which comprises business services provided, problems of growth faced, measuring perceived effect and success. Direct realism and critical realism approach will help me to understand theoretical and real understanding on the topic deeper. level .Both philosophy are of important for my research. so I prefer this philosophy.
3.1.3 Phenomenology
Phenomenology is an approach which is based on the way people experience social
phenomenon in the world they live. (Saunders, Lewis and Thornhill, 1997). Phenomenology
is characterized by a focus on the meaning that research subjects attach to social
phenomena; an attempt by the researcher to understand what is happening and why it is
happening. Easterby-smith et al., (1991) as cited in Saunders, Lewis and Thornhill, 1997
points out that researchers in this tradition are more likely to work with qualitative data and
use a variety of methods to collect these data in order to establish different views of
phenomenon.phenomenology approach is good at understanding social processes however
researcher may have to live with the uncertainity that clear patterns may not emerge.
My research aims is to have insight and evaluate a business incubation service .This also has to deal with connection to society, human behavior and experience for perfect understanding to the topic. The information to be derived from understanding the topic are fact basis and judgment basis as well. This approach will help me in some part to assess perceived effect of
15
incubation but not as a whole .so I reject this approach as my primary approach for research.
3.2 Purpose of Research Robson, (1993) as cited in Saunders, Lewis and Thornhill, 1997 has classified the purpose
of research as exploratory ,descriptive and explanatory.
3.3 Research Strategy
The Research Strategy is a general plan of how to answer research question set. It will
contain clear objectives, derived from research question; specify the source from which data
collection is intended; consider the constraints which will be inevitable .crucially, it should
reflect the fact for employing particular strategy. (Saunders, Lewis and Thornhill, 1997).Each
strategy can be used for exploratory , descriptive and explanatory research. Some of these
clearly belong to the deductive approach, others to the inductive approach. (Yin 2003 as
cited in Saunders, Lewis and Thornhill, 2007).Robson(1993) lists the three traditional
research strategies as:
Experiment;
Survey;
Case Study;
3.3.1 Experiment
Experiment is a research which owes much to the natural science. it is also featured strongly
for social science research ,psychology as well (Saunders, Lewis and Thornhill, 1997). In
experiment, the link between variables can be studied, and the magnitude of effect of one
independent variable can be studied upon another dependent variable. (Hakim
2000).Experiment typically involves:
Definition of a theoretical hypothesis;
Selection of samples of individuals
Allocation of samples to different experiments;
Introduction of planned change on variables;
Measurement on a small number of variables;
Control of variables.
3.3.2 Survey
Survey is tends to be used for exploratory and descriptive research. This strategy is common
and popular strategy in business and management study. It is commonly used to answer
who, what, where, how much and how many questions.The data is collected by using a
questionnaire. The data collected are standardized and easily comparable.
The data collected are quantitative data and can be analysis quantitatively using descriptive
statistics.In addition ,the data collected can also be used to give suggestion about possible
reasons for relationships between variables . However , There are other data collection
techniques as well for survey strategy. (Saunders, Lewis and Thornhill, 2007).
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3.3.3 Case Study
Case study is a strategy for doing research which involves an empirical investigation of
particular contemporary phenomenon within its real life context using multiple source of
evidence‘. Robson (2002:178).The case study strategy gives use good understanding of the
context of research and processes that are going on.( Morris and Wood 1991).
The case study strategy also can give answers to the what, how and why questions so it is
also a common approach for research strategy.
Case study strategy is most often used in explanatory and exploratory research. The data
collection techniques like interviews ,observation, documentary analysis, questionnaire etc
and are likely to be used in combination. (Saunders, Lewis and Thornhill, 2007). In case
study strategy it is also likely to need to use and triangulate multiple sources of data.
My research aim is to evaluate business incubation services. The theoretical
framework for business incubation will be studied with help of a business
incubation service provider .the problems and real challenges that business
incubator faces would be under consideration for deeper understanding. A
study on a real business incubator in practice will help me to observe and
analyze the phenomenon and real perspective of business incubation. So, for
my research I have chosen a case study strategy where questionnaire will be
supplied for data collection to both incubator and incubatees.
3.4 Research Conduct
For any research data collection is one of important phase.The data which we collect will
help to support our view for finding of research.The ways of collecting data are;
Primary data collection
Secondary data collection
3.4.1 Primary Data Collection
The new data which are completely new are primary data. The purpose of data is to answer
the research questions or meet objectives of research.The ways to collect primary data are
observation, semi structured interviews, in-depth interviews and questionnaires.The nature
and area of research governs the selection of ways to collect data (Saunders, Lewis and
Thornhill, 1997)
Interview
The discussion with a view of a purpose between two or more people is an interview (Kahn
and Cannell, 1957, cited on Saunders, Lewis and Thornhill, 1997). The interview helps to
collect a reliable data which are relevant to research questions and obtain the objectives.In
structured interview ,the interview is based on predetermined and identical set of questions
to sample interviewees.It is generally formal and standardized .the interviewer reads
questions and answers from interviewee are recorded.
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In such interview, the respondents should not feel any partiality even in the tone of voice.
Even voice inflection of interviewer may be cause of bias responses (Barath and Cannell,
1976, Benson, 1946).
The non-standardized interviews are semi-structured and unstructured interviews. The
questions vary and have different themes in interview.It is generally suitable for omitting
some questions for particular interview owing to the context and circumstances.The orders
of questions, way of conversations can be changed in semi-structured interview. There is
also chance of adding new question according to necessity (Saunders, Lewis and Thornhill,
1997)
The unstructured interview doesn‘t have specific questions and time length and they are
totally informal.This method is useful for exploring the depth of a general area of topic of
interest so it is also called as in-depth interview. While using this method even research
doesn‘t have pre-determined list of questions to ask but they have to be clear of area of topic
to explore (Saunders, Lewis and Thornhill, 1997)
Questionnaires
One of best method to collect data is questionnaire method . There is room for being
confident on same interpretation by respondents as it has standardized questions. (Robson,
1993, cited on Saunders, Lewis and Thornhill, 1997).
Self administered questionnaires are one of best ways to collect data from respondents as
they feel free to complete at their convenience.Questionnaires are also cost effective than
face to face interview as there is no cost like travel and time .(Bachrack and Scoble, 1967).
The self-administered questionnaires are sent by post and after it is completed by
respondent, they return back by post or can also be delivered by hand and collected later at
later time.The problem with mail survey is that there is low response rate which reduce
accuracy in statistical analysis. There is also doubt that the returned questionnaire is same
person or not.
The interview administered questions on the other hand can be recorded either by using
phone or structured interviews which can be taken by face to face interview with
respondent.The physical presences will increase the reliability of data collected as physical
presence dilutes the dilemma of whether the respondent is same person or not. however,
there is also possibility that in presence of interviewer ,some respondent may response to
please (Dillman, 1978, cited on Saunders, Lewis and Thornhill, 1997)
3.4.2 Secondary Data Collection
The secondary data are the data which are collected by other for some purposes. (Hakim,
1982, cited on Saunders, Lewis and Thornhill, 1997)
18
These data can be useful to answer the questions and research topic, so these data are also
used by many researchers. The data may be in published or may be raw. It includes both
quantitative and qualitative data.
One source is Documentary which can be records, information in websites, articles, journals
publications and the books published with information about organizations. Bryman (1989)
cited on Saunders, Lewis and Thornhill, 1997).Other secondary data are non-written data
like taped interviews, recorded audio and videos are also authentic source for research.The
survey data which are collected by organizations ,government like consensus of population
are also reliable data for research
3.5 Methodology in practice
The theoretical aspect of methodology is the foundation for any research which helps
researchers to reach conclusion of the research objective and get the solution of research
problem. There are various things in practice while following the steps of methodology for
the validity of data. There has to be test for data collection method for reliability and
authenticity of collected data.
Pilot Testing
Pilot testing includes steps of checking the questionnaire with experts or friends before the
questionnaires is handed or supplied to respondent .it is a vital step before the data
collection takes place.
This pilot testing helps to confirm unambiguous and refined questionnaire which are
without flaws so that respondents would be easily understand questions and answers the
questions easily (Saunders, Lewis and Thornhill, 1997)
In my research, I have chosen questionnaires as way of collecting data, so pilot test was
done for validity and reliability of data collected. The pilot test was done with my supervisor
and it was checked and approved. In addition ,suggestions were also taken from friends by
distributing to them for opinion.
Question of reliability of finding
My questionnaires include two separate sets of questions each for key-informant from
incubator and participant incubatee which are related from sections of my literature review.
In my understanding, these questions on the main subject matters are strong enough to
give the answer to reach the objectives and finding of my research. After pilot testing, the
questionnaires are handed to key-informant from incubator and participant incubatee by
meeting in person .
I have used Interview administered questionnaires as collecting primary data. My data
collector assistant from made contact to incubator team and incubatee team. A prior written
19
acknowledgment letter was presented. An appointment was fixed at convenient location of
respondent at convenient time before meeting and data was collected in meeting. The
physical presence of interviewer and respondents confirms the respondent and other points,
shared experiences and related notes can also be taken at the same time which is helpful for
analysis of data. Thus, interview administered questionnaires helped in increasing the
reliability on the collected data.
Choosing Samples
I have used Snowball Sampling for selecting key-informants from incubator which is
choosing sample through contact or network. Firstly we need to contact with one or two
members and the same members later identify further members (Saunders, Lewis and
Thornhill, 1997). However, in this method, there may be chance that the respondent is likely
to suggest the other respondent who is in touch with them or like them which may lead to
biasness. (Lee 1993 cited in Saunders, Lewis and Thornhill, 2007). For participant
incubatee selection,. All of them were approached due to aim of research as sample was
low in number i.e. 16.
Theoretical and practical both aspects of Methodology have equal importance
for research papers. Acknowledging this fact, I have gone through careful
planning to all aspects of research methodology. For reliable and authentic
data ,the questionnaires were pilot tested. This blend of both aspects of
methodology will help me to get better finding of my research .
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Chapter 4: Findings
4.1 Business Incubation program (BIP)
Business Incubation Program is a non-profit making organization under the ownership of
government but strictly operated as a private organization with an autonomous management
set-up. The BIP, Kathmandu, is located in the premises of DoCSI, within an available built-
up space of over 6,000 sq. ft. With a mission of being a center of excellence.
It is primarily focusing on the provision of proactive support and guidance tailor made for
its clients through a range of in-house as well networked services such as subsidized flexible
accommodation, logistics, testing and lab facilities, market and finance linkages and human
resources who can mentor and guide clients to successfully transform start-up companies to
a fast growing enterprise. It will also be a dynamic process for the production of future
generation of fast growing innovative enterprises that will be able to stand up with the best
and compete in the global market (Incubator Initiative Planning Grant, 2006).
Government of Nepal has formed a Business Incubation Board having members from
different industrial, science & technology, professional and experts from different sectors to
run and guide this program at top most level. Current Board of Directors of this program is as
follows:
Table 1- Business Incubation Program Board Members,source (BIP, 2007)
Business Incubation Program Board Members
Name of organizations Position
Director General, Department of Cottage & Small Industries (DoCSI) Chairman
Federation of Nepal Chamber of Commerce & Industry (FNCCI) Member
Kathmandu University, School of Management, (KUSoM) Member
National Association of Science & Technology (NAST) Member
21
Information Technology Professional Forum (ITPF) Member
Ministry of Environment, Science & Technology (MoEST) Member
Director, Department of Cottage & Small Industry (DoCSI) Member-
Secretary
The work of management team is supervised by one of Director level personnel as Program
Chief appointed by DoCSI. Currently, the DoCSI is funding this program from its regular
annual program budget. Program Chief and Management team are liable to present
progress reports to BIP board members.
4.2 Summary of Data Collection Experience
Two set of questionnaire were prepared to be filled by pivot management persons from
Business incubator and another to be filled by incubatees. An acknowledgment letter for
data collection was provided to Business Incubation program .Business incubation program
helped to make contact with incubatees for data collection. As the research subject was in
different country, Nepal and data collection method was selected as face to face
questionnaire response collection. Researcher was unable to be physically involved in data
collection due to being in United Kingdom. So, A data collection assistant was carefully
selected to help in data collection. The data collection assistant was a graduate of rural
development and was well-informed about the research methodology. The questionnaires
are in English and the respondents are native Nepali language speakers. So, The Data
collection assistant translated each English medium question into Nepalese while performing
the questionnaire session and the answers was again noted down in English language. A
daily communication was set between researcher in United Kingdom and data collection
assistant in Nepal to coordinate and facilitate data collection process.
To collect data from incubator management side, 3 key informant was selected who were
involved directly into business incubation process. Altogether there were 16 incubatees with
whom attempts were made to contact. The number of participating incubatees was 12.
4 of them were out of contact (2 of them were graduated incubatees and were not in contact
with BIP recently. Remaining 2 incubatees were out of Kathmandu due to personal reasons.)
All the issues, suggestions, comments and various personal experiences were also noted
down during the filling of questionnaire.
4.3 Findings
In 2 sets of questionnaires for incubator and incubatees , the questions and statements were
on 4 point scale. The participants were allowed to rate them . The participants from
business incubator and incubatees were 3 and 12 respectively. So, number of key informant
for Incubator (N) was 3 and number of participant ( N) was 12 for incubatees.
22
For convenience of analysis ,Weighted Factor Analysis was used for each set of
questions. The Weighted factor was assigned to each choice in question .lowest weight
was assigned to least agreeing choice .Similarly, highest weight was assigned to most
agreeing choice. All the questions were with 4 point scale so,
Each choices were assigned as 1,2,3,4 weighted factor with starting from value of 1 with
least agreeing choice toward most agreeing choice with value of 4.
(For example-Poor-1,Average-2,Good-3,Excellent-4)
Each question was then multiplied with Frequency of response which gave a minimum and
maximum range. The response range hence was dependent on value of N (no of
respondent).
For response range of Incubator ,minimum was 3 and maximum was 12 as N=3. Similarly
minimum response range for incubatees was 12 and maximum was 48 as N=12.
For Some choices of questions ,some incubatees did not respond as they had not deal
with such business support, mediation service i.e. Number of response N was less than 12,
.but N=12 was taken as number of respondent for all of graphical representation. Therefore
The weighted factor was given as 2.5 (1<2.5< 4) for those unanswered responses and
weighted factor analysis was carried on.
4.3.1 Incubatee Background Information
a. Age
Figure 5-Age of Incubatees
The total number of Incubatees under business incubation are 16 till date.5 of them were
incubated as first batch in 2007 since the program started and are graduated from Business
Incubation Program . 5 of them were under business incubation since 2008 and remaining 6
were under business incubation since 2009. In Nepal, the population of 15-64 age groups is
61.1% (CBS, Nepal 2011). High percentage of 18-34 age groups in business incubation was
encouraging.
b. Gender
Figure 6-Gender ratio
62% 25%
13%
Age of Incubatees
18-34
35-50
51-above
N=16
23
The number of women in business was relatively less .There were only 3 females among
total number of Incubatees. In Nepal, Women participation is generally low in all business
activities where majority of women are active in house-hold activities. Women are always
encouraged to actively participated in all business activities by government and non-
government organizations.
c.Education background
Figure 7-Educational background
The number of incubatee with high school education was found to be 8. The number of
incubatee with graduate level of education was found to be 6 and 2 incubatee were with
under high school level of education.
4.3.2 Selection Policy
Selection of clients was based on strict criteria that are in alignment with the available
resources and demand reasonable cost for development. After passing through a broad
selection criteria, BIP Nepal provided a pre-incubation course for developing business plan
of its incubatees. Between the time of business plan development, management team
assessed their needs and prepared a work plans for serving them according to their needs.
BIP Nepal support both type of incubates i.e. Virtual and In-house.
81%
19%
Gender ratio
Male
Female
N=16
12%
50%
38%
Educational background
Under High School
High school
Graduate
N= 16
24
Figure 8-Importance of Selection criteria as perceived by Incubator
Note-weighted factor: doesn’t matter-1,moderate-2,Important-3,very important-
Figure 9-Importance of Selection criteria as perceived by Incubator
The response on importance of factors for selection gave knowledge on factors which were
thought more important than others. Some factors were agreed more important than others.
Business proposal, stage of idea, plans to implement and market potential was highly
agreed upon as important .However, available resources and cost, and range of desired
support was also seen as important. Family background, type of firm, employment history
was found to be assumed less important. There was also suggestion by Key informant on
basis of day to day activities that criteria of selection should also focus in commitment and
willing to pay additional services.
4.3.3 Infrastructure
The views about majority of infrastructure by incubatees were also nearly same as rated by
key-informants from incubator but for fax. Phone and computer, it wasn‘t same. The
incubatee‘s perceived quality about fax, phone, and computer was also as of other
infrastructure. the incubatees were of less need of these infrastructure so even these were
available, these were used less .In, Nepal, small business do not use fax, and computer
much due to low penetration of technology into business. The incubatees who were into
production industries showed dissatisfaction over R& D facilities and stated that
improvement in this particular infrastructure was vital and would help in their businesses .
4.3.4 Business support
3 5.25 7.5 9.75 12
Family Background
Business proposal
Stage of idea/business
Creativity of idea
Technical knowledge
Use of information technology
Plans to implement
Expected earning/expenditure
Selection criteria as perceived by Incubator
Selection Criteria
Response Range (N=3)
25
Figure 10-Perceived Quality of business Support by Incubator
Note- weighted factor: Poor-1,Average-2,Good-3,Excellent-4
Figure 11-Perceived Quality of Business Support by Incubatees
Note- weighted factor: Poor-1,Average-2,Good-3,Excellent-4
The leadership training, financial management, marketing management, Accounting and
taxation, business registration services were provided to all where as other business
services were provided according to individual need.
The key informant from business incubator tends to agree that the quality of business
services was of average quality. HR management ,legal issues, Export assistance, and
Secretarial services were found to be provided according to individual need.
The business support was found to be reactive and episodic. most of time entrepreneur
requested help dealing with crisis or problem. It was less continual and proactive as there
was less intense intervention by incubator manager. As most of incubatees were startup with
sole enterprises, export assistance, HR management was felt less important by incubatees.
Some of incubatees were more satisfied for business support regarding Branding and
patent.
3 5.25 7.5 9.75 12
Leadership training and coaching
Financial management
Marketing management
HR management
Legal issues
Entrepreneurial development
Accounting and taxation
Export assistance
Secretarial services
Business registration services
Perceived Quality of Business Support by Incubator
Business services
Response range (N=3)
12 21 30 39 48
Leadership training and coaching
Financial management
Marketing management
HR management
Legal issues
Entrepreneurial development
Accounting and taxation
Export assistance
Secretarial services
Business registration services
Perceived Quality of Business Support by Incubatees
Business services
Response range (N=12)
26
An incubatee view - “Incubation is good and would encourage many more entrepreneurs if it
was publicized a little more. I am satisfied that I got various trainings/exposures. I also got
technical support as incubation team arranged for an expert's visit to my field”.
4.3.5 Mediation
Note: Weighted factor: Strongly Disagree-1, Disagree-2, Agree-3, Strongly Agree-4
The key informants from incubator and participant incubatees were seen agreeing on
mediation statements on questionnaire .Even both side agreed that the mediation was not at
desirable level. But it has helped morally being firms under Business incubation. As a direct
effect of mediation, Incubatees has experienced they got faster services when approached
to external companies, government offices for administrative and registration works.
An Incubatee view-“ Incubation has made my work faster and saved me cost . One example
I can take of Registration of company. it would have taken me around Nepalese Rupees
6000 to register company. But since incubation office mediated, i could do the registration
with the mandatory sum of 1000 as the communication was done between BIP and
government authority for business registration. It also took me only 3 hours to do so.
Otherwise, it would take 2-3 days minimum.”
Since Business incubation is a new concept it has not been able to influence change in
regulation and laws .Recently, due to approach and mediation from Business Incubation
program, Business incubation has been in priority of New Industrial Policy of Nepal, 2010.
4.3.6 Graduation Criteria
The graduation policy was found to be flexible. After a certain period ,with mutual agreement
between incubator and incubatee ,the firm was graduated.
12 21 30 39 48
Mediation has helped incubatee to understand and
interpret regulations and law .
Mediation has been able to influence changes in
regulations and laws.
Mediation has helped increase the visibility, credibility
and understandability of incubates in the eyes of external actors.
Mediation has helped incubatees obtain legitimacy and
social acceptance.
Incubatees Views on Mediation Statements
Mediation
Response range
27
Figure 12-Important criteria for graduation as Perceived by Incubatees
Note- Weighted factor: Not at all-1, Less Important-2, Important-3, Very Important-4
Trading as independent business was perceived as an important factor to graduate by both
key-informant from incubator and participants from incubatees. There seemed to be
contrast in view on Time under incubation as an important factor. The response from
incubator on Time under incubation was seemed perceived highly while incubates preferred
it as low importance. The incubatees were ready to be under business incubation for longer
period if it gives positive result in their growth.
“An Incubatee View- I feel that I could graduate from incubation after I am able to
establish a brand name for my produced bag products and gain some recognition in the
market for it ” .
The key-informant from incubator and participant incubatees were seen much agreed on
limited market information systems and research and Limited awareness and capacity for
marketing as marketing resources problems faced in small business operation in Nepal.
Both key-informants from incubator and participant incubatees perceived day to day survival
focus as less important problem for growth. Growth in business is sought by most of
business operating in Nepal.
Other local problem faced by some incubatees were tax imposed by local authorities for
marketing and promotion campaign, display board /hoarding board which added extra cost
to their products.
c. Operational/Production problems
12 21 30 39 48
Sales turnover
Profitability
Time under incubation
Trading as independent business
Important criteria as Perceived by Incubatees
Graduation criteria
Response Range N=(12)
28
Figure 13-operational/production problems perceived by Incubator
Note: Weighted factor: Strongly Disagree-1, Disagree-2, Agree-3, Strongly Agree-4
d. General management Problems
Figure 14-General management Problem perceived by Incubator
Note: Weighted factor: Strongly Disagree-1, Disagree-2, Agree-3, Strongly Agree-4
3 5.25 7.5 9.75 12
-Limited knowledge in manufacturing and
distribution process
-Inadequate supply of infrastructure
services
-Poor work ethics
-Inadequate educated workforce
Perceived by Incubator
Operational/production problems
Response Range (N=3)
3 5.25 7.5 9.75 12
-Crime and theft
-Lack of government support
-Government stability
-Ineffective government bureaucracy
-Policy instability
-Corruption
-Lack of technological sophistication
Perceived by Incubator
General management Problem
Response Rate (N=3)
29
Figure 15-General management Problem perceived by Incubatees
Note: Weighted factor: Strongly Disagree-1, Disagree-2, Agree-3, Strongly Agree-4
The key-informant from incubator and participant incubatees has pointed out Lack of
technological sophistication, Policy instability, and Ineffective government bureaucracy as
major general problems of growth for new start-up in Nepal. Corruption is also seen as big
problem than crime and theft .
Other general social problems that incubatees faced were found to be forceful charity,
political labor union disrupting work, and force full charity by local mafia, etc.
e. Owner Related Problems
Figure 16 -Owner related problems perceived by Incubator
Note: Weighted factor: Strongly Disagree-1, Disagree-2, Agree-3, Strongly Agree-4
12 21 30 39 48
-Crime and theft
-Lack of government support
-Government stability
-Ineffective government bureaucracy
-Policy instability
-Corruption
-Lack of technological sophistication
Perceived by Incubatees
General management …
Response Rate (N=12)
3 5.25 7.5 9.75 12
-Resistance to modern management practice
-Lack of entrepreneurial culture
-Lack of motivation for growth
-Lack of management abilities
-Lack of trainings
-Gender
-Family history
Perceived by Incubator
Owner Related Problems
Response Range (N=3)
30
Figure 17-Owner related problems perceived by Incubatees
Note: Weighted factor: Strongly Disagree-1, Disagree-2, Agree-3, Strongly Agree-4
Lack of entrepreneurial culture and resistance to modern management were found to be
agreed by both key informants from incubator and participant incubatees. Lack of training,
lack of management abilities and lack of motivation growth were perceived more by
participant incubatees as owner related problems. The incubatees felt that these owner
related problems were also problems for growth which can be overcome by training and
support to interested ones. Gender and family history wasn‘t perceived as much bigger
problem of growth by both key informants from incubator and participant incubatees.
4.3.8 Perceived Effect of Business Incubation on Incubatees
4.3.10 Measure of Success of Incubatee firm as perceived by Incubatees
Chapter 5: Discussion and limitations
5.1 Discussion
5.2 Limitations
The study had time constraint as it was to be conducted for 4 months. The literature review
can point out other issues of Business incubation which were not discussed and was
discarded. One of important limitation this research has is it doesn‘t discuss about the role
of business incubation manager .various authors Holovnia et al., (2008);Jim Robbins(2002)
12 21 30 39 48
-Resistance to modern management practice
-Lack of entrepreneurial culture
-Lack of motivation for growth
-Lack of management abilities
-Lack of trainings
-Gender
-Family history
Perceived by Incubatees
Owner Related Problems
Response Range (N=12)
31
have highlighted the effect of experience and capabilites of manager in Business incubation
Process.
This study has limted to business incubation service by Government of Nepal. It is not able
to raise the enterprise development issues and efforts running in nepal from private
initative or by non governmental organisation. The activities for enterprenurship development
from them is scattared and unorganised but not negligible to ignore for Nepal.
Another limitation in this research is that this research doesn‘t discuss about financial
sustainability of business incubation center itself. The case study Business Incubation
Center was government funded and the research was focused in evaluating the services
provided and exploring the topic. The strategies that business incubation center incorporates
for being financial sustainable have effects on business incubation process and a different
framework or working model may arise as various authors like Richards 2002 has stated.
32
Chapter 6: Conclusion and Recommendation
6.1 Conclusion
This research study leads to us following conclusion;
6.2 Reflections
If I were to do this research again, I would approach the research in some different ways. I
feel the study of evaluation of business incubation services could also be done with focusing
in supply and demand of business incubation services. The data collection could be more
refined with use of different sets of questionnaires for graduated and under-incubation
incubatees as there were seen some mixed responses. Some questions were seen less
relevant to incubatees who were still under incubation.
I would approach the primary respondents early .i learned to consider the factors which can
delay the research process. Even the social factor like celebration of festival in between the
data collection period interrupted the data collection process. This early consideration would
have increased my sample size.
Conducting a research staying in United Kingdom and exploring over the case study over
another country, Nepal initially had some sort of lack of confidence and fear for not being
able to grasp the real scenario. There was always fear that the questionnaire may not be
well perceived by the respondents. So it was pilot tested before it was handed to
respondents.
Personally, the research study made me learn about the procedure of doing research. I
learned the skill for forward plan and proposal planning also. I learned to coordinate with
organization. I learned the skill for preparing an original piece of work on a defined and
relevant topic.
6.3 Recommendations
6.4 Contribution
This research is the first research study over the Business Incubation Program (BIP). This
study can help any interested individuals or organization to find about progress of business
incubation scenario in Nepal. The stakeholders of Business Incubation Program can use this
study to find about business incubation services provided. This study can also help
researchers interested to find about initiatives in entrepreneurial development environment
in Nepal.
33
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36
APPENDIX A-Key-Informant (Incubator) Survey Questionnaire
PART-1
Key- informant Person name-
Designation-
Selection criteria
37
1. How selection is done for Tenant Company?
a. Referral b. Selection process. c. Others (please
specify)…………….
3.Please rate the importance of following factors used for Selection Criteria.
Please tick the choices as appropriate
Doesn’t
Matter
Moderate
Important
Very
Important
Family background
Business proposal
Stage of idea/business
Creativity of idea
Technical knowledge
Use of information technology
Plans to implement
Expected earning/expenditure
Range of desired support required
Expected duration of support
Market potential /commercialisation of
idea
Previous training experience
Employment history
Patents/intellectual property
Type of firm
Available resources and cost
Reservation by government
38
(marginalised/female /ethnic group)
Any comment (please specify)
…………………………………………………………………………………………….
Infrastructure
1.Please rate the following infrastructures provided by incubator.
Cost of use Please tick as
appropriate
Please tick as appropriate
Free Paying Furnished Unfurnished Poor Average Good Excellent
Office space
Meeting
room
Cost of use Please tick as
appropriate
Please tick as appropriate
Free Paying Shared Individual Poor Average Good Excellent
Phone
Fax
Computer/
Internet/e
Business
postal
address
Cost of use.
Please rate the service as
appropriate
Free Paying Poor Average Good Excellent
Loan equipment for business
purposes
39
(laptops/projector/cameras)-
R & D facilities(facilities for
designing, simulating and testing
new products such as labs,
servers)-
Any comment-(please specify)
…………………………………………………………………………………………………
Business support
1.Please rate the following business services provided
Provided Services (please tick
as appropriate) Business
service
provided
Please rate the service as appropriate
Provide
d to all
Provided
according
to
individual
need
Never
provided Poor Average Good Excellent
a. Leadership
training and
coaching-
b. Financial
management-
c. Marketing
management-
d.HR
management-
e. Legal issues
f.
Entrepreneurial
-development
Poor Average Good Excellent
g. Accounting and
taxation
40
h. Export
assistance
i. Secretarial
services
j. Business
registration services
k. Others (please
specify)……………
……………
2.What is preferred approach to provide Business support ? please tick as
appropriate
a. Reactive and episodic- (entrepreneur requests help dealing with crisis or problem) .
b. Proactive and episodic counselling (manager engages entrepreneurs in informal ,ad hoc
counselling).
c. Continual and proactive counselling (under review and intense –aggressive intervention by
incubator manager).
d. Others (Please specify)
…………………………………………………………………………………………………
…..
3.Any comment(please specify)
……………………………………………………………………………………………….
Mediation and networking
1.Please rate the mediation and networking provided.
Provided Services (please tick as
appropriate) Mediation
and
networking
provided
Please rate the service as appropriate
Provided
to all
Provided
according
to
individual
need
Never
provided Poor Average Good Excellent
a. Mediation
regarding
partners-
41
b. Mediation
regarding
customers-
c.Mediation
regarding
suppliers
d. Mediation
regarding
employees-
e. Mediation
regarding
financiers-
f. Mediation
regarding
equity
investment-
g. Others
(please
specify)………
………………..
2.Please Rate as appropriate for following statement.
Please tick as appropriate
Strongly
Disagree
Disagree Agree Strongly
Agree
SD D A SA
a. Mediation has helped incubatee to
understand and interpret regulations and
law .
b. Mediation has been able to influence
42
changes in regulations and laws.
c. Mediation has helped increase the
visibility, credibility and understandability
of incubates in the eyes of external
actors.
d. Mediation has helped incubatees
obtain legitimacy and social acceptance.
Graduation-
1.Please rank the importance of the following factors for graduation from
incubation.
Please tick as appropriate
Not at all less important Important Very
important
Sales turnover
Profitability
Time under incubation
Trading as independent
business
Others (please
specify)…………………….
Problems of growth facing by small firms
1.Please rate the importance of following factors of problems of growth for new start-
up business in Nepal.
Please rate as appropriate
Strongly
Disagree
Disagree Agree Strongly
Agree
a. Financial resource problems- -Lack of expertise in financial management
43
- Access to finance
-Cash and burrowing power
-Tax rate
-Inflation
-Tax regulation
-Others ( please
specify)…………………………………………..
b. Marketing resource problems- -Focus on day to day survival
-Limited market information systems and
research
-Limited awareness and capacity for marketing
activities
-Others (please
specify)…………………………………………..
c. Operational/production problems
-Limited knowledge in manufacturing and
distribution process
-Inadequate supply of infrastructure services
-Poor work ethics
SD D A SA
-Inadequate educated workforce
-Others (please
specify)……………………………………………
…
d. General management problem-
44
-Crime and theft
-Lack of government support
-Government stability
-Ineffective government bureaucracy
-Policy instability
-Corruption
-Lack of technological sophistication
-Others (please
specify)……………………………………………..
e. Owner related problems
-Resistance to modern management practice
-Lack of entrepreneurial culture
-Lack of motivation for growth
-Lack of management abilities
-Lack of trainings
-Gender
-Family history
-Others (please
specify)…………………………………………….
Measure of success of incubator-
APPENDIX B-Participant Incubatee Survey Questionnaire
Part 2
Incubatee information
1. Name-
2. Age-
45
3. Gender - Male Female
4. Education - High school Undergraduate Graduate
5. Enterprise Name -
6. Enterprise Est. Date -
7. Enterprise industry type -
Infrastructure
Business support
1.Please rank the following business service provided
Please tick as appropriate
Poor Average Good Excellent
Leadership training and coaching-
Financial management-
Marketing management-
Hr management-
Legal issues
Entrepreneurial development
Accounting and taxation
Export assistance
Secretarial services
Business registration services
Others ( Please specify)
……………………………………………
2. Any comments (Please
specify)…………………………………………………………………………………………
…
Mediation and Networking
46
1.Please rank the mediation and networking services provided by incubator.
Please tick as appropriate
Poor Average Good Excellent
Mediation regarding partners -
Mediation regarding customers-
Mediation regarding suppliers-
Mediation regarding employees-
Mediation regarding financiers-
Mediation regarding equity investments-
Others (please
specify)…………………………………………….
2.Please rate following statement as appropriate.
Please tick as appropriate
Strongly
Disagree
Disagree Agree Strongly
Agree
a. Mediation has helped incubatee to
understand and interpret regulations and law .
b. Mediation has been able to influence
changes in regulations and laws.
c. Mediation has helped increase the visibility,
credibility and understandability of incubates in
the eyes of external actors.
d. Mediation has helped incubatees obtain
legitimacy and social acceptance.
3.Any Comments-(please
specify)…………………………………………………………………………………………
.
Graduation-
47
Problems of growth facing by small firms
Perceived effect of incubation service provided to incubate
1.Please rate the following statement as appropriate
Please tick as appropriate.
Strongly
Disagree
Disagree Agree Strongly
Agree
1.Would not have progressed the business as
quickly: slower growth .
2.Would have been less successful/not so
professional or as competitive .
3.Would have not learned about issues in
business .
4.would have taken longer (staff, businesses
and network)
5.would be Less confident .
6.Very little would have changed
7.Would have spent more money on
equipment/would have had to get quite a large loan
8.Would not have been taken seriously by larger
businesses
9.Would not exist as a business/not trading
10.Would be less productive at home/lack of
credibility within family resulting in less family
support.
Measure of success of incubatee
1.Please rate the following statement as appropriate
48
Please tick as appropriate.
Strongly
Disagree
Disagree Agree Strongly
Agree
1.The sales turnover and profitability has
been positive under business incubation
2. The enterprise has grown over
incubation period.-stages of growth.
3.The firm has graduated leading to
independent trading
4. Business skill/professionalism is
improved
5. Confidence in self and business has
increased.
6.Networking with peers has increased
and productive.
7.There has been cost saving due to use
of BI services.
8.There has been Positive Publicity to
business.
2.Any Comments (Please specify)-
……………………………………………………………………………………….
APPENDIX C-List of Key- Informant
49
SN NAME DESIGNATION Association with BIP
1 Ms..Rakshya Aryal
Enterprise Development Officer,BIP 2010- going on.
2 Mr. Rabindra K Neupane
-Ex Enterprise Development Officer ,BIP
-Lecturer of Small Business Management, Tribhuvan University
-BDS Manager, FNCSI Nepal -Program Director,Integrated Management & Technology Research Center (Imatech)
2007-2009
3 Er. Pradeep Jha -Technical Officer, Government of NEPAL 2008-2010
APPENDIX D -List of Participant Incubatee
50
SN Tenant firm owner incubation period
firm type
1 Anima Visual & Research Service Centre
Ms. Anjana Sharma
2007-2009 Visual production house
2 Himalayan agarbatti udyog
Mr. Hari Gopal Shrestha
2007-2009 Incence-stick prodution
3 Matri bhumi chulo jadan udhyog
Mr Madhukar K.C
2007-2009 Production of eco-friendly improved cooking stove
4 Karnali technology development
Mr. Takka Bahadur Nepali
2008 Alternative energy appliance production
5 One peace fashion house
Ms. Sangita Lama
2008 Designer dress production
6 Kathmandu macaroni industry pv. ltd
Mr. Shiva Hari Prasai
2008 Macaroni production
7 Ever Green Herbal and Cosmetic Products Pvt.Ltd.
Mr. Gopal Kafle 2008 Herbal cosmetic production
8 Nepal infopark Pvt. Limited
Mr. Saurav Dhakal
2008 Online media content production
9 Anamol Jadibuti Udhyog Mr.Man Bahadur saud
2009 Herbal medicinal production
10 Pahadi Kshyetra Bikas Parisad
Mr. Kashiraj 2009 Jatropa plantation
11 Shiwakoti Bag Udhyog Mr. Khadananda Shiwakoti
2009 Bags production
12 Pragati Hastakala udhyog
Mr. Santi Raman Paneru
2009 Eductional materials production
APPENDIX E -Records of Meeting
51
Date- 28/6/2011
Summary of Discussion:
-feedback of proposal given
-acceptable with some modification
-need to be precise about literature review and objective
Work required by next meeting:
-rewrite objective
-literature review
-foucus to find 2 author(book,journals for base of research)
Date of next meeting: 4/7/2011 ,16:30 pm
Date- 4/7/2011
Summary of Discussion:
-revise the focus of research and further development
Work required by next meeting:
-work on literature review more
-focus on growth of companies
Date of next meeting: 18/7/11 ,11:30 am
Date- 18/7/2011
Summary of Discussion:
-body of literature review decided
Work required by next meeting:
-carry on literature review
-topic business incubation need to be started
Date of next meeting: 25/7/11 , 11:30 am
Date- 25/7/2011
52
Summary of Discussion:
-First half of literature review done
Work required by next meeting:
-look at important highlighted points
-edit required parts
Date of next meeting: 2/8/11
Date- 2/8/2011
Summary of Discussion:
-main points of literature review discussed
Work required by next meeting:
-explain all the elements /issues of literature review
-put into model
-send over email
Date of next meeting:8/8/2011
Date- 8/8/2011
Summary of Discussion:
-summary model discussed
Work required by next meeting:
-prepare and arrange together summary model
-send over email
Date of next meeting:15/8/11
Date- 15/8/2011
53
Summary of Discussion:
-looked at summary model
-summarise model
Work required by next meeting:
-final refinement needed
-send over email
Date of next meeting:22/8/11
Date- 22/8/2011
Summary of Discussion:
-Discussed questionnaires preparation
-looked at various model of questionaire drafts
Work required by next meeting:
Draft questions related to research objective
Date of next meeting:2/9/11
Date- 2/9/2011
Summary of Discussion:
- discussion over questionaire
Work required by next meeting:
-Draft judgment based questions that arises
-draft Fact based questions that arises
-send over email
Date of next meeting:6/9/11
Date- 6/9/2011
54
Summary of Discussion
-questionaire and 4 point scale discussed
Work required by next meeting:
-Refinement over questionaire needed
-send over email
Date of next meeting:19/9/2011
Date- 19/9/2011
Summary of Discussion:
-Discussion over sets of questions
-Discussion over layout of questions
Work required by next meeting:
-Refinement needed over questions
-Modify question content
-send over email
Date of next meeting:23/9/2011
Date- 23/9/2011
Summary of Discussion
-final discussion about questionaire was done
Work required by next meeting:
-final refinement needed to be done in questionaire
-now focus in completing the methodology part.
Date of next meeting:6/10/2011
55
Date- 06/10/2011
Summary of Discussion:
-discussion about interpreting data
-discussion about weighted mean
-discussion about bar chart
Work required by next meeting:
-complete weighted mean in data obtained
-start making graphical representations
Date of next meeting:10/10/2011
Date- 10/10/2011
Summary of Discussion:
-discussion about findings
Work required by next meeting:
-complete findings ,make all bargraphs
Date of next meeting:17/10/2011
Date- 17/10/2011
Summary of Discussion:
-discussion over findings,layout
-amendment in topic of research
-discuss over table of content
Work required
-complete remaining works
APPENDIX F-Introduction Letter
56
57