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The Higher ED Blog: Anatomy of business incubation in Canada

Tara Vinodrai / April 13, 2015

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The Higher ED Blog: Anatomy of business incubation in Canada

How do we help entrepreneurs start new businesses? And how do we improve the chances that these start-up firms will survive? Business incubation has been identified as one of the critical means of assisting entrepreneurs in the venture creation process and holds the promise of being an important economic development tool for job and firm creation, fostering an entrepreneurial culture, accelerating local industry growth, and supporting broader business development. As such, business incubation and acceleration have become hot topics in economic development. This has not gone unnoticed by students in the University of Waterloo’s Local Economic Development program. Indeed, several recent posts here on Higher ED have explored questions like ‘Do incubators benefit their host communities?’ and ‘What are the trends in food-related incubators?’. Adding to this discussion, a major research paper The Business Incubator Landscape: A Canadian Perspective, by recent graduate Nancy Huether, surveyed the current state of business incubation programs and initiatives across Canada.

Nancy’s first task was to find out what information already exists. Academic and policy research has examined different types of business incubation, acceleration and tech transfer models and best practices; the effectiveness of business incubators in nurturing start-ups; and the impact of business incubation on firm performance and the broader regional economy. In Canada, Statistics Canada’s (2005) Survey of Business Incubators is one of the most comprehensive (if somewhat dated) sources of data on the Canadian business incubation industry. A 2012 study by the Evidence Network provides a more up-to-date portrait of business incubation in Canada. However, the business incubation landscape is evolving quickly.

For this reason, Nancy then set out to take stock of current trends and practices. To do so, she undertook a data mining exercise to collect key information about known business incubators in Canada. This meant collecting data from current websites and—to the extent possible—gathering historical information from previous research efforts. This is not as easy as it sounds. There is little agreement on how to define a business incubator and no comprehensive list of business incubators and accelerators. The aforementioned report by the Evidence Network identified 150 business incubators and accelerators operating in Canada. Meanwhile, the Canadian Association of Business Incubation (CABI) reports that there are over 130 business and technology incubators in Canada. Through an extensive process of validation and cross-checking, Nancy compiled a unique database of 140 Canadian business incubator organizations and analyzed data on the age, location, industry specialization, property/space, strategic and funding partnerships, and services provided by these organizations.

Here’s what her database reveals:

  • First, there has been substantial growth in the number of business incubators in Canada, especially since 2000 (see Figure 1).
  • Second, the majority of incubators are in urban areas – although there were more incubators than might be expected in rural communities.
  • Third, broad, mixed (i.e. not sector, technology or issue specific) incubators account for almost half of Canadian incubators; another 25% were oriented towards information and communication technologies (ICTs). However, there is diversity amongst incubators and emerging incubators are addressing niche sectors such as social innovation, food and the creative economy.
  • Fourth, while incubators themselves may have autonomy, other partners such as universities, government programs, and economic development offices, are important for funding and other strategic resources.
  • Fifth, fewer than 20% of incubators operate on a for-profit basis.
  • And finally, despite the conventional wisdom that business incubators need to offer a physical space, only two-thirds of Canadian business incubators offered space, while the remainder offered a suite of services to entrepreneurs and start-up businesses.

Figure 1 Number of Canadian incubators by year established

Number of Canadian incubators by year established

Overall, Nancy’s project suggests that there is much more to be learned about this rapidly evolving field. So why not find out more? If this topic sparks your interest, check out the University of Waterloo Economic Development Program’s one-day seminar, Fostering Local Innovation: What Economic Developers Need to Know About Incubators, on April 17, 2015 to learn more from academic experts and leading practitioners in the field.

Nancy Huether completed her Major Research Paper under the supervision of Dr. Paul Parker; her project was part of the ongoing study, Supporting entrepreneurship, innovation and business start-ups in rural Ontario: What role for business incubators?, funded by the Ontario Ministry of Agriculture, Food and Rural Affairs.

About the author

Dr. Tara Vinodrai is Director of the Local Economic Development graduate program at the University of Waterloo. She is an expert on urban and regional development, innovation and clusters, and the creative/cultural economy.

About the series

Higher ED: Insights for the Next Economy is a platform for students, guest speakers, staff and faculty of the University of Waterloo’s professional and graduate economic development programs to share knowledge with the field at large. The series takes works destined for an academic audience and reworks them into a fresh, easy-to-digest blog article.

Established in 1988, the Local Economic Development program is the only master’s program in Canada devoted solely to local economic development. It offers a balance between theory and practice by combining coursework, a major research paper, an internship, and weekly seminars featuring guest speakers. Students are prepared for careers in local, community, or regional economic development.

The Economic Development Program is a nationally-accredited provider of professional training. It delivers certification programs and seminars that offer a deep understanding of the Canadian context in a convenient block format. Peer learning is combined with informative lectures and practical case studies to provide dynamic instruction that is beneficial for junior and senior-level practitioners.

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