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Science Based IncubatorsScience Based Incubators

The role of Business Incubators in post-2006 EU The role of Business Incubators in post-2006 EU What are the prioritiesWhat are the priorities

Jorge Costa-DavidJorge Costa-David

European Commission European Commission

Enterprise Directorate GeneralEnterprise Directorate General

Enterprise Directorate-General

Oxford, 10 December 2004Oxford, 10 December 2004

2

The context (I)The context (I)

Lisbon objectives (EU Council 2000 invited the EC and M. States to focus their action on small and micro businesses)

• 24 million SMEs in Europe 25 2/3 of total private employment average size : 6 persons

European Charter for SMEs Open method of co-ordination « Think small first » and « SME Envoy » Entrepreneurship agenda

1. Entrepreneurship Green Paper

2. Entrepreneurship Action Plan

3

The context (II)The context (II)

• Wider EU• Kök report

– Blaming, Shaming, Faming– Fewer priorities, more focus– National (M. State specific) action plans

• Reactions to all the above• EC DG Enterprise and its main functions• New Commission (as of 22 November

2004)

4

Enlargement: Key Facts

As from 1st May 2004

• Larger/est Integrated Market in the World

• EU 25 : 450 Mio Inhabitants 25 Mio Enterprises

• Implementation of the ‘ Acquis Communautaire ’

• Economic Prospects

5

Challenges/Opportunities

• Strengthening Competitiveness in Candidate Countries

• Entering New Markets• Investment Opportunities

• Clustering, Networking, Industrial Co- operation

• Sustainable Development

6

CHALLENGES FOR ‘ACCESSION’ AND CANDIDATE COUNTRIES

• Private business activity has grown very fast in CCs during transition to market-oriented systems

• SME sector less developed than in EU member states → however, strong latent potential for entrepreneurship

• Very small businesses → need for policies, access to finance and business support to encourage the transformation of self-employed and microenterprises to larger companies

• Limited knowledge of the demand for finance among SMEs in the CCs → however, latent demand potentially important

• Supply of finance to SMEs in the CCs different than in EU countries → commercial banks not aware enough of SME needs

7

Strategic goal of Lisbon (2000)

• “to become the most competitive and dynamic knowledge-based economy in the world…

• … capable of sustainable economic growth with more and better jobs and greater social cohesion.”

Role of the European Commission

8

The European Charter for Small Enterprises

Charter for Small Businesses of June 2000 commits Member States and the Commission to create “the best possible environment for small enterprises”.

Erkki Liikanen said “Charter is central to achieving the Lisbon goal of making Europe into the world’s most competitive and dynamic knowledge-based economy by 2010”

9

Charter Action Lines (I)

• Education and training for entrepreneurship

• Cheaper and faster start-up

• Better legislation and regulation

• Availability of skills

• Improving online access

• More out of the Single Market

10

Charter Action Lines (II)

• Taxation and financial matters

• Strengthen the technological capacity of small enterprises

• Successful e-business models and top-class small business support

• Develop stronger and more effective representation of small enterprises’ interests at Union and national level

11

Central objective of the Charter

“Create top-class small business support systems, easy to access, to understand and relevant to the needs of business”

12

I. Awareness and visibility - results

75% of EU small business lack information on the availability of support services

Better take up of support services by female entrepreneurs and by entrepreneurs with secondary and university education

13

I. Awareness and visibility - results

0%

5%

10%

15%

20%

25%

30%

35%

40%

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

Information rate

Par

ticip

atio

n ra

te

Greece

Sweden

Netherlands

Ireland

Italy

Norway

Germany

Denmark

Belgium

Finland

United Kingdom

P ortugal France

Austria

Spain

percent of enterprises

percent of enterprises

EU-average

Graph 1: Information and participation rates of businesses

14

I. Awareness and visibility - results

Main reason for 60% of enterprises not to make use of support services: “they do not see any need for external help”.

15

I. Awareness and visibility - results

60%25%

9%6%

no need for external help

no awareness

wrong kind of content

not offered under the right conditions

Graph 2: Main reason for not using support services

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I. Awareness and visibility - conclusions

Two main factors influencing awareness

• Promotion of support services– Direct contacts and personal visits - most

welcome promotional methods– Word-of-mouth

• Organisation of contact points– looking for support services at local / regional

levels

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I. Awareness and visibility - conclusions

KEY CHALLENGES OF SUPPORT POLICY

• Promotional tools should focus on direct and personal contacts

• Co-ordination between service providers

18

II. Types of support - results

• EU Small businesses need specifically targeted support services – 70% according to their size; – 77% to their sector and – 73% according to their phase of development

• There seems to be a certain mismatch between demand of services and offer in Europe

19

II. Types of support – results (II)

• Regional differences as far as enterprises’ needs are concerned

• Demand for support services related to the development of the business location

20

II. Types of support – conclusions (III)

KEY CHALLENGES OF SUPPORT POLICY

• Small business need more tailor made support and more targeted services

• Coherent support services in the area of professional information and finance

• Demand for specific types of support differs by the location of an enterprise

21

III. Conditions and Delivery - results

65 70 75 80 85 90

quality of service

professionalism of staff

effect on business

pricing policy

communication with provider

understanding of business

access to service

EU

Graph 5: Satisfaction with use of support services

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III. Conditions and Delivery – results (II)

15%

20%

25%

30%

35%

65% 70% 75% 80% 85% 90% 95%

Satisfaction rate

Part

icip

atio

n r

ate

Netherlands

Ireland

Germany

Denmark

Belgium

Finland

United Kingdom

P ortugal

France

percent of enterprises

Spain

percent of enterprises

EU-average

Graph 6: Satisfaction and participation rates

23

Objectives of 2001-2005 Multi-Annual Programme for SMEs

• Promote entrepreneurship • Enhance growth and competitiveness• Improve administrative and regulatory environment• Improve financial environment• Facilitate access to Community support services and

networks• Contribute to the « open method of coordination »

- Exchange of information - Identification of best practices- Implementation and monitoring

DG Enterprise main functions

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Enterprise Policy Main ActivitiesEnterprise Policy Main Activities

REGULATORY FRAMEWORKREGULATORY FRAMEWORK

Action Plan on Regulatory Environment(2002)

COMPETITIVENESSCOMPETITIVENESS

Competitiveness Report (annual), specific issues: Manufacturing industry (2001) ICT (2001) Biotechnology (2001) Services (2002) Competition (2002) Sustainable development (2002)

ENTREPRENEURSHIP & INNOVATIONENTREPRENEURSHIP & INNOVATION

Charter on small enterprises

Scoreboards

Benchmarking

Lessred tape

ImpactAssessment

Entrepreneurship Green Paper/Action Plan

Innovation (annual) Enterprise Policy (annual)

Minimum standards for consultation

Communication on impact assessment

DG Enterprise main functions

25

Policy areas mentioned by respondents

A) Continued efforts needed

1. Administration and regulation

2. Access to finance

3. Support and training services

4. Innovation

5. Facilitating transfer of businesses

6. Entrepreneurship education

7. Attitudes towards risk-taking and failure

European agenda for European agenda for EntrepreneurshipEntrepreneurship

26

Policy areas mentioned by respondents

B) More efforts needed

1. Social security for entrepreneurs

2. Public procurement

3. State aids

4. Taxation

5. Labour law complexity and inflexibility

6. Internationalisation

7. The regional dimension

European agenda for European agenda for EntrepreneurshipEntrepreneurship

27

Suggestions about the approach

A co-ordinated approach to entrepreneurship policy

Involving policy-makers at EU, national and regional level as well as businesses organisations

Ensuring synergy among different policy areas that affect entrepreneurship (Enterprise, innovation, employment, taxation, education, …)

Respecting diversity among different regions, types of entrepreneurs and their enterprises

European agenda for European agenda for EntrepreneurshipEntrepreneurship

28

Five key areas for action

1. Fuelling entrepreneurial mindsets

2. Encouraging more people to become entrepreneurs

3. Gearing entrepreneurs for growth and competitiveness

4. Improving the flow of finance

5. Creating a more SME-friendly regulatory and administrative framework

The Entrepreneurship Action PlanThe Entrepreneurship Action Plan

European agenda for EntrepreneurshipEuropean agenda for Entrepreneurship

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Key actions 2004-2005• Fostering entrepreneurial mindsets through school

education• Reducing the stigma of failure• Facilitating transfer of businesses• Improving social security of new small business

owners• Tailor-made support for women and ethnic minorities• Facilitating SMEs business cooperation in the internal

market• Fostering innovative clusters • More equity and stronger balance sheets• Listening to SMEs• Simplification of tax compliance

The Entrepreneurship Action PlanThe Entrepreneurship Action Plan

European agenda for EntrepreneurshipEuropean agenda for Entrepreneurship

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Possible key actions 2006 and beyond

Conducting entrepreneurship campaigns

Fostering the creation of more fast-growing enterprises (gazelles)

Promoting entrepreneurship in social sectors

Enabling micro-enterprises to recruit by reducing the complexity of regulations

Facilitating SMEs’ access to public markets

The Entrepreneurship Action PlanThe Entrepreneurship Action Plan

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Innovation and Technology Transfer• Innovation policy

• Gate2Growth : business plan assistance & project-investor matching (www.Gate2Growth.com)

• Networks– Innovation Relay Centers : 68 IRCs to promote

technology transfer – ‘Innovating Regions in Europe’ network

• CORDIS (www.cordis.lu)

Other EU programmes and policies on SMEs with a bearing on BIs

32

Innovation ScoreboardC

urr

ent

per

form

ance

EU

ave

rag

e

Trends over last four years

EU average

+/+High performance,

High trend:“Moving ahead”

+/- High performance,

Low trend:“Losing momentum”

-/- Low performance,

Low trend:“Falling further

behind”

-/+Low performance,

High trend:“Catching up”

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Overall innovation performances

P T

TR

SKSI

RO

P L LV

EECZ

CY

BG

J PUS

NO

IS

CHUK

SE

FI

HU

AT

NL

LUIT

IE

FR

ES LT

EL

DEDK

BE

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

0 5 10 15 20 25 30 35 40 45

Average change in trend indicators (%)

2003

SII-

2

2. Losing momentum 1. Moving ahead

4 Falling further behind 3. Catching up

34

Innovation Scoreboard: M. State 1

113

140

254

104

142

141

223

342

380

102

246

189

160

177

106

161

142

151

0 50 100 150 200 250 300 350 400

S&E grads

Work pop w 3rd educ

Lifelong learning

Emp h-tech manuf

Emp h-tech serv

Public R&D exp

Business R&D exp

EPO h-tech pats

USPTO h-tech pats

SMEs innov in-hse

SMEs innov co-op

Innov exp

Venture cap

New cap stock mark

New-to-mark prods

Home Internet access

ICT exp

VA h-tech manuf

35

Enterprise investment in LLL

EU A B D DK E EL F FIN I IRL L NL P S UK

% e m p l o y e e st a k i n g j o b -r e l a t e d t r a i n i n gc o u r s e s

35.3 32 40 32 53 26 13 37 50 15 41 36 41 18 60 39

T r a i n i n g % o fl a b o u r c o s t s

1.9 1.3 1.6 1.5 3.0 1.5 1.1 2.0 2.4 0.8 2.4 1.9 2.8 1.2 2.8 2.7

% e m p l o y e e sw i t h c o m p u t e rt r a i n i n g

34.1 35.9 55.2 20.1 18.2 26.1 21.4 39.2 40.4 48.3 36.6

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Biotech Innovation: Performance

37

Innovation performance vs GDP

2000 SII vs. 2002 per capita GDP (EU=100)

ELP

SI

DK

E

A

BF

D

NL

UKFIN

IRL

60

70

80

90

100

110

120

130

-10.0 -8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0 8.0

SII

Per

capita

GD

P (

EU

=100)

R² = 0.55

38

Innovation Scoreboard: M. State 1

113

140

254

104

142

141

223

342

380

102

246

189

160

177

106

161

142

151

0 50 100 150 200 250 300 350 400

S&E grads

Work pop w 3rd educ

Lifelong learning

Emp h-tech manuf

Emp h-tech serv

Public R&D exp

Business R&D exp

EPO h-tech pats

USPTO h-tech pats

SMEs innov in-hse

SMEs innov co-op

Innov exp

Venture cap

New cap stock mark

New-to-mark prods

Home Internet access

ICT exp

VA h-tech manuf

39

Innovation Scoreboard: M. State 2

55

48

60

98

84

79

42

22

33

101

42

70

81

39

208

89

75

67

0 50 100 150 200 250

S&E grads

Work pop w 3rd educ

Lifelong learning

Emp h-tech manuf

Emp h-tech serv

Public R&D exp

Business R&D exp

EPO h-tech pats

USPTO h-tech pats

SMEs innov in-hse

SMEs innov co-op

Innov exp

Venture cap

New cap stock mark

New-to-mark prods

Home Internet access

ICT exp

VA h-tech manuf

40

Report on Benchmarking of Business Incubators

• Available on:http://europa.eu.int/comm/enterprise/entrepreneurship/support_measures/incubators/index.htm

Highlights issues such as:

• Role of Business Incubators

• Business Incubators definitions and typology

• Geographical aspects and scope of incubator activities

• European Policy context

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Business Incubator type (I)

Two years ago the following issues were raised at

the Best practices in Science Based incubators

conference

• Traditional Business Incubators • ‘New economy’ incubators• Other, e.g. virtual incubators (such as the Synergy

Incubator - virtual service delivered through a virtual medium, the internet)

42

Business Incubator type (II)

‘New economy’ incubatorsre private-sector, profit-driven with the pay-back coming from

investment in companies rather than from rental income;

They tend to focus mainly on high-tech and internet-related activities and unlike ‘traditional’ incubators, do not have job creation as their principal aim;

‘New economy’ incubators often have an essentially virtual presence with financial and business services at the core of the offering unlike their ‘traditional’ counterparts that usually centre on the provision of physical workspace.

43

Setting Up and Operating Incubators (I)

• Business incubators should be designed to support and be part of a broader strategic framework – either territorially orientated or focused on particular policy priorities (e.g. development of clusters), or a combination of these factors

44

Setting Up and Operating Incubators (II)

• Incubators should be promoted by an inclusive partnership of public and private sector stakeholders

45

Setting Up and Operating Incubators (III)

• There are a number of different set up funding models but the evidence from this project is that public support for the establishment of incubators in Europe will remain critical for the foreseeable future

46

Setting Up and Operating Incubators (IV)

• There are different ways in which incubators cover their operating costs with many incubators relying on public subsidies, but dependence on this source of revenue funding should be minimised

47

Business Incubators functions (I)

• The provision of physical space is central to the incubator model. Standard good practices now exist with regard to the most appropriate configuration of incubator space

48

Business Incubators functions (II)

• The value added of incubator operations lies increasingly in the type and quality of business support services provided to clients and developing this aspect of European incubator operations should be a key priority in the future

49

Business Incubators functions (III)

• The type of activities client companies are pursuing, in particular the technology/knowledge intensity of these activities, is the key factor (rather than physical features or operating modality) that should be used to differentiate one type of incubator from another

50

Business Incubators functions (IV)

• Across Europe, there are a variety of different business incubator models and precise modalities should reflect local, regional and national circumstances and priorities

51

Evaluating Business Incubator services and impacts

• The performance of business incubators should be judged primarily in terms of the results achieved, i.e. the impact they have on businesses, wider economic development and other priorities

52

In seeking to achieve best practice particular attention should be paid to (I):

Benchmarking and best practice sharing should focus on the four key incubator service areas identified in the report:

entrepreneur training,

business support,

financing, and

technology support

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In seeking to achieve best practice particular attention should be paid to (II):

• Business incubators should be encouraged to periodically undertake impacts assessments

• As a starting point to any EU-level initiative, priority should be given to developing a set of common definitions and quality standards for European business incubators

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A European Definition?A European Definition?

A business incubator is an organisation that accelerates and systematises the process of creating successful enterprises by providing a comprehensive and integrated range of support, including:

Incubator space

Business support services

Clustering and networking opportunities

By providing their clients with services on a 'one-stop-shop’ basis and enabling overheads to be reduced by sharing costs, business incubators significantly improve the survival and growth prospects of new start-ups.

A successful business incubator will generate a steady flow of new businesses with above average job and wealth creation potential. Differences in stakeholder objectives, admission and exit criteria, the knowledge intensity of projects, and the precise configuration of facilities and services, exist and will distinguish one type of business incubator from another.

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Points for reflection (I)

• Information base about BIs and STPs

• Development of definitions (commonly agreed)

• Improving understanding

• Variety of BI and STP is decisive for success

• BI and STP must continuously improve quality of services

56

Points for reflection (II)

• Benchmark development

• Toolboxes

• Certification/accreditation

• Interaction between local level/knowledge

• Information / Experience

57

BIS as cornerstone instrument for a successful implementation of all relevant, Lisbon objectives

specific, instruments and policies (I)

WHY? - Privileged forum for:

• Incubation of ideas and innovation (not just a ‘coaching’ site)• High quality training (not just provision of office space and

facilities)• Social integration (not just for hi tec ventures)• Promotion of sustained growth (not just for ‘hit and off you go’

approach• Wider networking and partnerships (not just for local approach)• Establish standard schemes with potential sources of finance• Establishing the links between the teaching world and first steps

in working life

58

BIS as cornerstone instrument for a successful implementation of all relevant, Lisbon objectives

specific, instruments and policies (II)

• Debate and info dissemination on sensitive issues such as, e.g. reform measures, career guidance

• Promote the taking of proactive action on major upcoming issues for the EU such as:

– Ageing population– IPR / EU patent– CSR, Environmental & Welfare issues with ways to

tackle the problems posed and disseminate good practice from the outset at shop floor level

• Disseminate good practice

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Business Incubators Database (I)

1513

25

110

237

81202

87

2422

2421

103

8111

2821

3260

AUSTRIABELGIUM

BULGARIACYPRUS

CZECH REPUBLICDENMARKESTONIAFINLANDFRANCE

GERMANYGREECE

IRELANDISRAELITALY

LATVIALITHUANIA

LUXEMBOURGMALTA

NETHERLANDSPOLAND

PORTUGALROMANIA

RUSSIAN FEDERATIONSLOVAKIA

SPAINSWEDEN

SWITZERLANDUNITED KINGDOM

Incubators by country = 774

60

Business Incubators Database (II)

AUSTRIA 15

BELGIUM 13

BULGARIA 2

CYPRUS 5

CZECH REPUBLIC 1

DENMARK 10

ESTONIA 2

FINLAND 37

FRANCE 81

GERMANY 202

GREECE 8

IRELAND 7

ISRAEL 24

ITALY 22

LATVIA 2

LITHUANIA 4

LUXEMBOURG 2

MALTA 1

NETHERLANDS 10

POLAND 3

PORTUGAL 8

ROMANIA 1

RUSSIAN FEDERATION 1

SLOVAKIA 1

SPAIN 28

SWEDEN 21

SWITZERLAND 3

UNITED KINGDOM 260

All countries 774

Incubators by country = 774

61

Business Incubators Database (III)

SOFTWARE DEVELOPMENT

138COMMUNICATION103

ENGINEERING98

E-BUSINESS129

COMPUTER TECHNOLOGY

123

BIOTECHNOLOGY113

INFORMATION AND COMMUNICATIONS TECHNOLOGY (ICT)

117

MULTIMEDIA104

E-COMMERCE104

ENVIRONMENT108

Incubators by sector – Top 10

62

Business Incubators Database (IV)

Incubators by sector – Top 10

Top Ten Business Sectors represented by CORDIS Business Incubators

SOFTWARE DEVELOPMENT 138

E-BUSINESS 129

COMPUTER TECHNOLOGY 123

INFORMATION AND COMMUNICATIONS TECHNOLOGY (ICT) 117

BIOTECHNOLOGY 113

ENVIRONMENT 108

E-COMMERCE 104

MULTIMEDIA 104

COMMUNICATION 103

ENGINEERING 98