10 Dec Business Incubators Grow Economy and Jobs
Wisconsin is a national leader in the total number of business incubators located in the state and they are a significant catalyst for new job creation as well, according Thomas Lyons, Professor of Community Development at the University of Louisville who recently addressed an audience at the Wisconsin Small Business Development Center’s monthly lecture series at the MGE Innovation Center, a business incubator located in the University of Wisconsin Research Park.
Lyons, director of the Center for Research on Entrepreneurship & Enterprise Development, presented the findings of a new research report entitled, “The State of the Wisconsin Incubation Industry in 2002,” which was conducted for the Wisconsin Business Incubation Association.
“Wisconsin’s incubators are working the high-end of economic development and are helping the state and local economy. Wisconsin ranks fourth in the nation with 33 business incubator programs behind New York, California, and Pennsylvania,” Lyons said.
Technology and R&D companies located in business incubators were reported to be the most significant growth sector representing about 55% of incubator clients surveyed, compared to 32% in 1999 and 17% in 1996. The light-manufacturing segment represented 73% of incubator clients, slightly down from previous years findings, but still an indicated that incubators are continuing to play an important role in fostering manufacturing activity in Wisconsin.
Although there has been a great deal of publicity surrounding “for-profit” incubators, the report shows that only two of Wisconsin’s 33 responding incubators are structured this way. The findings suggest that business incubation in Wisconsin continues to be viewed as an activity that has a largely public purpose.
Wisconsin business incubation programs range in age from less than one year to eighteen years. The average age is 7.53 years. Among the 33 responding incubators, ten, or 30 percent, started their incubators within the previous two years. Thirteen incubation programs, or 39 percent, have been in business for more than ten years. The coexistence of older incubation programs and newer incubation facilities shows that Wisconsin business incubation is a vital industry with a healthy mix of established players and new talent.
Job and Wealth Creation
The survey found that 683 firms have graduated from 27 responding Wisconsin incubation programs. This represents an 83 percent increase in the total number of new businesses added to the state’s economy by incubation programs over what was reported in 1999. Among current tenants/affiliates studied, approximately 80 percent were profitable and on average 80 percent are still in operation, and approximately 12.4 percent have been involved in acquisition or merger.
Wisconsin incubation programs client firms have created a substantial number of full-time equivalent (FTE) positions. In 2001, current tenants generated an average of 75 FTE positions, which translates to a total of 2,475 positions in the calendar year 2001, up from 1,883 in 1998 and just 624 in 1989. The increases demonstrate the continuing contribution of the Wisconsin incubation industry to the local economy in this regard.
Six incubators reported that companies that had left their incubators currently employ 1,305 full-time equivalent employees with combined revenue of $98 million in 2001.
In spite of the success of the new business incubator programs, there has been a substantial drop in involvement and support for them by state government and local economic development organizations. The report’s authors suggest that there are good opportunities in the state to link business incubators with educational institutions as well as attorneys, accountants, architects, and engineering firms to access viable business ideas and high-quality, professional business services.
“Now is not the time to stop supporting entrepreneurial development strategies,” Lyons said. “It is hard to get the attention of policy makers. It requires patience, as both the general public and politicians do not understand entrepreneurial development.” Lyons added, “Sponsors of incubators should not think of their contributions as a subsidy but as an investment in our economy.”