Best practices to create an enabling environment for SME incubation in South Africa

Dames, Ricardo Shane

Title: Best practices to create an enabling environment for SME incubation in South Africa
Creator: Dames, Ricardo Shane
Subject: Business incubators -- South Africa
Subject: New business enterprises -- South Africa
Subject: Small businesses -- South Africa -- Management
Date Issued: 2012
Date: 2012
Type: Thesis
Type: Doctoral
Type: DBA
Identifier: vital:9301
Identifier: http://hdl.handle.net/10948/d1015031
Description: The humble beginnings of business incubators date back to the 1970s in the USA and United Kingdom, where abandoned industrial buildings were converted to rent out to small businesses. South Africa (SA) was first introduced to business incubation in the 1980s when the Small Business Development Corporation (SBDC) established a number of business ‘hives’ and provided business space to entrepreneurs to operate their businesses. In their most basic form, business incubators provide a safe and nurturing environment for entrepreneurs to establish their small businesses. While in incubation, the Small and Medium Enterprises (SMEs) are supported with a number of services which assist their growth and development until they are able to exit the incubator as sustainable and viable businesses. Global incubator models have matured significantly, and now include assisting with business idea generation, accelerating business start-ups and commercialisation processes, and identifying high-growth orientated SMEs to assist them with gaining market access. The establishment of business incubators was a government-driven initiative, and more than 33 SME incubators exist in SA. Most of the incubators are government-funded, and have focused on the establishment and growth of SMEs to act as a catalyst to promote economic development and alleviate socio-economic challenges such as unemployment and poverty. Despite these noble objectives, incubation in SA has not been fully utilised, and a high SME failure rate still prevails in the country. One of the reasons for SME failure may be ascribed to the lack of an enabling SME incubation environment in SA. When compared to other developing countries such as Brazil with as many as 400 incubators, it is clear that the SA incubation industry still needs further development. The purpose of this study therefore was to ascertain the best practices of global business incubators in both developed and developing countries, and how SA incubators could learn from these best practices to create a more conducive and enabling SME incubation environment. Background literature on business incubation with a specific focus on best practices in world incubators in both developed and developing countries, was reviewed. Some of the literature reviewed included Aernoudt (2004), Buys and Mbewana (2007) and Chandra (2009). From the literature review, four main best practice areas were identified, namely strategic focus, sources of funding, incubator services, and the role of government. The study followed a qualitative approach, and an interview schedule was developed to seek the perceptions of incubator managers on how the four identified best practices can be utilised to create an enabling SA incubation environment. A survey was conducted by interviewing 14 incubator managers (twelve government and two private) in SA. Data was collected over a six-month period, using face-to-face and telephonic interviews. Data was analysed using the content analysis, constant comparison, grounded theory and case study methods. The biographical profiles of the incubator managers and incubators were presented in case studies. An initial analysis was made to identify themes and sub themes within the four best practices explored, using the constant comparison method. Thereafter a provincial comparative analysis was made, as well as a comparison of government funded versus privately funded incubators. The findings suggested that there is a relatively high turnover in incubator management, and that they often do not have incubator management experience. A provincial comparison of SA incubators revealed that their strategic focuses are greatly influenced by the industry prevailing in the various provinces. All SA incubators provide pre- and post incubation services, but few are utilising virtual incubation. Most SA incubators are government-funded, and some use a hybrid funding model. It was evident that most SA incubators are aware of government policies and programmes available to assist them on local, provincial and national levels. A comparison of the best practices of two developing countries and three developed countries, as well as suggestions made by SA incubator managers indicated that SA has indeed followed best practices from both developing and developed countries, but there are areas of non-alignment which provide scope for improvement, to create a more conducive and enabling incubation environment. This study recommends that incubators should have an entrepreneurial focus, and reposition and align their strategic focus with government policies and instruments. SA incubators must pursue opportunities for virtual incubation as well as linkages with academic institutions, in order to offer value-added services such as research, development and commercialisation of the product ideas. Incubators in SA must pursue a hybrid funding model with a combination of government and private funding, and generate some or their own income. With regard to the role of government, it is recommended that the roll-out of more industry-specific incubators be privatised, and that an overseeing body for incubation be established.
Format: xx, 328 leaves
Format: pdf
Publisher: Nelson Mandela Metropolitan University
Publisher: Faculty of Business and Economic Sciences
Language: English
Rights: Nelson Mandela Metropolitan University

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