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According to NBIA , BI is a business support process that accelerates the successful development of startup and fledgling companies by providing entrepreneurs with an array of targeted resources and services (…) beyond the process of incubation it has been stated that the process will look different depending on the needs and resource of each community that embraces it. Business incubation as defined has been diversified in forms, detailed as per the need of country and per the assessment as to where in particular a nations stands in terms of development and different models as per the needs can be modified to that particular scenario.
Business incubation as is known has shown wide spread success around the globe, with the incubators being active in various modes supporting entrepreneurs, startups and providing business advice, governance and management practices, incubator finances, graduation of the incubated firm/business into standalone and income generating firm; as well with the best practices, one being integrating the “incubator “ into the community.
This case study takes up BI models from around the world and matching the viability of NABDP’s LED component; newly proposed intervention; in regards to the BI process as a whole the paper will take studies and evaluate models from around the world, assessing the region and evaluate the above assessment and reflect on the long term viability of the NABDP LED component. More over the paper should serve as part of the project initiation documentation.
NABDP LED will address the urgent need of poverty reduction and community empowerment in Afghanistan, the component’s strategy is based on a gradual shift form NABDP’s focus from rehabilitation to development, market oriented assistance. The methodology for the component streamlines the delivery of development assistance through capitalizing on NABDP’s achievements so far and creating synergies between all five NABDP components. The concept of business incubation is at the core of the methodology which has been adjusted to meet the need of Afghanistan’s rural development, with an emphasis on area based development. The program has opted for a phased approach to the operations of the component; phase 1 of the component coinciding with the Phase III of the program; the primary goal being to establish and make fully operational business support centers (BCS) at district level, following Phase I of the Component; Phase II’s goals are to establish business incubators/agricultural (industrial) parks at provincial level, using the existing and fully operational network of BSCs.
The BSC will be the driving force behind the LED implementation. Being initially fully funded through the NABDP they will gradually develop into sustainable business enterprises, as the local economic development would allow rural entrepreneurs to pay for the services at favorable rates. From that point onward, they will implement their programs through public-private partnerships (PPP). Over time, their trained staff will be capable of delivering a broad range of business development services (BDS) to rural entrepreneurs.
NABDP’s ultimate goal of alleviating poverty among the rural population of Afghanistan through empowering the communities and enhancing community participation and community aspects, has been considered to be the entry point o providing post conflict and immediate rehabilitation and development assistance in a broad variety of public spheres; NABDP’s unique access and presence at the district and community level which through intervention such as LED will serve as an interface between broad variety of otherwise disconnected actors- with the overall objective of improving rural livelihoods and reduce poverty through supporting commercialized rural production and services that generate income and jobs, and increase production and productivity throughout the rural economy these objectives directly contribute to the MDG 1 ( eradicate extreme poverty and hunger.
The goals here are developmental and as for the case which is unlike incubation in US, Europe and other developed economies, the goal in these settings ( as if interpreted to Afghanistan ) is to utilize business incubation as part of an overarching organizational infrastructure that educates, promotes and supports formation of free markets; consequently, it is necessary to encourage growth and development of an entrepreneurial spirit, provide training and awareness about basic business organization forms, and beyond.
Need for Business Incubation
Business incubation emerged as an economic (and as a consequence/subsequently social) development tool in the early and mid 1980s, initially in the USA and Europe, subsequently spreading around the world. Today, observers and the ‘global business incubation community’ estimates about 5,000 business incubators in the world, depending on definitions and without accurate ‘audit’ data, of which at least 1,000 are in Asia (approximately half in China), 1,000 in North America, 900 in Europe and close to 400 in Latin America (with a sizeable and robust industry in Brazil). There are two or more business incubators in 70 countries and 60 national or regional business incubator associations. In some countries, such as the USA, Australia and China there is more than 15 years of experience and the industry is relatively mature, whereas in many other developed and developing countries it is a relatively new industry.
On the same note it should be added that traditional public business incubators are established to achieve community based economic development goals. These incubators most often tend or ( should) provide office space and a suite of specialized assistance to a variety of startup firms. Since incubators with development goals are often located in economically depressed rural areas. Over all intent is to foster a number of high quality start-up firms that will subsequently grow; with the incubator facilitating within the specific geographic area and employ an increasing number of local workers.
Here it is needed to give a brief about if business incubation and the whole “ Business Support ” concept would help new businesses grow and overcome the liability of newness; when businesses enter a market, their survival often hinges on their ability to overcome three forms of novelty: market, production and management ( shepherd and douglas 2000); it was obvious from the study that being new to a market, to production system, processes and to management can hinder survival and growth of these firms until the firm establishes legitimacy, efficiency and organizational systems (shepherd, Douglas 2000) that enable it to maintain a flow of heterogonous resources necessary for production and exchange. In turn novelty to market describes the degree to which customers are familiar with a new venture, when a business enters a new market in faces disadvantage due to customer loyalty ( porter 1980), here the case of OVOP it has to be assessed as how well could the after incubated firms output be marketed but more on that details later for now it is evident that without a secured customer base and a viable product, new firms also lack legitimacy which is necessary to secure finances for establishing and growing operation( Aldrich 1999), another facet is that prior to production and product be marketed, additionally enterprises may struggle with improving and discovering efficiencies if there are novelty, which can delay the creation of economies of scale ( porter 1980), this is specially the case with new businesses with dangerously low level of resources; combined a new firms novelty to market, to production, to management impede it’s growth and threatens its’ survival( porter 1980) that is where incubation comes in and if applied to proper modes would help new and startup business have an opportunity to become from an idea to something productive.
Business incubation and best practices “a global perspective”:
A redefinition; Business incubation is defined as location in which entrepreneurs can receive proactive value added support, and access to critical tools, information, education, contacts, resources and capital that may otherwise be unaffordable, in accessible or unknown. Well structured incubators( those who carry the process of incubation) provide links to industry , business support services to enhance and develop business, upgrade skills and techniques, technological advice and assistance in financial resources, initial marketing facilities and potential private investors and strategic partners. The overarching goals of business incubation are:
1. Support start-up enterprises and existing entities: Incubation reduces risk of failure, increases longevity, and fuels growth.
2. Raise incomes, create jobs, and generate wealth: Supporting enterprise growth, increasing living wage employment, and fueling the local economy directly and indirectly.
3. Encourage local wealth retention and reinvestment: This includes keeping business activities local, such as hiring, procurement, ‘buying local’,
In the works produced, Johnsrud(1998) profiled the most common elements of successful business incubation facilities culled from an extensive research literature and resources available from the national business incubation association (NBIA) and other sources. These elements in general have not changed for traditional business incubators and include:
Ideally the followings are important milestones for successful business incubator operation
It should be mentioned that business incubator are confirmed in the literature on innovation and in practice in more successful economies as one of the important investments to develop effective employment and sustainable new startups to support knowledge based enterprise development. Since business incubation process through the incubators maximizes the success of emerging business; it subsequently creates jobs, revitalize communities and commercializes new technologies therefore facilitating regional economic development.
Here I would want to share some statistics which were obtained by the Ottawa MBA program from the 1998 state of the incubation industry study conducted by NBIA; in the study It was shown that most incubators which is 43% were mixed use, 25% technology, where as 10%, 9%, 6% and 5% for Manufacturing, targeted, service and empowerment respectively; it is shown that incubators can focus their resources matching the need- of course much has happened since the study was done. In particular, there is an increase in incubators employing a for profit model and the percentage vertically focused- Here it can be argued that the role of incubator is more of consulting than incubating, but performing services creates financial self sustainability and building capacity for the incubators
After my extensive research on global best practices in incubation the I would summarize the section stating that the main strategic thrust of Business incubation is the transformation of the economy to one which is primarily knowledge based rather than resource based, and which is more completive and sustainable in the long run, it is perhaps too early to say as to how successful the strategy can be in context to Afghanistan, perhaps in 2015 it will be possible to asses as how successful has this ( business incubation) been.
Business Incubation “a regional Perspective”:
"Business incubation (BI) is based on the philosophy that entrepreneurs can thrive when they are surrounded by fellow entrepreneurs, guidance and support of business experts and others who understand the startup process. BI programs can support the entrepreneurs and small enterprises by providing a proper ladder to technology-led start-ups as they move out of prototyping and into production. Like an incubator machine that provides essential temperature & environment to hatch chickens from eggs, the incubation center supports fresh entrepreneurs who have innovative ideas but lack overall knowledge & resources to run the enterprise and develops the enterprise to be successful in future by providing hand in hand in its growth.
The role of Business Incubation in growth and development is universally recognized, and is demonstrated by the quantity of studies, research, and literature dedicated to the subject. Both in developed and developing countries, governments have been playing a key role in defining policies, programs and instruments which support the development of micro, small and medium enterprises. One of the mechanisms employed to nurture small firms for more than two decades is “business incubation”. Incubators provide qualifying new start-up businesses with a set of facilities -- physical space, shared services, business and legal advice, and financial inputs – to facilitate their creation and assist them until “graduation”, when they have the capacity to “survive” in the outside competitive environment. Success of incubators depends on several factors, and many lessons have been learned so far. Many of them can be applied to incubators in developing countries. Some aspects, however, require specific attention, depending on the status of the private sector development in each country. Many developing countries have experimented with a variety of programs and schemes supporting small and medium enterprises, often with assistance from multilateral and bilateral organizations. Business incubation programs or initiatives have arisen especially over the last decade, with varying degrees of success. From various developing regions, there is evidence that incubator initiatives help promising entrepreneurs launch their business and succeed. However, incubators still do not exist in most developing countries, especially where they could make the most dramatic difference in the development equation.
In developing countries, incubators are a quite recent phenomenon. There are no comprehensive surveys regarding the current status of business incubation in developing and transition economies. About 500 incubators were estimated in 1997. Today their number is considerably higher, taking into account the average 20 percent annual growth rate estimated in 1997, and, above all, the impressive investments promoted in specific countries. The Republic of Korea alone is reported to have more than 300 incubators. In 2001 there existed some 130 incubators in China, against 110 in 1999. Malaysia and India also invested considerably in incubators, especially in technology-oriented incubators. In Brazil 150 incubators were surveyed in 2001. Most not-for-profit incubators are supported by central or local government resources, although some resources may also be provided by other sponsors or partners, including from the private sector. For-profit incubators are funded by private investors. Venture capital firms are mainly interested in the equity investments in ventures of for-profit incubators, especially in the Internet sector. Large high-tech corporations tend to invest in incubators to foster their R & D activities, in the hope some of the incubated ideas may become successful marketable products and/or profitable start-up companies. In developing countries, most incubators are not- for-profit, with funding generally provided by public resources. Over the last ten years, support has also been provided by multilateral and bilateral donor organizations, especially for the feasibility and planning activities associated with new incubator creation. It should be said, however, that in several developing countries the incubator industry is evolving rapidly, and in some cases incubators show levels of dynamism and innovation, as well as models of partnership and funding, which are comparable to the ones currently observed in industrialized economies.
In Nepal approaches to business incubation is to promote and nurture enterprises, many studies that were conducted to assess how well BI will impact the country’s economy, findings suggest that prevailing business is complex and conducive to enterprises development, implementation of the business incubation program can promote and motivate potential entrepreneurs who have innovative idea but lack the supporting infrastructure, mainly resource and both managerial and marketing skills, suggested is that it is high time now to push ahead the BIC toll- that to uplift the entrepreneurship capability to compete both locally and globally which will nurture an environment for high value innovation in the sectors with competitive edge and tap the opportunities available under globalization.
In Mongolia the Government aims to implement the opportunities for technology transfer, identify needs for the main sectors, evaluate in depth and priority mitigation, technologies, as well establishment of the SME, and entrepreneurship support initiatives through the implementation of the BI and the BSC concepts, it is encouraging to note that the concepts of business incubation and incubators in Mongolia is just being introduced; it is hopeful that Mongolia can build some well established and success full incubator but with the support of international agencies.
In Vietnam, despite that business incubation and technology incubators are getting popular in several developing countries as an innovative way for developing and promoting small scale industries, however, it is not yet practiced in Vietnam competition pressure compels the government to implemented the technology business incubation as soon as possible , the ministry of Industries did later initiated some activities to establish and develop concepts to implemented as part the BI practice.
In China, Incubators tend to be larger in terms of size and incubating capacity. Involvement from the government is more evident and has an impact on the incubator models, organization, and funding structure. The incubator scenario in China has been evolving rapidly, with new incubator approaches appearing over the last few years.
Although Israel is not a developing country, the case of Israel’s Incubator Program is considered particularly interesting and worth presenting in this study. The incubator approach in Israel is broadly known as one of the most successful and innovative in the world. Taking into account Israel’s scarcity of natural resources, as well as its geopolitical constraints, there are many lessons that can be learned from this model, which presents interesting peculiarities. The country has become home to some of the most successful high-tech companies in the world. In the fields of electronics, medical systems, software, Internet security, and multimedia, Israeli companies are at the cutting edge of innovation. In this small country with a population of only six million, over 3,000 high- tech companies exist today; 1,000 of them are startups. The high-tech industry today generates more than 70 percent of Israeli exports. Several points of strengths support Israel’s success in the high-tech industries. These include the high level of education of the workforce in the country; the compulsory military service, which contributes to training young people in new technologies; a flow of skilled and relatively inexpensive workforce fuelled by immigration; a vibrant capital market; and policies, resources and fiscal incentives offered by the government to foster capital inflows, exports and research.
Taiwan's incubation centers are an important mechanism for building an innovation platform to aid the cooperation between businesses, academies and research institutions. To date, more than 90 incubation centers have been set up in Taiwan, demonstrating a high density in such a small geographical region. Notably, Taiwan's incubation centers have been established mostly by universities and colleges, allowing the effective use of existing resources to stimulate the cultivation of innovation-oriented SMEs, thereby contributing to the upgrading of Taiwan's industries and technologies. It seems that although Taiwan's incubation centers are fairly successful in terms of the growth rate of incubatees/tenant companies, completion rates have been less satisfactory. This could be due to a constantly changing environment with many operational issues confronting incubation centers, such as those associated with the grasp of market dynamics and trends as well as the funds required to support incubatees. To enhance the function of the incubation service, the Challenge 2008 National Development Plan was implemented by the Taiwanese government with the aim of establishing a high-quality incubation center network which would contribute to the development of a systematic learning mechanism to create a knowledge-based entrepreneurial society.
In some countries such as the Republic of Korea, Singapore and Malaysia, a number of ministries/departments are already involved in the promotion of technology incubation systems. They are now putting efforts to have well-coordinated and complementary approach. Various policies related to the incentives tax structure, real estate development, operations, skill-development and human resource development programmes and development of SMEs, among others are being suggested to take them in place so as to encourage technology incubator promotion agencies.
As the region compared to Afghanistan is advanced in regards to infrastructure, awareness and education level; despite majority being already involved to some extent with the business incubation the case with Nepal and Pakistan can be attributed to have promising impacts as in comparison to cases of different countries be it from the same region; the overall goal being providing better means of support to spur rural growth- best practices taken from around the world and further modified to regional scenario and the rural Afghanistan can only promise success. In short, business incubation centers are not only crucial to a nation's economic growth and prosperity but also directly or indirectly contribute to the development of other constituents in a national innovation system. For instance, the knowledge spillover effects of universities or research institutions often led to innovative activities around them. Through internal and external networking, incubation centers become the knowledge providers which then diffuse scientiﬁc knowledge to enterprises and the whole area of the regional/national innovation system.
Business incubation in the “Rural” Context
Well-run physical business incubators can play an important role in economic development efforts. Taken in isolation, however, results are mixed as to ‘efficiency’ in the use of subsidized money, to achieve the mission of job creation and business growth. In a recent NBIA study of 15 rural incubators, six were “low performing”, with few clients, graduates, or jobs created. And, few of the 15 were financially self-sufficient. Finances known are critical aspect of any business incubation and as businesses are to be expanding under the ladder of any incubator and then considering the case where they have to be implemented in the rural context- some complexities arise as the need for development and the infrastructure available are on different scales and implementation of such works requires interventions at various levels.
Business service and incubation centers for assisting rural communities are needed in developing countries, where typically two-thirds of the population is agriculture-based. Establishing an incubator in this environment poses special problems, as the local infrastructure is usually weak, often neglected. In turn, the skills and communication bases are poor and so is the access to finance for the facility and for its beneficiaries. The business improvement services have to be geared to these local conditions, and the political/organizational boundaries properly bridged. Where the population served is very small, scale-economies may be promoted by networking with other support agencies.
The relative advantage that business incubation would have in Afghanistan is that NABDP will utilize the infrastructure it has put in place and support the rural Afghanistan by bringing about incubatees and graduating those to productive and self reliant enterprises. It may seem a little presumptuous given the case with Afghanistan and its rural scenario for the reason that people will need to be educated first creating more awareness thereby making budding entrepreneurs and ideas from amongst them; then promoting these to fully fledged firms which would have outputs that are productive in nature. It can be realized with utilization of best practices combined with the NABDP led model which is elaborated further under the dedicated heading.
Business Incubation and Afghanistan:
It is evident from previous sections that business incubation is a lengthy and time consuming process. Further the process differs widely when in consideration of different environments, Afghanistan being an under developed country and cases of business support centers will require immense resources and a pool of professionals as well a great amount of support at policy level from a number of government institutions.
From the online research it was found that Afghanistan do have business incubator programs tailored to meet the needs of Afghanistan and one such program is the Afghanistan small business development institute which is accredited to the National Business Incubation Association, The goal of the Afghan Small Business Development Institute, Inc., is to empower the people of Afghanistan with capital, skills and education, consultative expertise, and trade development necessary to start and operate successful micro-enterprises and small businesses. What they have achieved so far is unavailable but on sidelines of business incubation, Afghan Small Business Development Institute, Inc., also operates Afghan Women In Business; a program specifically designed to meet the needs of Afghan Women starting and operating micro-enterprises and small businesses.
Another organization being the AidAfghan, which on sidelines of the rural livelihood improvements also supports the business development goals with a nationwide small business incubator providing basic business training, and microfinance.
Moreover in an effort to connect US and International technology companies and entrepreneurs with Afghanistan’s emerging high tech sector, the US department of defense task force for business stability operation TFBSO, Launched the technology business incubation program in Heart which provides housing on one campus, a state of the art technology centre as well as meeting rooms, computer labs.
It can be taken into account that very little has been done in regards to business incubation in Afghanistan, and organizations that are involved are doing very little , for example the Afghan Business Development Institute was opened in 2003 and since now there is known very little of their activities around Afghanistan.
NABDP LED “a comparative study”
A brief of what the NABDP LED is has been given in the context part as well what best practices are there has also been elaborated in the previous sections. Here I would do a theoretical analysis of what is aimed at from the LED side and from my own perspective and learning reflect on ways that these methodologies could be improved and cover the whole Afghanistan efficiently.
The NABDP has planned to initiate the district and provincial level business incubators- the incubators will be in form of BSCs and will offer office space, production space, provides professional services and delivers training; DDA’s role will be to serve as project board. This has a visible advantage as the DDA plans and will also be a link between community needs and businesses.
Similarly, business support and incubation activities that has taken place in the region and the developing world; their implications suggest that business support provided in any form has greatly influenced the local economies; case of India is of importance as they have formed cooperative societies, association of farmers, credit societies and more, this has not only helped local farmers gain an upper hand in developing their potential as well providing them with the required resources to gain credit and output their product to market- matching scenario is the livestock derivative associations where on society/association works all around one state as on society, working from the bottom chain till the product delivery. It should be noted that typical business incubation as the way it happens in rest of the world would have a very lesser dramatic impact; as for interpreted to the rural case of Afghanistan; since the infrastructure ( physical, HR, policy ) are not available to provide provisions for multinational products, thus, the overall aim with the NABDP LED should be to strengthen the agriculture sector as to form product chains and provide these product chains appropriate means to be marketed.
Here of course the products derived from these industrial/agricultural parks is needed to be market viable, as a comparative analysis Pakistan has many milk producers which are private and a variety of packaged milk is available in the marketed under different names, which unlike India does not promote the one product concept; Afghanistan’s case is similar to Pakistan, as the output product has to compete, it has to be given required policy support and more.
The business support centers’ need to work for the Agricultural sector and provide for the needs of incubation from agriculture and inverse which unlike most models from other countries where a greater emphasis was on technology incubation. Over all it can be said that potential of agriculture growth to reduce poverty is four times greater than other sectors, and NABDP’s LED will work to contribute to poverty alleviation by introducing innovative and people owned methodologies through the business support centre concept, which will ultimately provide productive and immediate means of income and with the network of business supports centers that will be formed in the process, form a strong resource based centers promoting the economic development aims.
Business incubation was defined with the abstract, following a perspective on NABDO LED and the whole theory of incubation was briefly described; as for evaluation of validity to the concept global and regional best practices was evaluated and summed under the respective heading; where some regional countries stood in terms of their incubator programs; some organizations which are involved in Afghanistan was also briefly described; overall this paper asks if the BCSs in Afghanistan will succeed or not ?
For any country that adopts the business incubation it has to focus the resources of the incubator to produce results, programs of the incubator have to act as agents of change in their respective regions, these programs must as well be attuned to the development initiative in the location; further the country through and for the BSC has to create a clear, successful and competitive strategy being focused and needing to minimize overlaps with other programs; for the BSCs structure competent, innovative, sustainable management has to formed which can be the right example of innovation, as well create mechanism and instrument that advance innovation and productivity.
Business incubation has achieved significant outcomes in last 20 years globally and in a decade regionally and has proven to help change the economy from that of resource based to knowledge based. Countries like India in Nepal has invested extensively in incubation of business in forming cooperatives and agricultural parks – moving now to technology and high tech incubation.
In rural context business incubation, though has shown to increase productivity but survey and experiences are lacking to put under a statement as how this has been so far, but overall providing the best “incubation” will eventually be agent of change in the respective rural settlement.
Developing the good infrastructure, mobilizing the government support, bringing change in mindset and making market and socio economic conditions acceptable and conducive for innovations and entrepreneurship are some of the pertinent issues which Afghanistan encounters. Creating links between knowledge generation and enterprise development is one of the most important challenges Afghanistan faces. The central role of the entrepreneurship now here is to turn science, technology, and innovation into business opportunities. For this to happen, the government should aim at broader incentive structures which rewards innovation, fosters start-ups, and sustains existing firms with injections of capital. The NABDP LED, building on learning’s from the research conducted, will have a dramatic impact on the lives of many in rural Afghanistan , as well helping the already established firms and advancing them will nurture a sound and steady development.
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