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A Real Options-Driven Theory of Business Incubation

Author

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  • Sean M. Hackett

    ()

  • David M. Dilts

    ()

Abstract

This article employs real options-theoretic reasoning to develop a theory of business incubation. This theory seeks to predict and explain how business incubators and the process of business incubation increase the likelihood that new ventures will survive the early stages of development. It conceptualizes the incubator as an entrepreneurial firm that sources and macro-manages the innovation process within emerging organizations, infusing these organizations with resources at various developmental stage-gates while containing the cost of their potential failure. The incubator is the unit of analysis while incubation outcomes--measured in terms of incubatee growth and financial performance at the time of incubator exit--provide indicators of success. Our model of the incubation process and specification of the range of possible incubation outcomes offer implications for managerial practice and policy-making vis-ý-vis incubator management and good entrepreneurial failure.

Suggested Citation

  • Sean M. Hackett & David M. Dilts, 2004. "A Real Options-Driven Theory of Business Incubation," The Journal of Technology Transfer, Springer, vol. 29(1), pages 41-54, January.
  • Handle: RePEc:kap:jtecht:v:29:y:2004:i:1:p:41-54
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    Citations

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    Cited by:

    1. Huang, Chieh-Wei & Huarng, Kun-Huang, 2015. "Evaluating the performance of biotechnology companies by causal recipes," Journal of Business Research, Elsevier, vol. 68(4), pages 851-856.
    2. Zoltan Bajmocy, 2006. "Opportunities of University Business Incubation in the Less Favoured Regions of Transition Countries," ERSA conference papers ersa06p190, European Regional Science Association.
    3. Bajmócy, Zoltán, 2004. "Az üzleti inkubáció szerepe a vállalkozásfejlesztésben
      [The role of business incubation in company development]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(12), pages 1132-1150.
    4. Schwartz Dafna & Bar-El Raphael & Malul Miki, 2008. "A Joint Virtual Advanced Technology Incubator - A New Pattern of Israeli-Palestinian Economic Cooperation," Peace Economics, Peace Science, and Public Policy, De Gruyter, vol. 14(2), pages 1-19, July.
    5. M. Schoonmaker & E. Carayannis & P. Rau, 2013. "The role of marketing activities in the fuzzy front end of innovation: a study of the biotech industry," The Journal of Technology Transfer, Springer, vol. 38(6), pages 850-872, December.
    6. Sara Barajas Cortés & Arturo Lorenzo Valdés, 2010. "Valuación de proyectos de inversión para PYMES con opciones reales," Revista de Administración, Finanzas y Economía (Journal of Management, Finance and Economics), Tecnológico de Monterrey, Campus Ciudad de México, vol. 4(1), pages 1-17.
    7. Albort-Morant, Gema & Ribeiro-Soriano, Domingo, 2016. "A bibliometric analysis of international impact of business incubators," Journal of Business Research, Elsevier, vol. 69(5), pages 1775-1779.
    8. Christine Cooper & Stephanie Hamel & Stacey Connaughton, 2012. "Motivations and obstacles to networking in a university business incubator," The Journal of Technology Transfer, Springer, vol. 37(4), pages 433-453, August.
    9. Sandri, Serena & Schade, Christian & Mußhoff, Oliver & Odening, Martin, 2010. "Holding on for too long? An experimental study on inertia in entrepreneurs' and non-entrepreneurs' disinvestment choices," Journal of Economic Behavior & Organization, Elsevier, vol. 76(1), pages 30-44, October.
    10. Yonghua Zou & Wanxia Zhao, 2014. "Anatomy of Tsinghua University Science Park in China: institutional evolution and assessment," The Journal of Technology Transfer, Springer, vol. 39(5), pages 663-674, October.
    11. Ernesto Tavoletti & Corrado Cerruti, 2012. "Business Incubation: The Case of the European Space Agency," DSI Essays Series, DSI - Dipartimento di Studi sull'Impresa, vol. 29.
    12. Sean Hackett & David Dilts, 2008. "Inside the black box of business incubation: Study B—scale assessment, model refinement, and incubation outcomes," The Journal of Technology Transfer, Springer, vol. 33(5), pages 439-471, October.
    13. Ernesto Tavoletti, 2013. "Business Incubators: Effective Infrastructures or Waste of Public Money? Looking for a Theoretical Framework, Guidelines and Criteria," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 4(4), pages 423-443, December.
    14. Lim, Terence & Lo, Andrew W. & Merton, Robert C. & Scholes, Myron S., 2006. "The Derivatives Sourcebook," Foundations and Trends(R) in Finance, now publishers, vol. 1(5–6), pages 365-572, April.
    15. repec:kap:jtecht:v:42:y:2017:i:3:d:10.1007_s10961-016-9493-4 is not listed on IDEAS
    16. Jin Hong & Jinfeng Lu, 2016. "Assessing the effectiveness of business incubators in fostering SMEs: evidence from China," International Journal of Entrepreneurship and Innovation Management, Inderscience Enterprises Ltd, vol. 20(1/2), pages 45-60.
    17. Elisa Salvador, 2011. "Are science parks and incubators good “brand names” for spin-offs? The case study of Turin," The Journal of Technology Transfer, Springer, vol. 36(2), pages 203-232, April.
    18. McAdam, Maura & Miller, Kristel & McAdam, Rodney, 2016. "Situated regional university incubation: A multi-level stakeholder perspective," Technovation, Elsevier, vol. 50, pages 69-78.
    19. Thobekani Lose & Robertson K. Tengeh, 2015. "The Sustainability and Challenges of Business Incubators in the Western Cape Province, South Africa," Sustainability, MDPI, Open Access Journal, vol. 7(10), pages 1-14, October.
    20. Fidelis A. Ayatse & Nguwasen Kwahar & Akuraun S. Iyortsuun, 2017. "Business incubation process and firm performance: an empirical review," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 7(1), pages 1-17, December.

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