Creating a start-up not always the best approach

People who want to create new products shouldn’t automatically assume they also need to create a start-up company, says Victoria University of Wellington researcher and Master of Innovation and Commercialisation programme director Jenny Douché.

Jenny Douche sits in the Hub on Kelburn campus

Jenny, who graduates with a PhD in Management next week, explores in her research how, and to what extent, business incubators influence new companies and their products.

During her research, she found some business incubators offer short-term programmes that encourage start-ups.

“But this isn’t necessarily the best approach. These programmes can substantially reduce the business incubator’s ability to influence the strategies of companies on the longer-term programmes, potentially limiting the company’s growth potential.”

Jenny says business incubators should provide tools, advice and resources that work towards improving the companies and their products, rather than fostering the creation of more start-ups.

“There’s a wider perception that you can’t create a new product without a start-up, which is seen as the ‘in’ thing. But incubators should recognise that most people don’t want to start a whole business, they just want to create new and better products.

“Incubators, and entrepreneurship educators in general, should focus on teaching the concepts of new product development.

“It would be more efficient for those people with an innovative product idea to set their sights on being intrapreneurs as opposed to entrepreneurs, so they could develop their product from within an existing company where resources are more abundant.”  

Jenny’s research involved surveying and interviewing the chief executives of six business incubators and the heads of 37 companies that had been supported by incubators. She examined how business incubators’ support tools—including advice on product development, marketing and strategy, funding and physical provisions—can shape the development of new companies.

Jenny identified a number of factors that determined how and to what extent the companies were influenced by the incubators.

“For example, one of the variables that determined incubators’ degree of influence was whether they tailored their approach to the needs of the individual company. Those that did, had greater influence over the companies than the incubators that created programmes with quite generalised support.”

Other variables that determined an incubator’s level of influence include the company’s product type (physical product vs. digital), the incubators’ purpose (nurturing an entrepreneurial community vs. creating a profitable company), and whether the companies had an existing external governance structure in place.

Associate Professor Urs Daellenbach, who co-supervised Jenny’s thesis with Professor Sally Davenport, says the research is crucial in highlighting that the “standard incubation process may not lead to significant changes or upgrading of new business strategies as intended”.

“Incubators are often set up to provide services perceived to be international best practice, many of which are generic and readily available via online resources. As Jenny’s research demonstrates, these practices only become particularly effective when they are customised to the companies.”

Yesterday, a paper based on Jenny’s thesis won the award for best paper in the ‘entrepreneurship, start-ups and small business’ category at the Australian and New Zealand Academy of Management awards.