Business Incubators and Small Enterprise Development: The Nigerian Experience Oyeyemi Adegbite Small Business Economics 17: 157���166, 2001. ��� 2001 Kluwer Academic Publishers. Printed in the Netherlands. ABSTRACT. The article reviews the development of business incubators in a developing country, namely Nigeria.The current operational status of the seven existing incubators are highlighted as well as the successes and shortcomings asso- ciated with the implementation of the programme. This is followed with an assessment of the needs to be addressed before incubators can make the desired impact in stimulating entrepreneurship development and technological innovation. Finally, policy recommendations are made to guide the future development of business incubators in Nigeria so that they can make effective contribution to the goal of promoting small and medium scale enterprises. 1. Introduction Business incubators are now recognised in both developed and developing countries as important instruments for promoting entrepreneurship development and technological innovation at the small and medium enterprise level. Pioneered in Western Europe and North America there are now thousands of business incubators all over the world established with the primary objective of stimulating the emergence of a steady flow of successful small and medium scale enterprises, thereby promoting entrepreneurship and innova- tion in particular and socio-economic development in general. Within this context, business incubators have established a successful track record in Western Europe and North America over the past two decades and are now recognised as being one of the most effective ways of promoting entrepre- neurial activity and local economic development. Studies to evaluate their performance indicate that they can reduce the failure rate amongst new business start-ups to below 10 percent over a three year period, as compared with 60 to 80 per cent for small business generally. It is against the foregoing background that several developing countries, including Nigeria, have adopted the business incubator approach to accelerate the development and promotion of small and medium scale enterprises. 2. Business incubation concept It is useful at the outset to define and explain the concept of business incubation. A business incu- bator may be defined as an organisation that facilitates the process of creating successful new small enterprises by providing them with a com- prehensive and integrated range of services, including: a. Incubator space in fully built-up factory build- ings on flexible and affordable terms. b. The provision of a comprehensive range of common services, including enterprise coun- selling and training, shared secretarial support, start up financing and assistance with product development and marketing. c. Strict admission and exit rules, which are designed to ensure that the incubator concen- trates its efforts on helping innovative, fast- growth business start ups that are likely to have a significant impact on the local economy. Exit rules generally limit tenancy to a period of between three to five years, thereby ensuring a reasonable turnover of tenants. d. Professional management, which involves monitoring tenant businesses closely against Final version accepted on 17 July 2000 Enterprise Consulting Group Ltd. P. O. Box 2746 Ikeja, Lagos State Nigeria

their business plans, and ensuring that the incubator itself operates in a business-like fashion with the prospect of becoming finan- cially self-sustaining. e. ���Hands on��� assistance, including R&D advice and risk capital, usually through a network of external providers. By providing entrepreneurs with the foregoing services on a ���one-stop��� basis, and enabling tenants to reduce their overhead costs by sharing facilities, business incubators are able to signifi- cantly improve the survival and growth prospects of new start-ups. However, it should be pointed out that in its generic sense, the term business incubator is also used to describe a wide range of organisations that in one way or another, help entrepreneurs to develop their ideas from inception to full com- mercialisation and the launching of a new enter- prise. Thus, a broad definition of the term embraces on the one hand technopoles and science parks, which are essentially real estate operations and on the other hand, organisations which have no single location and concentrate instead on managing a network of enterprise support services, the so-called incubators without walls. In view of the spectacular growth of business incubators there is a growing volume of literature on the subject. In this regard the writings of such authors as Gibb, Smilor and Gill, Abetti, Vesper, Sternberg, Timmons, Deberesson and a host of others readily come to mind. The overall conclu- sion from the review of literature is that business incubators are now a major force to be reckoned with in stimulating: a. Entrepreneurial activity and the emergence of new small-medium enterprises. b. Technological innovation and adaptation. c. Regional development and local economic activity. Furthermore, at the practitioner level, several con- ferences have been organised by national and multilateral bodies at which thought provoking papers have been presented to compare situational similarities and differences as well as the emerging challenges facing business incubators in different settings. Some of the bodies that have been active in this area include the United Nations Fund for Science and Technology Development (UNFSTD), The German Association of Technology and Business Incubation Centres as well as the National Business Incubation Association in the U.S. 3. Types and roles of business incubators in 3. Nigeria In the Nigerian context two broad types of business incubators can be distinguished, namely: a. Industrial Business Incubators. These are generalised industrial nurseries for nurturing new business start-ups with a view to pro- moting entrepreneurship and stimulating the emergence of industrial establishments at the small-medium enterprise level. Generally, there are no restrictions on tenant admission beyond the minimum basic requirements as may be stipulated in the admission procedure. b. Technology Business Incubators. Technology business incubators are primarily aimed at innovative, technology-oriented small and medium scale enterprises desirous of commer- cialising R&D results, especially from the research institutions, with a view to promoting technological innovation and entrepreneurship development. In the foregoing context, these are specialised business incubators, with well laid down criteria for tenant admission. Both types of incubators are expected to perform a number of roles and functions in Nigeria, thereby stimulating the growth of small and medium enterprises (SMEs) as well as accelerating the pace of socio-economic development in general. Thus, the business incubator movement in Nigeria is being spearheaded by two Federal agencies as discussed below. The Federal Ministry of Industries, the apex institution for promoting industrial development in Nigeria is already committed to a programme of establishing several industrial incubators all over the country in order to stimulate the emer- gence of an increasing number of small and medium scale manufacturing establishments able to utilise the abundant supply of human and material resources available in the country. Under the programme it is envisaged that one model industrial estate/incubator will be established in 158 Oyeyemi Adegbite