Testing the Differential Effect of Business Incubators on Firm Growth

Abstract

This research examines whether business incubators produce a differential effect on the growth of firms. Given that there is no direct estimate for the counterfactual (simultaneously measuring the economic growth of a firm outside and inside of an incubator), the authors use a propensity score matching technique to control for the factors that are related to both firm growth and the probability that an incubator manager would accept that firm for incubation. The analysis indicates that incubators have a significant positive impact on firm job creation, and this impact is not reduced if a matched comparison group is used. Furthermore, this study finds that incubated firms receive five times as many business services (legal, financial, marketing, etc.) as their nonincubated cohort. This may account for the networking effect found in previous studies.

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