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Hatching Good Ideas? Characteristics of Minnesota's Business Incubators After slow growth initially, the number of business incubators has grown rapidly in recent years. The first business incubator opened in 1957 in Batavia, New York, and the number only grew to 12 business incubators in North America by 1980.E By 1998, there were around 600 incubators.' In early 2000, there were more than 800 business incubators in North America." Location is also a key feature of business incubators. According to an NBIA survey, the breakdown of incubator location was 53 percent urban, 28 percent rural, and 19 percent suburban in 1989.v By 1998, the distribution had shifted to 45 percent urban, 36 percent rural, and 19 percent suburban. Overall, the key change between 1989 and 1998 was the increase in proportion of rural incubators and corresponding proportional decrease in urban incubators. Location of U.S. Business Incubators 1989 and 1898 The Economics of Business Incubators Theoretically, business incubators allow new companies to exploit economies of scale in some start-up costs. These cost advantages are usually only available to large businesses. Small companies often don't have funds for copiers, fax machines, computer networks, administrative support staff, and other necessary services. By renting space in an incubator, the theory is that cash-starved small companies could lower their fixed costs and make funds more quickly available for profit-making operations. Small businesses may also have advantages over large businesses. For example, small businesses are generally considered less bureaucratic and more entrepreneurial. In addition, small businesses are thought to have more creative freedom, and are able to respond flexibly to change. Adding potential economies of scale is expected to enhance these advantages by reducing the disadvantages of small businesses. Suburban is^io Urban 53% 1989 1998 Source: National Business Incubation Association. Accessed at wwwnbia.org/info/facts on August 16, 2000. A recent study from the Harvard Business Review took these advantages a step further. It suggested that the ideal incubator provides an entrepreneurial environment, economies of scale, and a crucial final element: preferential access to a network of companies. According to the report, the so-called "networked incubator," is the type of incubator that will be most able to develop successful start-up companies.'° Similarly, another report states that the keys to success for incubators in the future will depend on deep pockets, deep connections, and focused industry expertise." Minneso(a Department of Trade and Economic Development