The Center for Business Acceleration and Incubation Studies (CBAIS) at the University of Michigan is committed to economic development and diversification through the establishment and promotion of business incubators. Business incubators have been shown to be an effective job creation tool; they not only generate new places of work but also retain them in the community where they were created. Business incubators increase the survival rate of new businesses from an average of 20% to 80%. In addition, 84% of businesses that “graduate” from incubators remain in the same region ten years later.
CBAIS is one of the premiere organizations in the Midwest studying which types of small businesses and business incubators have the best potential for growth in a specific region. The Center carries out market feasibility studies for proposed new incubators to determine whether a project has a solid market, a financial base, and strong community support. During the past several years CBAIS has completed many studies, which can be viewed on the institute’s publications page.
In 1997 CBAIS conducted a national incubator study for the Economic Development Administration (EDA) of the U.S. Department of Commerce,Business Incubation Works, that developed performance measures for different types of incubator programs and then analyzed the impact of incubator investments on local economies. In 2011 CBAIS completed a second national study of business incubation for EDA, Incubating Success: Incubation Best Practices That Lead to Successful New Ventures, focused on best practices in business incubation and their impact on the performance of “graduating” companies.
The U.S. Department of Commerce Economic Development Administration (EDA), a longtime financial supporter of business incubators, funded a research study to examine the relationship between incubator best practices and client outcomes. This research study was conducted by CBAIS at the University of Michigan’s Institute for Research on Labor, Employment and the Economy; the State University of New York at Albany, the National Business Incubation Association; and Cybergroup Inc. The study used a robust methodology to collect and statistically analyze data, and determine specific relationships between how an incubation program operates and how its client companies perform, as measured by a number of outcomes.
The purpose of this study was to test whether there was a causal relationship between business incubation practices and client firm success, particularly after these firms have moved out of – or graduated – from the incubation program. Using the results of this study, the research team created the web-based tool for incubation practitioners that measures their program’s performance compared with industry best practices and provides feedback about how they can improve their performance.