Start-EU-up! Lessons from international incubation practices to address the challenges faced by Western European start-ups
Start-EU-up! Lessons from international incubation practices to address the challenges faced by Western European start-ups
Marijn van Weele 0
Frank J. van Rijnsoever 0
Chris P. Eveleens 0
Henk Steinz 0
Niels van Stijn 0
Menno Groen 0
JEL Classification M 0
0 Innovation Studies, Copernicus Institute of Sustainable Development, Utrecht University , Utrecht , The Netherlands
Despite the continued efforts of policy makers, Western European start-ups are still struggling. Further, as questions are being raised about the effectiveness of incubators, there is a growing call for incubators around the world to learn from each other and improve themselves. Our paper enables Western European incubators to learn from their foreign peers by qualitatively exploring the challenges faced by Western European startups and the practices that incubators around the world use to address these challenges. Our study thereby takes a two-step approach. First, using the components of the entrepreneurial ecosystem to structure data coming from 90 qualitative interviews with Western European entrepreneurs and incubator managers, we explore five interrelated challenges that constrain the ability of Western European start-ups to grow into high-impact businesses. In the second part of our study, we conduct a total of 191 interviews in Silicon Valley, the greater Boston area, Israel and Australia to identify practices that incubators in these regions use to address the five challenges identified in the first study. Our findings suggest that, rather than addressing the underlying institutions that cause challenges in the entrepreneurial ecosystem, incubators provide symptomatic solutions by creating an environment that protects start-ups from unfavorable institutions. Accordingly, we conclude that existing incubators have only limited potential to strengthen entrepreneurial ecosystems, and we end our paper with a call for a new generation of 'systemic incubators' that aim to transform or create institutions to address the institutional challenges that constrain start-up activity.
Incubators; Start-ups; Europe; Business support; Regional development; Entrepreneurial ecosystem
Stimulating the emergence and growth of technology-based start-ups (hereafter: start-ups)
has become a central part of Western European policies to achieve economic growth
(Ahmad and Ingle 2013; Brown and Mason 2014). While these start-ups only constitute a
small part of the total population of small businesses, policy makers see them as important
drivers of employment and innovation (Brown and Mawson 2015; Michael and Pearce
2009). However, these start-ups suffer from high failure rates; about one-third of Western
European start-ups do not survive their second year (Bartelsman 2005; Scarpetta et al.
2002). To offset the risks associated with start-ups, European governments increasingly
support them through incubators: organizations that provide start-ups with a broad range of
services and resources needed for survival and growth (Aerts et al. 2007; Bergek and
Norrman 2008; Bruneel et al. 2012). It is estimated that there are currently over 1000
European incubators, 85% of which is located in Western European countries, and that
their number has seen a fivefold increase between 2007 and 2013 (Aerts et al. 2007;
Ahmad and Ingle 2013; Salido et al. 2013). Accordingly, incubators are considered to be
‘the mainstays of high-technology industrial development in Europe’ (Oakey 2012 p. 67),
and ‘an institutionalized component of the EU’s and its member states’ national innovation
systems’ (Ahmad and Ingle 2013 p. 123).
The efforts of Western European policy makers to support start-ups through incubators
are in line with a global trend: the number of incubators increases rapidly around the world,
which has led to a diverse global population of incubators and related start-up support
initiatives (Aerts et al. 2007; Chandra et al. 2012). This provides an ‘immense opportunity’
for incubators all over the world to learn from each other and improve themselves (Ahmad
and Ingle 2013 p. 131; see also Aernoudt 2004; Tavoletti 2013; Terjesen et al. 2013). Such
learning is urgently needed, as questions are being raised about the effectiveness of
incubators, in Western Europe (see e.g. Schwartz 2009, 2013; Tama´sy 2007) and elsewhere
(see e.g. Lewis 2001; Tavoletti 2013). Further, Western Europe still seems to be lagging
behind other economies in terms of start-up activity (Startup Manifesto 2013; The
Economist 2012; Tijssen and van Wijk 1999).
However, cross-national comparative studies on incubators are rare (Ahmad and Ingle
2013; Phan et al. 2005; Rothaermel et al. 2007). International studies that do exist (e.g.
Aernoudt 2004; Lalkaka 2002; Lee and Osteryoung 2004; Lendner and Dowling 2007)
have two limitations. First, they primarily provide comparisons of incubator attributes,
such as configurations, objectives and historical underpinnings. Such analyses have been
criticized for failing to explain how the incubation process unfolds. Accordingly, there is a
growing call for scholars to move away from the incubator’s attributes and towards the
incubator’s practices to explain in more detail how incubators provide their support
(Ahmad and Ingle 2013; Hackett and Dilts 2004a, b; Phan et al. 2005). Second, existing
studies pay little attention to the incubator’s context. Doing so is important, as incubators
enable start-ups to overcome constraints that may be specific to the local entrepreneurial
ecosystem, such as a lack of venture capital or legitimacy for start-ups (Amezcua et al.
2013; Clarysse et al. 2005; Degroof and Roberts 2004). Identifying incubation practices
therefore requires a thorough understanding of the challenges in the entrepreneurial
ecosystem that incubators should address. However, although previous studies have looked
at Europe’s challenges for innovation and entrepreneurship (see e.g. Kelley et al. 2012;
Tijssen and van Wijk 1999), none of these studies have looked at the specific challenges
faced by the early-stage, technology based start-ups that are typically supported by
incubators. It is important to do so, as these start-ups have unique characteristics that
distinguish them from the greater small business population: they are young,
technologydriven, and their founders often lack entrepreneurial experience (Bergek and Norrman
2008; Rice 2002). This may result in specific challenges faced by these start-ups compared
to the more generic challenges identified by previous studies.
To address these limitations, our study answers two research questions. First, ‘‘what are
the main challenges faced by start-ups in Western Europe?1’’ Second, ‘‘which practices can
incubators use to address these challenges in the Western European context?’’ We structure
the identification of challenges around the concept of entrepreneurial ecosystems. To create
a comparable group of countries, we study innovation driven economies (Kelley et al.
2012). These economies have a relatively high share of opportunity-driven
entrepreneurship, which includes technology based start-ups, and are home to the majority of incubators
and are therefore relevant for our study (Aerts et al. 2007). Empirically, we base our
conclusions on two studies that use semi-structured interviews with entrepreneurs,
incubator managers, and other key stakeholders in the entrepreneurial ecosystems of the
Netherlands, Germany, Switzerland, France, the United States (Silicon Valley and the
greater Boston area), Australia and Israel.
Our study contributes to the extant literature by exploring how incubators strengthen the
entrepreneurial ecosystem. Our findings suggest that incubators provide symptomatic
solutions rather than addressing the institutions that cause challenges in the entrepreneurial
ecosystem. Our study is also of great practical relevance, as Western European policy
makers and incubator managers can use our study to help start-ups overcome their major
challenges. Next, we discuss the components of the entrepreneurial ecosystem and the
support provided by incubators. We then present two empirical studies: one in which we
identify challenges, and one in which we identify practices. We end our paper with a brief
discussion and conclusion.
We begin this section by discussing the literature on entrepreneurial ecosystems. This
literature will guide our empirical analysis by enabling us to identify those components that
are underdeveloped in Europe and that thereby constrain start-up activity. We then discuss
the incubator’s role in the entrepreneurial ecosystem.
2.1 Entrepreneurial ecosystems
Over the past 5 years, literature on entrepreneurial ecosystems has emerged to explain the
presence or absence of start-up activity in a geographical area. Its focus on the role of the
start-up’s environment makes the literature on entrepreneurial ecosystems similar to that
on clusters or innovation systems (A´ cs et al. 2014). However, the entrepreneurial
ecosystem literature is unique in the sense that it points at components in the environment
that are particularly important for start-ups rather than firms in general (Spigel 2015).
Accordingly, the entrepreneurial ecosystem consists of a set of interdependent components
that exist outside the start-up that contribute to the start-up’s success (Spigel 2015; Stam
2015). Entrepreneurial ecosystems are not only shaped through top-down policies, but
1 ‘Western Europe’ consists of Austria, Belgium, France, Germany, Liechtenstein, Luxembourg, Monaco,
the Netherlands and Switzerland (United Nations Statistics Division 2015).
primarily through bottom up activities involving a broad range of interdependent
governmental and non-governmental actors (Feld 2012; Stam 2015). If components in the
entrepreneurial ecosystem are underdeveloped, start-ups may face challenges that constrain
their growth. The increasing interest in entrepreneurial ecosystems has led to the
identification of a variety of components that are deemed to be important for a thriving
ecosystem (see e.g. Cohen 2006; Feld 2012; Neck et al. 2004; Spigel 2015; Stam 2015;
WEF 2013). In discussing the most cited components, we follow literature on innovation
systems to broadly group these components into three categories: actors, networks and
institutions (Carlsson and Stankiewicz 1991; Hekkert et al. 2007; Van Rijnsoever et al.
There are various actors who can strengthen the entrepreneurial ecosystem by providing
resources that are necessary for startups to thrive and by shaping the ecosystem’s
institutions. First, the ecosystem should have a talent pool of individuals with high level of
human capital, which includes both technical and entrepreneurial skills (Feld 2012; Florida
et al. 2008). These individuals act as start-up founders or employees (Neck et al. 2004).
Second, domestic and foreign markets, consisting of consumers and businesses who act as
customers, should be accessible and large enough for start-ups to be able to sell their
products or services (WEF 2013). Third, financial capital, provided by private investors or
public funding agencies, enable start-ups to obtain the necessary resources for their
founding and growth (Cohen 2006; Neck et al. 2004). Fourth, support services can provide
start-ups to obtain specialized knowledge (Spigel 2015). These services are primarily
provided by mentors (experienced entrepreneurs who advice young founders), professional
service providers (e.g. lawyers, accountants or consultants), and incubators (that we discuss
in more detail in the next section). Fifth, universities may play a catalyzing role.
Universities contribute to the ecosystem’s human capital by providing well-educated
entrepreneurs and employees as well as faculty staff that may act as consultants to start-up
companies. Further, their expertise may lead to technological opportunities based on which
start-ups can build their products, and they are important in fostering a culture of
innovation and entrepreneurship (Etzkowitz 2004; Neck et al. 2004; Stam 2015). Finally, both
public and private actors can contribute to the ecosystem’s physical infrastructure. This
infrastructure provides start-ups with the required tangible resources, including office
space, telecommunication facilities and transportation infrastructure (Spigel 2015).
The presence of these actors alone is insufficient for entrepreneurial ecosystems to be
successful. Actors should be connected through various formal and informal networks
(Neck et al. 2004) that facilitate the flow of resources between them (Spigel 2015).
Networks of actors in the entrepreneurial ecosystem operate under an institutional
environment that supports or constraints start-ups. Institutions are the socially constructed ‘rules of
the game’ that structure the actions of actors in the entrepreneurial ecosystem (North 1990;
Pacheco et al. 2010; Scott 1995). The entrepreneurial ecosystem literature primarily points
at the ecosystem’s regulation and culture as the two most important institutions that
influence start-up activity (Neck et al. 2004; Spigel 2015; Stam 2015). Governments can
create the optimal conditions for innovation and entrepreneurship to flourish, for example
by ensuring low levels of corruption, a high quality educational system and adequate
intellectual property protection (Casper and Soskice 2004). In addition, governments can
provide regulatory institutions that are specifically aimed at stimulating start-ups, including
start-up subsidies or incentives to support R&D collaboration between start-ups and
universities (Goldfarb and Henrekson 2003; van Rijnsoever et al. 2014). The ecosystem’s
culture should encourage entrepreneurship as a career path, it should ensure that (nascent)
entrepreneurs think in terms of the market where they want to sell their products, it should
make risk taking socially accepted, and it should celebrate successful local start-ups
(Spigel 2015; WEF 2013).
2.2 Incubators in the entrepreneurial ecosystem
Incubators can strengthen the entrepreneurial ecosystem by supporting local start-ups.
Since their widespread diffusion in the 1980s, the incubator’s value offering has developed
considerably (Bruneel et al. 2012; Mian 2014), which reflects their changing role in the
entrepreneurial ecosystem. Accordingly, incubators support start-ups in various ways.
First, as part of the ecosystem’s support services (Spigel 2015; Stam 2015), incubators
provide start-ups with direct access to several ancillary resources and services. Initially, the
‘first generation’ incubators focused on providing start-ups with shared office space and
other tangible resources, such as meeting rooms, to create economies of scale (Barrow
2001; Bruneel et al. 2012). More specialized (e.g. university-affiliated) incubators also
provided access to equipment or laboratories (Mian 1997). From the early 1990s,
incubators increasingly focused on supporting technology based start-ups (Ahmad and Ingle
2013; Bruneel et al. 2012). Incubators realized that founders of these start-ups lacked
entrepreneurial experience, which led incubators to expand their service portfolio (Bruneel
et al. 2012). Incubators started providing professional consultancy services, as well as
coaching and training for entrepreneurs, primarily as a way for entrepreneurs to develop
missing business knowledge (Rice 2002). These incubators also started to provide financial
capital by investing in their tenant companies (Aerts et al. 2007; Barrow 2001).
Second, by curating the relationship between entrepreneurs and their peers, or between
entrepreneurs and other actors in the entrepreneurial ecosystem incubators act as a node in
the entrepreneurial ecosystem (Bergek and Norrman 2008; Spigel 2015). This was the
focus of the ‘third generation’ incubators, which emerged in the late 1990s and aimed to
facilitate access to external resources and networks (Bøllingtoft and Ulhøi 2005; Hansen
et al. 2000). These incubators stimulated start-ups to interact with each other in the
incubator’s ‘community’, by co-locating start-ups in the incubator’s premises, by creating
synergies among start-ups through the incubator’s selection process, by organizing network
events, and by acting as relational ‘brokers’ to make one-on-one connections (Cooper et al.
2010; Hughes et al. 2007; Totterman and Sten 2005). The incubator thereby creates a dense
network of start-ups that are willing to help each other by engaging in collaborative
projects or by exchanging knowledge and networks (Mcadam and Marlow 2007;
Totterman and Sten 2005). Facilitating such network density leads to greater visibility of
startups in the entrepreneurial ecosystem, which makes it easier for start-ups to connect to
external actors. Incubators further facilitate such access to external networks by organizing
events, by establishing partnerships with for example investors or universities, or by
leveraging the personal networks of incubator managers and mentors (Hansen et al. 2000;
Patton and Marlow 2011).
Third, incubators can help start-ups to cope with the institutions of the entrepreneurial
ecosystem. They may do so by acting as a ‘safe harbor’ that protects start-ups from
unfavorable institutions (Amezcua et al. 2013; Hackett and Dilts 2004b). For example, the
incubator’s community creates a culture of support and encouragement (Cooper et al.
2010), which may compensate for the absence of such a culture in the entrepreneurial
ecosystem. Start-ups in the incubator may also benefit from the added credibility that
incubators bring, as acceptance into the incubator acts as a ‘stamp of approval’ to potential
collaborators (NESTA 2011). This contributes to the start-up’s legitimacy, which may be
particularly valuable in ecosystems where founding a start-up is perceived to deviate from
the dominant cultural norms and values. In addition to protecting start-ups from
unfavorable institutions, incubators may also act as ‘institutional entrepreneurs’ (Amezcua
et al. 2013); actors who transform or create institutions that favor their interests (DiMaggio
1988). For example, by organizing a collective group of start-ups, the incubator increases
the power and legitimacy of the individual start-ups (Pacheco et al. 2010), which may
enable incubators to negotiate favorable regulations. As an institutional entrepreneur, the
incubator no longer only impacts individual start-ups, but has the potential to improve the
institutions of the entrepreneurial ecosystem as a whole.
3 Methods study 1
3.1 Research design and case selection
To explore the challenges of Western European start-ups, we conducted 90 semi-structured
interviews with entrepreneurs, incubator managers and other key stakeholders in the
entrepreneurial ecosystem, such as investors, university technology transfer officers,
mentors and policy makers2 in Western European countries. Our sample consists of 13
incubators, six of which were part of the Climate Knowledge and Innovation Community
(Climate-KIC), a European initiative to stimulate clean tech innovation and
entrepreneurship. These university-affiliated incubators were located in the Netherlands
(3), France (1), Switzerland (1) and Germany (1). Although Climate-KIC focuses on
supporting clean tech start-ups, these six incubators were active in a wide variety of
industries. To complement our sample, we included insights from seven non-university
affiliated incubators located in Germany (5) and the Netherlands (2). These incubators
were approached through events, desk research and existing network contacts. The final
sample of 13 incubators allows for comparison while maintaining a high level of variation,
which contributes to the reliability and generalizability of our findings. The sample is
homogeneous in the sense that all incubators focused on supporting early stage start-ups,
which we defined as new ventures where technical know-how is capitalized and exploited
through new products and services (Bergek and Norrman 2015; Trimi and
BerbegalMirabent 2012). Further, rather than solely focusing on one type of support (e.g.
coworking spaces that only provide office space, or educational programs that only provide
mentorship) the incubators in our sample supported these start-ups with a comprehensive
range of services. Within these constraints, we maximized variation. This is particularly
important when the population under study is heterogeneous, as is the case with incubators
(Aernoudt 2004; Bergek and Norrman 2008). Our sample reflects this variety as it includes
incubators in different industries (e.g. software, clean tech, life sciences), with different
founding partners (e.g. universities, investors, municipalities), operating both for profit and
non-profit. The diversity of the interviewees as well as the relatively large number of
interviews that we conducted contributes to the reliability of our findings, as it enabled us
to triangulate our findings in an early stage, thereby minimizing the influence of
interviewees’ individual bias and (mis)perceptions (Bryman 2008).
We were not able to conduct interviews in the Western European countries of Austria,
Belgium, Liechtenstein, Luxembourg and Monaco. However, the nine Western European
countries are very similar in for example their regulatory framework and entrepreneurial
2 The interview data from the six university-affiliated incubators was also used in a prior study on incubator
strategies (van Weele et al. 2016).
attitudes and are therefore often grouped in the same categories in for example the Global
Entrepreneurship Monitor and the literature on Varieties of Capitalism (Hall and Soskice
2001; Kelley et al. 2012). Further, among the interviewees were several European policy
makers, as well as entrepreneurs that were active in multiple European countries, and
incubator managers and investors overseeing an international portfolio of start-ups. The
international background of these interviewees compensated for the limited number of
European countries in which interviews were conducted. We are therefore confident that
the challenges that we identify are relevant to Western Europe as a whole.
3.2 Data collection and data analysis
Interviewees were approached through the network of Climate-KIC, through the
researchers’ personal networks, through desk research and by asking interviewees to
introduce the researcher to other interesting actors for this research. All interviews were
conducted between January 2012 and May 2015. Conducting interviews on-site enabled us
to augment the dataset with observations and informal conversations. Table 1 below
provides an overview of the interviewees per category and country. In addition, we
attended various start-up events and formal meetings organized by Climate-KIC during
which challenges and solutions for European (clean tech) entrepreneurship were discussed.
This enabled us to triangulate our findings and to enrich our interviews.
The interviews took 40 min, on average. During the interviews, we wanted to ‘‘follow
wherever the informants lead us in the investigation of our guiding research question’’
(Gioia et al. 2012 p. 20). We therefore conducted semi-structured interviews with a
common set of questions, while allowing interviewees to elaborate on their answers and
enabling us to ask additional probing questions. Accordingly, the list of questions as
provided in Appendices 1 and 2 should not be interpreted as a strict interview protocol, but
as a broad set of questions that guided the interviews. Every interview started with a brief
introduction of the research goal. We then asked interviewees to describe their personal
background as well as the background of their start-up or incubator. Given our aim of
identifying challenges faced by start-ups, we then asked interviewees to discuss what they
perceived as the strengths and weaknesses of their particular region or country in terms of
starting a business. This discussion formed the core of the interviews. Many interviewees
had an international background, and we asked them to compare the different
entrepreneurial ecosystems in which they had lived to each other. In this part of the interview, the
concepts of the entrepreneurial ecosystem literature acted as ‘sensitizing concepts’
(Blumer 1954) that guided us to ask probing question about specific components of the
Table 1 Interviews conducted for study 1
Other (e.g. investors,
policy makers, university
entrepreneurial ecosystem (e.g. to what extent did you feel supported by your university
when founding this start-up? What forms of start-up capital are available?). Initially, we
relied on open questions to identify general challenges. As the study evolved, we included
more specific questions to explore particular challenges in greater detail. In the case of
incubated entrepreneurs and incubator staff, we also asked about what forms of support
were provided by the incubators.
If possible, the interviews were recorded and transcribed. Data was collected until no
new relevant topics emerged, which suggests that theoretical saturation was reached. Data
was analyzed by coding the interviews using the qualitative data analysis program Nvivo.
As a qualitative, inductive study, our coding was a highly iterative process. Still, it roughly
proceeded in three phases. During the initial stage of coding, we labelled segments of
interview scripts with codes that were based on interviewees’ own words. For example the
segment ‘‘the skills that you need as an entrepreneur: presenting, networking, etc., they
don’t teach these at a university’’ was labelled as ‘universities do not teach entrepreneurial
skills’. Using such ‘in vivo’ codes minimizes researcher subjectivity and bias (Gioia et al.
2012). In the second phase of coding, we combined in vivo codes into broader categories.
Again, the literature on entrepreneurial ecosystems guided our analysis as they provided a
general sense of what to look for. For example, codes that were related to universities (e.g.
‘universities do not teach entrepreneurial skills’, ‘universities lack entrepreneurial culture’,
‘difficult to negotiate IP with universities’) were combined into a higher level code that
was labelled ‘universities are not focused on entrepreneurship’. These higher level codes
eventually formed the core concepts of this study: the challenges faced by Western
European start-ups. Given that the components of entrepreneurial ecosystems are
interdependent, the third phase of coding consisted of ‘axial coding’ (Corbin and Strauss 1990)
to explore relationships among codes. This eventually enabled us to create a schematic
overview of how the challenges are connected and potentially re-inforce each other.
4 Findings study 1
We now discuss the main challenges faced by Western European start-ups, by focusing on
those components in the entrepreneurial ecosystem that interviewees felt were
underdeveloped. In doing so, we focus on those challenges that were consistently identified over
almost all countries in our sample. Appendix 3 provides additional supporting material for
these challenges to confirm that each challenge was observed in each country.
4.1 Lack of market orientation
The entrepreneurs in the incubators typically had a strong technological background, but
the interviews showed that most entrepreneurs were unfamiliar with activities related to
managing and growing their business such as presenting to investors, reaching out to
customers or managing employees. A Dutch incubator manager said: ‘‘Selling their
product, being able to clearly communicate their value proposition, that’s a thing that a lot of
entrepreneurs struggle with’’. Entrepreneurs were seen to underestimate the importance of
fulfilling a customer need and were thus struggling to create a scalable business around
their idea. One of the Swiss incubator managers said: ‘‘There has to be a strong market
focus. A lot of ideas we get, people think only from the product itself, like a researcher or
so who hasn’t thought of customers at all’’. This lack of market orientation was partly seen
as the result from education systems in Europe, which pay little attention to the
development of entrepreneurial skills and a practical and commercial mindset. In addition,
one of the interviewees said that Europeans are inherently modest and not as good as ‘sales
people’ as Americans. Accordingly, this challenge is primarily rooted in cultural European
institutions that are not easily changed.
4.2 Lack of an entrepreneurial culture
Related to this, interviewees found that the culture of Western European countries does not
encourage entrepreneurship. This challenge has also been recognized by the European
Commission (European Commission 2013). Entrepreneurs felt that entrepreneurship is
perceived as a high risk career choice, and that their social environment was skeptic
towards their aspirations to start a business. An entrepreneur illustrated: ‘‘they give me so
much credits for having the courage to take this risk’’. Interviewees also found that failure
is not socially accepted and they were concerned about stringent bankruptcy laws. These
formal and informal institutions contribute to a high fear of failure among entrepreneurs,
they may inhibit entrepreneurial initiatives and they may temper ambitions of
entrepreneurs. Investors and incubators found that those start-ups that do exist have limited
ambitions for growth, as entrepreneurs were primarily motivated by a desire to be their
own boss instead of aspiring to create a large company. One of the investors said: ‘‘It’s all
about the entrepreneurial drive: what is your goal? Where do you want to go? Many
entrepreneurs are happy when they have one or two customers … They’re playing it safe’’.
4.3 Small domestic market
Compared to US or Asian markets, the individual European countries have relatively small
domestic markets, and the larger European market is fragmented. This problem has been
recognized before (Bravo-biosca 2011). However, despite policy makers’ efforts to unify
the European markets (European Commission 2013), foreign markets, even within Europe,
remain difficult to access. Interviewees perceived the European market to be fragmented,
as countries differ from one another in terms of language, regulations, customer
preferences, etc. These institutional differences make it difficult for start-ups to capture the entire
European market. While start-ups offering similar products or services may co-exist in
different European countries, it is difficult for start-ups to scale their activities. The small
domestic markets can partly explain the limited ambitions for growth of European
entrepreneurs. As one Dutch investor and former entrepreneur illustrated, European
startups think local instead of global: ‘‘Our goal was to attract 100,000 users. Which is a lot by
Dutch standards, but nothing from an international point of view. The problem is that
you’re not thinking big, and we made some wrong choice because of that’’.
4.4 Lack of early stage capital
Europe’s lack of financial capital for start-ups is well-documented (Bottazzi and Da Rin
2002; Philippon and Ve´ron 2008) and was also identified as a challenge by interviewees in
our sample. Interviewees felt that ‘seed funding’, a relatively small amount of funding to
get the company started, was relatively easy to obtain. However, entrepreneurs felt that
only a small number of investors were willing to provide ‘early stage capital’, larger
amounts of additional funding necessary to develop a proof of concept and to scale
marketing activities. A German incubator manager said: ‘‘it’s very rare that very big
investments are made in Berlin or Germany. There are a lot of smaller investments and lot
of angel investors, but it seems to be very hard to larger get investments here’’. Again, this
makes it difficult to scale start-ups. As an explanation, multiple institutional causes were
mentioned. First, investors found it unattractive to invest in start-ups due to Europe’s
fragmented market and because start-ups lacked an experienced management team and a
strong market focus. Second, entrepreneurs found investors to be risk averse, as they
preferred to invest in real estate or family owned, low tech businesses. Third, the
motivations of European entrepreneurs to be their own boss makes them hesitant to give up
equity to investors (Audretsch et al. 2002; Fiedler and Hellmann 2001). This was illustrated
by one of the entrepreneurs who said: ‘‘I don’t want anyone to interfere. (…) I want to be
the one in charge. That is my main concern’’.
4.5 Universities are not focused on entrepreneurship
European universities were perceived to fulfill their role as catalysts in the entrepreneurial
ecosystem only to a limited extent. A manager of a university affiliated incubator in the
Netherlands said: ‘‘there are cultural and institutional causes for this, but no, there’s not
an entrepreneurial culture. That doesn’t mean that people don’t do it [founding a start-up],
but it’s definitely not stimulated’’. Although research and education at European
universities were perceived to be of high quality, interviewees said that it was difficult to create
start-ups based on university research, as the basic research conducted by universities is not
ready for commercialization. Start-ups also struggled to access university equipment and
entrepreneurs felt that university technology transfer offices had little experience with
start-ups, constraining the transfer of knowledge from universities to start-ups. Thereby,
entrepreneurs were unable to access cutting-edge knowledge and technology that can form
the basis of high-tech firms with a competitive advantage (Grant 1996; McEvily and
Chakravarthy 2002). Finally, in line with Wilson (2008), we found entrepreneurship
education at universities to be rare, and poorly integrated in the university’s curriculum.
Interviewees found that universities neglected entrepreneurship as a career choice and
prepared students for careers in government, multinationals or universities instead. Some
universities organized standalone courses in which students developed entrepreneurial
skills, such as writing a business plan. However, these courses were not focused on
creating technology-based start-ups with a high growth potential. Universities thereby lack
a culture of ambitious entrepreneurship. When discussing the university’s culture and
curriculum, one student entrepreneur said: ‘‘You’re expected to pursue a career at a big
multinational or to start a PhD. Entrepreneurship is just not an option (…) The skills that
you need as an entrepreneur: presenting, networking, etc., they don’t teach these at a
university’’. The institutional cause of this challenge is the strong incentive for universities
to pursue academic research rather than to collaborate with industry or to commercialize
knowledge (Goldfarb and Henrekson 2003).
Figure 1 provides a conceptual overview of the challenges that we identified. Overall, it
seems that the main problem in Western Europe is not the unwillingness or inability of
entrepreneurs to found start-ups. Rather, the lack of market orientation, ambition and
resources (e.g. access to large markets and capital) constraints the ability of existing
startups to grow. One Dutch incubator manager illustrated this as follows: ‘‘Most start-ups are
able to achieve some small successes: to think of a good idea, to attract some subsidies, to
find a launching customer… But they fail to make it out of that stage to experience real
growth’’. Consequently, the image emerges that the overarching challenge is for start-ups
to grow into successful businesses. This creates a reinforcing, vicious cycle, as there are
few successful entrepreneurs who could serve as inspiring role models or as ‘angel
Start-ups not a rac ve for investors
Small domes c market
Lack of early stage capital
Fig. 1 Challenges faced by Western European start-ups
investors’ who invest in a new generation of start-ups. The challenges identified all have
institutional roots in European culture, norms and regulations, which makes it difficult to
The severity of the challenges will likely differ across countries: the small domestic
market challenge, for example, will likely be more severe for start-ups in the Netherlands
than in France or Germany. We also note that the five challenges were not the only
challenges that interviewees identified. For example, interviewees in France also perceived
the bureaucratic procedures for starting and operating a business as an important challenge,
and German interviewees felt that many local start-ups lacked innovative ideas as they
mostly copied and improved existing business models and ideas. Still, given that the
aforementioned five challenges were consistently identified by interviewees in all
countries, they form a good starting point for exploring incubation practices. Further, these five
challenges are similar to those identified by more generic studies on European innovation
and entrepreneurship (see e.g. Kelley et al. 2012; Philippon and Ve´ron 2008; Schneider and
Veugelers 2010; Tijssen and van Wijk 1999), and are also in line with recent European
policies to support start-ups, such as the Entrepreneurship 2020 action plan and the Start-up
Europe Partnership, (European Commission 2013, 2014). This further validates our
5 Methods study 2
5.1 Research design and case selection
Next, we conducted a multi-case study in which we studied start-ups and incubators in
various entrepreneurial ecosystems. We used a theoretical sampling strategy to identify a
specific case (i.e. a specific region or country) that would be likely to provide useful
practices for every challenge identified in study 1.3 These ecosystems are, similar to
Western Europe, innovation driven economies (Kelley et al. 2012) that stimulate
entrepreneurship to achieve economic growth. Our sampling strategy resulted in the
following four cases:
5.1.1 Silicon Valley
We use Silicon Valley as a case study to identify incubation practices through which
incubators make start-ups more market oriented, as Silicon Valley has the most developed
entrepreneurial ecosystem and also the most mature and developed incubators (Aernoudt
2004; Herrmann et al. 2012). Consequently, Silicon Valley entrepreneurs and incubators
are famous for their ability to translate technological ideas into successful, high-growth
start-ups, and Silicon Valley is therefore a suitable case study. Data was collected between
February and July 2013.
We study start-ups in Australia to gain further insights on how start-ups are able to thrive in
a country lacking an entrepreneurial culture. Although Australia has a rich history of small
businesses, it also has a high fear of failure (Kelley et al. 2012) and the lack of an
entrepreneurial culture has been recognized to constrain the development of technology
based start-ups (PWC and Google 2013). Data was collected in Sydney, Melbourne and
Canberra between February and July 2013.
To identify incubation practices that enable start-ups to overcome a small domestic market
we look at Israel. This country has a small domestic market that is isolated from foreign
markets. However, this challenge has not stopped Israel from becoming a ‘start-up nation’
with Israeli start-ups having a global impact (Senor and Singer 2009). Data was collected
in the high-tech regions of Tel Aviv and Haifa between May and July 2014.
5.1.4 The greater Boston area
To identify incubation practices that facilitate the relationship between start-ups and
universities we study the greater Boston area, which is the metropolitan area surrounding
the city of Boston that covers cities such as Somerville and Cambridge. This area is not
only home to many top-tier research institutes, but also to many start-ups in a variety of
industries, such as IT, clean tech and life sciences. Data was collected between February
and July 2014.
3 Although we connected every individual case to a specific challenge, we also derived incubation practices
from other cases. For the lack of early stage funding, we did not include a specific case, but identified
incubation practices across all four cases. The Australian interview data was also used for a study on start-up
communities (van Weele et al. 2014).
5.2 Data collection and data analysis
The authors visited the countries between 2 and 6 months, which enabled them to be
submerged in the local entrepreneurial ecosystem to gain in-depth insights. For all
countries, the second author assisted in data collection to discuss and interpret findings and to
ensure a consistent and valid process of data collection and analysis. Similar to study 1,
interviews were the primary data source, and we interviewed a similar group of
entrepreneurs, incubator representatives and other stakeholders. In addition to incubators we
studied related programs that aim to facilitate entrepreneurship, such as co-working spaces,
university entrepreneurship programs and national entrepreneurship policies. Table 2
below provides a detailed breakdown of the number of interviews per category. We
collected data on a total of 34 incubators (and related start-up programs) in Silicon Valley (6),
Australia (11), Israel (10) and the greater Boston area (7). Similar to study 1, we aimed to
have a diverse rather than a representative sample to identify a variety of practices.
Interviewees were identified and approached through desk research, by attending events
and by asking interviewees to make introductions to other interesting individuals after the
Again, the interviews were semi-structured, and the same set of guiding questions was
used as for study 1. We explored the strengths and weaknesses of the entrepreneurial
ecosystem in a similar way as we did for study 1. Then, because we aimed to identify
incubation practices, the support provided by the incubator was discussed in more detail.
We asked incubator representatives about how they support start-ups, and we asked
entrepreneurs what forms of support they receive, how, and when. In doing so, we asked
case specific questions based on the country focus as outlined in Sect. 5.1 (e.g. ‘‘how does
your incubator enable start-ups to overcome Israel’s small domestic market?’’). The
literature on incubators guided us here, by enabling us to ask probing questions about forms
of support that the interviewee might have missed (e.g. ‘‘what is the role of the incubator’s
community in connecting to international markets?’’). Similar to how the questionnaire of
study 1 evolved, we began by asking general questions about the incubator’s support. In
later stages, we focused more explicitly on particular incubation practices to understand
them in greater detail.
Interviews were recorded, transcribed and analyzed with Nvivo in a similar manner as
in study 1. We started the coding process by staying close to the interviewees’ own words.
We then categorized similar codes into broader categories that formed the incubation
practices. Again, data was collected until theoretical saturation was reached and no new
concepts emerged. Then, for every case, detailed country reports were written to create an
in-depth understanding of the entrepreneurial ecosystem and incubation practices for every
individual case. The final phase of data analysis consisted of a cross case comparison, in
Table 2 Interviews conducted for study 2
which we related the various incubation practices to the challenges faced by Western
6 Findings study 2
We now discuss how incubators in Silicon Valley, Australia, Israel and the greater Boston
area can help start-ups in overcoming the challenges that we identified in study 1. In doing
so, we also relate the incubation practices to the institutions that are at the heart of these
challenges. Table 3 provides an overview of the incubation practices.
6.1 Lack of market orientation
Incubators used a variety of practices to make start-ups more market oriented:
6.1.1 Push for interaction with customers
Inspired by the lean start-up method (Blank 2013; Ries 2011), incubators encouraged
startups to engage with customers in order to identify customer needs. Some incubators
Australia Israel Boston
Table 3 Incubation practices
1 Lack of market orientation
2 Lack of an entrepreneurial culture
3 Small domestic market
4 Lack of early stage capital
5 Universities are not focused on entrepreneurship Provide access to technical expertise and equipment Mediate in internships
An ‘X’ signals that a particular incubation practice was identified in a particular entrepreneurial ecosystem
informally encouraged start-ups to do so through mentors who emphasized the importance
of such ‘customer development’. One of the Silicon Valley incubators had a formal
requirement that every start-up should talk to at least 100 customers during their stay in the
6.1.2 Provide mentorship
One of the incubator managers said that start-ups develop parameters or boundaries around
their idea that result in implicit assumptions about their product or market. These
assumptions may constrain the search for a suitable target market when they become taken
for granted assumptions that are not questioned during daily operations. During ‘‘tough’’
and ‘‘stressful’’ one on one sessions, mentors forced entrepreneurs to explicate and
challenge these underlying assumptions, making entrepreneurs re-evaluate their start-up: ‘‘It’s
not that they tell you you’re wrong, they’ll … push back. Sometimes you need somebody to
not assume everything you say. That was very useful’’. These mentors were typically
experienced entrepreneurs who had started multiple businesses in the past and were seen to
have the necessary credibility to make entrepreneurs re-evaluate their technology or
6.1.3 Provide small amounts of funding
To find a viable business model, one of the more prominent Silicon Valley incubators
promoted an iterative development process in which start-ups continuously adjusted their
product or idea based on the feedback of the market (being customers and investors). This
incubator was skeptic of providing start-ups with too much money, as this eliminates the
market pressures that force start-ups to iterate on their business model: ‘‘If you give too
much money in the beginning, good founders can work on bad ideas for too long’’.
Accordingly, the incubator only provided a small amount of funding, just enough to cover
the founders’ living expenses during the duration of the incubator program.
6.1.4 Facilitate outsourcing
Given the limited entrepreneurial experience of entrepreneurs, they struggled to get
acquainted with the various aspects of setting up a company, such as incorporating the
company or filing for taxes. Instead of developing these skills in-house, the incubator
enabled start-ups to outsource these unfamiliar activities. We found incubators to provide a
wide range of in-house services, such as design, legal, or human resources. This enables
start-ups to focus on developing their product and finding a market application: ‘‘At this
incubator you’re only supposed to do two things: talk to your users and develop your
All but the third practice are focused on networks, as incubators connect start-ups to
each other, to mentors or to external networks. These practices primarily aim to help
startups find a target market and to accelerate their development. They do not change the
underlying cultural institutions that cause start-ups to be insufficiently market-oriented.
The practices raise questions about the tendency of European incubators to be founded and
supported by governments and universities (Aerts et al. 2007; Barbero et al. 2012). The
practices suggest that, to make start-ups more market-oriented, incubators need be more
market-oriented as well. One way to do so is by relying more on private instead of public
funding. Further, mentors and incubator staff require entrepreneurial experience to be
credible. However, interviewees found that European incubator staff often had a policy or
academic background. A French entrepreneur illustrated: ‘‘We were in contact with the
university. In which there are some coaches. But it was all ********. They have no idea
what was the reality in the field. So it is really important to have people that have been in a
startup. That have the experience’’.
6.2 Lack of an entrepreneurial culture
Incubators can use several practices to create a culture of entrepreneurship and ambition.
6.2.1 Organize start-up tours
Some Israeli and Australian incubators organized a start-up tour to foreign ecosystems such
as Silicon Valley. These start-up tours aimed to expose start-ups to the cultural values of a
different entrepreneurial ecosystem, by connecting them to start-ups and other stakeholders
abroad, rather than changing the culture of the domestic entrepreneurial ecosystem. Some
entrepreneurs explained that they were ‘‘inspired’’ by the ambitious Silicon Valley
startups, taking that mindset back home: ‘‘Getting that mindset of how things operate down in
the Valley. And adopting that to our… Not only to our business, but to ourselves’’.
6.2.2 Create a supportive community
The community of start-ups in an incubator forms a group of likeminded individuals that
entrepreneurs can identify with. These communities created a shared ‘sense of belonging’,
and provided motivation and comfort as entrepreneurs saw other start-ups going through
similar challenges: ‘‘It shows that things are not easy, and everyone has these issues that
they go through … Hearing their struggles makes you feel like ‘‘o, we’re not doing so
badly’’. Selectively admitting start-ups to the community was seen as important. Some of
these communities had a selection process to decide who could join. Being accepted into
the community provided motivation and confidence that helped entrepreneurs to justify
their aspirations to their social environment. As one Australian entrepreneur illustrated: ‘‘It
makes me confident that I got picked by these twenty people … I might fail … but people
can’t tell me I was a fool, because I was picked’’.
6.2.3 Create a healthy competition among start-ups
The incubator’s community contributed to a ‘‘healthy competition’’ between start-ups, as
start-ups were inspired by the positive results of others, and aspired to achieve similar
success. One entrepreneur said: ‘‘You don’t want to be the only team that did not get
funded’’. This culture of peer pressure stimulated entrepreneurs to push themselves and to
set their ambitions higher. This culture can be stimulated by organizing weekly meetings
during which entrepreneurs were encouraged to show each other their progress. These
meetings ‘‘pushed people to finish things in order to show them off’’. One of the Australian
incubator managers said: ‘‘we have a Monday morning meeting. Everybody has a ‘no fail
goal’ that you have to achieve. You don’t want to be the guy that says ‘‘no, we didn’t
achieve our goal this week’’.
The above practices are all focused on encouraging interaction between start-ups. By
doing so, the incubators create its own culture that encourages risk taking and ambitious
thinking. The incubator thereby becomes a ‘safe haven’ for start-ups, rather than
addressing the culture in the broader entrepreneurial ecosystem. An Australian incubator
manager illustrated this as follows: ‘‘I think [entrepreneurs] need a place like this because
it gives them a safe place to experiment, which is free from the negative Australian cultural
traits’’. Incubators emphasized that it is important to only select high quality entrepreneurs,
as this contributes to the healthy competition and inspiring culture in the incubator’s
6.3 Small domestic market
Incubators can use various practices to enable start-ups to overcome the small domestic
market constraint by facilitating the expansion into foreign markets.
6.3.1 Create an international community
Israeli incubator managers emphasized the importance of having a mix of international
teams in the incubator’s community. This encouraged all start-ups to ‘‘think big’’ and to
have a ‘‘global mindset’’; to use English in communications, and to see their start-up as a
potentially global business.
6.3.2 Create international partnerships
Incubators in all countries relied on their external network to connect entrepreneurs to
foreign customers, thereby compensating for the start-up’s lack of international networks.
One Israeli incubator manager said that only providing introductions is insufficient, as
start-ups suffer from a ‘knowledge gap’: start-ups were unaware of cultural differences
between countries, and they did not always appreciate that foreign customers or investors
may value the start-up’s services differently. Consequently, to sell their products in foreign
markets, start-ups first needed to gain in-depth understanding of these foreign markets.
This incubator created structural and ongoing partnerships with foreign corporates that
enabled start-ups to do so: ‘‘we realized that there were more pieces missing, and it led us
to understand the need to bring in these organizations as partners, and not just introduce
the start-ups to them’’.
6.3.3 Enable a soft landing in foreign ecosystems
One of the Israeli incubators had their main office in Silicon Valley at which the entire
incubator program took place. Entrepreneurs were provided with office space, and, more
importantly, with advice and guidance on local regulations and customs. The incubator
thereby enabled Israeli start-ups to have a ‘‘soft landing’’ in Silicon Valley, facilitating the
transition towards a different ecosystem and providing access to a larger market. The
incubator encouraged start-ups to have their sales office in Silicon Valley, while continuing
R&D in Israel. This enabled start-ups to be ‘immersed in the market’, creating a deep
understanding of local rules, norms and institutions.
One Silicon Valley incubator manager said: ‘‘a strategy that is successful in their home
country is not necessarily successful here. The rules of the game are different’’. Through
the above practices, incubators enable start-ups to understand institutional differences
across countries by creating relationships with local customers and investors. Incubators
provide guidance on where to adjust the start-up’s strategy to ensure a fit with the local
context, thereby enhancing the growth potential of the start-up. However, the incubator
facilitates the transition to a different market environment without addressing the
institutions that inhibit this transition itself.
6.4 Lack of early stage capital
6.4.1 Selectively connect start-ups to funding sources
With some incubators having an acceptance rate as low as five per cent, the incubator acted
as a quality filter to investors: ‘‘It’s the ability to distinguish themselves in the crowd …
[Investors know that] you’ve been screened, you’ve been trained, and you’ve already made
it past these first bars’’. Consequently, being part of an incubator gave the start-up a strong
competitive advantage. Silicon Valley incubators in particular tried to connect start-ups to
networks of investors, for example by organizing a ‘demo day’, during which all start-ups
presented to a large group of investors in an attempt to raise capital. Incubators also
connected their start-ups to banks, corporates or government funds. Again, the incubator
acts as a quality filter, as one member of a grant review panel illustrated: ‘‘You probably
had to go through some sort of selection process to get admitted in an incubator. Even if
it’s as simple as talking about your technology a little bit. That’s the kind of filter that even
on a minimal level is important on a grant application’’. For corporates, incubators were
not only a filter, but, by partnering with them, also a way to create a more ‘entrepreneurial’
company image, to attract talented future employees, or to engage in demand driven open
innovation strategies. One of the Israeli incubators asked its corporate partners to identify
challenges in their company, after which the incubator selected start-ups that offered
potential solutions to these challenges. For the incubator, these partnerships may be an
additional source of revenue.
6.4.2 Enable start-ups to be capital efficient
Next to providing funds, incubators enabled start-ups to be ‘capital efficient’, by cutting the
start-up’s expenses. Besides facilitating access to economies of scale and providing
subsidized office space, we also found incubators to negotiate deals with service providers
(such as software companies or lawyers). Consequently, incubators can provide start-ups
with ‘perks’ (e.g. free software or legal services) worth tens of thousands of dollars.
6.4.3 Create a separate joint fund
One of the Silicon Valley incubators had a separate early stage venture capital fund, in
which it invested together with local investors and corporates. However, It should be noted
that such a fund may also constrain the ability of start-ups to raise funding from external
investors, as it may provide a negative signal when the incubator’s fund decides not to
invest in a particular start-up, as one entrepreneur illustrated: ‘‘That’s very confusing, to
have a VC arm judging startups…. I think it’s a conflict of interest. It’s confusing to the
outside world. ‘You’re in the incubator, but they’re not investing in you? What’s going
on?’. This signaling issue can be overcome by ensuring that, although the incubator may
help in creating the fund and finding partners, the fund has no official affiliation with the
incubator, and that it is not only bound to invest in start-ups from the incubator.
With the exception of the third practice, these practices create networks between
startups and investors. The first two practices enable start-ups to make better use of the existing
funds available in the entrepreneurial ecosystem. The incubator thereby does not address
the institutions that cause the lack of early stage capital. By creating a separate joint fund,
the incubator has the potential to extend the pool of investors. In addition, by co-investing
and by acting as a filter to investors, the incubator mitigates some of the risks associated
with investing in start-ups. The incubator thereby addresses the risk-averse cultural
institution that partly causes the lack of early stage capital. Inspired by Silicon Valley
success stories, we found Western European incubators to connect start-ups to investors by
organizing demo days. However, we argue that the potential to do so is limited, due to the
underdeveloped capital services and because Western European incubators often lack the
track record and selectiveness to raise the interest of investors. Moreover, attracting
venture funding may conflict with entrepreneurs’ desire to stay in control of their start-up.
6.5 Universities are not focused on entrepreneurship
6.5.1 Provide access to technical expertise and equipment
. By providing introductions to university staff and technology transfer offices, the
incubator enables start-ups to access scientific knowledge that may give them a competitive
advantage. Start-ups can access such knowledge by involving university staff as personnel,
as consultants or as advisory board members. Start-ups may also benefit from accessing
university specialized equipment, such as a wind tunnel or gene sequencing equipment.
Incubators may help by, in addition to contacts, providing standardized contracts. These
contracts ensure that the start-up’s IP is protected, and enable start-ups affiliated with the
incubator to have more favorable terms.
6.5.2 Mediate in internships
Start-ups perceived the university as a valuable source of talented interns that can
effectively transfer knowledge and technology from the university to the start-up. One
university representative from the Boston area perceived internships as ‘‘one of the most
effective ways’’ to foster relationships between universities and start-ups. However, there
are several barriers to start-up internships. Start-ups were concerned about the time
required to host interns, students found it difficult to connect to start-ups, as they did not
post internships on their website, and universities were concerned about the uncertain
nature of start-ups: ‘‘start-ups can blow up or implode. I think that we may be hesitant to
devote too much time and energy to finding internships in start-ups because start-ups are
very volatile’’. Incubators can mitigate these concerns. One of the Boston incubators
organized ‘intern fairs’ to connect interns to start-ups. Further, incubators may help by
providing standardized internship agreements, or by guaranteeing internships and placing
interns at different start-ups when the original hosting start-up exits the market.
6.5.3 Complement university curriculum
One of the university-affiliated incubators in the Boston area organized courses, such as
project-based marketing courses or business plan competitions, together with universities,
and hosted the courses at the incubator facility. The incubator also provided course
material through case studies or projects at start-ups. One interviewee said that the
incubator thereby extends the university’s theoretical curriculum with ‘implementation
education’ that is more practical and hands-on. Another interviewee said that the incubator is
‘co-curricular’ as it complements the university’s traditional courses: ‘‘If the next
Facebook were to come out of this [incubator] no one would complain but that is not the main
goal because they’re students, they’re here for school … This execution part is still
educational. And after they have left [the university], if they want to execute on something
else, they’ll be better prepared’’.
6.5.4 Create a student board
One of the incubators had created a ‘student board’ that organized guest lectures,
coordinated workshops, and facilitated internships at start-ups. Both students and university
staff found that the student board played an important role in fostering an entrepreneurial
culture at the university. Having student members in the board creates close relationships
between the incubator and the student community, and the board thereby creates a bridge
between students and start-ups.
The above practices are focused on facilitating interaction between start-ups and
university staff or students. By doing so, the incubator fosters a culture of ambitious
entrepreneurship at universities, and provides start-ups with high quality scientific and
entrepreneurial skills that are required for building a start-up with potential for high
growth. However, the practices do not aim to change the regulatory incentives that make
entrepreneurship an underexposed topic at universities. Further, although incubators may
contribute to creating an entrepreneurial culture among students and university staff, the
interviews suggest that the potential to do so is limited. One of the incubator managers said
that the university culture takes a long time to change, and compared universities to an ‘oil
tanker’ ship whose direction is difficult to change due to its size and momentum.
Consequently, these practices primarily aim to facilitate entrepreneurship in a given
7 Discussion and conclusion
The five challenges faced by Western European start-ups all contribute to the main
problem for start-ups to scale their activities and grow into high impact businesses. All of
these challenges have institutional roots, which makes it difficult to overcome them
entirely. Most of the identified practices that address these challenges are based on
connecting the start-up to other actors. Based on these practices we conclude that the concepts
of ‘networked incubators’ (Bøllingtoft and Ulhøi 2005; Hansen et al. 2000) and ‘third
generation incubators’ (Aerts et al. 2007; Bruneel et al. 2012) are still applicable to the
prominent entrepreneurial ecosystems we studied.
We contribute to the extant literature by providing deeper insights on the incubator’s role
in the entrepreneurial ecosystem. Incubators can directly provide some of the resources that
entrepreneurial ecosystems require, such as financial capital, mentorship or a physical
infrastructure. Moreover, their emphasis on connecting start-ups to each other and to other
actors means that incubators can play an important role in strengthening the ecosystem’s
networks. Regarding the ecosystem’s institutions, our findings suggest that incubators
address challenges in the entrepreneurial ecosystem by mitigating the effects of unfavorable
institutions. Incubators do so by creating a ‘safe haven’ that protects start-ups from these
institutions or by bridging institutional differences between actors or countries. As such,
incubators do not address the institutional causes of malfunctioning entrepreneurial
ecosystems but provide symptomatic solutions instead. Consequently, whereas prior studies
emphasized the potential of incubator’s in contributing to entrepreneurial ecosystems (see
e.g. Clarysse and Wright 2015; Ferna´ndez et al. 2012; Tsai et al. 2009), our study points at the
limitations of incubators in strengthening the entrepreneurial ecosystem.
This finding also has important implications for policy makers and incubator managers.
Policy makers should be aware that incubators are only a partial solution to institutional
problems that run too deep for any single incubator to solve. If start-ups are indeed
considered to be a vital component of future Western European economic growth, it is
necessary to change the underlying regulations and cultural attitudes. Incubators can play a
role in this process by acting as institutional entrepreneurs. Therefore, we call for a ‘fourth
generation’ of ‘systemic’ incubators that aim to transform or create institutions to
strengthen the entrepreneurial ecosystem (DiMaggio 1988). By doing so, these incubators
would have the potential to improve the entrepreneurial ecosystem as a whole. Although
questions are being raised on the effectiveness of many European incubators, there are also
some incubators that have been around for many years and have created a track record of
supporting successful start-up. As such, they have established themselves as legitimate
actors in the entrepreneurial ecosystem. This, combined with the networks among
incubated start-ups that enable incubators to take collective action, puts these incubators in a
good position to engage in institutional entrepreneurship. They can do so for example by
lobbying for start-up friendly regulations at a national or European level. Or they could try
to influence the national culture by organizing events that reach a national audience in
promoting successful role models. A first step towards this fourth generation incubators
can be found in the European Accelerator Assembly (Accelerator Assembly 2015), which
aims to strengthen Europe’s entrepreneurial ecosystem by connecting the incubator
community to European policy makers.
Strengthening entrepreneurial ecosystems by transforming institutions will likely take
years. Until then, incubator managers and policy makers may use the incubation practices that
we identified to address the challenges faced by start-ups. We also recommend policy makers
to address the dependence of Western European incubators on public funds (Aerts et al. 2007;
Barbero et al. 2014), as this contributes to the lack of market orientation of start-ups. It also
encourages start-up quantity over quality. Such ‘low selectivity’ strategies (Clarysse et al.
2005; Degroof and Roberts 2004) do not seem appropriate in the Western European context,
as our findings suggest that Europe does not suffer from a lack of start-ups in general, but of a
lack of start-ups that experience growth. Accordingly, we recommend incubators to be more
selective by focusing on supporting start-ups with potential for high growth, and to explore
funding streams in addition to public funds. One suggestion would be for incubators to partner
with corporates, as we have seen for example in the Israeli case.
We end our paper with some limitations and avenues for further research. First, we are
aware of cross country institutional differences within Western Europe that may affect the
severity of the challenges we identified (Bosma and Schutjens 2011). However, as our
findings are in line with European policies and studies, we are confident that the five
challenges play a role in every Western European country, and that the variation lies
mostly in the strength of certain challenges. Given that the aim of our research was to
identify challenges without measuring their relative importance, further research is
necessary to provide deeper insights into the importance of these challenges and the influence
of country specific influences. The second limitation is related to our qualitative research
design. We opted for a qualitative approach because, by relying on the knowledge and
perceptions of interviewees to inform us, it enabled us to inductively identify incubation
practices that have the potential to address the challenges faced by Western European
startups. Given that we derived these practices from incubators in successful entrepreneurial
ecosystems, we believe that these practices are an important first step towards more
effective incubators. However, our qualitative approach did not allow us to verify the
effectiveness of these practices. Consequently, we encourage future research to take the
next step by quantitatively testing if incubators in general, and the incubation practices that
we identified in particular, indeed address the challenges that we identified and thereby
contribute to the success of European start-ups.
Open Access This article is distributed under the terms of the Creative Commons Attribution 4.0
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and reproduction in any medium, provided you give appropriate credit to the original author(s) and the
source, provide a link to the Creative Commons license, and indicate if changes were made.
Appendix 1: List of questions for entrepreneurs
Could you briefly describe your personal background? (e.g. entrepreneurial
What were your motivations to become an entrepreneur?
What do you consider to be weak and strong points of the entrepreneurial ecosystem
your start-up operates in? (e.g., capital market, entrepreneurial community,
regulations, overall culture: risk taking, ambition, status of entrepreneurs, etc.)
Do you have any suggestions to increase the emergence and growth of start-ups in
5. What were your reasons to join this incubator?
6. In terms of support provided by the incubator, what has been most valuable?
7. How would you describe your relationship with the incubator? (e.g. formal, informal, how often do you meet, who takes the initiative for support, etc.)
Appendix 3: Supporting material
Could you briefly describe your personal background? (e.g. entrepreneurial
What are your responsibilities within this incubator?
How would you describe the entrepreneurial ecosystem?
What are strengths and weaknesses? (E.g. regulations, availability of capital,
level of ambition, culture, etc.)
What would you change to strengthen the entrepreneurial ecosystem for start-ups
Can you describe the background of the incubator?
E.g. when was it founded, with what purpose, annual budget, size in terms of
employees and start-ups.
What does your business model look like; how is the incubator financed?
What does your incubation process look like? (e.g., do you identify different phases?
What kind of support do you provide?
What do you think is most important in the support offered by the incubator?
Do you see any patterns or common mistakes made by start-ups?
Appendix 2: List of questions for facilitators
Accelerator Assembly . ( 2015 ). Accelerator Assembly . http://www.acceleratorassembly.eu/. Accessed 11 Sept 2015 .
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