Small businesses have generally been considered an engine of job creation and economic growth in the United States since the 1970s. This can be attributed to two factors. First, economic restructuring—characterized by the transformation from a manufacturing into a service-oriented economic base—left many formerly prosperous communities fragmented by corporate downsizing and industrial departure. Second, groundbreaking research published by David L. Birch of MIT during this era showed that job creation was being driven primarily by enterprises of twenty or fewer employees; a trend postulated to continue indefinitely. Small-business development efforts arose in this context as a strategy to overcome unemployment and to stimulate potential growth industries. Also known as entrepreneur-led economic development, many state and local governments made small-business assistance a policy priority.
It is an empirical fact, however, that despite their role in job creation and economic development, small businesses have very high failure rates and their attrition occurs within a narrow timeframe. Therefore, efforts to help small-businesses start needed to be compounded with efforts to help them survive and grow in order to realize their economic benefit. Becoming mainstream in the 1980s, the business incubator is one policy innovation designed specifically to accomplish this task.
There is no single definition for business incubation or a business incubator. Conceptually, business incubators nurture the development of entrepreneurial companies, helping them survive and grow during the start-up period, when they are most vulnerable. Client companies are co-located within a single incubator facility and each benefits from flexible reduced rents, business support services and resources tailored to young firms such as networking assistance. Business incubators can public, private or nonprofit entities or sponsored by an educational institution, although many are developed collaboratively. The population of incubators in the United States grew from 12 to 1,115 between 1980 and 2006.
Business incubators are incredibly heterogeneous with respect to their geographic location, mixture of tenants, sources and amount of funding, operating policies and objectives. Early research efforts sought to render this growing phenomenon through definitions, taxonomy and configuration. Altogether, much is known about the incubation process, but little of this understanding is grounded in theory and even less can be said about methodological approaches to evaluation.
Very little research has addressed firms who have graduated from the incubator, which obfuscates a true understanding of the long-term impact of business incubation. This thesis attempts to fill that gap through a case study of a sample of 77 graduates from the Hamilton County Business Center (HCBC). Categorical and quantitative data was collected on these firms and the results show that HCBC graduates have a very high survival rate, have remained in the region and largely have industrial classifications in proven areas of employment growth.