Real Options and the Option to Incubate: An Exploratory Study of the Process of Business Incubation

12 Pages Posted: 5 Sep 2008

Date Written: 2004

Abstract

The purpose of this study is to construct and to test a model that illustrates the incubation process and project business incubation outcomes. Following a discussion of the nature and function of business incubators, real options theory is used to develop a theory of business incubation.

A model of this real options-driven theory of business incubation is presented, along with three hypotheses generated by the model. Taken together, the hypotheses suggest that business incubation performance is positively related to selection performance, the intensity of the incubator's monitoring and business assistance efforts, and resource munificence.

Data from a 2004-2005 survey of 53 incubator managers are used to test the model. Analysis of these data does not support the hypotheses suggested by the model. The implications of the model's failure to predict incubation outcomes are explored.

Keywords: Startups, Incubators, Firm performance, Firm growth, Survival rates, Real options, Market entry, Firm survival, Economic growth

Suggested Citation

Hackett, Sean M., Real Options and the Option to Incubate: An Exploratory Study of the Process of Business Incubation (2004). Available at SSRN: https://ssrn.com/abstract=1260438 or http://dx.doi.org/10.2139/ssrn.1260438

Sean M. Hackett (Contact Author)

Aoyama Gakuin University ( email )

4-4-25 Shibuya, Shibuya-ku
Tokyo, 150-8366
Japan

HOME PAGE: http://www.aoyamagakuin.jp/english/index.html

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