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The wider benefit of incubators to their surrounding areas

Research has found that on average over five years, an additional £48 million was invested in UK regions where an accelerator had been based.

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The benefits of business incubators can spill over into their surrounding regions
The benefits of business incubators can spill over into their surrounding regions

Business accelerators and incubators in the UK not only contribute to the success of the start-ups they support but have positive spill-over effects for the surrounding areas, according to new research.

 

The research found that within five years of an accelerator launching in a given region, it was associated with an additional £48 million on average being invested in technology sectors, an increase of 243 per cent.

 

Trigger for data-sharing

 

The report prepared by the innovation foundation Nesta for the Department of Business, Energy and Industrial Strategy, gives a picture of the impact across the UK at a time when £20-£30 million of public funding (UK & EU) is going into accelerators and incubators every year.

 

On the back of this report, Nesta is calling for obligatory data-sharing for incubators and accelerators that are publicly funded, as well as further investment into pilot programmes to understand the importance of incubators and accelerators to start-ups survival and growth.

 

The research draws on commercial data to understand how the launch of an accelerator might impact the rest of the region. The results also show that this increase in investment is not driven by investments going to accelerated firms but to those outside the accelerator programme.

“However, accelerators and incubators are just one part of the toolbox of interventions which can help boost innovation and entrepreneurship”

Previous research has pointed to the increased exposure to entrepreneurial activity that accelerators bring to the region, such as social events open to the public, as an explanation as to why investors take an increased interest in these areas.

 

Given these findings, the authors of the report recommend that public funders invest in pilot programmes in order to continue benefiting regions directly and to prioritise building evidence that can help shape policy in this area.

 

Other key findings from the report show:

  • Most start-ups (over 60 per cent) consider the contribution of the incubator or accelerator they attended to have been significant or even vital to their success.
  • Of start-ups surveyed, 75 per cent perceived direct funding as very useful, followed by office space (59 per cent) and lab space or technical equipment (58 per cent).
  • Accounting for selection bias, accelerators still typically have a positive effect on survival, employee growth and funds raised.

“At Nesta, we strongly believe policy should be underpinned by rigorous evidence so we are happy that this research begins to map the impact incubators and accelerators can have on UK businesses and the wider ecosystem,” said Jonathan Bone, senior researcher at Nesta and one of the report’s authors.

 

“However, accelerators and incubators are just one part of the toolbox of interventions which can help boost innovation and entrepreneurship. Further work needs to be done to understand the relative cost-effectiveness of these different tools which amongst other things also includes tax credits, network building and grants.”

 

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