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“Assessing external alignment of the services offered by for-profit business incubators, a customer perspective”

A research proposal by:

Full name: Bas Job Johannes Bisschop

Student number: S1259490

Email: [email protected]

Date of submission: 22 of June 2017






























1. Introduction

Situation and complication

Innovation is a key term and driver of economic development (Schumpeter, 1934). The current innovation economy characterizes itself by the necessity to innovate in order to survive and to stay competitive in the market (Cefis and Marsili, 2006). Two types of innovations can be distinguished: 1) Incremental innovations and 2) Radical innovations (Norman and Verganti, 2014). Incumbent firms seem to suffer from radically innovating their services or products. This phenomenon is described as creative destruction (Schumpeter, 1942). Hence, entrepreneurship and start-ups are often seen as the remedy (Ahuja and Morris Lampert, 2001). Moreover, entrepreneurship is believed to positively contribute to job creation and economic wealth (Garnsey and Mohr 2010). Also, universities recognize the importance of entrepreneurship. This is characterized by them becoming more entrepreneurial by stimulating entrepreneurship among their students (Etzkowitz, 2008). According to (Kwong and Thompson, 2016) students are not educated anymore to fulfill a certain profession, but to become an entrepreneur. Moreover, being an entrepreneur nowadays also encompasses some sort of status symbol. Meaning it is becoming increasingly popular. Although entrepreneurship and start-ups are seen as the source of (radical) innovation (Ahuja and Morris Lampert, 2001), they often fail at succeeding. The vast majority of start-ups fail within a few years of their initiation (Stokes and Wilson, 2010). Researchers argue this is because small and new businesses are very fragile and vulnerable especially in the beginning phase. They for example lack: build-up credibility, have only a few network partners or their inexperience leads to information asymmetries (Phan, Siegel and Wright, 2005). These liabilities attributed to start-ups are denoted as liabilities of smallness and newness (Brüderl and Schussler, 1990).

To overcome such market failure, entrepreneurs often resort to support organizations such as business incubators (BIs) (Lalkaka and Bishop, 1996). BIs are mechanisms to reduce the rate of small business failure and to stimulate new business creation (Rothaermel and Thursby, 2005a). From the literature, it becomes apparent that a ‘Business Incubator' is somewhat of an umbrella term for any organization that offers support services to new ventures such as: office space, shared resources, business coaching and access to networks (Barrow, 2001). Frequently other used terminologies of BIs include: ‘Research Parks', ‘Innovation Centers', ‘Seedbeds', ‘Science Parks', ‘Knowledge Parks', ‘Industrial Parks', ‘Technopoles', ‘Networked Incubators' and ‘Business Accelerators' (Theodorakopoulos, Kakabadse, and McGowan 2014). Although many terminologies exist within the umbrella, their main goal remains the same; namely to help new ventures overcome the market failure hurdle so that they can develop into self-sustaining, successful companies (Rothaermel and Thursby, 2005a).

With so many different variations describing the same phenomenon, it may come as no surprise that the amount of BIs has grown substantially over the past few years (Knopp, 2007). Moreover, in an ever-growing competitive environment, organizations should strategically position themselves through their business model to attain differentiation and a (possible) competitive advantage (Bruneel, Ratinho, Clarysse, and Groen, 2012).  

Cayannis and von Zedwitz (2005) distinguish between several different BI business models (not-for-profit, for-profit, public/private entity, amongst others). Followed by a categorization of five BI archetypes: the university incubator, the independent commercial incubator, the regional business incubator, the company-internal incubator, and the virtual incubator.

One of the most important elements of a business model is the value proposition (Isabelle, 2016). The value proposition is used to explain how an organization delivers value to its customers (Bruneel et al., 2012). Up till now the main body of research in the field of BIs has focused predominantly on areas as: organization, success factors, performance, comparative analysis and geographical region (Isabelle, 2013). Hence, limiting the focus on the BI as the unit of analysis. While balanced scorecards and best practices could provide managers of BIs a good starting point for their value proposition, it does not provide them with in depth-knowledge about customers' needs and expectations, which is a necessity according to Bruneel et al. (2012). Moreover, Butz and Goodstein (1996) argue that, in order to attain differentiation and a competitive advantage, organizations should create customer value.

However, the customer value construct is very complex (Khalifa, 2004), in the sense that it is difficult to measure what and how valuable a product or service is to a customer (Smith and Colgate, 2007). Developing a deep understanding of what customers seek in a product or service is therefore vital for a BI to align customers' needs and expectations with their offerings.

Research Goal

Therefore, this study aims to investigate service differentiation strategies of for-profit BIs through the consumer lens of value creation. Thereby extending the existent theoretical and practical knowledge by providing insight into the external alignment process of the services offered by for-profit business incubators.

2. Research questions

Central research question (RQ)

How can for-profit incubators align their offering with customers' needs and expectations?


How can customer value be assessed?

Which services are valuable to tenants of for-profit incubators?

Why are the identified services valuable?

How should the services be offered to the tenants?

To what extent differ the identified services in terms of value for (potential) tenants?

3. Theoretical Framework

Strategic positioning theory

An organizations' competitive position is determined by its competitive scope and competitive advantage (Wen and Chen, 2011). In order to identify competitive advantage possibilities, a firm must have insights into the critical success factors of the industry in which it operates (Barbiroli and Focacci, 2003). The BI literature distinguishes between five key success factors: stage of venture, fit with incubator's mission, selection and graduation policies, the nature and quality of incubation services, and network partners (Isabelle, 2013). Furthermore, the study of Varadarajan (1985) suggests that critical success factors need to be divided into: ‘‘success producers'' and “failure preventers”. Where the former could enable a firm to attain a competitive advantage and outperform its rivals (Varadarajan, 1985).

Competitive scope

An incubator's competitive scope can be defined in terms of generic strategies (Porter, 1980), where BIs can choose to be either ‘focused' or ‘diversified' (Sherman and Chappell, 1998). Focused means that BIs only allow tenants from a specific sector or technology field. Whereas diversified incubators allow all kinds of companies.

Competitive advantage

Choosing the right generic strategy can be a predecessor of achieving a competitive advantage (…). However, since business is nowadays more and more driven by demanding customers, many organizations search for new ways to achieve and retain a competitive advantage beyond or in combination with their strategic scope (…..). Hence, according to various studies the next major source for competitive advantage will most likely stem from a customer orientation (…..). Hence, firms should focus on customer value creation in order to achieve a competitive advantage (Cooper, 2001).

Customer value

The emerging customer value paradigm and theory of the firm (Slater 1997) suggests that firms exist to create value for others. The paradigm characterizes itself by the focus on normative customer value creation strategies (Treacy and Wiersama 1993) as well as on the importance of the customer value concept (Gale 1994). Here the definitions, conceptualizations, and typologies of customer value are explained. The customer value construct hosts a lot of complexity (Khalifa, 2004). Making it difficult for an organization to measure accurately how customers determine the value of a particular product or service (Smith and Colgate, 2007). Therefore, it is necessary for organizations to develop a deep understanding of what customers seek (O'Cass and Ngo, 2011) and hence the allocation of resources to address customer expectations (Srivastava et al., 2001). In order to assist BIs, prior research has integrated viewpoints from several industry players such as: executives, external experts and customers in order to shed light on the customer value creation possibilities and its potential (Matthyssens et al., 2009).

Mian (1994) suggests that these customer value creation possibilities in combination with incubators' differentiation possibilities (as mentioned above) reflect the added value of the incubator's service offering.

External Fit

External fit is part of the bigger theory ‘strategic fit'. External fit relates to programs, activities and strategies that an organization develops to respond to the external environment (….). According to Chin-Shien Lin, Tzu-Ju Ann Peng Ruei-Yuan Chang Van Thac Dang (2016) it is better to pursue external fit over internal fit. It is only effective to increase the internal fit after a firm's external fit hits above average  (Chin-Shien Lin Tzu-Ju Ann Peng Ruei-Yuan Chang Van Thac Dang, 2016) For BIs, the external fit relates to tenant's service expectations and perceptions. Hence, aligning these expectations with the offerings' with the BI service offerings is crucial.

4. Theoretical and practical relevance

Theoretical relevance

There has been an ever-growing interest by researchers and scholars in the field of Business Incubation (……). And although BIs seem to have reached both practical and theoretical maturity, an overall consensus and a clear definition of a BI is yet to be found (……). Moreover, the main body of research focusses predominantly on best practices and drivers of performance (…..). And even though practitioners often claim the benefits of BIs (Lewis, 2010), there is no systematic evidence to prove it. Moreover, ample research examines which services BIs should offer to start-ups. This stream of research dates to the 1980's and the categories of incubator services found by (Kuratko and La Follette, 1987) are still used with the addition of the category: ‘networking'. These categories make up the three generations of BIs (Bruneel et al., 2012). However, more recent research shows that it is not the type of service, but rather the way the service is offered by a BI that defines the value proposition (Vanderstraeten and Matthyssens, 2012). Hence, this is exactly the line of thought in which this study continues. Thereby calling a direct request from Vanderstraeten and Matthyssens (2012). In their recommendations for further research they propose that: “researchers might conduct a similar study among for-profit incubators or those focused on social or basic research” (Vanderstraeten and Matthyssens, p. 666, 2012). Vanderstraeten and Matthyssens (2012) focused on not-for-profit BIs in their study, which is the type of BI that has received the most attention in the literature. Mainly because BIs are often publicly funded (Lewis, 2001; OECD, 1999, 2010). However, some studies also point out the negative side of publicly funded BIs. They are for example often not self-sustaining. That is, they depend on public subsidies and other forms of public financial support (…..). Hence, it would be interesting to dive deeper into the world of for-profit BIs. Without receiving public funds, it seems to be even more important for this type of BIs to differentiate themselves in order to be self-sustaining. Hence, this study broadens the body of knowledge as to how BIs can differentiate themselves by providing their tenants with a good fit between expectations and service offerings. This study does so by focusing on customer value and hence taking on a customer's perspective. Moreover, this study aims to go one step beyond the study of Vanderstraeten and Matthyssens (2012). Meaning that this study will also shed light on the type and nature of valuable service offerings. And look at the way services are provided to tenants. However, what is not yet clear from the study of Vanderstraeten and Matthyssens (2012) is how valuable the identified services deem to be according to the tenants. Hence, acquiring a deeper understanding of which services provide value and why they provide value for the tenants in combination with a quantitative approach that will shed light on how valuable the identified service offerings are to the tenants of for-profit BIs will broaden the existing body of knowledge on BI's and hence contribute to the BI literature.

Practical relevance

The practical relevance of this study characterizes itself by the fact that

managers of for-profit BIs are provided with a deeper understanding of which services create customer value for their (potential) tenants and hence are presented with a direction on how to (re)-formulate their value proposition. Moreover, the study will also provide insights into why the offerings are valuable and how valuable the service offerings are to tenants. So that managers of for-profit BIs can more effectively choose an appropriate service-based differentiation strategy. Moreover, they will gain an insight as to how to allocate their effort and resources regarding their service offerings. Hence, this might enable a BI and their respective manager to outperform its rivals and attain a competitive advantage.

5. Methodology

Research design

The formulated central research question and its sub-questions in this research proposal require both qualitative and quantitative methods. Qualitative data is often required when the research domain is broad and complex, so that a deeper understanding around the topic can be obtained (…..). It provides the interviewer with the possibility to depart from any schedule, by allowing the interviewer to ask follow-up questions. So that the interviewer can listen to the interviewee's point of view and he or she can assess what the interviewee deems relevant and important (Bryman and Bell, 2015). Hence, qualitative data is typically used to answer ‘why' and ‘how' questions in an exploratory context (Eisenhardt and Graebner, 2007). Furthermore, this study will also make use of a quantitative data approach in the form of questionnaires. Quantitative data use numbers as its basis for making generalizations about a phenomenon (…..)

Therefore, this empirical study will make use of multiple methods in its research part. This form of research has been increasingly adopted by researchers over the years (…..). Moreover, multiple methods increase the validity and the reliability of a study (….). Hence, the qualitative part will lay the foundation for the quantitative part, so that the identified factors will serve as the basis for explaining a phenomenon. In the case of this study, the qualitative part (step 1) is used to obtain an understanding around the type and nature of the service offerings of for-profit BIs. Moreover, by the means of in-depth interviews, the tenants will be able to explain why they think certain service offerings are valuable and moreover which services seem more valuable than others. The quantitative part (step 2) will be used to test the trends and phenomena that became apparent in step 1. So that meaningful answers can be provided about the extent to which tenants find certain services more valuable than others.

Since the purpose of this thesis is to broaden the knowledge regarding the external alignment of BIs service offerings, this study embraces a similar approach as Vanderstraeten and Matthyssens (2012) for step 1. However, with the difference that for-profit BIs are selected as the unit of analysis. The units of observation will be limited to for-profit BI tenants, for-profit BI managers and BI experts. So that just as in the study of Vanderstraeten and Matthyssens (2012) triangulation of the data can be obtained. Besides the use of multiple methods, data triangulation also increases the validity and reliability of the study (……). The data will be triangulated so that the insights gathered from the in-depth interviews with tenants will be evaluated by both the BI managers and experts. Furthermore, I aim to include focus groups in this part of the research consisting of tenants, managers (and industry experts). So that an in depth understanding can be obtained through group dynamics (…..). In the end this will result in a consensus regarding the findings. The findings of this exploratory part will then be analyzed and interpreted. After transcribing the outcomes, trends may be identified that form the basis for step 2. Here, the findings will be incorporated in a questionnaire, together with the general information about tenant (such as age, size and sector of activity).

Qualitative part (step 1)

Data selection

For the qualitative part, the unit of analysis will be the for-profit BI; ‘De Gasfabriek' in Deventer, the Netherlands. Unlike in the study of Vanderstraeten and Matthyssens (2012), this study does not comply with the regional focus of having multiple BIs within 60km. The argumentation behind this, is that this study does not have the time span of multiple years to conduct research. Hence, it would be virtually impossible to gain access and set up interview appointments at non-familiar for-profit BIs within the four months' timespan of this research. However, since I am conducting this research as an intern at ‘De Gasfabriek' in Deventer, this will allow me to have easier access to tenants and BI managers inside the facility than it would be at unfamiliar other for-profit BIs elsewhere in the Netherlands. Therefore, the first qualitative step will be limited to obtaining data at only ‘De Gasfabriek'. Although I recognize that this may limit the generalizability and validity of the outcomes, I argue that the quantitative part in which I will test these insights on a larger scale will make up for the limitations. Furthermore, ‘De Gasfabriek' incorporates both a ‘focus' and a ‘diversified' scope. Two types of strategies that are highlighted in the research of Vanderstraeten and Matthyssens (2012). Hence using ‘De Gasfabriek' as my unit of analysis will not limit me to just one type, meaning I will still be able to gather information around service offerings for both a ‘focus' and ‘diversified' scope. The units of observation within ‘De Gasfabriek' will be tenants inside the ‘focus' building as well as tenants inside the ‘diversified' building. Moreover, managers and founders of ‘De gasfabriek' will be interviewed as well as BI industry experts. I expect to encounter the most difficulty in arranging an interview with BI industry experts. However, I am convinced that I will find suitable candidates, as the network of ‘De Gasfabriek' and ‘The University of Twente' are both very broad.

Data collection

Arranging interviews and appointments

The arrangement of the in-depth interviews will be done in person. As indicated in the previous part, I have easy access to all tenants and managers/founders within ‘De Gasfabriek'. Hence, I do not expect any difficulties in interviewing them separately or in a focus group setting.  However, arranging interviews/appointments with industry experts could play out to be more difficult. Therefore, I will make use of the combined network of ‘De Gasfabriek' and ‘The University of Twente' to gain access to suitable candidates. This will be done through the means of sending out emails or calling potential candidates directly.

Methods and design

The qualitative part of this research will consist semi-structured interviews which will be conducted in both an individual as well as a focus group setting. Semi-structured interviews consist of several key questions that help to define the areas to be explored, but also allows the interviewer or interviewee to diverge to pursue an idea or response in more detail (…….). Hence, this seems to be the right tool to obtain a deeper understanding on the topic. First, because it includes some flexibility in the sense that the order of questions does not necessarily have to be followed and second because the interviewer is able to iterate the design of the interview along the arrangements of the interviews.

Execution of interview with recording

The interviews will be executed both in a (focus) group setting as well as in a face-to-face setting. To have a flowing conversation, notes will not be taken during the interview. However, I will kindly ask approval to all the interviewee to record our conversations, so that the information is always available to be transcribed.

Transcription of Interview

In this part, the interviews will be transcribed so that the insights obtained can be used in the data analysis part of this research. This is a time-consuming process, however vital to good continuation of the study.

Data analysis

After transcribing all interviews in English, it is now time to discover trends and phenomena. Hence, the qualitative data will be coded and grouped, so that one can distinguish between different insights and obtain a greater understanding (….). After the insights are coded, they will be used to form the basis of the questionnaire of step 2 of this study. Moreover, hypotheses will be formulated on the basis of these results regarding the extent to which certain services deem to be more valuable to tenants than other services. These hypotheses will be tested in the data analysis part of step 2.

Quantitative part (step 2)

Data selection

In step 2 the unit of observation and unit of analysis are broadened. For-profit BIs in the geographical area of the Netherlands will be selected and then in particular their (potential) tenants as the unit of observation. This part contains a standard questionnaire, which makes it easier to distribute (digital) and thus providing for easier access to units of observation. Every (potential) tenant of a for-profit BI qualifies in step 2. Tenants can be potential if they have an interest in joining a for-profit BI and are as such on a waiting list.

In order to generalize the results of the quantitative part, the ‘sample' selection is crucial (….). A fact that I am fully aware of. However, at this point in time, I do not have the precise selection criteria at hand. Furthermore, I am not sure yet which sampling method I will use. To gain a deeper understanding into this topic, I will resort to Babbie (2009) among other methodology literature.

Data collection

Arranging interviews and appointments

First contact with the (potential) tenants of for-profit BIs will be arranged through telephone calls and emails. Moreover, when the candidates agree to participate in the research a digital questionnaire will be send to them.

Methods and design

The digital questionnaire will encompass the findings from step 1. These services will be displayed at the questionnaire on a 5-point Likert scale. Furthermore, control variables will be added to the questionnaire such as: the tenants' age, size and sector of activity. Hence, the extent to which (potential) tenants find certain services more valuable than others can be statistically tested.

Data analysis

SPSS will be used to test and analyze the data. The type of test that I will employ is not yet clear. However, I am aware of the fact that I need to label my variables and include my control variables to find out whether the extent of the difference in value attributed to certain services is statistically significant or not. Hence, on this basis the proposed hypothesis can be tested.

6. Master thesis outline

The thesis follows roughly the same structure as the research proposal, with some additions. First of all, the outline includes an abstract. This encompasses the problem, design, methods and outcome of the study. Furthermore, an executive summary of the study is provided at the beginning of the thesis. So that hard-working professionals, professors and busy BI managers have a one-pager with all the relevant information they need. The theoretical and practical relevance is incorporated in the introduction part. Moreover, a section for the empirical results is added. The data will be analyzed and interpreted in this part. This is followed by a discussion and finally a conclusive. In the conclusion part, the theoretical and practical contributions will be discussed, as well as the limitations of the study and recommendations for future research. This is the full outlook of the table of contents of the thesis:

1. Front Page

a. Abstract

2. Executive summary

3. Introduction

a. Framing the research problem

b. Research goal

i. Research questions

c. Theoretical relevance

d. Practical relevance

4. Theoretical framework

a. Strategic positioning theory

b. Customer value

c. External fit

5. Methodology

a. Research design

b. Qualitative part (step 1)

c. Quantitative part (step 2)

6. Empirical results

7. Discussion

8. Conclusion

a. Theoretical contributions

b. Practical contributions

c. Limitations and recommendations for future research

9. Acknowledgements

10. Appendix

11. References

7. Planning and milestones

8. References (in progress)

The references are marked in yellow throughout the research proposal. I did not manage to finish in time. I am aware of the APA guidelines and will definitely follow them in my thesis.

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