The National Business Incubation Association of North America defines a business incubator as a business support process that accelerates the successful development of start-up and fledgling companies by providing entrepreneurs with an array of targeted resources and services. Another definition states that incubators are organisations that support the growth of new enterprises, by providing business support services that bring together human and financial capital. Incubators in its most literal sense is a building that houses tenant companies in their initial phases to assist new entrepreneurs to survive during the period in which they are most at risk of failure, until they can graduate or leave the incubator in a financially stable state to operate on their own. But not all incubators are residential. More are becoming virtual incubators with a stop and go service delivery model. Incubators are thus currently moving away from the residential model. Incubatees are advised to open a business in the community where they live and the incubator becomes a support centre to provide certain services via email or telephonically with physical visits only on a “when-it-is-absolutely-necessary” – basis.
The first incubator opened in the United States in 1959, and in the United Kingdom in 1970. In the South African context, the incubation idea was started in 1995 when the Small Business Development Corporation established a similar concept which were known as hives of industries. These hives were not real incubators because there was no time period for a company to move out of the hive. The hives referred to workstations that were gathered together to form a cluster of workshops, facilitating co-operation between businesses.
The main role of business incubators are to accelerate the successful development of enterprises. Therefore incubators have a history as economic development mechanisms. It provides entrepreneurs with a broad array of services to help them get their ventures off to a successful start. Incubators are also seen as playing a vital role in promoting innovation and economic growth through their efforts to help entrepreneurs turn their business ideas into profitable, sustainable new ventures. It is one of the most useful tools for helping entrepreneurs to create networks and enhancing the likelihood that their emerging business will survive and be successful. Throughout the world, universities, governments, and co-operations are using incubators to accomplish goals. In Indonesia, for example, every university was encouraged to have their own business incubator that could provide entrepreneurial activities to facilitate the development of invention and innovation among potential students to become entrepreneurs. Incubators can therefore be categorised as public; non-profit; university related; and, privately owned.
Incubators have been used in China, the former East Germany and the Ukraine to facilitate the transition to a market economy. In Israel incubators were used to integrate immigrants from Russia and the former Soviet Bloc into the mainstream economy. However, in spite of the relatively long history of incubation, there is conflicting evidence as to whether or not incubation works. On the one hand, there is evidence that start-ups who received incubator coaching have a higher survival rate than non-incubated entrepreneurs. But, on the other hand there is the opinion that incubation has no effect on the success of start-up entrepreneurs.