Study Released at Incubator Conference Shows "Home-Grown" Jobs Increasing in Appalachia July 2005

CHARLESTON, WEST VIRGINIA, July 19, 2005—A major new study assessing the growth of incubators throughout the Appalachian Region was released at the Appalachian Regional Commission conference "Incubating Innovation and Entrepreneurship: Supporting Business Incubation and Knowledge-Based Enterprise in Appalachia," held July 17–19. (A fact sheet providing highlights from the survey is below.)

Nearly 250 representatives from local development districts, nonprofit organizations, foundations, universities, and the private sector participated in the conference. Co-sponsored by the Charleston Area Alliance, the conference took place at Embassy Suites Hotel in Charleston, West Virginia.

Governor Joe Manchin, Congresswoman Shelly Moore Capito, and ARC Federal Co-Chair Anne B. Pope delivered welcoming addresses. In addition, there were 30 other presenters addressing the attendees, who came from 12 of the 13 states in the Appalachian Region.

About the survey, ARC Federal Co-Chair Pope said, "We have always believed that incubators have a big impact, but with this survey we now know it with certainty. Appalachia's incubators have led to the creation of over 24,500 new jobs, and more than 1,300 homegrown companies have graduated from incubators in the Region. Most of these new businesses have stayed in or near their incubator communities, so the jobs created are sustainable and local economies are made stronger through diversification."

The survey—A Survey of Business Incubators in Appalachia—found that almost all of the Region's incubators are nonprofit and that the most common types are mixed-use and technology-focused.

"According to the survey, over half of the Region's incubators are associated with academic institutions, emphasizing the importance of Appalachia's educational assets in economic development," Pope explained. "The Small Business Administration has reported that over 80 percent of businesses fail in their first five years, but a survey by the National Business Incubation Association found that 87 percent of businesses that have graduated from an incubator are still in business after five years."

The conference was divided into business incubation and technology tracks to provide an in-depth look at business incubation, best practice technology commercialization efforts, and entrepreneurial support initiatives that have proven effective in helping rural areas make the transition from traditional to knowledge-based communities.

Representatives from State Science and Technology Institute, Oak Ridge National Laboratory, LSU Business and Technology Center, Carnegie Mellon University, Technology 2020, ACEnet, Georgia Tech, and the Southern Growth Policies Board were among the presenters at the convention.

Fact Sheet: A Survey of Business Incubators in Appalachia

Background

Business incubators have existed since the 1950s as a way to nurture homegrown business start-ups, greatly increasing their chances for long-term survival. The Appalachian Regional Commission has supported business incubation since 1978 as a tool for fostering local economic development and diversification in Appalachia.

To assess the effectiveness of business incubators in Appalachia, ARC commissioned an outside survey of the 85 known incubators operating in the Appalachian Region. Conducted by the Greenwood Consulting Group, the survey obtained an 89 percent response rate and provided detailed information on the operations and outcomes of the Region's incubators. The study is the most comprehensive assessment of Appalachian incubators ever conducted.

Highlights

• Appalachia's incubators have led to the creation of 24,500 new jobs by companies that either have graduated from the incubators or are still residing in one of the 85 currently operating facilities.



• Appalachian business incubators have graduated over 1,300 businesses. Previously collected data show that most of these businesses relocate near the incubator or elsewhere in their host community.



• Thirty percent of Appalachian incubators are very small, measuring less than 15,000 square feet, making it difficult for them to achieve stable financial footing from lease revenue alone. A majority are charging below-market rates, compounding the difficulty in achieving self-sufficiency.



• Appalachian incubators are providing an array of basic office and business assistance services to tenants and clients at rates that are consistent with national norms. The most used services include networking, accessing loans, and office services such as conference rooms and copier/facsimile services.



• The typical Appalachian incubator provides services to approximately 30 businesses, including tenants, anchors, and affiliated clients not necessarily housed within the incubator walls.

Conclusion

Appalachian business incubators are making an important contribution to economic growth and job creation in the Region. They have proven successful at helping communities start and grow their own businesses, providing support when it is most needed—the businesses' infancy. They are modeling national best practices in many areas, but they need to be concerned about continued operational costs, particularly when relying on uncertain funding sources.