Local/Regional Economic Development in South ... - Value Chains

nancing needs. This is the result, on the one hand, of the
costs of the required advisory services for business startups
and also of the necessity of offering ongoing advising
and back-office services at a price that is affordable for
business start-ups and thus requires no subsidies.
Impact/results chain
Results hypotheses:
A functioning incubator facilitates the founding of new,
usually small firms. Potential business owners who had
previously lacked the courage to begin their own businesses
thus received the encouragement they needed to
start a business. This first creates income for the founder
and usually also for other workers within a short period.
The back-office services provided by the incubator lower
business costs in the initial phase and increase the effectiveness
of the firm. The advisory and training services
offered by the incubator reduce the risks to the business
owner and lower the number of failures. After a period of
one to five years, the firms leave the incubator and make
room for new start-ups.
Activities and outputs:
The project began by propagating the idea of an incubator
in the Provisional Self-Government Institutions and
the international donor community and to concretize it
through stakeholder workshops and discussions. At the
micro level, the project trained and upgraded the actors
who took on conceptualization and business planning for
the incubators at the municipal level. Project staff members
served as trainers, advisors, and coaches. Informationgathering
trips to existing incubators in various European
countries rounded out the concept and created a common
basis for discussion among the stakeholders. The project
commissioned a cost estimate for the structural rehabilitation
of an old building and a reasonableness check of the
operating concept developed by the counterpart.
Use of outputs:
The formulation of needs within the local municipality led
to the approach of a project of the European Agency for
Reconstruction (EAR), which also supports investment in
building infrastructure for municipally operated incubators.
After locating the most suitable building and location,
EAR awarded the first grant for a municipal incubator
in Decan, as a pilot project.
Naturally, the results hypotheses can not yet be verified in
the present project phase. However, given that incubators
are proven instruments of economic development, it can
be assumed that the hypotheses are valid.
Lessons learned and recommendations
Given the kind of institution it is, an incubator must be
viewed as a business firm – even if it requires subsidies.
This means that site location, equipment, services offered,
and floor space design must be oriented to the needs of
business start-ups and their customers, not to the plans
and objectives of the initiators. If the initiators make compromises
because they are pursuing other economic or social-policy
goals besides the success of the newly founded
businesses, the chances of success for the firms and, thus,
the incubator are reduced.
Particularly public institutions are in danger of pursuing
such secondary objectives, either because they wish to promote
their own municipality or because they wish to create
jobs to replace those of a failed large company.
This situation is exacerbated by the fact that those who
start new businesses, as new entrepreneurs, are usually not
yet able to clearly formulate their needs. They do not understand
the market and customer demand as well as firms
that have long-term customer relationships and experienced
managers.
In addition, advising business start-ups, which includes a
market evaluation, is often offered by the same institution
that initiated the incubator. There is thus the danger that
economic and socio-political objectives will find their way
in and a conflict of interest that hurts business start-ups
emerges. Setting up and operating the incubator should
therefore be strictly separated, both institutionally and in
terms of content, from advisory services for business startups
and also from business-start-up financing.
The incubator can make it easier to start a business; however,
it is no replacement for other necessary preconditions
for start-ups. These include not only technical and personal
qualifications of the founder, but also the entire economic
environment, competitiveness vis-à-vis imports,
the quality of the macro location, and market demand.
Although an incubator reduces the capital required for the
start-up, it cannot replace initial capital.
Thus, an incubator is not a cure-all, but requires many
flanking measures in the framework of a program for economic
development and employment promotion.
Recommended reading
CEFE International
www.cefe.net
Contact
Peter Welling, GTZ OE 3112 Kosovo
peter.welling@gtz.de
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