The recommendations in this study provide a broad overview of potential investments in improving the conditions for innovation and entrepreneurship that the results of the assessment suggest. They focus on ways that donors, policymakers and infoDev can support business incubation practitioners and ICT-enabled entrepreneurs in developing economies. The recommendations imply an evolving partnership among these stakeholders, one where they collaboratively address the challenges of program design, funding and implementation. Where there are opportunities for distinct roles for particular stakeholders, however, we highlight them.
Recommendations can be found at the end of each section of the Assessment Observations. A subset of them is captured below, with a focus on some of the key opportunities for infoDev to leverage its grantee portfolio for ongoing learning and impact.
Invest in capturing and disseminating knowledge about business incubation, entrepreneurship and innovation.
- Leverage the infoDev network for learning. infoDev has facilitated access to some critical knowledge assets, including practitioners and experts, but there is tremendous unmet need among business incubation managers for more insight into entrepreneurship, innovation and business incubation in a developing country context. infoDev is well-positioned to invest in capturing and sharing learning from the experiences of grantees across the network, including good practices studies and international exchanges between grantees.
- Study and replicate the most successful business incubation models. infoDev should consider a deeper investment in understanding the drivers of success in particularly effective business incubation models and components. These investments should be followed with pilot initiatives that seek to test the findings and replicate these models in a variety of environments.
- Expand regional business incubation networks. infoDev has begun to invest in regional networks as an effective structure for exchanging ideas and experiences. These efforts should continue and in some cases be expanded to include wider stakeholder participation. Networks should also be explored as mechanisms for facilitating access to new markets and advocating for regional interests.
Invest in building a vibrant business incubation sector
- Promote the financial sustainability of business incubators. Financial sustainability is a real challenge for business incubators in developing economies, most of which are not in a position to cover all operating costs with earned revenue or return on client investment in the short-term. Operating capital is particularly hard for managers to raise, inhibiting their ability to plan for the longer term. infoDev and other donors should continue to support organizations financially, and consider additional investments in operating capital as complements to project-based funding, as well as serial funding that may evolve over time.
- Use technology to scale business incubation services in cost-effective ways. Virtual and remote business incubation models can scale business incubation services by using outreach services and the Internet, for example, as lower-cost channels for a significantly larger client base. This channel holds particular promise in countries where Internet penetration is increasing and geography remains a significant barrier to accessing business incubation. infoDev should invest in studying these models more closely to understand the drivers of their effectiveness, and help to expand them where appropriate.
Invest in developing local leaders in innovation and entrepreneurship.
- Build capacity in business incubation. The required skill set for successful business incubation managers is hard to find, develop and retain, given that these skills are valued highly in the market and that the resources of business incubators are often constrained. This challenge is a particular barrier to the success of technology-focused business incubators, which require very sophisticated human resources to serve clients. infoDev and other donors should consider investing more directly in leadership development, including capacity building for high potential individuals, global networking and knowledge-building opportunities.
Include business incubation in a larger portfolio of investments in strengthening the business environment for ICT-enabled entrepreneurs.
- Continue targeted investments in ICT – and build on them. ICT infrastructure and skills are necessary, if not sufficient enablers of entrepreneurship and innovation. As this study has illustrated, their absence is limiting the competitiveness of SMEs in some emerging business environments, and infoDev should continue to facilitate ICT-enabled growth in areas where there is particular need. Without simultaneous investments in other environmental changes, however, infoDev, donors and policymakers risk minimizing their impact. They should consider complementing these investments with a greater focus on softer assets (knowledge, culture, institutional reform), and/or should partner more closely with other service providers in the SME development arena.
- Develop and diffuse a policy framework for supporting ICT-enabled entrepreneurs. Most entrepreneurs in the Initiative’s business environments are not operating in a policy environment optimized for the development of technology entrepreneurs. infoDev and donors should consider ways to strengthen knowledge and advisory services that guide policymakers on providing regulatory, legal and policy support to this critical segment. These services should seek to capture the policy innovation occurring in many developing economies, and diffuse leading-edge thinking on issues such as start-up and registration incentives, intellectual property protection for ICT companies, and flexible HR laws that accommodate the particular needs of SMEs.
- Address the lack of risk capital. Despite increasing attention on correcting the market failure for SME financing in developing economies, entrepreneurs in the Initiative’s business environments still face tremendous barriers to fairly-priced capital. infoDev should partner with donors and policymakers to promote further investment in disseminating and developing innovative SME financing instruments that are customized to the realities of a range of global business environments.
- Promote a stronger culture of entrepreneurship and innovation. A culture that does not reward entrepreneurial behaviors seemed to be a major barrier to entrepreneurship and innovation in most of the Initiative’s business environments. infoDev and other donors should consider supporting more activities that build on and promote the cultural attributes that are correlated with innovation, particularly the diffusion of local success stories that embody those attributes.
Next: Future Research Questions