Evaluating and Enhancing The Impact of Business Incubators in Developing Countries: Evidence from Nigeria

In developing countries, micro, small and medium-sized enterprises provide nearly 90% of all employment. MSMEs therefore represent a key part of the solution to unemployment and poverty. However, these enterprises exhibit low levels of survival and productivity. Business incubators are deployed as a vehicle for improving enterprise survival and growth. As a policy option, incubators focus on enterprises that already have growth potential, and aim to support their survival, growth and productivity. But do these incubators achieve the desired impact? What can be done to intensify their impact? Rigorous analyses on these two questions require relevant data on incubated and non-incubated firms which is mostly unavailable in low-income countries. Thus, this project seeks to enable the impact evaluation of business incubators by creating a rich dataset from administrative and survey data from Nigeria.

The first step in the project will be to digitise the analogue records collected by the National Board for Technical Incubation on all enterprises that have applied, successfully or not, to the 25 business incubators in Nigeria that are at least ten years old. Based on this roster, a census will be conducted to establish the survival status of the firms, to update the roster with any missing data on firm-level attributes at baseline and to collect current data on the relevant firm-level attributes to generate a pseudo-endline. If this data collection is successful, the project will go on to conduct an impact evaluation using a difference-in-differences estimation to measure incubation impact on productivity and growth in a matched sample of incubated and non-incubated firms and whether this varies by the gender of the firm owner. Lastly, a random sample of current incubates will be given a short motivational training module on entrepreneurial attitudes. Their performance outcomes - on aggregate and across gender groups - will be then compared to a matched control sample.

Business incubators have proliferated in LICs starting from the 1990s and they are believed to support MSME performance, yet, quantitative impact evaluations of incubators are scarce and generally restricted to developed countries. Studies in Nigeria, and Africa as a whole, are merely descriptive and offer limited insight on their impact. This project seeks to produce fresh data and evidence in this regard, which will be widely relevant to research and policy discussions on how to support the emergence and evolution of high-growth enterprises in LICs.

Authors

Abiodun Egbetokun

Obafemi Awolowo University