Business Incubation Proving A Major Job Creator

PRESS RELEASE
30 July 2009
For immediate release

Business Incubation Proving To Be Major Job Creator

At a time when the New Zealand government is planning to spend an additional $8.6 billion on infrastructure over the next six years, new statistics show that business incubation needs to be viewed as part of the job creation equation.

Incubators New Zealand Chairman Jonathan Kirkpatrick says recent data shows that companies assisted by regional incubators had an estimated economic impact of $417 million last year and now employ around 1,000 people nationwide.

“Our industry has generally focused on revenue and export growth as showing incubation’s primary contribution to economic development. However the latest data also shows that our graduating companies now average over 10 staff. This places them amongst elite company as only 6.5% of New Zealand firms employ greater than 10 employees”, he says.

Mr Kirkpatrick recognises that the current economic climate means that government, media and public are now focused on programmes that can create jobs. He cites recent research, completed by Grant Thornton for the U.S. Department of Commerce Economic Development Association, as showing the importance of investment in business incubation. This study of the economic impact and cost of public investment in infrastructure found that business incubators in the U.S. are the most effective means of creating jobs “ more effective than building roads and bridges, industrial parks, commercial buildings, and sewer and water projects.

“This research showed that incubators provide up to 20 times more jobs than community infrastructure projects. That doesn’t mean that investment in roading, schools or telecommunications shouldn’t happen but rather that investment in our country’s entrepreneurial support infrastructure is also vitally important. We need to leveragῥ this investment to generate new jobs and help people start their own high-growth businesses, he says.

Incubators New Zealand represents business and technology incubators from throughout the country. These incubators assist and encourage high-growth start-ups to achieve their full potential by providing them with expertise, networks, tools and access to capital.

The incubation industry in New Zealand is currently assisting over 120 companies and has graduated another 177 businesses in the last five years. The latest data shows that these graduate companies now average $1.1 million in annual revenues with 44% of revenue coming from exports. These graduated companies have raised almost $30 million in capital to date with the current incubated companies having secured another $9 million.

Mr Kirkpatrick notes that the U.S. research also found that, by dollars invested, business incubation projects have historically been the least well-funded of public economic development infrastructure projects, and believes that this was comparable with the New Zealand experience. However the industry has recently received a welcome boost with New Zealand Trade and Enterprise committing an additional $1.8 million per annum to the previous annual national funding of $2.7 million.

“This increased funding is as a result of a government review that found that firms that were incubated had better business outcomes than those that were not. It also highlights that while the industry is still relatively new in New Zealand, it has matured to the point where even a recent World Bank study used our national industrΌ as an example of best practice, he says.

“We now have the opportunity to achieve even greater results in the future as we use this increased funding to improve the services we provide and the number of companies that we can assist. The fact is that any increased investment in incubation will always result in new jobs, innovations and economic activity for New Zealand.”

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