The Role of IT-Focused Business Indicators in Managing Regional Development and Innovation

Abstract

1. Introduction The term 'innovation' can be defined as the successful exploitation of new ideas, often involving new technologies or technological applications. Its importance lies with the fact that it can deliver better products and services, new and more efficient production processes and improved business models. Indeed, innovation has driven economic progress, from the invention of the spinning jenny that transformed the textile industry during the 18th century, to the harnessing of electricity and the development of mass production. More recently, semi-conductors, the Internet and wireless technologies have revolutionized business performance and the economic potential of nations. Today, innovation is even more urgent for companies and countries alike, due to an increasing number of macro- and micro-economic trends: Trade liberalization and a rapid fall in communication and transport costs mean that many western countries must increasingly compete against countries with much lower labor costs and well-educated labor forces. For example, wages in China are less than 5% of those in the UK. Labor costs in Korea are just over half the UK levels, while the proportion of graduates in the working age population is almost identical. Technology and scientific understanding are changing our world faster than ever before. Developments in information technologies, new materials, new fuels and nanotechnology are unleashing new waves of innovation, thus creating many opportunities for entrepreneurial businesses to gain competitive advantage at regional, national and international levels. Global communications, the 24 hours, 7 days a week phenomenon of the 21st century, means that consumer tastes are also changing faster, as new trends, ideas and products spread across the world almost instantaneously. Unfortunately, finding efficient ways to promote and manage innovation at regional and national levels is not a straightforward issue. Research indicates that managing innovation heavily depends on certain intertwined and complex parameters that are critical for turning innovative ideas into local and national economic prosperity (Porter, 2003): * Sources of new technological knowledge * Capacity to absorb and exploit new knowledge * Access to financing * Entrepreneurship and competition * Collaboration and networks of alliances * A regulatory environment that promotes the above. Managing these parameters is an even more difficult task for information technology startups--the growth workhorse for many regional and national economies across the globe. Such startups are historically characterized by growth factors that heavily depend on endogenous needs, thus increasing the quantity and quality of innovation parameters that need to be properly managed. To address the challenge, governments are investigating and adopting best-practice vehicles for managing regional development and innovation. In this article, we focus on one such vehicle, namely business incubators. After presenting basic definitions, we provide quantitative and qualitative research findings on the positive effects that business incubators may have on regional development. Unfortunately, these findings are often drawn independently from the incubator's internal structure, due to commercial sensitivities that often limit researchers' access to incubators. Our involvement in the development of an IT-focused incubator in the UK provided new research insights, from an inside-out perspective. The latter is presented in terms of an integrated incubator model and the structure of its components is described and analyzed. 2. Business Incubators: Definitions and Relevant Research Terluin (Terluin, 2001) classified theories on regional economic development based on organizational competitiveness. The result is the grouping of these theories into: a) traditional models; b) pure agglomeration models; c) local milieux models; and d) innovation models (see Table 1). …