A BOOTSTRAP MODEL FOR MICROENTERPRISE DEVELOPMENT OF A DISTRESSED COMMUNITY

Phase IV: The incubator system (execution phase)

This is perhaps, the most important phase of the Bootstrap model. There are two types of business incubator systems-in-house incubator system where start-up small businesses are housed in a central location and monitored carefully; and the incubator-system at large, in which technical assistance is provided entrepreneurs who operate their own businesses from different locations throughout the community. Under the first incubator system, a group of small businesses are brought together under one roof and allowed to remain there for at least 3 years. These businesses are provided significant public subsidies, including rent and other services in an effort to reduce their operating expenses and enhance their ability to earn a profit. Despite the fact that businesses participating in the second model are not provided a physical location, they still enjoy substantial subsidies from the government. The latter, through CERA, may provide such businesses tax breaks, subsidies to purchase inputs for operations, protection from external competition, and other services designed to enhance the ability of these businesses to grow and mature. Basically, the local government is expected to provide these businesses the nurturing environment to grow and eventually become competitive.15

The incubator system has gained popularity as an intervention strategy that is essential for economic development, especially in highly depressed areas. Support facilities provided incubator firms include (1) managerial training and assistance; (2) shared secretarial services; (3) telephone services; (4) utilities; (5) warehousing; and (6) janitorial services. The incubator system provides significant shelter from brutal global competition, allowing local firms to grow and mature and eventually gain the ability to compete globally.16

In addition to serving as a place of nurture to start-up companies, the incubator house can be used for regular training for prospective and existing small business owners and their employees. A successful incubator system should significantly enhance the survival rate of small businesses and improve the ability of the local community to undertake its recovery program.

Establishing the incubator system

In each community, the CERA must acquire a building that (1) has enough room to house all the businesses participating in the incubator program; (2) is located close to the community's industrial area; (3) is adequately served by the community's transportation system; and (4) can appropriately serve the needs of the firms recruited to participate in the incubator program. Since the building is likely to serve successions of clients, it should not be too specialized.

As a non-profit organization, the CERA would have to depend on local contributions to be able to secure the building. Of course, given the nature of its mandate, it would not be inappropriate for the organization to seek assistance from the government; especially when one considers the fact the job creation and wealth generation are two important objectives of the incubator system. In countries such as the U.S., it has been determined that it costs at least one and the half to four and the half times less to create a job through the incubator system than through traditional manufacturing concerns such as the automobile industry.17 In developing countries, the cost of creating jobs through the incubator system is expected to be even smaller.18