Business incubation as a method of foreign market entry

Despite international business incubators becoming more widespread in recent years,
knowledge about the role they can play in helping a firm to enter a foreign market is limited.
Drawing upon interviews with 47 managers from 24 firms and organisations that have used an
international business incubator operated in China by UK export promotion organisation the
China-Britain Business Council, this research finds that the low risk, high control environment
offered by business incubation can reduce the overall cost of commitment for entering a foreign
market and thereby trigger a firm’s decision to enter it when such a move would otherwise be
considered too risky or costly. Furthermore, during the business incubation process, the firm is
able to benefit from an infusion of foreign market knowledge, network expansion and business
development support, which provides it with the confidence to exit the business incubator and
make a full market commitment of its own. In doing so, business incubation can the reduce the
liabilities of foreignness experienced by the firm, and give rise to an accelerated, low risk and
controlled foreign market entry process.
These findings extend theory from the international business studies literature into the domain
of business incubation. They also extend and apply theory from the business incubation
literature (until now concerned with company growth and development in home markets) to the
internationalization of the firm. The findings are particularly relevant for SMEs (small and
medium-sized enterprises) seeking ways to overcome the fears and challenges of entering into
promising but ‘difficult’ emerging markets, such as China. The findings also have implications
for policy makers seeking effective methods to support the international business and trade
activities of firms and organisations.