PROMOTING INDUSTRIAL DEVELOPMENT IN ETHIOPIA

THROUGH THE ESTABLISHMENT OF TECHNOLOGY

BUSINESS INCUBATION
(Case Study on Basic Metal and Engineering Sector)

By
Aberham Genetu

A thesis Submitted to the school of Graduate Studies of Addis Ababa University

in partial fulfillment of the requirements for the Degree of Masters of Science in
Mechanical Engineering (Industrial Engineering Stream).

Advisor
Dr.-Ing. Daniel Kitaw (Associate Professor)
Co-Advisor
Mr. Gulelat Gatew (PhD Candidate)

ADDIS ABABA UNIVERSITY

ADDIS ABABA INSTITUTE OF TECHNOLOGY
MECHANICAL ENGINEERING DEPARTMENT

October 2011
Addis Ababa
Ethiopia

I
 Addis Ababa University
Addis Ababa Institute of Technology
Mechanical Engineering Department

PROMOTING INDUSTRIAL DEVELOPMENT IN ETHIOPIA

THROUGH THE ESTABLISHMENT OF TECHNOLOGY
BUSINESS INCUBATION
(Case Study on Basic Metal and Engineering Sector)

By Aberham Genetu

APPROVED BY BOARD OF EXAMINERS:

___________________________ _______________ _____________

CHAIRMAN, DEPARTMENT SIGNATURE DATE
GRATUATE COMMITTEE (DGC)

DR.- ING. DANIEL KITAW ____________ __________

ADVISOR SIGNATURE DATE

MR. GULELAT GATEW _______________ _____________

CO- ADVISOR SIGNATURE DATE

___________________________ _______________ _____________

INTERNAL EXAMINER SIGNATURE DATE

___________________________ _____________ _ _____________

EXTERNAL EXAMINER SIGNATURE DATE

I
 ACKNOWLEDGEMENT

All things were made through him, and without him was not anything made that was made.
First of all, I thank my God for thou made this is also possible. Next, I would like to thank my
advisor Dr.-Ing Daniel Kitaw who always makes me enthusiasm for his experience and way
of expression. I am greatly indebted to my co-advisor Mr. Gulelat Gatew, for all his guidance,
insightful comments, patience, and encouragement throughout the process of the project.
Without him, this project can‟t have the present form. I want to gratitude Mekelle University
for sponsoring my education and providing me secretarial services throughout the study.

I am very grateful to all my families for their love, encouragement and support. I would also
thank Ministry of Science and Technology and Addis Ababa City Government Investment
Authority for their help in giving data and information. It goes with out saying that my
deepest gratitude extends to my friends. It is always impossible to mention all, therefore, who
ever has contributed to my thesis, one way or another, forgive me for not mentioning your
name and accept my heartily admire.

Aberham Genetu

October, 2011

I
TABLE OF CONTENTS
ACKNOWLEDGEMENT ....................................................................................................................... I

LIST OF FIGURES ................................................................................................................................ V

LIST OF TABLES ................................................................................................................................. VI

LIST OF ACRONYMS ....................................................................................................................... VIII

ABSTRACT ........................................................................................................................................... IX

CHAPTER ONE ..................................................................................................................................... 1

INTRODUCTION .................................................................................................................................. 1

1.1 Background of the Study......................................................................................................... 1

1.2 Problem Statements of the Study ............................................................................................ 3

1.3 Objective of the Study............................................................................................................. 4

1.3.1 General Objective............................................................................................................ 4

1.3.2 Specific Objectives.......................................................................................................... 4

1.4 Significance of the Study ........................................................................................................ 4

1.5 Scope of the Study .................................................................................................................. 4

1.6 Research Methodology ........................................................................................................... 5

1.7 Organization of the Study ....................................................................................................... 5

CHAPTER TWO .................................................................................................................................... 7

LITERATURE REVIEW ....................................................................................................................... 7

2. TECHNOLOGY BUSINESS INCUBATORS ............................................................................... 7

2.1 History of Technology Business Incubators ........................................................................... 7

2.2 Current Trends of TBI............................................................................................................. 9

2.3 Definition of TBI .................................................................................................................. 10

2.4 Peculiar Characteristics of TBI ............................................................................................. 12

2.5 Types of Incubators ............................................................................................................... 13

2.6 Goals for Establishing TBI.................................................................................................... 15

2.7 Benefits of Technology Business Incubation ........................................................................ 16

2.7.1 Role of TBI as Technology Transfer Tool .................................................................... 17

II
 2.7.2 Role of TBI for Supporting Small and Micro Enterprises (SMEs) ............................... 18

2.7.3 Role of TBI as Economic Development Tool ............................................................... 19

2.8 Facilities and Supports Included in TBI Centers .................................................................. 20

2.9 Frame Work for Establishing TBI......................................................................................... 22

2.10 Challenges and Failure Factors of TBI ................................................................................. 24

2.11 TBI from the Perspective of Ethiopia ................................................................................... 25

CHAPTER THREE............................................................................................................................... 26

CASE STUDY ...................................................................................................................................... 26

3. BASIC METAL AND ENGINEERING ...................................................................................... 26

3.1 An Overview of Basic Metal and Engineering Sector .......................................................... 26

3.2 Business Start-up and Technology Related Problems in the Sector ..................................... 30

3.3 Significance of TBI Establishment for Metal & Engineering Sector .................................... 32

3.4 Policy Environment toward TBI Establishment for the Sector ............................................. 33

CHAPTER FOUR ................................................................................................................................. 36

4. BENCHMARKING BEST PRACTICES ..................................................................................... 36

4.1 The Importance of Benchmarking and Criteria of Selection ................................................ 36

4.2 Benchmarked Countries ........................................................................................................ 37

4.3 Success Factors and Lessons Learned................................................................................... 51

CHAPTER FIVE................................................................................................................................... 54

5. DESIGN OF TBI FOR METAL AND ENGINEERING SECTOR ............................................. 54

5.1 General Description of the Center......................................................................................... 54

5.2 Location Area for the Center................................................................................................. 56

5.3 Services Offered in the Center .............................................................................................. 57

5.3.1 Physical Infrastructure .................................................................................................. 57

5.3.2 Business Development Services ................................................................................... 63

5.3.3 Networking Services ..................................................................................................... 63

5.4 Facility (Layout) Design ....................................................................................................... 65

5.5 Governance of the TBI Center .............................................................................................. 65

III
 5.5.1 Organizational Structure ............................................................................................... 66

5.5.2 The Components of the TBI‟s Organization Structure ................................................. 67

5.6 Financial Analysis ................................................................................................................. 69

5.6.1 Facility Development Budget ....................................................................................... 69

5.6.2 Capital Expense Costs ................................................................................................... 70

5.6.3 Operating Budget .......................................................................................................... 73

5.7 Incubate Selection Process .................................................................................................... 75

5.7.1 Selection Procedures ..................................................................................................... 77

5.7.2 Entry Criteria................................................................................................................. 77

5.7.3 Exit Criteria ................................................................................................................... 78

5.8 Financial Strategy for the TBI............................................................................................... 78

5.8.1 Financial Strategy for Capital Cost ............................................................................... 79

5.8.2 Financial Strategy for Operating Cost........................................................................... 80

5.8.3 Financial Strategy for Seed Money ............................................................................... 80

5.9 Strategy for Sustainability ..................................................................................................... 81

5.9.1 Operational Cost and Revenue Structure ...................................................................... 81

5.9.2 Performance Measurement............................................................................................ 82

5.10 Implementation Plan ............................................................................................................. 83

CHAPTER SIX ..................................................................................................................................... 86

6. CONCLUSION AND RECOMMENDATION ............................................................................ 86

6.1 Conclusion ............................................................................................................................ 86

6.2 Recommendations ................................................................................................................. 87

REFERENCES ..................................................................................................................................... 88

Appendix A: Small Scale Manufacturing Industries in 2008 ............................................................... 92

Appendix B: Large and Medium Manufacturing Industries Establishments ........................................ 93

Appendix C: Price of Some Office Furniture ....................................................................................... 94

Appendix D: Specification for Foundry and Mechanical Workshop Machines .................................. 95

Appendix E: Detailed Layout of the Proposed Facilities .................................................................... 101

IV
LIST OF FIGURES

Figure 2.1. Evolution of the business incubators concept ........................................................ 8

Figure 2.2. Business incubation process ................................................................................. 11

Figure 2.3. Incubator establishment process ........................................................................... 23

Figure 3.1. Comparison of small scale manufacturing sectors in person engaged .................. 27

Figure 3.2. Comparisons of small scale manufacturing sectors in production value .............. 27

Figure 3.3. Trends of basic metal and engineering establishments ......................................... 28

Figure 3.4. Contribution of the sector in terms of job creation and establishments ................ 29

Figure 3.5. Comparisons of value of imported products ......................................................... 30

Figure 5.1. The organizational structure of the TBI ................................................................ 67

Figure 5.2. The incubate selection process .............................................................................. 76

Figure 5.3. Gantt chart for the project Schedule ...................................................................... 85

V
LIST OF TABLES

Table 2.1. Taxonomy for describing technology based business incubators........................... 13

Table 2.2. Distribution of business incubation centers by their type ....................................... 14

Table 3.1. Number of medium and large basic metal and engineering establishments and their

number of employees in 2010 .................................................................................................. 28

Table 3.2. Gross value of production of the sector in thousands of birr .................................. 29

Table 3.3. Problems of small scale metal and engineering enterprises ................................... 31

Table 3.4. Problems of small scale basic metal and engineering enterprises at operation ...... 31

Table 3.5. Milestone of for technological capability ............................................................... 34

Table 4.1. Characteristics of Chinese technology incubation centers ..................................... 38

Table 4.2. Typical profile of TBI in manufacturing domain of India ...................................... 39

Table 4.3. Characteristics of Indian technology incubation centers ........................................ 40

Table 4.4. The Characteristics of Brazil incubation centers .................................................... 42

Table 4.5. The Characteristics of Korean incubation centers .................................................. 44

Table 4.6. The Characteristics of Malaysian incubation centers ............................................. 46

Table 4.7. The Characteristics of South African incubation centers ....................................... 48

Table 4.8. The Characteristics of USA incubation .................................................................. 50

Table 5.1. Adopted parameters for the proposed establishment .............................................. 55

Table 5.2. Space requirement for common workshop area ..................................................... 59

Table 5.3. Office area requirements and configurations for tenants ........................................ 60

Table 5.4. Area requirement for offices and common facilities .............................................. 61

Table 5.5. The total built up area of the center ........................................................................ 62

Table 5.6. Minimum lease price for expansion zone in Addis Ababa city administration ..... 69

Table 5.7. Building cost in Addis Ababa ................................................................................. 70

Table 5.8. Facility development budget estimation ................................................................ 70

VI
Table 5.9. Foundry equipments and costs................................................................................ 71

Table 5.10. Imported machineries cost for mechanical workshop .......................................... 71

Table 5.11. Locally available machineries and tools cost for mechanical workshop .............. 72

Table 5.12. Capital costs for office furniture and accessories ................................................. 72

Table 5.13. Estimated salaries for the employees of the TBI .................................................. 74

Table 5.14. Estimated annual operational costs for the first year ............................................ 74

Table 5.15. Entry criteria for the proposed TBI ...................................................................... 77

Table 5.16. Exit and graduation criteria for the proposed TBI ................................................ 78

Table 5.17. Estimation of occupancy rate and rental income .................................................. 81

Table 5.18. Operational cost and revenue structure................................................................. 82

Table 5.19. Project schedule for the establishment of the facility .......................................... 84

VII
LIST OF ACRONYMS

BDS Business Development Services

CSA Central Statistical Agency

EIA Ethiopian Investment Agency

FDRE Federal Democratic Republic of Ethiopia

GDP Gross Domestic Product

ICT Information and Communication Technologies

IP Intellectual Property

IT Information Technology

MOST Ministry of Science and Technology

NBIA National Business Incubation Association

NGO Non Governmental Organizations

SME Small and Micro Enterprises

TBI Technology Business Incubator

UKBI United Kingdom Business Incubation

UN United Nations

VC Venture Capital

WB World Bank

VIII
 ABSTRACT

This thesis deals with the establishment of technology business incubation center focusing
on metal and engineering sector. Technology business incubators play an indispensable role
for transformation of technological ideas or innovations into commercial products by
providing necessary facilities and supports for entrepreneurs. Hence, the principles behind
technology incubation center are reviewed from literatures, research papers and web sites.
Since every sectors have their own unique facilities requirements in the establishment of
technology business incubation, metal and engineering sector is selected as a case study.
The sector is at forefront in the realization of industrial lead economy; therefore, the overall
impacts of the progress in metal and engineering sector on development endeavor are
elaborated. The problems which hinder the technological development of the sector such as
insignificant support for technology oriented entrepreneurs, lack of systematic technology
transfer mechanism, lack of institution which provides facility and business development
services and lack of comprehensible guidelines for the establishment of technology business
incubators are identified. The role of technology incubation center establishment as a tool of
assisting the technological development of the sector and the prevailing Ethiopian policy
environment toward such establishment are discussed.

In order to establish the center the experience and best practices of China, India, Brazil,
Korea, Malaysia, South Africa and United States are incorporated. Through adoption of
design parameters and procedures from these countries; a model of technology incubation
center is proposed with detailed design requirements. Among others, the establishment
includes design of services provided, facilities required, financial requirement,
organizational structure, entry criteria and exit criteria. Based on the outcomes of
benchmarked and many other successful countries, it is concluded that technology business
incubation centers are crucial in Ethiopia for the advancement of technology or innovation
in basic and metal and engineering sector. Finally recommendations are forwarded to
promote technology incubation centers in the country.

IX
 CHAPTER ONE

INTRODUCTION

1.1 Background of the Study

Innovative entrepreneurs are increasingly recognized as a critical element in the process of

innovation and the creation of technology based firms. However, entrepreneurs face a number
of obstacles while they are starting a business. Some of the obstacles are high-fixed and entry
costs, lack of access to capital, insufficient technical and market information and weak
management skills. As a result, the start-up phase of a small business is associated with
considerable uncertainty and new businesses often have a number of problems during this
period.

Technology business incubators (TBI) evolved to overcome the aforementioned problems of

entrepreneurs and to assist the new venture creation process. They provide an environment
where public and private resources can combine to meet the needs of small businesses during
their critical stages of development. Since technology business incubator maximizes the
success of emerging companies; it subsequently creates jobs, revitalizes communities,
commercializes new technology and facilitating economic development (Lalkaka, 2000).

While developed countries have already taken a lead in the development of TBI, a significant
number of developing countries have begun the track and are sharing the benefits by
generating wealth for their citizen. Even, some African countries have already started the
projects of TBI establishment and in some cases they are vigorously promoting the projects.

Both in developed and developing countries, governments have been playing a key role in
defining policies, programs and instruments which support the development of TBI. North
American incubators assisted more than 27,000 start-up companies that provided full-time
employment for more than 100,000 workers and generated annual revenue of more than
US$17 billion (NBIA, 2009). China up to 2008 alone set up 670 technology business
incubators which generated 18.662 billion Euros and employed 928000 persons. Meanwhile,
in India incubated enterprises have generated cumulative revenue about US$125 million by
2009 (Tang et.al., 2010). Similarly, countries such as Korea, Malaysia, Brazil and Turkey

1
have established a significant number of TBI to assist their economic development endeavor.
These TBI centers create most of the big firms which produce technology oriented products in
their respective countries and they become technology exporters.

On the other hand, Ethiopia is importing a number of technology products, machineries and
electromechanical equipments from the abovementioned countries. Most of manufacturing
companies in the country are engaging on the production of consumable items that have
insignificant/less technological value (Altenburg, 2010). Industries that might help
accumulate technological capabilities and create dynamic inter industry linkages such as
chemical, electrical and electronics, metal-processing and other engineering industries are
small in numbers. Overall, the technological level of firms is very low (CSA, 2011).

Firm turnover is high in Ethiopia, especially among small firms. Small firms rarely ever grow
into a medium-sized segment, reflecting a lack of entrepreneurial and managerial capability.
60% of firms exit in the first three years after entry. This situation reflects that there is a big
group of necessity entrepreneurs who start own account activities without any clear business
idea and some firms are constrained in their access to credit, land, and product markets
(Altenburg, 2010).

Moreover, most research findings of innovators couldn‟t be commercialized because of lack

of supportive environment. Problems of financial constraints, linkage and cooperation with
industries and proper research facilities including infrastructure, equipment and supplies are
evident (MOST, 2010).

Promotion of competitive knowledge and technology based products for local consumption
and export is very crucial. As a result, the country has to provide conducive environment for
technology based entrepreneurs. One way of providing assistant for early entrant to
technology related business is through the establishment of TBI. In order to set up TBI, it is
important to be based on the priority sector of the country. In this regard, the establishment of
incubation centers for basic metal and engineering sector plays a significant role. It assists the
development of the sector through innovative products, emerging new companies, import
substituted products and export of innovation. The total impact of such establishment hastens
the industrial development of Ethiopia.

2
1.2 Problem Statements of the Study

The Ethiopian Government‟s Micro and Small Enterprises (MSE) development strategy
focused on linking MSE‟s with micro financing institutions and technical and vocational
education and training (TVET) schools. While the government is busy in increasing the
number of MSEs, many micro and small enterprises remain small for many years and often
fail at early stage without even lasting three years in business (Altenburg, 2010). It is
impossible to expect competent enterprises, while there are no organized business
development services available to give training, consultancy and advisory assistance.
Moreover, there is no program or organization that supports innovative entrepreneurs to
commercialize their innovative ideas. Such entrepreneurs could not start their own business
largely for the lack of adequate supportive infrastructures and services.

Technological incubation centers are facilities equipped in such away to render the necessary
support for small scale technology related businesses that can be grown to large scale
enterprises. Though, basic metal and engineering sector could play a tremendous role on
overall economic development efforts of the country; there is no TBI for the sector. This is
evident from the insignificant number of innovation in the sector (Asmamaw and Zelalem,
2010). Generally, the following problems, which call for the establishment of technology
incubators that focus on this specific sector, are prevailed.

 The country imports a number of metal products and equipments which can easily be
produced with in the country through technology transfer mechanisms and tools.
 There is no adequate knowledge transfer mechanism from universities to industries
through research and innovative works.
 No/insignificant support, in any kind, to innovative entrepreneurs that are capable of
creating commercial items and own business.
 There are no comprehensible guidelines and manuals which used to support the
establishment of technology incubators.
 The growth of small scale firms that are in need of special support such as facility and
business development services.

3
1.3 Objective of the Study
1.3.1 General Objective

The general objective of the study is to analyze the prevailing situations toward the
establishment of technological incubation center and designing a model of technological
incubation center with detailed facilities for basic metal and engineering sector.

1.3.2 Specific Objectives

The specific objectives of the study are:

 To assess the national policy toward science and technology innovation and incentives.
 To identify the problems of basic and metal engineering sector from the perspective of
technological development.
 To assess the impacts of technological business incubation on the sector.
 To assess and take a bench mark of best practices of selected countries, for the
establishment of technology incubation center.
 To develop a model of technological incubation center with detailed facility, financial
requirement and governance for innovators focusing on metal and engineering sector.

1.4 Significance of the Study

The study enables to establish a model of technology incubation center for innovators
focusing on small scale metal and engineering sector. It includes all necessary parameters for
establishment of TBI; as a result it can serve as guideline or manual. Moreover, it can serve as
a benchmark for other sectors. It creates awareness on the importance of technology business
incubation and their social and economical impacts on the development endeavors. Finally,
policy makers and future researchers can use it as an input for exploring the TBI programs.

1.5 Scope of the Study

The study is limited to the establishment of TBI for basic innovative entrepreneurs focusing
on metal and engineering sector. The foundry and mechanical shop facility is equipped with
traditional machines. Hence the designed facilities are based on traditional metal
manufacturing principles and it is not intended for high tech entrepreneurs.

4
1.6 Research Methodology

Literature Survey: The theoretical principles and foundations of technology incubation

center are reviewed from the literatures written by different authors. These literatures include
books, research papers, manuals, business plans and feasibility study papers.

Data Collection: Best practices from benchmarked countries are adopted to design the center.
These countries are China, India, Brazil, Korea, Malaysia, South Africa and United States.
Data of manufacturing industries and levels of manufacturing industries, metalworking
industries, are surveyed from electronic documents and libraries. The sources of these surveys
are from Ethiopian Statistical Agency and Access Capital Research. However; data used in
cost estimations are collected mostly from market survey. The remaining data are collected
from Ethiopian Investment Agency and Addis Ababa City Administration Investment
Authority.

Interview: The data collected through interview with ministry of science and technology,
with the participants of 4th international exhibition on metal and engineering and discussions
with professionals related to the topic.

Data Analysis: The descriptive techniques have been adopted for analysis of data. In doing
so tables, graphs and percentages are used. While proposing the incubation facility, the
measurement data is adopted from the benchmarked countries. Microsoft Project software is
used for project scheduling and AutoCAD software is used for the design of facility layout.

Result and Discussion: From the adoption of best practices of benchmarked countries a
model of incubation center is proposed for metal and engineering sector.

1.7 Organization of the Study

This research paper is organized into six chapters. Chapter one deals with the introduction of
the study. Chapter two discusses the theoretical concepts, principles and foundations of
technology incubation centers. Chapter three covers the case study. Under this chapter the
situation of basic metal and engineering sector, the importance of incubation for the sector
and the policy environment is discussed. Chapter four discusses best practices of selected or
benchmarked countries. Chapter five covers the designed model of technology incubation
center for innovators focusing on metal and engineering sector. The level of the model, the

5
designed facility, the designed layout, the anticipated financial strategy and the overall
administration of the center and strategy for sustainability are included. The last chapter,
chapter six contains conclusion and recommendation.

6
 CHAPTER TWO

LITERATURE REVIEW

2. TECHNOLOGY BUSINESS INCUBATORS

2.1 History of Technology Business Incubators

The term business incubator gained popularity in the media between 1999 and 2001; but the
business incubation model traces its beginnings to the late 1950s (NBIA, 2009). Every
authors and literatures asserted that the first incubator was created by Joseph Mancuso in
Batavia, New York in 1959 on a former Massey Ferguson facility (Akcomak, 2009). The
Massey Ferguson plant was closed; and after the big plant closings a new economic growth
plan was needed (Antoine et.al., 2008). The new plan was incubators and by the late 1980s
there were 12 to 15 incubators in the United States (Antoine et.al., 2008; Monkman, 2010).

Starting in the early to mid 1980s, editors of the journal, frontiers of entrepreneurship
research, dedicated a session to the subject of business incubation each year at their annual
conference. It is from these proceedings that the definition of incubator used by much of the
industry began to emerge. In 1985, three papers presented at the conference asserted that an
incubator must have a physical plant with below market rents, shared services, logistical
support, and business consulting assistance. In the beginning incubators focused primarily on
industrial and technical areas (Antoine et.al., 2008). The majority of these incubators served
clients ranging over many different industries, prompting the term mixed use incubators
(Lewis, 2008).

While the United States was expanding its network of business incubators, other countries
around the world began to embrace the concept of business incubation as a viable approach
for stimulating, diversifying or even stabilizing local economies (Claggett, 2003). A number
of countries, including: the United Kingdom, France, Germany and Italy, adopted technology
incubation as a means of promoting job creating innovative enterprises and the
commercialization of university research. Several industrializing countries followed suit, and
the numbers of technology incubators in some of them grew considerably during the 1980s
and 1990s (UN, 2001).

7
 1970s Managed Enterprise Industrial
Workshops Agencies Estates

Business Business Incubator Science

Early
Centers Concept Parks
1980s

Multi Purpose Incubators

Specialized Incubators
Mid
1990s
Technology Incubators Sector Specific
Incubators Without Walls Incubators

Late New Economy Virtual

Incubators Incubators
1990s

Figure 2.1. Evolution of the business incubators concept (Source: Bizzotto, 2003)

Today there are more than 1100 incubation programs in the United States alone and more
than 7000 worldwide (Monkman, 2010). Incubators come in all shapes and sizes, some
specializing in a single industrial niche such as biomedical, manufacturing, software
development, agriculture and specialty foods, or even retail (Lewis, 2008). The development
of the new high tech economy stimulated the growth and led to the creation of sector specific
incubators. Another factor that enhanced the growth wave was the adoption of the concept in
many developing countries such as China, Brazil, India, Malaysia, and Turkey (Akcomak,
2009). Most developing nations including Africans are vigorously promoting the concepts in
their development endeavor. In these countries, the impacts of TBI on overall economic
development are well recognized. Therefore, understanding their direct and indirect benefits
is the main reason for the expansion of technology incubation center.

8
2.2 Current Trends of TBI

The traditional first and second generation incubators in industrializing countries were
focused on providing technology entrepreneurs with lab, workspace, shared office facilities,
administrative support with minimal advisory and networking services (Lalkaka, 2000).
Although government, chamber of commerce, and university sponsored business incubators
have occupied this space for years, their primary missions have not been aligned with the
interests of the entrepreneurs they host. Rather, they have revolved around economic
development, job creation, provision of fee based services, and generation of royalties for
universities. This misalignment can ultimately hurt the entrepreneur; in some cases, the
entrepreneurs may end up paying much money for services they may not need rather than
getting just the services needed at a price the entrepreneur can afford. Traditional incubators
are typically not staffed with full-time, dedicated executives with relevant entrepreneurial
experience (Bers and Dismukes, 2009).

Currently, the third generation incubator models, such as international enterprise centers or
international business incubators have emerged. They are intended to create high-tech and
knowledge based ventures by synergizing and linking the global R&D community, venture
capital and international joint ventures. The current 7,000 business incubators worldwide will
be expected to grow as other nations also are looking to business incubators as a way to
stimulate economic growth. InfoDev, an arm of the World Bank Group, is actively promoting
business incubator development in less developed countries through its business incubation
initiative. Also, the United Nations Industrial Development Organization (UNIDO) oversees
more than 500 incubator projects in developing and transitioning economies. The European
Commission provides funding to nearly 160 business incubation programs (Monkman, 2010).
As the movement toward establishment of business incubation facilities has expanded during
the past decade or so, the numbers of regional and national, as well as international,
associations and networks have emerged (Johnsrud, 2004).

The next generation incubators are expected to be for-profit and sector specific. Incubator
facilities provide space for fields varying from food services, to software development, to arts
and crafts (Antoine et al., 2008). In developing countries most incubators are still funded by
the government and the for-profit idea is yet to develop (Akcomak, 2009). For those wanting
to make the transition in this millennium to the third generation technology incubators, the

9
primary requirement is to enhance the quality of their management, marketing and personnel
support for client-companies, actively promote the innovation process, and facilitate access to
financing (Lalkaka, 2000). In some nations; such as Korea, China and India the concept is
fully understood that the private sector also engaged in the set up process. In order to
promote the concept, governments should play an indispensible role by devising a supportive
policy and taking the first initiation to establish technology incubators.

2.3 Definition of TBI

There are a number of definitions given for business incubation as well as technology
business incubation. Since business incubation is a broader term which encompasses the
technology business incubation under its umbrella, first it is appropriate to define what
business incubation mean. Many authors, literatures, organizations in the fields, have given
their own explanations for business incubation. Some of the definitions are quoted as follows.

National business incubators association (NBIA) defines business incubators as: It is a

program that nurturing the development of entrepreneurial companies, helping them survive
and grow during the start up period, when they are most vulnerable. This program provides its
client companies with business support services and resources tailored to young firms (NBIA,
2009).

InfoDev an army of united nation defines it as: It is the provision of support for new
businesses through the early stages of development and change. This involves helping them to
establish and accelerate their growth and success, and then graduating them when they reach a
certain level of maturity (InfoDev, 2010).

The national association for the United Kingdom incubation industry (UKBI) defines it as: A
business development process that is used to grow successful, sustainable entrepreneurial
ventures that will contribute to the health and wealth of local, regional and national
economies (UKBI, 2005).

Claggett Wolfe Associates define it as: A program where businesses can receive support that
accelerates their time to market, establishes a sound operational foundation, increases their
access to capital, and improves their opportunities for success. An incubator offers critical
tools, information, contacts and resources through coaching, mentoring, and networking in a

10
pro active manner that provides value to both incubator clients and those who support the
program (Claggett , 2003).

All definitions which revolve around business incubation approve that it is a program to
support certain objective. The objective can vary from country to country, from organization
to organization or from region to region, depending on the priority of the owners. Again the
support rendered to the entrepreneurs or start up business may vary according to the objective
of the program. Whatever the objectives, it is intended to provide necessary support for start
up businesses or entrepreneurs to grow and become self sufficient companies. Figure 2.2
shows a typical business incubation process and critical supports that rendered in the
program.

Target Entry Criteria INCUBATION Exit Criteria Graduates

Market

Pre- Training Business Financial Technolog After

Incubation Advice Support y Support Care

Physical Space

Figure 2.2. Business incubation process (Source: WB, 2010)

On the other hand technology business incubation refers to the type of incubation where the
focus group consists of innovative; mostly technology oriented, or knowledge intensive
enterprises and that have extensive interactions with the academic sphere (Johnsrud, 2004;
Bajmocy, 2007). According to Lalkaka, technology business incubator is an environment with
a small management staff that provides the physical space, shared facilities, counseling,
training and information specific to selected technology ventures, with access to university
research, finance and technical support services in one integrated and affordable package. TBI
is usually linked to a technical university, research laboratory or technology park. It is service
oriented and depends upon the use of equipment, libraries and facilities from the
university/laboratory linkage, as well as professional services from an informal network of
community supporters (Lalkaka, 2000).

11
In the same manner, the united nation for industrial development organization describes
technology business incubators as a special type of business incubator specializing in new
technology based companies. The primary mission of a TBI is not to create jobs or to develop
a region but to facilitate the commercialization of research results as well as the acquisition
and use of state of the art technologies, which would improve competitiveness of the nations
(UNIDO, 1999).

Overall the definitions of TBI emanate from its objective. Since it is established to convert
innovative idea into marketable items, the entrepreneurs in this industry are innovative or
technology oriented. Apart from this, the entrepreneurs require unique facility and support
programs that differentiate them from other incubation sectors. Therefore, their focus, mission
and requirement used to define technology incubation.

2.4 Peculiar Characteristics of TBI

In order to understand the peculiar characteristics of technology business incubators in depth,

it is worth of mentioning the characteristics of business incubator that distinguish it from
others business set up. According to Lalkaka, the distinguishing characteristics of the business
incubator can be (Lalkaka, 2000);
 A managed work space providing shared facilities, advisory services, and networking
 Small management teams with core competencies to provide early diagnosis
 Careful selection of start-up groups as incubator tenants, and their nurturing and growth
 Flexible exit policies
 Initial support is provided by the government, universities or other sponsors

Similarly, NBIA generalizes the distinguishing characteristics of business incubator into three
points (NBIA, 2009). These are:
1. It must have a mission to provide business assistance to early-stage companies.
2. It must have staff that delivers and coordinates business assistance to client companies
3. It must be designed to lead companies to self sufficiency.

The next question will be what makes TBI unique from the other types of business
incubation. A number of authors are elaborating these peculiar characteristics. Lewis D. A.
asserts that the proportion of clients is the determinant factor in order to identify the TBI.
According to him, if 50% of the client bases are technology firms then an incubator can be

12
considered a technology incubator. Moreover he claims that the most important differences
between most technology incubators and the general population of business incubators is that
operating and startup costs are greater for technology incubators (Lewis, 2001).

Similarly, Lalkaka lists the unique characteristics of TBI such as being knowledge intensive,
need access to academic and scientific facilities, requirements of high finances with the
probability of higher risk levels and need to draw upon experienced professionals and a
skilled work force (Lalkaka, 2000).

Generally, technology business incubations aim explicitly at incubating enterprises with high
or advanced technology content. A typical TBI provides its clients with a comprehensive
range of services, not only the rental space at an affordable price but also a full range of
business and specialized services aimed at intensifying technology utilization. TBIs generally
have strict admission and exit criteria and the set of business support services is designed to
include those that facilitate technology transfer and commercialization of new technologies.

2.5 Types of Incubators

The taxonomy of incubators is depending on the criteria that used to identify them. Based on
ownership and capital sourcing, there are three types of incubators: public, private, and
university (Zablocki, 2007). Based on their governance structures and business models they
can be identified as for profit and non-profit incubators (Hallam and Devora, 2009). Some
classify them according to their focus as mixed use or niche. The most frequent types of niche
incubators are related to technology (technology incubators) and bio-technology (Scaramuzzi,
2002). Therefore, while identifying the types of incubators what matters is the criteria used to
classify them. Though a number of criteria could be available and used; the frequent ones and
their subsequent taxonomy of incubators are presented in table 2.1.

Table 2.1. Taxonomy for describing technology based business incubators (Source: Hallam
and Devora, 2009)
Based on Founders Location Business Model Programs

Government Physical For-Profit Facility Based

Types
University Virtual Not-For Profit Service Based
Private Affiliates

13
For-profit incubators: Their primary objective is to generate profit. Therefore, for-profit
incubators charge service fees to the tenants and often take a portion of equity in the new
venture (Hallam and Devora, 2009).

Not-for-profit incubators: They include government and community based incubators. The
main objective for non-profit models is job creation, encouraging entrepreneurship in the
community and diversifying the economic base (Hallam and Devora, 2009).

Public/Private partnerships: Large enterprises can be linked to the development of small

businesses as vendors for components and services. The private sector will participate in the
incubation process only after the state has financed the establishment and initial operations
(Lalkaka, 2000).

University based: They might be non-profit or for profit. Usually funded by the university
and co-funded by local, national and international government and public organizations, they
provide support and services to new knowledge based ventures (Hallam and Devora, 2009).

Virtual technology incubator: Sometimes called as without walls incubator, is a program

that helps entrepreneurs to turn their ideas into viable business without providing them with
the physical amenities. A virtual program doesn‟t offer specialized space or equipment
therefore the incubator‟s operating costs are minimal (Johnsrud, 2004).

International business incubators: Such a facility focuses on international collaborations,

both financial and technological, to facilitate the entry of small foreign businesses, including
returned expatriates, into local markets (Johnsrud, 2004; Lalkaka 2000).

According to InfoDev, in 2010 the assessment on 290 business incubation in 87 countries

reveals the result that is summarized in table 2.2.

Table 2.2. Distribution of business incubation centers by their type (Source: InfoDev, 2011).

Ownership University Government Private sector Civil Society

Percentage 18 19 34 29
Business model For profit Not- for-profit
Percentage 13 87

14
Generally, incubators are identified by ownership, business model, business sector, scope,
objective etc. Data reveals that most of the incubators are not-for- profit incubators. For profit
incubators are a new generation of incubation model and might involve the participation of
private investors. In terms of sectors; most of the incubators are mixed use incubators, but
currently sector specific incubators are emerging and their number is increasing.

2.6 Goals for Establishing TBI

The goal of business incubation is different from one establishment to the other. The sponsor
of the incubators, most of the time governments, universities etc, have their own requisite for
the establishment. Therefore, it is not surprising that their missions, programs, and objectives
have differed substantially.

The main objective of TBI is to facilitate the seeding stage technological development and to
compete in the global market place. The goal of TBI is also to promote technology based
firms, and to address regional and local developmental issues through science and technology
(Monkman, 2010; KJ Smith, 2004; Dubey et al., 2005). Some of the major objectives of
establishing TBIs are (Dubey et al., 2005):

 Technology Commercialization: Most universities, R&D institutions and technical

institutions have technologies, which needs to be commercialized.
 Economic Development: A main underlying goal of support for new business formation
is economic development through job generation.
 Intellectual Property Venture: TBIs create lucrative intellectual property based venture.
 Entrepreneurship Development: One of the main goals of technology incubators in
developing countries and economies has been the development of an entrepreneurial
culture and the creation of SMEs.
 R&D for Industry: Creating awareness among academic institutions about the
requirements of industry and reorient their research and development programs to suit the
need of industry.
 Problem Solving: Act as a problem-solving agency not only in the areas of technology
but also in other related areas of business development.

Apart from the above major goals for the establishment of TBI, depending upon the
incubator‟s focus, the specific objectives might be technological innovation through

15
interaction with universities and research complexes, regional development by decentralizing
economic activity away from urban concentrations, industrial sub-contracting by linking up
with industrial estates, international out-reach by helping foreign companies to quickly enter
the domestic market and targeted development of special groups(Akcomak, 2009;
Lalkaka,2000).

Each and every country has its own economic policy and prioritizes its development endeavor
based on their policy direction. Therefore, TBI will be established to achieve certain objective
of their owners. Whatever the direct mission for their establishment, it is widely agreed that
they bring economic prosperity either directly or indirectly.

2.7 Benefits of Technology Business Incubation

Technology business incubators can play an active role in local, regional, and national
economic development efforts (Claggett, 2003). For the affiliated university, the TBI offers
opportunities to build firms led by local faculty, scientists and engineers while enabling
society to reap the rewards from investment in local universities and research institutes. The
incubator also provides employment opportunities, part time and full time, for university
students and graduates. For the start up venture, the incubator offers the promise of creating a
new business at higher survival rate, with reduced duration and costs. For the community,
these businesses stimulate economic activity, with collateral growth of suppliers and
customers. Significant tertiary effects come from the incubator playing a catalytic role in
developing entrepreneurial skills, modifying the culture of university-industry relations, and
influencing national policies toward small businesses. For the state, the TBI is a
demonstration of its commitment to promote employment, technology commercialization,
regional development and exports, while securing returns as corporate and personal taxes
which are typically many times the net subsidy (Lewis, 2008; Monkman, 2010; Lalkaka,
2000; UN, 2001).

The following are the major benefits that can be achieved by technology business incubation
establishments (Claggett, 2003).
 New Business Formation: It is the most common economic development focus of
incubators around the world. These programs focus on supporting entrepreneurs from
business concept development to product launch.

16
 Business Stabilization: A number of regions around the world have begun to investigate
ways to use incubators to reach out to and help existing small-to-medium-sized
enterprises that have become unstable for one reason or another.
 Business Expansion: A number of regions around the world have also begun to use
business incubators to help existing small to medium sized enterprises expand. These
programs provide service to help business owners improve operational efficiency,
identify, and access new markets, expand production capabilities, hire and manage labor,
and secure capital.
 Business Attraction: A recent enhancement by economic development professionals is to
use business incubators to attract businesses to a region.

In general, technology incubators afford a means of enhancing overall economic growth and
development, facilitating restructuring, technology diffusion and commercialization, and
creating jobs. The role of technology incubators as technology transfer mechanism, as
supporting the development of small and micro enterprises, and as overall economic
development tool is discussed below.

2.7.1 Role of TBI as Technology Transfer Tool

Transfer of technology has been defined as the transfer of systematic knowledge for the
manufacture of a product, for the application of a process or for the rendering of a service.
Technology exists in different forms and can be transferred through different channels (UN,
2005). In the 21st century, technological innovation is an essential factor for an enhanced
competitive edge for industries within the knowledge based economic system (Marques et al.,
2010; Liu et al., 2009). The basic source of industrial development, knowledge and
technological change comes from industrialized countries through technology transfer (Saad,
2000). Some countries such as Japan and Korea fulfilled technology transition through the
successful technology transfer and technology learning. With the establishment of formal
research and development operations, they are making the transition from imitation to
innovation, including the creation of patentable knowledge (Li, 2010).

The ability of businesses to engage with innovation and development is generally recognized
as being the driving force behind increased revenue and improved living standards. Small
innovative firms, including the new technology based firms, are decisive actors in this
process, since they accelerate structural change and create new forms of employment.

17
Technology business incubation is the mechanism and infrastructure that is tending to be used
to support the generation of new firms, commercialize technology and attract investment.
They are established to facilitate the transfer and commercial development of university or
laboratory owned discoveries and inventions. They provide the scientist/inventor-turned-
entrepreneur with a structured environment in which to perfect the scientific and technical
aspects of the technology and to gain experience in areas such as management, marketing,
finance, product design, and other critical to successful business development. In this
context, they play an important role, to support and increase this dynamic trend, as a
knowledge/technology transfer mechanism (Johnsrud, 2004; Marques, 2010).

2.7.2 Role of TBI for Supporting Small and Micro Enterprises (SMEs)

In both developed and developing economies, small and medium enterprises (SMEs) are
considered crucial to fostering economic and social development. The failure rate of small
new businesses in their initial years is high in both developed and developing economies,
particularly in Africa where there are higher percentage of inexperienced workers starting
businesses. The failure may arise from the competitive environment within which the
businesses are launched and also the effectiveness of the specific business idea. It is also a
consequence of the lack of experience of the entrepreneur who is launching the business and
deficiencies in the environment such as shortage of capital, legal difficulties, lack of
information, etc (WB, 2010).

Business incubators provide focused support to entrepreneurs through a supportive

environment that helps them establish their business ideas and develop their concepts into
market ready products, supports the acquisition of business knowledge, facilitates the raising
of necessary finance, introduces the entrepreneurs to business networks, all of which should
substantially reduce the level of failure. They increase new entrepreneurs‟ chances of survival
and success by building capacity and networks (Monkman, 2010; Scaramuzzi, 2002).

Moreover the TBI can play a vital role in increasing the awareness levels of the SMEs to
know the emerging trends in technology and business opportunities. This attempt of bringing
in business incubators to support the SMEs technology transfer issues will provide a new
dimension to the business incubation movement and will also lead to evolving growth
accelerator programs as a major value benefit to SMEs. The SMEs in need will get a
personalized and holistic support (A.Balachandran, 2008).

18
Figure 2.3 depicts that the rate of growth for SMEs while receive incubation assistance
program is much more than when they do not so.

Help with a
Effect

foreign trade

Help with SME with incubator

a loan assistance

Advice on
Marketing The success of an
incubation program

Business
plan
SME with out incubator
assistance

Time

Figure 2.3. Package of assistance that makes a difference in the business success (Source:
NBIA, 2009)

Generally, incubation programmes can increase survival rates dramatically when programmes
are well run and help SME to manage risk and build competitiveness through early, high risk
growth stages. In this respect technology incubation program play a major role by providing
business development services for SMEs.

2.7.3 Role of TBI as Economic Development Tool

TBIs help to strengthen local economies because their small business tenants and clients are
more likely to survive the precarious early years than start up enterprises that do not receive
incubator support services. Thus, governments often fund and support business incubators as
a way to increase the number of successful new companies. As the number of companies
increases, so do the number of better paying jobs which, in turn, broadens the community's
and state's tax base (Johnsrud, 2004).

According to Lalkaka, the rationale behind the incubator as an economic development tool
arises from its potential to do some of the following (Lalkaka, 2000):

19
 Empower disadvantaged groups and backward regions
 Promote technology commercialization
 Promote synergy among businesses and with university, research and civil society,
 Reduce costs and consequences of business failures
 Modify the cultures of risk-taking, teamwork, networking, information sharing
 Create direct and indirect jobs
 Generate income, sales and exports for the community/country

Generally, if incubators are supported with comprehensible policy direction and full
commitment, their impacts on overall economic development is tremendous. Specially for
developing nation such as Ethiopia, the program will assist the economic growth efforts
through multiple directions. Apart from increasing employment rate, broaden tax base and
increasing survival rate of emerging business; the major impacts of TBI is in creating
innovative entrepreneurs and businesses in the society.

2.8 Facilities and Supports Included in TBI Centers

A typical business incubator is a multitenant facility with common office equipment and a
shared conference room. There is also an on-site full-time manager to assist in the delivery of
business assistance training and services. The facility should provide flexible space so that an
emerging company can expand within the facility during its period of incubation, as well as
be able to accommodate new firms. In the case of technology incubation, high speed
broadband internet access, specialized laboratory space or other unique research, design, or
production capacity and, where possible, access to university research facilities are considered
critical for attracting clients (Lewis, 2001).

Moreover incubators offer flexible leases, reception, and other common areas. They provide
emerging businesses with an infrastructure of telephone, local area network along with shared
use of basic business equipment such as copier, fax machine, and other office equipment. An
incubator can give a new company a much needed visible identity to help promote its
offerings and find funding or investment capital (KJ Smith, 2004).

Z. Sipos and A. Szabo grouped these necessary support services into four groups and list
down them as (Sipos and Szabo, 2006):

20
1. Basic services:
A) Rent of space: Renting flexible space (office, production space, laboratories).
B) Usage of places: These services include physical and industrial infrastructure, conference
hall and conference rooms, shared meeting and board rooms, communal rooms for guests and
visitors, computer rooms, cafeteria and other similar services.
C) IT services: IT service comprise of telecommunication and information technology, access
to high-speed internet, electronic mail, design of websites, shared office services.

2. Advanced level services

A) Consulting: Consulting services include business plan processing, continuously provision
of business consultancy, consulting on tax and customs, financial management, consulting on
innovations, modern technology, acquisition and protection of license, and other on-demand
issues.
B) Business Training: Trainings and courses offered in the center include professional
business training courses, business management skills training, knowledge transfer, tutorship
and personnel training services, entrepreneurial training programs and offering special
courses.
C) Business Information: The service comprise of information on tax and customs,
information on innovations, new technology and protection of intellectual property rights,
information on available financial sources, hi-tech advisory and data base.
D) Cooperation: The services include assistance with networking with professional,
networking with other incubators and different support institutions.

3. Financial help
Financial help services comprise of reducing start-up costs, assistance with early financing
(early bank loans, angel and commercial finances), financial services like micro loans, credit
program, intermediation of financial sources, fundraising, access to favorable financing
resources.

4. Additional services
Office services, usage of equipments: Office services include reception, postal services,
office equipment, usage of tools, shared office administration (for example secretarial
services), Library, actual legal, accountant and other.

21
Moreover, technical services, technological help and security and insurance are supports
included in the TBI. Some incubators provide as many services as possible while other
provides some of the basic services. All the services offered by technology incubators might
fall in one or more support programs listed above. The mission, focus, level and other aspects
of the TBI will determine what types of services should be offered by the program.

2.9 Frame Work for Establishing TBI

Typically, the preparatory work comprising feasibility and business planning for a business
incubator requires 6 to 9 months, and the implementation takes a further 6 to 9 months, that
is, a total of almost one year before the TBI can start operations. Where the concept is new,
the implementation process can take longer; with strong leadership and assurance of funding,
the process can be accelerated (Lalkaka, 2000). The general steps for preparatory process are
listed below.

Step 1: From the start, responsibility has to be established to coordinate program

development. It should stress that government enabling policies and financial supports are
essential initially. Further, private sectors have a responsibility by helping create businesses.
Step 2: A small study team of key selected sponsors could undertake a well prepared
reconnaissance tour to TBIs and related developments in industrial and industrializing
countries.
Step 3: The feasibility study then looks at the main parameters. Entrepreneur surveys are
useful to broadly indicate the local profile, attitudes, strengths and needs, in order to
determine the services and facilities for which the TBI is to be designed
Step 4: Consensus has to be developed among the key players on the viability of the program.
This is followed, if warranted, by the business plan to determine management, market, and
money needed, to identify the options regarding objectives, facilities and services design, and
to analyze investment, income and expense estimates, risk factors, working capital,
marketing, implementation actions and other parameters.
Step 5: The critical assumptions have to be discussed and final decisions taken whether and
how to proceed with the TBI implementation process.
Step 6: Once the project is starting, legal incorporation has to be studied or executed and the
funding pursued seriously.

22
Step 7: The appropriate organization structure is developed and the board of directors
formally appointed, with the necessary responsibilities and authority. Figure 2.3 shows an
incubator preparation process.

Project Development

Promote Establish Steering Appoint Study Tour

Concept Committee Consultant

Inception Report

Strategic Feasibility study

Objectives methodology

Market Research

Identify possible Evaluate entrepreneurial Access existing

locations potential and needs enterprise support

Location Interim Report Modality

Business Planning

Site and Operating aims Facilities and Organization Costs and

Premises and procedures services and staffing funding

Final Report

Create legal Appoint project Recruitment and Obtain

entity managers training financing

Implementation

Figure 2.3. Incubator establishment process (Source: UKBI, 2005)

23
The above seven steps show the general procedure to establish technology incubation
programs; however, the detailed procedures can be developed by the project management
team. Since the success of the program is largely dependent on the viability of procedures for
establishment, it is very important to design an effective and efficient procedure.

2.10 Challenges and Failure Factors of TBI

For a variety of internal and external factors, incubator planning and operations in developing
countries have problems which constitute risks in its successful operation. These include the
following (Lalkaka, 2000):

 Feasibility process is often skipped, or not promptly implemented

 There is inadequate involvement of business/community.
 Inadequate start up finance and working capital for incubator.
 Over-lapping SME support initiatives cause waste of resources.
 Location may be chosen for political considerations.
 Entrepreneurship is poorly understood and nascent.
 Manager with poor communication, networking and business skills, and low salary.
 Constraints such as access to markets, management skills, trade and technology
information.
 Difficulty in accessing sources of finance due to bureaucratic appraisal, high collateral
and interest, and lack of information on sources.
 Legislative environment and tax structure are unfriendly to small enterprise development.
 Weak international linkages.

Generally, TBI fail to perform according to expectations for a variety of reasons, starting in
the planning stage such as lack of feasibility study, inadequate pool of entrepreneurs, weak
demand for services, poor governance, location with poor business infrastructure and
inappropriate building layout. Moreover, they might fail because of weak operating factors
such as manager without business experience and skills, inadequate counseling, information
and networking services, poor systems for accessing finance for tenants, high investment and
operating costs and insufficient professional linkages. Therefore, it is important to consider
such challenging factors at the very beginning, and providing a sound working environment
for incubators to succeed.

24
2.11 TBI from the Perspective of Ethiopia

The role of technology business incubation in technology development is being universally

recognized. Their rationale for supporting technology transfer mechanism, SMEs and overall
economic development lies in their contribution to employment, new business development,
innovation and growth. The data regarding business incubator effectiveness show that the
survival rate of incubated firms range is much higher when compared to the survival rates of
non incubated businesses. In terms of job creation, the program generates a substantial
number of employments in countries where such programs and projects are implemented.
Generally, incubators have a multiplier effects on the overall economic development.
Therefore, Ethiopia can be benefited from TBI establishment if significant support is given to
the program. Government has to provide a sound policy environment and financial incentives
for the implementation and expansion of TBI programs. Additionally, the first initiation for
the introduction of the program should be start from the government.

Currently, encouraging initiatives is seen by the Ministry of Science and technology in

preparing policy document which favors the establishment of incubations. Moreover, there
are few ICT focused incubators in some regions. These include Mekelle Information
Communication Technology Business Incubation Centre, Bahir Dar ICT Business Incubation
Centre, South Nation and Nationalities People Regional State ICT Business Incubator,
Adama Business Incubation Center (InfoDev,2011). All the aforementioned TBI
establishments are focusing on ICT and their scales of establishments are considered to be
small.

Apart from these initiatives, the country much lags behind in the development of TBIs even in
comparison with some developing nation. Therefore, the program should be given a proper
attention and support from the government and concerned authorities. While developing
technology business incubators program, Ethiopia can tailor the experience of other countries
to fit into its context, as there is sufficient experience across the world. However, in order to
start a business incubator project there is a need to carryout comprehensive planning and
preparation. Sectors which have a great impact on overall economic development and which
increase the competitiveness of the country, such as Basic metal and engineering, should be
supported with incubation program.

25
 CHAPTER THREE

CASE STUDY

3. BASIC METAL AND ENGINEERING

3.1 An Overview of Basic Metal and Engineering Sector

According to the central statistical agency, the manufacturing industries in Ethiopia are
categorized into three groups. These are:
1. Large and medium scale manufacturing establishments( engaging 10 or more persons and
using power driven machinery),
2. Small scale manufacturing establishments (engaging less than 10 persons and use power
driven machinery) and
3. Cottage or handicraft manufacturing establishments (performing their activities by hand).

Since TBI facilities are intended for the commercialization of innovative or technological
idea, the use of specialized and simple machineries in the production process is inevitable.
Therefore, under this study only the first two categories of basic metal and engineering
manufacturing industries are analysed.

Basic metal industries include production of metal from ore, scrap and conversion of billet,
slab etc. into primary metal products while engineering industries include manufacture of
fabricated metal products, machinery and equipment, computing machinery, electrical
machinery and apparatus, communication equipment and apparatus, motor vehicles, trailers
and semi-trailers.

The small scale basic metal and engineering sector is engaged on the manufacture of
structural metal products, cutlery, hand tools, treatment and coating of metals, general
mechanical engineering and hardware. According to the survey of 2008, there is no small
scale basic metal and engineering sector engaged in the production of machinery and
equipment. There were 4355 establishments and created 15,301 permanent and temporary
employment. It is next to grain mill services and manufacture of furniture in number of
establishment, numbers of persons engaged, gross value of production and value added which
constitute 10 %, 11 %, 15 %, and 15.6 % of the total respectively. Therefore, this sector has a
viable source of employment and has a tremendous economic impact among the small

26
manufacturing sectors. Figure 3.1 and 3.2 compare the basic metal and engineering with other
manufacturing sectors in numbers of person engaged and gross value of production
respectively.

60
50
Percentage

40
30
20
10
0
Food Grain Mill Textiles Wearing Basic metal Furniture Others
Products Services Apparel and
Engineering
Manufacturing sectors

Figure 3.1. Comparison of small scale manufacturing sectors in number of person engaged

45
40
35
Percentage

30
25
20
15
10
5
0
Food Grain Mill Textiles Wearing Basic metal Furniture Others
Products Services Apparel and
Engineering
Manufacturing Sectors

Figure 3.2. Comparisons of small scale manufacturing sectors in gross value of production

The medium and large manufacturing of basic metal and engineering enterprises are engaged
in the production of machinery, equipment, motor vehicles, trailers and semitrailers. Table 3.1
shows the medium and large manufacture of basic metal and engineering sector by numbers
of establishments and job creation in 2010.

27
Table 3.1. Number of medium and large basic metal and engineering establishments and their
number of employees in 2010 (Source: CSA, 2011)

2009/2010
No of No of
Sub-Sector Firms employees
1 Manufacture of Basic Iron and Steel 39 4016
2 Manufacture of Fabricated Metal Products 154 9977
3 Manufacture of Machinery and Equipment 15 859
4 Assembly of Motor Vehicles, Trailers and Semi-Trailers 11 1671
Total 219 16,523

From table 3.1 the number of firms engaged in the manufacture of machinery, equipments,
motor vehicles, trailers and semitrailers constitute 12 % of the total metal and engineering
sector. However, most of the firms are engaged in the fabrication of metal products which
account 70%. While analyzing the sector growth in terms of number of establishment, it
shows a higher level of growth starting from 2006/2007. Similarly, the employment level is
increasing in line with the number of establishments.

250

200
No of firms

150

100

50

0
2005/2006 2006/2007 2007/2008 2008/2009 2009/2010
Years

Figure 3.3. Trends of basic metal and engineering establishments

The following chart can be developed while analyzing the sector in terms of job creation in
comparisons with other manufacturing sectors from 2005-2010.

28
 14

percentage of contribution
12 Legend
10
Number of
8 firms
6
4 Number of
2
employees
0
years

Figure 3.4 Contribution of the sector in terms of job creation and number of establishments

From figure 3.4, the contribution of the sector in terms of number of establishment and job
creation shows a decreasing trend from 2005-2008; however, starting from 2008 onwards, it
is on increasing trend. Currently the contribution of the sector in both parameters is around
10%. In line with the fast national economic development, the contribution of the sectors in
job creation is also expected to increase. Further analyzing the contribution of the sector to
gross value of production, it is around 15%.

Table 3.2. Gross value of production of the sector in thousands of birr (Source: CSA, 2011)

Sub-Sector 2009/2010
1 Manufacture of Basic Iron and Steel 1,699,510
2 Manufacture of Fabricated Metal Products 3,402,348
3 Manufacture of Machinery and Equipment 222,265
4 Assembly of Motor Vehicles, Trailers and Semi-Trailers 800,166
Total 6,124,289
Its proportion from the total manufacturing industries 14.58 %

From the above analysis the growth of the sector has a tremendous economic impact on the
country from the perspective of job creation and gross value production. However, from the
research by access capital, Ethiopia expends 37 % of the money in 2010 that used to purchase
imported items on basic metals and engineering products. Machinery, metals and related
materials, vehicles and electrical materials constitute 11 %, 11 %, 8 % and 7 % of the total
imports respectively. The figure is even greater than the percentage of money used for the
purchase of petroleum and chemical products which is 17 %.

29
Figure 3.5. Comparisons of value of imported products

In terms of product variety, the sector‟s major products include low-value engineering
products such as iron bars, wires, nails, iron sheets, crown cork, motor vehicle spring,
metallic door and metallic window. This reveals that there is huge demand for the products of
the sector. Therefore, the growth of the sector can assist the process of import substitution
products and saves foreign exchange. Generally, supporting the sector to be technologically
competent brings a significant economic benefit.

3.2 Business Start-up and Technology Related Problems in the Sector

Whether they are small or medium to large scale, the enterprises in the sector has a number of
problems during their establishment and operation. Under this title, the problems associated
with firms engaged in small scale while starting their business and the problems of medium to
large scale firms associated with their low technological advancement are discussed. Because,
mostly such kind of problems that are calling for the need of establishment of TBI. The data
used in this analysis are obtained from the survey of CSA of 2008 and 2010 on nationwide
manufacturing enterprises.

Table 3.3 shows the first major problems of small scale enterprises in the sector at the time of
establishment.

30
Table 3.3. Problems of small scale metal and engineering enterprises during establishments

Problems No. of Percentage of Cumulative

Responses Responses Percentage
Lack of sufficient initial capital 2360 2360/4266=55.32 55.32
Lack of smooth supply of raw material 221 221/4266=5.18 60.5
Obstacles from government regulation 216 216/4266=5.06 65.56
Lack of information 94 94/4266=2.2 67.76
Lack of foreign exchange 88 88/4266=2.06 69.82
Access to credit facilities 64 64/4266=1.5 71.32
Absence of adequate skills 51 51/4266=1.2 72.52
Others 545 545/4266=12.78 85.3
No problems faced 627 627/4266=14.7 100
Total number of respondents 4266 100

From table 3.3, lack of sufficient initial capital is the most significant problems of the sector.
Moreover, lack of smooth supply of raw material, obstacles from government regulation and
lack of information is the next major problems cited by the participants of the sector. These
problems constitute almost 70 % of the total problems facing the industry. Only 15 % of the
respondents said they have no problems. Further analyzing the sector for reasons of not
working at full capacity, table 3.4 is developed.

Table 3.4. Problems of small scale basic metal and engineering enterprises during operation
Problems No. of Percentage of Cumulative
Responses Responses Percentage
Absence of market demand 1661 1661/3812=43.57 43.57
Shortage of supply of raw materials 848 848/3812=22.25 65.82
Lack of working premises 423 423/3812=11.1 76.92
Absence of credit facility 240 240/3812=6.3 83.22
Shortage of supply of spare parts 52 52/3812=1.36 84.58
Lack of adequate skills 23 23/3812=0.6 85.15
Others 565 565/3812=14.82 100
Total number of respondents 3812 100

31
Absence of market demand, shortage of supply of raw materials, lack of working premises,
absence of credit facility are the top major problems. These constitute 83.22 % of the total
problems. The survey also shows there is an information problem such as where to get
appropriate training, about market and appropriate machinery.

Based on the research conducted by Asmamaw and Zelalem on Engineering and technology
challenges, the factors that contribute for slow progress of the medium to large enterprises in
the sector are the quality of products are not competent, new technology transferring system is
very limited, innovation trends are very low. Limited types of products are produced
repeatedly in a particular industry, which indicates that there is a stagnant technology.
Accordingly, insufficient competence level of employee and skilled man power shortage,
insufficient trends on research and development, lack of relations with Ministry of Science
and Technology, limitation in product variety, limitation of innovation trend, lack of sub
contracting culture, lack of loan from banks, lack of support from capacity building
organizations, lack of recent information on the sector, short coming in product acceptance,
compliance to local & international standards, and intellectual property protection issues are
problems observed in the sector (Asmamaw and Zelalem, 2010).

It is clear that the prevailing problems and challenges should be improved, in order to bring
the competitiveness of the sector. Therefore, adoption of new and appropriate technology,
improvement of current technology, research and development, partnership and strategic
alliance with academy and government, foreign technology partnership and technology
transfer are among the priority solutions to achieve the desired objective. These will call for
the establishment of technology business incubation focusing on the sector.

3.3 Significance of TBI Establishment for Metal & Engineering Sector

Basic metals engineering plays a great role in enhancing the economic development of
Ethiopia. It is at forefront in the realization of the agricultural development lead
industrialization strategy of the country. This is because of its economic and technological
contribution in supplying inputs such as raw materials, machinery, hand tools, spare parts,
components, construction materials as well as in expanding infrastructure and providing
material for agriculture, and other economic sectors. One of the main indicators of socio-
economic and technological development of a country is the level of the progress scored in
this sector. However, in Ethiopia industries that might help accumulate technological

32
capabilities and create dynamic inter industry linkages such as metal processing and
engineering industries are few in numbers. Overall, the technological level of firms is very
low.

Since technology is an essential precondition for improving productivity, attaining industrial

development and promoting export growth; innovative entrepreneurs focusing on the sector
should be supported with conducive environment to bring technological development of the
sector and the country at large. Moreover, it is a key element for Ethiopia to integrate into and
compete in the global economy as well as to meet its development goals.

The main role of technology business incubation for metal and engineering sector is through
creating new innovation and technologies and serving as a technology transfer mechanism.
Innovative entrepreneurs increase the technological development and competitiveness of the
sector by broadening the number of business establishment in the sector. The establishment is
also used to promote technology innovation through interaction with universities and research
centers, introduce new ventures to functioning clusters of high technology enterprises and
provide advisory services for enterprises initiating innovative products and services.
Consequently, they promote technological product export, create job, increase revenue and
tax base.

Generally, the establishment of technology business incubation for this specific sector enables
the country to diversify the non-existent technology based products, improved productivity
and quality. Moreover, existing medium and large enterprises can be benefited from the TBI
through developing new sources for components by subcontracting, acquiring for innovations
and opportunities for investment of funds in new ventures. The overall effects of TBI center
establishment bring industrial development for the country. For these reasons the
establishment of TBI for metal and engineering sector is indispensable.

3.4 Policy Environment toward TBI Establishment for the Sector

Based on the draft policy document of Ministry of Science and Technology (MOST), there is
currently lack of systematic transfer of foreign technologies based on the demands of the
various social and economic sectors. Additionally, the existing financial system of the country
is not designed to address the needs of innovative activities in the enterprises. As a result, the
ministry has adopted the National Science, Technology and Innovation Policy. The policy is

33
adopted under the vision to see Ethiopia undertaking coherent STI initiatives which
eventually lead the country to begin exporting its own technologies by the year 2025. Table
3.5 shows some of the indicators in technological capabilities at base line and the milestone to
be achieved in 2025.

Table 3.5. Milestone of for technological capability (Source: MOST, 2011)

Objective Baseline (2010) Targets (2025)

Technology transfer & No systematic way of Export of Ethiopian technologies
development technology transfer
Export promotion Dominated mainly by Export of high technology products
primary goods
Industrial capability Huge unmet demand for Adopt international quality
manufactured products standards, innovate new materials
and products
GDP (%) 0.2 2
Patents and utility Patent 1 Patent 110
Models (UM) granted Utility Model 24 Utility Model 3000
for residents

From table 3.5, it is clearly shown that the current technological development level of the
country is very low. The budget allocated for the promotion of science and technology is
insignificant. The outcomes from patent right and utility model also reflect there is low level
of innovation. Hence, it is understood that the country shall build its technological capability
by devoting resources to assimilation, adaptation and improvement of foreign technologies.

Consequently, a strategy is devised to alleviate the existing problems and to increase the
technological capability of Ethiopia. Some of the strategies are establishing regional centers
of excellence to undertake research focused on technology adaptation, promoting the
development of domestic technological capabilities for the effective absorption of foreign
technologies, creating conducive and supportive environment for nurturing and developing of
innovative business enterprises and setting national priority programs for the transfer of major
technologies. Similarly, an incentive strategy is devised. Creating national technology and
innovation funds, introducing fiscal incentives such as tax exemption and duty free privileges
for technological and innovative activities of Ethiopian SMEs, creating a system of special
privileges and awards for outstanding innovations/achievements are some of the incentives
stated in the policy.

34
Metals & metal products engineering are categorized as a national priority technology
capability programs of Ethiopia based on the immediate needs and the strategic moves of the
country. At the same time Science and technology parks or incubators are identified as the
innovation support and research system. It is stated that incubators are the major actors which
will be engaged in the actual work of technology transfer, diffusion and research.

Based on the interview conducted with the staffs of Ministry of Science and Technology, it is
known that a team has formed to study the possibility of developing TBI in the country.
Generally, from policy perspective, there is conducive environment for innovative
entrepreneurs in basic and metal engineering. Moreover, the policy encourages the
establishment of technology incubators.

35
 CHAPTER FOUR

4. BENCHMARKING BEST PRACTICES

4.1 The Importance of Benchmarking and Criteria of Selection

Benchmarking is the process of comparing the quality, the performance and the efficiency of
a specific process or method to another that is widely considered to be a standard or best
practice (UKBI, 2005). Since there are sufficient experiences worldwide both in developed
and developing economies; it is considered appropriate and effective to build on the
experience of other countries while developing technology business incubators for Ethiopian
context. However, the stage of development, the educational level, the culture of society, the
government policy and other situations of Ethiopia are different from other countries. These
preconditions should be critically analysed, while adopting others‟ experiences.

The experiences of China, India, Brazil, Korea, Malaysia, South Africa and USA have taken
as bench mark. The selection is mainly based on their rich experience on the topic,
availability of bench marking parameters, recommendation from international organization
and relevancy with developing nation. United Nations Industrial Development Organization
lists china, India and Korea as countries of best practices for the development of technology
incubation (Tang et. al., 2010; Dubey et. al., 2005; Lalkaka, 2000; UNIDO, 1999). Similarly,
the International Bank for Reconstruction and Development cited Brazil, Malaysia and South
Africa as a reference for global good practice in incubation policy development and
implementation (InfoDev, 2010; World Bank, 2010). USA is a pioneer that has an extensive
and proven experience in technology business incubation as a result it is beneficiary to adopt
its successful parameters.

Zablocki lists benchmarking factors while establishing incubation centers. These factors are
overall characteristics of incubators, nature and scope of support services, key tasks of
managers and partners, promotion of services, monitoring and evaluation of business
incubator services, financial strategies and performance of assisted projects and regional
impacts (Zablocki, 2007).

36
4.2 Benchmarked Countries

1. CHINA

The technology incubation policies and programmes in China basically evolved from the
`Torch‟ programme initiated in 1988 by the state council and is implemented by the Ministry
of Science and Technology (MOST). The Torch programme implements specific projects for
the development and commercialization of new technologies in specialized fields. Priority
areas include new materials, environmental technologies, biotechnology, and aerospace and
information technology. Tenant companies are mostly spin offs from universities, research
and development institutions, state owned enterprises but ownership typically remains with
the parent institution.

China has been proactive in formulating specific fiscal policies and incentives to encourage
both the incubators and their tenants such as providing tax exemption, reduction of income
tax, low rentals to attract talented entrepreneurs and start-up companies and also to facilitate
international cooperation and financing mechanisms. Besides the national and local
governments have also formulated policies and enacted laws for encouraging technological
innovation, commercialization of research and development results and promotion of
technology intensive SMEs which tacitly support the development of technology business
incubation in China. As a result, China is only next to USA in the number of operational
technology incubators. This is the result of strong government back up, proactive policies and
extensive networking [InfoDev, 2010; World Bank, 2010; UKBI, 2005).

Up to 2008, 670 technology business incubators were set up. These TBI occupied 231.6
million square meters and hosted 44346 ventures which generated 18.662 billion Euros and
employed 928000 persons. In all, 31764 ventures in total have been graduated from these TBI
by 2008 (Tang et al., 2010). Table 4.1 summarizes the nature of Chinese incubators.

37
Table 4.1. Characteristics of Chinese technology incubation centers (Source: Tang et al.,
2010; InfoDev, 2010; World Bank, 2010)

Chinese Incubators
1. Management and Operational Policies
Objective Creation of technology based new enterprises, facilitating technology
transfer, creating jobs and regional economic development
Nature Non-for-profit organizations , Mostly government-sponsored
Governance/ Central government gets involved in policy making and monitoring;
Structure The board of directors governs TBI. Board members come from local
government, university, enterprises and other investors.
Sources of a) Local government (free land and initial fund)
funding of TBI b) Other sponsors such as universities, state-owned enterprises and
other investors.
Funding of new Very complex system with many potential funding institutions at
ventures different levels. High proportion of venture capital comes from
entrepreneur themselves. Weak venture capital system especially at
early stages. Public funding used (as seed) to attract other funds from
other sources.
a) Critical role played by incubator at early stages of firm creation
b) Innovation fund is available for new ventures through a project
competition
c) Local government agencies pool funds, identify investment and
channel funds into new ventures
Selection To hold intellectual property with market potential; to have a qualified
entrepreneurial team.
Meet the requirement of MOST such as:
i) Maximum registration capital,
ii) Foundation year,
iii) Registration place,
iv) Incubation surface,
v) Property of high-tech and environment friendly products and
vi) Professional entrepreneurs.
Duration 3-5 years depending on the sector
Graduation A series of formal criteria determined by MOST and TBI
2. Services Provided to Tenant Companies
Physical resources, business operation support, access to capital and investments,
mentoring, coaching, consulting, legal advice, book-keeping, networking services
3. Performance and Outcomes
Outcomes a) 72 tenant firms per incubator
(2005-2008 on b) 19.75 employees per tenant firms
average) c) 37.85 graduated firms per incubator

38
2. INDIA

The incubator movement in India took off in the late 1980s as a complementary policy tool
aiming at promoting entrepreneurship and stimulating new venture creation. The government
has introduced a special scheme in 1998 for providing income tax relief on research and
development expenditure and five-year tax holiday for commercial research and development
companies to invest in research and development and also to encourage the establishment of
research parks. This is essentially to build on India‟s strong human resources base in science
and technology to address its need for modernization and competitiveness in the global
market.

It was not until 2000 that India started its TBI programme with clear policy strategy. TBIs
under the national science and technology entrepreneurship development board focus on
technology areas such as information and communication technology (ICT), biotechnology,
new materials including nano materials, instrumentation and maintenance, manufacturing and
engineering, design and communication (media & infotainment), health, agriculture and allied
fields, and energy and environment. Tenant companies in a TBI may number 10 to 20 and
they generally graduate out after 2-3 years of incubation (InfoDev, 2010; World Bank, 2010).
Table 4.2 shows the specialization area of Indian mechanical and manufacturing Incubators
and their nature.

Table 4.2. Typical profile of TBI in manufacturing domain of India (Source: UKBI 2002)

Parameters Specification
Total floor area 15000- 25000 sq ft
Number of companies 10-15
Floor area for each company 350-500 sq ft
Number of employees at start up 3-10
Incubation period 3-5 years

By the end of 2009, there were approximately 120 TBIs in India of these, 40 were established
in software technology parks (STPs). TBIs were promoted by government departments, banks
and financial institutions, and private companies. The incubated enterprises have generated
cumulative revenue about US$125m by 2009 (Tang et al., 2010). Table 4.3 summarizes the
nature of Indian incubators.

39
Table 4.3. Characteristics of Indian technology incubation centers (Source: Tang et al., 2010;
InfoDev, 2010)

Indian Incubators
1. Management and Operational Policies
Objective Creation of technology based new enterprises, facilitating technology
transfer, creating jobs and regional economic development
Nature Both profit and Non-profit organizations. More than two third TBIs are
government promoted and about one third by others such as banks and
private companies. Host institutions where the TBIs are located play an
instrumental role in management and performance of the TBI
Governance/ Central government plays a promoting role and has loose control over TBI.
Structure The main bodies that govern the TBIs are the governing/ advisory board and
the executive management team at the local level. The local or regional
governments do not have major control over TBIs, except where they are
involved as one of the stakeholders.
Sources of a) Central government
funding of b) Host institutions
TBI c) Financial institutions
d) Private sector companies
Funding of Very complex system with many potential funding institutions at different
new levels. High proportion of venture capital comes from entrepreneur
ventures themselves. Weak venture capital system especially at early stages. Public
funding used (as seed) to attract other funds from other sources.
a) TBI plays a critical facilitating role to obtain funding for start-ups and
provide seed capital in some cases
b) Weak support from angels and VC, but improved in recent years.
Selection Generally, the following criteria are applied for selection:
Sound idea and business plan, commitment and integrity of promoters,
potential for growth, willingness to follow mentoring and advice, capacity
to meet targets and willingness to pay for facilities and services.
Duration 2-3 years depending on the sector (duration can be reviewed)
Graduation A series of formal criteria determined by TBI
2. Services Provided to Tenant Companies
Physical resources, business operation support, access to capital and investments,
mentoring, coaching, consulting, legal advice, book-keeping, networking services
3. Performance and Outcomes
Outcomes It is estimated that about 500 tenants graduate every year from total TBI in
(2005-2008 India. 60% of them are considered to be technology based start ups.
on
average)

40
3. BRAZIL

The first incubator was established in 1986. Most incubators were located in a university or a
research institute and more than 80 per cent of the tenants were spin offs from academia and
other companies. Incubators in Brazil are generally linked to universities and financed by
various governmental and non governmental sources. These trends of incubators in Brazil are
reflections of synergies (a triple helix) among the university, industry, and the government.

Another interesting feature of incubators in Brazil is the innovative approaches to incubation

models. Local needs and the attempts to alleviate poverty shaped the emergence of different
incubators and incubation models significantly. Many incubators were established as a
remedy to unemployment aiming solely at job creation especially in traditional sectors such as
agricultural equipment, furniture, and textile. There are even incubators that are specialized to
foster entrepreneurship in cultural activities such as music, art, and cinema industry. There are
now about 400 incubators operating in Brazil. More than half of these incubators are
technology business incubators (Zablocki, 2007; InfoDev, 2010).

There were cases where incubators did not provide business support and consultancy services
at all. Moreover some incubators provided very poor physical and operational infrastructure.
These problems were exacerbated by institutional constraints to entrepreneurship, such as
bureaucracy and insufficient risk capital funding (InfoDev, 2010). Table 4.4 summarizes the
nature of Brazilian incubators.

41
Table 4.4. The Characteristics of Brazil incubation centers (Source: Zablocki, 2007; InfoDev
2010)

Brazilian Incubators
1. Management and Operational Policies
Objective Transfer of technologies generated at the universities and at research
centers, creation of new business opportunities for employment and
products with high added value, and the development of
entrepreneurship in technology-based businesses
Nature For-profit, non-profit. Incubators in Brazil are reflections of synergies
(a triple helix) among the university, industry, and the government
Governance/ Built in partnerships with government at the city, state and federal
Structure levels and with local universities, research institutes and private
business. They usually have boards and a senior manager that ensure
both strategic input and management in accordance with good corporate
conduct.
Sources of Generally funded by a coalition of partners from the public and private
funding of TBI sectors. The majority of incubators are sponsored by universities, linked
to the business sector and financed by a variety of government
programs. It was determined that public authorities and agencies
contribute approximately to 35% of the costs of setting up an incubator.
Period of grant funding varies between different funds and schemes but
typically for short periods. Funds are given through competitive grants
Funding of new Gaps in financing, particularly for early stage ventures, can be a major
ventures deterrent to new business creation and often lead to the early demise of
the most promising start-ups. Direct finance is available from federal
agency, which provides 0% interest loans as a seed fund for new start-
ups and then loans to stimulate SME growth in the early stages.
Selection Different, depending on the incubators‟ goal.
Duration Mostly between 2-3 years
Graduation A series of criteria determined by each incubators
2. Services Provided to Tenant Companies
Offer a range of counseling, help in business plan development, training and support
services as well as shared facilities such as use of reception, meeting and exhibition rooms,
parking, security, telephone, computer laboratory, technical information center, and
mechanical workshop.
3. Performance and Outcomes
Outcomes Half of them have 6-15 tenant firms per incubator, average number of
(up to 2004) tenants are 11. 74 % is the average level of occupancy. Average numbers of
employees are 5. The average incubator space is 3000 sq m

42
4. KOREA

The origins of business incubation in Korea traced to the early 1990‟s. The concept of
business incubation was first introduced in Korea in 1991 when the production technology
research center was established and operated technology incubators, the predecessor of
today‟s technology business incubators. Although the first Korean incubator was started in
1993, the major expansion has taken place in 2000‟s. The government reoriented its policies
towards high tech and start up companies with the emphasis on promotion of SMEs. The
government is further pursuing a wide range of policy measures and programmes such as
highly advanced national research and development project to encourage technology
innovation and improve industrial research and development capabilities and strengthen the
technology incubation systems in the country. Thus Korea in keeping with its global
positioning appears to have a well designed and articulated strategy to promote high tech
SMEs through the incubation route.

A technology incubator focused on enhanced business services is sponsored by the ministry

of science and technology at the Korean advanced institute of science & technology. Support
to entrepreneurs came in the form of a three step process: pre-foundation consulting,
supervision of the start-up stage, and production of a test-product - from technology
development to commercialization. Such support, however, was out-of-wall. In Korea, central
government led business incubation is the most prevalent (Sipos and Szabo, 2006). The
Ministry of Science and Technology (MOST), Ministry of Commerce, Ministry of Industry
and Energy through small and medium business administration and the Ministry of
Information and Communication play a pivotal role in promoting SMEs. The business
incubation programme of MOST is managed by the high-tech venture centre of Korea
Advanced Institute of Science and Technology. Korean Business Incubation Association is
actively engaged in evolving programmes for promoting networking and strengthening
business support services of TBIs (Suk and Mooweon, 2006; Sipos and Szabo, 2006).

As of 2003, Korea had about 333 technology and business incubators. Among these, 322
centers were non profit incubators (Suk and Mooweon, 2006). Table 4.5 summarizes the
nature of Korean incubation centers.

43
Table 4.5. The Characteristics of Korean incubation centers (Source: Suk and Mooweon,
2006; Sipos and Szabo, 2006)

Korean Incubators
1. Management and Operational Policies
Objective Technology diffusion and regional technological development.
Nature Mostly non-profit organizations. Mostly promoted and supported by the
governments and also privately supported.
Governance/ Business incubation in the Republic of Korea has been led by the central
Structure government.
Sources of Government provides loan for facilities and operating expenses, tax
funding of exemption, investment to high-tech ventures from direct to indirect
TBI investment

Funding of Besides government grants and loans, venture capital companies and angel
new investors provides additional liquidity for venture capital and equity
ventures injections to support techno-entrepreneurship development

a) the government is urging venture capitalists and foreign investors to

create their own incubation funds to help start-up companies
b) special measures initiated to support technology intensive and knowledge
based enterprises through pension and other funds from insurance
companies

Selection Generally, the following criteria are applied for selection:

i) Idea and business plan,
ii) Innovation oriented,
iii) Capacity or resources of the firm,
iv) Willingness to follow mentoring and advice,
iv) Ability to pay for facilities and services.
Duration 1-3 years
Graduation A series of formal criteria
2. Services Provided to Tenant Companies
R&D institutions, location, intellectual property/technical consultancy assistance, venture
financing, government finance support and tax incentives, entrepreneurship development
programmes, and strategic alliances.
3. Performance and Outcomes
Outcomes a) The average area per incubator is 1,700 Sq.m.
(as of 2002) b) On average about 14 tenants per incubator.
c) the average tenancy period is from 1-2 years
d) 1690 firms were graduated

44
5. MALAYSIA

Malaysia enacted the first national science and technology policy in 1986 and established a
number of institutions to stimulate technology oriented programmes. In 1991, the national
action plan was launched which outlined the strategies for strengthening science and
technology capabilities. The plan provided the framework for the development of hi-tech
industries, and strategies for the promotion of knowledge based industries. In Malaysia the
technology incubation policies and programmes are essentially derived from this plan.

The business incubation movement began in 1988 with the establishment of a small incubator
unit at the standard and industrial research institute of Malaysia (SIRIM). Malaysia has been
at the forefront of setting up technology incubations especially aimed at the fostering of neo-
technologies. The focus is on selected high-tech sectors, which include information
technology, advanced materials, aerospace, biotechnology, advanced manufacturing and other
environmentally sound technologies. Thus they are located in university campuses, research
and development institutions and in technology parks and actively promote and support
commercialization of technologies emerging from these organizations.

As a result of this the technology incubators provide in close proximity a pool of specialists,
experts, research and development facilities, venture capital and other business support
services. Besides, there are variety of other technology incubation models and concepts being
experimented in Malaysia. As of March 2009, Malaysia has more than 106 incubators
operating in the country with different types of incubation focus such as ICT, multimedia,
advanced engineering, agro-bio, food, etc. Out of 106 incubators, 97 are government
sponsored (federal and state), while only nine (9) are privately-owned (InfoDev, 2010). Table
4.6 summarizes the nature of Malaysian incubators.

45
Table 4.6. The Characteristics of Malaysian incubation centers (Source: InfoDev, 2010)
Malaysian Incubators
1. Management and Operational Policies
Objective Facilitating technology transfer, to help universities and R&D centers
commercialize their know-how, to help companies generate spin-off
activities, contribute to local competitiveness and job creation, to help
disadvantaged communities/individuals with dedicated projects
Nature Non-for-profit organization. Mostly government sponsored, no
examples of mixed private-public sector funding
Governance/ The federal government is the main and virtually the sole player in
Structure incubator development in Malaysia.
Sources of Government covers 100% both start-up and running costs. The
funding of TBI banking system remains the main provider of funds; alternative
sources of financing include the development financial institutions and
the various special funds established by the government, which are
provided in the form of grants and soft loans. However, this support is
mainly targeted at established companies and not much is available to
start-ups.
Funding of new Venture capital comes from government under Malaysia technology
ventures commercialization centre. The targeted beneficiaries of the pre-seed
fund programme are only individuals (existing companies are not
eligible).
a) Conditional funding to develop viable business plans into
commercially focused ICT projects.
b) It is not a pure grant and recipients will also benefit from mentoring
services and access to shared lab facilities
Selection Most technology-based incubators take into consideration:
i) Enterprise profile,
ii) Innovation, product/service type, business model,
iii) Expansion in business scale and outcomes,
iv) Benefits, take-up of specialized services.
Duration Average duration of the incubation process is 4 years
Focus area The main business activities tend to be ICT, research and development
and advanced manufacturing.
Graduation A series of formal criteria
2. Services Provided to Tenant Companies
Include some pre-incubation services, advice on product development, help with raising
finance, networking, and professional services, managed workspace and shared utilities.
3. Performance and Outcomes
Outcomes a) At an average of around 25 tenant companies per incubator
(up to 2010) b) At an average employment of around 3.5 per company
c) Average size of incubators is around 50,000 square feet
d) Average occupancy rate 75%

46
6. SOUTH AFRICA

The concept of incubation in South Africa was first practiced in 1995 when the small business
development corporation (SBDC) established the “hives of industry”. The hives are a number
of independent workstations that are grouped together to form a cluster of workshops and
they were an attempt to bridge the first and third world economies in South Africa. Apart
from providing basic accommodation at minimal rates, tenants were also provided with the
small business development corporation‟s collective support services including loans,
business and legal advice, marketing assistance and bulk buying facilities. Prospective tenants
were trained after demonstrating their skills. Tools, machinery and other equipment were also
available for hire. Services such as bookkeeping, typing and telephone facilities were
available to tenants at a small cost.

In 2000, the department of science and technology approved the establishment of the Godisa
technology incubator programme in conjunction with the department of trade and industry
(Mbewana, 2006). Godisa was established to develop a national incubation framework,
experimenting with various models in order to identify the most suitable model/s for the
South African environment. The Godisa trust aimed to bring about the enhancement of
technological innovation through the creation of technology-intensive SMMEs with the
objectives of increased economic growth, employment creation and sustainable development
(InfoDev, 2010).

South Africa's has around 28 incubators supporting entrepreneurs in sectors as diverse as

horticulture, construction, chemicals, ICT, biotechnology, metal fabrication, furniture
manufacturing and platinum beneficiation. While there are a few private sector-led
incubators, most are supported by the government. Table 4.7 summarizes the nature of South
African incubation centers.

47
Table 4.7. The Characteristics of South African incubation centers (Source: Mbewana, 2006;
InfoDev, 2010)

South African Incubators

1. Management and Operational Policies
Objective Technology transfer and innovation, creation and development of
sustainable and competitive SMEs, supporting selected groups (i.e.
women entrepreneurship)
Nature Non-for-profit organizations , mostly government-sponsored
Governance/ Promoted governmental mechanism favoring public private partnership
Structure based incubators
a) All the incubators are registered as independent entities, being either
not-for-profit companies or trusts, and report to Small Enterprise
Development Agency
b) The non-executive directors responsible for each incubator are
appointed by the members of the Company or Trust, and the executive
director manages the incubator.
Sources of Government grants in successive funding phases (3 years)
funding of TBI
Funding of new Funding shortages are feature of the incubation landscape. There is
ventures only one operational venture capitalist organization in the country and
none of the incubators have in-house seed funds
Selection The potential of the actual underlying business idea is crucial, not only
the skills and qualifications of the individual submitting a business
proposal.
Most incubators take into consideration:
i) Level of education
ii) Product/process feasibility
iii) Financial health
iv) Previous experience etc
Graduation A series of formal criteria determined by TBI
2. Services Provided to Tenant Companies
Shared office environment ,access to science and technology expertise and facilities,
availability of low-interest funding, supportive government policies, competent and
motivated management and networking
3. Performance and Outcomes
Outcomes
(As of 2009) 224 SMME‟s established and 10,628 direct plus indirect jobs created

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7. UNITED STATES OF AMERICA

In many ways, the US has been a pioneer in the industry, many practices at developing
country incubators have been derived from the American experience. Some of the best US
incubators are university affiliated. A trend is towards incubators that are sector specific, or
corporation sponsored (Lewis, 2008).

US incubation programs usually start as local initiatives by economic development agencies.

Following the initial preparations, federal agencies are approached. Federal funding is usually
limited to preparation and construction costs as well as research grants for client companies
and is then compounded with other local/private sources (UN, 2004).

Small business clusters are the spontaneous (and at times deliberate) coming together of
groups of entrepreneurs in geographic proximity for collective efforts in raising and
sustaining competitiveness. The ultimate cluster phenomenon is Silicon Valley. In sixty years,
has grown to over 7,000 electronics and software companies. Its 300,000 top scientists
include some one-third born abroad. A dozen new firms (and many new millionaires) are
created each week. What makes this „innovation machine‟ really work is the prevailing
culture of risk-taking, competitiveness, the critical mass of professional services from lawyers
and accountants, the technical infrastructure and the venture capital (NBIA,2009).

Since 1998, the number of incubators in North America has nearly doubled. There are over
1,100 business incubators presently operating in North America, mostly in USA. 94% operate
as non-profits. The general characteristics of USA incubators are summarized in table 4.8.

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Table 4.8. The Characteristics of USA incubation (Source: NBIA, 2009; UN, 2004)

USA Incubators
1. Management and Operational Policies
Objective To help small firms exploit and commercialize research results.
Nature Mostly a nonprofit organizations , there is wide variation in incubator
types, funding methods and quality
Governance/ Each community or institution sponsoring an incubator must develop
Structure its own operational plan, mission and goals
Sources of Some federal funds are available to help organizations build or
Funding of TBI renovate facilities into new incubators.
The largest source of federal funding for business incubators comes
from the U.S. Department of Commerce Economic Development
Administration
Selection A series of formal criteria determined by TBI
Graduation A series of formal criteria determined by TBI
2. Services Provided to Tenant Companies
Workspace, shared physical facilities, management support, technical support and
networking assistance. Access to other professional services (such as legal and
accounting/financial) and access to capital
3. Key Performance Indicators
Occupancy rate is 81% (on average)
Survival rate is 87%
Average number of tenants per incubator is 25 (in-house and affiliates combined)
Average number of full time jobs per tenant company is 7.7
Average new jobs created per tenant per year is 2
Average tenancy period is 33 months
4. Outcomes (as of 2005)
Assisted more than 27,000 start-up companies that provided full-time employment for more
than 100,000 workers and generated annual revenue of more than $17 billion.

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4.3 Success Factors and Lessons Learned

Even though there is a variation between the aforementioned countries in terms of objectives,
geographical characteristics and the needs of the incubated companies, there are generic
elements that present in the incubation process of all countries‟ incubator. The following key
issues, that should be considered while establishing technology business incubation in
Ethiopia, are summarized.
1. The need to have clear objective (business plan) prior to establishment: Well
described goals or an objective of the center is the first priority while establishing technology
business incubation. The incubator should aim to support businesses in an industry that is
structurally and contextually feasible and attractive in the country. Therefore feasibility study
has conducted, to design the business incubator and assess whether an incubator might be
feasible or not. Consequently, a preliminary business plan which contains incubator‟s
environment, target markets, management plan, operational policies and procedures, the
marketing strategy, types of business which will be incubated, forecast of possible internal
and external risks should be incorporated.

2. The need to define stakeholders /local alliances of the TBI: It is the responsibility of
governments to introduce and expand the establishments of technology incubation centers
through various policy directions and supports. The support may include ensuring an effective
environment for business growth, reducing unnecessary bureaucracy, creating circumstances
where fair competition can flourish, ensuring access to finance and services, access to public
and private R&D, incentives for entrepreneurial activity and innovation (tax incentives,
intellectual property laws that facilitate the commercialization of ideas.). Though government
and its institutions might play the lion‟s share in promoting TBI, there should be a number of
organizations that involved in such endeavors. Therefore these stakeholders should be
identified and their role in the process should be defined. The most important stakeholders of
the incubators are government agencies, local authorities, academic centers,
research/development centers, commercial firms, financial institutions, trade unions, business
associations. Each stakeholder has its own input for the TBI and can involve in the
governance of the center. Success of the center could largely dependent on the level of
involvement of the stakeholders.

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3. The need to develop mechanisms for financing the TBI: Financing the TBI is required
at two different phases of the incubation process. The first phase is at the stage of establishing
(creating) the center which is rendered for implementation of training programs, development
of infrastructure, development of services. The second phase is at the stage of operational
activity which includes staff salary, utility cost, maintenance cost, and loan fund for tenants.
These grants could be acquired from government, stakeholders and international donors. Best
experiences show that incubators are more likely to succeed when supported by a broadly
based partnership of public and private sector sponsors. Particularly in the initial stages,
public sector funding is critical to ensure that incubators become operational. Meanwhile
revenue could be generated by collecting money from rent and other various services.
Financial support does not necessarily mean a support in cash but it could be in kinds. Many
financing options exist for entrepreneurs, from private sources through banks to family. Each
has its own requirements, both formally and informally, ranging from appropriate loan
amounts, application procedures and collateral. Knowing these requirements is the basis for
determining financing strategies.

4. The need to include services provided to the tenant in TBI: Services that are provided
for tenants are different from one incubator to another. There are a number of factors for the
variation of services rendered. Generally, technology business incubators provide basic
services such as rent of space, workshops, laboratories or halls. Common services may
include secretarial support, internet, security services, reception and mailing facilities, access
to office equipment, meeting rooms, conference facilities, and exhibition space and catering.
Moreover, they provide counseling and advising on business planning, accounting, legal,
marketing, production, innovative technologies, access to research specialists, matching with
partners from universities and research organizations, improving productivity, quality control
and maintenance. Access to financial resources, namely early-stage financing (seed funds,
venture capital funds), soft loans and grants is also provided in the center.

5. The need to have clear entry and exit criteria that in line with the objective: TBIs
should have strict admission and exit criteria and the set of business support services is
designed to include those that facilitate technology transfer and commercialization of new
technologies.

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6. The need to staff the TBI centers: Incubator facilities are run by various types of boards
with varying degrees of representations. These boards provide overall direction. However, the
day to day activities of incubation center is monitored through its permanent staff. The
number of administrative and professional staff depends on the size and nature of the
incubator.

7. The need to evaluate the activities of the TBI: In order to expand and improve the
service of incubators, the performance should be evaluated. Efficiency of the incubators is
determined through financial measurements, measurements of operational activity, and
measurements of the services. Usually exit rates, the growth of graduated companies, taxes
paid, average salary/new job created, and the amount of private equity attracted, funds raised
by the companies, jobs created and business survival rates are indicators adopted to assess
impact regardless of the final goals of the incubation initiative.

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 CHAPTER FIVE

5. DESIGN OF TBI FOR METAL AND ENGINEERING SECTOR

5.1 General Description of the Center

The proposed technology business incubator is for small scale innovative entrepreneurs or
business start up that focus on metal and engineering sector. The term small scale is used to
express that the facility is not equipped with hi-tech equipments and it is not intended for
practicing of advanced technologies. Instead the proposed facility is equipped with traditional
equipments used to perform basic innovative/ technological tasks. It is evident that hi-tech
facility has a tremendous impact on technological and innovative economic development
efforts. But certain factors should be considered while looking for such facility as an option.
The context of our country could not be viable to host hi-tech incubation centers, at least, at
this very beginning for a number of reasons. Some of the reasons could be the country‟s
culture toward science and technology is not yet developed, the availability of intellectuals
and innovators in hi-tech might not be adequate to call for such centers, the financial
capability and option to establish such facility might not be feasible where the idea of
technology incubation is at infancy stage and above all its beyond the objective of this study.
Generally by considering the possibility of the proposed TBI growing into hi-tech facility, the
stage of technology incubation concepts in the country and the immediate need of the
country; it is decided to establish a facility used for basic innovative metal and engineering
works. Hence in this study conventional mechanical workshop practice is exercised.

The primary mission of the proposed incubator is to contribute to the growth and success of
emerging technology businesses in metal and engineering sector. In line with this, the center
will bring a number of direct and indirect benefits to the sector, community and the country.
The proposed incubator includes facility space, business development assistance and
networking to capital and other technical resources. From the benchmarked countries the
following general parameters are adopted for the proposed establishment.

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Table 5.1. Adopted parameters for the proposed establishment

Parameters Description Reason

Objective To assist the growth and The sector has a considerable economic
success of technology or impact and should be assisted with tools of
innovation based enterprises technology transfer in order to bring
in metal and engineering technological development for Ethiopia
sector
Nature Not-for-profit Incubation industries are new to Ethiopian
context, and the idea for profit is not viable
at this early stage.
Governance Board of directors who are From the best practices, the participation of
representative of stakeholders stakeholders in governance of the center
governs the center brings sustainability to TBI.
Sponsor for Government and its institution Since the concept is new; government
establishment should take the first initiation and then the
participation of private sector might follow.
Duration of A maximum of three years From the experience of bench marked
tenants countries of manufacturing based
incubators
Number of Twelve Considering the early stage of TBI concept
tenants in Ethiopia and the experience of bench
marked countries
Services Common workshop, Considering the basic metal and
offered to individual offices, common engineering sector along with the
tenants facilities, Business experience of benchmarked countries
development services,
Networking services
Selection Innovation based To achieve the objective of the center
criteria
Graduation Meeting the milestones or Creating successful technology based
criteria goals of the TBI businesses is the goal of TBI
External Business development These services are useful for SME and
client service services, consultancy, training established businesses. Based on the
requirements of clients, additional services
might be added

The above parameters serve as the general guidelines for the establishment of the center;
however, the detailed design parameters are elaborated in the subsequent section.

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5.2 Location Area for the Center

The general criteria for selecting location in the establishment of TBI are compatibility with
proposed use, location relative to the market served, costs of acquisition or rehabilitation, size
of space, lease flexibility, availability of infrastructure and etc. There are a number of
potential places or regions that satisfy one or more of the above criteria for the development
of TBI in Ethiopia. However, the proposed center is the first of its kind (focuses on basic
metal and engineering sector); high consideration is given to its potential to expand
throughout the country. By considering all selection criteria and the potential places in
Ethiopia, Addis Ababa is selected. The bases for the selection of Addis Ababa are;

1. Most basic metal and engineering industries (47.5 %) are distributed in Addis Ababa city
2. It has a diversified economy like commerce, manufacturing, finance, real estate and
insurance.
3. It has numerous private colleges in addition to government‟s universities and institutions.
4. All the roads interconnecting regional governments are passing through it. Additionally, it
has Bole International Airport.

Generally, Addis Ababa is considered to excel all potential towns in the country in terms of
communication infrastructure, proximity of knowledge source, business and finance service
and availability of entrepreneurs.

Further, the selection of specific site for technology incubator is determined by a number of
criteria. Because of its nature and mission the proposed TBI should be near to technical
universities. As a result, there are two basic site options for the proposed TBI facility in Addis
Ababa. Either it should be near to Addis Ababa Technology Institute in Arada sub-city or
near Addis Ababa Science and Technology University which is in Akaki Kality sub-city.
However, the latter option is better for a number of reasons such as adequate land to
accommodate an incubator facility and possibilities for future expansion, land cost,
availability of a large number of industries in the region. Hence, Akaki Kality sub-city is the
proposed site and the land is in close proximity to Addis Ababa Science and Technology
University.

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5.3 Services Offered in the Center
5.3.1 Physical Infrastructure

While considering design parameters, it is widely agreed that there is no standard or one size
fits all incubators. Therefore, the subsequent design parameters are adopted from the manuals
and feasibility study in the bench marked countries, from NBIA, from conventional machine
shop and office facility design principles to Ethiopian context.

5.3.1.1 Foundry and Mechanical Workshop

Since every innovators/ entrepreneurs are coming to the TBI center with their own unique
products, the series of processes required for their innovative products could be quite
different. As a result in the proposed workshop it is tried to include facilities that required for
performing basic metal manufacturing processes. The manufacturing of basic metal and
engineering passes through different processes such as; casting and foundry processes,
forming and shaping processes, machining processes, joining processes, and finishing
processes. The proposed TBI includes basic tools and equipments used to perform the
aforementioned processes. The level of the facility can be considered as a medium size
workshop.

Casting and Foundry Processes and Equipments: Foundry operation consists of mainly
melting, molding, sand preparation and conditioning, core making, pouring, cooling, surface
cleaning, fettling, heat treatment, inspection and casting repair. Sand casting is selected for
the process because it is an inexpensive method for making a small number of parts and
medium to large parts of a range of ferrous and nonferrous alloys. Considering the scale of the
proposed TBI; sand casting equipments which are relevant with the objective of the center are
proposed. The equipments and materials proposed for the TBI to perform the processes are
melting furnaces, sand core shooting, sand mixer (muller), molding machine and hand tools
such as hand riddle, shovel, draw spike, lifters, slicks, smoothers and etc.

Forming and Shaping Processes and Equipments: A multitude of operations are classified
as bulk forming processes, of which rolling, forging, and extrusion are the most important. On
the other hand sheet-metal operations include shearing, bending, stretch forming, spinning,
and explosive forming are included under this process. Though there are a number of
equipments available for this process, shearing and bending (rolling) machines are proposed.

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Machining processes and Equipments: Machining processes also called material removal
processes use a sharp tool to remove material from the work piece in the form of chips. For
the purpose of performing machining operations saws, lathes, milling machine, drilling
machines and grinding machines are proposed.

Joining Processes and Equipments: Joining processes include mechanical fastening,

adhesive bonding, and welding processes. For the purpose of such operation arc welding
equipments and riveting machine are incorporated.

Finishing Processes and Equipments: There are a number of finishing operations that can
be applied to metal products. In most cases, the finishes will protect the product from
corrosion. Finishing processes include polishing, sand blasting, cladding and electroplating,
and coating and painting. Compressor with spray gun is the machine proposed for the
finishing process.

Metrology equipments: These are equipments that used for measurement tasks. Scales,
vernier scales, micrometer scales, dial indicators, calipers and transfer gauges are included.
Moreover metal layout equipments like scribers, dividers, trammel, hermaphrodite caliper,
surface gauge and surface plate are considered.

Miscellaneous equipments: Apart from the above equipments, simple material handling
equipment (hand trucks or trolleys) , some safety materials (include welding aprons, gloves,
face shields, respirators and fire extinguishers and comprehensive first aid equipment) and
simple electrical testing equipments are included.

The abovementioned machines and tools are general purpose equipments; however, the tenant
might need special equipment and testing apparatus that are not available in the TBI. In this
case the manger of the center can facilitate the access of such equipments and apparatus
through networking with universities or other organizations.

The raw materials used in the center are mainly sheet metals and various sizes of metal rods.
It is assumed that there is no need for larger storage area as space allocated for tenants are
adequate to accommodate their own raw materials. Therefore, a small common storage area is
designed with in the workshop. By considering the proposed machines and equipments, the

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size of tenant companies and experience of benchmarked countries, the following area
requirement is proposed for the design of foundry and mechanical workshop facilities.

Table 5.2. Space requirement for common workshop area

Facility Area requirement

Workshop area 460m2
Storage 50 m2
Total area 510m2

As traditional mechanical workshop facility design practices, a high ceiling clearance of

4.5 m and long clear span distances of 10 m with high bay lighting fixtures is considered. The
machines are laid with a minimum aisle distance of 1.5m between two machines. Moreover,
an office of size 9m2 for technical assistants with in the workshop and an open loading dock
are proposed. The facility is equipped with basic utilities such as electric power, water and
fire emergency equipments.

5.3.1.2 Individual Tenant Rooms

Offices that are offered for tenants can vary depending on specific factors. The space
requirements for tenants of manufacturing sectors are larger than any sector specific TBI.
Therefore, the proposed individual tenant rooms are also based on industries experience.
Based on their stage of development tenants are classified into early stage, mid level stage
and near graduation stage. The resource capacities of near graduation tenant companies are
higher than the new entrants. As a result, near graduation stage companies require larger area
than others; similarly, the mid level stage tenants require larger area than early stage
companies. Such allocation of space allows tenants to move within the building and provides
flexibility to accommodate tenants as they grow.

By taking the size, sector and stage of development of the tenant being targeted, the following
office configuration is proposed for the twelve tenants‟ office.

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Table 5.3. Office area requirements and configurations for tenants

Type of Tenant Number of Units Size of Units Total size

Early stage 6 (50%) 50 m2 300 m2
Mid level stage 4 (30%) 90 m2 360 m2
Near graduation stage 2 (20%) 120 m2 240 m2
Total Space 900 m2

Additionally, a separate toilet with an area of 6m2 and two shower rooms with an area of
10.5m2 for tenants are designed. The flexibility of each tenant‟s office sizes is introduced by
creating moveable office partitioning. Each individual office units designed to have roll-up
doors that are 2m wide. Moreover, they have equipped with office furniture. However, it is
the right of tenant companies to change their interior office space based on their needs and
requirements.

5.3.1.3 Offices and Common Facilities

While considering administrative and support functions included in the center, it is mainly
adopted from the bench marked countries. However, based on the context of our country
additional secretary rooms, security rooms and first aid room are included. The design
parameters for facilities are based on the anticipated organization structure, administrative
function, and expected number of persons. In addition to these factors, the general practice of
incubation centers‟ office configuration is incorporated. Table 5.4 shows the designed office
and common facilities space requirements.

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Table 5.4. Area requirement for offices and common facilities

Offices and Proposed Description

common facilities Area in m2

Offices
General manager 17 Adequately sized to accommodate private meeting
office with 7 people.
Executive secretary 12 Can accommodate up to 4 guests
Administrative 12 Can accommodate private meeting with 5 persons
assistants office
Technology advisor 12 Can accommodate private meeting with 5 persons
office
Reception 14 To provide information to guests
Common Secretary 9
office
General service 9 Private office with 2 guest seats
officer
IT officer 9 Private office with 2 guest seats
Common facilities
Product display 50 To showcase innovative products of tenants for
Secretarial service external
12 To visitors
provide clients with secretarial services
room
Conference hall 80 Can handle 50 individuals
Training hall 50 Can handle 20 individuals
Computer lab 24 Can handle 10 individuals at a time
First aid room 13
Resource Center 40 Provides tenants with information and resources
Material store 11 To store materials such as stationery, sanitary
Cafeteria 60 Provides seating for more than 25 customers
Janitorial 4
Toilets 10 For management staffs alone
Lobby area 15
Total Area in m2 433

Moreover networking spaces through which people have to pass or corridor at 1.8m wide is
proposed. Therefore, including corridor space, the built area for offices and common facilities
is 590 m2. The total built up area for the proposed TBI is summarized in table 5.5.

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Table 5.5. The total built up area of the center

Facility Land allocation in m2

Offices and common facilities 590
Foundry and mechanical workshop 510
Tenant offices with common toilets and showers 920.8
Total built up area 2020.8

Additional Facilities:

Car parking: A parking area which accommodates 20 cars at a time is proposed. It is

assumed that most vehicles that come to the facility are external clients‟ (guests) and tenants‟
cars. Therefore, based on parking standards, 2.4m x 4.8m parking space for each car is
proposed. Though it might not frequent, rigid vehicles can come to the center to load and
unload raw materials, products, machines and etc. For this purpose 3.06m x 6.12m parking
area is considered.
Road: Assuming the frequent types of cars coming into the center are small, a road of 5 m
wide is designed.
Security room: Security or guard room is designed at the gate which has an area of 6m2.
Green area: An area of 100 m2 is allocated for green area.
Expansion region: An area 17 % of the total which is 660 m2 for future expansion is
anticipated.
Electrical system: A 3-phase electrical supply is connected to the TBI. The foundry and
mechanical workshop uses different electrical meters from the administrative and common
office areas.
Telephone and Internet: Each administrative office unit has a fixed line telephone and
broadband internet connection. Moreover, each office unit is networked with each other.

Generally, the total land requirement for the proposed facility is 4565 m2, of which 2020.8 m2
is a built-up area. The remaining land is used for pass way, green area, parking and future
expansion.

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5.3.2 Business Development Services

Business development services (BDS) include the types of expertise required by businesses in
order to be successful. BDS are offered to both the tenants and external customers. Through
such services that the center is able to provide an integrated coaching and training program
for small and micro enterprise at very affordable prices. Apart from this, BDS enable the
facility to be financially independent by generating incomes. A number of business
development services are provided based on the need and requirements of the clients.
However, the major services included in the center are:

Business planning and skills development: In order to help both internal and external
clients to overcome the common barriers to start-up, survival and growth, the center provide a
range of business planning advice, support and basic business skills training. These include;
preparation of business plans, financial documentation, market research, feasibility studies for
business development, management skills training and etc.

Consulting Services: The center provides consultants to the established or yet to be

established organizations that in need of such services on charge bases.

Educational programs: Based on recommendation from the general manager, an education

program that is relevant with the client companies is provided on regular basis. Such services
include; courses on production process, new manufacturing technology, quality, maintenance
engineering and etc.

Seminars: Seminars emphasizing topics of special interest to emerging technology

businesses are provided on a regular basis. The general manager identifies topics based on an
understanding of incubator client needs and invite guest speakers with expertise in the topic
area.

Resource Library: The center builds and maintains up to date information resources for
technology start ups including resource directories, business form templates, and checklists.

5.3.3 Networking Services

Networking services are the major responsibility of the general manger and mainly delivered
to the tenant companies. Since they are new and their business knowledge is low,

63
entrepreneurs are unable to connect themselves to the financial and business network easily.
Therefore, in order to overcome such barriers of start up companies the TBI center provides
the following services to its tenant companies.

Financial network: The incubator establishes and maintains relationships with a network of
banks, creditors, associations and investors to acquire seed and venture capital for tenant
companies. The incubator provides introductions between incubator clients and appropriate
investment resources. Such networking can be made with Commercial Bank of Ethiopia,
Development Bank of Ethiopia, Construction and Business Bank of Ethiopia, Addis Ababa
Credit Associations, private and cooperative banks.

Professional network: The incubator develops a high-quality professionals, technologists

and business owners that have the technical and business skills needed to support client
businesses. It screens such professionals and facilitates the interaction between them and the
client. Addis Ababa is a home of many international and national organizations. Moreover, a
number of professionals and scholars are dwelling in the city. As a result, it is possible to
identify and networking them with the center.

Educational institutions network: Educational institutions provide a talented, affordable

work pool to support incubator and incubator client projects. Moreover, they provide library,
technology and research resources for start up companies. Apart from Addis Ababa
University and Addis Ababa Science and Technology University; many private colleges,
training institutions, technical and vocational institutions are available in the city.

Networks of suppliers, customers, investors: The TBI facilitates interaction between its
clients and key industry participants including raw material, accessory and machinery
suppliers, potential users and buyers of technology products and investors who are willing to
invest as business partner. Most of metal and engineering companies, technology product
suppliers and big investors are in the city and around the city. Hence, the task of networking
the center with suppliers, customers and investors can be smooth.

The aforementioned networking services alone might not be adequate; governmental

organizations, technology institutions, policy makers can also be contacted and networked
with the center. Generally, it is the responsibility of the general manger to identify
individuals, organizations and institutions with which networking are important.

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5.4 Facility (Layout) Design

While designing the layout of the proposed center, it is tried to allocate each facility in
convenient places for its intended function. Moreover, special consideration is given for
efficient use of space. The minimum distance between parking and building as well as
between road and building is considered. The parking is designed in a way to accommodate
large number of cars with available space. Each building side is accessible except for
workshop building which is aligned with the fence in order to save construction cost. Green
area and future expansion region are also placed for their intended purposes. The cafeteria and
product display facilities are easily accessible by external visitors. Generally, the layout of all
facilities is depicted in Appendix E.

5.5 Governance of the TBI Center

Apart from making policy document and monitoring the progress, in this model of TBI the
task of establishing and funding the center lays on the government and governmental
organizations. The TBI center is sponsored by government and it serve as a non-profit entity.
The non-profit establishment enables the tenants to acquire the supports at minimum charge.
The following institutions are identified as the potential stakeholders of the TBI. The
organizations, which are regarded as the owners, provide the required support during and after
the establishment.

1. Addis Ababa Science and Technology University

2. Addis Ababa Technology Institute
3. Ministry of Science and Technology
4. Addis Ababa City Government
5. Ministry of Education
6. Addis Ababa Credit and Saving Institution
7. Development Bank of Ethiopia
8. Ministry of Industry
9. Ethiopian Association of Basic Metal and Engineering

The reasons behind the selection of the above organizations as stakeholders are mainly related
to their importance and direct relation with TBI establishment. Addis Ababa Science and
Technology University, Addis Ababa Technology Institute, Ministry of Education and

65
Ministry of Science and Technology provide coaching, training, technology related materials,
research and innovation documents to the center. Addis Ababa Credit and Saving Institution
and Development Bank of Ethiopia serve as the financial source for TBI clients. Ministry of
Industry provides the required support for graduated companies in order to sustain them in
business. The established TBI center is located in Addis Ababa; hence, Addis Ababa city
government plays an indispensable role by providing the necessary infrastructures such as
land, water and electricity. The established TBI model is sector specific; as a result, the
involvement of Ethiopian Association of Basic Metal and Engineering assist the incubated
companies in creating links and integration with the big and already established metal and
engineering firms.

Through their restless effort the board of directors and the general manager can attract a
number of stakeholders. Other institutions, private organizations, donors, NGOs and
governments could be stakeholders. Increasing the number of stakeholders broaden the
supports that the facility is receiving in kind and quantity.

5.5.1 Organizational Structure

The TBI center is run as an autonomous business entity and report to the board of directors.
The following organizational structure is customized in order to administer the activity of the
center. The structure enables to implement the incubator program with a minimum of
administrative and bureaucratic effort.

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 Board of Directors

Auditor

TBI General Client Selection

Manager Advisory Committee

Administrative Technology
Assistant Advisor

General Service
Officer Tenants IT Officer

Technical assistants
Janitor
Guards
Driver

Figure 5.1. The organizational structure of the TBI

5.5.2 The Components of the TBI’s Organization Structure

Board of directors: The board of directors is comprised of 9 members. The members are the
representative of the stakeholders (owners) of the TBI center. Board members are nominated
by stakeholders. Planning and formulating policy (strategic planning), hiring the general
manager position, managing external relations and promoting the incubator are some of their
roles and responsibilities.

Client Selection Advisory Committee: Client selection advisory committee members are
chosen for their experience and understanding of business development issues, interest in
technology development, and adequate academic knowledge. Their numbers is greater than
five and serve the incubation center on temporary basis. They are drawn from the
universities, professional association, metal industry and other agencies, to advise on the
selection of tenant businesses, and their exit.

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Auditor: An independent, external auditor is nominated and hired by executive committee of
the board. The Auditor audits the financial operations of the incubator on an annual basis and
report to the board of directors.

General Manager: The general manager is hired by the board of directors and reports to
them. The general manager should have an entrepreneurial capacities and experience,
excellent communication, sales, negotiating, decision-making and networking skills.
Experienced in technology start-ups and understanding of business management are crucial
criteria. A person with master‟s degree in technology affiliated and business administration
fields such as industrial engineering, business administration or operation management suit
the position. Some of the major duties of the general manager are managing the overall
operations, identification of constraints to tenant success followed by corrective actions and
establishing network of venture capitalists.

Administrative Assistant: An administrative assistant is the first contact that people have
with the incubator and tenants. Administrative Assistant supports to manager on public
relations, computer systems, administration, and maintain equipment and supplies.

Technology advisor: Technology advisor is responsible to the manager for technology

support, counseling and information programs focused on tech-venture creation. While not
necessarily technologist or engineer, a technology orientation is essential for the position. A
person with a strong interest and experience with issues of technology venture creation and
familiarity and contacts with the local technology establishment are some of the qualification
required for technology advisor.

Technical assistants: Technical assistants are hired to support tenant companies on technical
matters. Some innovative products may require complicated processes; hence, technical
assistants should have extensive work experience on the sector. Additionally their educational
level should be competent with the requirement of the facility. A diploma level education and
an experience of machine maintenance are some of the criteria.

IT officer: IT officer is an expert in IT field and has some experience in office equipment
maintenances. He/ she assist the center in IT related tasks.

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General Service Officer: General service officer oversight the overall facilities in the center
and reports to the administrative assistants.

Other staffs: Additionally three secretaries, four guards, one driver and two janitors are
proposed for the center.

Generally, at the initial stage the incubation might not have adequate capital to hire the
required number of staffs. Therefore, the existing staffs are likely to perform multiple tasks.
All management and staff are employed by the TBI general manager. All decisions related to
staff are made by the general manager, including selection, hiring and dismissal.

5.6 Financial Analysis

The financial analysis presented in this sub topic includes a facility development budget that
considers a new construction of the TBI facility located within the Akaki-Kality sub city, an
estimate of capital expenditures for start-up, and operating costs for the first year. The
estimated costs are based on the data obtained from Ethiopian investment Agency, Addis
Ababa city administration investment authority, and from the field survey of suppliers of
furniture and office accessories.

5.6.1 Facility Development Budget

The facility development budget includes land and construction related costs for the TBI
facility. Although the land required for the TBI facility can be acquired free of lease, the lease
cost of the land is included in the estimation. The minimum lease price in Addis Ababa
administration is varying based on the grade of land. Table 5.6 shows the minimum lease
price of land in expansion zone of Addis Ababa.

Table 5.6. Minimum lease price for expansion zone in Addis Ababa city administration
(Source: EIA, 2008)

Land zone Grade of lease land Minimum price in birr/m2

Expansion zone 1 273
2 230
3 167
4 147

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The lease holding of urban land is on auction or negotiation basis. Assuming the land in
expansion zone of Akaki-Kality sub city, the city administration can provide it with birr 273
per square meter on negotiation.

Regarding cost of building, it generally differs by type of the construction materials used, the
type of foundation, wall height, and location. The data from Ethiopian investment agency
shows the average cost for simple storage building is from birr 1500 to birr 2500 per square
meter.

Table 5.7. Building cost in Addis Ababa (Source: EIA, 2008)

Building type Price in birr per m2

Simple storage building 1500-2500
Apartment building up to four stories 2500-3800
Tower building with elevator facilities 2800-4500
Residential G+1 building (normal) 2400-2800
Residential villa type building (bricks) 2500-3000
Residential villa type building (HCB) 2000-2600

However, for the proposed TBI birr 3000 per m2 is taken by considering the complexity or
height of the building and the current construction materials cost increment. The total budget
for facility development is summarized in table 5.8.

Table 5.8. Facility development budget estimation

Facility cost Units in m2 Unit cost Total cost in birr

Land lease cost 4565 273 birr per m2 1,246,245
2
Construction cost 2020.8 3000 birr per m 6,062,400
Roads and parking area 800 130,000
External areas, fence, landscaping etc 220,000
Total facility development budget 7,658,645

5.6.2 Capital Expense Costs

Capital expenses are related to start-up costs such as furnishing for foundry and mechanical
workshop, administrative offices, computer lab, training and conference rooms, etc. Costs for
furnishing the cafeteria are not included in this estimation, because it is desired to lease or
rent it for service providers.

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Though there are simple machineries and hand tools which are available in local markets,
most machineries required for the center are to be imported from abroad. The valuation for
locally available machines and tools are based on market survey. But, the costs for other
machineries are calculated based on the fact that they are imported from China. The cost is
assumed to cover the shipping of all the machineries to the port of Djibouti. After the port, a
road freight transport mode is used. Dry bulk traffic from port Djibouti to Addis Ababa
charges birr 75 per quintal and this rate used in calculation. The weight and other
specification of the machines are shown in Appendix D. Since the TBI is sponsored and
established by the government, custom duty charges and clearance charges are neglected. The
individual and total estimated costs for capital expenditure are presented below.

Table 5.9. Foundry equipments and costs

Foundry Equipments Unit Price in birr Description

Foundry Electric Induction Furnace 1 103462.5 Imported
Sand Core Shooting Machine 1 86300 Imported
Foundry Sand Mixer 1 43675 Imported
Sand molding machine 1 95275 Imported
Hand Tools (hand riddle, shovel, draw spike,
lifters, slicks, smoothers etc) 20,000 Local Market
Sub total 348712.5
Contingency 5 % 17435.63
Total 366,150

Table 5.10. Imported machineries cost for mechanical workshop

Imported machineries for mechanical workshop Unit Price in Birr

Heavy duty lathe machine 1 349850
Universal lathe machine 1 175007.5
Universal milling machine 1 139250
Power hacksaw machine 1 14270
Vertical drilling machine 1 17950
Metal cutting band sawing machine 1 45470
Mechanical eccentric press 1 116105
Hydraulic shearing machine 1 173725
Rolling machine 1 104925
Tool grinder 1 13289
Radial drilling machine 1 86825
Sub total 1236667
Contingency 5% 61833.33
Total Cost 1,298,500

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Table 5.11. Locally available machineries and tools cost for mechanical workshop

Locally available machineries and tools Unit Unit cost in birr Total cost in
for mechanical workshop birr
Hand drilling machine 2 2700 5400
Circular saw 2 5500 11000
Hand grinding 2 3500 7000
Bench grinder 2 1500 3000
Bench drilling 2 7500 15000
Riveting gun 3 1200 3600
Bench vice 4 3840 15360
Welding machine 2 17000 34000
Compressor with spray gun (270L) 1 22800 22800
Hand tools and accessories 30000 30000
Metrology Equipments 10000 10000
Miscellaneous equipments 45000 45000
Sub Total 202160
Contingency 5 % 10108
Total 212,268

Table 5.12. Capital costs for office furniture and accessories

Capital Expense Unit cost Unit Estimated costs

Administrative Office Equipments
Desk top Computers (including all accessories 9000 11 99000
and install)
Lap top computers 12500 2 25000
Printers 6500 3 19500
Photocopier 11000 3 33000
Scan print and copy machine 4000 2 8000
Fax with installation 8000 2 16000
Tables different types 10 41546
Chairs different types 10 23774
Guest chairs different types 26 34390
File cabinets 13 24700
Shelving 4 10400
Fixed line telephone and internet supply 10000
Contingency 15000
Computer lab equipments
Computers (including all accessories and 9000 10 90000
install) tables
Computer 1010 10 10100
Chairs 1000 10 10000
Conference room
Desks 2300 66 151800
Tables 1 3164
Audio visual equipments and white board 39000
Digital camera 1 4500

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 Training room
Desks 1800 25 45000
Tables different sizes 10 36200
Whiteboard and other accessories 10000
Resource Center
Tables 1100 4 4400
Chairs 1000 4 4000
Shelves 2400 6 14400
Books, softwares Estimated 15000
Furnishing Tenant offices
Chairs 1840 12 22080
Tables 3103 12 37236
Cabinets 1900 12 22800
Pick up truck 1 300000
Miscellaneous 45000
Total costs in birr 1,224,990

From tables 5.9, 5.10, 5.11 and 5.12, the capital cost for machineries and office equipments is
366,150 +1,298,500+212,268+1,224,990 = birr 3,101,908.

The estimated cost of erection including consulting mechanical engineers, preparing special
foundations and physical erection of machineries is birr 75,000. Similarly, the cost of
electrical equipments such as electric motors, starters, switches, cables & other electrical
items are assumed to be birr 150,000.

Therefore, the total capital cost is 3,101,908 +75,000+150,000= birr 3,326,908

5.6.3 Operating Budget

The operating budget estimates expenses associated with the first year of TBI operation
including salaries. But some expenses such as utility costs for foundry and mechanical
workshop should be paid by tenants. The administration or management of the center will
propose mode of payments for each tenant. Table 5.13 shows an annual salary of the
employee based on the current minimum salaries of civil servants.

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Table 5.13. Estimated salaries for the employees of the TBI

No Description Required Salary in birr

number Monthly Annually
1 General Manager 1 6530 78360
2 Technology advisor 1 4500 54000
3 Administrative Assistant 1 3000 36000
4 General service officer 1 2500 30000
5 IT officer 1 3000 36000
6 Secretaries 3 3300 39600
7 Technical assistants 2 2000 24000
8 Janitor 2 970 11640
9 Driver 1 800 9600
10 Guard 4 2200 26400
11 Gardener 1 450 5400
Total 18 29250 351000

Like wise the remaining operating budget is shown in table 5.14.

Table 5.14. Estimated annual operational costs for the first year

Annual estimated
Operational Expense Description costs in birr
Salaries 351000
Employee reimbursement Travel, parking etc 36000
Meeting refreshment 6000
Employee training 8800
Professional services for TBI 90000
Utilities Electric, water, internet etc. 41000
Simple Equipments 15000
General Supplies 50000
Maintenance 25000
Miscellaneous expenses 25000
Contingency 2% of the total 12956
Total annual operational costs 660,756

Based on the above estimations the total budget for establishing and operating the first year of
the technology business incubation is 7,658,645 + 3,326,908 + 660,756= birr 11,646,309.

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 5.7 Incubate Selection Process

Applicants might learn about the incubation program (notice for application) through web
site, telephone, mail, personal contact or an incubator visit. Therefore, if they are interested all
prospective candidates complete a brief application form. The brief application form includes
description of the applicant‟s current business (personal) status and a very preliminary sense
of the applicant‟s service and facility needs.

Then the manager evaluates the application against the predetermined criteria. If the business
description or business plan adequately addresses screening criteria, the potential candidate is
informed for further interview or presentation in the presence of selection panels. Meanwhile,
applicants that fail to fulfill the criteria are informed by the manager.

Applicants who meet the incubator‟s basic qualifications (pre-screening) are invited for a
formal interview or presentation with the manager and selection panels. Based on the panel‟s
input, the general manager makes a decision regarding acceptance and inform the Board.
Then after the decision of the board of directors; the selected clients sign contractual
agreement with the center. The contractual agreement include, understanding of the TBI
center objectives, graduation criteria and possible reasons for a client‟s termination from the
program and the time they have to quit.

After the clients enter into the program, all the efforts of the incubator is toward offering
services and programs which strengthen the company for its future entry to market.
Moreover, continuous monitoring of the client companies is carried out.

Finally, after going through all the process of incubator, the management evaluates the
performance of the clients. If the clients satisfy the graduation criteria, clients leave the
incubator, setting up an independent room and consolidating itself to the market of its choice.
Meanwhile, the clients that fail to satisfy the objective of the incubator or fail to perform
according to the agreement are forced to leave the program. Generally, the devised incubation
process is depicted in figure 5.2.

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 Inquiry is made by a potential Inquiry via web, telephone, mail, personal
tenant or notice for application contact or notice on newspapers, radio, TV,
by the TBI websites etc

Application form, executive summary of

Formal registration of business plan (applicant‟s current and/or
application planned products, design portfolio, market
strategy and sales plan)

Manager reviews application for

Evaluation of the application completeness, determine validity of
application against entrance criteria with
consultation of other agencies/experts if
necessary

Decision on the application

Failure to meet
status for potential candidate Reject
criteria

Conducting Presentation to selection committee

interview/presentation with
selected applicants

Decision on the Failure to achieve

Reject
presentation/interview status expectations

Tenant signs agreements (program

Contractual agreement with
selected applicants monitoring agreement & reporting system)
with TBI and moves into the center

INCUBATION Failure to achieve

Reject
expectations

Graduation of successful Achieve the incubation/agreed goal;

Firms Determined against the graduation/exit
criteria

Figure 5.2. The incubate selection process

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5.7.1 Selection Procedures

The selection committee which is a panel of six to eight people (comprise of representative of
stakeholders and experts in the field of technology and manufacturing backgrounds) assist the
general manager in understanding the business case and determining if the applicant should
be approved for acceptance into the incubator.

5.7.2 Entry Criteria

In order to ensure clients benefit from the services provided and to achieve the goal of the
incubator, all applicants are evaluated against a predetermined set of criteria. In this particular
case the following entrance criteria have been adopted for use at the TBI center.

Table 5.15. Entry criteria for the proposed TBI

Applicants should have a certain level of academic competence

Applicants have an innovative business idea with a technology related character.
It should be an idea of innovating new products related to basic metal and engineering.
It should introduce a new skills or technical knowledge to the country;
There should be the existence of a definable market for the potential product
The product should be commercialized within shortest possible time.
With potential to replace currently imported products to the local economy
Applicants shows sufficient evidence of interest to become techno entrepreneur
They should provide a written business plan including a market strategy
The applicant business must have the capacity to provide economic benefits including
high employment potential and opportunities,
Applicants business must comply with local and state legislation.
Applicants are able and willing to pay a subsidized fee when it is proved to be necessary.
ability to pay incubator rents while they develop positive cash flow
Applicants should aim to start trading within one year.
Applicants should agree to work with the incubator management.
To identify their business development needs in order to deliver the required
support/service
To ensure milestones for successful graduation from the program.
Applicants agree to participate in confidential/non confidential surveys while in the
program and for certain years after graduation from the program.
They should provide baseline business data as requested by incubator management.
They should inform the center for changes related to business plan, financial status and
internal operations

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5.7.3 Exit Criteria

In order to leave the incubator program, set up their independent room and consolidate
themselves on the market of their choice; the clients should graduate successfully. The
graduation stages of the clients are determined against certain criteria of exit. In this particular
case the following graduation or exit criteria is adopted/designed.

Table 5.16. Exit and graduation criteria for the proposed TBI

Clients who have progressed beyond the incubator‟s ability to provide sufficient value.
When the business needs more space than the TBI can accommodate.
Firm no longer requires incubation (when the pre-agreed milestones are reached)
Clients who developed the capability of being competitively marketed on local and
international market.
Clients who own the rights to intellectual property (IP) of a product that has been developed
Clients who failed to meet the terms of the contractual agreement, to comply with centers
regulations, to accept professional mentoring and/or achieve agreed upon milestones can
result in early termination of the tenants.
Clients who change their company emphasis from that originally planned in the business
plan.

Occupancy is determined by the incubator management. The manager reviews the

performance of the client on each successive three months after the commencement of
tenancy, but expected to last no more than three years. Extensions beyond three years are at
the judgment of the board of directors.

Though the tenant company is graduated and leaves the program, it should be in close contact
with the center. The information obtained from the graduated companies enables to measure
the effectiveness of the program.

5.8 Financial Strategy for the TBI

Financing is one of the crucial issues for the success and sustainability of any technology
business incubation. TBI requires funding for three main purposes; these are capital cost,

78
operating cost and seed money. The designed TBI model is for not-profit organization.
Hence, taking this into consideration the following financial strategy is devised.

5.8.1 Financial Strategy for Capital Cost

The direct capital budget is come from governmental organization in different forms. Addis
Ababa City Administration can provide land free of lease for setup. Since TBI strengths the
technological capability of the country and result in industrial development; the city
administration is a strong partner in providing suitable land free of lease.

Addis Ababa Science and Technology University, Addis Ababa Institute of Technology,
Ministry of Education and Ministry of Science and Technology provide the required capital
budget for the establishment of TBI. The proportion of contribution of each institution is
decided after negotiating on the program. If the negotiation agreed on the primary stakeholder
of the program, then it is the responsibility of that stakeholder to cover most of the capital
cost. However, if all stakeholders agreed on equitable involvement then the financial
contribution is formulated as to reflect the situation. It is understood that the contributions
might be in kind like furnishing the offices.

Since private investors can be interested in profit making businesses alone and they perceive
the TBI as government projects, their support is less likely. However, they might contribute if
they are convinced about the indirect benefits they are going to achieve. The starting point is
recognition of the kinds of assets and benefits that may attract private investors. Therefore,
the incubator manager works to mobilize private sector involvement, in mutual interest.
Private investors can participate in the program through foundations, purchases of know-how
and supplies. Moreover, grants can be obtained from international donor agencies such as the
United Nations Industrial Development Organization (UNIDO), European Union, Non-
Governmental Organizations, and foreign governments with economic cooperation agencies
(such as Japan, Germany, USA etc.). Generally, doing a research on the sources of grants and
securing the required financial budget is the responsibility of the TBI project team and
management.

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5.8.2 Financial Strategy for Operating Cost

Income like rent for use of the incubator facility, service charge from internal and external
clients, fees from special projects and community activities can be generated from the TBI
program. The revenues received from the tenants usually cover only a part of the total
operation costs. Moreover, the remaining sources of income might not generate the required
amount of money to fund the operation cost at least until the activities and services of the
program is well known by the public. So, it is required to secure a constant fund from a
definite source till the program become stable to operate independently.

The operating cost of the TBI is covered by the government until the cash flow of the center
demonstrates a positive trend. The boards of directors approve an annual budget that
contributed from the stakeholders. Each stakeholder contributes their share for the operational
cost of the program. Apart from the stakeholders other possible sources of operating cost can
be assessed.

5.8.3 Financial Strategy for Seed Money

Access to finance is one of the services provided by the TBI for clients. It might be difficult to
find a precise source of seed capital for clients, as the knowledge of financial institution of the
country in this aspect is uncertain. However, there are a number of option to acquire seed
capital such as financing from own resources, contacts with investors/business, normal bank
loans and etc.

Bank finance is a viable option for financing the business of tenants. To facilitate bank
financing, the TBI develop a special financial advisory unit to assist tenant companies prepare
loan applications and service bank debts. Therefore, clients are helped in preparation of their
business plan before soliciting banks for seed capital financing.

In this regard, Addis Credit and Saving Institution and Development Bank of Ethiopia could
be the main stake holders of the program. Moreover, royalty financing based on future returns
from innovations is one way of helping the program to obtain seed capital. The private sector
can also be involved in providing seed capital for the clients and can own a proportion of
tenant business.

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5.9 Strategy for Sustainability

The achievement of sustainability for the TBI center is one of the crucial responsibilities of
each stakeholder. Rental and provision of space are not sufficient to cover all the costs of the
incubator. Therefore, mode of raising additional revenues should be devised. Providing
consultation and advisory service, technology and technology sources, training and rented
conference hall for external clients could be a viable source of income for the center.
Sometimes it might be happened that machines could be idle; in this case the foundry and
mechanical shop are used by external clients through negotiation or contract.

Moreover, the sustainability of the center is guaranteed when it tries to achieve the objective
of establishment. The center should prove its impact on the sector and bring innovation or
technological development. In other words the efficiency of the center should be measured.

5.9.1 Operational Cost and Revenue Structure

Revenues are expected to be generated from rent, tenant client service fees, external client
service fees and cafeteria rent. Though it is difficult to estimate; grants and donations are also
included in the revenue structure. As the service of the TBI center is expanding, more revenue
sources can be added. While analyzing the operational costs, it is assumed that the expense
will grow at 8 percent for the consecutive 4 years and will remain the same for the next years.

It is found that rental rates for office space in Addis Ababa vary significantly from location to
location or from building to building depending on the quality of the building and distance
from the center of the town. However, the minimum bid prices set by the administration for
rented houses are from birr 45.5 to 60 per m2 (EIA, 2008). Hence, birr 55 per square meter is
taken as rental rate for tenant offices. By considering yearly occupancy rate and a 6 percent
annual inflation, the following rental income is generated.

Table 5.17. Estimation of occupancy rate and rental income

Rental Revenues
Operational years Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
Percentage of space leased 10 30 50 75 80 80
Space leased in square meter 90 270 450 675 720 720
Rental rate in birr/m2 55 58.3 61.8 65.5 69.4 73.6
Rental revenue in birr 59400 188892 333720 530550 599616 635904

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Additionally, the service of cafeteria will be rented at 60 birr per square meter for the first
operational year and will grow at the rate of 6 percent annually. Likewise, the revenues
generated from the service rendered to tenants assumed to grow by 6 percent and revenues
from outside customers are estimated to grow by 15 percent annually. Generally, the
following revenue and cost structure is developed.

Table 5.18. Operational cost and revenue structure

Revenue
Year 1 Year 2 Year 3 Year 4 Year 5 Year 6
From rent 59,400 188,892 333,720 530,550 599,616 635904
From tenant services 50,000 53,000 56,180 59,551 63,124 66,912
From external services 70,000 80,500 92,575 106,462 122,431 140,795
From cafeteria 43,200 45,792 48,540 51,452 54,540 57,812
From grants / donations - - - - - -

Total Expected
Revenue 222,600 368,184 531,015 748,015 839,711 901,423
Operational costs
Annual Expenses 660,756 713,617 770,706 832,363 898,952 898,952
Operational Results
-438,156 -345,433 -239,691 -84,348 -59,241 2471

Looking into the cost and revenue structure, it is estimated that the center able to cover its
operational costs at 6th year after commencement of operation. Therefore, there is a need to
constantly financing the center and it is the responsibility of the government to provide funds
until the center is self-sufficient. The board of directors warrants the availability of yearly
operational costs on their budget plan.

After the first 6 year, the center is capable to generate adequate revenue to run its programs.
At this junction the center should look for an expansion or additional program. It can be
transformed into hi-tech facility with introduction of non traditional machines such as
computer numerical control (CNC) and robotics. But, the feasibility study should be
conducted for the project prior to implementation.

5.9.2 Performance Measurement

At the very beginning it is difficult to quantify the expected outcomes of the center in
numerical value. It might take a certain number of years to gain the anticipated results;

82
however, industry practitioners suggest performance indicators to measure the outcomes of
technology incubators. Hence, these indicators which are relevant with the proposed TBI are
adapted. They are:

1. The number of tenant clients within the center

2. The number of technologies/innovations produced
3. The number of patents applied for and received by incubator clients
4. The number of owner equity deals between tenants and existing companies in the metal
and engineering sector.
5. The number of patent transfer (sell, rent) to the firms in the metal and engineering sector.
6. The number of companies that successfully graduate from the center
7. The number of jobs created on an annual basis within the incubator and by graduated
companies.
8. The number of incubator graduates that stay ( operational) in the community
9. Tax revenues generated by technology incubator clients and graduates
10. Number of technologies exported
11. Number of technologies that substitute imported items and etc.

5.10 Implementation Plan

The incubation program is developed in three phases.

Phase 1: Initiation: This first phase of TBI development plan is assumed to take one year.
The first major action under initiation phase is to hire the incubator project manager. The
detailed activities of project manager include;
 Work with the identified stakeholders
 Create the legal structure
 Identify supporters for the program
 Review and file legal documents
 Create incubator advisory committee
 Create board of directors
 Identify funding sources for incubator build-out
 Identify funding for first year operations and initiate fund raising program.

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Phase 2: Implementation: This second phase of an incubation program is takes the duration
to establish the facility with the required support services and commence the incubation
program. The detailed activities under this phase include;
 Hire an incubator general manager
 Identify and lease commercial space
 Accept resident client companies
 Continue working with affiliate companies and solidify the incubator program and
services

Phase 3: Expansion: After the incubation program is implemented and lays its foundation in
the community, the next phase is to look for an expansion project. The major activities under
this phase include;
 Conduct formal six-month review and explore feasibility of developing affiliate client
program,
 Increase the program offerings to attract a greater number of incubator companies
 Secure stable and diverse revenue streams toward a long-term facilities solution.

TBI Project Implementation Schedule: It is assumed that the first phase (initiation of the
incubation program) takes one year. Therefore an implementation program for the facility
development is assumed to begin on September 2012 after the first phase is accomplished.
Based on the above assumptions the project schedule for the establishment of the facility is
developed below.

Table 5.19. Project schedule for the establishment of the facility

Activity Name Description Duration (days) Precedence

(ID)
1 Licensing and registration 10 -
2 Acquisition of land 20 1
3 Land development and Building 180 2
4 Electrification and Utility 10 3
5 Purchasing machines and equipments 110 2
6 Machine installation 30 4,5
7 Hiring Staff 20 4,5
8 Launch facility 15 6,7

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The starting and finishing time for each task is scheduled and depicted in the following Gantt chart. From the graph it is found that 255 working
days are required to finish the project. Activity 1, 2, 3, 4, 7 and 8 are considered as a critical activities and need due considerations during project
execution.

Figure 5.3. Gantt chart for the project Schedule

85
 CHAPTER SIX

6. CONCLUSION AND RECOMMENDATION

6.1 Conclusion

Technology business incubators have become an increasingly widespread tool for

technological, industrial, and overall development endeavors in many developed as well as
developing nations. Their direct and indirect effects on economy urge Ethiopia to look for
technology incubators as a viable tool for technology or industrial advancement. However,
core sectors such as basic and metal engineering has not any technology incubation centers
yet. The basic and metal engineering sector has a tremendous impact on the overall economic
development activities especially on industrial development. Considering the government‟s
move toward industrial lead economy the sector is at the core to assist the transition. It is most
capable to produce new jobs, enterprises, technological/innovation based products and foster
economic growth than any other sectors. Therefore, it is crucial to support basic metal and
engineering sector directly or indirectly through the establishment of technology incubation.

Adapting incubation concepts, models and practices of successful countries to Ethiopian case
is useful to take actions in clear or success route. Consequently, best practices of China, India,
Korea, Brazil, Malaysia, South Africa and USA is bench marked or upgraded to our socio-
economic environments to establish technology business incubation. Aiming to assist
innovators or technology entrepreneurs, technology business incubation with basic
technology facility is designed. The proposed TBI is laid on 4565 m2 of land in Addis Ababa
and comprises of facilities such as foundry and mechanical workshop, administrative offices,
common areas and tenant offices. The center is proposed to provide business development
and networking services. The budget for the establishment of the center is estimated to be birr
11,646,309. Generally, the TBI supports basic innovators, small enterprises and established
firms on the sector; moreover, it can be a model for technology business incubations on basic
metal and engineering and other sectors.

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6.2 Recommendations

 Since technology incubators create innovative enterprises and bring technological

development, all communities and stakeholders should strive for the development of
technology incubators.

 The role of government should be irreplaceable for supporting technology business

incubation as a tool of a technology driven economic development strategy with
necessary policy actions and uninterrupted funding.

 It should be clear that not all of the sectors have the potential to utilize an incubator; as
a result, priority areas should be identified prior to establishing business incubators. In
this case the proposed TBI center can serve as a model for other sectors in order to
adapt some of its parameters.

 Universities and technical institutes in the country should look for the development of
technology incubation centers with in their premises. They should assist technological
development of regions based on their respective regional governments‟ priority.

 Technology incubator should be registered as members (develop strategic alliances)

with international associations of business incubators. They should also network with
the technology incubators of other countries to gain experiences; if not grants.

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1. A.Balachandran (2008), Role of Business Incubation Systems to Facilitate Technology

Transfer and Development, VIT University, India.
2. Access Capital Research (2010), Ethiopia’s Import and Export, Addis Ababa.
3. Akcomak I. S. (2009), Incubators as Tools for Entrepreneurship Promotion in
Developing Countries, United Nations University, Netherland.
4. Altenburg T. (2010), Industrial policy in Ethiopia, Deutsches Institut für
Entwicklungspolitik, Bonn.
5. Antoine C., Anthony D., James M. and Ihsan T. (2008), An Internal Analysis of
Massachusetts Biomedical Initiatives, Worcester Polytechnic Institute.
6. Asmamaw T. and Zelalem T., (2010), Engineering and Technology Challenges, Ethiopian
Association of Basic Metals and Engineering.
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2nd Central European Conference in Regional Science, IEEE explore, pp 56-67.
8. Bers J. A. and Dismukes J. P. (2009), Accelerated Radical Innovation – The Execution
Side Lessons from a Seed-Stage Technology Incubator, PICMET 2009 Proceedings,
August 2-6, Portland, Oregon USA.
9. Bizzotto C. E. N. (2003), The Incubation Process, InfoDev Incubator Support Center,
Brasília, Brazil.
10. Claggett W. A. (2003), Market Feasibility Study for Business Incubation Opportunities in
Lane County, Claggett Wolfe Associates ,Oregon, USA.
11. David J. C., Malan J. and Lalkaka R. (2002), Improving Business Incubator Performance
through Benchmarking and Evaluation, 16th International Conference on Business
Incubation, National Business Incubation Association, Toronto, Canada.
12. Dietrich F., Harley B. and Langbein J. (2010), Development Guidelines for Technology
Business Incubators, Bonn, Germany.
13. Dorf R. C. (1998), The Engineering Handbook, CRC Press LLC, Boca Raton, USA.
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15. FDRE CSA (2011), Report on large and medium scale manufacturing and electricity
industries survey, Addis Ababa.
16. FDRE CSA (2010), Report on Small scale manufacturing industries survey, Addis Ababa.

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17. FDRE EIA (2008), Factor costs, Addis Ababa.
18. FDRE MOST (2010), National science, technology and innovation policy: building
competitiveness through innovation, Addis Ababa.
19. Hallam C.R. A. and Devora N. (2009), Technology-Based Business Incubation: A Study of
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Incubators, workshop on New Economy & Entrepreneurial Business Creation in
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25. Lalkaka R. (2000), Manual on Technology Business Incubators, United Nations
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48. WB (2010), Global Practice in Incubation Policy Development and Implementation,
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Practices, pp 1305-1314. URL: www.ipHandbook.org

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Appendix A: Small Scale Manufacturing Industries in 2008

Industrial Group No of Gross value of No of

establishments production Value added employees
Manufacture of Food Products Except Grain Mill services 1541 308,346,153 57,255,451 2471
Grain Mill Services 23047 1,113,873,376 479,699,504 39815
Manufacture of Textiles 1366 39,110,832 19,621,876 868
Manufacture of Wearing Apparel, Dressing and Dyeing of Fur 3097 115,655,245 60,584,805 2326
Manufacture of Luggage, Handbags and Footwear 46 4,370,821 1,482,397 97
Manufacture of Wood and Products of Wood and Cork, Except
Furniture 90 7,819,873 3,072,214 220
Manufacture of Paper and Paper Products 3 103,635 56,424 7
Publishing, Printing and Reproduction of Recording Media 755 29,055,792 7,486,315 786
Manufacture of Chemicals and Chemical Products 6 636,322 198,287 31
Manufacture of Other Non-Metallic Mineral Products 457 116,877,481 56,288,440 1765
Manufacture of Fabricated Metal Products, Except Machinery and
4355
Equipment 419,600,595 178,086,816 7411
Manufacture of Machinery and Equipment N.E.C. 0 0
Manufacture of Parts and Accessories for Motor Vehicles and their
0
Engines 0
Manufacture of Furniture; Manufacturing N.E.C. 8575 635,850,091 277,872,921 18527
TOTAL 43338 2,791,300,216 1,141,705,450 74324

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Appendix B: Large and Medium Manufacturing Industries Establishments

2006/2007 2007/2008 2008/2009 2009/2010

Sector No of No of No of No of No of No of No of No of
firms employees firms employees firms employees firms employees
1 Manufacture of Food Products and Beverages 381 35,686 485 41,265 562 44,957 572 60,110
2 Manufacture of Tobacco Products 1 799 1 1,254 1 1122 1 986
3 Manufacture of Textiles &Wearing Apparel 73 29,306 61 18,223 84 24,259 91 30,724
4 Tanning and Dressing of Leather 72 8,351 83 8,586 89 8,750 114 10,707
Manufacture of Wood and Products of Wood
5 and Cork 41 2,010 70 3,166 48 2,111 54 3,261
6 Manufacture of Paper and Paper Products 117 8,161 143 8,917 127 8,822 123 9,998
Manufacture of Chemicals , Chemical Products,
7 rubber & plastic products 128 14,649 162 16,489 162 19,989 235 25,044
Manufacture of other Non-Metallic Mineral
8 Products 284 11,137 488 16,853 608 19,790 482 19,482
9 Manufacture of Basic metal and engineering 116 8,742 134 8,418 154 9,448 219 16,523
10 Manufacture of Furniture 229 5,713 299 7,134 363 7,945 281 8,251

TOTAL 1442 124,554 1926 130,305 2198 147,193 2172 185,086

Gross value of production 18,579,125,000 22,946,588,000 28,787,699,000 42,008,056,000

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Appendix C: Price of Some Office Furniture

Furniture Price in Birrs

L shape 6740
Guest chair 1000
Writing table 3103
L shape office 4760
Table with out drawer 1800
Manager chair 4193
Large table 3164
Medium table 1765
Computer table 1010
Secretarial chair 1839
Cabinet 1900
Desk top computer 9000
Lap top computer 12500
Digital camera 4500
Photocopier 11000
Printer 6500
Scan, print and copy machine 4000
Projector 12500

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Appendix D: Specification for Foundry and Mechanical Workshop Machines
Foundry Machines

Foundry Induction Furnace Technical Specification

Item Unit Specification
Rated capacity kg 10-50
Rated power kw 50
Input voltage v 380
Transformer capacity kva 60
Out voltage v 750
Output frequency khz 2.5
Melting time min 20-60
Power consumption (steel) kw.h/t 900
Water cooling t/h 3
Input water pressure mpa 0.2
3
Volume m 1.2
Weight kg 350
Supplier: Qingdao Tongfeng Casting Machine Co. Ltd., China

Sand Core Shooting Machine Technical Specification

Item Unit Specification
Core box of size mm 450x400x300
Max. weight of shoot sand kg 15
Template's size, max. /min. mm 500/190
Core boxes to force kg 1300
Productivity h 60S
Working pressure mpa 0.65
Shoot sand pressure mpa 0.4
Power supply ac 380V
Heating method electrical electrical
Heating power kw 20
Sand-up way Air slide
Supplier: Qingdao Tongfeng Casting Machine Co. Ltd., China

Foundry Sand Mixer Technical Specification

Item Unit Specification
Disc diameter mm 1000
Feeding capacity Kg/s 110
Productivity t/h 1.5-2.5
Power Kw 4
Spindle speed rpm 45
Single-round pressure 0-1100
Machine weight kg 900
Supplier: Qingdao Tongfeng Casting Machine Co. Ltd., China

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 Sand Molding Machine Technical Specification
Item Unit Specification
Foundry flask max. dimension mm 500x450x200
Worktable size mm 600X550
Jolting load kgf 300
Compressive stress kgf 5000
Molding process mm 180
Productivity box/h 40-60
Jolting cylinder diameter mm 150
Compress press 160
Consumption of free air m3/box 0.4
Overall dimension(LxWxH) mm 1300x800x1700
Supplier: Qingdao Tongfeng Casting Machine Co. Ltd., China

Mechanical Workshop Machines

Lathe Machine (Heavy Duty) Technical Specification

Item Unit Specification
Max. swing over bed mm 800
Max. swing over carriage mm 520
Center distance mm 1000
Width of gap mm 320
Swing over gap mm 1000
Width of guide way mm 550
Spindle bore diameter mm 105
Rapid traverse speed m/min 3.8
Max. travel of cross slide mm 493
Travel of top slide mm 200
Main motor power kw 11
Rapid traverse motor power kw 1.1
Coolant pump motor power kw 0.09
Gross/Net weight 4000mm kg 7800/6100
Supplier: Tengzhou Xili Machine Tool Co. Ltd., China

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 Lathe Machine (Universal) Technical Specification
Item Unit Specification
Max. swing over bed mm 400
Max. swing over carriage mm 230
Max. swing over gap mm 700
Width of gap mm 250
Max. length of work piece mm 1000
Width of guide way mm 394
Spindle speed rpm 26-2000
Dia. of spindle bore mm 82
Max. travel of cross slide mm 348
Travel of top slide mm 150
Travel of tailstock quill mm 150
Diameter of tailstock quill mm 75
Main motor power kw 7.5
Gross/Net weight 2000mm kg 4010/3030
Supplier: Tengzhou Xili Machine Tool Co. Ltd., China

Universal Milling Machine Technical Specification

Item Unit Specification
Table size mm 360x1250
Longitudinal travel mm 700/680
Max. transverse travel mm 255/240
Max. vertical travel mm 410/390
Table size mm 1250x360
Distance from horizontal mm 175
spindle to supporting
Spindle speed range rpm 60-1800
Vertical up-down speed table mm/min 590
Range of table travel mm 18
Main motor power kw 4
Motor of lifted table kw 1.1
Overall size (LxWxH) mm 1880x1700x1700
Net weight/Gross weight kg 2000/2200
Supplier: Tengzhou Xili Machine Tool Co. Ltd., China

Power Hacksaw Machine Technical Specification

Item Unit Specification
Max. sawing size for Round steel mm 250
Max. sawing size for shape bar mm 250x250
Saw blade width mm 450×35×2
Stroke of sawing bow reciprocation no/ min 91
Length of saw blade strokes mm 152
Motor kw 1.5
Net weight kg 680
Overall dimensions (LxWxH) mm 1550x700x1000
Supplier: Qingdao Prosper Machinery Co. Ltd. , China

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Vertical Drilling Machine Technical Specification
Item Unit Specification
Max. Drilling capacity mm 32
Max. feed resistance N 9000
Max. Permissible spindle torque N.m 160
Throat distance mm 280
Spindle travel mm 200
Spindle box travel mm 200
Spindle speeds range r/min 50-2000
Feed rates r/min 0.056-1.8
Max. travel of table mm 310
Working surface of worktable mm 400×530
power of main motor kw 2.2
Flow of cooling pump l/min 25
Overall dimensions (LxWxH) mm 962x847x2340
Net weight of machine kg 1000
Supplier: Qingdao Prosper Machinery Co. Ltd. , China

Bench Drill Press Technical Specification

Item Unit Specification
Drilling capacity mm 16
Chuck size mm 16
Table travel mm 190
Table size mm 200×190
Spindle travel mm 55
Distance spindle axis to column mm 125
Column diameter mm 60
Spindle speeds range r/min 300-3190
Spindle speeds series 12
Motor power hp 1/2
Overall height mm 860
Net weight./Gross weight kg 40/43
Packing case dimensions mm 680×440×255

Metal Cutting Band Sawing Machine Technical Specification

Item Unit Specification
Cutting capacity round mm 280
Cutting capacity rectangle mm 280x350
Oil pump Motor power kw 0.42
Main motor output kw 2.2
Voltage v 380V
Frequency hz 50
Band saw dimensions mm 0.9x27x3505
Process Speed m/min 20/45/80
Overall size mm 2095x1095x1445
Machine weight kg 1000
Supplier: Qingdao Prosper Machinery Co. Ltd. , China

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 Mechanical Eccentric Press Technical Specification
Item Unit Specification
Nominal capacity KN 250
Nominal pressure stroke mm 6
Stroke of slide mm 80
Strokes per minute mm-1 100
Max. die height mm 180
Die height adjustment mm 45
Distance between slide center and frame mm 500
Thickness of bolster mm 50
Distance between columns mm 250
Bench size mm 400x600
Hole dimensions in bed mm ø160
Bottom size of slide mm 180x200
Size of the handle hole mm ø40x60
Main motor power kw 3
Overall dimension mm 1600x1100
Height above floor mm 2180
Total weight kg 2300
Supplier: Anhui Laifu NC Machine Tool Co., Ltd., China

Hydraulic Shearing Machine Technical Specification

Item Unit Specification
Max. shearing thickness mm 4
Max. shearing width mm 2500
Stroke times Per min 18
Back gauge range mm 20-600
Shearing angle (0) 0.5-1.5
Throat depth mm 100
Motor power Kw 4
Overall dimensions (LxWxH) mm 3000x2000x1850
Supplier: Qingdao Prosper Machinery Co. Ltd. , China

Rolling Machine Technical Specification

Item Unit Specification
Plate yield limit Mpa 245
Max. plate thickness mm 8
Max. plate width mm 2500
Min. diameter mm 500
Diameter of upper roller mm 240
Diameter of lower roller mm 200
Central distance mm 310
Main motor power Kw 11
Overall dimension mm 4550x1350x1610
Supplier: Qingdao Prosper Machinery Co. Ltd. , China

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Radial Drilling Machine Technical Specifications

Item Unit Specification

Drilling depth mm 140
No. of spindle: speeds/range r/min 6(72-1000)
No. of spindle: feeds/range mm/rev 2(0.1 a 0.2)
Drill power kw 1.5
Drilling radius, max/min mm 750/350
Drilling head: traverse mm 400
Distance base plate to spindle ,Max/Min mm 835/ 275
Diameter of column sleeve mm 190
Working surface of the base plate mm 750x650
Length x Width x Height mm 1170x670x160
Arm elevator motor KW 0.75
Standard box table (XxYxZ) mm 400x350x350
Weight of machine Kg 1100
Supplier: Qingdao Prosper Machinery Co. Ltd. , China

Tool Grinder Technical Specification

Item Unit Specification
Diameter of edge mill mm 90-630
Max. diameter (mill cutter thickness) mm φ200x150
Max. length ( straight cutter) mm 250
Carving cutter mm φ13
Sand wheel specifications mm φ125x180
Spindle speed r/min 2860
Motor power W 370
Water pump power W 40
Overall dimensions mm 650x800x1580
Supplier: Qingdao Prosper Machinery Co. Ltd. , China

Arc Welding Machine Technical Specifications

Item Unit Specification

Input power voltage v AC380 ±10%
Frequency Hz 50/60
Rated welding current A 400
Welding current range A 5~400
Rated duty cycle 60%
Rated input capacity kva 13
Phase 3 phase
Weight kg 35

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Appendix E: Detailed Layout of the Proposed Facilities

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DECLARATION
This thesis entitled “Promoting industrial development in Ethiopia through the establishment
of technology business incubation” is my original work and has not been presented for a
degree in any other university, and that all sources of material used for the thesis have been
duly acknowledged.

_____________________________ ________________________
Aberham Genetu Date

This is to certify that the above declaration made by the candidate is correct to the best of my
knowledge.
_____________________________ ________________________
Dr.-Ing Daniel Kitaw (Advisor) Date

_____________________________ ________________________
Mr. Gulilat Gatew (Co-advisor) Date

105