The business of business incubation: How stakeholders measure value and investment returns in South African fintech incubators

Abstract

Business incubation is a growing phenomenon in South Africa. Using a qualitative research approach, specifically in-depth interviews with business incubator (BI) managers (CEOs, directors, executives, founders, and sponsors), this study reports on the perceived economic value of Johannesburg-based, fintech-focused BIs and the business gains achieved from the activities of BIs. Applying theory related to business incubation, this paper finds that business incubation is equally about assisting and developing start-ups and entrepreneurs as it is about the business gains that BIs extract from the process. Moreover, private sector stakeholders, particularly banks, are perceived as the primary sponsors of fintech BIs in South Africa, and they invest for various business and socio-economic reasons. Foremost among these is business diversification and compliance with South Africa's affirmative action policies, which feature prominently as the primary benefits the banking BIs gain from the process. We discuss this as the positive duality of business incubation. Finally, we suggest several managerial and policy level implications related to our findings, including the importance of strengthening triple helix partnerships and using regulatory sandboxing to facilitate fintech innovations. Overall, this study contributes to our empirical understanding of BIs in emerging economies broadly and fintech-focused BIs in South Africa in particular.