Between consultation and control: how incubators perform a governance function for entrepreneurial firms

Abstract

Purpose

This paper examines the governance function that incubators perform for entrepreneurial firms. The authors demonstrate that this governance function has both a consultative and a control dimension and illustrate how these are enacted in the interactions between incubators and entrepreneurs. The authors also show how these interactions come into being and how entrepreneurs assess the value of the governance role played by incubators.

Design/methodology/approach

The paper is based on a cross-sectional interview study with entrepreneurs of 21 start-ups that were hosted by three different incubators. The start-ups are all early-stage technology firms. The analysis in the paper follows an inductive approach.

Findings

The authors find that the governance role of incubators is about both consultation and control. Consultative forms of governance include providing input and advice as well as questioning ideas and assumptions. Controlling forms of governance comprise setting targets and tracking progress as well as enforcing structures and documentation. The authors furthermore show that governance episodes are triggered either by the entrepreneurs themselves or by the incubator. In the former case, such episodes are mainly about consultation, while in the latter one, they often have a pronounced control element, which materializes particularly through regularly enforced meetings. Most entrepreneurs seem to appreciate this control element, acknowledging that, in its absence, they would lack the self-discipline of doing some things that need to be done.

Research limitations/implications

This study’s findings extend prior research on inter-organizational relationships and the types of governance mechanisms observed therein. The authors show that a strict separation between actors who offer consultation and those who exercise control is too simplistic. Incubators influence entrepreneurial firms both through consultative and controlling forms of governance. In terms of limitations, this study’s analysis focuses on the perspectives of entrepreneurs, and the authors did not include the perspectives of incubators nor did the authors directly observe meetings between these two parties.

Practical implications

This paper provides examples for how entrepreneurial firms can benefit from being part of an incubator.

Originality/value

This study contributes to the discussion of the governance of inter-organizational relationships by focusing on incubators. In so doing, the authors also complement extant literature on management control in entrepreneurial settings by showing how the incubator fulfills a control function for entrepreneurs before these implement control mechanisms themselves.

Citation

Flanschger, A., Heinzelmann, R. and Messner, M. (2023), "Between consultation and control: how incubators perform a governance function for entrepreneurial firms", Accounting, Auditing & Accountability Journal, Vol. 36 No. 9, pp. 86-107. https://doi.org/10.1108/AAAJ-09-2020-4950

Introduction

Entrepreneurial firms or new ventures are an interesting object of management research, not only because they are important drivers of innovation, but also because such firms typically do not (yet) have the same management practices in place as large, established firms. This is true also for management control practices. Several studies shed light on the evolution of management control practices in young firms (e.g. Akroyd and Kober, 2020; Akroyd et al., 2019; Becker and Endenich, 2023; Davila and Foster, 2005, 2007; Gomez-Conde et al., 2021; Sandino, 2007; Taylor et al., 2019). This literature has predominantly examined the drivers behind, and consequences of, the adoption of control systems – such as budgets, HRM systems or risk management tools – by early-stage firms (for a synthesis see Pelz, 2019). One finding in this literature is that external actors, in particular venture capitalists and other financiers, have a positive influence on the adoption of control systems in entrepreneurial firms (e.g. Davila and Foster, 2007; Granlund and Taipaleenmäki, 2005).

In this paper, we seek to extend our understanding of how external actors influence the management of entrepreneurial firms. Like prior research, our interest is with questions of management control. Yet, in contrast to the above-mentioned literature, we do not study the adoption of control systems, but rather ask how external actors may exercise control in more direct ways, as part of their governance relationship with an entrepreneurial firm. In other words, we take a broader look at the governance of new ventures and enquire into the control effects that may transpire as part of such a governance relationship.

Empirically, we focus on the incubator as a governance actor who is specific to entrepreneurial firms. The purpose of incubators (or “accelerators” or “technology parks”) is to “nurture young firms, helping them to survive and grow during the start-up period when they are most vulnerable” (Aernoudt, 2004, p. 127). Incubators offer a variety of services for entrepreneurial firms, including legal and financial counselling, office space, networking opportunities and the like (e.g. Aerts et al., 2007).

The entrepreneurship literature typically makes a rather clear distinction between the role of incubators and that of investors (e.g. venture capitalists) as another important governance group. Incubators are said to perform a governance function that is mainly about offering “advice and support”, while investors enact a governance role by exercising “control” over the start-up (Cumming et al., 2019). Control is thereby defined as the ability to influence and enforce changes in the new venture, such as by virtue of the investor's contractual rights or board representation. Advice and support, in contrast, are of consultative nature only. Accordingly, the literature has mostly examined different types of advice and support offered by incubators and how relevant these are for the future development of a new venture (e.g. Bergek and Norrman, 2008). Little has been said about the extent to which the influence of incubators may also feature elements of “control” in the sense of a more authoritative influence on entrepreneurs and their new ventures. Can incubators be said to exercise control? And if yes, how does such control materialize? The present paper re-examines the governance role of incubators with these questions in mind.

Addressing these questions is important in order to better understand the type of influence that external actors, such as incubators, can have on an entrepreneurial firm. Becker and Endenich (2023) show that incubators constitute a part of the “ecosystem” that influences how entrepreneurs make sense of planning and control needs. In particular, they highlight how such incubators act as a meso-level actor to promote a “lean” and “agile” approach to control systems. However, they do not explicitly discuss the nature of the interactions between incubators and entrepreneurs, and they do not investigate whether there is a more direct control element in the governance role played by incubators. Understanding such a governance role is important as entrepreneurial firms require some form of direction even before they adopt control systems. Hence, we propose that the influence that incubators have on the control of new ventures is not limited to their influence on which control systems should be adopted. More specifically, we suggest that incubators also have a more direct governance effect that materializes in the interaction between the incubator and entrepreneurs and that contains elements of both consultation and control.

To address our research questions, we draw upon cross-sectional interviews with 21 entrepreneurs, who were all accompanied by incubators. We asked entrepreneurs about their interactions with the incubators and how they would assess these. The cross-sectional qualitative design allows us to balance breadth and depth in our analysis (Hall and Messner, 2018; Lillis and Mundy, 2005). We analyze our interview material using an inductive approach, following the methodological advice of Gioia and colleagues (Gioia et al., 2012). Our findings evidence the existence of different ways in which incubators can be said to perform a governance function. These range from more consultative forms of governance (providing input and advice, questioning ideas and assumptions) to more controlling forms (setting targets and tracking progress, enforcing structures and documentation). We show that the governance role is exercised mainly through regular meetings between the incubator and the entrepreneurs, where “governance talk” happens. We also show that most entrepreneurs in our sample appreciate not only the advice and support, but also the control elements of their governance relationship, acknowledging that, in the absence of such control, they would lack the self-discipline of doing what needs to be done.

Overall, these findings contribute to the literature in the following ways. First, they help advance research on entrepreneurial firms in the accounting literature. Prior research in this area has mainly discussed the existence or non-existence of control systems in new ventures and different reasons for the adoption of such systems (see Pelz, 2019). It has not examined in depth the role of external actors in exercising governance over new ventures, however. Our findings suggest that incubators, as one prominent external actor in the early stage of a new venture, perform a governance function that resides particularly in the direct interactions between incubators and entrepreneurs.

Second, we contribute to the entrepreneurship literature on incubators. While this literature has examined the consultative dimension of incubator governance (Ahmad and Ingle, 2011; Bergek and Norrman, 2008; Clayton et al., 2018; Hallen et al., 2020; Van Weele et al., 2017; Vanderstraeten et al., 2020), it has not discussed control effects that may be associated with an incubation relationship. Discussing such control effects allows elaborating on the relationship between external governance and internal management control mechanisms. Here, we suggest that the control exercised by incubators may substitute for a lack of internal management control systems in the new ventures, but it may, over time, also lead to a learning effect, whereby entrepreneurs continue along the paths proposed by the incubator once they have exited the incubator.

The remainder of the paper is structured as follows. The next section presents the background literature. We then outline the research design, followed by the empirical analysis. The paper concludes with a discussion of its main findings and contributions.

Background literature

Our study builds upon, and aims to contribute to, two streams of literature. The first one examines the adoption and evolution of management control practices in entrepreneurial firms. The second one enquires into the role of external actors for the management of such firms.

Control practices in entrepreneurial firms

Entrepreneurship is typically defined in terms of an innovative act (Schumpeter, 1934) or the pursuit of opportunities under limited resources (Alvarez and Barney, 2007; Stevenson and Jarillo, 1990). Entrepreneurial firms are one vehicle for such entrepreneurial behavior. These firms (also referred to as new ventures or start-ups) are an increasingly important player in many economies across the world. Given the importance of entrepreneurship as an engine for innovation, fostering entrepreneurship features prominently on the agenda of many policy-makers. The European Union, for instance, explicitly seeks to promote the creation of “more innovation and more jobs through fast-growing, innovative firms” [1].

Failure rates among entrepreneurial firms are quite high however (Bruno et al., 1992; Hogarth and Karelaia, 2012), and there are different reasons for such failure. In some cases, the innovative idea or opportunity turns out not to be that innovative after all; in other cases, failure is related to the inability to turn a good idea into a workable business (Bruno et al., 1992). Indeed, the skills required for identifying opportunities and coming up with innovative ideas are not the same as those required for managing a business in financial, social and administrative terms. And with a change in the age and size of a firm comes a change in managerial tasks and challenges (Greiner, 1972; Terpstra and Olson, 1993).

The adoption of management control practices or systems is part of the managerial responsibility that entrepreneurs have to assume when developing their business. The purpose of such controls is to create clarity in terms of objectives to be achieved, to motivate organizational actors and to facilitate decisions in a variety of areas such as marketing, product development or sales (Merchant and Van der Stede, 2017). In large firms, managers may establish controls both to inform their own sense-making and decision-making and to guide the behavior of their subordinates. Small entrepreneurial firms often do not have many employees (or any employees at all), and control tools will often serve primarily the sense-making and decision-making of the entrepreneurial team rather than being used to control the behavior of employees (Becker and Endenich, 2023). For instance, entrepreneurs install budgets to plan their financial revenues and expenses; they design performance measures to understand their progress; or they install cost accounting tools that help them in negotiations with suppliers or customers.

While such control systems would therefore seem to be appropriate in a very early stage of an entrepreneurial firm (Becker and Endenich, 2023), the literature also shows that systems take time to develop. Davila and Foster (2005, 2007) examine the sequence in which early-stage firms introduce management accounting and control systems. They find that financial planning systems tend to be adopted before human resource planning and strategic planning systems, while systems for performance evaluation are adopted only at a later stage (Davila and Foster, 2007), reflecting the idea that planning for the future is more important for early-stage firms than evaluating the past. Sandino (2007) finds that the choice of control systems is contingent upon the strategic orientation of the early-stage firms and that a control system-strategy fit increases performance.

The founding entrepreneurs are obviously the first actors to consider when trying to understand adoption of control systems (Cardinal et al., 2004). There are also other actors, however, who drive adoption, both inside and outside the focal firm. Davila and Foster (2005) provide evidence that hiring a financial manager increases speed of adoption, which is plausible since the decision to hire such a manager will often be made on the basis of a need for more formal control. When founders exit the firm and non-founding CEOs enter, then these may introduce new control systems. Davila and Foster (2005) do not find a faster time-to adoption of budgets and other accounting systems for firms with non-founder CEOs, but they find in another study that founder CEOs are more quickly replaced in firms with low control system adoption (Davila and Foster, 2007). Based on a case study, Akroyd and Kober (2020) suggest that the impact of the founding entrepreneurs on control systems might extend beyond the initial start-up stage. While managers in their case firm had replaced the founding entrepreneurs, the choice of control systems by the managers was still influenced by the culture that the entrepreneurs created. Akroyd and Kober speak of an “imprinting” effect that entrepreneurs have on subsequent control system adoption.

In terms of outside actors, Davila and Foster (2007) show that start-ups backed by venture capital funding are faster in adopting control systems. This is not least because venture capitalists would often impose such systems to better monitor the firm, or they would hire managers who introduce such systems on their behalf (see also Granlund and Taipaleenmäki, 2005). Focusing on control systems for product development, Davila et al. (2009) identify two external reasons for such adoption. New ventures introduce controls to gain legitimacy among important stakeholders and/or to fulfill contracting needs with business partners.

Becker and Endenich (2023) do not consider individual external actors, but the entire “ecosystem” in which new ventures emerge and grow. In addition to venture capitalists and other financiers, incubators constitute an important part of this ecosystem. Becker and Endenich (2023) show how incubators promote a “lean” and “agile” approach to control systems, which entrepreneurs are likely to adopt.

Taken together, prior literature on control in entrepreneurial settings has identified various drivers for the adoption of control system in new ventures. To some extent, this literature also considers the influence of external actors on control, but more in terms of how such actors influence the adoption of control systems rather than how they may exercise control over the entrepreneur in more direct ways. This brings us to the governance role of external actors.

External actors and the governance of entrepreneurial firms

Entrepreneurial firms are embedded in an ecosystem with different outside actors who influence the trajectory of these firms (Wurth et al., 2022). In addition to peers, with whom entrepreneurs may exchange ideas and experiences (Chatterji et al., 2019), there are two types of actors with particular relevance for the governance of new ventures. On the one hand, new ventures depend on securing early financing from investors. On the other hand, they benefit from the support of actors such as incubators, accelerators, or technology parks. The literature suggests that these two types of actors differ in terms of how they influence new ventures. Cumming et al. (2019) speak of two “different governance paths” and suggest that “technology parks are characterized by advice and networks, while VCs [venture capitalists] are characterized by control” (p. 455, our emphasis).

Investors, such as venture capitalists, fulfill a governance role that builds to an important extent upon the formal control that they have over the new venture. This control results from the contractual setup of the financing relationship and from board representation, which allows the investor to directly influence important decisions of the new venture. While control in established firms is often diluted among many shareholders, venture capitalists represent a concentrated form of ownership which goes along with strong control rights. For instance, Cumming et al. (2019) find that many start-up firms financed by venture capitalists in their sample have their CEO replaced after a short period of time. Moreover, VC financing typically leads to acquisition exits in these start-ups.

In contrast, incubators (or accelerators or technology parks) are typically associated with a consultative rather than a control function (Hallen et al., 2020). They offer “advice and support” (Cumming et al., 2019) to entrepreneurs rather than directly controlling the decisions being taken. As a consequence, events such as CEO replacement or acquisitions are less likely for those ventures that are merely supported by incubators rather than financed by VCs (Cumming et al., 2019).

The characterization of incubators as offering advice and support is in line with the substantial body of research examining the roles of such incubators (e.g. Aerts et al., 2007; Ahmad and Ingle, 2011; Clayton et al., 2018; Vanderstraeten et al., 2020). Bergek and Norrman (2008) categorize incubator services into four groups, namely the provision of office space, support with a pool of shared services, business advice and network provision. Different types of start-ups will need different services, depending especially on their stage of development and industry. Sometimes, a particular incubator cannot offer what the entrepreneurs are looking for, which is why joining an incubator is not always beneficial for new ventures (Lukosiute et al., 2019).

Rice (2002) suggests that incubators differ in terms of how proactive they are in offering their services. Similarly, Bergek and Norrman (2008) suggest that incubators may see themselves in a more active or more passive role. Accordingly, incubation approaches range from “strong intervention” to “laissez-faire” (Bergek and Norrman, 2008, p. 24), depending on whether the incubator pushes the start-ups to consume its services or whether it is up to the entrepreneurs to decide for themselves what they need. Van Weele et al. (2017) find that “strong intervention” is more likely “[w]hen entrepreneurs were inexperienced and did not prioritize developing business knowledge” (p. 28). The authors identify four main practices that constitute such strong intervention: aggressive coaching, mandatory training sessions for entrepreneurs, fixed milestones and recruitment of professional managers for the start-ups.

This brief review of the literature invites the following conclusion. On the one hand, there is a clear distinction between incubators as having a governance role which is about “advice and support” and investors as governance actors who “control” (Cumming et al., 2019). On the other hand, some studies on incubators allude to the idea that their role may be more authoritative than what terms like “advice and support” or “consultation” seem to suggest (e.g. Bergek and Norrman, 2008; Van Weele et al., 2017). Based on this, we ask whether and in which sense the governance role of incubators can be said to contain elements of “control” over entrepreneurs.

Our understanding of “control” here is broader than that of exercising formal decision-rights. Indeed, in the same way in which control inside organizations (management control) is to an important extent realized through (informal) talk and communication (e.g. Ahrens, 1997; Goretzki and Messner, 2016; Kober and Thambar, 2022; Preston, 1986; Roberts, 1990), control by outside parties is not necessarily limited to formal decision rights either and may also appear in various forms of “communication and persuasion” (Levit, 2019, p. 2775). This is evident not only from research on investors' activism (Becht et al., 2009; Bedford and Ditillo, 2022), but also from the literature on supply chains governance, which has emphasized the relevance of relational forms of governance (control) which happen by means of frequent interaction and communication (e.g. Dong et al., 2017; Håkansson and Lind, 2004).

Research design

Data collection

To answer our research questions, we draw upon data collected through a cross-sectional interview study, covering a sample of 21 entrepreneurial firms. More specifically, we study new technology-based firms (NTBFs) which are entrepreneurial firms striving for the goal of commercialization of an idea in the area of technology (Löfsten and Lindelöf, 2002). We selected our sample firms by relying on the network of one of the authors, who is at the same time a founder himself and has been affiliated with one of the incubators. More precisely, we contacted founders of technology start-ups (mainly engineering, web services and pharma) in three incubators. The sample consists of 21 firms that are part of three different incubators, all located in the German-speaking area. The goal of incubation in these incubators is regional development, technological advancement but also commercialization of research activities stemming from university research. Indeed, all three incubators have a regional focus. This regional focus is visible in the start-ups they host but also in the ownership and funding structure of these incubators.

Incubator 1 is located outside a provincial capital and has several facilities including a laboratory for biotechnology start-ups. It understands itself as an “accelerator of creativity” for start-ups in different industries such as IT, consulting, media, or biotech. It has existed for some 35 years and is organized as a cooperation between regions, cities, universities and private partners. It is funded through sponsorships by its owners as well as through fees paid by the start-ups. Incubator 2 positions itself as a high-tech start-up incubator and was founded some 20 years ago with the ambition to help regional start-ups become an “international success story”. It has incubated more than 150 start-ups and closely cooperates with three regional universities which are also the majority owners. Similar to incubator 1, it is funded by public and private partners and also charges membership fees. Most entrepreneurs in our sample are affiliated with this incubator. Incubator 3 is the smallest incubator in our sample. It has tree facilities in the region and is mainly owned by the region, the two main cities and university partners. Incubator 3 very much emphasizes its role for regional development. The incubator is financed by the EU regional development fund, the provincial government, the two main cities and through the fees it charges.

All three incubators are not-for-profit entities and none of them invest equity in the start-ups. This is worth mentioning given that there have been critical voices regarding the potential for an exploitative effect of business incubation, when incubators receive valuable equity stakes for little input (Lukosiute et al., 2019). This is not an issue in this setting. Rather, incubation here means that entrepreneurs who become part of the incubator can use office space and other facilities and benefit from mentoring as well as from access to the business network of the incubator (see Aernoudt, 2004; Mian et al., 2016; Ratinho et al., 2020). Mentoring is provided by “advisors” who work for the incubator on a part-time basis. In the past, these were mainly experienced entrepreneurs themselves; more recently, more specialist advisors without an entrepreneurial background have joined the incubators. The directors of the incubators play a key role for the general development of the incubator, but are not strongly involved in directly advising the start-ups. They would typically join quarterly meetings only in exceptional circumstances, such as when a start-up has to leave the incubator or when the entrepreneur specifically asks for the presence of the director.

At the time of data collection (2010), all 21 organizations in our sample were rather small, each having less than 50 employees and several without any employees at all. All firms were owned mainly by the entrepreneurs, with less than 25% of the shares held by external parties. None of the firms were funded by a venture capitalist. The majority of firms were founded in 2008 or afterward, suggesting that they were in a very early stage [2].

We chose a cross-sectional interview study to balance breadth and depth in our analysis. Cross-sectional interview studies are useful to identify empirical patterns within a population of organizations; this can motivate theorizing about the reasons for these patterns (Lillis and Mundy, 2005). At the same time, the qualitative nature of such a study allows eliciting elaborate descriptions of practices, which is not possible in a quantitative study (Hall and Messner, 2018; Lillis and Mundy, 2005; Lukka and Vinnari, 2014).

The same interview guide was applied throughout all interviews (see Appendix). We asked questions about the foundation and development of the firm, about its products and services, about relevant external actors, and in particular about the interaction with and role of the incubator. Overall, we conducted 21 face-to-face interviews, each lasting between 45 and 90 min. The interviews were conducted in German, which was the native language of all interviewees, and were subsequently transcribed to facilitate data analysis. We translated the quotes shown in the paper into English after performing our data analysis. A list of all interviews can be found in Appendix.

Data analysis

While our interview guide defined a priori our main areas of interest, we subsequently analyzed our data in an inductive way in order to identify interesting patterns. We thereby followed the approach suggested by Gioia et al. (2012). In the first stage of our analysis, we read our interview material with a focus on how the incubator would exercise some form of “control” over the new venture. We selected all interview sequences which we felt addressed this thematic focus and copied the interview quotes into a spreadsheet file, adding in each case a first-order code that described the substance of the quote (e.g. “incubator asks critical questions”). While our initial focus was on “control effects”, we later came to understand that our data reflected the governance role of incubators more broadly and would range from more consultative forms of governance to more controlling forms. We therefore re-labelled some of our inductive codes and re-oriented the other parts of the paper accordingly.

Our coding revealed that our data were informative about three things in particular: the governance practices of incubators; the situations in which such governance emerged; and entrepreneurs' assessment of this governance role. Accordingly, we had three thematic areas of interest, which became our “overarching themes”. We eventually labelled these as “governance practices”, “initiation of governance episodes” and “entrepreneurs' assessment of the governance exercised by incubators”, respectively.

Within these themes, we then aggregated the first-order concepts into second-order concepts. We thereby went through all first-order codes and consolidated them, combining codes that captured similar contents. This process was rather straightforward for the second and third overarching concept. For the first overarching concept (“governance practices”), the creation of second-order codes was somewhat less obvious. We realized that some of these practices were primarily of consultative nature, while others had a more pronounced control dimension. The consultative elements were similar to the advice and support function identified in the entrepreneurship literature (Hallen et al., 2020), while the control elements resembled controls that one would see inside firms (e.g. Merchant and Van der Stede, 2017). We came to understand that it was precisely this combination of consultation and control which was interesting about the governance role of start-ups, which is why we aggregated the inductively derived codes into consultation and control elements, respectively.

Table 1 shows the coding structure that emerged from the data analysis. In what follows, we will describe these findings in more detail.

Empirical findings

We present our empirical findings in three steps, reflecting our overarching codes. We first provide evidence for the different governance practices that incubators would perform in their interactions with entrepreneurial firms. We then discuss the triggers that initiate such governance episodes. Finally, we examine entrepreneurs' attitudes towards the governance exercised by the incubators.

Consultative forms of governance

Providing input and advice

We start with the consultative forms of governance that incubators exercise. These revolve around the “advice and support” function that prior literature on incubators has identified (Bergek and Norrman, 2008; Cumming et al., 2019; Hallen et al., 2020). We distinguish between two forms here: input and advice, and questioning.

Incubators can provide input and advice in different forms. An important part of the input concerns the management of the commercial side of the business. In particular, several interviewees would mention the importance of receiving “input on financials” (# 2) from the incubator. As most entrepreneurs in our sample have a technical background, they consider help with understanding and managing the financial side of their business as particularly important. Interviewee 15, for instance, explains that the incubator realized that there was a lack of expertise in the firm regarding the commercial awareness within the start-up, which is why the incubator “tried to push this part and to provide support, respectively”. Similarly, interviewee 16 explains that the incubator “has trained us to think in an entrepreneurial way. I am not really a salesman or something like this, but have started the whole thing in order to put my technical expertise into practice. And [the incubator] has forcefully reminded us of this entrepreneurial mindset”. Some interviewees would also mention advice in the area of “marketing theory” (# 2) or with respect to “strategies for negotiation” (# 7) with other companies, for instance.

The basis for this kind of advice is the expertise of the incubator. Most of our interviewees would acknowledge that the incubator has a lot of experience with young firms and knows how things should or should not be done. Interviewee 10, for example, sees the incubator as one of the actors “who brings a lot of experience with them, whom you can listen to more than others”. This is specifically relevant when there are important decisions to be made: “The most important decisions that you have to make are the reason for having an incubator” (# 10).

Prior literature suggests that incubators do not only offer advice themselves, but connect entrepreneurs to a network of other actors, such as peers, potential customers, or investors (Hallen et al., 2020). We could also find evidence of this. Interviewee 13 explains that he and his team would often lack knowledge of whom to contact for a particular question or problem and that, in this respect, the experience of the incubator was helpful as he would tell them “who are the partners to consider and who are the ones to rather avoid” (# 13). Interviewee 19 explains that the incubator also proposes potential mentors for the firm. In addition, the incubator provides a space for “exchange with other founders and this is a very important aspect that one should not underestimate” (# 19). In this latter respect, another interviewee explains that being part of the incubator means being part of a network – “you talk and discuss in the meetings, everyone narrates a bit how he is doing. In doing so, you gain a lot of experience, you are part of a network of similar people and I would say that this is very important” (# 18). Interviewee 18 has also experienced that being part of an incubator “has a certain significance within society” and increases the legitimacy of the start-up.

To some extent, interviewees identify a “corrective” dimension in the input of the incubator. For instance, incubators would draw the attention of the entrepreneurs to specific issues that the latter might not think of, providing “a kind of general advice in terms of ‘keep an eye on this or have a look at that’” (# 15). Also, interviewee 6 suggests that “from time to time, it is good if someone looks at [our business] from outside, when he makes us aware of things” (# 6). And another interviewee remarks that, “as a founder you have a specialist perspective on things and the incubator can provide a more general input which is sometimes also helpful to achieve this ‘out of the box thinking’” (# 19). Similarly, interviewee 9 explains that the incubator “pointed out things that a ‘normal technician’, in quotation marks, would not think of” (# 9).

Becker and Endenich (2023) suggest that entrepreneurs use control systems to guide the selection of the right business models. This sort of guidance may also be performed by the incubator as a governance actor. In particular, we find that incubators would recommend that entrepreneurs focus on what is most important to the business. Interviewee 13, for example, explains that he suffers from “the problem that I cannot say ‘No’ and that I want to do so many things at the same time, which can be detrimental for the firm. And in this respect, it was an important tip [by the incubator] that I should focus on a few things and should cut out others, that I should really say ‘No’ [in some cases]” (# 13). In a similar way, interviewee 1 explains that the incubator would suggest “taking a step back and looking at the big picture, look at what you want to do – in the sense of strategic control, I would say” (# 1).

Finally, some of our interviewees suggest that the advisory role of the incubator has developed over time, from more general advice in the early stage to more focused advice later on. Interviewee 4 explains that “over time, we have developed a closer collaboration, where the incubator has gained more insight into our business and was therefore also able to react more quickly” (# 4). For interviewee 10, this is also a question of trust: “Over time, you gain more and more trust. In the beginning, you are a bit reserved. In my case, this took a bit of time. But the depth of the conversation increases over time” (# 10).

Overall, the provision of external input and advice was a recurrent theme in our interviews and seems to be a dominant way in which incubators perform a governance function for entrepreneurial firms. This confirms findings from prior literature which associate the incubator primarily with such an advice and support function (Bergek and Norrman, 2008; Cumming et al., 2019; Hallen et al., 2020).

Questioning

While the first mode of consultation consists in the provision of input in the form of “answers”, we see a second mode of consultation which is more about raising questions. Here, the incubator plays the role of the devil's advocate, challenging entrepreneurs and making them think twice about their ideas and assumptions.

Interviewee 6, for instance explains that, especially in the beginning, the incubator “has shaken to the core” the ideas and assumptions underlying his business. “Does this even work in this way? Is there a market for this technology? Are you sure about this? Is the pricing model realistic? There was a lot of questioning, and rightly so” (# 6). Likewise, another interviewee tells us that the incubator would ask him “very sharp, very specific questions, which make me think, because I have not yet thought about this in this detail. And it's very important to ask such questions” (# 21). Another interviewee feels that the incubator makes sure that “you don't make something up out of thin air” when describing the prospects of the business (# 2).

Entrepreneurs described especially the quarterly meetings as spaces for such inquiry. In the quarterly meeting, the incubator would “look closely at what you present and what the next steps should be. They challenge this in a detailed way and they did step on my toes” (# 13). The interviewee characterizes the quarterly meetings as the “harshest version of a conversation with the [incubator]” (# 13). Similarly, another interviewee tells us that “it is very interesting in the quarterly meeting, because the discussion and the whole conversation brings a lot of things to the surface” (# 18).

While, overall, in our interviews there was less reference to raising questions compared to providing input, the substance of this evidence suggests that this is also an important form of consultation performed by the incubators. Moreover, the boundary between these two is arguably fluid, especially when it comes to the “corrective” dimension of input discussed above, which also contains an element of challenge. Like input and advice, questioning happens in the interaction between incubators and entrepreneurs. These governance practices are thus constituted through particular speech acts (Van Werven et al., 2022), like “advising”, “proposing” or “questioning”. Since they rely on these speech acts, it is difficult to disembed them from the interaction setting. Governance talk is situational (in terms of the incubator reacting to current problems faced by the entrepreneurs, for instance) and depends on the expertise of the incubator who performs these speech acts. This expertise arguably also relates to being able to balance between allowing conversations to “move forward” and interrupting them by questioning, respectively. Questioning means not letting pass the explanations and accounts of the entrepreneurs (Vollmer, 2019). As such, it is a somewhat intrusive practice which, in other contexts, may well be regarded as too intrusive, in the sense that people would normally expect that their (routine) accounts are being passed by others without much complication (Vollmer, 2019). But in the context of the incubator, questioning is part of the governance routine and hence of the “background expectancies” (Vollmer, 2019, p. 18) of the actors involved. And while it may be challenging for the entrepreneur to be confronted with difficult questions during meetings with the incubator, it is also clear that these meetings interrupt the flow of entrepreneurial activity only temporarily, as incubator managers also know that they have to “move on” eventually.

Controlling forms of governance

Setting targets and tracking progress

We also identified evidence in our data which suggests that incubators exercise a controlling form of governance. Such control elements go beyond the advice and support elements discussed above insofar as they have a more authoritative or mandatory nature and subject the entrepreneurs to a particular process of control. We identified two expressions of such a control dimension. The first one is about incubators setting targets for the firms and tracking progress in achieving these targets. This was a recurrent theme in our interviews.

Interviewee 9 explains that the incubator “defines targets, but not impossible ones” (# 9) and that these targets are then the basis for discussions in later meetings, in the sense of assessing: “Target achieved, target not achieved. What can you change and improve?” (# 9). Another interviewee tells us that the incubator suggested that they arrange service contracts with the customers. “If he says, ‘Try to get service contracts’, then this becomes for us somehow a goal. We try to translate such recommendations into concrete goals” (# 6). While this includes an element of “advice” (“try to get service contracts”), it goes beyond an individual speech act and introduces a process, whereby advice translates into a target which subsequently is monitored and discussed again in the future.

It was especially during quarterly meetings where progress was tracked and discussed. Interviewee 7 tells us that the quarterly meetings revolve around three “main points: what was planned, what has been achieved, and what is planned [for the future]? These three things, and this covers all points from the technical side, what has been achieved and what not, and of course from the organizational side” (# 7). Another interviewee describes the quarterly meeting as an “anchor point” that happens regularly. “It offers a good retrospective, because we look at what has happened or has not happened. You evaluate your time schedule, where you are.” (# 3). In a similar way, interviewee 13 explains that the regular meetings with the incubator are like a “stage-gate process” where you look at “where are we now? Are we in plan? How strong are the variances? And those variances, how can we fill them?” (# 13). And interviewee 15 refers to the “coaching” by the incubator in terms of communicating “what we have achieved and what we want to achieve” (# 15). We can clearly see here the similarity to a management control process inside an organization, where managers would set targets (for themselves or for their subordinates) and then follow up on these. Here, it is the incubator who performs this sort of control as part of its governance role.

Having to discuss their progress also has an effect on entrepreneurs' preparation for these meetings. One of our interviewees explains that, in anticipating the meeting with the incubator, he and his partner would discuss “how to justify if we haven't reached certain goals. Which excuse we can come up and what we offer as a solution” (# 21). The regular meetings establish an accountability relationship with the incubator, in the sense that entrepreneurs feel the need to explain and justify themselves.

The governance role played by the incubator when setting targets and discussing target achievement is similar to that of investors when they install results controls in the venture to keep track of progress (Bedford and Ditillo, 2022). It is also similar to management control practices implemented by entrepreneurs themselves so as to inform their own decision-making and/or to guide the behavior of their employees. These similarities suggest that there is indeed a “control” element at work here which goes beyond the “advice and support” that incubators are normally associated with (Cumming et al., 2019).

Enforcing structure and documentation

The control exercised by setting targets and tracking progress closely relates to another form of control that we could identify in our interviews. Rather than just mentioning the content of the discussion with the incubator, interviewees would at times also emphasize the role of the incubator in enforcing some kind of structure and order on the young firms. Here, the control exercised by the incubators takes the form of ensuring a “due process”.

Interviewee 21, for instance, explains that the incubator helps him to “keep a certain order” in terms of how to run their business. Similarly, interviewee 10 suggests that “the incubator points towards certain things or deadlines and admonishes you in a way” (# 10). According to another interviewee, being subject to such structures, like the regular quarterly meetings, “leads to a certain form of self-discipline. If you don't already have this, this is a good way to intensify it” (# 19).

An important part of the due process, which the incubator enforces, is to have written reports of the presentations in the meetings and written documentation of what is being discussed. Interviewee 7 explains that “it is important to have the things that are being discussed in black and white”. This would concern in particular items like revenue goals, because there is always the risk, according to this interviewee, that there is “a lot of fantasy” in such numbers. “And so it is important to have it in black and white, to see how it really looks like and what is concrete and what is not” (# 7). Likewise, another interviewee confirms that “it is very important that we always record in writing: How far have we come, and where is the goal? Has it been reached to the next meeting? We always write this down in our minutes” (# 20). Again, note that this sort of control is about installing a particular process (which can be applied to different pieces of content, so to speak).

Interviewee 12 suggests that documentation might seem irrelevant if the business is going well. “Why should I then document all this?” But, on the other hand, “you might only know afterwards” whether it was important to document it or not. “So it does not hurt and perhaps you will need it later” (# 12). We will come back to this point below, when discussing entrepreneurs' assessment of the control exercised by incubators.

Overall, the controlling forms of governance that we observe in our data are also rooted in the governance talk between incubators and entrepreneurs. But, unlike the consultative ones, they go beyond such talk by having a processual dimension. It is not the specific content (e.g. the specific questions being asked, the specific targets being set) which matters here only or primarily, but the process of setting targets in the first place or of documenting important decisions made. Establishing such a process is a way of creating an infrastructure for the subsequent exchange of accounts (Ahrens, 2022; Vollmer, 2019). Written documentation can be used to raise questions during meetings, and the definition of targets produces a precedent for coming back to these targets in the next conversation. As such, controlling forms of governance do not only influence entrepreneurs' behavior in a direct way; they also create background expectations about what entrepreneurs might have to account for in the future and they allow such future “accounting” to become seen as part of an accepted routine rather than an intrusive act.

Initiation of governance episodes

The above findings spotlight the forms of governance that incubators would engage in. The governance relationship materializes in the conversations between incubators and entrepreneurs. How does such a conversation come into being? Our data show that it is either the entrepreneur or the incubator who initiates “governance talk”.

Several of our interviewees mention that they would proactively contact the incubator in case of need. Interviewee 17, for example, explains that it is important to have somebody whom you can contact “if you have a concrete problem” so as to “get the help that you expect” (# 17). Similarly, interviewee 13 says that the people from the incubator would “listen to every foolish idea that I have and really give competent answers” (# 13). Some of the entrepreneurs emphasize the hands-on nature of interacting with the incubator. For instance, interviewee 1 explains that “if there are things where we believe that the people [in the incubator] have experience, because there are recurring issues which happen in every firm, then we might write a short e-mail or go downstairs and ask them how they would do it” (# 1). Interviewee 12 confirms that, “if you have a problem, you can talk to them at any time” and adds that, if there is nothing to talk about, then it is also fine. “You are not handcuffed. They don't request you to do bureaucratic things” (# 12).

This last comment is interesting, because it clearly transpires from our interviews that incubators also exercise authority by virtue of the regular meetings that they schedule with them. Here, the governance talk is not “chosen” by the entrepreneur, but initiated by the incubator. As already alluded to above, such meetings (and the documentation and reporting that go along with them) constitute fixed reference points and enforce structure on the relationship between the incubators and the entrepreneurs.

Interviewee 2 explains that the quarterly meetings “constitute an enforced appointment” and adds that he would “prepare precisely for this type of meeting, as it is an appointment that I cannot change or that I can hardly change, because it has to take place in the quarter” (#2). Similarly, another interviewee explains that the enforced nature of the meetings is important insofar as “it is not bad to reflect upon whether something happened or did not happen. This is the point where you have to concern yourself with this” (# 3). And interviewee 8 confirms that a meeting “requires you to present” and that “it is good to have a bit of monitoring in this respect” (# 8). There is thus repeated reference in our interviews to the “enforced” nature of the meetings, to the fact that scheduling meetings implies “a certain type of pressure” (# 3), insofar as the entrepreneurs have to report there.

Overall, we can see in the data that incubators initiate governance talk particularly by enforcing regular meetings with the entrepreneurs. In addition to this, they would sometimes also approach the entrepreneurs in a more flexible way. Interviewee 13, for instance, explains that “the ladies [from the incubator] ask from time to time how things are going, whether there is a need for some advice” (# 13).

Finally, some interviewees mention that, over time, there has been a shift in interaction with the incubator from a “general, high-frequency time towards a demand-driven, low-frequency time” (# 6). In other words, the fixed points of contact became less important and the governance relationship assumed a more flexible form.

When considering these different occasions for governance talk, we can conclude that the consultative forms of governance are present in all of these cases, whether it is the incubator or the entrepreneur who initiates the talk. The controlling forms of governance, in contrast, are enabled particularly by the regular nature of the mandatory meetings which are initiated by the incubator. It is here where the processual nature of control can materialize, in the sense that entrepreneurs have deadlines to meet, are made to reflect on what happened since the last meeting, or write down what has been discussed.

Entrepreneurs' assessment of the governance relationships

The final question we address is how the entrepreneurs assess the governance exercised by the incubators. Our above discussion already revealed that entrepreneurs would often comment in a positive way on the role of the incubator, not only when it comes to the input and advice that the latter provides, but also with respect to the pressure and control that go along with having regular meetings and ensuring a due process. This positive assessment is expressed in different ways by our interviewees.

Interviewee 7 suggested, “I can only repeat again that, without the incubator, we would not have tried [to become an entrepreneur]. That's certainly the purpose of having the science park. It's a fact that in our science studies, you don't have any exposure to business issues. Everything that they [the incubator] did for us has been really useful for us. As I said, it was not always what I preferred to do, but without this incubator we would not have come even close to understanding all this” (# 7). What this suggests is that the incubator is appreciated because they complement the entrepreneurs' expertise and increase their confidence to start a business in the first place. They are seen as a “helping hand” in those areas where the entrepreneurs are most uncertain about. We suggest that this is facilitated by the actual expertise of the advisors who would often have an entrepreneurial background themselves.

When looking at particular episodes of governance talk, our interviewees would emphasize the detailed engagement on the part of the incubator's advisors. Interviewee 21, for instance, tells us: “I think that's great. I was really positively surprised, when I left the quarterly meeting, how they had stepped on my toes there” (# 21). He compares this to being employed in a firm and having a boss who challenges you, “And when you are self-employed, you don't have anyone who says, ‘Come on!’ And so it's all the more important that this happens in the quarterly meeting”. This supports the idea that the incubator operates as an external governance actor who is needed precisely when there are no strong internal management controls or established internal governance mechanisms in place.

Other interviewees expressed themselves more strongly, saying that the incubator would “kick their butt” and make sure, “that if things don't progress, they push a little and give motivation” (# 17). Similarly, “it's important that, if you don't mind my saying, you get kicked in the ass every three months” (# 13). It also seems that the pressure and control exercised by the incubator translates into increased self-discipline. As interviewee 2 explains, the quarterly meetings are “brilliant, because you are forced to keep going. […] And that you kick yourself in the butt if things don't go so well (# 2). Similarly, interviewee 17 felt “pushed by the fact of having to write the quarterly reports” (# 17), and interviewee 8 explains that the quarterly meetings were most of the time a “confirmation rather than a negative critique. But it was good to know that we are on the right track” (# 8).

Some of the more explicit language used by the interviewees quoted above is perhaps indicative of a male-dominated culture, where “blunt feedback” is considered as part of a forward-looking mentality that allows one to progress, even if it might sometimes “hurt”. Several interviewees admitted that the control element in the incubators' activities can be annoying, but still typically emphasized that this was “necessary”. Interviewee 14 explains that “in the beginning, it was a bit annoying, but when the meeting is over, you are always glad to have had such an opportunity” (# 14). Likewise, another interviewee admits that “it can of course be a bit cumbersome” to have a meeting and to be required to prepare yourself for it. But it is still a good thing, according to him (# 3). And interviewee 21 explains that the critical questions by the incubator were “unpleasant but very important” (# 21).

Only two of our interviewees had a predominantly critical view on the governance role played by the incubator. One of them (# 9) refers to “all this paperwork” that is required and explains that, for him, this “has caused stress” (# 9). The other one explains that, since they did not yet have a prototype, most discussions about the market or commercial aspects were somewhat futile. And so the meeting “was rather a supplement that was somewhat annoying and was not very useful” (# 19).

Concluding discussion

Incubator governance between consultation and control

Our cross-sectional interview study illuminates the role that incubators play as a governance actor for entrepreneurial firms. Central to our analysis is the identification of different governance practices that incubators exercise. These practices range from more consultative to more controlling forms of governance. Incubators consult entrepreneurs by providing input and advice and by questioning their decisions. They exercise control by setting targets and tracking progress as well as by enforcing structure and documentation.

Prior literature on entrepreneurship has already discussed the consultative role played by incubators (Ahmad and Ingle, 2011; Bergek and Norrman, 2008; Clayton et al., 2018; Hallen et al., 2020; Van Weele et al., 2017; Vanderstraeten et al., 2020), but it has not said much about control exercised by this governance actor. Indeed, some studies make a rather clear distinction between the governance role of incubators and that of other outside actors, particularly investors. While incubators are described as offering “advice and support”, investors exercise “control” over the start-up (Cumming et al., 2019).

This rather clear distinction risks masking the more nuanced ways in which incubators exercise control, whereby control is understood more broadly than the exercise of formal decision-making rights as the ability to influence and enforce changes in the new venture. Our paper suggests that incubators do exercise control over entrepreneurs in the sense of subjecting them to a particular course of action which becomes an accepted part of the incubation process. This includes setting targets and monitoring these through regularly held meetings as well as imposing demands for structure and documentation. These mechanisms are not contractual and do not give the incubator any decision-making rights, but they are based on the authority of the incubator and the acknowledgement of this authority on the part of the entrepreneurs.

These observations extend prior research on inter-organizational relationships and the types of governance mechanisms observed therein. This literature has pointed out that actors external to a focal organization may resort to different mechanisms of influencing this organization, sometimes based on contractual rights, while in other cases based on appeals to cooperation. For example, in their study of the relationship between Ericsson and Telia, Håkansson and Lind (2004) observe market-based, hierarchy-based and cooperative forms of governance, depending on the particular organizational units involved. They conclude that the inter-organizational governance relationship should be seen as a “form of multi-dimensional coordination where issues related to different activities are dealt with in quite different ways” (p. 68).

A similar observation about different forms of governance has been made within the literature on shareholder activism. In established firms, large individual shareholders (such as pension funds or hedge funds) rarely have a controlling stake over the firm's management. This means that they “cannot force their ideas on their target companies; they must persuade its board of directors or the majority of shareholders that adopting their proposals is in the best interests of the firm” (Levit, 2019, p. 2775). This happens through “soft” forms of governance, such as regular communication with management about strategies and activities to be undertaken (e.g. Becht et al., 2009; Dimson et al., 2015; Roberts et al., 2006; Tengblad, 2004). This is also true for private equity firms which often have a controlling stake. Bedford and Ditillo (2022) examine how private equity (PE) firms influence the trajectory of their investee firms. They find that the PE firms do not only resort to formal governance mechanisms like board representation, but also exercise influence through a variety of other channels, including regular informal meetings to discuss strategic and operational issues with management. Bedford and Ditillo (2022) thereby adopt a broad understanding of “control”, encompassing all channels which help “motivate opportunity search and influence decisions concerning the strategic direction of the company” (p. 854).

Our paper speaks to this literature and confirms that there are different paths through which external actors exercise governance. The incubator is an external actor who has very little formal control over the new ventures. Given the absence of an equity investment (like for PE firms or other shareholders) and cooperation for product or service delivery (like for suppliers or joint venture partners), the incubator does not have the same governance needs as these other actors. Its primary purpose is to support entrepreneurial firms, which explains the focus of the entrepreneurship literature on the different forms of advice and support offered (Ahmad and Ingle, 2011; Bergek and Norrman, 2008; Clayton et al., 2018; Hallen et al., 2020; Van Weele et al., 2017; Vanderstraeten et al., 2020). Yet, as we showed in our paper, there is also a control dimension in the governance role exercised by incubators. In order to support entrepreneurs, it may be necessary to impose also some controls over them.

We hence arrive at a conclusion that is, in a reverse manner, complementary to that of the above-mentioned studies on investors and supply-chain partners (Becht et al., 2009; Bedford and Ditillo, 2022; Håkansson and Lind, 2004). While these studies emphasize that the governance role of these actors is not limited to formal and hierarchical governance mechanisms but extends to include “soft” forms of governance (assistance and cooperation), we suggest that the arguably soft governance role of incubators (which is mainly about assisting start-ups) also extends to include “harder” elements of control. This should not deny the fundamental differences between these actors, but demonstrates that – despite such differences – they share some of the same ways for how to influence the trajectory of (entrepreneurial) firms.

Incubator governance and management control

Our paper also speaks to the literature on management control systems in entrepreneurial firms (Becker and Endenich, 2023; Davila et al., 2009; Pelz, 2019; Sandino, 2007). This literature has mainly identified the types of control systems used in young firms as well as the drivers behind adoption of these controls. It thereby also pointed to the role of external actors, such as venture capital firms, as initiators of the adoption of control systems (Pelz, 2019).

In large firms, controls such as budgets or performance measures are typically seen as means for managers to guide the behavior of subordinate employees (Merchant and Van der Stede, 2017). In small entrepreneurial firms, where the management of the firm is often operationally engaged and where hierarchies are flat, such tools are often more about self-control and learning (by the entrepreneur-manager) rather than control of employees (Becker and Endenich, 2023). Budgets, roadmaps, or operational performance indicators have an important informational function for entrepreneurs as they manage their business forward.

When entrepreneurial firms enter an incubator, they might have few such controls in place. Part of the role of an incubator is then to guide entrepreneurs in adopting control systems that are useful for them (Becker and Endenich, 2023). Our paper shows that this guidance happens not least by creating a control relationship between the entrepreneur and the incubator. Rather than just telling entrepreneurs that they should adopt this or that control system, the incubators themselves create such a control mechanism and use it as a structuring device for their interactions with the entrepreneur. This can then lead to a learning effect, in the sense that the entrepreneurs continue to work with some controls even after they have left the incubator. So, for instance, they may realize that regular target-setting and monitoring helps them assess their progress. Or they may learn that asking employees to document important decisions will help them create accountability.

It is here where the distinction between “consultative” and “control” elements of incubator governance is also relevant. Consultation is useful in many ways, but it is also rather situational and depends on the expertise of the incubator in providing good advice and asking good questions. Once the entrepreneur has exited the incubator, this consultation role could be fulfilled by other actors, such as partners or employees within the firm or investors or consultants outside. The control elements in the incubator's governance role are more independent of person-specific expertise. They are structural mechanisms that entrepreneurs can continue to pursue themselves once they have left the incubator. In other words, this form of external control can live on in the internal management control systems that the entrepreneur decides to adopt.

Our findings provide a rather positive view on the incubator-entrepreneur relationship, with most interviewees seeing the incubator indeed as a helpful resource. Other authors have pointed out that not all entrepreneurs are equally well served by the services of their incubators (Lukosiute et al., 2019). In our study, we saw only few instances where entrepreneurs felt that the governance exercised by the incubator was not particularly helpful for them. And even then, it was regarded more as an annoyance rather than as a material problem. Nevertheless, we concur with Lukosiute et al. (2019) that entrepreneurs should carefully check the services offered by an incubator and judge whether these are in line with their demands. More generally, our research demonstrates what sort of positive effects entrepreneurs may expect from their interactions with incubators. Being sensitized to such effects may allow entrepreneurs to better appreciate their interactions with incubators, even in cases where perhaps the immediate benefit is not always obvious. In particular, entrepreneurs, who prefer “doing things” to “writing them down” or “exploring” to “taking stock”, may come to see the control imposed by incubators as a learning exercise, in the sense that they will need to adopt increased self-control once they exit the incubator or otherwise ensure that there is an ongoing control of their activities.

Limitations and further research

Our study has certain limitations which we wish to acknowledge. First, we treated our sample of start-ups as one group, rather than differentiating further within this group. There might be patterns regarding the interactions with incubators that differ between different groups of firms. For instance, one contingency factor could be the stage of maturity of a start-up. Some of our interviewees suggested that their interactions with incubators became less frequent over time. Not only might these interactions become less frequent, they could also change in terms of the nature (e.g. in terms of the relative dominance of different governance practices). Another factor that could influence the interactions between incubators and start-ups is the maturity of the control systems adopted by the start-ups. If young firms already have a set of their own controls (and people who are dedicated to maintain and enact these systems), one would imagine that incubators are less important as an instance of external control. Future research could more systematically examine such differences and offer theoretical explanations for why the governance talk between incubators and entrepreneurs differs between start-ups with different characteristics.

Second, by interviewing only entrepreneurs and asking them about their interactions with incubators, we focused on one side of this “dyad”. We did not include the perspectives of the incubators and we also did not directly observe such meetings, as other researchers did (Van Werven et al., 2022). Relying on one actor always runs the risk of having a somewhat biased or filtered view on what really happened in a meeting, and it would be valuable to directly observe meetings and/or to interview incubators to get a more multifaceted view on how such meetings influence start-ups.

Despite these limitations, we believe that our paper enriches our understanding of how incubators exercise governance over entrepreneurial firms. In particular, we show how incubators do not only provide support or advice to entrepreneurs, but also impose control processes on them, which guide the interactions between these actors. In complying with such control mechanisms, entrepreneurs potentially learn the value of creating routines within their own firms that facilitate the exchange of accounts with employees, suppliers, customers or other parties.

Table 1

Emerging themes from data analysis

First-order themes	Second-order themes	Overarching themes
Providing specific functional input; stimulating an entrepreneurial attitude; establishing contacts and networks; inducing focus; playing a corrective role	Consultative forms of governance	Governance practices
Challenging goals and assumptions; playing the devil's advocate; enforcing a realistic view on the business
Specifying goals; giving recommendations that translate into goals; comparing target and actual; asking why goals have not been achieved; setting deadlines	Controlling forms of governance
Requesting written reports; documenting discussions
Asking specific questions; seeking advice	Entrepreneur approaches the incubator	Initiation of governance episodes
Quarterly meetings; asking whether there is a need to talk	Incubator initiates governance episodes
Emphasizing the need to have some pressure; benefiting from discipline and enforced meetings	Positive assessment	Entrepreneurs' assessment of the governance exercised by incubators
Unpleasant questions; cumbersome preparations for meetings and documentation	Admitting annoying elements
Meetings not very useful; meetings create stress	Critical assessment

Table A1

List of interviewees

#	Person	Firm	Founding year	# of founders	# of employees*	Sector	Incubator
1	Founder	A	2010	3	0	Mechanical engineering	1
2	Founder	B	2011**	1	1	Mechanical engineering	2
3	Founder	C	2008	2	0	Mechanical engineering	2
4	Founder	D	2009	2	2	Software engineering	3
5	Founder	E	2010	1	5	Web services	2
6	Founder	F	2010	2	2	Software engineering	3
7	Founder	G	2010	2	0	Pharma	2
8	Founder	H	2009	2	3	Design	2
9	Founder	I	2008	1	0	Process engineering	2
10	Founder	J	2010	1	0	Web services	1
11	Founder	K	2009	3	34	Web services	2
12	Founder	L	2010	2	2	Mechanical engineering	2
13	Founder	M	2010	2	1	Consumer goods	2
14	Founder	N	2010	1	0	Hardware and Software engineering	2
15	Founder	O	2011**	2	0	Web services	2
16	Founder	P	2010	2	0	Consulting	2
17	Founder	Q	2011**	1	0	Biotech	2
18	Founder	R	2010	1	0	Consulting	2
19	Founder	S	2011**	1	0	Pharma	3
20	Founder	T	2009	4	0	Pharma	2
21	Founder	U	2005	2	0	Web services	2

Note(s): ^*Excluding founders

^**Interviewed in the process of being founded

Notes

1. https://eit.europa.eu/our-activities/entrepreneurship

2. Some interviews were conducted in the process of founding the firm, i.e. before the firm was officially founded. Often, entrepreneurs are already advised by incubators before officially registering their firm. Only one firm (Firm U, # 21) was founded earlier.

Appendix

Interview guide

Introduction

1. Background on the firm

2. Products or services offered

3. Stage of development

4. Outlook

Impact of external actors

1. Which external actors have been influential?

Role of the incubator

1. Interactions with the incubator

2. Role of quarterly meetings

3. Learnings from interaction with incubators

4. Impact of incubator on strategy

5. Impact of incubator on development of the firm

6. Reporting and target-setting

7. Risks and uncertainties

8. Satisfaction with incubator's services