Adaptive strategies in response to economic downturn

The final part of the literature review is devoted to the investigation of strategies of adaptation that different organizations employ in order to overcome difficulties posed by the economic recession.

First of all, it is important to say that there are plenty of studies focusing on adaptations under recession, though only few `explore the causes, processes and consequences of strategic adaptation under recession conditions' (Kitching et al., 2009, p. 8). It is no surprise that mostly for-profit organizations are considered in the literature devoted to crisis adaptations.

Kitching J. with colleagues investigated in detail the processes and general consequences of business adaptations to economic downturns. The authors performed a deep analysis of different commercial companies under crisis conditions and they reached vital conclusions about the problem of adaptation. They claim that because of globalizing, constantly changing the world it is not possible to use extrapolation of what has been done by companies in the past. Recessions have a very volatile influence on different organizations. That is why in any industry there are firms which prosper during the crisis and those who go bankrupt. The final point about recessions and adaptations is that there is absolutely no universal `best practice' that would shelter an organization during a recession. The researchers also put forward several collateral ideas concerning adaptive strategies. For example, they state that large enterprises are more likely to have distinct strategic policies rather than small firms, and that government has all the potential to reduce harmful influence of the recession.

Above mentioned ideas reveal the basic concept of what a recession is in connection with adaptation strategies. Let us look closer to the possible process that can be undertaken as an adaptation strategy.

What can be the organization's response to economic recession? Obviously, possible responses include doing nothing, adapt or `fundamentally re-think' the whole idea of an existing business model (Kitching et al, 2009). Adaptation and total reconsideration strategies are of particular interest for the present research.

There are two popular classifications of adaptive strategies suggested by Sternad D. (2012): internally-externally oriented actions, and pro-active-retrenchment strategies. Internal actions are characterized by changing inner business elements such as control systems, business processes in general or staff policy. External adaptation activities, on the other hand, are aimed at interacting with the outer world through marketing strategies, pricing policies or competition decisions. Retrenchment strategies call for a reduction in costs, investment and human resources while the pro-active position of the firm implies looking for investment opportunities. As was already mentioned earlier, crisis always provides opportunities to develop, and pro-active strategies are the representation of this idea. As real business cases show, in New Zealand during the crises of 2009 those firms who undertook investment strategies were more likely to report growth in turnover and profitability (Battisti and Deakins, 2009). Quite a few other authors corroborate the positive consequences of employing pro-active adaptation strategies under recession (De Ruijter, 2012; Salenborg, 2013).

Research Question 2a: Which strategy does the incubator choose to fight the crisis? Pro-active or retrenchment? Why?

Discussing the perspectives of launching one or another adaptation strategy, there are different views on what constitutes the peculiarities of adaptation perspectives. Sternad D. (2012), for instance, investigated cultural differences in adaptation processes; however, he came to ambiguous conclusions which cannot guarantee somewhat significant differences in adaptation strategies associated with cultural specificities of entrepreneurs. Kitching J. et al. (2009) took another road in explaining possibilities for escaping the recession impact and proposed an idea that business size is of critical importance for successful adaptation, as in large enterprises `strategic analysis, choice and implementation are often distinct activities' which makes it easier for larger firms to forecast potentially dangerous impact and tackle it. However, the researchers recognize possible counterarguments and see the size only as a small part of adaptation success.

Referring to the experience of SMEs during difficult times of crises, Lowth (2010) points out that companies often realize the necessity of a `robust business strategy' under recession, but what is done in response to economic downturns strongly resembles an emergent strategy concept.

Research Question 2b: What is the role of an emergent strategy for the business incubator during the crisis?

It must be admitted that the extant literature mostly neglects the topic of adaptive strategies of non-profit organizations under recession. Probably this is because non-profits seriously depend on the will of various stakeholders, and often managers of NPOs cannot influence the strategic movements of the organization. However, this topic is becoming more interesting to researchers, and Kolbeinsson J.B. (2014) introduces a new concept of `crisis incubation' which comes from Iceland which was heavily struck by the crisis of 2009. A particular interest pertaining to business incubators in Iceland during this crisis is caused by the policy of Innovation Center Iceland which created a number of business incubators throughout the country in order to help innovative companies recover. The author investigated the differences between traditional business incubators, acting in formally benign economic environments, and those operating under recession. The main result of the study is that during crises it is much easier for potential incubatees to enter the incubator. Another important outcome of the research concerns services provided by `crisis business incubators'. For example, during a recession it gets more difficult to provide any help for tenants in obtaining financing.

These results of the only paper concerning directly business incubators under recession can be seen as major strategic responses of such organizations to hostile economic environments.

Research Question 2c: How has the range of services provided by the HSE incubator changed since the start of the crisis in 2014?

2.METHODOLOGY

This study concentrates on factors that influence business incubator's strategy and methods of strategy adaptation to the hostile business environment. To achieve the ascertained goal, the method of a case study will be employed. A particular case is going to be based on the experience of the business incubator at the Higher School of Economics in Moscow and its current transformation strategy influenced by the economic recession in the country which started in 2014. Three methods of data collection will be employed for the present case study.

Personal interviews, document review and observation seem to be the most consistent and easy to perform methods in light of the specificity of the present investigation. Managers and residents of the incubator are going to be interviewed about the current situation and future plans in terms of anti-recessionary policy within the organization and recently employed a stream of decisions aimed at building a pattern for orienting in the new hostile environment.

The document review method will be exploited because the incubator is heavily dependent on the SME support government and university policy and demands of other stakeholders who direct most of the business incubator activities. The changes in this policy can be discovered in various public and private documents including office mail; the obtained data from the documents will be juxtaposed to the actions of the incubator managers.

Observation is considered to be of particular value in order to feel the atmosphere in the organization and draw more reliable and unbiased conclusions. Observation in the present research includes attending meetings and special events, registering situations that may help the research, and also performing some work in the organization, which means that, to some extent, it is a participant observation.

Proceeding from the fact that there is a scarce theoretical body of knowledge on business incubation process worldwide and there is clearly not enough statistical data related to the Russian industry of incubation I tend to believe that qualitative method of a case study is the key approach to assessing business incubator adaptation strategies in Russia. It allows tracking hidden factors that influence the strategy and put them together so that it is possible to see the holistic picture (Erkko A. and Klofsten M., 1998). Keeping in mind that qualitative methods are significantly more flexible than the quantitative ones, a case study is exactly what is needed in this research. Additionally, the results of interviews might contain emotionally biased and just totally different answers which only can be correctly interpreted via qualitative methods. It should be noted that the methodology was chosen in the context of several constraints including scarce statistical data for the Russian business incubation industry and the completely new topic of recession adaptation in the Russian business incubator literature.

Data analysis in the present research will involve commonly accepted stages for case studies which include describing, interpreting, drawing conclusions and determining significance.

An important fact concerning the present study is that the case covers two time periods: the end of the year of 2014, when the crisis only started to progress and the end of 2015, when the crisis was already standing on a sound base. The process of collecting data in 2014 took about two weeks while in 2015 this process covered a period of a month.

To make it easier to follow the narration I will briefly cover the structure of the empirical part of the research. This part is going to adhere to the following plan.

The case study will be divided into three sections, covering, respectively, the state of the business incubator at the beginning of the crisis, then, the impact of economic crisis in Russia on the business incubator, and, finally, the adaptive strategies that the incubator undertakes in order to adjust to the crisis environment. A particular emphasis during the process of data collection was put on the investigation into ascertained research questions, however, I was also interested in some collateral information about adaptation strategies of the business incubator that may be helpful for a holistic understanding of this problem.

3.CASE STUDY

Peculiarities of Business Incubators in Russia

Russia has stepped into the market economy, into the world of capitalism almost 25 years ago and is continuing to pursue the developed countries in many aspects. Concerning small business development and motivation of innovation among young entrepreneurs, Russia is lagging behind Europe and America. However, the Russian government sees the small business as an important factor in a successful economy and during the last 5-7 years there have been certain steps towards creating institutions that would help the development of entrepreneurship among the younger generation in this country. Hence, in April 2010 the Russian government developed a program on improving the universities' innovative infrastructure, according to which Ministry of Education of the Russian Federation received 15 million rubles in 2010, 10 million in 2011 and 15 million in 2012 Постановление правительства Российской Федерации . - 2010. p. 5. This amount of money was supposed to be spent among other things on the building of university business incubators. Moreover, actually after 2010 we saw a significant rise in the numbers of new business incubators in different regions of the country.

It is important to say that regarding the development of small business infrastructure in Russia we can simply talk about university business incubators as they have particularly been given a push in their development. This was clearly illustrated by Forbes in its article called “Five Best Russian Business Incubators”. Four out five incubators ranked there were university affiliated ones Forbes http://www.forbes.ru/svoi-biznes/startapy/59358-pyat-luchshih-rossiiskih-biznes-inkubatorov. The incubator of Higher School of Economics was also included in this list. The overall ownership structure of business incubators in Russia is presented in the diagram below.

Figure 2. Ownership structure of BIs in Russia in 2013. Source: Ernst & Young

The majority of incubators are not specialized in a narrow field and they can be called mixed incubators. Managing a mixed incubator means to reduce the risk of startups failure by diversification. On the other hand, this approach creates a heterogeneous membership structure which was described in the previous part of the research and which can hamper creating the effective network.

Talking about goals of business incubators in Russia it seems that one of the purposes of the overwhelming majority of incubators is providing tenants with cheap office space. As a proxy for this we can look at the prices of renting an office in an incubator comparing to market prices. 71% of incubators set prices below market value.

If we look at criteria of effectiveness of Russian business incubators and analyze, for example, the survival rate we will see a frustrating picture. The survival rate of tenants while they are residents both in Russia and in Europe are high (86% in Russia, 93% in Europe). However, when we look at the survival rate for a certain period after “graduating from” an incubator we will see a drastic change in figures (88% in Europe and 27% in Russia). Is it all about Russian entrepreneurs or is it the quality of business incubators?

As concerns some procedural peculiarities of Russian incubators, there are two points that are really important. The first one is the length of programs for tenants. In Russia they usually last one or two years while in Europe and America the time period is longer and on average lasts three years. This characteristic does not mean anything concerning the quality of provided services but it is interesting how the period came to be shorter.

An even more critical thing about business incubators in Russia that by all means has to be taken into consideration any time you compare Russian incubators with American or European ones is that “none of the business incubators has a toolkit for regular monitoring and self-assessment” (Rogova, 2014, p. 277). The Russian experience in innovative strategies and introducing new means of engaging with startups is at the development stage and the culture of thinking in long-run is not adopted by managers of business incubators.

In order to make it easier for readers to follow the research findings, the picture below summarizes the peculiarities of Russian business incubators.

Figure 3. Peculiarities of business incubators in Russia

State of affairs in the business incubator in 2014

The incubator at the Higher School of Economics was created at the end of 2006 as a subdivision of the University. It was the first university incubator in Moscow to be created particularly for students' business initiatives. Since then quite some successful startups like PensiaMarket, TimePad, Skillopedia came out of it. The incubator organizes more than a hundred events yearly, and up to this moment more than 10 000 people finished the incubation programs in the BI HSE.

The first stage of the research started in November 2014. I will start the description of the situation in the incubator at that time with the structure of the organization that characterizes the organization. As was already stated earlier, the incubator was created to be a subdivision of the Higher School of Economics, namely the part of the innovative block of the university. There are nine vice-principals at the HSE, and one of them is in charge of the management of innovation processes at the university. The incubator exists within this department and the head of the incubator is directly under the control of the vice-principal. An important fact that at the time when the data was being collected in 2014 the incubator did not have the CEO. The previous one left the job and the new one was not yet appointed. By the time of November of 2014 such a situation had been lasting for over a month.

The incubator consists of three departments. The first one deals with educational programs, the second one is about the tenants' support, and the last one is the department of youth entrepreneurship development in the social sphere. There are also several subdivisions that are not affiliated with the incubator on paper but historically they interact very closely. The example of such subdivision is the center of prototyping. The incubator is financed directly by the university, however, according to responses of managers, not all the departments of the incubator are fully financed externally. There are several other sources of revenue that the incubator uses including enrollment fees, sponsorship, and corporate events.

Figure 4. The organizational structure of BI HSE

I will now describe the incubation program functioning for startups, and this represents the operational level the business incubator organization. The program lasts one year with the possibility of extension to two years. During this time the incubatees get access to office space made in the form of co-working. An educational part involves seminars, master classes, lectures, and sessions. Startups do not have to attend these events. According to incubatees' opinion they see much value in these educational events, however, they do not always attend them, and the more they stay in the incubator and the more money they earn, the fewer events they take part in.

Most of the tenants see the incubator as a co-working where they get a below market price on office space, and also can network with other incubatees. Actually, the managers see this genuine networking ability as the key advantage of the BI HSE, and they see it as their main goal to develop the network by organizing events where tenants can share their knowledge and experience, and keeping updated the pool of experts who take part in incubator's events and can be of particular help for the tenants.

Speaking of enrollment fees, every incubatee has to pay monthly a certain amount of money for office space, meeting rooms, stationery, printers and coffee. The rent payments are significantly below market rates which creates a serious problem of misunderstanding the idea of the incubator. Such a situation greatly appeals to companies who seek to reduce their costs but do not look for incubation. Managers of the incubator quickly react to situations of this kind and this is probably the only reason why the nascent company may lose the place in the business incubator. As was already said earlier, the managers greatly appreciate the networking ability of their organization and this ability can be put into practice only in a homogeneous structure of membership that involve common ideas and goals of the tenants. If there is a danger that this structure might be ruined by one of the tenants the incubator says goodbye. Coming back to fees and other payments, it has to be noted that the incubator provides access to academic events held at the Higher School of Economics on a free of charge basis.

The incubating model dictates that the incubator does not require a share of the company or its profits. It enrolls companies consisting of at least two people and they should have a promising business idea. These are the crucial factors of screening practices that the incubator performs. It cannot be considered as a systematic approach as most of the decisions concerning enrollment are not based on unified criteria. However, as managers claim, it is rather hard to become an incubatee and the major part of the applicants are turned down because of poor presentation skills and vague team perspectives. It also should be noted that despite this fact, it is hard to be enrolled as well as it is hard to be sent away from the incubator once you are a member. The statistics reveal the fact that the overwhelming majority of tenants get the opportunity to prolong their stay in the incubator for two years. This situation means that the incubator does not have much pressure from the outside or the inside and is not put in conditions where it has to constantly reach for the goals and satisfy the requirements of stakeholders. This loose situation was expected to get tougher as the crisis grew bigger, and I will discuss this matter in the next section.

Speaking about significant peculiarities of the BI HSE in 2014, the major thing is the development of the department of entrepreneurship in the social sphere. In 2014 this department experienced the increased attention from the incubator's managers. The idea of helping to develop social startups is new for the business incubator industry in Russia at this time. The idea is to assist nascent businesspeople in progressing in the social sphere, motivate them to set correct goals and demands from this market, create a pool of experts in social entrepreneurship, and to explain the peculiarities of such a business. This undertaking can be considered as a non-trivial one, while demanding to take on a substantial portion of risk and money spending. It is very important to know how crisis influences such innovative initiatives in the non-profit sector. It will not be a mistake to consider the start of developing the new direction of incubation as an investment project, since it requires money, time, and it is not evident whether the whole thing is going to work out. No other business incubator in Moscow in 2014 was developing this sphere of entrepreneurship, and it makes it more interesting and important to find out how the business incubator carried this initiative in the next two years through the crisis.

In November 2014 there were 11 startups in the incubator, most of them finishing their second year of the incubation program. The overwhelming majority of the companies prolong their stay in the incubator to two years apart from situations when their stay is no longer consistent with the global idea of the business incubator. For example, there was an HR agency in the incubator that was developing rather well, and, consequently, they started to get more and more clients which meant that they had to hold many meetings in the business incubator. That was unacceptable for the managers and the company had to leave the incubator.

Regarding the staff of the incubator, there were five managers who were responsible for different aspects of the organization's well-being. Apart from several people who were in charge of maintaining accounting and office needs, there were managers dealing with communication with startups and experts affiliated with the incubator, social entrepreneurship, and PR of the organization. As was mentioned earlier the incubator did not have a CEO at the time when the research was being carried out, however, within a month, in December the director was employed. This is the staff structure of the business incubator at the end of 2014. One more important thing to say about the managers is their relationship with the main stakeholder in the name of the Higher School of Economics and the vice-principal in particular. For example, the hierarchical model of division of labor and responsibility for the BI HSE would be as follows: the innovative block of the Higher School of Economics and the vice-principal develop the strategy of the BI HSE, say the final word on most of the operational decisions and personnel employment. The reality is different for the incubator. The managers are free to develop their vision of the organization and discuss their ideas with the vice-principal. Moreover, the university does not impose any limitations and restrictions on the business incubator activities. The only requirement is to be financially stable and to stay within the budget. The managers appreciate such a relationship with the university because they can faster react to extraordinary situations and, consequently, be more flexible regarding the decision making process.

Crisis effects on the incubator

I have described the idea of how the BI HSE looked like at the end of 2014 putting a greater emphasis on aspects pertaining to the ascertained research questions of the present study. At this stage of the case study I will speculate on the influence of the crisis on the business incubator.

Undoubtedly, the task of defining the influence of the crisis on any organization is a highly complicated matter because you risk falling into the trap of taking collateral influence for the direct one, and, what is even more important, of missing hidden interrelations between variables. However, I will base my judgment on the interviews with managers, documents and observation.

Bringing forward the most evident consequence of the crisis, the reduction in financing has to be considered. When I asked the managers about crisis effects on their organization all of them mentioned this issue. The reduction influenced almost every aspect of the organization that needed money. Notwithstanding the fact that overall funds meant for operational needs and investment programs decreased, such aspects as salaries and financial resources for events also dramatically declined.

An important issue particularly pertaining to non-profit organizations deals with multiple sources of income. What I mean is that before the crisis the incubator acquired most of its financial resources from the Higher School of Economics and corporations that held events with the incubator and paid for it. The BI HSE organized such events with Intel, Oracle, Microsoft and many other organizations. When the crisis hit, the university reduced the financing and corporations also reduced their marketing budgets. This means that the incubator got hit from two sides and it is quite uncommon for commercial organizations. In the case of non-profit organizations, you literally cannot predict what is going to change tomorrow and how it is going to influence your organization.

This idea can be illustrated by the shift in staff structure during the crisis. During the period from December 2014 to April 2016 every employee changed, and not only once. The present team of managers works in the incubator six months, and this is the longest period the team holds for the previous 1,5 years. An interesting fact is that the incubator faced the situation when many people left the incubator and almost the same number wanted to apply for the job. It is not easy to explain the roots of this situation and whether this increased staff turnover has to do with the peculiarities of the non-profit organization or not, however, the increased turnover cannot be directly explained by the economic downturn in the country. The question may come up here: is there a specific HR policy in the non-profit organizations like business incubator so that employees and potential applicants react differently from employees in for-profits to economic hostilities in the country? The literature on this topic reveals that the employees in non-profits are different from their colleagues in commercial organizations since their main goal is not making a profit but achieving other goals. This totally corresponds with the data obtained in the present study through the observation and interviews. Hence, this peculiarity might be the reason for the unconventional reaction of employees to the crisis.

The Economic downturn is the time when for-profit companies suffer from shrinking demand for their products and services. Their clients' income decreases, preferences change and, consequently, companies strive to attract customers. It is rather easy then to identify adaptive strategies of for-profits since it is evident what they are trying to attain. The BI HSE experienced the opposite situation during the crisis. The CEO of the incubator claims that the demand for incubating services is at its peak now. That means that more entrepreneurs and startups seek to be enrolled in the incubator. However, it would be too simple to claim that the crisis has an opposite influence on the demand of non-profits rather than for-profits. However, one of the possible reasons for this may be the release of personnel. Since the common situation during the crisis is the reduction of personnel, the newborn unemployed who often possesses a valuable working experience might start looking for opportunities to apply his knowledge and skills in his startup. In order to do this, he might need an incubation program because of a lack of entrepreneurial experience. Such a conclusion can be drawn because of the average level of startups that are applying for the incubation program. The CEO of the incubator claims that this level has increased since the end of 2014. This is likely to be the part of the holistic picture of the demand on incubation programs during the crisis, however, a significant part of the increased demand might also lie within adaptations that were performed by the management of the incubator including positioning and branding of the incubator. I will discuss this in detail in the next section.

Another important issue that has to be discussed in the present case study is how the crisis influenced the requirements of stakeholders of the business incubator and the overall system of communication between stakeholders and management. The system of division of responsibility between stakeholders and managers is of particular importance here. When discussing literature on the topic I have mentioned that Russian style of management is very hierarchical and often the companies, even the biggest ones, are the companies of a single person that directs the company. If we consider the stakeholders of the BI HSE, the major stakeholder is seen to be the university, the Higher School of Economics. However, there are also other stakeholders of innovation like corporations, which have their particular interest in having relationships with such organizations as business incubators, and other non-profit organizations that are somehow interdependent with the business incubator. All these connections are based on a certain system of communication and division of labor and responsibility. The common idea is that the crisis requires mobilizing all of the organization's resources and conveying all the power to a very limited group of people. The incubator was characterized with the different system in 2014 and, interestingly, the crisis did not change this situation. Even in conditions of economic recession the division of labor and responsibility adheres to the partnership model where the business incubator managers have the authority to develop the strategy and put into practice. This statement is quite accurate because the data was obtained from different respondents and even different teams of incubator managers. This idea is of particular importance because the partnership model makes the incubator more flexible regarding adaptations to the external environment. The incubator that, for example, experiences the hierarchical model would undertake significantly different strategies to adapt to the crisis, hence, the present case study is mostly valid for the partnership model business incubators.

The system of division of labor and responsibility influences a crucial aspect that may be transformed during the crisis. The major stakeholders may impose new KPIs on the incubator managers. I already discussed the issue of multiple objectives problem for non-profit organizations, and during the economic recession this problem is thrown into sharp relief. In conditions of scarce resources, and increased external pressure the stakeholders may demand from the business incubator achieving additional goals. The business incubator has experienced this situation as the university placed the incubator under an obligation of providing a certain amount of credits for the HSE students. According to the managers' responses on this issue, this new KPI is not hard to fulfill, however, it takes additional time and people to organize projects and events for students.

In this part of the research the factors that particularly influenced the incubator during the crisis in Russia were considered. The most evident and probably most significant influence had the reduction in financing from multiple sources. The reason for this lies in the overall economic situation in the national economy. A controversial effect of the crisis experienced the staff structure of the organization as the incubator watched how teams of managers changed several times during a period of 1.5 years. The demand for the incubation services experienced a rise in the previous year, and, moreover, the level of entrepreneurial ideas have also notably increased. Moreover, the last thing that I lay a particular emphasis on in the discussion of crisis effects on the incubator was the system of division of labor and responsibility between the major stakeholders and the managers of the incubator. In 2014 the BI HSE represented a partnership model (Marx and Davis, 2012), and the same stayed in 2016 which is very important because it gives additional opportunities for effective adaptation to the crisis. However, the university imposed new KPIs on the incubator in the form of providing a certain number of academic credits for HSE students.

Figure 5. Crisis effects on the BI HSE

Adaptation strategies of the BI HSE during the crisis

In the final part of the present research I am going to discuss the adaptation strategies that the BI HSE undertook during the economic recession. An important thing here is how the incubator managers perform changes in the organization, and what their ideas are based on. Notwithstanding the common idea that incubation model in most of the cases depends on the needs and requirements of startups (Grimaldi and Grandi, 2005), the director of the incubator claims that the only factor that the managers consider when making a decision concerning the strategic and operational level of the business incubator is market signals. They take into account the latest events in the sphere of innovative entrepreneurship, track the tendencies that corporations and governments support, analyze the trends of entrepreneurial activities in the country, look for new opportunities to develop that come directly from the market. A common idea is that it is really hard for non-profits to reveal any market signals because of multiple objectives and stakeholders' interests, and the existing situation within the BI HSE moves this organization closer to the for-profit sector as it seeks opportunities in the market and also is free from the binding influence of the university and other stakeholders. I will now talk in detail about the changes that the BI HSE underwent in times of the crisis.

In April 2016 the BI HSE was preparing the new strategy of development for the next five years. Since 2006 when the incubator was established its managers already has made efforts to develop a sound strategy for the organization's development but the new ideas are meant to be long-lasting and comply with the challenges posed by the external environment. Since the document is not still finished I could not obtain data from the rough copy, hence, I draw conclusions from the perspective of the incubator's managers. They claim that unlike previous strategic documents the new one operates with figures and is developed mostly for the managers itself rather than for the university as the main stakeholder. The CEO believes that the new strategy, which is going to be well-structured and put in a written form, will help to clearly distinguish between primary objectives and minor tasks. This problem is seen as one of the most important issues for a non-profit since it is easy to fall into this trap and tough to get back on the right path. The process of developing this new strategy again adheres to the partnership model of the division of labor and responsibilities as the document is being developed entirely by the incubator managers and when it is ready they will make a presentation of it for the executives of the innovative block of the university for the purpose of discussion and further adjustment of the document.

Having discussed the new strategy that is being developed in the BI HSE at the moment, it is important to talk about the changes in the incubator that have already been put into practice. I will start with the internally-oriented actions of the incubator managers.

In early 2015 the CEO and other managers of the incubator launched a campaign that was aimed at changing the incubator's positioning and branding. This campaign consisted of two major goals: to improve the SMM of the organization, thereby attract more entrepreneurs and potential partners; and the second one was to be enrolled in the international rankings of business incubators. Both of these goals were achieved since the incubator significantly increased its contact database to more than 23000 people, and the conversion rate of the event attendance to more than 35%. The major movement was towards using all of the possible social media platforms, and keep the accounts, groups and channels on Youtube updated regularly. Regarding videos on Youtube, the incubator created a channel with lots of educational videos for young entrepreneurs.

In November 2015 the HSE business incubator was declared to be the 14th in the global rankings of UBI Global test of university business incubators. This repositioning and rebranding of the BI HSE might also have influenced the demand for the incubation services, which I mentioned in the previous part. The managers do not directly connect this campaign with the economic recession, however, they admit that this campaign was the reaction to the changing markets and the willingness to develop the organization.

The repositioning of the business incubator went even further because of new connections with other organizations set up during the crisis. Since 2015 the BI HSE has joint programs with the Russian Venture Company, the government fund of funds for the development of the national innovative economy. The BI HSE in these interrelations carries out pre-seed functions to uncover the most promising startups and then send them over to investors in RVC.

This relation became possible in 2015 because nearly every aspect of the incubation model was transformed. The ideas of changing the ineffective model already existed in 2014 when the data for the present research was being collected. However, only the new team of managers and CEO himself gave these ideas a push and turned the ideas into reality.

The biggest problem with the previous incubation program was the temptation to use the incubator simply as an office space because the duration of the program was two years. The new program reduced the length of active incubation to three months. As managers claim, the 3-month period makes the whole process more dynamic and efficient not only for companies but also for the business incubator. Moreover, since 2016 the enrollment campaign is held every month which allows the incubator to adjust its program to the needs of entrepreneurs, markets and stakeholders every month. The managers believe that the crisis is a time of change, and the more flexible your organization is the more opportunities to successfully overcome difficulties you can seize. Another idea of reducing the time of stay in the incubator is minimizing the risk of the `living dead policy' (Dee et al, 2011, p. 20). It is often very hard for the incubator managers to decide whether the startup is good or not because they work on a very early pre-seed stage. When the startup can expand its stay to two years there is a risk that all these years this particular company can waste their time because of a poor team of the idea. On the other hand, a 3-month period is more illustrative of the entrepreneurs' potential and does not let the atmosphere in the incubator become too heterogenous.

Apart from the reduction of the length of the program, other significant changes have been undertaken. A very peculiar practical framework was developed in order to effectively control startups and guide them in real-time mode. In order to do this, a business expert was hired on a full time basis which was never the case for the BI HSE. Every month the introductory meeting for new tenants is held where the managers explain what their work will consist of, and what are the possible outcomes of the stay in the incubator. Particularly new thing in the new incubating model is new KPIs imposed on startups. What the incubator is demanding from the nascent entrepreneurs now is to test as many hypotheses as they can. This is the only criterion which is taken into consideration when evaluating startups at regular so-called `pitch days' when incubatees share their achievements and failures.

The previous incubating model performed quite rigid screening practices though they were not totally based only on objective criteria. The main requirements were that a team consists of more than two people and that they have got a promising and feasible idea. With the advent of the new concept of incubation the managers decided not to turn down teams of two or even one person. One and the major criterion is now the personality of the nascent entrepreneur himself. Such situation is now possible because of the flexibility the incubator gained by reducing the length of the program and structuring the whole incubation process.

One of the interesting changes that the BI HSE experienced during the crisis is an extension of sources of income. As was already said earlier the university finances only the salary budget, the costs of maintaining the building, and the fund that is aimed at maintaining services that the incubator provides, while all other initiatives, events and programs have to be financed by the incubator itself. Since the financing was reduced in early 2016 the incubator started to seek additional opportunities to make money. They indeed found several extra sources of revenues. One of the most of those sources today is the incubator regional policies. A specialist was hired to set up relationships with regional business incubators and other platforms for entrepreneurship development. The BI HSE promotes its services for educating and consulting regional incubator managers and helping them organize regional business incubators from scratch. The enhanced regional policies and, consequently, contact database of the incubator also help it to increase sales of the business game franchise that is called `Iron Entrepreneur'.

Interestingly, the incubator seems to reject any retrenchment policies as seen from the services provided by the incubatees. The managers state that the number and quality of services that are for tenants' use in the incubator are only growing. The university supports the idea that there is no great future to expect if to cut costs too severely. For example, after reducing the financing the salaries of the managers also declined, however, that did not last for long. The CEO explained the recent situation of unprecedented staff turnover rate, and the university agreed to leave salaries at the same level. To illustrate the most important changes that the incubator underwent during the crisis I used the diagram below.

Figure 6. Adaptations of the BI HSE

Theoretically reasonable explanation of the overall activities of the BI HSE might be classified as actions pertaining to the emergent strategy of the organization. The managers react to the challenges posed by the internal and external environments by fixing problems on a rolling basis, not planning the pattern in the long-run. However, there are signs of incremental movement from an emergent strategy to a business planning. The recently developed 5-year strategy demonstrates this idea, and the possibility of adhering to a robust long-range strategy is getting more plausible because the BI HSE strives to overcome common shortcomings of the Russian business incubator industry, namely, the BI HSE is developing a toolkit for regular monitoring and assessment. At the moment, the monitoring is mostly applicable to tenants rather than the incubator itself, however, the positive trend is clearly seen.

Figure 7. Peculiar changes in the BI HSE 2014-2015

4.DISCUSSION AND CONCLUSIONS

The present research was aimed at revealing the practices and patterns of adaptations performed by the Higher School of Economics business incubator during the economic crisis in Russia. In the first part of the paper I discussed the existing literature on the topic, which helped the research to be systemized and theoretically structured. The extant papers dealing with problems of business incubators, and non-profit organizations in general, in the context of economic recessions and other hostile business environments is very scarce. However, I tried to piece various studies together so that it helps the reader to form a reliable and adequate understanding of business incubator issues. A substantial difficulties pose the understanding of the business incubator as an organizational form. From the theoretical perspective, most of the business incubators are non-profits, and financed by governments, universities or other organizations. This is the type that is represented by the Higher School of Economics business incubator. However, one cannot classify this incubator as an entirely non-profit organization because it has multiple sources of additional income, and the goal of making money is quite significant. Moreover, the university business incubators, which include the BI HSE, rarely function as a platform for volunteering. There we face a problem of applying the strategies of adaptation that for-profits practice, which are more or less well-studied, to business incubators.

I figured out several research questions that come out of reviewing the literature on the topic. They concern the impact of a recession on the incubator, and the adaptation actions of the incubator. The case study shows that the BI HSE is unconventionally influenced by the economic downturn in the country. The demand for the incubation services has risen during the crises and, moreover, the average level of startups and teams became significantly higher. I believe that this effect could be gained by two major reasons: the release of the qualified professionals due to staff reductions in commercial companies, and an intensive SMM campaign in conjunction with systematic repositioning and rebranding of the organization.

The screening practices underwent serious changes in the form that the managers started to care less about the team and the idea, and consider only the personality of the leader even if he does not have a perspective team.

HR policy did not change much between 2014 and 2016, though the team of managers is close to a balanced condition now when nobody is leaving the organization or being hired or replaced. I give credit to the CEO in this situation for negotiating the salaries with the university. If the salaries were reduced, the staff turnover rate might have significantly risen again, as it was before the end of 2015.