This sounds like an article from 1998. Are there still any incubators that work this way? Certainly none of YC-like seed firms that sometimes get called "incubators" do.

This seems to be arguing that they're at the wrong point on a continuum. But there can be more than one "right" part of a continuum as well -- the model of a small, focused team works, but plenty of big companies use huge numbers of less-focused teams, and those also work.

The incubator model could be another local maximum.