Abstract Strategic positioning and fit theories may inform the service-based differentiation strategies that incubators use to secure external and internal alignment. External alignment relates to tenant service expectations and perceptions; internal alignment involves a competence configuration for each strategy alternative. By implementing the proposed framework, an incubator can achieve service differentiation and ultimately enhanced customer (tenant) value. Qualitative research among nonprofit economic development incubators reveals two service-based differentiation positions: specialists and generalists. Whereas extant research advocates only a specialist stance, the present analysis confirms that service-based differentiation can result from a generalist stance. This study offers the first typology of service-based differentiation strategies for incubators that aligns strategy with external and internal variables.