Have the Innovation Systems Died?

But, entrepreneurial ecosystems are born.

This post is mainly based on Entrepreneurial Ecosystems. Erik Stam & Ben Spigel. Discussion Paper Series nr: 16-13. Utrecht School of Economics, 2016

Historically, technology and innovation have been geographically concentrated. The spatial component of technology and innovation has been studied academically from different points of view:

  • The Marshallian industrial districts
  • the Italian industrial districts
  • The innovative milieu
  • Clusters, by Porter
  • Local, regional and national innovation ecosystems

The industrial district approach emphasizes the local division of labour of an industry (Marshall, 1920) and the interaction between the community of people and a population of firms within a socio-territorial entity in order to be successful on international markets.

The cluster approach focuses on ‘geographic concentrations of interconnected companies, specialised suppliers, service providers, firms in related industries, and associated institutions in particular fields that compete but also co-operate’ (Porter, 1998). Most cluster studies focus on firms and industries, including their dynamics.

Regional innovation systems (RIS) refer to the networks and institutions linking knowledge producing hubs such as universities and public research labs within a region and innovative firms. These linkages allow knowledge to spill over between different organizations, increasing a region’s overall innovativeness (Cooke et al., 1997).

Today there are two particularities that are changing the dynamics and also the focus of the analysis of technology and innovation concentrations. There are the following two: 1) An acceleration of technological change, a strong disruption and 2) a rapid diffusion and assimilation of this disruption. Linked to both, there are the enormous expectations on technology. Expectations are the driving force that marks the evolution of the system. Expectations move the respective actors and oblige to act, legitimizing the process and attracting investors and other agents. Therefore, expectations are “performative” by nature and shape the dynamics of a technological trajectory. Traditionally, technology has been created in two places: established companies and in public and private research centers (universities, etc.). But due to the acceleration of the tech change and due to the expectations on technology, in recent years there has appeared a new actor: Startups.

As a result of all this, the dynamics of spatial concentration of technology also change. Models of innovation systems are no longer valid. Today we talk about entreprenurial or entrepreneurship ecosystems. This is the last academic concept. Erik Stam from Utrecht School of Economics describes well this idea. He says: The entrepreneurial ecosystem approach differs from industrial district, cluster, and innovation system approaches by the fact that the entrepreneur, rather than the firm, is the focal point of analysis.

Most cluster studies focus on firms and industries, including their dynamics. As opposed to the clusters, district, and innovation systems literature, the focus of ecosystems research is placed firmly on the entrepreneur and the startup rather than larger, more established firms or slower growing SMEs.

The entrepreneurial ecosystem approach thus begins with the entrepreneurial individual instead of the company but also emphasizes the role of the social and economic context surrounding the entrepreneurial process.

The high-growth startups that make up the basis of entrepreneurial ecosystems are not necessary included in all cluster and industrial district models.

While frameworks of industrial districts, clusters, and innovation Systems do include a role for entrepreneurs, the focus is not specifically on them but rather the role of entrepreneurs and startups within larger systems of value creation and innovation. As a result, these existing approaches often see startups as smaller versions of larger, international firms rather than as unique organizational entities with different (and often more constrained) capabilities and resources.

As opposed to the clusters, district, and innovation systems literature, the focus of ecosystems research is placed firmly on the entrepreneur and the startup rather than larger, more established firms or slower growing SMEs.

The definition of an entrepreneurial ecosystem is a set of interdependent actors and factors coordinated in such a way that they enable productive entrepreneurship within a particular territory.

We see “productive entrepreneurship” as an outcome of successful ambitious entrepreneurship.

Ambitious entrepreneurs are individuals exploring opportunities to discover and evaluate new goods and services and exploit them in order to add as much value as possible.

That means more than just ‘being your own boss’ or ‘pursuing self-fulfilment’ through business ownership; ambitious entrepreneurs attach importance to the performance and success of their ventures and seek to quickly scale up.

In practice ambitious entrepreneurs are more likely to achieve substantial firm growth, innovation or internationalization than the ‘average’ entrepreneur.

Source of the table: Entrepreneurial Ecosystems Around the Globe and Company Growth Dynamics. World Economic Forum, 2013

 

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