It can also be a group of companies, including start-ups, and one or more coordination entities, which share similar goals and decide to form a network or organization in order to explore economies of scale combined with flexibility and entrepreneurial "drive". Economies of scale can be explored in business functions such as business development, financing, market analysis, marketing communications, IT / MIS infrastructure, human capital management, legal support, financial & accounting management while each participating start-up focuses to research & development, product Management, sales & pre-sales / after-sales support.
Some researchers believe governments have little effect to create an ecosystem for entrepreneurship. Nonetheless, the entrepreneurial ecosystem idea does lend itself to entrepreneurship policy, where targeted programs can be developed to plug the gaps in the ecosystem. For example, advisory programs have had some success.
The ecosystem metaphor
"Ecosystem" refers to the elements – individuals, organizations or institutions – outside the individual entrepreneur that are conducive to, or inhibitive of, the choice of a person to become an entrepreneur, or the probabilities of his or her success following launch. Organizations and individuals representing these elements are referred to as entrepreneurship stakeholders. Stakeholders are any entity that has an interest, actually or potentially, in there being more entrepreneurship in the region. Entrepreneurship stakeholders may include government, schools, universities, private sector, family businesses, investors, banks, entrepreneurs, social leaders, research centers, military, labor representatives, students, lawyers, cooperatives, communes, multinationals, private foundations, and international aid agencies.
In order to explain or create sustainable entrepreneurship, one isolated element in the ecosystem is rarely sufficient. In regions which have extensive amounts of entrepreneurship, including Silicon Valley, Boston, New York City, and Israel, many of the ecosystem elements are strong and typically have evolved in tandem. Similarly, the formation of these ecosystems suggests that governments or societal leaders who want to foster more entrepreneurship as part of economic policy must strengthen several such elements simultaneously. However, recent research shows that government policy is often limited in what it can do to develop entrepreneurial ecosystems.
In July 2010, the Harvard Business Review published an article by Daniel Isenberg, Professor of Entrepreneurship Practice at Babson College, entitled “How to Start an Entrepreneurial Revolution.” In this article, Isenberg describes the environment in which entrepreneurship tends to thrive. Drawing from examples from around the world, the article proposes that entrepreneurs are most successful when they have access to the human, financial and professional resources they need, and operate in an environment in which government policies encourage and safeguard entrepreneurs. This network is described as the entrepreneurship ecosystem.
Several academic researchers have begun to investigate entrepreneurial ecosystems as well. Spigel suggests that ecosystems require cultural attributes (a culture of entrepreneurship and histories of successful entrepreneurship), social attributes that are accessed through social ties (worker talent, investment capital, social networks, and entrepreneurial mentors) and material attributes grounded in a specific places (government policies, universities, support services, physical infrastructure, and open local markets). Stam distinguishes between framework conditions of ecosystems (formal institutions, culture, physical infrastructure, and market demand) with systematic conditions of networks, leadership, finance, talent, knowledge, and support services.
An entrepreneurship ecosystem can be a group of companies, including start-ups, and one or more coordination entities, which share similar goals and decide to form a network or organization in order to explore economies of scale combined with flexibility and strong entrepreneurial drive. Economies of scale can be explored in business functions such as business development, financing, market analysis, marketing communications, IT / MIS infrastructure, human capital management, legal support, financial & accounting management while each participating start-up focuses to research & development, product Management, and sales, pre-sales, and after-sales support.
There are several key conditions that typically define a healthy ecosystem. The ecosystem:
- is tailored around its own unique environment – it does not seek to be something it isn’t, like the “next Silicon Valley”
- operates in an environment with reduced bureaucratic obstacles in which government policies support the unique needs of entrepreneurs and tolerate failed ventures
- actively encourages and invites financiers to participate in new ventures - although access to money isn’t without barriers for those planning new business ventures
- is reinforced, not created from scratch, by government, academic or commercial organizations
- is relatively free from, or is able to change the cultural biases against failure or operating a business
- promotes successes, which in turn attract new ventures
- is supported by dialogue among various of the entrepreneurship stakeholders
Startup Ecosystem - following the financial downturn of 2008 and the long lasting slow growth period, there have been increasing focus towards fostering more startup company creation around the world to further target regional support efforts towards those type of companies that have higher innovation, growth and job creation potential. This has also led to an increasing focus on startup ecosystem development.
University-based Entrepreneurship Ecosystem – In academic settings, entrepreneurship ecosystems commonly refer to programs within a university that focus on the development of entrepreneurs and/or the commercialization of technology or intellectual property developed at the university level.
Business cluster – A business cluster is a geographic concentration of interconnected businesses, suppliers, and associated institutions in a particular field. Early research was done in this context by Benjamin Chinitz in 1961. Chinitz posed several theories, but most importantly noticed a correlation between average firm size and average growth rates within regions. In addition, Glaeser, Kerr and Ponzetto followed up this research and confirmed the relationship between smaller average firm size and higher growth rates. Chatterji, Glaeser and Kerr also noted that some of the most famous entrepreneurial clusters (Silicon Valley, Boston's Route 128 Corridor, and Research Triangle Park) were located near large research universities. Governments often look to clusters to stimulate innovation and entrepreneurship in their region. When clusters are applied to entrepreneurship, experts agree governments should not seek to create new clusters, but rather reinforce existing ones. Tony Hsieh, founder of Zappos, has begun a project to see if an entrepreneurial cluster can be created in Las Vegas.
- Startup ecosystem
- Business cluster
- Economies of agglomeration
- Collaborative innovation network
- Innovation system
- Venture capital
- http://ideas.economist.com/blog/cluster-bluster Can policy makers create an ecosystem for entrepreneurship?
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- Stam (2015) Entrepreneurial Ecosystems and Regional Policy: A Sympathetic Critique. European Planning Studies 23(9): 1759-1769. DOI: 10.1080/09654313.2015.1061484
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- Glaeser, Edward L, William R. Kerr, and Giacomo A.M. Ponzetto, ”Clusters of Entrepreneurship” (NBER Working Paper Series, National Bureau of Economic Research, Cambridge, MA, 2009).
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- Metz, Rachel. “Zappos CEO Bets $350 Million on a Las Vegas Startup Scene” MIT Technology Review. July 17, 2013. http://www.technologyreview.com/news/516526/zappos-ceo-bets-350-million-on-a-las-vegas-startup-scene/.
- Babson Entrepreneurship Ecosystem Program
- Babson Global
- The Dutch Entrepreneurial Ecosystem
- MIT Entrepreneurship Center
- The Development of University-Based Entrepreneurship Ecosystems: Global Practices
- New Orleans start-ups and all that jazz
- Where Israeli Entrepreneurship Really Came From
- President Obama Can Make Start-Up America Succeed
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