The Cultural Governance of Entrepreneurial Ecosystems

Ben Spigel^a

University of Edinburgh Business School

ben.spigel@ed.ac.uk
Abstract: Entrepreneurial ecosystems have emerged as a popular concept to explain the continued ability of regions to produce innovation-based startups. However, our understanding of how ecosystems influence entrepreneurs remains vague, decreasing the usefulness of the concept in academic and policy debates. This paper argues that ecosystems are composed of mutually dependent cultural, social, and material attributes. This framework is used to explore the entrepreneurial ecosystems of Calgary and Waterloo, Canada. Though both cities enjoy high rates of technology entrepreneurship, Calgary’s entrepreneurial ecosystem is weaker than Waterloo’s due to the lack of a strong entrepreneurial culture that normalizes entrepreneurial networking and cooperation.

Keywords: Entrepreneurial ecosystem, geography, institutions, culture, policy

Entrepreneurial ecosystems (also known as entrepreneurial environments) have become an important tool in the study of the geography of high-growth and innovative entrepreneurship. Ecosystems are the combination of supportive cultural outlooks, dense social networks, accessible investment capital, organizations like incubation centres and universities, and active economic policies within a region that help to create regional environments that support the development and growth of high-risk, innovation-based ventures. They are seen within the academic (Feldman et al., 2005; Malecki, 2009), policy (Isenberg, 2010; World Economic Forum, 2013) and popular literature (Feld, 2012; Hwang and Horowitt, 2012) as a critical tool for developing resilient and growing regional economies. But despite its importance research on ecosystems remains under-developed and under-theorized. In its current state, ecosystems represent more of a conceptual umbrella encompassing a variety of different perspectives on the geography of entrepreneurship rather than a cogent theory about the emergence of sustainable communities of technology entrepreneurs. There is the implicit assumption within much of the ecosystems literature that regions with high rates of entrepreneurship have successful ecosystems while those with lower rates suffer from ineffective or non-existent ecosystems. This leads to a tendency amongst policy makers to copy best practices from thriving ecosystems without regard the underlying local social and cultural attributes on which their success depends (Harrison and Leitch, 2010). Part of this problem stems from the fact that while previous work on entrepreneurial ecosystems has focused on specific cultural, economic, and policy elements but has largely ignored the interdependencies between these attributes and how they influence the entrepreneurship process.

To address this gap, this article investigates the types of attributes that constitute entrepreneurial ecosystems, the relationships between them, and how they influence regional entrepreneurial processes. Through a qualitative examination of technology entrepreneurship in Calgary and Waterloo, Canada the paper draws a distinction between ‘munificent’ and ‘arid’ ecosystems based on the strength of the interrelationships between the their internal attributes. This offers a broader perspective of ecosystems that allows us to theorize about their development and role in regional economies. The paper argues that identifying the underlying attributes of ecosystems and how they influence the actions of entrepreneurs and other actors is the first step in developing a cogent theory of entrepreneurial ecosystems.

The following section discusses recent developments in the study of entrepreneurial ecosystems and their connections with other investigations into the geography of entrepreneurship. Section three provides an overview of the different attributes of ecosystems that have been identified in previous research and discusses the role of their mutual interrelationships. Section four introduces the empirical examination of the entrepreneurial ecosystems of Calgary and Waterloo as well as the qualitative methodologies used to study them followed the empirical results from two cases. Section five concludes by suggesting a research agenda for entrepreneurial ecosystems built around the attributes identified in the paper.

Entrepreneurial ecosystems are combinations of social, political, economic, and cultural elements within a region that support the development and growth of innovative startups and encourage nascent entrepreneurs and other actors to take the risks of starting, funding, and otherwise supporting high-risk ventures. As originally defined by Dubini (1989) ecosystems (or as she called them, environments) are characterized by the presence of family businesses and role models, a diverse economy, a strong business infrastructure, available investment capital, a supportive entrepreneurial culture, and public polices that incentivize venture creation. Others, such as Spilling (1996), Neck et al. (2004), and Kenney and Patton (2005) have highlighted features such as skilled workers, support services such as lawyers and accountants specializing in the needs of new ventures, and large local firms to act as talent attractors and spinoff generators. More recent work by Isenberg (2010) and groups such as the World Economic Forum (2013) and Startup Genome (2012) have argued that accessible local and international markets, available human capital and financing, mentorship and support systems, robust regulatory frameworks, and major universities are the most important pillars of an ecosystem.

The ecosystems literature developed out of studies of regions with long histories of supporting and incubating large numbers of successful technology startups such as Silicon Valley in the US (Leslie and Argon, 1996). Such work frequently cites the importance of a supportive culture in fostering this continued entrepreneurial success (e.g. Feldman 2001; Lafuente, et al., 2007; Mayer 2012). The success of these regions is not the result of one event or person but rather several interlocking factors such as educational systems, role models, cultural outlooks, and supportive political regimes. Saxenian’s (1994) work on the of the contrasting economic trajectories of Boston and Silicon Valley has been particularly influential, describing how Silicon Valley’s ‘open culture’ encouraged inter-firm cooperation and knowledge sharing while Boston’s ‘closed’ culture created insulated companies that were unable to keep up with the fast changing computer industry of the 1980s. This highlights both the importance of supportive cultural outlooks as well as the consequences of different cultural beliefs that decrease trust, cooperation, and knowledge sharing within a community (James, 2005; Staber, 2007). As Malecki (2009) argues, we should also examine the social, cultural, and economic factors of less successful regions in order to better understand the internal processes of entrepreneurial systems.

However, while the geographic milieu in which entrepreneurship takes place is recognized as an important influence on the nature of the local entrepreneurship process and the resulting structure of the entrepreneurial ecosystem, the ways in which these contexts emerge and influence the practices of entrepreneurs and other actors remains unclear (Mason and Brown, 2014). Thus, while there is a general agreement that the geography of entrepreneurship is important (e.g. Thorton and Flynn, 2003; Steyaert and Katz 2004; Trettin and Welter, 2011) there is less consensus about how the overall geographic environment affect entrepreneurship and its implications for the development of regional policies and economic trajectories (Spigel, 2013). A better understanding of the attributes that make up an ecosystem and their relationship to the underlying regional culture is necessary in order to study how ecosystems influence the actions of entrepreneurial actors.

Despite the growth in academic and policy research there is no clear consensus on what constitutes a successful entrepreneurial ecosystem. Failed attempts to build new ‘Silicon Valleys’ through investments in new incubation centres or publicly funded venture funds suggest that the attributes of ecosystems do not promote entrepreneurship in isolation but their benefits are created through mutually supportive interactions and relationships (Lerner, 2009). Few researchers however, with exceptions such as Spilling (1996), Harrison and Leitch (2010), and Feldman (2014), have noted the mutual dependence between the elements of an ecosystem. It is difficult to understand how entrepreneurial ecosystems emerge within regions and evolve in response to both internal entrepreneurial dynamics and external economic and social shocks without understanding the role of these relationships.

A survey of the literature on entrepreneurial ecosystems reveal ten types of attributes that are commonly cited as important characteristics of successful entrepreneurial ecosystems (see Table 1). These are: (1) a supportive culture which encourages entrepreneurship; (2) a regional history of entrepreneurship and the presence of successful entrepreneurs; (3) accessible pools of skilled workers; (4) availability of investment capital in the form of angel investors and venture capitalists; (4) strong social networks between entrepreneurs, investors, and other entrepreneurial actors; (5) role models, mentors and dealmakers with high social capital who can advise entrepreneurs and build networks within the community; (6) policies and government organizations that support and train entrepreneurs; (7) research universities that provide knowledge spillovers to the surrounding community; (8) support services such as incubation facilities as well as lawyers and accountants accustomed to dealing with the unique needs of startups; (9) physical infrastructure such as available office space and telecommunication facilities; and (10) open markets free of regulatory barriers and which provide opportunities for new ventures.

These attributes can be aggregated into three broad categories: cultural, social, and material. Cultural attributes are the underlying beliefs and outlooks about entrepreneurship. Aoyama (2009 p. 500) argues that regional cultures influence “entrepreneurial rationality by shaping acceptable entrepreneurial practices and norms.” Cultural beliefs normalize outlooks about entrepreneurship, for instance making it seem a standard part of a person’s career path or something only to undertaken when no other options are available (Kibler et al., Forthcoming). Regional histories of successful entrepreneurship and prominent examples of local entrepreneurial success stories help normalize venture creation and encourage potential entrepreneurs to take the risk of starting new firms through prominent local success stories (Nelles et al., 2005). An ecosystem’s cultural attributes therefore represent underlying beliefs about entrepreneurship within a region, including its inherent purpose, rewards, and risks.