Management of Entrepreneurial Ecosystems Erkko Autio, Professor, Imperial College Business School
Platform Value Now project: 2015-2017 horizon scanning activities solution experiments with industry, public sector and other stakeholders empirical case studies development and application of of systems methods and tools scientific reflection and reporting Aalto University University of Jyväskylä VTT International Institute of Applied Systems Analysis (IIASA) Imperial College London Wilson Center Stevens Institute of Technology Contact: leena.ilmola@iiasa.ac.at
Innovation ecosystems and entrepreneurial ecosystems
Innovation ecosystems create and exploit leverage Thomas, Autio & Gann, 2014
Innovation and entrepreneurial ecosystems: Comparison Ecosystem service Key function Entrepreneurial Ecosystem Innovation Ecosystem Trial-and-error allocation of resources towards high-productivity uses Creation of new economic value Facilitating the creation and growth Facilitating ecosystem value co-creation of innovative and high-growth new through ecosystem leverage (innovation, ventures manufacturing, transaction) Location specificity Medium to high Low to medium Participant co-specialisation Low High Participant heterogeneity High Low to medium Industry specificity Low to medium Medium to high Coordination device Multipolar coordination, sometimes a backbone organisation Usually around a platform Autio & Thomas, 2015
Entrepreneurial ecosystems: Definition Entrepreneurial ecosystems are dynamic interaction systems that allocate resources towards productive uses through innovative and high-growth new ventures
Dynamic of entrepreneurial ecosystems Attitudes Aspirations Activities Productive Resource Allocation through Entrepreneurship Entrepreneurs perceive opportunities The only way to validate perceptions is by mobilising resources Opportunity cost attached to resources requires that the opportunity yields a higher return; otherwise the opportunity is abandoned The net outcome of this resource allocation dynamic, if high quality, is increase in Total Factor Productivity
GEI predicts growth in Total Factor Productivity two years ahead (n = 163) (countries = 50)
Entrepreneurs can be productive, unproductive and destructive!
Entrepreneurial ecosystems and quality of entrepreneurs
How do entrepreneurial ecosystems work?
Emergence
So, how does one manage entrepreneurial ecosystems?
Two paradigms for entrepreneurship policy
Market failure: Fix the failure by throwing money at it
System failure: Fix it by building walls **
Why is ecosystem failure different? Market and system failures are fundamentally static: They exist or not Ecosystem failures are different: Failure of the ecosystem to produce a dynamic service Knowledge of the inner workings of the ecosystem embedded in the ecosystem itself, not easily seen from the outside Inter-dyad interactions may create cascading effects and unintended outcomes Stakeholders not necessarily well aligned Interlocking relationships can create a high level of ecosystem inertia If we do not see innovative high-growth firms, where is the failure? Not enough free money? Inability of the system to support high-growth firms? High-potential entrepreneurs decide to do something else instead?
Market and structural failure approaches break down in EEs Top-down versus bottom-up You cannot pinpoint market failures because system is too complex You cannot focus on static structure because entrepreneurial ecosystems are driven by dynamic action
Challenge: Coordinating multipolar emergence Total Factor Productivity
Insight from socio-ecological literature: Deep stakeholder engagement Engagement with policy stakeholders can range from traditional top-down communication to bottom-up consultation to two-way participation through deep stakeholder engagement Benefits Helps uncover hidden interactions, cause-effect chains and thus tap knowledge within the system Helps facilitate multipolar coordination and collective governance Helps facilitate mutual co-alignment and thus pre-empt conflicts and mistrust Helps build commitment to collective action Helps build self-reinforcing social norms to sustain contributions to the common good by individual stakeholders
Empirical Case: Scottish Collective Impact Scottish REAP project Started 2012 (still ongoing) Coordinated by Scottish Enterprise Used GEI analysis to make sense of the Scottish ecosystem 2-year participation
Facilitating entrepreneurial ecosystems: Our approach Discovery Workshop - Uncover a region s ecosystem bottlenecks - Bottleneck Analysis Workshop - Understand bottleneck drivers - Solution Development Workshop - Develop a consensus for policy action - Collective Impact - Implementation, follow-up and monitoring (at least a year) -
Analysis
ENTREPRENEURIAL ASPIRATIONS ENTREPRENEURIAL ABILITY ENTREPRENEURIAL ATTITUDES INSTITUTIONAL VARIABLES # INDIVIDUAL VARIABLES # PILLARS # Market Agglomeration 0.46 28 Opportunity Recognition 0.70 7 Opportunity Perception 0.39 15 Tertiary Education 0.80 17 Skill Perception 0.53 15 Start-up Skills 0.60 16 Business Risk 0.72 12 Risk Acceptance 0.43 18 Nonfear of Failure 0.46 14 Internet Usage 0.92 14 Know Entrepreneurs 0.57 12 Networking 0.79 11 Corruption 0.78 16 Career Status 0.41 27 Cultural Support 0.55 19 Entrepreneurial Attitudes 53.7 13 Economic Freedom 0.73 17 Opportunity Motivation 0.80 11 Opportunity Startup 0.65 13 Gender Equality 0.88 14 TEA Female 0.53 14 Gender 0.48 11 Technology Absorption 0.78 13 Technology Level 0.83 11 Technology Sector 0.79 12 Staff Training 0.66 14 Educational Level 0.65 18 Quality of Human Resources 0.52 19 Market Dominance 0.64 18 Competitors 0.99 4 Competition 0.70 11 Entrepreneurial Ability 59.6 14 Technology Transfer 0.72 16 New Product 0.72 7 Product Innovation 0.67 16 GERD 0.81 15 New Technology 0.61 14 Process Innovation 0.69 15 Business Strategy 0.61 17 Gazelle 0.85 8 High Growth 0.73 10 Globalisation 0.94 6 Export 0.87 12 Internationalisation 0.94 4 Capital Market 0.41 25 Informal Investment 0.62 25 Risk Capital 0.41 27 Entrepreneurial Aspirations 63.6 13 INSTITUTIONAL 0.72 15 INDIVIDUAL 0.67 8 GEDI 59.0 14 Bottom quartile 0.41 0.41 0.39 Lower middle quartile Higher middle quartile Top quartile Estonia performs relatively less well in comparison against EU countries than globally Overall, the EU comparison suggests Estonian weaknesses for institutional variables, where Estonia mostly lags behind EU mean Overall, the EU comparison suggests strengths for Estonia in individual-level variables, except for Entrepreneurial Attitudes, where the Estonian weaknesses are confirmed by the EU comparison In the EU comparison, Estonia s weakest pillar overall is Risk Capital (27 th ), followed by Cultural Support (19 th ), Quality of Human Resources (19 th ), Start-up Skills (16 th ), Product Innovation (16 th ), and Process Innovation (16 th )
Policy prioritisation and portfolio optimisation Scotland Wales N. Ireland England UK Opportunity Perception 13% 21% 24% 8% 9% Startup Skills 11% 11% 13% 8% 9% NonFear of Failure 4% 3% 6% 5% 5% Networking 11% 11% 9% 9% 9% Cultural Support 3% 0% 0% 6% 6% Opportunity Startup 4% 3% 1% 5% 5% Tech Sector 0% 6% 0% 0% 0% Quality of Human Resources 4% 3% 5% 4% 4% Competition 0% 0% 0% 3% 3% Product Innovation 9% 9% 6% 10% 10% Process Innovation 11% 11% 13% 9% 9% High Growth 9% 6% 7% 11% 10% Internationalisation 7% 6% 4% 10% 10% Risk Capital 12% 11% 12% 13% 11% 100% 100% 100% 100% 100%
North West UK Bottleneck Drivers 3 4 Soft Skills Gap London Brain Drain Execution Skills Gap Disjointed Advisory 1 2 2 3 4 5 Unbalanced Teams Image of Entrepreneurs Appreciation of BMI 11 10 11 11 8 8 Ability to Grow Willingness to Grow Investment Readiness 15 13 15 12 Innovation Bottleneck Globalisation Bottleneck 18 17 Mentoring Gap 6 UKTI Referrals 12 Inward Investment Finance Bottleneck 7 Regional Promotion 7 Lack of FB Role Models 9 FB-SME Tradition 16 14 FB Trust Structures 10 ERDF Inflexibility
Scottish Collective Impact Effective Connections Skills for Growth Financing for Growth Role of Universities Role Models Corporate Discussion Group
For complaints Erkko Autio Imperial College Business School erkko.autio@imperial.ac.uk
Sources Acs, Z. J., Autio, E., Szerb, L. 2014. National Systems of Entrepreneurship: Measurement Issues and Policy Implications. Research Policy, 43(1): 476-494. Acs, Z., Szerb, L., Autio, E. 2015. Global Entrepreneurship Index 2016. Amazon Books & Global Entrepreneurship Week Autio, E., & Thomas, L. 2013. Innovation Ecosystems: Implications for Innovation Management. In M. Dodgson, N. Phillips, & D. M. Gann (Eds.), The Oxford Handbook of Innovation Management: 204-228. Oxford: Oxford University Press Thomas, L., Autio, E., & Gann, D. 2014. Architectural leverage: Putting platforms in context. Academy of Management Perspectives, 28(2): 198 219 Autio, E., Levie, J. 2015. Management of entrepreneurial ecosystems (in submission) Autio, E., Kenney, M.F., Mustar, P., Siegel, D.S., Wright, M.T., 2014. Entrepreneurial innovation: The importance of context. Research Policy 43, 1097-1108.
Global (Regional) Entrepreneurship Index GEI (REI) Download from www.thegedi.org