enabling entrepreneurial ecosystem in secon-tier regions: the case of aarhus

7/26/2019 Enabling Entrepreneurial Ecosystem in Secon-tier Regions: The Case of Aarhus

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A A R H U S U N I V E R S I T Y

J U N E 2 0 1 6

A u t h o r : C h r i s t i a n J a n t z e n , M S c . F i n a n c e & I n t e r n a t i o n a l B u s i n e s s

S u p e r v i s o r : C l a u s T h r a n e , A s s o c i a t e P r o f e s s o r , D e p a r t m e n t o f M a n a g e m e n t

C H A R A C T E R C O U N T

: 1 1 6 ,

2 1 3

E N A B L I N G E N T R E P R E N E U R I A L E C O S Y S T E M S I N

S E C O N D -

T I E R R E G I O N S :

T H E C A S E O F A A R H U S



Abstract

Aarhus has many of the resources needed to become a thriving entrepreneurial hub: large marketleading companies, strong entrepreneurial spirit, highly skilled labour, and young creative minds.

However, the entrepreneurial ecosystem of Aarhus lacks the collaboration needed among its players tofacilitate an efficient use of these resources. In recent years, the field of entrepreneurial ecosystems has

received increasing attention from academics due to a surge in public interest. Most studies usequantitative methods to examine ecosystems’ attributes such as access to capital and new firm creation.

This study proposes a qualitative approach to explore the relationship between these and otherelements of entrepreneurial ecosystems. The research is based on 11 interviews with entrepreneurs,

venture capitalists and policy makers, accompanied by four months of participant observation in thefield. The study finds that the entrepreneurial ecosystem of Aarhus is fragmented. This, in turn, leads to

barriers to collaboration and the city employing valuable resources inefficiently. Among the main

causes of this fragmentation are factors such as a weak internal culture, zero-sum games, and lack ofentrepreneurial engagement. The study is unique because it condenses the current research knowledge

into seven propositions and uses the theory to analyse the entrepreneurial ecosystem of Aarhus.Moreover, the study compares existing findings to the ones made directly in the field. Based on the

analysis, the paper proposes an ‘inside-out’ approach to building successful entrepreneurial ecosystems. The paper concludes by discussing its implications for both policy makers and scholars.

Acknowledgements

The willingness of 11 interviewees and dozens of other conversations carries a significant stake in thispaper. Two distinct people made this project possible. My supervisor Claus Thrane; without hisguidance and ideas, the study may well have evolved in an entirely different manner, and Lasse Chor;

his network and knowledge of the ecosystem are what made this thesis possible in the first place.

Keywords

Entrepreneurship, Economic Geography, Entrepreneurial Ecosystems, Economic Systems, RegionalEconomics, Networks, Startups, Clusters, Growth-Entrepreneurship



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Table of Contents

1. INTRODUCTION 41.1 B ACKGROUND 4

1.2 CONTEXT 41.3 PROBLEM STATEMENT 5

1.4 MOTIVATION 5

2. LITERATURE REVIEW 6

2.1 DEFINING THE ENTREPRENEUR 6

2.2.1 A NOTE ON ENTREPRENEURSHIP "

2.2 THE EMERGENCE OF THE ENTREPRENEURIAL ECOSYSTEM 8

2.3 UNWRAPPING THE ECOSYSTEM 10

2.3.1 ENTREPRENEURS 112.3.2 FINANCE 12

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3. METHODOLOGY 17

3.1 RESEARCH DESIGN 17

3.1.1 A QUALITATIVE STUDY 17

3.2 LITERATURE SEARCH 17

3.3 DATA COLLECTION 183.3.1 INTERVIEWS 183.3.2 FIELDWORK 193.3.3 DATA ANALYSIS 19

4. FINDINGS 20

4.1 THE FRAGMENTED ECOSYSTEM 20

4.1.1 LACK OF COMMUNITY VALUE 204.1.2 SUB-CLUSTERS DOMINATE 214.2 THE CAPITAL-ENTREPRENEURSHIP DEADLOCK 21

4.2.1 LACK OF INVESTOR KNOWLEDGE 22

4.2.2 LOW QUALITY OF STARTUPS 224.3 THE POSITIVE ATTITUDE TOWARDS ENTREPRENEURS 23

4.3.1 LARGE INFLOW OF NEW ENTREPRENEURS 234.3.2 FEAR OF FAILURE 244.4 THE ZERO-SUM GAMES 24

4.4.1 AN ECOSYSTEM LED BY ITS SUPPORTERS 244.4.2 ZERO-SUM GAMES BETWEEN COMMUNITY LEADERS 254.4.3 LACK OF LATER STAGE SUPPORT 254.5 THE STRONG ACCESS TO SKILLED LABOUR 26

4.5.1 PRESENCE OF EARLY EMPLOYEES 264.5.2 UTILISING SPECIALISED KNOWLEDGE 274.6 THE SMALL HOME MARKET 27

4.6.1 LACK OF GLOBAL OPPORTUNITIES 284.6.2 EARLY ADAPTORS AND INCUMBENTS 28



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4.7 THE HAND-OFF POLITICAL APPROACH 29 4.7.1 A BOTTOM-UP ECOSYSTEM 294.7.2 PUBLIC RESOURCES 29

5. ANALYSIS 31

5.1 PROPOSITION 1 (ENTREPRENEURS) 31

5.2 PROPOSITION 2 (FINANCE) 315.3 PROPOSITION 3 (CULTURE) 32

5.4 PROPOSITION 4 (SUPPORTS) 325.5 PROPOSITION 5 (HUMAN CAPITAL) 33

5.6 PROPOSITION 6 (MARKETS) 33

5.7 PROPOSITION 7 (POLICY ) 34

6. DISCUSSION AND IMPLICATIONS 35

6.1 BOOTSTRAPPING AN ECOSYSTEM 35

6.2 THE BIG IDEA : AN INSIDE-OUT APPROACH 366.2.1 PHASE 1: CONNECTING THE ENTREPRENEURS 366.2.2 PHASE 2: THE EVOLVING NATURE OF CULTURE 376.2.3 PHASE 3: THE INTER FIRM-BASED CLUSTER 376.2.4 PHASE 4: THE EXTERNAL CLUSTER 376.2.5 THE CYCLICAL NATURE 376.3 IMPLICATIONS: AARHUS AND BEYOND 38

6.3.1 FOR POLICY MAKERS 386.3.2 FOR SCHOLARS 38

7. CONCLUSION 39

7.1 LIMITATIONS 40

8. BIBLIOGRAPHY 41



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1. Introduction

1.1 Background

At the heart of the central region in Denmark lies the city of Aarhus, the subject of this study. Inpopular media, Aarhus is often hailed for its vibrancy and entrepreneurial spirit, an image whichcontinues to spur high growth for the city’s popularity among the Danish population. With apopulation of roughly 300,000 people, Aarhus is the second largest city in the country. The universitypopulation of 50,000 has made the city the youngest in Denmark. Multinational companies such as

Arla, LEGO, Vestas, and Bestseller are all headquartered in the area, making the business ecosystemrich with opportunities. The questions being raised are: how is this fertile soil being used by the city’sentrepreneurs? What does the entrepreneurial ecosystem around entrepreneurs look like in Aarhus?

These types of questions are what this study sets out to investigate to provide answers that will informthose developing the entrepreneurial ecosystem of Aarhus.

1.2 Context

With the recent growth in entrepreneurial activity around the world (Compass, 2015) the notion ofentrepreneurial ecosystems is increasingly becoming an area of interest for scholars. The amount ofresearch being published in this field is rapidly expanding. Moreover, the acknowledgement thatentrepreneurial ecosystems play by a different ruleset than traditional economic clusters is becomingprevalent among scholars (Saxenian, 1994; Storper, 1995; Storper, 1997). This body of research hasprovided us with initial insights about how ecosystems form and what matters in building andconstructing them. Work has emerged around areas like academia (Feldman, Francis, Bercovitz, 2005;

Ács, Autio & Szerb, 2014), policy (Isenberg, 2010) and practical business (Feld, 2012; Hwang &

Horowitt, 2012) and viewpoints from various schools of thought have emerged (Spiegel, 2015). Thishas provided us with an initial setting for investigating ecosystems. With the continuous rise inpopularity among scholars, the field of research will likely sustain its advancements.

Despite the advances in knowledge on entrepreneurial ecosystems, there are still some caveats to benoted in current research. From an evolutionary perspective, we still know little about how ecosystemshave emerged (Feldman & Braunerhjelm, 2004). The lack of evolutionary knowledge makes thedevelopment of upcoming ecosystems a challenge. Replicating initiatives from the more developedecosystem (such as Silicon Valley) rarely provides a high return on investment (Lerner, 2009; Isenberg,

2010). Observing the evolution of young ecosystems is thus key to understanding the time dimensionin ecosystemic development, and inform the development of future ecosystems. Another challenge incurrent research is the understanding of connections and relationships inside ecosystems (Motoyama &

Watkins, 2014). Although it has been discovered that the anatomy of an ecosystem matters greatly(Feldman & Zoller, 2011) scholars have often defaulted to measuring ecosystems by their attributes.Examining the relationships between components of an entrepreneurial ecosystem can thus lead to agreater understanding of the underlying connections it contains. Through closing important gaps likethese, we could unlock the secrets of regions like Silicon Valley and Route 128.



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1.3 Problem Statement

Scholars do not yet have a great understanding of how entrepreneurial ecosystems are connected andevolve over time. This paper has been designed around a dynamic approach in which connectivity,relationships, and evolution are studied. Research has historically focused on top-tier regions likeSilicon Valley, meaning that second-tier regions like Aarhus are poorly understood by scholars (Mayer,2012). Analysing these second-tier regions is thus important to comprehend less developed regions.

The following research questions guide the study:

o How is the entrepreneurial ecosystem connected in Aarhus?o What governs the dynamics of the entrepreneurial ecosystem in Aarhus?

Through answering these questions, we would come closer to an explanation on how to develop theentrepreneurial ecosystems in second-tier regions like Aarhus. The paper should be able to provide an

in-depth understanding of the inner workings of the entrepreneurial ecosystem of Aarhus to facilitatemore informed decisions about developing it. The research will be limited to focus on theentrepreneurial ecosystem, rather than the entire business cluster. The reason for this is twofold; 1)focusing on the whole region is too time-consuming for the constraints of a thesis, and 2)entrepreneurial ecosystem are characterised by a significantly different ruleset (see 2.3).

1.4 Motivation

Aarhus is an interesting case due to its status as a less developed second-tier entrepreneurial region,thus resembling most cities. However, at first glance, the Aarhus case may seem uninteresting for most.

The city has no great history of entrepreneurship nor does it have a thriving entrepreneurial ecosystem.

However, this is how most regions look. The similarity to other areas is what makes Aarhus particularlyinteresting, especially since the findings could help guide decision makers in similar ecosystems. Aarhuscan be classified as a second-tier ecosystem given its lack of track record regarding entrepreneurialsuccess. Solely studying pioneering top-tier ecosystems will do little to inform researchers on theirevolution, as their current status is inherently dependent on their past. Conversely, in second-tierregions, we can observe the development over time and thus more easily understand why they developin certain ways. Moreover, Aarhus has an appropriate size for conducting a study like the one outlinedin this paper. With its relatively small size, Aarhus provides the perfect testing ground for research. It issimple to map, and the data needed to perform analytical work are readily obtained.

To answer both research questions adequately, this study sets out to examine the connections andrelationships between the attributes of the city’s entrepreneurial ecosystem. The upcoming sectionreviews the current literature in the field and outlines a framework for understanding ecosystems. Thisknowledge base will then be condensed into seven unique propositions that provide insights on what

we currently know about entrepreneurial ecosystems. Following the literature review, a methodologysection will discuss the methods used and the qualitative nature of this study. The paper then presentsempirical evidence from the Aarhus ecosystem that will be analysed with regards to the previouslymentioned seven propositions. Based on this analysis, a reformulation of Isenberg’s (2010) model willbe proposed, accompanied by a discussion of the model’s implications for policy makers and scholars.

The study concludes by answering the two research questions outlined in this introduction.



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2. Literature Review

In the literature on entrepreneurship there has been a considerable amount of definitions introduced byboth scholars and practitioners. Some of these definitions appear contradictory and may confuse theirreaders. This lack of consensus on the subject and need for common ground is widely acknowledged inthe field (Sexton & Smilor, 1986; Venkataraman, 1997; Shane & Venkataraman, 2000 and more). Thereason for this definition problem could be rooted in the heterogeneity associated withentrepreneurship’s nature. Entrepreneurship happens at every corner of the planet, from all walks oflife, and across every industry. Creating a definition that captures both Larry Page of Google and third-

world textile manufacturers is rather challenging. Similar problems arise when it comes toconceptualising the ecosystem in which entrepreneurs operate. The attempts of theorising areas of highentrepreneurial activity have been many, due to the job-creation effects and economic growthentrepreneurial ecosystems offer. However, over-engineering local ecosystems to resemble top-tier

ecosystems is highly inadvisable (Isenberg, 2010). Instead, one should understand the local ecosystemand embrace the unique conditions it holds within.

2.1. Defining the Entrepreneur

Numerous scholars have tasked themselves with defining entrepreneurship and the entrepreneur.Several schools of thought have emerged with varying definitions. In his 2010 paper, Gedeon arguesthat researchers have applied and created various sub-domains to address the complexity of definition.

These include ‘Corporate Entrepreneurship’, ‘Social Entrepreneurship’, ‘Necessity Entrepreneurship’and ‘Opportunity Entrepreneurship’. Moreover, he notes that the schools of thought historically can be

divided into four major areas, namely: The Risk Theory of Profit, The Dynamic Theory of Profit, TheBehaviour School and The Traits School (For the full list of definitions sees Gedeon’s review, Table 1).

The origins of definitions stem from the mid-1700’s and arguably entrepreneurship has changed sincethen. This change also becomes prevalent when examining the evolution of the definitions in academia.

The earliest definitions focus on the entrepreneur as the bearer of risk in the transition period betweeninputs and outputs. In bringing the production and price in line with the demand, she earns herentrepreneurial profits (Cantillon, 1755). Building on top of this first theory is numerous definitions allassuming risk to be at the centre of every act of entrepreneurship. Hawley (1907) for instance argues

that undertaking the proprietary risk is the essential variable for every entrepreneur, and this is whatsets her apart from managers implementing innovation into their firms. It is thus implied thatentrepreneurs inherently take risks to accomplish a potentially greater profit than could be gainedthrough employment. More modern definitions also put the profit-risk equation at the heart of whatentrepreneurship is (Hull & Bosley, 1980; Draheim, 1972). The main point of critique to the risk-centric view of entrepreneurship is that it fails to encapsulate the many branches of entrepreneurshipthat do not carry an equal amount of risk as opportunity-based entrepreneurship (i.e. non-profitentrepreneurship, intrapreneurship). Furthermore, it assumes that there is a static pool of opportunities.It matters less who exercise these opportunities, but rather which individual is willing to carry the risk.

With its roots in the neoclassical economic theories, the Schumpeterian view offers a much more

dynamic approach to entrepreneurship. In his opinion, entrepreneurs are the ones responsible for



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carrying out new combinations and form these into new enterprises. In doing so entrepreneurs cause“creative destruction” in markets (Schumpeter, 1934; 1942). The underlying assumption in the moredynamic views of entrepreneurship is the missing link in the market, a disequilibrium, andentrepreneurs are there to exploit the opportunities this generates. Similar patterns of thought can beseen in more recent definitions such as the one by Bygrave & Hofer (1991) arguing that entrepreneursbuild organisations to pursue their perception of opportunities. Whereas more dynamic approachoffers a broader and more complete view of the act of entrepreneurship, they fail to tell us much about

who the entrepreneur is and how she acts in the pursuit of opportunities.

In recent periods of research, psychology minded researchers have flocked to the field in the attempt todiscover a common set of characteristics governing whether an individual is entrepreneurial (e.g.McClelland, 1987; Shaver & Scott, 1991; Lee & Tsang, 2001). Although some studies have found aconnection between parental role models and a preference towards self-employment (Brockhaus &

Horwitz, 1986), these fail to predict the future entrepreneurial performance of an individual (Kolvereid& Isaksen, 2012). The underlying assumption that all entrepreneurs share common characteristics is vague and Gedeon (2010) notes “studies seem to show that entrepreneurs are as different from oneanother as they are from non-entrepreneurs” (p. 21). However, he does argue that there seems to beconsensus around the finding that entrepreneurs’ characteristics, goals, values, and culture can affectthe performance of new ventures.

In modern periods, the most quoted paper on entrepreneurial definitions is the 2000 article “Thepromise of entrepreneurship as a field of research” by Shane & Venkataraman. Their view onentrepreneurship is based on opportunities. It is argued that the nature of opportunity recognition

varies heavily depending on the eyes seeing it. An accountant will not see similar opportunities in spacediscovery as an aeronautical engineer and vice-versa. Furthermore, they argue that opportunityrecognition is not sufficient for defining an entrepreneur. The actual formation of a new venture iscritical to exploit the opportunities. Due to this inherent focus on opportunities, the above definition ofentrepreneurship is the one this study will be guided by going. The definition in itself is not a make-or-break point for the research in this paper. However, it is important to understanding which sort ofentrepreneurship (namely opportunity-based entrepreneurship) will be the focal point of the study.

2.1.1 A Note on Entrepreneurship

The research carried out in this paper will focus on growth-entrepreneurship. It is important tounderstand the distinction between the creation of growth ventures and self-employment/soleproprietorship. The two generate significantly different types of value and takes varying degrees of risk(Chatterji, Glaeser & Kerr, 2013). As Steve Blank argues 75% of small businesses are a success. On thecontrary to growth startups, where 75% fail (Blank, 2013). Isenberg (2011) states that sole-proprietorsare non-entrepreneurs. The reason for the distinction lies in value creation. Whereas sole-proprietorstransfer value they would have generated working for other firms, high-growth startups create large

value for societies. This creation happens through employment, taxation, reinvestment in communities,and role modelling. Furthermore, regarding entrepreneurial ecosystems, the ladder are the ones whobenefits from a thriving ecosystem.



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2.2 The Emergence of the Entrepreneurial Ecosystem

Prior to reviewing the entrepreneurial ecosystem, it is relevant to examine how the concept emergedand how similar theories have shaped today’s understanding. Many related concepts have been devisedover the years, to explain why regional clusters develop and benefit firms. The earliest concept in thefield is the concept of agglomeration economics devised by economist Alfred Marshal. A theoryarguing that grouping together companies creates economies of scale and network effects, leading to acomparative advantage over competing regional economies (Marshal, 1890). In recent periods, theconcept of economic clusters has been popularised by economists Michael E. Porter and PaulKrugman. Cluster theory argues that grouping similar firms in tight geographical areas will lead to anincrease in competition, more rapid innovation, and the creation of new companies in the field.Economic regions thus create competitive advantages over other areas and continuously expand thatposition into the global economy (Porter, 1990; 1998; Krugman, 1991).

The notion of a business ecosystem is a new idea in the eyes of scientific research. Until the 1993,ecosystems have mainly been explained through geographical economics, agglomeration economics,and industrial clusters as described above (Mason & Brown, 2013). The scientific term is originallycrafted by James Moore in an article published in Harvard Business Review in 1993. Moore argued thatyoung firms do not evolve in a ‘vacuum’ and that the relational structure of suppliers, customers, andpartners matters greatly for entrepreneurs. Businesses created under these conditions, have a higherchance of growing (Moore, 1993). In 1994 AnnaLee Saxenian published her highly influential book onregional advantages, comparing Boston’s Route 128 and Silicon Valley. What Saxenian found was thatthe open and non-hierarchical culture of Silicon Valley had significantly affected the area’s economic

boom in the technology sector. On the contrary, the much more firm-centric and closed Boston lackedbehind. Her conclusions were that a focus on ‘regional innovation’ and local culture can spurconsiderable economic growth (Saxenian, 1994). Her work revitalised the interest in entrepreneurialecosystems. It expanded on the neo-classical economic notions of agglomeration economics throughthe integration of culture, structure, and sociology to the field. Moreover, it deepened the idea thateconomics alone is far from perfect when it comes to explaining the success of ecosystems.

Similar to the views proposed by Saxenian, Michael Storper devised his theories of territorialdevelopment in the global world. He argued that the view of traditional economic systems, where we

measure systems as their input and output, do not suffice. Instead, we should consider regional areas asnetworks governing human interactions through informal rules of the system. His theory highlights theimportance of local blocks in the globally networked world (Storper, 1995; 1997). Both Saxenian andStorper thus focused their research on uncovering these regions to understand better how theygenerated economic value through more than the sole presence of specific elements. The concept oflearning economies and knowledge regions similarly emerged during the same period. This approachhighlights the importance of establishing communities in which firms learn from each other.Furthermore, through engaging in the regional area surrounding them, they develop knowledge as aregional intangible asset that cannot be duplicated (Lundval & Johnson, 1994; Asheim, 1996; Morgan1997). Similar to the concept of learning economies, the theory of regional innovation systems (RIS)

was popularised during the same period of research. The RIS research takes a dynamic view of systems,



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through describing how knowledge flows via actors in a local cluster. The network is thus governed byinstitutions like universities, enterprises, and governments. These systems hold both innovation assetsand a culture of knowledge sharing between its actors. Accordingly, the theory also accounts for howlocal systems interact with both global networks of knowledge and markets (Cooke, 1992; Asheim &Ikasen, 2002). When comparing the research of RIS with modern research in entrepreneurialecosystems, we can draw significant parallels between the theories. Both fields rely on explaining theinteractions between the agents in a system and uses intangible assets such as culture, collaboration, andknowledge sharing as central themes of their theory. It could be argued that research in the are ofentrepreneurial ecosystems is an accurate approach concerning a subset of the RIS that deals withentrepreneurs. These similarities should become increasingly evident as we continue to uncover theentrepreneurial ecosystem.

In recent periods, the attention has shifted towards the ‘softer’ aspects of the business ecosystems.

Storper and Venables (2002) introduced the concept of ‘buzz’ in urban economies. They argue that theconnections created by face-to-face contact are vital in explaining the evolution of economic clusters. This interaction increases the strength of human relationships in the area and limits the possibleharmful effects of moral hazard. Related to buzz, Gertler (2003) argues that individuals gain deeperinsights into emerging technologies, cultural habits, and local knowledge flows from ‘being there’ with aphysical presence in an area. How the buzz is transferred depends on the structure of the social ties inthe area. More ‘tense’ structures can limit the information flow in a region and diminish the benefits ofpresence. On a different note, economist Richard Florida explains the emergence of innovationsystems through his idea of the ‘creative class’. He argues that 30% of the population belong to a classof creatives. Accumulating this sort of class in dense geographical areas will cause innovative clusters to

form. He highlights regions like Silicon Valley and Route 128 as having a dense population belongingto the creative class. Moreover, the theory argues that specific sectors (technology, design, R&D,among others) attract more creatives to an area than other industries (Florida, 2002).

The evolution of the field has seen a shift from general economic thinking towards a more ‘anatomical’understanding of regions. Scholars have increasingly adopted an acknowledgement of the intangibleassets in an area. Research suggests that systems are more than the sum of its parts and the underlyingculture, relationships, and interconnectedness must be recognised. The perspective of theentrepreneurial ecosystem relies on research from previous fields, yet offers a view tailored towards

entrepreneurs, specifically those creating high-growth ventures. Isenberg (2011) devised a modeloutlining the factors present in an entrepreneurial ecosystem, consisting of six specific domainssurrounding entrepreneurs. Brad Feld developed four cornerstones of the ecosystem in his book‘Startup Communities’ in which he outlined the story and key ingredients of the thriving ecosystem inBoulder, Colorado (Feld, 2012). Similarly, a significant amount of research has recently been conductedby the Kaufman Foundation to explain how ecosystems develop and what triggers success with localentrepreneurship. All of these and many others will be discussed in the upcoming section as theentrepreneurial ecosystem is reviewed in depth.



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2.3 Unwrapping the Entrepreneurial Ecosystem

Entrepreneurial ecosystems are distinct with unique components governing their behaviour. To fullygrasp the entrepreneurial ecosystem, an understanding of what it consists of must be established. Thisexplanation provides both a complete picture of what is referred to when discussing an entrepreneurialecosystem and a base of consensus for further analysis. Component-based models (see figure 1) aregreat at explaining features and mapping out players. Such models are ideal for building anunderstanding of the ecosystem, yet fall short when it comes to examining connections andrelationships between the players. Therefore, it is important to realise that a component-based modelcannot be used in a vacuum. Related theories can effectively be used in harmony with them to analysethe dynamics of an ecosystem.

Several attempts at devising an ecosystemic model have been conducted, and many have a clear set of

similarities. Spiegel (2015) has created a model in which he explains the relationship between threeprimary attributes of an ecosystem: material, social and cultural. The model has been applied to the casestudy of entrepreneurial ecosystems in Calgary and Waterloo, Canada. Similarly, Thomas Funke has

created an ‘ecosystem-canvas’ formapping out the local players inan ecosystem. His model attemptsat building a shared understandingof the problems and opportunitiesin an entrepreneurial ecosystem. The work of Funke has since

been used to help inform thegrowth of the ecosystem in theGerman capital Berlin (Compass,2015). An array of lesser knowmodels has been developed toexplain ecosystems. However,these will not be taken intoconsideration by this paper.

The framework used for thepurpose of understanding entrepreneurial ecosystem in this study is highlighted above (figure 1).Originally developed by Daniel Isenberg (2010), the model is chosen due to its intuitive nature andencapsulation of all known domains in an ecosystem. As with all models, Isenberg’s framework haspitfalls. It fails to deliver an explanation for why players need a presence, how they interact, and whichare more important. In spite of these pitfalls, the model is more than sufficient for creating a sharedreality of an entrepreneurial ecosystem and its attributes. Based on this understanding, one can theninvestigate dynamic factors such as networks, relationships, and connections to explore the interactionsbetween the different domains.

Figure 1: Daniel Isenberg’s (2011) model of the Entrepreneurial Ecosystem



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In the upcoming section, the seven sub-sections representing the current state of research in Isenberg’sdomains will be examined. It is crucial to understand each area in depth to conduct research that buildson the current understanding. From this examination, a series of propositions will be crafted. Eachproposition will serve as ‘best practices’ knowledge within a particular domain of the entrepreneurialecosystem. The unique propositions can later be used to analyse how a particular local ecosystemperforms compared to the current state of research.

2.3.1 Entrepreneurs

At the heart of every ecosystem are its entrepreneurs and their startups. That is an undeniable fact as, without entrepreneurs no ecosystem would exist. What is being discussed, however, is whetherentrepreneurs also need to be at the centre of leading the ecosystem. Brad Feld argues that successfulecosystems must be led by its entrepreneurs as they work in networks, rather than hierarchies.Furthermore, he claims that leaders of an ecosystem need a long-term perspective (+20 years). Giving

shorter sighted players such as capitalists, politicians, and supporters the control can damage theecosystem, something Feld labels as ‘feeder-control’ (Feld, 2012). Feldman et al. (2005) similarly arguethat entrepreneurs are the ones building the ecosystems around them. Entrepreneurs do not rely ongovernments and other supporters to create their ecosystem. They argue that the focus of governmentsinstead should revolve around creating new opportunities for entrepreneurs. Contrary to both thesearguments Isenberg (2014) states that entrepreneurs are not necessarily the drivers in an ecosystem.Isenberg stresses the importance of having a range of influencers and connectors which can drive theecosystem. He uses cases like Boston and Israel to exemplify ecosystems not led by its entrepreneurs.Isenberg does, however, agree entrepreneurs themselves will ‘sniff’ out opportunities rather than beingforced towards them, and that ecosystems must evolve organically without being ‘over-engineered’

from the top-down.

A notion often believed by many is that the ultimate goal of an entrepreneurial ecosystem is to createmore entrepreneurs. That is in fact not the case. Shane (2008) notes “Policy makers believe a dangerousmyth. They think that startup companies are a magic bullet that will transform depressed economicregions, generate innovation, create jobs, and conduct all sorts of other economic wizardry” (p. 4). Heargues that the focus should be on expanding the successful businesses and help these create moregrowth opportunities. That is ultimately where the ecosystem supports entrepreneurs and startupcompanies. Entrepreneurs do not have large organisations to rely on for guidance, growth, and

learning. Instead, successful entrepreneurs can rely on each others expertise, networks, and knowledgefor growing their companies, thus creating similar benefits to those of large established enterprises(Aurswald, 2015). The end goal of an entrepreneurial community should thus be to ensure that thesuccessful entrepreneurs thrive there. Fostering a culture in which more people build mediocrecompanies eventually seizing to exist, is an inefficient strategy for policy makers wishing to createeconomic growth.

Proposition 1: Creating more startups has a diminishing effect and should not be the goal. Insteadconnecting the current entrepreneurs creates growth opportunities through learning.



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2.3.2 Finance

The role of risk capital plays a vital role in developing both successful businesses and the localentrepreneurial ecosystem. However, the area of venture capital (VC) also seems to be surrounded bycertain myths. A lack of risk capital is often cited as one of the most common needs in a startupecosystem by its entrepreneurs (Isenberg, 2014). However, in reality very few startups rely on riskcapital to succeed. In fact, only half of the world's VC activity is located outside of California (Hwang& Horowitt, 2012). Similarly, Feld (2012) argues that instead of the focus on creating VC activity in alocal community, it is much more efficient to concentrate on the community and building strongerstartups. Once this is achieved, investors will be attracted to the ecosystem. That is however not to saythat capital is not impactful in a local area. It has been observed that doubling a city’s VC activity willlead to a 1% increase in employment (Samila & Sorensen 2011). What is important to note is that itshould not necessarily be the focus of community builders. VC’s rely on a steady deal flow to keep theirbusinesses attractive and if communities fail at creating this flow, investing consistently in the

ecosystem will never be profitable. Lerner (2009) instead argues that local communities should focus onbuilding well-connected startups and lower the outside barriers for international capital to flow to theecosystem. Capital is often treated as a silver bullet by the players in an ecosystem, however, whatresearch reveals is that there is a range of factors needed for VC to be effective.

Proposition 2: Venture capital has a significant impact in an ecosystem. A pure focus on attractingcapital is inefficient, rather ecosystems should build more attractive firms for capitalists.

2.3.3 Culture

Culture seems to have played a vital role in the development of some of the world’s most important

entrepreneurial ecosystems (Saxenian, 1994). Also in modern literature is local entrepreneurship culturehighlighted as an outstanding explainer for a value generating ecosystem. In the sense ofentrepreneurial culture, two paths have been investigated: the general beliefs towards entrepreneurship(external) and the culture between players of an ecosystem (internal). An example of the ladder is

Aoyama (2009) arguing that local entrepreneurial culture shapes the norms and beliefs in an ecosystem,in turn influencing how local businesses are perceived. Similarly, Hwang & Horowitt (2012) argues thatactors engaging in an entrepreneurial ecosystem must be driven by extra-rational motivators. Ratherthan expecting a monetary compensation for their efforts, they should seek a ‘return-on-involvement’from the ecosystem. Having a strong culture between entrepreneurs and other players in an ecosystemseems to matter greatly. Feld (2012) mentions the ‘give-before-you-get’ mentality in the Boulderecosystem and that the inclusiveness of the ecosystem has caused it to become an ever-expandingentity. Moreover, enhancing collaboration and eliminating the zero-sum games between entrepreneursis an important aspect, according to Feld. Another key finding is the importance of ‘entrepreneurial-recycling’. The term describes successful entrepreneurs who have exited their businesses giving back tothe ecosystem through reinvesting their wealth, knowledge, and experience to create newentrepreneurial activities (Mason and Harrison, 2006). Highlighting the local stories of these successfulentrepreneurs can also have a powerful effect in inspiring the upcoming entrepreneurs in an ecosystem(Feldman et al., 2005; Isenberg, 2010).



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In a broader sense, we find the general public opinion towards startup companies and entrepreneurshipas a career path. Kibler, Kautonen and Fink (2014) argue that a strong culture towards entrepreneurs inthe general public can be part of creating a normalised outlook towards entrepreneurship. This can, inturn, support entrepreneurial firms in their development. Several attempts to measure this‘entrepreneurial-spirit’ have been conducted. Most notably by Achs, Autio and Szerb (2014) creatingthe Global Entrepreneurship and Development Index (GEDI). Their index is published once a year tomeasures a country’s entrepreneurial attributes and culture towards entrepreneurship. Similarly,

Armway (2015) has created an index comparing the entrepreneurial spirit across countries based on thedata from close to 50,000 respondents. Whereas measures like these are useful for assessing theexternal cultural norms and attracting new talent to an ecosystem, they are not tackling the internalsocial rules of an ecosystem, which create most value (Isenberg, 2010).

Proposition 3: External entrepreneurship-friendly culture is valuable, yet only to a certain extent.

An internal culture of collaboration is what generates the most value for ecosystems.

2.3.4 Supports

The support functions in an entrepreneurial ecosystem play a significant role in acting as connectors forother players. Besides the notion that modern infrastructure plays a critical role in entrepreneurialcommunities, researchers have found some of the highly significant support functions to be mentors,events, and support professions (legal, accounting, etc.). Mentors, especially, seem to play a crucial rolefor entrepreneurs and growth ventures. A startup being mentored by experienced entrepreneurs onaverage grows 3,5 times faster than those without mentors (Compass, 2015). The importance ofmentors is also featured in the case study of the St. Louis ecosystem conducted by Motoyama &

Watkins (2014). In this study, they argue that mentoring is the most critical ability of all supportorganisations. Their case study also highlights the importance of entrepreneurial events in whichentrepreneurs connect through entrepreneurial activities. Several practitioners have similarly stressedthe importance of events with 'entrepreneurial content' as a vital part of growing entrepreneurialcommunities. Engaging the local stack of entrepreneurs is, however, often an overlooked factor byscholars (Feld, 2012; Hwang & Horowitt, 2012). Lastly, it is important to note that the presence ofsupport professions in itself is not necessarily sufficient for an entrepreneurial ecosystem. These firmsneed to understand the nature of entrepreneurial ventures and pay their services forward for the chanceof a later gain. As Mason & Brown (2014) notes: “Such firms are often willing to offer their support tostartups at no charge with the expectation that long-term business relationships will emerge in duecourse” (p. 12).

Proposition 4: Support functions play a vital role in ‘gluing’ together the community, mainly throughrelevant events, mentoring, and support.

2.3.5 Human Capital

The presence of cheap skilled labour is an essential part of a thriving ecosystem, as startups rely on thisresource to sustain their development. Great examples of this, is the impact Stanford University andMIT have had in Silicon Valley and Boston respectively. However, it also seems that an over-emphasis

on the importance of having proximity to a top university does not appear to be justified. There are



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countless examples of thriving ecosystems that do not possess this (Mason & Brown, 2013), and thehighest performing entrepreneurial workers are often around 40 years old (Chatterji, et. al.). Universitiesseem to play two major roles in a startup community. One role is that of creating new entrepreneurialopportunities through the commercialisation of research, for instance through technology transferprograms (TTP) (Shane, 2004). The second role is that of a ‘talent-feeder’ to the ecosystem. Byproviding highly-skilled graduates that can be hired by the local business environment, these transferthe knowledge acquired at universities into the entrepreneurial ecosystem (Wolfe, 2005). Both roles arenecessary for an ecosystem’s talent-pool and continued growth. Lerner (2009) argued thatentrepreneurship is a global phenomenon and allowing startups to hire skilled labour outside ofnational boundaries is an effective way to attract human capital. Lerner does, however, not diminish theimportance of strong local education.

An often debated issue is the effectiveness of entrepreneurial education. It seems that this sort of

education has little to no significant effect on a startup ecosystem (Isenberg, 2014). Conversely, Feld(2012) argues that the main issue with this type of education is not necessarily its effectiveness. Hestates that the problem with this kind of teaching is that it is often located within business schools,rather than with actual inventors in computer science or engineering. Y-Combinator president, Sam

Altman, has equivalently presented the belief that roughly 33% of entrepreneurship can be taughtthrough education (Altman, 2014). In an increasingly technical world, there is no doubt that the needfor high-skilled labour is a critical component of any entrepreneurial ecosystem. The means forcultivating this type of resource is, however, not necessarily an internal ecosystemic process.

Proposition 5: The presence of cheap high-skilled labour is crucial to ecosystems. The flow of labour

can come from both internal and external sources.

2.3.6 Markets

Large established corporations are crucial for the entrepreneurial ecosystem to thrive (Feldman et al.,2005; Isenberg, 2013a; Ebdrup, 2013). Their ability to attract talent to a local area is unprecedented(Feldman dubbed them ‘talent-magnets’), and a startup ecosystem cannot exist without incumbentfirms. They cultivate an ecosystem through investments in new ventures, as customers, early adaptors,and potential partners. Furthermore, when big companies in a local area fails they give birth to a new

wave of young startup firms. These are competing over the lost market shares, a dynamic that has beendubbed ‘whale-fall’. Examples of these falls are Nokia, IBM, Blackberry and several other high-techfirms, giving way to new blood in an ecosystem (Isenberg, 2013). Despite this impact, its been arguedthat local policy makers should in turn favour the incumbent firms less and create opportunities forentrepreneurs (Aurswald, 2015). A complete neglect of incumbents, however, is by no meansfavourable for neither of the parties.

Another popular term that has risen in recent years is that of the ‘dealmaker’, and their importance hasbeen discovered in several ecosystems. The original notion was introduced by Feldman and Zoller(2011). They find strong evidence that having a high degree of dealmakers connecting the players in anecosystem is an efficient predictor of the growth of an ecosystem. Accordingly, Napier and Hansen

(2011) argue that having dealmakers act as the missing link between players, though creating



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connections across the ecosystem and towards new markets, is crucial for success. Both research paperspoint to the fact that the anatomy of a local ecosystem matters greatly and assuming that the presenceof all other actors is not sufficient. Without dealmakers, the crucial connections do not flow across thelocal ecosystem. Moreover, the impact of dealmakers proves why solely measuring the components ofan ecosystem does not suffice. Researchers must dig deeper to examine the connections between theplayers of an ecosystem to gain valuable insights into local conditions.

Proposition 6: Ecosystems need incumbent firms to thrive and cultivate new ventures. Dealmakers areessential to connect startups with opportunities across the ecosystem.

2.3.7 Policy

Several ideas have been formulated around the role of policy in entrepreneurial ecosystems, enough sothat policy makers should be able to make informed decisions about their efforts to enable ecosystems.

In his 2009 book ‘The Boulevard of Broken Dreams’, Harvard scholar Josh Lerner addresses a range ofreasons why government initiatives to boost startup activity fail. He argues that a top-down approachto ecosystems and lack of understanding of what entrepreneurship is, are the most common pitfalls forpolicy makers. Both observations are very much in line with the findings made by several otherresearchers (Isenberg, 2010; Feldman et al., 2005; Chatterji et al., 2013). He instead argues that localpolicy makers should be very patient in their efforts to promote entrepreneurship and consistentlymeasure what has an actual impact on the ecosystem. At the same time, they should remain flexibleenough to change the initiatives that are implemented (Lerner, 2009). Researchers thus seem to agreethat governments must acknowledge the complexity of entrepreneurial ecosystems and stop the pursuitof quick fixes economic growth. As Isenberg (2010) notes: “Ironically, even Silicon Valley could not

become itself today even if it tried” (p. 3).

When it comes to the role of national government, there seems to be somewhat more ambiguity amongresearchers. Often the argument is that governments should focus on creating framework conditionsfor entrepreneurship to thrive. However, research from both Denmark and The Netherlands suggeststhat despite creating some of the world's best conditions for new companies, this does not seem toaffect the amount of high-growth ventures established in the countries (Napier et al., 2013; Stam,2013). Policy makers must, therefore, define their role between the hands-off approach and the top-down approach. Mason and Brown (2014) have proposed four elements of the ecosystem which policymakers can target; entrepreneurial agents, entrepreneurial resources, connectors, and theentrepreneurial orientation. They conclude that the ultimate goal of policy makers should be to supportan ecosystem in which high-potential entrepreneurs are favoured, and not over-value their role in theecosystem. Furthermore, Motoyama & Wiens (2015) suggest that the main problems with currentpublic entrepreneurship policies are that policy makers will often try to fill out the gaps in the localmarketplace. Gap filling efforts often happen through the creation of public venture funds andincubators. However, research suggests that these initiatives are very ineffective. Instead, governmentsshould help foster learning and connections through initiatives like catalytic events. There is a clearconsensus in the current state of the research that governments should accept their supporting role inthe ecosystem. Rather than trying to lead it, they should seek to engage and grow organically with the

entrepreneurial ecosystem.



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Proposition 7: The bottom-up approach is essential for successful ecosystems. Policy makers shouldassume a role of supporters and connectors to private initiatives.

As noted at the beginning of the section component models have a range of limitations. However, itshould provide us with a common understanding of what an ecosystem is. An important aspect to noteis that ecosystems do not follow a standardised trend. Rather, each ecosystem develops under a set ofunique local conditions. It should thus not necessarily be the goal for community builders to acquire allof the above features, but to identify local strengths and specialise around these. As Feldman andBraunerhjelm (2004) argue, we still know little about how ecosystems historically have emerged and thetime dimension is often neglected. Trying to learn from an ecosystem that has developed over 50 yearsand applying that knowledge to younger systems is not efficient. This means that practical ecosystemicevolution is more a process of trial-and-error learning than it is finding the magical Silicon Valley ‘silverbullets’. As research progresses, a greater emphasis is thus needed towards examining relationships and

the evolution of an ecosystem.



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3. Methodology

Aarhus as a region is particularly interesting to study as it resembles most other ecosystems in the world. Designing a study of complex phenomena like an entrepreneurial ecosystem is a challengingtask. This section will outline the research design, literature search, and the data collection process. Thestudy has been designed with the previous research in mind, to accommodate for some of the criticisedpitfalls. That should, in turn, contribute to closing some of the knowledge gaps that currently exists inthe field of research.

3.1 Research Design

This paper is set as a single case study of the entrepreneurial ecosystem in Aarhus, with research beingconducted over a four-month period from February to June, 2016. The study seeks to build an in-depth

picture of Aarhus and the dynamics existing inside its entrepreneurial ecosystem. The base design ofthe study is exploratory given little prior knowledge of the social phenomenon in the local context(Stebbins, 2001). The primary goal of the research is understanding the relationships between players ofthe ecosystem, rather than a descriptive approach towards components. Inductive reasoning will be themeans of reaching this goal. The inductive method is effective in this type of study, given that littleresearch has previously been published on the subject matter. Due to the time constraints, a cross-sectional study will be performed, with data collected in one-shot within four months. Ideally, thisstudy would have had a longitudinal component such that the entrepreneurial ecosystem could beobserved as an evolutionary process.

3.1.1 A Qualitative Study The study is put in a qualitative research frame due to its focus on connections and relationships. It canbe discussed whether quantitative methods would have been appropriate to make observations moremeasurable. However, given the narrow local context of this study, the qualitative methodology is thepreferred mode of research (Ragin, 2014). The qualitative approach should provide rich insights aboutthe entrepreneurial ecosystem of Aarhus, since the data are obtained from local entrepreneurs,capitalists, and policy makers. The data will be collected in a non-contrived setting, through interactions

with the natural environment (see section 3.3). In part, the study seeks to create grounded theory. Thestudy began solely with two research questions without preconceived notions of the ecosystem.

Through gathering and coding data to discover patterns, theory emerges. However, it can be discussed whether the methodology of the study is in fact grounded theory. Due to its reliance on previousresearch from the field in analysing the Aarhus case, the method is not grounded theory in its purestform. Nonetheless, the study contains significant traits from grounded theory, enough justify the use ofthe methodology throughout the paper.

3.2 Literature Search

The sources for obtaining the literature needed for this study have been threefold. The starting pointfor the search was through reviewing the books Startup Communities (Feld, 2012) and The Rainforest

(Hwang & Horowitt, 2012). Moreover, literature was found through using two main academic



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databases; EBSCO and Google Scholar. The keywords used to gather literature were ‘entrepreneurshipecosystem’, ‘startup ecosystem’, ‘entrepreneurial ecosystems’ and ‘entrepreneurship’. Given the smallsize of the field most literature references to similar papers, meaning that exploration through articlesand journals have been possible. The cornerstone papers for identifying the most relevant research inthe field have been: Entrepreneurial Ecosystems and Growth Oriented Leadership (Mason and Brown,2013), The Relational Organization of Entrepreneurial Ecosystems (Spiegel, 2015) and TheEntrepreneurship Ecosystem Strategy as a New Paradigm for Economic Policy (Isenberg, 2011). Lastly,

The Kaufmann Foundation’s online directory has been a significant source of literature, as thefoundation is the most active researchers of entrepreneurial ecosystems.

3.3 Data Collection

The foundation of this thesis is based on rich data from both qualitative interviews and participant

observation. A total of 11 interviews and a fieldwork log with 15 entries acts as the foundation foranalysis. Furthermore, the study relies on secondary data such as OECD and GEDI. This sectionoutlines how data has been collected, the design of the collection process, and the mode of analysis.

3.3.1 Interviews

Out of 16 interview requests, 11 requests were successful and resulted in interviews. The sample setrepresents a broad range of entrepreneurs differing in age, years of experience, and company size. Mostinterviewees have founded businesses in the technology sector and the interviews have been conducted

with an unstructured approach. The mix of participants is seven entrepreneurs, two capitalists, and twostakeholders. The unstructured method has been chosen to support the emergence of grounded theory.

Moreover, due to the exploratory nature of the study, the unstructured approach has been deemed themost appropriate with regards to the research questions. The table seen below contains an overview ofthe participants in the study:

Name Sort ID Organisation Firm Size Date

Thomas Laursen Entrepreneur I1 UNSILO 15-29 03/03/16

Morten Larsen Entrepreneur I2 Hungry.dk 15-29 08/03/16

Simon Staack Entrepreneur I3 Emplate 1-5 10/03/16

Alexander Christiansen Entrepreneur I4 KidUp 1-5 15/03/16Lars Stigel Investor I5 Capnova n.a 15/03/16

Rune Mai Entrepreneur I6 Spiir 6-14 16/03/16

Jan Beyer Sørensen Official I7 Local Gov. n.a 16/03/16

Camilla H. Lastein Entrepreneur I8 Lix Technologies 6-14 16/03/16

Finn Støy Investor I9 Finn Støy n.a 17/03/16

Astrid H. Tyrsted Incubator I10 StartupLab n.a 21/03/16

Claus M. Christensen Entrepreneur I11 Clearhaus 15-29 21/03/16



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3.3.2 Fieldwork

The second core element of the data collection process is from of participant observation throughinvolvement with the organisation #AARSOME. The fieldwork log (Appendix 2) contains a series ofobservations gathered at events, meetings, and conversations. It consists of a thorough description ofthe observation and reflections on the takeaways. The time and date for these observations range fromthe 12th of January until the 23rd of May. None of the participants have been explicitly informed thatthe conversations would be used for research purposes, ensuring a natural setting.

3.3.3 Data Analysis

Upon ending the data collection process, the data have been organised and made ready for analysis. The method of analysis has followed Yin’s (2011) process of 1) compiling data, 2) disassembling data,3) reassembling data, 4) interpreting, and 5) concluding. The initial step of the process meant compilingthe data into different ID’s and organising them in a spreadsheet (Appendix 4). The second phase

involved re-listening to interviews and re-reading the fieldwork log. From there, a series of statementshas been extracted, and patterns have been detected. A list of 220 quotes has been created to supporteach of the statements from the interviews. It could be discussed whether full transcription would havebeen appropriate. However, given the time constraint a larger sample size was prioritised. From therough dissemblance process, the data points and quotes have been ordered into six categories, usingIsenberg’s (2011) framework.

The goal of the process has been to ensure the objectivity of the study’s findings. Participantobservation is inherently subject to researcher bias, giving the high degree of personal involvement.Furthermore, the evaluation of the data presents another limitation, given that the assessment becomes

subject to the researchers’ worldview (Spradley, 1980). Member checking could have been used to validate the evaluation with the participants. However, this was deemed impossible due to the nature ofthe data collected (see Findings).



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4. Findings

The fourth section of the study will outline the findings made in the field over the four-month periodthis project has run. The results have been sorted into seven distinct domains, each concerned with aparticular area of the entrepreneurial ecosystem (as defined by Isenberg). This structure will ensure thatthe complete story of the entrepreneurial ecosystem in Aarhus is told. Given the earlier criticism ofmodels that are too component based, the approach of these findings has been different to most otherresearch. Rather than a static view where domains are measured with quantitative data, a dynamicapproach has been taken to discover connections between components of the ecosystem. A lot ofdirect quotes will be used in the findings, to ensure the objectivity of the research.

4.1 The Fragmented Ecosystem

An essential part of any ecosystem is the interplay and connectivity between its entrepreneurs. Asalready noted startups do not exist in a vacuum, as they depend on each other for sparring, network,learning, and growth. In Aarhus, however, it seems that startups do in fact live in a vacuum. Oneentrepreneur explained: “There is not really a special Aarhus-spirit in the city” (I11). The lack of an‘Aarhus-spirit’ may have several root causes that can be explained through a variety of factors.Interestingly, the entrepreneurs who are actively engaging in smaller networks with their peers, takehigh value from their connections as noted by several: “I like to meet with the other founders in ourCEO network, they understand my challenges and problems” (I1) was observed by one. Anotherargued: “Our ‘founders club’ has been extremely valuable for both me as a person and my company”(I6). If the local entrepreneurs are aware of the value arising from interacting with each other, the

question of why they are not engaging with the community is natural to ask. Another key point that canbe drawn from this observation is that entrepreneurs are not directly reluctant to engage with eachother and share knowledge.

4.1.1 Lack of Community Value

A story that repeated itself in the interviews is the lack of value the best entrepreneurs feel they aregaining from actively engaging with their community. One noted: “I would like to engage and supportthe ecosystem, but we need more professionalism in our approach and initiatives” (I2). The lack ofprofessionalism is evident in the form of the events initiated in the ecosystem. Most events are targeted

towards either inspiring more people to become an entrepreneur or towards helping new entrepreneurs with the basics of their business (F8). Only rarely do events which favour the high-potentials appear. That, in turn, makes it less attractive for the best entrepreneurs in the city to engage with thecommunity. For instance, one argued: “Simply put, I just don’t have the time to stand down at the localpub and drink beers with entrepreneurs that are completely new in the game” (I1). The fragmentednature of the ecosystem is in fact quite surprising. Close to all interviewees pointed towards therelatively small size of Aarhus as a strength, meaning it is easier to get an overview of other relevantplayers in the ecosystem. The making of new connections would thus, logically, not be problematic.

The fact that most talented entrepreneurs have decided to abandon the ecosystem has a self-enforcing

effect on their willingness to participate. The less interaction there is from the best entrepreneurs in the



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ecosystem – the less quality and professionalism new initiatives will have. A negative feedback loop hasbeen set in motion. A feedback loop that if continued, may threaten to harm the community spirit astime goes on. The lack of a community feeling may not necessarily directly impact the talentedentrepreneurs immediately. What it does for the community, however, is limit the ability of new,potentially gifted, entrepreneurs to gain access to peer learning through relationships with andmentorship from the best entrepreneurs. That dynamic, in turn, slows down the stream of new high-potential startups (F10). Uniting the ecosystem will be a point for discussion in the later sections.However, the early indicators of a thriving community are starting to emerge: “The community woulddefinitely be more attractive if the initiatives were more ambitious. But it’s bubbling currently and thepossibilities of getting help are ever increasing” (I8) was the comment of one entrepreneur. The idea ofan increasing inflow of new entrepreneurial activities was echoed in several interviews, in particular bythose closest to the community. With a growing ecosystem comes a vast amount of opportunities tocreate a more vibrant ecosystem, but the potential pitfall may be a further fragmentation between top-

tier entrepreneurs and the rest of the community.

4.1.2 Sub-Clusters Dominate

The entrepreneurial ecosystem of Aarhus holds a series of sub-clusters with individual cultures, norms,and efforts to connect their entrepreneurs. Most of these exist in the form of incubators ormembership organisations, such as Startup Lab, Culture Workspace, and Accelerace. In organisationslike these, young firms have the possibility to connect with peers and grow their businesses. Initiativeslike the ones mentioned above are all recent (within five years), thus supporting the hypothesis of agrowing community around Aarhus-based entrepreneurs. Despite the growth, a narrative often told

was the vacuum created by these organisations, with little interconnectivity between the initiatives (F6).

Having communities that are driven by incubators and accelerators brings a series of structuralproblems. Once the successful startups grow, they will eventually move to larger office spaces and thelearning opportunities for the next generation of startups become limited. That is particularly the case,as long as the growing startups are reluctant to recycle their knowledge back into the ecosystem. Asdescribed in detail earlier, this does not seem to be the case in Aarhus, thus limiting the interactions tobe purely between newer entrepreneurs.

4.2 The Capital-Entrepreneurship Deadlock

Every entrepreneur commented that the lack of capital was a problem for local entrepreneurs. Earlier it was stated that almost all entrepreneurs will argue that their ecosystem lacks risk capital (Isenberg,2014), and the entrepreneurs of Aarhus do not differ. One entrepreneur noted “Honestly; I think mostpeople wouldn’t even know where to start looking for capital in Aarhus” (I6). Several others echoedthis opinion with statements such as: “There is virtually no access to capital on the local scene” (I1) and“Venture capital is not very accessible here” (I4). One would have to be precocious about using thesestatements as facts, however, in the case of Aarhus, there is a strong case. Denmark as a country rankssixth out of the 34 OECD countries in terms of GDP per capita. Despite this, based on the amount of

venture capital invested in high-growth startups the county ranks 18th, below countries like Hungaryand Portugal. Compared to the neighbouring country Sweden, investors only put up one-third of the

capital for new ventures in the Danish ecosystem (OECD, 2015). Furthermore, a large degree of the



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existing venture capital flows through the more developed startup ecosystem in Copenhagen, giving Aarhus based entrepreneurs a significant challenge in raising capital.

4.2.1 Lack of Investor Knowledge

Some of the strongest opinions were exercised when it came to the topic of the venture capital scene in Aarhus. The venture capital environment is mainly dominated by public funds Capnova and Borean, as well as a number of angel investors, more or less organised in syndicates. Most of the privateinvestment scene is, as mentioned previously, situated in the capital city Copenhagen. Six out of sevenentrepreneurs interviewed have closed investment rounds, only one of which was from the publicfunds. Despite this, most of the entrepreneurs seemed to have an opinion on especially the publicfunds, their terms, methods, and deal structure (F7). The prevailing narrative from entrepreneurs wasthat the funds take far too much equity, contribute with insufficient knowledge, and lack reasonableterms for entrepreneurs. For instance, one strongly noted:

“I think most public funds have completely ridicules terms and they do not at all look at the biggerpicture or the future perspectives. They instead obsess about gaining control and return on investment,and I have heard several ‘horror-stories’ from fellow entrepreneurs taking money from public funds. I

would never take money from a Danish VC. Honestly, I think they are kind of laughable” (I8).

The stories about the local venture funds were central in most of the interviews with entrepreneurs. Another entrepreneur stated that: “A lot of the public funds still have a hard time knowing anythingabout new business models. They are stuck in an industrialised way of thinking” (I6) with reference tothe funds’ inability to understand the next generation of technology startups. The one entrepreneur

who took an investment from a public fund was satisfied with the relationship to his investors, yet stillnoted that “The short runways from our investors made us take wrong decisions in the early stages”(I1). The lack of knowledge concerned with venture financing contributes with further challenges tothe startup ecosystem of Aarhus. Given that investors in Aarhus lack investment knowledge, this willonly add to the depletion of resources for entrepreneurs in the city, resulting in more startups leavingthe city to find the needed resources elsewhere. Exactly that was the case with significant startups

JustEat (London) and Trustpilot (Copenhagen). The structural problem with the local public funds istheir objective in the market. Most are created with the classical economic incentive of making up formarket imperfections. This results in funds that cannot compete with private investors and are solelyallowed to invest in companies that are unable to raise money elsewhere in (I5). This dynamic skewsthe performance of the funds towards more negative results, as they are unable to invest in the best

ventures created in the ecosystem.

4.2.2 Low Quality of Startups

Investors argued that great investment cases are tough to stumble upon in Aarhus and thatentrepreneurs are the reason for the low amount of investments. One investor stated that “I think thereis enough capital in the city. All entrepreneurs will tell you that there is no capital, in reality, there arenot enough good investment cases” (I9). Several indicators in the ecosystem support the claim thatthere is a lack of high-potential startups (F13). A phrase often heard was that there seems to exist a

‘BMW-syndrome’ among Aarhus-based entrepreneurs, in which they stop growing their businesses



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once they are able to afford a BMW car. The notion of such a syndrome is, however, not shared by theentire ecosystem and one argued: “I think that our low degree of growth companies has to do with asmall home-market, rather than the famous BMW-syndrome” (I7). The lack of ambitious and high-quality startups where not only noticed by investors. It was noted numerously by fellow players withstatements like “The mindset is not really to think big and people are often really short-sighted in theirthinking” (I10) and “People are not thinking big enough here. There is a tendency to sell companiesearly on, rather than taking the risk of going global yourself” (I8). Often times the scenario above isportrayed as a chicken and egg problem in which a ‘deadlock’ exists between the two parties relying oneach other (investors and entrepreneurs). Breaking this deadlock between investors and entrepreneurs

will be a point for discussion in the coming sections of the study.

4.3 The Positive Attitude towards Entrepreneurs

With the shifts that technology is creating in the world, an increasing number of new entrepreneurs areemerging to seek out opportunities (Compass, 2015). These shifts in the world of business are creatinga transition in the culture surrounding entrepreneurs, which is growing increasingly positive. Accordingto Armway (2015), Denmark rated as the world's most entrepreneurship-friendly country on the planet,based on a sample of 49,775 respondents in 44 countries. One entrepreneur stated that: “The culturehas definitely changed. Being an entrepreneur is much more ’rock star’ like today. I never meet anyonethinking: what a fool” (I1). Both observations contribute to the notion that the culture surrounding

Aarhus-based entrepreneurs is positive.

4.3.1 Large Inflow of New Entrepreneurs

With an increasingly positive culture towards entrepreneurship comes a significant inflow of newentrepreneurs seeking opportunities. “It’s becoming popular to be an entrepreneur in Aarhus, so theterm is a bit vague currently” was the claim of one interviewee (I10). The great inflow of newentrepreneurs is largely visible throughout the city. New incubation spaces are opening at a rapid pace,and there are daily stories in the local media about recent innovations (F6). Aarhus is seeing atremendous amount of buzz around becoming an entrepreneur currently, a trend that may continue topick up momentum in coming years. One stated: “Entrepreneurship, in general, has a tailwindcurrently. A great indicator of the culture is actually how the press talks about them. Compared to 10years ago you see way more stories today” (I7). One could suspect that the impact this inflow has onthe ecosystem is one of dilution, as one entrepreneur noted: “Entrepreneurs in Aarhus are put on apedestal, and it’s become a shortcut to becoming an expert” (I3). Despite this, the concern of dilutionis not generally shared by the entrepreneurs in the community. Conversely, another argued that: “It’sbecoming a modern thing to be an entrepreneur. It’s a great thing to see so many new entrepreneurs.However, a lot of them will normally quit their companies once they meet challenges” (I4).

Shane (2009) stated that creating more entrepreneurs are not necessarily a positive thing for societies.In the case of Aarhus and Denmark, the statement holds true. Although an increasing amount of

ventures are being formed by entrepreneurs, their ability to create high-growth firms is lacking behindsimilar economies. 26 out of the 5000 fastest growing companies in Europe are based in Denmark

(Inc., 2016). The small home market was previously argued to be the primary cause of this



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phenomenon. However, the growth of comparable markets with homogenous geographical featuressuch as Sweden (555), Norway (204), and Finland (324) suggests that the small home market fails toexplain the entire phenomenon. For an explanation of why Danish startups see limited growth,decision makers must thus look beyond local market factors.

4.3.2 Fear of Failure

A recurring narrative of unambitious entrepreneurs was observed over the course of the study,especially from entrepreneurs themselves. The impact that the lack of ambition has had in theecosystem, top-tier entrepreneurs’ lack of engagement and investors’ reluctance to invest, has alreadybeen addressed. The root cause for the lack of ambition could be the inherent fear of failure that seemsto live inside the ecosystem (F13). Famous traits of the Danish culture are things like an ‘equalitymindset’ and the notorious ‘Law of Jante’. Both traits hinder the process of starting high potentialstartups, as observed by one entrepreneur: “Here failure is seen as something that’s inherently negative.

As long as we have that mentality, we should not expect to see too many good startups in Denmark”(I11). Similarly, another investor (I9) noted that many entrepreneurs have what he dubbed an‘employee mindset’, and failed to take the necessary risks to succeed.

A downside of disconnected ecosystems is the disconnect occurring between new entrepreneurs androle models. As those entrepreneurs who are successful, ambitious, and excellent role models are notseeking to inspire the community, the culture is kept unambitious. This phenomenon was particularlynoted by one young entrepreneur: “There are a lot of great startups in the city. However, I wish they

were more accessible as role models for the rest of us” (I3). The dynamic of role models in the Aarhusecosystem explains how negative feedback-loops become reinforcing. There exist cultural resources in

Aarhus, such as role models, that would spur a greater rate of successful startups if used efficiently. Insecond-tier ecosystems like Aarhus, the utilisation of cultural assets like role models is crucial, asresources are scarce. Changing an entire culture, is often a lengthy and challenging process, requiringsmall steps and a long-term view by those encouraging the transition. However, as Isenberg (2010)encouraged: “Tackle cultural change head-on” (p. 9).

4.4 The Zero-sum Games

In Aarhus, the limited pool of resources has resulted in supportive participants competing, rather thancollaborating to create more resources (F2). Brad Feld (2012) wrote, that to successfully buildentrepreneurial communities the participants must believe in playing positive-sum games. In second-tier ecosystems where resources are scarce, these games are significantly harder to play. The zero-sumgames are limiting the growth of the ecosystem in several ways, many of which will be outlined below.

These observations come from insides through fieldwork in the community, rather than direct quotesfrom the interviews. From the outside, most of the initiatives in the city are both sympathetic andcollaborative, yet behind the scenes, the behaviour is surprisingly Machiavellian (F4).

4.4.1 An Ecosystem Led by its Supporters

It is evident in Aarhus that entrepreneurs have little influence on the activities happening in the

ecosystem. Most initiatives, events, and community building efforts are led by support functions such



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as incubators, consultants, and media, all players with a direct interest in the ecosystem. The dominanceby supporters directly impacts the ecosystem in a specific way. Most of the initiatives are created tomaximise the utility of a given support player, rather than benefit the entire community (F3). Theimpact of this dynamic can be observed in the type of events created in the city. Often, these arefocused on getting more people to start companies, hence more resources for consultants andincubators. As previously discussed, this dynamic is limiting the involvement from top-tierentrepreneurs. There is simply no value for them to gain in through engagement. Understanding thisdynamic in the ecosystem is critical, as throughout the section a series of ‘toxic’ behaviours will beexplained. One can only understand how these are affecting the ecosystem, through realising that theentities displaying them are the community leaders rather than their rightful position as supporters tothe local entrepreneurs.

4.4.2 Zero-sum Games Between Community Leaders

The zero-sum behaviour became evident in multiple ways over the time this fieldwork took place.Examples were seen in cases where new initiatives threatened existing ones managed by the communityleaders (F2). Rather than welcoming an expansion of community initiatives to strengthen thedevelopment of the ecosystem, the players would seek to maintain their position as a local leader. Thisbehaviour has translated into a community where some new initiatives are being sabotaged behind thescenes, by the leaders pledging to move the ecosystem forward (F4). The ecosystem thus holds a fewtoxic entities that, perhaps unknowingly, are trying to control the ecosystem. The dynamic was notedseveral times during the interviews. One story was how incubation spaces would try to poach startupsand convince them to relocate between spaces (F6). Another noted: “Particular people are yelling tooloudly in the community. There is often a personal agenda behind everything they do and a lot of the

most dominant people in the ecosystem rarely bring any real value” (I10).

Despite the previously described Machiavellian behaviour, in recent years, a series of significant supportinitiatives have begun to emerge. Altruistic initiatives like Startup City (incubation), Culture Workspace(incubation) and #AARSOME (support organisation), were recent efforts all portrayed as providing

value to the community by entrepreneurs. Perhaps less surprisingly, these efforts have all been led byyounger newcomers to the community. One of these noted that: “Support organisations give the city amore entrepreneurial mindset. We do, however, lack more people taking initiatives that stretch beyondjust helping people to get started with their new businesses” (I4). Increasing the amount of initiatives

similar to these, where relationships and connections are optimised, will strengthen the ecosystem of Aarhus and move the community towards collaboration.

4.4.3 Lack of Later Stage Support

The city has a tendency to favour early stage initiatives that rarely helps startups build and scale theirbusinesses. As noted earlier, this results in successful startups ceasing to engage with the community,causing little or no interaction between experienced and upcoming entrepreneurs (F10). Anotherdimension to the type of initiatives created is that most of the support functions have no experience

with later-stage activities. A recurring theme, for instance, is how the city is lacking an acceleratorprogramme for young startups. However, those proposing the idea have little entrepreneurial

experience and would thus create little value in such a setting. There are a lot of good intentions from



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several community leaders. However, the resources that are needed to lead the ecosystem towards scaleand growth are not activated currently. As long as this resource-base goes unutilised, strengthening thestartup initiatives in the city will continue to be a challenge. Finding ways to employ more experiencedresources is thus critical to creating a stronger connection between the entrepreneurs of the ecosystem.

It could be argued that the ecosystem has excellent infrastructure for starting companies. There areseveral offerings to get support from business professionals such as lawyers, accountants andconsultants. Many incubation spaces will have these either as a permanent part of their network oroffer workshops and sparring opportunities. Access to this kind of resources provides tremendous

value for early stage startups. However, their value diminishes over time, as companies grow. As oneentrepreneur argued: “There are plenty of people who are willing to help. However, it is important tocut to the bone. I don’t need a consultant to tell me what a business model canvas is; I would ratherhave access to state-of-the-art research from the University” (I3). Additionally, one entrepreneur stated

that “I think today a lot of people know how to start their company, but they need a market, finance,and human capital” (I6). Another issue raised by more seasoned entrepreneurs was the lack ofinfrastructure, specifically that the city needs an international airport. In essence, there exists a great

variety of initiatives for starting new businesses in Aarhus. However, when it comes to helpingentrepreneurs scale and grow their startups, the selection is more limited.

4.5 The Strong Access to Skilled Labour

An essential part of the firm formation process is the access to cheap skilled labour. In an increasinglytechnological world, the sort of work required is becoming more specialised. The access to these kinds

of skills can drive the growth of a startup, yet solely having access to the labour is not sufficient. Ifstartups cannot attract skilled employees and compete with larger companies, the access to labourmatters less. At the heart of Aarhus lay the local university with approximately 50,000 students, makingup a significant part of the city’s total population. The university provides the business ecosystem ingeneral with a large inflow of both talented students and cutting-edge research, thus making it aninvaluable asset for the city. The question is then, how the entrepreneurial ecosystem benefits from thistalent mass and whether this resource is employed to its fullest by the ecosystem.

4.5.1 Presence of Early Employees

Getting the first employees to join a startup is often challenging, given the insecurity associated withyoung firms. The great stream of talents that annually pour into the ecosystem makes convincing theearliest employees to join startups less challenging in Aarhus. Often the earliest hires will be newlygraduated students willing to run the risk of joining early-stage companies, and the young employeesplay a vital role for entrepreneurs. “Our biggest strength in Aarhus is the young people of the city.

There is plenty of talent in town, and there is gold on every street corner” (I7) was noted by one. Another argued that “I believe that if you are attractive as a company, you can get good people. I’venever had trouble hiring good people in Aarhus” (I2). Continuous investments in education andattracting talented students is thus an integral part of supporting the startup ecosystem. However, asargued by Chatterji, Glaeser and Kerr (2013), the best entrepreneurial workers are typically around 40

years old. What this means is that lots of students will not suffice when accelerating the growth of an



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early-stage firm. Aarhus based startups thus need to be attractive for more experienced entrepreneurial workers as well.

In getting these more experienced workers to join the city’s startups, the challenges start to emerge. Aarhus is not known for its startup culture, and a large part of the highly educated workforce isaccessed in competition with multinational powerhouses such as Arla, Bestseller, Lego, and Vestas.

That gives the entrepreneurs particular challenges when it comes to hiring more experiencedemployees. Several entrepreneurs addressed the problem: “University graduates are easy to find,however, more senior people have a hard time taking the plunge into a startup. It’s going in the rightdirection, but it’s still hard” (I1) was the statement of one. Another argued: “It’s easy enough to findnewly graduated employees. Finding more senior hires are much more difficult” (I4). As observedearlier, the culture around startups in Aarhus is somewhat risk-averse, and the fear of failing outweighsthe upside of joining a startup (F13). One entrepreneur furthermore noted that the competition from

the more cultivated startup ecosystem in Copenhagen made hiring in Aarhus a difficult task: “It hasbeen harder the last couple of years since everyone believes Copenhagen is the place for startups” (I6). The challenges in Aarhus make an interesting observation. Individually, entrepreneurial firms havetrouble competing with established organisations. However, thriving entrepreneurial communitiesbecome assets that startups can leverage in their search for more experienced employees.

4.5.2 Utilising Specialised Knowledge

A point continuously mentioned was the interplay between startups and research institutions in the city. The issue that was brought up is the gap that exists between entrepreneurs and the cutting-edgeresearch at Aarhus University that could be used to build stronger businesses. One argued that “It

would be perfect for the local startups if we could use the harder and less accessible knowledge in thecommunity” (I6) referring to the research being conducted at the university. Employing the resourcesof the university is crucial in a city like Aarhus, where a large part of the city’s activities is built aroundits research institution. The university may have the potential to help develop startups through utilisingthe research for commercial purposes to grow their businesses. The act of pairing the presence of theuniversity’s activities with the local startup scene has a series of intriguing prospects. Ecosystemsshould be built around local conditions and the human capital in Aarhus is one of the most valuableresources that the city contains. Finding ways to utilise this resource fully will be essential. Hiring high-performing employees is an issue for most companies and something we know that most entrepreneurs

will mention as a limitation. However, in a city which is so heavily dominated by a large university, Aarhus-based startups have a better ground for attracting skilled labour than almost anywhere else inthe world. If the city’s entrepreneurial community can find ways of recombining the human capital, thiscould spur significant advances in growth for its startups.

4.6 The Small Home Market

With a population of approximately six million people, the home-market upon which Aarhus basedstartups operate is small in size. The small market forces companies with a desire to grow rapidly toeither make activities global from the offset or relocate their business abroad for scaling. This challenge

is one that every country with a small home market needs to address. The amount of Danish growth



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companies underperforms the Scandinavian neighbouring countries with similar home markets when itcomes to scaling companies internationally. The question is whether we can explain this dynamicthrough examining the entrepreneurial ecosystem of Aarhus. Moreover, we must investigate how localmarkets are enabling growth and whether larger corporations play an active role in the entrepreneurialecosystem of Aarhus.

4.6.1 Lack of Global Opportunities

Markets are always complicated to explain; as different markets may have varying dynamics. There aregeneral trends that can be observed in the markets surrounding Aarhus. One significant challenge

Aarhus based entrepreneurs are facing is global scaling. As one noted: “It’s extremely limited what youcan do in the local market, and I would love to know more about how to enter international markets.Investors are saying: 'First you take the U.K and then the U.S,' but how do you do that?” (I8). Thequote encapsulates some of the pains local entrepreneurs are challenged with, especially those who are

successful. The phrase ‘Denmark is just a test market before going global’ is often heard in theecosystem, yet the local knowledge on global scaling is limited from both entrepreneurs, advisors,investors, and supporters (F13). There are plenty of entrepreneurs in the community who have createdinternational businesses. However, common for most of them is a reliance on their internal network toscale their startups. For instance, one successful entrepreneur argued: “The largest challenge is to findthe first few great people abroad. I didn’t need to be connected when starting in other countries; I hadan internal network helping me out” (I2). Despite the most successful entrepreneurs being able to scaletheir businesses through experience and networks, most founders in the city do not have this option.

The lack of internal networks combined with a disconnected ecosystem makes the creation of theseinternational connections more challenging for most entrepreneurs.

4.6.2 Early Adaptors and Incumbents

Another crucial aspect of market attractiveness is the access to early adopting customers and largemultinational companies. Attracting early consumers in the Danish market was mentioned as achallenge by some entrepreneurs. For instance, one noted: “The Danish market sounds great on papergiven that everyone has a tonne of devices. However, Danes are somewhat late followers making ithard to scale and test new products” (I4). These market realities may be hindering the growth ofstartups, only strengthening the argument of a need for faster internationalisation. However, assessingthe adoption rate of new products, of course, comes down to more than just interviews, as this is

influenced by a number of factors, such as market-fit, product quality, etc.

The incumbent companies in the city have long been disconnected from the startup ecosystem.However, in recent years, it seems that they are starting to embrace the new wave of local startups.

Accelerator programmes, incubation environments, and collaboration with startups are becomingincreasingly typical for large organisations and one entrepreneur explained: “Large companies wereopen to trying out our products and giving us an early proof of concept” (I1). Despite early signs ofengagement from incumbent firms, their overall connection to the ecosystem is still limited. One noted:“Large companies in Aarhus are rather incumbent and not very entrepreneurial in their mindset” (I1).Many of the companies are willing to engage and collaborate with startups, mainly to a point where it

does not require larger investments. Their efforts are usually depended on specific employees driving



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their engagement (F11). However, initiatives like Danish Food Cluster and Stibo Accelerator showearly signs of interest in entrepreneurs from incumbent firms in Aarhus. Getting large corporations toengage more with the startups comp is a vital resource for the ecosystem and one of the areas holdingthe most significant potential for the city and its future entrepreneurs.

4.7 The Hands-off Political Approach

In the Aarhus case, the local government has chosen a hands-off approach to entrepreneurship. Muchof the public activity in the area is driven by the Danish state. As already noted, state driven investmentfunds, public grants, and an extended range of sparring opportunities are available for entrepreneurs inthe ecosystem. Most of these initiatives are run with little involvement from the private sector. Themunicipalities’ director of business development noted that: “Luckily, we are getting to a point wherethe startup ecosystem is starting to drive itself. Our reason for existing is purely based on market

imperfections, and we don’t want to be a large landlord for the entrepreneurs like we’ve seen in othercities. Rather we are here to secure the resources that entrepreneurs rely upon, for instance the greattalent mass and the attraction of national initiatives” (I7). In sharp constant to the strategies of the stategovernment, the local government is thus trying to limit its role in the ecosystem and leavedevelopment to private initiatives.

4.7.1 A Bottom-up Ecosystem

The regulatory approach results in the ecosystem developing from the bottom-up, with initiatives beingdriven by private actors rather than public. The bottom-up approach is relevant for a series of reasons.It means sustainability for the ecosystem and that the structure, initiatives, and main drivers will not be

altered as a new mayor takes office (Feld, 2012). Furthermore, an ecosystem that is driven ‘organically’ will create exactly the initiatives that are needed by the players, rather than politicians. The approach was noted by most of the entrepreneurs who embraced the small degree of public involvement in their ventures. One stated: “The local government should not be a part of the ecosystem as an active player.Instead, they could make it easier for entrepreneurs to use them as customers” (I3). And several othersechoed this statement with quotes like: “I never thought of the local government as an active player. I

would appreciate not to get involved with the public initiatives” (I8) and “I am not concerned with thelocal government and honestly I don’t even think they know we exist” (I11). However, not taking anactive role in the ecosystem, does not entail no engagement at all. Local politicians do support privateinitiatives created in the community, as long as no execution is required. They choose to work withlocal community leaders and help those that are close to the grassroots, where the initiatives arecreated. This view of supporting efforts, rather than leading them, further contributes to a bottom-upmovement in the ecosystem. The challenge for local policy makers lies in supporting the right initiativesto achieve a desirable outcome for the ecosystem.

4.7.2 Public Resources

Part of the national initiatives to support entrepreneurship is a series of initiatives to support thecreation of new ventures. The public investment funds have already been addressed. Other initiativesinclude sparring opportunities from federal consultants and help setting up new companies. The

regulatory framework around starting new ventures is among the most liberal in the world, something



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we know does not impact entrepreneurial activity (Napier et al., 2013). The challenge for these publicresources is that the high-potential entrepreneurs are unwilling to use them. One entrepreneur notedthat: “There is a lot of public sparring, but none of them has ever tried to start anything themselves.

The public people know nothing about ’the new way’ (digital businesses) of being an entrepreneur”(I1). Similarly, another argued: “My company has never used public resources; I think they are generic”(I6). The study of Aarhus thus adds to the body of research suggesting that public resources like these,are a poor investment for policy makers. Their ability to provide the sparring needed for entrepreneursto grow their companies are limited in reality.

The dynamic above highlights why the ‘gap-filling’ approach is not viable. Rather the approach ofsupporting ambitious private initiatives is the most viable path for policy makers, in their desire tocontribute to the development of ecosystems. The simple explanation is that high-potentialentrepreneurs are not interested in direct governmental involvement, as was also argued by Feldman et

al. (2005). One entrepreneur summed up this point by stating: “I simply believe that the best people arein private companies” (I8). It is with this dynamic in mind that governments, both national and local,should design their future efforts to help develop entrepreneurial ecosystems. That being said, thepublic efforts towards entrepreneurship are strong in Denmark. A large pool of resources is beinginvested into the area. How these resources could be used in a more effective manner, will be discussedthroughout the upcoming sections of the thesis.



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5. Analysis

The findings of the research have been presented, and the next step in the process is analysing these. As previously shown, there are certain ‘best practices’ when it comes to enabling entrepreneurialecosystems. With regards to the findings already made in the field of entrepreneurial ecosystems, theresults from the case study of Aarhus can now be compared to the research in the field. Previouslyseven propositions were condensed from the current state of research. These are used in the upcominganalysis. This analysis can in ultimately be used for recommendations on how to develop the localecosystem further, a topic for discussion in the final section of this thesis.

5.1 Proposition 1 (Entrepreneurs). Creating more startups has a diminishing effect and should not bethe goal. Instead connecting the current entrepreneurs creates growth opportunities through learning.

The entrepreneurial ecosystem is fragmented, in particular between its entrepreneurs. The mostexperienced entrepreneurs are reluctant to engage with the community due to a lack of value for theirtime invested. However, the early signs of unity are starting to show, and several entrepreneurs notedhow their founder-networks are helping them develop their capabilities. A much greater emphasis onnetworks like these is crucial to connect the city’s entrepreneurs. The problem most of theentrepreneurs noted was the amount of ‘noise’ in the community from so-called ‘wantrepreneurs’,causing the best to limit their involvement. Filtering out the noise in the city is thus a vital first step touniting the entrepreneurs in Aarhus. Connecting the entrepreneurs of Aarhus is key to cultivating theecosystem, as connectivity can spur valuable growth opportunities for entrepreneurs.

The myth that creating more startups will equal a stronger ecosystem seems to exist in Aarhus. Many ofthe initiatives that initiated are designed to focus solely on the very early stages of entrepreneurship.

These type of events are crucial to inspire the entrepreneurs of tomorrow, but should not be mistakenas ecosystemic development. They do little to develop the community and rarely provides value toexisting entrepreneurs. Instead, a greater focus on creating ‘entrepreneurial content’ for later-stageentrepreneurs would be valuable towards connecting more experienced entrepreneurs. In turn, this

would make the community more attractive for those that can inspire, mentor and share knowledge.

5.2 Proposition 2 (Finance). Venture capital has a significant impact in an ecosystem. A pure focuson attracting capital is inefficient, rather ecosystems should build more attractive firms for capitalists.

The capital markets in Aarhus are underperforming significantly against comparable economies. Thequestion in this sense is then how to view this problem. The venture capital scene in the country is stillquite inexperienced, and it will continue to pick up momentum as it grows in the coming years. Withthis in mind, one should not fall into the trap of believing that more venture capital into the ecosystem

would solve all its problems. Statements like: “We need entrepreneurs who think completely different. There are a lot of startups, but far too few hit high growth numbers and become large” (I9) pointstowards an underlying problem in the ecosystem. As long as this is evident among current investors inthe city, there is a case for developing other areas of the ecosystem as well. That is not to say that the

attraction of venture capital is not a major factor for Aarhus. Rather, the case is whether it is realistic to



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attract millions of dollars to a city that is currently not producing a series of high-potential startups. Itseems more convenient to activate the local resources already present in the ecosystem, beforeattracting new ones. Instead, the primary focus regarding venture capital should be on 1) enablingprivate investors to make more educated decisions about which entrepreneurs to fund (i.e. networks,training) and 2) activate the knowledge of investors into the ecosystem through engaging with itsentrepreneurs (knowledge sharing, mentoring). The ladder is a challenge mainly due to the obstaclesaddressed in the next section. However, over time it is collaborative behaviour like this that could helpinvestors support their ecosystem, and create a more prosperous environment for investments.

5.3 Proposition 3 (Culture). External entrepreneurship-friendly culture is valuable, yet only to acertain extent. An internal culture of collaboration is what generates the most value for ecosystems.

The external culture is favourable, and the entrepreneurial spirit in Aarhus is at its highest points inrecent history. The entrepreneurs in the city have a high social status, and the trait is seen as anadmirable career path. This external culture of acceptance is valuable in several ways for the city’sentrepreneurs as it facilitates hiring, PR, fundraising, etc. However, the external culture only makes up asmall fraction of an ecosystem and the challenge for Aarhus is the internal culture in the ecosystem.

The internal culture is dominated by zero-sum games, fragmentation, and a reduced ability tocollaborate effectively. Although, early signs of cooperation are starting to show in the ecosystem, thereis still a long way to connectedness. Promoting a culture of collaboration and tightness is thus crucialfor the city. Cultural changes demand a significant amount of time and switches should not be expectedto happen overnight. However, with the right players stepping forward to promote this cultural shift,through leadership and engagement, change is obtainable. Another cultural issue for the city is the

eminent ‘fear of failure’ among its entrepreneurs. The fear is often causing entrepreneurs to stick withunsuccessful startups due to the embarrassment associated with failing. It means limited risk-taking indecision making and often entrepreneurs become saturated as the firm reaches a certain size. Tacklingthis kind of cultural change is more complicated. It is deeply ingrained in the Danish mindset, which inall fairness has produced world-leading companies. Addressing this shift will require not only strongrole models promoting ‘big thinking’, but also the necessary resources to help entrepreneurs grow theirbusinesses beyond a certain size.

5.4 Proposition 4 (Supports). Support functions play a vital role in ‘gluing’ together the community,mainly through relevant events, mentoring, and support.

Support functions in Aarhus play an interesting role as they are currently leading the ecosystem. Thisdynamic means that rather than gluing the ecosystem together, parallel agendas are often set toaccomplish self-interests. The problem is not that these players lead the community (it is vital thatinitiatives are created), but rather that parts of the community are being led with bad intentions. Wehave seen Feld (2012) argue that a community should always be led by its entrepreneurs. However, itcould be discussed whether it is the intentions of community leaders, that should determine whetherthose players should be leading. A key measure of how well a city’s support functions manage to gluetogether an ecosystem is their ability to engage the entrepreneurs, and currently, the entrepreneurial

stack of Aarhus is not actively engaged. The ‘entrepreneurial content’ being created in Aarhus is thus



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not sufficient for its supporters to fill out the role as connectors. Instead, the city’s supporters shouldask themselves how they can engage the entrepreneurs in the ecosystem. Solely focusing efforts on thecreation of new entrepreneurs or very early stages provides little value to the ecosystem. An intensifiedfocus on later stage initiatives for experienced entrepreneurs would instead spur greater value for thecommunity. High-potential entrepreneurs need mentoring and learning opportunities from experiencedpeers, rather than inspirational talks, consulting, and incubation.

5.5 Proposition 5 (Human Capital). The presence of cheap high-skilled labour is crucial toecosystems. The flow of labour can come from both internal and external sources.

The presence of Aarhus University results in a significant inflow of high-skilled labour to theecosystem. Talent attraction is a challenge for most companies. The issue for Aarhus based startups liesin convincing employees to take the risk of joining a startup, especially those with more experience.However, the possibility of attracting high-skilled labour in Aarhus is highly present in the community,and human capital is one of the strongest resources in the city. As entrepreneurship continues to gainmomentum regarding popularity, the attractiveness of working with growth firms will continue to surgein coming years. Thus, what the local startups need are a series of tools for attracting more seasonedemployees. A recent example of such a tool was the government easing regulations on equity-salarypayments. Similarly, the emergence of a nationwide hiring platform exclusively for growth startups hasrecently surfaced, making hiring more accessible for startups. The development of such initiatives is

vital to a startup’s ability to attract top talent, as they are rarely able to rely solely on their companystatus. It could be argued that the primary objectives of an ecosystem, with regards to human capital, isto make its startups attractive for potential talents and leverage the community as an asset.

5.6 Proposition 6 (Markets). Ecosystems need incumbent firms to thrive and cultivate new ventures.Dealmakers are essential to connect startups with opportunities across the ecosystem.

The presence of multinational companies in Aarhus is high, with several world leading companiesheadquartered in the city. Despite this, their engagement with the city’s startups remains questionable.

While many founders argued that the big businesses are easy to work with, their overall investment oftime and resources into the ecosystem is at a low level. The root causes for this phenomenon can beseen from many viewpoints, and investigating it in-depth could have a study of its own. What is oftenevident in the community is that large companies are willing to engage and act as clients, but not invest.

An underlying factor explaining this may be the business mix of incumbent companies. Most of thecompanies operate within mature industries such as retail and agriculture; fewer is concerned with highinnovation industries, such as technology. A stronger network of dealmakers between the startupcommunity and large organisations could thus help strengthen the bonds between the two. Moreover,cultivating dealmakers to enhance connections towards global markets is equally important for theentrepreneurial ecosystem, as the home market is limited in size. With several recent initiatives in mind,the early signs of larger companies playing a more active role in the ecosystem are emerging. Finding

ways to connect incumbent firms with startups is a vital task for the ecosystem’s future growth, as thisis an area that carries significant unutilized resources.



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5.7 Proposition 7 (Policy). The bottom-up approach is essential for successful ecosystems. Policymakers should assume a role of supporters and connectors to private initiatives.

The bottom-up approach employed by the local government of the city has meant that the local startup

ecosystem is developing organically. The current body of research suggests that applying this view isthe most sustainable way of development for policy makers. The fact that most entrepreneurialinterviewees hardly notice the presence of local government should be seen as an upside, as the self-image as a support function is essential for any governmental institution. A continuous focus onlocating and supporting the right private players in the ecosystem should be the primary objective forthe local government going forward. Cultivating private initiatives is an effective way of supporting theecosystem and as the director of business development noted: “I tell myself that we are spending ourmoney wisely, and I do not believe that will change” (I7). While the public interest in entrepreneurship

will inevitably continue to rise, the local government should to not be tempted to take charge of the

ecosystem. Rather, continuing to promote entrepreneurship through highlighting the current successesin the ecosystem towards upcoming entrepreneurs, is advisable. These promotional efforts will thushelp enable the entrepreneurial culture in Aarhus. As noted earlier, the governmental role in a startupecosystem is complicated and most successful efforts develop through trial and error learning. As longas gap-filling and top-down development are avoided, the ecosystem of Aarhus will continue to groworganically alongside its local government.



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6. Discussion and Implications

In the final part of the study, a strategy for enabling second-tier entrepreneurial ecosystem like Aarhus will be discussed. It encapsulates the lessons learned during the past four months and pairs these withthe current state of research. The result of this is a dynamic view on ecosystemic development, tocreate value for entrepreneurs, investors, policy makers, and other stakeholders. The upcoming section

will not be a guaranteed recipe for success; rather it is a theory for developing disconnected ecosystemslike Aarhus. Employing local knowledge of specific components in an ecosystem to implementinitiatives is critical in any development. Combining a dynamic view with local knowledge is thusadvisable. As we know, ecosystems form under local conditions through a trial-and-error process, andthis approach could form the basis for anyone wanting to develop a second-tier ecosystem.

6.1 Bootstrapping an Ecosystem

An entrepreneurial ecosystem is a set of resources that should support its entrepreneurs in creatingmore valuable companies. These resources come in many forms, whether they are monetary,regulatory, or cultural. Common for all is that they are assets used by the entrepreneurs in a local area.In second-tier ecosystems like Aarhus these resources are scarce as the ecosystem is not very welldeveloped. The anatomy of the ecosystem is thus what determines how these resources are used, andhow they flow through in the ecosystem. Picture the ecosystem as a giant net surrounding the resourcesin the community. These resources can take the form of either tangible assets (money, universities,customers, employees) or intangible assets (culture, relationships, knowledge). The intangible assets ofan entrepreneurial ecosystem determine how efficient the tangible assets flow through the system, in

deciding the underlying rules for exchanging such resources. The surrounding net of an ecosystem thendetermines how much resources are wasted, due to a lack of connectivity. In the case of Aarhus, thismeans that while some areas of the ecosystem enjoy a great exchange of resources, other parts of theecosystem will not experience the same benefits, due to the fragmented nature of the ecosystem.

What is meant with the ‘bootstrapping’ approach is that second-tier ecosystems should seek for ways toemploy their current resources more efficiently before attracting new ones. Often, policy makers andpractitioners alike focus intently on the resources not available in the ecosystem, rather than optimisingthose already present. Optimisation can be facilitated through a process of increasing the connectivity

in the ecosystem. This interconnectivity is crucial, as it determines the effectiveness of all otherresources in the ecosystem. This, in turn, determines the ease at which the ecosystem can scale toinclude more assets. It has always been tempting to solely evaluate regions based on their quantitativeeconomic factors, yet we must acknowledge that ecosystems are more complex than that. Although thismindset is more ambiguous to grasp, it provides superior results, as shown in not only research but alsothe results of this thesis. Through adopting this mindset, we can begin to discuss how ecosystems canbe built from the bottom-up.



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6.2 The Big Idea: An Inside-out Approach

Anyone criticising one approach should be prepared to propose an alternative theory. Throughout thisthesis, the argument against static-measurement approaches to ecosystems has been echoed. It has been

stated that we must view ecosystem as dynamic entities, evolving over time. With this criticism in mind,the following section contains an alternative view on how ecosystems are built. In other words; adynamic view. The approach has its roots in the existing literature on entrepreneurial ecosystems,paired with the findings made in Aarhus. It has yet to be tested in the real world, as we still know littleabout how ecosystems evolve. Rather, the model is an act of connecting the current dots and in fact areformulation of Daniel Isenberg’s (2011) existing theory. It encompasses the same elements as haspreviously been used to analyse the entrepreneurial ecosystem of Aarhus.

Figure 2 showcases the reformulated model that is

described above. The model is divided into fourdifferent phases for successfully growingentrepreneurial ecosystems. As already noted, allecosystems develop under local circumstances, thusmaking a general theory more complicated to design.

A larger degree of evolutionary data from severalecosystems would be needed to test whether themodel has broader implications. However, the modelencompasses data and trends from not only Aarhusbut several other ecosystems facing fragmentation

issues such as Kansas City (Mayer, 2012) andHamburg, Germany (F12). This could lead to thebelief that many second-tier ecosystems face the sametype of problems, yet to make that a conclusive theory

would be an overstatement.

The model follows four phases that will be outlinedbelow and has been dubbed ‘The Inside-out

Approach’. It includes the seven elements from theoriginal model yet the weight given to their ideal evolution has been changed. The model takes its basisin the bootstrapping philosophy discussed in the ladder section, meaning the goal is to connect anecosystems' current resources. The reasoning behind this approach lies in how ecosystems scale.Pouring additional resources into an ecosystem that cannot effectively employ those already present isan inefficient way of building economic systems. Securing the fundamentals of an entrepreneurialecosystem before attempting to scale is crucial, and it is this dynamic which the model builds on.

6.2.1 Phase 1: Connecting the Entrepreneurs

The power of connecting the entrepreneurs in an ecosystem with each other have been documented byseveral scholars and practitioners alike. It is a vital step in the development of any ecosystem. The

reason fostering this connection is crucial, lies in the amount of peer-to-peer learning and mentoring

Figure 2: The Inside-Out Entrepreneurial Ecosystem



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benefits that these relationships facilitate. Building collaboration between the entrepreneurs thus holdslots of value for an ecosystem. From a larger perspective, every time an experienced entrepreneurdecides not to engage with fellow entrepreneurs (either from lack of interest or lack of possibilities),

valuable intellectual resources and connections are lost. Connecting the entrepreneurs is the only freelunch in startup-land, as both entrepreneurs and their knowledge will always be present in anecosystem. As concluded by the case study of St. Louis by Motoyama & Watkins (2014), this valuableconnection is best facilitated through entrepreneurial events that encourage learning and engagement.

These type of events will, over time, promote a culture of collaboration between a city’s entrepreneurs.

6.2.2 Phase 2: The Evolving Nature of Culture

Having models that encapsulate culture is a challenge, given its complexity to measure. In the inside-out approach this is attempted through mapping culture as a process, rather than an area of theecosystem. What this provides is the notion that cultural change happens over time, as other areas of

the ecosystem is evolving. All ecosystems will develop their own distinctive culture and thus it cannotbe measured in a pre-set box. Rather, culture must be acknowledged as an evolutionary process thatover time glues together the development in all other domains of the ecosystem. Defining culture as aseparate phase is thus not as ‘correct’ as the other phases in the model, yet it showcases the evolution.

6.2.3 Phase 3: The Internal Firm-Based cluster

The third phase of the model holds a cluster of finance, markets, and human capital. The reason forprioritising these particular elements is that they are internalised by the startups consuming them. Theseresources are all critical components to building entrepreneurial ventures and should thus hold a highpriority when developing ecosystems. The third phase is based on the idea that startups will achieve

more efficient growth if they are connected to cultivated markets, high-skill labour, and entrepreneurialfinance. The impact of the three is already well documented in the reviewed academic literature(Chatterji et al. 2013; Lerner, 2009). Furthermore, these three elements were mentioned by allentrepreneurs interviewed in Aarhus as being the most critical for scaling their companies. Connectingstartups with these crucial elements is key to creating more growth firms in an ecosystem.

6.2.4 Phase 4: The External Cluster

As building blocks for growth startups have been established, the next step is creating a businessfriendly environment. Often the reverse is observed in which the favourable environment is initially set

up with the hope of fostering stronger startups. However, this rarely seems to be useful (Napier et al.,2013). The idea is not that a supportive environment is negative for startups, far from it. Rather, theidea is that environments like these become relevant, only once the core building blocks are secured.Cultivating those blocks should thus be the top priority of policy makers, before investing in afavourable business environment. Entrepreneurship will happen, whether it is easy to register anenterprise or locate incubation space matters less. Lowering these barriers becomes critical at aparticular point in any evolution, yet only once the fundamentals have been built.

6.2.5 The Cyclical Nature

As with all systems, the entrepreneurial ecosystem never ceases to evolve. As the ecosystem grow, it

will attract new generations of entrepreneurs that will consume financing opportunities, market



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connection, incubation, and governmental support. The challenge for ecosystemic developers is todetermine in which part of the cycle their ecosystem is located, and act with regards to local conditions.It would be optimistic to believe that entrepreneurial ecosystems can be thoroughly explained in alinear fashion like this. An explanation like this is not the intention. Rather, it should be used aguideline to understanding the dynamic development of an ecosystem, beyond its individual attributes.

6.3 Implications: Aarhus and Beyond

The findings, analysis, and discussion, have several implications for various stakeholders in the field ofentrepreneurial ecosystems. The research contributes to the field with unique insights from a lessdeveloped second-tier ecosystem. They contribute to a narrow, but growing field of research that willcontinue to expand in the years to come. As the interest in entrepreneurship increases, the field ofentrepreneurial ecosystems will naturally evolve with it. With its qualitative approach, the study

provides deep insights from a second-tier ecosystem facing similar challenges to those observedelsewhere. The study has the following implications:

6.3.1 For Policy Makers

Policy makers should avoid the temptation of trying to ‘gap-close’ and correct market imperfections.Rather, work with understanding both the entrepreneurs and ecosystem to make informed decisionsabout sustainable development. As the Aarhus case highlights, this approach supports the organicevolution of an entrepreneurial ecosystem. Recognising that ecosystems are not built by policy makersis critical in any city. Seek to enable those initiatives that support the current state of the ecosystem, andfavour those with high potential. Moreover, policy makers should become entrepreneurial advocates

and promote collaboration among the players in the ecosystem.

6.3.2 For Scholars

The case study of Aarhus underscores the importance of understanding the anatomy of anentrepreneurial ecosystem. As the findings highlight, researchers must seek to understand therelationships between the attributes of an ecosystem. In Aarhus, many of the attributes that describethriving ecosystems are present: strong external culture, large university, young innovators, and bigcorporations. Had these been assessed solely through quantitative measures, the conclusions of thispaper would have been significantly different. However, the qualitative approach revealed a range ofelements (connectedness, fragmentation, zero-sum games) contributing to these resources not beingused efficiently. Only through gaining these rich insights can researchers begin to understand thedynamics of an entrepreneurial ecosystem.



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7. Conclusion

This thesis has been a study examining the entrepreneurial ecosystem in Aarhus. The paper initiallystated that the current methods for studying ecosystems rely too heavily on quantitative measures. Toaccount for this, the following two research questions have guided the study:

o How is the entrepreneurial ecosystem connected in Aarhus?o What governs the dynamics of the entrepreneurial ecosystem in Aarhus?

In answering both questions, the study has relied on 11 qualitative interviews with local players andfour months of participant observation in the field. Based on the findings made in Aarhus the thesiscan conclude that:

The entrepreneurial ecosystem of Aarhus is fragmented. This fragmentation is creating barriers tocollaboration among its participants, causing valuable resources to be wasted. The most successfulentrepreneurs are reluctant to interact with the ecosystem, causing the flow of knowledge betweenentrepreneurs to be limited. The effect becomes self-enforcing as it creates a negative feedback loophindering the ecosystem’s growth. Connecting successful entrepreneurs in Aarhus holds enormouspotential and should be a top priority for the city.

Every entrepreneur commented that a lack of capital was a constraint for local entrepreneurs.Moreover, the local investment scene is dominated by public funds, lacking the sufficient knowledge ofentrepreneurial finance. Conversely, investors claimed that deal-flow is poor in Aarhus and firms lack

potential. From a quantitative perspective, both parties have strong cases as the city is underperformingin both areas. The lack of growth startups is partly the product of a limiting mindset amongentrepreneurs. Often, the fear of failure outweighs the upside of taking significant risks. Cultivating aculture of risk-taking can be accomplished through activating successful role models in the ecosystem.

The limited pool of resources in Aarhus has resulted in supportive participants playing zero-sumgames. As the supporters currently lead the ecosystem, this mentality is causing additional barriers forcollaboration. Most events in Aarhus focuses on early-stage content, thus limiting the incentive forexperienced entrepreneurs to participate. Local policy makers have employed a ‘hands-off’ approach to

entrepreneurship, facilitating bottom-up development in Aarhus. Rather than implement publicinitiatives, the local government supports grass-root efforts in the entrepreneurial ecosystem.

A valuable resource in Aarhus is the city’s highly skilled labour pool. Attracting talented employees inthe early stages of growth is uncomplicated for entrepreneurs in the city. However, hiring moreexperienced workers is challenging as these lack cultural and monetary incentives to join startups. Thestudy theorises that a thriving entrepreneurial ecosystem can be leveraged to attract skilled labour, asthey provide visibility for entrepreneurs. Despite a small home market being a natural constraint in

Aarhus, the city lacks international connections in its network. The connectivity between incumbentsand entrepreneurs is increasing, yet still limited. Cultivating dealmakers in the city would be an effective

way to strengthen both of these connections and facilitate growth in the ecosystem.



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Over the recent years, we have advanced our knowledge of entrepreneurial ecosystems significantly.However, we still know little about their behaviour and evolution over time. Case studies like the oneconducted in Aarhus are thus vital to enhance our understanding of ecosystemic behaviour. Decisionmakers are often tempted to draw conclusions based on quantitative data as these provide clear andmeasurable results. In the context of entrepreneurial ecosystems, however, such data do not exclusivelysuffice. Examining relationships, networks, connections, and dynamics is strongly advisable, as itprovides us with a deeper layer of understanding in a local ecosystem. The inside-out approachdeveloped in this study is one way of theorising these dynamics; undoubtedly there are numerous othermethods. However, as the field continues to expand, gaining these insights become increasingly crucial.Ultimately, understanding how entrepreneurial hubs form around local conditions can createconsiderable economic prosperity in the global arena and help deprived economies thrive in the future.

7.1 Limitations

A natural constraint for this study has been the four-month period over which it has run. Ideally,research like this had applied a longitudinal methodology following the participants over several years.Further research in Aarhus is suggested to observe how the ecosystem will evolve over time.Conducting fieldwork through participant observation always carries the risk of subjectivity. The goalof the study has been to present findings with the highest degree of objectivity, yet it remainsquestionable whether a different researcher would have drawn an identical conclusion. The study relieson self-reported data from participants, a source naturally limited by human biases and due to a lack ofprevious knowledge of Aarhus has been challenging to filter.



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enabling entrepreneurial ecosystem in secon-tier regions: the case of aarhus

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