Management of Entrepreneurial Ecosystems

Erkko Autio, Professor, Imperial College Business School

Platform Value Now project: 2015 - 2017

horizon scanning activities solution experiments with industry, public sector and other stakeholders empirical case studies development and application of of systems methods and tools scientific reflection and reporting Aalto University University of Jyväskylä VTT International Institute of Applied Systems Analysis (IIASA) Imperial College London Wilson Center Stevens Institute of Technology Contact: leena.ilmola@iiasa.ac.at

Innovation ecosystems and entrepreneurial ecosystems

Innovation ecosystems create and exploit leverage

Thomas, Autio & Gann, 2014

Innovation and entrepreneurial ecosystems: Comparison

Entrepreneurial Ecosystem Innovation Ecosystem

Ecosystem service Trial-and-error allocation of resources

towards high-productivity uses Creation of new economic value

Key function Facilitating the creation and growth of innovative and high-growth new

ventures

Facilitating ecosystem value co-creation through ecosystem leverage (innovation,

manufacturing, transaction)

Location specificity Medium to high Low to medium

Participant co-specialisation Low High

Participant heterogeneity High Low to medium

Industry specificity Low to medium Medium to high

Coordination device Multipolar coordination, sometimes a

backbone organisation Usually around a platform

Autio & Thomas, 2015

Entrepreneurial ecosystems: Definition

Entrepreneurial ecosystems are dynamic interaction systems that allocate resources

towards productive uses through innovative and high-growth new ventures

Dynamic of entrepreneurial ecosystems

Entrepreneurs perceive opportunities

The only way to validate perceptions is by mobilising resources

Opportunity cost attached to resources requires that the opportunity yields a

higher return; otherwise the opportunity is abandoned

The net outcome of this resource allocation dynamic, if high quality, is

increase in Total Factor Productivity

Attitudes

Aspirations Activities

Productive Resource Allocation

through Entrepreneurship

GEI predicts growth in

Total Factor Productivity

two years ahead

(n = 163)

(countries = 50)

Entrepreneurs can be productive, unproductive and destructive!

Entrepreneurial ecosystems and quality of entrepreneurs

How do entrepreneurial ecosystems work?

Emergence

So, how does one manage entrepreneurial ecosystems?

Two paradigms for entrepreneurship policy

Market failure: Fix the failure by throwing money at it

System failure: Fix it by building walls

**

Why is ecosystem failure different?

Market and system failures are fundamentally static: They exist or not

Ecosystem failures are different:

• Failure of the ecosystem to produce a dynamic service

• Knowledge of the ’inner workings’ of the ecosystem embedded in the ecosystem

itself, not easily seen from the outside

• Inter-dyad interactions may create cascading effects and unintended outcomes

• Stakeholders not necessarily well aligned

• Interlocking relationships can create a high level of ecosystem inertia

If we do not see innovative high-growth firms, where is the failure?

• Not enough free money?

• Inability of the system to support high-growth firms?

• High-potential entrepreneurs decide to do something else instead?

Market and structural failure approaches break down in EEs

Top-down versus bottom-up

You cannot pinpoint market failures

because system is too complex

You cannot focus on static structure

because entrepreneurial

ecosystems are driven by dynamic

action

Challenge: Coordinating multipolar emergence

Total Factor Productivity

Insight from socio-ecological literature: Deep stakeholder engagement

Engagement with policy stakeholders can range from traditional top-down

communication to bottom-up consultation to two-way participation through deep

stakeholder engagement

Benefits

• Helps uncover hidden interactions, cause-effect chains and thus tap knowledge within the

system

• Helps facilitate multipolar coordination and collective governance

• Helps facilitate mutual co-alignment and thus pre-empt

conflicts and mistrust

• Helps build commitment to collective action

• Helps build self-reinforcing social norms to sustain

contributions to the common good by individual stakeholders

Empirical Case: Scottish Collective Impact Scottish ’REAP’ project

Started 2012 (still ongoing)

Coordinated by Scottish Enterprise

Used GEI analysis to make sense of the Scottish ecosystem

2-year participation

Facilitating entrepreneurial ecosystems: Our approach

Discovery Workshop - Uncover a region’s ecosystem bottlenecks -

Bottleneck Analysis Workshop - Understand bottleneck drivers -

Solution Development Workshop - Develop a consensus for policy action -

Collective Impact - Implementation, follow-up and monitoring (at least a year) -

Analysis

Estonia performs relatively less well in comparison against EU countries than globally

Overall, the EU comparison suggests Estonian weaknesses for institutional variables, where Estonia mostly lags behind EU mean

Overall, the EU comparison suggests strengths for Estonia in individual-level variables, except for Entrepreneurial Attitudes, where the Estonian weaknesses are confirmed by the EU comparison

In the EU comparison, Estonia’s weakest pillar overall is Risk Capital (27th), followed by Cultural Support (19th), Quality of Human Resources (19th), Start-up Skills (16th), Product Innovation (16th), and Process Innovation (16th)

# # ## # #Market Agglomeration 0.46 28 Opportunity Recognition 0.70 7 Opportunity Perception 0.39 15

Tertiary Education 0.80 17 Skill Perception 0.53 15 Start-up Skills 0.60 16

Business Risk 0.72 12 Risk Acceptance 0.43 18 Nonfear of Failure 0.46 14

Internet Usage 0.92 14 Know Entrepreneurs 0.57 12 Networking 0.79 11

Corruption 0.78 16 Career Status 0.41 27 Cultural Support 0.55 19

Entrepreneurial Attitudes 53.7 13

Economic Freedom 0.73 17 Opportunity Motivation 0.80 11 Opportunity Startup 0.65 13

Gender Equality 0.88 14 TEA Female 0.53 14 Gender 0.48 11

Technology Absorption 0.78 13 Technology Level 0.83 11 Technology Sector 0.79 12

Staff Training 0.66 14 Educational Level 0.65 18 Quality of Human Resources 0.52 19

Market Dominance 0.64 18 Competitors 0.99 4 Competition 0.70 11

Entrepreneurial Abi l ity 59.6 14

Technology Transfer 0.72 16 New Product 0.72 7 Product Innovation 0.67 16

GERD 0.81 15 New Technology 0.61 14 Process Innovation 0.69 15

Business Strategy 0.61 17 Gazelle 0.85 8 High Growth 0.73 10

Globalisation 0.94 6 Export 0.87 12 Internationalisation 0.94 4

Capital Market 0.41 25 Informal Investment 0.62 25 Risk Capital 0.41 27

Entrepreneurial Aspirations 63.6 13

INSTITUTIONAL 0.72 15 INDIVIDUAL 0.67 8 GEDI 59.0 14

Bottom quartile 0.41 0.41 0.39

Lower middle quartile

Higher middle quartile

Top quartile

EN

TR

EP

RE

NE

UR

IAL

AB

ILIT

Y

EN

TR

EP

RE

NE

UR

IAL

AS

PIR

AT

ION

SINSTITUTIONAL VARIABLES INDIVIDUAL VARIABLES PILLARS

EN

TR

EP

RE

NE

UR

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TIT

UD

ES

Policy prioritisation and portfolio optimisation

Scotland Wales N. Ireland England UK

Opportunity Perception 13% 21% 24% 8% 9%

Startup Skills 11% 11% 13% 8% 9%

NonFear of Failure 4% 3% 6% 5% 5%

Networking 11% 11% 9% 9% 9%

Cultural Support 3% 0% 0% 6% 6%

Opportunity Startup 4% 3% 1% 5% 5%

Tech Sector 0% 6% 0% 0% 0%

Quality of Human Resources 4% 3% 5% 4% 4%

Competition 0% 0% 0% 3% 3%

Product Innovation 9% 9% 6% 10% 10%

Process Innovation 11% 11% 13% 9% 9%

High Growth 9% 6% 7% 11% 10%

Internationalisation 7% 6% 4% 10% 10%

Risk Capital 12% 11% 12% 13% 11%

100% 100% 100% 100% 100%

North West UK Bottleneck Drivers

London Brain Drain

Unbalanced Teams

Disjointed Advisory

Soft Skills Gap

Lack of FB Role Models

FB-SME Tradition

Ability to Grow

FB Trust Structures

Image of Entrepre-

neurs

Willingness to Grow

Innovation Bottleneck

Inward Investment

Regional Promotion

Mentoring Gap

GlobalisationBottleneck

FinanceBottleneck

ERDF Inflexibility

Execution Skills Gap

Apprecia-tion of BMI

UKTI Referrals

Investment Readiness

1

2

32

3

44

5

6

77

8

8

9

10

10

11

11

11

12

13

14

15

15

12

17

16

18

Scottish Collective Impact

Effective Connections

Skills for Growth

Financing for Growth

Role of Universities

Role Models

Corporate Discussion Group

For complaints

Erkko Autio

Imperial College Business School

erkko.autio@imperial.ac.uk

Sources

Acs, Z. J., Autio, E., Szerb, L. 2014. National Systems of Entrepreneurship:

Measurement Issues and Policy Implications. Research Policy, 43(1): 476-494.

Acs, Z., Szerb, L., Autio, E. 2015. Global Entrepreneurship Index 2016. Amazon

Books & Global Entrepreneurship Week

Autio, E., & Thomas, L. 2013. Innovation Ecosystems: Implications for Innovation

Management. In M. Dodgson, N. Phillips, & D. M. Gann (Eds.), The Oxford Handbook

of Innovation Management: 204-228. Oxford: Oxford University Press

Thomas, L., Autio, E., & Gann, D. 2014. Architectural leverage: Putting platforms in

context. Academy of Management Perspectives, 28(2): 198–219

Autio, E., Levie, J. 2015. Management of entrepreneurial ecosystems (in submission)

Autio, E., Kenney, M.F., Mustar, P., Siegel, D.S., Wright, M.T., 2014. Entrepreneurial

innovation: The importance of context. Research Policy 43, 1097-1108.

Global (Regional) Entrepreneurship Index GEI (REI)

Download from www.thegedi.org