Resource Acquisition and Institutional Structure in Entrepreneurial Ecosystems: Evidence from Edinburgh

Resource Acquisition and Institutional Structure in

Entrepreneurial Ecosystems: Evidence from Edinburgh

Ben Spigel, PhD Chancellor’s Fellow

University of Edinburgh Business School Centre for Entrepreneurship Research

1.What are entrepreneurial ecosystems and why should I care?

2.The institutional structure of Edinburgh’s ecosystem

3.Resource acquisition & co-production

4.Remind me why I should care again

1.What are entrepreneurial ecosystems and why should I care?

2. The institutional structure of Edinburgh’s ecosystem

3. Resource acquisition & co-production

4. Remind me why I should care again

Defining entrepreneurial ecosystems

• How does a region’s economic/social/cultural environment affect ambitious entrepreneurship?

• “Actors and Factors”

• Focus on high-growth ventures (Vital 6%) rather than overall startup rates

• Importance of grass-roots, entrepreneurial leadership rather than top-down state control

Three core arguments

1. The context of entrepreneurship is critical to understanding its process

2. Not all forms of entrepreneurship are equally important to larger economic outcomes

3. Entrepreneurs are key actors in the urban / regional setting of the entrepreneurship process

Policy

Finance

Culture

Support

Talent

Markets

Entrepreneurial Ecosystem

Early Customers Networks

Skilled workers Educational Institutions

Infrastructure Support professions

Success stories Societal norms

Risk capital Angels and VC

Leadership Government

Isenberg, 2010

Networks Leadership Finance Talent Knowledge Support Services

Formal Institutions Culture Physical

Infrastructure Demand

Entrepreneurial Ecosystem

Entrepreneurial Activity

Aggregate Value Creation

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Stam, 2015

Spigel, 2015

Critiques • Research led by policy rather than policy led by

research

• Early research either conceptual or based on successful case studies

• Circular logic: lots of entrepreneurship = ecosystem = lots of entrepreneurship

• Just a new name for clusters and innovation systems

Why are ecosystems different?

• Focus on needs of start-ups & scale-ups rather than other types of firms

• Uniqueness of entrepreneurial resources & knowledge

• Advantages cut across sectors

• Highlights unique position of startups within broader regional economic and social context

• Startups are not big firms that just happen to be small

Why are ecosystems important?

• Huge interest from policy makers and practitioners

• Reflects growing importance of high-growth firms in economic development plans

• Need for rigorous research to evaluate options and push back on policy imitation

Where are we now?• Existing work has sought to define important

attributes of successful ecosystems

• Beginning of data-driven identification of ecosystems

• Lack of micro-perspectives about how ecosystems benefit entrepreneurs

• Lots of definitions of what ecosystems are; little is known about how they work

1. What are entrepreneurial ecosystems and why should I care?

2.The institutional structure of Edinburgh’s ecosystem



Edinburgh’s ecosystem• Strong digital tech economy

with 2 ‘unicorn’ startups

• High rate of new venture creation & large pool of skilled tech workers

• Strong research universities

• Strong angle investment scene but lack of follow-on VC

• Punches way below its weight

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Source: Fortune

Role of support programs in ecosystem

• Support programs provide training, funding, and access to resources to startups

• Compensates for market failures from information asymmetries

• But do they actually help startups succeed or do they preserve ‘zombie firms’

Types of Program Functions

Broad Functional

Ecosystem Coordination

Business training

People Finding Mentorship

Networking Competitions

Advising Awards

Inspiration Market Research

Space & Incubation

Awards and Financing

Motoyama and Watkins 2014

Support programs in Edinburgh

• 43 separate programs that support tech entrepreneurs in Edinburgh

• Categorised based on analysis of program materials

• Largely aimed at new startups

Broad support

Coordination

People Finding

Networking

Financial Advising

Inspiration

0 8 15 23 30

138

268

5

Functional Support

TrainingCompetitions

MentorshipSpace & Incubation

AwardsDirect Financing

0 8 15 23 30

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16

Support programs in Edinburgh

• 43 separate programs that support tech entrepreneurs in Edinburgh (a conservative estimate!)

• Categorised based on analysis of program materials

• Largely aimed at new startups

Stages of Support

Growth 17%

Startup 31%

Pre-Start 31%

Idea 21%

Program governance• Scottish Enterprise is

dominant actor: directly supports 37% of programs and provides resources for at least 80%

• Problem of mismatch between national and local needs

• Evidence of entrepreneurs creating independent organisations to fix their own problems

Going deeper• Interviews with leaders of 27

programs

• Strong connections between organisations

• Informal ‘pipelines’ to funnel entrepreneurs to more advanced programs

• Trend towards programs specialising in particular sectors, parts of startup lifecycles

What’s missing• Fewer programs aimed at

problems of scaling up and quick growth

• Little signposting — hard to know what resources are out there

• Too much focus on digital talent, not enough on business development skills

• Clash of egos between program leaders

Location of Sales Professionals



3.Resource acquisition & co-production


Methods• Pilot interviews (n=8) with high growth

entrepreneurs

• Entrepreneurs identified through Engage/Invest/Exploit program run by University of Edinburgh Informatics Ventures

• Interviews focus on what resources they get from the ecosystem and how they engage with it

Program Usage

• Entrepreneurs selected which of 58 different support programs / groups they interacted with

• Average of 12.8 programs in past 12 months

• Importance of cohort-based programs

• Public programs aren’t seen as critical

Most used programsProgram # of Firms Type

EIE 8 Investment training programs

Business Gateway 7 Startup adviceMBM Commercial 7 Startup-oriented law firm

Pitch @ The Palace 5 National business plan competition

Codebase 4 Private AcceleratorEdinburgh e-Club 4 Evening startup talks

Entrepreneurial Scotland 4 Business fellowship

Global Scot 4 International Development

Power of Youth 4 Private startup groupScottish Development

International 4 International Development

Types of resources• Types of resources coded

from interviews

• Knowledge about the entrepreneurship most important

• More likely to gather technical / market information from the internet than from the local ecosystem

Type of Resource # of Firms

Business Training 8Community ‘Buzz’ 7Business Advice 7Entrepreneurial

Community 7

Funding 6Entrepreneurial

Knowledge 5

Network Building 5Office Space 3

University Knowledge 1

Differences in resource use

• 6 of 8 firms were digital tech, 1 life science & 1 engineering

• Non-digital firms felt they couldn’t learn as much from other entrepreneurs

• But no differences in program use between digital / non-digital firms

“The ecosystem is something that doesn’t exist [for me]….as far as peers in the sense of companies that do similar things.” (ER08)

“I’m quite different [from other new ventures] because we’re not in software.” (ER01)

Co-creation of resources• Resource needs change as

firm develops

• Early stage firms need generic training and platforms to build their networks with other similar entrepreneurs

• Scale-up entrepreneurs worked to build their own informal groups dedicated to solving their specific challenges

• Lots of community building by prominent local entrepreneurs

“I run a thing where we have a monthly dinner for startup founders…it’s invite only so it’s not like open door. It’s only for people who have kind of got to a certain point, who have the same sort of problems, have the same sort of discussions” (ER05)

Initial findings• Traditionally important resources like university

knowledge & lead users not seen as important

• Knowledge about the entrepreneurship process is key resource in the ecosystem

• Only 30% of most used programs were public — importance of entrepreneur-led programs

• Importance of learning from entrepreneurial community




4.Remind me why I should care again

Ecosystem policy• Ecosystems and related ideas

likely to be major interest of policymakers at all levels

• Ties in to growing importance of city-regions as main engines of economic growth

• Increasing importance of devolution & ‘Northern Powerhouse’

Ecosystem research agenda

• Moving beyond taxonomies of ecosystems

• Ecosystems as ongoing processes of resource acquisition, learning, and organising

• Ecosystems from the ground up rather than the top down

• Comparisons between types of entrepreneurs & between ecosystems

Policy questions

• How can regions catalyse the civic action necessary to build a successful ecosystem?

• How can the state build effective programs and stay out of the way?

• Does focusing on potential scale-up firms require picking winners?

Questions?