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The Cultural Governance of Entrepreneurial Ecosystems Ben Spigel a a Chancellor’s Fellow University of Edinburgh Business School [email protected] Abstract: Entrepreneurial ecosystems have emerged as a popular concept to explain the continued ability of regions to produce innovation-based startups. However, our understanding of how ecosystems influence entrepreneurs remains vague, decreasing the usefulness of the concept in academic and policy debates. This paper argues that ecosystems are composed of mutually dependent cultural, social, and material attributes. This framework is used to explore the entrepreneurial ecosystems of Calgary and Waterloo, Canada. Though both cities enjoy high rates of technology entrepreneurship, Calgary’s entrepreneurial ecosystem is weaker than Waterloo’s due to the lack of a strong entrepreneurial culture that normalizes entrepreneurial networking and cooperation. Keywords: Entrepreneurial ecosystem, geography, institutions, culture, policy 1. INTRODUCTION Entrepreneurial ecosystems (also known as entrepreneurial environments) have become an important tool in the study of the geography of high-growth and innovative entrepreneurship. Ecosystems are the combination of supportive cultural outlooks, dense social networks, accessible investment capital, organizations like incubation centres and universities, and active economic policies within a region that help to create regional environments that support the development and growth of high-risk, innovation-based ventures. They are seen within the academic (Feldman et al., 2005; Malecki, 2009), policy (Isenberg, 2010; World Economic Forum, 2013) and popular literature (Feld, 1

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The Cultural Governance of Entrepreneurial Ecosystems

Ben Spigela

aChancellor’s FellowUniversity of Edinburgh Business School

[email protected]

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

1. INTRODUCTIONEntrepreneurial ecosystems (also known as entrepreneurial environments) have become

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

To address this gap, this article investigates the types of attributes that constitute entrepreneurial ecosystems, the relationships between them, and how they influence regional

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

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

2. THE STRUCTURE OF ENTREPRENEURIAL ECOSYSTEMS2.1 The Context of Ecosystem Research

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

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

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examine the social, cultural, and economic factors of less successful regions in order to better understand the internal processes of entrepreneurial systems.

However, while the geographic milieu in which entrepreneurship takes place is recognized as an important influence on the nature of the local entrepreneurship process and the resulting structure of the entrepreneurial ecosystem, the ways in which these contexts emerge and influence the practices of entrepreneurs and other actors remains unclear (Mason and Brown, 2014). Thus, while there is a general agreement that the geography of entrepreneurship is important (e.g. Thorton and Flynn, 2003; Steyaert and Katz 2004; Trettin and Welter, 2011) there is less consensus about how the overall geographic environment affect entrepreneurship and its implications for the development of regional policies and economic trajectories (Spigel, 2013). A better understanding of the attributes that make up an ecosystem and their relationship to the underlying regional culture is necessary in order to study how ecosystems influence the actions of entrepreneurial actors. 2.2 The Attributes of Entrepreneurial Ecosystems

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

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

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

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entrepreneurs to take the risk of starting new firms through prominent local success stories (Nelles et al., 2005). An ecosystem’s cultural attributes therefore represent underlying beliefs about entrepreneurship within a region, including its inherent purpose, rewards, and risks.

Table 1: Commonly Cited Attributes of Entrepreneurial Ecosystems Type of Attribute

Attribute Description Examples

Cultural Supportive Culture Cultural attitudes which support and normalize entrepreneurial activities, risk taking, and innovation.

Aoyama (2009); Feldman (2001); Julian, 2007

Histories of Entrepreneurship

Prominent local example of successful entrepreneurial ventures. Nelles et al. (2005); Feld (2012)

Social Worker Talent Presence of skilled workers who are willing to work at startups. Arruda et al (2014); Audretsch et al. (2011); Bahrami and Evans, 1995; Harrison and Leitch (2010)

Investment Capital Availability of investment capital from family and friends, angel investors, and venture capitalists.

Borgh et al (2012); Kenney and Patton (2005); Malecki (2009)

Networks Presence of social networks that connect entrepreneurs, advisors, investors, and workers and that allow the free flow of knowledge and skills.

Dubani (1989); Malecki (1997); Neck et al (2004)

Mentors and Role Models

Local Successful entrepreneurs and business people who provide advice for younger entrepreneurs

Feld (2012); Kenney and Patton (2005); World Economic Forum (2013)

Material Policy and Governance State-run programs or regulations that either support entrepreneurship through direct funding or remove barriers to new venture creation

Arruda et al. 2014; Borgh et al., 2012; Isenberg, 2012

Universities Universities and other higher education institutions which both train new entrepreneurs and produce new knowledge spillovers

Audretsch et al. (2011); Dubani (1989); Feldman et al. (2005); Wolfe (2005)

Support Services Firms and organizations that provide ancillary services to new ventures, e.g. patent lawyers, incubators, or accountancies.

Kenney and Patton (2005); Patton and Kenney (2005); Startup Genome (2012)

Physical Infrastructure Availability of sufficient office space, telecommunication facilities, and transportation infrastructure to enable venture creation and growth.

Audretsch et al. (2011); Mack and Rey (2014)

Open Markets Presence of sufficient local opportunities to enable venture creation and unimpeded access to global markets.

Spilling (1996); World Economic Forum (2013)

Social attributes refer broadly to resources and support accessed through the social networks of entrepreneurs, investors, workers, or advisors. Social networks themselves have long been acknowledged as critical for successful entrepreneurship, as entrepreneurs use their social networks and capital to gather knowledge about the market place and new technologies, acquire resources such as investment capital and access to markets (Greve and Salaff 2003; Nijkamp 2003; Patel and Conklin, 2009). Networks tend to be locally focused with the densest and strongest ties developed within the entrepreneur’s home region (Rutten et al., 2010). Networks of investors, ranging from friends and family to more organized angel investors and venture capitalists, are key to enabling entrepreneurial growth within a region because investors typically use their own social networks to identify and appraise new investment opportunities (Shane and Cable, 2002). This dependence on networks creates a concentrated geography of financial investment, with angels and venture capitalists tending to invest in the regions in which they are located (Christienson 2007).

Mentors also play a central role in supporting younger entrepreneurs by providing guidance and helping them avoid many of the common pitfalls associated with starting and growing a new firm (Ozgen and Baron, 2007; Bosma et al., 2012). The presence of mentors helps to increase the rate of new firm formation within regions and reduce rates of firm failure

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(Lafuente et al., 2007). Much like investors, mentors connect with entrepreneurs through their personal networks, meaning they are more likely to advise local entrepreneurs than those outside their home region. Feldman and Zoller (2012, see also Feldman 2014) emphasize the importance of ‘dealmakers,’ actors with high levels of social capital and connections that actively build strong networks within regions and assist entrepreneurs connect with the network-based resources they need to grow. The importance of a skilled workforce in entrepreneurship-based regional economies is well documented (Feldman, 2001; Malecki, 2009; Audrestch et al., 2011). This includes both technical workers as well as experienced managers who can join the boards of startups and help them grow (World Economic Forum, 2013). However, the mere presence of these employees is not enough: they must have a similar tolerance for risk as entrepreneurs in order for them to thrive in jobs characterized by little job security, longer work hours, and lower initial pay. Entrepreneurs face increased challenges in regions where workers are unaccustomed to the unique expectations of working at startups (Spigel, 2011).

The material attributes of an ecosystem are those with a tangible presence. This presence can be a physical location, such as with universities or infrastructure, or formalized rules like entrepreneurial policies and well-regulated markets. Universities are one of the most discussed attributes of ecosystems, prized for their ability to generate new knowledge, spin-off firms and to train highly skilled workers and entrepreneurs (Krichhoff et al., 2007). Academic entrepreneurs hold the promise of revolutionizing markets by commercializing laboratory innovations, though the most important functions of universities is in training the next generation of technologists, scientists, and entrepreneurs (Wolfe, 2005) Support services, both in the form of accounting, legal, and marketing firms specializing in the needs of startups and who provide discounts or service-for-equity schemes as well as publicly-funded entrepreneurial support organizations and incubation facilities, supply ancillary services to startups and help entrepreneurs navigate the complex commercial challenges of starting, growing, and exiting small, innovative firms (Kenney and Patton, 2005; Patton and Kenney, 2005; Totterman and Stern, 2005). While the role of physical infrastructure in entrepreneurial ecosystems is less studied than other attributes, the presence of sufficient office space, telecommunications facilities, and transportation connections provide space for firms to grow and tap into global markets (Neck et al., 2010; Audrestch et al. 2011; Mack and Rey, 2014). Polices and markets are less ‘material’ in the sense that they do not have a physical location, but instead materialize through the rules and regulations enacted through state power. Policies represent laws and directives that create publicly funded support programs designed to encourage entrepreneurship through tax benefits, investment of public funds, or reductions in bureaucratic regulation (Huggins and Williams, 2011). Open markets refer both to the lack of legal barriers to opening a firm as well as the presence of sufficient economic opportunities to support multiple entrepreneurial endeavours (Spilling, 1996; World Economic Forum, 2013). 3.2 Relationships Between Ecosystem Attributes

The cultural, social, and material attributes of an ecosystem do not exist in isolation; rather they develop and work in concert with one another. Cultural attributes can be seen as the ‘foundation’ of an ecosystem because they influence the basic attitudes and outlooks towards entrepreneurship. Actors’ underlying beliefs about the legitimacy of entrepreneurship as a career choice and the wider social status of entrepreneurship within the community affect their desire to engage in venture creation or their willingness to support the entrepreneurial endeavours of others (Liñan et al., 2011; Spigel, 2013). By normalizing support for entrepreneurship within the larger community an ecosystem’s cultural attributes create a context through which supportive

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social attributes can emerge. Supportive cultural values can encourage nascent entrepreneurs to start a firm, successful entrepreneurs and experienced business people to dedicate time towards networking and mentoring, skilled workers to join startups, and high net-worth individuals to consider investing in them. This contributes to the formation of denser and richer networks between entrepreneurs, investors, and advisors. The legitimation of entrepreneurship within the local culture generates a context in which the social attributes of an ecosystem can emerge and flourish.

The presence of thriving social elements in an ecosystem foster a context in which the material attributes can have a significant positive impact on the entrepreneurship process. Entrepreneurship, innovation and technology transfer policies frequently fail without suitable social institutions within the wider community to support them (Hughes, 2007). Policies designed to encourage entrepreneurship through training, public funding, or incubators struggle in the absence of an underlying community of other entrepreneurs, advisors, and workers to support these new programs and the new ventures they create. Similarly, it is difficult to develop networks of firms that provide support services for startups in the absence of supportive cultural and social attributes that encourage non-entrepreneurs to help smaller ventures. The presence of thriving material ecosystem attributes therefore depend on strong social attributes like networks of entrepreneurs, investors, and workers, which in turn require a preexisting supportive culture to develop.

However, the relationship between attributes in an ecosystem is not necessarily a hierarchy of ‘lower’ elements supporting ‘higher’ ones. The development and success of material attributes can reinforce social attributes, in turn strengthening the underlying cultural attributes (see Figure 1). Economic development agencies or entrepreneurial support organizations can play an important role in fostering networks of entrepreneurs and raising the profile of successful local startups. This encourages new actors to engage in networking activities, increasing the amount of financial, technical, and mentorship resources within local social networks. Strong sets of social attributes such as networks, mentors, and investment capital within a region then help to reinforce and reproduce the ecosystem’s pre-existing culture by normalizing these practices and creating new stories of successful entrepreneurship that enter in the region’s history.

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Figure 1: Relationships Between Ecosystem Attributes

The relationships between the three types of attributes help distinguish strong ‘munificent’ entrepreneurial ecosystem from weaker ‘arid’ ecosystems. Munificent ecosystems feature supportive feedback loops between the three categories of attributes, with each strengthening and reproducing the others. This helps to develop a resilient entrepreneurial economy that can respond to external shocks and internal economic and social changes. Thus, ecosystems are not defined by their current high or low rates of entrepreneurial activity but rather the extent to which they possess a self-sustaining economic, social, and cultural environment that promotes entrepreneurship over the long term. While arid ecosystems can have high rates of startup activity, the lack of connections between the ecosystem’s attributes means that the regional economy is vulnerable to shocks like the loss of a major employer or market.

Entrepreneurial ecosystems are more than regions with high rates of innovative or growth oriented entrepreneurship. They are complex systems which encourage particular activities such as entrepreneurship, risk taking, investment, and networking and which are reproduced by both the conscious efforts of dealmakers and policy officials as well as through the daily activities of entrepreneurs, workers, and investors. Understanding the influence of entrepreneurial ecosystems

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on regional economic trajectories therefore requires an examination of how these attributes form, evolve, and influence both one another as well as the actions of entrepreneurial actors. 4. ENTREPRENEURIAL ECOSYSTEMS IN CALGARY AND WATERLOO, CANADA

4.1 Case Study Selection The study of entrepreneurial ecosystems, and of entrepreneurial geographies more

generally, is bifurcated between quantitative methodologies which seek to identify beneficial entrepreneurial environments amongst a large number of regions (e.g. Feldman and Zoller, 2012; Qian et al., 2013) and qualitative studies that attempt to examine the underlying processes that underlie particular ecosystems (e.g. Aoyama, 2009). While both perspectives are necessary, case study based approaches are well suited to study the complex array of localized factors that constitute an ecosystem. The goal of such studies is to use the experiences of actors within an ecosystem to understand how their entrepreneurial practices and outlooks are affected by the dynamics of the ecosystem and how these practices and outlooks in turn have affected how the ecosystem functions. A comparative approach highlights features within particular ecosystems in order to better show which are unique to the region and which are more standardized parts of the entrepreneurship phenomena and Schumpeterian innovative capitalism. The present study adopts Peron and Ram’s (2004) ‘multiple stories milieu’ approach in order to explore how entrepreneurial actors develop their practices within their larger regional contexts and how this affects the structure of the entrepreneurial ecosystem.

The cases of Calgary, Alberta and Waterloo, Ontario (part of the larger Kitchener-Waterloo-Cambridge census metropolitan area) are a useful comparison to understand the consequences of the differing relationships between ecosystem attributes. Both cities are centres of high-tech entrepreneurship, ranking first and second, respectfully, in a study of Canadian technology entrepreneurship (Pennington, 2009). As shown in Table 2, both cities perform much better than the Canadian average in terms of their human capital, GDP per capita, and size of venture capital investments. The lower rates of self-employment in Waterloo are due to the region’s comparatively large industrial sector and belie the high rates of technology startup activity in the region. Despite the differences in size they have many points in common which make them a useful comparison. Each city is home to leading research universities (the University of Calgary and the University of Waterloo), headquarters of locally founded global technology firms (SMART Technologies in Calgary, a smart whiteboard company and Blackberry, the smartphone company formally known as RIM, in Waterloo), public entrepreneurship support programs, and large pools of skilled workers and investment capital. As Calgary and Waterloo are smaller and less culturally diverse than larger urban centres like Toronto, Montréal, or Vancouver, it is easier to identify specifically regional cultural characteristics, increasing the reliability of the comparison.

Kitchener-Waterloo

Calgary Canada

Population 477,160 1,096,833 33,476,688

Self-Employment Rate (%) 8.55 11.29 11.02

Labour force in natural and applied science occupations (%)

8.87 11.91 7.16

Population with bachelor’s degree or higher (%)

21.65 28.82 20.85

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Kitchener-Waterloo

Calgary Canada

Bachelors degrees or higher in STEM fields (%)

11.6 15.14% 9.82

GDP per capita (2007 dollars) $50,161 $73,151 $45,704

Number of VC investments 2000 - 2011 93 196 6004

Average size of VC investment, 2000-2011 (2007 dollars)

$1,979,297 $2,866,391 $239,583

VC investments per 100,000 residents (2000-2011)

19.49 17.87 17.93

Source: Statistics Canada (2011); Conference Board of Canada (2012); Thompson Reuters (2013)

Table 2: Demographic and Economic Data for Waterloo and Calgary

4.2 Qualitative Methodology Semi-structured interviews were conducted with 71 technology entrepreneurs, investors,

and economic development officials between 2010 and 2012 (see Table 3). Interviews focused on respondents’ views of their region’s entrepreneurial community and how it has affected the practices they used to start, run, and grow new ventures. In order to avoid a bias towards the founders of larger and more successful startups, a random pool of technology firms younger than 20 years old was constructed using Scotts Business Directory, a Canadian firm directory.1 After eliminating firms that did not sell a technological product, subsidiaries of larger firms, and where the founder had left, 83 firms were contacted for interviews in Calgary and 84 in Waterloo, leading to 28 (33.7%) and 23 (27.3%) entrepreneur interviews, respectively. Interviews were conducted until data saturation occurred.

Waterloo Calgary

Total

Entrepreneurs 23 28 51

Investors 5 5 10

Economic Development Officials

4 6 10

Total 32 39 71

Table 3: Type and Location of Interviews

5. THE RELATIONSHIPS BETWEEN ATTRIBUTES IN ARID AND MUNIFICENT ECOSYSTEMS

5.1’Arid’ Ecosystem in Calgary, Alberta

1 Firms from the following industries were included in the sample: Computer and peripheral equipment manufacturing; Software publishers; Data processing, hosting and related services; Computer systems design and related services; Other scientific and technical consulting services; Engineering services.

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Calgary has undergone a profound economic transformation as a result of the extraction of Alberta’s natural gas and petroleum reserves. The discovery of nearby natural gas deposits in the early 1900s and the later development of the Athabasca Tar Sands in Northern Alberta in the last two decades helped build Calgary from a small frontier town to a command and control centre for Canada’s resource sector and associated finance and support services (Chastko, 2004). All of Canada’s ten largest energy firms are headquartered in Calgary and the city’s financial industry has begun to displace Toronto as the gateway for investment into Canada’s resource sector. One of Canada’s largest entrepreneurial communities has developed around this economic engine: nearly 12% of Calgary’s population is self-employed, the highest rate in Canada (Statistics Canada, 2012).

Many of the region’s technology startups are oriented towards the energy industry, which interviewees saw as rich in entrepreneurial opportunities and more focused on speed of product development rather than price. As the founder of a software firm serving this industry said: “They weren't interested in saving money, they were only interested in getting it done. How much money isn't an issue” (C103). Other interviewees generally concurred with this view, with one investor saying, “A lot of technology [entrepreneurship] happens here. I think that 10 or 11% of the population is employed in the technology sector, but 99.5% of that is in technology for oil and gas.” (C135) Indeed, the oil and gas sector was the primary market for 17 of the 28 (68%) entrepreneurs interviewed in Calgary. This suggests that the oil and gas market within Calgary plays a critical role in the region’s entrepreneurial ecosystem.

The cultural foundation of Calgary’s entrepreneurial ecosystem is strongly influenced by the organizational culture of the oil and gas industry. The cultural outlooks of the industry are almost hegemonic within the region. As early as the 1980s, House (1980 p. 2) argued: “oil dominates the economic and social life of the city”. More recently, Langford et al. (2010) quote a successful Calgarian entrepreneur as saying: “This is an oil and gas town” (p. 3). The discourses of cowboys and roughnecks have contributed to a local culture that emphasizes the pursuit of wealth rather than the social prestige of building an advanced technology or stable enterprise. These cultural attitudes create higher social rewards for personal wealth than it does for technological or business achievements, such as being featured in a technology magazine like Wired or creating an internationally recognized business. These views are common within the region’s economy, affecting business practices in both large and small firms (Miller, 2002). In essence, interviews suggest that the region’s culture places a higher value of the economic rewards of entrepreneurship than on the social value of building a company, developing an advanced technology, or being one’s own boss.

These cultural outlooks have a profound influence on the nature of the ecosystem’s social and material attributes. This is most apparent when looking at interviewees’ attachment to entrepreneurship. Because of the importance of creating wealth within the region’s culture, most entrepreneurs structured their firms to grow as quickly as possible and positioned themselves for an eventual buyout offer from a larger firm rather than for long-term sustainability. 12 of the 28 (42%) interviewed entrepreneurs in Calgary were categorized as ‘profit-oriented’ because they had structured the firm to maximize their short-term personal profit rather than long term sustainability, compared to 1 of 23 entrepreneurs (4%) in Waterloo (𝛘2 = 7.936, p < .01). The visible presence of other startups that achieved profitable exits provides many examples for new entrepreneurs about the viability of profit-oriented entrepreneurship. In the words of one entrepreneur in the resource sector: “...especially [in] the gas business, these little firms get

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bought up, merged, and some of them bail, but most get merged and their assets get bought by a bigger fish...that’s just the nature of the oil business.” (C104)

As a result, few interviewees reported strong connections to their firms or to entrepreneurship in general. One entrepreneur reported that he had “created something that someone wants to buy, [but] I’ve got no emotional attachment to it. It's just a company... If someone today came and gave me an offer on [my firm], I'd be gone tomorrow. No emotional ties to this stuff what so ever.” (C127) Another said: “I wouldn't say that I dreamed about [entrepreneurship], but I also wouldn't say that I saw myself as doing a 9-to-5 employee gig for the rest of my life. I think it was sort of a preference, but it wasn't central to my being that I must be an entrepreneur, that I must start a business.” (C119) Other entrepreneurs reported selling more than 50% of their firms’ equity to investors, effectively giving up control of the firm in order enable faster growth. This suggests a lowered social status of entrepreneurship within the local culture, where the outcome (windfall profits from exiting the venture) is seen as more important than the overall entrepreneurial experience. Such outlooks contribute to a situation where there are fewer experienced serial entrepreneurs or independent startups to act as role models, reducing the capacity of the ecosystem to produce both direct mentors to advise new entrepreneurs or inspirational exemplars to motivate potential founders to take the risks of starting their own firm. Economic development officials in Calgary corroborated this view, with one saying: “We don’t have the RIMs,” meaning that there is no great startup success stories in the region to encourage entrepreneurs in the region (C107).

The low value placed on entrepreneurship within Calgary’s ecosystem negatively affected the willingness of employees to work at startups. Almost all interviewees reported that they could not compete with the high salaries and other fringe benefits offered by the major oil companies. The founder of an e-learning startup said: “Two days ago we had a new employee who spent one day here and said he got a better offer,” (C110) while an another entrepreneur outside the resource industry complained: “It’s energy, energy, energy [in Calgary]. If you’re doing tech or you’re a designer or a programmer, if you’re motivated by money it’s great. If you’re motivated by doing something a little bit different or creative it might not be as good of a fit.” (C121) Workers’ focus on wages suggests they also shared the perception of the lower social prestige for working at an innovative startup compared to a larger energy firm, reducing the number of potential employees willing to work in startups.

Furthermore, the focus on the economic gains of entrepreneurship over the social status of building a successful firm or technology affected the propensity of entrepreneurs to develop strong social ties with other entrepreneurs, limiting the effectiveness of social networks within the ecosystem. Most respondents expressed little desire to share advice or learn from the experiences of other entrepreneurs. Only 46% of interviewed entrepreneurs in Calgary reported seeking advice about the running business from family and friends, compared to 70% in Waterloo (𝛘2 = 3.638, p < .1). Entrepreneurs in Calgary typically thought it was more important to build their networks within the oil and gas industry, which many saw as an “old-boys network,” (C129) rather than with other local entrepreneurs. On the whole, interviewees reported frequently engaging in networking activities to keep abreast of new developments in the marketplace and find new clients, but that they spent little time meeting with other entrepreneurs to develop new their business skills. This suggests that while entrepreneurs do actively network, their focus is on finding new clients rather than meeting other entrepreneurs and sharing advice and support with them.

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These outlooks towards networking contribute to the ineffectiveness of the ecosystem’s entrepreneurship support programs and other material attributes. While Innovate Calgary (a publicly funded startup incubation facility and entrepreneurial support organization) runs entrepreneurship training and networking programs, none of the interviewed entrepreneurs — even tenants of Innovate Calgary’s incubation centre — reported participating in them. Nor did interviewees regularly participate in networking events hosted by the city’s Chamber of Commerce or the University of Calgary. As one entrepreneur explained: “there’s been quite a few different entrepreneurship groups, but what I have found is that most of them are there because they think they’re going to get a chance to meet potential clients. What it ends up being is a bunch of people like themselves.” (C104) Another characterized them as “breakfast clubs where an unsuccessful car salesman and an unsuccessful relator and an unsuccessful insurance salesmen would get together for breakfast once a week.” (C127)

The local market is the most important attribute of Calgary’s ecosystem: large energy and natural resources firms are a constant source of new opportunities for startups. As one entrepreneur put it: “If you live in Calgary, and you want to make money, you should be in energy.” (C119) Calgary’s high rates of entrepreneurship and self-employment are almost entirely based around this industry and the large and open market for energy services is the main force behind its entire entrepreneurial ecosystem. However, the culture of this industry has contributed to an undervaluing of certain entrepreneurial activities within the region’s underlying culture, such as building networks with other entrepreneurs, focusing the firm on innovation rather than quick growth, or working for startups rather than large corporations. As a result, there is less support for material attributes of the ecosystem such as networking events or training to improve entrepreneurial skills. The absence of such programs contributes to the lowered importance of entrepreneurship within in the ecosystem. 5.2 ‘Munificent’ Ecosystem in Waterloo, Ontario

Waterloo, Ontario, a city-region approximately 110 kilometers west of Toronto, is commonly seen as one of the major hubs of Canadian technology entrepreneurship. The presence of major firms such as Blackberry and the University of Waterloo, one of the world’s leading computer science and engineering universities, have contributed to the development of a regional economy propelled by a strong entrepreneurial ecosystem. This ecosystem is characterized by supportive relationships between its cultural, social, and material attributes; the presence of several active entrepreneurial support agencies help encourage and strengthen local networks of entrepreneurs, mentors, and workers and help publicize entrepreneurial success stories, which reproduces and reinforces the region’s underlying entrepreneurial culture.

Many observers connect this ecosystem with an entrepreneurial culture dating back to the region’s founding by Mennonite farmers and German immigrants in the 19th century (Bramwell et al., 2008). While the reality of this connection is questionable, waves of German migrants to the region throughout the early 20th century helped create a thriving industrial economy that was instrumental in the founding of the University of Waterloo in 1957 as a polytechnic university intended to supply local firms with skilled engineers (Scott, 1967; Bathelt and Spigel, 2011). As a result, the university has had an applied, entrepreneurial outlook that lead to the creation of features such as a mandatory co-op program in which students spend several semesters working at firms and acting as conduits for knowledge spillovers and an intellectual property regime in which faculty and students own the rights their innovations. These factors have led to to high rates of research spinoffs and academic entrepreneurship (Eastwood, 1987; Kenney and Patton, 2011). A similar culture has developed throughout the larger region that supports entrepreneurial

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risk taking and provides entrepreneurs and related actors with a great deal of social prestige. In the words of a local economic development officer: “[entrepreneurship] is a part of our DNA…entrepreneurs matter. It’s a badge of honour.” (W101). Numerous interviewees discussed how an entrepreneurial ethos permeates the community and how, in the words of one entrepreneur: “...we’re just so lucky that everyone is prepared to share and be involved and that there’s a bunch of structured mentoring and networking and there’s a ton of informal stuff that just happens that people just take care of each other in the region.” (W115).

This culture is based around two pillars. The first is the presence of many success stories from local startups that grew into internationally competitive firms. While Blackberry’s journey from a small pager designer to an international smartphone leader is the most famous, other local successes include OpenText, a database company spun out of the University of Waterloo and KIK, an instant messaging service with over 100 million users founded by a University of Waterloo alumnus. These success stories inspire others to follow in their path. As a local investor argued: “everybody you talk to wants to get that big, wants to grow fast and to be able to get into the international markets as quickly as possible, and all the entrepreneurs really try to be RIM…. and to understand and realize that it can be done.” (W128). Second, the University of Waterloo attracts numerous students with preexisting entrepreneurial intentions and its history of successful spinoffs and entrepreneurship programs helps foster these outlooks in the rest of the study body. These students will develop positive attitudes towards entrepreneurship by the time they enter the local labour market, encouraging them to either start their own firm or to work at startups.

This culture promotes the formation of strong and dense social networks between entrepreneurs, workers, advisors, and investors. Many respondents believed that sharing their experiences and learning from others was an essential part of being an entrepreneur in Waterloo. As one explained:

Here, unlike any other community that I’ve lived or worked [in], there’s a strong sense of not just a desire, but a responsibility, to help up and coming companies, especially technology companies…We do a good job of integrating people into the community and that builds strong ties...I’d hazard a guess that we have more individuals in this community that have very broad, expansive networks than other communities. (W114)

Local policymakers held similar views, with one saying: “what you’ll find is that this community is very well networked. There are networking functions daily. I can go to any of those functions and know most of the people in that room. And we all circulate in different circles, but we’re all connected.” (W107) Comments like these suggest that networking is a highly valued practice within the community. This is born out by the significantly higher rates of entrepreneurs in Waterloo reporting to have discussed their firm issues with family and friends discussed above.

The importance of entrepreneurship and networking in the region’s culture has encouraged many successful business people to participate in these networks, contributing to their high perceived valued by entrepreneurs. A local venture capitalist explained that: “the CEOs of the large companies, whether it’s [former co-CEOs] Mike [Lazaridis] and Jim [Balsillie] at RIM or Tom Jenkins at OpenText…will help the next generation of entrepreneurs. [If I] sent a note over to [them] to say I met with this company, the CEO has been struggling with this or that, would you be able to help them. I know they’re going to get a response.” (W115)

The cultural importance of entrepreneurship within the community has helped build strong networks of skilled workers accustomed to the unique demands and opportunities of

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working in a startup. None of the entrepreneurs interviewed in Waterloo experienced the same the challenges as their counterparts in Calgary did of competing against the much higher salaries from larger firms. Instead, the normalization of working within startups has allowed entrepreneurs leeway in offering lower salaries or job security in favour of a more relaxed workplace and the possibility of revenue sharing. The social status accorded workers in firms that are seen as particularly innovative can serve as a substitute for more pecuniary interests. For example, one entrepreneur reported that his workers were willing to forgo their pay during periods of low cash flow in exchange for flexible working conditions and a portion of future revenues. The founder believed that: “the model of being able to work from home, be your own boss and get to be a participant in a pretty cool product made up for not getting a pay check.” (W130)

The material attributes of Waterloo’s ecosystem helped maintain the strong cultural support for entrepreneurship amongst workers, mentors, and successful business as well as the entrepreneurs themselves. Communitech, a non-profit entrepreneurship support organization, has been very successful in promoting the ethos of technology entrepreneurship throughout the region. Some of this support is direct, such as its Accelerator Centre and Hyperdive incubator that supply subsidized office space, early stage funding, and expert advising to selected local startups. Other programs provide less direct support to individual firms but help create a community entrepreneurs can turn to when necessary. The organization’s peer-to-peer groups and networking events give entrepreneurs the opportunity to meet both other firm founders as well as executives from larger firms and prospective investors, advisors and mentors. Many interviewees said these networking programs helped them learn from other entrepreneurs who had encountered similar problems as them as well as introducing them to more senior business people who can provide guidance on long-term strategic decisions. As one entrepreneur described: “[Communitech] was instrumental for us at the early stage. It gives you access to facilities, access to contacts and the events. Again, that’s induced serendipity. You attend events certainly to pick up information, but you also run into the types of people who are maybe interested in investing or who can help out.” (W118)

These events do more than simply help entrepreneurs connect with like-minded people: by allowing new entrepreneurs to meet with more successful entrepreneurs, Communitech and other local organizations are able to promote a particular vision of high-growth technology-led firms. This vision helps reproduce the cultural importance of technology entrepreneurship within the region’s ecosystem by celebrating successful entrepreneurs and normalizing particular practices like young university graduates founding growth-oriented companies. Communitech is in a position to influence how entrepreneurship is understood, in effect allowing it to reinforce the ecosystem’s social and cultural attributes. However, Communitech could not have become such a successful material attribute of the ecosystem without the support of local business and political leaders that came about through the preexisting social and cultural attributes that supported technology-based entrepreneurship. The high social status of entrepreneurship encourages successful business people to pledge both time and money to support these organizations.

6. DISCUSSION Both Calgary and Waterloo feature feedback loops between the cultural, social, and

material attributes of their ecosystems (see Figure 2). In the case of Waterloo, organizations like Communitech and the University of Waterloo promote networking amongst entrepreneurial actors as well as highlight local examples of successful technology entrepreneurship, increasing

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the social status of entrepreneurship. This encourages actors within the region to participate in these networks, to dedicate their limited time to advising or mentoring entrepreneurs, or to work in a high-risk startup. The high level of entrepreneurial activity created by this reproduces and reinforces the region’s pre-existing cultural outlooks towards entrepreneurship. The strength of these attributes and their relationships creates a rich, ‘munificent’ ecosystem for technology entrepreneurship.

Calgary represents a more ‘arid’ ecosystem. The predilection for personal wealth creates an incentive to build startups whose focus is on creating quick profits by serving the immediate needs of the local resource sector rather than building an advanced technology with global demand or a sustainable business model. This should not be interpreted as greed, but instead that social standing within Calgary’s entrepreneurial community is largely created through personal wealth rather than other types of business accomplishments. As a result, entrepreneurs have little incentive to dedicate a great deal of time to networking with other entrepreneurs or advisors when they could focus on scanning their environment for new business opportunities. Given this context, it is difficult for entrepreneurial support organizations like Innovate Calgary to strengthen existing networks amongst entrepreneurs or build new ones. This leads to the low levels of engagement within the ecosystem’s social attributes, which is further perpetuated by the pre-existing profit-oriented culture. The weakness of Calgary’s ecosystem stands in contrast to its high rates of technology entrepreneurship; the region’s booming economy acts as a catalyst for entrepreneurial activity.

Figure 2: Relationships Between Ecosystem Attributes in Calgary and Waterloo

To build on the biological metaphor inherent in the term ‘ecosystem’: Calgary’s ecosystem can be thought of as an industrialized cornfield while Waterloo’s is more similar to a

meadow. A cornfield is capable of extraordinary yields, but only when it is constantly fertilized,

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ploughed, and protected with pesticides. Its productivity quickly collapses without this intervention. Without strong relationships between its cultural, social, and material attributes, it is likely that Calgary’s entrepreneurial economy would deteriorate if the local resource sector were to suffer a protracted downturn due to declining petroleum prices, as it did in the 1980s and 1990s. A meadow has lower productivity, but its rich web of plants and animals creates a resilient and self-perpetuating ecology. The strong linkages between its cultural, social, and material attributes suggest that Waterloo’s ecosystem will be resilient to shocks such as the decline of Blackberry since 2012.

7. CONCLUSIONStudying the interplay between cultural, social, and material attributes is key to

understanding the larger role of entrepreneurial ecosystems within regional economies. Entrepreneurial ecosystems should not be defined simply as regions with high rates of entrepreneurship; this mistakes the effect for the cause. This would mistake the effect for the cause. Instead, there should be increased attention to the internal dynamics of ecosystems to better understand how they actually support the entrepreneurship process. This paper draws a distinction between munificent and arid ecosystems. In munificent ecosystems like Waterloo, the strong connections between attributes create a mutually reinforcing system in which the cultural outlooks that foster dense networks and effective public programs are themselves strengthened by these factors. In arid ecosystems like Calgary, the lack of these relationships contributes to an overall weaker ecosystem that is less able to cope with economic shocks or downturns in its local economy. Thus, the effects of entrepreneurial ecosystems do not exist in isolation but rather materialize through the combined influence of multiple attributes. This relational perspective of cultural, social, and material attributes makes three contributions to the study of entrepreneurial ecosystems and the geography of entrepreneurship more broadly. First is the identification of various categories of elements that constitute an ecosystem. This provides a framework for future research methodologies that can analyze and compare entrepreneurial ecosystems to reveal the different ways in which they emerge, change over time, and act influence the entrepreneurship process. Second, it provides for an expanded view of entrepreneurial ecosystems, which acknowledges that the underlying attributes exist in many different regions, even those that do not appear to be traditionally successful entrepreneurial regions. This suggests that many regions contain the potential for a strong ecosystem but their attributes, particularly their cultural and social attributes, must be cultivated over a long period of time. It also demonstrates that high rates of entrepreneurship do not necessarily imply a well functioning entrepreneurial ecosystem or environment. Finally, the importance of relationships between the different attributes demonstrate that new material attributes such as entrepreneurial support organizations, state-financed startup investment schemes, or new university technology and knowledge transfer programs, are unlikely to succeed if they are not underpinned by complimentary social and cultural attributes. Regional entrepreneurial policy therefore should focus on building underlying support for these new programs rather than expecting the programs themselves to create entrepreneurial cultures and networks.

As research on entrepreneurial ecosystems continues to develop, there is a need for a detailed theoretical framework to understand the processes through which ecosystems emerge, change, and influence the activities of entrepreneurial actors within them. Without this, research on ecosystems risks devolving into simple description of successful regions that lacks any claim to more generalizable findings about ecosystem’s internal dynamics or its role in economic

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development. Identifying the attributes of entrepreneurial ecosystems and their relationships is the first part of a much broader research agenda. There is also a need for a dynamic perspective that seeks to understand how the structure and influence of ecosystems change over time in response to both external economic and social shocks as well to internal changes, such as entrepreneurial successes or the concerted philanthropic or organizational efforts of a few ‘ecosystem entrepreneurs.’ At the same time, researchers must develop metrics that can be used to identify the presence of the ecosystem attributes discussed in this paper and compare them between different regions. While some metrics, such as startup rates, VC investment, and the size of entrepreneurial exits are readily available, gathering comparable data on cultural outlooks or the effectiveness of social networks is much more difficult. These research developments will provide both a more nuanced and rigorous understanding of how entrepreneurial ecosystems affect the entrepreneurship process but will also enable more precise and reliable policy recommendations to strengthen existing ecosystems and develop them in regions without histories of successful entrepreneurial growth.

Without a strong theoretical foundation and clear metrics, the term ‘entrepreneurial ecosystem’ risks becoming a buzz word that encourages policy interventions that do little more than generate consultancy fees. But as a concept, entrepreneurial ecosystems provides several important insights into the nature of entrepreneurship within a community that makes it a valuable addition to the literature. It emphasizes the importance of the larger community in creating and sustaining supportive environments and highlights the fact that entrepreneurship is an interactive process involving a diverse array of parties rather than the act of a solitary entrepreneur. Therefore, the development of research on entrepreneurial ecosystems should focus not on the rates of entrepreneurship within a region but rather the development of supportive (or non-supportive) attributes and communities and the processes through which these affect the actions, outlooks, and practices of entrepreneurial actors.

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