The Entrepreneurial Ecosystem

Organising Business Creativity: Blog 2 of 6

How do you feel when you hear the word “entrepreneurship”? Do you shudder because of the inconceivable risk associated with it, or do you get excited because of its sheer potential to impact the world and yourself?

Well, I suppose something in between would be possible too, although I certainly know people who fall into either extreme.

The advisor for the career development program at Harvard Business School, Timothy Butler, once said that the students there — even those that have no intention of founding a startup — would be offended if you told them they were not “entrepreneurial” (Butler, 2017).

If you happen to be in an environment where “entrepreneurship” is thrown around a lot as a buzzword, then I’m sure you have at least a vague idea of what entrepreneurship means. But how exactly do you define “entrepreneurship”? Truth is there is no THE definition. However, I do like this definition I encountered: “Entrepreneurship is the process of creating value by bringing together a unique package of resources to exploit an opportunity.” (Stevenson & Carlos Jarrillo‐Mossi, 1986, p. 10)

I myself happen to be in an environment where “entrepreneurship” is a ubiquitous and unfading topic — a thriving “entrepreneurial ecosystem” so to say. The use of the metaphor “ecosystem” is rather overwhelming, be it in academia, industry, policy, or management, and yet there really is no precise definition of it. In fact, there is a research paper that describes this uncertain definition and the need to disentangle it . (Audretsch, Cunningham, Kuratko, Lehmann, & Menter, 2019)

In its effort to summarize the extensive literature on the topic, the authors encountered two requirements for an entrepreneurial ecosystem: Generating value for the ecosystem and distributing the value among the members of the ecosystem (Audretsch et al., 2019).

Speaking of such an ecosystem, I can say with confidence that the one I mentioned to be in just a couple of lines ago fulfills these two tasks. Specifically, I am part of the Munich startup ecosystem which comprises mostly the universities in Munich, in particular the Technical University of Munich (TUM) and to a slightly lesser extent the Ludwig-Maximilians-Universität München (LMU), the top two universities of Germany according to QS World rankings and THE rankings (Times Higher Education [THE], 2021; Top Universities, 2022). But apart from the general rankings, the entrepreneurial characteristic is what really makes them stand out. According to Sifted, my university TUM is ranked third in Europe in terms of churning out “unicorns” — a term used for startups worth more than US$1B — just closely behind University of Cambridge and INSEAD. The statistics tell us it has produced 8 unicorns so far and 9 future unicorns are in the making (Nicol-Schwarz, 2021).

But okay, that is enough of me being proud of my university. Isn’t it interesting that entrepreneurial ecosystems happen to revolve around universities? Researchers support this notion of universities being key actors within entrepreneurial ecosystems because they do not only disseminate knowledge but also commercialize knowledge themselves through academic spinoffs. Additionally, academic spinoffs are more likely to internationalize. (Audretsch et al., 2019)

The argument that public research is a key ingredient in knowledge and technology transfer is also supported by research. While examining the economic impact of direct interactions with public research institutions on new technology-based firms (NTBFs) innovation success, researchers found those firms to be more likely to introduce new products and services to markets. A reason might be that academic research would flow and spillover across an entrepreneurial ecosystem. (Fudickar & Hottenrott, 2019)

(Fun fact: Hanna Hottenrott was one of the two professors for an economics course I attended back at my university.)

Of course, even if the entrepreneurial ecosystem is strong, that doesn’t mean startups inside it cannot fail. In fact, one of the common patterns resulting in startup failure is the following: “wrong opportunity, right resources” (Eisenmann, 2021).

Thankfully though, such failure patterns can be avoided if you are aware of them. Thus, I highly recommend you continue now with the HBR article of Tom Eisenmann (see Reference List) if you are interested in founding a startup and want to avoid these traps.

References

Audretsch, D. B., Cunningham, J. A., Kuratko, D. F., Lehmann, E. E., & Menter, M. (2019). Entrepreneurial ecosystems: Economic, technological, and societal impacts. The Journal of Technology Transfer, 44(2), 313–325. https://doi.org/10.1007/s10961-018-9690-4

Butler, T. (2017). How to Identify and Hire Truly Entrepreneurial Leaders. Retrieved from https://hbr.org/2017/03/hiring-an-entrepreneurial-leader

Eisenmann, T. (2021). Why Start-ups Fail. Retrieved from https://hbr.org/2021/05/why-start-ups-fail

Fudickar, R., & Hottenrott, H. (2019). Public research and the innovation performance of new technology based firms. The Journal of Technology Transfer, 44(2), 326–358. https://doi.org/10.1007/s10961-018-9695-z

Nicol-schwarz, K. (2021, July 26). Europe’s top 10 ‘unicorn universities’. Sifted. Retrieved from https://sifted.eu/articles/unicorn-universities/

Stevenson, H. H., & Carlos Jarrillo‐Mossi, J. (1986). Preserving Entrepreneurship as Companies Grow. Journal of Business Strategy, 7(1), 10–23. https://doi.org/10.1108/eb039138

Times Higher Education (2021). World University Rankings. Retrieved from https://www.timeshighereducation.com/world-university-rankings/2022/world-ranking#!/page/0/length/25/sort_by/rank/sort_order/asc/cols/stats

Top Universities (2022, January 29). QS World University Rankings 2022. Retrieved from https://www.topuniversities.com/university-rankings/world-university-rankings/2022

This is part of a blog series on “Organising Business Creativity”. It is a course I am currently attending as an exchange student at the triple-accredited Hanken School of Economics in Helsinki, Finland. As I go through the various topics of the course, I will write short blogs on them while referencing at least three of the assigned readings. Enjoy!