Answered: Write reflection and insights regarding…

Understanding Business

12th Edition

ISBN:9781259929434

Author:William Nickels

Publisher:William Nickels

Chapter1: Taking Risks And Making Profits Within The Dynamic Business Environment

Section: Chapter Questions

Problem 1CE

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Write reflection and insights regarding the features of entrepreneurial escosystem.

Features of Entrepreneurial Ecosystem:

Entrepreneurial ecosystems generally emerge in locations that have place-specific assets. For example, Oxford’s emergence as an entrepreneurial ecosystem is undoubtedly linked to its strategic location with regard to London and Heathrow airport, its attractiveness as a place in which to live, its university and associated global brand and its unique cluster of UK government laboratories (Lawton Smith, 2013). Entrepreneurial ecosystems are typically desirable places to live either on account of their cultural attractions or their physical attributes which provide opportunities for outdoor activities. Florida (2002) has emphasised the importance of such considerations for the creative class. Their existing employment is often biased towards knowledge-intensive sectors, employing largenumbers of graduates. In some cases an entrepreneurial ecosystem may emerge from a previous industrial tradition. For example, the emergence of an aircraft industry in the Solent region of England arose out of its establishing boat-building industry. Thisis because the earliest aircraft were designed to land and take off on water and therefore drew upon boatbuilding skills to design and manufacture the aircraft floats. However, when aircraft began to be designed for airfields the region lost its advantageand the industry expanded in other locations. The Swiss medical technology ecosystem developed out of a background of precision skills developed by the watch industry. The unique combination of biotech and engineering skills was able to produce better medical devices (Vogel, 2013a).

9At the heart of an entrepreneurial ecosystem typically there is at least one, and usually several, ‘large established businesses’, with significant management functions (e.g. head office or divisional/ subsidiary office) as well as undertaking R&D and production activities. These businesses will also be rich in technology. They play significant roles in developing the ecosystem. First, they are ‘talent magnets’, recruiting large numbers of skilled workers, many of them recent graduates, from outside the area (Feldman et al, 2005). Second, they provide business training for their employees and enable them to progress up the corporate hierarchy. It is through this process that staff who were initially recruited for their technological know-how acquire management skills to become technology managers. This represents a valuable resource for small firms. Third, they are a source of new businesses as some staff will leave to start their own companies. ‘Cluster maps’ showing where the founders of businesses were initially employed highlight the key role of certain companies as sources of large numbers of spin-offs (for example see Neck et al, 2004 for Boulder). Fourth, large exogenous firms play a major role in developing regional ecosystems, especially in peripheral regions, developing the ecosystem’s managerial talent pool (Adams, 2011) and providing commercial opportunities for local businesses. For example, SMEs in the UK’s oil and gas ecosystem in Aberdeen have been able to sell to the multinational energy companies operating in the North Sea and in many cases also ‘piggyback’ on these relationships to access other oil and gas markets around the globe (Raines et al, 2001; Mason and Brown, 2012). Large companies can also make a variety of other contributions, including the provision of space and resources for local start-ups, the creation of programmes to encourage start-ups and the development of companies that enhance their own eco-systems. They also put the ecosystem ‘on the map’.Indeed, as Isenberg (2013) states, “you simply cannot have a flourishing entrepreneurship ecosystem without large companies to cultivate it, intentionally or otherwise.” But for these benefits to occur requires the businesses to be open and collaborative. Arguably, the businesses that are most effective in stimulating the ecosystem are those that are locally headquartered rather than being part of multinational businesses. Major shareholders are likely to be local, there will be a significant number of senior management jobs and the business is likely to be embedded, with a strong commitment to the local area. This, in turn, points to the importance of well-functioning stock markets that enable growing firms to achieve IPOs rather than sell-out to large multinational companies. This is implicit in the FORA model which highlights the importance of ‘blockbuster entrepreneurship’. This is a successful entrepreneurial firm that has grown to an exceptional size and has created significant wealth for its founders, investors, senior management and employees. These individuals, in turn, maintain an ongoing involvement in the ecosystem, reinvesting their experience and wealth as mentors, investors and serial entrepreneur.

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