Why does context shape entrepreneurial innovation? Analysis of innovation ecosystems

Taking context into account in entrepreneurship research

Academic literature on entrepreneurship focuses on the individual, the team, and the resulting business. The authors of the article start from the observation that, with the exception of a few early studies, the vast majority of research has not paid much attention to the “context” in which entrepreneurial activity takes place.

However, this context plays an important role in stimulating, shaping, diversifying, and regulating entrepreneurial activity, as well as in its outcomes in terms of the types of innovation produced and the performance of new companies. In other words, the authors note that entrepreneurial innovation is not just a matter of talented individuals or good ideas; it is greatly influenced by the context in which it occurs.

The aim of their article is to fill this gap by proposing, on the one hand, an organizational framework for understanding the contextual influences on entrepreneurial innovation and, on the other hand, a research program on this topic.

What they refer to here as context is something that can be broken down and studied. The core of their article proposes a typology of six contexts or dimensions that stimulate or inhibit entrepreneurial activity:

• Industrial and technological contexts

Certain phases of an industry’s life cycle—often the early ones—are marked by higher entrepreneurial activity than others. Similarly, the architectural attributes of a technology facilitate or limit the innovative activities of the actors who use it.

• Organizational contexts

The organizational context reflects the influence of organizational culture, practices, experience, knowledge, and skills of future founders on entrepreneurial innovation. Thus, factors such as skills, previous employment, existing incentives, and the availability of financing have a strong influence on both people’s entry into entrepreneurship and the type of innovation they produce.

• Institutional and political contexts

Institutions such as intellectual property rules, the rule of law, competition rules, etc. influence the opportunity costs of starting a business.

Regions with entrepreneurship support networks make it easier to start a business. Other more informal institutions also influence entrepreneurial activity through social and cultural norms, perceptions of legitimacy or desirability.

• Social contexts

Networks between entrepreneurs, business partners, financiers, and existing companies influence entrepreneurship and its nature. Interactions and exchanges between diverse actors with varied knowledge are essential for the production of new knowledge and therefore for entrepreneurial innovation. These networks include entrepreneurs, their customers, all actors with complementary assets, and those in institutional forums. Each of these contexts has temporal and spatial dimensions.

• Temporal contexts

Industries, organizational and institutional contexts are marked by a strong temporal dimension. Industries, laws, and regulations evolve over time. Entrepreneurial ecosystems also change, and new clusters are created. Successful entrepreneurs who bring their capital, networks, and experience create feedback loops that can facilitate entrepreneurial dynamics.

• Spatial contexts

The spatial dimension of entrepreneurship concerns the geographical location of new businesses (global, national or regional distribution) and the institutions that support them. This dimension may include the mobility of innovative entrepreneurs to geographical areas where regulations, laws, networks, etc. seem more favorable to innovative entrepreneurship.

Towards a systemic approach to entrepreneurial ecosystems

Far from dissecting them with a scalpel, the authors show that these contexts interact: they are not independent but form a whole, a multidimensional framework, sometimes coherent and sometimes fragmented, which influences innovation trajectories. They consider that the interaction between variations in these contextual elements and entrepreneurs constitutes different entrepreneurial ecosystems that generate different types of innovation.

The authors then propose a research program based on these six dimensions, which links the different contexts and entrepreneurial innovation. Among the many questions they raise are:

• What are the mechanisms by which ecosystems structure, mature, decline, or renew themselves?
• How does context influence the effectiveness of regional and national programs designed to stimulate entrepreneurial innovation?
• How do these contexts affect the diffusion and commercialization of new technologies by entrepreneurs?
• Which contexts of entrepreneurial innovation have the greatest impact on business growth?

Finally, the authors of the article show that since the 1990s, policymakers in many countries, including France, have implemented policies and tools aimed at creating an environment more conducive to entrepreneurial innovation. They highlight the many objectives, measures, and instruments developed by public authorities to, for example, influence the number of businesses created or promote the creation of growth- and innovation-oriented businesses.

Finally, they suggest that a policy aimed at promoting a particular aspect of entrepreneurial innovation requires a specific combination of instruments for a particular combination of contexts. In other words, a “combination of contexts” requires a “combination of policies.” Such an approach requires a more detailed assessment of the effectiveness of policy instruments. Clearly, this vision makes the task of policymakers more difficult, but it can, in turn, contribute to more effective policy.

Question for Philippe Mustar, Professor at the Center for Industrial Economics (CERNA) at Mines Paris – PSL and co-author of the article

Philippe Mustar, how do you explain the success of your article published in 2014, which continues to be widely cited?

“Twelve years after writing this article, the literature on entrepreneurial ecosystems has grown considerably (not to be confused with that on business ecosystems, which is about fifteen years older). At the time, the field was still emerging and only a few papers containing the term ”entrepreneurial ecosystem” in the title or keywords had been published. It should be noted that the first article to popularize this concept was written by Daniel Isenberg, professor of entrepreneurial practice at Babson College Executive Education, and dates back to 2010.

Today, entrepreneurial ecosystems are one of the most studied and prolific topics in entrepreneurship research. Our article arrived at the kairos, a Greek word meaning “opportune moment,” that is, at the right time, neither too late nor too early. At a time when the term “entrepreneurial ecosystem” was beginning to spread, this paper offered both a conceptual framework and research questions that have been taken up—and continue to be used—by hundreds of colleagues around the world. These 2,000 citations are one of the small pleasures of being a researcher. It is very gratifying to see that our work, which helped launch a new research program, is not only cited but also taken up by so many colleagues around the world.”

For further reading:

Erkko Autio, Martin Kenney, Philippe Mustar, Don Siegel, Mike Wright, “Entrepreneurial innovation: The importance of context,” Research Policy, Volume 43, Issue 7, 2014, Pages 1097-1108, ISSN 0048-7333.