A Process Model of Locational Change in Entrepreneurial Firms: An Evolutionary Perspective

How do changes in the spatial organization of entrepreneurial firms come about? This paper provides a conceptualisation of the process of locational change. A process model of locational change is constructed on the basis of an empirical study of 109 locational events during the life course of 25 young firms in knowledge intensive sectors (knowledge services and biomedicals). This process model of locational change maps both internal and external variation and selection processes. This model contributes to the development of a causal process theory of the spatial development of (new) firms.location, entrepreneurial firms, evolutionary theory, decision-making, process models

Why Butterflies Don’t Leave - Spatial development of new firms

There is an emerging interest in the local conditions of entrepreneurship and firm dynamics. The often-cited examples of entrepreneurship in successful regional clusters show that entrepreneurship is really a localized phenomenon, which seems to be at odds with the increased globalization of economic activity, in which firms are said to be relatively footloose and easily become multinational enterprises. Other authors have noted that in spite of information and communication technologies, the vital importance of face-to-face contact cannot be discounted (Hallowell, 1999); as Leamer and Storper (2001: 641) observe, the Internet “allows long distance ‘conversations’ but not ‘handshakes’ ”. Next to controversies concerning the role of the global and the local for firms (cf. West, 2002), there is a general weakness in the theory of the firm concerning the analysis of (new) firm dynamics. According to Geroski (2001) the theory of the firm in economics is preoccupied by the question of why firms exist, and it is both very narrow and very static. Further work in this area might be usefully extended to address the question of how firms grow and develop over time, and this, in turn, will force people to think through issues associated with what makes change difficult for firms. We will deal with these issues in a discussion of evolutionary theories of the firm in general, and specific theories of the entrepreneurial firm and the multinational firm in particular, and regional cluster approaches. The central question in this paper is: “Are there necessary interactions between the development of entrepreneurial firms and their spatial organization over time?”. We will deal with this question in a longitudinal way, i.e. analyze the development of entrepreneurial firms and the changes in their spatial organization during their life course. The development of entrepreneurial firms involves the firm–founding (Shane and Khurana, 2003) and the subsequent early growth (Garnsey, 1998) of the firm. These firms are not self-employed (anymore), and mostly not (yet) a multinational corporation; in a sense they are neither small nor large, but dynamic, turning from a caterpillar into a butterfly (cf. Penrose 1995), and are central to dynamics in the new, or entrepreneurial economy (Bresnahan et al., 2001; Audretsch and Thurik, 2003). The empirical part of this study is based on comparative case studies (Eisenhardt, 1989; Yin, 2003) of 25 entrepreneurial firms, and 8 micro firms in four propulsive industries, namely professional business services, biomedicals, graphics-media, and shipbuilding. The spatial organization of firms consists of the dynamic constructs of locational adjustment and locational flexibility, which refer to the adjustment of the spatial organization of firms outside the headquarter (the location at which the entrepreneur/owner-manager executes his activities) of the firm and to the flexibility of the location of the headquarter respectively. With these two dimensions the tendency towards concentration or dispersion of the firm can be observed (cf. Storper, 1997, p.299-300). The spatial development of new firms consists of the sequence of locational events. Locational events refer to the changes in the state of the spatial organization of firms. The different types of locational events were coded in order to find typical sequences of locational events (cf. Abbott, 1995). Concrete events have been studied that may be unique to some extent. However, “[t]he focus is not on how or why something happened but on how or why something happens” (Mohr, 1982, p.5). We are looking for mechanisms that explain the spatial development of new firms. The abstract knowledge resulting from insight into these mechanisms may be more generally applicable. We have used a combination of quantitative and qualitative methods. We registered the general characteristics of the entrepreneur, his network relations, the firm (its strategy, structure and capabilities), inter-organizational relations, and their locations. The qualitative method involved a life history of the firm as told by the entrepreneur (Van Geenhuizen et al., 1992). This life history has been explicated with a critical incident technique (Tjosvold and Weicker, 1993; Chell and Pittaway, 1998). The fieldwork involved the study of how (location) decisions are actually made during the life course of emerging firms and how they affect and are affected by the firms’ development in general. Next to the quantitative data derived from the interviews other data from company archives, the press and other media was collected. The empirical study shows that capabilities more often seem to constrain (as a place-specific sunk cost) than to enable the spatial flexibility of entrepreneurial firms. However, certain organizational capabilities have to be built in order to become multilocational, especially on the interregional and international levels. The inter-organizational networks in regional clusters are hardly relevant in the explanation of the dynamics in the spatial organization of entrepreneurial firms. They only seem to constrain the location behavior in the early phases of entrepreneurial firms, when radical changes in the spatial organization are almost never considered at all.

Entrepreneurship, Evolution and Geography

This chapter is an inquiry into the role of entrepreneurship in evolutionary economic geography. The focus is on how and why entrepreneurship is a distinctly spatially uneven process. We will start with a discussion on the role of entrepreneurship in the theory of economic evolution. Next, we will review the empirical literature on the geography of entrepreneurship. The chapter concludes with a discussion of a future agenda for the study of entrepreneurship within evolutionary economic geography.entrepreneurship, evolution, geography

Entrepreneurship, Innovation and Institutions

This paper discusses the nature of entrepreneurship and its relation to innovation along a cycle in which exploration and exploration follow upon each other. We place the roles of entrepreneurship in innovation policy within this cycle of innovation. Different types of innovation along the cycle of innovation are realized with different forms of entrepreneurship, which are constrained or enabled by different legal institutions. One of the key roles of governments is to design, change or destruct institutions in order to improve societal welfare. The question is what governments should do in the context of innovation policy. Here, social scientists can make a contribution by providing insight into what entrepreneurship and innovation is (theories about these phenomena), and how institutions affect them in reality (empirical evidence about their effects). This requires social scientists to be engaged scholars and to provide new policy options as an honest broker between the academic world and the policy world. The key question of this paper is: How can policy best enable innovation based entrepreneurship? The answer is derived from looking at both theoretical tenets and empirical evidence using an institutional design perspective, which aims at providing arguments for the design, change and/or destruction of institutions, given the goals of the governments. We provide an overview of some (empirically tests of) institutions that enable or restrain particular types of entrepreneurship. Examples of these institutions are intellectual property rights and the Small Business Innovation Research program, employment protection, and non-compete covenants.entrepreneurship, innovation, institutions, innovation policy

Starting anew: Entrepreneurial intentions and realizations subsequent to business closure

We know that most businesses fail. But what is not known is to what extent failed ex-entrepreneurs set up in business again. The objective of this article is to explore potential and realized serial entrepreneurship. Based on three disciplines – psychology, labour economics, and the sociology of careers – we formulated propositions to explain (potential) serial entrepreneurship. We tested these propositions empirically with a longitudinal database of 79 businesses that had closed within 5 years after start-up. A large majority of the ex- entrepreneurs maintained entrepreneurial intentions subsequent to business closure, while almost one in four business closures were followed by a new business (serial entrepreneurship). Our results show that the determinants of restart intention (potential serial entrepreneurship) and actual restart realization (realized serial entrepreneurship) are different. Ex-entrepreneurs who are young, who worked full-time in their prior business, and who recall their business management experience positively are likely to harbour restart intentions. Only ‘being located in an urban region’ transpired to have a significant effect on the start of a new business. Although entrepreneurial intentions are a necessary condition for the start of a new business, this study shows that the explanation of entrepreneurial intentions is distinct from the explanation of new business formation subsequent to business closure.serial entrepreneurship, business closure, entrepreneurial intentions, new business formation, The Netherlands

Gazelles, Industry Growth and Structural Change

This paper examines to what extent gazelles are the drivers of the growth of industries and structural change. To this purpose we analyze gazelles over a 12 year period (annually from 1997 until 2008) in the Netherlands, and relate them to the dynamics in employment per industry. We use a panel vector autoregressive (PVAR) model to explore the relations between the presence of gazelles and industry (employment) growth (with 43 two digit industries). An increase in the presence of gazelles in an industry appears to have a positive effect on the subsequent growth of the industry. We do not find evidence for an inverse causal relation: there are no long run positive effects of increases in industry growth on the presence of gazelles. There is also no relation between the overrepresentation of gazelles and subsequent industry growth.entrepreneurship, gazelles, industry growth, structural economic change

Gazelles, Industry Growth and Structural Change

This paper examines to what extent gazelles are the drivers of the growth of industries and structural change. To this purpose we analyze gazelles over a 12 year period (annually from 1997 until 2008) in the Netherlands, and relate them to the dynamics in employment per industry. We use a panel vector autoregressive (PVAR) model to explore the relations between the presence of gazelles and industry (employment) growth (with 43 two digit industries). An increase in the presence of gazelles in an industry appears to have a positive effect on the subsequent growth of the industry. We do not find evidence foran inverse causal relation: there are no long run positive effects of increases in industry growth on the presence of gazelles. There is also no relation between the over-representation of gazelles and subsequent industry growth.industrial organization ;

Types of Entrepreneurship and Economic Growth

In this paper, we empirically investigate the effect of entrepreneurship on economic growth at the country level. We use data from the Global Entrepreneurship Monitor, which provides comparative data on entrepreneurship from a wide range of countries. An important element of this paper is that we compare the effects of entrepreneurial activity on economic growth in high income, transition and low income countries. This dataset also enables us to make a distinction between the effects of entrepreneurship in general and growth-oriented entrepreneurship in particular. We present empirical tests of the impact of entrepreneurial activity on GDP growth over a four year period for a sample of 36 countries. Our empirical analyses suggest that entrepreneurship does not have an effect on economic growth in low income countries, in contrast to transition and high income countries where especially growth-oriented entrepreneurship seems to contribute strongly to macroeconomic growthentrepreneurship, growth-oriented entrepreneurship, economic growth