National and regional contexts are implicated positively and negatively in shaping the possibilities for entrepreneurship. On the one hand, institutions may influence the identification of business opportunities and the possibilities for entrepreneurship. On the other, they may create resource constraints and drive entrepreneurs to make use of informal institutions.
Chaired by Ayşe Seyyide, this Centre for Innovation Management Research (CIMR) workshop invited four researchers to share their findings on the implications of context on the formalisation of entrepreneurship. The discussion was informed by both institutional and micro level perspectives, ranging from Egypt to Columbia and from wastepickers to the OECD.
Entrepreneurship from a comparative economics perspective
Slavo Radosevic, Professor of Industry and Innovation Studies at UCL, began the discussion from a comparative economics perspective.
The dominant narrative around entrepreneurship focuses on individuals, but a person-centric definition of entrepreneurship cannot be accommodated within the National Systems of Innovation (NIS) definition. Professor Radosevic argues that we must therefore look to which innovation systems are supportive of entrepreneurship, balancing connectivity with creativity.
Viewing entrepreneurship then as a macro-phenomenon, there are three analytical approaches that are relevant in exploring the relationship between varieties of capitalism and entrepreneurship:
- GEM/GEDI Approach: Individuals are the entrepreneurs, and the issue is whether the external environment context is conducive to their aspirations and attitudes.
- Risk-Reward Nexus (RNN) Approach: The major entrepreneur is the innovative enterprise and its social conditions which have to do with the issue of financial commitment, strategic control and organisational integration.
- Entrepreneurial Propensity of Innovation (EPIS) Approach: Entrepreneurship is a system-level property or capacity to generate knowledge–intensive entrepreneurship based on knowledge-intensive entrepreneurial opportunities.
Professor Radosevic’s research will examine which of the varieties of capitalism is the most conducive for the generation of knowledge-intensive entrepreneurship opportunities.
Divergent patterns of institutional entrepreneurship by emerging country entrepreneurs
Dina Mansour, a third year PhD student at Birkbeck’s Department of Management, is studying the bilateral relationship between institutions and high-growth entrepreneurs in Egypt. She notes that institutions in developing countries are more fragile than their counterparts elsewhere. In strong, civil societies with efficient judicial systems and freedom of expression, institutions will shape how people act. Conversely, weak institutions leave institutional voids, creating space for entrepreneurs to develop destructive workaround solutions which can be collectively detrimental to the national institutional framework.
Mansour’s research suggests that, while laws and policy may change on paper, this does not always shape what is happening at grassroots level. A lack of trust in institutions means entrepreneurs continue to develop their own informal infrastructure, one that has the potential to cause long term damage to the national institutional framework if successive entrepreneurs continue to follow this example.
Informal entrepreneurs and formalisation: insights from a role identity transition lens
Continuing the discussion around informal entrepreneurship, Dr Manto Gotsi from the Department of Management put forward her research into the formalisation of wastepickers in Cali, Columbia.
In emerging economies in particular, informal entrepreneurship activities account for up to 60% of GDP and can be seen as a stifling force to the development of the state. The majority of these entrepreneurs have chosen this route by necessity and are operating on a low-skilled, marginalised basis. While governments are keen to transfer these informal entrepreneurs into formalised roles, the tradition remains persistent.
In exploring this process, Dr Gotsi and her colleagues found that the road to formalisation is not a straight line; there are numerous entry and exit points in the transition process. The formalisation of the role of wastepickers in Cali through policy change alone was not enough to secure their transition; those who successfully transitioned from informal to formal can be separated from others by their belief in a ‘higher calling’ that gave them a sense of purpose and identity as an entrepreneur. Informal entrepreneurs who desired external validation, or who did not view themselves as entrepreneurs, did not formalise, or did not remain as formalised entrepreneurs in the long term. Dr Gotsi therefore calls for role identity development and campaigns to motivate and validate entrepreneurs to be incorporated into the formalisation process.
Applying entrepreneurial ecosystem and industrial path development concepts to regional policy analysis – a critique
Dr Jonathan Potter is Head of the Entrepreneurship Policy and Analysis Unit in the OECD Centre for Entrepreneurship, SMEs, Regions and Cities and Visiting Professor at Birkbeck. He discusses an attempt to develop policy advice on how to promote entrepreneurship and industrial transition in six regions in Poland, the United Kingdom and Thailand using the entrepreneurial ecosystems framework (Stam, 2015) and the industry path development framework (Grillitsch, Asheim and Trippl, 2018).
The application of these frameworks highlighted certain bottlenecks, such as culture and business support services in the entrepreneurial ecosystem and limited SME supply chains in industry path development. Dr Potter will look to ways to combine these two frameworks to support entrepreneurship policy.
The presentations from this workshop are available to download from the event page.