Evolutionary entrepreneurial ecosystems: a research pathway

Successful local economies continuously refine and reshape their knowledge base and technological boundaries to preserve their competitiveness over time (Buciuni & Pisano, 2018). This has emerged as an essential condition for their future prosperity and long-term sustainability. Others that fail to ‘reinvent’ themselves may fall into what Krugman refers to as the ‘specialization trap’. Excessive specializing in a narrow set of economic activities is deemed detrimental to the long-term competitiveness of a mature regional economy (Hassink & Shin, 2005; Narula, 2002; Williams & Vorley, 2014) as this makes them vulnerable to others’ comparative advantages. To survive and prosper, mature local economies have been left with little option but to evade the ‘specialization trap’ through relentless evolution to become productively active in new related or unrelated technological domains (Boschma, 2015; Kedron et al., 2019; Klepper, 2002; Kogler, 2015; Martin & Sunley, 2015; Murmann & Frenken, 2006). The evolution of an economic system hinges on its ability to absorb and develop a heterogeneous set of competences which serve as the foundations of economic complexity (Hidalgo & Hausmann, 2009). By adding new forms of knowledge to the existing base of competences, regional economies can improve their economic complexity, expand in new technological and industrial spaces, and ultimately increase their likelihood of evading the ‘specialization trap’.

In recent years, the ability of a territory to evade technology ensnarement and adapt to the vicissitudes of the global economy has found support in the emerging form of entrepreneurial ecosystems (Acs et al., 2017; Acs et al., 2014; Autio et al., 2014; Isenberg, 2010; O’Connor et al., 2018; Spigel, 2017; Stam & Spigel, 2016). Entrepreneurial ecosystems are considered by some to be neither industry nor technology-specific (Auerswald & Dani, 2017; Autio et al., 2018); in fact, their sustainability and evolution hinges on agnostic heterogeneity (Autio et al., 2018). Entrepreneurial ecosystems thinking is founded on the assumption that entrepreneurs are responsible for pushing the boundaries of a given economic system towards new geographical and technological trajectories. Entrepreneurs represent the aggregators and codifiers of new knowledge and competences, the triggers and enablers of innovation development, and the architects of new introductions into the market (Schumpeter, 1911; Shane & Venkataraman, 2000).

Entrepreneurial ecosystems are by their nature dynamic and evolutionary, having an origin or antecedent and transitioning over time (Spigel & Harrison, 2018). Firms, industries. or even clusters within a local economy are subject to the finite nature of life cycles and eventual demise. For ecosystems, however, expiration is not inevitable. Rather, the evolutionary processes of adaptation and mutation induce the diversity and heterogeneity that facilitates the sustainability and perpetuity of an ecosystem (Malecki, 2018; Roundy, 2017). However, there is scant knowledge of how these evolutionary processes of entrepreneurial ecosystems are manifest (Alvedalen & Boschma, 2017; Cavallo et al., 2019; Spigel & Harrison, 2018). From its conception (Cohen, 2006), the academic literature on entrepreneurial ecosystems makes an implicit acknowledgement of the evolutionary imperative (Motoyama & Knowlton, 2017; Pitelis, 2012). However, explicit studies of the evolution of entrepreneurial ecosystems are rare, or better considered more as expositions of industrial clusters’ life cycles (Cantner et al., 2020; Mack & Mayer, 2016). Much remains to be known about the antecedents and dynamics underlying the birth and evolution of local economies in the guise of complex entrepreneurial ecosystems.

As is common with emerging fields that exhibit early promise, a slow start to research on entrepreneurial ecosystems initially was then followed by a great upsurge in research output, in this case, triggered by a critical published piece that attracted wide attention (Isenberg, 2010). Academic researchers across a variety of fields and policymakers seeking the elixir of entrepreneur-led local economic growth turned their attention to the EE concept. Over a short number of years there emerged an enlarged volume of output then became cluttered and veered down unhelpful research alleys that inhibited theory development. Fragmentation and diffusion of research away from the core principles mitigated against theorizing. We propose that there is now the need for entrepreneurial ecosystems’ literature development to take stock, re-categorize the research to date, and get back on track through a re-focus on the key tenets of the framework. For instance, we contend that some entrepreneurial ecosystems research has by parts become at extremes either overly narrow (universities and accelerators as entrepreneurial ecosystems) or excessively broad (entrepreneurial ecosystems on a global scale via digitalization) thereby hampering theory development. Recently there have been a number of systematic literature reviews on entrepreneurial ecosystems that have endeavoured to refine and shape the emerging field and provide directions for future research in the quest for a more general theory (Alvedalen & Boschma, 2017; Brown & Mason, 2017; Cao & Shi, 2020; Cavallo et al., 2019; Hakala et al., 2020; Malecki, 2018; Stam & Spigel, 2016) (see Table 1). Despite some inconsistencies in measurement, all show similar patterns of exponential growth in EE literature post-2015. However, there is no review article specifically on the evolution of entrepreneurial ecosystems to date.

Our aim, therefore, in this paper, is to reflect on and assess developments to date in the furtherance of the still under-theorized concept of entrepreneurial ecosystems. We in particular advocate for increased emphasis by researchers on the evolutionary dynamics and processes integral to the understanding of entrepreneurial ecosystems. To that end, we suggest in this paper that a number of crucial evolutionary aspects remain unresolved for entrepreneurial ecosystems. Foremost amongst these are the appropriate and evolving boundaries of the ecosystem, the internal and external sources of new knowledge and the actors blending them with the existing knowledge base, and whether the entrepreneurial ecosystem’s evolution is guided by the visible hand of Government or is it less visibly anchored by large corporations, often MNEs, or institutions such as local universities. Additionally, shedding light on the intersection between local and global knowledge circuits will be a fundamental element of a new effective research approach. We frame the future research agenda around critical debates in need of further resolution: (1) entrepreneurial ecosystems as life cycle versus complex adaptive systems; (2) evolving boundaries of entrepreneurial ecosystems; and (3) governance of evolutionary entrepreneurial ecosystems. Additional to theory development considerations, there are methodological considerations for future research on the evolution of entrepreneurial ecosystems. It has been reported that much research to date consists of static, cross-sectional studies that miss out on crucial temporal change dynamics of entrepreneurial ecosystems across time (Adams, 2020; Alvedalen & Boschma, 2017). There have been negligible systematic attempts at investigating the evolution of entrepreneurial ecosystems through a longitudinal analysis (Ryan et al., 2020). We, therefore, make some recommendations for longitudinal process approaches to future research more befitting of the study of evolutionary processes of entrepreneurial ecosystems.

In addition to advancing the heterogeneous and yet growing literature on entrepreneurial ecosystems, our work also carries important policy implications. Firstly, we contend that understanding the key mechanisms underpinning the evolution of entrepreneurial ecosystems will offer some valuable insights to policymakers focusing on fostering the competitiveness of regions and cities. Particularly in today’s highly volatile global economy, understanding when and why ecosystems evolve over time and across space represents an essential starting point for any entrepreneurship- and innovation-focused policy. Secondly, tracking the evolution of entrepreneurial activities at local level will offer policymakers the opportunity to gauge the evolutionary trajectory of firms’ specialization and sources of competitive advantage. This, we argue, will allow a finer-grained analysis of the specific requirements marking entrepreneurial firms’ operational activity and the related areas of policy intervention like investments in the local educational systems, logistical infrastructures, and financial support. Finally, and building on the previous implication, a more explicit longitudinal analysis of entrepreneurial ecosystems will permit local institutions to scout outside the ecosystem for complementary resources. From the deployment of policies aimed at attracting foreign direct investments, to the creation of global pipelines to tap into relevant sources of knowledge and capital, we contend that a thorough understanding of the historic evolution of a local ecosystem will represent the necessary starting point for any outward-looking industrial policy.

The structure of the paper is as follows. The next section of the paper focuses on a systematic literature review. Section 3 develops a theory on evolutionary entrepreneurial ecosystems and illustrates some shortcomings inhibiting the emergence of a general theory. Section 4 addresses issues under debate and endeavours to shape a future research agenda and calls for the deployment of more apt methods. The final section presents a discussion and some early conclusions.

The conduct of our systematic review was influenced by robust exemplars of best practice previously published in Small Business Economics (Dabić et al., 2019; Grégoire & Cherchem, 2020; Karami et al., 2019; Pittaway & Cope, 2007). Guided by such, our systematic review broadly involved three stages: in the first, we systematically identified, collated, and filtered the existing EE literature to create a study population of top quality journal articles. We then proceeded to categorize these articles into four themes that have to date served as the main foci of the entrepreneurial ecosystem literature. We lastly showed that of these four themes, the literature on evolutionary dynamics and processes of entrepreneurial ecosystems has been least explored.

Stage one of our systematic review process followed the method proposed by Tranfield et al. (2003): (1) a detailed planning of the review process around search terms; and (2) a staged filtering of the collated literature via a rigorous filtration process for inclusion and exclusion; and (3) a detailed deep-grained analysis of the selected literature. For the first planning step, we defined the conceptual boundaries and screening criteria such as publication type and objective research quality via the widely recognized ABS classification system. As the initial academic paper on EE was published in 2006, we conducted the search for publications between 2006 and 2020. Based on these screening considerations and decisions, we then assembled the EE literature through the conduct of an extensive literature string search of various databases, including ProQuest, Scopus, Web of Science (WoS), and Business Source Complete (BSC). The search strings used were ‘Entrepreneur* Ecosystem*’. The first wave search included published and unpublished materials such as journal articles, working papers, conferences proceedings, and papers in an edited volume (Mochkabadi & Volkmann, 2020). Our initial filtration process only included scientific publications with a definite abstract. Therefore, publications such as books, book chapters, reports, and editorials were excluded (Liñán & Fayolle, 2015). This initial search and filtration, combined with the cleansing and eliminating of duplicates, recovered 2697 articles. We then screened these filtered set of papers by analysing the content of the title and abstract to ensure it was explicitly related to EE. Post this second round filtration process, we identified 568 relevant contributions on EE in all journals of the broadest quality. Figure 1 shows that after the initial use of the term ‘entrepreneurial ecosystem’ in the publication of Cohen (2006), EE published research output showed no pattern of increase for almost a decade. The publication in HBR of Isenberg’s (2010) policy advisory steps triggered stronger interest amongst academics. Consequently, output sharply increased from the year 2015. Of the twice filtered 568 articles, 387 were found to be in the ABS listing, and, of these, 137 were top-ranked classed as ABS 3, 4, or 4*. Figure 2 shows EE research has been published in leading journals such as Entrepreneurship Theory & Practice, Research Policy, Small Business Economics, Entrepreneurship and Regional Development, and Regional Studies. This list represents an interesting mix of Entrepreneurship and Economic Geography journals. This final number of 137 journal articles constituted our final study population for subsequent thematic analysis and categorization.

The co-authors now reviewed and analysed these 137 higher ranked articles following Braun and Clarke’s (2006) systematic procedure to identify the principal themes within the EE literature published to date. From our deep understanding of the EE literature and assiduous reading of population articles, we identified themes based on our agreed categorization and classification of our population of publications. Any discrepancies in theme identification were discussed by the co-authors and minor adjustments applied where deemed necessary. If a publication addressed multiple themes, the stated aim of the study served as our criterion for categorization and classification (Liñán & Fayolle, 2015). Our analysis resulted in four predominant themes: Place, Governance, Actors, and Evolution (see Fig. 3). We readily established that the quantity of articles in three of the thematic categories, place, actors, and governance, heavily outnumbered those on evolution. There is clearly a distinct paucity of explicit studies on the evolution of entrepreneurial ecosystems. Of the 137 top-ranked articles, we have only identified 14 articles that can be deemed to have entrepreneurial ecosystem evolution as their prime focus of investigation (see Table 2). All of these have been published since 2016. Only nine of these are empirical and even these limited few have methodological dissonance having been widely reproached for a failure to extend beyond a static framework and attendant inability to capture evolutionary processes over time (Acs et al., 2017; Adams, 2020; Alvedalen & Boschma, 2017; Cavallo et al., 2019; Stam, 2015). In Table 3, we identify merely 10 longitudinal studies in our population and only four of these (Auerswald & Dani, 2017; Ryan et al., 2020; Schäfer & Henn, 2018; Thompson et al., 2018) are also to be observed in the list of EE evolution studies. Previous EE review articles also point to the drawback of static studies and lack of dynamism and longitudinal methods and approaches, but tangentially and without much guidance for rectification and theoretical advancement (Alvedalen & Boschma, 2017; Brown & Mason, 2017; Malecki, 2018). Although some scholars have called for and placed increased emphasis on the temporality of EE through studies of evolutionary processes and governance across time (Colombo et al., 2019; Spigel & Harrison, 2018), they still represent a significant minority. Therefore, to redress these deficiencies, we propose a research agenda for theory development that places a heavy emphasis on future studies to better and more comprehensively capture evolutionary processes of entrepreneurial ecosystems.

The entrepreneurial ecosystem perspective represents a more holistic and finer-grained approach to studying the evolution of a local economy and its underlying mechanisms (Audretsch & Belitski, 2017; Cohen, 2006; Isenberg, 2010; Stam, 2015; Stam & Spigel, 2016; Stam & van de Ven, 2019). An entrepreneurial ecosystem generally operates on a grander scale and scope than a conventional industrial cluster and is commonly industry and technology agnostic (Auerswald & Dani, 2017; Autio et al., 2018; Malecki, 2018). Amongst the features that define the entrepreneurial ecosystem framework, the notion of sustainability has been at the core of this novel research discipline since its early developments (Cohen, 2006). An ecosystem’s sustainability derives from the introduction of heterogeneous variation and adaptation that can extend an entrepreneurial ecosystem’s lifespan (Boschma, 2015; Colombelli et al., 2019; Malecki, 2018; Roundy, 2017; Ryan et al., 2020; Spigel & Harrison, 2018). As a result, the resilience and long-term competitiveness of an entrepreneurial ecosystem spring from coherency around specialism in its early existence (Roundy, 2017; Spigel & Harrison, 2018) and heterogeneity from the later diversity introduced by new firm formations across multiple technologies (Malecki, 2018).

Much of the early work on entrepreneurial ecosystem research was policy-oriented aiming to develop economic growth prescriptions for and via expanded entrepreneurial activity (Cukier et al., 2015; Gauthier et al., 2017; Isenberg, 2011; Mason & Brown, 2013, 2014; Mulas et al., 2016). Growth, by its very nature, implies evolutionary processes. In a seminal and highly influential policy report, Mason and Brown (2014) presented an early evolutionary model of an entrepreneurial ecosystem. Building on this, a few years later the same authors developed their pilot policy work academically to propose a two-stage typology of nascence and maturity of entrepreneurial ecosystems distinguishing between early-stage ‘embryonic’ and later-stage ‘scale-up’ ecosystems (Brown & Mason, 2017). Around the same time, and confirming the development of a new research pattern, Mack and Mayer (2016) pioneered an evolutionary model that dealt with EE dynamics over time. Colombelli et al. (2019) then used hierarchical and relational governance lenses to present the life cycle stages of entrepreneurial ecosystems as ‘birth’, ‘transition’, and ‘consolidation’.

As the study of the evolution of EEs gained traction, further studies examined the origins and creation of an entrepreneurial ecosystem and the early stages of its existence (Harima et al., 2020; Roundy et al., 2018; Thompson et al., 2018); others then placed particular emphasis on the later maturity stages. Malecki (2018), for instance, describes the elements of an entrepreneurial ecosystem that matured into one deemed to be a ‘strong’ entrepreneurial ecosystem, and others depicted the composition of a matured ‘resilient’ version (Roundy, 2017; Ryan et al., 2020). For some researchers, however, the life cycle approach came to represent an inappropriate lens since the evolution of an entrepreneurial ecosystem was seen to be non-linear across stages, but rather, recursive as with an adaptive system (Adams, 2020; Auerswald & Dani, 2017; Haarhaus et al., 2020; Roundy et al., 2018).

Existing studies also suggest that there are multiple evolutionary pathways for entrepreneurial ecosystems. The creation and evolution of an entrepreneurial ecosystem can be organically entrepreneur-led (Feld, 2012); alternatively and possibly simultaneously, it can be guided by the visible hand of government (Adams, 2020; Fuerlinger et al., 2015), or even anchored by large corporations (Bhawe et al., 2019; Colombo et al., 2019; Ryan et al., 2020) and universities (Cunningham et al., 2019; Hayter, 2016; Johnson et al., 2019; Miller & Acs, 2017; Nicholls-Nixon et al., 2020). Additionally, an entrepreneurial ecosystem can mutate from a pre-existing system such as an industry cluster (Autio et al., 2018; Pitelis, 2012), or set of co-located clusters of varying vintages, through technological convergence in related and unrelated branches (Auerswald & Dani, 2017). For instance, Ryan et al. (2020) empirically illustrated how a strong, resilient entrepreneurial ecosystem could emerge from the metamorphosis of an antecedent industrial cluster, primarily via MNE spinouts, and lead the evolution of an entire production region. Contrariwise, Cantner et al. (2020) conceptually outlined subsequence for an entrepreneurial ecosystem in its further evolution into a ‘business ecosystem’.

Regardless of the specific evolutionary path, an ecosystem can follow, incumbent entrepreneurs and corporate or institutional spillovers generally play a key role in the development of entrepreneurial ecosystems. Pioneer entrepreneurs that either serially start more firms or successfully exit their initial venture serve to activate an entrepreneurial ecosystem’s ongoing growth and renewal. They do so as role models, mentors, and even angel financiers that channel their resources, time, and energy into its perpetuation (Mason & Brown, 2014; Mason & Harrison, 2006; Ryan et al., 2020). Spillovers can serve to propel and expand the evolution of an entrepreneurial ecosystem, primarily by building on and expanding the accumulation of knowledge at a local level (Agrawal & Cockburn, 2003; Breschi & Lissoni, 2003; Clarysse et al., 2014; Harima et al., 2020; Ryan et al., 2020; Van De Ven, 1993). They generally come in either of two forms, spinout or spinoff.

Large enterprises, both indigenous and inward investors, can serve as the breeding grounds of local entrepreneurship in several domains. They can contribute and catalyse an entrepreneurial ecosystem’s creation and growth by taking the role of incubators and stimulating the spinout of high-tech start-ups in related and unrelated varieties (Brown & Mason, 2017; Colombelli et al., 2019; Klepper, 1996, 2007; Ryan et al., 2018; Spigel & Harrison, 2018). Large firms attract skilled employees, enhance their managerial skills, and provide them with business opportunities by connecting them to global customers (Colombelli et al., 2019; Ryan et al., 2020). Employees’ experiences and learnings in these large organizations are likely to spawn new spinout ventures mostly through the development of variants of a core product. Over time, this process increases heterogeneity in the entrepreneurial ecosystem, hence supporting its long-term competitiveness. Spinouts, in fact, fuel diversification and new knowledge creation and create heterogeneity that eventually strengthens the resilience of an entrepreneurial ecosystem. As such, large firms act as ‘knowledge integrators’ within the entrepreneurial ecosystem and facilitate the codification and absorption of new knowledge at the local level and provide connectivity to new global market opportunities for indigenous firms or aspiring entrepreneurs (Bhawe et al., 2019; Buciuni & Pisano, 2018).

Large firms are not the only actors supporting the evolution of an entrepreneurial ecosystem. Universities can also deepen an entrepreneurial ecosystem’s technology base and enhance its capacity as the breeding ground for entrepreneurship. Extensive research shows that universities can incubate and facilitate new venture spinoffs in an entrepreneurial ecosystem too (Cunningham et al., 2019; Hayter et al., 2018; Johnson et al., 2019; Miller & Acs, 2017; Nicholls-Nixon et al., 2020; Theodoraki et al., 2018). Renowned entrepreneurial ecosystems, such as Silicon Valley, Route 158, and Cambridge UK, have world-class universities that record high rates of such spinoffs (Audretsch & Belitski, 2013). These spinoff ventures are commonly in new technology domains either in related or unrelated varieties (Boschma & Frenken, 2011; Meoli et al., 2019; Meoli & Vismara, 2016). This increased heterogeneity amplifies the resilience of the entrepreneurial ecosystem (Roundy, 2017).

There are areas of discord amongst the community of entrepreneurial ecosystem (EE) scholars that are in need of resolution to progress the entrepreneurial ecosystem from framework to theory. We now bring forth what we identify as some crucial debates and issues for resolution in the entrepreneurial ecosystem field and suggest specific areas for future research on the evolutionary processes rather than the more prevalent but issues such as EE elements and actors. These are both static and by now well-rehearsed.

Understanding the dynamics and factors underpinning the evolution of economic regions will allow light to be shed on one of the most critical issues confronting local economies, notably their capacity to be adaptive in order to constantly recreate their competitive advantage and survive over time. This matter has lately emerged as one of the most pressing issues for any local economy competing in today’s volatile global economic scenario. Confronted by such challenging tasks, scholars, practitioners, and policymakers have the opportunity to tap into the growing and yet underdeveloped literature of entrepreneurial ecosystems to explore an alternative approach to gauge local competitiveness. In particular, we suggest that an explicit focus on the evolution of entrepreneurial ecosystems can offer an effective approach to assess the dynamics underpinning the transformation of local economies across space and over time. In this article, we traced a future research roadmap on the evolutionary processes of entrepreneurial ecosystems. Foremost, amongst these are the appropriate and evolving boundaries of the ecosystem, the internal and external sources of new knowledge and the actors blending them with the existing knowledge base, and whether the evolution is guided by the visible hand of Government or is it less visibly anchored by large corporations, often MNEs, or institutions such as local universities. Additionally, shedding light on the intersection between local and global knowledge circuits will be a fundamental element of a new effective research approach.

Tackling these research issues matters for several reasons. First, it will help to shed further light on a topic — the evolution of entrepreneurial ecosystems — that has received only limited attention to date, and that is still largely underdeveloped. Related to this reason is the need to draw the boundaries of an ecosystems and to track them as they evolve. This necessarily requires the study of both the geographical and technological dimensions of an ecosystem’s boundaries, a condition that will allow a better definition of the nature and characteristics of any ecosystem. A second motivation to further develop the study of evolutionary entrepreneurial ecosystems relates to the growing intersection of local and global dynamics. As regional economies are increasingly partaking in global value chains, understanding how new knowledge flows into localized ecosystem and supports the establishment of new entrepreneurial activities in related and unrelated technological domains represents a necessary condition in the study of the competitiveness of regional economies.

The study of the evolution of entrepreneurial ecosystems through the analysis of the transformation of their boundaries and the intersection of local and global dynamics will not only open up new research opportunities, but should provide additional policy implications. Above all, we argue that our work offers three specific implications to local institutions and policymakers in general. First, we believe that the comprehension of the key dynamics underlying the evolution of entrepreneurial ecosystems will support policymakers’ ability to make decisions in support of the competitiveness of their local economy. In a global context which has become particularly turbulent and volatile in recent times, assessing the mechanisms that drive change in the specialization and competitive advantage of places will be a sine qua non condition for the definition of any robust industrial policy agenda. A static approach, on the contrary, could dangerously lead policymakers to a condition of ‘cognitive redundancy’ (Uzzi, 1997) and ‘cognitive myopia’ (Maskell & Malmberg, 2007). Second, tracking the evolution of entrepreneurial firms within an ecosystem will allow policymakers to assess the evolutionary trajectory of firms’ specialization and sources of competitive advantage. This, in turn, will permit a finer analysis of the specific resources that are required by local firms and pave the way for the development of ad hoc industrial policies. Lastly, a clear understanding of the historical evolution of a local entrepreneurial ecosystem will equip policymakers with invaluable insights into the resources that a local system must attract from outside its boundaries to remain competitive over time. From foreign direct investments to the connection to global pipelines and global value chains, assessing the evolution of context-specific capabilities, resources, and constraints will represent the necessary starting point for any outward-looking strategic policy decisions.