Is a Balanced Entrepreneurial Ecosystem Essential for Success? A European Analysis
The concept of an entrepreneurial ecosystem (EE) has gained prominence in economic development, suggesting that supportive networks, institutions, and resources are essential to foster innovation and entrepreneurship. Yet, new research by Éva Komlósi (University of Pécs), Marcus Dejardin (University of Namur and UCLouvain), László Szerb (University of Pécs), and Balázs Páger (HUN-REN CERS) questions the common belief that only a balanced, bottleneck-free ecosystem is universally necessary for high economic performance. By analysing data from 125 regions across 24 European countries, it has been revealed that both balanced and unbalanced ecosystems can drive economic success, depending on specific regional contexts. This central finding of the paper challenges the one-size-fits-all approach to EE development, proposing a nuanced view where local conditions determine ecosystem configuration.
What is an Entrepreneurial Ecosystem?
An entrepreneurial ecosystem refers to a network of actors and resources, such as entrepreneurs, institutions, and capital, that enable productive entrepreneurship within a region. One line of studies suggests that these ecosystems require balance across key components like human capital, innovation, finance, and infrastructure for optimal performance. When one of these components is weak or missing, it can create a “bottleneck,” potentially reducing the entire system’s efficiency. While balanced ecosystems are traditionally seen as ideal, this study explores whether high economic performance can be achieved in regions where not all ecosystem components are fully developed or “balanced.”
The Study’s Approach and Findings
The Regional Entrepreneurship and Development Index (REDI) was applied to examine key factors in regional entrepreneurial ecosystems, focusing on components like opportunity-driven startups, technology adoption, human capital, innovation, competition, and financing. Employing a fuzzy-set qualitative comparative analysis (fsQCA) method, the study investigates how different combinations of these factors contribute to economic success in distinct macro-regions of Europe.
Their findings reveal that achieving high regional economic performance does not require the same high-quality level in every component of an EE. However, considering all European regions, a supportive ecosystem that encourages competition, innovation, and opportunity-driven entrepreneurship is necessary for high economic outcomes. In regions with a “balanced” ecosystem, all key elements perform consistently, while in “unbalanced” ecosystems, certain elements may be underdeveloped or even missing. It has been pointed out that both balanced and unbalanced ecosystems can lead to high economic performance at the overall European level. However, the most developed regions in Europe’s leading economies (primarily the capital and highly urbanised regions) typically have a balanced ecosystem.
Context-Specific Needs in European Macro-Regions
The study segments Europe into three macro-regions—Northwestern Europe, Mediterranean Europe, and Central Eastern Europe—revealing how contextual factors shape the success of different EE configurations. When examining groups of regions that are homogeneous in certain respects, a different picture emerges:
- Northwestern Europe (NWE): In the NWE macro-region, regions achieving high economic performance all have relatively unbalanced entrepreneurial ecosystems, where the absence of factors like high growth, financing, or globalization still supports strong performance. This is surprising, as previous analyses—especially compared to the U.S.—have often attributed Europe’s lower economic performance to missing elements like fast-growing startups, venture capital, and multinational corporations.
- Mediterranean Europe (ME): In the ME macro-region, regions achieving high economic performance all have balanced entrepreneurial ecosystems, with most factors either present or irrelevant to the outcome.
- Central Eastern Europe (CEE): High-performing CEE regions succeed with both balanced and unbalanced ecosystems. In unbalanced regions, weaknesses in high growth and financing components are offset by strengths in other ecosystem factors, such as globalization (export potential, economic complexity and connectivity) and innovation.
Policy Implications: Customizing Support for Unique Ecosystem Needs
The research underscores the importance of tailoring EE development strategies to the unique needs of each region rather than attempting to replicate other ecosystems seen in the world’s most famous hubs, like Silicon Valley. Policymakers can leverage these insights in several ways:
- Avoiding a One-Size-Fits-All Model: Instead of aiming for balance across all ecosystem components, policymakers might identify specific strengths within their regions and build upon them. For instance, CEE regions could focus on enhancing connectivity and international partnerships to offset limited venture capital access.
- Identifying and Addressing Bottlenecks: By recognising which elements are less critical to local success, regions can strategically allocate resources to areas with the most impact.
- Encouraging Regional Specialization: The findings suggest that fostering niche ecosystems tailored to regional characteristics can be more effective than forcing a standardised approach. Policymakers can encourage regional strengths, which capitalise on existing advantages.
Conclusion: Rethinking the Blueprint for Entrepreneurial Success
Komlósi and colleagues’ research provides a fresh perspective on entrepreneurial ecosystems, challenging the notion that all prosperous regions require a balanced, bottleneck-free configuration. Instead, the success of entrepreneurial ecosystems in Europe appears to depend on nuanced, context-specific configurations that leverage unique regional assets. Both balanced and unbalanced ecosystems can achieve high economic performance, provided they harness local strengths and compensate for weaknesses in strategic ways.
For policymakers and stakeholders, these insights pave the way for more flexible, adaptive approaches to economic development. By focusing on region-specific ecosystem needs, Europe can foster diverse entrepreneurial landscapes that support sustainable growth, innovation, and resilience in a rapidly changing world.
Reference to the paper: Komlósi, É., Dejardin, M., Szerb, L., Páger, B. (2024). Is a balanced entrepreneurial ecosystem essential for success? A configurational analysis of European regional entrepreneurial ecosystems. Journal of Technology Transfer. https://doi.org/10.1007/s10961-024-10149-8
