The Dynamics Between Entrepreneurship Environment And Education

Description
During on this information examines the dynamics between entrepreneurship, environment and education.

The Dynamics between Entrepreneurship,
Environment and Education
EUROPEAN RESEARCH IN ENTREPRENEURSHIP
Series Editors: Alain Fayolle, Professor of Entrepreneurship, EM Lyon and CERAG,
France and Visiting Professor at Solvay Business School, Belgium and Paula Kyrö,
Professor of Entrepreneurship Education, Helsinki School of Economics, Finland
This important series is designed to highlight the unique characteristics and rich
variety of European research in entrepreneurship. It provides powerful lenses to
help identify and understand the importance of European cultural roots within the
international entrepreneurship landscape.
The ?rst volume of this book series, under the collective supervision of the
European Entrepreneurship Summer Universities group (ESU Network), was
published in 2005 by Edward Elgar Publishing with the title: Entrepreneurship
Research in Europe: Outcomes and Perspectives and was edited by Alain Fayolle,
Paula Kyrö and Jan Ulijn.
The Dynamics between
Entrepreneurship,
Environment and
Education
Edited by
Alain Fayolle
Professor of Entrepreneurship, EMLyon and CERAG
Laboratory, France, and Visiting Professor, Solvay Business
School, Belgium
Paula Kyrö
Professor of Entrepreneurship Education, Helsinki School of
Economics, Finland
EUROPEAN RESEARCH IN ENTREPRENEURSHIP
Edward Elgar
Cheltenham, UK • Northampton, MA, USA
© Alain Fayolle and Paula Kyrö 2008
All rights reserved. No part of this publication may be reproduced, stored in
a retrieval system or transmitted in any form or by any means, electronic,
mechanical or photocopying, recording, or otherwise without the prior
permission of the publisher.
Published by
Edward Elgar Publishing Limited
The Lypiatts
15 Lansdown Road
Cheltenham
Glos GL50 2JA
UK
Edward Elgar Publishing, Inc.
William Pratt House
9 Dewey Court
Northampton
Massachusetts 01060
USA
A catalogue record for this book
is available from the British Library
Library of Congress Control Number: 2008932876
ISBN 978 1 84720 571 1
Printed and bound in Great Britain by MPG Books Ltd, Bodmin, Cornwall
Contents
List of ?gures vii
List of tables viii
List of contributors ix
Foreword by Hans Landström xi
Preface xv
1 Introduction: broadening the scope and dynamics of
entrepreneurship research in Europe 1
Paula Kyrö and Alain Fayolle
PART I THE DYNAMICS BETWEEN ENTREPRENEURSHIP
AND ENVIRONMENT
2 New elements for the analysis of entrepreneurial structure 15
Joaquín Guzmán Cuevas and Felipe Rafael Cáceres Carrasco
3 Micro–macro paradoxes of entrepreneurship 28
Villy Søgaard
4 New initiatives to revitalize society: public entrepreneurship in
the south of Sweden 47
Tobias Dalhammar
5 Developing characteristics of an intrapreneurship-
supportive culture 77
Hanns Menzel, Robert Krauss, Jan Ulijn and Mathieu Weggeman
PART II THE DYNAMICS BETWEEN ENTREPRENEURSHIP
AND EDUCATION
6 University entrepreneurship and government support schemes 105
Einar Rasmussen, Odd Jarl Borch and Roger Sørheim
7 Enterprise education in di?erent cultural settings and at
di?erent school levels 131
Ulla Hytti
v
8 Assessment and promotion of entrepreneurial initiative and
attitudes towards entrepreneurship: the case of Estonia 149
Urve Venesaar and Indrek Jakobson
9 Advancing entrepreneurship education in Finnish basic
education: the prospect for developing local curricula 168
Jaana Seikkula-Leino
PART III THE DYNAMICS BETWEEN ENTREPRENEURSHIP
AND SMALL BUSINESSES
10 An empirical taxonomy of start-up ?rms’ growth trajectories 193
Mahamadou Biga Diambeidou, Damien François, Benoît Gailly,
Michel Verleysen and Vincent Wertz
11 Linking entrepreneurial orientation and dynamic capabilities:
research issues and alternative models 220
Jorunn Grande
12 The impact of global value chains on Andalusian tourism
SMEs 245
Pilar Tejada and Francisco Liñán
13 Family business responsible ownership: challenging the next
generation’s abilities 268
Juha Kansikas, Jan Krejci and Alena Hanzelková
14 Conclusion: towards new challenges and more powerful
dynamics 289
Alain Fayolle and Paula Kyrö
Index 297
vi Contents
Figures
3.1 Problem framework for studies that should take account of
systems e?ects 34
5.1 Intrapreneurship-supportive culture as the nexus of
national, professional and corporate culture types 80
5.2 A deductively developed description of an
intrapreneurship-supportive culture 92
7.1 Forms of entrepreneurship 134
7.2 Desirability of self-employment in selected European
countries and the US (European Commission, 2007) 135
9.1 Respondents’ estimates of whether or not more
entrepreneurship education will be implemented over the
next 12 months by di?erent municipality categories 177
9.2 Respondents’ estimates of whether or not more
entrepreneurship education will be implemented
over the next 12 months by di?erent partner categories 178
10.1 Two-dimensional representation of ?rm successive states 203
10.2 Density distribution of operating income along the
principal axes 204
10.3 Examples of two-dimensional projections of 18 ?rm growth
trajectories 206
10.4 Growth trajectories digraph 207
10.5 Distribution of growth trajectories observed 209
10.6 Typical trajectories 211
11.1 A conceptual framework linking EO and DC 233
11.2 Conceptualizations of possible relationships between EO
and DC 236
12.1 Global tourism value chains 250
12.2 Main European tour operators 252
vii
Tables
2.1 Variables in the analysis 21
2.2 Rotated component matrix 22
2.3 Cluster analysis 23
3.1 Classi?cation of articles from 2004 issues of
Entrepreneurship and Regional Development 35
6.1 Characteristics of the government e?orts to support
commercialization of research 117
6.2 Challenges to entrepreneurship in universities and
government schemes 119
7.1 Classi?cation of enterprise education models 142
8.1 Motives for starting a business among acting and
potential entrepreneurs 157
8.2 Knowledge and personality traits that are useful for
starting a business 159
8.3 Opinions expressed by respondents about personality traits
that characterize their entrepreneurial initiative 161
10.1 Results of PCA analysis 201
10.2 Most frequent sequences 210
10.3 Taxonomy of growth trajectories 212
11.1 Examples of studies on DCs: de?nitions, dimensions and
type of studies 224
11.2 Examples of studies on EO: descriptions, dimensions and
type of studies 230
12.1 Structure of Andalusian tourism enterprises, 2005 255
12.2 Case study SMEs 256
12.3 SWOT for Andalusian hotel SMEs 261
12.4 SWOT for Andalusian travel agency SMEs 262
viii
Contributors
Odd Jarl Borch, Professor, Bodø Graduate School of Business and
Nordland Research Institute, Norway
Felipe Rafael Cáceres Carrasco, Titular Professor of Applied Economics,
University of Seville, Spain
Joaquín Guzmán Cuevas, Professor of Applied Economics, Department of
Applied Economics I, University of Seville, Spain
Tobias Dalhammar, Department of Culture and Society, Malmö
University, Sweden
Mahamadou Biga Diambeidou, PhD Researcher in Entrepreneurship,
Louvain School of Management, Université catholique de Louvain, Belgium
Alain Fayolle, Professor of Entrepreneurship, EM Lyon, France
Damien François, Université catholique de Louvain, Department of
Mathematical Engineering, Machine Learning Group, Belgium
Benoît Gailly, Professor of Innovation, Center for Research in Change and
Innovation Strategies (CRECIS), Louvain School of Management,
Université catholique de Louvain, Belgium
Jorunn Grande, Associate Professor, Nord-Trøndelag University College,
Norway
Alena Hanzelková, PhD Director for academic matters and quality, Brno
International Business School (BIBS, a.s.), Czech Republic
Ulla Hytti, Research Manager, D.Sc. (Bus. Adm. & Econ.), Adjunct
Professor, TSE Entre, Turku School of Economics, Finland
Indrek Jakobson, MBA, PhD student, Tallinn University of Technology,
Estonia
Juha Kansikas, Head of Master’s Degree Programme in Entrepreneurship
in Family Business, Jyväskylä School of Business and Economics, Finland
Robert Krauss, Manager, Mechanical & Electronic Technologies, Invest in
Germany GmbH, Germany
ix
Jan Krejci, PhD student of Brno University of Technology, Major Finance,
Czech Republic
Paula Kyrö, Professor of Entrepreneurship Education, Helsinki School of
Economics, Finland
Francisco Liñán, Assistant Professor, University of Seville, Spain
Hanns Menzel, TU Eindhoven, Department of Technology Management,
Organisation Science and Marketing Group, the Netherlands
Einar Rasmussen, Bodø Graduate School of Business, Norway
Jaana Seikkula-Leino, Adjunct Professor, University of Turku, Finland
Villy Søgaard, Associate Professor, Danish Institute of Rural Research and
Development (IFUL), Denmark
Roger Sørheim, Professor, Trondheim Business School and Bodø Graduate
School of Business, Norway
Pilar Tejada, PhD student, Department of Applied Economics I, Faculty
of Economics and Business Sciences, University of Seville, Spain
Jan Ulijn, Professor, Department of Organisation Science and Marketing,
School of Industrial Engineering, Eindhoven University of Technology
and Open University, the Netherlands
Urve Venesaar, Associate Professor and Vice-Dean for Research at the
School of Economics and Business Administration, Tallinn University of
Technology, Estonia
Michel Verleysen, Professor, Université catholique de Louvain, DICE –
Machine Learning Group, Belgium
Mathieu Weggeman, Professor, Department of Organisation Science and
Marketing, School of Industrial Engineering, Eindhoven University of
Technology, the Netherlands
Vincent Wertz, Professor, Department of Mathematical Engineering,
Université catholique de Louvain, Belgium
x Contributors
Foreword
Entrepreneurship as a research ?eld emerged out of the changes and
dynamics that we could identify in society during the 1970s and 1980s.
Early research within the ?eld was strongly rooted in the development of
society at that time. Since then, entrepreneurship research has matured, and
has become less sensitive to changes in society – the research has ‘travelled
away’ from the strong societal orientation that we could ?nd in the early
days of entrepreneurship research. Instead it has become more inward-
looking and more narrowly focused on theoretical research issues. As a con-
sequence, we can question ourselves whether entrepreneurship research still
focuses on the important questions in society – questions that have an
impact on wealth creation in society.
This journey away from the strong societal orientation is occurring at the
same time as the world, and not least the European scene, is changing more
than ever. The diversity of entrepreneurial activities and innovativeness
within European countries is pronounced, and this is an important issue
that demands a better understanding of the relationship between entrepre-
neurship and society. Against this background, the theme for this book,
edited by Alain Fayolle and Paula Kyrö, on the dynamics between entre-
preneurship, environment and education is very timely – entrepreneurship
research needs to be rooted in the changes that occur in society, and this
book provides an excellent example of research topics that highlights the
relationship between society and entrepreneurship research.
Entrepreneurship is a relatively new ?eld of research, not more than
20–25 years old – or little more than half an academic career – that during
the last decade has gained extensive interest beyond the usual areas of man-
agement studies (see Landström, 2005). As in many other ?elds of research
in social sciences, entrepreneurship research has its roots in the development
of and changes in society. In this case we can go back to the 1970s and 1980s,
decades during which we experienced huge structural changes in society
worldwide, an emerging development of the knowledge economy, and far-
reaching political changes emphasizing stronger market-oriented ideolo-
gies. As a consequence new areas of interest emerged in society such as
entrepreneurship, innovation, industrial dynamics, and job creation. It was
in this context that the interest in entrepreneurship research grew, especially
among researchers in the US, and we can identify a couple of pioneer
xi
researchers on entrepreneurship – researchers that could show that the
future di?ers from the past, not least in terms of the importance of entre-
preneurship – and a great number of scholars from di?erent disciplines
rushed into this new and promising ?eld of research. The interest in entre-
preneurship research was strongly linked to the development and dynamics
of society, and the research conducted was deeply rooted in the changes that
occurred in the society during the 1970s and 1980s.
Since the beginning of the 1990s we can ?nd an enormous growth of
entrepreneurship research. This expansion can be measured in various
ways – with respect to the number of researchers, the number of published
articles, number of conferences and journals opening up for entrepreneur-
ship contributions – and the expansion is obvious, irrespective of the
measurement employed. The research was still rooted in society and the
expanding knowledge economy of the 1990s, resulting from rapid techno-
logical advances and the globalization of world trade. The quick changes,
the complexity and uncertainty in society constituted a hotbed for entre-
preneurship. In many countries, especially in Europe, entrepreneurship
became a vehicle to solve regional and national problems and to stimulate
entrepreneurship. The changes and interest in entrepreneurship taking place
in society gave rise to new research questions, and many new topics emerged
in entrepreneurship research. As a consequence the research in entrepre-
neurship became highly fragmented with many parallel ‘conversations’ in
research.
But . . . the ?eld of entrepreneurship research has matured, and I will
argue that its maturity has made entrepreneurship researchers less sensitive
to changes in society – the ?eld of entrepreneurship research started to
‘travel away’ from the important questions in society, and the strong soci-
etal orientation that we found in entrepreneurship research since its begin-
ning. As I see it, at present, the ?eld seems to be caught between the e?orts
to overcome the drawbacks of newness and the need to achieve maturity.
Research topics have stabilized, focusing on some core questions of inter-
est within entrepreneurship research, and research has been more special-
ized, with groups of researchers being focused more narrowly on particular
theoretical research issues, which also indicates that there are stronger
theory-driven approaches within the ?eld (Cornelius et al., 2006). Thus, the
?eld has attained the characteristics of a more ‘normal science approach’
(Aldrich and Baker, 1997) with weaker links to and less sensitivity to
changes in society. This development of the ?eld counteracts its original
openness towards stimuli from and interaction with important changes in
society, and there is a risk that entrepreneurship researchers are no longer
focusing their attention on important questions that have an impact on
wealth creation in society.
xii Foreword
With this background in mind I ?nd this book refreshing. The editors,
Alain Fayolle and Paula Kyrö, have recognized the need for creating an
interface between entrepreneurship research and the dynamics of society,
not least in the European context. In this book the signi?cance of the rela-
tionship between entrepreneurship and society is clearly shown: the ?rst
part shows the dynamics between entrepreneurship and society in a more
general sense; the second part continues the discussion on the relationship
between entrepreneurship and society by looking on it from an education
perspective; and ?nally, the third part of the book focuses on the ability and
capability of di?erent kinds of ventures to compete in di?erent contexts.
The authors of the chapters o?er a broad variety of topics and approaches
that signi?cantly contribute to the understanding of changes in society, and
the diversity of the contexts in which entrepreneurship occurs.
I am convinced that the book will inspire a dialogue, not only among
researchers, but also between research and policy-makers in order that the
changes and dynamics of society be better understood.
Hans Landström
Lund University, Sweden
REFERENCES
Aldrich, H.E. and T. Baker (1997), ‘Blinded by the cites. Has there been progress
in entrepreneurship research?’ in D.L. Sexton and R.W. Smilor (eds),
Entrepreneurship 2000, Chicago, IL: Upstart, pp. 377–400.
Cornelius, B., H. Landström and O. Persson (2006), ‘Entrepreneurship studies: the
dynamic research front of a developing social science’, Entrepreneurship Theory
and Practice, May, pp. 375–97.
Landström, H. (2005), Pioneers in Entrepreneurship and Small Business Research,
New York: Springer.
Foreword xiii
Preface
This second book in the series ‘European Research in Entrepreneurship’
highlights the unique characteristics and rich variety of European research
in the ?eld of entrepreneurship, environment and education. Its three parts,
with 14 chapters and 28 authors from 21 European universities and research
institutions presenting ?ndings from 13 countries enable a perception of the
importance of European cultural roots within the international entrepre-
neurship landscape. The ?rst volume of this book series, under the collec-
tive supervision of the European Entrepreneurship Summer Universities
group (ESU Network www.esu.?), was published in 2005 under the
title: Entrepreneurship Research in Europe: Outcomes and Perspectives.
Encouraging comments on it inspired us to continue this discourse and to
go deeper into its di?erent dimensions. The current landscape of the
research introduced in this book exempli?es the expanding European dia-
logue between entrepreneurship, environment and education. We hope it
delineates the shape, dimensions and horizon of the multidisciplinary land-
scape for others to learn from and explore further.
We also want the book to provide university students, teachers, researchers
and policy-makers with new insights through which to understand the con-
textual dimensions and the broadening aspects of the current state-of-the-
art in European research into the dynamics between entrepreneurship,
environment and education.
To paint such a landscape always requires a sustained and intense commit-
ment from di?erent contributors. In our process the ?rst step took place in
2005 with the start of the preparations for the third ESU meeting in Finland.
A total of 63 participants from 15 countries presented their research for eval-
uation, obtained feedback and improved the ?rst versions of their papers.
Initial choices from these revised papers were then made by the ESU scienti?c
publishing committee. The authors of the chapters selected were then sup-
ported by the excellent international reviewers who altruistically invested time
and e?ort in helping the authors to improve the quality of their contributions.
Also, during this process, the publisher was always willing to support our
ideas. We would like to extend warm thanks to all these people for their help,
intelligent involvement and capacity in this publishing process and hope its
outcome will result in a better understanding of and engagement in the
complex European landscape of entrepreneurship research.
xv
Finally, as we approach the ?rst step towards our next ESU meeting in
Norway (August 2008), we have in mind a great number of ideas, thoughts
and dreams about a third book in the series. We hope that, like its prede-
cessors, such a book will be a great opportunity for young and older
researchers in entrepreneurship to share and communicate original and
fruitful research ?ndings with a unique European ?avour.
Alain Fayolle and Paula Kyrö
xvi Preface
1. Introduction: broadening the scope
and dynamics of entrepreneurship
research in Europe
Paula Kyrö and Alain Fayolle
This book continues the discourse on the dynamics of entrepreneurship
research set in motion in the ?rst book in this series, European Research in
Entrepreneurship (Fayolle et al., 2005). At that time our aim was to identify
and elaborate the emergence of a European position in the entrepreneur-
ship debate and to see what kind of a pro?le the European research might
have. The positive response to that book indicated that European research
does indeed have its speci?cs, which merit further research.
In our introduction, ‘The entrepreneurship debate in Europe: a matter
of history and culture’, we anticipated that the dialogue between Europe
and, for example, Asia will intensify in the future, challenging European
research and e?orts to enhance its entrepreneurial and innovative culture.
This challenge is a reality today. For example the Chinese government
has now taken a strategic decision to develop an innovation-based
country by 2020 by integrating entrepreneurship into its education, devel-
opmental activities and research (Wang Xingsun, 2007). There is also a
lot to do to catch up with the USA in this respect. Only the new EU
member states, Latvia, Lithuania and Poland score better than the USA
in the desirability of self-employment (European Commission, 2007).
Inside Europe the assessment of the Total Entrepreneurial Activity
(TEA) Index signals that the countries ranked high in innovativeness still
have entrepreneurial activity below the European average, for example
France, Finland and Estonia. These striking di?erences and contradic-
tions in entrepreneurial activities, readiness and innovativeness within
European countries and the proactive attitude and activities of European
competitors impose a demand for a better understanding of the complex
dynamics between entrepreneurship, environment and education. The
spirit and pervasive theme of this book follow this new emerging and
complex understanding of entrepreneurship and take advantage of the
opportunities it o?ers to revitalize the ideas of the European historical
roots of entrepreneurship. Each chapter investigates some aspect of the
1
relationship between entrepreneurship and environment, and thus enhances
this complex dialogue.
In this landscape our book will outline the di?erent aspects of this
dynamics exemplifying the expanding European dialogue between entre-
preneurship, environment and education. Its 14 chapters, including the
introduction and the conclusion, represent di?erent disciplines, nationali-
ties and approaches. Altogether they bring us ?ndings from 13 countries,
and 28 researchers from 21 universities and research institutions. By bring-
ing these together we hope to de?ne the shape, dimensions and horizon of
the multidisciplinary landscape for others to learn from and explore
further.
The ?rst part of the book illustrates how the dynamics between entre-
preneurship and environment has expanded and diversi?ed, the second
part further explores the dynamics between entrepreneurship and educa-
tion, and the third part elaborates how this simultaneously culture-speci?c
but globally oriented approach, changes the activities and developmental
needs of the ?rms. Thus the book o?ers a perspective through which to
understand the importance of European cultural roots within the interna-
tional entrepreneurship research. It introduces both comparative chapters
and chapters with speci?c cultural contexts to investigate what kind of
aspects we might share in Europe and what aspects are culture-speci?c.
In this introduction we try to describe how entrepreneurship research has
spread in a variety of directions as interactions with environment, educa-
tional systems and organizations. As anticipated in our last book, it has
gained a more extended cultural and networking view in its e?orts to con-
tribute to renewing society. This has come a long way from the speci?cities
of an individual entrepreneur and the basic functions of the small ?rm,
opening up a new and complex landscape for researchers. This landscape is
brie?y developed in each section of our introduction, before the presenta-
tion of the chapters themselves from all these three di?erent but interre-
lated spheres.
DIALOGUE BETWEEN ENTREPRENEURSHIP AND
ENVIRONMENT
The dialogue between entrepreneurship and environment has been
expanded and broadened both in policy documents and research. It is
among the key factors in the EU innovation strategy, which emphasizes the
importance of the creation of an entrepreneurial culture by fostering the
right mindset, entrepreneurship skills and awareness of its career opportu-
nity as an essential part of European competitiveness (Commission of the
2 The dynamics between entrepreneurship, environment and education
European Communities, 2006). This broad cultural approach has also been
reinforced in entrepreneurship research. It brings together multidisci-
plinary research, for example, from economics, sociology, management,
marketing, strategy, education and geography, and links organizational,
regional and national cultures to systems, structures and networks. It also
includes public spheres of entrepreneurship research and provides new con-
cepts for understanding their dynamics and interrelationships (Bjerke and
Dalhammar, 2006). Besides the interplay between economics, businesses,
?rms and regional and national prosperity, entrepreneurship research has
attached itself to broader concepts such as active citizenship, education
systems, curriculum development and democracy.
This complexity has not beenreceivedwithout criticism. Some researchers
feel that expanding entrepreneurship research to so many aspects, structures
and processes of society dissolves its borders and blurs its identity. On the
other hand there are others who ask howcultural changes and research of its
dynamics are possible by isolating phenomena out of context and the
dynamics that mould these contexts. These contradictory opinions are ingre-
dients in the current research and mould the conceptualization of entrepre-
neurship. For example, Dalhammar argues here for the expanded approach
and introduces us to a newconcept of public entrepreneurship, which is not
restricted to the economic sphere. As he de?nes it, ‘The term “public”
emphasizes public space, that is, the space that concerns all citizens and that
is neither private nor o?cial’ (Dalhammar, this volume, p. 47)
Part I of the book, ‘The dynamics between entrepreneurship and envir-
onment’ contains four chapters. These four chapters together colour the
landscape of interrelationships between environment and entrepreneur-
ship, its structures, systems and processes that attract European scholars
today. They all seek to expand the concepts and dimensions of research to
complex processes, and combine company, local and national activities
with the global problems we face today.
Chapter 2, ‘New elements for the analysis of entrepreneurial structure’,
written by Cuevas and Carrasco of the University of Seville, analyses the
quality perspective on entrepreneurial structure. Their interest compre-
hends the whole economic system in which the entrepreneurial activity is
located. Thus they develop further the general ideas of Schumpeter on
entrepreneurial innovation. The authors argue that their new concept of
functional dependency within the scope of ‘New Economic Geography’ is
quite close to the ‘value chain’ approach. Their ?ndings from 400 enter-
prises in Andalusia in southern Spain open further two main research
?elds. On the one hand, it is possible to develop a comparative analysis
among regions in order to identify the pro?le of those entrepreneurial
clusters that contribute most/least to economic growth. On the other hand,
Introduction 3
their new concept may be useful in analysis of the role of SMEs in global
value chains for di?erent activity sectors. This chapter describes how the
?rms’ and regions’ growth is not only dependent on quantity but essen-
tially on quality issues embedded in the structures of an economic system.
These features are not only region-speci?c but re?ect shared aspects of
global value chains.
In Chapter 3, ‘Micro–macro paradoxes of entrepreneurship’, Søgaard of
Denmark suggests that a strong micro focus in entrepreneurship research
leads us to neglect macro-level explanations for entrepreneurship and to
abstract it from the wider systems e?ects of stimulating or hampering
entrepreneurship. Søgaard points out that the macro perspective is not an
aggregation of micros but a far more complex social process. More
speci?cally, he investigates this problem by analysing from the 2004 articles
on Entrepreneurship and Regional Development to what extent entrepre-
neurship research does (or does not) address relevant ‘systems e?ects’ of
entrepreneurial activity. The author concludes that a tendency to ignore the
wider social implications of entrepreneurial activities should be taken seri-
ously by any researcher wanting to see entrepreneurship as a fully-?edged
member of the social sciences. To go further in that direction, he suggests,
requires a commitment to understanding for the sake of understanding and
more or less remembering the ideals of the classical Humboldt University.
Going further in that direction, in Chapter 4, ‘New initiatives to revital-
ize society: public entrepreneurship in the south of Sweden’, Dalhammar
of the University of Malmö investigates public entrepreneurship that con-
ceptualizes activities mainly belonging to society and not restricted to the
economic sphere. This public entrepreneurship relates to the growing the-
oretical school of social entrepreneurship. The term ‘public’ emphasizes
public space that concerns all citizens and that is neither private nor o?cial.
Together with Bjerke the author suggests that public entrepreneurship can
be conceptualized by a social mission of creating something that others can
use or bene?t from. In this ?eld social change theory can bring into entre-
preneurship research an approach where change is seen as a structured
process in which it may be possible to identify a speci?c direction or ten-
dency. It can also lead us to investigate the changes that a?ect norms,
values, behaviour, cultural meanings, and social relationships (Scott and
Marshall, 2005).
As his case studies Dalhammar uses examples of new initiatives that deal
with unemployment for marginalized people in urban areas, Job Emergency
in Malmö and Business Pool in Landskrona. The results indicate how such
initiatives can contribute to social change. These examples, which are in a
speci?c cultural context containing at the same time commonalities
and di?erences, provide ideas about how to increase the collaborative
4 The dynamics between entrepreneurship, environment and education
responsibility of dealing with huge immigration problems all over the world.
As the author argues, public entrepreneurship is crucial as a means of revi-
talizing a city or a region, and even whole societies. In this context public
entrepreneurship is a new concept that re?ects the society of today and the
society of tomorrow, helping us to critically study and evaluate public entre-
preneurship initiatives and analyse their role in creating social value and
contributing to social change.
Chapter 5 in Part I, ‘Developing characteristics of an intrapreneurship-
supportive culture’ draws our attention to the intersection of national,
professional and corporate culture. The research group of Menzel, Krauss,
Ulijn and Weggeman from the Department of Technology Management
in the Technological University of Eindhoven in the Netherlands identi?es
the conditions required in order to make intrapreneurship occur in the
large established ?rms and other organizations. Using Hofstede’s
(2001) theory and terminology about national cultures, they develop a six-
dimensional description of a culture conducive to intrapreneurship.
Aggregating 329 quotations from 97 publications they identify 24 cultur-
ally-bound factors that provide Hofstede’s dimensions with a new open
system dimension. By this addition they believe it is possible to make a dis-
tinction between intrapreneurship-supportive and non-supportive cul-
tures and thus improve the innovativeness and competitiveness of large
?rms and organizations. This chapter indicates how complex and multidi-
mensional the cultural processes are and how professional and corporate
cultures are intertwined in the processes enhancing entrepreneurial behav-
iours and practices.
DIALOGUE BETWEEN ENTREPRENEURSHIP AND
EDUCATION
A new emerging discourse in entrepreneurship education addresses its
attention to education systems, curriculum development and pedagogy.
This branch of research regards learning entrepreneurial and enterprising
readiness as a lifelong process which assumes multidisciplinary research
and expertise throughout the educational system (Kyrö and Carrier, 2005).
These points of departure provide a new direction and still unexplored
landscape for entrepreneurship research. Education is both society’s
medium for adopting its ideas of a good life, and a process of preparation
for the students of the future (Bowen, 1981). The European Commission
Report in 2002 recommended acknowledging the importance of entrepre-
neurship teaching in the national curriculum as well as in the curricula for
each level of the educational system as one of the key qualitative indicators
Introduction 5
for entrepreneurship education (European Commission, 2002). However,
little is actually known in entrepreneurship research about the complex
interrelationships between education systems, curriculum development
and pedagogy.
In research this challenges us to combine expertise both from education
and business-related disciplines, and to cross the borders of di?erent edu-
cational levels. Perhaps the lack of such research is due to the fact that edu-
cation and economics in Europe are historically regarded as two di?erent
spheres, and comprehensive and university-level education especially have
emphasized the ideal of the civilized human being as a contradiction to the
market actor. Still today entrepreneurship education in most cases is
regarded as business education and many countries even today focus
mainly on adult education, as Hytti’s and Seikkula-Leino’s chapters in this
book demonstrate. To overcome these problems and contradictions we
have to be able to open up the conceptual dialogue between these two
spheres and consider their cultural di?erences. We also need to di?erentiate
the dominating Anglo-American discourse from the continental European
discourse to understand the impact of these di?erences and to bene?t from
their advantages (cf. Kyrö, 2006).
As Seikkula-Leino argues in Chapter 9, the curriculum is the most
important document in the education system. It expresses the wishes and
needs of a society and shows how to adopt these wishes in practice. It indi-
cates what relevant skills should be achieved through education and what
kind of education programmes should be provided (Bobbitt, 2004, p. 11).
Thus changing the curriculum is about making changes in societies.
Therefore values as well as ideological and political objectives drive these
changes. The current policy proposal to integrate entrepreneurship educa-
tion into the curricula of all EU member states represents such an ideo-
logical and political objective. The curriculum legitimates the idea of the
‘right’ knowledge and proceeding, being thus a powerful document that
creates the basis for educational movements. A curriculum reform also
expresses social pressures, such as developing equality and adjusting edu-
cation to meet the needs of labour development (Flouris and Pasias, 2003).
A curriculum also de?nes subject matter, pedagogical development and
assessment, thus guiding what and how to teach and learn (cf. Flouris and
Pasias, 2003).
The di?erences in developing entrepreneurship by mainstreaming it
throughout curricula at all levels of education show considerable variation
among European countries. For example Austria, Denmark, Finland,
Iceland, Luxemburg, Norway, SpainandSwedenhave alreadyincludedentre-
preneurship education throughout their curricula (European Commission,
2002; 2004). Hytti’s comparative study in this book indicates how di?erently
6 The dynamics between entrepreneurship, environment and education
policy-makers understand the content and pedagogy of entrepreneurship
education in di?erent countries. It also explains howthis understanding leads
to di?erent curricular decisions with direct bearing on practice. However, it
might also represent cultural di?erences or confusion or lack of consensus
about how entrepreneurial and enterprising education should be integrated
into curricula and education systems.
Part II of the book, ‘The dynamics between entrepreneurship and edu-
cation’, continues the discussion on the interrelationships of society and
entrepreneurship, now from an education perspective. It explores the
dimensions of integrating entrepreneurship into governmental support and
education systems. Thus it draws our attention to the various aspects of
education, their similarities and di?erences, thereby also imparting some
ideas on how to be more successful in these processes.
Chapter 6, ‘University entrepreneurship and government support
schemes’, starts this discussion by positioning spin-o? processes to the
larger international and national settings and structures. The authors,
Rasmussen, Borch and Sørheim of the Bodø Graduate School of Business,
argue for the need to reform the commercialization of research, both by
changes in the academic system and in the instruments for research funding
and by setting up separate structures to support such activities. They claim
that due to the complexity of entrepreneurial activity in academic settings
there is a need for tailor-made instruments which should also be adapted
to the national agendas. However, they claim that few studies have investi-
gated how these government schemes are designed and implemented. Their
?ndings from a comparative study of government programmes in Canada,
Finland, Ireland, Norway, Scotland and Sweden pave the way for conclu-
sions regarding the kind of rationale behind the di?erences in the support
schemes between these countries and the di?erent ways of structuring the
support programmes at government, university and project levels. This
interplay sets the scene for the processes that provide innovations in edu-
cation systems and further for the programmes and abilities needed to
enhance them.
In Chapter 7, ‘Enterprise education in di?erent cultural settings and at
di?erent school levels’, Hytti continues the educational discourse by claim-
ing that as enterprise education does not take place in a vacuum, the entre-
preneurial culture and environment of a given region, country or a
particular school needs to be taken into consideration when planning the
enterprise education programme. She suggests that since European coun-
tries have di?erent entrepreneurial cultures, these di?erences should also be
re?ected in the enterprise education programmes and curricular structure.
The comparative analyses of the di?erences in enterprise education
programmes run in ?ve European countries, Austria, Finland, Ireland,
Introduction 7
Norway and UK identify these di?erences in the national approaches
and the content of the programmes. In some countries especially the
focus is solely on business abilities and there seems to be a lack of pro-
grammes at an earlier stage (kindergarten, primary schools), while
only few programmes focus on building awareness and on supporting
entrepreneurial behaviour. The author suggests that the bridges between
entrepreneurship and education (pedagogy) should be stronger in order to
make enterprise education as much about the process as about the subject.
If the focus is only on developing the skills of potential and future
entrepreneurs, these programmes will only cater for the needs of a small
minority.
Chapter 8, ‘Assessment and promotion of entrepreneurial initiative and
attitudes towards entrepreneurship: the case of Estonia’ by Venesaar and
Jakobson, aptly exempli?es the situation in a country that only recently
laid down new guidelines for entrepreneurship development and educa-
tion from 2007 to 2013. This government’s understanding of entrepre-
neurship follows the broad approach and highlights cultural and
educational aspects. The authors report a situation of initiative and atti-
tudes just before this programme was launched. Their ?rst survey con-
tains a sample of 1000 Estonians aged 16 to 64 and the second survey of
443 bachelor’s and master’s students. These ?ndings give all of us some
interesting ideas about the factors behind the high scores of Estonia, the
similarities and di?erences between entrepreneurs and potential entre-
preneurs, students and non-students. As Hytti suggests, they also lay the
foundations for developing country-speci?c government actions and
education.
Chapter 9 continues this discourse with the case of Finland, where
enterprise education has a strong non-business focus compared to other
countries in Hytti’s study. Under the title ‘Advancing entrepreneurship
education in Finnish basic education: the prospects for developing local
curricula’, Seikkula-Leino introduces a partnership model based on cur-
riculum theories. She suggests that using a partnership model in curricu-
lum reform might help to better understand the complex dynamics
between di?erent partners involved. She further investigates through this
model how the National Core Curriculum for Basic Education established
in 2004 has succeeded locally. According to this, all municipalities are
required to o?er entrepreneurship education, at least after 2006. The
survey of teachers, principals, curriculum coordinators, directors of edu-
cation and cultural services departments, trades ombudsmen and repre-
sentatives of local entrepreneurs (N 478) was conducted in spring 2005.
Despite the numerous di?culties listed by respondents, one third of those
in teaching were going to implement more entrepreneurship education in
8 The dynamics between entrepreneurship, environment and education
their future daily work. Despite this result, partners know relatively little
or nothing about entrepreneurship education and the partnership model
has not been as successful as expected. It seems that the curriculum that is
taught and the curriculum that is learned can only develop if it is a vivid
document that is able to be changed and shared by all partners involved in
the process.
DIALOGUE BETWEEN ENTREPRENEURSHIP AND
ORGANIZATION
Many businesses are faced by the growing competitive intensity of a
complex and changing environment, and while their very existence depends
on strongly established structures, they cannot remain in a precarious
status quo. In order to survive, innovation is a key factor. Corporate entre-
preneurship or intrapreneurship is precisely one business tactic adopted by
these companies to bring new elements into their system without creating
chaos. It consists in encouraging the emergence of new activities that bring
about growth. These can take the form of internal ventures; organizations
created or ‘started up’ within an already existing business frame.
Reproducing entrepreneurial attitudes and behaviours within existing
companies and institutions therefore appears, at least theoretically, as an
e?ective antidote to inertia and lack of innovation within these organiza-
tions (Stevenson and Jarillo, 1990; Fayolle and Basso, forthcoming). In
practice, however, the di?culties experienced by the organizations that have
tried to develop these behaviours and attitudes reveal another aspect of the
phenomenon: the existence of contradictions and paradoxes linked to the
combination of con?icting perspectives that result in counter-productive
tensions. Current research in the ?eld of corporate entrepreneurship study,
among other topics, underlines the in?uence of key variables, such as
culture for instance (see Chapter 5), on the ?rm’s entrepreneurial behav-
iours. Moreover, the researcher is more and more trying to open the black
box of organization in which appear the counter-productive contradictions
and paradoxes between a traditional bureaucratic behaviour and a more
entrepreneurial one.
In Part III of the book, ‘The dynamics between entrepreneurship and
small businesses’, each of the four chapters investigates the landscape of
small ?rm competitiveness from di?erent perspectives. They contem-
plate the broadening horizon of small ?rms and organizations requiring
methodological and theoretical renewal, ability and capability to adapt to
and compete in the global landscape and ?nd ideas for sustaining compet-
itiveness in the future.
Introduction 9
In Chapter 10, ‘An empirical taxonomy of start-up ?rms’ growth trajec-
tories’, the Belgian research group of Diambeidou, François, Gailly,
Verleysen and Wertz seeks to develop a methodological solution for inves-
tigating the dynamic approach to new ?rm growth processes. They analyse
the initial growth trajectories of 741 Belgian ?rms using their new applied
mathematical method. Their results question the relevance of uniform
quantitative approaches to studying growth processes and suggest that new
?rm growth is neither a continuous nor idiosyncratic process. It can be ade-
quately described through a limited number of typical growth trajectories
that can be identi?ed in a systematic way.
In Chapter 11, ‘Linking entrepreneurial orientation and dynamic capa-
bilities: research issues and alternative models’, Grande suggests that the
interface between entrepreneurial orientation and dynamic capabilities
o?ers an arena to small ?rms to increase their sustaining competitiveness.
He develops di?erent alternative models for analysing this interrelationship.
This kind of theoretical development that brings entrepreneurial practices
to the organizational context in small ?rms is still rare; even organizational
entrepreneurship as a concept starts to be familiar to all of us. The contri-
bution it can make to the future discourse at the interface of strategic man-
agement, learning organization and entrepreneurship is based on its ability
to increase our understanding of the dynamic processes of entrepreneurial
organizations, especially how to develop entrepreneurial practices.
Chapter 12, ‘The impact of global value chains on Andalusian tourism
SMEs’, by the Spanish researchers Tejada and Liñán describes how the
landscape of small ?rms in the tourism industry has changed, forcing them
to adapt to the globalization process. They further argue that the competi-
tiveness of small ?rms in tourism, as one of the most internationalized
sectors in the world economy, is dependent on their integration into the
global tourism value chain. By analysing this dynamics in seven hotels and
travel agencies in the region of Andalusia the authors anticipate that these
global value chains will o?er an opportunity for competitiveness of small
?rms in the future.
Chapter 13, ‘Family business responsible ownership: challenging the
next generation’s abilities’, written by Kansikas, Krejci and Hanzelková
concludes the book by bringing us ideas about how the next generation of
responsible ownership could be developed. This kind of ideological dis-
cussion is very much needed to promote research in this ?eld. It reminds us
that, after all, to approach entrepreneurship as a dynamics between envi-
ronment and education is impossible unless we are ready to reveal those
values we believe can help the next generation to survive and enhance
democracy and equality in the global landscape where the challenges are
more complex than perhaps ever before.
10 The dynamics between entrepreneurship, environment and education
CONCLUDING COMMENTS
All these chapters re?ect how the European landscape of entrepreneurship
research is nowmore complex than ever. Together they represent an overview
of the current state of entrepreneurshipresearchinEurope and, we hope, also
re?ect the future directions of research in this ?eld. Even if it is rooted in
Europe it views and positions itself in the global context. It also appears to
gather around two dimensions; on the one hand it rather contextualizes than
isolates research settings and on the other hand, more than before, it views
entrepreneurshipas a dynamic learning anddevelopmental process, whatever
context it takes place in. These developments point out the need for compar-
ative research settings and methodological advance to gain access to the
dynamic processes of these settings, examples of which are also introduced in
this book. The third branch of research, still in its nascent phase, focuses on
the ideological dialogue of entrepreneurshipandexpands its scope frombusi-
ness to society. This direction actually returns to the historical roots of entre-
preneurshipinEurope, whichoriginates fromthe ideas of the Enlightenment.
These roots draw on the ideal of democracy and equal opportunity in
Europe, providing educational systems for enhancing these ideals. Whether
any of these three research orientations will be more powerful than others in
understanding the dynamics of entrepreneurshipinthe future or whether this
complexity will even expand is the question that inspires us to continue this
European dialogue. Perhaps this complexity is actually characteristic of the
European viewon entrepreneurship research and thus might even strengthen
in the future. We hope the reader will ?nd these questions as inspiring as they
are to us and thus feels encouraged to continue the dialogue.
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paper presented at the UIC Research Symposium, Chicago, 2–4 August 2006.
Bobbitt, F. (2004), ‘Scienti?c method in curriculum making’, in D.J. Flinders and
S.J. Thornton (eds), The Curriculum Studies Reader, second edn, New York:
Routledge Falmer, pp. 9–16.
Bowen, J. (1981), A History of Western Education, Vol. 3: The Modern West, Europe
and the New World, London: Methuen & Co. Ltd.
Commission of the European Communities (2006), ‘Communication from the
Commission to the Council, the European Parliament, the European Economic
and Social Committee and the Committee of the Regions. Putting knowledge
into practice’, Com (2006) 502 ?nal, Brussels.
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project on education and training for entrepreneurship, Enterprise Directorate
General.
Introduction 11
European Commission (2004), ‘Final report of the expert group “Education for
Enterpreneurship” making progress in promoting entrepreneurial attitudes and
skills through primary and secondary education’, Enterprise Directorate
General.
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states), United States, Iceland and Norway’, Analytical Report, April 2007, Flash
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Fayolle, A. and O. Basso (forthcoming), ‘Entrepreneurial spirit and corporate entre-
preneurship in large companies’, International Journal of Entrepreneurship and
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Perspectives and Outcomes, Cheltenham, UK and Northampton, MA, USA:
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Grilo, I. and R. Thurik (2006), ‘Entrepreneurship in the old and new Europe’,
SCALES-paper N200516, Zoetermeeter, January, 2006.
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International Entrepreneurship Education, Issues and Newness, Cheltenham, UK
and Northampton, MA, USA: Edward Elgar, pp. 93–111.
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Cambridge.
12 The dynamics between entrepreneurship, environment and education
PART I
The Dynamics between Entrepreneurship and
Environment
2. New elements for the analysis of
entrepreneurial structure
Joaquín Guzmán Cuevas and
Felipe Rafael Cáceres Carrasco
INTRODUCTION
In spite of the diversity of de?nitions of entrepreneurship within the tra-
ditional specialized literature, usually there is a clear distinction between
the ?eld that refers to the entrepreneur’s action (entrepreneurial function)
and the ?eld that refers to the result or consequence of that action (enter-
prise). For example, the recent de?nition proposed by P. Thornton and
K. Flynn states that: ‘we de?ne entrepreneurship as both the discovery and
exploitation of entrepreneurial opportunities and the creation of new
organization, which occur as a context-dependent social and economic
process’ (Thornton and Flynn, 2003). In the wide ?eld of entrepreneurship
one can distinguish, therefore, two aspects for analysis:
a) the entrepreneur;
b) the enterprise.
In this second ?eld of entrepreneurship, it is possible to distinguish three
approaches or levels of analysis. First, there is the ‘micro’ approach, whose
prevalent interest of analysis is the individual one. The theories developed
at this level frequently have the maximization of the ?rm owner’s pro?t as
their main objective. For instance, there are well-known theories such as the
risk-uncertainty theory or the di?erent psychological theories focusing on
the optimization of an entrepreneur’s behaviour which are based on this
approach.
Secondly, beyond individual interest, the ‘meso’ approach has the ?rm’s
interest as its main focus. Logically, this study or ?eld of research is wider
than the ?rst one and includes, among others, the transaction cost theory,
the network theory, the spin-o? process and, in general, every theoretical
branch belonging to management.
15
Finally, in the ‘macro’ approach, the fundamental interest of analysis is
not only that of the individual and that of the enterprise, but also the inter-
est of the whole economic system in which the entrepreneurial activity is
located. In recent years, some researchers have considered the relationship
between entrepreneurship and economic growth an interesting issue to study.
Four topics in particular have been the interest of numerous researchers. The
?rst focuses on the creation of enterprises and includes contributions that
consider a positive relationship between the number of enterprises in an
economy and the rate of economic growth. (Wennekers and Thurik, 1999;
Kent, 1982; Dubini, 1989; Storey, 1994; Acs and Armington, 2004). The
second topic pays attention to cultural, historical and institutional variables
as determinants of entrepreneurship and economic growth in a speci?c
context or territory (McMillan and Woodru?, 2002; Yu, 1998; Baumol,
1990, Grabher, 1993; Courlet and Soulage, 1995; Garofoli, 1994). Another
way in which entrepreneurship has been linked to economic growth is com-
petition (Feldman and Audretsch, 1999; Nickell, 1996; Wennekers and
Thurik, 1999). It considers that rivalry among enterprises increases with the
number of ?rms (Porter, 1985) and reinforces the innovation process and the
learning experience of organizations (Molero, 2001). The fourth is perhaps
the topic which has received the most attention by researchers. After the
important contribution by Schumpeter (1934, 1942 [1996]), a large group of
researchers has pointed out a positive relationship between entrepreneurial
innovation and economic growth (Fagerberg, 1988; Vespargen, 1992; Nadiri,
1993; Aghion and Howit, 1992; Grosman and Helpman, 1991). Moreover,
the endogenous growth theory has introduced innovation as an essential
factor to explain the increase of income (Romer, 1994). As a result, innova-
tion has been considered as a principal function of enterprises in economic
growth (Acs, 1992; Carree and Thurik, 2003; Audretsch and Thurik, 2004;
Grabher, 1993; Holcombe, 1998; Courlet and Soulage, 1995; Garofoli, 1994).
Obviously, the relationship of the ‘macro’ approach with the two previ-
ous approaches is quite strong, but the main concern in this aggregate level
may be represented, for example, through the following question: what
should the entrepreneurial activity be like in order to maximize the eco-
nomic growth of a territory? This approach is framed by what could be
called quality of entrepreneurial structure.
ENTREPRENEURIAL STRUCTURE: A QUALITY
PERSPECTIVE
In the ?eld of entrepreneurship, few researchers have paid attention to the
relationship between the characteristics of enterprises and economic growth.
16 The dynamics between entrepreneurship and environment
Some interesting contributions concerning this issue focus on the character-
istics of enterprises, but rarely connect them with economic growth. For
example, the following classi?cation can be established (Cotec, 1996):
? Parochial SMEs: oriented to the local market;
? Individualistic and global SMEs: compete in international market
but are not associated to other ?rms;
? SMEs that manufacture components: make standard products;
? High technology SMEs;
? SMEs in clusters of production.
This classi?cation, which shows di?erent characteristics of ?rms that
probably a?ect economic growth in di?erent ways, raises several questions,
for example: is it possible to quantify the contribution of every type of
enterprise to the GDP? Why does the typology vary among territories?
What is the role of entrepreneurship in the formation of typologies?
The shortage of background knowledge on the ‘macro’ approach to
entrepreneurship is not surprising. The traditional theories on economic
growth (Solow, 1956), including the most advanced models on endogenous
growth (Romer, 1994), do not speci?cally consider entrepreneurship in rela-
tion to the variables that explain the process of economic growth. In this
sense, despite the modern endogenous models, taking into account the
general ideas of Schumpeter on entrepreneurial innovation, incorporating
the technological process and the progress of knowledge, the entrepreneur’s
role is not speci?ed in the implementation of new technology in the pro-
ductive mechanism. Implicitly, one assumes that any innovation created in
a research centre is automatically incorporated into the production process.
Nevertheless, it is necessary to take into account, in order for this process
to take place, that there must always be an enterprise to incorporate these
innovations, and that this circumstance does not always occur, especially in
the underdeveloped countries or regions. Furthermore, other contribu-
tions, as much in the microeconomic as in the macroeconomic approach,
establish the importance of the capacity of innovation of enterprises for the
territory’s economic growth, but there are still many unknown aspects of
the capacity of ?rms to innovate. For example: how should this capacity be
measured?
The Schumpeterian ideas, and the economic models that consider the
innovation in a territory, o?er an interesting contribution for the analysis
of connection between the entrepreneurial structure and economic growth.
Thus, considering the role of the Schumpeterian entrepreneur, it is possi-
ble to classify the di?erent qualitative categories of the entrepreneurial
structure, according to the stronger or weaker entrepreneurial innovation
New elements for the analysis of entrepreneurial structure 17
dynamic. In this sense, it is possible, for instance, to distinguish (O’Kean,
1991):
1. Excellent entrepreneurial structure;
2. Imitator structure;
3. Routine structure; and
4. Empty structure.
Logically, it is predictable that an ‘excellent’ entrepreneurial structure,
with a high degree of its own innovation, exerts great in?uence on the
market and, therefore, will give rise to a high level of economic growth.
Nevertheless, aside from the innovation factor, within every entrepre-
neurial structure there are other characteristics that in?uence the economic
process to a higher or lower degree (Guzmán and Santos, 2001). This is the
case, for instance, in ?rm size, level of training of the personnel, the coop-
eration level among ?rms, the quality certi?cates of goods and services pro-
duction, and so on. These are quite simple variables and easily observable,
but there may be other ones which might help to explain the strengths
and/or weaknesses of the entrepreneurial structure belonging to a territor-
ial economy whether at a local, provincial, regional or national level.
Speci?cally, we will concentrate on two less ‘visible’ variables:
1. Productive dependence;
2. Functional dependence.
Productive Dependence
In literature about entrepreneurship it is di?cult to ?nd references to this
concept, because it has rarely been used to characterize the entrepreneur-
ial structure. Nevertheless, productive dependence is, in our opinion, an
important characteristic of enterprises to take into account, because it
shows the vulnerability of ?rms. Then, from a ‘macro’ view, it could be a
factor that a?ects sustainable development of economies.
Productive dependence refers to the level of concentration of ?rms in
relation to the number of suppliers, on the one hand, and in relation to the
number of clients, on the other. A higher productive dependence index with
respect to purchasing means that a high proportion of input came from a
small number of suppliers. Thus, a maximum value means that 100 per cent
of purchasing is concentrated on only one supplier. On the side of sales, a
maximum value of productive dependence means that 100 per cent of sales
are concentrated on only one client. This is the case, for example, for a small
?rm working under a subcontract for another big company.
18 The dynamics between entrepreneurship and environment
The productive dependence in a ?rm, whether with respect to sales or to
purchasing, is an indication of the degree of risk and vulnerability of such
a ?rm. Obviously if there is a high proportion of enterprises with a high
degree of productive dependence in an economy, it would represent a neg-
ative aspect in the qualitative pro?le of the entrepreneurial structure.
Functional Dependence
This is a new concept. It is based on the level of concentration of purchases
and sales with respect to their territorial origin and destination. Within the
wide scope known as ‘New Economic Geography’ (Krugman, 1991), what
is here called ‘functional dependence’ is quite close to the ‘value chain’
approach (Porter, 1985; Gere?, 1994) of the ‘value stream’ (Womack and
Jones, 1996) or even, in the French tradition, the concept of ‘?lière’.
Nevertheless, there is an essential di?erence with respect to this analytical
approach, because the so-called ‘functional dependence’ does not try to
value either the governance relationships among ?rms or the links among
productive sectors. It is possible to ?nd other background information on
this concept in contributions by Hirschman (1961) and, more recently, in
national and regional programmes to encourage the level of enterprise
interlinkages, in order to increase local sales (UNCTAD, 2001; Izushi,
1999).
From a territorial point of view, the economic literature has only pointed
out a few hypotheses that have come to represent a higher degree in the rela-
tionship among SMEs to suppliers and to clients belonging to any territo-
rial ?eld – in comparison to big companies (Garofoli, 1994; Florio, 1996).
However, it is possible that SMEs, within underdeveloped regions, are spe-
cialized in the functions of distribution or seeking out of the market
(‘market-maker’ for the ‘product-maker’ ?rms, which are located in the
advanced economies, Guzmán and Santos, 2006). For that reason, the
functional dependence tries to evaluate the relationship between the inputs
from an external market and the outputs bound for the internal market.
Based on empirical information for each enterprise of the purchasing
and sales ?ows belonging to local, provincial, regional, national and inter-
national markets, it is possible to quantify the relationship between the ter-
ritorial origin of inputs with respect to the territorial destination of
outputs. Thus, a maximum value of the functional dependence index of a
speci?c enterprise means that 100 per cent of its purchasing comes from the
foreign market and 100 per cent of its sales go to the local market. By con-
trast, a minimum value of the functional dependence index means that the
?rm acquires 100 per cent of its inputs in the local market while 100 per
cent of its outputs go to the international market.
New elements for the analysis of entrepreneurial structure 19
THE FUNCTIONAL AND PRODUCTIVE
DEPENDENCE IN THE EMPIRICAL ANALYSIS:
RESULTS
In order to evaluate the importance of functional and productive depen-
dence in the entrepreneurial structure of a territory, an empirical analysis
has been developed using a database that has been created from a sample
of 400 enterprises of di?erent sizes and from di?erent sectors, located in
the province of Seville, within the Andalusian region in southern Spain.
The information was obtained from personal interviews with entrepreneurs
or those who developed the entrepreneurial functions in the ?rms polled.
The ?nal objective of this inquiry is to test empirically if the new con-
cepts, so-called ‘productive dependence’ and ‘functional dependence’, are
key qualitative characteristics for evaluation of the entrepreneurial struc-
ture. The results obtained can perhaps contribute to macroeconomic
evaluation of the entrepreneurial structure’s quality in any territory or
economy with new elements.
In order to achieve the objectives of this empirical study, a factor analy-
sis has been developed from the 400 elements of the representative sample.
Once the factor scores were obtained, the ?rms were classi?ed into homo-
geneous clusters. These results reinforce the results of the factor analysis.
They show the characteristics of the enterprises with di?erent degrees of
productive and functional dependence.
The factor analysis is developed based on a set of 15 variables which rep-
resent di?erent characteristics of the quality of the entrepreneurial struc-
ture in the province of Seville. In Table 2.1 the variables and their maximum
and minimum values are listed. The Functional Dependence Index (FDI)
has been calculated by weighing (W
i
) the responses given by the interview-
ees to ten questions about the percentage of both the sales (S
i
) and pur-
chasing (P
j
) made by those enterprises in the local market, the rest of the
provincial market, the rest of the regional market, the rest of the national
market and foreign markets. The Functional Dependence Index increases
when the level of concentration of purchases goes up or the border of input
markets (local, regional, national, foreign countries) becomes more distant,
and decreases when the level of concentration of sales goes up or the limits
of output markets become closer.
FDI?? S
i
? W
i
?? P
j
? W
i
The Purchasing Productive Dependence Index (PPDI) has been calculated
by weighing (W
i
) the responses to four questions of the questionnaire about
the percentage of purchases that the polled enterprises usually make from the
20 The dynamics between entrepreneurship and environment
primary, the two primary, the ?ve primary and the ten primary suppliers, and
then adding them. The Sales Productive Dependence Index (SPDI) has been
calculated in a similar way (W
j
) but considering the percentage of sales.
PPDI??W
i
; SPDI??W
j
Prior to the factor analysis, the suitability sample has been checked
through the Kaiser–Meyer–Olkin Test, which achieved a value of 0.808 and
Barlet’s Sphericity Test which shows a signi?cance level of 0.000. The
factor analysis has been developed using the principal components method
and the varimax rotation has been applied. Four factors with self-value
higher than 1 have been identi?ed. Table 2.2 shows the rotated component
matrix and the variance that explains each of the four factors. Altogether,
these four identi?ed factors embrace more than 54 per cent of the original
variable’s variance.
The ?rst factor explains more than 22 per cent of the total variance and
is associated with eight variables which achieve a value higher than 0.5: V4,
V7, V9, V10, V11, V12 and V13. These variables represent the size of the
?rms, the existence of formal agreement of cooperation with other enter-
prises, the R&D activity and innovation, the development of actions for
quality and the possession of a certi?cate of quality, and the annual plan-
ning of actions. All these variables are strongly related to the activities
New elements for the analysis of entrepreneurial structure 21
Table 2.1 Variables in the analysis
Variable De?nition Range
V1 Functional dependence index ?4 to 4
V2 Purchasing productive dependence index 0.2 to 1
V3 Sales productive dependence index 0.2 to 1
V4 Size (number of employees) 1 to 5000
V5 Employment growth (%) ?? to ?
V6 Sales growth (%) ?? to ?
V7 Formal agreement of cooperation with other enterprises* 0 – 1
V8 Informal agreement of cooperation with other enterprises* 0 –1
V9 R&D activity* 0 – 1
V10 Innovation index 0 – 4
V11 Possession of quality certi?cate* 0 – 1
V12 Actions for quality* 0 – 1
V13 Annual planning* 0 – 1
V14 University degree-holding managers (% of total workers) 0% to 100%
V15 University degree-holding employees (% of total workers) 0% to 100%
Note: * 0: no; 1: yes.
oriented towards improving the ?rms (Guzmán and Santos, 2001), that is,
they are related to the entrepreneur’s willingness to increase his or her enter-
prise’s competitiveness. For this reason, this ?rst factor may be called
‘Action promoting competitiveness’.
The second factor explains more than 13 per cent of the total variance
and it is strongly associated with the variables V5 and V6, which represent
the employment and the sales growth of the ?rms, respectively. Therefore
it will be named ‘Growth’.
The third factor explains almost 10 per cent of the total variance and is
basically associated with two variables related to ‘Training’: V14 (univer-
sity degree-holding managers) and V15 (university degree-holding employ-
ees), although it is also related to a lesser extent to another variable, the
informal agreement of cooperation.
The fourth factor explains more than 9 per cent of the total variance and
it is very interesting in this analysis because it is strongly associated with the
22 The dynamics between entrepreneurship and environment
Table 2.2 Rotated component matrix
1
Component
1 2 3 4
V1 0.0043 0.228 ?0.148 0.746
V2 ?0.0746 ?0.199 0.0027 0.703
V3 0.248 ?0.317 0.195 ?0.320
V4 0.505 0.037 ?0.181 ?0.278
V5 ?0.109 0.873 ?0.0171 0.0243
V6 ?0.147 0.862 ?0.0888 ?0.0324
V7 0.611 ?0.207 ?0.0236 ?0.214
V8 ?0.191 0.0902 0.530 0.0304
V9 0.691 ?0.243 0.0135 ?0.273
V10 0.668 ?0.324 0.0810 ?0.172
V11 0.733 0.0296 0.0446 0.0887
V12 0.683 ?0.082 0.190 0.0457
V13 0.617 ?0.0588 0.244 0.125
V14 0.383 0.152 0.657 ?0.151
V15 0.293 0.219 0.739 ?0.101
%Variance explained 22.033 13.316 9.759 9.606
Cumulative variance explained 22.033 35.349 45.109 54.715
Notes:
Extraction method: Principal Component Analysis.
Rotation method: Varimax with Kaiser normalization.
1. Rotation converged in 6 iterations.
variables V1 and V2, which represent the functional dependence and the
purchasing productive dependence of ?rms in the sample. The identi?cation
of this fourth factor, which will be called ‘Dependence’, means that, in addi-
tion to other well-studied characteristics of the ?rms, such as innovation,
collaboration, planning, actions to improve the quality of products, growth
of sales and employment and the training degree of managers and the rest
of personnel, it is also important to take into account the elements related
to the dependence among ?rms in order to evaluate the pro?le of the entre-
preneurial structure of a given territory.
The cluster analysis seems to reinforce the results of factor analysis. As
was pointed out before, the clusters have been created based on the scoring
of factors obtained from the factor analysis for each of the four identi?ed
factors. The cluster analysis is created through the K-mean for two groups,
because after several tests, it was evident that the results obtained were the
most appropriate for the purpose of this research. Table 2.3 displays the
centre of the ?nal clusters and the number of cases for each cluster. This
result shows that:
? In cluster 1 there are 325 enterprises – more than 80 per cent of the
sample – that have lower levels of action promoting competitiveness
(factor 1) and training (factor 3) with respect to the enterprises in
cluster 2, but, at the same time, the ?rms in the ?rst cluster have more
growth in terms of employment and sales, than the ?rms in cluster 1.
How can this contrast be explained? Perhaps the response to this
question lies in the theory of enterprise growth. According to this
theory, the high level of ‘growth’ (factor 2) in the majority group is
due to the smaller size of the ?rms. The Variance Analysis shows
di?erences between the sizes of the two enterprise clusters, at 0.0000
level of statistical signi?cance. The mean size is 340 employees in
cluster 1 and only ?ve employees in cluster 2.
New elements for the analysis of entrepreneurial structure 23
Table 2.3 Cluster analysis
Final clusters
1 2
Competitiveness factor ?0.33738 1.46199
Growth factor 0.16793 ?0.72772
Training factor ?0.03263 0.14138
Dependence factor 0.12993 ?0.56305
Number of cases in each cluster 325 75
? Cluster 2 is formed by only 75 enterprises – less than 20 per cent of
the sample – which are characterized, in contrast to the larger group
of 325 enterprises, by high levels of actions promoting competi-
tiveness (factor 1), and extensive training of the managers and
employees (factor 3). Therefore one may a?rm that this minor
quantitative group is shaped by the ‘best’ enterprises because they
have the most innovation, have paid the most attention to the
quality of their products or services, make the most formal agree-
ments of cooperation, make the most planning actions, and have
the most quali?ed personnel. Furthermore, the enterprises of
cluster 2 show the lowest level of functional dependence and pur-
chasing productive dependence. That is, on the one hand, the enter-
prises acquire a big part of their input from their territorial location
(Province of Seville and the Andalusian region), and their sales are
directed, in high proportion, toward the external territorial market.
Therefore their contribution to endogenous economic growth is
high with respect to the group of enterprises with the highest level
of functional dependence. On the other hand, they are ?rms that
buy their input from many di?erent suppliers, and have a low level
of vulnerability with respect to enterprises with a higher degree of
purchasing productive dependence.
CONCLUSIONS
According to the previously theoretical approaches and based on the par-
ticular ?ndings obtained by the empirical analysis, it is possible to point out
some relevant aspects for future analysis of entrepreneurship from the per-
spective of the relationship between the entrepreneurial structure and the
economic growth of a territory.
a. In the analysis of entrepreneurial structure of a territory, in addition
to several well-known characteristics of enterprises, such as the size of
?rms, the activity sectors, the degree of innovation, the collaboration
agreements, the training personnel, and so on there are others linked
to inter-entrepreneurial dependence that acquire a special importance
in the evaluation of entrepreneurship.
b. The new concepts ‘productive dependence’ and ‘functional depen-
dence’ constitute structural elements which may acquire particular
importance in an e?ort to improve the knowledge of the relationship
between the characteristics of enterprises and the economic growth of
a territory. The productive and functional dependence degree may
24 The dynamics between entrepreneurship and environment
act favourably or unfavourably on the economic growth-development
process, in a structural and permanent way.
c. At least two main research ?elds will be open in the future as a conse-
quence of the use of these new analytical concepts. On one hand, it is
possible to develop comparison analysis between regions in order to
identify the pro?le of those entrepreneurial clusters which contribute to
economic growth to the greatest/least extent. In the end, this ?rst
research line attempts to analyse –and to measure – the relationship
between productive and functional dependences with economic
growth. On the other hand, both new concepts may be useful in analy-
sis of the role of SMEs in global value chains for di?erent activity
sectors.
d. Froman economic policy perspective, these newconcepts may represent
adiscriminatingfactor inorder toimprove institutional or public support
for SMEs within a framework of regional economic development.
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New elements for the analysis of entrepreneurial structure 27
3. Micro–macro paradoxes of
entrepreneurship
Villy Søgaard
Classical economics optimizes what already exists, as does mainstream eco-
nomic theory to this day, including the Keynesians, the Friedmanites, and the
Supply-siders. It focuses on getting the most out of existing resources and aims
at establishing equilibrium. It cannot handle the entrepreneur but consigns him
to the shadowy realm of ‘external forces’, together with climate and weather,
government and politics, pestilence and war, but also technology. The traditional
economist, regardless of school or ‘ism’, does not deny, of course, that these
external forces exist or that they matter. But they are not part of his world, nor
accounted for in his model, his equations, or his predictions.
(Peter Drucker, 1985 [1994], p. 24)
INTRODUCTION
Over the past decades, entrepreneurship research has grown tremendously.
Increasing numbers of journals, chairs, researchers, conferences, and so on
are devoted to the ?eld of entrepreneurship. Some researchers, such as
Cornelius, Landström and Persson (2006), have empirically examined the
‘maturing’ of this ?eld of research, that is, the process through which it
comes to resemble other mature disciplines with an increasingly internal
orientation of researchers citing one another, a stabilization of key topics,
an increased level of specialization among researchers, and the emergence
of a research community led by core researchers (Cornelius et al., 2006,
p. 2).
No doubt this process re?ects, at least in part, the growing insight and
wisdom that comes with age and experience, but – as every teenage rebel
knows – maturing and ageing can also lead to entrenched positions, to adult
complacency and perhaps even resignation, as more and more windows of
opportunity begin to close behind us. The maturing and stabilization of a
research area is a social process, conditioning researchers to address some
issues rather than others. For an excellent, historical overview, implicitly
questioning the ‘maturing hypothesis’, the reader is referred to Fayolle et al.
(2005). According to these authors, ‘expectations for the future involve
28
developing methods for studying . . . the interaction between individual and
collective human processes’ (ibid., p. 11).
One reason why this interaction has been neglected may be found in the
‘Oedipal’ aggressions of entrepreneurship research vis-à-vis neoclassical
economics. As Peter Drucker so eloquently stated in the introductory quo-
tation, entrepreneurship does not ?t well into mainstream economic theory.
In particular, the underlying assumptions of the textbook model of perfect
competition (perfect information, rational choice, given preferences and
technology, and so on) seem to rule out entrepreneurship altogether: if
every market opportunity were already being fully exploited; if best prac-
tice technologies were readily available to every potential producer; if
resources were already being allocated perfectly throughout the economy,
there would be no room for improvement, no room for innovation, and
little space for the entrepreneur (Baretto, 1989), except to secure the suc-
cession of generations.
It is hardly surprising, therefore, that scholars of entrepreneurship have
been inclined to dismiss wholesale the lessons of received neoclassical
orthodoxy. However, what economics has to o?er is a systems perspective:
economists of nearly all persuasions agree that the whole is more than the
sum of its parts. The perfectly valid critique of the negligible role of entre-
preneurship in mainstream economics does not permit us to sacri?ce this
fundamental insight. From an economic policy perspective it is not, as a
rule, safe to assume that ‘what is good for General Motors, is good for the
United States’. Indeed what is good for the individual ?rm may in some
cases be bad for society as a whole – or vice versa.
It seems obvious to draw a parallel to the aid-e?ectiveness literature and
its so-called micro–macro paradox. According to a meta analysis under-
taken by Doucouliagos and Paldam (2005), ‘studies summarizing project
evaluations typically ?nd that about half of all projects succeed, while the
other half fails, but hardly any harms development. Thus, by aggregation
the macro evidence should show that aid increases growth’. It does not,
however. The question is: what comes between micro and macro e?ects in
the context of aid and economic development? And what about the macro
e?ects of entrepreneurial activity? The much celebrated Schumpeterian
concept of creative destruction should make it clear that the growth of the
entrepreneurial ?rm need not contribute to the growth of the economy in
any simple and additive way. Yet, how exactly does the fate of the ?rm
in?uence that of the economic system of which it is part?
The present chapter is written on the assumption that, from a policy per-
spective, the sharp intellectual division between mainstream economics and
entrepreneurship research constitutes a problem. Policy-makers are faced
with a choice between a mainstream approach in which entrepreneurs
Micro–macro paradoxes of entrepreneurship 29
hardly exist (or in which entrepreneurship is supposed to look after itself)
and a body of entrepreneurship research characterized by a strong micro
focus, both in terms of neglecting macro-level explanations for entrepre-
neurship and in terms of abstracting from the wider systems e?ects of stim-
ulating or hampering entrepreneurship.
The primary aim of this chapter is to consider one side of this dual
micro–macro problem – the extent to which entrepreneurship research does
(or does not) address relevant ‘systems e?ects’ of entrepreneurial activity.
The other side of the coin, the super?cial treatment of entrepreneurship
within mainstream economics, will be discussed only in passing.
It should be stressed that this does not amount to a claim that all entre-
preneurship research should be conducted from a systems approach (see,
for example, Arbnor and Bjerke, 1997). Other approaches may be useful,
or even superior, when it comes to understanding the logic of entrepre-
neurial decision-making, entrepreneurs’ use of ICT, or their interaction
with venture capitalists. The fallacy of composition is not permissible to
any approach, however. Each participant in a bicycle race can win by being
fast enough, but no methodological school of thought allows its followers
to conclude that all participants could win the same race if only they were
all fast enough.
If a new enterprise outperforms an existing one, the number of people
employed by the new enterprise is likely to overestimate the net employ-
ment e?ect of the new venture. In fact, the net employment e?ect could be
negative, at least in the short run. Conversely, multiplier mechanisms may
induce many more jobs than those within the walls of the company itself.
It follows that aggregate employment e?ects of entrepreneurship cannot be
found by simply adding the number of jobs within newly established enter-
prises. In order to integrate micro and macro perspectives one must take
account of relevant systems e?ects.
In the following section the nature of such e?ects is set out. First,
however, the social forces shaping the emerging research discourse are con-
sidered. The third section asks whether there is a ‘micro–macro problem’ in
entrepreneurship research and considers the nature of this problem. The
fourth section goes on to discuss possible reasons for this problem. A dis-
tinction is made between theoretical, methodological, ideological (or dis-
cursive) and institutional explanations.
WHAT SYSTEMS EFFECTS?
Many stakeholders have an interest in doing – or funding – research on entre-
preneurship, and there are several motivations for doing so. Researchers, of
30 The dynamics between entrepreneurship and environment
course, have come from many di?erent disciplinary backgrounds, which has
undoubtedly hampered the development of entrepreneurship research into
an integrated academic ?eld. A great deal of research has been empirically
oriented, focusing on such varied issues as the psychology of the entrepre-
neur, motivations for setting up a business, access to venture capital, and so
on. Some of this research appears to be genuinely ‘disinterested’, that is, it
does not ?ow directly from the desire to know how best to attain speci?c
goals apart from gaining insight into speci?c aspects of entrepreneurship.
Like all other forms of research, entrepreneurship research must be funded,
however, which induces researchers to appeal to the incentives of external
stakeholders.
Their incentives may be broadly divided into private and public motiva-
tions for taking an interest in this area of research. Some external stake-
holders, such as seed or venture capitalists, business angels or (existing or
would-be) entrepreneurs obviously have an interest in studies relating
speci?c management practices, growth strategies or characteristics of ?rms
or entrepreneurs to the survival or commercial success of the new enter-
prise. Unsurprisingly, a great deal of research has been aimed at shedding
some light on these issues.
Political actors often take a strong interest in stimulating economic
growth and renewal and frequently see entrepreneurship as a vehicle for
doing so. For example, in an address to the British American Chamber of
Commerce, Peter Mandelson, former Secretary of State for Trade and
Industry, expressed the view that ‘we need more entrepreneurs in the
British economy; they are the real agents of economic change because
enterprise is the bedrock of a modern economy. . . . Government must
make this process as easy, accessible and e?ective as possible’ (Mandelson,
1998).
Similarly, reports from the European Commission (for example, 2003)
have repeatedly stressed the need for more entrepreneurship as a prerequi-
site for realizing the so-called Lisbon objectives of turning the European
economy into the most competitive economy in the world by 2010 (see, for
example, Communication from the Commission to the Council and The
European Parliament on Implementation of the Risk Capital Action
Plan (RCAP), COM(2001) 605 Final, p. 14). In general, a number of
micro–macro issues have to be analysed to support public policy conclu-
sions, however.
Is More Always Better?
Entrepreneurial skills, like other skills, are unevenly distributed, and
some undoubtedly contribute more as employees than they might do as
Micro–macro paradoxes of entrepreneurship 31
self-employed. This raises the question: who, and how many, should be
encouraged to (or discouraged from) becoming entrepreneurs? The dimin-
ishing returns hypothesis is supported by empirical evidence. In a recent
contribution, Carree et al. (2002) developed a statistical model to analyse
the relationship between economic growth and business ownership,
drawing on data for 23 OECD countries during the period 1976–1996.
They found some evidence to support their claim that there is an equilib-
rium level of business ownership and a penalty for deviating – positively
or negatively – from this optimum level. Also, their research suggests
that the optimum level of business ownership varies with economic
development.
Employment E?ects
Entrepreneurial ventures may generate export revenues and create local,
national or even international markets for their services and other inputs,
thereby boosting local demand and employment. Or they may ?ourish and
grow entirely at the expense of incumbent ?rms, adding nothing but
another dose of uncertainty and ‘creative destruction’ to the business envir-
onment. Thus, as mentioned above, employment within entrepreneurial
?rms is highly unlikely to be an appropriate measure of the additional net
employment generated by entrepreneurial activity. The activity within these
?rms a?ects, positively or negatively, the employment of many other ?rms –
suppliers, competitors, and so on.
Alternatives to – and Opportunity Costs of – Entrepreneurship
Finally, entrepreneurship is but one of several sources of economic growth
along with education, technical change and innovation, export growth, and
a host of other factors. It is not clear ex ante which of these factors can do
most to stimulate the economy, but the economic policy-maker, endowed
with scarce resources, ought to be interested in knowing. The entrepreneur
may decide to start up his or her own venture despite their lack of market-
ing knowledge, management skills, technical know-how and capital for fear
that existing companies should steal their idea. In this situation, reducing
the transaction costs involved in selling a new product or process idea to an
existing ?rm might be more e?cient in terms of generating growth than
inducing the entrepreneur to go it alone. What sort of arrangements could
be put in place to ensure that the business idea of the entrepreneur (or
‘extrapreneur’) is exploited in the best possible way? Where do we get the
most of existing resources?
32 The dynamics between entrepreneurship and environment
Risk and Uncertainty
Obviously, a macro assessment of the risk and uncertainty associated with
entrepreneurial activity may di?er substantially from the micro assessment
of the individual entrepreneur. Whilst the signi?cance of uncertainty avoid-
ance has been addressed, for example, in a study undertaken by Wennekers,
Thurik, Stel and Noorderhaven (Wennekers et al., 2003), contributions
speci?cally addressing the micro–macro paradox at this point seem rare.
The chapter seeks to provide a general picture of how such key
micro–macro problems have been addressed within the ?eld of entrepre-
neurship research so far and discusses the possible need for a redirection of
research against this background. It is, however, beyond the scope of the
chapter to get deeply into substantive arguments concerning each of these
‘paradoxes’.
Whilst studies based on the private motivations for doing entrepreneur-
ship research may not have to take account of systems e?ects, the validity
of studies based on public motivations hinge crucially on their taking
account of such e?ects. Otherwise, entrepreneurship research may end up
making false conclusions implicitly by aggregation. This tendency is clearly
present in many studies on the role of small ?rms as ‘job engines’. Since the
pioneering work of Birch (1979), who found that no less than two-thirds of
new (net) jobs in the US between 1969 and 1976 were created in small ?rms
with less than 20 employees, many similar studies have been carried out in
other countries. Although the validity of this research has been challenged
on methodological grounds (cf., for example, Davis et al., 1996), this cri-
tique has been focused largely on statistical problems of little practical
signi?cance (Davidsson et al., 1998). The ways in which job creation by
small ?rms might a?ect job creation elsewhere appear to have been largely
neglected.
MICRO–MACRO PROBLEMS IN
ENTREPRENEURSHIP RESEARCH
Since this chapter is concerned with entrepreneurship research, we shall
focus mainly on one side of the dual micro–macro problem – the extent to
which entrepreneurship research, based on public research motivations,
takes account of systems e?ects. This chapter was inspired, of course, by a
subjective impression that studies often fail to do so. Subjective impressions
are fallible, however, and a more systematic approach seems called for to
settle the issue. Figure 3.1 presents a crude framework for classifying this
type of study.
Micro–macro paradoxes of entrepreneurship 33
Based on the model of Figure 3.1 it is possible to distinguish between the
following types of entrepreneurship research:
1. Research that does not expressly address the perspectives suggested in
the model of Figure 3.1 – for example, research on entrepreneurs’ use of
ICT, of the succession of generations, of personal networks, and so on.
2. Research addressing policy impact on entrepreneurial activity.
3. Research addressing the socioeconomic impact of entrepreneurial
activity.
4. Research into the socioeconomic impact of policies to in?uence entre-
preneurial activity (vis-à-vis other policies).
Each type of research may then be graduated according to the way in which
it takes account of systems e?ects.
By way of illustration, Table 3.1 presents a classi?cation of articles from
all issues of Entrepreneurship and Regional Development in 2004. This
journal was chosen because its title explicitly links micro–macro (or at least
micro–meso) issues, and the year 2004 was chosen for practical reasons
(electronic access to PDF versions of all articles). It would obviously be
desirable to include more journals over a longer period of time. A similar
study, covering 337 articles published in leading entrepreneurship journals
in 1999–2000 (Kyrö and Kansikas, 2005), suggests that macro-level research
is equally rare in other leading journals.
About one in four articles (seven in 27) were more or less explicitly
linking policy options and social impact. The remaining 20 articles were on
34 The dynamics between entrepreneurship and environment
Figure 3.1 Problem framework for studies that should take account of
systems e?ects
Policy options,
including
policies to support
entrepreneurial
activity
Entrepreneurial
activity
Social impact, e.g.
in terms of
growth,
employment, etc.
a) Taking account of systems
effects
b) Not taking account of systems
effects
such issues as networking, the adoption of ICT, entrepreneurship in
speci?c contexts, conceptual issues, and so on – that is, on issues re?ecting
‘private motivations’ and, in a very few cases, pure research motivations.
The classi?cation of chapters is inevitably somewhat subjective, of
course, and the sceptical reader is invited to consult Appendix 3A.1, which
indicates just how each individual article has been classi?ed.
From the overall distribution of articles it appears that what has been
labelled ‘private motivations’ are more important than ‘public motivations’
in generating entrepreneurship research. The numbers within the ‘public
motivations’ columns are too small to allow for any general conclusions.
Moreover, the classi?cation of some of the papers in this category is admit-
tedly questionable. For example, the article by Rehn and Taalas from the
May 2004 issue (pp. 235–50), which is categorized here as one of three arti-
cles on ‘socio-economic impact of entrepreneurial activity’, is a highly
interesting article on the Soviet Union ‘as a fundamentally entrepreneurial
society’. Similarly, it could be argued that the article on the Shell LiveWire
venture creation programme by Greene and Storey from the March issue
(pp. 145–59) is not really about policy impact on entrepreneurial activity,
although the analysis does appear policy-relevant. Finally, Pereira’s article
on ‘State entrepreneurship and regional development: Singapore’s indus-
trial parks in Batam and Suzhou’ is classi?ed under ‘socio-economic
impact of policies on entrepreneurial activity’. This chapter touches upon
systems e?ects, but they are not systematically analysed.
Micro–macro paradoxes of entrepreneurship 35
Table 3.1 Classi?cation of articles from 2004 issues of Entrepreneurship
and Regional Development
Policy impact Socioeconomic Socioeconomic Other
on impact of impact of types of
entrepreneurial entrepreneurial policies on research
activity activity entrepreneurial
activity
‘Public ‘Private
motivations’ motivations’
? ‘Pure
research’
Systems e?ects – – –
analysed
Systems e?ects 2 3 1 20
discussed
Systems e?ects – – 1
not considered
The article entitled ‘Is small beautiful?’ (Johansson, 2004) does not take
into account systems e?ects. It describes the growth of Swedish IT ?rms
between 1993 and 1998, based on data covering all ?rms in the entire
industry. The article demonstrates quite clearly that small ?rms have
grown much faster than larger ?rms during this period. However, it does
not take account of the interaction between the growth in small and
larger ?rms. That is why it has been classi?ed under ‘systems e?ects not
considered’.
The relative scarcity of research on socioeconomic impact suggests that
policy-makers wanting to assess the impact of their policies will have to
resort to other research sources – or do without. Moreover, the lack of
attention to systems e?ects within the ‘public motivations’ columns sug-
gests that there is reluctance to deal with tensions between the two types of
motivations.
There are counter examples, however, as shown by the work of Carree
et al. (2002), mentioned above. Similar research has been carried out by
Martínez in an analysis of entrepreneurship and regional growth in Spain
(Martínez, 2005).
Yet, on the whole, the sample of articles appear to con?rm Rehn’s and
Taalas’ view that
at the core scholars in entrepreneurship are pro rather than contra. As a result,
the community of academics that studies it by and large accepts entrepreneur-
ialism as a good thing. When it comes to the place of the studied phenomenon
in society, the analysis has often been restricted to questions regarding how to
foster and support entrepreneurship in di?erent contexts. Usually this has been
done in a way that implicitly assumes that entrepreneurialism is an exogenous
variable, something that is introduced into a society and that there is a constant
lack of. Rehn and Taalas (2004, p. 235)
EXPLANATIONS OF THE MICRO–MACRO
PROBLEMS
What are the reasons for this bias towards the fallacy of composition
within entrepreneurship research? We suggest four elements that should be
considered:
1. Theoretical explanations. Opposition to mainstream economics.
2. Methodological explanations. Design di?culties associated with address-
ing the micro–macro problem.
3. Ideological explanations. Glori?cation of ownership. Entrepreneurial
universities, etc. The fate of the Humboldt University.
36 The dynamics between entrepreneurship and environment
4. Institutional explanations. Specialization of research preventing resear-
chers from seeing innovation, intrapreneurship, entrepreneurship and
so on as alternative levers of economic renewal.
Theoretical Explanations
First, as mentioned in the opening paragraph, mainstream economics has
traditionally tended to rule out entrepreneurship altogether. Thus, the
concept of entrepreneurship does not appear at all in the indices of such
widely accepted textbooks as Hal Varian’s Intermediate Microeconomics
(1999), Jehle and Reny’s Advanced Microeconomic Theory (2001), Pindyck
and Rubinfeld’s Microeconomics (1997), or Eaton et al.’s Microeconomics
(2002). Implicitly, the entrepreneur is relegated to some ‘primordial ooze’
from which the economic system once emerged. In Robert Frank’s
Microeconomics and Behavior (1991), Case and Fair’s Principles of
Microeconomics (1994), and Paul Samuelson’s classic Economics (1973),
the concept of entrepreneurship is mentioned only in passing. Parkin,
Powell and Matthews describe entrepreneurial ability as ‘the factor of pro-
duction that organizes the business, makes business decisions, innovates
and bears the risk of running the business. These activities would not be
undertaken without the expectation of a return. The expected return for
supplying entrepreneurial ability is called normal pro?t.’ (Parkin et al.,
1997, p. 214).
Some economists have taken a much stronger interest in entrepreneur-
ship, of course. In particular, the so-called Austrian school of economists
has levelled a serious criticism against the neoclassical framework. This
criticism is serious because it is targeted at the very core assumptions of the
neoclassical model. Competition is seen as a dynamic process and not as a
static structure, and the perfect rationality assumptions of microeconomic
theory are dismissed in favour of bounded rationality/procedural rational-
ity assumptions.
These fundamental premises undoubtedly constitute the two overriding
reasons for the neglect of entrepreneurship in economic theory. William
Baumol (1968, 1990) is one of the few economists to have looked seriously
into the relationship between economics and entrepreneurship, which
earned him the International Award for Entrepreneurship and Small
Business Research in 2003. On that occasion Eliasson and Henrekson
(2004, p. 3), reviewing his work, noted how his
analysis of the entrepreneur . . . has been guided by two principles that he for-
mulated very early in his career: 1) Make your assumptions confer with reality
as much as you can . . . but not to the extent that you cannot say anything.
Micro–macro paradoxes of entrepreneurship 37
Therefore, it becomes necessary, he argues, to economize on the introduction of
realism into analysis. 2) If possible, try to stay within the framework of neo-
classical analysis.
The tension between these two principles raises the question if it is possible
to carry out entrepreneurship research within the framework of neoclassical
analysis. Many researchers have found it di?cult, and it is possible that the
systems approach has been dismissed along with the neoclassical heritage.
Methodological Explanations
Secondly, the systematic empirical inclusion of systems e?ects is demand-
ing. The so-called meta analysis by Doucouliagos and Paldam (2005),
based on a number of aid e?ectiveness articles, is an instructive case in
point. The article largely fails to demonstrate the e?ectiveness of develop-
ment aid. This is not tantamount to demonstrating its ine?ectiveness,
however – a subtle, but very important point. Among other things, this is
to do with methodological di?culties such as the following:
? Development aid normally makes up only a small percentage of the
economies of receiving countries. For example, suppose various eco-
nomic injections were randomly administered to 70 countries over,
say, a 5-year period. In order to be able to measure the impact of such
injections, one would have to be able to attribute almost 20 per cent
of the (unexplained) di?erences in economic growth to these injec-
tions to obtain a statistically signi?cant e?ect. In practice, this is quite
an ambitious target.
? Medical experiments are randomized to meet the ceteris paribus
clause. One does not want to measure the e?ectiveness of a drug by
comparing the health of a healthy person who never takes the drug
on account of his good health to that of an unhealthy person who
does so on account of his poor health. In contrast, the statistical
comparisons underlying the aid-e?ectiveness literature are some-
times done as if aid actually were administered at random, unrelated
to the needs of the receiving countries. If aid is given to compensate
natural disasters, war, or poor governance, and if it fails to compen-
sate fully for such evils, aid and growth may well be negatively corre-
lated, even if the aid provided is in fact e?ective.
? Medical experiments are usually con?ned to one drug at a time.
Development aid is nearly always a mixture of many di?erent
‘drugs’ – schools, irrigation systems, power stations – the e?ects of
which may be short-term or protracted over several decades.
38 The dynamics between entrepreneurship and environment
Very similar problems pertain to assessing the social impact of entrepre-
neurial activity. The methodological di?culties involved in sorting out
whether ‘entrepreneurial spirit’ is a source or a consequence of exceptional
growth are quite challenging. Interestingly, a comprehensive analysis by
Teasdale and McVey (2001) concluded that the most likely explanations for
this were to be found in macroeconomic conditions (such as interest, busi-
ness con?dence, and so on). This ?nding signi?cantly modi?es the ‘inde-
pendent variable’ perspective of entrepreneurship. However, while there is
certainly room for improvement, work such as that of Carree et al. (2002),
or Martínez (2005) suggests that this type of analysis is possible.
Ideological Explanations
In the article by Cornelius et al. (2006) the growth and maturing of entre-
preneurship research is seen as a process similar to the maturation of other
disciplines. One should not overlook, however, that it is also a process
unfolding in a speci?c historical context. We are currently witnessing what
Etzkowitz and Leydesdor? (1997) referred to as The Second Academic
Revolution. In many respects this ‘revolution’ is an understandable reaction
to a range of pressures: the increasing number of students, the emerging
knowledge society and the competitive pressures from globalization, to
name just a few.
Reforming the university system is a demanding enterprise, however.
While the ideal type Humboldt University was caught in a dilemma
between independency and social relevancy, there has recently been a ten-
dency – probably in reaction to the leftist tendencies of the 1970s – to
equate social and commercial relevancy.
For example, in Denmark, Research Minister Helge Sander has under-
taken to reform university research under the slogan ‘from research to
receipt’:
Government has a clear position on development and research. Research is not
something that should be collecting dust on university shelves. The Government
wants an active interaction between knowledge institutions and businesses.
Business should be using research actively to ensure the transfer of knowledge
‘from heads to hands’, from ‘research to receipt’. In general, it is important that
research and education be much more tightly related to ?rms as well as private
investors. Government is in full swing securing this interaction. The new univer-
sity reform is an obvious case in point. We’ll now get university boards with an
external majority – and with business representatives. (Source:http://www.oem.
dk/sw7999.asp, accessed 30 April 2006)
The above quotation is from an address delivered by the Minister at Danske
Maritime’s reception, 25 June 2003.
Micro–macro paradoxes of entrepreneurship 39
There is no denying, of course, that commercial application is an import-
ant vehicle for social relevancy. Yet, reconciling ?nancial dependence and
academic independence is no small challenge. There may be pro?table
markets for the scienti?c approval of all sorts of messages, ranging from
creationism to the harmlessness of sugar, bubble gum or carbon dioxide.
Institutional safeguards are required to ensure that commercial relevancy
is not bought at the expense of credibility, and that other forms of social
relevancy are also being catered to. In an important article Fujigaki and
Leydesdor? (2000) describe how the logic of scienti?c validation di?ers
from that of market (or political) validation.
Institutional Explanations
Finally, the specialization of research that comes with the maturation of
the research ?eld may prevent researchers from adopting a more holistic
view enabling them to see innovation, intrapreneurship, entrepreneurship
and so on as alternative processes of economic renewal. It deserves
notice, for example, that none of the articles on policy in?uence in the
sample of Table 3.1 addressed relevant alternatives to policies to support
entrepreneurialism.
CONCLUSIONS AND PERSPECTIVES
This chapter set out to examine the extent to which entrepreneurship
research addresses, or fails to address, relevant systems e?ects of entrepre-
neurial activity. Although the empirical basis for drawing this conclusion
could be expanded, the evidence presented strongly suggests that there is a
tendency to ignore the wider social implications of entrepreneurial activ-
ities. This problem should certainly be taken seriously by any subject
wanting to see itself as a fully-?edged member of the social sciences.
As mentioned in the previous section, important design di?culties must
be overcome to handle such problems empirically. The cited work by Carree
and Thurik (2003) is suggestive, but other approaches may prove useful as
well.
Without denying or minimizing the sometimes impressive achievements
of entrepreneurial individuals, it is a good thing that entrepreneurship
research has matured beyond the so-called ‘great man hypothesis’ and the
unquali?ed glori?cation of ownership. This process of maturation will
undoubtedly continue.
Maturity means innocence lost, however, and the process of maturation is
taking place in the context of a Second Academic Revolution, threatening to
40 The dynamics between entrepreneurship and environment
undermine the ideals of the classical Humboldt University. Theoretical and
empirical studies of the wider social impact of entrepreneurialism are
required for entrepreneurship research to move beyond the perspectives of
the individual entrepreneur or venture capitalist and inform policy-makers
in a reasonably objective fashion. Such studies require a commitment to
understanding for the sake of understanding, and they may be di?cult to
undertake in a research environment depending more and more on private
funding.
Above all, entrepreneurship research should address systems e?ects
more explicitly and consistently, both theoretically and empirically. It is
conceivable that further theoretical developments will clarify the nature of
such e?ects. One need not pursue a mainstream or neoclassical research
agenda to appreciate that the whole is more than the sum of the parts.
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Micro–macro paradoxes of entrepreneurship 43
APPENDIX 3A.1 SAMPLE OF ARTICLES
CLASSIFIED
Entrepreneurship and Regional Development 2004
Key to the classi?cation of articles
44 The dynamics between entrepreneurship and environment
Policy impact on Socioeconomic Socioeconomic Other
entrepreneurial impact of impact of types of
activity entrepreneurial policies on research
activity entrepreneurial
activity
Systems e?ects A B C
analysed
Systems e?ects D E F J
discussed
Systems e?ects G H I
not considered
‘In what sense “regional development?”: entrepreneurship, E
underdevelopment and strong tradition in the periphery’, by Paul
Benneworth, Entrepreneurship & Regional Development, November 2004,
16(6), 439–58.
‘Policies to promote new knowledge-intensive industrial agglomerations’, D
by Colm O’Gorman and Mika Kautonen, Entrepreneurship & Regional
Development, November 2004, 16(6), 459–79.
‘Beyond portfolio entrepreneurship: multiple income sources in small J
?rms’, by Sara Carter, Stephen Tagg and Pavlos Dimitratos,
Entrepreneurship & Regional Development, November 2004, 16(6), 481–99.
‘Internationalization of private ?rms: environmental turbulence J
and organizational strategies and resources’, by Paul Westhead, Mike
Wright and Deniz Ucbasaran, Entrepreneurship & Regional Development,
November 2004, 16(6), 501–22.
‘Networks and linkages among ?rms and organizations in the Ottawa- J
region technology cluster’, by Judith J. Madill, George H. Haines Jr. and
Allan L. Riding, Entrepreneurship & Regional Development, September
2004, 16(5), 351–68.
‘High technology localization and extra-regional networks’, by John N.H. J
Britton, Entrepreneurship & Regional Development, September 2004, 16(5),
369–90.
‘Entrepreneurs’ networks and the success of start-ups’, by Peter Witt, J
Entrepreneurship & Regional Development, September 2004, 16(5), 391–412.
Micro–macro paradoxes of entrepreneurship 45
‘Creating space for play/invention – concepts of space and organizational J
entrepreneurship’, by Daniel Hjorth, Entrepreneurship & Regional
Development, September 2004, 16(5), 413–32.
‘Networks, weak signals and technological innovations among SMEs in J
the land-based transportation equipment sector’, by Pierre-André Julien,
Eric Andriambeloson and Charles Ramangalahy, Entrepreneurship &
Regional Development, July 2004, 16(4), 251–69.
‘Is small beautiful? The case of the Swedish IT industry’, by Dan I
Johansson, Entrepreneurship & Regional Development, July 2004, 16(4),
271–87.
‘International entrepreneurship and the small business’, by Denise J
Fletcher, Entrepreneurship & Regional Development, July 2004, 16(4),
289–305.
‘Financial bootstrapping and venture development in the software J
industry’, by Richard T. Harrison, Colin M. Mason and Paul Girling,
Entrepreneurship & Regional Development, July 2004, 16(4), 307–33.
‘Self-employment in the era of the new economic model in Latin America: J
a case study from Nicaragua’, by Michael J. Pisani, José A. Paán,
Entrepreneurship & Regional Development, July 2004, 16(4), 335–50.
‘Reclaiming the space of entrepreneurship in society: geographical, J
discursive and social dimensions’, by Chris Steyaert and Jerome Katz,
Entrepreneurship & Regional Development, May 2004, 16(3), 179–96.
‘A cross-national study of culture, organization and entrepreneurship in J
three neighbourhoods’, by Lauretta Conklin Frederking,
Entrepreneurship & Regional Development, May 2004, 16(3), 197–215.
‘Depleted communities and community business entrepreneurship: E
revaluing space through place’, by Harvey Johnstone and Doug Lionais,
Entrepreneurship & Regional Development, May 2004, 16(3), 217–33.
‘ “Znakomstva I Svyazi” (Acquaintances and connections) – Blat, the E (?)
Soviet Union, and mundane entrepreneurship’, by Alf Rehn and Saara
Taalas, Entrepreneurship & Regional Development, May 2004, 16(3), 235–50.
‘Networking, trust and embeddedness amongst SMEs in the Aberdeen oil J
complex’, by Danny MacKinnon, Keith Chapman and Andrew Cumbers,
Entrepreneurship & Regional Development, March 2004, 16(2), 87–106.
‘Human capital, social capital, and innovation: a multi-country study’, by J
Mourad Dakhli and Dirk De Clercq, Entrepreneurship & Regional
Development, March 2004, 16(2), 107–28.
‘State entrepreneurship and regional development: Singapore’s industrial F
parks in Batam and Suzhou’, by Alexius A. Pereira, Entrepreneurship &
Regional Development, March 2004, 16(2), 129–44.
46 The dynamics between entrepreneurship and environment
‘An assessment of a venture creation programme: the case of Shell D
LiveWIRE’, by F.J. Greene and D.J. Storey, Entrepreneurship & Regional
Development, March 2004, 16(2), 145–59.
‘Strategic marketing practices and the performance of Chinese small and J
medium-sized enterprises (SMEs) in Taiwan’, by Siu Wai-Sum, Andrew
Wenchang Fang and Andrew Tingling Lin, Entrepreneurship & Regional
Development, March 2004, 16(2), 161–78.
‘Cities and cyberspace: new entrepreneurial strategies’, by Marina Van J
Geenhuizen, Entrepreneurship & Regional Development, January 2004,
16(1), 5–19.
‘Fibre tracks: explaining investment in ?bre optic backbones’, by J
Edward J. Malecki, Entrepreneurship & Regional Development,
January 2004, 16(1), 21–39.
‘Pizza over the Internet: e-commerce, the fragmentation of activity and J
the tyranny of the region’, by Helen Couclelis, Entrepreneurship &
Regional Development, January 2004, 16(1), 41–54.
‘ICT policies for SMEs and regional disparities. The Spanish case’, by J
Juan R. Cuadrado-Roura and Antonio Garcia-Tabuenca, Entrepreneurship
& Regional Development, January 2004, 16(1), 55–75.
‘Breeding places for ethnic entrepreneurs: a comparative marketing J
approach’, by Enno Masurel, Peter Nijkamp and Gabriella Vindigni,
Entrepreneurship & Regional Development, January 2004, 16(1), 77–86.
4. New initiatives to revitalize society:
public entrepreneurship in the south
of Sweden
Tobias Dalhammar
INTRODUCTION
This chapter deals with an important sub?eld in entrepreneurship research
labelled public entrepreneurship. Related to the growing theoretical school
of social entrepreneurship, public entrepreneurship conceptualizes an
activity that mainly belongs to society and is not restricted to the economic
sphere. The term ‘public’ emphasizes public space, that is, the space that
concerns all citizens and that is neither private nor o?cial. In their research,
Hjorth and Bjerke (2006) use the original Latin meaning of the word ‘pub-
licus’, which means something that concerns all citizens and that nobody
can disclaim responsibility for. Examples of public issues are unemploy-
ment, residency, environment and education. Entrepreneurship is concep-
tualized as enterprise in a wider sense. That is, to create something that
others can use or bene?t from (Bjerke and Dalhammar, 2006).
In recent years, there has been a growing interest in initiatives with a
social mission. By initiative, the meanings in the Concise Oxford English
Dictionary (2006) are intended: 1. the ability to initiate or begin something,
including the power or opportunity to act before others do; 2. a fresh strat-
egy intended to resolve or improve something. Generally, public entrepre-
neurship initiatives aim to create social value and to contribute to social
change. The Canadian Oxford Dictionary (2004) o?ers some clarity to the
de?nition of social values: ‘the principles or moral standards of a person
or social group . . .; the generally accepted or personally held judgment of
what is valuable or important in life.’
1
Regarding social change, theories on
the topic cover many aspects and are complex. It is one of the central prob-
lems of sociology, where change is seen not as a mere succession of sepa-
rate events (as depicted in some narrative histories) but as a structured
process in which it may be possible to identify a speci?c direction or ten-
dency. Social change theories now cover a broad range of phenomena,
47
including short-term and long-term, large-scale and small-scale changes,
from the level of global society to the level of the family. Further, sociolo-
gists are also interested in changes that a?ect norms, values, behaviour, cul-
tural meanings and social relationships (Scott and Marshall, 2005).
Research has shown that an important factor for the success of a city or
region is the practice of what we can refer to as ‘collaborative advantage’
(Henton et al., 1997; Dees et al., 2002). In successful cities/regions actors
collaborate in order to strengthen their position in relation to other cities
and regions. There are tight relationships between business, administration
and non-pro?t organizations, and previous research has shown that het-
erogeneity and diversity foster entrepreneurship, leading it to become more
e?ective (Johannisson, 1994; Aldrich, 1999). Driving forces at the core of
these cities/regions are a number of people we could label ‘public entrepre-
neurs’. Public entrepreneurs could come from any of the three sectors, but
they often have a background in or links to the non-pro?t sector. Generally,
they practise a leadership based on collaboration between all three sectors
and they often act without formal authority or position. It is argued that
public entrepreneurship is crucial as a means of (re-)vitalizing a city or a
region, and even whole societies (Catford, 1998). However, there are voices
stating that civil society with strong citizen engagement can only be
restored at the community, not the national level (Sandel, 1996).
The focus of public entrepreneurship initiatives is generally employment
or related activities that are meaningful to the people who constitute the
target group of these initiatives. It is argued that unemployment among
groups of citizens leads to marginalization and segregation and thereby
increased social problems in certain neighbourhoods (Ekberg, 1999). For
example, people with no income other than social allowance cannot choose
where to live but are reduced to public housing apartments, which in
general are located in the least attractive areas of urban cities. The conse-
quence is concentration of these people and increased social problems
(Ekberg and Rooth, 2000).
Two cities that experience such problems are Malmö and Landskrona in
the south-western part of Scania (‘Skåne’ in Swedish), the most southern
region in Sweden. This has led to ‘ghettoization’ in some neighbourhoods.
This ‘ghettoization’ coincides with increased immigration to the cities since
o?cial policies for bringing these ‘new’ citizens to the labour market have
failed. In this chapter I present two case studies – one fromeach city – which
represent initiatives that aimto increase job opportunities for people who are
outside the labour market. The ?ndings from the cases show that these ini-
tiatives – which use new ways to try to solve social problems – can get results
and provide new paths and models for dealing with complex public issues
today and in the future. The two case studies do not make social change by
48 The dynamics between entrepreneurship and environment
themselves, but they are part of a larger movement of public entrepreneur-
ship initiatives that together contribute to social change in urban cities like
Malmö and Landskrona. Thus, although the results are speci?c for these
contexts and environments, the issues are relevant both in a national and
international perspective as well. Therefore, public entrepreneurship research
generates learning and knowledge that are useful throughout the world.
Problem and Purpose
Three broad questions guide me in this research:
1. How can societies act to create more self-support and commitment in
meaningful activities among their inhabitants?
It is suggested that public entrepreneurship initiatives can help people
utilize resources and competences not utilized today. This implies that
new creative processes have a role to ?ll in the future development of
cities like Malmö and Landskrona.
2. What new knowledge is needed?
By this it follows that researchers have to study examples of public
entrepreneurship, present what these concepts mean and how they can
contribute to social change and in the longer run to the (re)vitalization
of cities, regions and societies.
3. How would it be possible to identify obstacles and remove them or turn
them into opportunities?
Researchers need to communicate the knowledge generated (point 2
above) and present a sound critique that brings up both positive and neg-
ative sides of public entrepreneurship. Using these ?ndings as a basis for
discussion and dialogue, they could provide understanding and more
public support for initiatives that contribute to social change and actu-
ally make a di?erence for citizens. No matter how innovative and poten-
tially successful these initiatives are, they still need strong public support
to be functional and reach success. This is evident not the least when it
comes to grassroot initiatives that have a clear ‘bottom up’ approach.
The overarching question is if and how public entrepreneurship can
create social value and contribute to social change regarding a public issue
like unemployment. In a wider perspective these issues concern democracy:
to participate as a citizen in the city/region and in society, since labour pro-
vides people with opportunities. For example, people get options to choose
where to live.
By using case studies I want to grasp factors and aspects that pro-
vide understanding about what the reality for the practice of public
New initiatives to revitalize society 49
entrepreneurship looks like: how do initiatives work with a social mission
to create social value with respect to a public issue and thereby contribute
to social change?
It should be stated here that I do not cover all aspects that the complex
?eld of public entrepreneurship constitutes. Rather, this chapter aims to
exemplify its potential by using two cases from two cities. An analysis and
discussion concerning these cases provide insights on possible paths for
future research.
Outline of the Chapter
The rest of the chapter is organized in the following way: in the next section
I discuss the process that has led to the current situation of labour and res-
idential segregation in Sweden, a process that to a great extent coincides
with increased immigration to the country. Thereafter, I present theories on
public entrepreneurship and their relation to the dominating sub?eld of
social entrepreneurship.
Next, I discuss the methodology used for my case studies. I introduce them
by presenting the situation in the cities of Malmö and Landskrona, and
exemplify with two neighbourhoods in these cities mentioned above –
Rosengård in Malmö and Öster in Landskrona – where aspects of high con-
centration of immigrants and labour and residential segregation are present.
My two cases – Job Emergency in Malmö and Business Pool in Landskrona
– are examples of public entrepreneurship, in this instance of new initiatives
that deal with unemployment for marginalized people in urban areas. My
analysis shows that the concept of public entrepreneurship adds learning and
knowledge to research on practices that aim for social change. A deeper
analysis brings up the role that actors such as public housing companies
could play for public entrepreneurship initiatives and how they can con-
tribute to social change. In a concluding discussion, researchers are urged to
study new initiatives and processes that public entrepreneurship exempli?es
in order to understand and learn how to address important social issues in
society. I also make some suggestions on how public entrepreneurship ini-
tiatives ought to be studied to maximize learning experiences.
BACKGROUND TO THE DEVELOPMENT OF
IMMIGRATION AND LABOUR AND RESIDENTIAL
SEGREGATION IN SWEDEN
Many cities in Sweden today face problems related to labour and residen-
tial segregation. Two cities that experience and live with these issues are
50 The dynamics between entrepreneurship and environment
Malmö and Landskrona in the very south-western part of Scania (‘Skåne’
in Swedish) – the most southern region in Sweden. These two cities have
also received great numbers of immigrants, above all refugees, mainly
during the past 20 years. Therefore, this is also a question that to a great
extent concerns immigration. Since all people who have a legal right to stay
in Sweden are entitled to support from the social welfare system, unem-
ployment and thus social allowance dependency put costly strains on the
economy. Besides, this situation results in personal pressure on these
people. Further, the marginalization of people in certain areas of the cities
means that resources and competences of these people – including immi-
grants and ethnic minorities – are lost.
The immigration to Sweden that took place before the mid-1970s was
generally labour-driven, and these new citizens adjusted to Swedish society
relatively easily. However, by then, there was little focus on integration. The
consequence was that di?erent cultures could exist together and mix suc-
cessfully, but the immigrants were expected to assimilate themselves into
Swedish society (Andersson et al., 2002). The development in Sweden in the
1980s and especially in the 1990s and onwards is one of increasing immi-
gration, mainly of refugees, to this country (Ekberg and Rooth, 2000). This
new immigration has shifted the structure of how people live and work, not
the least in areas in Malmö (Cars and Hagetoft, 2000) and Landskrona
(Andersson et al., 2002). The cities of Malmö and Landskrona are divided
cities concerning issues like residency and employment and although they
do not ?t the description or de?nition of metropolises, they have residents
that ?t the description of ‘ghetto poor’. Examples of districts in which
these people live are Rosengård in Malmö and Öster in Landskrona, where
there is high concentration of immigrants and where unemployment and
social allowance dependency rates are high. This has been an ongoing
development that has mainly taken place during the past 15–20 years and
has accelerated from the mid-1990s.
At the same time as Rosengård in Malmö and Öster in Landskrona are
de?ned neighbourhoods with distinct characteristics, their development
cannot be treated separately from other processes that take place in their
respective cities, in Swedish society and internationally. Their developments
coincide with similar processes in other parts of the world and make these
social problem issues important topics for most people on this planet,
regardless of whether they are researchers, policy-makers or experiencing
these problems personally. In recent years, researchers have become
increasingly interested in studying these matters and presenting solutions
and models to deal with them.
When dealing with labour and residential segregation, one has to con-
clude that many o?cial policies initiated to deal with these issues have
New initiatives to revitalize society 51
failed. Di?erent programmes, despite great economic resources, have pro-
vided poor results (Ekberg and Rooth, 2000; Åslund, 2000). One of the
basic and paramount reasons seems to be that these programmes do not
engage the citizens that represent the target group. There appear to be huge
physical and above all mental distances between policy-makers and citizens
who experience these problems in their daily lives. Thus, there is a demand
for other ways of facing and dealing with these social problems.
PUBLIC ENTREPRENEURSHIP AS PART OF THE
SOLUTION
The generally accepted term for social initiatives targeting social issues
like the ones discussed above is social entrepreneurship (Dees, 1998;
Sullivan Mort et al., 2003; Peredo and McLean, 2006). Further, there are
related terms like ‘government’ entrepreneurship (Osborne and Gaebler,
1993) ,‘civic’ entrepreneurship (Henton et al., 1997), ‘community’ entre-
preneurship (De Leeuw, 1999; Dupuis and de Bruin, 2003), ‘idealistic’
entrepreneurship (Piore and Sabel, 1984) and ‘mundane’ entrepreneur-
ship (Rehn and Taalas, 2004). Another closely connected term often
used is social enterprise/social enterprising (Chell, 2007). All these
theories constitute important sub?elds and widen the overall ?eld of
entrepreneurship. Recently, a new term has been elaborated on and con-
ceptualized anew, namely public entrepreneurship. Below, I ?rst go
through the concept of social entrepreneurship and move on to public
entrepreneurship in order to clarify their meaning and to prepare a
later discussion about the relevance of studies in the ?eld of public
entrepreneurship.
Social Entrepreneurship
The academic ?eld of entrepreneurship has – particularly during the past
decade – been revitalized and challenged by one strong sub?eld, namely
what in general is labelled ‘social entrepreneurship’. The interests various
actors in society have in social entrepreneurship mainly concern the hopes
they have about this phenomenon. Dees (1998) states that we ‘need social
entrepreneurs to help us ?nd new avenues toward social improvement as we
enter the next century’. Sullivan Mort et al. (2003, p. 76) de?ne social entre-
preneurship as ‘the entrepreneurship leading to the establishment of new
social enterprises and the continued innovation in existing ones’. Further,
Dees et al. (2001) state that social entrepreneurs strive for more innovative
solutions that should lead to sustainable improvements and for increased
52 The dynamics between entrepreneurship and environment
openness to experimentation with various methods in the social sector.
Other researchers discuss similar things. Peter Drucker claims that social
entrepreneurs ‘change the performance capacity of society’ (Gendron,
1996, p. 37). Bornstein (1998, p. 36) characterizes social entrepreneurs as
‘pathbreakers with a powerful new idea, who combine visionary and real-
world problem-solving capacity, who have a strong ethical ?ber, and who
are “totally possessed” by their vision for change’. Thompson et al. (2000,
p. 238) describe social entrepreneurs as ‘people who realize where there is
an opportunity to satisfy some unmet need that the welfare system will not
or cannot meet, and who gather together the necessary resources (generally
people, often volunteers, money and premises) and use these to “make a
di?erence”’. Thus, it is suggested that social entrepreneurship has the
ambition and potential to revitalize today’s post-welfare societies that
struggle with issues like unemployment and residential segregation previ-
ously discussed in the text.
Sullivan Mort et al. (2003) bring up one of the major problems with the
?eld of social entrepreneurship: there are a number of current usages of the
term. In fact, it shares this lack of clarity with the overall ?eld of entrepre-
neurship. At the same time, this lack of clarity is one of the major advan-
tages for the ?eld of entrepreneurship in general and perhaps for the
sub?eld of social entrepreneurship in particular. It creates free space for
researchers and a dynamic that often is not present in other ?elds. And from
time to time, researchers attempt to conceptualize what the ?eld is all about,
which forms bases for debates and future directions.
Dees (1998) conceptualizes social entrepreneurship by tracking the roots
of the overall theory on entrepreneurship and combining it with the social
dimension of the term. When reviewing the ?eld of entrepreneurship he
summarizes the French classics by using the eighteenth and nineteenth
century philosopher/economist, Say, and moves on to the early twentieth
century legend, Schumpeter. He also draws on two major modern contrib-
utors in the entrepreneurship ?eld, Drucker and Stevenson, to ?nd the
meaning of ‘social entrepreneurship’. Dees puts a strong focus on the indi-
viduals – the social entrepreneurs. In Dees’s (1998) conceptualization,
social entrepreneurs:
1. Act as change agents in the social sector;
2. Adopt a mission to create and sustain social value;
3. Recognize and relentlessly pursue new opportunities;
4. Engage in a process of continuous innovation, adaptation and learning;
5. Act boldly without being limited by resources currently in hand;
6. Exhibit a heightened sense of accountability to the constituencies
served and for the outcomes created.
New initiatives to revitalize society 53
The conclusion from Dees’s (1998) conceptualization is that social entre-
preneurs are a rare breed of leaders with behaviours that are exceptional.
By and large, Peredo and McLean (2006, p. 64) agree with these conceptu-
alizations. In order to distinguish social entrepreneurship from other forms
of entrepreneurship, they put strong emphasis on the aim to create social
value. ‘It is a commitment to providing social value that marks the divide
between social and other forms of entrepreneur.’ According to Johnson
(2003, p. 2) one commonality emerges from almost every description of a
social entrepreneur: ‘the “problem-solving nature” . . . is prominent, and
the corresponding emphasis on developing and implementing initiatives
that produce measurable results in the form of changed social outcomes
and/or impacts.’
Useful as they are, these paramount theories on social entrepreneurship
to some extent fall short of understanding the practice of initiatives that
aim to create social value and strive for social change. Another newly con-
ceptualized term that covers the same ?eld and that could move the topic
forward is public entrepreneurship.
Public Entrepreneurship
As brie?y described in the introduction to this chapter, public entrepre-
neurship refers to entrepreneurship that neither belongs to the private nor
the o?cial (although it can have relations to and include both private and
o?cial actors) and has dimensions outside business and administration
(Hjorth and Bjerke, 2006; Bjerke et al., 2007). It should be stated that the
concept of public entrepreneurship is confusing in English, since it com-
monly refers to entrepreneurship carried out in the so-called public or
o?cial sector (‘o?entliga sektorn’ in Swedish). The generally accepted
English term is social entrepreneurship, although other suggestions, such
as ‘government’ entrepreneurship (Osborne and Gaebler, 1993) and ‘civic’
entrepreneurship (Henton et al., 1997) have been proposed (see above).
Public entrepreneurship conceptualizes entrepreneurship as enterprise
or enterprising in a wider sense, that is to create something new that other
people can use and bene?t from (Bjerke and Dalhammar, 2006). This is not
limited to a product or a service at a commercial market where producers
serve other people as consumers, but could be education, venues and
meeting places where citizens strive to create social value for themselves and
other citizens (Spinosa et al., 1997; Dees, 1998; Peredo and McLean, 2006;
Hjorth and Bjerke, 2006; Bjerke and Dalhammar, 2006; Chell, 2007; Bjerke
et al., 2007). The concept of public entrepreneurship is guided by old
Roman philosophical principles of abundantia (which means that there
should be abundance and welfare for all citizens) and aequitas (equality
54 The dynamics between entrepreneurship and environment
between citizens). The original meaning of the term ‘public’ is used, as in
the Latin word ‘publicus’, which means something that concerns all citizens
and that nobody can disclaim responsibility for. However, it is up to each
citizen to choose to do something about public issues in society (Hjorth and
Bjerke, 2006; Bjerke et al., 2007). Thus, all citizens in a society that are able
to do something have a responsibility to act to ?nd solutions to public
issues. Put di?erently, Sullivan Mort et al. (2003, p. 83) quote the Schwab
Foundation (an organization that works practically with social entrepre-
neurship), and this organization expresses a belief that all people have
social entrepreneurial virtues. They mention ‘an unwavering belief in the
innate capacity of all people to contribute meaningfully to economic and
social development; a driving passion to make that happen; a practical but
innovative stance to a social problem.’
This brings two important changes regarding people’s role in society. The
?rst is the move from consumer to citizen; the other is the move from social
to public. Public entrepreneurs act as citizens and engage in public issues
(that is, issues that are for all citizens and that nobody can disclaim respon-
sibility for) in order to drive social change. In such processes they create
sociality, which can be understood as collective investments in a common
image of how a phenomenon in society should or should not be; where
people are united by a striving for change and of sympathy and solidarity
for each other (Hjorth and Bjerke, 2006). In other words: a common view
on a phenomenon in society that is of public interest (? concerns all) and
a commitment to create change in relation to that phenomenon. Examples
of public issues are employment, residence, activities for young people,
environment and education.
There are two reasons for developing theories on public entrepreneurship
instead of using social entrepreneurship theories. First, the term ‘public’
has a clearer meaning than the term ‘social’. More or less everything in
social science has to do with society and relations in one way or another –
thus are social – but not all things in society are public – that is, concern all
citizens. Second, the ruling social entrepreneurship discourse is clearly
in?uenced by business entrepreneurship (McLeod, 1997; Drayton, 2002;
Sullivan Mort et al., 2003). This strong in?uence makes it harder to under-
stand the driving forces to create social value that several researchers regard
as crucial (Dees, 1998; Sullivan Mort et al., 2003; Bjerke and Dalhammar,
2006). In their studies of public entrepreneurship initiatives and processes
in the south of Sweden, Bjerke et al. (2007) found that paramount social
entrepreneurship theories fail to provide a deeper understanding for these
initiatives and the processes they represent. It seemed as if the ‘conta-
giousness’ of business aspects on social entrepreneurship was preventing
learning and knowledge generation from taking place. Other researchers
New initiatives to revitalize society 55
have acknowledged this incorporation of business aspects in social entre-
preneurship as well. ‘By moving towards social entrepreneurship as a pro-
fession, however, and emphasising its business skills, there is a danger that
its full complexity may be submerged and remain unrecognised’ (Sullivan
Mort et al., 2003, p. 81).
An imaginative example: an entrepreneur hardly chooses between start-
ing an IT business and making $100 million, and helping unemployed
tenants in public housing to get jobs (unless he can employ them all in
his/her IT business, but it is neither likely that he could hire them all, nor
that they would have the competences the entrepreneur needs!). The driving
forces are di?erent. However, there also are things that unite. One such
factor is that all forms of entrepreneurship to a large extent deal with the
issue of resource acquisition. Typically, entrepreneurship starts with a good
idea but empty hands (Gartner, 1985; Alvarez and Busenitz, 2001).
Theories on public entrepreneurship add some dimensions to the con-
ceptualizations on social entrepreneurship. These are:
1. The concept of public and what it means for the motive of public
entrepreneurship;
2. The concept of sociality and what it means for the behavioural aspects
of public entrepreneurship;
3. The concept of citizenship and what it means to the identity perspec-
tive of public entrepreneurship.
METHOD USED FOR THE CASE STUDIES OF
PUBLIC ENTREPRENEURSHIP
I have conducted case studies in the two cities Malmö and Landskrona.
Through academic connections I have established contacts with people
who work at the public municipal housing companies in each town: MKB
Fastighets AB in Malmö and AB Landskronahem in Landskrona. Both
companies have taken an active role in improving the situation for many of
their tenants. Thus, they have traditions in initiating and being involved
in initiatives to create social value and to contribute to social change.
Basically, there are economic interests, since the companies want to main-
tain the value of their properties, that is, their buildings. But the way they
do this is not merely the traditional way through technical renovation and
maintenance of the buildings. Instead, they focus on the tenants who live
in the apartments. If the tenants do not appreciate and take care of their
homes, this depreciates the value of the property in more ways than one:
direct damage and destruction of the buildings, for example through
56 The dynamics between entrepreneurship and environment
vandalism; the clientele are people that other people do not ?nd attractive
to have as neighbours; the area gets a bad reputation, which means that
people do not want to live there voluntarily, and so on. Therefore, they have
adopted policies to invest in people, just as much as they invest in buildings.
In both MKB and Landskronahem, there have been people in the man-
agerial bodies that have an interest in social work, and these people could
be labelled public entrepreneurs in the sense that Henton et al. (1997) char-
acterize them. In my research, I have had the opportunity to follow their
everyday work over time. I have taken a closer look at two initiatives/cases
that were introduced a couple of years ago and that have an in?uence on
their target groups. Both initiatives deal with a high priority issue that
addresses the focus of this chapter, namely new ways of creating job
opportunities for marginalized people, including immigrants and ethnic
minorities, in segregated urban areas. The ?rst one is ‘Job Emergency’
(‘Jobbakuten’ in Swedish) in Malmö and the second ‘Business Pool’
(‘Företagspoolen’ in Swedish) in Landskrona. I have spoken to people in
di?erent positions involved in the initiatives and have looked at project doc-
umentation in order to understand how these initiatives can bring about
social change (see Appendix 4A.1 for detailed information about data
collection). There is value in conducting studies in both cities, since
Malmö and Landskrona have di?erent backgrounds and characteristics.
Comparisons between the two cases can then help us to understand why
certain enterprises may work better in some contexts than others.
Case studies are an appropriate qualitative method when the researcher
wants to provide a ‘dense’ description of a phenomenon. It is mainly
grounded in ?rst-hand empirical data, which means that it is holistic (gives
a fully covering picture) and provides a picture that is close to the real sit-
uation. This information is simple for the reader to understand, sheds light
on di?erent meanings and can generate ‘silent’ (or tacit) knowledge. Above
all, however, case studies are valuable because they provide information
based on which one can make an assessment. Such an assessment is the ?nal
result of an evaluation (Merriam, 1998). Therefore, case studies generally
include description, interpretation, evaluation and assessment.
Wigren (2007) states that qualitative studies represent a spread of
di?erent qualitative techniques and approaches. She refers to Denzin and
Lincoln (1994:2), who de?ne qualitative research in the following way:
‘Qualitative research is multimethod in focus, involving an interpretive,
naturalistic approach to its subject matter. This means that qualitative
researchers study things in their natural settings, attempting to make sense
of, or interpret, phenomena in terms of the meaning people bring to them.’
Thus, conducting qualitative studies means learning from experiences of
the people and organizations involved. I mainly gathered data by talking to
New initiatives to revitalize society 57
(rather than interviewing) people in di?erent positions. I have had regular
meetings and made follow-up calls with people involved in the initiatives to
check the status of the initiatives. Through these people I also obtained
di?erent secondary sources of documentation, like protocols, which I used
with caution. I have been careful not to accept any sources too lightly
without checking them ?rst and this means that I have compared them with
other sources and checked with people who are able to verify them.
It is di?cult to use the term ‘successful’ when talking about public entre-
preneurship initiatives that aim to create social value and to contribute to
social change. There are many qualitative but few quantitative factors, a
matter that makes assessment di?cult. Further, it is hard to measure
exactly how a speci?c initiative has contributed to social change in a certain
context and what time span should be used. However, public entrepreneur-
ship deals with change and although many initiatives have vague visions
and goals, most initiatives formulate some goals for what they want to
change and what they want to achieve. This provides the opportunity to
compare with goals set in advance. These goals may be more or less clear.
Further, they may be more qualitative or more quantitative in character.
Either way, one should be able to assess that an initiative has created social
value and contributed to social change. Even though these changes are
small and it is di?cult to comment on their long-term e?ects, together with
other initiatives they represent a direction or trend in cities like Malmö and
Landskrona today.
CASES OF PUBLIC ENTREPRENEURSHIP IN
MALMÖ AND LANDSKRONA
In this section I present my cases on public entrepreneurship initiatives in
Malmö and Landskrona. I include an introduction to the cases in which I
present the background for each city and the speci?c neighbourhoods of
Rosengård in Malmö and Öster in Landskrona. These two districts are con-
crete contexts and environments where marginalization and unemployment
take place.
An Introduction to Malmö and Rosengård
The residential and labour market segregation presented in the background
section above, in many ways matches the process of a particular district in
Malmö, namely Rosengård. Malmö is the third largest city in Sweden with
a population of little more than 270 000 inhabitants. The Rosengård dis-
trict has almost 8000 apartments in nine quarters. About 50 per cent of the
58 The dynamics between entrepreneurship and environment
apartments are owned by the public municipal housing company in Malmö
(MKB Fastighets AB) and the rest by private landlords (Cars and
Hagetoft, 2000). About 21 000 people live in the area and the majority of
them have their roots in other countries in the world (O?cial statistics
about Malmö).
2
The infrastructure in areas like Rosengård is a strong heritage of the
‘Million homes programme’, whose aim was to build 1 million new apart-
ments in Sweden in ten years (1965–1974). The result in Malmö – as in most
Swedish cities – was large-scale housing city-quarters or suburbs. Many of
them, like Rosengård, comprise high-rise buildings, a lack of focus on
outdoor living facilities and no division of public, semi-public and private
space. Between 1967 and 1974, close to 6000 new apartments were built in
Rosengård, which meant that around 25000 people were o?ered a place to
live. According to Cars and Hagetoft (2000, p. 3), these new residents were
?lled with a ‘pioneer spirit’. However, soon after its completion, a debate
arose that was critical of construction projects like Rosengård. The critical
voices stated that the project was focused on mere rationality, e?ciency and
pro?t, without caring about the people who should live there. Naturally, the
neighbourhood and its residents took a beating in the debate, further nur-
tured by the fact that they were without real power to a?ect what was said.
Besides, it became clear that services in the area, such as child care, were
not adequate. This negative process was further nurtured when the eco-
nomic recession appeared in the early 1970s. Malmö, an old manufactur-
ing blue-collar worker town, faced worse problems than many other cities
in Sweden, and many of the people who had just moved to Rosengård
belonged to that category. Soon after that, empty ?ats started to appear in
Rosengård. When the Rosengård project was ?nalized in the mid-1970s,
many rootless people lived in the neighbourhood, and with the immigra-
tion waves that followed in the years to come, this situation worsened. One
social project after another was initiated with little or no success. Cars
and Hagetoft (2000) claim that they have failed because they are not
anchored locally, which means that the residents cannot relate or commit
to them.
Rosengård has fewer residents today than when the neighbourhood was
completed in the mid-1970s, but since the 1990s the numbers have slowly
increased. The average age is relatively low, and there is an overrepresenta-
tion of young people and children. This consistently high number of school
and pre-school children also indicates that the population is not stabilizing.
As previously noted, the number of immigrants is high. In the whole city
of Malmö, about one out of four has an immigrant background. In
Rosengård, the number of immigrants is 75 per cent, or three out of four.
There are high proportions of refugees from Yugoslavia, Bosnia and Iraq
New initiatives to revitalize society 59
in the neighbourhood. Typical for the neighbourhood is a high turnover in
apartments. The municipal housing company – MKB Fastighets AB – has
equal or lower vacancy levels in other areas in Malmö.
O?cial websites of the City of Malmö state that Malmö has a higher
unemployment rate than average for Sweden (5.2 per cent as against 4.1
per cent).
3
In Rosengård, these numbers are much higher, although there
are big di?erences within the neighbourhood. For the whole area of
Rosengård, the number of people in employment is 37 per cent, but only
8 per cent were registered as unemployed.
4
This implies that many people
seem to have abandoned hope of ever getting a job and/or have lost faith
in o?cial actors. Further, although it is di?cult to study the activities in
a shadow economy, there are likely to be hidden ?gures within a rather
in?uential black economy. However, one should bear in mind that
some studies tend to lean to the conclusion that the unemployed are less
inclined to become involved in black market activities than people who
are already in the labour market (see for example a report from the
Swedish Tax Authority).
5
Further, about one quarter of the residents
receive social allowance, and Cars and Hagetoft (2000) claim that the
social allowance dependency is as high as 50 per cent. The average income
is 14 per cent lower than for the city of Malmö as a whole. Disposable
income has decreased for both men and women since the 1990s, and
women have a lower income than men. It is important to make clear
that there are di?erences within the Rosengård neighbourhood. In quar-
ters with only rental ?ats, a majority of the households live on social
allowances.
An Introduction to Landskrona and Öster
The distance between Landskrona and Malmö is only about 40 km (24.85
miles), but the cities di?er in size and background. At the same time, there
are similarities, mainly in the adjustment to a new economic reality with
new conditions. A new economy has to replace the old, and this transition
has a?ected both cities.
Landskrona – just like Malmö – is an old shipyard town. However,
according to statistics at the o?cial website of the municipality of
Landskrona, since the town only has a population of about 40000 people,
6
its dependency on this particular industry was greater. In the 1970s, around
40 per cent of the working population worked in the town’s shipyard
‘Landskronavarvet’ (Andersson et al., 2002). Therefore, the shipyard crisis
that followed in the late 1970s and early 1980s a?ected Landskrona deeply.
In 1983, the decision to terminate the yard’s business was taken, leaving
several thousands of people unemployed. Although major government
60 The dynamics between entrepreneurship and environment
programmes were initiated to help these people ?nd new jobs or start study-
ing, there was a severe decline in the town, economically but also mentally
and morally.
From 1985 to 2000, Landskrona had a refugee camp that annually
received between 50 and 75 refugees. Between 1993 and 1995, following the
war in former Yugoslavia, Landskrona received 2000 refugees, which cor-
responds to 5–10 per cent of the town’s population. This put pressure on
the town, and a treaty from 1994 between the municipality and the Swedish
Immigration Agency states that Landskrona should aim to receive no more
refugees for the years that followed. Despite this, over the last ten years
about 100 refugees per year have arrived and settled in Landskrona.
Landskrona today has an immigrant population of about 20–25 per cent,
and according to a manifesto about integration in Landskrona accepted by
the municipal council in 2001, the town is facing problems with labour and
residential segregation, unemployment and high rates of social allowance
dependency.
7
Major immigrant groups are (in declining numbers) people
from former Yugoslavia (including Albanians), Danes, Bosnians (who now
count as a separate group since Bosnia is now an independent country),
Finns, Germans and Lebanese (Andersson et al., 2002). While Malmö has
its segregated areas at the outskirts or in certain areas outside the city
centre, Landskrona has its problem areas in the very centre of the town.
Thus, Landskrona di?ers from most other Swedish cities in this respect,
and instead it can be compared to the situation in many cities in the USA,
where the middle- and upper-classes move to the suburbs and leave the less
fortunate in declining city cores (Webster, 1995). One such area is Öster.
In 2001, Landskronahem acquired apartments in the Öster area, located
close to the town centre. One reason was that Landskronahem wanted to
o?er more centrally located apartments to its tenants. Further, since the
1990s the situation at Öster had been a burden for the housing market in
Landskrona, and since Landskronahem was the major housing company,
it was strongly a?ected by this situation. By acquiring apartments in Öster,
the company wanted to drive the development in the right direction. From
the very beginning, Landskronahem was aware that the situation in Öster
could not be solved by only using traditional methods for a housing
company, that is, by renovating and maintaining the physical structure of
the area and the buildings. In 2002, the company board decided to launch
the Österprojektet for a period of three years, from 1 January 2003 to 31
December 2005.
The report that evaluated the Österprojektet
8
states that it covered a
number of sub-projects. Sometimes these were part of the bigger overall
project, sometimes they were collaborations across borders of di?erent
activities, sometimes they were generated from the overall project and
New initiatives to revitalize society 61
sometimes just sponsored economically or morally by the overall project.
What made the Österprojektet di?erent were the many social and cultural
sub-projects. Altogether, about 15 di?erent sub?elds with projects and ini-
tiatives were somehow connected to the overall project. Examples are pro-
jects like Barnen i Centrum (‘Children in the Centre’), Levande Centrum
(‘Living Centre’), as well as a concrete physical rebuilding of the Öster area,
scienti?c projects, cultural projects and marketing projects.
The evaluation of Österprojektet was based on ?ve criteria: (1) the quality
in living, both concerning property management and investments and
improvement measures in the living environment; (2) the development of
Öster as a neighbourhood in Landskrona, focusing on social and economi-
cal business ratios; (3) the marketing e?ort carried out to promote a living
at Öster; (4) the attractiveness of Öster as an alternative on the housing
market in Landskrona; (5) an evaluation of the e?ort made at Öster. The
overall evaluation shows that some internal goals have been reached while
others have not been ful?lled. There are still things to improve, particularly
concerning security, since tenants do not feel as safe in Öster as they do in
other areas of Landskrona. However, in an overall perspective most factors
have been improved during the three years the project lasted. As an example,
the percentage of people dependent on social allowance has dropped from
around 35–40 per cent in 2002 to around 25 per cent in 2004.
Immigration and Globalization: the Development in an International
Perspective
Although cities like Malmö and Landskrona and the areas of Rosengård
and Öster have unique and speci?c characteristics, they are also a?ected by
outside forces. Immigration does not take place in a vacuum. Many other
international processes a?ect where, what and how immigration takes place
and the order and intensity of that process. For example, Cars and Hagetoft
(2000, p. 4) conclude that Rosengård’s problems ‘were no longer isolated
problems in one neighbourhood; they consisted of a complexity of symp-
toms that were a re?ection of an entire society in crisis, with often unpre-
dictable structural transformations and increasing marginalisation of
substantial groups of the population’. Thus, the situation in Rosengård and
Öster mirrors many characteristics of residential and labour market segre-
gation, both in Sweden and internationally.
Sassen (1998) asserts that the USA as an ‘immigration country’ should
acknowledge its responsibility for how immigrants live in the country.
Derrida (2001) also makes this statement when he discusses the duty of the
host and that the rights to residence for refugees – not just visitation – must
be regulated. From the description of the historical process of, for example,
62 The dynamics between entrepreneurship and environment
Rosengård, research states that o?cial policies have greatly contributed to
the situation and thus authorities should take a great deal of responsibility
regarding helping people (Cars and Hagetoft, 2000). This help could
include actual support for public entrepreneurship initiatives incorporating
and engaging citizens themselves, like the ones presented below.
A Public Entrepreneurship Initiative in Malmö: Job Emergency
MKB has a tradition of initiating and/or engaging in di?erent activities in
Rosengård. MKB have initiated some of these projects themselves, but
most are results of collaborations with other actors. MKB’s role is then
more of support whereby the company utilizes its position as a strong and
in?uential actor. One concrete example is an alternative employment
agency outside the o?cial system in Malmö where people can go on a daily
basis to ?nd out about new temporary jobs. This is called ‘Job Emergency’
(‘Jobbakuten’ in Swedish, and started in 1998) (see www.jobbakuten.nu).
MKB initiated the idea and hired a private consulting ?rm to run the orga-
nization. The reason for their interest in a venture like this is that it aims to
provide jobs for its tenants. ‘The background was that the tenants came to
us and asked if we could help them ?nd a job. We’re no unemployment
agency, but when the o?cial unemployment agency shut down its o?ce
here in Rosengård we came up with the idea to start an alternative unem-
ployment agency. That’s what we’ve done’, the ‘project leader for social
issues’ at MKB and the driving person behind this initiative, explains.
Job Emergency matches people who want a job with companies that need
to increase their workforce for a short or long period. Registration is free
of charge and the service is also free for the companies that use it. The
demands are that the employer pays wages according to contract and has
proper insurance for the workforce. In practice, the initiative works in the
following way: employers who want temporary workers contact Job
Emergency and specify what skills they need. The people who work with
the organization then try to match the quali?cations with the people who
want a job. People who look for jobs can sign up in a database, but they can
also contact Job Emergency on a daily basis to ?nd out about new jobs.
This practice works as follows: a minibus labelled Job Emergency drives to
di?erent blocks in Rosengård according to a schedule set in advance.
People who look for a job come to the bus and ?nd out if there are any jobs
available that match their quali?cations and skills. According to the project
leader at the private consulting ?rm:
Typically, many jobs are service jobs in restaurants or cleaning ?rms so there
are no high demands on the people that should do the job. But there are also
New initiatives to revitalize society 63
craftsmen that need people to carry out di?erent jobs and we have many
quali?ed immigrants that can do jobs in carpentry, painting, water and electric-
ity installation.
No o?cial registration is done regarding these jobs, since the idea is to
get people who are motivated to ?nd a job and not the ones who want to
register for another period of unemployment bene?t or social allowance.
The initiative has been successful in creating new jobs, whereof most are
temporary in character. One person at MKB involved in the initiative says:
‘These temporary jobs give these people references and if they do a good
job, they have chances to get a permanent job. This is a means for the
employers to test someone without taking big ?nancial risks.’
Voices have been raised stating that this is nothing a public housing
company should engage in. The newspapers have said things like ‘MKB
annoys the o?cial unemployment agency’. ‘But I think this is exactly what
a public housing company should do’, the project leader for social issues at
MKB emphasizes. ‘This is management of living, not just management of
housing! For us it is a key issue to work for the tenants in the grey zones
that lie between government, private and municipal activities.’ The reason-
ing behind this thinking is that parents and children who are occupied in
activities they regard as meaningful assist in creating stable and pleasant
neighbourhoods with minimal damage. Also that employment is a recipe
against segregation – and partly also against health problems.
The results have overall been positive. Just three years after the initiative
started, Job Emergency’s register has covered more than 100 businesses and
more than 800 people who wanted a job. ‘We know that many of these
people never were enrolled in the o?cial government unemployment
agency’s databases’, the project leader at the private consulting ?rm says.
His explanation for this fact is that many people – and particularly immi-
grants and ethnic minorities – are suspicious of o?cial actors like the
unemployment agency. The project leader for social issues at MKB states:
There could be many reasons for this. One is that they come from countries
where people generally are suspicious or afraid of government actors and they
also identify us [MKB] as one. And they don’t know what the unemployment
agency stands for. Sometimes their knowledge about the Swedish society is very
poor.
He continues by saying that the o?cial unemployment agency has failed to
reach these people and build trust with them. ‘Despite nice words and big
programs these people have got little help.’
The rolling bus also visited other districts in Malmö. Thus, Job
Emergency spread outside Rosengård and incorporated several neighbour-
64 The dynamics between entrepreneurship and environment
hoods in Malmö. In fact, the city of Malmö was so impressed by its results
that in 2004 it started its own Job Emergency – including a minibus – which
used the same concept. However, the initiative will be terminated at the end
of 2007. ‘Partly this has to do with the favourable labour market at the
moment. And the initiative may have outplayed its role since even the city
accepted and incorporated the idea’, a person at MKB involved in the ini-
tiative says. Besides, he adds that people within the MKB organization
claim that the costs generated by Job Emergency are greater than the
bene?ts from the jobs created. ‘But that’s the downside of projects like this.
If we can’t count them as pro?table within a short time period, people don’t
see the larger social values they produce.’
A Public Entrepreneurship Initiative in Landskrona: Business Pool
Just like MKB, Landskronahem has ambition to improve conditions for its
tenants. One example is the above-mentioned Österprojektet, where
Landskronahem was one of the main actors. This project included many
other actors, including grassroots people who are able to work with the
tenants directly using their natural venues. Another concrete example was
initiated a couple of years ago. A group of public and private actors –
including actors from Landskronahem – formed an informal network
named ‘Business Pool’ (‘Företagspoolen’ in Swedish) which aims to
increase employment among members of an immigrant community where
unemployment is high.
The background was that out of about 150 adult members of the local
basketball club BF Bosna Basket in Landskrona, only one had a job. These
people were Bosnian immigrants who arrived in the early 1990s when the
war broke out in former Yugoslavia. ‘I spoke to people from the basketball
club and I found this shocking when I heard about it!’, remarked the
contact person in the managerial body with the title ‘project leader’ at
Landskronahem. He says that he ?nds the question of employment a key
issue for making life better for the tenants. ‘I felt I had to do something. I
somehow “own” the question because many of these people are tenants
that live in Landskronahem’s apartments. And since I have connections I
was in a position to help.’ BF Bosna Basket was the owner of the initiative.
The original actors included – besides the above-mentioned basketball club
and Landskronahem – a local bank, a tenants’ society, a local private
company and two private landlords. This initiative was launched in 2002 in
a context outside the professional agendas of these people and organiza-
tions, and was something they did not get paid to do, which means that they
did not have much time to spend on this initiative. This also explains why
the Business Pool is not that well-known among the wider public.
New initiatives to revitalize society 65
The aim is to form a basis for employment, and whenever a member of
the network gets the information that there is a free job position some-
where, they turn to the immigrant community to see if there is anyone
quali?ed. ‘The ?nancial support to the initiative is of course important, but
we can also act as “door openers” for the adult immigrant population
in Landskrona. With our help, they may integrate better in society and
thereby get a job’, the CEO for the tenant society says. For example, they
can provide references which will aid job applications. Recently, one person
who had earlier been employed by the local bank involved in the initiative
secured a new position at that bank. His previous job was at the counter,
but he had to resign after the bank was robbed. Unfortunately, memories
from his past in the former Yugoslavia exacerbated the psychological reac-
tion and shock following this experience. He had a gun pointed at him
in the past, and the bank robbery brought back traumatic memories.
However, the back-o?ce job he was o?ered minimized the risk that he
would have to face the same situation again. ‘Of course I’m a bit nervous,
but I’m thankful for this opportunity’, he says.
The Business Pool was appreciated and from the original ?ve initiators,
between 10 and 20 big and small companies and institutions later became
involved in the initiative. These actors have contacts with other companies
and thus they have a good opportunity to scan the labour market for both
formal and informal job opportunities. In 2004, when the basketball club
wanted to do something about high rates of unemployment among young
adults aged 18–25 – an initiative called ‘Our Future’ (‘Vår Framtid’ in
Swedish) – they used the Business Pool as an important part of the basis
for an application to the European Union.
Since the network started, around 50 per cent of the original 150 adults
have got di?erent kinds of jobs – both temporary and permanent – as a
consequence of this project. ‘It’s not su?cient, but it’s better than that only
one person has a job. And this is done with small costs for the actors
involved. The big investment is the personal commitment by the members
of the network’, the project leader at Landskronahem stated. Today,
however, the initiative has been inactive for more than a year since the ori-
ginator and former chairman of the basketball club has moved from
Landskrona. The project leader at Landskronahem summarizes: ‘Despite
the actual and potential value of an initiative like this, to a large extent it is
dependent on key people. If important people leave the initiative, the ini-
tiative can fade away.’
Unlike Job Emergency in Malmö, Business Pool never began in a limited
geographical context. Instead, it was the immigrant group that was the
focus. ‘But all people are welcome’, the project leader at Landskronahem
assures. Thus, other people outside this group can also turn to the pool
66 The dynamics between entrepreneurship and environment
for help. ‘We wouldn’t support an initiative that discriminates people.
The problem rather is that it is hard to reach certain groups – particularly
immigrants – and we need to connect to leading people with in?uence on
members of those groups’, he adds. However, Landskrona is a much
smaller town than Malmö and initiatives can more easily be distributed
throughout the city. The people involved in Business Pool see no limitations
but intend to enhance the network and the concept further. ‘In the longer
run, new initiatives and networks who use the same concept could embrace
more immigrant communities. We may be able to create something new out
of this’, one representative from BF Bosna Basket states.
ANALYSIS OF THE CONTRIBUTIONS OF THE CASES
Both the Job Emergency and Business Pool initiatives are examples of
entrepreneurship that has a social mission to create social value and con-
tribute to social change. Relating them to theories on this topic, much of
what the paramount ?eld of social entrepreneurship covers is relevant in
the light of the cases. However, in order to create a deeper understanding
regarding the practices of these two initiatives, there is a need for public
entrepreneurship theories as well. Brie?y, I use the cases to go through the
conceptualizations on social entrepreneurship deriving from Dees’ (1998)
six points and thereafter I move on to discuss the three additional points
covered by Hjorth and Bjerke’s (2006) conceptualizations on public entre-
preneurship that I presented in the theoretical section.
Using Social Entrepreneurship Theories
Social mission, social value, acting as change agents in the social sector,
measuring impact
Both initiatives have a clear focus on an important social problem. The
people involved de?nitely have a social mission with these initiatives and they
have also succeeded in creating social value and contributing to social
change. They have also assured that they – at least to an acceptable extent –
measure the impact these initiatives have on the situation for the target group.
Innovative
They also organize these initiatives in new and creative ways, particularly
in those contexts and environments. In this way, the organizers are able to
provide a springboard for the aims of these initiatives: that they are able to
come up with new solutions to severe social problems we face today and
will face tomorrow.
New initiatives to revitalize society 67
No resource constraints
The actors involved in the initiatives are not hindered by lack of resources.
In fact, they rather ?nd ways to minimize the use of resources. In compar-
ison with the billions of euros the national government has spent on big
support programmes – that to a large extent can be regarded as failures –
these initiatives show that collaborative organizations can contribute to
change using few resources. This emphasizes the potential e?ectiveness of
small and informal new solutions in comparison to large and in?exible
structures.
Bringing in Public Entrepreneurship Theories
No matter how relevant social entrepreneurship theories are, it is evident
that if we really want to understand what the cases consist of and how they
can contribute to social change we need to incorporate theories on public
entrepreneurship as it is conceptualized by Hjorth and Bjerke (2006).
Public issue
The notion of the public extends beyond that of the social. It is clear that
both Job Emergency and Business Pool have social missions, want to
increase social value and contribute to social change. However, the actors
have recognized that the public issue at hand – employment opportunities
for marginalized citizens in segregated areas (including immigrants) – is
precisely a public issue, that is that it concerns all citizens and nobody can
disclaim responsibility for it. Still, this is something that the actors involved
did not have to do, but they realized they were in a position to help and took
responsibility.
Create sociality
It is obvious that the actors who formed the initiatives and the networks
around them are committed to providing jobs when possible. They do not
even use the initiatives to market themselves externally and they do not let
their own interests take over. They deal with a public issue and try to gather
others to foster a common view that says they can collaborate to do some-
thing and make a di?erence.
Act as citizens
The initiators involved act rather as citizens than as professionals. If they
were to act as professionals, they probably would have done things di?er-
ently and perhaps also di?erent things. Now they act as citizens who
help other citizens. This connects to the discussion about both the public
issue and the sociality sections above. They neither have the need nor the
68 The dynamics between entrepreneurship and environment
ambition to use this in their marketing, although it might be a good thing
to use them as part of their goodwill in order to make these initiatives more
visible.
Public Entrepreneurship an Important Concept for the Future
One should bear in mind that Job Emergency and Business Pool are
relatively small initiatives in limited contexts. However, by using new solu-
tions they were able to make a di?erence regarding public issues. The Job
Emergency initiative wanted to help marginalized people without jobs. The
actors involved in the Business Pool initiative engaged in the public issue of
unemployment among members of an immigrant group. Although similar
initiatives may exist elsewhere, when they were introduced Job Emergency
and Business Pool were innovative in their speci?c contexts and environ-
ments. They were committed to improving employment for marginalized
people in urban environments and acted to ?nd new ways to deal with this
situation in the particular contexts and environments, that is the cities of
Malmö and Landskrona.
Further, one should remember that these initiatives to a certain degree
are controversial. In the local debate, actors have wondered if public
housing companies should engage in such matters and collaborations. This
may be a reason why these initiatives start in a modest and rather secretive
manner. However, one important matter with these initiatives is precisely
that they are initiated in the ?rst place. This shows that Malmö and
Landskrona may be heading in the direction Henton et al. (1997) talk
about: the collaborative advantage that makes cities and regions competi-
tive in comparison to other cities and regions. Characteristic for such
cities/regions is that actors from di?erent sectors collaborate and that the
collaborative networks are permeated by public entrepreneurship. Further,
Henton et al. (1997) de?ne a few key individuals – the public entrepreneurs
that exemplify this spirit. In the cases presented in this text, the developing
manager at MKB (Job Emergency) and the contact person/project leader
at Landskronahem are the people who come closest to being labelled public
entrepreneurs. Who the public entrepreneurs will be higher up in the hier-
archy in the cities of Malmö and Landskrona, hopefully is a story that time
will tell.
Public Housing Companies as Public Entrepreneurs
The cases show that public housing companies can play an important role in
creating social value and contributing to social change and thus have a key
role in public entrepreneurship initiatives. They have natural connections to
New initiatives to revitalize society 69
citizens who need help and they are also able to build trustful relations with
these citizens. The cases show that the tenants – that is the citizens – asked
for help, and the people at the housing companies (and other actors involved)
felt that they were in a position to help. Although the ‘public’ in public
housing companies mainly equates with the term ‘o?cial’, in these instances
they take a public responsibility in the sense that Hjorth and Bjerke (2006)
talk about: they engage in a public issue that concerns all citizens and try to
do something about it. In Sweden today there are legal barriers to what
public housing companies can do. However, if public (and private) housing
companies had the opportunity to engage more in di?erent initiatives, they
could help to shape whole local neighbourhoods. It is perhaps far-fetched,
but not unlikely that MKB could run local neighbourhood schools in a
not-too-distant future. In the past, MKB provided facilities as replacement
classrooms when a local school shut down. Thus, such ideas and local col-
laborations already exist. In an international perspective this may not seem
to be a big deal, but in Sweden this is de?nitely an innovation. One could even
speak about a revolution in comparison to the situation only 15–20 years
ago.
What can we Learn from Public Entrepreneurship Studies?
The cases presented conclude that concrete initiatives as examples of
public entrepreneurship show how we can utilize people’s resources at the
same time as they represent the kinds of ?exible and functional support-
ive initiatives that cities like Malmö and Landskrona need. Here, it is
important to note that public entrepreneurship means engagement and
participation. Public entrepreneurship has nothing to do with charity.
That is, public entrepreneurship initiatives engage people and make them
create value themselves. Above all, ‘bottom up’ initiatives that engage and
include citizens directly a?ected by them – like the two cases in this text –
are needed in order to foster motivation, commitment and participation.
These ‘bottom up’ initiatives have di?erent logics and drivers than those
that are simply ‘top-down’ implemented from above. This is particularly
true if a number of actors with di?erent backgrounds come together and
collaborate. Thereby, just as the literature suggests, heterogeneity and
diversity foster entrepreneurship to become more e?ective (Johannisson,
1994; Aldrich, 1999).
One of the main reasons for conducting research on public entrepre-
neurship should be to create knowledge based on learning about why public
entrepreneurship creates change and makes a di?erence for citizens, that is,
revitalizes cities/regions and societies. The research should also help us to
understand how public entrepreneurship initiatives:
70 The dynamics between entrepreneurship and environment
? Create sociality and collaboration;
? Create new spaces, both physical and mental;
? Make participative actors form functional collaborations.
There has been talk about the importance of sociality in this text, and
sociality is conceptualized as mutual consensus concerning how a phe-
nomenon in society ought to be. However, reality is seldom as simple as that
a number of actors from di?erent sectors come together and form func-
tional collaborations around a public issue regarding which they have the
same view. Rather, there are negotiations or con?icts where some actors
demonstrate and exert power to get what they want. One has to remember
that generally actors have their own reasons for participating in these col-
laborations. I do not discuss the question of power further, but recognize
that it is of crucial importance for the success of public initiatives that the
participating actors are able to realize that it is the public issue and nothing
else that is in focus, that is that they create sociality around a certain phe-
nomenon and leave their own special interests behind.
CONCLUDING DISCUSSION
At the beginning of this chapter, I concluded that there is a rising interest
in new initiatives and processes that have social missions. This is nothing
new as such. Entrepreneurship has been present throughout the history of
mankind, albeit in di?erent forms and sometimes with other labels. But just
as with increasing globalization (movement of people, resources and so
on), the order and intensity of such processes and initiatives have increased
rapidly (and probably are still speeding up at an ever-increasing rate). It is
not possible to grasp all parts of such complex processes: society is gen-
uinely complex, to use a semantic paradox.
It is argued that what I refer to as public entrepreneurship is crucial as a
means of (re-)vitalizing a city or a region, and even whole societies (Henton
et al., 1997; Catford, 1998). But there are voices stating that civil society
with strong citizen engagement can only be restored at the community, not
the national, level (Sandel, 1996). Bringing in voices from the ?eld of glob-
alization and immigration, Kapur (1997) argues that in today’s globalized
world local initiatives unite people, even if they live at the very borders of
this globalized world – mentally or physically – or do not participate fully
in public life. This may be part of an answer: an enterprising spirit where
people form collaborative initiatives to get their voices heard (Hymes, 1996)
and simultaneously form alliances with other minorities (Asad, 2000) in
order to increase their in?uence and power in today’s society. Thereby,
New initiatives to revitalize society 71
phrases and concepts like inclusion and integration can ?nd a breeding
ground to function in practice.
Finally, I want to calm sceptics who may think this looks like the
emperor’s new clothes. Public entrepreneurship is a new concept that
re?ects the society of today and the society of tomorrow, but it is yet to be
studied closely by researchers. What are needed in order to challenge these
new processes in society scienti?cally are thorough studies of public entre-
preneurship initiatives and the processes that take place in relation to these
initiatives. That is, to study and evaluate public entrepreneurship initiatives
critically and analyse their role in creating social value and contributing to
social change (if, how, why and where). We need to create learning and
knowledge concerning what these public entrepreneurship initiatives mean
to cities like Malmö and Landskrona. We also need to evaluate what
aspects are context-speci?c and what aspects are more general in order to
make clear what learning and knowledge can be transferred to other cities
and regions and perhaps to higher levels, like the nation, the European
Union or the so-called industrialized world. In a wider perspective,
research on public entrepreneurship should cover what value public entre-
preneurship initiatives may bring to cities, regions and societies today and
in the future. I would like to see more local studies in di?erent settings that
show how public entrepreneurship initiatives a?ect these cities and/or
regions. We would gain much knowledge from comparisons of cases that
can help us understand commonalities and di?erences. Learning experi-
ences from such studies can help us navigate through the challenges we face
today and meet the challenges we will face tomorrow.
NOTES
1.http://www.oxfordreference.com/views/ENTRY.html?subview=Main&entry=t150.e75663.
2.http://www.malmo.se/stadsdelar/rosengard/ faktaomrosengard.4.33aee30d103b8f159168
00046362.html.
3.http://www.malmo.se/download/18.fe3a2d310a090ba6c380005954/M-info+KLAR+mars
+06+F%C3%A4rg.pdf.
4.http://www.malmo.se/download/18.d2883b106e53ae64c80001627/20.Rosengård.
pdf+2005.
5.http://www.skatteverket.se/download/18.18e1b10334ebe8bc8000111627/1521j.pdf.
6.http://www.landskrona.se/pages/cgi-bin/PUB_Latest_Version.exe?pageId=1434&allFrame
set=1&r=1148903756934.
7.http://www.landskrona.se/pages/cgi-bin/PUB_View_File.exe?pageId=1393&objType= 4&
versionId=1&objByName=Vi%20kan%20bättre.doc.
8. The text about the Österprojektet is mainly is mainly taken from an internal report that
evaluates the Österprojecktet entitled ‘Österprojektet I Landskrona: utvärdering av Börje
Winker våren 2006’ (Wikner, 2006).
72 The dynamics between entrepreneurship and environment
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New initiatives to revitalize society 75
APPENDIX 4A.1 DOCUMENTATION OF
MEETINGS, INTERVIEWS, PHONE
CALLS AND OTHER CONTACTS
Job Emergency
Primary sources:
Meetings with the ‘project leader for social issues’ at MKB Fastighets AB; 5
meetings during the period 9 February 2006–24 May 2007.
Meeting with the project leader at the private consulting ?rm who ran Job
Emergency 24 April 2006.
Meeting with operative personnel at MKB Fastighets 15 March 2007.
Phone conversations with the ‘project leader for social issues’ at MKB Fastighets
AB. At least 10 conversations during the period 9 February 2006–24 May 2007.
Mail contacts. At least 10 mail contacts during the period 9 February 2006–24
May 2007.
Secondary sources:
Internal project documentation from MKB Fastighets AB and the private
consulting ?rm.
Article about Job Emergency in the periodical Bofast March 2006.
Job Emergency’s website,http://www.jobbakuten.nu.
Business Pool
Primary sources:
Meetings with the project leader from the managerial body at Landskronahem;
10 meetings during the period 9 February 2006–27 September 2007.
Meetings with representatives from BF Bosna Basket; 5 meetings during the
period 5 May 2006–13 November 2007.
Phone conversations with the project leader from the managerial body at
Landskronahem. At least 10 conversations during the period 9 February
2006–15 November 2007.
Mail contacts. At least 30 mail contacts during the period 9 February 2006–15
November 2007.
Secondary sources:
Internal project documentation from Landskronahem and BF Bosna Basket.
Article about Job Emergency at Landskrona Direkt 17 December 2002.
BF Bosna Basket’s website,http://www.proteamonline.se/?Id=42.
76 The dynamics between entrepreneurship and environment
5. Developing characteristics of an
intrapreneurship-supportive culture
Hanns Menzel, Robert Krauss, Jan Ulijn and
Mathieu Weggeman
INTRODUCTION
Intrapreneurship is nowadays a topic with a high attraction equally to
many scholars and managers in companies of any size. It can be broadly
de?ned as entrepreneurship within existing organizations, and there is
broad consensus both in academia and business practice about the rele-
vance and the need of bringing entrepreneurship into established com-
panies. Already Schumpeter (1934), who stated that ‘new enterprises are
mostly founded by new men and the old businesses sink into insigni?cance’,
identi?ed the need to instil the logic of entrepreneurship into the estab-
lished businesses.
What Drucker (1985) stated some twenty years ago, that ‘today’s busi-
nesses, especially the large ones, simply will not survive in this period of
rapid change and innovation unless they acquire entrepreneurial compe-
tence’, still seems to hold true today. Besides existing small and medium
sized companies (Aaltio, 2002; Carrier, 1994, 1997; Fayolle, 2003; Veenker
et al., 2004), in particular big companies are turning towards intrapreneur-
ship because they are not getting the continuing innovation, growth and
value creation that they once had (Heinonen and Korvela, 2003; Mair,
2005; Pinchot, 1985; Pinchot and Pellman, 1999).
Moreover, intrapreneurship is especially important for R&Das a valuable
source to develop radical innovation – that is the discovery and exploitation
of completely new business opportunities that go beyond the existing main-
stream business of the ?rm (Antoncic and Hisrich, 2003; Burgelman, 1983;
Fayolle, 2003; Hornsby et al., 2002; Kelley et al., 2002; Klein, 2002; Klein and
Specht, 2002; Lorange, 1999; Vanhaverbeke and Kirschbaum, 2005). Mature
organizations can develop newbusiness activities based on highly innovative
technologies which they would miss without intrapreneurship.
Yet, especially large industrial companies have di?culty in accommo-
dating intrapreneurship and managing radical innovations. Usually R&D
77
in these companies focuses on the short term and emphasizes incremental
innovations that require the exploitation of existent resources and path-
ways rather than on radical innovations that demand the exploration of
new and unknown paths. Furthermore, R&D engineers and scientists are
often not at all entrepreneurial in their approaches. They focus too much
on technical issues and lack an integrated approach. In order to facilitate
intrapreneurship in R&D, both individual intrapreneurs and a supportive
organizational setting must be present simultaneously.
In this respect, an emergent body of literature seeks to identify the con-
ditions that are required in order to make intrapreneurship occur in organ-
izations (Carrier, 1994). Several authors stress that entrepreneurial and
innovating behaviours of both individuals and organizations depend on
cultural factors (Anfuso, 1999; Carrier, 1994; Eesley and Longenecker,
2006; Fayolle et al., 2005; Miles and Covin, 2002; Morris et al., 1993;
O’Connor and Ayers, 2005; Smith, 1998; Sommerlatte, 2001; Ulijn and
Brown, 2004; Ulijn et al., 2001; Ulijn and Weggeman, 2001). Such a culture
would build on all principles relating to the way an organization operates
that will raise opportunities of creating pro?table newness or di?erence in
doing business. But what does this mean more concretely? What kind of
organizational structures and resources should be available? What has to be
provided by top management? And what are the requirements on the team
and on the individual level?
Still, it is not fully clear how to de?ne, build and measure such a culture
that supports intrapreneurship in its entirety. A large body of both schol-
arly and practice-oriented literature deals with this topic, but a holistic
approach towards modelling intrapreneurship-supportive culture still
seems to be missing. Hence, this work aims to identify the relevant
contributions in this domain. Based on an extensive literature review,
intrapreneurship-supportive culture is conceptualized as an intersection
of national, professional and corporate culture types. A framework is pro-
posed that – once further developed and empirically tested – would serve
as an instrument both to measure and to determine relevant levers to
shape intrapreneurship-supportive culture.
Therefore, the ?rst section explores the underlying concepts of intrapre-
neurship-supportive culture – namely national, professional, and organiza-
tional culture – and their interaction. Then, the second section presents
the literature review by clustering and assigning retrieved factors and con-
stituents to cultural dimensions. Leading on from this rich reservoir of
knowledge, the third section describes and assesses the pro?le of an intrapre-
neurship-supportive culture. Finally, the fourth section discusses the results
and gives recommendations about how to shape, implement and maintain an
intrapreneurship-supportive culture on the organizational level.
78 The dynamics between entrepreneurship and environment
BUILDING BLOCKS OF AN INTRAPRENEURSHIP-
SUPPORTIVE CULTURE
An appreciation of the importance of culture and cultural di?erences is
highly relevant for entrepreneurship and innovation. From an organiza-
tion’s point of view, innovation activities are basically built around inter-
action processes between individuals and the surrounding organization,
including the interaction and transfer of people across national, pro-
fessional and corporate cultural boundaries. The seminal research by
Hofstede (1980) has inspired much of the cross-cultural research activity
since 1980 and has been one of the dominant research paradigms in cross-
cultural studies. Culture, as Hofstede suggests, is something like the ‘soft-
ware of the mind’, the operating system that allows human individuals to
share and make sense of experience (Hofstede and Hofstede, 2005). It
refers to a set of shared norms, values, beliefs and attitudes held by the
members of a group, such as a nation or organization (Hofstede and
Hofstede, 2005).
Recognizing and understanding di?erences in cultural patterns provides
individuals with a framework for interpreting the goals, motivations and
behaviours of others. Intrapreneurship-supportive culture can be under-
stood as a set of culture-bound patterns shared by a group of individuals.
These patterns are shaped, changed or maintained through the interaction
between individuals of the group or organization. These interaction
processes are fed by each single individual’s ‘learned’ cultural background.
People are born in a national culture context, acquire a certain professional
culture, in particular starting from the age of 18 or earlier depending on the
educational level, and are then exposed to a corporate culture when enter-
ing a company to work with. As Ulijn and Weggeman (2001) point out,
these three culture types are most relevant for an individual’s education and
working experience and can, therefore, be considered as constituents of
intrapreneurship-supportive culture (as depicted in Figure 5.1).
The human behaviour in companies is obviously in?uenced by the
national culture of the country in which the individuals and the companies
are based. Since national culture is already ‘programmed’ into individuals’
minds early in life, where the family and later school and friends are impor-
tant cultural in?uences, behaviour tends to be on average more or less con-
sistent with this national culture (Hofstede, 2001; Wennekers et al., 2002).
With regards to the context of intrapreneurship, this ?nds support from
earlier work suggesting that national culture has a signi?cant impact on
how entrepreneurship and innovation is achieved (Fayolle et al., 2005;
Nakata and Sivakumar, 1996; Ulijn et al., 2004). Shane et al. (1995) and
Shane (1997), for instance, pinpoint national culture as a leading principle
Developing characteristics of an intrapreneurship-supportive culture 79
for innovative output and performance of organizations. Also Jones and
Davis (2000) study the link between dimensions of national culture and
innovative activities and the implications for locating global R&D opera-
tions. They conclude that national culture a?ects innovation and should
be considered as a factor informing the location decision for innovative
capabilities.
Not only does national culture play an important role for intrapreneur-
ship, but so also does the in?uence of professional culture and its interac-
tion with national culture. Professionals entering an organization bring in
a large repertoire of cultural knowledge gained not only from the wider
society but also from their professional training and previous work experi-
ence (Bloor and Dawson, 1994). Professional culture orientations ?nd their
roots during childhood and early years of education. A more important
in?uence of professional culture is given later through the professional edu-
cation or the studies one chooses. Certainly, both professional training on
the job and university studies determine and stabilize one’s professional
orientation.
However, there are preliminary indications that there may be di?erences
in professional cultures across national cultures, and to complicate matters
even more, they may interact in unexpected ways (Ulijn and Weggeman,
2001). Ulijn et al. (2001) report a study that indicates that not only the pro-
fessional background as such, but its interaction with national culture is
80 The dynamics between entrepreneurship and environment
Figure 5.1 Intrapreneurship-supportive culture as the nexus of national,
professional and corporate culture types
Intra-
preneurship-
supportive
culture
National
culture
Professional
culture
Corporate
culture
decisive for this transition process. The study examines factors among
German and Dutch engineers that account for a di?erent transition from a
technology towards a market orientation and the impact of national cul-
tures. The study found that the technology versus market orientation of the
Dutch engineer is not di?erent from that of the German engineer. However,
the transition from technology towards market orientation occurred earlier
for the Dutch engineers than for the German ones. A plausible reason for
this is that the strong feminine values of Dutch national and corporate
culture (Hofstede, 1980) might lead to a customer orientation more easily
than the more masculine German values keeping a strong internally driven
technological base.
Besides national and professional culture, corporate culture is commonly
understood to have a strong impact on innovation (Chandler et al., 2000;
Peters and Waterman, 1982; Sherwood, 2002). This brings about the ques-
tion why certain types of organizations are perceived to be more innovative
than others, but also the question regarding what type of organizational
culture this would refer to. And what organizational culture would be most
appropriate to support intrapreneurship? For instance, Hofstede et al.’s
(1990) typology includes dimensions of organizational culture that appear
to be crucial for innovation, such as the open system, loose control or
pragmatism. Ulijn and Weggeman (2001) stress that an innovation-
supportive culture would prosper in an organization that is grounded on a
combination of the clan/Anglo-Nordic and the guided missile/Germanic
culture types. Thus, dimensions of corporate culture certainly in?uence
intrapreneurship-supportive culture and, in turn, the innovative output and
performance of a ?rm.
However, since the in?uence of corporate culture on individuals’ per-
sonality occurs rather late in their careers, together with a tendency towards
increased job rotation across both national and corporate culture borders,
its impact on intrapreneurship-supportive culture might be weaker than is
often assumed. Research indicates that even in companies that are known
for their strong corporate culture, national culture remains of para-
mount importance in explaining its employees’ business-related behaviour
(Hofstede et al., 1990). National culture di?erences are re?ected, for
instance, in the way organizations solve problems in di?erent countries, but
also in the validity of management theories in the countries. Di?erent
national cultures have di?erent preferred ways of structuring organizations
and di?erent patterns of employee motivation. For example, they limit the
options for performance appraisal, management by objectives, strategic
management and humanization of work. It is due to these individual-based
in?uences that – especially large – organizations are unlikely to exhibit a
homogeneous corporate culture across the entire organization.
Developing characteristics of an intrapreneurship-supportive culture 81
Given this, intrapreneurship-supportive culture would be formed through
the intersection of national, professional and corporate culture types.
People are born in a national culture context, acquire a certain professional
culture, and then they are exposed to the corporate culture of the organiza-
tion they enter. Hence, an intrapreneurship-supportive culture seems to be
very much rooted in the national and also professional culture imprints of
the individuals. This is the picture that provides the basic understanding and
framework to guide the development of a holistic conceptualization of
intrapreneurship-supportive culture. The objective of the following section
is, therefore, to collect – based on a literature investigation – evidence that
helps to conceptualize intrapreneurship-supportive culture.
TOWARDS A DESCRIPTION OF AN
INTRAPRENEURSHIP-SUPPORTIVE CULTURE
As outlined above, intrapreneurship-supportive culture would appear as an
integration of national, professional and corporate cultures and refers
explicitly to the intrapreneurship process: while national and professional
cultures seem to be bound to the individual level, corporate culture is rather
linked with the organizational level of intrapreneurship. To comprehen-
sively describe the culture that supports intrapreneurship, an extensive lit-
erature study was conducted. Articles in scienti?c journals and books of
the following research ?elds were taken into account: innovation, entre-/
intrapreneurship, marketing, change management, national, professional
and organizational/corporate cultures. The study has been conducted in
two steps.
In the ?rst step, constituents and factors that are deemed to be conducive
to intrapreneurship have been identi?ed in the literature. By means of an
inductively conducted context analysis, the reviewof 97 publications resulted
in an unstructured list of 329 quotations. It became apparent that, regarding
the validity of the factors, roughly two categories of contributions exist. The
?rst provides on the basis of anecdotal evidence and case studies qualitative
descriptions of how an intrapreneurship- and innovation-friendly organiza-
tional climate can be implemented in (established) organizations; it was strik-
ing that this type of contribution is clearly practitioner-oriented with limited
scienti?c rigour regarding conceptualizing, empirical testing and modelling.
The other puts emphasis on the impact that national culture has on innova-
tion output and performance of companies; here, the ?ndings are mainly
based on empirical testing and validation, but lack the link to applicable
knowledge that would allow organizations to shape and implement an
intrapreneurship- and innovation-supportive culture.
82 The dynamics between entrepreneurship and environment
In the second step, all 329 quotations taken from the literature have been
clustered and aggregated to 24 factors that seem to foster intrapreneurship.
Based on that, Ulijn and Weggeman’s (2001) conceptualization of innov-
ation culture served as an auxiliary framework to assign these factors to the
following six cultural dimensions: high vs. low power distance, high vs. low
uncertainty avoidance, individualism vs. collectivism, masculinity vs. femi-
ninity, long-term vs. short-term orientation, and open vs. closed system ori-
entation. While the ?rst ?ve dimensions are known from Hofstede’s (1980)
terminology of national culture, the sixth dimension, open vs. closed
system orientation, was elaborated from Ulijn and Weggeman’s (2001)
dimension innovation drive and Hofstede and Bond’s (1988) dimension,
open vs. closed system. The result of this stepwise research process is pre-
sented in the following subsections. Each of the six dimensions of an
intrapreneurship-supportive culture is described in detail by linking and
summarizing the reasoning retrieved from the original publications.
High Versus Low Power Distance
Power is an integral part of innovation activities. It is needed to facilitate,
orchestrate and shape innovation (Dougherty and Hardy, 1996; Kanter,
1983), and often organizations resist innovative ideas because of the allo-
cation of power in organizations and inertia (Shane et al., 1995). This is
because the way power is distributed and structured within the society or
organization is a question of culture. Power distance indicates how indi-
viduals regard power di?erentials within the society or organizations
(Hofstede, 1980).
In cultures scoring low on power distance, emphasis is put on egalitarian
values, meaning that people prefer democratic leadership, cooperative
strategies and striving for consensus. Authority is distributed equally, and
power is a matter of facts rather than positions; people aim at democratic
leadership, cooperation and consensus. In contrast, cultures with high
scores of power distance accept and expect that power is not distributed
equally within the society or an organization. They tend to adhere more
rigidly to organizational hierarchies, prefer centralized decision-making,
and they accept authoritarian leadership and obedience to superiors.
Innovation depends strongly on interaction, information sharing, and
debates between people across disciplines and hierarchies (Anfuso, 1999;
Ekvall, 1996; Nicholson, 1998; Rice, 2003). It is important that innovators
and R&D teams adopt participative approaches and aim at widespread
support for innovative projects before formal attention is paid by those in
authority. This support enables the participants to convince the decision
makers that innovation needs broad-based support in the organization
Developing characteristics of an intrapreneurship-supportive culture 83
(Ahmet, 1998; Cooper and Kleinschmidt, 1995; Frishammar and Hörte,
2005; Hisrich, 1990; Kahn, 1996; Kanter, 1985; Kumpe and Bolwijn, 1994;
Luchsinger and Bagby, 1987; Martins and Terblanche, 2003; McGinnis and
Verney, 1987; Ottum and Moore, 1997; Pinchot, 1985; Rodriguez-Pomeda
et al., 2003; Russell, 1999).
Innovation e?orts will obviously fail when goals and directions are made
only by a few people at the top and then forced top-down. They should be
discussed, deliberated and changed, based on feedback from and commu-
nication between people at all levels: top-down, bottom-up, and all across
functions and disciplines. Accordingly, the management and decision-
making structure should be ?at and decentralized, with multiple informal
networks, to mobilize people, enable direct access resources, as well as to
enhance entrepreneurial behaviour (Ahmet, 1998; Dougherty and Hardy,
1996; Eesley and Longenecker, 2006; Fry, 1987; Haskins and Williams,
1987; Howell and Higgins, 1990; Kanter, 1985; McGinnis and Verney,
1987; Nakata and Sivakumar, 1996; Rodriguez-Pomeda et al., 2003;
Stevenson and Gumpert, 1985). Creating a true feeling of empowerment,
that is delegating managers’ power and responsibility towards the employ-
ees is vital in order to foster a culture of innovation (Fayolle, 1999; Higgins,
1995; Kanter, 2000; Kotter and Heskett, 1992; Kumpe and Bolwijn, 1994).
In particular, the perception that management is supportive is central to a
culture that facilitates innovation because management trust enables
people to take risks without fear or undue penalty for failure (Ahmet, 1998;
Bitzer, 1991; Chandler et al., 2000; Chisholm, 1987; Cooper and
Kleinschmidt, 1995; Fry, 1987; Haskins and Williams, 1987; Hisrich, 1990;
Kuratko and Montagno, 1989; Kuratko et al., 1990; Rule and Irwin, 1988;
Süssmuth Dyckerho?, 1995). This helps to signal trust, triggers active indi-
vidual participation, and encourages personal responsibility for outcomes.
Organizational hierarchies, which to a certain extent are necessary in an
organization, should not imply that there is too much power distance
between higher ups and lower downs on the process and working level. In
sum, the literature suggests that an intrapreneurship-supportive culture
requires low power distance, building on ?at hierarchies, decentralized
power, and egalitarian values in order to foster communication and inter-
action in all directions, and to empower employees.
High Versus Low Uncertainty Avoidance
Uncertainty is implicitly inherent in innovation, and especially in radical
innovation. The exploitation of new technologies faces huge uncertainties
concerning the uses and potential future applications, but it also encour-
ages exploration along a wide variety of alternative paths (Rosenberg,
84 The dynamics between entrepreneurship and environment
1996). The way uncertainty is dealt with (that is, its avoidance or accept-
ance) has strong implications for the nature of the innovations pursued –
exploration versus exploitation, high risk versus low risk, radical versus
incremental. Uncertainty-avoiding individuals have a concern for security,
and prefer established rules and formalization/planning of activities in
order to reduce risk. In contrast, in an uncertainty-accepting culture, indi-
viduals are more ?exible, rules are not necessary, and decision-making is
pragmatic and situational.
The process of developing new ideas towards successful products is
about discovery, exploration and pursuing new ways; it is a risk-intensive
process that requires signi?cant capital outlays and a long time-horizon
where predictable resource needs and control over the environment are
lacking. The literature suggests that (individual) willingness to accept risk
and to face uncertainty is a fundamental element of an innovation-
supporting culture (Ahmet, 1998; Bitzer, 1991; Brazeal, 1996; Chisholm,
1987; Czernich, 2004; Draeger-Ernst, 2003; Duncan et al., 1988; Eesley
and Longenecker, 2006; Ekvall, 1996; Fayolle, 2003; Kuratko and
Montagno, 1989; Kuratko et al., 1990; Martins and Terblanche, 2003;
Mokyr, 1990; Pinchot, 1985; Rothwell and Wissema, 1986; Stevenson and
Gumpert, 1985; Thornberry, 2001). This is especially relevant for top
executives where control of uncertainty is a major issue (Quinn, 1979;
Stevenson and Gumpert, 1985). Without top management’s willingness
to support highly risky R&D projects, large-scale innovation can not
reach fruition.
Related with risk is failure. Not all new ideas lead to successful innov-
ation; only a minor fraction of new ideas will ?nally yield sustainable
pro?ts (Rosenberg, 1996). In an intrapreneurship-supportive culture fail-
ures are regarded as opportunities and lessons to learn from, and not as
occasions for punishment (Ahmet, 1998; Bitzer, 1991; Bretani and
Kleinschmidt, 2004; Chisholm, 1987; Collins and Porras, 1994; Cooper and
Kleinschmidt, 1995; Draeger-Ernst, 2003; Eesley and Longenecker, 2006;
Frohman, 1998; Fry, 1987; Haskins and Williams, 1987; Higgins, 1995;
Hisrich, 1990; Kuratko and Montagno, 1989; Kuratko et al., 1990;
Nicholson, 1998; Pinchot, 1985; Russell and Russell, 1992; Russell, 1999;
Sherwood, 2002; Smith, 1998; Süssmuth Dyckerho?, 1995). The accep-
tance of failure is essential when it comes to promoting entrepreneurial
behaviour within the organization. In this way, a culture of continuous
learning is established. When an idea’s ?nal result is not successful, empha-
sis is placed on what was learned and people do not fear losing their job.
Taken together, there is strong agreement that an innovation-supporting
culture builds on low uncertainty avoidance realized through individual
risk-awareness, tolerance of failure, fewer rules and less formalization.
Developing characteristics of an intrapreneurship-supportive culture 85
Individualism Versus Collectivism
Individualism (in contrast to collectivism) refers to the relationship that
individuals have with the society that surrounds them, that is, whether
people are rather concerned about themselves or about others (Hofstede,
1980). In individualistic cultures, ties between individuals are loose, and
self-reliance, autonomy, independence and leadership are considered
important. Individualistic people seek to di?erentiate themselves from
others, emphasize personal outcomes over relationships, and value indi-
vidual needs, interests and goals over those of the group (Triandis, 1995;
Trompenaars and Hampden-Turner, 2001).
In contrast, collectivistic cultures are characterized by a tight social
framework in which people distinguish between their own groups (so-called
in-groups) and other groups. The in-group is built and maintained through
harmonious relationships, rules of behaviour, membership and loyalty
(Hofstede and Hofstede, 2005; Triandis, 1995). Collectivistic people value
group interests, goals and outcomes over those of the individual and, as a
result, they strive to minimize disruption. They rather pursue cooperative
strategies, show more concern about attaining the other party’s goals than
about attaining their own goals, and are more willing to make sacri?ces for
their in-group (Lewicki et al., 1994; Triandis, 1995).
It is commonly understood that an intrapreneurship-supportive culture
is grounded on policies and practices that provide degrees of individual
freedom and autonomy to act in order to stimulate initiative and personal
responsibility to pursue creative ideas (Ahmet, 1998; Draeger-Ernst, 2003;
Eesley and Longenecker, 2006; Ekvall, 1996; Fayolle, 2003; Fry, 1987;
Haskins and Williams, 1987; Kanter, 1985; Luchsinger and Bagby, 1987;
Lumpkin and Dess, 1996; Martins and Terblanche, 2003; McGinnis and
Verney, 1987; Morris et al., 1994; Nicholson, 1998; Peters and Waterman,
1982; Pinchot, 1985; Pinchot and Pellman, 1999; Rodriguez-Pomeda et al.,
2003; Russell, 1999; Salomo et al., 2003a; Schmid, 1987; Ulijn and
Weggeman, 2001). These individualism-reinforcing characteristics will
stimulate people to think, be creative, take initiative, and to show responsi-
bility, which is important for innovation.
However, it is questionable whether a purely individualistic culture will
make innovation happen; it will also stimulate people to focus too strongly
on their personal ambition, tasks and goals. This will create a sphere of
high competition among the employees, which will eventually force people
to keep their ideas for themselves instead of sharing them across di?erent
departments, groups or disciplines (Deloitte Touche Tohmatsu, 2005;
Eesley and Longenecker, 2006; Ulijn and Weggeman, 2001). Innovation is
an interrelated process that involves various cross-disciplinarily, iteratively
86 The dynamics between entrepreneurship and environment
and sequentially linked stages including idea generation, evaluation, devel-
opment and implementation (Specht et al., 2002; Weule, 2002). No single
individual has the skills, let alone the resources, to take an idea right
through to implementation, and even small groups can ?nd this very
di?cult (Sherwood, 2002). Combining ideas, exchanging information, and
verifying each other’s ideas seems to be crucial for innovation.
However, successful innovation evidently also requires collective forces.
This means that an intrapreneurship-supportive culture fundamentally
needs ‘we’ consciousness, group spirit, sense of belonging, loyalty, obliga-
tion to contribute, and strong cohesion between all members of the group
or organization (Ekvall, 1996; Frohman, 1998; Kanter, 1985; Kumpe and
Bolwijn, 1994; Nakata and Sivakumar, 1996; Robbins, 1998; Shane et al.,
1995; Ulijn and Weggeman, 2001). As a consequence, employees need to
commit themselves to the organization and greater goals that go beyond
their self-interest (Ahmet, 1998; Kahn, 1996; Kanter, 1985; Kuratko and
Montagno, 1989; Martins and Terblanche, 2003; McGinnis and Verney,
1987; Pinchot, 1985; Russell, 1999). Especially in today’s complex, inter-
disciplinary innovation processes, in which work activities are increasingly
based on collaboration and organized around groups rather than individ-
uals, collaborative methods, such as networks, cross-boundary teams,
supply chain partnerships and strategic alliances, are crucial in building a
culture of innovation (Kanter, 2000; Ulijn and Weggeman, 2001). This is
also supported by Schmeling (2001) who empirically ?nds that collectivism
positively predicts helping behaviours and values.
We may conclude that in order to build an intrapreneurship-supportive
culture, a combination of individualistic and collectivistic orientations is
needed (Morris et al., 1993; Morris et al., 1994; Ulijn and Weggeman,
2001). It could be achieved in the way that Kanter (2000) suggests, that
leaders should mobilize individual talent in the pursuit of collective goals
to make employees responsible for their companies and empowered, but
not bounded by their jobs.
Masculinity Versus Femininity
Masculinity versus femininity refers to the extent of clarity and distinc-
tiveness of gender roles (Hofstede, 1980). In a masculine culture emphasis
is on success and achievement: people live to work, they are goal oriented,
show ambition and need to excel. On the other hand, in feminine cultures
quality of life and a harmonious, playful atmosphere are important: people
work to live, and put emphasis on interdependency and nurturance. Given
the results of our literature review, it is rather di?cult to provide a clear-
cut proposition regarding whether an intrapreneurship-supportive culture
Developing characteristics of an intrapreneurship-supportive culture 87
should be driven by masculine or feminine orientations. There is only little
(empirical) work dedicated to this question.
On the one hand, there are indications that femininity would be sup-
portive of an intrapreneurship-supportive culture. To foster creativity, idea
development and opportunity recognition, an intrapreneurship-supportive
culture certainly needs to be based on a playful atmosphere, good relation-
ships, communication, and exchange among the participants (Ekvall, 1996;
Thwaites, 1992). Furthermore, the level of con?ict should be low, and per-
sonal tension, prestige di?erences, or power and territory struggles and
gossip should be avoided. Thus, high degrees of femininity through a focus
on people and the establishment of warm, supportive climates a?ect the
initiation stages of new product development positively (Nakata and
Sivakumar, 1996). Indeed, as Ulijn et al. (2001) suggest, the high feminin-
ity values of the Netherlands and also Scandinavian countries appear to
foster technical innovation in the initial stages of the innovation process.
On the other hand, femininity alone would not make innovation happen.
Masculinity also has a positive e?ect on intrapreneurship-supportive
culture, which is also built on purposefulness, clear goal-setting, and an ori-
entation towards achieving these goals (Barczak and Wilemon, 1992;
Bitzer, 1991; Chisholm, 1987; Collins and Porras, 1994; Draeger-Ernst,
2003; Eesley and Longenecker, 2006; Frohman, 1998; Luchsinger and
Bagby, 1987; McGinnis and Verney, 1987; Nakata and Sivakumar, 1996;
Pinchot and Pellman, 1999; Quinn, 1979; Rodriguez-Pomeda et al., 2003;
Stevenson and Gumpert, 1985; Thamhain, 1990). Creativity and the dis-
covery of a business opportunity is one step in innovation, but the other is
pursuing the idea towards implementation and market. Addressing clearly
identi?ed customer needs and attempting to deliver the best possible solu-
tion to the customer has a lot of what can be described as being typically
masculine. These objectives must be clear to all participants involved,
because challenging goals stimulate and commit people to look beyond the
feasible to the possible.
Goals should not only be formulated in terms of money or technical
objectives, but control, motivation, and reward systems must be redesigned
to support innovation and intrapreneurial goals (Ahmet, 1998; Anfuso,
1999; Bretani and Kleinschmidt, 2004; Chandler et al., 2000; Duncan et al.,
1988; Fry, 1987; Haskins and Williams, 1987; Higgins, 1995; Hisrich, 1990;
Kanter, 1985; Kuratko and Montagno, 1989; Kuratko et al., 1990;
Luchsinger and Bagby, 1987; Martins and Terblanche, 2003; McGinnis and
Verney, 1987; Nicholson, 1998; Pinchot, 1985; Rule and Irwin, 1988;
Schmid, 1987; Sherwood, 2002; Süssmuth Dyckerho?, 1995). On top of
that, Quinn (1979) ?nds that successful major innovations require a certain
admiration for the achiever. Interestingly, some highly innovative countries,
88 The dynamics between entrepreneurship and environment
such as France, Germany, Japan and the United States score high on the
masculinity dimension. In general, the cultures of these countries put
emphasis on achievement orientation and are among the major innovating
nations worldwide, also because of their strength in engineering (Fayolle,
1999; Fayolle et al., 2005; Johnston, 1989; Nakata and Sivakumar, 1996;
National Academy of Engineering, 2005; Shaw et al., 2003), which basically
builds on solution- and target-driven, thus, very masculine approaches.
Given this, we may conclude that an intrapreneurship-supportive culture
scores medium on the masculinity dimension based on a combination of
both feminine and masculine cultural orientations. The former puts
emphasis on people and relationships between people, whereas the latter is
concerned with goal, result and task orientation.
Long-term Versus Short-term Orientation
Long-term versus short-term orientation has great implications for the
pursuit of innovative activities. This dimension of culture refers to people’s
time horizons, attitude to tradition and change as well as preferences for
static or dynamic environments (Hofstede and Bond, 1988). Long-term ori-
ented cultures put emphasis on a dynamic, future-oriented mentality, includ-
ing openness to the new, persistence and hard work. In contrast, short-term
oriented cultures have a concern for rather static environments combined
with a focus on the past and the present, on tradition and on keeping within
well-known and well-accepted boundaries (Hofstede and Bond, 1988).
Basically, innovation is about change and future. Therefore, an intrapre-
neurship-supportive culture values longer time horizons (Bingham, 2003;
Nakata and Sivakumar, 1996; Quinn, 1979; Ulijn and Weggeman, 2001),
which is especially bene?cial for major innovations that usually take a long
time to develop, to absorb in the market, and to yield pro?t (Rosenberg,
1996). This includes a future orientation to long-term business objectives
(Brazeal, 1996; Fry, 1987; Hisrich, 1990; Pinchot, 1985; Rothwell and
Wissema, 1986), as well as a challenging vision and imagination of the
future technological and market environment (Bitzer, 1991; Kanter, 1985;
Pinchot, 1985; Schmid, 1987). A static perspective of technology and
market would not be conducive in an environment where new, uncommon
ideas and solutions, experimentation and iterative testing are demanded. It
is important that people are ?exible and quickly adapt to a changing envir-
onment (Ahmet, 1998; Cooper and Kleinschmidt, 1995; Draeger-Ernst,
2003; Haskins and Williams, 1987; Kanter, 1985; Martins and Terblanche,
2003; Özsomer et al., 1997; Pinchot, 1985; Rule and Irwin, 1988).
As we can see from the major part of the literature, it is suggested that
an intrapreneurship-supportive culture builds on exploration, openness
Developing characteristics of an intrapreneurship-supportive culture 89
towards the new and unknown, long-term orientation, acceptance of
change, and persistence in iterative and long work processes. However, as
Kumpe and Bolwijn (1994) state, the right balance between renewal and
stability must be kept, which is especially a task for R&D management,
who need to keep a tight rope between the short-term demands of business
unit leaders, while at the same time leaving enough room to work on long-
term research. This is in line with Funke and Andonian (2005) who identify
the need for a balanced capital structure that has a long time horizon
combined with a short-term pro?t orientation. This allows for courageous
and future-oriented management decisions and prevents the company
from losing ?nancial robustness. Given this, we may conclude that an
intrapreneurship-supportive culture scores medium to high on the long-
term orientation dimension.
Open Versus Closed System Orientation
As the literature investigation reveals, the six-dimensional framework
used by Ulijn and Weggeman (2001) is not fully appropriate to cover
intrapreneurship-supportive culture in its entirety. In order to distinguish
intrapreneurship-supportive culture, the orientation of people to the inside
and/or the outside must be taken into account, too.
The so-called system orientation basically refers to the degree to which
the organization and its members monitor and respond to changes in the
external environment, as well as the ability to be in exchange-relations with
other communities and organizations (Chesbrough, 2003; Robbins, 1998).
An open system puts emphasis on issues such as cooperation, networking,
sharing of knowledge as well as search and curiosity across the boundaries
of the ?rm. In contrast, a closed system orientated community would rely
very much on their internal (re)sources and capabilities; exchange with
external groups would be minimized or even avoided.
Indeed, the literature suggests that companies, and especially the large
ones, need to overcome their natural tendency to focus inward and open up
their system to the outside world. This means that initiating, handling and
using a portfolio of inter-organizational relationships is highly important
for innovation (Bingham, 2003; Chesbrough, 2003; Ritter and Gemünden,
2003; Tushman, 2004). The origin of innovation is the ability of individu-
als to discover new, innovative business opportunities (Kirzner, 1997;
Klevorick et al., 1995) which are not necessarily to be found within the
boundaries of the organization. In order to discover external sources and
resources of innovation, members of organizations should continuously
monitor and respond to changes in the external environment, such as cus-
tomers, users, suppliers and venture partners (Chesbrough, 2003; Kanter,
90 The dynamics between entrepreneurship and environment
2000; O’Connor and Ayers, 2005; Russell and Russell, 1992; von Hippel,
2005).
In particular, it is suggested that market orientation – a clear orientation
towards the customer and the value added for the customer – is a crucial
element of successful innovation (Bitzer, 1991; Draeger-Ernst, 2003; Eesley
and Longenecker, 2006; Frishammar and Hörte, 2005; Fry, 1987; Haskins
and Williams, 1987; Hisrich, 1990; Kohli and Jaworski, 1990; Martins and
Terblanche, 2003; McGinnis and Verney, 1987; Pinchot, 1985; Rice, 2003;
Rodriguez-Pomeda et al., 2003; Russell, 1999; Salomo et al., 2003b; Souder,
1981). Empirical evidence suggests that market or customer orientation is
an antecedent component of innovativeness and, in consequence, to the
?rm’s capacity to innovate, that is, to introduce new products successfully
into the market (Atuahene-Gima, 1995; Hurley and Hult, 1998; Salomo
et al., 2003b). The impact of this increases with the degree of product inno-
vativeness (Salomo et al., 2003b). Market orientation is not only increasing
the direct contact with the market/customer, but also facilitating physical
proximity to research, production and marketing so that future users have
a hand in research and development (Quinn, 1979).
Hence, an open organization is recommended for promoting innovative-
ness, but opening up the processes also involves speci?c risks. Without con-
current closure of processes to absorb these greater risks, greater openness
produces not a further increase but a drop of innovativeness. More
speci?cally, an intrapreneurship-supportive culture builds on the coexist-
ence of internal and external factors of innovation along the whole value
chain: funding of innovation, idea generation, sourcing and sharing of
knowledge, joint development, marketing and distribution. This is what
Chesbrough (2003) calls open innovation: it is neither a fully closed nor a
fully open system, but the boundaries of the organization are permeable,
both from the inside to the outside and the other way round. Thus, we may
conclude that an intrapreneurship-supportive culture would score medium
on the open system dimension to make best use of both internal and exter-
nal factors and sources of innovation.
THE SIX DIMENSIONS OF AN
INTRAPRENEURSHIP-SUPPORTIVE CULTURE
The result of the literature study is a six-dimensional pro?le building on 24
culturally-bound factors that seem to support the occurrence of intrapre-
neurship in the context of large, established organizations. It can be under-
stood as a holistic description of an intrapreneurship-supportive culture as
it was deductively developed based on an investigation of relevant literature.
Developing characteristics of an intrapreneurship-supportive culture 91
As depicted in Figure 5.2, the radar plotting technique can be used to visu-
alize the pro?le. Thereby, the score of each dimension was determined by
qualitatively estimating the impact that each dimensions may have on
intrapreneurship. A ?ve-point scale was used to evaluate if the factors’
impact appears to be very low (0 points) or very high (100 points).
Low power distance (PDI ? 0 points) Despite organizational hierar-
chies that are given in large organizations, the power distance between the
organizational and the individual level of intrapreneurship should be low.
To avoid the intrapreneurship con?ict emerging and remaining unsolved,
intrapreneurs must be encouraged to openly deliberate their ideas and
initiatives across all hierarchies. This requires management to be accessi-
ble and actively to establish direct links to the individual level. Hence,
intrapreneurship-supportive culture clearly builds on ?at hierarchies,
decentralized power structures and egalitarian values.
Low uncertainty avoidance (UAI ?0 points) Intrapreneurship presup-
poses that the individual and the organizational level are simultaneously
willing to accept and take risks. Evidently, the intrapreneur is the one who
92 The dynamics between entrepreneurship and environment
Figure 5.2 A deductively developed description of an intrapreneurship-
supportive culture
0
25
50
75
100
PDI
UAI
IND
MAS
LTO
OSO
initiates the risk-intensive new venture process, but without top manage-
ment’s willingness to support highly risky R&D projects and new venture
initiatives, large-scale innovation can not reach fruition. Moreover,
intrapreneurship will only emerge if rules and formalization are reduced
and people are fault-tolerant. In this way, continuous learning is estab-
lished, encouraging employees to engage again and again in new intrapre-
neurial ventures.
Medium individualism (IND ? 50 points) A balanced combination of
individualistic and collectivistic orientations is essential for intrapreneur-
ship. The intrapreneur, who certainly needs to be individualistic to some
extent, must not forget the interests of the organization and its stake-
holders. Pursuing entrepreneurial opportunities individually may be suc-
cessful in the case of independent entrepreneurship but will probably fail
when it comes to intrapreneurship. Both the intrapreneur and the manage-
ment have to pursue cooperative strategies in order to achieve a greater,
common goal.
Rather high masculinity (MAS ? 75 points) Intrapreneurship-
supportive culture seems to have both masculine and feminine elements,
with an emphasis on the former. For radical innovation necessitating enor-
mous R&D e?ort, the personality of the intrapreneur appears to feature
typical masculine orientations, such as goals and achievement orientation,
problem solving and implementation. Yet, he or she must not forget the
larger organizational context where a good atmosphere and relationships
between people need to be maintained, which may be particularly relevant
for the early stages of the intrapreneurship process.
Rather long-term orientation (LTO ? 75 points) Intrapreneurship
requires a general openness to explore the new and unknown, long-term
orientation and vision of the future, acceptance of change, and persistence
in engaging in an iterative and long development process. Still, the organ-
ization must not disregard the fact that renewal and stability should be bal-
anced, which is especially a task of R&D management that needs to keep
a tight rope between the short-term demands of the daily business, while,
at the same time, leaving enough room to work on long-term research.
Medium open system orientation (OSO ? 50 points) The open organ-
ization is recommended for promoting intrapreneurship which, however,
does not imply that the system be opened up entirely. It is neither a fully
closed nor a fully open system, but the boundaries of the organization are
permeable, both from the inside to the outside and the other way round to
make best use of both internal and external factors and sources of innov-
ation. Such an organizational setting provides a bigger variety of options
to the intrapreneur than a closed system would do, a?ecting the entire intra-
preneurship process from opportunity recognition and idea generation,
Developing characteristics of an intrapreneurship-supportive culture 93
sourcing and sharing of knowledge, joint development and funding to mar-
keting and distributing the new product.
DISCUSSION AND CONCLUSION
The objective of this chapter was to conduct an extensive literature
review in order to identify the state of the art of both research on and
practical relevance of an intrapreneurship-supportive culture. By using
Hofstede’s (2001) theory and terminology about national cultures and
Ulijn and Weggeman’s (2001) conceptualization of innovation culture as
auxiliary frameworks, the review of 97 publications resulted in a deduc-
tively developed six-dimensional description of an intrapreneurship-
supportive-culture. Aggregated from329 quotations, 24 culturally-bound
factors could be identi?ed and assigned to the ?ve Hofstedian dimen-
sions PDI, UAI, IND, MAS, and LTO, or to the newly established
sixth dimension, OSO. Given the number and quality of sources studied,
it can be assumed that a fairly complete picture of intrapreneurship-
supportive culture could be drawn. Still, a critical re?ection seems to be
recommended.
Admittedly, this framework does not and can not claim to be complete,
but – as the literature review shows – it certainly contains and builds on
culture-bound constructs that are relevant for intrapreneurship-supportive
culture. Still, deductively developed description needs to be validated
empirically. Also, in order to measure intrapreneurship-supportive culture
on the group or organizational level, we have to be clear about what inno-
vation as a dependent variable does precisely mean. Thus, there is a need to
correlate the framework to measures that re?ect organizational inventive-
ness, innovativeness, performance, or the like.
This also includes what has been addressed earlier by Nakata and
Sivakumar (1996), who suggest that an innovation culture would appear
di?erently in the early and later stages of the innovation process. The early
phases, often described as the fuzzy front end with a long distance to appli-
cation, require creativity, higher degrees of freedom, divergent research,
and exploration. In contrast, the later phases centre on exploitation,
process e?ciency and planning, convergent development, and implemen-
tation towards application. In contrast to this standpoint, Miron et al.
(2004) ?nd indications that an intrapreneurship-supportive culture would
not be competing with a culture that promotes e?ciency and quality, both
characteristics of the later phases of exploitation and implementation. In
any case, the focus of this contribution is on the early phases to promote
intrapreneurship and the development of radical innovation.
94 The dynamics between entrepreneurship and environment
Furthermore, questions of relevance and implications for practice must
be addressed. We may ask, for instance, whether this kind of culture is rele-
vant for the context of business economics. If so, does intrapreneurship-
supportive culture exist in certain highly innovative organizations? And,
if not, how can we trigger cultural change? Therefore, organizational
members must become aware that sustainable innovation and intrapre-
neurship require a speci?c culture. Usually, processes of cultural change
require that people recognize that ‘survival of the community’ is at stake
(Trompenaars and Hampden-Turner, 2001). Thus, promoting an intrapre-
neurship-supportive culture must be done in such a way that people realize
that a certain old way of doing things does not work any more.
Yet, sensitizing people is not enough to facilitate cultural change to the
extent that it e?ectively changes the behaviour of people and other indi-
vidual and organizational outcomes. The individual intention and willing-
ness to change are prerequisites of change in behaviour. This is because
culture is made by interaction of people, con?rmed by others, convention-
alized and passed on to others or newcomers to learn, and at the same time
determines further interaction (Trompenaars and Hampden-Turner, 2001).
Thus, given empirical validation of the conceptualization, concrete levers
of action must be de?ned in order to e?ectively facilitate a change towards
an intrapreneurship-supportive culture.
Based on this, several recommendations for further research can be
derived. Given the literature-based approach, it is necessary to test and
verify this description of an intrapreneurship-supportive culture empiri-
cally. Both longitudinal and multidimensional studies are recommended to
relate intrapreneurship-supportive culture to organizational innovativeness
and performance (Ulijn and Weggeman, 2001). Also, it might be inter-
esting to compare our approach (based on culture) with other empirical
studies on factors and determinants of innovation and intrapreneurship
(independent from culture).
This would be in line with what has been suggested by Damanpour
(1991), that new studies should consider di?erent dimensions and vari-
ables, such as the individual, organizational and environmental level and
include measurement of innovation using not only technical, but also
organizational and administrative aspects. Next, given the various contri-
butions which qualitatively describe intrapreneurship-supportive culture
and give – often incomplete – advice of how to implement it, this topic cer-
tainly has high relevance for business practice. Thus, there is a need to
produce practice-relevant outcomes and to make an e?ort in order to
better understand how this concept of intrapreneurship-supportive
culture can be linked to some concrete levers of action to e?ectively shape
it on the company level.
Developing characteristics of an intrapreneurship-supportive culture 95
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102 The dynamics between entrepreneurship and environment
PART II
The Dynamics between Entrepreneurship and
Education
6. University entrepreneurship and
government support schemes
Einar Rasmussen, Odd Jarl Borch and
Roger Sørheim
INTRODUCTION
The formation of spin-o? companies from research organizations is seen
as one of the most e?ective ways of commercializing new knowledge and
technology (Bray and Lee, 2000; Brett et al., 1991; Davenport et al., 2002;
Rogers et al., 2001). It is found that university spin-o?s often commer-
cialize early-stage inventions where existing companies fail to commer-
cialize or show no interest in the technology (Matkin, 1990; Thursby
et al., 2001). Furthermore, several studies indicate that the formation of
spin-o? companies is a more successful route to commercialization of
university inventions than licensing (Bray and Lee, 2000; Gregory and
Sheahen, 1991; Rogers et al., 2001). Thus, the university spin-o? ?rm may
be seen as a distinct channel for technology transfer for some types of
inventions.
National and regional authorities see a potential for economic growth
and increased employment resulting from the resources that are invested
in the universities (OECD, 2000), and universities are seen as engines of
regional economic growth (Candell and Ja?e, 1999). In the US, the
number of university patents, licenses, and equity ownerships has grown
dramatically in the last 20 years, partly following the implementation of
the Bayh-Dole Act in 1980 (Mowery et al., 2001). The great success in the
US in bringing new research ?ndings to the marketplace has inspired
countries to undertake reforms aiming to increase the extent of commer-
cialization of research, by changes both in the academic system and in
the instruments for research funding (Benner and Sandstrom, 2000;
Slaughter and Leslie, 1997), and through setting up separate structures to
support such activities (Guston, 1999; Hellström and Jacob, 2003; Mian,
1997). Policies have been induced top-down from the government and its
agencies, while other initiatives are emerging bottom-up from individu-
als and from inside the university (Goldfarb and Henrekson, 2002;
105
Rasmussen et al., 2006). Some initiatives are formal, while informal mech-
anisms are in many cases found to play an even more signi?cant role
(Franklin et al., 2001).
In this chapter a spin-o? ?rm is de?ned as a new venture based on uni-
versity research. Recent studies have recognized the heterogeneity of uni-
versity spin-o?s (Heirman and Clarysse, 2004; Mustar et al., 2006), and
that policy measures need to be tailored to the speci?c contexts, entrepre-
neurs and resources required (Lockett et al., 2005; Wright et al., 2004).
This study addresses the range of government programs to facilitate the
creation of research-based university spin-o? ?rms. Several studies have
investigated university spin-o? formation and the role of policy schemes
(Lockett et al., 2005; Mustar, 1997; Rasmussen et al., 2006). However, few
studies have investigated how government schemes are designed and
implemented.
The objective of this chapter is twofold. First, we discuss the di?erent
types of support mechanisms that might be available to govern-
ments aiming to facilitate the creation of university spin-o?s. Second, we
analyze the challenges when designing government support programs. We
elaborate on the di?erent organizational mechanisms used to manage the
implementation of the government support measures. As a point of
departure we take the creation of a university spin-o? and the entrepre-
neurial process. Birley (2002) asserts that entrepreneurial activity is more
complex in academic settings than anywhere else, related both to techno-
logical and organizational challenges. Hence, there might be a need for
tailor-made instruments to facilitate commercialization activities within
universities. Moreover, we claim that there is a need to adapt these instru-
ments to the national agendas, the university context, and the project
characteristics.
The chapter is structured as follows. First, we elaborate on the complex
process of research-based spin-o? ?rm formation from universities, and the
role of government support. We look in particular at the development
phases from research idea to the launching of a new high-tech ?rm. Second,
the ?ndings from a study of government programs to support commercial-
ization of research in Canada, Finland, Ireland, Norway, Scotland and
Sweden are presented. We discuss the rationale behind the di?erences in the
support schemes between these countries and the di?erent ways of struc-
turing the support programs at government, university and project levels.
Finally, conclusions and implications for further research and policy impli-
cations are provided.
106 The dynamics between entrepreneurship and education
FRAME OF REFERENCE
The Spin-o? Process and the University Context
Key topics in the process of new venture creation include the opportunity
or business idea on which the new venture is based, the individuals or entre-
preneurs involved in the start-up, and the organizational context in which
the ?rm is initiated (Bruyat and Julien, 2001; Phan, 2004; Rasmussen, 2006;
Stevenson and Jarillo, 1990). University spin-o? ?rms are special due to
some common characteristics. They are developed from an opportunity
emerging within academic research. The academic inventors often play a
key role in the development process, and the initial phases of development
often take place within a university setting.
The university setting is complex due to multiple outputs, ambiguous
goals, and stakeholders with di?ering interests (March and Olsen, 1976).
Universities provide composite products within education and research. To
achieve its objectives the university organization is characterized by a frag-
mented structure with loose couplings between di?erent parts of the organ-
ization (Weick, 1976). Participation in the decision-making process is often
?uid, and the number and role of actors involved, and the amount of e?ort
they put in, are uncertain and changing (Cohen et al., 1972).
The complexity of university spin-o? development is evident from the
many stakeholders involved and their interwoven objectives. Diverse goals
and outputs such as teaching, doing basic and applied research, societal
utility, and a combination of non-pro?t and commercial activity add to this
complexity (Lee, 1996; Navarro and Gallardo, 2003). The internal com-
plexity is due to the highly specialized competence and autonomous work
practice of the employees, the creative nature of work tasks, and the norms
and structure of the science system (Merton, 1973; Stephan, 1996). The
external complexity is evident from the many stakeholders such as students,
funding agencies, industry, and other adopters of research results, com-
bined with the changing operational contexts and expectations of univer-
sities (Shane, 2004). The academic culture appreciates publishing and open
accessible research, while entrepreneurial activity may be a sensitive issue
(Ndonzuau et al., 2002). For the spin-o? activity, this may create challenges
related to opportunity recognition, incentives for the researcher to exploit
the opportunity, and access to university resources necessary for further
commercialization.
The venturing scientists meet the potential for con?ict with traditional
academic values and tasks. The entrepreneurs initiating university spin-o?s
are embedded in a context where for instance environment support (Reitan,
1997), local group norms (Louis et al., 1989), and university culture
University entrepreneurship and government support schemes 107
(Franklin et al., 2001) a?ect their behavior. The academics involved in
setting up a spin-o? company have little in common with the heroic and
solitary Schumpeterian entrepreneur (Mustar, 1997). Based on their study
of professorial entrepreneurship, Kenney and Goe (2004, p. 679) suggest
that ‘being embedded in an academic department and disciplines with cul-
tures that are supportive of entrepreneurial activity can help counteract the
disincentives created by a university environment that is not strongly
supportive of these activities’. This indicates a complex structure where
academics are part of di?erent cultures within their scienti?c discipline,
department, university and external environment. To gain the necessary
resources, academic entrepreneurs are dependent on networks and integra-
tion between a wide variety of actors embedded in di?erent sub-cultures
(Mustar, 1997). For the academic wanting to pursue a commercial idea, this
might imply breaking norms and creating emotional strain on the relation
to the academic culture.
The Spin-o? Process and the Entrepreneurial Characteristics
Interaction over a long period of time is often needed to transfer research-
based knowledge to a commercial setting. University spin-o? projects are
characterized by a dynamic interaction of di?erent individuals throughout
the start-up process (Chiesa and Piccaluga, 2000; Clarysse and Moray,
2004; Roberts and Malone, 1996; Vanaelst et al., 2006). Arguably, a large
share of research ?ndings consists of tacit knowledge, making it important
that the researcher(s) possessing this knowledge are involved in the com-
mercialization process. Several studies point to the risk that advanced
knowledge-based ideas may fade away if the idea is separated from the
creator or researcher (Henrekson and Rosenberg, 2001; Stankiewicz, 1986).
Jensen and Thursby (2001, p. 241) found that most licenses from US uni-
versities comprise technologies that ‘are so embryonic that additional e?ort
in development by the inventor is required for a reasonable chance of com-
mercial success’.
For the spin-o? venture, the dependency on the original inventor repre-
sents both an advantage and a possible future challenge. On the negative
side, several studies show that lack of business experience and management
skills is recognized as a potential barrier to success for venturing scientists
(Radosevich, 1995; Samsom and Gurdon, 1993). Hence, an entrepreneurial
team consisting of both the academic inventor and experienced entrepre-
neurs may be favorable, and this is also found to be common among uni-
versity spin-o?s (Birley, 2002). Also the use of entrepreneurs from outside
the university, so-called surrogate entrepreneurs, is found to be a viable
strategy for spin-o? creation (Franklin et al., 2001; Radosevich, 1995).
108 The dynamics between entrepreneurship and education
The Spin-o? Process and the Need for External Resource Acquisition
The complexity and the often long time horizon of the spin-o? process
makes it di?cult to acquire the resources needed to develop the project, in
particular the ?nancial resources. It is often di?cult to anticipate the com-
mercial potential of university spin-o? projects in the ?rst stage, and it is gen-
erally di?cult to obtain funding for further development of early stage,
high-risk projects (Westhead and Storey, 1997; Wright et al., 2006). The busi-
ness opportunities exploited by university spin-o?s are often based on many
years of research e?ort and have high knowledge content. New research
?ndings often need large investments in further development before they can
reach the marketplace as new products or services (Jensen and Thursby,
2001). These investments might not be induced without a proper protection
of the intellectual property (IP), thus securing exclusivity of the rights to eco-
nomic exploitation (Granstrand, 1999; Monotti and Ricketson, 2003).
Patent scope has been found to increase the probability that university inven-
tions are commercialized through a spin-o? venture (Shane, 2001). For the
spin-o? venture, funding may be obtained through the entrepreneurs’ and
the university’s internal funding, or through debt and equity ?nance (Wright
et al., 2006). Due to the early stage nature and high knowledge content of the
technologies, asymmetric information may lead to a high degree of market
failure when it comes to the funding of university spin-o?s.
The relation with the external context is crucial for spin-o? develop-
ment and for spin-o? processes to meet challenges in obtaining market
knowledge and commercial networks and resources. As noted by Rosenberg
(1991), innovations are increasingly interdisciplinary, and close cooperation
between a number of specialists is required to succeed. There might be a
communication gap between academics, the investors, government repre-
sentatives and industry due to di?erences in expertise, culture and language.
In order to understand scienti?c reports and to communicate with acade-
mics there is a need for specialized competence, which might not be present
in industrial companies or other adopters. Likewise, academics may have
problems understanding industry’s needs. Network activities with the uni-
versity, customers, suppliers and the regional innovation network seem
important for spin-o? development (Pérez and Sánchez, 2003). For
instance, Shane and Stuart (2002) found that founders of university spin-
o?s who had prior relations to venture capitalists are more likely to receive
venture funding and less likely to fail. Another source of resources to
develop the business concept is through strategic alliances (Carayannis
et al., 2000). For the spin-o? venture, the academic entrepreneurs have to
create cooperating networks towards arenas within the business community
where they have limited knowledge and experience.
University entrepreneurship and government support schemes 109
The Role of Government Support
The characteristics of the university setting, the academic entrepreneur and
project complexity make the structuring of government support a chal-
lenging task. The discussion above shows that the university setting leads
to several pitfalls that may severely hamper the process of bringing a
promising research idea through the commercialization process towards a
new spin-o? ?rm. For the university, contributing to this speci?c type of
knowledge-intensive commercialization processes may therefore call for
several new measures. Lerner (2002) emphasizes the special challenges of
the bureaucracy meeting the markets, especially when dealing with profes-
sional investors and a broad set of stakeholders. Hence, it is important to
?nd administrative mechanisms at university level that increase the market
impulses and market interests of the new venture in an early stage, without
hampering the other stakeholders’ interests and the other university tasks.
The government support system needs to ?nd organizational solutions to
govern the e?orts channeled into the commercialization process to avoid
endless ‘garbage can’ processes within the anarchic university organization
(Cohen et al., 1972). At the same time, the governance regime must not
induce a lot of red tape hampering the dynamism of the interests behind
the spin-o?.
The university serves as a stakeholder both as research provider and
through IP ownership, and by representing the interests of society and the
government. The government may have several stakes in this process both
as policy-maker, owner, and provider of ?nancial support. Hence, there
may be di?erent national agendas that have to be taken into consideration,
in addition to the university context and the commercialization project
characteristics. Some countries are striving to increase the number of spin-
o?s, while others are focusing on supporting the development of existing
companies through publicly supported research. Several countries are
looking for strong clusters that may in?uence the priority of the funding
and the need for more centralized control. In some countries, the new
public management ideas of decentralization and privatization may have a
strong in?uence (Czarniawska and Genell, 2002).
The types of roles that public funding initiatives can play in promoting
the commercialization of research may be divided in two main groups.
First, initiatives can promote institutional changes with the long-term view
to create structures and build competence for the commercialization of
research. This approach might be seen as an attempt to correct systemic
failure which inhibits the ability of universities and private actors to
develop viable opportunities into spin-o? ?rms. This can be done by induc-
ing changes in the culture, attitudes and incentives; by networking and
110 The dynamics between entrepreneurship and education
training; and by establishing organizational structures such as technology
transfer o?ces (TTOs), incubators, and entrepreneurship centers within
the universities to support the entrepreneurs (Klofsten and Jones-Evans,
2000; Rasmussen et al., 2006). Furthermore, initiatives could also be devel-
oped in boundary organizations (Hellström and Jacob, 2003) operating in
the intersection between the university and the business sector, such as
incubators, science parks, network organizations and consultants.
Here, government support programs can provide permanent basic
funding for maintaining a relevant infrastructure for technology transfer.
Examples are, for instance, when the TTOs or comparable actors are
dependent on some government funds to secure their basic operation. This
is a way for governments to support changes in the university sector helping
the institutions to change and become more entrepreneurial universities
(Clark, 1998).
The second group of government initiatives provides direct support to
speci?c commercialization projects. The rationale for this approach is to
mitigate market failure by stimulating the supply and demand side for
research-based technologies. Examples of such support could be direct
?nancial support (grants, loans, equity), direct ‘soft’ support (training,
counseling, infrastructure), and e?orts to stimulate private sector invest-
ments (networking, co-funding).
Furthermore, the government can take a role as an innovator by fueling
experimentation, launching new initiatives, and disseminating knowledge
about best practice. In this way the government schemes can assist both
public and private actors to implement new insights, thus overcoming
‘anticipatory myopia’ (Salmenkaita and Salo, 2002). Commercialization is
an area of high complexity and uncertainty, and experimentation is neces-
sary to ?nd solutions to the speci?c challenges of speci?c contexts.
Government programs can take the initial risk and cost and create new and
better routines and arrangements for the commercialization of research.
The lessons learned from such investments may bene?t several actors.
As a consequence, in the design of spin-o? support tools the govern-
ment has to ?nd the right types of incentives and has to look into the
organizational con?guration of the support scheme at di?erent levels. The
government support schemes may vary regarding the range of control and
coordination by national agencies, the organizational solutions at univer-
sity level, and ways to organize at the project level. Hence, speci?c organ-
izational design is needed for these types of ventures at di?erent levels: the
research idea and the entrepreneur at project level, the university structure
at the organizational level, and the government with its national agencies
working on behalf of the public interests at the regional and national
levels.
University entrepreneurship and government support schemes 111
METHODOLOGY
Sample
The empirical data used in this study cover government programs to
support the commercialization of research in six countries: Canada,
Finland, Ireland, Norway, Scotland and Sweden. The countries were
selected for having comparable characteristics related to population size,
economy, educational system, geography, living standards and industry
structure. In addition, some of the countries have some speci?c character-
istics such as long geographical distances and a business sector consisting
mainly of SMEs. All the countries have a well developed university sector
where the major source of funding for university research is basic funding
and grants from the government. Furthermore, all countries have well
developed national policy schemes for the commercialization of research
(Lundström and Stevenson, 2005).
Data Collection and Analysis
Information was obtained from a literature review and interviews with well
informed people in each country. A large number of policy reports in the
form of statistical information, benchmarking studies, case studies and
program evaluations provided extensive background information about the
innovation policy and the government programs in each country. Further,
we obtained updated brochures, descriptions and criteria about the speci?c
programs. This information allowed us to de?ne the key research questions
and develop a model to guide further data collection. Next, we conducted
semi-structured interviews with well informed people in each country; such
as policy-makers, program managers, policy researchers, university admin-
istrators and program users. In total, we interviewed about 100 persons in
80 face-to-face and 20 telephone interviews. A case description about each
country was written and has been veri?ed by key people in all these coun-
tries except Ireland.
Some challenges related to the data collection should be noted. Few
countries provide detailed national statistics on the number of spin-o?s
and other outputs from the commercialization of research. Exact compar-
isons of the various initiatives in the countries studied would be unreliable
as the di?erent areas of operation, other initiatives in place, and di?erent
contexts make each program unique. Therefore, it makes limited sense to
compare the quantitative output from one program in one country with
another program in another country because of di?erent ways of measur-
ing data, di?erences in industry structure, highly diverse composition of
112 The dynamics between entrepreneurship and education
initiatives, and di?erences in scope. Also, the output numbers are not
directly comparable due to the variation in the de?nitions used. Further, it
is even more di?cult to relate the output metrics to any speci?c programs
or initiatives as the additionality is not clear-cut. That is, the output may
have occurred even if the program did not exist. Most often, several initia-
tives are involved in supporting each commercialization project, and iso-
lating the e?ects of single measures is a challenging task. In this study, we
have emphasized the main characteristics of the di?erent programs and the
organizational solutions through in-depth discussions with o?cials on
di?erent levels. During these discussions, the speci?c characteristics of the
commercialization process and the university setting have been targeted.
The data have been analyzed inductively by a team of researchers in coop-
eration with practitioners.
FINDINGS
This section presents the range of government measures to commercialize
research emanating from universities and research institutes in the six
di?erent countries.
Country Descriptions
Canada
Among the countries in this study, Canada has the longest track record of
formal support for university spin-o?s. This is more than 20 years in some
of the leading research universities. Despite this rather long tradition, the
government resources to support the commercialization of research are
increasing and the number of programs at federal and provincial level is
vast. One survey identi?ed 178 initiatives having CAD3.2 billion expendi-
ture a year (Gault and McDaniel, 2004). At the universities, the industrial
liaison o?ces (ILOs) or TTOs play a central role as coordinators of the
di?erent funding sources. The Canadian universities have di?erent
approaches to IP ownership, but the quantitative results from their com-
mercialization activities do not seem to be a?ected by IP policy (Clayman,
2004). As the commercialization and technology transfer infrastructure in
Canada has matured, both government programs and university ILOs take
a broader view on technology transfer than just patenting and licensing.
For government agencies, the bene?ts for Canada and Canadians are
central, while the universities increasingly view technology transfer as a
strategic part of their activities. In total, the Canadian e?orts to commer-
cialize research have passed the pioneering period and have developed into
University entrepreneurship and government support schemes 113
a more operational phase where these activities are generally seen as an
important part of research and innovation activity.
Finland
Policy studies often refer to Finland as a world class model having an inno-
vation environment with high R&D investments, a high number of patents
?led, a highly educated workforce, and a high share of high-technology
based ?rms, just to mention a few indicators. The Finnish innovation
support system consists of several actors responsible for a high number of
policy measures. The major funding schemes have a strong collaborative
approach and usually require university–industry collaboration. Hence,
only a few rather young initiatives are targeted at the commercialization of
research ?ndings in the pre-start-up phase or in the stage before an indus-
trial partner is involved. Although one of the strengths of the Finnish
system is claimed to be the close networking between a number of di?erent
public innovation actors, the complicated system with many actors may
confuse the users of the di?erent initiatives. The culture for commercial-
ization of research at the Finnish universities is not very strong. The col-
laboration with companies has worked well, but little is invested in
competence in licensing and creating spin-o?s. To build an infrastructure
at Finnish universities has not been a priority until recently. According to
our interviewees there is, however, a shift towards a more proactive attitude
among university managers to increase the commercialization of research.
The attitude is becoming increasingly more positive among university
faculty, but many professors are still reluctant to mix business and acade-
mic activities.
Ireland
During the last years there have been increased e?orts towards technology
oriented R&D in Ireland. There has been a ?ve-fold increase in research
funding over the six-year period up to 2006. The new policy is very much
based on cluster thinking, especially within ICT and biotechnology. This
emphasis has consequences for the organization and the tools imple-
mented at the university level, with increased emphasis on high potential
research areas. Government support agencies are active at university
level, supervising the commercialization process and providing coordina-
tive links between universities and industry. The strong coordination
e?orts are followed up at university level. The integrated Research and
Innovation Centres are coordinating R&D applications, applications for
commercialization support, and supporting technology transfer. The main
responsibility for the infrastructure is placed at the universities and the
TTOs and innovation centers. At national level, Ireland has a support
114 The dynamics between entrepreneurship and education
scheme for the education of spin-o? entrepreneurs in the later phase of
commercialization.
Norway
Commercialization of research has not been a core activity for Norwegian
universities until recently, although signi?cant public support for commer-
cialization has been granted to boundary organizations in the university
cities. Due to the low level of industry R&D expenditure, the Norwegian
government considers it to be particularly important to foster the creation
of new research-based ?rms. Legislative changes in 2003 and the subse-
quent establishment of TTOs at the major research universities have
resulted in a higher emphasis on commercialization. The infrastructure and
competence to support spin-o?s is still under construction in Norway. The
main government schemes for the commercialization of university research
are taken care of by one program in the national research council. This
program has been in operation since 1994, and is regarded as quite suc-
cessful in terms of supporting the establishment of an infrastructure at the
universities, the number of successful projects supported, and its ?exible
unbureaucratic operations. The program provides support to the regional
science parks and the university TTOs, which are responsible for following
up the spin-o? projects. In addition, new schemes are launched according
to perceived needs, such as proof-of-concept funding, a commercialization
grant for academics, and networking activities.
Scotland
The basic rationale related to governmental support of commercialization
of research from Scottish universities and research institutes is related to
the fact that Scotland has a strong science base while their industry base is
less developed. There is a belief that it is possible to strengthen the indus-
try base by stimulating the commercialization of research from Scottish
universities. There is a dedicated focus in supporting the industrialization
of research within life science, energy and tech-media. In Scotland there is
a strong recognition that stimulating entrepreneurship within universities
and research institutions is very di?erent from stimulating entrepreneur-
ship in general. These projects and entrepreneurs are nurtured through
separate programs in order to generate future high-growth companies.
Both top-down and bottom-up approaches are used in order to form a
more streamlined pipeline for commercialization projects from research
institutions. However, Harrison and Don (2004) point out that even
though much is already being done in terms of stimulating the exploita-
tion of Scotland’s science base, there is still scope for more e?ective coor-
dination of these various schemes and for a more robust focus on the
University entrepreneurship and government support schemes 115
business development models appropriate for the creation of world class
high-growth companies.
Sweden
Sweden has long traditions that focus on R&D and collaboration
between university and industry. The R&D level in Sweden is the highest
in the world, particularly due to the high level of research in industry.
There are, however, few national programs for the commercialization of
research from universities. Independent foundations in seven regions have
addressed this issue since the mid-1990s. This is now reorganized from
seven independent foundations into one company with seven subsidiary
companies. Despite the lack of national innovation programs aimed at the
university sector, there seems to be a history of a high activity level at many
universities and colleges. At the university level the holding companies
were established in the mid-1990s. To some extent the holding companies
have taken the role to build commercial competence at the universities, but,
with few economic resources, the holding companies have had a limited
e?ect.
Country Characteristics Compared
The national objectives and main focus in the policy to commercialize uni-
versity research di?er between the six countries, as summarized in Table 6.1.
The main focus ranges from broad e?orts to increase the number of
industries and make the ‘thousand ?owers bloom’ to a more selected focus
on speci?c research areas. The support is both decentralized to the regional
level, as in the Nordic countries, and centralized, as in Ireland and
Scotland. Canada excels through a broad range of tools and a multi-level
support structure. Regarding ?nancial support, the countries with the most
centralized schemes also have the broadest range of ?nancial support tools
covering all the steps in the development process. Canada has emphasized
competence and training within the universities to be able to tackle the high
complexity of the spin-o? ?rm formation process. Finland has strongly
emphasized industry partner solutions, not least due to the success of the
mobile phone company Nokia. This may result in a high industry involve-
ment in the design of government e?orts. However, it may also increase the
dependency on a few larger companies.
The countries in this study can be divided in three groups. Finland,
together with Sweden, is in a particular situation as these countries
are number one and two in the world when it comes to research spend-
ing as a share of gross domestic product (GDP). This is due to the high
level of research in industry, which is also re?ected in these countries’
116 The dynamics between entrepreneurship and education
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commercialization policies. Thus, the focus is more on university–industry
collaboration, rather than fostering new spin-o? ?rms. Although this
picture is nuanced and there is signi?cant focus on spin-o? creation, it
seems fair to say that Sweden and Finland have a shorter history and fewer
initiatives to support spin-o? ?rm formation from universities.
The second group of countries consists of Canada and Norway, which
have a lowshare of R&Dspending in industry, in contrast to Sweden and
Finland. Due to limited possibilities to commercialize university research
in domestic industry, policy-makers in Canada and Norway have seen it
as important to facilitate the creation of new spin-o? ?rms. The third
group, Ireland and Scotland, stands out with a much more focused
e?ort to achieve excellence in research and commercialization in selected
areas. This is also evident in the more centralized operation of govern-
ment support schemes in these countries compared to the others in this
study.
ANALYSIS
The countries in this study have implemented a broad range of measures to
facilitate university spin-o?s. The governments’ responses to the challenges
regarding commercialization of university research are summarized in
Table 6.2.
One type of government measure is targeted at changing the institutional
setting in order to make it better equipped to create and support spin-o?
projects. In this category we identi?ed programs to change the attitudes and
culture within universities to be more supportive to commercialization
and spin-o? activity, programs to build competence in commercialization
and business development at universities, and programs to build an e?ect-
ive infrastructure in the form of commercialization support units and facil-
ities such as TTOs and incubators.
Another type of program is addressing speci?c commercialization pro-
jects. In this category, di?erent models of proof-of-concept funding were
frequently used. Furthermore, many programs supported business devel-
opment in early phases of the development of a spin-o? ?rm. Furthermore,
we also identi?ed that government schemes may play the role of inducing
improvements in the commercialization system and developing new initia-
tives. Thus, government schemes are acting as a facilitator for transferring
best practice from other countries and institutions and acting as an inno-
vator and risk-taker in developing new initiatives. In this section we will
discuss these three types of schemes and di?erent ways of organizing these
government initiatives.
118 The dynamics between entrepreneurship and education
Programs to Change Culture and Build Infrastructure
How to get academics and universities more involved in the commercial-
ization of research is a key issue among agencies and people working to
promote commercialization. This relates both to increasing the entrepre-
neurial orientation of the university faculty and sta?, and to reducing
administrative barriers within the university.
The infrastructure may be organized in two di?erent ways; in boundary
organizations acting as mediators between the academic and the business
community or as initiatives within the universities. In Norway and Finland
commercialization activities are in some cases outsourced to separate com-
mercialization units, while in countries like Canada, Ireland and Scotland,
activities are organized within the universities with close links to the uni-
versity administration. In Ireland, strong e?orts are made to meet with
the researchers at institutes and to present role model examples of
entrepreneurs.
Science parks have become a natural part of the environment at most
universities. Some of these play a role as administrators of government
University entrepreneurship and government support schemes 119
Table 6.2 Challenges to entrepreneurship in universities and government
schemes
Characteristics of Challenge for commercialization Target area for government
spin-o? process of research results schemes
University role Universities are institutions of Support organizational
education and basic research change within universities
with multiple goals and (infrastructure)
stakeholders
Cultural Commercialization projects Support the
di?erences need to make a transition from entrepreneurial process
academic to commercial culture with both infrastructure
and project support
Interactive Di?erent competencies and Support competence
process collaboration needed throughout development and
the commercialization process networking activities
Financial capital Early-stage high-risk nature of Financial support to
projects projects in areas of market
failure and incentives for
private investors
External relations Networks and communication Support networking
crucial activities
schemes to promote the commercialization of research results from the
adjacent university. Examples of other types of infrastructure organized in
boundary organizations are external advisors connected to science parks,
network organizations, and specialized government agencies. It seems,
however, to be di?cult for this type of initiative to achieve close interaction
with the university departments, and alignment with the other missions of
a university might be a challenge.
Technology transfer is increasingly seen as a strategic tool for universities
in order to increase their impact on society. Thus, the role of TTOs is cur-
rently evolving more towards being a part of university activities. This
development was particularly visible in Canada, where the TTO infra-
structure has been in operation for up to 20 years. We identi?ed several
examples where government support schemes contributed to the develop-
ment of a professional TTO function within universities both by direct
funding and through training programs for TTO personnel. There are also
many examples of schemes that support the establishment and operation
of on-campus incubators at the universities. Other activities that are set up
to increase the commercial orientation of university scientists and to iden-
tify promising business ideas are seminars and training programs for scien-
tists, business plan competitions, and other ‘marketing’ activities. Still, it is
a challenge to reach all the researchers in the universities.
We found that the awareness and focus on commercialization varies a great
deal, not only between countries but also between universities and research
groups. Hence, the appropriate measures vary depending on the maturity
of the commercialization topic at each institution and research group.
Although there is no doubt that academics are increasingly becoming more
positive towards the commercialization of research, few recipes or best prac-
tice to stimulate this change can be found. As e?orts to change culture
mainly have to be implemented at the institutional level, few government pro-
grams are aimed directly at researchers for such issues. This is often a more
internal a?air at universities, and perhaps not prioritized very much in all
institutions. Thus, it seems clear that a commitment from the university man-
agement is crucial for the government initiatives to be e?ective.
It seems that the need for competence in the ?eld of technology transfer is
becoming more evident as the infrastructure becomes more established. This
competence is not easily available and may be facilitated through the devel-
opment of a portfolio of experienced consultants supporting the projects. In
countries with a long track record, such as Canada and Scotland, the focus
ontraining programs seems tobe particularly strong. InCanada, for instance,
there seems to be a general agreement that there is a lack of competent people
in the research institutions to handle commercialization projects. Hence,
several government schemes have focused their funds more on networks,
120 The dynamics between entrepreneurship and education
partnerships and training programs (hands-on internships). There is a strong
focus on developing talent and it is very often stated that technology transfer
also includes the transfer of people. Specialized training programs for all
those involved in the commercialization process may prove bene?cial. This
includes consultants, the researchers themselves, and the TTOsta?.
Programs to Support Speci?c Commercialization Projects
Government programs may provide direct support to commercialization
projects in several ways, from direct funding and physical infrastructure to
‘soft’ support in the form of mentoring, training and networking. The focus
on ‘soft’ support is increasing and is related to an increased emphasis
on skills and competence, not only ?nancial and physical resources. We
identi?ed several training programs for academic entrepreneurs, and the
government schemes often supported mentors and consultants who con-
tributed with their experience and networks to the spin-o? projects.
In most countries, it is acknowledged that there is a funding gap between
the research-based inventions made within the universities and commercial
concepts that are of interest to industry and private capital. The investors
and industry often feel that the risks are too high to support the develop-
ment of a research-based idea. The ?rst phase of this funding gap is pri-
marily addressed by grant-based programs, while programs in later stages
usually require private co-funding and sometimes equity in the projects. It
seems, however, that projects where no company or investor has shown
interest will be cut o? from programs requiring cost sharing.
Some countries have set up development grants or so-called proof-of-
concept funds providing funds to verify the industrial applicability of the
research-based invention. Often, a second round of funding is available if
an investor or industrial partner is committed to the project. A reported
challenge of such proof-of-concept grants is to make sure that the funding
is used for commercialization activities, and not for further research.
Several programs are set up to stimulate private sector investment in
spin-o? projects. It seems generally di?cult to get seed funds to invest in
university technologies in early phases of development, but some funds
have been set up with formal university ownership. More common,
however, are attempts to connect with business angels and venture capital
?rms both through formal networks and networking arenas.
Inducing Improvements and Developing New Initiatives
To experiment with new initiatives is both risky and costly, but this is nec-
essary in order to learn and to ?nd new and better models that could be
University entrepreneurship and government support schemes 121
applied across many institutions. Hence, the responsibility for supporting
new experiments might be at the national level, as the risk might be too high
for single organizations or agencies at regional level. An experimental
approach was especially visible in Canada, where new pilots were common
in order to test the viability of concepts to see if they could be launched as
a general initiative.
Another trend in several of the Canadian programs is that they fund net-
working between institutions or even require that a consortium is made to
be eligible for receiving funds. The diversity of approaches and a willing-
ness among some of the public actors to experiment with new initiatives
also gives rise to some new and innovative instruments. Thus, they seem
more eager to design new initiatives than to operate the existing infrastruc-
ture, such as funding the initial set-up of networks and TTOs which are
supposed to be operated by the universities after the initial public support
is spent. The aim of many government initiatives is to make themselves
redundant and not to become a basic funder of infrastructure. In this way
the government schemes are taking on the cost and initial risk of develop-
ing new initiatives, but assume that if the initiative becomes successful it
will be able to acquire funding from other sources.
The Organization of Government Initiatives
Some countries, such as Canada and Finland have a number of auto-
nomous actors who are initiating programs, while other countries, such as
Ireland and Scotland have a more centrally coordinated system. Sweden
relies heavily on regionally based initiatives, while in other countries the
programs are governed centrally. The countries with a clear national ambi-
tion and cluster orientation, such as Ireland and Scotland, have more cen-
tralized organizations. These countries have specialized e?orts towards a
limited number of industries. Moreover, we also observe that this makes
their universities even more focused on achieving research and commer-
cialization excellence within a few main areas. With a more centralized
organization the universities are followed closely; sometimes with govern-
ment representatives on campus securing the interests and coordination
between the commercialization units.
The degree of governmental intervention and how the di?erent countries
choose to organize these activities varies. Governments are actively encour-
aging universities to include commercialization as a part of their mission,
rather than being a responsibility for actors outside the university. Some
countries acknowledged that a wider range of structural changes than just
providing funds through support programs was needed to change the
culture at universities. One challenge may be that two di?erent government
122 The dynamics between entrepreneurship and education
levels are responsible for academic research (for example ministry of edu-
cation) and for industry development (for example ministry of industry).
For instance in Canada, Finland and Norway, it seems that the latter are
much more occupied with promoting commercialization than the former,
and some of the e?orts might bene?t from a better coordination between
these levels.
In some of the government agencies, especially in Canada, there were
worries that the universities had too narrow a focus on achieving quantita-
tive output goals. Many of the TTOs in Canada, Scotland, Ireland and
Finland have a broader mission, including writing applications and contact
with industry partners. An interesting observation is that the revenue from
some TTOs in Ireland and Scotland goes back to the university, and not the
TTO. In this way the TTO does not get too focused on the ?nancial mea-
sures. In addition, it is easier to gain legitimacy for the TTO and commer-
cialization activity if the revenue from this activity is shown to the
academics by means of direct funding for research.
The empirical ?ndings from this study suggest that more specialized
e?orts are bene?cial in order to create networks among scienti?c ?elds,
between universities, and towards speci?c industries. Networking between
regional actors at a national level is seen as important. One possible strat-
egy to promote networking by government programs is through enforced
networks. Here, the sta? are employed directly at the government level, but
are operating within the research institutions. Another strategy is to accept
only consortia or networks as eligible applicants for commercialization
infrastructure grants. We also see that government programs are support-
ing regional network organizations.
Often there are other general programs that provide signi?cant add-on
funding to the commercialization initiatives. Although this study considers
programs specially targeted at research-based innovations, these projects
frequently bene?t from more general initiatives such as grants, loans and
equity schemes for start-ups; incubators and training for entrepreneurs;
and grants and tax deductions for R&D activity.
The results above show that the countries have put signi?cant e?orts into
developing an innovation policy with in?uence on other areas like regional,
industrial, education, and research policy. In the countries included in our
study we ?nd a varying degree of systematic analyses mapping the market
imperfections and e?orts towards ?nding the right level of the di?erent types
of support schemes. Typical gaps identi?edare lackof competent people, lack
of internationalization, lack of funding for the early stages, lack of venture
capital, and lack of culture and infrastructure within the universities. Some
agencies spend considerable resources on benchmarking and evaluation
studies in order to discover and highlight best practice fromrelevant sources.
University entrepreneurship and government support schemes 123
CONCLUSIONS
This study has shown that due to the complexity of commercialization
support schemes, there is considerable need for knowledge related to the
design and implementation of government schemes for spin-o? ventures.
There is a need for a special focus on initiating new ideas and tools towards
entrepreneurial culture and orientation (Chrisman et al., 1995; Kenney and
Goe, 2004). As the spin-o? ideas proceed through the commercialization
process, new problems emerge and new tools are needed to meet imperfec-
tions such as lack of ?nancial resources (Wright et al., 2006). There is also
an active interplay between the support instruments and the university
infrastructure for commercialization.
In parallel with the development of the support, there is a need to
develop the organizational platform to handle spin-o? creation within the
universities. A well developed organizational platform may then change the
need for government support as commercialization activities mature and
better formal and informal infrastructures are developed.
The university context and tailor-made solutions are important. Hence,
government initiatives with success in a country or institution with a long
track record and a well developed infrastructure for commercialization may
not be suited to a context where the activity and infrastructure is lacking.
It might be that the complexity of the technology transfer ?eld and the need
for specialized competence will become clearer only after some degree of
local experience (Rasmussen et al., 2006). This is in line with the academic
entrepreneurship literature ?nding that university researchers lack com-
mercialization experience and knowledge, especially in the early phase of
development (Bird and Allen, 1989; Vohora et al., 2004).
An established external network and strategic alliances with people and
companies that may take the idea further towards building a business plat-
form are found crucial in prior studies (Bower, 2003; Davidsson and
Klofsten, 2003; Grandi and Grimaldi, 2003). In some countries the foun-
dation for this type of cooperation is lacking, meaning that the university
and the entrepreneur have to take the idea the whole way towards estab-
lishing a new ?rm. In this study we found that countries with weak coop-
eration between industry and research institutions tend to establish more
comprehensive programs to facilitate commercialization in the form of
spin-o? ?rms.
Countries with well-established links between industry and research
institutes tend to pay less attention to direct spin-o? support. In designated
areas these countries seem to have industries with an absorptive capacity to
capitalize on the basic and applied research undertaken at universities and
research institutes. These countries also emphasize meeting places like
124 The dynamics between entrepreneurship and education
science parks on the university campus. Hence, the introduction of
more extensive e?orts in order to commercialize research ‘directly’ from
research institutions may not be successful because researchers oriented
towards commercialization already use their capacity in research–industry
collaboration.
New policies may focus on speci?c knowledge-intensive industries in the
?elds where the countries have or seek to develop an international compet-
itive advantage. This may take the form of emphasis on speci?c industry
clusters, in?uencing the innovation support system to prioritize much of
the commercialization support towards the same areas. However, this may
create challenges in other areas. The need for specialized competence within
speci?c areas creates a need for sector-based initiatives. There has to be, in
particular, a focus on the market imperfections in di?erent areas and in
di?erent growth phases of the commercialization projects.
This study shows that countries with a clear national ambition and
cluster orientation have more centralized funding agencies. The universities
are monitored closely, sometimes with government representatives on
campus, securing the interests and the coordination between commercial-
ization units. The universities in these countries are also taking broader
responsibility for the whole infrastructure and for coordinating the R&D
activities. In countries with larger national R&D locomotives, there is less
emphasis on spin-o? activity and less centralized schemes. Some of the
countries experiment with decentralized funding in several ways. However,
here they face incentive challenges and con?icts of interest between
di?erent stakeholders. The independent commercialization units often
become powerful compared with the researchers and the spin-o? project.
This may hamper the commercialization process as it proceeds into ?rm
establishment and the seed-stage.
Policy Implications
Due to the complexity of the university spin-o? process and the di?erent
history and characteristics of the national settings, interpretation of the
implications from this study should be made with caution. In particular, it
would be doubtful to compare statistics and quantitative outputs between
the diverse settings, especially because there are few common de?nitions
and the measurement methods are diverse. Still, several trends can be
identi?ed and important lessons can be learned from these cases.
It seems clear that commitment from the university is crucial in order to
succeed with commercialization and research-based spin-o? ?rm forma-
tion. Thus, for some initiatives to be e?ective there is a need to induce
changes in the university organization. For instance, it would not be very
University entrepreneurship and government support schemes 125
relevant to introduce opportunities for proof-of-concept funding unless
the universities were able to identify promising opportunities and were
equipped to handle the projects funded by such grants.
There has to be a focus on experimenting with new initiatives (bottom-
up). Also one has to be aware that technology transfer is a profession that
needs speci?c competence and training. This also includes network capa-
bilities. Increased focus on networking and specialization, sometimes
imposed from the government level, is important. For the government,
broad output metrics are needed to secure public interest and avoid agency
problems.
A critical issue when addressing market failure through project support
is the decision about what projects to support. In early phases, such as
proof-of-concept, the decisions usually have to be based on some form of
assessment or evaluation, as there are no markets for embryonic early-stage
ideas. In later phases, programs may rely on private actors by requiring that
private capital has been invested in order to be eligible for receiving public
funds. Leaving the decision about what projects to support to the market
might tend to favor projects in established rather than emerging industries.
Suggestions for Further Research
This study emphasizes the need for further in-depth studies of commer-
cialization processes and how to organize public support. There is a need
for more studies looking at how university programs can bring forward
latent resources in the university or regional context, and not only consid-
ering the ?nancial needs of the venture. Furthermore, research should
focus on the organizational capabilities of the support programs that
balance interests without hampering the dynamism of the projects and the
entrepreneurial spirit of the researchers involved. In particular, there is a
need to look more closely into the interplay between the ?nancial support
schemes and the administrative solutions chosen. It may be found that suc-
cessful administrative solutions and entrepreneurial orientation in the uni-
versity support sta? may reduce the need for ?nancial support.
There is a need for more comparative research between di?erent uni-
versities, including in-depth studies following the commercialization
process through its di?erent stages. At national level, future studies should
look more closely into the balance between targeting commercialization
e?orts towards established university–industry networks and established
industry clusters versus a more open-ended, bottom-up approach facili-
tating more ideas and contributing to a more diverse entrepreneurial
community.
126 The dynamics between entrepreneurship and education
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130 The dynamics between entrepreneurship and education
7. Enterprise education in di?erent
cultural settings and at di?erent
school levels
Ulla Hytti
INTRODUCTION
Enterprise education and entrepreneurial studies have been strongly pro-
moted and in some countries included by legislation in the national curric-
ula. European countries have di?erent entrepreneurial cultures, and
di?erences should be re?ected in the enterprise education programmes and
curriculum structure. Terminology di?ers according to culture, and this
makes transnational exchange of knowledge and research in the ?eld
di?cult. In planning research in the area of enterprise education we encoun-
tered a lack of comparable material across Europe. The terms used in one
culture do not carry the same meaning in other cultures, and this makes
theory and programme development di?cult.
Hence, any understanding and interpretation of entrepreneurship must
re?ect the social, cultural and historical environment in which the activity
is embedded. In di?erent times and places entrepreneurship has had
di?erent meaning, such as (external) entrepreneurship, which is about
setting up and managing small businesses and/or growth-oriented, entre-
preneurial ventures; intrapreneurship, which is understood as an entrepre-
neurial way of action within an organization; and enterprising behaviour,
which deals with the behaviours, skills and attributes of any individual in
all spheres of life (Kyrö, 1996). The di?erentiated understandings of entre-
preneurship are linked to di?erent sets of learning objectives in enterprise
education which may be categorized under three headings: (1) learning to
understand entrepreneurship; (2) learning to become entrepreneurial; and
(3) learning to become an entrepreneur (see also Hytti et al., 2002; Hytti
and O’Gorman, 2004).
As enterprise education does not take place in a vacuum, the entrepre-
neurial culture and environment of a given region, country or a particular
school needs to be taken into consideration when planning the enterprise
131
education programme. If there is a strong interest in entrepreneurship as a
desirable career option, it makes sense to place the focus on providing pro-
grammes that support the activity. Vice versa, if the interest in entrepre-
neurship is low, it does not make sense to provide start-up courses but to
focus on building awareness and on supporting entrepreneurial behaviour.
Another major element that needs to be incorporated in the planning is the
school level: the younger the students, the more the focus should be on sup-
porting entrepreneurial behaviour, not on preparing the students for the
world of business.
While it appears that at the European level all of these di?erent app-
roaches can be found, there are important di?erences in the national
approaches. It seems that the programmes target school levels appropri-
ately: the business focus on education is introduced only at vocational level
(secondary schools, higher education). However, in certain countries there
seems to be a lack of programmes at an earlier stage (kindergarten, primary
schools), and only few programmes focus on building awareness and on
supporting entrepreneurial behaviour. In some countries enterprise educa-
tion is taken exclusively to mean training for persons who are interested in
becoming self-employed. For example, in Austria and Norway there is a
strong business focus on enterprise education, that is its role is understood
as the capability to increase the number of start-ups. In Austria this is
perhaps grounded in the role of Chambers of Commerce and the particu-
lar examinations required from entrepreneurs. In Norway, large ?rms have
dominated the labour markets and fairly little attention has been paid to
SMEs or entrepreneurship. Based on surveys, however, the entrepreneurial
culture in Austria and Norway is quite weak – meaning that only a minor-
ity is interested in entrepreneurship as a career option. Hence, there might
be a need to shift the focus. The situation is quite di?erent in Finland, where
enterprise education has a strong non-business focus; this re?ects the entre-
preneurship culture in the country quite well and is potentially able to
strengthen it for the future. Therefore, enterprise education means more
than education for those who are interested in becoming self-employed as
it also encompasses education aimed at increasing the entrepreneurial
behaviour of students and employees. In Ireland and the UK, there seems
to be a mixed approach. Interestingly, the approach in these countries is
based on di?erentiated policy development. In the UK, enterprise educa-
tion has been explicitly present in education policy over the decades, while
in Ireland the initiatives have been many but they are not related to any
comprehensive enterprise education policy.
This research is grounded in a larger European research project that
aimed at establishing a common frame-of-reference that would allow
Europe-wide comparability in order to create new knowledge of enterprise
132 The dynamics between entrepreneurship and education
education and facilitate transnational academic and pedagogic discussion
and cooperation among theorists and practitioners in this ?eld. This
chapter reports the di?erences of enterprise education programmes run in
?ve European countries (Austria, Finland, Ireland, Norway and the UK).
ENTERPRISE EDUCATION: DIFFERENT GOALS,
METHODS AND OUTCOMES
Enterprise Education in Di?erent Cultural Settings
The role and aims of enterprise education are connected to the meanings
assigned to entrepreneurship. The history of entrepreneurship studies has
relied on psychology and has aimed at pro?ling the ‘Entrepreneur’ (char-
acteristics, demographics, and so on). In the ?eld of management and busi-
ness economics, these so-called trait studies were the key interest area until
the 1990s (Brockhaus, 1982; Kovalainen, 1989). In such studies the per-
sonal characteristics of entrepreneurs were under investigation. These
studies did not provide any conclusive results because the characteristics
identi?ed were largely similar to that of other groups, such as managers or
creative people (Gartner, 1988; Gartner, 1989; Bird, 1989; Baron, 1998).
From the point-of-view of enterprise education the identi?cation of certain
characteristics of entrepreneurs does not seem to be a promising app-
roach – if such innate attributes given at birth were found to be exclusive to
some people the role of enterprise education becomes redundant.
Recently it has been suggested that it is the process of entrepreneurship
and not the individuals that should be in the focus of entrepreneurship
research. Hence, entrepreneurship is about exploring, discovering and
exploiting opportunities (Shane and Venkataraman, 2000). From this per-
spective entrepreneurship is more of an act of doing than a state of exist-
ence. In this vein, entrepreneurship is not reserved for certain people
(business founders) but could be seen to be a process that can touch many
people in di?erent forms. From this perspective enterprise education has a
distinctive role in aiming at developing the attitudes, competences and skills
of the individuals to engage in the process of entrepreneurship. A frame-
work for understanding the di?erent forms of entrepreneurship (elaborated
from Kyrö, 1996) is provided in Figure 7.1.
An important element in this framework is the entrepreneurial culture
and environment of a given country, region or even a school. The planning
of enterprise education programmes and models should re?ect the entre-
preneurial culture. If entrepreneurship is a widely accepted and desirable
activity, it might be that the focus on the national or regional level is largely
Enterprise education in di?erent cultural settings 133
on external entrepreneurship – providing the necessary skills in becoming
and acting as an entrepreneur. However, if waged work remains the pre-
ferred option in a country or a region, and entrepreneurship is considered
to be an option only for the few, selected individuals, this suggests that the
main focus cannot be solely on promoting external entrepreneurship but
should be placed on developing enterprising behaviour and intrapreneurial
activity.
The European Commission tracks the preferences at the country level
and the results from the most recent Flash Eurobarometer are presented in
Figure 7.2 (European Commission, 2007). The question posed to the
respondents is ‘How desirable is it for you to become self-employed within
the next ?ve years?’ and the ?gure represents the number of respondents
that claim it is very desirable. The results demonstrate that there are impor-
tant di?erences across the di?erent countries. In some new member states
(Latvia, Poland and Lithuania), about 50 per cent of the people consider
self-employment as a desirable career option. The option is even more
desirable than in the US which is mostly presented as the country when it
comes to entrepreneurship. At the same time in some old member states
only less than 20 per cent of the people consider self-employment as desir-
able. Almost half those in the old member states (EU-15) (49 per cent) have
never thought about starting up a business. When compared to the US, this
is almost double (27 per cent). However, the situation is again di?erent in
134 The dynamics between entrepreneurship and education
Source: Elaborated from Kyrö (1996).
Figure 7.1 Forms of entrepreneurship
Entrepreneurial culture
Environment
External
entrepreneurship
Intrapreneurship
Enterprising
behaviour
Collectivity Individuality
Thinking, attitudes,
way of action of
an individual
A wayof action
in an organization
‘True’
entrepreneurship
Small business
ownership
and
management
Campaigns
promoting
entrepreneurship
Entrepreneurial
activities
Entrepreneurship
education
Enterprise
education
the new member states: there only 40 per cent have never thought about
starting up a business.
The analysis of an entrepreneurial culture might also be interesting from
a school’s perspective: for example to examine the general attitudes and
intentions of students in a particular school or university vis-à-vis an entre-
preneurial career, which might serve as assessment of the platform for
enterprise education (Schwarz and Grieshuber, 2000; Harju et al., 2004).
Students interested in enterprise education may be interested in becoming
entrepreneurs themselves or they may attend the course just to ful?l their
curiosity (Hytti, 2001) or to increase their understanding of business
(Heinonen et al., 2006).
Following this, it is suggested here that these cultural di?erences should
be taken into consideration when planning the enterprise education curric-
ula at the national level and also to some extent at the school level. If only
a small minority of the students would prefer or even consider entrepre-
neurship as a career option, the programme needs to be di?erent from the
case where a signi?cant number of the students share this idea. In the coun-
tries on the right-hand side of Figure 7.2 the focus on enterprise education
should be more on awareness-raising, informing people that option exists
and what it is in general about (Jack and Anderson, 1998; Chen et al.,
1998). For this purpose there is a need to organize, for example, media cam-
paigns or seminars and lectures in the open fora. Awareness-building can
of course also be understood as the ?rst ladder in also preparing people
to pursue an entrepreneurial career at a later stage since an individual’s
Enterprise education in di?erent cultural settings 135
Figure 7.2 Desirability of self-employment (% of respondents) in
selected European countries and the US (European
Commission, 2007)
0
10
20
30
40
50
60
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i
a
P
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propensity to pursue alternative employment paths is greatly in?uenced by
knowledge of the existence of other options. This implies that in order to
be able to make the choice of becoming an entrepreneur in the later stages
of one’s career, one has to see that this given option exists. (Oakey et al.,
1998; Vesalainen et al., 1999).
Also important in these cultures is to prepare the individuals for entre-
preneurial ways of working, ?tting into any profession or any career
forming the second status or group of enterprise education. These needs
are ful?lled through information but also through di?erent types of entre-
preneurial learning methods (Rae, 2004; Harrison and Leitch, 2005;
Heinonen and Poikkijoki, 2006; Heinonen and Akola, 2007), di?erent
types of team work, workshops or projects in order to get the feeling of an
entrepreneurial process and to learn from it (Jack and Anderson, 1998).
In the countries representing the left-hand side, enterprise education
seems to show more demand for programmes that actually prepare people
to act as entrepreneurs and manage businesses (Jack and Anderson, 1999;
Solomon et al., 2002). Those seriously interested and/or determined starters
might be in need of experimenting and playing with the idea, trying entre-
preneurship out in controlled circumstances, for example in a class setting
by setting up mini-businesses or through workshops. This third group –
including determined starters, nascent entrepreneurs and in some cases also
start-up ?rms – are also in need of the basic skills and information directly
linked to setting and running a small ?rm, acting as an entrepreneur.
Here a rather dichotomous divide is presented between the left and right-
hand side countries in terms of the supply of enterprise education.
However, in practice all the di?erent aims need to be covered at the national
level and this discussion is meant to suggest where the focus of enterprise
education should be on a country level. This also implies that it might be
di?cult to transfer enterprise education programmes from one country to
another if these cultural di?erences are not taken into consideration.
Enterprise Education Policies in the Di?erent Countries
Next, the enterprise education policies and their development in the coun-
tries involved in this research will be brie?y outlined.
Austria
Since the mid-1990s, policy-makers have intensi?ed their e?orts to increase
the rate of business creations and to create a positive environment for entre-
preneurship, for example by raising the awareness of the wider Austrian
public regarding how new enterprises have a positive impact on employment,
innovation and competitiveness. Since then, by implementing a series of
136 The dynamics between entrepreneurship and education
measures, attempts have been made to facilitate and accelerate business cre-
ations and to create better conditions for young entrepreneurs. Also at this
time enterprise education in schools was launched. The inclusion of the
training ?rm concept in the curricula of the secondary schools and colleges
as well as the creation of junior ?rms in other school types have led to an
encouragement of entrepreneurship education in the upper secondary edu-
cation sector (schools for students aged between 14 and 18/19). In contrast
to the training ?rms, students in junior ?rms do not simulate the start-up and
management of a company, but actually create and manage businesses. In
addition, action has been taken in higher education by appointing new chairs
in entrepreneurship and also increasing study programmes in teacher educa-
tion. (Stamp?, 2002) Hence, in Austria the focus is largely on the business
approach, and the understanding of enterprise education is re?ected through
the aim of promoting more start-ups.
Finland
Since the early 2000s enterprise education has been mentioned as a subject
in its own right in the basics of the curriculum of the comprehensive school,
and is currently included in the lower level and upper level basic education.
In addition, all vocational examinations include basic entrepreneurial
skills. The objective of enterprise education is, in general terms, the devel-
opment of the entrepreneurial qualities of individuals in addition to pro-
viding them with entrepreneurship skills. Enterprise education includes
everybody within the school system. Enterprise education aims at develop-
ing an intrapreneurial attitude, which is a combination of ?exibility, initia-
tive, risk-taking ability, self-direction and on the other hand cooperation
skills and a strong motivation to achieve, knowledge of entrepreneurial
activity, and knowledge of the requirements of entrepreneurial activity
from the point of view of career orientation and further studies. The overall
objective is that schools and education institutions, together with their
interest groups, develop the students’ basic knowledge of the importance
of and possibilities o?ered by entrepreneurial activity. At the same time
they try to give an idea of entrepreneurship. The teachers’ competence will
be increased and the input of outside entrepreneurship experts will be
increased. Teaching methods, which emphasize the action orientation of
both individuals and groups, like projects, are considered to be well suited
to promoting the development of entrepreneurship (Vento-Vierikko, 2002).
As a conclusion, the non-business focus dominates in Finland. It is
acknowledged that enterprise education has several opportunities to
promote entrepreneurship: training of attitudes, waking up entrepreneur-
ial potential and teaching skills and knowledge related to entrepreneurship
(Honkanen, 2004; Heinonen and Akola, 2007).
Enterprise education in di?erent cultural settings 137
Ireland
In Ireland, the school curriculum has very little formal entrepreneurship
training/education; however, there are still many initiatives. The primary
method used to promote entrepreneurship is Enterprise Award Schemes, of
which there are a great number. E?orts to promote youth enterprise are
very active in Ireland. Government agencies, the media, banks, business
associations and private sector companies all participate in the sponsorship
and promotion of these awards and their winners. In addition, initiatives
considered to educate students suitably for entrepreneurship at primary
and secondary levels include, for example, the development of higher order
thinking abilities and problem-solving skills. Enhancing entrepreneurial
culture and abilities are promoted through the transition year option in
secondary schools. Recently taken actions also suggest a shift in education
paradigm to provide a more comprehensive entrepreneurial element in edu-
cation institutions (O’Gorman, 2002; Cooney and Kidney, 2007).
Norway
The Norwegian educational system has traditionally not focused on entre-
preneurship or SMEs. One main direction of vocational training has been
the education and training for craft certi?cates at secondary level. The
reward of a certi?cate requires some business management courses. There
have also, for several decades, been study programmes in general business
management at secondary as well as tertiary levels. However, entrepre-
neurship has previously had very little room in the total curriculum and the
total enrolment at secondary level as well as tertiary levels in Norway
(Havnes, 2002). However, in the 2002/2003 school year the Graduate
Programme in Higher Education was introduced by Young Enterprise
Norway. In the programme, real companies are established by a group of
students for 12 months. To date there have been 940 students in the pro-
gramme (Johansen and Eide, 2006). However, entrepreneurship or enter-
prise education are not yet explicitly addressed in policy-making.
UK
Enterprise education in the UK only entered schools for the ?rst time in the
late 1970s. A major national training scheme for school leavers called the
Youth Opportunity Programme was launched in 1978. In schools, the aim
was at bridging the gap between education and employment, and provid-
ing a broader set of skills for adult working life. The impact of a growing
link between industry and education became evident in the dissatisfaction
regarding the relevance of the school curriculum to the skills required by
industry. The 1970s therefore became the foundation for the development
of an education system that helped to prepare young people for the world
138 The dynamics between entrepreneurship and education
of work. This ‘emergent phase’ was followed in the 1980s by a phase in
which the focus on education was very much on preparing young people for
employment, not self-employment. This was despite the continuous growth
in unemployment among young people at the time. Then, the late 1990s wit-
nessed a re-emergence of interest in enterprise and entrepreneurship.
Government departments have largely replaced the private sector in
encouraging and promoting Enterprise Education at all levels of education.
For the ?rst time there is a statutory requirement to introduce elements of
enterprise into the curriculum for older secondary school students (Cotton,
2002). Hence, the UK holds the largest tradition of including entrepre-
neurship in the education policy. Traditionally, the understanding of enter-
prise education is wide as it is also considered as a tool for combating social
exclusion of marginal groups (such as school dropouts and disabled
persons) (Gladstone, 2005).
Enterprise Education at Di?erent School Levels
Besides the entrepreneurial culture of a given country or region, it is also
important to understand the di?erent aims for enterprise education based
on the di?erent school levels (Deuchar, 2004; Birdthistle et al., 2007). This
di?erentiation is also needed to alleviate some of the tensions identi?ed at
the school level. For example, some of the teachers have expressed strong
reservations about the whole concept of ‘enterprise education’ as the
assumption is that the aim is to start preparing the kindergarten or primary
school children for an entrepreneurial career, that is to prepare them for
the world of business and money (Iredale, 1993; Lewis and Massey,
2003; Davies et al., 2004). The following school levels were applied in the
analysis:
? Under 6 years of age (kindergarten and infant school).
? 6–12 years (primary school and lower level of comprehensive
school).
? 13–19 years (education in upper level of comprehensive school, at the
vocational level, in colleges and upper secondary school).
? Higher education (degree education in universities, colleges and at
the polytechnic level).
? Other (continued or adult education).
The di?erent school levels can also be understood as the ladder in enter-
prise education: in the kindergarten and primary schools the focus is pri-
marily or even solely on developing enterprising behaviour (Iredale, 1993)
and only at secondary school level and later in education does the focus
Enterprise education in di?erent cultural settings 139
shift partly towards learning to become an entrepreneur in the busi-
ness sense. In a similar way, building enterprising behaviour can also be
understood as the cornerstone in all school levels especially if there’s a
need to strengthen entrepreneurial culture in society (Lewis and Massey,
2003).
To summarize, I will analyse which kind of enterprise models are run in
the di?erent countries and at di?erent school levels re?ected against the
desirability of entrepreneurship as a career option in these countries.
METHODOLOGY
This study was conducted by a multi-country research team in their respec-
tive countries (for detailed results refer to Hytti et al., 2002). The bene?t of
the approach was that through the understanding shared and developed by
the members of the team, it was possible to approach the practice, that is
to identify what is considered as enterprise education in the respective
countries in the study.
Comparative research is conducted for several reasons, for example, to
increase understanding of own’s own country, to improve understanding of
other countries, to test a theory across diverse settings, to examine the local
reception of imported cultural forms, and to build universally applicable
theory, to name a few. However, there are several challenges attached to
cross-national research, such as the problems attached to ‘comparing
apples and oranges’. In addition, comparative research creates a pressure
for increased need of communication between the researchers, the need to
share and compare not only research ?ndings but also theories and con-
cepts, writing styles and publication strategies. Moreover, researchers must
work in a foreign language and inequalities may be introduced by the
common resort to English as the lingua franca (Livingston, 2003). We
applied the following strategies to overcome these potential barriers.
In this study 62 enterprise education programmes or initiatives run in ?ve
European countries were analysed in order to identify what aims and objec-
tives enterprise education programmes explicitly or implicitly were trying
to achieve. Since the research team decided not to adopt a strict de?nition
of what constitutes enterprise education, we required the researchers con-
ducting the ?eldwork to be culturally sensitive to the phenomenon at large
in order to re?ect the cultural underpinnings of enterprise education in
their choice of the literature and programmes selected for the study. This
was achieved by selecting national researchers to carry out the ?eldwork.
In addition, the research team engaged in an extensive discussion in order
to reach an understanding of the phenomenon studied.
140 The dynamics between entrepreneurship and education
The researchers identi?ed and documented an illustrative sample of
national or regional programmes in the selected countries. In seeking to do
this each national team was required to be sensitive to the need to docu-
ment programmes from each of the three stages of the education system
(essentially primary, secondary and higher education). It was agreed that
the following types of programmes would not be included: programmes
targeted at operating entrepreneurs or training programmes aimed at
unemployed persons for setting up a business (especially if there was a
choice of many projects).
In terms of documenting the programmes, the project coordinator
prepared an inquiry reference form to ensure that there was standardiza-
tion of data collected for each programme across the di?erent national
contexts. In collecting the data for each programme, multiple sources of
information were used, for example research or evaluation studies of the
related programmes, internal evaluation reports and where there was
insu?cient written documentation, the promoters of the programmes
were interviewed.
The research work was coordinated by the Turku School of Economics
and the data collection was carried out in conjunction with four other
partner countries (Austria, Ireland, Norway and the UK).
ENTERPRISE EDUCATION PROGRAMMES IN
EUROPE
Based on the analysis of enterprise education programmes it was possible
to demonstrate that they do just not fall into a ‘one size ?ts all’ category but
the variety of aims presented previously could be identi?ed from the pro-
grammes. Some of the programmes or initiatives aimed at ful?lling just one
particular need while others explicated wider aims. By using the framework
of the di?erent aims assigned for enterprise education the programmes in
this chapter are categorized under the following headings based on their
explicitly or implicitly announced objectives (Hytti et al., 2002; Hytti and
O’Gorman, 2004):
A. Programmes aimed at creating skills and improving the information
necessary for a person willing to start up or manage a small business;
B. Programmes striving to create a better understanding of (small) busi-
nesses and entrepreneurship in order to prepare people for the world of
work and the relevant structural changes; or
C. Programmes trying to help people to become more enterprising in their
overall lives in a changing society and culture.
Enterprise education in di?erent cultural settings 141
The main results are presented in Table 7.1.
Most programmes that aspired to increase the number of start-ups were
carried out in secondary schools (13–19 years) and in higher education
institutes whereas in the primary schools (students under 6 years or 6–12
years) the aim for enterprise education in most cases was at improving the
enterprising skills of students without a business focus or in creating more
understanding of the world of work through community linkages. Hence,
our suggestion for creating a ladder from enterprise education is sup-
ported. The activity starts with building enterprising behaviour and only
in the later phases of education does the business focus surface on the
arena.
Most of the Austrian programmes aim at preparing individuals to act as
entrepreneurs, that is the programmes aimed at facilitating the start-up of
new businesses. In addition, none of the Austrian programmes target the
lower secondary school levels (children under 12 years), which is under-
standable given that the chosen approach is geared towards promoting
start-ups. A similar concentration could also be identi?ed in Norway. In
Finland the focus is on programmes that aim at helping students to become
more enterprising and to understand business and entrepreneurship. The
programmes were also split across the di?erent school levels.
The programmes run in Ireland were split across the di?erent school
levels and were relatively broad in their objectives since most of the
142 The dynamics between entrepreneurship and education
Table 7.1 Classi?cation of enterprise education models
Country Number of Number of Level of education
programmes programmes
targeting di?erent
aims (A, B, C)
Austria 13 A (13), B (6), C (2) 13–19 years (4), HE (6), other
1
(4)
Finland 11 A (2), B (8), C (9) ?6 years (3), 6–12 years (5), 13–
19 years (6), HE (2), other (8)
Ireland 14 A (10), B (11), C (8) ?6 years (1), 6–12 years (3), 13–
19 years (7), HE (5), other (5)
Norway 11 A (7), B (3), C (2) 6–12 years (1), 13–19 years (2),
HE (8), other (4)
UK 13 A (9), B (7), C (9) 6–12 years (1), 13–19 years (9),
HE (5), other (6)
Note:
1
The category ‘other’ includes adult education and teacher training which are not
focused on in this chapter.
Source: Based on Hytti et al. (2002).
programmes were seen to target all of the identi?ed three objectives. The
similar holistic approach to enterprise education could be identi?ed in the
case of the programmes run in the UK.
Thus, it seems that, based on our analysis, the o?ering of enterprise edu-
cation programmes in the selected countries could be grouped into three
categories:
1. A strong business focus on enterprise education (Austria, Norway)
2. A strong non-business focus on enterprise education (Finland)
3. A mixed approach (Ireland, UK)
The case for Austria and Norway seems to suggest a potential mismatch
between the entrepreneurial culture and the types of programmes run.
Whilst only a minority of Austrians or Norwegians consider entrepreneur-
ship as a desirable option – 16 and 23 per cent of the population respec-
tively (European Commission, 2007), the programmes target only this
minority. In Austria, the entrepreneurship culture is dominated by the role
of Chambers of Commerce. Hence, there is a risk that the majority of
Austrians will not be a?ected at all by the programmes and it is not possi-
ble to change the entrepreneurial culture in the long run either. In contrast
to the other countries in this study, in Austria a special exam is necessary
for many of those interested in an entrepreneurial career. This under-
standing of the quali?cations needed for an entrepreneur also re?ects the
focus on entrepreneurship policies and enterprise education. From a cul-
tural perspective the Austrian case is very interesting. In many other coun-
tries the history of entrepreneurs is ?lled with stories of entrepreneurs
being those without any quali?cations and who, therefore, had no choice
other than to set up their own business.
Norwegian policies have not traditionally taken small businesses or
entrepreneurship into account although lately entrepreneurship has sur-
faced in the policy arena, also in education. Traditionally, large ?rms have
had a major role in the Norwegian economy and as unemployment has not
been a problem in Norway, the promotion of self-employment has not been
a topical issue.
In Finland, Ireland and the UK the interpretation of enterprise educa-
tion covers a wider range than the approaches taken in Austria and
Norway. In these countries enterprise education is understood to target
persons aiming for self-employment but also to foster entrepreneurial atti-
tudes, which are a combination of ?exibility, initiative, risk-taking ability,
self-direction and on the other hand cooperation skills and a strong motiv-
ation for achievement. Nevertheless, in all of the countries it is also seen
to be important to provide and increase knowledge of entrepreneurial
Enterprise education in di?erent cultural settings 143
activity, and to create a larger understanding in society of what entrepre-
neurship is about. This understanding is necessary to combat the prejudices
still existing in some of the countries towards entrepreneurship. For
example, one of the Norwegian motives for providing enterprise education
targeted the small-town attitude that some persons may be reluctant to
start up their own businesses out of fear of what their neighbours might
say. Attitudes and values are di?cult to change, and although entrepre-
neurship is currently highly valued in most European countries, it is not so
long ago when entrepreneurs were considered as ‘evil capitalists’ who
gained pro?ts by exploiting their employees. It is therefore important to
have a long-term commitment to enterprise education and not to let this
attitude re-surface.
However, these results must be interpreted cautiously because although
we have aimed to capture an illustrative sample in our analysis it is di?cult
to assess whether we have achieved this given that the sampling has been
done by independent researchers in each country.
CONCLUSIONS AND DISCUSSION: ENTERPRISE
EDUCATION – A CULTURALLY AND SOCIALLY
SENSITIVE PHENOMENON
In this chapter 62 enterprise education programmes from ?ve European
countries have been analysed. This chapter focuses ?rstly on the di?erences
in the entrepreneurship culture and environments in the di?erent contexts
and suggests how these should be taken into consideration in planning the
enterprise education programmes. The missing link in enterprise education
programmes seems to be the confusion and misunderstandings between the
projected aims, the potential audience in a given country and the type of
enterprise education programmes that are being set up. Rather than creat-
ing more, new enterprise education programmes for audiences believed to
be ‘demanding’ the programmes, there is a need to carefully re?ect the need
and possibilities for carrying out such programmes in each context. Hence,
to the disappointment of many policy-makers, carrying out more and
more start-up programmes will not necessarily result in more start-ups
(Heinonen et al., 2006).
Secondly, the chapter supports the thinking that enterprise education
in earlier school years should have primarily or solely a non-business
focus, which supports the entrepreneurial behaviour of students. In all of
the studied countries the focus for enterprise education at primary school
level (12 years or younger) was on developing the enterprising skills of the
students. Strengthening this perspective might help to alleviate some of
144 The dynamics between entrepreneurship and education
the tensions currently identi?ed in schools and by teachers vis-à-vis enter-
prise education (Iredale, 1993; Lewis and Massey, 2003; Davies et al.,
2004).
Thirdly, by combining the understanding from the above two perspec-
tives, it is possible to develop a ladder of enterprise education that starts by
developing entrepreneurial behaviour and thinking and by creating aware-
ness of entrepreneurship. Especially in weak entrepreneurship cultures
based on desirability of entrepreneurship as a career option, particular
attention should be placed on building a strong cornerstone of and for
entrepreneurship. This thinking lends itself to variations for the country,
region or school level. Currently, the business orientation – how to set up a
business – is often too strong. As a result, there are suggestions that the
bridges between entrepreneurship and education (pedagogy) should be
stronger in order to make enterprise education as much about the process
as about the subject (Kyrö, 1999). If the focus is only placed on developing
the skills of potential and future entrepreneurs, these programmes are
serving the needs of a small minority, at least in many of the old member
states of the European Union.
One thing is clear – enterprise education has penetrated all school levels,
from kindergarten to higher education. However, further work is needed to
develop suitable models for di?erent societal, cultural and economic con-
texts as one cannot transfer the models from one culture to another without
re?ecting the impacts of the di?erent contextual arrangements.
Future research is needed to investigate the connections between the
appropriate aims and models of enterprise education in the di?erent cul-
tural and social settings. This is also in line with recent suggestions in entre-
preneurship research: the phenomenon is considered to be changing and
acquiring new meanings both over time and in di?erent places (Steyart and
Katz, 2004; Hytti, 2005). Also, there is a need for more research on actual
practices of education programmes through in-depth case studies as well as
on how the teachers’ perceptions on enterprise education evolve over time
(Lewis and Massey, 2003).
This study is based on a review of policies and programmes in the ?ve
di?erent countries. However, further research is needed on the results and
outcomes of these di?erent programmes and in the di?erent settings. It is
clear that the impacts on performance and ?nal results are interesting
research questions but also the most di?cult to capture. However, they
need to be asked, since we cannot blindly assume that enterprise education
programmes and models are able to achieve all the results they seek to
achieve (Fayolle, 2005; see also Heinonen and Akola, 2007). Clearly this
calls for longitudinal research approaches (Smith et al., 2002).
Enterprise education in di?erent cultural settings 145
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148 The dynamics between entrepreneurship and education
8. Assessment and promotion of
entrepreneurial initiative and
attitudes towards entrepreneurship:
the case of Estonia
Urve Venesaar and Indrek Jakobson
INTRODUCTION
Increasing entrepreneurial initiative has been a subject for discussion in the
European Union countries in recent years with the objectives of initiating
various political measures and activities, supporting national competitive-
ness and development, as well as setting up new enterprises and creating
jobs. Entrepreneurship also contributes to personal ful?lment and the
achievement of social objectives. To this end, development of entrepre-
neurship has been encouraged by many documents adopted in the
European Union in recent years (for example European Commission,
2003b; European Commission, 2000). Also, a number of measures have
been implemented and planned by the Estonian government towards sup-
porting entrepreneurship and entrepreneurial culture in the country.
Entrepreneurship is viewed in general as a mindset and process to create
and develop economic activity within a new or existing organization
(European Commission, 2003b). Entrepreneurship is also de?ned as ‘the
nexus of two phenomena: the presence of lucrative opportunities and the
presence of enterprising individuals’ (Shane and Venkataraman, 2000).
These de?nitions refer to a considerable round of di?erent factors
in?uencing the level of entrepreneurial initiative in the country. Generally
these are factors creating a required external environment on the one hand,
and on the other hand, the existence of persons who have motivation and
capacity to identify business opportunities and to pursue them. In this
chapter both sides are considered based on the case of Estonia and includ-
ing some comparisons with other countries where available.
Although in previous research individual-level factors were assessed that
were important in explaining who exploits entrepreneurial opportunities
(Shane, 2003), this approach has been criticized because basing studies only
149
on personality traits sets methodological limits to explaining entrepreneur-
ial initiative (for example Reynolds, 1997). Though appropriate personal
characteristics for acting as an entrepreneur can be developed, also other
factors (for example motivations, intentions) are still relevant to entrepre-
neurial action in the event that potential exists. The range of factors con-
sidered in the current research includes the existence of entrepreneurial
motivation, its ‘pull’ and ‘push’ factors, knowledge, and personality traits
useful in starting and doing business. Factors that pull people into entre-
preneurship may include ambition for freedom and independence, striving
for achievements and self-realization or other e?orts for personal ful?lment.
The push factors such as unemployment and di?culties with ?nding waged
labour, job insecurity or a wish to earn more may in?uence the intention of
people to enter into entrepreneurship. In the case of transition countries, in
connection with the changing economic paradigm the assessment and devel-
opment of personality traits and their comparison with other countries
would help to better understand the potential for entrepreneurship devel-
opment. The opinions of respondents about the business environment and
constraints in business development may indicate the need to improve
entrepreneurship promotion policies in the country.
Interconnections between attitudes and the intention to become an
entrepreneur were studied by Shepherd and Douglas (1999), who stated
that the individual will intend to become an entrepreneur only when the
total satisfaction expected from the combination of four factors –
independence, risk, hard work and income – is higher for the entrepre-
neurial opportunity than it is for the best non-entrepreneurial option
(Shepherd and Douglas, 1999). According to Ajzen (1991), the intention of
carrying out a given behaviour will depend on the person’s attitudes
towards that behaviour; hence positive attitudes towards entrepreneurship
would measure the extent to which individuals intend to establish their own
business. But in addition to intention and the existence of initial motiva-
tion, businesses-relevant knowledge and entrepreneurial competency are
important to ensure successful start-up and survival in business (for
example Bird, 2002; Onstenk, 2003). From the standpoint of educational
institutions emphasis has been placed on providing an opportunity to
develop personal entrepreneurial competency (Bird, 2002). Authors have
expressed di?erent opinions about the skills one needs to use business
opportunities successfully (for example Hougaard, 2005). It is important
for the educational institutions to know which skills (competencies) should
be developed in educating future entrepreneurs and enterprising people. In
this context it is interesting to know what Estonia’s potential is and what
entrepreneurship policies and educational programmes should include in
order to increase entrepreneurship competency.
150 The dynamics between entrepreneurship and education
The objective of this chapter is to analyse the entrepreneurial initiative
of Estonian people based mainly on the research by the Estonian Institute
of Economic Research to better explore people’s attitudes towards entre-
preneurship, their motivations and constraints and to ?nd out what possi-
bilities there could be to further activate the entrepreneurial initiative in
Estonia. The respondents’ opinions on the knowledge and personal char-
acteristics that are useful in starting in business are also used to ?nd answers
to the last question. The target groups of the questionnaire were entrepre-
neurs, potential entrepreneurs (at the time of the research, starting a
company or thinking about it) and people not interested in entrepreneur-
ship. In addition to the main research results, case studies of entrepreneurs
(for example academic entrepreneurship) and potential entrepreneurs (for
example students) are included to explain the issues of entrepreneurial
initiative and attitudes of selected target groups. For development of an
entrepreneurship culture it is important to examine the stimulation of
entrepreneurship education and other measures supported by the public
sector, which can in?uence people’s attitudes and intentions towards entre-
preneurship and may foster their entrepreneurial initiative.
The rest of the chapter describes ?rst the method and sample used for
analysis. This is followed by analysis of people’s opinions about attitudes
towards entrepreneurship, motives for starting a business, opinions about
personality traits that characterize the entrepreneurial initiative of the
respondents, requisite knowledge and qualities for entrepreneurship.
Finally, the obstacles to starting in business in Estonia across di?erent
target groups (people in general, students) are analysed. The chapter ends
with conclusions.
ESTONIAN ENTREPRENEURSHIP POLICY AND
ECONOMIC DEVELOPMENT
The main objectives of the Estonian entrepreneurship policy were formu-
lated a few years ago and these included a task to promote entrepreneur-
ial initiative and growth of new enterprises and to raise enterprises’
competitiveness (Ministry of Economic A?airs, 2002). A new document,
‘The Estonian Entrepreneurship Policy for 2007–2013’ (Ministry of
Economic A?airs and Communications, 2006), is a step forward in the
development of entrepreneurship and entrepreneurial initiative through
a favourable entrepreneurship environment and appropriate support
schemes. Entrepreneurship policy has established four aims: a strong
enterprise culture; a legal environment favourable for entrepreneurship;
SMEs’ access to ?nance; and opportunity for SME growth and exports.
Assessment and promotion of entrepreneurial initiative: Estonia 151
Activities aimed at promoting an entrepreneurship culture are needed in
three areas: people are enterprising and want to become entrepreneurs;
people have the skills and knowledge necessary for doing business; culti-
vation of positive attitudes towards entrepreneurs and entrepreneurship in
society. Activities in the following spheres are undertaken to achieve these
goals: entrepreneurship education in schools; life-long learning for entre-
preneurs; raising the awareness of entrepreneurship and innovation
throughout society; developing the ability of enterprises to cooperate.
Therefore, government tends to in?uence the image of entrepreneurship
positively in the country, but in implementing this task it is useful to
explain the development aspects of the entrepreneurial initiative in
Estonia.
The development of the Estonian economy in general has been assessed
to be successful among Central and Eastern European countries. However,
several studies have shown some backwardness in the development of
entrepreneurship, re?ected by ?rms’ birth rate and creation of jobs com-
pared with a number of other countries (Venesaar and Loomets, 2006;
Jürgenson et al., 2004; Acs et al., 2004; Minniti et al., 2005). There are also
signi?cant regional variations in enterprise development, re?ected in the
total stock of SMEs and in the rate of new ?rm formation (OECD, 2002;
Venesaar and Loomets, 2006). A research study conducted by the Estonian
Institute of Economic Research discovered that only 11 per cent of the
population
1
of Estonia were busy with setting up an enterprise at the time
of the survey (Estonian Institute of Economic Research, 2004), compared
with 15 per cent in Europe, 14 per cent in Finland and 25 per cent in the
USA (European Commission, 2003a). This indicates a need to analyse
more profoundly the entrepreneurial initiative and attitudes towards entre-
preneurship as well as factors in?uencing the entrepreneurial activity of
Estonian people.
Characterizing the business environment, Estonia is known for its very
liberal and open economic policy during the whole transition period. A pri-
ority in economic policy has been stable monetary policy, a balanced state
budget and laissez-faire or non-interference in the economy by the govern-
ment. Changes in the economic and legislative environment in the early
1990s led to a rapid increase in the number of private enterprises in Estonia,
encouraged by the relatively simple conditions for setting up enterprises. A
relatively successful privatization model and active implementation of other
reforms also contributed to the initial increase in the number of private
enterprises. However, the positive e?ect of these external factors on the
establishment of new enterprises that stimulated entrepreneurship develop-
ment gradually diminished. There is therefore a need to enhance people’s
entrepreneurial initiative, and this is where the public sector activities (for
152 The dynamics between entrepreneurship and education
example improving the availability of ?nances and quality of business advi-
sory services; developing entrepreneurship education; providing services for
raising the awareness of entrepreneurship and innovation throughout the
society) in supporting the development of entrepreneurship should grow
increasingly more signi?cant. However, it is important to consider the
opinion of people when assessing the impact of factors creating a favourable
external environment for encouraging entrepreneurial initiatives in the
country.
METHOD AND SAMPLE
The empirical study conducted by the Estonian Institute of Economic
Research, which this chapter is using, was based on a telephone survey of
1000 16–64-years-old Estonian people in November 2004 (Estonian
Institute of Economic Research, 2004). The sample represents the 16–64-
year-old Estonian population by gender, age, county and education. The
study sought to collect information on people’s attitudes toward entrepre-
neurship and their involvement with entrepreneurship and about factors
that encourage and inhibit entrepreneurship. Demographic (for example
sex, age, education), social (level of income) as well as geographical
(county) factors were important to consider while analysing the survey
results.
The questionnaire included direct questions about people’s attitude to
starting up a business. People’s attitude was measured by empirical evalua-
tion as the number of individuals who would like to be an entrepreneur
(that is negative attitude/no intention, intending or being in the process). A
time perspective was also introduced for those intending to be an entrepre-
neur, for example in the near future or later. On the basis of respondents’
answers the target groups in the survey were entrepreneurs (12 per cent of
those questioned), potential entrepreneurs (9 per cent) and those not inter-
ested in entrepreneurship (79 per cent). Entrepreneurs were de?ned as sole
traders, owners and partners or shareholders of enterprises who were
actively participating in management. The respondents who were not active
in entrepreneurship but who were thinking of doing so or at the time of the
survey were setting up their own enterprise were classi?ed as potential
entrepreneurs.
For comparison, an empirical study using identical questions was
carried out among bachelor programme graduates and master’s students at
Tallinn University of Technology in di?erent specialities during two semes-
ters (Spring 2005 and 2006), after they ?nished a course in Business
Administration. The majority of these students (73 per cent) may be
Assessment and promotion of entrepreneurial initiative: Estonia 153
classi?ed as potential entrepreneurs (thinking of being an entrepreneur). In
total, 443 students were questioned, including those in three specialities:
business administration, logistics and technical specialities (for example
mechanics, power engineering, information technology, chemistry). In
addition, to explain better the opinions of people or students questioned,
a qualitative survey was carried out among ?ve academic entrepreneurs of
Tallinn University of Technology to specify special topics (for example
motivations to start a business; assessment of knowledge and skills neces-
sary for starting with entrepreneurship; explanation of factors constrain-
ing entrepreneurship in the country).
The chapter contains an analysis of respondents’ attitudes towards
entrepreneurship and of the entrepreneurial initiative of the Estonian
population and students on the basis of various characteristics, whereas the
results of the survey are assessed on the basis of the response rates. The
Likert scale method is used to measure the attitudes of respondents based
on their own opinions on the motivations to start a business, the assessment
of knowledge and personality traits necessary for starting a business and
statements about their entrepreneurial characteristics and obstacles to
starting a business. Opinions were expressed in a 5-point scale (1 – com-
pletely agree; 2 – agree; 3 – neither agree nor disagree; 4 – disagree; 5 – com-
pletely disagree). The smaller the average estimate, the more likely it is that
the respondent has this trait.
In the questionnaire the questions about motivation were grouped into
three, expressing the ambition for freedom, self-realization and push
factors. The respondents were asked their opinion on their personality
traits and behavioural habits connected with business relations and behav-
iour in organizations. The respondents were asked to evaluate a total of 20
statements about personality traits that characterize entrepreneurial initia-
tive. These included diligence, self-assurance, determination, creativity,
ambition for achievement, discerning, risk tolerance, coping with failure
and ability to plan. The respondents’ opinions in the value scale character-
ize how much their personality traits approach or diverge from the charac-
teristics of an entrepreneur and what the di?erence is between target
groups’ and respondents’ attitudes and intentions to be an entrepreneur.
The opinions of respondents about the obstacles met in starting a busi-
ness and possible need for support are also a subject of analysis. For this
we asked the respondents to list in order of importance the factors that
inhibit starting a business. We also asked what kind of support the respon-
dents thought would be most helpful for starting a business and whether
they were aware of the state support measures available in Estonia and
whether they had used them. For assessing the role of the university in fos-
tering entrepreneurial initiative among students, we asked students to
154 The dynamics between entrepreneurship and education
answer whether the speciality they learned had motivated them and had
helped in starting their own business. We also asked which subjects they
learned in university that had helped in starting in business and what
knowledge they still wanted to learn that would encourage them to start a
business. The latter questions help to evaluate students’ awareness of entre-
preneurship policies and suggest how to improve educational programmes
as a tool for raising entrepreneurial initiative in the country.
PEOPLE’S ATTITUDES TOWARD
ENTREPRENEURSHIP
A study of the attitudes of the Estonian population toward employment in
entrepreneurship and of the related problems indicated that 29 per cent of
people would prefer to work as entrepreneurs, which is much lower than in
the European Union on average (47 per cent; EOS Gallup Europe, 2003a).
The popularity of wage labour was evidenced by the ?nding that 65 per cent
of the respondents preferred working as employees. The Eurobarometer
survey (European Commission, 2004) indicated that 37 per cent of the
population would prefer to be self-employed in Estonia. Di?erences
between the two surveys can be explained by the di?erent questions, for
example in the Eurobarometer survey the respondents were asked about
their opinion regarding being self-employed, which can be interpreted more
widely than the question about being an entrepreneur.
To de?ne overall entrepreneurial activity of the population all respon-
dents were asked whether or not they had recently set up a business or were
at the time of the survey setting up a business. The answers show that the
majority of the population are not active in entrepreneurship – 61 per cent
had never thought of starting their own enterprise, 16 per cent did not
intend to start a business but had thought about it. The non-active were
predominantly women (68 per cent), older people (73 per cent), people with
primary or basic education (68 per cent), with lower income (68 per cent)
and those living in southern Estonia (65 per cent). Eighty-nine per cent of
the entrepreneurs were aged 25–54 years. A typical entrepreneur in Estonia
was 35–44 years old and a man rather than a woman. Forty-three per cent
of the entrepreneurs had higher education and 55 per cent secondary or
vocational secondary education. The share of people with higher education
among entrepreneurs is remarkably higher than the overall educational
level of the Estonian population.
According to the survey, 11 per cent of the population on average were
identi?ed as potential entrepreneurs (those thinking of setting up their own
enterprise or who were already doing this at the time of the survey). Young
Assessment and promotion of entrepreneurial initiative: Estonia 155
people were thinking more frequently than average about setting up their
enterprise (19 per cent of those aged 16–24 and 13 per cent of people aged
25–34). Hence, potential entrepreneurs are much younger than entrepre-
neurs: 84 per cent of the potential entrepreneurs were aged 16–44, their
typical age being 16–24. Potential entrepreneurs had a lower level of edu-
cation than existing entrepreneurs (59 per cent had secondary education,
20 per cent had basic education). Nearly half (47 per cent) of the potential
entrepreneurs intended to set up their enterprise in the longer term; of
those, most were young people and those with a lower level of education.
Thirty-three per cent of the future entrepreneurs had taken concrete steps
in starting a business (for example had collected funds). Most of the people
see an enterprise as consisting of owners and salaried employees and those
who did think of acting alone tended to be older people and those in
smaller towns. This indicates insu?cient acknowledgement of sole traders
as ‘entrepreneurs’ in Estonian society.
According to the study conducted at Tallinn University of Technology,
the students identi?ed mostly as potential entrepreneurs have very positive
attitudes toward entrepreneurship (around two thirds intended to be an
entrepreneur) (Venesaar et al., 2006). But if we were to sum up those who
were thinking of starting a business and those who were actually doing this
at the time of the survey, then only 17 per cent of all respondents were plan-
ning to start a business in the short term; most of the respondents were
postponing it to the more distant future. Hence, many students are not
ready to start a business immediately after graduation, although many of
them have a positive attitude toward entrepreneurship and the intention to
be an entrepreneur. There are many reasons that could be connected with
personality traits, knowledge and skills or conditions of business environ-
ment, which may refer to a need to improve teaching of entrepreneurship
and/or developing business promotion services.
MOTIVES FOR STARTING A BUSINESS
Based on the status of the respondents (for example existing entrepreneurs
or potential entrepreneurs), their gender, age, education or some other
characteristics, we can identify di?erences in the motives for starting a busi-
ness (for example ‘pull’ and ‘push’ factors). Based on the opinions of the
target groups, the most important motives for acting and potential entre-
preneurs seem to be the wish to ?nd more freedom of activity and the wish
to be one’s own boss (Table 8.1). For potential entrepreneurs even more
important are push factors (for example, a wish to earn more or to earn a
good income). Factors of self-realization (for example to follow someone’s
156 The dynamics between entrepreneurship and education
example, continue family traditions, achieve a better position in society)
were of less signi?cance in starting a business, although the wish to put
oneself to the test was deemed quite important. If comparing two target
groups, potential entrepreneurs are more ambitious for freedom than
acting entrepreneurs (for example to have more freedom of activity, to be
one’s own boss and the wish to be more respected in the ?rm). All other
factors were regarded by potential entrepreneurs to be more important
than by acting entrepreneurs. Motives for starting a business were stronger
Assessment and promotion of entrepreneurial initiative: Estonia 157
Table 8.1 Motives for starting a business among acting and potential
entrepreneurs
Acting Potential Di?erence ?
entrepreneurs entrepreneurs
Ambition for freedom
More freedom of activity 1.64 1.58 0.06
Be one’s own boss 1.62 1.53 0.09
Be more respected in my ?rm 2.75 2.60 0.15
Be in the vanguard of technological 3.72 3.02 0.70
ideas
I want to develop my hobby in 2.56 1.89 0.67
business
Self-realization
I wanted to put myself to the test 2.48 1.78 0.70
I wanted to command and motivate 3.44 2.61 0.83
others
I want to continue family traditions 4.17 3.37 0.80
I want to gain a better position in 3.47 2.26 1.21
society
I want to follow someone’s example 4.18 3.27 0.91
I want to implement an idea or 2.68 1.74 0.94
innovation
Push factors
A wish to earn more 2.22 1.33 0.89
If I lost my job, I would become an 2.06 1.94 0.12
entrepreneur
I want to earn good income 2.37 1.63 0.74
I was not satis?ed with my work 3.38 3.30 0.08
Di?culties with ?nding waged 3.63 3.35 0.28
labour
Note: Opinions are expressed on a 5-point scale (1 ? completely agree; 2 ? agree; 3 ?
neither agree nor disagree; 4 ? disagree; 5 ? completely disagree), additionally the answer
‘not opinion’.
among men, those in the age group 25–44 and respondents with higher
education.
If the results are compared with a similar survey in the United Kingdom
(Small Business Service, 2002), then entrepreneurs in both countries are
similar in their ambitions (for example the ambition for freedom, the wish
to be one’s own boss). Development of a hobby or other activity into a busi-
ness was more typical in Estonia, but the implementation of technological
ideas was less signi?cant than in the United Kingdom. Putting oneself to
the test and the willingness to take risks were important motives for start-
ing a business in Estonia, but not as important as in the United Kingdom.
Most important push factors for Estonian potential entrepreneurs were
better earnings or improvement of one’s income (because of low salaries in
employee positions); an important motive for starting a business in Estonia
was also the loss of one’s job.
Among students, stronger opinions about all motivations were
expressed by those students who expressed an intention to start a business
because they were doing this already or were just thinking about it at
the time of the questionnaire. Those who rated the motivations highly
intended to start a business in the near future, compared with those with
lower motivations who thought they would postpone starting a business
the distant future (Venesaar et al., 2006). Economics and logistics students
evaluated the ambition for freedom and self-realization to be more import-
ant; students in technical specialities stand out by showing a strong motiv-
ation to implement new ideas and technological innovations. Those more
motivated to start a business are bachelor students and men. This opinion
may have been in?uenced by the fact that most of the master’s degree stu-
dents are working in parallel with studying at university and they are not
willing to give up the safe job-related security and income. The main
motives for younger age groups (20–25) are self-realization and good earn-
ings possibilities; for the older group (over 30) it was ambition for freedom
(Venesaar et al., 2006).
Interviews with academic entrepreneurs indicated that the main reason
for starting a business was a wish to develop further from the situation
where the current job did not o?er enough development opportunities. It
is important to note that neither better income nor other monetary incen-
tives were a motivation. They clearly con?rmed the key role of examples
from the aspect of starting a business and emphasized the importance of
samples just in their ?eld of activity. They also stressed the importance of
personal development perspectives. An opportunity to earn more money
was estimated to be important only in the long term, whereas the work of
the entrepreneur was regarded as more developing than that of the
employee just because of its complexity.
158 The dynamics between entrepreneurship and education
KNOWLEDGE AND PERSONALITY TRAITS USEFUL
IN STARTING OR DOING BUSINESS
On the basis of respondents’ opinions we can assess which knowledge and
personality traits are needed when starting a business considering the exter-
nal environment of Estonia. On average one ?fth of the respondents com-
pletely agreed with the suggested knowledge and skills that are relevant for
starting a business, and hence we can draw a conclusion that preparation
of acting entrepreneurs was quite modest. Average opinions of both acting
and potential entrepreneurs gave higher ratings of knowledge where one
could get entrepreneurship-related help, as well as skills for solving prob-
lems (Table 8.2). Only every ?fth respondent had experience of managing
an enterprise or business education. Most of the present newly established
entrepreneurs did not have any bookkeeping knowledge, business quali-
?cation, experience of managing an enterprise or previous experience of
setting up an enterprise. Opinions expressed by potential entrepreneurs are
very similar to these; they mostly lack experience of managing an enter-
prise, business education, and experience of setting up an enterprise,
knowledge about bookkeeping or experience in marketing. The respon-
dents in relatively younger age groups (25–34 years) had more knowledge
about starting a business. This can be explained by recent entrepreneurship
Assessment and promotion of entrepreneurial initiative: Estonia 159
Table 8.2 Knowledge and personality traits that are useful for starting a
business
Acting Potential
entrepreneurs entrepreneurs
Knowledge
Previous experience in starting an enterprise 3.87 3.92
Knowledge how to prepare a business plan 3.36 3.26
Knowledge where to ?nd ?nancial means 3.14 2.83
Knowledge where to get entrepreneurial assistance 2.38 2.30
Business education 4.00 3.95
Experience in managing an enterprise 3.71 4.11
Skills
Marketing experience 3.14 3.31
Bookkeeping experience 3.69 3.58
Good skills of problem solving 2.32 2.22
Note: Opinions are expressed on a 5-point scale (1?completely agree; 2?agree; 3?neither
agree nor disagree; 4?disagree; 5?completely disagree), additionally the answer ‘no
opinion’.
policies and availability of services provided actively for start-ups in
Estonia (including a website for entrepreneurs: www.aktiva.ee).
Estonian acting and potential entrepreneurs rely on communication and
contacts rather than on professional knowledge and skills. The academic
entrepreneurs con?rmed the importance of the skill of dealing with people
as the most important of all skills, although they also emphasized the
importance of managerial skills and experiences.
Therefore, both potential and acting entrepreneurs indicated more often
the importance of knowing where to get entrepreneurial assistance and
where to ?nd sources of ?nance when starting a business. They also
expressed a need for obtaining good problem-solving skills and marketing
experience.
OPINIONS ABOUT PERSONALITY TRAITS THAT
CHARACTERIZE RESPONDENTS’
ENTREPRENEURIAL INITIATIVE
In order to ?nd out whether or not and in which way entrepreneurs di?er
from each other, the respondents were asked to evaluate 20 statements on a
5-point scale. The smaller the average estimate, the more likely it is that the
respondent has this trait. Based on the status of the respondents (actual
entrepreneurs or potential entrepreneurs), we can identify di?erences in per-
sonal characteristics, skills related to participation in business relations and
behaviour in organizations in the target groups. The personal characteris-
tics and behaviour typical of an entrepreneur are positively correlated with
the intention to start a new venture. A proof of the latter statement is that
potential entrepreneurs have, more than other target groups, attached
signi?cance to such personal characteristics as self-assurance, progress-
making ambition, risk tolerance and planning ability (Table 8.3). Also many
other personal characteristics that characterize entrepreneurial initiative,
skills relating to behaviour with business contacts and in organization are
more important for potential entrepreneurs than for salaried employees.
Entrepreneurs agreed most with such statements as ‘I know what I want and
act with this end in view’, ‘I am willing to cooperate with very di?erent
people’ and ‘I have faith in myself and con?dence’. The survey among stu-
dents showed that, depending on the growing intention to start their own
business (for example those who are thinking about it, in the start-up
process, or have already started during the last three years), the ranking of
the personality traits on the value scale is also rising (Venesaar et al., 2006).
Those not interested in entrepreneurship agreed much less frequently
with all the statements. Thus, on the basis of the self-evaluations it is
160 The dynamics between entrepreneurship and education
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possible to identify people who have more abilities to start in and do
business. The students’ survey con?rmed that those who intend to start a
business in the near future could be characterized by valuation of more
enterprising personality traits. At the same time, lower valued personal-
ity traits characterized the group of students who were thinking about
starting a business in the distant future. Here we should give a thought
to whether the knowledge provided at university and the methods of teach-
ing this knowledge are suitable and adequate for the development of entre-
preneurial behaviour in students and to create in them the intention
to undertake entrepreneurial activity. Promotion of entrepreneurship
can be facilitated by improving educational programmes and teaching
methods aimed at increasing entrepreneurial initiative at di?erent levels of
education.
Academic entrepreneurs underlined just cooperativeness and communi-
cation skills as the main personal characteristics that an entrepreneur must
have, but they also mentioned the fact that it is important to have the ability
to cooperate with partners. Several persons often start a business together
and this enables them to cover the whole relevant range of activity.
Indirectly, a major obstacle to starting a business is the lack of a partner or
poor cooperation skills. This statement completely conforms to the quan-
titative research results and there were no discrepancies between them.
PEOPLE’S OPINIONS ABOUT FACTORS
CONSTRAINING A NEW VENTURE CREATION
Obstacles mentioned by future entrepreneurs in setting up new enterprises
included the problem of ?nancing, which is acute in Estonia: 36 per cent of
the target group mentioned shortage of ?nancial resources and start-up
capital, which is somewhat higher than the result of a similar survey con-
ducted in the United Kingdom (24 per cent of the future entrepreneurs in
the UK) (Small Business Service, 2002). Both acting entrepreneurs and
future entrepreneurs mentioned fear of falling into debt, and in connection
with that, the risk of failure as the next obstacle. Many respondents, espe-
cially entrepreneurs, mentioned insu?cient knowledge and lack of a busi-
ness idea as obstacles (especially women and respondents with a lower level
of education). Forty per cent of the entrepreneurs and also potential
entrepreneurs saw risk in the economic climate, for example lower pur-
chasing power of consumers and rapidly growing competence in the
market. The respondents were also worried about the fact that by setting
up an enterprise they would lose the security provided by a steady job; they
also mentioned social problems (taking care of children, older people,
Assessment and promotion of entrepreneurial initiative: Estonia 163
health problems). To sum up, potential entrepreneurs were more optimistic
than acting entrepreneurs, seeing fewer obstacles or seeing possibilities to
conquer them. The research indicated that women are more conservative
and less risk-tolerant than men. This indicates the need to arrange training
for women to manage risk and overcome fear, as well as to ?nd sources of
?nance.
Although a major obstacle to starting an academic business is acknow-
ledged to be insu?cient sources of ?nance, it is rather a general problem.
Quantitative research surprisingly revealed that managers of academic
businesses do not fear debts. This is motivated by the speci?c characteris-
tics of this entrepreneurship environment, which requires very large
amounts of intellectual capital and small amounts of monetary capital
investment. Also the shortage of positive motivation rather than a large
number of negative scenarios and obstacles is of critical signi?cance when
deciding whether to start a business or not.
Among students, to summarize the factors that obstruct starting a busi-
ness we primarily examined the top three factors (by all respondents). As a
result, over half of the respondents (53 per cent of all respondents) men-
tioned lack of a business idea as the obstacle. The second important obsta-
cle is insu?cient knowledge and skills (40 per cent). Both of these factors
are a major problem for students who have not thought of starting a busi-
ness or who are in the early stages of starting (those who were thinking of
starting a business). The third important obstacle is the possibility of
failure (39 per cent). Respondents who at the time of the survey were start-
ing a business or who already had started a business estimated this reason
to be more important. More frequently mentioned obstacles are also fear
of losing the present job-related security and income from the present job,
and fear of falling into debt. Also previous studies have indicated fear of
risk among students (for example Venesaar et al., 2006), which may be
caused by insu?cient knowledge about entrepreneurship, starting a busi-
ness, evaluation skills of business opportunities, or other relevant know-
ledge, which many respondents admitted to be a major obstacle to starting
a business.
When we asked the students what kind of support would be most helpful
for starting a business, they considered the most important entrepreneur-
ship advice in the ?rst year of start-up, training in taxation and account-
ing, and information on relevant procedures for starting a business and on
enterprise support. The latter opinion indicates that students are not aware
of the measures o?ered by the entrepreneurship support system, although
support to start-up enterprises in ?nding information and explaining pro-
cedures is the most widespread service in Estonian entrepreneurship policy
and there is also a website with various information a start-up entrepreneur
164 The dynamics between entrepreneurship and education
might need, but many students do not know what this website contains.
During the implementation of entrepreneurship policies the spread of
information should be improved and services should reach the potential
entrepreneurs (Ministry of Economic A?airs and Communications, 2006).
The role of the university in developing entrepreneurial behaviour has
been evaluated in the research on the basis of students’ own opinions. The
impact of the programmes and knowledge obtained on starting a ?rm indi-
cated that what one has learned in business administration specialities helps
most of the respondents (75 per cent) to start their own business. Over half
of the respondents (57 per cent) answered that going through the curricu-
lum has motivated them to start in business (Venesaar et al., 2006). The
knowledge areas that students want to learn more about, regarding encour-
aging them to develop their own ?rm, are business planning, business law,
application of accounting programmes and foreign languages.
CONCLUSIONS
Analysis based on the empirical study undertaken by the Estonian Institute
of Economic Research showed that the attitudes of Estonian people
toward employment in entrepreneurship were less enthusiastic than in the
European Union on average. As for motives, the most important for acting
and potential entrepreneurs seem to be the wish to ?nd more freedom of
activity and the wish to be one’s own boss. For potential entrepreneurs even
more important are the push factors (for example, a wish to earn a more or
to earn a good income because of low salaries for employees). Both acting
and potential entrepreneurs rely on communication and contacts rather
than on professional knowledge and skills. Hence the opinions of both
potential and acting entrepreneurs indicated a need for knowledge about
where to get entrepreneurial assistance and where to ?nd sources of
?nance, as well as for obtaining knowledge about problem-solving skills
and marketing experience. The personal characteristics and behaviour
typical of an entrepreneur are positively correlated with the intention to
start a new venture. Thus, on the basis of the self-evaluations it is possible
to identify people who have more abilities to start in and do business.
Promotion of entrepreneurship can be facilitated by improving educational
programmes and teaching methods aimed at increasing entrepreneurial ini-
tiative at di?erent levels of education.
Obstacles mentioned by entrepreneurs in setting up new enterprises
included the problem of ?nance (including start-up capital), insu?cient
knowledge and skills (especially women and respondents with a lower level
of education), risk in the economic climate and social problems. The
Assessment and promotion of entrepreneurial initiative: Estonia 165
research results indicate a need to introduce various political measures and
activities for promoting entrepreneurial initiative through improvement of
the business environment and entrepreneurship culture, and to focus entre-
preneurship policy to the needs of di?erent groups of entrepreneurs (start-
ups, women, students and so on) through increasing opportunities for
training, consultancy and other activities. During the implementation of
entrepreneurship policies, the spread of information should be improved
and services should reach the potential entrepreneurs.
The research results among students showed that despite the consider-
able proportion of respondents thinking about starting a business, most of
them do not want to undertake entrepreneurial activity directly after
graduation, but are postponing this to a more distant future. Though
di?erent target groups valuated their motivation regarding entrepreneur-
ship di?erently, the respondents’ attitudes towards entrepreneurship cor-
related very clearly with their intentions to start a business in a time
perspective. The role of the university in entrepreneurship needs to be
increased to support the realization of society’s new challenges in the
development of innovation and economic growth through developing
entrepreneurial competencies and entrepreneurial skills for fostering
entrepreneurship as well as entrepreneurialism in a wider context in
society.
NOTE
1. The criterion selected for the evaluation indicated the number of people who at the time
of the survey were thinking about starting an enterprise or who were busy with setting up
a new enterprise.
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Assessment and promotion of entrepreneurial initiative: Estonia 167
9. Advancing entrepreneurship
education in Finnish basic
education: the prospects for
developing local curricula
Jaana Seikkula-Leino
INTRODUCTION
The strategy of the European Union highlights the importance of the
development of an entrepreneurial culture by fostering the right mindset,
entrepreneurship skills and awareness of career opportunity. According to
the European Union policy, entrepreneurship should be included at all edu-
cation levels and throughout the common curricula (Commission of the
European Communities, 2006).
Mainstreaming, the idea that entrepreneurship is embedded in all subjects
and pedagogy, not applied as a speci?c subject, is still quite rare despite the
existing background of policy recommendations. Entrepreneurship educa-
tion has its roots in business education, and many countries are still focus-
ing on entrepreneurship development at adult education level. Some
European countries such as Luxemburg, Norway, Finland, Iceland, Spain,
Austria, Denmark and Sweden have also included entrepreneurship educa-
tion development at other education levels (European Commission, 2002;
2004). Finland in particular has extensively mainstreamed it at all education
levels, including primary and secondary education.
In Finland the development of entrepreneurship education has been
supported administratively. The Ministry of Education announced an
initiative entitled ‘The Clari?cation and the Action Program of Entre-
preneurship Education’ in 2004. Accordingly the Finnish National Board
of Education introduced the ‘National Core Curriculum for Basic
Education’ in 2004, which includes elements of entrepreneurship educa-
tion. In Finland this basic education is o?ered at primary and lower
secondary school levels. It is uniform, country-wide, nine-year general
education given in comprehensive schools when children are about 7–16
years old. During the ?rst six years children are taught mainly by class
168
teachers whereas in the last three years teaching is by specialized subject
teachers.
The current curriculum reform in Finland is to a large extent based on
MacDonald’s (2003) partnership model. This means that administra-
tive bodies, curriculum reformers, researchers and parents all take part in
the process of reforming the curriculum. This requires cooperation
between schools and professional development among teachers, as well as
taking into account the wishes and concerns of the pupils and the munic-
ipalities. Moreover, the curriculum reform is based on the idea that
national curriculum norms guide local curricula realization. In the
reform, entrepreneurship education is not a subject in its own right, but
will be implemented as an interactive theme. This theme will then be
included in the subjects locally and could also be realized through school
cultures.
How can entrepreneurship education be developed through this kind of
educational reform? In fact, there should be good prospects for develop-
ment. There are options to include local, municipal and school-level add-
itions in the framework of the curriculum. The national norms emphasize
the relationship between the school and its surroundings by re?ecting the
school’s role as part of the local community. In general, this model provides
for development at the local level, which involves partnership between edu-
cation, entrepreneurship and working life. However, it can be assumed that
these reform processes may not be easy and they may di?er between munic-
ipalities.
This chapter aims to present how the local curricula have been integrated
into entrepreneurship education and how entrepreneurship education is
developing through this education reform. Studying this phenomenon is
warranted, as the curriculum is the most important document through
which a society expresses its wishes and needs in terms of education. There
is a lack of relevant studies in this context. Entrepreneurship education
research is also mainly conducted on adult education and not on basic edu-
cation as in the present study. This study was carried out during the spring
of 2005. At that time the curriculum process was still ongoing in many of
the municipalities. Therefore, the purpose was to map out the situations of
the local curriculum development from the point of view of entrepreneur-
ship education.
This chapter focuses ?rst on the concepts and theoretical background.
Secondly, the methodology used and results obtained are presented.
Thirdly, the results are elaborated in the discussion part of the chapter and
further evaluated in the conclusion.
Advancing entrepreneurship education in Finnish basic education 169
CONCEPTS AND THEORETICAL BACKGROUND
Entrepreneurship and Entrepreneurship Education
The concept of entrepreneurship is a fundamental for de?ning entrepre-
neurship education. As Gartner (1990) argues, entrepreneurship has many
di?erent meanings. Its focus has changed according to times and contexts.
Present-day entrepreneurship has the characteristics of individual, self-
orientated behaviour; the creation, management and ownership of a small
enterprise (external entrepreneurship); corporate or organizational entre-
preneurship and intrapreneurship, which refers to the interplay between the
individual and organizational entrepreneurship (Kyrö and Carrier, 2005).
Moreover, the de?nition of entrepreneurship could involve the sources
of opportunities which then refer to the processes of the discovery, evalu-
ation and exploitation of opportunities: and the set of individuals who
discover, evaluate and exploit them (Shane and Venkataraman, 2000).
Entrepreneurship is a complex phenomenon subsuming a wide range of
beliefs. Some believe that entrepreneurship must refer to risk-taking indi-
viduals who start new, innovative and fast-growing ventures. Others may
only focus on the idea that entrepreneurship is about starting new ventures
(Gartner, 1990).
To de?ne entrepreneurship education we may consider terms such as
enterprising and entrepreneurial. The only major distinction between these
two is that entrepreneurial is traditionally associated with business activity,
and enterprising can refer to any context. In order to avoid confusion and
to be exact, this chapter uses both concepts explicitly: entrepreneurial
(referring to the business context) and enterprising (referring to general
education and learning processes). As Kyrö (2005) argues:
In general entrepreneurial and enterprising behaviour involves the idea that the
human being, looking around him and combining di?erent elements, creates
holistic realities, which have their consequence in action. Even when the envi-
ronment is full of paradoxes and events, the entrepreneur chooses what is suit-
able for him and his ideas. He does not select his elements from a single
environment; on the contrary, his ideas can spring anywhere and this combines
di?erent elements and this enhances the creation of something new.
Kuratko (2005) points out that this perspective may be exhibited inside
and outside an organization and in pro?t or not-for-pro?t enterprises, and
in business or non-business activities including the perspective of bringing
forth creative ideas (Kuratko, 2005).
Teaching younger pupils entrepreneurship education is more about enter-
prise education. The purpose is for pupils to take more responsibility for
170 The dynamics between entrepreneurship and education
themselves and their learning, to try to achieve their goals, be creative, dis-
cover existing opportunities and in general to cope in our complicated
society. Moreover, they should take an active role in job markets and con-
sider entrepreneurship as a natural career choice. This education involves
developing behaviours, skills and attributes applied individually and/or col-
lectively to help individuals and organizations of all kinds to create, cope
with and enjoy change and innovation. It involves higher levels of uncer-
tainty and complexity as means of achieving personal ful?lment and orga-
nizational e?ectiveness. This enterprising education is the process by which
these behaviours are practised and supported. These skills, behaviours and
attributes are exhibited in organizations of all kinds including the family
and community context. This education may embody elements of learning
for the accomplishment of some task. Moreover, it involves learning
through a particular pedagogy and learning about, which then refers to cog-
nitive learning (cf. Gibb, 2006).
As Remes (2001) argues, in basic education self-orientated entrepre-
neurship should be emphasized. According to Menzies and Paradi (2003),
the focus is not only on developing factors related to motivation, self-
awareness and creativity, and according to Heinonen (2004) responsibility
for learning, but also on cooperation and interaction, which refer to inter-
nal entrepreneurship development. In comparison, according to Gibb
(2005, p. 48), in the school context, external entrepreneurship education is
about developing innovation and business ideas as well as strengthening
cooperation between schools and work life, including such activities
as work experience and study tours. Through all these processes, self-
orientated, internal and external entrepreneurship, we have a chance to
develop an enterprising society, which means entrepreneurship and enter-
prising mindset development in societies.
When the pedagogy of entrepreneurship education is based on socio-
constructivism, learning communities have a major role in these processes
(cf. Blenker et al., 2006, p. 99; Jack and Anderson, 1999; Rae, 2000, p. 148)
and experiences are crucial in learning. Therefore in the pedagogical dis-
cussion of entrepreneurship education, we could base it, for example, on
Kolb’s (1984) experimental learning theory.
Curriculum and Curriculum Reform
The de?nitions of curriculum are based on two assumptions: 1) the cur-
riculum indicates what relevant skills should be achieved through experi-
ences; 2) the curriculum directs what kind of education programmes
should be delivered (Bobbitt, 2004, p. 11). Traditionally the concept of cur-
riculum is linked to two approaches; the Anglo-American concept of
Advancing entrepreneurship education in Finnish basic education 171
curriculum and the German concept of Lehrplan. Lehrplan has a more
administrative focus. It is about designing curriculum in terms of subjects
and contents as well as guiding the implementation of schedules. The
Anglo-American curriculum takes a more constructive and broader
approach to issues such as didactics. In the Finnish context curriculum is
concerned with both of these elements (cf. Heinonen, 2005).
A curriculum reform is about making changes in societies. Therefore
values as well as ideological and political objectives drive these changes. As
in the European Union, the current policy stresses the development of
entrepreneurship, and as a consequence its integration into curricula in all
member states. Moreover, these educational movements are based on
power, such as current social and economic policy, and opinions about the
‘right’ knowledge. These elements give the power to make decisions, for
example, about designing and structuring a curriculum reform (cf. Flouris
and Pasias, 2003; Littledyke, 1997; Marsh, 2004, p. 117; Zajda, 2003).
Furthermore, a curriculum reform articulates social pressures, such as
developing equality and adjusting education to meet the needs of labour
development (Flouris and Pasias, 2003). Thus the integration of entrepre-
neurship education into curricula responds to the needs of working life
development. In addition, general trends in societies, like globalization,
internationalism, and technical development form the basis for developing
goals for education and hence for the curriculum reform (cf. Letschert and
Kessels 2003, 160). A curriculum reform is always about teaching and
learning, involving subject contents, didactics, pedagogical development
and evaluation (cf. Flouris and Pasias, 2003). And it deals with concrete
didactical and pedagogical issues.
As MacDonald (2003) suggests, in fact, a curriculum reform is about
making choices: we need to consider the di?erent structures of the
processes, to decide who is responsible for these processes, to choose aims,
and to estimate the di?erent future outcomes. Littledyke (1997) also rec-
ommends that the technical implementation of these processes should play
a major role in curriculum reforms.
These aspects of curriculum and curriculum reform also apply to the
design process of the Finnish curriculum reform, which is to a large extent
based on MacDonald’s (2003) partnership model. In practice the curricu-
lum implemented in Finland also contains a combination of a centralized
and decentralized model of curriculum reform. In other words, the national
administrative bodies, the local educational administrations and the teach-
ers cooperate in the curriculum reform to create a whole. In Finland, the
curriculum has administrative elements, such as subjects and contents, but
it also has the approach of pedagogical and didactical development. This
core curriculum guides the local curricula design processes.
172 The dynamics between entrepreneurship and education
There are so far no published studies about this particular curriculum
reform process. Earlier studies on curriculum reforms support the point of
view that the participation of teachers in the drafting of local curricula
enables, among others, a better adoption of the curricula, the pedagogical
development of teaching as well as the better learning of the students (cf.
Atjonen, 1993; Heinonen, 2005; Sulonen, 2004; Syrjäläinen, 1997; see van
der Akker, 2003, p. 9). This supports the implementation of the partnership
model. Local curriculum work also provides a good opportunity for the
development of a sense of community (Heinonen, 2004; Syrjäläinen, 1997),
which is also one of the key factors in this curriculum reform structure.
However, there are no studies about how the partnership takes place on a
wider scale – for example about interactive cooperation within a municipal-
ity or about the relationship between local and central government.
Such a curriculum process that actively involves teachers has highlighted,
however, that the curriculum itself is still perceived as an abstract docu-
ment. According to Atjonen (1993), who made an extensive study of pre-
vious curriculum reforms in Finland, the objectives and contents ought to
be recorded more clearly and concisely and there should be more references
to how to implement them pedagogically. The lack of teaching material was
also brought into the discussion when the limitations of the implementa-
tion of the curriculum reform were addressed. Accordingly, Heinonen
(2005) highlights that a curriculum reform itself will not change the school,
but it should function as a tool for development. In order for teachers and
other representatives of the educational sector to be involved in this reform
process, curriculum training should be increased both in teachers’ basic and
continuing education (Heinonen, 2005; cf. Shulman and Shulman, 2004).
Atjonen (1993) clari?es from the practical point of view that the devel-
opment of curriculun reform should be a continuing process also serving
the needs of the development of concrete teaching. Therefore, the curricu-
lum ought to include both administrative and pedagogical aspects. The
pedagogical curriculum is a changing document that functions as a foun-
dation for practical teaching work. Such a document is updated annually.
It should also function as an evaluation tool.
According to Burton et al. (2001, pp. 19–20) a successful curriculum
reform should involve vision, strategies and structure. A clear vision means
that we actually know the attitudes, knowledge and skills involved, in order
to have a chance of achieving objectives. For example, in a curriculum
reform we need to take into account our situation and the reality in which
we currently ?nd ourselves and where we want to be in the following months
and in a year. By adopting a strategy, through an implemented curriculum,
it is possible to reach the desired vision. Strategy also involves peda-
gogy, subjects, organizational culture and learning environments. Structure
Advancing entrepreneurship education in Finnish basic education 173
supports the realization of curricula. When this structure is functional the
curriculum is internalized, there is support available for teachers, and there
are enough pedagogical resources, such as teaching materials. Teachers and
the learning organization are also supervised and led by the administration
so that it is possible and meaningful to implement the curriculum.
As Heinonen (2005) argues, success in curriculum reform depends on the
development of the visions and structures which support processes. If we
only focus on strategies, such as subjects, pedagogy and learning cultures,
it is relatively di?cult to achieve the desired changes.
In this reform, the national norms guide local curricula development.
Integrating cultural elements into the local curriculum can create di?erences
between various curricula. They may also re?ect di?erent localities, nature,
people and work life. The local curricula can take into consideration the
strength of local special expertise, the aims for pedagogical development
and technological resources. On the other hand, di?erences in economic
conditions provide a di?erent background for these curricula designs and
their development between di?erent local authorities. Moreover, local cur-
riculum reforms may vary according to the administrative levels at which
decisions are made (cf. Atjonen, 1993, pp. 30–31).
Local curriculum work has an impact on the commitment to the process
yet not necessarily on the more profound understanding of it (Constantino,
2003). If the parties involved commit to the reform, both the process and
systems change – and the content of the changes remains the same (Webb
and Vulliamy, 1999). However, Fullan (1999), McGinn (1999) and Adams
(2000) emphasize that a curriculum reform is always a very intricate phe-
nomenon which is also confusing – but it is at its best when a decentralized
and a centralized model are combined in the process and when local cur-
riculum work and teachers’ participation are involved. The Finnish cur-
riculum reform at the basic education level is based on this approach.
The main aim of this study is to ascertain how entrepreneurship education
is integrated into the local curricula in this curriculum reform. What are the
attitudes towards entrepreneurship education? What resources are avail-
able for entrepreneurship education? Answers to these questions provide
an opportunity to evaluate the current state of entrepreneurship educa-
tion development at the basic school level. This will yield the prospects of
providing practical ideas for entrepreneurship education development.
Furthermore, there will be an opportunity to analyse the curriculum reform
which is the context for the development of entrepreneurship education.
Thesequestions areapproachedbythreeintegratedtheoretical approaches:
1. Kyrö’s (2005) di?erent forms of entrepreneurship; 2. McDonald’s (2003)
partnership model of curriculum reform; and 3. Burton et al.’s (2001,
pp. 19–20) processes of vision, strategy and structure.
174 The dynamics between entrepreneurship and education
METHODOLOGY
A quantitative cross-sectional survey was chosen as a method to enable the
generalization of the results in Finnish society. It was conducted among 43
medium-sized municipalities, as these municipalities o?er basic education
at all levels instead of having a joint school system with some other munic-
ipalities. The population of these medium-sized municipalities varies from
3000 to 13000 inhabitants.
The study takes into account possible di?erences between municipalities.
Those municipalities were selected in which the average learning outcomes
of schools were either signi?cantly better or worse than expected on the
basis of socioeconomic background factors. Thus through the regression
analysis the e?ect of socioeconomic background factors on school achieve-
ment can be controlled for (cf. Kuusela, 2003). As a consequence, munici-
palities have an aligned starting point, making it possble to study the
curriculum process itself more reliably. The data on learning outcomes and
socioeconomic factors is based on the o?cial national statistics (Statistics
Finland). The criteria for school achievement are based on national tests
conducted by the National Board of Education 1998–2003.
All in all, the study includes 18 municipalities (from now on referred to
as municipalities with worse than expected results) in which the learning
results are worse than expected on the basis of socioeconomic background
and 19 municipalities (from now on referred to as municipalities with better
than expected results) in which the results are better than expected. In add-
ition, the study includes four municipalities that have – according to a ques-
tionnaire conducted by the Federation of Finnish Enterprises – a very
positive attitude towards entrepreneurship (from now on referred to as
entrepreneurial municipalities). Moreover, the study also includes two
municipalities in which an entrepreneurship education development initia-
tive was started during the study (from now on referred to as development
municipalities).
The questionnaires were sent to teachers, principals, curriculum coordi-
nators, directors of education and cultural services departments, trades
ombudsmen (municipalities’ trade and industry o?cials) and representa-
tives of local entrepreneurs (N?478). Even though the context of this
research is medium-sized municipalities in Finland it is assumed that the
results, according to di?erent respondent groups, could be generalized to
Finnish society as a whole. For example, it is assumed that teachers’
responses do not vary between small, medium and large municipalities.
In order to ?nd out the di?erent forms of entrepreneurship and its state in
basic education the questionnaire was based on Kyrö’s (2005) four forms of
entrepreneurship. Questions which were based more on entrepreneurship
Advancing entrepreneurship education in Finnish basic education 175
education pedagogy, attitudes and resources were considered according to
the work of Turtiainen (2002), Remes (2003; 2004, pp. 89–90) and Ristimäki
(2003). Finding out about the development of the partnership model was
based on a two-way idea, on the one hand respondents’ evaluation and on
the other hand researchers’ evaluation, thereby rendering the study more reli-
able. The questions concerning this partnership model development were
formulated according to MacDonald’s (2003) theoretical view. Moreover, the
implementation of the partnership model was evaluated through questions
concerning vision, strategy and structure (cf. Burton et al., 2001). In the for-
mulation of questions on curriculum development Atjonen’s (1993) earlier
research and questionnaires were used. The National Core Curriculum for
Basic Education 2004 and the supporting material (cf. Halinen, 2004;
Liljeström, 2004) concerning this curriculum reform, were also used.
The majority of the questions used a Likert-type scale (such as: ‘I know
enough about entrepreneurship education’; 1 ?I totally disagree; 2 ?I dis-
agree; 3 ?I agree; 4 ?I totally agree). In addition, some open-ended ques-
tions were included (such as ‘How do you understand the content of
entrepreneurship education?’). The questionnaire was pre-tested in one
medium-sized municipality (N?39) in early spring 2005. According to
the preliminary measurements it was possible to estimate that the
questionnaire was usable for this study and there was no need to make
major changes to the real questionnaire (preliminary questionnaire: alpha
?0.6–0.7). In the survey, the reliability of the questionnaire was also quite
good (alpha ? 0.7–0.9).
The survey was conducted during the late spring of 2005. The statistical
tests were regression analysis, frequencies and cross-tabulations. In order to
ascertain, for example, gender and di?erent respondent group di?erences,
analyses of variances (ANOVA) were used. All tests were conducted using
SPSS software. The response rate of this survey was approximetely 70 per
cent. This high response rate was achieved by securing a promise to partic-
ipate through the letters of commitment which were sent to directors of
education and cultural services departments, trades ombudsmen and
representatives of local entrepreneurs during early spring 2005.
RESULTS
Integration of Entrepreneurship Education into Local Curricula
The survey shows that only 50 per cent of the respondents had integrated
the theme of entrepreneurship education into individual subjects – even
though this is required by the National Core Curriculum. Entrepreneurial
176 The dynamics between entrepreneurship and education
municipalities and development municipalities have actively carried out
curriculum work, and entrepreneurship education has been integrated with
and into separate subjects and the schools’ cultures. These municipalities
also clearly indicate the fact that entrepreneurship education will be more
actively implemented in the future. In the other municipalities the curricu-
lum work has not sparked o? such a development process.
The curriculum work of entrepreneurship education is mainly carried out
by teachers. Business life, organizations or students are not actively involved
in this work. In this regard, there are no signi?cant di?erences between
municipality categories or between genders or between age groups. Only in
entrepreneurial and development municipalities do education authorities,
school head teachers and principals support this work in some respect.
The respondents were asked whether they were going to implement more
entrepreneurship education in their municipality, school or in their own
teaching during the next twelve months. About 36 per cent of respondents
reported that they would integrate entrepreneurship education more than
before, which means that 64 per cent were not going to do so. Di?erences
between municipalities are shown in Figure 9.1. The di?erence is statisti-
cally signi?cant (p ? 0.01).
In the entrepreneurial and development municipalities approximately
45 per cent of the respondents were going to implement more entrepre-
neurship education over the next 12 months (compared to their current
Advancing entrepreneurship education in Finnish basic education 177
Notes:
1 ? Municipalities with better than expected outcome.
2 ? Municipalities with worse than expected outcome.
3 ? Entrepreneurial municipalities.
4 ? Development municipalities.
Figure 9.1 Respondents’ estimates of whether or not more
entrepreneurship education will be implemented over the next
12 months by di?erent municipality categories (N?326)
1
32
57
2
35
65
3
46
54
4
44
56
0
%

o
f

r
e
s
p
o
n
d
e
n
t
s
20
40
60
80
100
yes
no
implementation rate). Similarly, about 34 per cent of the respondents from
the municipalities with better or worse than expected results reported this
way. Di?erences in terms of profession are shown in Figure 9.2.
Figure 9.2 shows that education o?cials, trades ombudsmen and repre-
sentatives of entrepreneurs were going to integrate more entrepreneurship
education over the next 12 months (2005–2006). Headteachers and princi-
pals, curriculum coordinators and guidance counsellors were also – to some
extent – going to do so. However, approximately half of them were not
going to implement more entrepreneurship education in their schools.
Teachers were the most reluctant to promote more entrepreneurship edu-
cation. Approximately 75 per cent of all teachers reported that they were
not going to do so. About 16 per cent of subject teachers and 24 per cent
of class teachers reported that they were going to emphasize entrepreneur-
ship education more in their teaching over the next 12 months.
According to the deeper analysis of variance there were no statistically
signi?cant di?erences between genders or between di?erent age groups.
Men were nonetheless somewhat more eager to increase the amount of
entrepreneurship education in their work.
178 The dynamics between entrepreneurship and education
Notes:
1 ? Education o?cials or equivalent.
2 ? Head teachers and principals.
3 ? Curriculum coordinators.
4 ? Guidance counsellors.
5 ? Teachers, grades 1–6, students’ age: 7–12.
6 ? Teachers, grades 7–9, students’ age: 13–16.
7 ? Trades ombudsmen.
8 ? Representatives of entrepreneurs.
Figure 9.2 Respondents’ estimates of whether or not more
entrepreneurship education will be implemented over the next
12 months by di?erent partner categories (N?323)
1
60
32
2
39
58
3
44
56
4
30
60
5
24
73
6
16
80
7
75
21
8
73
5
0
%

o
f

r
e
s
p
o
n
d
e
n
t
s
20
40
60
80
100
yes
no
The answers to the open-ended questions indicated that one problem in
curriculum development work is the lack of adequate instructions as to
how to integrate entrepreneurship education with and into individual sub-
jects. In fact, the National Core Curriculum does not provide su?cient
instructions for any kind of theme-based inter-subject or inter-curricular
work. The concept of entrepreneurship education is perceived as somewhat
confusing. The National Core Curriculum does not provide enough
instructions on how to implement the curriculum development work in
cooperation with municipalities, di?erent school levels, homes, and with
industry and commerce. Even the municipalities with advanced developed
curricula (the entrepreneurial and development municipalities) lack
planning in their development of entrepreneurship education – for example
monitoring and assessment have not been considered at all.
The curriculum development work for entrepreneurship education was
most often perceived as a meaningful activity in the entrepreneurial and
development municipalities. Involvement in business has a positive e?ect
on attitudes towards this. As a consequence, it can be said that on a general
level, knowledge of entrepreneurship and entrepreneurship education also
inspires people to take part in the planning process.
The entrepreneurial municipalities especially (and to some extent also
the municipalities with better than expected results) had taken account of
the local development needs for entrepreneurship education in their cur-
riculum development. These needs included more cooperation between
schools and local businesses, as well as more knowledge about entrepre-
neurship education and shaping attitudes towards entrepreneurship. In the
other municipality categories the development of entrepreneurship educa-
tion was not considered during the curriculum process.
All municipality categories su?er from the same problems to a certain
extent. It nonetheless seems that some municipalities are more aware of
these problems than others and strive to solve them. This enables them to
develop entrepreneurship education and entrepreneurship.
Attitudes
The attitudes of teaching sta? towards the curriculum reform are neither
negative nor positive (statistical average ?27.5, calculated average ?27.0,
scale 11–44 points). There was no statistically signi?cant di?erence between
the municipality categories in this respect. However, a signi?cant di?erence
(p ? 0.000) was found for the statement ‘Without the curriculum it is
di?cult to assess what the students should be taught’. In the municipalities
with better than expected results the respondents reported that it was not
di?cult to assess what to teach without the curriculum, whereas in the
Advancing entrepreneurship education in Finnish basic education 179
other municipalities the respondents reported that the curriculum was
needed as a form of support in the planning of teaching. It is probable that
in the ?rst category of municipalities the curriculumdoes not in?uence the
planning of teaching.
In general, attitudes towards entrepreneurship education are neither pos-
itive nor negative (scale 11–44, statistical average ?27.5, the average for all
respondents ? 27.6). Some individual statements of attitudes even show a
positive tendency; for example the statement of ‘Entrepreneurship educa-
tion promotes the achievement of basic education goals and equality’.
However, the attitudes towards entrepreneurship education are most nega-
tive with respect to the local curriculum process.
Guidance counsellors (average ?32.2, standard deviation ?4.9), educa-
tion directors or equivalent o?cials (average ? 30.1, standard deviation ?
4.5), head teachers and principals (average ? 29.5, standard deviation ?
4.6) had the most positive attitudes towards entrepreneurship education.
They also have most experience of participating in entrepreneurship educa-
tion and they had the most information about it. Teachers of grades 1–6 had
the most negative attitudes (average ?26.0; standard deviation ?4.8). This
is a statistically signi?cant di?erence from education o?cials (p ? 0.05).
Teachers’ negative attitudes were also re?ected in their reluctance to partic-
ipate in entrepreneurship education. The study also suggested a positive cor-
relation between teaching sta? with business experience and with more
positive attitudes towards entrepreneurship teaching (p ? 0.000), (experi-
ence, average ? 28.9, standard deviation ? 4.9; no experience, average ?
26.2, standard deviation ? 4.6). Thus we may assume that business experi-
ence develops positive attitudes towards entrepreneurship education.
Knowledge and Other Resources
Generally speaking the results indicate that respondents do not know very
much about entrepreneurship education. The average for all respondents in
this regard is 2.2 (scale 1–4). The statistical variation between municipality
categories, genders or teacher groups (teachers of grades 1–6 and teachers of
grades 7–9) is not signi?cant. Teachers of grades 1–6 reported the lowest level
of knowledge about entrepreneurship education (average ?1.9). Education
o?cials or equivalent respondents felt they knew more than what the teach-
ers reported(average ?2.3). The results indicate that trades ombudsmenhave
fairly limited knowledge about entrepreneurship education (average ? 2.6).
The representatives of entrepreneurs thought that they knewquite a lot about
it (average ?3.2). Their assessments in this regard indicate quite a wide vari-
ation (standard deviation ?1.1). In other words, some of themfelt they knew
a lot, whereas others felt they knew relatively little. As could be expected,
180 The dynamics between entrepreneurship and education
people who had participated in entrepreneurship education reported a higher
level of knowledge than did people who had not. However, it must be noted
that the di?erence between the two groups was not statistically signi?cant.
Knowledge about entrepreneurship education was also ascertained
through an open-ended question: ‘What do you think entrepreneurship
education could be in basic education?’ About 40 per cent (188) of all
respondents within the teaching ?eld answered this question. The people
with the most education in this regard, such as guidance counsellors and
education o?cials, 30 per cent of the teachers of grades 1–6 and 13 per cent
of the teachers of grades 7–9 reported that entrepreneurship education
concerns both the development of the individual, self-orientated and exter-
nal entrepreneurship. Approximately 45 per cent of the teachers answered
that entrepreneurship education had more to do with the development of
external entrepreneurship. However, many of the teachers of grades 7–9
believed that entrepreneurship education only concerned the development
of individual, self-orientated entrepreneurship.
The respondents considered that other resources required, such as
1) funding; 2) education; 3) materials; 4) information; 5) cooperation part-
ners; 6) management support; and 7) developmental atmosphere are not
su?cient anywhere (Likert-scale questions were used to gather information
about resources).
The insu?ciency of resources in general (the numbers 1–7 all together)
is indicated by the fact that even according to the best and most positive
assessments, the best resources were mediocre (scale of 12–48, calculated
average 30.0, the statistical average 24.6, standard deviation 4.2).
In terms of di?erences between municipalities in the various statements,
a statistically signi?cant di?erence (p ?0.05) was evident for the statement
‘We are a municipality that wants to develop and improve its educational
services’. The entrepreneurial municipalities were keener to improve edu-
cation locally (average ? 3.5, standard deviation ? 0.5). Thus it can be
stated that in the entrepreneurial municipalities the willingness to improve
and to develop was also manifest in other issues such as better provision of
resources, not just in entrepreneurship education.
DISCUSSION
The State of Entrepreneurship Education in Basic Education and
Directions for the Future
The study shows that local organizations were facing and continue to face
many challenges. The respondents felt that curriculum design from the
Advancing entrepreneurship education in Finnish basic education 181
point of view of entrepreneurship education was hard and that there was
not enough time, ?nancial resources, information or support available. One
third of the respondents within the teaching ?eld were nonetheless going to
implement more entrepreneurship education in their day-to-day work in
the future.
This is a positive result, and indicates that people have started to o?er
more entrepreneurship education. However, the National Core Curriculum
is norm-based and requires local authorities to carry out its orders and
instructions. According to it, all municipalities are supposed to carry out
entrepreneurship education, at least after the year 2006. In this respect, this
study shows that entrepreneurship education has not been su?ciently taken
into account in the curriculum development work.
It must be noted nonetheless that curriculum reform is a multifaceted
process. The National Core Curriculum containing the goals of national
education policy is not mechanically or directly transferred to the local level
and to the local curricula. The curriculum is a document that changes at
many di?erent levels and according to many situations and requirements
(cf. Cuban, 1992, pp. 90–92). Despite the norm-based nature of the cur-
riculum, subjective interpretations are always in play. These interpretations
must be made in education and teaching.
People know relatively little about entrepreneurship education. Teachers
consider that entrepreneurship education is more related to the development
of external entrepreneurship. This reveals a lack of knowledge, since entre-
preneurship education deals in basic education with self-orientated and
inner entrepreneurship (cf. Remes, 2001; 2004; Menzies and Paradi, 2003).
It seems that the very concept of entrepreneurship education is still some-
what unclear, or at least that it evokes con?icting ideas (cf. Gibb, 2005,
p. 46). The concept of entrepreneurship education should therefore be made
clear and concrete as often as possible. The idea of inner, self-orientated
entrepreneurship can be made clearer and easier to grasp by using the
concept of entrepreneurialism or enterprising in this context. Furthermore,
entrepreneurship education for teachers should certainly be increased.
Poor knowledge of entrepreneurship education within the teaching ?eld
is also re?ected in practice in the ambiguity as to whose responsibility it is
to realize entrepreneurship education. Gender issues should also be taken
into consideration in the development of entrepreneurship education.
According to this study men prefer entrepreneurship education, which also
stresses the idea of women as minor actors in terms of entrepreneurship
development (cf. Heilbrynn, 2004).
Teachers are the most reluctant to increase entrepreneurship education.
The negative experiences of teachers are mostly due to the abstract nature
of the curriculum (cf. Atjonen, 1993). Moreover, many respondents think
182 The dynamics between entrepreneurship and education
that they lack su?cient resources, for example, information and knowledge.
Such experiences of undeveloped curriculum reform structure (cf. Burton
et al., 2001, pp. 19–20) are one of the reasons for negative attitudes towards
entrepreneurship education. These attitudes then of course have negative
consequences for the success of the curriculum development work of entre-
preneurship education. How to get teachers motivated to develop entre-
preneurship education is certainly a question worth careful consideration.
The characteristics of the contents of entrepreneurship education have
been taken into consideration in the curriculum work: its usefulness to
pupils and its practical realization in cooperation with local businesses.
However, this curriculum work has not been very well planned or method-
ological – for example none of the municipalities have paid attention to the
monitoring or evaluation of entrepreneurship education after the imple-
mentation of the new curriculum.
As this study shows, the municipalities with previous experience of entre-
preneurship education and a pro-entrepreneurship climate have developed
entrepreneurship education during the curriculum reform process. In other
municipalities the development of entrepreneurship education during this
process has proved very di?cult. The cultural background plays a major
role in terms of promoting entrepreneurship education. Therefore this
study supports the argument that the development of entrepreneurship
education should be linked in a broader sense to the development of the
whole municipality – for example to the development and implementation
of the municipality’s education or economic strategy.
The Context of Entrepreneurship Education Development – The
Partnership Model
Clearly the structure of this curriculum reform, MacDonald’s (2003) part-
nership model, has not worked as well as expected. In fact, teachers view
the National Core Curriculum as abstract and di?cult to understand in
terms of everyday teaching (cf. Atjonen, 1993). How could the curriculum
be made more concrete? The curriculum is, after all, also an o?cial admin-
istrative document in which certain terminology, albeit abstract, must be
used. The curriculum that is taught and the curriculum that is learned can
only develop if the curriculum is an advisory document capable of changes
(cf. Atjonen, 1993; MacDonald, 2003). It is the basis for concrete planning.
This document needs annual updating. At the same time it could also func-
tion as an evaluation tool (cf. Atjonen, 1993). We should nonetheless focus
on the essential basic principles and starting points since the problems of a
curriculum are usually due to the fact that it contains too many goals and
too much content (cf. van der Akker, 2003, p. 7).
Advancing entrepreneurship education in Finnish basic education 183
The Practical Development of the Partnership Model – Vision, Strategy
and Structure
According to this research, planning and evaluation of entrepreneurship
education is lacking from the partnership model. Therefore the realization
and implementation of entrepreneurship education needs local-level analy-
sis. After this, for example, the next steps (cf. Burton et al., 2001, pp. 19–20)
could follow in the planning process.
1. Create a vision of the situation (taking stock of where we are now and
where we would like to be in the future).
2. Set objectives (choosing a few essential objectives at a time).
3. Draft a strategy (mapping out the target groups, the learners, cooper-
ation partners, integration with subjects and school culture, pedagogy
and learning environments).
4. Consider how the structure can be made functional (making the entre-
preneurship education plan fully understandable so that it can be
adopted, ensuring that material and other ?nancial resources are in
order and that organization and teacher management are properly
taken care of, drafting a functional and realistic schedule).
5. Plan the assessment (assessment is connected to the development of
entrepreneurialism at individual level and at school level, to the devel-
opment of interaction, to the handling of risks and problems, to the
creation and utilization of new ideas and to the acquisition of entre-
preneurship knowledge).
It is considered essential that teachers get basic training and in-service
training since too little is known about curriculum and local curriculum
design. The management of municipalities, teachers working for the
municipality and people in charge of the municipality’s trade and industry
issues would bene?t from participating in joint training sessions and
courses. This would foster in a broader sense the development of learning
communities (cf. Blenker et al., 2006, p. 99; Jack and Anderson, 1999; Rae,
2000, p. 148) and would therefore support the development of a cultural
framework which is the basic premiss for entrepreneurship education.
Moreover, when all the parties involved in entrepreneurship education
understand the concept and have a common language with which to discuss
it, the actual implementation and realization of entrepreneurship educa-
tion are much easier.
This research shows that raising awareness about industry and commerce
creates positive attitudes towards entrepreneurship education and strength-
ens its implementation. Therefore, teachers’ in-service training should focus
184 The dynamics between entrepreneurship and education
on developing awareness of industry, commerce and working life, especially
knowledge about entrepreneurship.
CONCLUSION AND IDEAS FOR FUTURE
RESEARCH
According to European Union policy, entrepreneurship should be
included in all education levels and throughout the common curricula
(Commission of the European Communities, 2006). This is still quite rare
despite the existing background of policy recommendations. This research
took an evaluative approach to entrepreneurship education development
through curriculum reform and in basic education, which is still an unex-
plored ?eld.
This research notes that there are good opportunities for entrepre-
neurship education development through curriculum, even in basic edu-
cation, but in the future the following needs more precise consideration:
in this research the context of entrepreneurship education development
was locally designed curriculum and MacDonald’s (2003) partnership
model. This model is only partly working. The problems in it are more
related to the implementation of this structure. Many theories and earlier
studies have indicated that curriculum work is perceived as much more
meaningful, both in terms of teaching and learning, when teachers are
involved in its design (cf. Adams, 2000; Atjonen, 1993; Fullan, 1999;
McGinn, 1999; van der Akker, 2003, p. 9). In other words, it is perfectly
warranted to require teachers and other partners to participate more
actively in the curricular work since these partners are essential to making
it work in practice. But there must be knowledge about curriculum
design and contents in order to compile a curriculum and design its
implementation.
The conclusions of this study can be summarized into three recommen-
dations. First, curriculum reforms would yield more bene?t if we still focused
on the partnership model and teachers’ learning development (Shulman and
Shulman, 2004). This could be enhanced through teachers’ basic and in-
service training including elements of core curriculum, local curriculum
design and contents. However, organized training should also concentrate
on developing learning communities with di?erent partners involved in
realizing entrepreneurship education. This would also ensure a better basis
for integrating entrepreneurship education into local education and eco-
nomic strategy.
Secondly, the research showed that the design of entrepreneurship edu-
cation is poor, and planning and evaluation need more attention. Therefore
Advancing entrepreneurship education in Finnish basic education 185
it could be recommended that once the curricula of entrepreneurship edu-
cation that have now been drafted are implemented, we go back to this
curriculum annually to consider the goals, contents, realization and assess-
ment of this curriculum from a pedagogical point of view. This document
could then be annexed to the o?cial administrative curriculum. In order to
avoid an unnecessarily heavy burden, it would be bene?cial to focus on a
few essential objectives each year (cf. Blieck, 2005, p. 185).
Thirdly, the local entrepreneurship education plan could be annexed to
the curriculum and to the local economic strategy. Thus the economic
strategy itself would then indicate how entrepreneurship education is con-
nected to the development of a local pro-entrepreneurial atmosphere.
Through evaluation and monitoring these plans would be updated annu-
ally. The planning of assessment and monitoring needs special attention.
Design, implementation and monitoring processes, grounded on cooperation
of all of those parties responsible for the development of entrepreneurship
education locally, would provide a profound basis for entrepreneurship educa-
tion concrete development.
These ?ndings lead to ideas for future research. The curriculum reforms
need more research at the local level. The implementation of compiled
partnership curricula could be studied. Moreover, it would be bene?cial
to know what repercussions these compiled and implemented curricula
have on students’ development and learning. The proposals for action
presented in this study could be used in a practical development project
on entrepreneurship education and also could be linked to a research
project. Thus it would be possible to further develop the practical imple-
mentation models of entrepreneurship education. Since this study stresses
the ?ndings on teachers’ knowledge in a curriculum reform, developing
MacDonald’s (2003) theoretical framework of curriculum reform from
the persective of teachers’ learning (cf. Shulman and Shulman, 2004),
might also serve to create a more profound basis for developing and
understanding curriculum reform and thereby entrepreneurship educa-
tion development.
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190 The dynamics between entrepreneurship and education
PART III
The Dynamics between Entrepreneurship and
Small Businesses
10. An empirical taxonomy of start-up
?rms’ growth trajectories
Mahamadou Biga Diambeidou,
Damien François, Benoît Gailly,
Michel Verleysen and Vincent Wertz
INTRODUCTION
Over the past decades, new and small ?rm growth has received considerable
attention from researchers and policy-makers around the world. New ?rms
have been identi?ed as engines of growth, innovation and wealth creation
(Audretsch and Thurik, 2000; Birch, 1981; Davidsson, 1995; Davidsson
et al., 1998; Levie, 1997; OECD, 1994, 1998, 2002; Storey, 1994; Welbourne,
1997). Indeed empirical evidence indicates that only a small proportion of
?rms account for a signi?cant percentage of new job creation. Those ?rms
often accelerate the development of new technologies and products that
play a fundamental role in the prosperity of many countries (Birch et al.,
1997; Julien et al., 2001; Storey, 1997). New ?rms are therefore a key
element in regional economic development, and represent as such an inter-
esting research subject.
Despite their importance to regional development, knowledge about new
?rm growth is still scattered (Davidsson and Wiklund, 2000; Delmar, 1997)
and little knowledge is available regarding how ?rms grow and performover
time (Geroski, 2001). This can be partly attributed to methodological prob-
lems, such as the di?culties experienced in identifying entrepreneurial ?rms.
For example, to this concern Gibb and Davies (1990) argued that it is illusory
to think that it would be possible to detect this kind of ?rm or to produce a
complete ideal model. Other international studies concluded that a ‘typical’
high-growth ?rmdoes not exist (OECD, 2000; Delmar et al., 2003).
From a theoretical perspective, scholars have shown that research has
largely failed to generate cumulative results regarding new ?rm growth
because there is a great variability in researchers’ use of growth conceptu-
alization and operationalization (Davidsson and Wiklund, 2000; Delmar,
1997; Delmar et al., 2003; Murphy et al., 1996, Chandler and Hanks, 1993;
193
Weinzimmer et al., 1998; Wiklund and Shepherd, 2005). Indeed from a the-
oretical perspective the phenomenon of entrepreneurial growth has been
mostly studied within individual academic disciplines, which does not
encourage an integrated and systemic analysis (Garnsey and He?ernan,
2005). Research was done from di?erent theoretical imperatives such as
industrial organization, the resource-based view, strategic adaptation and
an evolutionary economic perspective. Research from each discipline tends
therefore to ignore important ?ndings from competing schools. For
example, since the original ‘theory of the growth of the ?rm’ from Penrose
(1959), where managerial resources played a pivotal role, diverse factors
have been suggested as a?ecting growth. Some of them, such as environ-
mental carrying capacity or market forces, are external to the organization
(Aldrich, 1990; Singh and Lumsden, 1990). Others are internal, like cap-
abilities, culture or strategy, and have been mainly addressed from the
resource-based view of the ?rm (Wernerfelt, 1984; Teece et al., 1997;
Boeker, 1997; Zahra et al., 2000; Canals, 2000).
From an empirical perspective, growth is a multi-faceted phenomenon,
but this heterogeneous nature is often neglected by scholars. Despite the
diversity of approaches in terms of indicators, formulae and time spans
used to measure growth (Delmar, 1997), empirical research has also largely
failed to generate cumulative results (Davidsson and Wiklund, 2000;
Delmar, 1997; Delmar et al., 2003; Weinzimmer et al., 1998). The common
explanation is the absence of consensus regarding which ?rm growth indi-
cators should be used (Weinzimmer et al., 1998; Delmar, 1997; Murphy
et al., 1996; Chandler and Hanks, 1993). Another explanation is that
researchers often measure growth along a single dimension (Weinzimmer
et al., 1998) although this approach has been widely criticized as ?rm
growth is heterogeneous in nature (Birley and Westhead, 1990; Delmar and
Davidsson, 1998; Delmar et al., 2003). As a consequence, using a single
measure of growth de?ned by a single criterion actually investigates only
one particular kind of growth, and the results are unlikely to be applicable
to other forms of growth (Delmar and Davidsson, 1998).
Finally, most studies about growth tend to focus on speci?c sectors (for
example high-tech) although the economic contribution of new ?rm
growth appears to be spread across various sectors (Delmar et al., 2003).
Indeed most papers looking at ‘promising ?rms’ have focused on samples
limited to new technology-based ?rms, from sectors such as software
products, telecommunications or biotechnology (Baldwin et al., 1994;
Vyakarnam et al., 1997; Woywod and Lessat, 2001; Calvo and Lorenzo,
2001; Julien, 2001).
In order to address those theoretical and empirical issues, recent entre-
preneurship research argues that there is a strong need for a conceptual
194 The dynamics between entrepreneurship and small businesses
scheme and for longitudinal growth studies (Busenitz et al., 2003; Chandler
and Lyon, 2001; Davidsson and Wiklund, 2000; Delmar et al., 2003;
Garnsey et al., 2006; Pettigrew et al., 2001). The underlying assumption is
that growth is a heterogeneous phenomenon that naturally happens over
time; it should therefore be analyzed in a dynamic process perspective and
across multiple organizational contexts. Indeed, while most new and small
?rm growth studies have focused on the explanation of the performance
using cross-sectional data and/or have assumed that growth is an uninter-
rupted process, longitudinal approaches have shown that regular growth is
the exception rather than the rule (Delmar et al., 2003; Garnsey et al., 2006;
Garnsey and He?ernan, 2005; McMahon, 2001; OECD, 2002; Stam,
2003).
However, longitudinal approaches generate methodological challenges
which require new research methods (Huber and Van de Ven, 1995; Poole
et al., 2000; Van de Ven, 1992), which in particular involve more than static
comparisons between initial and end states (Davidsson, 2004; Davidsson
and Wiklund, 2000). Based on their respective dissertations and works in
the ?eld, Davidsson et al. (2006, p. 5) argue that ‘?rm growth is a complex
phenomenon. It is not uni-dimensional. It is hard to predict and assess.
Further, it can manifest itself in various ways, and consequently it can have
di?erential e?ects on several di?erent levels.’
In this context, the purpose of this research is to present an original
method that can accommodate, in a systematic way, the longitudinal analy-
sis of new ?rm growth trajectories based on a multidimensional construct
of growth. More speci?cally, our objective is to answer the following
research question: is the early growth of a ?rm a process essentially idio-
syncratic, that is related to the individual characteristics of each ?rm or do
typical growth trajectories that are adopted by a majority of ?rms exist? We
analyzed the initial growth trajectories of 741 Belgian ?rms created
between 1992 and 2002 which have grown above micro-?rm size during that
period. We developed and tested an original methodology allowing an
empirical taxonomy of early growth trajectories across multiple sectors,
integrating the multidimensional aspect of growth.
In the following sections we detail our research design and introduce the
experimental setting. We then document the empirical results of this
research and discuss major ?ndings and limitations.
RESEARCH DESIGN
To deal with the challenges generated by the analysis of the complex nature
of new ?rm growth, we have elaborated a research design at the crossroad
An empirical taxonomy of start-up ?rms’ growth trajectories 195
of entrepreneurship research and applied mathematics (Lévesque, 2004).
More speci?cally, at a conceptual level, our research design integrates
multidimensional and dynamic approaches of growth across sectors in
order to conceptualize the early growth processes of ?rms. The key aspects
of this research design are addressed hereafter.
Multidimensional Approach and Ubiquity
When considering the measurement of growth, as discussed in the intro-
duction there is no consensus regarding which and how many indicators
should be used. Moreover, the majority of researchers do not justify theo-
retically their choice of variables, although those choices can have conse-
quences for the results (Delmar, 1997; Janssen, 2005). We therefore choose
for this research design to jointly use multiple indicators, based upon com-
monly used measures of ?rm economics and ?nancials, and let the empir-
ical data show which indicators are the most meaningful. Let us stress that
those ‘tangible’ measures of growth do not allow to distinguish organic
from acquisition-driven growth and tend to only indirectly re?ect the
‘intangible’ aspects of growth, such as the intellectual capital, the culture
or the strategy of a ?rm, which might play an important role but cannot be
taken directly into consideration in the context of our research design.
Moreover, we adopt the assumption that ?rm growth is a ubiquitous phe-
nomenon. In other words, we will not limit ourselves a priori to speci?c
sectors, on the basis of the assumption that ?rms develop in various
manners whatever their sector. We believe that the relevance of the sector
dimension should be checked empirically a posteriori and not preconceived
a priori.
Growth Trajectory
As discussed above, growth is a process of change that needs to be studied
over time (Davidsson et al., 2006, p. 40). Indeed, Penrose (1995) saw growth
as a cumulative process in which ?rm members build knowledge and com-
petence. According to this author, ?rms are ‘a result of a process of devel-
opment [. . .] in which interacting series of internal changes lead to increase
in size accompanied by changes in the characteristics of the growing object’
(Penrose, 1995, p. 1).
In the entrepreneurship context, recent authors emphasized the under-
lying assumption of the growth process, suggesting that ?rm growth is
driven by a ‘productive opportunity’ (Penrose, 1995) in a cumulative
process of interaction between the ?rm’s productive base and its market
opportunities (Garnsey, 1995; Garnsey et al., 2006). Thus, process studies
196 The dynamics between entrepreneurship and small businesses
of ?rms should examine interconnected causes, outcomes and further
feedback e?ects (Van de Ven, 1992). We need longitudinal research
because it mainly allows direct observation of such change, causal state-
ments, temporal context and feedback e?ects (Davidsson and Wiklund,
2000; Chandler and Lyon, 2001; Pettigrew et al., 2001). As a consequence,
our research design will focus on taking into account successive measures
of the growth process as the ?rm evolves over time, rather than only con-
sidering the initial and end states.
Empirical Taxonomy
As emphasized by most scholars in organizational studies (Archibugi,
2001; de Jong and Marsili, 2006; Ketchen and Shook, 1996; Pavitt, 1998;
Rich, 1992), a useful empirical taxonomy can reduce the complexity of
empirical phenomena to a few constructs. Thus, a widely accepted and
usable taxonomy is a fundamental element in the development of a
scienti?c body of knowledge (Sabherwal and Robey, 1993) and can serve as
an empirically based framework to theory development. Indeed, previous
researches suggest that, contrary to a typology considered as an individual
creativity invention, taxonomy is an empirical classi?cation tool for build-
ing the complex ?ling systems that allow both the ordering and retrieval of
large amounts of data (McKelvey, 1975; Pugh et al., 1969). Moreover,
according to Rich (1992), a taxonomy is more than a simple classi?cation
of items into separate groups. It is a speci?c classi?cation scheme that
expresses the overall similarity between organisms in a hierarchical fashion.
In addition, in their innovative small ?rm research, de Jong and Marsili
(2006) emphasized that taxonomy classi?es and labels many di?erent items
into groups or clusters that share common traits.
We therefore adopted in this research a taxonomy approach with the
objective of attempting to reduce the complexity and therefore to improve
our understanding of early ?rm growth. Hence our research design consists
in mobilizing advanced applied mathematics tools in order to develop an
empirical taxonomy of ?rm trajectories based on the initial evolution
across sectors and over time of multiple economic and ?nancial indicators.
EXPERIMENTAL SETTING
Having speci?ed our research design, we will present brie?y in this section
the methodology adopted to identify the typical growth trajectories, with
regard to the choice of the sample and variables and to the methods of
analysis adopted.
An empirical taxonomy of start-up ?rms’ growth trajectories 197
Choice of Sample and Variables
A valuable opportunity to address the key study issue in this chapter has
been provided by the availability of the BEL-FIRST database developed by
Bureau van Dijk Electronic Publishing (BvD), one of Europe’s leading
electronic publishers of business information. Our research collected lon-
gitudinal ?nancial information and demographic indicators about all
Belgian ?rms. As this study focuses on the initial growth of the ?rm, the
population considered here includes all the ?rms created after 1992 and still
in existence in 2002 (N?152 064).
Among these young ?rms, we selected all those which, since their cre-
ation, exceeded the stage of micro-?rm level (as de?ned by the European
Commission, 2003). This enables us to identify ?rms whose growth can be
regarded as ‘promising’ in the broadest sense, that is which can be consid-
ered as having contributed somewhat to economic development. This
allows us to build a sample that goes beyond exceptional cases of very high
and regular growth, often publicized but not at all representative of a
‘typical’ growth ?rm. Moreover, in order to eliminate most ‘false creation’
cases (such as a ?rm created through the incorporation of an existing sub-
sidiary), we eliminated ?rms that had already exceeded the size of a micro-
?rm at the time of their creation.
Regarding the choice of variables, we selected as our main measures of
growth three economic indicators: sales, employment and total assets, which
have all been considered as suitable indicators of growth (see Davidsson and
Wiklund, 2000). Those indicators are combined with seven ?nancial vari-
ables traditionally linked to ?rm performance (value added, operating
income, current income, net income, cash-?ow, working capital and share-
holders’ equity). In line with previous researchers (Davidsson and Wiklund,
2000; Birley and Westhead, 1990; Weinzimmer et al., 1998; Wiklund, 1999),
we think that the combination of multiple size and ?nancial indicators pro-
vides richer information and therefore allows better investigation of the
growth process. Finally our data also included information regarding each
?rm’s main sector of activity, type of ownership and legal form. On the basis
of this choice of variables, the ?rms for which available data were complete
and coherent or could be reconstituted by simple interpolation were selected.
Methods of Analysis
The method used to analyze the existence of typical growth trajectories
consists in considering a ?rm growth trajectory as a sequence of states (cor-
responding to the successive years of existence) in a space with 10 dimen-
sions (corresponding to the three economic and seven ?nancial indicators).
198 The dynamics between entrepreneurship and small businesses
In this space, mathematical tools for classi?cation and discrimination such
as a principal components analysis
1
(PCA) and empirical clustering based
on density estimation (Cuevas et al., 2001) can be mobilized (see François
et al., 2004 for other examples of tools for classi?cation). These tools make
it possible to identify and validate through density distribution potential
clusters, each cluster corresponding to ?rms in similar stages of develop-
ment. Once these clusters are identi?ed and tagged (‘stage A’, ‘stage B’,
etc.), the trajectory of a ?rm can be described as a sequence or a Markov
chain corresponding to the various stages it experienced successively. For
example AAABABB represents seven years of the trajectory of a ?rm
evolving between states close to the clusters ‘stage A’ and ‘stage B’.
The ?rms having adopted similar growth trajectories will be character-
ized by similar sequences. Those sequences can be compared through
graphical interpretation and Markov chain analysis (Bakerman and
Gottman, 1986; Howard, 1971) and then analyzed through a systematic
sequence analysis (Poole et al., 2000), in order to evaluate the heterogene-
ity of growth trajectories and test the existence, validity and characteristics
of typical trajectories.
EMPIRICAL RESULTS
We will present our results in four sections. The ?rst section relates to the
sampling results and to the validation of the use of multiple indicators and
sectors. The second section presents the result of the clustering of the suc-
cessive growth states into four ‘stages’. The next two sections explore the
heterogeneity of growth trajectories and the existence and characteristics
of typical trajectories through ?rst a graphical comparison and then a sys-
tematic analysis.
Sampling Results
As discussed above, our research is based on a sample including all Belgian
?rms created since 1992 and still in existence in 2002 (n?152 064). From
these ?rms, we selected those which grew above micro-?rm size at any time
during that period. There were 17 168 such ?rms identi?ed in our sample.
Those ‘promising’ ?rms represented 6 per cent of all the existing Belgian
?rms in 2002 and 11 per cent of the ?rms created since 1992 and still in
existence in 2002. However, they generated (in 2002) respectively 19 per cent
and 80 per cent of overall gross job creation.
Among the ?rms selected, 33 per cent had missing values regarding
employment, 53 per cent regarding sales and 17 per cent regarding cash
An empirical taxonomy of start-up ?rms’ growth trajectories 199
?ow. We excluded the ?rms that did not publish complete data for more
than two consecutive years, or ?rms that published less than 40 per cent of
the data available for two consecutive years. Using those ?lters, the ?nal
dataset included 741 ?rms.
Most sectors were represented in our sample (13 out of the 17 principal
sectors included in the standard NACE industry classi?cation). The major-
ity related to service industries (71 per cent), while only 11 per cent were
related to manufacturing and another 17 per cent to the construction indus-
try. Only 19 per cent of the ?rms in our sample were high-tech ?rms.
2
This
con?rms the relevance of our cross-sector approach.
Finally, the 741 ?rms in our sample were sorted according to the measure
of size (employment, sales or total assets) along which they had grown
above the micro-?rm size threshold. Fifty per cent of the ?rms in our
sample had reached only the micro-?rm employment threshold (more than
nine employees) while 33 per cent and 8 per cent had reached only the sales
and the asset micro-?rm thresholds respectively. Less than 10 per cent had
reached more than one threshold and 2 per cent had reached all three
thresholds (they simultaneously had more than nine employees, more than
1 million euros in sales and more than 2 million euros in assets). This
con?rms the relevance of our use of multiple indicators to measure growth
(Delmar et al., 2003; Janssen, 2005; St-Pierre et al., 2005), as using di?erent
indicators leads to di?erent selections of ‘promising’ ?rms.
Clustering
In order to explore the growth trajectories of the ?rms in our sample, we
?rst tested the existence of clusters among the various states a ?rm experi-
ences as it initially grows. We used for this purpose a Principal Component
Analysis based on the successive absolute value of our three economic
and seven ?nancial indicators for each ?rm. This analysis produced three
principal axes, with a cumulated variance of 82 per cent (the two ?rst
axes accounted for 72 per cent). Other choices of variables were tested, in
particular using relative rather than absolute ?nancial values (ratios).
Nevertheless, all these alternative choices proved less relevant in terms of
restitution of information, that is generating a weaker cumulated variance.
The three principal axes identi?ed enabled us to represent (through a
linear projection) all the successive states of the ?rms in a space with three
dimensions. These axes represent composite variables which can be
regarded as ‘latent dimensions’ of the problem (Evrard et al., 2003),
making it possible to apprehend fundamental dimensions of the studied
phenomenon. The three axes are detailed in Table 10.1, according to their
correlation
3
with the 10 starting variables after a Varimax
4
rotation.
200 The dynamics between entrepreneurship and small businesses
201
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Those results indicate that the ?rst axis is more correlated with four
?nancial variables (operating income, current income, net income and cash
?ow) which can be linked to the ‘Performance’ of a ?rm. The second axis
is more correlated with four indicators (employment, sales, value added and
total assets) which can be linked to the ‘Size’ of a ?rm. Finally, the third
axis is more correlated to the variables working capital and shareholder
equity, which can be linked to the ‘Resources’ of a ?rm.
Hence the results of the clustering allowed us to identify three principal
axes which can be used to extract signi?cant information relative to the evo-
lution of each ?rm over time, across our sample. Let us stress that this
reduction from the ten initial variables to three axes does not remove the
multidimensional aspect of our approach, as those axes have been identi-
?ed empirically (rather than de?ned a priori) and re?ect the fundamental
dimensions of our initial dataset, that is the most relevant measures of how
individual ?rm trajectories di?er.
Furthermore, by the design of our sample all the ?rms considered will
move from relatively low initial values to relatively high values of sales,
employment and/or assets, as they grow above micro-?rm size. The infor-
mational value of the ‘Size’ axis is therefore limited from a clustering point
of view. From a modeling point of view, this ‘Size’ axis could actually be
considered more as the dependent variable of this study.
We therefore focused our clustering analysis on the ‘Performance’ and
‘Resources’ axes. We can represent the successive states any ?rm in our
sample goes through as it grows along those two axes, projecting their
initial value along the 10 indicators on the two principal axes identi?ed and
taking as a reference point the average value of the sample (Figure 10.1).
However, those axes are only numerical constructs produced by the PCA,
which can only be related approximately to actual dimensions of the ?rms
and have no direct managerial interpretation for a given ?rm. In order to
test whether the two selected principal axes could be used in order to de?ne
meaningful clusters (that is whether they relate to actual di?erences
between actual ?rms from a managerial point of view), we measured the
density distribution of all 10 economic and ?nancial variables and of four
commonly used ?nancial ratios (return on equity, return on asset, capital
productivity and labor productivity) along the two axes.
As an illustration, the density distributions of the variable ‘operating
income’ within the four quadrants are presented in Figure 10.2, where the
vertical scale represents the probability, the horizontal scale represents the
value of the ?rm’s operating income and each of the four lines represents
the distribution within one of the four quadrants, as numbered in Figure
10.1. This ?gure indicates that there appears to be a cutting point (at
around 30 000 euros of annual operating income) between the distribution
202 The dynamics between entrepreneurship and small businesses
curves related to quadrants 1 and 2 (corresponding to ?rms with below-
average ‘performance’) and the distribution curves related to quadrants 3
and 4 (corresponding to ?rms with above-average ‘performance’).
The analysis presented in Figure 10.2 indicates that the ?rms that achieve
a higher value along the ‘performance’ principal axis are indeed di?erent
from a managerial point of view, as their operating income will be signi?-
cantly higher.
The application of this process to the 10 economic and ?nancial variables
and to the four ?nancial ratios indicate that the ‘performance’ principal
axis is signi?cantly related to operating income, current income, net
income, cash ?ow and labor productivity while the ‘resources’ principal axis
is signi?cantly related only to shareholder equity. Combining those two
axes and their managerial interpretation allows us therefore to identify four
di?erent stages a new ?rm can reach as it grows:
1. ‘Questions’ are ?rms located at the bottom-left of Figure 10.1. They
tend to combine lower than average operating income, current income,
net income, cash ?ow and labor productivity (low performance) with
lower than average shareholder equity (low resource). Their future
development might at ?rst sight seem at risk.
2. ‘Seeds’ are ?rms located at the top-left of Figure 10.1. They tend to
have lower than average operating income, current income, net income,
An empirical taxonomy of start-up ?rms’ growth trajectories 203
Figure 10.1 Two-dimensional representation of ?rm successive states
2
1
3
4
‘Performance’
‘Resources’
204
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cash ?ow and labor productivity (low performance) but higher than
average shareholder equity (high resource). A ?rm associated with this
pro?le could for example have been able to raise relatively important
funds to ensure its initial development, but needs time to improve its
performance.
3. ‘Boutiques’ are ?rms located at the bottom-right of Figure 10.1. They
tend to have higher than average operating income, current income, net
income, cash ?ow and labor productivity (high performance) but lower
than average shareholder equity (low resource).
4. ‘Stars’ are ?rms located at the top-right of Figure 10.1. They tend to
combine higher than average operating income, current income, net
income, cash ?ow and labor productivity (high performance) with
higher than average shareholder equity (high resource). Their future
development seems a priori promising.
Hence the PCA and the density analysis have allowed us to identify two
axes along which four stages of growth can be identi?ed that are both
empirically valid (as indicated by the PCA) and that correspond to actual
managerial dimensions (as indicated by the density analysis). We will
discuss in the next two sections how those two axes and four stages can be
exploited from a graphical and systematic point of view in order to test the
heterogeneity of the growth trajectories of young ?rms, and ultimately
build a taxonomy.
Graphical Analysis
Several representations of ?rm trajectories using the two principal axes we
identi?ed above are presented in Figure 10.3, where each box represents the
successive states adopted by a given ?rm along the two axes using a nor-
malized scale. In this ?gure, a selection of trajectories of similar shape
have been gathered together. The ?rst group (the top six boxes) represents
rather linear trajectories, from high resources/low performance to low
resources/high performance states. The second group gathers sigma-shaped
trajectories. They illustrate that the growth of those ?rms has not been
smooth over the years, with some periods that may even correspond to
decay. The third group (bottom line) presents angular trajectories going up
?rst (increase in resources) then bifurcating to the left (increase in perfor-
mance).
Going further, the trajectory of a given ?rm can be characterized
by the sequence of successive stages it goes through. Following a Markov
chain approach, the way ?rms in our sample move from one stage
to another (dependencies) can be represented through a digraph
An empirical taxonomy of start-up ?rms’ growth trajectories 205
206
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(Figure 10.4), which details the probability that a ?rm starts in a given
stage (boxes) and moves from one stage to another (arrows). Such a
digraph renders visible how stages are sequenced over time (Bakerman
and Gottman, 1986).
The results presented in Figure 10.4 indicate that the probability of
remaining within a given stage is quite high (p?0.61 for all four stages).
This behavior can be interpreted as ?rm inertia. Moreover, ‘magic
recoveries’ and ‘catastrophes’, that is moving directly from low levels
of performance and resource (‘questions’ stage, no. 1) to high levels
(‘stars’ stage, no. 4) and reciprocally is very rare (respectively p?0.02 and
p?0.03).
Those graphical analyses both indicate that growth trajectories can be
di?erentiated along a ‘performance’ and a ‘resources’ axis and that this type
of representation gives evidence of some homogeneity between the trajec-
tories of some of the ?rms. There appear to be at the same time a diversity
of trajectories but also groups of trajectories that share similar shapes and
that are worth investigating further, in a more systematic way. Indeed
whether the trajectories such as the ones presented in Figure 10.3 amount
to a taxonomy, that is whether we can identify a small number of trajecto-
ries that are adopted by a majority of ?rms, cannot be tested through
graphical analysis. Testing this hypothesis in a systematic way is the subject
of the following section.
An empirical taxonomy of start-up ?rms’ growth trajectories 207
Figure 10.4 Growth trajectories digraph
3
1 2
4
0.66
0.12
0.20
0.02
0.17
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0.03
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0.61
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0.26 0.35
Systematic Taxonomy
In order to explore the existence of typical growth trajectories based on the
characterization of ?rm trajectories as sequences of successive stages, we
?rst considered only the ?rms for which at least four years of data were
available, and looked at their trajectories during those four initial years of
existence. There were 602 ?rms in our sample (out of 741) for which such
data was available. The initial trajectory of each of those 602 ?rms can be
characterized by a sequence of four stages (four years) among the four pos-
sible stages we identi?ed through our clustering (‘seeds’, ‘stars’, ‘boutiques’
and ‘questions’ stages). This leads to 256 (4
4
) theoretical possibilities. The
distribution of the sequences observed among the 602 ?rms is presented in
Figure 10.5, where the observed combinations are listed on the horizontal
axis and where the vertical axis represents the occurrence of each of those
combinations. The shape of this distribution curve indicates that they are
not at all uniformly distributed.
A closer analysis of this curve shows that only 115 di?erent sequences
(not visible on the ?gure) have actually been observed, and that only
22 sequences have been adopted by more than 1 per cent of the ?rms. Those
22 sequences collectively cover 71 per cent of the ?rms and are presented in
Table 10.2.
If one follows a Markov chain approach and focuses on transitions
between stages rather than on the time spent within each stage (the
sequences 4333, 4433 and 4443 are therefore regarded as equivalent), seven
typical trajectories emerge from those 22 sequences. These trajectories are
presented in Figure 10.6.
Those seven typical trajectories can be split between four ‘stable’ ones (a
?rm remains in a given stage over the time period considered) and three
‘unstable’ ones. The four stable and three unstable trajectories are described
in Table 10.3, highlighting the corresponding sequences and presented by
decreasing frequency.
Those seven typical trajectories collectively include the ?rst 11 and the
21st sequences of Table 10.2 and therefore correspond to 59 per cent of the
?rms in our sample for which at least four years of data are available (602
?rms).
While those seven trajectories, considered individually, might appear as
quite natural development paths for ?rms to follow (in particular the three
‘unstable’ ones), it is clearly a non-obvious result to have identi?ed empir-
ically that it is those seven trajectories (and not any other possible subset of
the 24 theoretical combinations) which a majority of ?rms follow.
Moreover, it provides an empirical validation of the prevalence of non-
obvious (atypical) trajectories, such as trajectories ‘A’ and ‘C’.
208 The dynamics between entrepreneurship and small businesses
209
F
i
g
u
r
e

1
0
.
5
D
i
s
t
r
i
b
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t
i
o
n

o
f
g
r
o
w
t
h

t
r
a
j
e
c
t
o
r
i
e
s

o
b
s
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r
v
e
d
S
e
q
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e
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e
s

0
0
.
0
2
0
.
0
4
0
.
0
6
0
.
0
8
0
.
1
0
.
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4
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.
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6
0
.
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8
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.
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0
.
2
2
F r e q u e n c y
Hence this taxonomy shows a relatively great heterogeneity of growth
trajectories both in terms of frequency and development paths. The
detailed characterization of each one of these trajectories would require
individual case studies, which exceeds the framework of this research.
Indeed, no signi?cant correlations were observed (through ?
2
-test)
between the seven typical growth trajectories identi?ed and individual
measures of growth (sales, employment or assets) or between the growth
trajectories and particular demographic data (sector, type of ownership or
legal form).
The results presented above indicate that, based on empirical evidence,
new ?rm growth trajectories are neither ‘linear’ nor a random or idiosyn-
cratic phenomenon, and that a taxonomy of seven typical trajectories cor-
responding to a majority of ?rms can be identi?ed.
210 The dynamics between entrepreneurship and small businesses
Table 10.2 Most frequent sequences
Sequences Freq. (%) Cumul. Freq. (%)
(n?602) (n?602)
1 S2222 22 22
2 S2111 5 27
3 S2221 5 32
4 S1111 5 37
5 S4444 5 42
6 S2211 3 45
7 S2224 3 48
8 S3333 3 51
9 S2223 2 54
10 S2244 2 56
11 S2444 2 58
12 S1311 2 59
13 S2113 1 61
14 S1333 1 62
15 S2242 1 63
16 S4222 1 65
17 S4333 1 66
18 S1131 1 67
19 S1133 1 68
20 S2122 1 69
21 S2233 1 70
22 S3111 1 71
DISCUSSION AND CONCLUSIONS
Growth has been extensively studied in the ?elds of entrepreneurship,
strategic management and industrial organization. However, most studies
have concentrated on the explanation of growth using cross-sectional data
or case studies and have explicitly or implicitly assumed that growth is
essentially an uninterrupted process. However, the longitudinal studies of
growth suggest that regular (or linear) growth is the exception rather than
the rule.
With the aim to contribute to a better understanding of the growth
process of new ?rms, we have presented an original methodological
approach allowing the systematic analysis of early growth trajectories
based on a multidimensional construct of growth across sectors. This
method made it possible to track systematically typical growth trajectories
of ?rms having grown beyond the micro-?rm size, and to select through a
PCA two key independent dimensions of the problem leading to four clus-
ters which were used to identify seven typical growth trajectories. Those
seven trajectories were adopted by 59 per cent of the new ?rms considered
in our sample.
Hence our ?ndings indicate that this original systematic approach is
useful for taxonomy development and therefore contributes to reducing
the gap between the complexity of the new ?rm growth process and the
An empirical taxonomy of start-up ?rms’ growth trajectories 211
Figure 10.6 Typical trajectories
‘Resource’
‘Performance’
‘Stars’
‘Boutiques’
‘Seeds’
‘Questions’
A
B
D
C
G
E
F
2
1 3
4
standard approaches often used to deal with it. They also have several
implications and limitations, which will be discussed hereafter.
Implications
Our results ?rst con?rm that organizational growth constitutes a multiform
and cross-sector phenomenon by nature, which should not therefore be
reduced to a single dimension or studied within a single sector. Thus, the
results of our analysis support a multidimensional conceptualization of
growth, contrary to what many researches used, particularly in the studies
on the determinants of the growth process (Birley and Westhead, 1990).
Moreover, they reinforce the recent work emphasizing the heterogeneity of
new ?rm growth (Delmar et al., 2003; François et al., 2004; Janssen, 2005;
Weinzimmer et al., 1998). They also raise the question of the relevance of
212 The dynamics between entrepreneurship and small businesses
Table 10.3 Taxonomy of growth trajectories
Description Corresp. Freq. (%) Example
sequences (n?602)
Stable trajectories
B Grow as a ‘seed’ (high resources S2222 22 Firm having raised
but low performance) capital to reach
break-even
D Grow as a ‘star’ (high resources S4444 5 ‘Gazelle’; potential
and high performance) high-growth ?rm
A Grow as a ‘question’ (low S1111 5 Firm experiencing
resources and low performance) troublesome
growth
C Grow as a ‘boutique’ (low S3333 3 Pro?table service
resources but high performance) ?rm with limited
assets
Unstable trajectories
E Grow from a ‘seed’ to ‘question’ S2111, 13 ‘Seed’ which burns
S2211, capital before
S2221 break-even
G Grow from a ‘seed’ to ‘star’ S2444, 7 ‘Seed’ having
S2244, developed towards
S2224 pro?tability
F Grow from a ‘seed’ to ‘boutique’ S2333, 4 ‘Seed’ having
S2233, lowered ambitions
S2223
Total 59
the uniform quantitative approaches, focused only on the criterion of a
high relative growth rate in sales and/or employment adopted by policy-
makers and venture capitalists to evaluate the potential of a new ?rm.
Moreover, our empirical results suggest that new ?rm growth appears to
be neither a continuous (or life-cycle based) nor idiosyncratic (or com-
pletely random) process. It can be adequately described through a limited
number of typical growth trajectories that can be identi?ed in a systematic
way. This original contribution of our research has important theoretical
and practical implications.
Our results also con?rm that a cross-sectional approach can fail to
capture the complex reality of the evolving new ?rm. They support the
recent studies based on longitudinal approaches such as those of Delmar
et al. (2003), Garnsey et al. (2006), Garnsey and He?ernan (2005), Mustar
(2002), McMahon (2001) and Stam and Garnsey (2006).
Our ?ndings are important from a theoretical perspective because they
bring insight regarding how new ?rms evolve over time. They contribute to
our understanding and appreciation of the heterogeneity of the growth tra-
jectory phenomenon. Thus, researchers should develop more nuanced
explanations of the new ?rm growth process than the simple uninterrupted
or ‘linear’ dynamic growth process. Our ?ndings indicate that non-
linearities exist in new ?rm growth trajectories and emphasize the rarity of
very high growth trajectories.
Our ?ndings are also important from a practical perspective as they
con?rm that there is no such thing as a ‘growth ?rm’. Whether a given
?rm will be quali?ed as a ‘growth ?rm’ is strongly related to the criteria
used to measure growth and to the corresponding thresholds adopted.
Researchers should align their de?nition of ‘growth ?rms’ with the speci?c
context and/or objective of their research, be it managerial performance,
economic development or job creation. In particular, there is no universal
criterion to determine whether ?rm A has grown more over time than
?rm B, for any pair of ?rms. Indeed what constitutes a meaningful
measure of the size of a ?rm should be a function of the nature of the
?rm’s activity (for example manufacturing versus trading) and of its gov-
ernance structure (for example hierarchical and closed structure versus ?at
and open organizations).
In addition, this research provides a useful original taxonomy of new
?rm growth trajectories calling for explanations from case studies. Our tax-
onomy also extends previously developed taxonomies by taking into
account the ?rm’s ?nancial characteristics as complementary information
to its economics.
This study also provides a useful methodology contribution by showing
the value added of the use of advanced applied mathematic methods to
An empirical taxonomy of start-up ?rms’ growth trajectories 213
deal with the complex and dynamic nature of ?rm growth and therefore to
contribute to theory development. We provided an original methodolo-
gical approach based on systematic clustering and sequence analysis
to derive an empirical taxonomy. In sum, our approach supports the recent
work (Lévesque, 2004) emphasizing how mathematics can provide import-
ant contributions to current theories of management and organizations.
Limitations
This study has several limitations that should be noted. Firstly, in order to
examine growth trajectories, we needed a signi?cant number of longitudi-
nal data which justi?ed the use of retrospective secondary data limited to
only one country. Moreover, the nature of these data does not enable us to
measure the e?ect on the evolution of new ?rms of some important quali-
tative factors such as strategies, entrepreneurial motivation, partnerships
and human capital.
Our research is also limited by the natural selection bias excluding failed
?rms in the sample. Therefore, we have no way of knowing what type of
distinct growth trajectories such ?rms would exhibit, and how these growth
paths might di?er from the seven typical growth trajectories identi?ed in
this research.
Although these limitations are important and must be taken into
account, we are nevertheless convinced that this study should contribute to
a better understanding of the new ?rm growth process.
Future Research Directions
This research opens many future research directions. First, the replication
in various contexts of the developed empirical taxonomy and speci?c data
analysis methodology should be considered.
Secondly, while this research can be considered as a ?rst step towards a
better understanding of the start-up growth trajectories, further research is
needed to improve our understanding of the dynamic growth process of
new ventures. It should explore which endogenous and exogenous factors
might explain why a majority of start-ups follow the seven identi?ed typical
growth trajectories. To this end, our retrospective approach and data analy-
sis methodology should be complemented by other methods such as
surveys and multiple case studies.
In this context, among other orientations, it could be highly relevant to
re?ne our taxonomy by examining the relationship between innovative and
technological sources and growth trajectories, both in high and low tech-
nological industries.
214 The dynamics between entrepreneurship and small businesses
Finally, while our ?ndings provide empirical and methodological support
in new ?rm growth research, one of the most important future research
directions is to test the accuracy of the proposed taxonomy in the stability
of the ?rm dynamic growth process beyond the limited period of four years
retained in this research.
ACKNOWLEDGEMENTS
This research is supported by a grant from the National Bank of Belgium.
Part of this work is supported by the Belgian Program on Interuniversity
Attraction Poles, initiated by the Belgian Federal Science Policy O?ce.
The scienti?c responsibility rests with its authors. The work of D. François
is funded by a grant from the Belgian FRIA. Preliminary versions of this
paper were presented at the European Summer University 2006 on entre-
preneurship and entrepreneurship education research (Hameenlinna), at
the ERIM workshop ‘Perspectives on the Longitudinal Analysis of New
Firm Growth’ in 2005 (Rotterdam) and, at CRECIS – Louvain School of
Management seminar in 2006 (Louvain-la-Neuve). The authors would like
to thank Professors Fredric Delmar, Alain Fayolle, Saras D. Sarasvathy,
Björn Bjerke, Aard Groen, Paula Kyrö, Erik Stam, Elizabeth Garnsey,
Frank Janssen, Regis Coeurderoy, Nathalie Delobbe and anonymous
reviewers for their helpful comments.
NOTES
1. PCA is basically a projection method (Lawley and Maxwell, 1971) which can be used to
develop cluster-based taxonomies (Evrard et al., 2003; de Jong and Marsili, 2006).
2. To identify the ?rms related to ‘high tech’ sectors, we de?ned a conversion table between
the Code NACE-BEL and the Code US SIC for the classi?cation of industry sectors
according to technological intensity (from the Bureau of the Census and Walcott, 2001).
We then validated our approach by matching this with other existing classi?cation
approaches (OECD, 1998) of industrial sector classi?cation and of some new innovative
?rm classi?cation indicators in the literature.
3. Our initial variables being standardized, the coe?cient of correlation is a good indicator
of the relation between a variable and a principal axis (Evrard et al., 2003).
4. This algorithm of rotation is based on the maximization of the coe?cients of correlation
of the most correlated variables (Hendrickson and White, 1964; Kaiser, 1958).
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An empirical taxonomy of start-up ?rms’ growth trajectories 219
11. Linking entrepreneurial orientation
and dynamic capabilities: research
issues and alternative models
Jorunn Grande
INTRODUCTION
The purpose of this chapter is to highlight the relationship between entre-
preneurial orientation (EO) and dynamic capability (DC) in small and new
?rms. These two concepts have received increasing attention in the separate
?elds of entrepreneurship and strategic management due to their connec-
tion to value creation and ?rm performance (Teece, Pisano and Shuen,
1997; Eisenhardt and Martin, 2000; Lumpkin and Dess, 1996; Wiklund,
1999). Following results in these ?elds ?rm-speci?c resources, dynamic
capability and entrepreneurial e?orts will be essential in enabling ?rms to
renew and sustain competitive advantage. Nonetheless even if wealth cre-
ation is at the heart of both EO and DC few studies have addressed both
concepts in the same study. Researchers have also pointed out a lack of
knowledge on development of DC in new ?rms (Newbert, 2005; Zahra
et al., 2006). In addition research on entrepreneurial e?orts and resource
recon?guration in small ?rms is limited (Dale Meyer et al., 2002). To
address these research gaps possible links between the EO and DC per-
spectives are discussed and ?ve alternative models are suggested to illus-
trate their possible relationships and their potential as a departing point for
future studies.
The relationship between the EO and DC approach is particularly inter-
esting in new and small ?rms because elements from both concepts are
likely to interact in sustaining competitiveness in these ?rms. Small busi-
nesses often face severe challenges when their competitive and political
environment changes. Studies have shown that they are especially vulnera-
ble in periods of turbulence, since they often have limited resources devoted
to strategic processes as well as being ?nancially less robust (Penrose, 1959;
Carter and Jones-Evans, 2000). Survival and future existence will then
depend on their ability to adapt to these changes and to develop new
220
strategies and business platforms based on new opportunities in the
market. This puts a focus on their entrepreneurial e?orts as well as their
ability to develop new resources and capabilities for strategic change. This
will also be the case for many newly established ?rms. Embryonic ?rms are
often small and lack experience in building an e?cient organization since
they have had little time to develop (Newbert, 2005; Zahra et al., 2006).
They need to develop routines and systems in order to secure rent and value
creation from the idea-generating phase.
Recent research shows that critical elements for strategic change and cre-
ation of a long-run competitive advantage are often found in the internal
resource con?guration of the ?rm (Rumelt, 1991; Borch et al., 1999). This
is the essence of the resource-based perspective (Penrose, 1959; Barney,
2002), and the later theoretical extension into the dynamic capability
approach (Teece et al., 1997; Eisenhardt and Martin, 2000). The DC
approach centres around a ?rm’s ability to ‘integrate, build, and recon?g-
ure internal and external competence to address rapidly changing envir-
onments’ (Teece et al., 1997, p. 515). Important DCs mentioned in the
literature are networks, alliances, learning processes and decision-making
processes. When appropriate these DCs are supposed to give above-normal
performance and superior competitive advantages to the ?rm. This has led
many scholars to investigate the content and in?uence of DCs on resource
recon?guration and wealth creation in ?rms. Entrepreneurship is ulti-
mately about exploration and creation (Dale Meyer et al., 2002), and within
this ?eld the EO concept has also become a central focus because of its
alleged connection to ?rm performance. The EO construct is explained as
an expression of the ?rm’s entrepreneurial mind and includes dimensions
like the ?rm’s innovativeness, willingness to take on risk and its proactive-
ness (Covin and Slevin, 1989; Lumpkin and Dess, 1996). Research has
shown that ?rms with a greater EO than others tend to perform better (for
example in terms of sales growth and number of new products) (Wiklund,
1999; Madsen, 2007).
When reviewing the literature on DC and EO it is clear that both con-
cepts are related to how the ?rm deploys resource acquisition and develop-
ment, as well as in?uencing strategy development and performance of the
?rm. The di?erence might lie in that they cover di?erent parts of the aspects
and processes that are under investigation, but it might also indicate a ten-
dency towards congruence and overlap between dimensions of EO and
DC. This is not evident and the discussion on this nevertheless seems to be
missing in the scienti?c literature. Prior research also suggests that DCs are
important for creation and evolution of new business ventures (Newbert,
2005). Further investigation of their complementarity and possible inte-
grative approaches is likely to yield interesting insight. This will enable a
Linking entrepreneurial orientation and dynamic capabilities 221
more compatible understanding, and is likely to give valuable insight for a
greater scienti?c ?eld. By integrating them into one model we can illustrate
how entrepreneurial orientation and other factors might in?uence resource
recon?guration and development of dynamic capabilities.
The remainder of the chapter is organized as follows. First the main
content and issues within the resource-based view and the dynamic capa-
bility approach are presented. Then entrepreneurial e?orts and orientation
within the ?rm context are discussed. This serves as a background for dis-
cussing and analysing the complementarity between the DC and EO
approach. Finally ?ve di?erent models that illustrate possible relationships
and paths for future research are proposed.
THEORETICAL BACKGROUND
Strategic Management and the Resource-based View
Recent research shows that critical elements for strategic change and cre-
ation of a competitive advantage in the long run are often found in the
internal resource con?guration of the ?rm (Rumelt, 1991; Borch et al.,
1999). By identifying and acquiring resources that are critical to the devel-
opment of demanded products ?rms may earn above-normal earnings
(Wernerfelt, 1984). From this the resource-based view (RBV) has emerged
as an important perspective and instrument for ?nding and evaluating pos-
sible business opportunities and resource needs in ?rms (Penrose, 1959;
Barney, 2002). The RBV is now one of the most widely accepted theoreti-
cal perspectives within the ?eld of strategic management (Priem and Butler,
2001; Newbert, 2007). The seminal elements of the RBV approach are
found in Penrose’s The Theory of the Growth of the Firm (Penrose, 1959),
but the earliest attempts to describe and apply it as an independent per-
spective seem to be found in Rumelt (1984), Teece (1984), Wernerfelt (1984)
and Barney (1986).
The essence of the RBV is that the building of new competitive advan-
tages in new markets depends on the ?rm’s available resources and its ability
to develop both physical and human resources (Barney, 1986, 1991). It con-
ceptualizes the ?rm as a bundle of resources, where di?erent types of
resources vary in their level of importance for generating added value for
the ?rm. It focuses on the internal characteristics and resources of the ?rm
and on their relationship to performance, and argues that ?rms with valu-
able, rare and inimitable (VRI) resources have the potential to gain supe-
rior performance (Barney, 1986, 1991). It builds on the assumptions that
?rms are heterogeneous with respect to the resources and capabilities, and
222 The dynamics between entrepreneurship and small businesses
that these resources and capabilities are not always easy to move or copy
between ?rms. In this way the ?rm’s unique resource bundle gives the ?rm
a basis for developing strategies and lasting competitive advantages. Due to
the missing link between resource possession and resource exploitation,
organizational resources were later included as an important part of the
resource bundle in Barney’s framework and thus added the ‘O’ to the label
of the framework. Today this perspective is often named Barney’s VRIO
framework (Newbert, 2007). In addition to simply having valuable, rare
and inimitable resources a ?rm also needs to be organized in such a way
that it can fully exploit the potential of its resources (Barney, 2002).
The RBV gives interesting insight into the internal resources of the ?rm.
However, by considering the ?rm as a speci?c resource bundle, some
researchers claim that dynamic processes like organizational learning,
resource acquisition and knowledge integration, have received too little
attention in the traditional RBV (Eisenhardt and Martin, 2000; Newbert,
2007). This led to the development of a new approach and an increased
focus on organizational and dynamic processes within the ?rm (Teece et al.,
1997; Eisenhardt and Martin, 2000; Winter, 2003). Together with in?uence
from other theoretical approaches like organizational learning theory
(Argyris and Schön, 1978) and evolutionary economics (Nelson and
Winter, 1982) the dynamic capability (DC) approach therefore emerged as
a further extension and supplement to the RBV.
Dynamic Capabilities
The dynamic capability (DC) framework focuses on the type of processes
used by ?rms to exploit resources rather than on the resources themselves
(Newbert, 2007). Teece et al. (1997, p. 510) proposed the DC framework as
a means ‘to explain how combinations of competences and resources can
be developed, deployed, and protected’. Zollo and Winter (2002) state that
DCs arise from learning. Several de?nitions of DC can be found as seen in
Table 11.1, but common for all seems to be the emphasis on the ?rm’s
ability to change. Teece et al. (1997, p. 515) de?ne DC as ‘the ?rm’s
ability to integrate, build, and recon?gure internal and external compe-
tence to address rapidly changing environments’. Further DCs are
explained as processes embedded in ?rms, and as the routines and processes
that managers use to alter their resource base in order to create new value-
generating strategies (Eisenhardt and Martin, 2000). In other words they
include the attributes that enable the ?rm to coordinate and exploit its other
resources (Teece et al., 1997; Eisenhardt and Martin, 2000; Winter, 2003).
DCs are therefore critical in the sense that they create change and the
ability for continuous renewal of the ?rm. Also, DCs are not only the most
Linking entrepreneurial orientation and dynamic capabilities 223
224
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critical resources in an innovative situation, but also the hardest ones to get
hold of (Borch et al., 2005). The ?rm’s dynamic resources or capabilities are
therefore unique and give the foundation for the ?rms’ ability to initiate and
perform innovative processes. Examples of DCs mentioned in the literature
are business networks, strategic orientation, educational routines and
research (Teece et al., 1997; Eisenhardt and Martin, 2000). More speci?cally
Eisenhardt and Martin (2000) refer to DCs as organizational processes
that integrate resources, recon?gure resources and gain as well as release
resources. As such, DCs constitute the capacity to renew competencies and
to keep up with changing environments and are thus crucial in enhancing
the ?rm’s ability to achieve new forms of competitive advantages.
According to this approach DCs will be the type of resources that are
important to nourish and develop in young ?rms as well (Wu, 2007). Zahra
et al. (2006) explain that DCs must be well targeted and deployed in order
to achieve strategic goals. Managing these capabilities is therefore critical
in order for the organization to bene?t. DCs develop in response to a
variety of conditions, which implies that new ?rms are more likely to deploy
other DCs than more well established ?rms (Zahra et al., 2006). Since
earlier research on DCs is very limited when it comes to new ventures and
young ?rms (Newbert, 2005; Zahra et al., 2006), more insight is needed in
order to fully understand how they might be developed in these types of
?rms.
It should be noted that there is still a debate on what DCs are and how
they should be measured. For instance, some researchers claim that it might
be hard to distinguish between the DC itself and the result of a DC since
most studies are cross-sectional (Zahra et al., 2006). To clarify parts of the
DC concept scholars have pointed out the importance of distinguishing
between various levels of capabilities (Zollo and Winter, 2002; Winter,
2003; Arthurs and Busenitz, 2006). They stress that operational capabilities
(zero-order capability) are dedicated to the operational functioning of the
?rm, whereas DCs (?rst order capabilities) are directed toward changing
the operational capabilities like production processes or marketing routines
(Helfat and Peteraf, 2003; Winter, 2003). Operational capabilities are
explained as ‘how to earn a living now’, whereas DCs are explained as ‘how
to change your operational routines’. Cepeda and Vera (2007) also argue
that there exists an in?nite regress problem that makes it di?cult to iden-
tify the original source of competitive advantage since there always seems
to be a capability behind a capability. Even though these discussions show
that the DC approach is still in its infancy, the many contributions also indi-
cate that DCs are recognized as an ultimate source of competitive advan-
tage within strategy research (Arthurs and Busenitz, 2006; Cepeda and
Vera, 2007).
226 The dynamics between entrepreneurship and small businesses
To sum up the discussion on DC the de?nition by Zahra et al. (2006,
p. 91) is adopted and highlighted as an up-to-date version of the concept.
It says that DCs are ‘the abilities to recon?gure a ?rm’s resources and rou-
tines in the manner envisioned and deemed appropriate by its principal
decision-maker(s)’ p. 91. It contains the ?rms’ ability to change routines
and process in order to obtain superior performance. Actual DC categories
to measure are business networks, strategic orientation, educational rou-
tines and research (Teece et al., 1997; Eisenhardt and Martin, 2000),
resource acquisition (that is, market information, ?nancial capital, external
knowledge), resource recon?guration and integration, learning networks
and strategic path aligning (Borch and Madsen, 2007).
ENTREPRENEURSHIP IN FIRMS
Entrepreneurship as a phenomenon has been studied for generations, and
there is quite a body of knowledge accumulated in this area showing that
entrepreneurship might be de?ned in a variety of ways covering wider or
narrower perspectives (Davidsson, 2004). Dominant de?nitions of entre-
preneurship are built around the exploration and exploitation of opportu-
nities, where the pursuit of opportunities is an important component
(Stevenson and Jarillo, 1990; Shane and Venkataraman, 2000). Important
issues are also the creation of new resources and recombination of existing
resources in order to develop and commercialize new products and move
into new markets (Ireland et al., 2001). Entrepreneurial e?orts in an organ-
izational context have received increased attention among scholars in the
last two decades, due to the possible in?uence on renewal and performance
in ?rms (Miller, 1983; Covin and Slevin, 1991; Lumpkin and Dess, 1996;
Wiklund, 1999; Wiklund and Shepherd, 2003).
There are many variations in how entrepreneurial e?orts are labelled and
de?ned within an organizational context. Terms often used are intrapre-
neurship (Antoncic and Hisrich, 2003), strategic renewal (Sharma and
Chrisman, 1999), corporate entrepreneurship (Zahra and Covin, 1995),
entrepreneurial orientation (Lumpkin and Dess, 1996) and so on. The
common element can be summarized and found in Sharma and Chrisman’s
(1999, p. 18) de?nition stating that corporate entrepreneurship includes
‘the process whereby an individual or a group of individuals, in association
with an existing organization, create a new organization or instigate
renewal or innovation within that organization’. Thus in addition to requir-
ing individuals with particular entrepreneurial behaviour within the ?rm,
the ?rm also must possess an organizational environment that both toler-
ates and supports these activities (Elfring, 2005). The various labels also
Linking entrepreneurial orientation and dynamic capabilities 227
show its close link to strategic management and strategic decision-making.
Conceptualizing entrepreneurship as a process that occurs in an organiza-
tional setting has signi?cantly advanced the ?eld, but might have led to a
more unclear distinction between the management and entrepreneurship
?eld (Morris et al., 1994).
Entrepreneurial Orientation
Within the corporate context, entrepreneurial orientation (EO) has
emerged as an important concept for investigating the entrepreneurial mind
of ?rms and its possible in?uence on strategic processes and performance
(Rauch et al., 2004). As Lumpkin and Dess (1996, p. 136) state, ‘Firms that
want to engage in successful corporate entrepreneurship need to have an
entrepreneurial orientation (EO)’. They de?ne EO as ‘the processes, prac-
tices, and decision-making activities that lead to new entry’, and further
that it ‘involves the intentions and actions of key players functioning in a
dynamic generative process aimed at new-venture creation’. The reviewed
literature shows that EO is often described as the mindset of ?rms involved
in the pursuit of new ventures and used as a measure to characterize a set
of related processes including a variety of activities within the ?rm.
The ?eld seems to agree to conceptualize EO as having from three (Covin
and Slevin, 1989; Wiklund, 1999; Madsen, 2007) to ?ve dimensions
(Lumpkin and Dess, 1996; Hughes and Morgan, 2007), which might vary
independently of each other. These are 1) a propensity to act autonomously;
2) a willingness to innovate; 3) a willingness to take risks; 4) a tendency to
act aggressively towards competitors; and 5) a proactivity towards market
opportunities (Lumpkin and Dess, 1996). Here autonomy is understood as
the independent actions undertaken by entrepreneurial leaders or teams to
bring about a new venture and see it realized. The innovative dimension cap-
tures the tendency toward embracing and supporting creativity and experi-
mentation, technological leadership, novelty and R&D in the development
of products, services and processes. The risk-taking dimension re?ects an
acceptance of uncertainty and risk-related activities and is typically char-
acterized by resource commitment to uncertain outcomes and activities.
Competitive aggressiveness conveys the intensity with which a ?rm chooses
to compete and its e?orts to surpass competitors. Finally proactiveness is
related to a forward-looking perspective where companies actively seek to
anticipate opportunities to develop and introduce new products in the
market in order to obtain ?rst mover advantages and shape the direction of
the environment. It di?ers from the competitive aggressive dimension in that
it is not directed towards competitors but relates to market opportunities
(Lumpkin and Dess, 1996).
228 The dynamics between entrepreneurship and small businesses
Studies have also shown that the relationship between EO and perfor-
mance might be contingent on other environmental and/or organizational
factors (Covin and Slevin, 1989; Lumpkin and Dess, 1996). All of the
dimensions above may thus not be present or important in a new venture.
Research has shown that which of them are most dominant in a business
often depends on factors within the business itself or within the business
environment, for example type of industry (Lumpkin and Dess, 1996).
How a business chooses to act towards competitors and which methods are
likely to be most successful may therefore depend on the type of industry
the ?rm belongs to as well as their market situation. Also the necessity to
innovate or the degree of innovation might depend on how the ?rm posi-
tions itself within its environment. Lumpkin and Dess (1996, p. 137) there-
fore consequently argue that ‘(a) the relationship between EO and
performance is context speci?c and (b) the dimensions of EO may vary
independently of each other in a given context’.
Important questions among entrepreneurship scholars have focused on
the main content of EO, how it should be measured and how it in?uences
performance and processes in ?rms. Compared to the debate about DCs
there seems to be more agreement about the ingredients of the EO concept
and more standard measurement tools are developed. The discussion of the
impact of EO on performance continues (Smart and Conant, 1994; Hughes
and Morgan, 2007) and research e?orts seem to be more directed towards
determining the impact of EO with di?erent ?rm and environmental con-
texts (Wiklund and Shepherd, 2005). This indicates a need for more empir-
ical work on how EO in?uences the internal resource con?guration and
on the relationship between EO and performance within di?erent ?rm
contexts.
Others suggest that major shortcomings of the EO-construct are on the
management side and on risk handling (Covin et al., 2006; Jun, 2006). Jun
refers to de?nitions by Gartner (1990) and Morris et al. (1994) saying that
‘Entrepreneurship contains the function of management dealing with allo-
cation of resources, exploring new market, handling risk and uncertainties,
organizing responsibility and e?ciency’. Based on this de?nition he regards
the issue of how entrepreneurs implement their management and organ-
ization as an important question in the scope of EO. He therefore proposes
a new dimension called management professionalism as an important
aspect of EO. Furthermore he suggests exchanging the dimension of ‘will-
ingness to take on risk’ by ‘how risk is handled’ in order to better account
for how well the ?rms are prepared for facing risk rather than merely how
willing they are to take on risk.
The reviewed literature on EO shows that it is a concept that includes
activities related to identi?cation of new opportunity and subsequent
Linking entrepreneurial orientation and dynamic capabilities 229
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p. 199). Most studies carried out in the ?eld have centred on measuring
three dimensions of EO; innovativeness, proactiveness and risk-taking
(Covin and Slevin, 1989; Wiklund and Shepherd, 2003, 2005). Two addi-
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EO and the DC ?eld.
TOWARDS AN INTEGRATIVE APPROACH
Comparing the EO and DC Approach
Scienti?c literature shows that research on EO and DC are mainly carried
out in separate studies. Examples of those are shown in the previous section
and in Tables 11.1 and 11.2. The concepts have some obvious connecting
points, and research models often used in studies of EO and DC share
many similar contingencies. Figure 11.1 builds on Lumpkin and Dess’ con-
ceptualization of the EO–performance relationship (1996, p. 152) and is
extended to include the DC perspective. The dotted lines illustrate the
centre of attention in this chapter and where the need for more research is
addressed. Studies have shown that both environment and organizational
factors are likely to intervene with the relationship between EO and per-
formance as well as between DC and performance (Lumpkin and Dess,
1996, 2001; Eisenhardt and Martin, 2000). Research in these separate ?elds
suggests that both DC and EO characteristics vary depending on environ-
mental factors and ?rm context (Lumpkin and Dess, 2001; Aloulou and
Fayolle, 2005). Eisenhardt and Martin’s (2000) work showed that e?ective
patterns of dynamic capabilities might vary among ?rms due to di?erences
in market situations and dynamism. Dynamism and complexity relates to
the degree of uncertainty facing an organization, whereas muni?cence
signals the ?rm’s dependence on the environment for resources. They found
that in high velocity markets dynamic capabilities take on a di?erent char-
acter than in traditional markets, which means that the type of DC which
is both necessary and crucial to develop is likely to depend on the ?rm’s
environment.
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and competitive advantage are important arguments for why managers
should pay attention to EO and DC in their ?rm. These aspects are also
re?ected in empirical studies on EO as well as on DC. The main output vari-
ables used in empirical studies for both concepts seem to be performance
232 The dynamics between entrepreneurship and small businesses
233
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(?rst sales, international performance, ?nancial performance, and so on),
innovative strategies and operational capabilities (Tables 11.1 and 11.2; Dale
Meyer et al., 2002). Researchers emphasize that performance is a multidi-
mensional construct that can be measured in many ways (Morgan and
Strong, 2003). The e?ect of EO and DC on di?erent types of performance
measures is thus also likely to vary. It is therefore important that this
measure re?ects the ?rm goals and desired outcome. Various measures of
performance might also compete, depending on ownership, type and size of
the ?rm (Lumpkin and Dess, 1996). Some entrepreneurial e?orts and sub-
sequent resource investments may lead to a negative e?ect on short-term
performance, but they might be important for building a competitive advan-
tage and improving long-run performance. It should also be noted that not
all aspects of the EO and DC phenomena are always inherently valuable,
since they also need to be applied properly and ?tted to organizational needs
and environmental factors in order to optimize performance and competi-
tive advantage. As seen in Table 11.1 and 11.2, the dominant unit of analy-
sis in both EO and DC studies is the ?rm.
The innovative dimension of EO is likely to be partly intertwined with
the resource integration and recon?guration aspect of DC. The de?nition
of DC is centred on the ?rm’s ability to change routines or to do things in
new ways in order to use resources, new knowledge and so forth more
e?ciently. This shows a close connection to the innovation dimension of
EO. DC scholars have also identi?ed innovation as an important capabil-
ity that refers to the organizations’ ability to develop new products or
processes (Rangone, 1999). In particular Antoncic and Hisrich (2003) point
out that this part of the capability construct is close to the EO construct in
?rms. They state that ‘Intrapreneurial activities and orientation related to
the creation of new products and processes can be viewed as a manifesta-
tion of innovative capabilities’ (Antoncic and Hisrich, 2003, p. 12).
Learning is an important part of developing DC (Teece et al., 1997).
Entrepreneurial e?orts within ?rms might be perceived as a precondition
that leads to learning and resource integration. As such there is an impor-
tant link between entrepreneurship and learning, where entrepreneurial
activities may create disruptions that are part of the learning process
(Antoncic and Hisrich, 2003). Also the extrovert culture embedded in
proactive orientation is likely to facilitate information acquisition and uti-
lization (Keh et al., 2007). This is an important part of the learning process
and thus the recon?guration capacity of DCs.
The reviewed literature on EO and DC shows that both connect to the
ability to make strategic decisions and create competitive advantages. In the
?eld of strategic management and the resource-based view we have seen
that dynamic capabilities have emerged as crucial resources for future
234 The dynamics between entrepreneurship and small businesses
development and performance of the ?rm. So is the case with entrepreneur-
ial orientation within the ?eld of entrepreneurship. As an example Rauch
et al. (2004, p. 1) explain that EO might be viewed as a ‘?rm-level strategy-
making process that ?rms use to enact their organisational purpose, sustain-
ing their vision and create competitive advantage(s)’. Building a strong EO
might thus be a strategic choice for the ?rm. This strengthens the arguments
for an integrative approach exploring their relationship more explicitly. This
is also one of the philosophies behind the research stream of strategic entre-
preneurship (Ireland et al., 2003; Barney and Afrikan, 2001). This approach
addresses the close link between the ?elds but does not discuss explicitly how
the concepts of EO and DC might be related.
The above discussions referred to so far show that there are many similar
characteristics in EO and DC, but it is important to keep in mind their key
di?erences. Structure and systems are important elements of DC but not
in EO. Antoncic and Hisrich (2003, p. 20) state that entrepreneurship
‘includes non-product-market emergent activities and does not have relat-
edness, coherence and synergy as central focuses’. Both phenomena are
similar in so far as they represent investments to the organization’s resource
base. However, opportunity identi?cation and disruptiveness and auton-
omy are keywords that are speci?c for EO but not for DC. These elements
might lead to unpredictable and uncoordinated entrepreneurial actions
that might not be optimal if they are not organized in a proper way. Arthurs
et al. (2006, p. 199) emphasize that ‘whereas the identi?cation of a new
opportunity and the subsequent investments to the resource base are the
hallmark of entrepreneurial capabilities, the adjustment and recon-
?guration of the resource base in conjunction with an existing opportunity
are the hallmark of dynamic capabilities’.
The discussion above illustrates many interesting connecting points
between the dimensions EO and DC. In separate studies they have yielded
signi?cant ?ndings providing a key to understanding resource reco-
n?guration, new entry and value creation in ?rms. However, in the few con-
tributions where both concepts are used there is no fundamental discussion
relating the two concepts. To address this gap in the literature ?ve alterna-
tive models are proposed in order to illustrate the possible relationships and
as a direction for future research. Further investigation along these lines is
likely to establish a deeper understanding of capability development in
entrepreneurial ?rms in the future.
Alternative Models Depicting Possible Relationships
Figure 11.2 proposes ?ve di?erent models to illustrate possible links
between EO and DC. The ?gures are kept simple in order to focus on the
Linking entrepreneurial orientation and dynamic capabilities 235
236 The dynamics between entrepreneurship and small businesses
Figure 11.2 Conceptualizations of possible relationships between EO
and DC
Model 1: EO and DC are weakly linked or unrelated
Model 2: EO drives DC
Model 3: DC drives EO
Model 4: EO and DC have a reciprocal relationship
Model 5: EO is a DC
Entrepreneurial
Orientation
Dynamic
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Dynamic
Capabilities
Entrepreneurial
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Entrepreneurial
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Dynamic
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Dynamic Capabilities
Entrepreneurial Orientation
Entrepreneurial
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Dynamic
Capabilities
relationship between EO and DC. It should be noted that the suggested
relationships are also likely to be in?uenced by organizational factors (?rm
resources, age, size and so on) and environmental conditions. The illustra-
tion follows an outline used by Covin and Miles (2007) in investigating
the relationship between corporate venturing and business strategy. The
di?erent models are based on logical arguments and on how EO and DC
are depicted in strategic management and entrepreneurship literature. Each
of the models has implications for how ?rms might develop EO and DC in
order to cope with challenging environments and to continue developing
competitive advantages.
Model 1: EO and DC are weakly linked or unrelated
DC and EO might exist as independent phenomena within organizations.
For instance EO activities might be purely random and ignored by the
organization. Employers might discover new ways of doing things that rep-
resent improved earnings, but are not encouraged to bring this forward to
the management. By ignoring this opportunity the ?rm misses the oppor-
tunity to gain on self-generated valuable ideas (Covin and Miles, 2007).
This also indicates that EO and DC explain a unique proportion of ?rm
performance (Dess and Rasheed, 1993). In one way this illustrates how
studies concerning EO and DC have traditionally been carried out. The two
concepts have usually been investigated in separate studies in their respec-
tive ?elds and not considered in relation to one another.
Model 2: EO drives DC
In this model EO drives the building of appropriate DCs in ?rms. An
underlying logic supporting this model is that in order to launch a new
entry ?rms need and will bene?t from developing and applying DCs to
facilitate necessary changes to act on ideas. This is likely to be the situa-
tion for young ?rms where organizational systems are yet at their embry-
onic stage (Wu, 2007; Hughes and Morgan, 2007). Thus, appropriate DCs
are likely to intervene with the relationship between EO and performance
and thus further increase value creation from entrepreneurial activities.
Also the two dimensions of EO, competitive aggressiveness and auton-
omy put forward by Lumpkin and Dess (1996), mobilize continuous
competitor scanning and assessment as well as the freedom of employees
to be self-directed, explore opportunities and advocate new ideas (Hughes
and Morgan, 2007). These elements are likely to be fundamental
for building ?exibility and alertness to environmental changes and
market signals (that is DCs), enabling the ?rm to recon?gure its activities
and actions quickly (Grewal and Tansuhaj, 2001; Hughes and Morgan,
2007).
Linking entrepreneurial orientation and dynamic capabilities 237
This model illustrates a relationship investigated by Gri?th et al. (2006),
Matsuno et al. (2002) and by Jantunen et al. (2005). Gri?th et al. (2006,
p. 19) describe entrepreneurial proclivity (that is orientation) as a manage-
ment orientation ‘which drives the accumulation of knowledge and the
development of dynamic capabilities’. They describe EO as a factor pro-
ceeding and in?uencing DC. They claim that the management orientation
of entrepreneurial proclivity aids the accumulation of knowledge resources,
and might also help (as well as hinder) the conversion of these resources
into dynamic capabilities. Jantunen et al. (2005) also claim that EO
in?uences DC in their study on international performance of entrepre-
neurial ?rms. They postulated that EO is likely to be an important factor
for opportunity recognition in new markets and therefore also has a posi-
tive e?ect on international performance. This supports an integrative
approach where EO helps ?rms in building appropriate DCs in order to
enhance performance.
Model 3: DC drives EO
Model 3 illustrates a relationship suggested by Madsen et al. (2006) in their
study of the role of dynamic capabilities and intangible resources in devel-
oping entrepreneurial orientation. This study considers DC to be an
antecedent that drives development of EO, and in this way indirectly
in?uences the ?rm’s competitive advantage through in?uencing EO. The
logic behind this direction of the relationship is that DC can aid the ?rm in
developing a strategic desired EO in order to recon?gure resources and
improve performance of the ?rm. The direction in which DC in?uences EO
can also be explained by DC being the ability to perform processes and
activities, and EO being the activity itself. Another argument supporting
this view is that a ?rm’s entrepreneurial capacity will be partly limited by
its resource base. Firms with abundant resources are likely to have more
capacity than those with sparse capacity to engage in entrepreneurial activ-
ities (Covin and Slevin, 1991; Aloulou and Fayolle, 2005). Thus ?rms with
limited resources and capabilities (DCs) are less likely to take on risk and
act on new opportunities in the market compared to ?rms with more
resources; in this aspect DC in?uences the degree of EO.
Model 4: EO and DC have a reciprocal relationship
This model depicts a relationship where causality might ?ow in both direc-
tions. EO might drive the development of DCs, and these DCs might direct
the search and inventions (EO) in new directions that are more strategically
desirable for the ?rm (Ireland et al., 2003). This enables the ?rm to contin-
ually renew itself in order to gain new competitive advantage in dynamic
markets. Their reciprocal relationship might make it hard to determine the
238 The dynamics between entrepreneurship and small businesses
origin of e?ects. Elements of this model seem to ?t with the strategic entre-
preneurship perspective, where the purpose is to ‘connect the creation
aspect of entrepreneurship with the performance orientation of strategic
management’ (Dale Meyer et al., 2002, p. 19).
Model 5: EO is a DC
Model 5 pictures EO as a desired DC in itself. As noted earlier the border-
line between EO and DC is especially vague in studies on capacity and
learning of innovation. With respect to these aspects EO and DC seem to
be closely intertwined in such a way that it makes little sense to separate
them as di?erent phenomena; one is part of the other or vice versa.
Examples might be the innovative dimension and learning processes on
aspects connected to the scan and search for information. This perspective
is in line with Bhuian et al. (2005) who consider entrepreneurship a DC.
They claim that these two phenomena are closely intertwined and argue
that ‘without entrepreneurship businesses . . . would neither be dynamic or
adaptive’ (Bhuian et al., 2005, p. 10). This approach might be useful when
the investigated dimensions of EO and DC are likely to be closely related
and hard to separate in time and origin.
Theoretical and empirical literature on EO and DC show that there might be
several possible directions related to the relationships between the two con-
cepts. Both concepts encourage ?exibility and change in organizations: DC
in a more systematic and planned way. Since most studies have been carried
out separately for the two concepts, the relationship between them is still
unclear. The few studies which include both concepts seem to agree that EO
aids the building of appropriate DCs. However, other studies perceive EO as
being a DC and vice versa and are thus quite confusing with respect to the
relationship between the two perspectives. In order to clarify this relationship
further, the models above could serve as a framework for future studies.
CONCLUSION AND IMPLICATIONS FOR FUTURE
RESEARCH
Research within ?elds of strategic management and entrepreneurship
shows that building dynamic capabilities (DC) and being entrepreneurially
oriented (EO) are widely recognized as important for renewal, change and
competitive advantage in ?rms. However, little is known about the rela-
tionship between EO and DC even though they are likely to coexist in many
?rms where there is a desire to optimize output. There seems to be a ten-
dency towards congruence and overlap between EO and DC, but this has
Linking entrepreneurial orientation and dynamic capabilities 239
not been discussed explicitly in the literature. Literature shows that both are
connected to innovation capacity and learning in ?rms and include ele-
ments of resource integrations and recon?guration. The di?erence might
lie in the fact that they cover di?erent parts or dimensions of the aspects
and processes that are under investigation. This is not evident and this dis-
cussion nevertheless seems to be lacking in the scienti?c literature. Future
research should address this possible link in order to re?ne the content of
EO and DC and to provide a greater understanding on how they might
interact in ?rms.
These issues are especially important for new and small ?rms facing new
challenges. There is little research on how small ?rms develop entrepre-
neurial e?orts and DCs to address necessary changes (Dale Meyer et al.,
2002). Small ?rms often have few resources to handle change and might
face the risk of being stuck in the traditional way of operating the business.
In this situation they need to strengthen their ability to change and pursue
new business opportunities. This means that adopting an entrepreneurial
oriented mind and building new dynamic capabilities are factors likely to
be of great importance for their development. These issues call for more
longitudinal empirical studies in order to understand the importance and
development of EO and DC as well as their possible linkage in small ?rms
facing changing environments.
There is also little knowledge on how new ?rms develop systems and rou-
tines to secure value creation from entrepreneurial explorations and ideas.
Most contributions in the DC ?eld seem to be conceptual and the empirical
work is mainly devoted to established ?rms (Newbert, 2005; Zahra et al.,
2006). New ?rms normally lack experience in how to proceed from the ?rst
stage of their development. How should they develop and integrate systems
and routines (DCs) in order for their ?rst success and value-creating ideas
to proliferate? For instance high risk-taking ?rms might need to handle this
risk in order to reduce the possibility of negative consequences.
It should also be noted that the strategic management ?eld still lacks con-
sensus on DC as a construct and how it should be measured. With the
present lack of standard measurements tools, studies are less comparable,
and thus less useful in terms of the need to establish a common and well-
de?ned theory. This indicates a knowledge gap on the con?guration of DC,
and future research should also continue to address these questions.
Important questions among entrepreneurship scholars have focused on
determining the main contents of EO, how it should be measured and
how the di?erent dimensions of EO in?uence performance and processes
in ?rms. Compared to the debate about DC there seems to be more agree-
ment about the elements of the EO concept and more standard measure-
ment tools have been developed. However, an emerging issue in the
240 The dynamics between entrepreneurship and small businesses
EO ?eld is how the EO construct relates to management issues. For
instance how should risk and disruptiveness arising from entrepreneurial
e?orts be handled? This discussion also relates to the link between EO
and DC.
Five models have been proposed as a departing point for empirical and
theoretical discussion. Further insight into the relationship between EO
and DC is likely to yield valuable insight for a broadened scienti?c ?eld. It
will enable a more compatible understanding of the two concepts and add
knowledge about their interrelatedness as well as their importance for
building new resources and value for ?rms. More integrative research on
these issues is also likely to improve calibration of both concepts and gen-
erate more in-depth insight on how EO and DC in?uence the wealth cre-
ation processes and performance in ?rms.
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244 The dynamics between entrepreneurship and small businesses
12. The impact of global value chains
on Andalusian tourism SMEs
Pilar Tejada and Francisco Liñán
INTRODUCTION
The present process of globalization stresses the need to continuously seek
international competitiveness. Thus, ?rm strategies have been rapidly
evolving over the last few years. Technological advances have exerted a crit-
ical in?uence on this process, modifying the traditional consideration of
competitive advantage (López Domínguez, 2005). This has led to global
strategic designs, as is re?ected in the con?guration of global tourism value
chains (GTVCs).
Within the tourism sector, the following elements imply an increasingly
competitive environment: globalization of tourism markets, greater con-
sumer sovereignty, changing ?rm strategies, introduction of new technolo-
gies in the tourism industry, and the transformation of marketing channels
(Go and Pine, 1995). Tourism ?rms are forced to restructure thoroughly to
adapt to this new environment. Main strategies in this sense are ?rm
mergers, introduction of new agents in the market, new management
models, and internationalization (Ioannides and Debbage, 1997; Bywater,
1998).
These changes are forcing all tourism actors to adapt to the globalization
process. Whether small ?rms and entrepreneurs in this sector win or lose
from this process depends on their integration into the global tourism value
chain (GTVC). Local suppliers in tourism destinations such as Andalusia
need to recognize the relevance of this transformation and actively join
GTVCs. Therefore, our ?rst main objective in this chapter will be to under-
stand the con?guration of the global value chain in the tourism sector. The
relationships established among the di?erent participating agents will be
studied. As a second objective, we will analyse the position of Andalusian
tourism ?rms in global value chains. For this reason, several case studies
have been carried out on Andalusian hotels and travel agencies.
This chapter has bene?ted from the participation of the authors in
the research project ‘The role of SMEs in the global tourism industry’,
245
promoted and directed by the Organisation for Economic Co-operation
and Development (OECD).
GLOBAL TOURISM VALUE CHAINS
The term ‘value chain’ could be de?ned as the set of activities required to
transform raw materials into ?nished production and their sale. All the
activities ranging from the very conception of the product, going through
production and marketing, distribution and even disposal or recycling after
use comprise the value chain (Kaplinsky and Morris, 2001). The essential
idea in value chains is that each link adds value to the product (Gere?,
1994, 1999; Kaplinsky and Readman, 2001; UNIDO, 2002). In reality,
however, a large number of links are present in each value chain.
Nowadays, it is very rare for a single ?rm to perform all the activities
needed from the conception of the product to ?nal delivery to consumers.
The di?erent activities comprised in each value chain may be carried out by
?rms located in di?erent countries. Kaplinsky and Morris (2001) refers to
this as ‘extended value chain’.
Porter (1985) introduced the term ‘value chain’, which has become a
basic tool for ?rm analysis. Porter tries to systematically explore all the
activities performed within the ?rm, and their interactions. According to
Porter (1985, 1990), the overall value-creating logic of the value chain is
valid in all industries. This would include its generic categories of activities.
However, Stabell and Fjeldstad (1998) experienced serious problems in
applying the value chain model to more than two dozen ?rms from a variety
of industries. They agree with Armistead and Clark (1993) in that the
value-chain framework is less suitable for the analysis of activities in service
industries, such as insurance or banking. Therefore, they suggest three dis-
tinct generic value-con?guration models: the value chain, the value shop
and the value network.
This ‘value network’ term is similar to that of global value chain (GVC),
since ‘?rms that can be modeled as value networks rely on a mediating tech-
nology to link clients or customers who are or wish to be independent. The
mediating technology facilitates exchange relationships among customers
distributed in space and time. The ?rm itself is not the network. It provides
a networking service’ (Stabell and Fjeldstad, 1998, pp. 427).
Similarly, Dyer and Singh (1998) suggest that a ?rm’s critical resources
may span ?rm boundaries and may be embedded in inter?rm resources and
routines. They argue that an increasingly important unit of analysis for
understanding competitive advantage is the relationship between ?rms.
They identify four potential sources of interorganizational competitive
246 The dynamics between entrepreneurship and small businesses
advantage: relation-speci?c assets, knowledge-sharing routines, comple-
mentary resources/capabilities and e?ective governance.
For the speci?c ?eld of new communication technologies, Amit and Zott
(2001) develop a model of value-creation sources in e-business. They
studied 59 American and European e-businesses. These case-study analy-
ses led them to suggest that the value creation potential of e-businesses
depends on four interdependent variables: e?ciency, complementarities,
lock-in, and novelty.
According to literature, then, it may be argued that the unit of analysis
for competitive advantage shifts from the ?rm to the whole set of rela-
tionships established between ?rms. The concept of global value chain, in
this sense, comprises more than the relationships established within the
?rm. Even multinational corporations with subsidiaries in several coun-
tries cannot carry out the whole production process themselves. On the
other hand, global value chains consider linkages among di?erent ?rms
not only at national, but also international levels. It is, therefore, a wider
concept than that of the ‘?rm value chain’ (Porter, 1990) or ‘?lière’
(OECD, 2005b).
At present, however, the concepts and the methodology of the GVC
approach have mainly been applied to study industrial activities (Gere?,
1999; Humphrey and Schmitz, 2002; Schmitz, 1995, 1999; Rabelloti, 2004).
Nevertheless, some attempts have already been made to use them to analyse
the tourist sector (Clancy, 1998, 2002).
In this sense, tourism nowadays is one of the most international-
ized sectors in the world economy. According to the World Tourism
Organization (WTO), international tourismis the main source of exports in
the world. It is also the fastest growing sector in terms of income generated.
In 2005, there were a total of 808 million international tourists. Income
generated in 2004 was some $500 billion. These ?gures show the importance
of this activity and its level of exposure to international changes such as
globalization.
Impact of Globalization on Tourism
Global economic conditions and their transformations are one of the main
challenges faced by the tourism industry, as traditional patterns are being
increasingly changed. Growing international competition is transforming
this activity in a global industry and accelerating the creation of multina-
tional tourism organizations. According to Smeral (1998), the implications
of globalization a?ect both the supply and demand of tourism in several
ways. However, compared to other industries, very little research has been
done so far on GTVCs (OECD, 2005c).
The impact of global value chains on Andalusian tourism SMEs 247
On the demand side, tourism demand is becoming increasingly global
due to several factors: growing income levels; European population
ageing; saturated traditional destinations; appearance of new interests and
changes in ways of living. Thus, advances in information and communi-
cation systems have made tourists more experienced and demanding
(Vanhove, 1998). On the other hand, the high elasticity of tourism demand
with respect to income will lead to a very rapid growth of global tourism
demand in the near future (WTO, 1997; Bull, 1994). Similarly, dropping
air transport costs widens the access to new destinations at lower prices.
This opens the international tourism market for relatively low-income
tourists.
On the supply side, the e?ect of computerized information and reserva-
tion systems means that suppliers of tourism services act in a global
market. Airlines, hotel chains and tour operators develop their activities
throughout the world. Global distribution systems (GDS) give them the
ability to cover most of the international tourism demand. At the same
time, alliances, cooperation or mergers, in many instances urged by the need
to share the cost of technological systems implemented, act as an addi-
tional globalization force. The use of information and communication
technologies together with di?erent integration processes enlarges the
tourism value chain so that we can now talk of GTVCs.
Finally, new tourism destinations are being developed, many of them in
developing countries, thanks to large investments by multinational corpo-
rations. These investments are creating the infrastructure needed (at these
destinations) for di?erent tourism industry agents to expand. Given the
almost perfect substitutability existing between several tourism destina-
tions, price becomes an essential factor in determining their competitive-
ness. Having low unit labour costs turns out to be highly relevant, either
through low wages or high productivity. Given the importance that per-
sonal services have, the challenge for these new destinations is achieving
high productivity to keep costs low, while at the same time o?ering high
quality services to the customer/tourist.
For ?rms, the global reach of tourism activities may have both advan-
tages and disadvantages. It may help them improve their price/quality rela-
tionship and their national and international competitiveness through
economies of scale. On the other hand, centralized management of global
corporations means that innovation and knowledge generation is carried
out at the parent company. Therefore, the subsidiary’s role is limited to the
implementation of the parent’s strategy, instead of developing its own
innovation processes (Smeral, 1998).
It has become increasingly common for large tourism ?rms located in
developed countries to specialize in the activities generating higher value
248 The dynamics between entrepreneurship and small businesses
added within the tourism value chain, such as product design or market-
ing. In contrast, those activities yielding lower pro?ts and bearing stronger
competition are carried out by ?rms from less-developed countries with
lower labour costs. This is the case with many so-called ‘emerging destina-
tions’ such as Southeast Asia, for instance.
Con?guration of Global Tourism Value Chains
Tourism activities have traditionally been highly fragmented and geo-
graphically disseminated. There have always been major di?culties in
matching supply and demand. Therefore, mediation has had a crucial role
in tourism. A large proportion of ?rms operating in this sector, especially
those located in and around tourism destinations (hotels, restaurants, and
so on), tend to be small. Customers can come from very diverse origins and,
quite often, considerably distant ones. For this reason, substantially large
investments in advertising and communications are needed to contact
potential customers. Moreover, these ?rms normally bear high ?xed costs,
forcing them to maximize occupancy rates throughout the year.
Tour operators have been a satisfactory solution to these problems. On
the one hand, they have enough resources to face mass advertising cam-
paigns that can reach many consumers in di?erent parts of the world. On
the other hand, as they channel large numbers of tourists, they can ensure
permanently high occupancy rates, lowering uncertainty and demand
?uctuations. Therefore, the traditional tourism value chain consists of
four stages: suppliers of basic tourism services; tour operators or whole-
sale agents; travel agencies or retail trade; and ?nally consumers or
tourists.
The role of consumers within the value chain has been traditionally
downplayed. Value chain models frequently restrict value creation to the
stages of innovation, production and product delivery done by the primary
supplier or the intermediaries. However, the introduction of Information
and Communication Technologies (ICT) makes it possible for the supplier
to market its products directly to the consumer.
A useful approximation to the present con?guration of GTVCs is pre-
sented in Figure 12.1. The most relevant agents involved in the tourism
activity are shown (tour operators, travel agencies, global distribution
systems, reservation centres, hotels, destination management organizations
(DMOs), and so on), together with their most signi?cant relationships.
The primary supply is found at one end of the value chain. This
includes ?rms such as hotels and restaurants, which are mostly small and
medium-sized enterprises (SMEs). Airlines are situated at the same level,
together with other transport companies. One important di?erence,
The impact of global value chains on Andalusian tourism SMEs 249
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though, is that these ?rms are usually large. However, these suppliers
share some common characteristics, which make these activities prone to
price wars and requiring high occupancy rates in order to absorb ?x costs
and be pro?table:
? Need for signi?cant investments in ?xed assets.
? The supply is considerably rigid, as the number of beds or seats
cannot be modi?ed in the short run.
? Fixed costs are quite high. They represent some two-thirds of the
total cost in airlines, and around 40 per cent in hotels (Sinclair and
Stabler, 1998), whereas marginal costs are very low (the cost of
including an extra passenger in a plane with spare seats, or an extra
customer in a hotel with empty rooms, is close to zero).
? Production is of a highly perishable nature, as it may not be stored.
Any empty room in a hotel results in forgone income.
Tourism intermediaries are located in the middle part of Figure 12.1, and
they tend to be quite diverse. On the right-hand side of the ?gure most tra-
ditional intermediaries are presented, together with some new ones. These
newer agents have appeared basically as a consequence of the new distrib-
ution channels opened by the Internet revolution.
Within this middle link, tour operators can be highlighted. Sheldom
(1994) considers them to be one of the essential pillars of the development
of mass tourism. There is theoretical discussion regarding their role. Some
authors highlight their function as being mediators between tourism sup-
pliers (transport, accommodation, catering and so on) and retailers or ?nal
consumers (Sheldom, 1986; Yale, 2001). However, other researchers stress
their role as assemblers of basic supplies, transforming these supplies into
totally di?erent products. The tourist package is then marketed under its
own brand and, therefore, the tour operators could be considered not only
as intermediaries, but as producers (Holloway, 1989; González Soria, 1999).
The tour operator’s level is dominated by a small number of large ?rms.
They have been increasing their market power through di?erent integration
processes, both vertical (hotels, airlines, travel agencies) and horizontal
(merging with competitors). Therefore, it may be said that these companies
exert the governance of GTVCs, as they have the capacity to impose con-
ditions on the other elements along the chain. This high level of concen-
tration is most evident in the European tourism industry (Figure 12.2). In
this sense, the option to buy a tourist package is more common among
European tourists than American tourists.
However, along with these large ?rms, an important number of small and
medium-sized enterprises do exist. According to Sinclair and Stabler
The impact of global value chains on Andalusian tourism SMEs 251
(1998), this can be explained by the high degree of maturation reached by
the tourism market, allowing for the possibility of increased segmentation
and di?erentiation. More recently, a tendency towards multisegmentation
is found, employing two or more criteria to de?ne a demand segment,
instead of the classical segmentation based on only one factor.
For this reason, large tour operators concentrate on mass production of
tourist packages with very similar characteristics, which are highly substi-
tutable among themselves. These packages do not satisfy the preferences of
speci?c segments of the demand (market niches), which are served by
smaller tour operators, specialized in the production and marketing of
highly speci?c products.
Next, connecting tour operators with either ?nal customers or primary
suppliers, we can ?nd other traditional tourism intermediaries, the travel
agencies or retailers. Their main function is marketing tourist packages
made by tour operators or products of other suppliers, such as airlines or
hotels. They usually receive a commission on each sale. At the same time,
they provide customers with information about di?erent destinations, ser-
vices or suppliers, acting as advisors.
In the last few years much debate has been generated about the possibil-
ity that these agents may disappear from the tourism value chain. The
increasing use of the Internet has opened a new direct distribution channel
between tourism suppliers and ?nal consumers, where intermediaries are
not needed. This new situation is pressing down margins and commissions
for travel agencies, endangering one of their most important sources of
income. However, instead of a process of de-intermediation, it is likely that
new intermediaries will start to appear (re-intermediation) and that tradi-
tional travel agencies will start to use new technology (virtual agents, for
instance).
252 The dynamics between entrepreneurship and small businesses
Source: Elaborated with data from Schneiderbauer et al. (2004).
Figure 12.2 Main European tour operators
24%
16%
14%
9%
7%
5%
25%
My Travel
Thomas Cook
TUI
First Choice
ReWe
Kuoni
Others
Computerized reservation systems (CRS) originate from the 1960s, when
American Airlines and IBM developed the ?rst computerized system called
SABRE (automatic procedure to manage the availability of airplane seats).
It was initially limited to internal company use, but it soon started to be
installed in travel agencies, giving birth to the ?rst real CRS. The process of
deregulation of the air travel market in the USA contributed strongly to
their expansion.
Its second stage, the geographical extension of operations, together with
the inclusion of other tourism suppliers (hotels, car rental, railway compa-
nies), transformed CRS into what has been called global distributions
systems (GDS). These agents have taken advantage of the new opportuni-
ties o?ered by the Internet by creating virtual travel agencies, such as
Travelocity by SABRE, or Amadeus.net by Amadeus.
Di?erent local, regional or national tourism organizations (LTO, RTO,
NTO – also sometimes called National Tourism Boards, NTBs) would also
be placed within the intermediation stage. Their main function is normally
to promote tourism in that territory and provide information about the
di?erent suppliers located in it. They are normally public bodies.
Finally, a relatively new type of intermediary is having an increasing
presence and importance in GTVC. The so-called destination management
organizations (DMO) are normally public bodies or organizations receiv-
ing strong public support. They o?er a number of services related to their
speci?c tourism destination, with the purpose of attracting more tourists.
As the WTO Business Council (2001) points out, the future of DMOs rests
in electronic commerce so that they can:
? Create electronic links among suppliers of tourism services and their
destinations, so that they may centre on maintaining information and
the availability of their products.
? Act as intermediaries to help consolidate a wide range of destination
products (especially for SMEs), and distribute electronically to the
remaining agents within the tourism value chain.
These DMOs, therefore, may be justi?ed because of their value creation.
For consumers, they may provide objective high-quality information about
the destination, simplifying the purchase (adapting combined travels) and
recommending special o?ers. To suppliers, they may o?er the ‘destination
brand’, information on the range of products available at the destination,
distribution to both ?nal consumers and intermediaries, and mechanisms
to secure transactions.
The impact of global value chains on Andalusian tourism SMEs 253
THE ROLE OF ANDALUSIAN SMES IN GLOBAL
TOURISM VALUE CHAINS
During the last few years, the tourism industry has faced a number of
unprecedented challenges. At a global level, the industry has shown its
resilience to external shocks. However, at regional and local levels, the
e?ects have been more serious. Tourism organizations, such as the WTTC
(World Trade and Tourism Council), indicate that these international
events have accelerated changes which have been taking place since the
early 1990s due to the globalization process. The role of SMEs as tradi-
tional partners, suppliers or distributors of large ?rms would have been
deeply a?ected (Smeral, 1998). This has made more and more governments
realize that tourism cannot thrive without some guidance, especially in the
medium and longer term. This increasingly competitive environment
makes the whole tourism industry – but especially SMEs – face a large
number of challenges (OECD, 2005c).
In this context, the OECD has carried out a study on ‘The role of small
and medium-sized enterprises in the global tourism industry’, within the
larger research project ‘Enhancing the role of small and medium-sized
enterprises in global value chains’.
1
The purpose of this study is to get to
know how SMEs participate in global value chains. It will also allow the
identi?cation of good practices that may be adequate for SMEs to succeed
in the framework of globalization, making the most of their participation
in global value chains.
The authors’ research group ‘SMEs and economic development’ at the
University of Seville has undertaken this study in the region of Andalusia.
The ?eldwork has consisted of several case studies of small and medium-
sized tourism enterprises in Andalusia. As suggested in the general OECD
draft research outline, hotels and travel agencies have been interviewed
(OECD, 2005a).
Andalusia is an important international destination. In terms of recep-
tive tourism, it is equivalent to Thailand, while it more than doubles other
well-known destinations such as Cuba, the Dominican Republic, or
Argentina (Aurioles et al., 2001). During 2004, it was estimated that a total
of 22 million tourists visited the region, 2.9 per cent more than in 2003
(according to the Andalusian tourism survey, ECTA 2005); 40.9 per cent of
them were foreigners. Among the latter, nearly one third of them were
British (31 per cent). The relevance of these ?gures may be better under-
stood when compared to the total population of Andalusia: 7.85 million
inhabitants in 2005.
To meet this tourism demand, the Andalusian economy produced goods
and services valued at €12.5 billion (SAETA, 2005). Tourism has become
254 The dynamics between entrepreneurship and small businesses
the most signi?cant industry in the region, contributing 12.4 per cent to
GDP. This production has important e?ects on other activities, both direct
and indirect. Direct e?ects are highly concentrated, with 78 per cent of
them corresponding to catering and accommodation.
Indirect e?ects are generated in other economic activities (for example,
clothing, electricity, water) as a consequence of increased demand by the
hotel industry (for instance). Therefore, the sum of both e?ects represents
the total impact of tourism demand on the Andalusian economy. In 2004,
the sum was estimated at being €17.6 billion, with 71 per cent being made
up of direct e?ects and the remaining 29 per cent being indirect ones. Thus,
the multiplier e?ect on production would be 1.42, meaning that for each
euro of direct tourism demand, a value of €1.42 has to be produced.
The impact of tourism on employment is also very remarkable in
Andalusia. In 2004, 258037 job positions were needed to satisfy tourism
demand; 207037 of them were direct ones, and the other 50554 were indi-
rect. Therefore, the employment multiplier e?ect is 1.24. Table 12.1 shows
the employment structure of Andalusian tourism ?rms.
Research Design
The seven case studies carried out are distributed as shown in Table 12.2.
In Andalusia, some travel agencies also act as smaller tour operators (com-
bining retail and wholesale activities), but none of them functions as a tour
operator only.
2
For this reason, two retailers were interviewed, together
with one of those combined ?rms. Three and four-star hotels were inter-
viewed, as these two categories alone represent more than 70 per cent of
total beds.
The geographical distribution of these ?rms was made trying to represent
the main tourism typologies present in Andalusia: sun and sand, business
The impact of global value chains on Andalusian tourism SMEs 255
Table 12.1 Structure of Andalusian tourism enterprises, 2005
Sector 1–9 10–199 199–499 > 499
employees employees employees employees
Travel agencies* 89.4 10.5 0.1 0.1
Hotels** 81.0 18.3 0.7 0.1
Notes:
* Division 63 National Classi?cation of Economic Activities (CNAE), corresponding to
Division 79 of the International Standard Industrial Classi?cation (ISIC, Rev. 4).
** Division 55.1 of CNAE, corresponding partly to Division 55 of ISIC (Rev. 4).
Source: Compiled with data from Directorio Central de Empresas (DIRCE), INE.
and conferences, cultural and rural tourism. For that reason, case studies
were concentrated on two of the most important areas in the region, repre-
senting a wide variety of tourism motives.
In-depth interviews were carried out, structured along the outline pro-
posed by the OECD research-project steering committee. The interview
was divided into four main sections: awareness of the value chain, rela-
tionships within the value chain, dynamics within the value chain and
public support. In this case, the president of the Andalusian Federation of
Travel Agencies (FEAVV) and the vice-president of Seville’s Hotel
Association (AHS) collaborated with this study. They o?ered a general
overview of the situation in each sector, completing those views o?ered by
individual ?rms.
Results
A high proportion of interviewed ?rms had fewer than 50 employees, in
accordance with the fragmentation or atomization of the Andalusian
tourism businesses. Similarly, annual turnover in 2005 was moderate. Most
?rms had sales between 1 and 5 million euros. None of these ?rms belonged
to hotel or travel agent chains. Some were family ?rms managed directly by
the owners. Some others belonged to an investment group, but they had
independent management. Finally, one of the privately owned hotels had
signed a management agreement.
The most important cost is personnel, which represents some 35–45 per
cent of total costs in hotels, and even more in travel agencies (up to 75–80
per cent). Intermediate consumption of goods and services represents
256 The dynamics between entrepreneurship and small businesses
Table 12.2 Case study SMEs
No. Activity No. Category Location Motive
4 Hotels 1 3-star Seville city Cultural
3 4-star Cazalla Sierra Rural
(Seville)
Seville city Business and
conferences
Benalmadena Sun and sand
(Malaga)
3 Travel 1 retail-wholesale Seville city Business and
agencies conferences
2 retail Seville city Cultural
Malaga city Sun and sand
20–30 per cent in hotels, and they are much smaller in travel agencies (