Entrepreneurship, Innovation and Regional Development

An Introduction

Jay Mitra

• Publisher: Routledge
• Year: 2019
• ISBN:
  9781134864034
• Edition: 2
• Topic: Business
• Subtopic: Business General
• Index: Business

The fields of entrepreneurship, innovation and regional development are inextricably linked, with people, organisations and the environment or their location, forming the main building blocks in an integrated model of value creation. This second edition of a key textbook draws on the diversity of approaches in these areas to produce a unified understanding of this important subject and its sub-sets.

The author connects theory and practice using references to academic studies as well as industry sources. The importance of technology is highlighted throughout to demonstrate the value of new technology-based ventures and the role of technology for innovation in both organisational and spatial contexts. The economic and social contexts of entrepreneurship are covered in dedicated chapters offering an appreciation of multiple perspectives on key themes of growth and development.

Drawing on insights and concepts from a wide range of disciplines such as business, sociology, economics, geography and management, this unique textbook introduces entrepreneurship to students from different backgrounds and varied interests. With a range of new case studies and coverage of emerging themes such as smart cities, ecosystems, female entrepreneurship and social and human capital, this book provides an expert exposition of the elaborate empire of entrepreneurship.

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Entrepreneurship, innovation and regional development

An eclectic introduction

Let us start in Argentina.

Mini case study 1.1 Who owns opportunity?

This is an unusual story of occupation, resistance and production – words that do not enjoy much currency in the literature of entrepreneurship. Occupy, Resist and Produce are the three words of a slogan that sprang from one of the first factories, IMPA (Indus-trias Metalúrgicas y Plásticas Argentina) to respond to the Argentinian economic crisis of 2001. The organisation is one of the main rejuvenated businesses in Argentina, well known for its role in the development of the National Movement for Recovered Companies (MNER). As the second largest aluminium business in Argentina it is one of those unusual factories which operates the complete value chain in the aluminium making process.

It was in the early twentieth century, in 1928, that IMPA began its long and complex history after being founded by German investors with three factories in the neighbour-hoods of Buenos Aires. Since then the organisation has been through many different administrative arrangements, including a period of nationalisation in 1945 during the infamous regime of Juan Perón followed by re-privatisation, and a phase which saw it being run as a fake cooperative of the military.

The early days had seen a flourishing factory of 300 workers growing to around 700 in the early 1980s. The economic policies of President Frondizi in the early 1960s were deemed to be particularly profitable to a number of Argentinian industries such as petrochemicals and metalworking factories. In this clement environment situation, the company chose to become a cooperative allowing all workers to be on the same level with an equal share of profits. IMPA was doing well as the country’s leader in aluminium and was at the helm of its industry chamber in the country. It made aircraft parts and the ‘Evita’ brand of bicycles.

While the re-organisation was relatively easy in two of the three smaller factories, it was a problem in the larger unit where there were around 400 workers. The reality for most of the workers was one where power remained concentrated in the hands of a small number of workers supported by a recalcitrant trade union who turned a deaf ear to the protestations of other workers. The rot had set in with the fall in production, a shrinking workforce earning less than two pesos a week and the dismantling of equipment and machinery. By the 1990s the workforce stood at 190, and with mounting debts (rising to $6m) it was not long before the electricity was cut off.

A few years before the 2001 crisis, the company was taken over by its workers. In 1997 a group of workers attempted to run the company as a workers’ cooperative. With the help of a radical lawyer they occupied the premises and some of their supporters, including a rich benefactor, loaned them money to obtain their first supply of aluminium to start production. Survival at this stage meant diversification of activities and the recruitment of people within the workers’ cooperative. The workers already had their own medical centre but they decided to carve out a section of their factory to establish a secondary school in 2001 to provide free education aimed at expanding knowledge about cooperatives and to help students who had been excluded or those who found themselves in problematic circumstances. Then in 2002, another part of the factory was dedicated to the use of a cultural centre to help boost income and also to create an environment conducive to socialisation, and the further expansion of the minds of the workers and the wider community. This move enabled the acquisition of a kind of cognitive legitimacy for the workers’ actions and neighbourhood protection.

All this came to an abrupt halt with the economic crisis of 2001–2. The tension that followed between the interests of the Recuperated Factory Movement (MFR) keen to privatise the company and the majority of the workers led by the head of MNER (National Movement for Recovered Companies), generated some ugly clashes. However, a few months later, three of the workers showed extraordinary goodwill by paying off $4m back to the creditors, and this act pushed the government to allow for a temporary expropriation, enabling the state to buy the factory and allowing the workers to re-occupy it under a new name: ‘22 de mayo’, which happened to be a significant date – the day of one of their biggest protests.

Since 2010, with a range of projects in hand, it has been back to business as usual. A management team includes almost equal numbers of men and women and a monthly meeting is held of all members. The pay which is set at a slightly higher level than the average for ordinary industry workers, is equal for all IMPA workers. A major objective is to expand the secondary school into a university. The cultural centre offers numerous workshops, from theatre to clown classes and is always looking to add to its repertoire. IMPA is at the heart of supporting and growing a community through work, education and the arts, while engaging with the market and the government as part of an entrepreneurial ecosystem

In IMPA’s story we do not find the hallmarks of capitalist enterprise. A workers’ co operative is hardly a place nurturing heroic individual entrepreneurs creatively destroying the economic status quo or an arbitrageur cutting across asymmetric information by being alert to opportunities. Neither does the story show one of the main institutions of the socialist movement – the trade union – in a good light.

This first vignette is a very short story about entrepreneurship as understood by this author. It serves as a narrative measure of some of the most important ingredients of entrepreneurship: opportunity development, resource mobilisation, ecosystem development, passion, commitment, motivation, renewal, social capital and networks of people and institutions, and economic, social and cultural value creation. It is not simply the story of one or two extraordinarily gifted people with groundbreaking technologies.

Sources: The Argentina Independent (2010); New Internationalist (2013)

The power of entrepreneurship

The power of entrepreneurship lies in the passion and economic sense-making of people dedicated to making work worthwhile. This is why entrepreneurship can succeed in distressing circumstances of the recession and, paradoxically, both hostile (predatory federations) and ineffectual institutional (trade unions) power.

The opportunity lies in the collective motivation to rebuild an organisation through a new organisational structure and recapture its industrial strength in making good quality products. Although much store is laid by the role of formal institutions in promoting entrepreneur-ship, our story tells about first the failure of such institutions to sustain economic value, and second the importance of informal institutions to generate new economic and social value.

The tensions that characterised the early years of rebuilding mirror the struggle of entrepreneurs overcoming barriers to starting up and growth. But here in our story we not only find the standard set of issues around the shortage of money, technology and human capital which were either scarce or were scattered because of the recession and poor management, but the inadequacy of established institutional structures and an opposition to a different form of organisational structure: the workers’ cooperative. Again, paradoxically, in a reluctant and generally a troubled institution, namely the government, we find a willing stakeholder.

In all of this, and in identifying education and cultural activities as necessary instruments for social engagement and personal improvement, the new IMPA acts as a catalyst for creating an entrepreneurial ecosystem where social relationships underpin network development, business exchange, institutional development and support, and economic, social and cultural value creation. Treatises on the entrepreneurial ecosystem tell us much about the existence of institutions, stakeholders, connectivity and social embedding that support entrepreneur-ship and economic development. Some scholars have argued that without their existence in situ, the entrepreneurship process can be derailed. Our story shows us that the real value of an entrepreneurial ecosystem lies in its creation, in that it prompts an evolutionary variation, retention and selection process for transforming what is given.

The following chapters will elucidate what we mean in theory and practice about the power and value of entrepreneurship, while also reflecting on its limitations. But let us try another different story before we settle down to investigate the key building blocks of entrepreneurship.

Mini case study 1.2 A fantastic voyage

In 1966 the film Fantastic Voyage showed a miniaturised team of doctors travelling through human blood vessels and making life-saving repairs in the brain of a patient. Fantasy became comedy in 1987 when Hollywood remade the film with the title Inner-space. By this time engineers in the real world had absorbed the inspiration wholeheartedly, but instead of miniaturising themselves they began building pill-size robot equivalents that could travel through a person’s gastrointestinal tract. Going forward another 13 years, in the year 2000, patients began swallowing the first commercially built pill cameras. Since that point in history, doctors have literally opened up new vistas of medical science using these capsules to obtain unprecedented sights of places in the human body, such as the inner folds of the small intestine that are otherwise difficult to reach without surgery.

Overcoming the initial problem of a high rate of false or negative results because of the absence of human control, the engineers devised two-way high speed wireless data transmission of images and instructions.¹ As for the product, the pill had to transform itself into a robot with the ability to respond quickly and effectively to the orders of a technician. The components needed to fit into a 2 cm³ container and they needed sufficient power to complete tasks within 12 hours!

By 1999, the Israeli firm Given Imaging had introduced the first wireless camera pill, the M2A, with subsequent models confirming the usefulness of a wireless device to examine the gastrointestinal tract, establishing a practice called ‘capsule endoscopy’ used routinely in medicine now. The debut of the M2A was accompanied by the inauguration of a separate ten-year project by the Intelligent Microsystem Centre (IMC) in Seoul, Korea, to develop a new generation of capsular endoscopes with the robotic pill containing a light source for imaging and mechanisms for delivering drug therapies and taking biopsies on broad sensors. Furthermore, the endoscopist’s wireless remote control would have the ability to locomote.

Since 2000, 18 European business and research teams have formed a consortium with IMC to develop capsular robots for cancer detection and treatment. A group led by Paolo Dario and Arianna Menciassi at the Scuola Superiore Sant’Anna in Pisa, Italy under the medical supervision and guidance of Marc O. Schurr of Novineon in Tubingen, Germany, handles the scientific and technical coordination of the project, called VECTOR (versatile endoscopic capsule for gastrointestinal tumour recognition and therapy). The industry and academic research teams have come up with a variety of innovative ideas offering a range of solutions to a major challenge – how to control the capsular devices inside the body. A fantasy became reality!

Fantasy, story-telling, imagination, visioning, creativity, science, technological application, research, testing, team effort, commercialisation and changing the lives we lead – of such stuff is entrepreneurship and innovation made, especially in our fast transforming world today.

Creating value

The extraordinary story of the robot pills is one of hope and the creation of real value. Fantasy is transformed into reality through the mediation of scientists, engineers and medics, and the productive economic activities of entrepreneurs. Between fantasy and the medical journey that has taken us from Israel to Korea to Italy to Germany, among other countries, there lay opportunities – for better non-invasive medical treatment; for generating new products using multiple technologies; for multidisciplinary and cross-sectoral teams working across borders to harness talent and competencies; and for business to provide the commercial organisation base and resources with which to make the product widely available in the market.

It is in the creation of value that entrepreneurship and innovation find their meaning. Where innovation can be defined as the generation of new products, services and processes, entrepreneurship is associated with the identification of opportunity in society for such products and services, and in the realisation or exploitation of that opportunity through the organ-isation of resources with which to make the products available in the market. They enjoy a symbiotic connection and together they create value.

The value creation process takes the form of organising resources with which to develop new products and services for the market and for society. There is economic value in the:

• Assigning of a price to the product which enables it to be made, bought and sold in the market;
• Generation of a surplus value arising from the reward for actions taken in an environment of uncertainty and for the investment made to create such value;
• Effective manipulation of risk associated with taking up new opportunities even in a known or familiar environment where incumbents can thwart the realisation of such opportunities;
• Identification and use of new technologies with which to develop a product that can be exchanged in the market;
• Creation of jobs for those who make, market, buy, sell and evaluate the product or service; and in
• Creation of wealth for both the entrepreneur who organises the resources and for the wider community of employees, medics, engineers (as in the robot pill case) who work across the value chain, save money and provide a benefit to users by deploying key new technological developments.

Value creation has a social dimension too which is perhaps as important as the economic one. There is social value in the:

• Relationship and ties of and the exchanges between different talent (researchers, medics, engineers and entrepreneurs, for example) that are forged to design, create, make and bene...