Entrepreneurial Ecosystems for Tech Start-ups in India

Evolution, Structure and Role

M H Bala Subrahmanya

• Publisher: De Gruyter
• Year: 2021
• Topic: Business
• eBook ISBN:
  9783110679434
• Subtopic: Business General
• Index: Business

Why do tech start-ups emerge rapidly in emerging economies like India? What kind of entrepreneurial ecosystems have evolved for tech start-up promotion? What is their structure? What role do they play in the nurturing of tech start-ups to the advantage of regional economies? This book examines the trend of evolving entrepreneurial ecosystems for tech start-ups in India, ascertains its structure and examines its role in the nurturing of tech start-ups over its lifecycle, to bring out its implications for Indian economy. At the outset, it traces and conceptualizes what it terms an "ideal ecosystem" for tech start-ups in the Indian context, and explores the historical evolution of entrepreneurial ecosystems in two of the six leading start-up hubs in the country, namely, Bangalore and Hyderabad. It describes the characteristics and the structure of these ecosystems as they prevailed in the two start-up hubs, and analyses the role that they play in nurturing the development of tech start-ups. Finally, this book explores the ecosystem gaps that exist in the two cities, the factors causing these gaps, and makes policy recommendations to encourage the growth of a "healthy and vibrant" entrepreneurial ecosystem for the accelerated growth of tech start-ups in these two cities in particular, to promote employment, innovation and economic growth in the country at large.

Policy makers, researchers, engineering and management students, technology and business mentors, angels, venture capitalists, and MNC executives will find the book informative, revealing and a source of valuable insights into a new, rapidly emerging entrepreneurial India.

Chapter 1 Introduction

1.1 Backdrop

Of late, technology entrepreneurship contributing to high growth technology start-ups has been assuming growing importance all over the world, as a key to economic development (Bala Subrahmanya, 2015; Korreck, 2019). This is primarily attributed to the spread of information and communication technologies (ICT), and transformation of the organization of production throughout the world, where firms increasingly work in networks. Such high growth technology start-ups can contribute to structural change by introducing new knowledge intensive products and services, help sustain innovation, drive productivity growth and create productive employment opportunities. They can help to sustain innovations, as they can be the means as well as the outcome of innovations. They can boost productivity growth through innovated products/processes and create additional employment opportunities through more and more innovative technology start-ups. Thus, technology start-ups can make a decisive difference to an economy in terms of their contributions to GDP, industrial production and employment (OECD, 2013).

But what is needed is an appropriate entrepreneurial ecosystem for their generation, survival and sustenance, and growth over a period of time (Arruda, et al., 2013). Historically, emergence of technology start-ups has been primarily confined to a couple of start-up ecosystems, particularly Silicon Valley and Boston in the United States, but no more. Along with a world-wide explosion of entrepreneurship, there has been an explosion of new start-up ecosystems around the world (Start-up Genome, 2012). As a result, start-up ecosystems around the world have witnessed an increased burst of entrepreneurship that has seen new ones founded and existing ones experiencing maturity (Aleisa, 2013).

This assumes special significance in the context of emerging economies such as China, India, Mexico and Brazil, which are transforming their economies from low value-added manufacturing and services to innovation-based economies. Although the majority of the IT and software industry in these countries delivers low value-added services, there is a push to create technology start-ups that build innovative products with a global impact (Cervantes and Nardi, 2010). In the current global start-up landscape, India is recognized as one of the potential sources of tech start-ups (Gai and Joffe, 2013), and it currently ranks third globally, in terms of existing start-ups (NASSCOM, 2019; Live mint, 2019).

Given this, how an emerging economy like India would be able to generate technology start-ups in a big way and whether these start-ups will be able to sustain and succeed in the globalized competitive landscape would depend on the nature and quality of entrepreneurial ecosystems that it can encourage, support and realize. However, major differences in the entrepreneurial ecosystems exist from one region to another even within a country due to regional government policy, local culture, concentration of firms of varying sizes, education and research institutions, weather, etc., among others. It is against this backdrop that this research work is proposed to explore and understand the entrepreneurial ecosystems for tech start-ups in Bangalore and Hyderabad and ascertain the existence of any gap that might remain with respect to an ideal ecosystem for tech start-ups feasible in the Indian context.

1.2 Technology entrepreneurship, technology start-ups, high-technology start-ups and entrepreneurial ecosystem

There are some important concepts relevant to the present study, which need to be defined at the outset, namely, technology entrepreneurship, technology and high-technology start-ups and entrepreneurial ecosystem.

1.2.1 Technology entrepreneurship

The base for technology and high-technology start-ups lies in technology entrepreneurship. The concept “technology entrepreneurship” is defined in different ways by different researchers. Nichols and Armstrong (2003) defined technology entrepreneurship in terms of ‘organization, management and risk bearing of a technology-based-business’. For Jones-Evans (1995) technology entrepreneurship involves establishment of a new technology venture. Liu, et al (2005) define technology entrepreneurship as ways in which entrepreneurs draw on resources and structures to exploit emerging technology opportunities. According to Bialetti (2012, p. 9), “technology entrepreneurship is an investment in a project that assembles and deploys specialized individuals and heterogeneous assets that are intricately related to advances in scientific and technological knowledge for the purpose of creating and capturing value for a firm”. Overall, technology entrepreneurship can be defined to comprise the following:

• operating small businesses owned by engineers or scientists;
• finding problems or applications for a particular technology;
• launching new ventures, introducing new applications, or exploiting opportunities that rely on scientific and technical knowledge; and
• working with others to produce technology change (Bialetti, 2012).

1.2.2 Start-ups, technology startups and high-technology start-ups

A start-up, in general, is defined as a new venture with no previous history of operations (Bala Subrahmanya, 2015). As a result, such new ventures suffer from the liability of newness since they are unfamiliar and without any precedence (Certo, 2003). In terms of age, they are age-zero firms or infants (less than a year old) (Kane, 2010). Start-ups do not include existing enterprises which are acquired by new ownership, or those inherited by younger generations from the older ones, or “industry spin-offs” where a large firm has a control, directly or remotely, or franchises of any form (Bala Subrahmanya, 2015).

Start-ups are new businesses. The kinds of new start-ups that offer opportunity for growth and employment generation are generally considered to be those that are innovating, driven and looking to scale up (CII, 2015). A start-up is a young firm which could be an entrepreneurial venture or a new business, a partnership or temporary business organization to search for a repeatable and scalable business model (Grant Thornton, 2015). A start-up is a company that is in the first stage of its operations; it is often initially funded by its entrepreneurial founders as they attempt to capitalize on developing a product or service for which they believe there is a demand. A start-up is a new organization designed to search for a repeatable and scalable business model (Sanghi and Srija, 2016).

A “technology start-up” may be defined as a new venture which owes its origin to science/technology-based entrepreneurship, and therefore, the entrepreneur who promoted such a start-up may be qualified with a science/technology degree. Further, the product/service emerging from such a start-up must have technology content in it. However, it would be next to impossible to clearly specify and define a technology product/service in terms of technology content. In the US context, start-ups emerging from high-technology industries are defined as technology start-ups. Two alternative definitions given for technology start-ups by Hathway (2013) and Liu, et al., (2014), respectively are relevant in this context. Hathway has identified 14 high-tech industries under two broad groups: (i) Information and Communication Technologies (ICT) industries, and (ii) Miscellaneous industries, covering manufacturing as well as service industries (Table 1.1). The former includes 10 sub-sectors whereas the latter comprises four.

Table 1.1:High-technology industries.

Sl. No.	Industry
A	Information and communication technology (ICT) high-tech
1	Computer and peripheral manufacturing
2	Communications equipment manufacturing
3	Semiconductor and other electronic component manufacturing
4	Navigational/measuring/electro-medical/control instruments manufacturing
5	Software publishers
6	Internet publishing and broadcasting
7	Other telecommunications
8	Internet service providers and Web search portals
9	Data processing, hosting, and related services
10	Computer systems design and related services
B	Miscellaneous high-tech Industries
11	Pharmaceutical and medicine manufacturing
12	Aerospace product and parts manufacturing
13	Architectural, engineering, and related services
14	Scientific R&D services

Source: Hathway, 2013

Another classification (adopted by Liu, et al., 2014) is made based on the definition developed by Milken’s High-Technology Economy Report (DeVol, et al., 2009), which classifies high-tech firms as per the North American Industry Classification System (NAICS) codes, as given in Table 1.2. This classification clearly distinguishes the high-tech manufacturing industries from t...

Table of contents

• Title Page
• Copyright
• Contents
• Chapter 1 Introduction
• Chapter 2 Entrepreneurial ecosystems for start-ups: A global perspective
• Chapter 3 Research questions and methods
• Chapter 4 An ideal entrepreneurial ecosystem for tech start-ups: Characteristics, structure and role
• Chapter 5 Entrepreneurial ecosystems for tech start-ups in Bangalore and Hyderabad: An exploration of evolution
• Chapter 6 Entrepreneurial ecosystems for tech start-ups in Bangalore and Hyderabad: Structure and role
• Chapter 7 Ideal entrepreneurial ecosystem and ecosystems of Bangalore and Hyderabad: A gap analysis
• Chapter 8 Summary and conclusions
• Index