Entrepreneurship and Regional Development

The Role of Clusters

Héctor O. Rocha

• Publisher: Palgrave Macmillan
• Year: 2013
• Print ISBN: 9781137298256
• eBook ISBN: 9781137298263
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

Entrepreneurship and Regional Development aims to make a theoretical and practical contribution meeting the need for studies on the impact of clusters on entrepreneurship and societal outcomes. This book aims to answer the following research question: Do clusters matter to entrepreneurship and entrepreneurship outcomes at the societal level?

1

Introduction

Some 400 million people are starting or running new businesses, and hundreds of cluster initiatives have been launched in all the regions of the world (see Kelley, Slavica Singer, and Herrington, 2012; Porter, 2003a: p. 5; UNIDO, 2009) to promote entrepreneurship and employment growth (Delgado, Porter, and Stern, 2010; OECD, 2009). For example, two-thirds of European Union countries have introduced the cluster approach in their innovation policy (UNIDO, 2009) and almost all of the international organizations have launched cluster and entrepreneurship policies, suggesting that clusters and entrepreneurship foster economic development.¹

Yet both academics and policy-makers know little about the joint impact of entrepreneurship and clusters on regional development. The reason is the wide diversity of theoretical and policy approaches to defining and measuring clusters and entrepreneurship, and to evaluating their effect on regional development.

This book aims to fill this gap between the academic and policy interest in entrepreneurship and clusters, and the little research on their joint impact on regional development.

What follows substantiates this relevance–rigour entrepreneurship and cluster gap and shows how this book addresses it.

1.1 The relevance–rigour gap

1.1.1 Practical relevance

Both entrepreneurship and clusters – that is, geographically proximate groups of interconnected firms and associated institutions in related industries – have emerged not only as strong research areas but also as important issues for policy-makers during the last two decades. Marshall (1966 [1890]) and Schumpeter (1934) show that this interest is not new but renewed.

Cluster development is proposed as one of the factors that may help to fix the current capitalism system (Porter and Kramer, 2011). The interest in entrepreneurship is even stronger. According to GEM, nearly 400 million people are starting or running new businesses (Kelley, Slavica Singer, and Herrington, 2012), half of them in developing countries (Reynolds, 2012).² Also, the leading entrepreneurship journals have impact factors in the same range as the most respectable journals in the management field, and leading scholars propose entrepreneurship as a field of study independent of strategic management (Shane and Venkataraman, 2000; Busenitz et al., 2003; Wiklund et al., 2011), although this position is contested (see Sorenson and Stuart, 2008). This interest in entrepreneurship has led some scholars to conclude that the previous decade ‘may be viewed as a golden age for entrepreneurship scholarship’ (Wiklund et al., 2011: p. 4).

From the policy standpoint, relevant international organizations such as the World Bank, the Organisation for Economic Co-operation and Development (OECD), the European Commission, and various United Nations agencies have created specialized units, sponsored international conferences, or suggested policy options on entrepreneurship and/or clusters.³ For example, two-thirds of European Union countries have introduced the cluster approach in their innovation policy (UNIDO, 2009) and almost all international organizations have launched entrepreneurship and cluster policies to promote economic development. Also, national governments from both developed and developing countries are adopting entrepreneurship and cluster policies to promote economic development.⁴

At least two interrelated reasons explain the increasing interest in entrepreneurship and clusters. First, they are viewed as a solution to generating jobs and increasing competitiveness in the light of the drastic changes in the economic, institutional, and technological environment since the 1970s. In effect, the intrinsic rigidity of the independent large firm-based system was incompatible with the fast pace of change and the consequence was an increase in unemployment, due to both closures and productivity imperatives. Therefore entrepreneurship and clusters were viewed as two elements of the new productive system replacing the previous one to generate jobs and increase competitiveness. A shift of emphasis from mass to flexible production, from an independent firm-based to a regional network-based system, and from established large firms to new and small firms emerged as part of the solution (Piore and Sabel, 1984; Saxenian, 1994; Conti, Malecki, and Oinas, 1995). Second, as a consequence of the previous reasons, academics revisited and empirically researched the old ideas of industrial districts (Marshall, 1920 [1890]) and entrepreneurship as innovation by newly created firms (Schumpeter, 1934: p. 66). The works of Birch (1979, 1981) in the entrepreneurship field and Porter (1990) in the cluster field have definitively placed these topics as a priority in the policy-making and academic agendas.

1.1.2 Academic rigour

Despite the academic and policy interest in entrepreneurship and clusters, research on their joint impact on development at the regional level is lacking. Management researchers studying regional clusters have focused mainly on outputs at the firm level, such as innovation (Whittington, Owen-Smith, and Powell, 2009), or on internal mechanisms, such as trust and interfirm collaboration (Mesquita, 2007), interfirm knowledge exchange (Arikan, 2009), and interorganizational governance (Bell et al., 2009) among clustered firms rather than on the impact of new firms within clusters on regional development. Those who investigate the joint impact of clusters and entrepreneurship on regional outcomes have focused on specific kinds of cluster, such as industrial districts (Visser, 1999) and high technology (Pouder and St. John, 1996; Keeble and Wilkinson, 2000), using established small- and medium-sized enterprises (SMEs) (focus on size) as the unit of analysis rather than entrepreneurship (focus on new ventures). Researchers examining regional factors affecting firm births and employment growth (Reynolds, Storey, and Westhead, 1994; Audia, Freeman, and Reynolds, 2006; Glaeser, Kerr, and Ponzetto, 2010) have focused not on clusters as such but on the agglomeration of small establishments across industries within cities or on single industries. Those focusing on clusters show a positive impact of clusters on entrepreneurship, without examining the combined effect of clusters and entrepreneurship on regional development (Porter, 2003b; Rocha and Sternberg, 2005; Delgado, Porter, and Stern, 2010). Finally, those studying founding and failure rates (Hannan and Freeman, 1989; Lomi, 2000; Sorenson and Audia, 2000) and agglomeration economies (McCann and Folta, 2008; Glaeser et al., 2010) have focused on single industries and on only one dimension of clusters – that is, the agglomeration of economic activity.

1.1.3 The relevance–rigour gap

Therefore, there is a gap between the academic and policy interest in clusters and entrepreneurship and the little research on their relationship and joint impact on regional development.

Why? I argue that four reasons explain the relevance–rigour gap: conceptual, theoretical, methodological, and policy constraints.

From the conceptual standpoint, the phenomena-based rather than discipline-based nature of entrepreneurship (Wiklund et al., 2011; Brush et al., 2003), clusters (Porter, 1998, 2001), and regional development (Markusen, 2002) has led to different conceptualizations. For example, concepts such as entrepreneur, self-employment, SMEs, new firms, entrance, and innovation are categorized as entrepreneurship; a similar categorization occurs in cluster studies, in which the terms ‘industrial agglomerations’ and ‘clusters’ are used interchangeably.

Use of these different operational definitions and empirical results has resulted in a theoretical challenge: a single set of theories is inadequate to investigate the joint impact of clusters and entrepreneurship on regional development. More research taking the region as the unit of analysis and object of development is needed.

In particular, the regional level of analysis is still theoretically lacking in the entrepreneurship field. In effect, the region, used as a unit of analysis to investigate antecedents, processes, and outcomes of entrepreneurship, is absent in early entrepreneurship theoretical models (Bruno and Tyebjee, 1982), as well as in newer ones (Shane, 2003; Caree and Thurik, 2003; Wennekers and Thurik, 1999). As a consequence, the percentage of studies at the regional level in top journals is less than 4 per cent (Davidsson and Wiklund, 2001; Busenitz et al., 2003). The trend seems to be reversed with the appearance of regional studies on entrepreneurship (see Storey, 1984; Reynolds, Storey, and Westhead, 1994; Acs and Storey, 2004; Mueller, 2006; Sternberg, 2009) but more research is needed. The focus on individual-or industry-level rather than societal-level outcomes prevents theoretical developments as to how entrepreneurship affects regional development. There is still an overwhelming emphasis on individual-level outcomes, which is likely to continue in the future despite the increasing interest in more contextual-level entrepreneurship studies (Reynolds et al., 1999; Thornton, 1999; Schoonhoven and Romanelli, 2001). The emphasis on both individual-level outcomes (Shane, 2003: p. 5) and contextual antecedents rather than societal outcomes of entrepreneurship (Hannan and Freeman, 1989; see Thornton, 1999 for a review) is rooted tendencies in the field that will take time to reorient towards more societal-level outcome studies, one of the defined purposes of the entrepreneurship field (Low and MacMillan, 1988; Baumol, 1993; Low, 2001; McGrath, 2003; Wiklund et al., 2011).

From the methodological standpoint, the previous constraints, coupled with the lack of available data, undermine the empirical methods to measure entrepreneurship, clusters, and regional development, and to test their relationships. Although significant progress has been made in measuring entrepreneurship (Reynolds et al., 2005; Slavica Singer and Herrington, 2012) and clusters (Porter, 2003; Solvell, Ketels, and Lindvquist, 2009; Temouri, 2012) in a quantifiable and comparable way, there are still some barriers to overcome. In particular, cluster mappings or datasets face not only internal methodological limitations inherent to measurement issues but also external comparability among datasets, an issue that will be analysed in the last section of this chapter.

These research limitations have a policy correlate, because defining the policy targets and the set of actions to achieve them are the necessary steps in designing policies and evaluating them at a later stage. Therefore policy-makers lack clear guidance upon which to base policies on entrepreneurship, clusters, and regional development.

Given the evidence and motivation for the increasing interest in entrepreneurship and clusters, and the limited research on their relationship and impact on regional development, the present study aims to tackle the following research need or problem: Clusters and entrepreneurship are highly visible among academics and policy-makers given that similar historical conditions explain their resurgence, and similar potential impacts on employment and innovation highlight their socioeconomic importance. Yet conceptual, theoretical, and methodological constraints prevent the study of the impact of clusters on entrepreneurship and their joint impact on development at the regional level.

1.2 Aims and fundamental questions

This book aims to make a theoretical and practical contribution to meeting the need for studies on the impact of clusters on entrepreneurship and entrepreneurship societal outcomes. To this end, it aims to answer the following generic research questions:

Do clusters matter to entrepreneurship and entrepreneurship outcomes at the societal level? Why (or why not)?

These questions are broad enough to stimulate an entire research programme. However, the empirical nature of the present study requires more specific research questions to guide the formulation of testable hypotheses.

Four criteria are put forward to set the framework and formulate the concrete research questions of this research in order to make a theoretical and practical contribution: the what (phenomena and concepts), the how (relationships), the why (theories and assumptions), and the what for (implications) (see Reynolds, 1971; Whetten, 1989; Singleton and Straits, 1999). The first three criteria are the basic building blocks for a theoretical contribution and are related to the theoretical goals of understanding, describing, and explaining (Reynolds, 1971; Whetten, 1989; Singleton and Straits, 1999); the fourth criterion is the basic building block for a practical contribution and is related to the practical goal of control, change (Reynolds, 1971: p. 4), or prescription. What follows is a description of each of these four elements, the associated research needs in the entrepreneurship and cluster fields, and the specific research questions of this book.

1.2.1 The what

This criterion refers to the phenomena and associated concepts which, in theoretical terms, are the variables of the conceptual model of the study (Whetten, 1989; Singleton and Straits, 1999).

Therefore a first criterion to tackle the research problem and make a theoretical contribution is to clearly define the phenomena: entrepreneurship, clusters, and development. Given the multidimensional and multilevel nature of clusters, entrepreneurship, and development, any answer to the question about the impact of clusters on entrepreneurship and entrepreneurship societal outcomes will depend on how these phenomena are defined and measured. Different theories have contributed their own vocabulary and set of assumptions, stressed different dimensions, and identified different causal antecedents and effects. This conceptual variety helps to illuminate different aspects of entrepreneurship, clusters, and development but also makes it difficult to evaluate their relationship because different units of analysis are handled as if they were only one. Therefore the first specific objective of this study is to provide a conceptual and operational definition of entrepreneurship, clusters, and development based on an extensive review of the literature.

1.2.2 The how

Once the phenomena are conceptualized and measured, a second criterion to tackle the research problem empirically is to analyse how the concepts are related (Whetten, 1989; Singleton and Straits, 1999).

This study formulates the relationships of interest, comparing regions with clusters and regions without clusters to isolate the contributions of clusters at the regional level. The few studies that have used comparative research designs (Westhead and Storey, 1994; Visser, 1999; Fabiani et al., 2000) have focused on specific clusters to evaluate firm-level rather than regional-level o...

Table of contents

• Cover
• Title Page
• Copyright
• Contents
• List of Tables and Figures
• Foreword by David B. Audretsch
• Preface
• Acknowledgements
• About the Author
• List of Abbreviations
• 1. Introduction
• 2. Reviewing and Discovering the Concepts
• 3. Elaborating a Socioeconomic Theory of the Impact of Clusters on Entrepreneurship and Entrepreneurship Regional Outcomes
• 4. Preparing the Terrain for Empirical Testing
• 5. Getting Results
• 6. Making an Academic and Policy Contribution
• Appendices
• Notes
• Bibliography
• Index