Entrepreneurship, Innovation and Regional Development

Jay Mitra

• Publisher: Routledge
• Year: 2013
• ISBN:
  9781136702525
• Topic: Commerce
• Subtopic: Commerce Général

Entrepreneurship, Innovation and Regional Development is unique in that it addresses the central factors in economic development – entrepreneurship, innovation and organizational learning – as regional phenomena.

This definitive text focuses on different types of organizations to illustrate the value of entrepreneurship and innovation both for businesses and for regional development. Establishing a firm link between entrepreneurship, innovation and economic regeneration, the book also examines the factors contributing to their success.

Replete with international case studies, empirical evidence of concepts and practical examples, this is an ideal text to support postgraduate teaching and research related to entrepreneurship, innovation management and regional economic development.

1	Entrepreneurship, Innovation and Regional Development An introduction

You will know everything there is to know, about how entrepreneurship is born, nurtured and developed in this, the glorious 21st century of man.

(The White Tiger, Arvind Adiga, 2008)

A Fantastic Voyage

In 1966 the film Fantastic Voyage showed a miniaturized 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 Innerspace. By this time engineers in the real world had absorbed the inspiration wholeheartedly, but instead of miniaturizing themselves they began building pill-size robot equivalents that could travel through a person’s gastrointestinal tract. After 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 the 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), it 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 over up to 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 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 on-board sensors, a light source for imaging, and mechanisms for delivering drug therapies and taking biopsies. 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, commercialization, and changing the lives we lead – of such stuff is entrepreneurship and innovation made!

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 the fantasy and the medical journey that has led us from Israel and Korea to Italy and 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 organization 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 realization or exploitation of that opportunity through the organization 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 organizing 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 that enables it to be made, bought and sold in the market;
• the 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;
• the effective manipulation of risk associated with taking up new opportunities even in a known or familiar environment where incumbents can thwart the realization of such opportunities;
• the identification and use of new technologies with which to develop a product that can be exchanged in the market;
• the creation of jobs for those who make, market, buy, sell and evaluate the product or service;
• the creation of wealth for both the entrepreneur who organizes the resources and 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 talents (researchers, medics, engineers and entrepreneurs, for example) that are forged to design, create, make and benefit from the new product;
• the networks of organizations (as in the research laboratories and the business groups) that support one another through the representation of different capabilities and competencies in a particular time and in a defined space;
• the non-economic benefit that lies in the effective use of a product providing economic, psychological, physiological and social satisfaction of needs and wants at both individual and community level (as in the treatment of gastrointestinal problems of people);
• the replication of products and services across the global marketplace, making it possible for all communities and all people to derive appropriate benefits from their use once political and unproductive institutional or trade barriers are overcome.

The interplay of economic and social values in the act of entrepreneurship also helps to create personal value for both the maker and the user of a product or service. The interaction between all three value sets also generates cultural value as certain products or services, such as for example the Internet or the iPod, begin to work like symbols of a generation representing the values of a society. In the use of these symbolic artefacts and services people define their own personal and social values; they carve out their identities and become representatives of either their unique personal space or the collective arena of a group of people.

The aggregation of all these values (which could be referred to as ‘entrepreneurial value’) provides the basis for economic development in countries and their regions. The aggregation of these values is not simply an impersonal academic process; it follows from the actions of entrepreneurial people, in or with entrepreneurial organizations and in entrepreneurial environments. These people, the organizations and their environments come in many shapes and guises and it is in their differences rather than in their similarities (behaviour, actions, judgements, situations) that we are better able to examine how entrepreneurship, innovation and economic development occur. The fact that much of the value creation process occurs in local situations before they are adopted globally suggests that it is what happens in those local regions that captures the imagination of the curious researcher, the policy maker and even the entrepreneur. The fact that it is occurring across the world suggests that entrepreneurship and innovation are of significance the world over.

Interesting ideas and theories (some complex, others formulaic) now abound. They help us to make sense of the world of value creation. These ideas and theories and their currency will be discussed in the chapters that follow to give shape and purpose to the journey. For now and in introducing this book, there is some purchase to be obtained in exploring why the words ‘entrepreneurship’ and ‘innovation’ are falling off the tongues of almost every decision maker despite the limited real coverage they obtain in policy circles, in academia, in the media and in society at large.

The Growing Currency of Entrepreneurship and Innovation

In a special report on entrepreneurship in March 2009 in The Economist, Adrian Wooldridge argued that

the entrepreneurial idea has gone mainstream, supported by political leaders on the left as well on the right, championed by powerful pressure groups, reinforced by a growing infrastructure of universities and venture capitalists, and embodied by wildly popular heroes such as Richard Branson and India’s software kings.

Wooldridge used the term ‘creative creation’ to describe entrepreneurship in the attempt to rethink the idea of entrepreneurship as ‘creative destruction’ (Schumpeter, 1942) in modern times, and especially after the economically and socially ruinous effects of the current recession.

Entrepreneurship is exemplified in Wooldrige’s story about aspiring Indian entrepreneurs wanting not just to become rich but to play their part in forging a new India in the aftermath of the terrorist attacks in Mumbai in December 2008, the government-sponsored economic policies of the Regan-Thatcher era of the 1980s, the adoption of entrepreneurship and innovation by the select institutions of the European Union, the World Bank and the United Nations, and the mushrooming of entrepreneurship education and training programmes in universities across the world.

As with many other flat or spiky world activities, entrepreneurship is being globalized. In previously command and now often rapaciously open economies in Central and Eastern Europe and Russia, or the hitherto closed economy of China, entrepreneurship and innovation have been ‘let loose’ with varying degrees of success and productivity through a minefield of policies, institutions and practices.

Entrepreneurship today acquires a special significance. The standard models of economic growth, the machinations of high finance coupled with relatively free flows of capital across borders, and the connected technological resource bases of countries have come under severe scrutiny with the recent and continuing economic crisis.²

Growth, Entrepreneurship and Development

The continued and almost unyielding focus on economic growth by policy makers and researchers has not generated any consensus on either the best form of growth or its value in terms of human and wider economic development. The growing levels of income disparity between the developing world, especially in sub-Saharan Africa, where the poor have been getting poorer, and the developed world, where the rich have been getting richer (while at the same time the poor in these same rich countries are getting poorer), have created an economic divide that does not square up with the vanities of growth advocates. Easterly’s (2001) devastating critique of public policies for growth points to the failure of external aid, investments in machinery, the raising of education levels, the control of population growth and loan reparations to improve the living standards of people in poor countries.

One of the problems with growth theory is the poor correlation between investment and growth. Capital accumulation and increased labour inputs do not produce positive results because of diminishing marginal yields (Solow, 1956). Even new theories on increasing returns (Arthur, 1990) do not explain these anomalies, partly because of the failure to recognize the different conditions of growth that apply to specific economies at varying stages of economic development.

Across poorer or developing countries, for example, patterns of growth performance varied between 1970 and 2001, with individual rates showing up to 10.8 per cent in Botswana and –1.3 per cent in the Democratic Republic of Congo. Using the standard groupings in the World Economic Outlook and focusing on the 30 strongest and 30 weakest performers in terms of economic growth during the same period, Beaugrand (2004) concludes that it is difficult to establish common patterns. Strong performers (examples: Botswana, 10.8; Taiwan, 8.0, Oman 6.6) and weak performers (examples: Argentina 6.7, Azerbaijan, 0.8 and Congo –1.3) are to be found in all continents, among fuel exporters and non-fuel exporters and among countries that have experienced conflict. Both groups also included exporters of mineral products such as oil (strong performers: UAE, Oman; weak performers: Gabon, Trinidad) and diamonds (strong performers: Botswana; weak performers: Sierra Leone, Congo). Per capita GDP figures at constant US $ prices point to an even more problematic picture with variations in the range of 7.6 per cent in the newly industrialized Asian countries to –6.0 per cent in the CIS and Mongolia. The ratio of per capita income in the major advanced countries relative to the least developed nations rose from 30 in 1970 to 39 in 1980, 68 in 1990 and a peak of 102 in 1995 (Beaugrand, 2004).

The evolutionary process of moving away from traditional industrial sectors, especially from primary products, to manufacturing also embraces structural change at the level of institutions and by way of adoption of new technologies and industries. While the rhetoric for change is easily promoted and while it is almost impossible to see miracles being performed, the relatively impressive progress made by countries such as Bangladesh, Bhutan, Cambodia, Laos PDR, the Maldives, Swaziland and Yemen are good examples of success stemming mostly from the creation of new ventures relying often on relatively low technologies (Beaugrand, 2004). In other words, where nations and regions have adopted entrepreneurship and innovation as vehicles for economic change, they have unleashed opportunities for wealth creation. Using innovative organizational tools and technologies such as micro finance and mobile technology, they have also been able to distribute some of this wealth among the population.

Entrepreneurship in terms of economic value creation, and especially local entrepreneurship, in less developed countries can be a spur for economic development, especially if it is supported by certain framework conditions such as governance, attitudes, access to resources, infrastructure and credible political systems. The nature of these framework conditions and the type of entrepreneurship that might emerge are a function of the stage of development, as Acs and Szerb (2009) have found. There are, however, a number of other, distinctive variables to consider that challenge the assumptions made by uniform framework conditions.

Rapid growth in China is associated with foreign direct investment. Huang and Khanna (2003) have called into question this approach to transferring large amounts of income from the rest of the world, especially when comparing it with India’s support for private enterprise which they consider to be more beneficial in the long run. However, this argument does not necessarily consider local dynamics. Huang and Khanna’s prognosis is questionable, particularly in the Indian context where successful entrepreneurship has so far been limited to the information technology (software) sector (although that is changing), where growth is evident, or micro enterprises, where scaling up is a problem.

State-owned enterprises are not the only examples of entrepreneurial success in China. As Huang (2008) notes, private Chinese entrepreneurship in the rural areas the 1980s was displaced by state-owned economic activity in the urban regions in the 1990s. However, he does not account for the phenomenal changes in the attitudes to the economic, social and cultural lives of the Chinese people as evinced in the transformation of the cinema, the thea-tre and other performance and visual arts, representing a real opening up of China’s society and spawning a wide range of highly creative and economically successful ventures (Sinha, 2009), and in the innovative potential of networks of manufacturers engaged in the Shanzhai phenomenon³ of imitative electronic products (Li and Mitra, 2010). The creative environment of a region or a nation has begun to emerge as an essential pre-requisite for attracting talent and technologies from across the world (Florida, 2007).

Growth, Entrepreneurship and the Developed Nations

The importance of economic, social and cultural value creation is not restricted to the dynamics of less developed economies as they jostle for economic development. Moving along the ‘S’ curve that Acs and Szerb (2009) draw in their new study on the Global Entrepreneurship Index, we can identify new business models ...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright
• Contents
• Foreword by Zoltan J. Acs
• Foreword by Dott. Sergio Arzeni
• Acknowledgements
• 1. Introduction
• 2. Entrepreneurial opportunity: conditions and circumstances for innovation and new firm creation
• 3. Entrepreneurship theories: the economic arguments
• 4. The social dimensions of entrepreneurship
• 5. The entrepreneurial organization
• 6. The entrepreneurial environment: context, institutions, constraints and framework conditions
• 7. Entrepreneurship and learning
• 8. Entrepreneurship, internationalization and globalization: learning, innovation and development in the international context
• 9. Higher education, universities and entrepreneurship
• 10. Entrepreneurship policy: its emergence, scope and value
• 11. Entrepreneurship, innovation and economic development
• 12. Conclusion: future directions and the romance of entrepreneurship
• Notes
• Bibliography
• Index