Academic journal article Journal of Small Business Management

An Entrepreneurial System View of New Venture Creation *

Academic journal article Journal of Small Business Management

An Entrepreneurial System View of New Venture Creation *

Article excerpt

Journal of Small Business Management 2004 42(2), pp. 190-208

This paper reports the results of a two-phase study that explores new venture creation within the context of an entrepreneurial system. First, a genealogy of high-technology companies is presented depicting a high spin-off rate resulting from the presence of seven incubator organizations. Second, semantic structure analysis (Spradley 1980) based on semi-structured interviews with founders is used to develop a taxonomy. This taxonomy depicts the relationship among components in one entrepreneurial system, Boulder County, Colorado, that encourages, supports, and enhances regional entrepreneurial activity. Findings indicate that incubator organizations, spin-offs, informal and formal networks, the physical infrastructure, and the culture of the region are related uniquely and interact to form a system conducive for dense high-technology entrepreneurial activity. Additionally, greater rates of new venture formation were found following critical moments in the life of incubator organizations.

Introduction

This paper explores new venture creation within the context of an entrepreneurial system. Silicon Valley, arguably the most famous and successful entrepreneurial system, has been the envy of regional economic developers and the living laboratory for many academic researchers trying to ascertain how such communities have come to exist and to thrive. Furthermore, the goal of these Silicon Valley observers has been not only description but also replication. The wealth and job creation found in areas such as Silicon Valley, Boston's Route 128, and North Carolina's Research Triangle can be a region's answer to floundering local economies. Unfortunately, many of the models presented in the literature (Leslie and Kargon 1996; Miller and Cote 1987; Hall and Markusen 1985; Rogers and Larsen 1984) fail to prove successful when replication is attempted.

Previous research has shown the importance that different, single elements of an entrepreneurial system may have on the overall macroeconomic development of a region. Spilling (1996) focused on the effect of a mega-event; Stough, Haynes, and Campbell (1998) examined the effect of clusters of high-technology firms; Shepherd (1987) examined government interaction; and Florida and Kenney (1988) measured the impact of venture capitalists. Here, this study broadens the focus to investigate the interaction of many different elements of an entrepreneurial system, while also examining what impact this interaction can have on the macroeconomic development of a region. Before modeling with a goal toward replication can begin, first a deeper understanding underlying the phenomenon of extreme regional entrepreneurial activity must be acquired.

This paper reports the findings of a study that analyzes a system of dense high-technology entrepreneurial activity in Boulder County, Colorado. First, a genealogy of high-technology companies is presented, depicting a high spin-off ratio resulting from the presence of a small number of incubator organizations (Phase I). Second, semantic structure analysis (Spradley 1980) of semi-structured interviews is used to develop a taxonomy (Phase II) that depicts the incubator-spin-off relationship and that describes the other core components of a high-technology entrepreneurial system.

The discussion of new venture creation is framed within the context of entrepreneurial systems, which Spilling (1996) defines as the interaction of actors, roles, and the environment that determine the entrepreneurial performance of a region. Through this study's examination, it can be seen that Boulder County comprises the elements of an entrepreneurial system, while being part of a larger, open system of economic exchange. This foundation of an entrepreneurial system is used for two reasons. First, the genealogy of high-technology firms in Boulder County is contained within this entrepreneurial system; the system contains and supports entrepreneurial activity. …

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