Governance and the Entrepreneurial Economy: A Comparative Analysis of Three Regions

By Parker, Rachel | Entrepreneurship: Theory and Practice, September 2008 | Go to article overview

Governance and the Entrepreneurial Economy: A Comparative Analysis of Three Regions


Parker, Rachel, Entrepreneurship: Theory and Practice


The increasing number of regional concentrations of entrepreneurial activities and the shift of government--business relations to regional contexts have rendered regional governance arrangements of increasing importance. Drawing on the extensive literature on comparative models of national economic governance, this paper identifies three regional governance models: partnership, state--institutional coordination, and fragmentation. The three models are explored in the context of the entrepreneurial economy in three regions. The paper finds that regional governance arrangements differ from national varieties in the partnership and in the state--institutional models but not in the fragmented model. The difference is shown to involve the types of actors participating in governance arrangements and the types of economic activities promoted by the political--institutional context.

Introduction

In recent decades, major economic changes associated with globalization, the development of new technologies, the decline of traditional industries, and the emergence of regional concentrations of entrepreneurial activity have generated intense interest in the role governments may play in stimulating the entrepreneurial dynamics of local economies. There are two major approaches to the analysis of this role. The first deals with the range of instruments or support mechanisms used to stimulate regional entrepreneurial activity. The second focuses on how the governance of regional economies may differ from the governance of national post-war economies.

A growing literature documents and evaluates government policy initiatives in support of small business and entrepreneurship, including the provision of risk capital, investment in education and research, attraction of foreign direct investment (FDI), provision of grants, facilitation of network formation, and the establishment of science parks (O'Gorman & Kautonen, 2004). Cumming (2007), for example, has shown that government innovation funds have stimulated investment in start-up, early stage, and high-technology firms in Australia. On the other hand, other research has identified government barriers to entrepreneurship including "red tape" and the protection of inefficient industry structures (Hawkins, 1993). Begley, Tan, and Schoch (2005) have shown that government measures aimed at supporting entrepreneurship may have the opposite effect resulting in declining interest in starting a business. Finally, Neergard and Parm Ulhoi (2006) have found that government intervention to stimulate networks may have the unintentional effect of destroying interorganizational cooperation among entrepreneurial ventures. Much of this literature has focused on specific support programs or policies. In contrast, Venkataraman (2004) has emphasized the broader role played by the government in collaborating with regional leaders, including private institutions and universities, in stimulating a range of "intangible" entrepreneurial resources, including role models and novel ideas.

In a similar way to Venkataraman, the second body of literature highlights the way in which the governance of regional entrepreneurial economies differs from the national-managed economy. The concept of the entrepreneurial economy captures the dynamics of structural change in an economic system. Although the growth of small-business activity is closely connected to the idea of the entrepreneurial economy, the concept depicts broader developments intimately linked to Schumpeter's (1912/1934) analysis of creative destruction, in which the entrepreneurial pursuit of new technological product and market opportunities challenges existing firms and industries. Thus, the entrepreneurial economy is characterized by individual motivation, new ideas, risk taking, flexibility, innovation, and increasing regional or local organization of economic activity (Audretsch & Thurik, 2001; Brenner, 2004; Jessop, 2002; Thurik & Wennekers, 2004). …

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