ENTREPRENEURSHIP
Course Leader: Dr. Ram Kumar
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Chapter- Two
Entrepreneurship Ecosystem
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Entrepreneurship Ecosystem
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Fostering entrepreneurship has become a core component of economic
development in cities and countries around the world.
The predominant metaphor for fostering entrepreneurship as an economic
development strategy is the “entrepreneurship ecosystem.”
It should come as no surprise, however, that as any innovative idea
spreads, so do the misconceptions and mythology.
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Deffinition
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The term ecosystem was introduced by Tansley (1935) in a biological
context.
He describes it as the whole of living and nonliving organisms interacting
with one other.
The entrepreneurial ecosystem is a relatively new perspective within the
field of entrepreneurship but is now one of the most discussed topics in
that field.
Of course, this biological interpretation should not be taken
too literally. Nonetheless, it has some similarities when
comparing it with its economic counterpart.
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Deffinition
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An entrepreneurial ecosystem or entrepreneurship ecosystem is the social
and economic environment affecting the local or regional
entrepreneurship.
Entrepreneurial ecosystems are defined as a set of interdependent actors
and factors coordinated in such a way that they enable productive
entrepreneurship within a particular territory.
The entrepreneurial ecosystem often narrows entrepreneurship down to
high-growth startups or scaleups, claiming that this type of
entrepreneurship is an important source of innovation,
productivity growth, and employment.
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Deffinition
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Moore (1993) was the first one to use it in an economic context. He argued
that entrepreneurship does not exist in a vacuum, hereby emphasizing the
importance of its environment.
An ecosystem should create a flow of talent, information, and resources to
address each stage from ideation and launch to growth and scaling.
This modern systematic view of entrepreneurship has been termed the
entrepreneurial ecosystem by Daniel Isenberg.
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The
entrepreneurial
ecosystem
is a
complex
set of
elements aimed at
making
the
environment
conducive
for
entry, survival and
growth
of
entrepreneurship in
a region.
A
set
of
interconnected
entrepreneurial
actors
(both
potential
and
existing),Entrepren
eurial organization,
Institutions,
and
Entrepreneurial
process
entrepreneurial
organizations
An entrepreneurial
ecosystem
contains a set of
individual elements
within a
region
—such as human
capital,
an
entrepreneurial
culture
and
supportive
organizations that
interact in complex
ways.
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Deffinition
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It emphasizes self-organizing and self-regularizing mechanisms for
competitive market policies.
The combination of formal institutions (government regulations and
taxation system), informal institutions (corruption perception) and physical
conditions (access to finance, supportive infrastructure, a stable political
environment, a skilled labor force and a formal economy) are expected to
create an entrepreneurial ecosystem where the entry, survival and growth
of firms will be at its highest rate.
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Enabling Policies and Leadership
● It includes
1. Leadership
o Unequivocal support
o Social legitimacy
o Open door for advocate
o Entrepreneurship strategy
2.
Government
o Institutions support such as investment support
o Financial support .e.g. For R s D Start up funds
o Regulatory framework and incentives e.g tax benefits
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Enabling Policies and Leadership
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The focus should not be mainly the provision of capital but creating the
conducive environment for businesses by providing key policy which will
resonate well with the diverse group of stakeholders who symbiotically
drive the growth of the entrepreneurial ecosystem.
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Enabling Policies and Leadership
●
This is also where the buzz for economic development can first be created
with how governments provide leadership through policy direction and
create some kind of legitimacy for the general population to want to try
their entrepreneurial skills
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Isenberg affrmed that government cannot do it alone and that they must
engage the private sector early as it is the private sector best advantage to
develop a self-sustaining and profit driven market which are
outcomes of a successful entrepreneurial ecosystem
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Appropriate Financing
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1.
2.
3.
4.
5.
6.
7.
Financing Includes
Micro loans
Angel investors, friends and families
Zero stage venture capitals
Venture capital funds
Private equity
Public capital market
debt
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Appropriate Financing
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Zero stage venture capital: founded in 1981, by Paul Kelley
Zero Stage Capital is a venture capital firm that invests in emerging growth
companies in the following technology sectors: information technology,
communications, life sciences, and energy technology
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Appropriate Financing
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An angel investor: Angel investing is when a high net-worth individual
(angel investor) invests in a growing business. Angel investing happens
when an investor invests a large amount of money, or capital, into a
business during its early stages. This capital injection is typically paid back
through equity in the venture or convertible debt.
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Appropriate Financing
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What is venture capital?: Venture capital is a form of equity financing
where a VC firm—or group of investors—invests in an early stage or
emerging company in exchange for an equity stake in the company. The
drawback of working with VC is firms often require a controlling stake in
your company, meaning that you lose full control of the business you’ve
built. This can result in you no longer being in the driver’s seat of your
company, opening you up to the opinions and decisions of the venture
capitalists with whom you’re working.
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Appropriate Financing
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This is directly related to the policy issues as it can influence the outcome
of how venture financing is done, the regulation and strengthening of the
financial institutions, the presence of early stage funding in forms of
micro-loans, angel investors and rich family are key to raising the number
of start-ups.
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Appropriate Financing
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Appropriate financing can be greatly influenced after the initial
government contributions to early stages start-ups who go on to scaled
up through venture capital funding and end up going public or the owners
sell the venture (“cash-out”),
Need for is only important in the beginning of an ecosystem formation
because this can be imported from outside the ecosystem once there
start to emanate success stories of entrepreneurial achievement that have
scaled up and gone global.
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Conducive Culture
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Societal norms to pursuing entrepreneurship as against taking up paid
employment.
The general disposition towards such things as failure or huge economic
mistakes resulting in loss of investments is a very important factor that will
influence entrepreneurial mindsets.
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Conducive Culture
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Society reaction towards massive wealth creation and what status
entrepreneurs command can be a driving force compelling many people
to start their own venture and try to be creative, should society encourage
these, there is high tendencies for innovation, creativity and
experimentation to become a norm which can contribute in no small
means to the evolution of an entrepreneurial ecosystem
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Enlightenment Program
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Enlightenment program can be driven by government and business
development organizations to raise the level of public awareness and
propagate the importance of entrepreneurship.
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Conducive Culture
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The entrepreneurial community also has to create its own culture as soon
as the ecosystem takes form and actors are identified, this will enhance
the sharing of experience and expertise.
Also, the entrepreneurial community can quickly absorb failed
entrepreneurs and learn from their failure.
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Institutional Support
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An entrepreneurial ecosystem will obviously not evolve in a vacuum, it
does not revolve around financial incentives alone, there are certain basic
economic and social factors that need to be present.
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Institutional Support
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The need for ancillary infrastructures and other support cannot be over
emphasized in the budding stage of an individual entrepreneur as well as
for the evolution of an ecosystem.
Entrepreneurs spend nearly half of their time during making contacts and
networks with other entrepreneurs and related agencies.
Silicon Valley’s economic success was attributed to its relatively open,
non-hierarchically ‘regional network-based industrial system’ with porous
boundaries.
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Quality Human Capital
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Large numbers of start-ups is encouraging, meaning even with a high rate
of start-up failures we can still have substantial contribution to the
ecosystem, coupled with the existence of educational institutions offering
not necessarily entrepreneurship or technological specific academic and
professional degrees can make significant contributions to the human
capital base of an entrepreneurial ecosystem.
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Quality Human Capital
●
Human Capital in the form of experienced managerial and technical talent
is required to ensure entrepreneurial success. Training institutions and
outsourcing support should respond to growing needs for skills in the
marketplace.
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Venture Friendly Marfiets
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Developing the market in an evolving entrepreneurial ecosystem can be
challenging when introducing innovative products, this can be due to the
need to generate a reasonable number of early adopters, the need to
make product licensing less cumbersome, good and credible experts in
productizing and a good channel of innovation exportation to a global
market
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Venture Friendly Marfiets
Wider
global
beyond those
linkages
connecting
firms to product markets
play an important role in
the
development
entrepreneurial
ecosystems.
of
That as well as engaging in
localized learning, firms also
seek to build channels of
communication
with
selected external partners to
access
more
specialized
knowledge and assets not
available locally”
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Discussion Question Of The Chapter
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Please list out and explain cause for S M E s failures in Ethiopia
How do you evaluate the Entrepreneurial Ecosystem in Ethiopia for the
born and development of start ups
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ANY QUESTIONS
?
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THANK YOU!
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