New paper: Examining the cohesiveness and nestedness entrepreneurial ecosystems: evidence from British FinTechs

I'm happy to say my newest paper has just been published in Small Business Economics. You can read the (open access) paper here. "Examining the cohesiveness and nestedness entrepreneurial ecosystems: evidence from British FinTechs" looks at an important question in the research on entrepreneurial ecosystems: do regions have several nested ecosystems based around particular sectors or do they have a single, cohesive ecosystem linking all different types of founders. I look at this question by studying the founders and top managers at British FinTech firms in order to answer a pretty basic question: are they (a) Fin, (b) Tech, (c) Both, or (d) Neither. If it's A or B, that would suggest that regions have separate ecosystems for finance founders and technology founders, leading to little intermixing. If it's C, that would suggest that there is a cohesive ecosystem combining both. If it's D, well, we'll get to that.

The Question

Before I get to the answer, let's think about why this question matters. Nested vs cohesive ecosystems isn't just a minor conceptual quibble, it speaks to what ecosystems are and why they matter. Nested ecosystems mean that the most important resources for founders to grow is sector specific: industry knowledge, niche technology, and insider networks with specialist financiers. If there is a single, cohesive ecosystem in a region then the most important resources are more generic: knowledge about the scale-up processes, sales and marketing skills, or a broader investment community. So, being able to tell if a region has a single, cohesive ecosystem or if it has several distinctive ecosystems is an important way to really understand how ecosystems actually work.

To tackle this issue I looked at the world of FinTech. FinTech is digital technological solutions to problems facing the finance sector. The very word FinTech speaks of two worlds: finance and technology. Both have their own norms, structures, rituals, and cultures. In the platonic ideal of entrepreneurship, you would have someone with a deep finance background who os able to observe opportunities in that market that would be hard for an outsider to see connect with a technology expert who can develop a solution to that problem. I call this the 'You Got Peanut Butter in My Chocolate' outcome.

The Method

So, how do we figure out if this actually happens? To do this, I turned to my old friend, LinkedIn. I've previously used LinkedIn data to track the career mobility of engineers laid off from Blackberry to see if they stayed in the Waterloo ecosystem or not. In this project, I gathered the profiles of the founders and top managers of FinTech firms in the four largest FinTech clusters: TechCity in London, the City of London, Edinburgh and Leeds. Firms and people were identified by Beauhurst Business Intelligence, a great business information site that I've used in the past.

However, for this project I'm not interested in where they are, I'm interested in who they are. I needed to develop a way to classify people as being Finance people, Technology people, or something else. That's a bit harder since it's a classification task that requires making judgements about people's backgrounds, experiences, and career trajectories.

To deal with this, I worked with four amazing PhD students as research assistants. After I collected and cleaned the data (and that was a whole ordeal, believe you me), we had a database of 1570 people from 380 FinTech firms consisting of their their LinkedIn descriptions, their education, and their prior seven jobs. That is, if they included all that info. There was a lot of missing info. Many people had much less info and some people had a lot more. But, anyways. We developed a coding guide to look at people's prior jobs to classify them as Finance, Technology, Management, or Other. So, someone with a lot of jobs as an investment manager would be classified as finance, someone who had lots of jobs as a programmer tech, and someone who has spent most of their career as a marketer or salesperson would be management.

After doing this, I saw that people's job histories aren't enough to classify them alone, we also need to look at their employers as well. Because a human resources professional working for Goldman Sachs might be able to spot problems facing the finance world as well as any investment banker. So, we went through again, classifying more than 2,400 firms listed as prior employers as being technology firms, finance or other. In general, the coders agreed about 70% of the time and I resolved any conflicts. But this was still a months long process with a lot of back and forth and arguments over who was what.

Venn, veni, vidi (I came, I saw, I made Venn Diagrams)

After this classification process was done, I was left with a huge table of people, the firms they founded or worked at, and their classifications. How do deal with this? A bunch of Venn Diagrams!

What I found was actually pretty interesting. There was actually very little overlap between tech founders and finance founders. Only about 7% of FinTech firms had teams with both fin and tech experience. The most common figuration was actually just a management background, no Fin or Tech needed to start a FinTech firm!

Very little overlap between Fin and Tech!

You can see the same thing looking at founders employment background: fairly low levels of overlap between Fin and Tech

A bit more overlap, but still very low!

There are some interesting regional patterns. Leeds, the least developed of the four ecosystems being studied, had the lowest rates of overlap between backgrounds while the larger finance centers of London and Edinburgh had higher rates.

Questions, answered

So, what does this tell us. The data show that entrepreneurial ecosystems are fairly nested. The data show big disconnects between the technology and finance communities of all four case study sites. While there is some overlap in London, it's still far from the norm. I don't think this is either a good or bad thing, it's just a reflection on the nature of how communities form in advanced economies.

But for me, the biggest finding is that 'generic' business knowledge and entrepreneurial know-how is really important to FinTech. It's not just being able to solve Black-Scholes models in your head or being a blockchain ninja hacker. It's knowing how to manage diverse workforces. It's about knowing how to sell products and manage innovation processes. People with these skills are most likely to be the founders of high-growth FinTech firms. They hire people with the finance insights and tech skills that they need. Knowledge about the entrepreneurship process is as critical as more specializes domain knowledge in supporting the creation of high-growth FinTech ventures.

What does this mean for ecosystems researchers and builders? I think it means that we need to pay attention to managers as much as we pay attention to tech folks. Maybe this is my bias as someone in a business school, teaching business skills, but I think they're pretty dang important! We know that managerial know-how is important to firm success, but sometimes that gets lost in the shuffle with the focus on young tech entrepreneurs. Don’t neglect your middle-age middle-managers, they often make the best entrepreneurs!

Finally, I just want to thank the Frank H. Kenan Institute of Private Enterprise and their Frontiers of Entrepreneurship Research Grant for their support in this research. The paper required skilled and thoughtful PhD students in order to classify thousands of people and firms and they deserved to be paid top dollar for their work!

Buy my book! And also buy these other books on entrepreneurial ecosystems

I'm proud to announce that my new book on entrepreneurial ecosystems, Entrepreneurial Ecosystems: Theory, Practice, and Futures, was published this week. In this post I'm going to talk about why everyone should buy my book and why it deserves the mantle of "2020's ultimate beach thriller", but there's more! This week has also seen the publication of two other important books on entrepreneurial ecosystems. Investor and community builder Brad Feld and Ian Hathaway have published The Startup Community Way , the follow-up book to Feld's original ecosystems manifesto, Startup Communities. And just as excitingly, my colleagues Nicholas Friderici, Michel Wahome, and Mark Graham at the Oxford Internet Institute have published a new book, Digital Entrepreneurship in Africa: How a Continent is Escaping Silicon Valley's Long Shadow. I want to talk about how all of these books are worth reading by both academics like myself but also anyone who is interested in building stronger entrepreneurial communities and using ambitious entrepreneurship as a tool for regional economic and social development.

Entrepreneurial Ecosystems: Theory, Practice, Futures by Ben Spigel (That's me!)

Buy my book! Buy my book!

But first, here's why you should buy my book. This is the first book in Edward Elgar's Entrepreneurial Footprints series, which is designed to give readers a quick tour through a new realm of entrepreneurship research. This book is designed to give an in-depth overview of what entrepreneurial ecosystems are, why they matter, what we know about them, and what we should know about them. It's designed to be read by anyone, no matter their familiarity with entrepreneurship research, economic geography, or regional development theory. While this is still a research book aimed at other researchers, I worked hard to ensure that it's accessible to anyone with an interest in the topic.

But the book is more than just a summary of what's come before. In the book, I make what I think are three important arguments about why ecosystems matter. First, the ecosystem concept brings together several key ideas in both academic debates about entrepreneurship and regional economies and several new practice trends in entrepreneurship. These are some of the most important new debates in the entrepreneurship research literature, such as high-growth entrepreneurship and entrepreneurial context (which itself just saw an amazing new book from Ted Baker and Frederike Welter).

But entrepreneurial ecosystems research is also one of the rare academic theories that incorporate new developments in practice as well, such as the impacts of lean business models and new general-purpose business technologies and platforms as well as changes in who are the prime movers in modern economic development policy. While entrepreneurial ecosystems represent a very broad and diffuse topic, this is a feature, not a bug. As I argue in the book, it's not just that entrepreneurial ecosystems allow us to answer questions about how to support entrepreneurs or how entrepreneurs build communities, the ideas underlying ecosystems allow us to ask entirely new types of questions and answer old questions in new ways.

Second, this book finally gave me a chance to develop my argument that learning is one of the most important processes in entrepreneurial ecosystems. This is something that I've been saying for a while, but haven't really had a chance to go into the depth I've wanted. But the nice thing about a book is that no one can stop me! A key fact about entrepreneurship is that there are no new problems. Most entrepreneurs face similar problems, such as identifying a market, developing a product, selling to customers, or hiring great employees. While there are differences between sectors and types of businesses, a lot of advice ("stay lean,", "As hire As, Bs hire Cs," "bad customers are expensive") applies to almost every entrepreneurial firm out there. This makes the ability of entrepreneurs in a strong ecosystem to learn from each other a crucial advantage they have over entrepreneurs in places with less dense networks of entrepreneurial knowledge. This is a big shift from how we've been approaching ecosystems, which is to try and identify and measure resources like skilled entrepreneurs, accelerators, or meetups. Focusing on learning provides an entrepreneur-centric view of how ecosystems actually support firm growth and innovation.

Finally, for me, the most interesting (and challenging) chapter to write was critiques of entrepreneurial ecosystems. This is a new field and there are without a doubt many issues, particularly around vague definitions of what ecosystems are and the lack of methods to understand how they support firm growth. But the more trenchant critiques are around ecosystems as a neoliberal project. Entrepreneurship as an economic development strategy puts a lot of risk on entrepreneurs and workers instead of the state, which can much more easily take that risk on. And for all that risk, there is precious little evidence that the wealth created by successful high-growth entrepreneurship helps society as a whole rather than just enriching those at the top. I don't resolve these critiques, but they are issues that researchers need to deal with head-on.

The Startup Community Way by Brad Feld and Ian Hathaway

That brings us to the second big ecosystem book that came out last week (at least in the UK): The Startup Community Way. Brad Feld is one of the big reasons why the concept of entrepreneurial ecosystems have so much traction today. An investor and entrepreneur, Brad was one of the early movers in Boulder's entrepreneurial scene. His 2012 book Startup Communities brought attention to some of the most important core ideals of ecosystem building: the importance of bottom-up leadership from entrepreneurs themselves rather than top-down management from the state.

This new book builds on the first by reemphasizing these core principals and coming up with plans not for ecosystem building, but for ongoing ecosystem leadership and development. This is represented in a subtle shift in guidance away from the dictate that leaders should plan for the next 20 years to have a vision for at "least 20 years from today." This highlights the fact that it's not enough to build ecosystems, they must continually evolve in the face of both a changing society but also the changing needs of the community.

The big way the authors help ground this view is by really arguing that ecosystems should be seen as complex adaptive systems (CAS). There has been plenty of research that makes this point (see this paper by Mark Phillips and Paavo Ritala), But Startup Communities does a great job of breaking down what this view point actually means for those at the coalface of ecosystem development and entrepreneurial community building. From a research perspective, I've always been a bit sceptical of CAS approaches because it's not clear what it adds to our understanding of how ecosystems work. But the Feld and Hathaway provide a very grounded and practical perspective of how we should shift how we think about ecosystem building because of it.

Finally, for me at least (and I'm a pretty narrow demographic) the most interesting provocation in the book was on the relationship between the startup community and the entrepreneurial ecosystem. The startup community is exclusively made up of entrepreneurs and their direct supporters — investors, workers, mentors, coaches, etc. The broader ecosystem is the support apparatus that surrounds these people, such as economic development officials, university technology transfer offices, managers of co-working spaces. These actors do support the entrepreneurial community, but it's not their main job or priority — the economic development department is also interested in bringing in new factories and the university TTO wants to licence out patents to a big global company.

A nested structure of structures, from The Startup Community Way

Beyond this are even bigger structures like the national innovation ecosystem (patent law, R&D tax credits), the economy, and society. This draws attention to the different goals at work in even small communities and allows entrepreneurial ecosystem or startup community builders to focus on what they can change and the most central actors. This emphasises that there is often too much attention on ecosystem policy rather than development.

Digital Entrepreneurship in Africa by Nicolas Friederici, Michel Wahome, Mark Graham

The last book of real interest to ecosystem builders that came out recently is Digital Entrepreneurship in Africa by some great researchers associated with the Oxford Interest Institute. A few great things about this book. First, it's open access! This is something that makes it useful for a much wider swath of the community than is normal for an academic book. Simply go to the book’s page and download the chapters that look most interesting to you.

The book draws on in-depth case studies from more than a half-dozen sub-Saharan cities, ranging from Johannesburg in South Africa to Maputo, Mozambique. Data was based on both the OII's fantastic data on the African digital economy as well as more than 135 in-depth interviews with local leaders and entrepreneurs. This book is a triumph of the importance of getting local knowledge and insight to understand the contextual factors affecting the economy and society.

The huge interest in ecosystems has created a big drive up 'upgrade' African economies through digital entrepreneurship, but there has been precious little work on the potential of this as both an economic development strategy and as a tool for social mobility. This book provides a very balanced and critical look at this phenomenon. They're able to cut through the hype over 'Silicon Savannah' to understand the real challenges facing entrepreneurship in developing economies as well as the opportunities. Chapter 5 on uneven ecosystems is a great guide for anyone involved in ecosystem building in less developed regions about the challenges they should expect to face. There are no easy solutions and entrepreneurship is not the only tool that needs to be used to adjust long-standing internal and external problems facing these types of economies.

What these books are saying

Three books in a week is a huge deal for both the research and practice communities interested in ecosystem building. It shows the importance of going in more depth on this topic than a single research article or blog post. There is a lot of bullshit in both the research side of things as well as the more practice-oriented world and there is a need to cut through the bullshit to get to what matters and what doesn't. Books are a great way of doing this because it allows you to get to the detail — either the great contextual detail achieved by hundreds of interviews or the from-the-coalface perspective of people who have been doing the actual work of community building for years. All these books are worth giving your attention in order to think about what the are biggest issues facing the world of ecosystem building and what is really going to matter over these next few, uncertain, years.

Imagining Entrepreneurial Ecosystems in a Post-Covid World

What are entrepreneurial ecosystems and why do they matter in a crisis?

Entrepreneurial ecosystems are the types of people, organisations, networks, and outlooks of a place like a city or region that support high-growth entrepreneurship. While a great entrepreneur can come from anywhere , great entrepreneurship tends to be easier in particular places. These are normally cities with dynamic economies, lots of smart people, maybe a research university or two, along with lots of other successful entrepreneurs who can help, investors with money and insight into growth, and strong social networks that connect them all. Plentiful, cheep office space and lots of bandwidth help too. All these actors and factors combine to create, attract, and circulate the resources that entrepreneurs need to transform good ideas into high-growth scale-up firms.

This is important because it’s these scale-up firms that are responsible for the bulk of new job creation in most developed economies. By innovating new products and identifying new opportunities, these companies (which constitute about 2 - 6% of new firms founded in a given year ) attract new investment and revenues, creating jobs and building the local tax base.

It’s this support for highly innovative, fast-growing scale-up firms that make entrepreneurial ecosystems important for local economic development efforts. Entrepreneurship isn’t the only tool to create wealth and jobs, but it’s a powerful tool that allows a place to create its own economic destiny rather than depending on branch plants or remote offices. The archetype of an ecosystem is a place like Silicon Valley, but we can look at other places like Boulder, Colorado, Waterloo, Ontario, or Edinburgh, Scotland as places that have built strong economies around supporting digital and other types of entrepreneurs.

Ecosystems matter in a crisis because they’re a tool for recovery and resiliency. No matter how strong an ecosystem is, it can’t totally isolate entrepreneurs from an unprecedented health and economic crisis. Scale-up firms are by definition national and global in their outlook and will be hurt by the loss of national and global markets. But entrepreneurial ecosystems will play a critical role in how cities recover from this crisis as they try to replace jobs and tax revenues that were lost and orient themselves towards new futures.

Entreprenerus and Crisis

In order to think about what ecosystems will look like in a Post-Covid world, we need to think about the immediate effects of the Covid Crisis of entrepreneurial firms and their ecosystems. Though this crisis is playing out in real time, we can already see some impacts:

A swift collapse of many growing firms due to cash flow collapse

Some crises have a long lead up and give plenty of warning before they hit (at least in retrospect). By any standard, the current Covid crisis came to fruition shockingly quick. A little more than 5 months from its first emergence in China to the essential locking down of most of Europe and North America. Almost every company besides Zoom, Netflix and seed distributors are in a cash flow free-fall as customers can’t reach them or are cutting down their spending. This is as true for B2C companies as it is for B2B ones. But as these revenues dry up, their expenses don’t go down as fast. Even with layoffs, government support, and other benefits we will see many firms collapse due to the loss of cash flow. This not only adds to the unemployment, it leads to loss of IP and investments which will have knock-on effects for years to come.

Uncertainty makes it difficult for entrepreneurial firms to pivot and find new opportunities

In normal times, many entrepreneurs use lean strategies where they are constantly testing new business model and product ideas to find new customers and markets. This means that if there is a problem in one market — say a decline in demand for customised investment advice — they can pivot to new markets that take advantage of their underlying skills and resources. This doesn’t mean that all firms (or even most) can survive the loss of a major market, but at least there’s somewhere else to turn. This won’t be the case in the current crisis: pivoting can’t help you where there are few places to pivot too. This will make it harder to even well-run and well-organized firms to make it through the coming months

Loss of investment capital and loss of investors

Still lots of deal flow in Europe, but I’m sure that’s collapsed by now

Groups like Startup Genome have already started documenting the pull-out of investment in the past few months. Since the start of the year, for example, VC deals in China are down almost 60%. This only makes sense: it’s impossible to be able to value a company and predict its chances of success in such uncertainty. This will only continue over the next few months. In addition, we will see a rapid decline in angel investment. Angels are high net-worth individuals who invest in young firms as both a portfolio strategy but also as almost a social function in order to help their local business community. Given the rapid decline in equities and the chaos facing real estate, it’s hard to imagine there will be many HNW people willing to take a flier on a new company. This capital is important for helping innovative ventures rapidly scale, which in turn creates new jobs and (hopefully) new wealth.

High rates of necessity entrepreneurship

Entrepreneurship and unemployment are closely linked (from Farlie 2013)

We normally think of entrepreneurship as a good thing — mom, apple pie, and all of that. But this isn’t always a case. As mentioned above, only a very small minority of new ventures have any growth prospects. The vast majority are small lifestyle firms that will not grow much beyond the founder. And that’s totally fine!

However, in recessions we see an increase in entrepreneurship. There is a very strong correlation between unemployment and entrepreneurship. This is necessity entrepreneurship; the entrepreneur is only doing it because they can’t find a job. These are often low-quality firms with little growth prospects. Entrepreneurs who own these firms typically make less than they would in traditional employment, they take on more risk, and they are more likely to be anxious and depressed than those with regular jobs. We’d expect to see a lot more of these types of firms in the next few years, which acts as a drain on the economy.

How ecosystems can help

Ecosystems aren’t a panacea. No matter how strong an ecosystem is it can’t make up for a global collapse in demand and the evaporation of investment capital. But there are a number of ecosystems that will help entrepreneurs in the midst of this crisis.

Sharing knowledge about how to survive

All entrepreneurial ventures have one goal right now: survive. They do that by reducing their cash burn rate, trying to make what ever sales they can, or applying for grants, loans, and other kinds of public support. While each individual entrepreneur needs to make really tough decisions about how to do this that are specific to their firm and context, there are only so many ways to do this. There are lots of common practices and choices that will work in a variety of firms. One of the most important aspects of ecosystems is that they allow for the quick circulation of practical know-how. While in good times this might be knowledge of investor preferences or good employees who are looking for new opportunities, now the most important knowledge is tips for managing remote workers or how to apply for new bridging loans.

Entrepreneurs sharing what they’re going through with one another, what’s worked, and what hasn’t helps everyone. This will be particularly true around government support programs, which are complex, difficult to understand, and complicated to apply for. Sharing best practices helps people avoid mistakes (say, not having the right documents when they apply for support) and they learn what works from each other.

Now, because we’re all locked-in to our homes, this knowledge sharing can be global. But the relationships and trust that have built up between entrepreneurs within ecosystems makes the knowledge sharing quicker and more effective than what we can get from just reading blogs and twitters.

Emotional support and solidarity

Business advice is one thing, but only entrepreneurs know what other entrepreneur are going through. It’s not that every entrepreneur in a city is friends with each other, but in my research I’ve seen a lot of emotional support within entrepreneurial networks. Simply knowing that others are going through the same experience as you helps make it less traumatising. We’re already seeing this solidarity in the informal chats between entrepreneurs on community message boards and Slack channels. This kind of support is as valuable as any more formal support and is only possible because of the prior relationships entrepreneurs forged before the crisis.

Bringing together key plays to create local solutions

So far I’ve been talking about informal support in the ecosystem. This is because the crisis is so fast moving and so complex that it’s hard for formal support programs or organisations to keep up, to say nothing of leading their community out of danger. But in the coming months there will be a need for localities to find local solutions and identify local resources that can help local entrepreneurs. This likely won’t involve lots of money — that’ll be scarce for the next long while. But there are other options. Some cities with major universities of anchor firms may be able to leverage their resources to help the start-up and scale-up community, maybe by bringing them into their supply chains or sharing resources. Likely, this will involve lobbying local political leaders for specific forms of support. In either case, having a pre-existing community with key leaders (successful, engaged entrepreneurs, prominent support organisations, ect) makes this much easier.

What will post-Covid ecosystems look like?

Ecosystems will have an immediate role in helping entrepreneurs make it through the crisis. But what will they look like in a year or two? When we can go outside, but where we’re in what will likely be a significant recession and in which cities themselves may be fundamentally changed.

Fewer investors, less know-how

We know that lots of really innovative firms are going to go out of business in the coming months, and the something will happen to many venture capital firms. Given the shocking drop in stocks, real estate, and other assets we can also assume that there is going to be a drop in the number of angel investors and high net worth investors. This will look like a spectacular decline because we’re in a VC-bubble to begin with.

The withdrawal of investors is more than a problem of not enough investment capital (though this will be a big problem!) Good investors bring knowledge and insight with them to the firms they invest in. They provide advice on how to handle the HR, legal, and strategic issues that come with growth.

I saw a similar phenomenon in my work on Ottawa’s entrepreneurial ecosystem. All of the city’s VC and angel investors effectively vanished after the dot.com bust. Entrepreneurs had to learn how to scale with minimal outside Investmet, driven by internal revenues and efficiencies. The success of Shopify helped build a new investment scene more than a decade later. Many other ecosystems will see a similar pullout of investment, requiring radical changes in growth strategy amongst entrepreneurs.

Less focused policy

In the past few years we’ve seen a major focus in many cities and regions to have an explicit ecosystem strategy. Some of these efforts have worked better than others, but they represent a realisation that there is a need for public support for early stage firms as well as the importance of these firms for local economic development office.

There is likely going to be a paradigm shift in economic development logic, which will hopefully lead to more resources available at all levels. However, immediate policy over the next few years is going to focus on triaging the damage and trying to get people back to work. I think this will lead to a much larger focus for most local economic development agencies. Maybe this will be led by public works, maybe by some form of universal basic income. While high-growth innovative entrepreneurship will be a part of these efforts, it’s going to be a huge effort. I can see there being a shift of focus away from supporting these types of startups for now in favour of broader self-employment strategy.

Different meet-ups

Meet-up events have always been a really important part of how ecosystems work. They provide a meeting and learning space and help introduce new entrepreneurs to already established communities. I don’t know how society is going to change after Covid — will we all become hypochondriacs who are afraid of shaking hands or will we hate to spend a night at home when we could be out with other people? Local meet-ups for entrepreneurs have moved on-line, but eventually they’ll be back in person. I can see them remaining important, but maybe with a larger, more permanent virtual component. I can also see problems emerging in the loss of major sponsors who will be looking to control their own costs.

More inclusive

Many ecosystems aren’t as inclusive as they should be: people are excluded based on age, gender, race, care responsibilities and a lot of other factors. In the past year I’ve begun to see a change in many ecosystems and leaders and organisers try to explicitly including as many people as possible rather than just hoping they show up to events made for and by white men. I hope that as people get more used to online meetings they can begin to develop new methods that make it easier to include people who can’t necessarily make an afterwork bar event.

What should ecosystem leaders be doing right now?

Stay inside. Wash your hands. Sneeze into your elbow.

The world right now is about as uncertain as it can be. It’s impossible to say what will be happening next week, to say nothing of 6 months from now. It’s simply impossible to make any good predictions about what people or organisations should be doing now to prepare for the future.

Instead, they should stay flexible and lean. See what happens and look for opportunities to help the community. React to changes as they occur using the same entrepreneurial thinking that underlies the entire idea of entrepreneurial ecosystems.

Amazon and its ecosystems

The biggest topic of discussion in the urban policy Nerd-o-Sphere yesterday was the surprise and sudden announcement by Amazon that it was pulling out of its agreement to set up it’s second (third) headquarters in New York City. The 3 billion in local and state subsidies were under threat by civic groups, and either in a strategic move designed to preserve future incentives at other locations or in a fit of pique over having something it wants, Amazon announced that it was withdrawing from the agreements.

Two views on Amazon’s strategy

It’s kind of amazing to be seeing something in the news and know that it will result in at least a dozen different PhD dissertations. I really hope someone is collecting all the different pitches cities made to Amazon so we get a sense of what policy levers cities think they have for attracting major investments from knowledge-based companies.

After the withdrawal, the finger-pointing started. Amazon said they planned to create 25,000 jobs, which in turn will create more jobs outside of Amazon thanks to what those employees would spend. There would be a boost to Long Island City’s real estate market as Amazon would become a massive anchor, attracting new residents to New York and boosting commercial spending. While the city and state would give more than 3 billion in direct subsidies and forgone taxes, the idea is that this would be more than made up by the increased tax base the HQ would create.

Smokestack chasing is a venerable economic development policy. Offering subsidies and tax benefits to an employer to come to a region can boost employment, create local supply chains, and help build a virtuous cycle that leads to more economic growth through entrepreneurship and a higher skilled workforce. But such efforts are usually the domain of smaller, more peripheral regions with high unemployment rates, low wages, and cheep real estate.

The goal of bringing in a major firm through tax subsidies is to create an ecosystem that goes beyond the single company. New firms can spin off of the anchor as entrepreneurial employees find opportunities and reasons to hate their bosses. Employees get unskilled, either through investments the firm (and the government) made with local universities and colleges or just through the experience at working at the company. Corporate accelerators can spur local startup activity and connect it with the strategy of the anchor firm. Senior managers can act as investors and mentors to newer firms, helping them grow. All of this helps the economy grow, which is a good thing.

But NYC has much different dynamics, which make the sheer size of the subsidies seem silly. New York City’s unemployment rate is 3.6%, which is pretty much full employment. The unemployment rate in business service and information technology will be even lower. That means that Amazon creating 25,000 jobs will increase wages across the board for IT workers throughout the Tristate area. In theory this is a good thing, but wages are already so high, this will make it harder for new and growing firms to find the talent they need to grow in NYC. It’s questionable if NYC’s public transportation system can even handle that much increased employment in Long Island City. And Amazon’s hiring won’t just be local: it will attract thousands of new workers to the region who will heat up an already ridiculously overpriced housing market.

In an overheated economy like New York’s, we should be asking very tough questions about how these subsidies will increase the social welfare of the entire city. In most places in the world, the creation of this many high-paying jobs would have been a great thing. But NYC isn’t one of those places. The money that was promised to Amazon would go a long way to keeping the subway from collapsing or building the social housing that is desperately needed. But once those questions were asked, Amazon cut and run.

Economic development officials need to start realising that too much of a good thing isn’t always great. The point of subsidies is that they aren’t needed after a certain point: you build a sustainable business ecosystem that then creates its own incentives for future growth.

Teching FinTech in Edinburgh

The idea

This year I got to try an experiment: take a graduate class I had already been running on technology entrepreneurship and focus it entirely on FinTech. There were a few reasons for this:my University had committed to supporting FinTech and data-driven entrepreneurship as part of the Edinburgh city deal and also that my attempts to build a technology commercialisation class (the idea which was completely stolen from Michael Camp at OSU) in which students learned how to commercialise new technologies by using university-owned IP never really gained traction.

Whenever I teach entrepreneurship, I want it to be experiential. I’ve drunk the Babson kool-aid on experiential education. Entrepreneurship theory is fun to study, but the only real way to learn entrepreneurship is to do it. The classroom is an imperfect way to do this, but it gives students a nice, protected place to play around with ideas and learn some key ideas like flexibility, resiliency, and opportunity recognition.

Why FinTech? Edinburgh has one of the strongest foundations for FinTech in Europe. It is the second largest finance centre in the UK as well as having one of Europe’s most successful entrepreneurial ecosystems. Edinburgh is big enough to have everything an entrepreneur needs, but small enough that an entrepreneur can meet everyone she needs to in order to get what she needs.

Edinburgh has fewer FinTech founders with a finance background

But so far, the Fin hasn’t met the Tech in Edinburgh. Awhile ago, just for giggles, a PhD and I looked at the backgrounds of the founder of FinTech startups in Edinburgh, Manchester, and a random selection of those in London. We found that Edinburgh FinTech startups had the lowest rate of founders with a finance background. This isn’t a bad thing, but it means that FinTech startups in Edinburgh aren’t able to tap into the great pools of knowledge and social capital that have built up within the finance sector. And this is really important for entrepreneurship: who is better set up to realise that there’s a problem they can solve in the finance sector than someone who’s working within it.

The class

So, I had a few goals with this class:

• It should be experiential: minimise lectures, maximise group work.
• It should be interdisciplinary: Fin and Tech need to meet. The class needs to be welcoming to students from our Entrepreneurship & Innovation program, the regular management degree, along with students from computer science and anyone else who felt like they’d like the class.
• It should connect students with the local finance community: Students should be able to draw on Edinburgh’s finance community to find and validate opportunities.

That last point was the most important. In most entrepreneurship classes, the motto is: “Find a problem you have and solve it, chances are other people have that problem and it might be a real opportunity.” This is a great idea, but it my experience it ends up with class projects focused on solving students biggest problem: Where to find the cheapest drinks on Friday.

To come up with a good idea, entrepreneurs need a deep insight into the industry they’re looking to sell in to. But less than 10% of the students in my class (I asked) have any experience in finance. How do we give students a journey into the finance world that was deep enough for them to come up with a unique insight into a problem while at the same time doing it quickly enough that that have time to validate, test, and develop the ideas into full-fledged business models?

The answer was a two-pronged approach. First, I brought in speakers from Edinburgh’s finance community. I gave them specific instructions (sometimes followed, sometimes not) to talk about their jobs and daily activities rather than their thoughts on FinTech. What I wanted them to do was talk about what parts of their day that were annoying or wastes of their time. I wanted them to talk about the competitive threats that kept them up at night.

Second, more than anything else I wanted students to learn how to ask questions and listen. This is the most important thing: rather than just doing some research on an industry and coming up with a product, good entrepreneurs need to be able to listen to potential customers, figure out what is valuable for them, and then find a way to create that value. Your first idea about something is often wrong, but talking to people helps you refine the idea and make sure it’s a real problem.

The first part was accomplished with the help of both the Business School’s partnership team and the helpfulness of Edinburgh’s tight-knit finance community. We were able to get guest speakers ranging from executive vice presidents at global asset managers, investment research analysts, fund managers at boutique firms, and FinTech regulators at the FCA. As student groups focused in on a particular market or solutions, I was able to draw on the School’s connections to link them with industry experts and potential clients to interview. Students talked with venture capitalists, financial analysts, actuaries, and Turkish mobile banking users.

The second part was harder. I used Giff Constable’s wonderful [Talking to Humans](https://www.talkingtohumans.com/) to help students understand the risks of confirmation bias and how to ask non-leading questions. I tried to ensure that there was plenty of time for students to ask questions of the guest speakers and encouraged them to use the Q&A time to look for new opportunities. The most important questions being: “What do you still use Excel for” and “What wastes 10 minutes of your day, every day.”

I think this is where the class really worked. All the groups ended up shifting their ideas throughout the class, some radically while some less so. But all of them were able to show how interactions with customers or analysis of secondary data showed them that their initial ideas has some good points but could be better.

This is also the most transferable skill. FinTech is just using technology to solve finance problems. That’s a big market, but still a tiny slice of the world. Learning how to listen to people is one of the most important entrepreneurial skills and it one of the best ways to learn it is through doing it.

What I learned

1. Striking for 4 weeks during the term really messes up a lot of plans, but at least there were a lot of protest doggies.
2. Teams with mixed backgrounds and skills are great, but can lead to conflict. I had a few groups where there was some tension between the business school people and the informatics people. I’m not sure there’s a good solution to this besides trying to find time to present some material on effective teamwork.
3. Edinburgh’s finance community really wants to help. I got amazing buy-in from finance professionals at all levels to come into the class as guest speakers or who were willing to take time out of their day to talk with groups. The best example of this was the folks at the venture capital firm Par Equity inviting a group to observe pitches so they could refine their investment decision management product.

Final thoughts

The class worked a lot better than I thought. Even with a major strike in the middle, the students put together some amazing venture ideas. I have hope that one if not two teams will seriously consider taking their ideas forward beyond the class.

The class works because Edinburgh has such a strong entrepreneurial ecosystem and finance community. My hope for the class is that it helps build stronger connections between the city’s finance and tech communities beyond the classroom. The class will evolve as it continues, but I think that this experiential setup based around customer interactions will continue to be a great way to teach entrepreneurship to a very diverse group of students.

#teaching/fintech/info

An embarrassment of riches

Over the past few weeks, a whole host of new articles have come out on entrepreneurial ecosystems and related concepts. I think it's getting to the point where it's hard for one person to have read everything on the topic, if that was even possible. It's really great seeing the field develop over the past few years. Without further adu, here are some papers that I think are worth checking out. I haven't read all of them yet, but I think I'll be citing a lot of these papers in the future.

Towards a Process Theory of Entrepreneurial Ecosystems

“Entrepreneurial ecosystems have recently emerged as a popular concept within entrepreneurship policy and practitioner communities. Specifically, they are seen as a regional economic development strategy that is based around creating supportive environments that foster innovative start-ups. However, existing research on entrepreneurial ecosystems has been largely typological and atheoretical and has not yet explored how they influence the entrepreneurship process. This article critically examines the relationships between ecosystems and other existing literatures such as clusters and regional innovation systems. Drawing on this background, the article suggests that a process-based view of ecosystems provides a better framework to understand their role in supporting new venture creation. This framework is used to explain the evolution and transformation of entrepreneurial ecosystems and to create a typology of different ecosystem structures.”

Why I think this is interesting: A bit of a cheat, since I wrote this. But you should read it! The point of this article is to really think about what we study when we study ecosystems. Richard and I argue that we should really look at the practices entrepreneurs use to get resources within an ecosystem rather than the ecosystem itself.

Hierarchical and relational governance and the life cycle of entrepreneurial ecosystem

“In this paper, we explore the way the evolution of entrepreneurial ecosystems is shaped by different governance designs. We propose a theoretical framework in which we discuss what type of governance design would best fit the needs of an entrepreneurial ecosystem throughout its evolution. We also provide argumentations concerning the mechanisms that may explain the evolution through the different governance configurations. The conceptualization of a new framework has allowed us to specify a set of propositions, which we have tested on one single empirical setting, represented by Turin’s entrepreneurial ecosystem. The paper introduces some important policy implications. It highlights the need for a more complex relational form of governance for the growth of an entrepreneurial ecosystem, which could be obtained by means of a systemic and participative approach rooted in shared cooperative norms and informal routines.”

Why I think this is interesting: I'm always a fan of careful mixed-methods case studies of individual ecosystems. Anything that combines network analysis and longitudinal study are going to go to the top of my reading pile.

Take-up and variation of advice for new firm founders in different local contexts

“Although business advice has been linked to entrepreneurial outcomes, it is subject to information asymmetries and market failure. We argue that the knowledge concerning from whom to take advice before starting a new firm is more easily accessed in areas with high start-up rates which therefore ameliorates market failure. The study is based on surveys of 599 new firm founders in England and 381 new firm founders in Catalonia. A series of probit and heteroskedastic probit models are employed to investigate not only the probability of taking advice but also the variance in that probability, which reflects uncertainty. Supporting our view, the findings show that the taking of advice in the places with higher start-up rates exhibit less variation compared to other localities. We also find differing effects of place on the take up and variation of private sector and public sector advice. Implications from the findings are discussed”

Why I think this is interesting: Why I think this is interesting: Part of my evolving thinking about ecosystems is that they are primarily about entrepreneurs learning about entrepreneurship. However, this only works if entrepreneurs are actually open to learning about entrepreneurs. So, I've been trying to understand how open entrepreneurs actually are to learning from others and actually changing what they do.

The behavioural foundations of urban and regional development: culture, psychology and agency

“Urban and regional development theory is largely rooted in explanations based on the location, agglomeration and organisation of firms, industries and capital. Contemporary economic geography theory, however, is moving towards a (re)turn to addressing the role of human behaviour in determining urban and regional development outcomes. This article focuses on the concepts of culture, personality psychology and agency in order to understand how these behavioural factors interact and result in development differentials across cities and regions. It is proposed that psychocultural behavioural patterns provide a basis for understanding the type and nature of human agency within cities and regions. Furthermore, it is argued that such agency is based on a rationality that is spatially bounded, and intrinsically linked to the nature, source and evolution of institutions and power. It is concluded that the integration of human behavioural aspects into urban and regional development theory offers significant potential for exploring and explaining long-term evolutionary patterns of development.”

Why I think this is interesting: At the end of the day, ecosystems is just the newest way of thinking about the tension between structure and agency within the entrepreneurship process. I'll always read any article that tries to figure out what the balance between these two forces (though I'm a bit salty they didn't cite my article on the topic in ERD). 

Laboratory of the Precarious: Prototyping Entrepreneurial Living in Shenzhen

“Making has been envisioned as an enabler of an entrepreneurial self that prototypes hopeful interventions into precarious work and life conditions. This article unpacks how Shenzhen, a city in the south of China, was transformed from a site of low-quality production into the ideal laboratory for this subjectivity of entrepreneurial living. It shows how prominent and mostly male actors began experimenting with professional identity and expertise in design and engineering by articulating their engagement with Shenzhen through feminist and postcolonial critiques. Because these critiques only figured implicitly and were unacknowledged, the potential to build more democratic worlds was undermined.”

Why I think this is interesting: A bit of a deep cut here. It's not exactly about ecosystems, but I think this will be a useful critique of who we think of as the typical 'ecosystem entrepreneur.' We need to make sure we're critiquing the concepts and categories we're using.

Accelerator Expertise: Understanding the Intermediary Role of Accelerators in the Development of the Bangalore Entrepreneurial Ecosystem

“To understand the intermediary role of accelerators in the developing regional entrepreneurial ecosystem of Bangalore, we analyze data from 54 interviews with accelerator graduates, accelerator managers, and other ecosystem stakeholders, and from 49 websites, 13 online video interviews, 26 online news sources and 301 pages of policy documents. Specifically, we adopt a socially-situated entrepreneurial cognition approach to theorize how accelerator expertise, existing at a meso-level, intermediates between (micro-level) founders and the (macro-level) ecosystem. In our model, four types of accelerator expertise—connection, development, coordination, and selection—together increase stakeholders’ commitment to the entrepreneurial ecosystem, leading to venture validation (success or failure) and ecosystem additionality. These findings indicate that accelerators contribute to ecosystems in a way that is distinct from, but supportive of, building individual ventures.”

Why I think this is interesting: Not going to lie, I'm a bit salty this paper didn't cite me too. But I'm so desperate for good research articles on ecosystems from outside the UK and Western Europe I'm willing to overlook that party foul.

How Entrepreneurial Ecosystems Take Form: Evidence from Social Impact Initiatives in Seattle

“Research Summary This research uses insights from field theory to explore the early moments of how entrepreneurial ecosystems form through everyday interactions. We examine the cultural-cognitive and material micro-dynamics of activities occurring in support of social impact entrepreneurs and businesses from 2000 to 2014 in the Seattle WA region using archival and interview data sources. The pattern of results about what actors do and how interactions change over time supports a two-period model of ecosystem formation where initial distributed and disparate activity undergoes a phase transition to coalesce into a more coordinated and integrated social order. The findings point to endogenous sources of structuring, including language and interaction, rather than exogenous sources such as government action or instrumental policy goals. ”

Why I think this is interesting: Every third person I've talked to about ecosystems has said they're doing something on social enterprise ecosystems, but this is the first paper I've actually seen on it in the wild. I've got my own poker in this fire, but it's good to see that others are exploring this issue.

Workshop on Entrepreneurial Ecosystems

Workshop on Entrepreneurial Ecosystems

June 6th 10:30 to 4:00

University of Edinburgh Business School

Location: David Hume Tower Room 4.18

George Square, Edinburgh 

EH8 9JS

The Centre for Entrepreneurship Research at the University of Edinburgh Business School is hosting a Workshop on Entrepreneurial Ecosystems that will focus on the emerging field of entrepreneurial ecosystems and high-growth startup regions. 

The workshop will feature talks by two international experts on entrepreneurial ecosystems: Dr. Yas Motoyama of the University of Kansas and Professor Erik Stam of the Utrecht University School of Economics. 

The workshop will bring together scholars and policymakers from fields such as business, economics, geography to discuss how regions can support high-growth venture creation and entrepreneurship-led economic development. 

Attendance is free and lunch is provided 

Agenda: 

10:30 - 11:00 Arrival & coffee

11:00 - 11:10 Opening 

11:10 - 12.10 First session: Dr. Yas Motoyama 

12.10 - 13.00 Short ecosystem presentations & discussion

13:00 - 14:00 Lunch & networking

14:00 - 15:00 Second session: Professor Erik Stam 

15:00 - 16:00 Discussion & close 

Please contact Ben Spigel (ben.spigel@ed.ac.uk) or Fumi Kitagawa (fumi.kitagawa@ed.ac.uk) with any questions or to RSVP.

Anti-facist pedagogy in business schools

The events of the past 9 days make it clear that there is a shift towards authoritarianism and fascism in the United States marked by attacks on the humanity of immigrants and religious minorities. It joins several other countries in this regard. 

It is also clear that the main people behind these racist, facist policies have business degrees or business education. Donald Trump graduated from Wharton Business School in 1968. His principal advisor has a Harvard MBA. His UN ambassador has an accounting degree.

The rise of political leaders with business degrees, rather than law or political science is a rising but not new phenomenon. George W. Bush was famously the first president with an MBA (from Yale) and his first campaign highlighted his MBA training as a key source of his skill set as a manager. An older analysis shows that a degree in business administration or economics is one of the most common educational backgrounds for state leaders. 

Successful business people are increasingly using their business or entrepreneurial success as a platform for their political careers. Trump is the most obvious example of this but Darell Issa is another example. This trend will only grow.

Given this, Business Schools need to take on the responsibility and duty of training the next generation of political leaders as well as business leaders. This responsibility includes the need to deliver anti-facist and anti-racist training. We as management scholars need to begin a discussion of how we can take on this new responsibility in our teaching and research. 

What does anti-facist business pedagogy look like? It goes beyond simply offering a class on business ethics (even if it is mandatory). It has to be integrated throughout the curriculum. It has to accomplish several goals.

• First, it has to teach students to know when they are being lied to and understand the reasons. This is pretty useful skill for a future business professional to have anyways, but is is particularly necessary in a world where our leaders boast of having 'alternative facts'
• Second, it has to teach them that they are capable of being facist or racist. One of the biggest failure of our education system is that it presents racism as an act of determined hate rather than a series of many, simple, thoughtless actions. Students should learn both about unconscious bias in hiring and leadership, but should also be subtly exposed to how they engage in it. Maybe we can create a business simulation where students are given the option to adopt illegal policies (such as limiting worker safety to reduce labor costs or asked to review the resumes of different workers when hiring for a student startup). The key is help them realise that they are susceptible to these biases and they will have to police themselves. 
• Third, it must have them engage with humanity. Several entrepreneurial and social design classes have had students work with refugees or undocumented immigrants to better understand their situation and design solutions to help them. 

I want to begin a dialog about what an anti-facist business curriculum looks like. Critical scholars from fields like sociology, gender studies, history, and political science have put together several draft syllabuses and reading lists to better understand the post-trump world. Management scholars must do the same thing. Our challenge is that it is difficult for us to simply teach against fascism: students come to our programs and classrooms expecting to develop a very specific skill set and will likely resist too much overt anti-fascist training. Rather, we have to integrate these life lessons into our overall curriculums. 

If you have any ideas to share, please leave them below in the comments or e-mail them to me at ben.spigel@ed.ac.uk. My ultimate goal is to help arrange a late breaking PDW or informal gathering at AOM in August to discuss and develop these ideas further. 

What happens when the success story stops being a success?

Some less than great news about Fanduel, one of the most prominent success stories of Edinburgh's entrepreneurial ecosystem. According to the New York Times, both it and its main competitor Draft Kings are running low on cash.

“Within the past three weeks, the New York-based FanDuel has laid off more than 60 people, and both companies have acknowledged that they are months behind in their payments to vendors, especially to the array of public relations and lobbying firms that they have employed across the nation to persuade individual state legislatures to legalize daily fantasy games — the most critical component of rebuilding their business.
”

— New York Times

One of the things that separates Edinburgh from other entrepreneurial ecosystems of its size is that remarkable emergence of two high-growth unicorns, Fanduel and Skyscanner. These have become leading icons of the city's tech community. They're celebrated, the CEOs of both companies often give talks at events and it's something that city leaders can point to when trying to attract the attention of global investors and tech giants. But more than a symbol, these companies act as magnets, attracting highly skilled workers to the region who can then either startup their own firms or become highly valuable employees at other startups. Their success has helped build a culture within Edinburgh's tech community that says "I can do that." If you see something is possible, it becomes possible for you to do yourself. It's the business equivalent of this Pokemon ad (which I love)

http://bit.ly/1PoF8c9 Celebrate 20 years of Pokémon by watching the 2016 Pokémon Super Bowl spot! Join the conversation with #Pokemon20 on Twitter, Instagram, and YouTube. Visit the official Pokemon20.com site for more exciting ways to Train On. Official Pokémon site: http://www.pokemon.com Shop: http://www.pokemoncenter.com Facebook: http://www.facebook.com/Pokemon Twitter: http://www.twitter.com/Pokemon Instagram: http://www.instagram.com/pokemon Tumblr: http://www.pokemon.tumblr.com

But what happens when that success story succumbs? What would happen if (knock on wood) Fanduel and Draftkings make a desperation merger that results in widespread layoffs in Edinburgh and the loss of its local offices? 

Immediately, the impact would be big but not devastating. LinkedIn shows about 100 Fanduel employees based in Edinburgh. These are all really highly skilled people, both on the tech and managerial side. I have no doubt that those who wanted to would quickly find jobs at other local tech firms, from large ones like Amazon's local R&D lab to Skyscanner to smaller but still up and coming tech firms. Others would go abroad or down south to London depending on how deep their ties are to the city. We might even see a small spike in entrepreneurship as people who have been playing around with the idea of starting a company now take their severance and make a play. 

Longer term, it's hard to say. I feel that while right now Edinburgh (especially it's digital tech sector) has a very positive, supportive culture. But I think that this culture is rather fragile. We don't talk about failure. Richard Yemm and Pelamis Wave Power — a wave energy company in Edinburgh that went into administration in 2014 — used to be the toast of the town. Everyone was celebrating the advances it made. But after it went into administration not another word was spoken about it (except to blame the Chinese for stealing their technology). 

I've seen similar things happen in Ottawa after the collapse of Nortel in 2000. I've written about it with varying amounts of puns here and here and wrote a pretty decent book chapter about it here. Ottawa saw about a decade of retrenchment after the collapse of Nortel, with significant loss of talent to other regions. While the economy has recovered, the technology scene has shifted far away from the heavy duty networking technology Nortel was known for towards SaaS, including Shopify, one of the world's leading e-commerce platforms.

What I noticed in Ottawa after the collapse of Nortel but before the rebirth of its SaaS economy was a big depression in it's entrepreneurial culture. In a recent article I've written in the Journal of Economy Geography, I show how this lead to fewer people finding entrepreneurial mentors,  a crucial ingredient in a thriving entrepreneurial ecosystem. There were other knock-on effects: the lack of a strong entrepreneurial culture made it hard to create a cohesive entrepreneurial community. There was a big divide between the new startups downtown and the tech companies in the suburbs. They just didn't see eye to eye. The city didn't know who to support or how to support them because the firms couldn't come together in an organized fashion. 

So what does this tell us? It means that while the collapse of any one firm might not have immediate impacts on a city's entrepreneurial ecosystem, it does suggest that entrepreneurial cultures can be very fragile in small-sized ecosystems with just a few real big success stories. It's more than a bruised ego, a damaged entrepreneurial culture can discourage the kind of risk taking that startups need to scale up and can make it harder to attract new angel investors and venture capitalists to the region. 

How can ecosystems preempt this? There's no one silver bullet. Firms fail. It's part of life. All you can do is be prepared for it. One thing places can do is try to be more tolerant of failure. Celebrate failure as a learning opportunity rather than as personal failure. It's hard to do but necessary. Second, ecosystems should make sure that people recycle through it rather than leave. If Fanduel folds, there is an amazing pool of highly skilled, talented people. How can we make sure that they find jobs in the ecosystem rather than heading to sunnier climes? After the collapse of RBS, Edinburgh set up a senior management bank to help tap the talent pool that suddenly became 'available.' But it's also about providing targeted support for the recently laid off to make sure that local firms have a first shot to offer them new opportunities or that they receive startup support relevant to their needs and abilities.  

Will Fanduel suddenly collapse? I hope not. But an ecosystem so dependent on its successes that it can't outlive them isn't a very stable ecosystem to begin with. 

Branding entrepreneurial ecosystems

Wired Magazine recently ran a profile of the top startup cities in Europe. They profiled the most exciting startups in  Stockholm, Amsterdam, Paris, London, Lisbon, and Helsinki. Noticeably absent from this list was Edinburgh. Edinburgh has the highest per capita rate of 'unicorns' in Europe and the third world wide. It has one of top performing private accelerators in the world in CodeBase and one of the world's best computer science departments. 

The question is: why it didn't make the list?

I want to be in the room where it happens

This isn't just a question of the ego of a city (or my own ego) left off the hot or not list. An entrepreneurial ecosystem's global profile has a big impact on its future success. Ecosystems aren't real things that exist; much like Tinkerbell they only live as long as people believe in them. A place's perceived success will attract investors to it as well as budding entrepreneurs and startup employees. Generating a buzz about a place helps make it easier to get people to lend their time, energy, and passion to organising and running the entrepreneurial groups that make up an ecosystem. Companies benefit from this. This creates a virtuous cycle: successful entrepreneurial ecosystems create attention which helps establish the place as an 'entrepreneurial city.' This helps attract talent, investment, and customers. This in turn helps the ecosystem perform better, increasing the attention it gets from the global business press and community.  Rinse and repeat until they make an HBO show about you. 

You know you've made it when you get added to the Silicon Valley intro

The challenge for Edinburgh is how can it stop punching below it's weight? How can it attract media attention that goes beyond the local Scottish press (with the occasional profile from the FT when they venture North of the Wall). Part of the problem is that the city's two big successes — Skyscanner and Fanduel — aren't really connected to the place. Not to say that they aren't engaged with the community, they are, but the businesses themselves are disconnected from Edinburgh. Fanduel is for all intents and purposes an American company and Skyscanner is seen as a global company rather than a Scottish one. Good for Skyscanner, bad for Edinburgh. 

However, effectively branding an entrepreneurial ecosystem requires more than just press junkets and advertisements. It requires building a narrative that connects the history of the place with its future and helps explain why there is so much exciting activity happening there. A startup ecosystem isn't just a bunch of cool new ventures succeeding by themselves; it's an entire community that helps support innovative entrepreneurship. 

Waterloo, Canada is a great example of how to do this.  The city has not only helped develop numerous high growth tech firms like Blackberry (not so high growth any more), Kik Messenger and Tribe HR, but also attract offices from players like Google and Microsoft. This despite being a fairly small city just an hour away from the much bigger metropolis of Toronto. Waterloo has worked hard to build a narrative that connects its Mennonite and German history with its contemporary technology success. Drawing on this, they've been able to create the myth of Waterloo as Quantum Valley. This has help attract substantial interest from investors and researchers. 

Ironically, Edinburgh literally pioneered the idea of city branding. Walter Scott, author of books like Waverly and Ivanhoe, helped brand Scotland and Edinburgh with the image of Tartan and Highlanders. He used this image to arrange a trip by King George IV to Edinburgh, which was a boom to the city's businesses. 

Now this is how you build an ecosystem!

What can regions do to try to build their global ecosystem brand? 

1. While ecosystems need a diverse range of actors experimenting with new ideas, successful branding seems to require a prime actor. Communitech in Waterloo has been successful in part because everyone in the community sees it as the most important agency for building Waterloo's global brand. 
2. Everyone needs to help. That single organisation can't do everything on its own. Companies and entrepreneurs should be proud about where they come from and why that place is great. 
3. Internal communication is as important as external broadcasts. Building a shared story about the ecosystem needs to happen internally. It can't be imposed from the top down but has to emerge through consensus and shared myth making. 

New articles on entrepreneurial cultures and ecosystems

To absolve my guilt about not blogging more, I'll simply say that it's been a very busy year. The results of that busy year are now coming to fruition with two of my new articles on entrepreneurial cultures and ecosystems coming out in the past few weeks. First, I just published an article in the Journal of Economic Geography on regional entrepreneurial cultures and mentorship. This is work that came out of my dissertation that looked at the origin of entrepreneurial practices. I was interviewing entrepreneurs in Ottawa and Waterloo, Canada, and saw huge differences in both the number of entrepreneurs who had mentors. The difference was only seen looking between the two cities: it didn't matter if they were high-growth of lifestyle entrepreneurs or serial vs first time firm founders.

The reason for this was the relationship between each city's local culture and the shared culture of 'tech entrepreneurship' — the general feelings and understandings about entrepreneurship created by the global business media and entrepreneurial communities. That later culture sees mentorship as a real important part of the entrepreneurship process, but the importance of mentorship differs within different regional cultures based on a variety of factors.

So, how do we understand the complex interplay of local and non-local cultures? I argue that the work of Pierre Bourdieu can be very useful. Bourdieu talks about fields — ordered systems of social rules and relations — and habitus, people's internalised understandings of how fields work. Entrepreneurs are embedded in both their local field as well as the more global field of the technology entrepreneurship community. Entrepreneurs have to be very skilled at navigating the often conflicting norms found within different fields.

The paper is very conceptual and tries to build a model of entrepreneurial culture from a Bourdieuian perspective. The main take away is that instead of talking about if a place has an 'entrepreneurial culture' or not, we should be better concerned about the different types of fields entrepreneurs are embedded in and how they understand their overlapping position in them. This stops culture from being some monolithic, deterministic force and helps us understand it as a more nuanced context that contributes to entrepreneurs' own practices.

The second article, in the International Journal of Innovation and Regional Development, is an empirical peek at how Edinburgh's entrepreneurial ecosystem works. It reports some early work I did on the role of different entrepreneurial support programs that operate within Edinburgh's entrepreneurial ecosystem.

I think there are two important findings in this paper. One, Edinburgh has a huge number of different public and private programs designed to support high-tech entrepreneurs. I counted somewhere around 45, but that's a very conservative estimate. While I think Edinburgh is at the high end of the number of programs for a city of it's size, it's clear that most communities don't have just one program but a whole network of programs that work together to support entrepreneurs. This is echoed in a recent study of St. Louis by researchers at the Kauffman Foundation in Entrepreneurship and Regional Development.

Second, I didn't see much competition between these programs. While they overlapped to s0me extent in the types of support they provided (see figure above), they were generally able to specialise in different industries and stages of the entrepreneurship process, handing off entrepreneurs to different programs as their needs changed. This creates a pipeline that entrepreneurs can enter and ensures that they are supported throughout their journey.

Should we be surprised that university entrepreneurship programs don't produce too many entrepreneurs?

The answer to any question in a headline is No. A recent article in the Globe and Mail talked about the poor results from grants Ontario gave to universities to build out entrepreneurship programs. It's the traditional gripes about university startup programs: too much money spent useless things (office space and 3D printers) or money spent on things that could be free (mentorship) and it's too difficult to track outcomes.

This problem is everywhere. Entrepreneurship is seen by the public and by the government as A Good Thing That Should Be Encouraged. Money is made available to universities to promote entrepreneurship, usually through the creation of a entrepreneurship support group inside a business school or the university commercialisation body. They run business creation workshops for students, review business plans, hold pitching competitions, and maybe they have some sort subsidised office space or angel seed money for the very best kids.

And after 4 or 5 years of this, the results are tallied up and they don't look good. There are a few academic spinouts, but but many of them might still be in the angel investment/VC investment phase with very little to show. If the entrepreneurship organisation is very good at record keeping, they might have a list of how many students they helped have gone on to start a new venture, but chances are also that these startups have low growth potential. So there's a re-org, new management is brought in, a new mission statement crafted. Wash, rise and repeat.

The problem with many university entrepreneurship programs is that we are measuring the wrong things. It's great if we embed entrepreneurship in the curriculum so much that students in all disciplines from STEM to Slavic Studies are prepared to identify a pain point and build a Minimal Viable Product while filling out their Business Model Canvas while watching a TED talk. But the fact is that recent university graduates are pretty poorly positioned to startup a growth-ready startup. Because they have little experience in any industry, they are poorly positioned to identify needs in industrial value chains or really anything beyond consumer products / apps. Studies have shown that the most successful entrepreneurs are generally in their late 30s/40s and have at least 10 years experience in the industry they're entering. They have the knowledge, the legitimacy, and the resources necessary to successfully create a new, fast-growing venture.

In this sense, it's kind of foolish for recently graduated students to jump into starting their own company the second they graduate. Some students who have been dreaming about running their own company for years will do this, and that's great. They have the initiative, flexibility, and orientation needed to be a great entrepreneur.

But for most students, this entrepreneurship was never their goal after they graduate. For these students, the majority of a university's student body, the point of entrepreneurship education is to plant a seed. Knowing that entrepreneurship is an option for them, knowing the fundamentals about what works in a startup and what doesn't can help a graduate who is 8 or 10 years into their career in an industry see an opportunity and decide to take the risk of going after it. Now they not only have the skills to start a business they have the inside knowledge and experience that gives them an unfair advantage.

The problem is that these startups will never show up in any analysis of the university's entrepreneurial performance. The connection is too long-term and too subtle to easily pick up. But I think these types of startups are the most important outcome of university entrepreneurship education programs. It's just a shame that we'll never be able to count them.

There's no solution to this. All we can do is temper our expectations for what an immediate intervention can do. A single program with a 3-year rolling budget won't make a university a startup factory. This kind of transformation is a decades long project involving long-term investments, changes to the way tenure and promotions work, and a complete reinvention of the university's culture and the type of students it creates. But what these programs can do is help create a more entrepreneurial population of graduates, even if they don't become entrepreneurs until long after they've graduates.

What I learned about teaching entrepreneurship from watching 14 seasons of Project Runway

What I learned about teaching entrepreneurship from watching 14 seasons of Project Runway (and 4 seasons of Project Runway Allstars, and one season of Under the Gunn, and reading all of Tim Gunn's books), OR What happens when the sun sets at 3 PM in Scotland OR How I learned to stop worrying and love skill-based reality competitions. Teaching entrepreneurship is a weird thing. There's not a huge amount of theory you can teach. Oh there is stuff about what is the nature of an opportunity or the role of personality characteristics, but I don't think many teachers or students think these are actually important to knowing about entrepreneurship. There are techniques to teach, like design thinking, customer empathy, and business model canvases, but it's hard to avoid teaching these in a way that isn't completely vocational. In a university class, I want students to develop critical thinking skills, not just know how to fill out a business plan template.

I think about it like teaching photography: there are technical skills to learn like f-stops, lighting levels, and colour coordination and there are things like the history of photography that students can engage with, but at the same time it is an art that can only be learned through repeated practice.

But while you can take a photo in 1/60th of a second, building a new venture takes a long time. We can try to simulate this with business plan assignments, but the problem with this is that it takes a long time (at the very least a good portion of a course) for students to figure out if a business model they're working on can work or the types of challenges they'll face.

So, we can't just practice entrepreneurship. I think a better approach is to help students develop good taste. Throughout Project Runway, Tim is trying to help the contestants become better designers by helping them become more tasteful. Often time this takes the form of 'editing,' taking away features of the clothes to reveal the brilliant design underneath. This isn't a rote list of what colors go together or what's fashionable this season: taste according to Tim Gunn is a highly creative and dynamic knowledge about what works in a given context given your resources, time frame, and customer needs.

Taste in entrepreneurship is similar. I think a business model can be beautiful if it opens up a path to create value where no one saw value before or identifies a solution to a problem everyone has but no one realises they have. Business models can also be ugly, like a model where you compete in a saturated market to provide a commodity service. A good business education should help students develop good entrepreneurial taste to realise what is a good opportunity and what is one to be avoided.

For Tim, the best way to teach taste is to ask questions. The teacher shouldn't say that there's no customers for a new product, they should ask who the customers are, what's the price point, what problem are they solving. A teacher shouldn't say that it's a bad idea to start a restaurant but instead make sure that the student can articulate their Unique Selling Point and then look for the holes in their argument. You're job is to be something of a speed bump, making sure that you don't let students get to carried away with their own ideas that they don't look at it from different perspectives to see the flaws.

Good teaching is always good mentorship, but mentorship is especially important when trying to cultivate taste in students. It's helping students to understand what questions they need to ask and to understand what a good idea sounds like.

Drawing on my now very extensive experience of watching Project Runway, I've come up with a few tips on cultivating entrepreneurial taste that I'm going to try to work into my classes:

• Identify beautiful business models and share them with students. Try to explain what makes the business model beautiful: does it uncover a new source of value (like AirB&B), does it try something totally new and unexpected (like leasing jeans), does it do something that's already out there but just much better (like Slack)?
• Ask questions, lots of questions. Make students re-think every aspect of their idea to find the weaknesses.
• Use silence. If the student can't immediately answer a question, don't just skip it and move on, just sit there until they can answer it. If they can't, then they sure know that they have to figure out how to answer it now.
• Don't do the work for them. One of the biggest challenges mentors face is not to just jump in when you see a student struggling (look at the first season of Under the Gunn to see what that looks like) and help them out. But struggling is part of the learning process. Make sure you're not just giving them ideas, but you're helping them come up with their own ideas.
• Force them to road test. No plan survives contact with reality but road testing an idea is the only way to see if it works. Figure out way to make students take their ideas out of the class room and into the real world. Make them come up with £5 experiments (a market validation test that costs less than a really good cup of coffee) and then talk with them about the results.
• Be empathetic. Tim Gunn is the world's best mentor because he deeply empathises with all his students, no matter what their background. He's good at teaching because his students instantly know that he cares about their success. That way even when he's forcing them to start all over on a 12-hour design question, they know he's doing it because he believes they can do better.

A blessing of unicorns.

Three facts: a herd of unicorns is called a blessing, Scotland's national animal is the unicorn, and a unicorn can also mean a startup valued at over 1 billion USD.Given these facts, it was pretty much impossible not to title my recent talk on Edinburgh's entrepreneurial ecosystem "A Blessing of Unicorns." You can see the slides from the talk here

Edinburgh is a very strange entrepreneurial ecosystem. On a per capita basis, it has the third highest number of unicorns in the world, more than New York City, Berlin, and Bejing and behind only Silicon Valley and Provo, Utah.

For the past few months I've been carrying out a study of Edinburgh's entrepreneurial ecosystem. I recently published a white paper summarizing my initial findings, which you can read here [PDF warning]. I was primarily looking at the role of entrepreneurship support programs in helping to create a thriving entrepreneurial ecosystem.

Support programs, often run by the public sector, are a crucial part of an entrepreneurial ecosystem. They help correct for the market failures that often face early stage companies: entrepreneurs may have great vision and technology, but they'll always experience trouble convincing investors and customers of this. Programs can help entrepreneurs by providing them with training, grants, and help build their social networks to connect with other entrepreneurs and advisors.

I identified 43 different entrepreneurship support programs in Edinburgh. These ranged from large, publicly funded programs organized by Scottish Enterprise and Scotland-wide business plan competitions like the Converge Challange to smaller programs put on by local entrepreneurs, such as coffee meetups and organized drink nights. This is by any account a conservative estimate, almost every week I hear about a new program that just started up or an existing one that had slipped under my radar.

I interviewed the leaders of 26 of these programs to get a better sense of what they do and who they work with. The most interesting finding was how tightly networked all these programs are. As you can see below, this is a really, really dense network of support programs. There are almost no isolated programs with none or just one connection to other programs.

What does this mean? What I observed in Edinburgh was that individual programs were able to specialize in providing specific types of support to specific types of entrepreneurs. This can be helping early stage biotech entrepreneurs network with potential investors or organizing startup competitions for student entrepreneurs. As entrepreneurs change, the the leaders of support programs can connect them with other programs that provide more relevant services. This is only possible given the strong connections between programs. Allowing programs to specialize mean that they can provide more material support for a small subset of entrepreneurs rather than being everything for everyone.

What does this mean for Edinburgh's ecosystem? On one hand, it's a good thing. Lots of programs mean that entrepreneurs can pick programs that provide the right resources and support for them without having to endure generic programs that aren't very relevant to them.

However, I'm a bit concerned that the Scottish Government has a bit too much power in creating and running these support programs. In my study, about 80% of the programs I interviewed got their funding in some way through either Scottish Enterprise or another Scottish Government funding body. One of the defining characteristics of an entrepreneurial ecosystem is that it is primarily run by and for entrepreneurs. Entrepreneurs themselves should be identifying their needs and helping to create organizations to deal with the issues they encounter. The role of the government should be to sit back and support the entrepreneurs doing this. Otherwise the state risks investing resources in areas that aren't affecting entrepreneurs. Programs like StartEDIN are great examples of entrepreneurs coming together to identify common problems and working towards solutions. This should be encouraged rather than crowded out through public investment.

Where have all the salesmen gone ♬ ♬

I've been doing some interesting work on entrepreneurial ecosystems lately. I just published a paper in Entrepreneurship Theory and Practice on ecosystems (hint hint) but that was just the start. One of the points I made in that paper is that entrepreneurial ecosystems depend on more than just entrepreneurs. Look, entrepreneurs are the most important thing, but there are a bunch of other people that matter. Now, we know that angel investors are important and Kenney and Patton said that we should pay attention to folks like patent lawyers and accountants. Obviously you'll want experienced, successful entrepreneurs who can serve as mentors for future generations of firm founders. But I've been talking to a lot of entrepreneurs, policy makers, and other people in Edinburgh for the past month and from those conversations I think we need to think about a broader group of people that you need to make an effective ecosystem.

First of all is sales people. I think sales is the toughest nut for entrepreneurs to crack, especially entrepreneurs who see themselves as 'technologists' or 'innovators' rather than businesspeople. Heck, even businesspeople don't think of themselves as sales people: how many business schools or MBA programs actually teach sales techniques? The answer is Not Many. How many books on entrepreneurship actually talk about sales beyond a very simple 'it would be nice if you sold some stuff'?

But salespeople are very important for startups! Salespeople are typically the first employee at a startup that actually gets a real, competitive salary. They are instrumental in building connections with customers and landing the deals that actually pay for product development. But new entrepreneurs often have a lot of trouble working with sales people, they really don't know how to pay them, how to measure their effectiveness, or how to help them do their job. And if I'd have to guess, I doubt there are a lot of salespeople who like working in the structureless environment of a startup.

And this is where the trouble starts: there's been a 20 year debate in the academic research over if entrepreneurs are born or taught. The debate is still going on but there seems to be a consensus that we can at least try to instil an entrepreneurial mindset in people if we catch them early enough. There's be no discussion about this for sales. There is the basic assumption that salespeople are born; they are born with an extroverted personality, slicked back hair, and the ability to give a sales pitch so meaningful people run from the room crying and you never look at a slide projector the same way. This may or may not be true: I hate talking to people yet during my PhD I learned how to make cold calls to entrepreneurs in order to sell them something they truly didn't need — an hour of their time spent with me.

So we're left in a situation where we assume that since we can't teach sales entrepreneurs will just draw on what ever local talent exists and hope for the best. The problem is that there doesn't appear to be an even distribution of sales talent. We're lucky that the ONS's Labour Force Survey provides detailed occupational data so we can actually see where specific types of salespeople are in the UK. The map below displays the location quotient (LQ) of sales professions: not telemarketers or retail salesclerks but Marketing and sales directors, Business sales executives, and Sales accounts and business development managers. These are high level salespeople and managers. LQs are a nice metric for this sort of thing since they show the ratio of a certain profession to all other professions while controlling for population and other factors: an LQ above 1 means that the concentration is higher than the national average and below 1 means it's lower.

Not unexpectedly, London has a huge cluster of sales professionals: London is a global city filled with sales based companies, this is exactly where you'd expect them to be. But the map shows big problems for Northern England, Scotland, Wales, and Northern Ireland. These places have almost half the national average of sales professionals. This means that when startups go looking for salespeople, they have a smaller pool to draw from. They'll either have to pay more or get a lower quality worker. It means there's a smaller support infrastructure for salespeople to build up their skills and learn how to manage other salespeople.

What does this tell us? Typical region policy to support entrepreneurship focuses on training entrepreneurs first, then trying to educate potential angel investors, and maybe they have a workforce development program to help train people in computer programming or whatever else it hot right now (is Internet of Things a job yet?) But no one is really thinking about (1) how can we train more and better salespeople and (2) how can we train entrepreneurs to be better at working with salespeople. Having a broader conception of who matters in entrepreneurial ecosystems makes it clear that this should be a priority.

Uber and Carnegie Mellon and Pittsburgh

Richard Florida wrote series of tweets on the recent news that Uber as 'poached' around 40 senior researchers from Carnegie Mellon University. CM has a fantastic reputation in robotics and automation research and is one of the leaders of work on autonomous cars. Uber has made no secret of its interest in automated cars in order to disrupt the 'poor immigrants get a foothold in a new country' market'. The article he was responding to sees this as a problem: Uber has made no secret of its interest in being a leader in the self-driving car market and is throwing its sizeable resources into hiring the best minds in the business. The fact that they set up a research office in Pittsburgh is testament to how great CM is at this. The MarketWatch and WJS article views this as an attack on CM and that by stealing away their top researchers they've weakened the university's robotics program. The point that Florida was making is that there is no reason to see this as a threat. Indeed, that this is the entire point of university research!

Now, before we get going talking about this, I just want to make two points. One, the real market for disruption by self-driving vehicles is the trucking industry not the taxicab market. Two, is anyone else confused about why a gypsy taxi dispatch company is valued at 50 billion dollars?

But, let's put that aside for now. What made me interested in this topic is that I'm currently reading through Christophe Lécuyer's brilliant book on the history of Silicon Valley. It's no surprise that one of the reasons for the emergence of Silicon Valley as a technology cluster was the interaction between local tech entrepreneurs, defence contractors, and researchers at Stanford University.

Stanford was a leading research location for the self-driving cars of the 1950s: microwave radio tubes and klystrons. The highest of the high tech. Varian Associates was the Uber of the mid 1950s, an high-tech, engineer-led company near San Francisco that was beating the pants off of its competitors like RCA. Its secret was hiring physicists with a great theoretical understanding of the basic science and pairing them with the skilled trades people drawn from the region's burgeoning defence industry.

Key to their success were their close linkages with Stanford. These connections went far deeper than just drawing on the tech developed at the university, they hired graduate students and directly funded relevant research. In some cases Varian "relocated its engineering staff to Stanford to reinforce the firm's close connection with the university's research programs" (p. 110)

The same thing happened when in the development of the transistor and microprocessor. The main developer of this technology, William Shockley wanted to hire a Stanford professor onto his company but the professor declined as he was more interested in his academic research. But over the next few years they "reproduced Shockley's laboratory on campus. As a result, Standard was probably the first university to have the capability of making silicon diodes and transistors" (p, 138).

So, what does this have to do with CM and Uber? From the university's view Uber is a threat to their research. They've hired away 6 PIs and it sounds like 30 odd advanced post-doc or phD researchers, which is a huge deal. Those researchers are taking hundreds of person-years of experience out of the university. CM can try to replace those PIs, but even if the new hires are of the same caliber as those who have left it will take them years to get their own labs up and running.

From Uber's perspective this a great thing. By locating their research office in Pittsburgh they've gained access to knowledge spillovers from CM for years but now thanks to the *ahem* ambitious valuation of the company they're in a position to hire on these researchers and become *the* world leader in self-driving cars. From a regional economic development angle, this is great too. Uber's advantage in this industry will grow, helping them create even more high-skill, high-pay jobs.

But the history of Silicon Valley provides some useful insight into this. Lécuyer's history helps me understand something that isn't much talked about in academic research on the role of universities in economic growth. In order of importance, here is the contribution of universities to the economies of high-tech regions:

1. Producing highly skilled students who go on to work at local companies
2. Acting as a magnet to attract highly skilled researchers to the region who then go on to work at local companies
3. Knowledge spillovers from university research to local firms
4. Academic spinoffs and commercialization of university tech
5. Students spending lots of money on beer before leaving
6. Proceeds from sales of CDs from student a cappella groups
7. Sports?

A University's role as a producer of skilled graduates and magnet to attract skilled workers is their most important role in supporting economic development. Other things like knowledge spillovers and spinouts are secondary at best.

So, on one hand Uber's hiring of CM researchers is great. CM has acted as a magnet for attracting the top autonomous robotics people in the world and Uber is able to take advantage of that.

But by hiring away the PIs, Uber might have killed the golden goose. PIs with large grants and labs are great training ground for new highly skilled researchers. They attract top PhD students and post-docs and help them become world leading engineers and researchers. It's hard to know what the role of these PIs will be within Uber, but if they're not publishing or applying for grants it will be hard to attract the world's best researchers.

In many ways, history tells us that it would be better for Uber to support the PIs within their university labs. Give out large, undirected grants and let the researchers do what they do best. Give them lots of money to bring in more researchers and then hire the best of the best. Encourage spinouts from the university by being a early-stage customer and acquire those with the best product.

So, Florida is right that we shouldn't see this as an attack on the university because this is exactly what should happen. Local companies should hire the best talent that's produced at a university which in turn helps the region develop a stronger knowledge-based economy. But we should also be concerned that by poaching PIs, Uber has reduced the capacity of CM to produce and attract the world's best researchers which at the end of the day does a disservice to them, Carnegie Mellon, and Pittsburgh as well.

Kicking students out to get their work visas: Bad idea or worst idea?

The great thing about the end of the year, other than my birthday (better known as Christmas 2) is that governments try to release all their crazy policies while everyone is off enjoying the 'festive season' (better known as getting drunk). So I wasn't that surprised when I read that the Home Office is developing a new strategy of forcing all non-EU foreign students to leave the country before applying for a work visa. Let's discuss why this is a terrible idea. A university helps the regional and national economy by bringing in promising pupils, educating them, helping them gain technical and social skills, and then unleashing them on the economy as workers and entrepreneurs.One of the biggest economic contributions universities make to their surrounding regions is to attract and train skilled workers. All the cool research and 'academic spinoffs' are just added gravy, the true benefit comes from developing wicked smart kids.  Immigration policy should do its best to create pathways for foreign students trained in domestic universities to stay in the country. Universities aren't economic engines, their alumni are.

I also think that forcing a 4-month trip home would break the link between the student, the university, and the region. Let's imagine the optimum situation here: a brilliant student graduates and leaves the country to apply for a work permit. She has to give up her flat, sell or store all her furniture, and then move back with the parents. She goes out and applies for jobs and because she is brilliant, gets many offers and gets a work permit after about 120 days. Right there the university's home region has lost it's best claim to the student: she already lives there. Sure lots of students move after finishing university, but many students (particularly post grads) also set down roots in a place that encourages them to look for local work. This is especially true for entrepreneurs or people who want to work at startups who depend on their place-based social networks to find opportunities and jobs. This policy change will break these networks and bonds for every single non-EU student.

Second, it's pretty much admitting that the sole purpose of international students is to subsidize domestic students' tuition. I'm an international student / worker twice over: I'm an American but I did my undergrad and PhD in Canada and now I'm a migrant worker in the UK. As a student I knew that I was paying more than my Canadian friends, but at least I knew that Canada had some interest in keeping me after my studies. Maybe not as an undergrad (for some reason economic geographers aren't in demand in the Canadian labour market) but my PhD came with a permanent residency application stapled to it. I think changing the rules to basically say "thanks for the money, now why don't you go home and cool your heels for a few months while we decide if you can come back." would really change my view towards the university and the country.

Look, we all know that this change is being done for political reasons leading up to an election. Some idiots made an idiotic promise to minimize net immigration. But it's also important that every single idiotic consequence of these idiotic plans are raised and that the backers of these plans are forced to explain their rationales to a sceptical public.

Crashing oil prices and entrepreneurship in the oil sector

What an interesting time to be alive. Oil prices have dropped precipitously over the past 3 months. Down from over $100 to around $61 at the moment. There are various explanations for this. Saudi Arabia is trying to pull the rug out of the fraking boom in the US by reducing the profit margin on expensive production sites in North Dakota and Pennsylvania. I like the super geo-political-diplomatic explanation that the US cut a deal with Saudi Arabia to cut oil prices in order to hurt Russia (it doesn't sound true, but maybe it is!) What I'm interested in is how this will affect entrepreneurship in regions whose economies are dependent on oil extraction. For the past year I've been conducting a study about technology entrepreneurship in these sorts of regions. Places like Aberdeen in Scotland and St. John's in Newfoundland. I've just returned from 6 weeks of intensive fieldwork in St. Johns, made all the more interesting by the falling oil prices.

These places tend to have very, very high levels of entrepreneurship and self employment. The hugely capital intensive projects associated with sucking oil out of the seafloor brings in lots of money to the region but it also attracts some of the smartest and best trained engineers and scientists in the world to work on these projects. Entrepreneurs are able to find plentiful opportunities in these sorts of markets — many begin by serving the local market as contractors or sub-contractors on big projects before developing a technology that can be exported to other oil service centres. Think new software tools to manage the flow of resources into projects or submersible technologies that can be used to inspect offshore installations anywhere.

It's hard to figure out what the decline in oil prices mean. In the short term we're going to see very swift retrenchment by the major operators. They're going to cancel projects and lay off workers. But developing an on-shore or off-shore oil field is a major investment that'll most likely be in operation for several decades. You don't make decisions like that on major, but quick, fluctuations in the price of oil. After all, oil is still a non-renewable resource and it's still getting burned off like crazy. The price will return to very high levels eventually.

But in the meantime it will do some major damage to entrepreneurs in this sector. The major oil producers are really, really good at externalizing everything that isn't sucking oil out of the ground and selling it. As far as I can tell with projects in the North Sea, most of the design, development, installation, and maintenance work on offshore rigs are outsourced either to international oil service companies like Haliberton or to smaller local specialized firms. These opportunities will be the first to dry up, the entire point of this system is to be able to quickly drop projects and contractors during periods of cyclical decline. This will not be a fun period for entrepreneurs. Many will fail and others will either see a substantial loss of profits or the need to scour the world for new business.

But I think in the long-term this kind of short term shock can be good for the regions (if not the individual entrepreneurs). The economies of resource regions are tied to the fate of a highly variable commodity whose use will hopefully decline over the next 50 years. Anything that pushes firms to move beyond the oil and gas industry is a good long-term move. For example, I can see lots of maritime engineering firms and subsea technology companies in Aberdeen shift to offshore wind development. These installations require really advanced work to be build and maintained in one of the world's harshest environments. However, the payment for working on these projects is far lower than what they would expect to get for oil projects. When times are good these firms wouldn't have the resources to take on a project like wind power but in leaner times they just might. And by doing this they develop capabilities that can be exported around the world, helping the firm survive and reducing their dependence on the oil industry.