Integrating Entrepreneurship and Innovation Policy the Research Perspective

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Integrating Entrepreneurship and Innovation
Policy the Research Perspective

• Presented by Lois Stevenson
• At FSF, ITPS NUTEK Seminar
• Brussels, October 10, 2006

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Innovation production, diffusion and use of new
and economically useful knowledgeEntrepreneurshi
p the process of business start-ups and business
creation growth

• Innovation key to competitiveness and growth
• Entrepreneurial dynamism key to economic renewal
  and growth

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Policy definitions

• Innovation policy
• the generation of new knowledge
• making government investment in innovation more
  effective
• enhancing diffusion of knowledge and technology
  (network interaction effects) and
• establishing right incentives to stimulate
  private sector innovation to transform knowledge
  into commercial success
• Entrepreneurship policy
• creating an environment and support system to
  foster the emergence of new entrepreneurs and the
  start-up and early stage growth of new firms

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The research problem

• Previous disconnect between entrepreneurship and
  innovation
• Research questions often pursed by different
  researchers
• Separately identified as critical contributors to
  economic growth
• Policies often designed and implemented by
  different parts of government
• Policy making in small policy niches offers
  little opportunity for cross-policy coordination
• Different relevant stakeholders groups
• Convergence between/ complementarities of the two
  not being optimized
• Entrepreneurship involves the act of innovation
• Entry/exit activity is indicator of innovation
  performance
• Innovation systems often do not incorporate
  entrepreneurship as a focus
• Entrepreneurs essential to convert knowledge into
  economic and social benefits (knowledge filter
  role)
• Innovation performance will lag without
  entrepreneurial capacity

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Both evolutions of existing policy areas

• Entrepreneurship policy evolved from SME policy
• Innovation policy evolved from ST policy
• Both in infancy stages of evolution
• Insufficient recognition of overlaps and linkages
• Call for more horizontality and coordination with
  other policy domains
• Need for indicators to measure importance of
  entrepreneurship in innovation

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Policy convergence and integration
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Innovative entrepreneurship is e-policy type

• Evident in Lundström/Stevenson country
  assessments (e.g., AU, IE, NL, NO, UK)
• Policies to stimulate innovative entrepreneurship
  take different shape from those to stimulate
  general entrepreneurial activity
• Different target groups
• More likely to focus on knowledge environments
• Different choice of policy instruments and
  measures
• Ideal would be to have policies which promoted
  both generic entrepreneurship AND innovation
• Both are critical to competitiveness at firm,
  industry and economy levels
• Innovative entrepreneurship more effective in
  environments conducive to high levels of
  entrepreneurial activity
• More opportunity for external knowledge
  acquisition
• More informed entrepreneurs less trial and
  error
• Incubation phase of start-ups takes less time
• Higher incidence of high-growth firms

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Comparing E-policy and I-policy

• Similar strategic outcomes
• Economic growth (mixed evidence lots of
  intervening variables)
• Wealth creation
• Different policy objectives
• Job creation, social inclusion, poverty
  alleviation vs productivity enhancement,
  competitiveness
• Different relevant stakeholder groups in system
• Different target groups of policy focus
• Uneven resource allocation
• Different sets of measures

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E-policy I-policy policy targets

• Innovation policy
• RD investments
• Patents
• Supply of venture capital
• Supply of knowledge capacity
• ST engineering graduates
• Up-take of strategic technologies
• Diffusion of new technologies in enterprises
• Joint innovation activities (e.g., inter-firm
  collaboration

• Entrepreneurship policy
• Start-up rates
• Growth firms
• Supply of entrepreneurs
• Entrepreneurship and management graduates
• Supply of start-up capital
• Reduction of entry barriers

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Framework of Entrepreneurship policy areas
Policy Objectives
Create dynamic start-up market for entries and
exits
Stimulate climate and culture for entrepreneurshi
p
Stimulate more entrepreneurial activity new
businesses new entrepreneurs
Entrepreneurship education
Reduction of entry/exit barriers
Start-up financing
Start-up support (enterprise SB centres
networks)
Promotion of entrepreneurship
Target group measures
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Framework of Innovation policy areas
Policy Objectives
Increase RD intensity foster business innovation
Stimulate climate and culture for innovation
Stimulate development, commercialization
innovative new firms spin-offs new products
technology take-up
ST entrepreneurship education
RD investment
Equity financing risk capital
Incubators, TTOs, cluster networks
Promotion of innovation
Reduction of entry/exit barriers IP rules
Target group measures
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Benchmarking and framework determinants
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Recent developments E-policy

• European Charter for Small Enterprises,
  Multi-annual programmes, Lisbon Agenda
• Improve Europes enterprise performance
• European Agenda for Entrepreneurship
• EU Enterprise Scoreboard
• Benchmarks against 30 indicators (some innovation
  inputs)
• OECD Entrepreneurship Indicators Project
• Exploring options to define and measure
  entrepreneurship, factors that influence it, and
  impacts/ outcomes
• Focus on data and indicators
• Danish Consortium on Dynamic Benchmarking
• 56 indicators associated w/ entrepreneurship,
  activity levels
• Framework to measure entrepreneurship performance
• Policy studies
• Lundström Stevenson (2005) Gabr Hoffman
  (2006)

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Recent developments I-policy

• Creating an innovative Europe (2006)
• Boost Europes research and innovation
  performance
• Competitiveness and Innovation Framework
  Programme (2007-2013)
• Some attempt to carry innovation policies to
  enterprise level and to promote both innovation
  and entrepreneurship culture
• European TrendChart on Innovation
• Benchmarks against indicators
• 35 Country reports on innovation performance
• European Commission report on Policy, Indicators
  and Targets (2005)
• 75 indicators for 8 types of innovation policies
• No indicators for key policies such as promote
  and sustain creation and growth of innovative
  firms
• Policies to strengthen entrepreneurial
  innovation and encourage tech and knowledge
  transfer do not include indicators for
  entrepreneurial capacity or graduates in
  business/entrepreneurship
• Innovation policy and performance (OECD, 2005)

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Searching for an integrated approach to the
assessment of entrepreneurship and innovation
policy
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Research imperative

• Examine policies oriented to start-up and growth
  of entrepreneurial firms AND policies oriented to
  producing innovation
• Policies, institutional arrangements for policy
  implementation, scope of policy measures, policy
  and performance indicators
• Identify nexus between innovation policy and
  entrepreneurship policy, policy gaps and
  opportunities
• Identify good practices in the integration of
  these policy domains leading to more positive
  performance outcomes
• Draw lessons learned that can be applied in other
  countries
• Consider impact of context on appropriate
  policy orientation (e.g., level of economic
  development Sweden vs China)

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E-P Context Description 31 variables
Opportunities for entrepreneurship
Demographics and industrial structure
pop/growth and age, education, net immigration,
service sector/GDP, government taxation/GDP,
public sector share of employment
Economic performance GDP/capita GDP growth,
LF participation rate, unemployment rate,
exports
Economic Outcomes
Structure
SME entrepreneurial vitality
Density - of business owners SMEs per 1000
pop nascent self-employment SME share of
employment micro-firms and employment share,
female entrepreneurs
Dynamic annual entries, exits growth in no.
of SMEs, SME employment
Favorable context
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I-P Context Description add variables
Demographics and industrial structure
pop/growth education, net immigration, service
sector/GDP, government taxation/GDP, public share
of employment, RD intensity (BERD, GERD, URD)
Opportunities for innovation
Economic performance GDP/capita GDP growth,
LF participation rate, unemployment rate,
exports (of high tech products)
Economic Outcomes
Structure
Innovation vitality
Density - of business owners ST graduates per
1000 pop patents per M/pop no. of spin-offs
employment in tech sectors innovative SMEs
Dynamic annual entries, exits growth
firms sales of new-to-firm new-to-market
products
Favorable context