Faculty of Business, Justice and Behavioural Sciences
SEGRA Challenge:
Startups and Regional Ecosystems
Prof Mark Morrison*, Prof Morgan Miles# and Dr Larissa
Bamberry*
* Faculty of Business, Justice and Behavioural Sciences,
Charles Sturt University
# Dept of Management, Marketing and Entrepreneurship,
University of Canterbury
Faculty of Business, Justice and Behavioural Sciences
Challenge background
Literature Review of the Elements of
Entrepreneurship Ecosystems in Regional Areas and
how to develop them
Three surveys:
Survey of Incubators, Accelerators and Business Support
Groups in Regional Australia – completed for NSW
Survey of Entrepreneurship Ecosystems in Regional
Australia – seeking funding
Survey of SEGRA Challenge Sites (Cairns and Atherton
Tablelands) – partially completed for Cairns
Faculty of Business, Justice and Behavioural Sciences
The Regional Context
Perceived that Australia’s regional areas face a
number of challenges to innovation (Perrem
2012):
Too small and geographically dispersed to achieve
critical mass
Government reducing R&D funding in major regional
industries
Lack of human capital
Faculty of Business, Justice and Behavioural Sciences
The Regional Context
However there are reasons to be optimistic:
• Larger regional firms perform as well as urban firms on
marketing and organisational innovation (Perrem 2012)
• Larger inner regional centres which have universities have
higher capacity to absorb and leverage innovation due to higher
levels of human capital
• RDCs based in regional Australia have the capacity to help
develop university-RDC-private sector research that can help
create and commercialise innovations
• Many areas of entrepreneurial opportunity – agriculture and
food security, mining and the resources sector, tourism and
others
Faculty of Business, Justice and Behavioural Sciences
What is an Entrepreneurial
Ecosystem?
“A set of interdependent actors and factors
coordinated in such a way that they enable
productive entrepreneurship” (Stam, 2015:
5)
Faculty of Business, Justice and Behavioural Sciences
Key elements, outputs and
outcomes of the entrepreneurial
ecosystem (Stam 2015)
Faculty of Business, Justice and Behavioural Sciences
Limitations of Stam’s Model
Excludes enterprising individuals that are
critical for entrepreneurship to occur
Excludes natural capital endowments which
are often critical framework condition for
regional communities
Faculty of Business, Justice and Behavioural Sciences
Augemented Model of Regional
Entrepreneurial Ecosystems
FRAMEWORK
• NATURAL CAPITAL
• Institutions
• Culture
• Infrastructure
• Demand
SYSTEMATIC
• ENTERPRISING INDIVIDUALS
• Networks
• Leadership
• Finance
• Talent
• Knowledge
• Support services/Intermediaries
Elements
ECONOMIC GARDENING
• Next-Stage-Growth Programs
• RDCs and University tech transfer
• Entrepreneurial and Management Capabilities Development programs
INCUBATORS
STARTUP SUPPORT
• Capital Gains Tax policy relief
Activities
Viable Businesses that leverage Regional Comparative and Competitive Advantages
• Growth in profitability
• Growth in number and quality of jobs
• Better quality of life
Regional Economic Development
Faculty of Business, Justice and Behavioural Sciences
Framework Conditions
Faculty of Business, Justice and Behavioural Sciences
1. Natural Capital
Includes: Sub-soil capital (energy, minerals, water)
Soil – and above soil capital (arable land, forests,
rivers, lakes, sea coasts)
Natural and heritage areas
Geographic proximity
A large proportion of regional activity is based on
leveraging natural capital
But, it is not the only factor influencing regional
economic activity
Faculty of Business, Justice and Behavioural Sciences
2. Formal Institutions
Government
• market structures, property rights, infrastructure and
information provision
• directly support of ecosystems (strategic partnerships
with industry, research institutions, funding academic
programs and other initiatives eg R&D incentives)
Universities
• Stimulating and facilitating entrepreneurship
• Creating entrepreneurial capabilities
Others: RDAs, RDCs, Peak Bodies
Faculty of Business, Justice and Behavioural Sciences
3. Cultural Capital
• Entrepreneurship is positively linked to culture that
supports individual initiative and positive risk taking
(Woodside et al. 2016)
• Social legitimacy of entrepreneurship is positively linked
to entrepreneurial intentions (Kiber, et al 2014)
Faculty of Business, Justice and Behavioural Sciences
4. Infrastructure
• Positively associated with startup activity, but is specific
to the type of infrastructure and industry context
(Audretsch et al. 2015)
• Road / Transport / Ports / Water traditional infrastructure
required for an industrial economy
• Universities / Telecommunications / NBN critical
infrastructure for the digital/tech economy
Faculty of Business, Justice and Behavioural Sciences
5. Demand
• Includes access to markets, major customers
and value chain partners
• Regional ecosystems often challenged with this
element, which reduces opportunities and
increases costs
Faculty of Business, Justice and Behavioural Sciences
Systematic Conditions
Faculty of Business, Justice and Behavioural Sciences
Enterprising Individuals
• Entrepreneurship is the nexus of enterprising individuals
and attractive opportunities (Shane and Venkataraman
2000)
• Innovation ecosystems rely on a supply of people who are
willing to pro-actively accept and attempt to manage risks
while employing innovations to exploit market inefficiencies
or exploit new technologies to disrupt markets
• These individuals are not uniformly distributed
Faculty of Business, Justice and Behavioural Sciences
2. Networks
• Leveraging networks requires both political and social capitals
Political capital to provide access to power, organisations and
connections to resources (Emery and Flora 2006)
Social capital includes trust , norms and networks that facilitate
coordinated actions (Putnam et al. 1993).
• Collaborative relationships are critical for the development of
entrepreneurial ecosystems, which are facilitated by social
capital
• For SMEs this includes the ability to link with larger firms
Faculty of Business, Justice and Behavioural Sciences
3. Leadership
• Effective regional leadership is an enabling factor to develop
social networks, inter-organisational cooperation, financial
and political support, entrepreneurial culture, support
programs (Kasouf and Miles 2016, Markeley et al. 2015)
• Need a visible set of entrepreneurial leaders who provide
direction and are role models for the ecosystem (Stam 2015)
• In urban contexts are typically a strong group of
entrepreneurs (Feld 2012) but in regional contexts fewer
larger organisations, entrepreneurs, angels and other
stakeholders
Faculty of Business, Justice and Behavioural Sciences
3. Leadership
• In regional areas greater need for government agencies,
universities, research institutions to take a leadership role
While some suggests that ecosystem development should
largely be driven by entrepreneurs, evident that successful hubs
in both urban and regional areas have substantial government
investment (Lerner 2010, Mason and Brown 2014)
Evidence that regional entrepreneurial ecosystem development
programs that have substantial government and university
leadership can be very effective eg Markley et al.’s (2015)
“Entrepreneurial Communities Framework” which was applied in
Kansas
Faculty of Business, Justice and Behavioural Sciences
4. Finance
• Perception in regional Australian that access to short
term and intermediate term debt and equity is
constraining entrepreneurship (Adhikari et al. 2016)
• Also lack of access to informal equity and venture capital
funds (Harrison et al. 2010)
Faculty of Business, Justice and Behavioural Sciences
5. Talent/Human Capital
• Includes capacities, qualities, knowledge and skills, and has
been repeatedly associated with entrepreneurial success
(Unger et al. 2011)
• Works on the basis of clustering of human capital in a region,
which may be a challenge for regional Australia given the
small population base and geographic dispersion
• Opportunity for regional universities to build entrepreneurial,
managerial and technical (STEM) talent
Growing interest in entrepreneurship study in Australian universities
(Mazzarol 2014) but Australian universities generally do not see
producing entrepreneurs as a major part of their role (Spike Innovation
2015)
Faculty of Business, Justice and Behavioural Sciences
6. Knowledge
• Universities are the foundation of an ecosystem’s knowledge
infrastructure and are central to regional development,
particularly in declining regions where they can help build up
industrial clusters
• However, not all areas in regional Australia have access to
universities and not all universities are effective in this role
• Brown (2016) noted the problems with Scottish universities
supporting innovation policy and SME development
• Need for greater engagement of Australian universities with
entrepreneurship programs that work closely with industry (Mazzarol
2014)
• Need for more applied research in areas relevant to regional
advantage (Prime Minister’s Manufacturing Taskforce Report 2012)
Faculty of Business, Justice and Behavioural Sciences
7. Support services / Intermediaries
Lot of interest in Australia and internationally in incubation
and accelerators:
• Incubators provide working spaces and often advisory and
support services for new and existing but relatively young
businesses
• Tech accelerators involve intensive and short 3-6 month
programs which are supported by seed capital in return for equity
if funded when the program ends. In return they received access
to technology, mentoring, knowledge and networks.
Lots of problems with incubators and tech accelerators
which makes relying on them solely for regional
development problematic
Faculty of Business, Justice and Behavioural Sciences
Problems with incubators and tech
accelerators
• Lack of evidence that incubators enhance survival, innovativeness or
growth of firms (Tamasy, 2007)
• High rates of business failure in accelerators (Hathaway, 2016)
• Successful ventures moving offshore to where the market and scale up
financing is located (Mazzarol, 2016)
• Tech businesses do not generate large amounts of employment (Mason
and Brown, 2014)
• Established firms most capable of transformational growth, not start ups
(Brown and Mason, 2015)
• Not suited to supporting the development of existing businesses due to 3-
6 month time commitment away from the existing business.
Faculty of Business, Justice and Behavioural Sciences
An alternative for regional areas
Economic gardening, which involves development
and support for existing businesses, is an
alternative.
Particularly where focused on existing managed or
high-growth businesses that are seeking growth
and increased profitability
• Next Stage Growth (NSG) Programs
Faculty of Business, Justice and Behavioural Sciences
Venture by Motive and Objective
(Morris et al., 2015, 2016)
•Opportunity driven/ income replacement
•Necessity driven/ income replacement
•Opportunity driven/ wealth creating
•Necessity driven/ wealth creating
Managed Growth
High Growth
LifestyleSurvival
Faculty of Business, Justice and Behavioural Sciences
Next Stage Growth Programs
Focus on developing managed and high growth firms because of
the greater economic return
Focus on developing innovation but in new and traditional
sectors
Focus on developing technical, managerial and entrepreneurial
capabilities, including:
Opportunity Recognition/Assessment/Exploitation, Innovation and Creativity,
Entrepreneurial Marketing and Selling – Value creation, Networking, Lean
Operations, TQM
Regional Australian example is the EntruBiz program in
Victoria (Markley et al. 2015)
Faculty of Business, Justice and Behavioural Sciences
Distinctions between Tech-Startup and Job Growth-Oriented Regional Entrepreneurship Policy
CHARACTERISTIC TECH STARTUP FOCUSED
POLICY
JOB-GROWTH ORIENTED POLICY
Focal businesses Tech start ups Managed and high growth ventures in all industries
Policy intervention strategy Transactional forms for
support of accelerators and
a startup ecosystem
with capital gains tax relief,
public subsidies of
accelerators, etc.
Economic Gardening - Next Stage Growth programs,
Incubators and Infrastructure with enhanced public
investment in regional roads and transport assets,
universities, Rural R&D corporations, NBN, and tele-
communications. Tax and regulatory relief.
Plus support other efforts to develop regional
ecosystems (eg leadership, human capital,
knowledge, networks, cultural capital, access to
finance).
Objective of policy makers To create a vibrant
innovation and
entrepreneurship
ecosystem
To support new and existing business that have the
ability to: (1) create jobs, (2) generate income and
(3) contribute to the region’s economic development
by integrating into other regional firms’ value chains
Objective of entrepreneur Wealth creation for
founding equity holders at
liquidity event
To be an economically sustainable business that
creates jobs and income for owners, their families
and employees through normal business operations
Potential sustainable
economic impact on
regions
Low – with viable Startups
leaving regions and moving
to major urban centres
Medium – High - with viable firms growing in the
region and contributing to regional development
Faculty of Business, Justice and Behavioural Sciences
Evaluating the Cairns Ecosystem
Pre and post evaluation of the ecosystem
after the start of the theSPACE program
Involves supporting the Ecosystem plus
incubation and support for existing businesses
Seven expert interviews (local government,
state government, major corporate,
university)
Faculty of Business, Justice and Behavioural Sciences
Framework Conditions -
Cairns
Faculty of Business, Justice and Behavioural Sciences
Natural Capital
Faculty of Business, Justice and Behavioural Sciences
Formal Institutions
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Adequacy of Infrastructure
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Cultural Capital
Faculty of Business, Justice and Behavioural Sciences
Systematic Conditions -
Cairns
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Networks
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Leadership
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University involvement in ecosystem
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Support from Large Businesses for
the Ecosystem
Faculty of Business, Justice and Behavioural Sciences
Talent/Human Capital
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Access to Finance
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Availability of Support Groups
(agreement that there is availability)
Post
Pre01234567
Post
Pre
Faculty of Business, Justice and Behavioural Sciences
Overall rating of ecosystem
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