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Inducing heterogeneity in local entrepreneurial ecosystems: the role of MNEs

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Abstract

The role of entrepreneurial ecosystems in fostering economic growth has become a key priority around the globe. To develop such ecosystems, numerous countries have provided significant inducements to multinational enterprises (MNEs) to attract them to locate their operations within their borders. Despite the rise in MNEs’ entry, evidence on their efficacy in invigorating local entrepreneurial systems has been mixed. We propose that this may arise from a lack of focus on local ecosystems’ absorptive capacity, which is essential to spawning different types of entrepreneurial ventures that combine both replicative (imitative) and truly innovative local firms. This occurs as local entrepreneurs in proceed to capture, assimilate, and exploit MNEs’ different knowledge spillovers. Further, we argue that the dynamic interplay between knowledge flows through spillovers from MNEs and absorptive capacity is likely to promote the emergence, evolution, and sustainability of different types of new local firms—in some cases creating conformity and lock-ins and in others enhancing the heterogeneity of entrepreneurial activities. Over time, these developments encourage co-specialization between local new ventures and MNEs. Our analyses highlight key sources of heterogeneity in types of new firms that might emerge in a local ecosystem and how they might develop over time as a result of MNEs’ entry, creating wealth.

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Notes

  1. Throughout this paper, local entrepreneurship refers to domestic entrepreneurs, both independent and corporate, creating new firms.

  2. While most local entrepreneurs may not fall into either extreme category of replicative or innovative entrepreneurship, the dichotomy provides a good handle on understanding variety on a key attribute of entrepreneurship and there exist many ideas that fit one or the other category. For example, television, electric bulb, and many others may be outcomes of innovative entrepreneurship while each successive model of television may constitute replicative entrepreneurship because each new product is slightly better, cheaper, and more user-friendly.

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Acknowledgements

We acknowledge with appreciation the supportive comments of the reviewers and special issue guest editors.

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Authors and Affiliations

  1. Department of Management Innovation and Entrepreneurship, Poole College of Management, North Carolina State University, 2801 Founders Drive, Office, 1316 Nelson Hall, Raleigh, NC, 27606, USA

    Nachiket Bhawe

  2. Strategic Management and Entrepreneurship Department, Carlson School of Management [Suite, 3-430], University of Minnesota, 321-19th Avenue South, Minneapolis, MN, 55455-040, USA

    Shaker A. Zahra

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Bhawe, N., Zahra, S.A. Inducing heterogeneity in local entrepreneurial ecosystems: the role of MNEs. Small Bus Econ 52, 437–454 (2019). https://doi.org/10.1007/s11187-017-9954-7

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