The case of the UK and London
The objectives of this project were to discriminate the results of the Regional Entrepreneurship and Development index (REDI) in the UK. REDI is a project of the EU DC REGIO. The REDI index developed presented a fresh approach to measuring entrepreneurship in EU regions.
The Europe 2020 economic growth strategy emphasizes the role of Regional Policy in unlocking the growth potential of EU regions. Through Smart Specialization and, in particular, the flagship initiative, “Innovation Union,” the European Commission promotes innovation in all regions while ensuring complementarity between EU-, national-, and regional-level support for innovation, R&D, ICT, and entrepreneurship. To effectively implement Smart Specialization policies, reliable and relevant metrics are needed to track regional strengths and weaknesses in innovation and entrepreneurship. While metrics to track innovation are well established due to the long-standing focus of EU economic policy on innovation, measures to track entrepreneurship in EU regions are relatively less varied. It is the objective of this report to develop a systemic index – called the Regional Entrepreneurship and Development Index (hereinafter called REDI for short) – to strengthen the portfolio of entrepreneurship at the regional level in the EU.
The REDI index developed in this report presents a fresh approach to measuring entrepreneurship in EU regions. Although the systemic approach is long established in Innovation Policy – as encapsulated in the National (and Regional) Systems of Innovation theory, a systemic understanding of entre¬pre¬neur¬ship dynamics in countries and regions remains in its infancy. Although entrepreneurship scholars have long since recognized the regulating importance of context on entrepreneurship, the great bulk of both theorizing and empirical research on entrepreneurship has focused on the individual and the firm and ignored the study of the context within which these are embedded. This in spite of the widespread recognition that entrepreneurs do not operate in isolation from their contexts: Instead, the context exercises a decisive influence on who starts new firms, with what level of quality and ambition, and with what outcomes. This report builds on recent theoretical developments towards a systemic perspective to entrepreneurship in regions to develop an empirical and normative elaboration of the ‘Systems of Entrepreneurship’ phenomenon. This report argues that a systemic approach to under¬standing the economic potential of entrepreneurship in EU regions is particularly important for policy, because policy initiatives address typically system-level gaps and shortcomings.
The gap in a systemic understanding of regional entrepreneurial dynamics is pointedly highlighted by the observation that the entrepreneur is almost completely absent in theories concerning National and Regional Systems of Innovation. In these frameworks, the institutional structure predominates: it is the country’s or region’s research organizations, funding mechanisms and similar structures that somehow produce innovation outcomes. However, individual-level agency, such as opportunity pursuit and resource mobilization decisions and activities by enterprising individuals, is given virtually no attention in this literature. In consequence, this report argues that the entrepreneur remains relatively poorly integrated in innovation policy, and a systems perspective to regional entrepreneurship policy is similarly under-developed. One manifestation of this gap is that most measures of entrepreneurship in countries and regions are uni-dimensional measures, typically aggregates of new firm entry counts normalized by population size. Such measures tend to ignore, for example, the quality of the ventures created, and also, fail to consider who actually starts new firms.
Although the systemic perspective to understanding entrepreneurship in regions remains deficient, this is not to say that research would have been ignorant about salient externalities that impact entre¬pre¬neur¬ship in regions (see, e.g., Stenberg, 2009). Indeed, externalities such as regional agglomeration benefits were first highlighted by Alfred Marshall back in the 1890s (Marshall, 1920). However, what has been missing is an integrated treatment which considers both individual-level attitudes, ability, and aspirations and integrates these with system-level factors that regulate entrepreneurship processes in the region. This report draws extensively on regional entrepreneurship literature to build the REDI index.
Activities and Outputs
The output of this project was a set of facilitation meetings where we communicated the results of the REDI study to relevant stakeholders. These would include four groups. First, the financial community (venture capitalists and bankers) involved in providing finance to startups and growing companies. Second, the city of London represents a key constituency that has a direct interest in a better understanding of entrepreneurship and innovation and how to improve its performance. Third, the Bureau of Business Innovation and Skills. The forth constituent is the regional authorities of Scotland, Wales and Northern Ireland supporting entrepreneurship. These engagements would be written up into a report.
The outcome would be a better understanding of entrepreneurship and innovation process in the UK and potentially improved performance my optimizing the systemic approach.
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