“Ecosystem” has become the accepted term for describing the full range of conditions needed to support and encourage entrepreneurship. Most people now realize that neither education, financing, nor any other single factor can promote entrepreneurship without consideration for the system in which entrepreneurs function. But now that everyone is using the term “ecosystem,” what exactly does it mean?

Professor Daniel J. Isenberg at Babson College has nicely summarized the elements of an entrepreneurship ecosystem and the ways they play into a strategy to promote entrepreneurship. See his article “The Big Idea: How to Start an Entrepreneurial Revolution” in the Harvard Business Review (June 2010).

Because an ecosystem has many interrelated elements, Isenberg recommends an integrated approach to nurturing entrepreneurship instead of a one-dimensional solution. He tells policymakers to stop focusing on the Silicon Valley model—a product of special circumstances—and to look farther afield at countries such as Chile, Israel, and Rwanda. The countries that have successfully made the leap to entrepreneurial economies have taken advantage of their own local features. Isenberg wisely cautions against artificial attempts to design entrepreneurial clusters.

Isenberg also recommends letting markets work. Flooding start-ups with money and sheltering them in incubators can be counterproductive. Part of letting markets work is removing the administrative barriers. While Isenberg notes that legal and regulatory frameworks are “critical,” he leaves them to last on his list. I would move them near the top since these frameworks remain abysmal in many developing countries, where corruption often undermines reforms on paper.

All in all, this short article is well worth reading to get a handle on entrepreneurship ecosystems.

Kim Bettcher
CIPE

Comment here or share a message with the Community of Young Entrepreneurs: partners@cipe.org