Entrepreneurial Ecosystems in Low-Density Regions: Business Incubation Practices in Alentejo

Entrepreneurial Ecosystems in Low-Density Regions: Business Incubation Practices in Alentejo

Maria da Conceição Rego (Universidade de Évora, Portugal), Maria Raquel Lucas (Universidade de Évora, Portugal), Carlos Vieira (Universidade de Évora, Portugal) and Isabel Vieira (Universidade de Évora, Portugal)
DOI: 10.4018/978-1-5225-3525-6.ch003

Abstract

Low density regions face many development challenges. In the Alentejo region of Portugal, and in many other Southern European regions, such challenges have been intensified by the cumulative effects of the financial and economic crises, and the subsequent austerity. In such context, and to promote region catching up and sustainable development, a number of policies designed to promote local entrepreneurial ecosystems have been reinforced. In this study, we focus on one of these policies' instruments – business incubation - and on the region of Alentejo, and describe five incubators implemented by a local regional development association (ADRAL), some municipalities, a national association of young entrepreneurs (ANJE), and a local association of entrepreneurs (NERE). We assess the incubators' distinctive characteristics and those of some incubated projects, aiming at identifying the specificities of this approach and its success determinants.
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Introduction1

This chapter builds on the work developed by Rego et al. (2016) and enhances this previous analysis of incubation in the Portuguese region of Alentejo. A local regional development association (ADRAL), Évora’s municipal government, a national association of young entrepreneurs (ANJE), and a local association of entrepreneurs (NERE), are amongst the institutions implementing incubation facilities, both in Évora and in other Alentejo cities. Two examples promoted by ADRAL were previously analyzed. In what follows, the focus is extended to the facilities located in Évora.

The region of Alentejo is a low-density Portuguese region. As other European Union (EU) territories having so far failed to converge towards the union’s average socio-economic standards, it faces the problems resulting from lack of instruments to adjust to the asymmetric effects of common shocks and from increased outflows of human capital. Economic globalization in general, and the process of European economic and monetary integration in particular, have benefited Alentejo. However, the last financial and economic crises have hit the region especially hard, contributing to a partial overturn of its convergence process and aggravating traditional problems of relative underdevelopment, fragile businesses and human desertification.

Even though globalization and integration are promoted under the rational of contributing to improve peoples’ lives and businesses’ prospects, research and experience have shown that it may also intensify pre-existing economic and social asymmetries, especially when shocks occur. In fact, increased competition and the free movement of goods, people and capital may be advantageous for well-established firms, capable of thriving in highly competitive environments and having the capacity to conquer new markets, but also contribute to the disappearance of less vigorous, or incipient, entrepreneurial initiatives, which naturally need some support and nurturing before being able to face global competitors. Low density regions are particularly challenged by globalization because, although if offers new opportunities, it also contributes to dilapidate some of their much-needed businesses and facilitates the outflow of their most productive human resources. Thus, without well-structured development strategies and without policies aimed at supporting entrepreneurs, these territories cannot generate the economic dynamics needed for sustainable development.

In the 1980s and 1990s, mostly in North America and Western Europe, the political and economic consensus favored the notion of market supremacy and defended a minimalist government involvement in economies and societies. In the 2000s, abundant evidence of market failures around the world and across sectors of activity has opened the path for public-private partnerships and highlighted the need for the public support of entrepreneurs, especially in relatively under developed regions.

Even if many researchers defend that bottom-up entrepreneurship promotion strategies are more prone to success then top-down government endorsed ones, regional development in low density regions requires the joint efforts of national, regional and local forces. In such areas, the creation of entrepreneurial ecosystems will not occur without plans to support the implementation of entrepreneurs’ ideas and the building up of interactions between entrepreneurs, researchers and the already established business community. If well designed and implemented, such efforts may contribute not only to improve the regional stock of human capital, but also to establish a solid body of knowledge and experience capable of supporting existing firms and allowing the creation of new ones.

Business incubation is one way of carrying out such entrepreneurial supporting activities and this chapter presents examples of business incubation practices in Alentejo as a way of encouraging entrepreneurship. It describes a number of incubators and incubation projects, their characteristics and regulations, and the supportive relationships established in many areas between incubators, entrepreneurs, the host municipalities, the local regional development agency ADRAL, and ANJE, a private association representing young Portuguese entrepreneurs. It presents the physical spaces and services available, the access and permanence conditions, the criteria to classify applicant projects, the reasons for incubator exit and the incubated enterprises by sector of activity and characteristics. The chapter also discusses solutions and recommendations to deal with enterprises’ incubation and developmental issues.

Key Terms in this Chapter

Entrepreneurship: Soumodip Sarkar states that entrepreneurship is the process of creating or extending innovative business or which arise from identified opportunities ( Empreendedorismo e Inovação , 2 nd Ed. p.27. Lisboa: Escolar Editora, 2010 AU42: The in-text citation "Escolar Editora, 2010" is not in the reference list. Please correct the citation, add the reference to the list, or delete the citation. ). It means to create, change or extend business, take risks, innovating and discovering and exploring opportunities and producing wealth to add value to the companies and the society. To the Global Entrepreneurship Monitor (2013) AU43: The in-text citation "Entrepreneurship Monitor (2013)" is not in the reference list. Please correct the citation, add the reference to the list, or delete the citation. entrepreneurship is believed to contribute to economic development because entrepreneurs create new businesses, and new businesses create jobs, provide people with a variety of products and services, intensify competition, increase productivity through technological change and positively impact individual lives on multiple levels. Thus, the entrepreneurial spirit is essential to improve and/or revitalize the sustainable development of regions and nations.

Regions of Low Density: Regions displaying a demographic density (population per square kilometer) and especially an economic density (GDP per capita, economic development levels) well below national averages. Low density territories thus combine characteristics of demographic and socioeconomic fragilities and, often, physical and relational distance in relation to the main decision centers. These territories are often negatively affected by the spontaneous market dynamics and tend to push people and resources towards the areas where economies of agglomeration may be exploited.

Institutions: According to Hogdson (2006) AU44: The in-text citation "Hogdson (2006)" is not in the reference list. Please correct the citation, add the reference to the list, or delete the citation. , an institution is a special type of social structure that involves potentially codifiable and (evidently or immanently) normative rules of interpretation and behavior, i.e., institutions are systems of established and embedded social rules that structure social interactions. (Hodgson, G. M. (2006) AU45: The in-text citation "Hodgson, G. M. (2006)" is not in the reference list. Please correct the citation, add the reference to the list, or delete the citation. . What Are Institutions? Journal of Economic Issues, 40 (1), pp. 1-25.)

Incubators: Are institutions designed to provide vital support to enterprises, in the initial stages of their life, with the objective of sustaining and preparing their future survival in the non-protected and increasingly competitive environment of the market place.

Endogenous Development: Or bottom–up development theories. The fundamental characteristics of such theories are that both are founded on resources – human and physical – of the territory and that they privilege small scale interventions by promoters that may (or may not) be in the territory. In this context, “the fundamental question for regional development is no longer the region’s capacity to attract new projects, to become the region’s capacity to generate the conditions for the transformation of their productive structures”.

An Entrepreneurial Ecosystem - Based on a Synthesis of Definitions Found in the Literature: ( Moore, 1993 ; Zacharakis et al, 2003 ; Isenberg, 2010 AU40: The in-text citation "Isenberg, 2010" is not in the reference list. Please correct the citation, add the reference to the list, or delete the citation. ; Napier and Hansen, 2011 ; Malecki, 2011 ; Kantis and Federico, 2012 AU41: The in-text citation "Kantis and Federico, 2012" is not in the reference list. Please correct the citation, add the reference to the list, or delete the citation. ; Feld, 2012 ; Rosted, 2012 ): refers to the social and economic environment affecting the local/regional entrepreneurship. It alludes to “a set of interconnected entrepreneurial actors (both potential and existing), entrepreneurial organizations (e.g. firms, venture capitalists, business angels, banks), institutions (universities, public sector agencies, financial bodies) and entrepreneurial processes (e.g. the business birth rate, numbers of high growth firms, levels of “blockbuster entrepreneurship”, number of serial entrepreneurs, degree of sell-out mentality within firms and levels of entrepreneurial ambition) which formally and informally coalesce to connect, mediate and govern the performance within the local entrepreneurial environment”. Originally coined by James Moore (1993) in an influential article in Harvard Business Review, the term ecosystem means that businesses don’t evolve in a ‘vacuum’ but in a relationally embedded context with suppliers, customers and financiers. In dynamic ecosystems, new firms have better opportunities to grow, and create employment, compared with firms created in other locations.

Regional Development Agencies: Institutions created by Decree Law 88/99 of March 19th. They are defined in article 3 rd as “legal persons of private law that may be associations, foundations, civil or commercial companies, cooperatives, incorporated joint ventures or European economic interest groups”. Their objectives are stated in article 4 th : promoting, within the national framework of approved policies and strategies, the economic, social and cultural development of a part of the national territory by, inter alia: promoting activities that create employment and improve the environment and life quality; promoting the creation of enterprises and domestic and foreign investments, technological innovation; promotion of the creation of infrastructures and collective equipment; educative actions and professional training; valorization of human, natural, historical and cultural resources; design, negotiation and intermediation of plans, programs and development projects; provision of technical assistance and management of regional small and medium enterprises.

Knowledge Transfer: Is the transmitting of practical or theoretical knowledge, apprehended in an academic environment, to the entrepreneurial context with the objectives of, among others, improving production techniques and augmenting monetary returns.

Territorial Development: According to Simões Lopes (quotation on page 19 of his 1984 book Desenvolvimento Regional – Problemática, Teoria e Modelos ), “development requires justice, harmony, equilibrium, in a double perspective: spatial and temporal. A society is not developed if its ways of life are sustained by the exploitation of resources from other societies, and it cannot be developed if its life standards are created and maintained by consuming non-renewable resources at a faster rhythm than that required for their renovation. In both cases they exploit ‘others’: their neighbors, in the first case; future generations, in the second”. The Green Book for Territorial Cohesion, promoted by the European Commission in 2008, debates the problems of development and territorial cohesion in the following way: “Territorial cohesion is about ensuring the harmonious development of all the territories that make up the various EU countries, and that their citizens are able to make the most of the characteristics of each of them. In this respect, territorial cohesion is a factor of conversion of difference into advantage, thus contributing to sustainable development throughout the European Union”.

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