The Promotion of Entrepreneurship in Low Density Regions: The Case of the Agency for the Regional Development of Alentejo (ADRAL)

The Promotion of Entrepreneurship in Low Density Regions: The Case of the Agency for the Regional Development of Alentejo (ADRAL)

Maria da Conceição Rego (Universidade de Évora, Portugal), Maria Raquel Lucas (Universidade de Évora, Portugal), Isabel Vieira (Universidade de Évora, Portugal) and Carlos Vieira (Universidade de Évora, Portugal)
DOI: 10.4018/978-1-4666-9567-2.ch011
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Abstract

In the 1980s, the renewal of academic interest in entrepreneurship as a factor of development highlighted the role of entrepreneurs in creating jobs and driving innovation. In the new century, fostering entrepreneurship became a public policy priority. In Portugal, the practice of creating business incubators has been gaining momentum and various institutions have developed business incubation activities. This study focuses on ADRAL – Agência de Desenvolvimento Regional do Alentejo, an agency for the regional development of Alentejo – and analyzes one of its instruments for the promotion of entrepreneurship – the creation of business incubators (also designated as enterprises' nests) located in Marvão and Montemor-o-Novo. These chapter focus on these two cases and assess the distinctive aspects of the partnerships between the development agency and the municipalities, and also the characteristics of the entrepreneurial projects and respective entrepreneurs, aiming at identifying the specificities of this approach and its success determinants.
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Introduction1

This chapter presents two examples of business incubation practices in low density regions as a way of encouraging entrepreneurship. It describes the incubation projects, their characteristics and regulations, and the supportive relationships established in a number of areas between incubators, entrepreneurs, the host municipalities and the agency for the regional development of Alentejo (ADRAL). 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.

The development of a knowledge based economy is indispensable for Portugal’s sustainability and convergence towards European Union standards. In 1999, when the country adopted the euro, many politicians and academics expected that monetary union membership by itself would promote an easier and quicker process of economic catching up. However, the country was not able to take advantage of the new opportunities provided by monetary integration. Fifteen years later, the dire economic and social conditions experienced by this, and by other peripheral euro zone economies, confirmed that economic improvement is not an inevitable consequence of adopting new institutional environments. As argued many years ago by Schumpeter (1939), development has to come from within and should be driven by innovation. In the case of Portugal, current public sector´s fiscal constraints force private entrepreneurship to play a central role. As a consequence, local institutions that promote and assist entrepreneurial activities have become paramount in the country's development strategies.

The creation of jobs and the grounding of human resources are, under any circumstances, fundamental for territorial economic and social development, but their relevance is enhanced in low density regions. In such areas, which lack in multinational corporations and in other large entrepreneurial initiatives, local resources and small entrepreneurial activities are all there is to breed innovation and to generate employment opportunities. In such contexts, the promotion of entrepreneurship is a much valuable tool, stimulating creativity and disseminating information and knowledge that are indispensable to the implementation of business projects. Local institutions, be them municipalities, development agencies, universities or others, can make relevant contributions, for instance by creating, financing and managing business incubators. The practice of incubation has been used in other countries as a means for either reversing the decline of industrial regions or promoting the catching up of territories that have failed to converge in terms of economic growth and social development.

There are many justifications for the creation of business incubators. In low density regions, market failures that translate, inter alia, into a lack of access to education, capital and information, increase the costs and the risks faced by small and new enterprises. These disadvantages make them less attractive for private sector support and enhance the importance of the help provided by local and regional development institutions such as ADRAL.

ADRAL is a public limited company, with 66 shareholders, founded in 1998. Its head office is located in the city of Évora and various delegations spread across the southern Portuguese regions of Baixo Alentejo, Alentejo Litoral and North Alentejo. Its focus is on the promotion of Alentejo’s regional development and on the strengthening of its economic and productive basis, in cooperation with other regional, national and international agents and organizations. Amongst its many activities as leader of a consortium that includes more than 20 companies, ADRAL approved under the INALENTEJO (Regional Operational Alentejo Program) a Regional System of Technology Transfer, which includes the system of technology-based incubators. ADRAL is thus involved in the establishment of incubation centers to enhance innovative business initiatives and technological innovation.

After these introductory remarks, the chapter is organized as follows: Section 2 provides a brief literature survey of academic developments on enterprise incubation; Section 3 presents the two business incubation centers that constitute the case study of our research. We conclude the chapter with a section of final considerations and proposals for further research.

Key Terms in this Chapter

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.

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.

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.

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”.

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.

Endogenous Development (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”.

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.

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.

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