Institutions and the Entrepreneurial Discovery Process Andrés Rodríguez-Pose London School of Economics Workshop on S3 Governance: The ‘What’, ‘Who’ and ‘How’ of the EDP Pisa, Italy September 24, 2014

Institutions and EDP Rodríguez-Pose  Who should be involved in the EDP?  Institutions and the EDP  What happens in ‘weak’ institutional contexts?Overview

Institutions and EDP Rodríguez-Pose “Entrepreneurial knowledge involves much more than knowledge about science, technology and techniques. Rather, it combines and relates such knowledge about science, technology and engineering with knowledge of market growth potential, potential competitors as well as the whole set of inputs and services required for launching a new activity.” (Foray, David & Hall, 2011, p. 7) Conceptualising entrepreneurial knowledge

Institutions and EDP Rodríguez-Pose  Openness to ‘entrepreneurial knowledge’ from a diverse set of actors  The importance of market knowledge and the engagement of actors directly involved in the market Who should be involved?

Institutions and EDP Rodríguez-Pose The Entrepreneurial Discovery Process Entrepreneurial actors (namely those directly involved in the market) Experimentation and discovery Interaction between entrepreneurial actors and policy makers The EDP

Institutions and EDP Rodríguez-Pose  Institutions influence: 1.The entrepreneurial actors who are capable of providing ‘entrepreneurial knowledge’ 2.The generation of ‘entrepreneurial knowledge’ 3.The relationship between policy makers and entrepreneurial actors and the communication of ‘entrepreneurial knowledge’ Institutions and the EDP

Institutions and EDP Rodríguez-Pose  Entrepreneurial actors are the source of ‘entrepreneurial knowledge’  Two-pronged strategy: 1.Environments must support both the survival and success of existing actors and entrepreneurship 2.Promote the formation of new firms and the emergence of new actors more broadly 3.Build on the existing environment to transform it  Need of a crucial mass of entrepreneurial actors  Institutions and the institutional context are crucial: 1.They shape the extent to which an environment is suitable for, and conducive to the survival of existing actors (namely in the private sector) 2.And the emergence of new ones Entrepreneurial actors

Institutions and EDP Rodríguez-Pose  ‘Entrepreneurial knowledge’ is generated through experimentation and the pursuit of new opportunities and activities 1.Smart specialization strategies are crucial in this process  Entrepreneurial actors must experiment 1.Suitable contexts and a low degree market failures favours this process 2.But experimentation and renewal is also crucial in less auspicious institutional environments  Well-functioning institutions can work synergistically with specific policies designed to mitigate market failures and promote experimentation and discovery  Conversely, weak institutions may act as a barrier to the EDP Experimentation and discovery

Institutions and EDP Rodríguez-Pose  ‘Entrepreneurial knowledge’ generated through EDP must be processed by policy-makers 1.The internalisation process of the knowledge shapes subsequent decisions, priority-setting and strategy design 2.Channels of communication between all actors should be open and flexible  Valuable information is most effectively communicated if policy makers and entrepreneurial actors are engaged in an “ongoing relationship” (Rodrik, 2004)  Well-functioning institutions encourage trust, interaction, cooperation and dialogue 1.They permit the formation of stable relationships between policy makers and entrepreneurial actors (as well as between entrepreneurial actors) 2.They facilitate the transmission of ‘entrepreneurial knowledge’Interaction

Institutions and EDP Rodríguez-Pose Entrepreneurial Actors Create and condition a context that is conducive to both the survival and success of entrepreneurial actors and the emergence of new ones Enhance the effectiveness of policies implemented to mitigate market failures inhibiting processes of exploration and discovery Promote trust, cooperation, interaction and dialogue permitting the formation of relationships enabling the effective communication of entrepreneurial knowledge Experimentation and Discovery Interaction Institutions The Entrepreneurial Discovery Process Institutions and the EDP

Institutions and EDP Rodríguez-Pose  Does this mean that the EDP is only viable in ‘good’ institutional contexts? 1.In ‘good’ institutional contexts EDP is likely to happen more or less automatic 2.Good institutions facilitate the experimentation, discovery, and internalisation processes 3.Embedding EDP in the economic transformation and policy-making process (Rodríguez-Pose and Storper, 2006)  What about ‘weak’ institutional contexts? 1.EDP is crucial in ‘weaker’ institutional contexts 2.But it will not happen automatically 3.Need for external intervention -S3 strategies are fundamental in this respect (technical support) -Financial support through external intervention (Cohesion and Structural and Investment funds) -But ownership of EDP must remain local -Empowerment -Engagement Which environments for EDP?

Institutions and EDP Rodríguez-Pose  The institutional dimension of the EDP cannot be overlooked  Institutions and the institutional context exercise considerable influence – directly and indirectly – on the effectiveness and outcomes of the EDP  Awareness of and, where necessary, enhancement of the institutional context will yield benefits that extend well beyond the EDP  This implies a greater effort in areas with ‘weak’ institutional contexts 1.Technical support, financial aid 2.But ownership, responsibility and empowerment Concluding thoughts

Andrés Rodríguez-Pose More information at Institutions and the Entrepreneurial Discovery Process 12