Geography Reference
In-Depth Information
automatically to all places and applications in which they might be of value. A less heroic,
but perhaps not less important role is played by entrepreneurs in this dif usion of new
variations: they i ll the gaps in the market (Kirzner, 1973, 1997). Introducing existing
products and practices to new contexts - via processes of generalization, dif erentiation,
or reciprocation (see Nooteboom, 2008) - can be a truly entrepreneurial ef ort that might
even lead to radical innovations. Variety creation and dif usion are two important roles
played by the entrepreneur in economic dynamics. For example, the formation of new
technology based i rms might serve the purpose of creating new - technology intensive -
products or of dif using (the use of) new technologies in society.
Variation and dif usion also feed each other (see Nooteboom, 2008): the pursuit of
entrepreneurial opportunities feeds further opportunities (Holcombe, 2007). First, any
change by one entrepreneur alters the economic environment and provides opportuni-
ties for additional adjustments by other entrepreneurs. Second, entrepreneurial activity
is likely to create wealth and in that way increases the extent of the market. Third, the
creation of market niches that did not previously exist provides opportunities for new
entrepreneurs to enter and expand this market niche. Entrepreneurial opportunities
come into being because of prior acts of entrepreneurship (see Metcalfe's, 2002, 'growth
of knowledge'): 'Bill Gates could not have made his fortune had not Steve Jobs seen the
opportunity to build and sell computers, and Steve Jobs could not have built a personal
computer had not Gordon Moore invented the microprocessor' (Holcombe, 2007;
p. 61).
Next to variation and dif usion, selection plays an important role in entrepreneurship,
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rel ected in the fact that most new i rms do not survive for a long time, and that even a
smaller portion (often less then one out of ten start-ups) grows to some extent (Reynolds
and White, 1997; Stam et al., 2008). Selection is generated by the decisions of external
resource holders to allocate their resources among these i rms (Aldrich, 1999; Baum and
Silverman, 2004). New i rm formation is af ected by dif erent selection environments.
Most directly there is competition in product-markets: a lack of competition might indi-
cate an opportunity (a gap to be i lled) and a constraint (with too high entry barriers).
Fierce competition forces i rms to produce and sell ei ciently, in order to survive. For
new i rms that need to reach a substantial size, selection in the capital and labour market
is also important. They need to attract i nance and human resources in competition with
other organizations that need these resources in the face of limited supply. Competition
is often a very local process: more distant i rms are less likely to compete for the same
pool of human resources or product-markets than i rms in proximity (Baum and Mezias,
1992; Cattani et al., 2003; Sorenson and Audia, 2000).
Historically, the literature has often explained entrepreneurship as either the product
of environments (like provision of venture capital, growing demand) or of personal
attributes (like risk-taking propensity, need for achievement). Individuals are hetero-
geneously endowed with skills, knowledge, attitudes and preferences (values) that drive
their motives and behaviour (McFadden, 2001; Simon, 1957). Environments are hetero-
geneously endowed with knowledge, institutions, resources and demand for products.
The entrepreneurial process depends on entrepreneurial opportunities in the environ-
ment and enterprising individuals that identify and exploit these opportunities. When
individuals identify an opportunity, they do not react automatically by establishing a
new i rm (assuming that they have the intention to start one): new i rms are created with
