Why startups fail in emerging entrepreneurial ecosystems?
DOI:
10.14211/regepe.esbj.e2055Keywords:
Entrepreneurial Ecosystem, Startup Failure, New Venture Failure, Innovation, Emerging Markets.Abstract
Objective: Entrepreneurs are responsible for innovation, but they do not act in the vacuum, the greater the support for their action, the improve the chances of success. Startups - technology-based companies with high potential for growth and impact - are associated with the existence of entrepreneurial ecosystems that facilitate entrepreneurial action. This paper goal is to provide evidence that help to explain why startups fail in an emerging entrepreneurial ecosystem. Method: We perform exploratory research in which entrepreneurs whose startups failed in the emerging entrepreneurial ecosystem of Porto Alegre, Brazil, were interviewed. We complement the analysis with the collection of secondary data. Results: Building on Isenberg’s (2011) six domains, we generate ideas on how each of them in emergent entrepreneurial ecosystem may influence startup mortality. Our results indicate that emerging entrepreneurial ecosystem could be much better in avoiding the premature failure of startups. Policy and Finance are the most problematic domains, while culture, support, and markets are the three middle-ground dimensions. These last three need improvement, but they are not as critical as the first two. Contributions: This paper contributes to the entrepreneurial ecosystems literature by exploring how emergent ecosystems contribute for discontinuity of promising startups. Originality: Besides entrepreneurial mistakes, problems that are out of the entrepreneur control can also cause a venture's death (Cardon et al., 2011). Building on this, we use Isenberg's (2010; 2011) model for understanding the influence of the entrepreneurial ecosystem on the circumstances that entrepreneurs faced that determined their startup failure (Jenkins & McKelvie, 2016). Social Contributions: by better understanding why startups fail in emerging entrepreneurial ecosystems, we support policymakers in their focus on possible improvements of the features that seem most relevant to entrepreneurs. The public agents can then work to provide a better environment for future entrepreneurial endeavors.
Downloads
References
An Lab – Innovation Lab. (2018). Porto Alegre Startup. Retrieved August 15, 2018, from https://classic.mapme.com/portoalegre-startup
Arruda, C., Nogueira, V. S., Cozzi, A., & Costa, V. (2015). The Brazilian Entrepreneurial Ecosystem of Startups: An Analysis of Entrepreneurship Determinants in Brazil and the Perceptions Around the Brazilian Regulatory Framework. In R. Lèbre La Rovere, L. De Magalhães Ozório, & L. De Jesus Melo (Eds.), Entrepreneurship in BRICS (pp. 9–26). Springer International Publishing. https://doi.org/10.1007/978-3-319-11412-5_2
Auerswald, P. E. (2015). Enabling Entrepreneurial Ecosystems: Insights from Ecology to Inform Effective Entrepreneurship Policy. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2673843
Autio, E., Kenney, M., Mustar, P., Siegel, D., & Wright, M. (2014). Entrepreneurial innovation: The importance of context. Research Policy, 43(7), 1097–1108. https://doi.org/10.1016/j.respol.2014.01.015
Azoulay, P., Jones, B., Kim, J. D., & Miranda, J. (2018). Age and High-Growth Entrepreneurship (No. w24489; p. w24489). National Bureau of Economic Research. https://doi.org/10.3386/w24489
Azoulay, P., & Shane, S. (2001). Entrepreneurs, Contracts, and the Failure of Young Firms. Management Science, 47(3), 337–358. https://doi.org/10.1287/mnsc.47.3.337.9771
Ben Letaifa, S., & Rabeau, Y. (2013). Too close to collaborate? How geographic proximity could impede entrepreneurship and innovation. Journal of Business Research, 66(10), 2071–2078. https://doi.org/10.1016/j.jbusres.2013.02.033
Boso, N., Adeleye, I., Donbesuur, F., & Gyensare, M. (2019). Do entrepreneurs always benefit from business failure experience? Journal of Business Research, 98, 370–379. https://doi.org/10.1016/j.jbusres.2018.01.063
Brasil - Secretaria Nacional de Juventude. (2018). E-Startup: Plano Nacional de Desenvolvimento de Empreendedorismo e Startups para juventude. Brasília, DF, Brasil. Retrieved from http://juventude.gov.br/articles/participatorio/0022/4166/Plano_Nacional_de_Startups_VISUALIZA__O_2007.pdf
Brown, R., & Mason, C. (2017). Looking inside the spiky bits: a critical review and conceptualisation of entrepreneurial ecosystems. Small Business Economics, 49(1), 11–30. https://doi.org/10.1007/s11187-017-9865-7
Bylund, P. L. (2016). The problem of production: a new theory of the firm. Routledge.
Bylund, P. L. (2020). Finding the Entrepreneur-Promoter: A Praxeological Inquiry. Quarterly Journal of Austrian Economics, 23(3–4), 355–389. https://doi.org/10.35297/qjae.010074
Cadorin, E., Klofsten, M., & Löfsten, H. (2021). Science Parks, talent attraction and stakeholder involvement: an international study. The Journal of Technology Transfer, 46(1), 1–28. https://doi.org/10.1007/s10961-019-09753-w
Cantamessa, M., Gatteschi, V., Perboli, G., & Rosano, M. (2018). Startups’ Roads to Failure. Sustainability, 10(7), 2346. https://doi.org/10.3390/su10072346
Cantner, U., Cunningham, J. A., Lehmann, E. E., & Menter, M. (2021). Entrepreneurial ecosystems: a dynamic lifecycle model. Small Business Economics, 57(1), 407–423. https://doi.org/10.1007/s11187-020-00316-0
Carayannis, E. G., & Campbell, D. F. J. (2009). “Mode 3” and “Quadruple Helix”: toward a 21st century fractal innovation ecosystem. International Journal of Technology Management, 46(3/4), 201. https://doi.org/10.1504/IJTM.2009.023374
Cardon, M. S., Stevens, C. E., & Potter, D. R. (2011). Misfortunes or mistakes? Journal of Business Venturing, 26(1), 79–92. https://doi.org/10.1016/j.jbusvent.2009.06.004
Chatterji, A., Delecourt, S., Hasan, S., & Koning, R. (2019). When does advice impact startup performance? Strategic Management Journal, 40(3), 331–356. https://doi.org/10.1002/smj.2987
Creswell, J. W. (2007). Qualitative Inquiry and Research Design: Choosing among Five Traditions (2nd ed). Thousand Oaks California, United States: SAGE Publications Ltd.
Creswell, J. W. (2009). Editorial: Mapping the Field of Mixed Methods Research. Journal of Mixed Methods Research, 3(2), 95–108. https://doi.org/10.1177/1558689808330883
D’Andrea, F. A. M. C. (2023). Entrepreneurship and institutional uncertainty. Journal of Entrepreneurship and Public Policy, 12(1), 10–31. https://doi.org/10.1108/JEPP-01-2022-0018
D’Andrea, F., & Mazzoni, J. F. (2019). For a less dramatic creative destruction. MISES: Interdisciplinary Journal of Philosophy, Law and Economics, 7(3). https://doi.org/10.30800/mises.2019.v7.1245
Demartini, P. (2018). Innovative Female-Led Startups. Do Women in Business Underperform? Administrative Sciences, 8(4), 70. https://doi.org/10.3390/admsci8040070
Dhanaraj, C., & Parkhe, A. (2006). Orchestrating Innovation Networks. Academy of Management Review, 31(3), 659–669. https://doi.org/10.5465/amr.2006.21318923
Doval, G. P., & Actis, E. (2016). The Political and Economic Instability of Dilma Rousseff’s Second Government in Brazil: Between Impeachment and the Pragmatic Turn. India Quarterly: A Journal of International Affairs, 72(2), 120–131. https://doi.org/10.1177/0974928416637926
Ehrenhard, M., Wijnhoven, F., Van Den Broek, T., & Zinck Stagno, M. (2017). Unlocking how start-ups create business value with mobile applications: Development of an App-enabled Business Innovation Cycle. Technological Forecasting and Social Change, 115, 26–36. https://doi.org/10.1016/j.techfore.2016.09.011
El Shoubaki, A., Laguir, I., & Den Besten, M. (2020). Human capital and SME growth: the mediating role of reasons to start a business. Small Business Economics, 54(4), 1107–1121. https://doi.org/10.1007/s11187-018-0129-y
Elert, N., & Henrekson, M. (2017). Entrepreneurship and Institutions: A Bidirectional Relationship. Foundations and Trends® in Entrepreneurship, 13(3), 191–263. https://doi.org/10.1561/0300000073
Elias, S., Chiles, T., Li, Q., & D’Andrea, F. (2020). Austrian Economics and Organizational Entrepreneurship: A Typology. Quarterly Journal of Austrian Economics, 23(3–4), 313–354. https://doi.org/10.35297/qjae.010073
Endeavor Brasil. (2017). Índice de Cidades Empreendedoras 2017. São Paulo, SP, Brazil. Retrieved from http://info.endeavor.org.br/ice2017
Endeavor Brasil. (2020). Índice de Cidades Empreendedoras 2020. São Paulo, SP, Brazil. Retrieved from https://ice.enap.gov.br/files/2020_ICE_Endeavor.pdf
Englis, P. D., Wakkee, I., & Sijde, P. V. D. (2007). Knowledge and networks in the global startup process. International Journal of Knowledge Management Studies, 1(3/4), 497. https://doi.org/10.1504/IJKMS.2007.012538
European Committee of the Regions, Volpe, M., Friedl, J., Cavallini, S. (2016). Using the quadruple helix approach to accelerate the transfer of research and innovation results to regional growth, Committee of the Regions. https://data.europa.eu/doi/10.2863/408040
Faroque, A. R., Morrish, S. C., & Ferdous, A. S. (2017). Networking, business process innovativeness and export performance: the case of South Asian low-tech industry. Journal of Business & Industrial Marketing, 32(6), 864–875. https://doi.org/10.1108/JBIM-06-2015-0113
Florida, R. (2002). The rise of the creative class. Vol. 9. New York, NY, USA: Basic books.
Foss, N. J., & Klein, P. G. (2012). Organizing Entrepreneurial Judgment: A New Approach to the Firm (1st ed.). Cambridge University Press. https://doi.org/10.1017/CBO9781139021173
Foss, N. J., & Klein, P. G. (2020). Entrepreneurial Opportunities: Who Needs Them? Academy of Management Perspectives, 34(3), 366–377. https://doi.org/10.5465/amp.2017.0181
Fu, W., Revilla Diez, J., & Schiller, D. (2013). Interactive learning, informal networks and innovation: Evidence from electronics firm survey in the Pearl River Delta, China. Research Policy, 42(3), 635–646. https://doi.org/10.1016/j.respol.2012.09.006
Gaughan, P. H., Javalgi, R. G., & Young, R. B. (2018). An Institutional Theory Approach to Improve Planning for Innovation and Entrepreneurship Ecosystems in Developing Economies. KnE Social Sciences, 3(10), 122. https://doi.org/10.18502/kss.v3i10.2889
Gbadegeshin, S. A., Natsheh, A. A., Ghafel, K., Mohammed, O., Koskela, A., Rimpiläinen, A., Tikkanen, J., & Kuoppala, A. (2022). Overcoming the Valley of Death: A New Model for High Technology Startups. Sustainable Futures, 4, 100077. https://doi.org/10.1016/j.sftr.2022.100077
Ghio, N., Guerini, M., & Rossi-Lamastra, C. (2019). The creation of high-tech ventures in entrepreneurial ecosystems: exploring the interactions among university knowledge, cooperative banks, and individual attitudes. Small Business Economics, 52(2), 523–543. https://doi.org/10.1007/s11187-017-9958-3
Gill, R. (2000). Discourse Analysis. In M. Bauer & G. Gaskell, Qualitative Researching with Text, Image and Sound (pp. 173–190). SAGE Publications Ltd. https://doi.org/10.4135/9781849209731.n10
Governo Federal - Brasil. (2021). Marco Legal das Startups - Lei Complementar No 182 De 1o de Junho de 2021. Brazil. Retrieved from https://www.planalto.gov.br/ccivil_03/LEIS/LCP/Lcp182.htm
Griffith, E. (2022). ‘It’s All Just Wild’: Tech Start-Ups Reach a New Peak of Froth. New York Times. Retrieved from https://www.nytimes.com/2022/01/19/technology/tech-startup-funding.html
Guest, G., Namey, E., & Chen, M. (2020). A simple method to assess and report thematic saturation in qualitative research. PLOS ONE, 15(5), e0232076. https://doi.org/10.1371/journal.pone.0232076
Hair, J. F., Celsi, M., Ortinau, D. J., & Bush, R. P. (2008). Essentials of marketing research. New York, NY, USA: : McGraw-Hill/Higher Education.
Hustedde, R. (2007). What’s culture got to do with it? Strategies for strengthening an entrepreneurial culture. In Entrepreneurship and local economic development (pp. 39–58). Plymouth, UK: Lexington Books.
Instituto Brasileiro de Geografia e Estatística - IBGE. (2019). IBGE | Projeção da população. Retrieved May 25, 2019, from https://www.ibge.gov.br/apps/populacao/projecao/
Instituto Caldeira. (2022). Instituto Caldeira. Retrieved April 15, 2022, from https://institutocaldeira.org.br/en/
Investing.com (2022). Brazilian startups raised a record $9.4 billion in 2021. Retrieved from https://www.investing.com/news/stock-market-news/brazilian-startups-raised-a-record-94-billion-in-2021-2737335
Isenberg, D. J. (2010). How to start an entrepreneurial revolution. Harvard Business Review, 88(6), 40–50. Retrieved from https://institute.coop/sites/default/files/resources/Isenberg - How to Start an Entrepreneurial Revolution.pdf
Isenberg, D. J. (2011). Introducing the Entrepreneurship Ecosystem: Four Defining Characteristics. Retrieved March 30, 2019, from https://www.forbes.com/sites/danisenberg/2011/05/25/introducing-the-entrepreneurship-ecosystem-four-defining-characteristics/#65b64a5f5fe8
Islam, M., Fremeth, A., & Marcus, A. (2018). Signaling by early stage startups: US government research grants and venture capital funding. Journal of Business Venturing, 33(1), 35–51. https://doi.org/10.1016/j.jbusvent.2017.10.001
Jenkins, A., & McKelvie, A. (2016). What is entrepreneurial failure? Implications for future research. International Small Business Journal: Researching Entrepreneurship, 34(2), 176–188. https://doi.org/10.1177/0266242615574011
Kakarika, M. (2013). Staffing an entrepreneurial team: diversity breeds success. Journal of Business Strategy, 34(4), 31–38. https://doi.org/10.1108/JBS-06-2012-0020
Khelil, N. (2016). The many faces of entrepreneurial failure: Insights from an empirical taxonomy. Journal of Business Venturing, 31(1), 72–94. https://doi.org/10.1016/j.jbusvent.2015.08.001
Kshetri, N. (2014). Global Entrepreneurship (0 ed.). Routledge. https://doi.org/10.4324/9781315795607
Kücher, A., & Feldbauer-Durstmüller, B. (2019). Organizational failure and decline – A bibliometric study of the scientific frontend. Journal of Business Research, 98, 503–516. https://doi.org/10.1016/j.jbusres.2018.05.017
Kuschel, K., Lepeley, M.-T., Espinosa, F., & Gutiérrez, S. (2017). Funding challenges of Latin American women start-up founders in the technology industry. Cross Cultural & Strategic Management, 24(2), 310–331. https://doi.org/10.1108/CCSM-03-2016-0072
Lerner, J. (2009). Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed--and What to Do About It. Princeton University Press. https://doi.org/10.1515/9781400831630
Lombard, M., Snyder-Duch, J., & Bracken, C. C. (2002). Content Analysis in Mass Communication: Assessment and Reporting of Intercoder Reliability. Human Communication Research, 28(4), 587–604. https://doi.org/10.1111/j.1468-2958.2002.tb00826.x
Mason, C., & Brown, R. (2014). Entrepreneurial ecosystems and growth oriented entrepreneurship. Organisation for Economic Co-operation and Development - OECD, Home Centre for Entrepreneurship, SMEs, Regions and Cities, Local Employment and Economic Development (LEED Programme). Retrieved from: https://www.oecd.org/cfe/leed/Entrepreneurial-ecosystems.pdf.
Maté-Sánchez-Val, M., López-Hernandez, F., & Rodriguez Fuentes, C. C. (2018). Geographical factors and business failure: An empirical study from the Madrid metropolitan area. Economic Modelling, 74, 275–283. https://doi.org/10.1016/j.econmod.2018.05.022
Mendonça, L. (2020). Marchezan sanciona lei que cria Fundo Municipal de Inovação e Tecnologia. Prefeitura de Porto Alegre. Retrieved September 15, 2021, from https://prefeitura.poa.br/gp/noticias/marchezan-sanciona-lei-que-cria-fundo-municipal-de-inovacao-e-tecnologia
Minniti, M. (2008). The Role of Government Policy on Entrepreneurial Activity: Productive, Unproductive, or Destructive? Entrepreneurship Theory and Practice, 32(5), 779–790. https://doi.org/10.1111/j.1540-6520.2008.00255.x
Mueller, B. A., & Shepherd, D. A. (2016). Making the Most of Failure Experiences: Exploring the Relationship between Business Failure and the Identification of Business Opportunities. Entrepreneurship Theory and Practice, 40(3), 457–487. https://doi.org/10.1111/etap.12116
Nair, S., & Blomquist, T. (2019). Failure prevention and management in business incubation: practices towards a scalable business model. Technology Analysis & Strategic Management, 31(3), 266–278. https://doi.org/10.1080/09537325.2018.1495325
Neck, H. M., Meyer, G. D., Cohen, B., & Corbett, A. C. (2004). An Entrepreneurial System View of New Venture Creation. Journal of Small Business Management, 42(2), 190–208. https://doi.org/10.1111/j.1540-627X.2004.00105.x
Nicotra, M., Romano, M., Del Giudice, M., & Schillaci, C. E. (2018). The causal relation between entrepreneurial ecosystem and productive entrepreneurship: a measurement framework. The Journal of Technology Transfer, 43(3), 640–673. https://doi.org/10.1007/s10961-017-9628-2
Nummela, N., Saarenketo, S., & Loane, S. (2016). The dynamics of failure in international new ventures: A case study of Finnish and Irish software companies. International Small Business Journal: Researching Entrepreneurship, 34(1), 51–69. https://doi.org/10.1177/0266242614539363
O’Connor, A., & Audretsch, D. (2023). Regional entrepreneurial ecosystems: learning from forest ecosystems. Small Business Economics, 60(3), 1051–1079. https://doi.org/10.1007/s11187-022-00623-8
Packard, M. D., & Bylund, P. L. (2018). On the relationship between inequality and entrepreneurship: On the relationship between inequality and entrepreneurship. Strategic Entrepreneurship Journal, 12(1), 3–22. https://doi.org/10.1002/sej.1270
Pacto Alegre. (2019). Pacto Pela Inovação. Retrieved March 28, 2019, from https://pactoalegre.poa.br/
Quas, A., Martí, J., & Reverte, C. (2021). What money cannot buy: a new approach to measure venture capital ability to add non-financial resources. Small Business Economics, 57(3), 1361–1382. https://doi.org/10.1007/s11187-020-00352-w
Roundy, P. T., Brockman, B. K., & Bradshaw, M. (2017). The resilience of entrepreneurial ecosystems. Journal of Business Venturing Insights, 8, 99–104. https://doi.org/10.1016/j.jbvi.2017.08.002
Samadi, A. H. (2019). Institutions and entrepreneurship: unidirectional or bidirectional causality? Journal of Global Entrepreneurship Research, 9(1), 3. https://doi.org/10.1186/s40497-018-0129-z
Schwab, D. P. (2005). Measurement Foundations: Validity and Validation. In Research Methods For Organizational Studies (Second Edi, pp. 25–37). Mahwah, New Jersey: Lawrence Erlbaum Associates Publishers.
Schwarzkopf, C. (2016). Fostering Innovation and Entrepreneurship. Springer Fachmedien Wiesbaden. https://doi.org/10.1007/978-3-658-13512-6
Sebrae. (2016). Sobrevivência das empresas no Brasil. Brasília, DF, Brasil.
South Summit. (2022). South Summit Brazil. Retrieved February 17, 2021, from https://www.southsummit.co/brazil/
Spigel, B. (2017). The Relational Organization of Entrepreneurial Ecosystems. Entrepreneurship Theory and Practice, 41(1), 49–72. https://doi.org/10.1111/etap.12167
Spigel, B., & Harrison, R. (2018). Toward a process theory of entrepreneurial ecosystems. Strategic Entrepreneurship Journal, 12(1), 151–168. https://doi.org/10.1002/sej.1268
Stam, E. (2015). Entrepreneurial Ecosystems and Regional Policy: A Sympathetic Critique. European Planning Studies, 23(9), 1759–1769. https://doi.org/10.1080/09654313.2015.1061484
Startup Base. (2022). Startup Base. Retrieved April 15, 2022, from https://startupbase.com.br/home
The World Bank. (2022). Doing Business. Retrieved April 1, 2022, from https://archive.doingbusiness.org/en/data
Ucbasaran, D., Shepherd, D. A., Lockett, A., & Lyon, S. J. (2013). Life After Business Failure: The Process and Consequences of Business Failure for Entrepreneurs. Journal of Management, 39(1), 163–202. https://doi.org/10.1177/0149206312457823
Weber, J. R. (2022). Como Porto Alegre se tornou referência na nova economia e os desafios daqui para a frente. Gaúcha ZH. Retrieved from https://gauchazh.clicrbs.com.br/porto-alegre/noticia/2022/01/como-porto-alegre-se-tornou-referencia-na-nova-economia-e-os-desafios-daqui-para-a-frente-ckxqierkd005z01888mpchu1t.html
Williamson, O. E. (2000). The New Institutional Economics: Taking Stock, Looking Ahead. Journal of Economic Literature, 38(3), 595–613. https://doi.org/10.1257/jel.38.3.595
Wurth, B., Stam, E., & Spigel, B. (2022). Toward an Entrepreneurial Ecosystem Research Program. Entrepreneurship Theory and Practice, 46(3), 729–778. https://doi.org/10.1177/1042258721998948
Zahra, S. A., Wright, M., & Abdelgawad, S. G. (2014). Contextualization and the advancement of entrepreneurship research. International Small Business Journal: Researching Entrepreneurship, 32(5), 479–500. https://doi.org/10.1177/0266242613519807
Zen, A. C., Santos, D. A. G. dos, Faccin, K., & Gonçalves, L. F. (2019). Mapeamento do Ecossistema de Inovação: Percepções e Desafios. Pacto Alegre. Porto Alegre, RS, Brasil. Retrieved from https://pactoalegre.poa.br/downloads
Downloads
Published
Métricas
Visualizações do artigo: 1518 pdf downloads: 465 Viewer (xml, epub, html) downloads: 0 Mobile downloads: 0 Áudio (Português (Brasil)) downloads: 46 Audio downloads: 20 Audio (Español (España)) downloads: 13 Video downloads: 62
How to Cite
Issue
Section
License
Copyright (c) 2023 Fernando Antonio Monteiro Christoph D'Andrea, Diego Alex Gazaro dos Santos, César Vinícius Pereira Costa, Aurora Carneiro Zen
This work is licensed under a Creative Commons Attribution 4.0 International License.
Authors who publish in this journal agree to the following terms:
-
The author(s) authorize the publication of the text in the journal;
-
The journal is not responsible for the opinions, ideas, and concepts expressed in the texts, as they are the sole responsibility of their authors;
-
Authors retain copyright and grant the journal the right of first publication, with the work published under the CC BY 4.0
License, which allows sharing the work with acknowledgment of authorship and initial publication in this journal; -
Authors are allowed and encouraged to post their work (Submitted version, Accepted version [Manuscript accepted by the author], or Published version [Record version]) online, for example in institutional repositories or preprints, as it can lead to productive exchanges as well as earlier and greater citation of published work. REGEPE requires that authors indicate/link the published article with DOI. See the Effect of Open Access.
