Ecosystems cast a shadow: How high-quality entrepreneurial ecosystems hamper productive entrepreneurship in neighboring regions

Abstract

The entrepreneurial ecosystem framework describes how entrepreneurs in a region are influenced by their environment. The quality of regional entrepreneurial ecosystems has a positive influence on the occurrence of productive entrepreneurship, often proxied through innovative start-ups. However, existing research only looks at entrepreneurial ecosystems in isolation and does not account for the influence of neighboring entrepreneurial ecosystems. We study whether neighboring entrepreneurial ecosystems influence the prevalence of productive entrepreneurship in a focal region and whether this effect is positive, a ‘borrowed size’ effect, or negative, an ‘agglomeration shadow’ effect. We use spatial regression analyses and find clear evidence that high-quality neighbors cast agglomeration shadows, or in this case, ‘ecosystem shadows'. This suggests that regions lose entrepreneurial opportunities to neighbors with higher quality EEs. Our study is the first to study spillover effects between regional entrepreneurial ecosystems. Policymakers can use our findings to choose where to strategically deploy their resources to foster a more entrepreneurial society.