Entrepreneurial discovery processes in different regional contexts: a conceptual discussion

Arne Isaksen, Nina Kyllingstad, Jan Ole Rypestel and Ann Camilla Schulze-Krogh

Introduction

The need for creating more jobs to fight unemployment and social exclusion is evident in nearly all countries and regions in Europe and beyond. The question of how growth and jobs can be created by politics is high on the research agenda. One recent answer to the need of new jobs is the creation of new industrial paths (Martin and Sunley, 2006; Dawley, 2014; Isaksen and Trippl, 2016). The chapter departs from this approach. It contributes, however, to the literature by focusing on how different types of entrepreneurs through entrepreneurial discovery processes can impact on specific path developments in different regional settings.

A regional industrial path contains a set of firms in a region that are related through a value chain, joint input factors or utilisation of similar technologies. Firms’ activities are supported by a regional innovation system of knowledge organisations and formal and informal institutions and/or are linked to extra- regional knowledge sources (Binz et al., 2015). An industrial path lasts for some time as these are characterised by the persistence of regional industrial or institutional structures, and by the fact that economic agents continue their behaviour under changing external conditions (Henning et al., 2013: 1352).

New growth paths start, according to Foray (2015: 23—24), by an entrepreneurial discovery made by an individual entrepreneur, a firm, a regional leader and so on. The discover)' includes, for example, an innovation or an institutional change. ‘Entrepreneurial discover)' is the essential phase, the decisive link that allows the system to reorient and renew itself (Foray, 2014: 495). Entrepreneurial discovery processes also contain the demonstration by an entrepreneur or a firm that, for example, a new production process is possible. Demonstration supports the spillover of the entrepreneurial knowledge to more economic actors, the entry and agglomeration of similar and complementary firms, and as a result some fonn of industrial and structural changes that can stimulate new growth paths (Foray, 2014). If we extend this line of thinking, a successful entrepreneurial discovery will result in the creation of new knowledge for a region, which can initiate completely new economic activities, modernise existing ones, and further development of the regional innovation system.

Two understandings of the entrepreneurial discovery process (EDP) can be distinguished. These are first spontaneous processes that take place without any conscious policy, and, second, organised and managed processes as part of smart specialisation policy initiatives. Foray (2014) presents some historical examples of regional structural changes that illustrate spontaneous entrepreneurial discover)' processes. The examples resulted in ‘the entry and agglomeration of firms around the new activity’ (Foray, 2014: 493) that is ‘the formation of regional concentration of co-located activities and resources in related fields’ (Foray, 2014: 489). This chapter focuses on spontaneous entrepreneurial discovery processes and regards the achievement of cluster projects approved and financed by Innovation Norway as one result of this process. Knowledge of spontaneous EDPs can provide important information to the organisation and implementation of planned processes as part of regional smart specialisation initiatives.

In addition to firm entrepreneurs, other actors can be included in the entrepreneurial discover)' process. A discovery that eventually leads to new activities and system changes can be made, individually and/or collectively, by actors (including entrepreneurs), firms, organisations (such as universities), and agencies (for example regional development agencies). The importance of these actors is assumed to differ between regions. We also expect the entrepreneurial discovery process to occur in different ways and to different extents in various regions. This reflects the fact that ‘in general, entrepreneurial discoveries relate to existing structures and local knowledge’ (Foray, 2014: 498). Rodriguez-Pose and Wilkie (2015) also argue that formal and informal institutions represent the context within which entrepreneurial discover)' and economic activity occur. As ‘informal institutions are context and geography specific’ (Rodriguez-Pose, 2013: 1040), they vary across regions. A region with ‘a sound institutional context seemingly provides the optimal setting for the entrepreneurial discovery process’ (Rodriguez-Pose and Wilkie, 2015: 20). When institutions are well functioning, entrepreneurial discover)' occurs more or less automatically, i.e. not hampered by institutional constraint (Rodriguez-Pose and Wilkie, 2015). Weak institutional contexts, on the other hand, hardly support entrepreneurial discoveries.

This chapter aims to contribute to the existing literature on entrepreneurial discoveries and regional industrial development in three ways. First, it aims for a better understanding of how different regional contexts affect entrepreneurial discoveries, the entrepreneurial process, and outcomes. Second, the chapter links conceptually regional contexts, entrepreneurial discovery processes, and regional industrial path development. Third, it tries out one approach for studying entrepreneurial discoveries by focusing on key actors and regional innovation system changes that initiate cluster building processes. We use the regional innovation system (RIS) concept to characterise different types of regional contexts, while the notion of entrepreneurial discovery process introduces a dynamic element. EDPs need to be institutionalised in different ways through the support of RISs to be able to lead to path changes. EDPs will, however, also trigger changes in RISs, such as the emergence of new firms and possibly new supporting institutions. Thus, the two concepts may complement each other.

The rest of the chapter is organised as follows: section 2.2 discusses and links the three main theoretical building blocks of the chapter: entrepreneurial discovery, regional innovation system, and regional industrial path development. Section 2.3 presents the empirical context and data material for the empirical analysis of three emerging regional cluster projects in Norway. Section 2.4 examines the relevance of the conceptual framework developed in section 2.2 through empirical studies of the entrepreneurial discovery processes underlying the emergence of the three cluster projects. Section 2.5 concludes by discussing general theoretical lessons from the study.