An effectual leadership perspective for developing ruralentrepreneurial ecosystems

Morgan P. Miles & Mark Morrison

Accepted: 23 November 2018# Springer Science+Business Media, LLC, part of Springer Nature 2018

Abstract This study articulates the importance of anentrepreneurial method approach to leadership, relevantcontextual issues, and policy implications for develop-ing entrepreneurial ecosystems in a rural context. Theentrepreneurial method is proposed as the foundationsof a new leadership style to facilitate the creation andsuccess of rural entrepreneurial ecosystems. The con-textual issues that make rural entrepreneurial ecosys-tems unique include the critical need for entrepreneurialleadership in their creation and development; the role ofentrepreneurial social infrastructure in enabling andsupporting development; the need to leverage networksand virtual platforms to access markets, knowledge, andfunding; the scarcity of and need to develop enterprisingindividuals; the role of institutions and supportive gov-ernance; and the importance of natural capital.

Keywords Entrepreneurial method . Effectuation .

Rural entrepreneurship . Entrepreneurial ecosystems

JEL classifications L26 . L22 . L29

1 Introduction

There is no consensus on one definition of entrepreneur-ial ecosystems that offers a consistent set of objectives,the scale of analysis, attributes, actors, or processes(Malecki 2018). Spigel (2017) suggests, and Spigeland Harrison (2018: 153) note, that there may be con-fusion Babout the exact mixture of elements constitutingan entrepreneurial ecosystem.^ For this manuscript, weadopt Audretsch and Belitski’s (2017: 1031) definitionthat entrepreneurial ecosystems are

We define systems of entrepreneurship (furtherecosystem) as institutional and organizational aswell as other systemic factors that interact andinfluence the identification and commercializationof entrepreneurial opportunities. Systems of entre-preneurship are geographically bounded, e.g.,Austin, Texas, Cambridge and Oxford in England,Boston area in Massachusetts, Aalto in Finlandserve as an example of cities with thriving entre-preneurial ecosystems. Indeed regulation, institu-tions and norms, infrastructure, city amenities,access to finance and demand vary largely be-tween regions and cities where new ideas andknowledge reside…

Audretsch and Belitski’s (2017) definition is a usefulconceptualization when considering rural entrepreneur-ial ecosystems as it includes all forms and stages oforganizations from start-ups to the strategic renewal ofcorporations, is grounded on place, and importantlytakes into account the entrepreneurial process of

Small Bus Econhttps://doi.org/10.1007/s11187-018-0128-z

This paper is largely drawn from the paper The Elements ofEntrepreneurial Ecosystems in Regional Areas and Options forTheir Development written by the authors and presented at theStartups and Regional Ecosystems Challenge at the SustainableEconomic Growth for Regional Australia (SEGRA) Conference,Albany, Western Australia, 24-26 October 2016.

M. P. Miles (*) :M. MorrisonCharles Sturt University, Bathurst, Australiae-mail: mmiles@csu.edu.au

opportunity identification and exploitation (Shane andVenkataraman 2000).

Rural entrepreneurship and the ecosystems that sup-port it have long been recognized as a practical path forrural development but also as distinct from urban entre-preneurial ecosystems (Acs and Malecki 2003;Fortunato 2014; Markley et al. 2015). Pato and Teixeira(2016: 6) define rural areas as follows:

…rural spaces extend over regions and areas pre-senting a variety of activities and landscapes thatcomprise natural countryside, farmland, villages,small towns, regional centers and industrializedrural areas and incorporate a wide range of activ-ities like farming, commerce, services and smalland medium industries.

Given their context, rural entrepreneurs face uniquechallenges relating to geographical, social, institutional,and market access conditions, often resulting in con-straints on entrepreneurship and economic growth (Hoyand Vaught 1980; Wortman 1990; Markley et al. 2015).In contrast to urban ecosystems, which according toDubini (1989) are more likely to be Bmunificent^ envi-ronments for entrepreneurship, rural ecosystems tend tobe Bsparse^ environments for entrepreneurship. Ruralecosystems are often characterized by fewer resourcessuch as infrastructure and human capital; less access tofinance, government support programs, and informationspillovers; more costly access to large markets; lessdiversity of economic activity; and less access to thebenefits from immigrant entrepreneurship (Dubini1989; Bosma and Sternberg 2014). Consequently, thetype of entrepreneurship found in rural ecosystems isless likely to be opportunity-driven (Bosma andSternberg 2014) and is more likely to be necessity-driven (Dubini 1989; Bosma and Sternberg 2014). Wepropose that these challenges faced by rural entrepre-neurs can sometimes be ameliorated by leadersemploying Sarasvathy and Venkataraman’s (2011) en-trepreneurial method (e.g., Adhikar et al. 2018). We usethe creation of North Carolina’s Research Triangle Sci-ence Park (RTP) as an example of how critical leader-ship is in creating an entrepreneurial ecosystem (Link1995; Link and Scott 2003; Leyden and Link, 2013).

Link’s (1995) discussion of the establishment of theRTP is consistent with the views of Roundy (2017a:238) that the leaders of BSmall Town^ entrepreneurialecosystems whose areas are missing some of the key

components found in urban ecosystems have options toBbolster these deficiencies^ and may need to beBentrepreneurial in the way they attract, view and utilizeresources.^ For example, Link (1995: 14–15) notes thatprominent North Carolinian John L. Ponzer states that

Romeo Guest and I were having a drink oneafternoon before a Carolina Power and LightCompany meeting at the [Richmond County]Country Club [in Rockingham in the early1950s]. We were discussing some infrared heatingtests being conducted at Duke University. I dis-tinctly remember making the following remark:BWith all the technical know-how and research atN.C. State Schools of Engineering and Textilesplus Duke’s Engineering School it appears thatthey would find a way to dray a string that hadbeen immersed in a starch solution (textile warp)as few things are impossible these days withresearch.^ Romeo replied: BI agree and I am gladto know your feelings as I have been giving somethought to a similar idea. We need a ResearchCenter to help the textile boys.^ We thendiscussed the possibilities of a joint venture byDuke and State. We also discussed the possibili-ties of including Carolina and Wake Forest [WakeForest University, now located in Winston-Salem,was originally located in Wake Forest, North Car-olina]. We finally agreed that Duke, Carolina, andState offered the greatest potential and could becalled the Research Triangle Center.

Link (1995: 15) clarifies this by stating that

The Triangle idea was simple, the three universi-ties would act as a magnet to attract researchcompanies into the area, and this, in turn, wouldlead to the development of new industriesthroughout the state.

Leadership like that of Romeo Guest in the creationof the RTP that creates opportunities for rural commu-nities to pursue economic development through entre-preneurship can be conceptualized as an application ofSarasvathy and Venkataraman’s (2011) entrepreneurialmethod—an alternative paradigm to the scientific meth-od and based on the application of Sarasvathy’s (2001)effectual approach to the pursuit of attractiveopportunities.

This adaptive, opportunity-seeking effectual style ofleadership proposed employs Sarasvathy and

M. P. Miles, M. Morrison

Venkataraman’s (2011) entrepreneurial method, whichwe term effectual leadership (EL). EL suggeststhat leadership follows a process where the enter-prising leader(s) use an effectual approach to cre-ate or discover attractive opportunities by proac-tively leveraging innovation and risk (Shane andVenkataraman 2000; Sarasvathy 2001; Sarasvathyand Venkataraman 2011). EL occurs when leadersfirst consider their Bmeans^ such as (1) who theyare, (2) what do they know, and (3) who do theyknow (Sarasvathy 2001). Then, EL processes helprural community leaders recognize, assess, andexploit contingencies and create partnerships toshape the community’s future to constructivelypursue opportunities. For EL to be legitimate, eth-ical safeguards must be in place to inhibit self-serving behavior or conflicts of interest through anopen process of strategic conversations that trans-parently operates in the collective interest of allstakeholders (e.g., Miles et al. 2006; Miles et al.2016).

In most rural contexts, EL will be a form ofdistributed leadership through a collective socialprocess that involves not a single leader but aBgroup or network of interacting individuals^ withexpertise Bdistributed across the many, not thefew^ (Bolden 2011: 257). It seeks to stimulatethe process and create a conducive environmentfor what Johannisson and Nilsson (1989) describeas community entrepreneurship, which involvesBinspiring and assisting individuals and communi-ties to start their own businesses and take controlof their own destiny^ (McKeever et al. 2015: 59).In the context of developing rural entrepreneurialecosystems, especially those areas that are deplet-ed, the use of EL will often be motivated by acommitment to place (McKeever et al. 2015). Con-sequently, EL can share some of the characteristicsof servant leadership, such as entrepreneurs actingfor the benefit of the community, particularlywhere their focus is the establishment ofcommunity-owned enterprises or supporting thegrowth of other businesses (Roundy 2017a;Sendjaya and Sarros 2002). However, the methodsof EL need not always follow the principles ofservant leadership (e.g., serve others first). EL, asapplied to rural entrepreneurial ecosystem development,is illustrated in Fig. 1 and discussed throughout theremainder of the paper.

2 Purpose

First and foremost, rural entrepreneurial ecosystems areplace-based (Audretsch 2015), similar to the nineteenthcentury frontier entrepreneurial ecosystems wherewealth was primarily based on the exploitation andprocessing of natural capital endowments such as rowcropping, logging, or mining (Miller and Acs 2017).However, effective opportunity exploitation now alsorequires access to knowledge, technology, and markets(Jenson et al. 2016). Thus, the purpose of this study is toarticulate how EL is a useful approach for communityleaders to develop rural entrepreneurial ecosystems. Indoing so, Stam’s (2015) model of entrepreneurial eco-systems is used as our conceptual foundation andadapted to reflect the diversity and challenges of a ruralcontext better.

3 A conceptual model of rural entrepreneurialecosystem development

Stam (2015) argues that the factors that make up anentrepreneurial ecosystem remain mostly the same atall levels of analysis, from a national level to a metro/urban area, to a rural region. While Stam’s (2015) ty-pology offers a generalized model of entrepreneurialecosystems, five additional contextual differences mustbe considered when attempting to employ it in a ruralcontext. First, Stam (2015) understates an importantcondition required for a rural entrepreneurial ecosystemto facilitate productive entrepreneurship—that of effec-tive entrepreneurial leadership (Markley et al. 2015;McKeever et al. 2015). Rural communities need theimpetus of EL to foster their emerging entrepreneurialecosystem (Adhikar et al. 2018). Rather than being asystemic factor, as in Stam’s (2015) urban-centric mod-el, leadership in rural entrepreneurial ecosystems is typ-ically the stimulus required to drive the establishmentand growth of the ecosystem.

Second, Stam’s (2015) framework conditions areexogenous tomarket demand, although he does describeit as Bmore or less^ exogenous, suggesting it may notalways be exogenous. Market demand in rural econo-mies is often systemic andmust be created or developed,often through market creation initiatives (Darroch andMiles 2011), as well as having a local or frameworkaspect. Thus, we consider that for rural entrepreneurial

An effectual leadership perspective for developing rural entrepreneurial ecosystems

ecosystems, demand is both a framework and a systemiccondition through access to external markets.

Third, for entrepreneurship to occur in any context,there always must be an enterprising individual (Shaneand Venkataraman 2000). That is, the entrepreneurialactor who sees opportunities either as (1) Kirznerian—by recognizing the opportunity to move inefficient mar-kets towards general equilibrium through innovationthat makes the business more efficient, effective, andprofitable or (2) Schumpeterian—by recognizing oppor-tunities to disrupt the existing market equilibriumthrough innovation and the process of Bcreativedestruction^ and then taking the personal initiative todo so (Campos et al. 2017).

Lichtenstein and Lyons (2001: 4) argue that, BAregion’s supply of entrepreneurs cannot be taken forgranted^ while Lichtenstein et al. (2004: 15) contendthat a fundamental shortcoming of enterprise developmentin theUSA is that Bno-one in the community is responsiblefor the community’s supply of entrepreneurs.^Lichtenstein and colleagues (Lichtenstein and Lyons2001, 2006; Lichtenstein et al. 2004) emphasize the needfor an entrepreneurial pipeline that seeks to influence thequantity and quality of entrepreneurs in the community.Development of these entrepreneurial pipelines is crucialfor rural areas. While Stam (2015) incorporates variousframework conditions such as culture and demand thatencourage entrepreneurial activity, he does not explicitly

Effectual leadership processes applied to rural ecosystem development

Create or Discover Opportuni�es via the

Entrepreneurial Method1

• Who are we?• Who do we know?• What do we know?

Opportunity Assessment

• How can a problem be exploited as an a�rac�ve opportunity?• How can the opportunity be exploited in a way to manage risks? • How can exploi�ng this opportunity help construc�vely shape the future?• What business, poli�cal, and ins�tu�onal partnerships does it leverage?• What type of regional advantage will exploi�ng this opportuni�y develop?

Opportunity Exploita�on

• How can we exploit con�ngencies and serendipity?• How can we leverage our means, con�ngencies, and partnerships to develop

a rural entrepreneurial ecosystem?

Fig. 1 Effectual leadership processes applied to rural ecosystem development. 1: Adapted from Sarasvathy (2001), Sarasvathy andVenkataraman (2011), and Shane and Venkataraman (2000)

M. P. Miles, M. Morrison

include this most essential actor in the entrepreneurialecosystem. Consequently, in rural contexts, focused effortsare often required to stimulate latent entrepreneurshipthrough developing personal initiative, encouraging apositive culture for starting businesses, and creatingprocesses that support the creation of start-ups, therebybuilding the number of active entrepreneurs (e.g.,Campos et al. 2017).

Fourth, Stam (2015) fails to incorporate what it isoften the most distinct factor in rural regions, that ofregional natural capital endowments (Wortman 1990;Emery and Flora 2006). These include (1) sub-soilassets, (2) soil-based capitals, (3) natural and heritageareas, and (4) geographic remoteness or proximity(Hamilton et al. 2005).

Fifth, the nature of social capital and networks aredifferent in rural contexts. In rural communities, net-work size is much smaller than in urban areas, whilenetwork depth is typically much greater than in urbanareas. While this may seem to be indicative of highersocial capital in rural areas, it may have negative conse-quences for communities’ willingness and ability tochange and develop. According to Flora and Flora(1993) and Flora et al. (1997), in rural areas, the higherdensity of network ties and role homogeneity (i.e., whencommunity members interact across a variety of set-tings) can limit symbolic diversity and lead to the de-velopment of hierarchical social capital rather than qual-ity networks and effective resource mobilization. Inrural contexts, social embeddedness is more nuancedthan in an urban context, and the social dimension of asupportive entrepreneurial ecosystem cannot be consid-ered solely in terms of network size. Hence, we recon-ceptualize the systemic condition of networks for ruralecosystems as entrepreneurial social infrastructure.

A proposed model presented in Fig. 2 adapts Stam’s(2015) work to reflect better the factors necessary for thedevelopment of a rural entrepreneurial ecosystem byexplicitly including natural capital and enterprising in-dividuals and emphasizing the critical role of effectualentrepreneurial leadership in driving ecosystem devel-opment. Also, through leveraging networks and digitalcommunication, education, marketing, and funding plat-forms, rural entrepreneurs can effectually access exter-nal sources of finance, knowledge, and market demand.

Hence, because they can be influenced through EL inour model of rural ecosystems, one of Stam’s (2015)framework conditions, demand, and three of Stam’s(2015) systemic conditions, networks, knowledge, and

finance are reconceptualized as systemic—network-ac-cessible conditions. These framework and systemic con-ditions can lead to outcomes such as viable businessesand jobs and can be influenced by a range of develop-ment activities that are described later in the paper. Thismodel seeks to clarify the role and importance of EL tothe establishment and viability of rural entrepreneurialecosystems, through the implementation of activitiesthat influence systemic conditions within the entrepre-neurial ecosystem. A summary of the three main activ-ities related to EL is presented in the first column of themodel—involving coordination, support for existingbusinesses, and support for start-ups. In this model,these EL activities are the driving force behind im-proved ecosystem outcomes. Completing these activi-ties influences the development of the systemic—localand the systemic—externally accessed ecosystem con-ditions which are shown in the second column. Im-provements in these systemic conditions in turn influ-ence outcomes listed in the third column such as morebusinesses, jobs growth, income, quality of life, andplace identity. Moreover, as these outcomes develop—such as more local businesses and quality entrepreneurswho have strong external connections and are more ableto support newly developing businesses—they oftenhave a recursive and reinforcing effect on the systemicconditions in the model.

4 Entrepreneurial method leadershipand the creation of rural entrepreneurial ecosystems

An example of an implicitly entrepreneurial methodleadership approach to ecosystem development is howNorth Carolina’s Research Triangle Park (RTP) wascreated. Following Fischer et al. (2017: 1726), we ac-knowledge that Bin organizational research, studyingprocesses is important.^ To attempt to post hoc describethe process of the creation of the RTP, we draw exam-ples from Link and colleagues’ published work (Link1995; Link and Scott 2003; Leyden and Link 2013). Inthe 1950s, the state was suffering from a rapidly declin-ing industrial base, increasing poverty rates andrestricting economic opportunities (Audretsch 2015).As discussed by Link (1995) and Link and Scott(2003), the transition of an economy dependent ontobacco and textiles to the creation of the largest scienceresearch park in the USA started by the efforts of NorthCarolina’s state treasurer Brandon P. Hodges, Robert

An effectual leadership perspective for developing rural entrepreneurial ecosystems

Haines, president of Wachovia Bank and Trust, andmost critically, Romeo Guest, a local building developerwho all were concerned about the state’s bleak econom-ic prospects. Over time, these three leaders were able toconvince the state’s governor to bring the three majoruniversities in the state together with a land develop-ment group to attract R&D departments of large corpo-rations to move to central North Carolina.

To do this, these three community leaders first con-sidered their means that included (1) who they were—abanker, a bureaucrat, and a real estate developer; (2)what they knew—they were located in the political,education, and geographic center of North Carolina withgood transportation infrastructure, relatively cheap realestate, three excellent research universities, and strong

social, environmental, financial, and political communi-ty capitals—all factors considered useful for attractingbusinesses and Federal Government investment to theregion; and (3) who they knew—most of the prominentpolitical, community, and corporate leaders (Emery andFlora 2006; Link 1995; Link and Scott 2003). The ELprocesses as post hoc applied to the case of the creationof the RTP is illustrated in Table 1. These three leadersconvinced the Governor of North Carolina to ask thepresident of N.C. State University, Dr. Bostian, to writean Ban objective assessment of the idea of a researchpark in North Carolina^ (Link 1995: 19).

Romeo Guest then met with the remaining two uni-versity presidents, Dr. Grey of the University of NorthCarolina and Dr. Edens, president of DukeUniversity, to

Fig. 2 Model of rural entrepreneurial ecosystem development

M. P. Miles, M. Morrison

seek their support. Guest was able to create a partnershipbetween the three universities effectually and then le-verage the networks of the banker, the politician tolobby for the establishment of a formal governanceorganization, the Research Triangle DevelopmentCouncil chaired by Robert Haines, president ofWachovia Bank and Trust, which evolved to becomean organization charged with developing the infrastruc-ture of the RTP (Link 1995). However, creating thesepartnerships was not always straightforward. Accordingto Bauer (2014: 56), university administrators wereconcerned about being at the Bbeck and call^ of indus-tries, and William Carmichael, UNC-Chapel Hill ad-ministrator at one point responded that Guest and theother RTP proponents wanted Bthe professors here andall of us to be the prostitutes and you’re going to be thepimp.^ Resolving these concerns required governmentofficials to act as liaisons between business leaders andthe three universities. Thus, Guest and other businessleaders were able to leverage the relationships that were

available to achieve tri-partisan support for the RTPbetween business, government, and universities.

By 1959, Chemstrand corporation announced plansto relocate to the RTP due to Bthe proximity of threemajor universities and … the overall quality of life^ inthe area (Link 1995: 79). Subsequently, in 1965, a majorfederal research institution, the Environmental HealthScience Center, announced it would locate at the RTP,and this then was leveraged to attract other major orga-nizations resulting in more than 34,000 R&D jobs (Link1995). From the beginning, the park’s leadership simplytried to create a new future based on their community’scapital strengths, their knowledge, and their networks.However, they also acted entrepreneurially to developtheir community capitals and to create a more business-friendly environment in the RTP. Governor Hodges toattract corporations to the North Carolina and its RTPenacted legislation that (1) reduced corporate taxes, (2)funded construction of what become US Interstate 40 toenhance access to the park (US Interstate 40), and (3)

Table 1 Illustrating EL using the example of the establishment of the Research Triangle Parka

Effectualleadershipb

Romeo Guest—Prominent contractor,real estate developer

Brandon Hodges—State of NorthCarolina Treasurer and ProminentPolitical Leader

Robert Haines—President of thestate’s largest and most powerfulbank – Wachovia Bank and Trust

Who they wereand why theyhave adopted aleadershipposition

He was a contractor and developer whosaw that corporations were locatingR&D facilities around MIT, Harvardand the University of Virginia.

He likely saw this as an attractiveentrepreneurial opportunity that hecould exploit through his social andbusiness networks as Link (1995: 13)notes: BHe thought that if he could beinvolved in helping a company locatea site and move to North Carolina hewould have an inside track onbuildings its facility (Harper 1991). Ithad always been Guest’s practice notto bid on construction contracts. If hedid not receive a non-competitivecontract, he simply would not bid.^

A powerful and connected politicianwho was concerned about theeconomic situation of the state

The most powerful and politicallyconnected banker in the statewho could see as the stateprospered so would his bank.

What do I know The value of networking and buildingconsensus to gain advantage throughprofitable partnership

Economics, the state’s economicsituation, and what incentives thegovernment could provide tobusiness who did locate to the state

Banking, economic development,and power

Whom do I know Politicians, business leaders, anduniversity leaders. Everyone thatmattered in North Carolina at thattime

All of the state’s top executivesincluding the Governor

Politicians, business leaders, anduniversity leaders. Everyone thatmattered in North Carolina atthat time

aAll examples are drawn from Link (1995), Link and Scott (2003) and Leyden and Link (2013)b Sarasvathy (2001)

An effectual leadership perspective for developing rural entrepreneurial ecosystems

formed a state development bank to provide subdidizedcorporate finance (Bauer 2014). Since the estab-lishment of the RTP, entrepreneurial leaders havecontinued to promote and extend opportunities toothers within the region, including nascent entre-preneurs, innovated with organizational models toensure government support for specific industrysectors, and developed innovative strategies to at-tract finance from both inside and outside theregion (Lowe and Feldman 2017).

Stam (2015: 1766) suggested that leadership requiresa Bset of ‘visible’ entrepreneurial leaders who are com-mitted to the region^ and Bprovide direction and rolemodels for the entrepreneurship ecosystem.^ Stam(2015: 1761) suggested that this involves aBprivatization^ of entrepreneurship policy, in whichentrepreneurs themselves become the Bcentral players(leaders) and the role of government is decreased to moreof a feeder of the ecosystem than as a ‘leader.’^

In practice, leadership is expressed in the develop-ment of an entrepreneurship ecosystem in a number ofways. Leadership is needed to develop: (1) networks, (2)support programs (e.g., business support programs, in-cubators etc.), (3) infrastructure, and (4) an entrepre-neurial culture (Haines 2016). Further, leadership canworkwith businesses to access external demand throughassisting in developing regional or internationalexporting capacity, including through assistance in par-ticipating in the digital economy, assistance in accessingsupply chains, helping businesses work together in salescooperatives, and helping to develop export-focusedbusiness clusters. In rural entrepreneurial ecosystemswhere people are often more dispersed, EL is requiredto assist with the coordination and marshaling of re-sources. Typically, this involves making businessesaware of what resources and capabilities are available,the opportunities that can jointly be pursued, and how toexploit them.

However, in many rural areas, leadership is a re-source in short supply—there are often few large orga-nizations, entrepreneurs, or other stakeholders with thecapabilities to lead the process of entrepreneurial eco-system development. Therefore, in a rural context, gov-ernment, universities, and research institutions often areneeded to lead efforts to develop the framework andsystemic conditions of their entrepreneurial ecosystems,which implies the need for a model of distributed lead-ership. This form of distributed leadership model needsto have representatives from businesses and multiple

other organizations and agencies working together tosupport and oversee the development of the ecosystemis consistent with the views of Isenberg (2011). Isenberg(2011: 12) recommends that such a group develop andoversee a team of Bentrepreneurial enablers^ who willwork to develop the ecosystem:

Leaders need to create a brand new team of what Icall Bentrepreneurship enablers.^ They should notbe Bowned^ by the government, by a university, orby an incubator or support organization, but byrepresentatives of all. They should be a S.W.A.T.team empowered to succeed and resourced witheverything needed to do so, and with effectiveprofessional supervision.

Thus, despite the calls of Stam (2015) for ecosystemdevelopment to be entrepreneur-led, there is a role forgovernment to play, and it is evident that successfulentrepreneurial ecosystems typically have enjoyed sub-stantial government/public investment in both urban andrural communities (Lerner 2010). In rural communities,this need is arguably greater. In the USA, there areexamples of place-based rural entrepreneurship supportorganizations that are effective (Markley et al. 2015).For example, in 2001, the state of Kansas strategicallylaunched a program based on Sirolli’s (1999) enterprisedevelopment model in several rural communities, whichled to the more widespread adoption of entrepreneurshipas a rural development strategy. Markley et al. (2015:587) described their BEntrepreneurial CommunitiesFramework^ as being a framework for building thecapitals necessary to Bcreate an entrepreneur develop-ment system.^ An important emphasis within thisframework is Brelational^ forms of support, which in-clude the building of networks, social capital, and con-nections between key entrepreneurial actors for knowl-edge sharing, including with universities and otherstakeholders (Fortunato 2014).

In Markley et al.’s (2015) description of the imple-mentation of this framework in rural communities inKansas, it is apparent that policymakers embraced anEL approach to development. This involved workingwith other key stakeholders including existing business,university, and community leaders. Thus, it is evidentthat policymakers can play an important role leveragingEL in developing entrepreneurial ecosystems in rural areas.As Mason and Brown (2014: 13) noted, Bentrepreneurialecosystems do not emerge just anywhere^ but need

M. P. Miles, M. Morrison

leadership in helping communities to develop theirecosystems, echoing van de Ven (1993: 218) who noted:

…studies show that the process of innovation andentrepreneurship consists of an accretion of nu-merous institutional, resource and proprietaryevents involving many actors who transcendboundaries of many public and private sectororganizations.

A challenge when developing entrepreneurial eco-systems is to develop a critical mass of entrepreneursand resources necessary to support innovation develop-ment (van de Ven 1993). Mason and Brown (2014: 19)noted that Bdeveloping entrepreneurship ecosystems hasto be a blend of ‘top-down’ and ‘bottom-up’approaches.^ Though it is likely that government sup-port will be needed in the development phase, onceecosystems reach critical mass, they may become moreself-sustaining (Mason and Brown 2014; Brown andMason 2017).

Universities are sometimes able to serve as an effec-tual leader in the creation of an entrepreneurial ecosys-tem because of their Benhanced capability for intelli-gence, monitoring, and negotiation with other institu-tional spheres, especially industry and government^ andtheir ability to form Bcross-organizational and cross-institutional entities^ (Etzkowitz et al. 2000: 317, 316).In this context where there is an increasingly complexBmixed system of market forces and governmentinitiatives,^ there is also the emergence of new networkpartnerships including Binterface specialists often locat-ed in the non-profit sector^ (Etzkowitz et al. 2000: 329,327). A university’s willingness to engage with theregion and its problems often serves as a social andcultural catalyst that creates both entrepreneurial capa-bilities and efficacy through education, management,and technical outreach (Audretsch et al. 2015; Riceet al. 2014; Stam 2015).

In the RTP, it is apparent that a collection of entre-preneurs, government officials, and university facultiescooperated to support the development of the ruralentrepreneurial ecosystems, suggesting the use of a dis-tributed leadership form of EL. This suggests that theuse of EL will typically but not always be a form ofdistributed leadership, and leaders may have to workalone or with only a few like-minded people at least tostart the process of entrepreneurial rural development. Insuch cases, Roundy (2017a) recommends identifying

leaders with legitimacy who can act as Blocalchampions^ and help to prioritize entrepreneurshipamong citizens and government.

Also, there is limited evidence in all three casesexamined that at a community level, the leadership styleused as part of EL is consistent with servant leadership,in that the primary intent is to enhance the community’seconomic development (Miles et al. 2016). However, itis not evident that EL can be considered a form ofservant leadership. Sendjaya and Sarros (2002)suggest that servant leadership exists where themotive of the leader is to benefit others firstthrough altruistic behavior. In the three cases ex-amined, the leadership actors included governmentofficials in North Carolina whose job was to act inthe public’s interest and entrepreneurs who eco-nomically benefited through either property devel-opment or entrepreneurial support programs. Cer-tainly, there are cases where entrepreneurs haveused EL to stimulate the development of an entre-preneurial ecosystem for primarily altruistic mo-tives (McKeever et al. 2015; Roundy 2017b).

It is essential to understand if and how both theframework and systemic conditions of rural entrepre-neurial ecosystems differ from their urban counterparts,and how they can be developed in a rural context.

5 Framework conditions

5.1 Natural capital

Natural capital is an important source of comparativeadvantage for many rural communities and is often theraison d’être in the development of frontier rural entre-preneurial ecosystems (while Miller and Acs 2017discussed nineteenth century entrepreneurial ecosys-tems, the contemporary example of the private sectorspace industry exhibits the same sort of frontier rent-seeking). The portfolio of natural capital varies tremen-dously within and between regions. For example, inmany rural regions, a large proportion of all economicactivity is based on extracting, managing, harvesting, oradding value to natural resources. Likewise, remotenesscan be a comparative advantage for a rural communityin attracting or developing some types of business orgovernment initiatives such as toxic waste processingsites, maximum security prisons, and nuclear testing.Recognizing the types of natural capital in a region,

An effectual leadership perspective for developing rural entrepreneurial ecosystems

the industries that have developed because of it, andhow these can be further developed is typically animportant starting point for the development of ruralentrepreneurial ecosystems employing EL.

5.2 Institutions and governance

Government and other formal institutions play a centralrole in the development of rural entrepreneurialecosystems (Méndez-Picazo et al. 2012). Institu-tions impact the ecosystem through policies thatshape market structures, property rights (e.g., in-tellectual property), access to information, infra-structure, quality of life issues such as educationand healthcare, government taxation, economic de-velopment, and the activities of universities andresearch and technology organizations (Van Lenteet al. 2003; Chunhavuthiyanon and Intarakumnerd2014). Indeed Pato and Teixeira (2016: 10) notedthat Bthere is evidence many regions lag behindentrepreneurially, not only because of their physi-cal disadvantages but also because of inadequategovernance bodies and the sociocultural traits oftheir institutional framework, which impede effec-tive entrepreneurial activity.^ Furthermore, Patoand Teixeira (2016: 10) go on to contend thatBweak governance, allied to sociocultural barriersand the lack of previous entrepreneurial rolemodels, is one of the most important institutionalbarriers that hinder rural entrepreneurship.^

Government policy and institutions are critical in thedevelopment of rural ecosystems by facilitating strategicpartnerships with industry both within and outside theregion, research institutions, and universities that pro-vide support through R&D, technology transfer, andcommercialization, as well as through providing accessto funding, and capacity building initiatives.

Effective rural governance enables the commu-nity to more effectively lobby for resources forinfrastructure and access to government programsand initiatives (Pato and Teixeira 2016). Throughnetworking and collaboration and utilizing ruralcommunities’ political capital, EL can increasethe likelihood of more favorable outcomes(Markley et al. 2015). For rural communities, thisprocess can help to develop natural capital endow-ments, create and maintain infrastructure, provideincreased access to business support programs andinitiatives, and obtain access to financial capital.

5.3 Culture

The concept of the cultural capital in a region is impor-tant as one of a portfolio of factors influencing entrepre-neurial activity (Fortunato and Alter 2015). This raisesthe question of how does the culture of a communitypromote entrepreneurship, particularly in a rural con-text? A study by Woodside et al. (2016: 157) of 28nations extends McClelland’s (1961) seminal work onthe relationship between culture and entrepreneurshipby finding that entrepreneurship is positively linked tocultures that support Bindividual initiative and someamount of positive risk-taking.^ Likewise, work inWestAfrica found that Bteaching personal initiative^ and aBproactive mindset^ were more effective in enhancingsales and profits than traditional training programs thatfocused on building capabilities in small businesses(Campos et al. 2017: 1287).

Lee et al. (2004: 887) found there is a Bclose andpositive relationship between entrepreneurship and cre-ativity in a region.^ Others such as Kibler et al. (2014)found the social legitimacy of entrepreneurship to becritical for both the formation of entrepreneurial inten-tions and the translation of intentions into behaviors in aregion.

When a rural community perceives that entrepreneur-ship is socially legitimate, community members aremore likely to pursue entrepreneurial initiatives(Lafuente et al. 2007; Vaillant and Lafuente 2007).However, in many rural communities, entrepreneurshipis not well understood or respected and consequently,there are lower rates of entrepreneurial activity. In suchcontexts, EL is needed to shape a more entrepreneurialculture. This can be achieved by demonstrating publicsupport for entrepreneurship through regular local gov-ernment, and business chamber-supported events andencouraging entrepreneurship in a range of contexts thatare relevant to rural settings.

5.4 Demand

Access to markets, lead users, major customers, andvalue chain partners are often considered constrainingconditions for productive rural entrepreneurship. Con-sequently, an EL perspective considers demand both asa framework and systemic element in a rural entrepre-neurial ecosystem. Given limited demand within a ruralregion, economic growth can only occur if businessescan successfully market outside their own region.

M. P. Miles, M. Morrison

The lack of close geographic proximity to markets byrural entrepreneurs sometimes leads to systemic exter-nally generated market creation initiatives where theentrepreneur creates a new market or even a new indus-try. For example, David Walsh’s Museum of Old andNewArt generated an entirely new art tourismmarket inTasmania (Lehman et al. 2014; Fillis et al. 2016). Like-wise, a Tasmanian produce grower working with aSydney specialty retailer created a new Bcool climate^broccoli market in mainland Australia by coordinatingthroughout their value chain (Lewis et al. 2014). Marketcreation initiatives are one way for rural communities toameliorate the lack of market access through the use ofeffectuation and entrepreneurial marketing (Sarasvathyand Venkataraman 2011; Miles et al. 2016).

5.5 Infrastructure

The relationship between entrepreneurship and infra-structure is a topic of considerable academic and publicpolicy interest (van de Ven 1993; Audretsch et al. 2015).The infrastructure of an entrepreneurial ecosystem is theportfolio of public goods that supports and facilitatessmall business and entrepreneurship initiatives withinthe entrepreneurial ecosystem. The components of theecosystem’s infrastructure are dependent upon the ob-jectives of the ecosystem. Highways, rail assets, andports are traditional public investments in infrastructuredevelopment when the objective is to support an indus-trial economy, while public investment in universities,research institutions, high-speed broadband, and tele-communications are infrastructure items required forhigh-technology start-ups (Audretsch et al. 2015).

6 Systemic conditions

6.1 Enterprising individuals

Shane and Venkataraman (2000) consider that entrepre-neurship is the nexus of the enterprising individual andattractive opportunities. The willingness to proactivelyaccept and attempt to manage risks while employinginnovation to either exploit market inefficiencies andchanges in demand or exploit new technology to disruptmarkets is not universally distributed within the popu-lation (Venkataraman 1997). The intentional act of busi-ness creation or strategic renewal that either leveragesinnovation to become more efficient and effective or

commercializes innovation to disrupt markets and createnew product markets requires not only willingness butentrepreneurial competencies such as the ability to rec-ognize or create attractive opportunities and build anorganization to productively exploit them (Morris et al.2013). Without an enterprising individual, no entrepre-neurial action would occur (Campos et al. 2017).

While the number of entrepreneurs matters for ruralecosystems, the capabilities of entrepreneurs alsomatter.Lichtenstein and Lyons (2001, 2006) and Morris et al.(2015) highlight the importance of an entrepreneurialecosystem having a diverse portfolio of business at allstages of development and capability. Lichtenstein andLyons (2001, 2006) highlight the importance oftransforming entrepreneurs so that there are qualitativechanges in their effectiveness. Such transformationsenable entrepreneurs to provide higher value commer-cial offerings within markets more effectively and tomove into different stages within the pipeline. Lichten-stein and Lyons (2001: 8) suggest that Bthe process ofbuilding these skills is not a matter of passively ‘acquir-ing’ information, receiving services, or adopting thelatest business practices…becoming more skillful ofteninvolves significant, qualitative, and sometimes difficultchanges in behaviors, capabilities, and personalidentities—in other words, a transformation.^Lichtenstein and Lyons (2001, 2006) recommend theuse of an BEntrepreneurial Development System^ thatidentifies the key actors for development and their func-tions in building entrepreneurial capability in other en-trepreneurs and the community.

The challenge for rural areas is, therefore, to stimu-late some of the latent enterprising individuals to engagein entrepreneurial initiatives and to support existingentrepreneurs. Training programs in entrepreneurshipand business skills, start-up business boot camps, local-ized mentoring, developing networks for nascent entre-preneurs, accelerators, and business incubators can allhelp increase the rate and effectiveness of entrepreneur-ship within a community (Haines 2016; Campos et al.2017).

6.2 Entrepreneurial social infrastructure

An important theme in the entrepreneurship literature isthat economic behavior is embedded in social structure(Flora and Flora 1993, Flora et al. 1997, Pato andTeixeira 2016). Social networks have many potentialbenefits including providing access to resources such

An effectual leadership perspective for developing rural entrepreneurial ecosystems

as knowledge, finance, support, employees, and cus-tomers. Networks, in particular, have been linked tosuccessful entrepreneurial activity, with social capitalfacilitating the interactions within the networks(Audretsch and Keilbach 2004). Social interactions helpbuild trust and create norms for exchanges which reducethe transaction costs associated with business activityand leverage the efficiency of other forms of capital(Flora et al. 1997), as well as enhancing ecosystem actorcoordination and cooperation (Putnam 1993).Sarasvathy and Venkataraman (2011) contend that net-works are fundamental dimensions of the entrepreneur-ial method.

However, Flora and Flora (1993) clarify that not allsocial capital is supportive of entrepreneurship, and insome cases, it may block economic development. Theydescribed cases where leadership seeking to encouragedevelopment was ineffective despite seemingly highlevels of social capital because of control by a powerelite. Consequently, Flora and Flora (1993) proposed theconcept of entrepreneurial social infrastructure to showwhen and what elements of social capital will be sup-portive of entrepreneurship in rural communities. Theirconcept has three components: (1) symbolic diversity,(2) resource mobilization, and (3) quality of linkages.Symbolic diversity is a community orientation towardsinclusiveness that is tolerant of members expressingtheir views even if they are contrary to the Baccepted^perspective. It also means that the community is com-mitted to a process which is not controlled by vestedinterests. Resource mobilization reflects a willingness todistribute a range of different resources equitably andtake risks with them, as well as a willingness to invest asa community and as individuals. Quality linkages arethose that are inclusive and diverse so that multiplevoices are heard, and both horizontal within a networkand vertical linkages with external networks. Flora et al.(1997) found that some but not all indicators of the threeentrepreneurial social infrastructure components wereassociated with improved rural entrepreneurial develop-ment, suggesting that there is some support for theimportance of entrepreneurial social infrastructure inenabling the development of rural entrepreneurialecosystems.

In developing entrepreneurial social infrastructure, acommon challenge for rural areas is that the networkspresent are typically smaller than networks within largerurban ecosystems, even though the network density (asrepresented by the number of connections or ties

between people divided by the number of people in anarea) may be higher (Roundy 2017a). Roundy (2017a:247) recommends that some of the challenges faced inrural ecosystems in networking can be amelioratedthrough technology and that rural entrepreneurs canBbolster limitations in the size of their local networksby forming connections with individuals and firms notnecessarily geographically close,^ a recommendationconsistent with Flora and Flora (1993) who recommenddeveloping networks both horizontally and vertically.This strategy can be supported and encouraged throughthe use of EL.

6.3 Finance

Financial capital includes efficient access to sources ofshort, intermediate, and long-term debt and informal andformal equity. There is at least the perception in manyrural areas that local access to short-term andintermediate-term debt and all forms of equity isconstraining entrepreneurship and small business(Adhikar et al. 2018). Also, due to geographic proximityto urban centers, rural entrepreneurial ecosystems typi-cally have insufficient access to informal equity frombusiness angels who tend to invest close to where theylive, and venture capital funds or corporate venturinginitiatives (e.g., see Harrison et al. 2010). These finan-cial capital limitations in rural ecosystems can signifi-cantly constrain business growth and development.

Again, this suggests a role for EL to develop bothdigital and network approaches for entrepreneurs toaccess finance in rural areas, such as by establishinglinks to sector-specific networks of informal equity in-vestors, digital financial platforms includingcrowdfunding, and nearby business angel groups(Lowe and Feldman 2017; Roundy 2017a). The chal-lenge for the leadership of rural entrepreneurial ecosys-tems will be to coordinate and support entrepreneurs byproviding entrepreneurial competency programs to helpthem develop fundable businesses that are attractiveinvestments to both local and external sources offinance.

6.4 Human capital

Human capital is the notion that specific capacities,qualities, knowledge, and skills which people possesshave an economic value (Corona et al. 2006; Clarysseet al. 2014). This type of capital has repeatedly been

M. P. Miles, M. Morrison

associated with entrepreneurial success (Unger et al.2011). Specifically, human capital has been positivelylinked with discovering, creating, and exploiting oppor-tunities, acquiring financial resources and launchingventures, accumulating new knowledge and the processof evaluating potential ventures by venture capitalists(Marvel et al. 2014). Attributes of human capital linkedwith entrepreneurial activity in the literature includework experience, education, and entrepreneurial experi-ence and psychological attributes such as achievementorientation and locus of control (Marvel et al. 2014).

A lack of human capital can constrain businessgrowth in rural ecosystemswhere the population is moresparse. This can include access to staff with managerialand technical skills as well as access to unskilled labor.For rural ecosystems, there are several options for ad-dressing skills shortages, including improving informa-tion availability about jobs (e.g., through online ruraljobs sites), encouraging in-migration of skilled mi-grants, or working with universities and other vocationaleducation providers to directly identify and build capa-bilities. Universities are recognized for their ability tocontribute to rural ecosystems by building entrepreneur-ial, managerial, and technical talent (Etzkowitz et al.2000; Mazzarol 2014; Stam 2015).

Universities can also build talent in rural ecosystemsin other ways. For example, they can play a role indeveloping new entrepreneurs and businesses(Theodoraki et al. 2018), as well as supporting capacitybuilding of entrepreneurs and their employees througheconomic gardening programs. Interestingly, while thisrole is recognized in the literature, in reality, the role isoften not achieved. A challenge for universities is know-ing which form of support is most useful for supportingentrepreneurial ecosystems (e.g., Mian et al. 2016;Pauwels et al. 2016; Phan et al. 2016), with manyuniversities focusing on supporting start-ups rather thansupport of existing small-medium enterprises. Nonethe-less, it is apparent that many universities are seeking tobe more involved in supporting entrepreneurs(Mehlhorn et al. 2015).

6.5 Knowledge

Etzkowitz et al. (2000: 329) place universities Bcentral^to regional development, particularly for Bless favoredrural, declining regions.^ Audretsch et al. (2015: 222)found that universities and research institutions are thefounda t ions of an ecosys tem ’s knowledge

infrastructure. Likewise, Rice et al. (2014), in a casestudy of six mature university entrepreneurship pro-grams in top business schools, found that universitiesare often a critical factor in the creation and operation ofentrepreneurial ecosystems.

Unfortunately, while much of the literature suggeststhat universities are critical to ecosystems (e.g.,Etzkowitz et al. 2000), not all rural areas have localaccess to universities and research institutions. Whiledigital learning, technology transfer platforms, and ex-ternal networking can ameliorate this deficiency to someextent, geographic proximity to a local research univer-sity is a distinct advantage.

Furthermore, not all universities are useful in the roleof engaging with and supporting the development ofbusinesses. For example, Brown (2016: 200) noted thatScottish innovation policy relies on universities to meetthe needs of SMEs, Bdespite the overwhelming evidencefrom past experiences suggesting that universities maynot necessarily be the most desirable actors for thisrole,^ citing problems with growing enterprises beyondstart-ups, and the mismatch between business knowl-edge needs and the knowledge produced by research atScottish universities. This situation is not unique toScotland. For example, Mazzarol (2014: 4) stated that

…there is a need to enhance the overall level ofinnovationwithin Australia’s SME sector…^ (em-phasis added) and that B…this suggests a potentialdisconnect between the small business communityand the higher education sector in Australia^ con-cluding that B…most of Australia’s universitieshave only limited engagement with entrepreneur-ship programs that work closely with industry.

That this is a problem that occurs in multiple coun-tries suggests a need for government-supported pro-grams to encourage increased engagement between uni-versities and SMEs, particularly for support of SMEsbased in rural ecosystems where the transactional costsof engaging with and accessing the knowledge re-sources of universities are typically higher.

6.6 Support services

Internationally, there is increasing interest in businessincubation and accelerators (Mian et al. 2016; Mileset al. 2016). Incubators provide working space and oftenadvisory and support services (Hathaway 2016). Many

An effectual leadership perspective for developing rural entrepreneurial ecosystems

of these are non-profit entities or funded by government.There are also business accelerators that focus on start-ups (Hathaway 2016), which typically involve intensive3–6-month programs and are supported by seed capitalprovided to the start-ups in return for equity in the start-up. Participants in these accelerators are generally co-located and receive access to technology, mentoring andsupport, knowledge, and networks. Start-ups in acceler-ators are typically globally scalable and have a techfocus. At the end of the acceleration process, partici-pants make a pitch to fund the next stage of theirbusiness. It is expected that most proposed businesseswill fail, but a small number will succeed. In rural areaswhere there are smaller numbers of businesses andlimited access to technical resources, there are likely tobe fewer suitable locations for accelerator programs.

While accelerator programs may not be suited tomany rural ecosystems, the development of existingbusinesses through an economic gardening approachwhich leverages rural business support groups may havemore widespread utility in a rural context (Barrios andBarrios 2004; Fortunato 2014; Edward LoweFoundation 2015; Mazzarol et al. 2017). Economicgardening is often based on traditional enterprise pro-grams such as a publicly funded business advisoryservice or university-based management and technicalassistance centers (Barrios and Barrios 2004; EdwardLowe Foundation 2015) and has been an effective andefficient tool to stimulate entrepreneurship and smallbusiness development, including in rural areas(Chrisman et al. 1985, 1987; Cumming and Fischer2012). These programs help businesses improve theirvalue proposition and a range of processes related tomarketing, export expansion, human resourcemanagement, negotiations, planning, and otherbusiness processes such as lean management so thatthey compete more effectively. Economic gardeningprograms share many similarities with EntrepreneurialDevelopment Systems recommended by Lichtensteinand Lyons (2001, 2006) with their emphasis on devel-oping skills and capabilities among entrepreneurs.

7 Conclusions

The primary contribution of this paper is the propositionof a new model of rural entrepreneurial ecosystem de-velopment based on a specific style of communityleadership—that of EL. EL requires that the rural

community’s leaders commit to a Bmeans first^ ap-proach to development by employing effectual logic toleverage their community’s capitals to exploit attractiveopportunities to advance the region’s entrepreneurialecosystem. That suggests that rural leaders learn fromthe process that created North Carolina’s Research Tri-angle Science Park, where community leaders first con-sidered where they and their community were, who theywere, and whom they knew (their systemic and frame-work conditions). Then, they leveraged these to createmutually beneficial partnerships that exploit opportuni-ties, intentional, or serendipitous while managing theirdownside risks by proactively and innovatively using allethical and legal means at their disposal.

EL can also be used to identify and address frame-work constraints, and systemic conditions often found tobe problematic in rural ecosystems, such as a lack ofinfrastructure, access to finance, and human capital. Inrural communities where leadership capacity is oftenless available, the operationalization of EL may requirecombined efforts from government, universities, and theprivate sector.

Enterprising leaders in rural regions seeking to createor develop an entrepreneurial ecosystem may find thismethod a useful approach to strategic leadership. Whilethe entrepreneurial method has been applied to othersocial problems including international developmentpractices (Bonney et al. 2013) and social services prob-lems (Verreynne et al. 2013), to the authors’ knowledge,this is the first time it has been conceptualized as aleadership style for the development of rural ecosystems.

Publisher’s Note Springer Nature remains neutralwith regard to jurisdictional claims in published mapsand institutional affiliations.

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An effectual leadership perspective for developing rural entrepreneurial ecosystems