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Rostocker Beiträge zur Regional- und Strukturforschung, Heft 19 Rostock Contributions to Regional Science, Vol. 19
Cultivating Entrepreneurial Regions – Cases and Studies from the Network Project ‘Baltic Entrepreneurship Partners’
(BEPART)
Gerald Braun, Christoph Diensberg (Hrsg./ eds.)
Rostocker Beiträge zur Regional- und Strukturforschung, Heft 19 Rostock Contributions to Regional Science, Vol. 19
Cultivating Entrepreneurial Regions – Cases and Studies from the Network Project ‘Baltic Entrepreneurship Partners’
(BEPART)
Gerald Braun, Christoph Diensberg (Hrsg./ eds.)
Universität Rostock Wirtschafts- und Sozialwissenschaftliche Fakultät
2007
This publication was done within the project activities of BEPART – Baltic Entrepreneurship Partners, part-financed by the European Union, Programme Interreg III C. All information herein reflects the authors’ view only; the EU and related organizations are not liable for any use that may be made of the information.
HERAUSGEBER/ EDITOR: Gerald Braun (ISSN-REIHE/ ISSN SERIES) Lehrstuhl für Wirtschaftspädagogik Hanseatic Institute for Entrepreneurship and Regional Development (HIE-RO) an der Universität Rostock HERAUSGEBER/ EDITOR: Gerald Braun, Christoph Diensberg (HEFT/ VOLUME) LEKTORAT/ LANGUAGE EDS.: Irwin S. Berkowitz, Christoph Diensberg,
Susanne Wilhelm DRUCKVORLAGE/ ARTWORK Christoph Diensberg, Susanne Wilhelm CIP-KURZTITELAUFNAHME: Cultivating Entrepreneurial Regions/
Gerald Braun, Christoph Diensberg (Hrsg./ eds.) - Rostock: Univ., Wirtschafts- u. Sozialwiss. Fak., 2007. – 320 S. - (Rostocker Beiträge zur Regional- und Strukturforschung; 19)
ISSN 0947-6016 © Universität Rostock, Wirtschafts- und Sozialwissenschaftliche Fakultät, 18051 Rostock. BEZUGSMÖGLICHKEITEN: Universität Rostock Universitätsbibliothek, Schriftentausch, 18051 Rostock Universität Rostock Wirtschafts- und Sozialwissenschaftliche Fakultät Lehrstuhl für Wirtschaftspädagogik/ Hanseatic Institute for Entrepreneurship and Regional Development (HIE-RO) an der Universität Rostock Johann-Heinrich-von-Thünen-Haus Ulmenstr. 69 18051 Rostock Tel.: ++49(0)381 498 4561; Fax.: ++49(0)381 498 4562 [email protected] www.hie-ro.de www.bepart.info DRUCK: printmix24, Bad Doberan
CONTENTS
Gerald Braun, Christoph Diensberg
PREFACE: Developing Regional Entrepreneurship Cultures ..…………..V
Gerald Braun From Regional Knowledge to the Entrepreneurial Region ….……….. 1
Aarhus/ Denmark
Poul Dreisler The Role of University Education in the Aarhus Region, Denmark ............... 41
Häme/ Finland
Hillevi Ahonen, Jari Kattainen, Pekka Komulainen, Paula Kyrö, Marja Laurikainen, Anna Ripatti
An Example of Regional Collaboration in Entrepreneurship Promotion and Development – Häme Region …………. 65
Kainuu/ Finland
Päivi Malinen Entrepreneurship Promotion from a University of Applied Sciences’ Point of View. The Case of Kajaani University of Applied Sciences in Kainuu Region ….……. 101
Kaunas/ Lithuania
Pranas B. Milius, Jurgita Sarkiene
Regional Development Strategies and Entrepreneurship Promotion in the Kaunas Region ……….. 127
Krakow/ Poland
Anna Samborska, Dr. Jacek Klich, Dorota Franczukowska
Entrepreneurship Promotion in the Małopolska Region ……….. 153
Oulu/ Finland
Martti Hyry, Marianne Mäntylehto, Gottfried Effe
Entrepreneurship Promotion in Research Environment The Case of Oulu University ……….. 177
Rostock / Germany
Gerald Braun, Ina Brachmann, Pawel Warszycki
Entrepreneurship Promotion and Regional Development in the Region Middle Mecklenburg/ Rostock (MMR) ……….. 193
Stockholm/ Sweden
Claudia Hakanen, Bruce H. Lambert
Entrepreneurship Promotion in the Stockholm Region ……….. 219
Tallinn/ Estonia
Urve Venesaar, Ene Kolbre, Toomas Piliste, Piret Loomets
Entrepreneurship Promotion in Estonia and the Region Northern Estonia
…………247
Tartu/ Estonia
Janita Andrijevskaja, Tõnis Mets
Entrepreneurial Challenge for University and its Region in a Transition Country: Case of Tartu, Estonia ..……… 273
Twente/ Netherlands
Gerben Blaauw, Aard Groen, Gert-Jan Hospers, Paul Kirwan, Peter van der Sijde
Economic Development and Entrepreneurship Promotion in the Region of Twente ……….. 297
V
PREFACE Developing Regional Entrepreneurship Cultures
1. Entrepreneurship as a lever to (regional?) development in today’s world
Regional development is not an end in itself.
From a local perspective, a region is a means of existence for its human
beings and nature. Regional conditions shall contribute to their needs and
opportunities. Regional development is above all about developing conditions
and perspectives which make life worth living for the residents.
Seen from a countries’ or Europe’s point of view, regional development has to
contribute to needs and goals of these larger entities: to cultural standards
(e.g. economic, social and cultural well-being), to research and innovation
capacities, to mobility, to public services like infrastructure and education, to a
legal order and other groundwork of existence and development. Lagging
regions are undesirable because they contribute less than they are expected,
and since they may absorb valuable resources of different kind.
The global perspective casts the light on global challenges (heteronomy,
migration, poverty, epidemics, wars, ethnic conflicts, global warming etc.).
They do often have their origin and always show their effects on local and
regional levels, though in different ways, at different places, and at different
times. Likewise, also possible answers to such overall challenges lead us
down to regional potentials of creative, inventive and entrepreneurial human
beings who might be able to inspire, find and implement solutions. They will
start this regularly where they live. As Danuta Hübner, European
commissioner for regional policy says: “It is in the regions and cities that we
have to look for ways to turn globalisation into sustainable growth and jobs
and to move upwards in terms of international competitiveness.” (Hübner
2007, 30)
Three aspects then become obvious:
1. Today, regional development can not be limited to regional challenges and
necessities alone, by neglecting European and global perspectives.
VI
2. Entrepreneurship development is a possible lever not only to regional growth
but to the development of countries, of Europe and of the world as well.
3. Entrepreneurial activity has potentials to create both, solutions for others and
nuisance. Entrepreneurship has impact upon life. A non-normative, broad view
is its definition as a “(…) mindset and process to create and develop economic
activity by blending risk-taking, creativity and/ or innovation with sound
management (…)” (EU 2003, 6)
Promoting entrepreneurship within regional development strategies needs to accept
a sort of broader view and responsibility. Sustainable entrepreneurship promotion is
a concept to make such entrepreneurial activity more inviting, attractive and easy for
entrepreneurial talents and ideas which have a potential to improve the standards of
living. Certainly entrepreneurship promotion includes support for business start-ups,
but it goes far beyond.
2. Lessons from the boundaries of regional planning - and a redefinition
Johann Heinrich von Thünen (1783-1850) is well known as an early originator of
‘Regional Science’ and of ‘Location Theory’. When writing this introduction we recall
to him, who was living on his agricultural estate in Tellow, closely located to the
Hanseatic city of Rostock and to our University. It is less known that von Thünen also
thought about ways how to promote encouragement of his workers, by trying different
modes of profit-sharing. If we turn his thoughts (with some oversimplification, but with
history-awareness) into modern terms, he was thinking of how to promote
entrepreneurial activity. The notion of combining regional development with the
promotion of entrepreneurship is not a new one.
It took until mid of 20th century until ‘regional science’ evolved as a broader academic
field. Since then it has been closely linked to policies with the goal to counter regional
disparities, lagging regions, spatial problems, negative (sub)urbanisation effects etc
(cf. Polèse 1999). “The fundamental premise underlying most such regional policies
(…) was the belief that national governments could fashion the spatial structure of
the economy and in turn significantly affect the economic fortunes of lagging regions.
Regional development disparities could be reduced by central government policy.”
(Polèse 1999, 303)
VII
Such ‘old’ interventionist approaches have failed (cf. ibid, 304 ff.), when
location subsidies led to wrong allocations and inefficiencies;
stand-alone decentralisation policies (transferring administrative
responsibilities and departments away from central government locations to
regional levels) have not shown the expected positive regional effects;
mere investments into physical capital and infrastructure (e.g. into roads,
science parks, harbours, school-buildings etc.) have arrived at their limits. And
where such a ‘brick and mortar policy’ seemed successful in the short-run,
opposing medium-term negative effects have often been observed as well
(e.g. out-migration of the well-educated and more mobile ones);
growth pole policies have shown their limits. It turned out that (1) their top-
down implementation would be more feasible in a dictatorship than in
pluralistic democracies, and (2) they could not simply neglect institutional,
social and cultural conditions.
An interventionist approach fails since it ignores the often unpredictable (also
innovative = surprising) behaviour of human beings and the complexity of social life.
Regions are complex ecosystems. In the words of the Nobel-Laureate Friedrich A.
von Hayek we admit: „To act on the belief that we possess the knowledge and the
power which enable us to shape the process of society entirely to our liking,
knowledge which in fact we do not possess is likely to make us do much harm. (…) If
man is not to do more harm than good in his efforts to improve the social order, he
will have to learn that in this, as in all other fields where essential complexity of an
organized kind prevails, he cannot acquire the full knowledge which would make
mastery of the events possible. He will therefore have to use what knowledge he can
achieve, not to shape the results as the craft man shapes his handiwork, but rather to
cultivate a growth by providing the appropriate environment in the manner in which
the gardener does this for his plants.” (Hayek, 1974/ 1984, 276)
The imperative for regional development then needs to be redefined as “From
regional planning to the cultivation of regional development.” We can demand a
similar turn for such entrepreneurship-promotion policies which assume that more
and new entrepreneurs and start-ups can simply be produced by just another
support-programme (of funding, of training, of business plan competitions, of office-
space, etc.): “From entrepreneurship production to the cultivation of entrepreneurship
VIII
development!” (It is then not the isolated training programme which counts, but the
overall education and training conditions as a landscape. It is not the single funding
programme which counts, but the overall funding conditions. We need to think more
in terms of landscapes, and less in terms of fenced-in front-gardens. At the same
time we would also be responsible for the weather, so that there is not always
sunshine, but some winds and storms of change to enable innovation and progress.)
How could such a new approach of a ‘regional cultivation and empowerment policy’
work? Firstly, it will certainly have to embrace a basic assumption of the following
kind: “The success of a region will in the end depend on the capacity of local actors
(…) to take matters in hand, to organize various parties around common goals, to
adapt and to successfully adjust to outside pressures. Thus, the ultimate sources of
development lie in the region itself, in its people, its institutions, its sense of
community, and perhaps most important of all, in the spirit of innovation and
entrepreneurship of its population.” (Polèse, ibid, 308).
3. How to cultivate entrepreneurial regions and how to overcome obstacles of interventionist-thinking?
Let us postulate that the limits of “regional planning as a manageable process” are
still less accepted in regions and regional policies than they are known in institutions
of the world, of Europe and of states. Giving some indications below cannot replace a
valid verification on such a hypothesis by a systematic survey, but at least shows
evidence that the opposite would be wrong.
When writing this introduction we encountered an OECD paper, captioned
“Cultivating regional development: main trends and policy challenges in OECD
regions” (OECD, Pezzini, 2003). In its basic policy assumptions, the analysis states:
“Regional success and decline seem to result from a different regional capacity to
exploit the local financial, natural, physical, social and human capital to facilitate local
as well as foreign direct investments.” (ibid, 2). The paper then points out factors of
knowledge, skills and quality for example, to local institutional capacities and
community participation (cf. ibid., 20 f.): “(…) there is no secret alchemy for
converting labour, capital and technology into economic success. Social well-being
relies on institutions, formal and informal, explicit and implicit. Social capital is as
important as financial capital in promoting economic growth.” (ibid, 21). And: “In
IX
some cases, the most intangible aspects (entrepreneurship, cultural identity,
participation, and partnerships) are the most important in making the difference.
Arguably, what really counts for a region is not the availability of one form of capital
or another, but the ability to properly exploit it.” (ibid, 6).
The same paper also presents a survey where ‘experts from several OECD Member
countries’ were asked to rank different forms of capital (26 factors were suggested) in
their importance to make rural regions growing and leading. The respondents ranked
factors of ‘settlement patterns’ and ‘infrastructure’ much higher than factors of ‘local
institutions’ or ‘human resources’. And most interestingly, factors as ‘quality of
services’ and ‘innovation capacity’ were ranked as being of lesser importance, and
thus closing the ranking-list (cf. ibid, 6 f.).
The turn to human resources, entrepreneurship and innovation capacities as drivers
for regional development thus seems to be much more favoured from a distant
analytical view (here: OECD) than it is from the viewpoint of (here:) regional experts.
We find more indications for our above stated assumption when looking into our own
region of Mecklenburg-Vorpommern. In a recent meeting, we discussed on the terms
which denominate certain positions and institutions for our regional development
policies. An administration in charge is called “Regional Planning Administration”
(‘Regionaler Planungsverband’), and another one “Regional Management Middle
Mecklenburg/ Rostock” (Regionalmanagement Mittleres Mecklenburg/ Rostock’),
headed by a “Regional Manager” (‘Regionalmanager’). Admittedly, these are
denominations only, which do not show how these institutions and persons perceive
and operate in their daily action. But denominations indicate at least some
expectations, for example when building up these institutions some years ago. And
even if such expectations do not prevail, the signals given by such names will do so.
Another recent hint for a still governing interventionist-thinking on the regional level
can be found in the new ‘operational programme’ for implementing the European
Social Funds in our federal state for the years 2007 to 2013 (WM-MV, 2007).
Certainly, the new programme shows a much stronger focus on the activation of
endogenous growth factors if compared to the forerunner-period. But: The promotion
of entrepreneurship is still chiefly defined as an operational and isolated goal (cf. 72),
and not as a general goal which could (and to our ideas: should) be laterally
integrated into any kind of the four basic strategic approaches which the programme
X
defines as: improving innovation potentials, regional competitiveness, location
development and access to labour market/ social integration (cf. 42). The only two
laterally integrated policy approaches of the ‘operational programme’ are the
promotion of (a) equal opportunities and (b) sustainable development (cf. ibid)
Hence we raise the question: Isn’t entrepreneurship (the creation and development of
economic initiative and activity) the basic competence and condition to enable all of
these goals? And if one agrees: Why then is entrepreneurship promotion still reduced
to a single tool, restricted to a single tool-box of a limited activity field?
From our editor’s point of view and knowing the contributors of this book with us,
entrepreneurship promotion should be based on a much broader approach. But this
is much easier said that done. It is quiet easy to experience and to prove what does
not work and has not worked. One crucial thing will be to turn such failures into
learning instead of accusations between the actors. Effective policies need
cooperation. This learning takes time and does not happen from one day to another.
This is true for politicians, for business people and entrepreneurs, and off course for
scientists and researchers as well.
There seems no better way for overcoming interventionist thinking and the turn
towards (hopefully more successful) approaches for cultivating regional and
entrepreneurship development than learning from experience and trying out new
ways. Practical experience is always a good stepping stone for effective learning.
Progress in this field needs dialogue, communication, real cooperation and looking
beyond political, cultural and regional borders. This it what the project BEPART, this
book and its contributors finally aim to contribute at.
4. A short summary of the project and aims of BEPART
BEPART is an international network partnership and project of 12 institutions from
different regions in the Baltic Sea Area. Lead partner is the University of Rostock,
where the concept has been developed by the Hanseatic Institute for
Entrepreneurship and Regional Development HIE-RO. The project’s field of activity is
entrepreneurship promotion and education, especially at and by universities, which
are seen as having a large potential for future regional development.
The value proposition of BEPART is the contribution to a more successful stimulation
of entrepreneurship, which will support wealth and competitiveness (in Europe and its
XI
regions), as entrepreneurship is seen as driving force of social, technological and
economic development.
Network-partners of BEPART are universities, a university-related science park and a
regional development agency. The overall project objectives are directed towards
> more efficiency and impact of entrepreneurship promotion;
> contributing to the development of a creative and responsible entrepreneurship
culture.
July 2004 has been the official start of the project. It will be financed until December
2007. The history of the project goes back to the year 2001, namely to a book-project
on entrepreneurship in countries of the Baltic Sea Region (Braun, Diensberg 2002).
Its contributors were the groundwork to form the network structure of BEPART later
on.
XII
The total budget of BEPART (2004-2007) amounts to € 1,87 Mio of which roughly
€ 1,2 Mio are contributed by the EU programme Interreg IIIC/ ERDF (European
Regional Development Fund). € 670.000 is contributed by the partners or respective
member states.
Interreg III C as main funding source is an EU-funded programme which intends to
help Europe’s regions form partnerships to work together on common projects. The
programme goals in general strongly promote sharing knowledge and experience
with the idea that co-financed partnerships enable the regions involved to develop
new solutions to economic, social and environmental challenges.
For BEPART, two larger conferences (2005 and 2006) were one important means to
intensify such a sharing of experience. The main topic of these conferences was the
question: how to promote regional development by better entrepreneurship
promotion? The partners summarized conclusions by melting down the essence of
this broader dialogue into the following ten propositions.
5. Ten propositions of BEPART (Baltic Entrepreneurship Partners): Towards entrepreneurial regions
IMAGINATION OF ENTREPRENEURSHIP
(1) A broad concept of entrepreneurship is a better ground for effective
entrepreneurship promotion than a narrow one. Worldwide, one will find endless numbers of definitions and concepts of entrepreneurship.
Actually entrepreneurship is a various and broad phenomenon of applied creativity,
problem-solving, innovation and interaction, beyond business start ups. It is also a
concept for personal growth and learning. If we are to promote business start ups and to
develop entrepreneurship as a whole concept we shall broaden our own imagination of
entrepreneurship, demystify the concept, and make it attractive for many.
TOWARDS ENTREPRENEURIAL REGIONS
(2) A region can grow in entrepreneurship if values, structures and activities for
entrepreneurship are widely appreciated and supported. Entrepreneurship and innovation start with curiosity and the entrepreneurial spirit of
people, prior to business plans, money or office space. Within local and regional
environments, values and orientation towards entrepreneurship are fundamentals. Ideas
need freedom for initiative, experiment and development, and possibilities to access
supportive resources to put them into practice.
XIII
(3) An entrepreneurial region calls for the integration of the entrepreneurial focus
into many other policy fields beyond the promotion of high-tech innovation and
start-ups. Regions are complex ecosystems, and entrepreneurship is a complex phenomenon. In
order to facilitate entrepreneurship on a broader regional scale with sustainable effects a
systems approach is required. This is considered also in European initiatives like the
‘Lisbon Strategy’, the ‘Green Paper on Entrepreneurship in Europe’ and the corresponding
‘Opinion of the Committee of the Regions’. Still too many regional policy-approaches
neglect the complexity by means of using superficial, short-term or isolated concepts. The
entrepreneurship rationale demands a holistic approach.
(4) A starting point towards entrepreneurial regions is the development of learning,
education and culture for entrepreneurship. An education system is a mirror of dominant values of a certain region and society. If
entrepreneurship shall be important for a region, education is therefore a vital starting
point. The regional promotion of entrepreneurial spirit and competence within education is
a grass-root approach to promote the entrepreneurial learning of individuals, social
settings and organizations.
ENTREPRENEURSHIP EDUCATION AND TRAINING
(5) Entrepreneurship education shall be based on a concept for personal growth. Entrepreneurship is interaction and does not exist in a vacuum. As an entrepreneur one
would integrate others’ expectations and outside developments into one’s own ideas and
activities. Thus, reflection and interaction are core dimensions of entrepreneurial
competence. Learning which aims at improving reflection and interaction contributes to
personal growth. If we base entrepreneurship training and education on the learning goal
of personal growth we enable entrepreneurship pedagogy, and can support
entrepreneurial activity.
(6) Methods in entrepreneurship education need to support initiative and creativity,
the acquisition of structured experience within learning, and provide laboratory
conditions. Entrepreneurship education and training must incorporate methods which support
experiments, creativity, alertness, critical thinking, interaction and similar activity.
Teaching methods should turn away from traditional lecture-style teaching.
Entrepreneurial teaching and learning methods already imply entrepreneurial competence
and talent which one aims to strengthen. We call this ‘action learning approach’.
XIV
(7) The development of curricula for entrepreneurship goes beyond business
studies. Entrepreneurship addresses competences which can be utilized in all fields of work and
life. Curricula should not be limited to business studies. They shall provide the opportunity
to develop projects, business models or related sustainable concepts to be exposed,
tested and developed on markets or under similar conditions of competition.
(8) Entrepreneurship education and promotion will be more successful if facilitators
and teachers can make use of adequate training programmes (Training of
Trainers). Opportunities to professionalize will have a positive impact on entrepreneurship training
and promotion. Training of trainers (ToT) can offer such opportunity for teachers,
lecturers, consultants, incubator managers and even advanced students. It should be also
open for entrepreneurship promoters in politics and administration. The BEPART
approach is the development of an international ToT programme based on a broad
concept of entrepreneurship and on an ‘action learning approach’. Its aims are to learn
from and with each other, as well as to support international exchange and dialogue in the
field of entrepreneurship education and promotion.
TOWARDS THE ENTREPRENEURIAL UNIVERSITY
(9) Universities as catalyst for entrepreneurship need to develop and embrace their
own concepts of entrepreneurship. An entrepreneurial university aims at being competitive in its academic and service fields,
and encourages entrepreneurship initiative and competence building throughout research
and teaching. An entrepreneurial university creates space and conditions for the unknown,
and links teaching to research. From the BEPART perspective commitment to regional
entrepreneurship promotion and its regional impact belongs to the concept of
entrepreneurial universities. Part of the concept are activities towards building regional
innovation systems together with business and government.
INTENSIFYING TRIPLE HELIX INTERACTION
(10) In order to build regional systems for entrepreneurship and innovation we need
to learn new modes of triple helix interaction of university – business –
government. Organizing regional systems and environments for dynamic entrepreneurship and
innovation is a knowledge-intensive and complex challenge. The so called “triple helix”
model addresses interaction between university, business and government. The model
recognizes that universities and academia can and shall play an important role in regional
XV
innovation processes. It emphasizes the need for a collaborative and hybrid modus of
cooperation, and concedes that control cannot be stable and synchronized beforehand
but is dynamic by nature. BEPART regards this as a learning process which can only
progress by cooperative work towards building such systems.
6. The contributions of this book
A compilation of different perspectives on a similar topic allows comparisons and
widens the view onto a bigger picture.
Some basic commonalities of the collected studies and contributions on
entrepreneurship promotion in the regions of the BEPART partners are:
The interplay of theoretical thought with practical application in this policy field is
to a mutual profit;
The so called ‘knowledge society’ is a shared overall challenge to regional and
entrepreneurship development. The perception of this challenge seems to be a
major reason why universities increasingly embrace an active role in this field;
Most of the regions which are described here are so called ‘intermediate’ and
‘rural’ regions. For them, demographic change and mobility implies common
threats of ‘ageing’, ‘emigration’, ‘loss of human capital and of innovation capacity’,
and finally a loss of regional attraction for potential entrepreneurs, a crumbling of
creative settings;
Investing into the cultivation and support of entrepreneurship is regarded as a
key-approach to counter such threats, thereby strengthening the endogenous
growth resources of the regions;
Education and specialized support-institutions are highlighted as main actors to
implement an effective, sustainable support for (potential) entrepreneurs. Every
region which is presented here has already a multitude of such support
institutions, but coordinated activities are sometimes missed;
Often, though not always, these development activities towards more
entrepreneurship are linked to regional development strategies;
In some countries (for example in Denmark and in Finland), regional policies
towards entrepreneurship promotion are accompanied by larger national
initiatives and programmes, which seems to be an important synergy-lever for the
potency of local and regional support initiatives.
XVI
Selected practical policy recommendations given by the authors of the studies are:
to remove entry-barriers for entrepreneurial initiative and activity;
to develop and support learning-cultures for entrepreneurship, also by trying out
new ways of action-oriented pedagogy and didactics;
to turn attention to the huge potentials of universities for regional
entrepreneurship generation. Universities are expected to behave no more as
isolated giants and ‘ivory-towers’ but to develop themselves into cooperative,
open minded key-players with increasingly fuzzy borders among regional
innovation clusters;
to broaden the understanding of entrepreneurship, instead of keeping the concept
exclusive and accessible for a few ones only;
to invest into structures of competence development for potential entrepreneurs
(= investments into entrepreneurship learning, training and education), and to
develop such structures with an attitude of cultivation instead of intervention;
to develop more, better and dynamic modes of cooperation (learning in action)
between business/ entrepreneurs, public administration/ politicians and science/
universities (= ‘triple-helix-cooperation’).
The editors are very grateful to all authors and project partners who contributed to
this collection. We like to thank as well the even more helpers who made the editing
possible, at the partner-level and in Rostock. Preliminary versions of the studies have
been published on a CD-ROM for the 1st BEPART conference in October 2005 at the
University of Aarhus (DK). For the purpose of this book, most studies have been
revised and updated.
Since the ‘knowledge society’ turned out to be a recurrent theme in all contributions,
we decided to add a basic research article on how to get ‘from regional knowledge to
entrepreneurial regions’. This is followed by all other regional studies, which are
arranged in the alphabetical order of the regions.
Gerald Braun
Christoph Diensberg
Chair of Economics and Business Education/ BEPART Project Coordination
Hanseatic Institute for Entrepreneurship and Regional Development HIE-RO
University of Rostock
XVII
References
Braun, G./ Diensberg, C. (Eds.) 2002: Entrepreneurship im Ostseeraum - Unternehmertum als Motor von Wachstum und Integration, Berlin.
EU (European Union) 2003: Commission of the European Communities, Green Paper Entrepreneurship in Europe, Brussels.
Hayek, F. A. v. 1974/1984: The Pretence of Knowledge (Nobel Prize Lecture), In: Nishiyama, C., Leube, K. R. (eds.), The Essence of Hayek, Stanford, pp. 266–80.
Hübner, D. 2007: Leading the way, in: The Parliament, Regional Review, Issue 4, March, 29-31.
OECD, Pezzini, M. 2003: Cultivating regional development: main trends and policy challenges in OECD regions, Paris.
Polèse, M. 1999: From Regional Development to Local Development: On the Life, Death and Rebirth (?) of Regional Science as a Policy Relevant Science, In: Canadian Journal of Regional Science, XXXII:3, (Autumn), 299-314.
WM-MV 2007 (Ministerium für Ministerium für Wirtschaft, Arbeit und Tourismus Mecklenburg-Vorpommern): Europäischer Sozialfonds (ESF), Operationelles Programm des Landes Mecklenburg-Vorpommern, Förderperiode 2007 bis 2013, Schwerin. (Policy Paper, dated 05. March 2007).
XVIII
From Regional Knowledge to the Entrepreneurial Region Gerald Braun University of Rostock Chair for Economics and Business Education Hanseatic Institute for Entrepreneurship and Regional Development HIE-RO Phone +49-381-498 45 60 E-Mail: [email protected] Contents
Illustrations ................................................................................................................. 2
1. The Network Economy: Old Wine in New Bottles?.............................................. 3
2. Knowledge in the New Growth Theory ................................................................ 4 2.1 The Limitations of our Knowledge ....................................................................... 4 2.2 Knowledge in the Neoclassical Growth Theory ................................................... 7 2.3 Knowledge in the Polarization and Growth Point Theory .................................... 9 2.4 Knowledge Cluster and ‘Leap-Frogging’ Models ............................................... 11
3. From Knowledge Milieu to Knowledge-Acquiring Regions ................................ 13 3.1 Person-Centred Theories of Regional Development ......................................... 13 3.2 Innovation Capacity as Creative Environment................................................... 14 3.3 The Accumulation of Knowledge in Knowledge-Acquiring Regions .................. 17
4. From Regional Knowledge Container to Entrepreneurial Region ...................... 21
5. End of Conventional Regional Policy? .............................................................. 23
6. Framework of an Entrepreneurial Regional Policy ............................................ 27 6.1 Regional Milieu Policy ....................................................................................... 28 6.2 Regional Networks and Cluster-Development................................................... 32 6.3 Support of Entrepreneurial Personalities ........................................................... 34
References ............................................................................................................... 36
1
Illustrations Illustration 1: Concepts of Knowledge ........................................................................ 5 Illustration 2: From learning to innovation-phases of intellectual value creation ......... 6 Illustration 3: Concepts of Regional Growth.............................................................. 14 Illustration 4: From mass production to learning regions .......................................... 19
2
1. The Network Economy: Old Wine in New Bottles?
Beyond Robinson Crusoe’s island economy, successful commerce has always been
dependent on networks. The medieval guilds, the Hanseatic League, African nomad
clans and extended Chinese families - just to mention a few - are nothing else but
social networks. The individual resources of their members are diversified,
broadened and bundled together with the aim of development and survival via
recourse of network potentials. And all criteria, which are responsible for the success
of modern networks, are valid for the traditional networks too, for instance trust, long
term connection, reciprocity.
Nevertheless, the renaissance of the network society is neither accidental nor without
reason. In this connection, three developments are of particular importance:
• The globalisation of production and distribution has increased the number and
striking distance of networks without precedence. The revolutionalization of
communications’ technology - information highways, telematics, internet - have
solved “material downfall” (Bühl 2000, p.28) and transformed the world to a
“Global village” (McLuhan/Powers 1995). Theoretically, each product and each
production factor are available worldwide.
• Paradoxically, globalisation does not lead to worldwide identical and
homogenous production conditions - as prophesied by the two cosmopolitans
Adam Smith and Karl Marx. On the contrary, a significant hierarchy of regions
arises. At the top of this hierarchy, there are world metropolis with their science
parks, knowledge networks and high-tech clusters - and at the bottom end
agrarian and old industry declining regions, heavily depopulated, with torn-apart
networks and without competitive resource potential.
• The new networks of the innovation regions differ from the customary networks
through their systematic accumulation and diffusion of knowledge: The
utilization of knowledge on knowledge shifts to the centre of innovative
networks.
Since knowledge is personally embodied, the configuration with high human capital
becomes the comparative advantage of competitiveness of growth poles and
clusters. Moreover: The ability to learn, i.e., to augment existing knowledge with new
knowledge and to convert into marketable innovations, determines rise or fall of
regions.
3
2. Knowledge in the New Growth Theory
2.1 The Limitations of our Knowledge
Our knowledge about knowledge is inadequate. This is valid theoretically as well as
empirically. Principle terms and categories of the knowledge society – network,
knowledge, to research, to learn and to forget – are valid as ‘schillernd’
(Backhaus/Meyer 1993, p.332). [ambivalent] and ‘vielgestaltig’ (Backhaus/Meyer
1993, p.332) [polymorphic]. Now and then, some authors impose the same contents
with different terms and the same terms with different contents.
A consensus on the following issues could be attained:
• From a theoretical point of new knowledge has to be seen and analysed from
the point of view potential to aspire something. It is the “Möglichkeit etwas in
Gang zu setzen” (Stehr 1994, p.250) [possibility to get something underway].
• To distinguish1 between explicit, codified knowledge and implicit, tacit
knowledge is conventional (Polanyi 1967). Explicit knowledge can be
transferred worldwide over standardised information technology, through
languages and symbols, numbers, texts and pictures. Tacit knowledge, on the
other hand, is essentially personally embodied know-how that can only be
spread further through face-to-face contacts. “Spatial, social and cultural
proximity is a major condition - for this transmission process” (Koschatzky/
Kulicke/Zenker 2001, p.7). In recent times, cognition and neuro-science has
discovered a third dimension, the chilled intuitive knowledge, although – until
now – all endeavours to incorporate intuitive knowledge into a Theory of
Knowledge have failed.
1 Cf. Following the excellent article from Pohle, H.: Knowledge, Information and Innovation in
National and Regional Development. Mecklenburg-Vorpommern as an Example, in: Eich-Born, M. (Eds.): Innovationen für Mecklenburg-Vorpommern, Strategien für einen Wachstumspfad. Rostocker Beiträge zur Regional- und Strukturforschung, Heft 17, 2004, pp. 81ff.
4
Illustration 1: Concepts of Knowledge
implicit/tacit explicit/codified individuals • intuition
• experience • Common sense • judgement
• skills/qualification • design rules • procedures
groups/teams • rules of thumb • tradition • sources of information • requirements for
survival
• best practice • stories • working processes
Source: Lagendigk; Arnoud: Towards conceptual quality in regional studies: the need for subtle critique, SECONS Discussion Forum. Contribution No. 3, Bonn, February 2003 (Annex)
• The continual transformation from tacit knowledge to codified knowledge and
vice versa on an individual or even team level triggers knowledge innovations
(Nonaka/Konno 1998, pp.40), whereby one distinguishes between radical
innovations and incremental innovations.
• Knowledge and learning portrays a permanent process of intellectual value
creation with two distinctive features: (a) contrary to other production factors
knowledge increases through its applications and (b) the transmission of
knowledge does not lead to the loss of knowledge of the sender.
• The generation of new knowledge takes place fundamentally: (1) due to
“kreative Eingebung” (Pohle 2004, p.51) [creative intuition], randomly, non-
reproductive and along chaotic rules, (2) through systematic, standardized
learning, whereby one distinguishes among (a) learning-by-educating, (b)
learning-by-doing, (c) learning-by-using, (d) learning-by-imitating and (e)
learning-by-interacting.2 And in each case on individual and institutional level
(OECD 2001, pp.13).
• Knowledge is at the centre of a chain of intellectual value creation, whose
‘preliminary’ processes arise from learning in the widest sense of the word –
and whose output can (but need not) exist in innovations (cf. Paragraph 2).
Knowledge is a necessary yet not a sufficient condition for inventions and
innovations. An individual or collective entrepreneurial competence portfolio
2 Cf. In addition to this: Eich-Born, M.: Colleges as a Corner stone of a Regional Support System for
Mecklenburg-Vorpommern, in: Eich-Born, M.: Innovationen für Mecklenburg-Vorpommern, Strategien für einen Wachstumspfad. Rostocker Beiträge zur Regional- und Strukturforschung, Heft 17, 2004, S. 216ff.
5
must supplement, to enable the conversion of knowledge in inventions and
marketable innovations via enterprise competence (cf. more details in particular
6.3).
Illustration 2: From learning to innovation-phases of intellectual value creation
Source: according to Eich-Born, M.: Hochschulen als Bausteine eines regionalen Innovationssupportsystems für Mecklenburg-Vorpommern, l.c.; S. 216.
• Competitive advantages of regions result less from codified (hence transferable
knowledge), as from tacit, person-linked knowledge, above all from the
conversion of this knowledge in to marketable innovations. The stronger implicit
tacit knowledge generates, is distributed and diffused in a region, the more
difficult is it to imitate. ”It has become apparent that telecommunications provide
access to knowledge but does not facilitate its understanding and
implementation. The reason is that tacit knowledge, on which localized abilities
are based, is ‘sticky’ and difficult to transfer within or between organizations.”
(Malecki 2000, p.339).
• Development and innovation potential of a region are thus considerably
dependent on personally embodied tacit knowledge or - formulated from the
perspective of human capital theory - on the quantity and quality of the
endogenous human capital and its capabilities to learn, chaotic or as per norm.
Learning • Learning-by-
educating • Learning-by-
doing • Learning-by-
using • Learning-by-
imitating • Learning-by-
interacting
Knowledge • Explicit
knowledge • Implicit
knowledge • Intuitive
knowledge
Competences • Professional
competence • Methodological
competence • Social
competence • Decision-
making competence
Invention • Research • Development • Patents • Licences
Innovations • Radical
innovations • Incremental
innovations • new techno-
economic paradigms
Modes • Product
innovation • Process
innovation • Procedure
innovation • Organization
innovation
6
• Explicit knowledge is – at least theoretically – globally, tacit knowledge (since
person-linked) only locally available. Consequently, one could speak of a
glocalization of knowledge as imperative of a knowledge policy.
• A logically consistent and empirical verified theory of economic development
that incorporates the all forms of knowledge systematically does not exist and it
is disputed, whether it will ever exist.
“Theory, however, or at least theory as conceived in a rigorous logical consistent and
formal sense, has not kept pace with empirical and policy reality… How growth
occurs remains a poorly understood process.”(Cheshire/Malecki 2004, p.250).
2.2 Knowledge in the Neoclassical Growth Theory
The more the accord over the importance of ‘knowledge’ as production and
competition factor continues to exist, the more contradictory recovery and spatial
diffusion of knowledge are being interpreted.
In the early beginnings of the neoclassical growth theory3 it is implied that knowledge
can be codified and recorded without problems (explicit or ‘disembodied knowledge’).
The diffusion of this knowledge occurs without any kind of time delay, free of charge
and worldwide. “Regionale Wissens- und Technologieunterschiede als mögliche
Ursache für räumliche Wachstums- und Einkommensdivergenzen können somit gar
nicht entstehen.” (Döring 2004, p.134) [Regional knowledge and technology
differences therefore cannot emerge as a possible cause for spatial development and
income divergences.]
The consequence: with initially existing income and development differences
between economic regions, a catching-up process is automatically started, to whose
end an – absolute or relative – convergence4 of the regional income per capita
adjusts. From this perspective, knowledge is a global public good and there are
knowledge spill-overs worldwide.
3 A variant of the Solow-Swan model. For a representation see Barrow, R. J.; Sala-i-Martin, X.:
Economic Growth, New York 1995, pp. 26. For the meaning of knowledge and human capital in the classical development theory cf. e.g. Immel, S.: Bildungsökonomische Ansätze von der klassischen Nationalökonomie bis zum Neoliberalismus, Frankfurt a.M. 1994.
4 In the terminology of Barrow/Sala-i-Martin it is the so called ‘Beta convergence’. For the ‘overtaking’ phenomenon see Abramowitz, M.: Catching Up, Forging Ahead, Falling Behind, in : Journal of Economic History, Vol. 46, No. 2, 1996, pp. 385.
7
The advantage of neoclassical growth theory lies in its logical foundation, formal
elegance and systematic coherence. The criticism concentrates on the obviously
unrealistic assumption of knowledge as a global public good and neglect of tacit
knowledge. Further weaknesses are the restrictive model assumptions (ideal
competition and factor mobility, complete information). The historically acquired
“cultural capital” (P. Bourdieu) of a location, values, norms, designs of living, are
neglected. History does not occur.
The catching-up-thesis can finally be seen for some periods and regions as
empirically falsified5. Internationally and regionally an adjustment of the income per
capita has not taken place, but, in contrast, some regions managed to extend their
positions as frontrunners, while the rest simultaneously declined or – at least –
stagnated (see also López-Bazo 1999, p. 343).
The outlined criticism led to a productive progress of the neoclassical theory. The
new dynamic growth theory emancipates from the corset of static equilibrium
analysis (Romer 1986, p.1002/Krugman 1991). Contrary to the current hypothesis of
a fast turn in equilibrium track of regional progress (‘steady state’), the new growth
theory tries to explain the long term development of the regions. Through extension
of the model assumptions, the new approaches explain - simply formulated - not only
convergent growth rates of regions any more (‘catching up’). From now on, it is
possible for various development paths to produce increasing regional divergence. In
other words: a big difference in the absolute development effects of economic
regions is being admitted but the assumption of long term positive growth rates of all
regions is still valid. All regions, through free international exchange of products and
production factors, achieve prosperity and then profit from its welfare effects - only a
few regions grow faster than the others (Bröcker 1994, pp.29). That development on
one side and underdevelopment on the other side could be the result of a free world
market lies beyond the explanation horizon even of the new growth theory.
5 For instance, for the income gap from East to West Germany since 1997. For the interpretation of a
theoretical plausible low level equilibrium in East Germany cf. Mayer-Haßelwander, F.: Linkages und implizites Wissen als Determinanten wirtschaftlicher Entwicklung, Marburg 2000. In the 80s also for the EU regions, convergence could whatsoever be asserted cf. Paci, R.: More Similar and less Equal: Economic Growth in the European Regions, in: Weltwirtschaftliches Archiv, Jg. 133, Heft 4, 1997, pp. 609.
8
2.3 Knowledge in the Polarization and Growth Point Theory
Development models of the circular causation (‘cumulative-causation’ models) base
on the assumption that knowledge is regionally immobile, i.e. concentrating on
people-embodied tacit knowledge. A diffusion of knowledge takes place, if at all, only
limitedly, for instance through migration processes. The comparative advantage of
new knowledge remains, regionally, in a very restricted user domain. The
consequence: regionally concentrated knowledge and productivity differences
accumulate with time, “was im Ergebnis für bleibende, dauerhaft wirksame
Unterschiede in den Wachstumschancen von Regionen sorgt sowie zu einer
zunehmenden Divergenz im regionalen Pro-Kopf-Einkommen führt” (Döring 2004,
p.134). [What as a result, caters for long term effective differences in the
development chances of regions and leads to a growing divergence in the regional
per-capita income]. Regional concentration of knowledge from this interpretation
does not mean catching-up in the long term, but polarization of living conditions (out
of which: ‘polarization theories’).
The polarization theories (= dependency and underdevelopment theories) present
the neoclassical growth theory from head to toe (or vice versa): product and factor
mobility trigger cumulative causation processes that lead to a grow-apart
development of regions. Knowledge spillovers do not take place. The system
immanent consequences are stable effective and continuous differences in the
knowledge potential of economic regions - and an increasing divergence/polarization
in income per head. Globally regional innovation centres emerge and – as
underdeveloped anti-picture – peripheries6; spatially uncoupled from global
development and knowledge (Galtung 1972, pp.29). For disadvantaged regions, the
back-wash effects, triggered through factor mobility, are larger than the centrifugal
spread effects. Knowledge gains under these hypotheses – quite differently as
compared to the neoclassical growth theory – the character of a private good
(‘personally embodied tacit knowledge’).
The growth pole concepts also base on the model assumptions of polarization
theory. Based on agglomeration and linking benefits, sustainable development
effects emerge in the centres of economic and socio-cultural progress. Usually in
urban growth poles (“pôles de croissance”, Perroux 1964) a high probability of
6 J. Galtung defines the centre-periphery difference as „structural imperialism“.
9
innovative activities exists. Subsequently, primarily in metropolitan centres, sectoral
and regional concentration (‘cluster’, ’industrial districts’) of the development is to be
observed.
Essential points of criticism of polarization theory models concentrate on their lacking
theoretical foundation, on insufficient operationalization and rapid generalization of its
results. From an empirical point of view backward regions can be verified, which
caught up in productivity and per capital income – instead of – as by the growth pole
theory predicted – falling back (Martin 2001, pp. 51). This is the case, for instance in
Singapore, Taiwan, Ireland and Spain; regionally for the M-4 corridor in Great Britain
(west of London towards Bristol), the so-called 3 Italys (Emilia Romagna, Tuscan,
Venice) and regions in south Germany (areas around Stuttgart, Karlsruhe, Munich,
Dresden and Jena) - just to mention but a few.
These, in both approaches – development and polarization theory – made
assumptions, complete or no diffusion of the knowledge and concentration only on
explicit or implicit knowledge respectively, describe purely extreme positions.
Empirically verifiable, however, is that knowledge diffuses, “allerdings nur mit einer
mehr oder weniger großen zeitlichen Verzögerung und in Abhängigkeit von einer
räumlichen Entfernung” (Döring 2004, p.134). [nonetheless, only with a more or less
time delay and dependent on regional distance]. From one point of view, personally
embodied knowledge mostly possesses the character of a private local or regional
good, whose regional diffusion - if at all - ensues only via migration. From another
point of view, codified, explicit knowledge often is available in real-time worldwide, a
ubiquitous good, whose diffusion depends on economic market laws (‘digital divide’).
10
2.4 Knowledge Cluster and ‘Leap-Frogging’ Models
For knowledge societies, the so-called hierarchical knowledge expansion is valid as
representative. Metropolitan knowledge clusters produce new knowledge and
innovations that leap at other urban development and innovation centres. From there
onwards – if at all – in a long diffusion process, regional ‘trickle down’ into structurally
weaker and peripheral regions is more or less verifiable. As cause for metropolitan
knowledge lead or absolute monopoly of knowledge, the concentration of highly
qualified human capital in agglomeration areas is obvious - for instance around
universities and research institutes (Sassen 1996).
Consequently the adoption of new knowledge in human capital clusters is more
probable than in the sparsely populated, rural peripheries. Comparably, it is logical
for the concentration of business headquarters and their research and development
units in urban centres7. In each case, it is run out by regions with (starting) equipment
towards knowledge (‘history matters’). The regional knowledge gap can lead to a
lasting knowledge monopoly in the worst case – or will last at least over a long period
of time (Döring 2004, p.135).
Crucial to note is that the applied terms of knowledge are fuzzy and – still weighty –
knowledge in the accumulation model only occurs explicitly or implicitly. Knowledge
growth like knowledge diffusion obviously takes place incrementally; in other words:
the regional knowledge accumulation results from ‘learning by doing’ processes, in
which the existing knowledge is expanded constantly and in small steps through new
knowledge (with possibly decreasing rates of return). The catching-up and overtaking
of single regions through competition - or even skipping developing stages can not
be explained through evolutionary knowledge development. From particular political
significance are ‘leap-frogging’ models that explain the development of knowledge
capacities with technological breakthroughs (‘break through innovations’).
In these models there are two types of innovation:
• Incremental or “improvement innovations” (Eich-Born 2004, p. 16)8 which base
on adaptation of codified knowledge through learning-by-educating and
learning-by-using and
7 More differentiated are the 3 types of regions at: Danielczyk, R.: Ossenbrügge, J.: Perspektiven
geographischer Raumforschung- „Locality Studies“ und regulationstheoretische Ansätze, in: Geographische Rundschau, 45. Jg. 1993, Heft 4, S. 210ff.
8 The following arguments rely heavily on the excellent expositions of M. Eich-Born.
11
• basic innovations or breakthrough innovations that contain radical product and
process innovations up to a change of techno-economic paradigm, for instance,
in the sense of Kondratieff’s innovation cycles (Kondratieff 1925/Nefiodow
2001).
Innovations are mostly results of a network cooperation from pure and applied
research (e.g. in universities), innovation support systems (business development
institutions, Venture Capital Funds) und - last but not least - entrepreneurial initiatives
and readiness for risk. The foundation of basic innovations is often the transformation
of regional tacit knowledge into codified knowledge - and vice versa. This
transformation takes place through learning by interacting. Existing knowledge is
devalued through this and breakthrough knowledge created. ‘Leap-frogging’ models
also proceed from divergent regional knowledge inventories, whereby the
comparative competitive advantage, however, that results from knowledge
projections, shifts to comparably weaker areas and can make frontrunners out of
latecomers. Like basic innovations, they emerge and diffuse, and why this happens
and especially in structurally weakened regions, is poorly explained anyway, and it is
practically the black box of an endogenous theory of regional development. “In dem
Maße, wie das neu geschaffene Wissen durch lokale Lerneffekte verfeinert wird,
ergeben sich Wettbewerbsvorsprünge der dieses Wissen anwendenden Region, was
dazu führen soll, dass die vormals weniger entwickelte Region die bislang
wirtschaftlich führende Region überholt.” (Döring 2004, p.136). [From the extent, in
which the newly created knowledge is refined through local learning effects,
produces competitive advantages, which should lead this knowledge applying region
that formally was lagging behind in terms of progress to taking over the economically
leading regions].
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3. From Knowledge Milieu to Knowledge-Acquiring Regions
3.1 Person-Centred Theories of Regional Development
The outlined macro theories of regional development examine accumulation and
expansion of knowledge in the region excluding performers. Clearly formulated:
Development takes place without acting persons, like falling from heaven - or maybe
not. The knowledge of a region is nothing else but the sum of the knowledge from
researchers, developers, traders, employees and students, housewives and
administrative employees (just but to name a few groups).
Regional development through innovation is the combination of explicit and tacit
knowledge and the capability of individuals to learn and to implement innovations in
the market. Therefore the regional performers and their networks, i.e. the micro and
meso level, shifted in the centre of theoretical analysis (cf 3.3). “An awful lot ... is
known about the role of highly skilled human capital, the agglomeration tendencies or
R&D and the related localisation of innovation; and the role of institutions such as
universities. This knowledge however is still both tantalising incomplete and
incompletely incorporated into a satisfactory unifying theory.” (Cheshire/Malecki 2004
p.250).
13
Illustration 3: Concepts of Regional Growth
Source: Langendijk, Arnoud: Towards conceptual quality in regional studies: the need for subtle critique, SECONS Discussion Forum. Contribution No.3, Bonn, February 2003 (Annex).
The realisation that knowledge is not accumulated by the region but by its performers
- who learn and interact - is as trivial as well as meaningful. From the abundance of
competing partial theories, due to their theoretical and empirical significance the
creative environment theory and the concept of knowledge-acquiring regions shall be
outlined.
3.2 Innovation Capacity as Creative Environment
Unlike neoclassical growth theory and New Regional Geography9, the milieu
approach of the GREMI-group ( Groupe de Recherché Européen sur les Milieux
Innovateurs) stresses the meaning of a specific regional socio-culture for the
economic progress of a region, defined as “historical derived designs of living, which
are shared by members of a [regional] group” (Kroeber/Kluckhohn 1952, p.5).
Through this, the region is not seen as a passive knowledge container, in which
techno-economic more or less innovative trades are settled, but as frame of an active 9 Here for instance the regulations theory is valid, the concept of flexible specialization (MIT), the
concept of flexible production (Californian school) and the various industrial district concepts.
14
milieu, out of which progress is produced and stimulated through ‘creative talents’
(Krätke 1995, p.3). An innovative milieu is defined as “a ... complex network of mainly
informal social relationships on a limited geographic area, often determining a
specific external ‘image’ and a specific internal ‘representation’ and a sense of
belonging which enhance the local innovative capability through synergetic and
collective learning processes.” (Camagni 1991, p.3).
The three main functions of such a regional milieu are:
• The reduction of insecurity in innovation process through - mostly informal -
social relationships (predictability, trust, reciprocity).
• The increase of regional innovation potentials via collective learning processes
of the performers. Four types of learning are to be distinguished: (1) Learning-
by-educating, (2) learning-by-doing, (3) learning-by-using, (4) learning-by-
interacting (Nielsen/Lundvall, n.y. p. 3).
• The production of synergy effects (collective market and innovation strategies,
increasing competence, reduction of costs) mostly through informal contact.
Face-to-face communication in informal networks (‘invisible colleges’) support
regional innovations through the 4 Cs ‘Communication’, ‘Cooperation’,
‘Competence’ and ‘Creativity’.
Regional identity of a milieu then emerges from proximity and social identification.
The feeling of belonging to a region stamps self image and outside image of a
location (Rösch 1998, p.35).
Two views are of importance in this concept:
a) Not every milieu is innovative or creative. In other words: the existence of a
special relationship network is a necessary, but not sufficient condition for
creativity, reforms and innovation dynamics.
b) In some regions, blockade attitudes emerge through ‘closed-shop’ mentalities of
established social networks that are reform-hostile. Such persistent cartels that
aggravate innovations instead of stimulating them are innovation resistant.
A creative milieu arises only if the regional milieu is connected to the innovation
networks.
”... the milieu is innovative when it is capable of opening up to the
outside world and of obtaining there the specific information or
resources it requires. The innovative milieu in essence opens up to the
15
diversity of its environment by enriching itself through receptiveness of
chance; the milieu is innovative when its resources are organized,
coordinated and linked by economic, cultural and technological
structures that render the resources exploitable for the new production
combinations. The organizational dimension that characterizes the
innovation process in a milieu is manifested by the formation of
innovation networks.” (Maillat 1995, p.161).
The concept of creative milieu - although in the meantime degenerated to a scientific
fashion - has irrefutable advantages:
• It takes the theory debate one level back, to where it belongs: to the level of the
individual. Innovations are carried out by people. It is the “dynamic
entrepreneur” (J. Schumpeter), who implements innovations in the market - and
thus creates dynamic progress of capitalism. “While classical factors of
production are more and more accessible because of globalisation, competitive
advantage in advanced industries is increasingly determined by differential
knowledge, skills, and rates of innovation, which are embodied in skilled people
and organizational routine.” (Porter 1990, p. 158).
• Milieus are innovative, if ‘creative talents’ accumulate regional knowledge,
organize entrepreneurial learning processes and can transfer innovations into
competitive products (learning-by-interacting).
• The cultural capital of a region plays a decisive role in the activation of
innovative potentials. Socio-cultural values like courage, achievement
motivation, readiness for risk and an ‘entrepreneurial spirit’ assert the value
canon of an innovation spacious milieu. Such ‘designs of living’
(Kroeber/Kluckhohn) have historically grown, are timely stable and only in the
long term changeable. “What holds together the firms which make up the ...
industrial district is a complex and tangled web of ... historical and cultural
vestiges ... which is reasonably stable over time.” (Becattini 1989, p. 132).
Theoretical as well as empirical arguments confirm the fact that “achieving societies”
(McClelland 1961) with competitive knowledge potential and high capabilities for self
organization are structurally superior to “blocked societies” (Crozier 1970).
However, the current concepts of an innovative milieu arouse a lot more questions
than they can answer. Besides the terminologically unclear or even confusing
connotations (‘creativity’, ’network’, ’milieu’), the cause-effect relationships between
16
the milieu and the innovation capability of a region remain unclear (Fromhold-
Eisebith 1995, pp.30). Furthermore, they continue being tautological. “There’s
circularity: innovation occurs because of a milieu, and a milieu is what exists in
regions where there is innovation.” (Storper 1995, p.203).
Since determining all parameters of a creative milieu and establishing causal
relationships have not adequately been solved, the ex-ante distinction of innovative
and non-innovative milieus is only approximately possible.10 The question that also
remains unanswered is why in some historic and socio-cultural contexts creative
milieus with innovation networks emerge and grow (and die?) – and others do not.
Finally, the regional environment is picked out as a central topic of innovation
networks; it however remains partially hidden in an approach which primarily focuses
economically on the businesses of the region. Contrary to self-postulated knowledge
interests sociocultural values, knowledge and competences of regional actors or –
even more – (sub-) cultures of the milieu are scarcely treated.
“Aber gerade in der Verbindung dieser verschiedenen Forschungsobjekte (regionale
Netzarbeit und Einbettung in das Milieu) liegt die Haupthypothese des kreativen
Milieu-Ansatzes.” (Rösch 1998, p.49) [But in the connection of these different
research projects (regional networking and embedding in the milieu) lies the main
hypothesis of the creative milieu approach.]
Still decisive: the micro personal theories fail to aggregate to a macro theory of
regional development. In short: “How regional growth occurs remains an
inadequately understood process” (Cheshire/Malecki 2004, p.262).
3.3 The Accumulation of Knowledge in Knowledge-Acquiring Regions
The paradigm of a learning region broadens the concept of a creative or innovative
milieu - and focuses on the connection between learning/ knowledge/ invention/
innovations and regional economic growth. Under “radical reduction of complexity”
(M. Luhmann), the international competitive capability of economic regions is traced
back to the quality and quantity of the regional knowledge (Braun 2002, pp.7).
Learning regions are defined as a system of regional performers, whereby the
economic innovation process is spurred on by a permanent learning process within a
network. “The strength of an economy is dependent on the degree to which 10 „The milieux school returns, again and again, to the properties of milieux, but they do not specify
the potential mechanism and process how such milieux function, nor precisely what the economic logic of a milieux would be ...“ Storper, M.: The Resurgence of ...a.a.O., p. 203.
17
knowledge is created, used and shared.” (Malecki 2000, p.334). Consequently, the
region becomes a ‘learning’ region, if a system of regional performers’ progresses
generates already existing knowledge spreads and innovation through collective
learning in regional networks. Precisely, the capability to ‘demand-oriented
innovation’ means the transformation of industrial mass production regions to
knowledge based learning regions (cf. Ill. 4). “Regions are themselves becoming
focal points for knowledge creation and learning in the age of capitalism, as they take
on the characteristics of learning regions. Learning regions, as their name implies,
function as collectors and repositories of knowledge and ideas, and provide an
underlying environment of infrastructure which facilitates the flow of knowledge, ideas
and learning.” (Florida 1995, p.528).
Development and innovation effects of a region are as a result dependent on
personally embodied knowledge or on the quality and quantity of the endogenous
human capital. Nonetheless, regional knowledge requires as strategic resource a
respective organization and use in networks so as to produce “regional creativity”
(Anderson 1985, p.5).
“The accumulation of skills and knowledge in particular places ... has increased in
importance in recent years. This phenomenon includes two dimensions: First, firms
and industries depend on localized knowledge. Second, knowledge is not limited to a
few high-technologies or knowledge based sectors; the innovative or knowledge
activities of all sectors can be called knowledge based.” (Malecki 2000, p.335)
Simply formulated, the concept of a learning region emerges from an intellectual
value-adding self organized learning process, which bases on a ‘bottom-up’ strategy.
“Dies bedeutet eine Entwicklung, die ‘von unten’ (aus der Region heraus) aktiv
gestaltet und gesteuert wird.“ (Rösch 1998, p. 42). [This means a progress that is
steered and moulded ‘from the bottom’ (and thus out of the region)].
Therefore as many regional decision makers as possible (“elites“) should have a
share in this process (Rösch 1998, p.41).
18
Illustration 4: From mass production to learning regions
Dimension Industrial mass production regions
Knowledge based learning regions
Axial principle
Accumulation and diffusion of real and finance capital
Accumulation and diffusion of codified and implicit knowledge
Basis of competitive ability
Comparative advantage, based on • Natural resources • Physical labour force • Industrial technology
Comparative advantage, based on • Knowledge + learning • Intellectual work • Information technology
Economic fundament
Material production • Mineral resources • Material goods
Symbolic production • Bits & bites • Knowledge based services
Production system
• Industrial mass production • Labour force as value
creation basis • Separation of innovation from
production • Vertical relations as basis for
innovation
• Knowledge production • Intellectual work as value
creation basis (R + D) • Integration of innovation and
production • Networks as basis of
innovation
Human capital system
• Low qualified, low paid employment
• Taylorish job organization • Taylorish (one-time)
education
• Highly qualified knowledge work
• Network employment organization
• Multidimensional lifelong learning
Qualification profile
• Craft + Industrial knowledge • Specialized qualification • Individual competence
• Systemic, theoretic knowledge
• Key Qualifications • Network competences
Infrastructure system
• Physical infrastructure • Regional/national orientation • Face-to-face + electrical
information exchange
• Physical + communicative infrastructure
• Regional/global orientation • face-to-face+ electronic
information exchange
Economic governance system
• Independent, antagonistic • horizontal or vertical
organization • Regulation based on rigid
command + control
• Interdependent, cooperative • network organization • Regulation based on flexible
moral suasion + public-private-partnership
Economic political concept
• Order politics • National growth and
employment politics • Infrastructure politics • Structure conserving
• Network politics • Regional innovation politics • Education, research, know-
ledge politics • Structure transforming
Source: Own design
19
Necessary and at the same time sufficient conditions for international competitive
learning regions (“ability to sell”, "ability to attract” (Braun 1997, pp.7)) are:
1. The existence of a critical mass of human capital with high competence level
(that results from the constant expansion of knowledge through learning).
2. The existence of local knowledge, which is irreplaceable and unique. It results
from collective learning processes, which transform the implicit, regional
knowledge into codified, global knowledge - and vice versa.
3. Entrepreneurial performance competence, i.e. the capability of creative talents
to transform local knowledge into market accessible innovations.
4. Urban agglomeration areas with high attraction for knowledge producers
(entrepreneurial talents) e.g. through university knowledge networks, cultural
offers and proclaimed adventure worlds.
5. A specific network architecture that promises the performers (a) mid to long
term higher benefits as costs (b) a win-win situation for everyone involved.
Ideally, such networks fulfil the following conditions: (Koschatzky/Kulicke/Zenker
2001, p.6)
• Trust between the parties involved (better still: predictability)
• Relationships based on the long term
• Action alternatives and absence of hierarchies
• Dynamism, flexibility and openness (for entry and exit going)
• Limited competition between the network performers
• Independence and voluntary cooperation
• Decreasing transaction and learning costs through cooperation.
It needs not to be stressed that the outlined conditions are the exception - and not
the rule. It then follows that the number of non-knowledge acquiring, even partially
incapable regions is virtually larger than the learning regions.
In spite of some theoretical confusion11 and unexplained evolution of learning regions
(birth, growth, decline, death?), the following remains to be emphasized:
• The competition capability of regions is primarily dependent on the
concentration of unique local knowledge represented in highly qualified and
motivated creative talents, in universities, think tanks and research institutes
and also in business, administration, local politics and culture. 11 ‘Learning Region’ as theoretical model or concept for regional policy? Empirical or normative
approach?
20
• The acquired ability of leading performers (‘elites’) to build regional knowledge
networks and to share implicit and explicit knowledge becomes a strategic
resource in open knowledge regions.
• A culture of monopolizing knowledge (in some regions and social classes)
means a loss of international competitiveness and therefore regional
regression.
In other words: Not smallness of the performers is the regional problem, but
loneliness.
4. From Regional Knowledge Container to Entrepreneurial Region
With the focussing on the strategic roles of regional knowledge, the development
theory manages a very decisive knowledge breakthrough. This is in itself of
importance, even if some of the new knowledge closely considered is found to be
rather old.12
Nearly all approaches of knowledge growth theories do have in common,
a) that they claim to know what we should know13 and
b) that the specialized knowledge of regional human capital, its expertise and its
cognitive capabilities can be seen as sufficient conditions for the
competitiveness of regions.
Both points of view (or even better: speculations) explain at best the given
specialized knowledge ‘container’ of a region and not the market oriented knowledge
evolution through enterprising competence. Point formulated: Not the shortage of
qualified experts cements the economic backwardness of regions, rather the 12 As a classic of Human Capital theories still not adequately honoured e.g.: Johann Heinrich von
Thünen (1783-1850) and Friedrich List (1789-1846). 13 F.A. c. Hayek is one of the outstanding exceptions, describing competition as a discovery process
and Government intervention into the market as pretence of knowledge: „To act on the belief that we possess the knowledge and the power which enable us to shape the process of society entirely to our liking, knowledge which in fact we do not possess is likely to make us do much harm … We are only beginning to understand on how subtle a communication system the functioning of an advanced industrial society is based – a communication system which we call the market and which turns out to be a more efficient mechanism for digesting dispersed information than any that man has deliberately designed. If man is not to do more harm than good in his efforts to improve the social order, he will have to learn that in this, as in all other fields where essential complexity of an organized kind prevails, he cannot acquire the full knowledge which would make mastery of the events possible. He will therefore have to use what knowledge he can achieve, not to shape the results as the craft man shapes his handiwork, but rather to cultivate a growth by providing the appropriate environment in the manner in which the gardener does this for his plants.” v. Hayek, F.A.: The Pretence of Knowledge. Nobel Memorial Lecture, delivered at Stockholm 11 December 1974 in: v. Hayek, F.A.: The essence of Hayek, Stanford 1984, S. 276.
21
absence of creative talents with enterprising spirit, reform readiness and
entrepreneurial competence. “Quelle wirtschaftlicher Entwicklung ist die
Durchsetzung neuer Kombinationen oder unternehmerische oder innovative Aktivität.
Und Faktoren, welche die herkömmliche Theorie als Entwicklungsursachen anbietet:
Sparen Kapitalakkumulation, Rohstoffreichtum, Zunahme der Arbeitskräfte, sind
Begleiterscheinungen oder Folgen der Durchsetzung solcher Kombinationen.”
(Röpke 1982, p.38). [Source of economic progress is the enforcing of new
combinations or entrepreneurial or innovative activity. And factors, which the
customary theory offers as determinants of progress: Savings, capital accumulations,
mineral resource wealth, increase of workforce are side effects or consequences of
the enforcement of such combinations]. As a matter of fact, the key to innovations
that are linked to persons of entrepreneurial competence is to transform convertible
expertise into innovation on the market. “Unternehmerisches Handeln ist Handeln
dort, wo bisher niemand gehandelt hat.” (Baecker 2006). [Entrepreneurial acting is
acting where nobody has acted before]. Within and between functional and also inter-
regional competition, different entrepreneurial competence inventories do finally
determine the innovation and competition capabilities of regions (Staudt 1996, p.18).
In other words, an economic region without innovative activities is a stationary non-
developing area. Into such an area one can pump - even with state funds - so much
workforce, capital, infrastructure, but without entrepreneurial innovative activities,
there will be no development and hence no growth of living standards (Röpke 1982,
p.34).
Accordingly, three types of economic regions are to be distinguished:
(1) Regions with low and/or decreasing entrepreneurial competence; identified
through outward migration of creative talents, torn-apart or weak entrepreneurial
networks, few set up activities, few innovations and performers only with
imitative routine business activities (from Schumpeter: “Rentiers” or “Wirte”).
(2) Regions with stagnating innovation competence; constant numbers of talents,
compared with competing regions of mediocre start-up activities, an ‘average’
innovation level with established networks such as a mid term but precarious
balance innovative and imitative performers.
(3) Regions with high and/or growing entrepreneurial innovation competence.
These “entrepreneurial regions” distinguish themselves through growing
attraction for entrepreneurial personalities, growing and competitive
22
entrepreneurial networks, high set up activities, many innovations and a general
entrepreneurial spirit.
The critical task of a development oriented regional policy would be to create
conditions for a transformation of an innovation deprived region into an
entrepreneurial region, not less but also not more.
5. End of Conventional Regional Policy?
Despite energetic efforts of the regional development policy, high innovation regions
in East Germany are the exception and not the norm (IWU 2004, pp.257). And these
development clusters themselves are becoming more and more subsidized and have
not achieved the stage of sustainable development (yet)14.
All this has its good reasons. The transformation of innovation deprived descending
regions in to knowledge and development innovations is a long term historical
process that is only marginally influenced through political means - if at all. Even
historic ‘fast runners’ like the M-4 Corridor in Great Britain, Southern Ireland, the 3rd
Italy, Württemberg and Bavaria needed more than thirty years for their ascent.15
The current regional policy has – if such a simplification is permitted at all – the
following weaknesses:
(1) Theoretical deficits
It is always astounding as to what extent feasibility studies are made, plans set up,
programmes implemented in regional politics-without the theoretical, or more
precisely, development theory approaches explicitly being considered. “Es ist
genauso, als ob man Maschinen baut, ohne die Gesetze der Mechanik zu kennen,
Brücken errichtet, ohne statische Untersuchungen angestellt zu haben.” (Röpke
14 In fact, the institute for World Economy (IfW) speaks of a „case of subvention“. According to IfW,
the subventions that flowed into East Germany since the beginning of the 90s caused about “false excitement to the workers and entrepreneurs.” Among other things, the subventions that were paid to East German entrepreneurs made sure that the firms invested in a capital intensive instead of an employment intensive production. With another (occupation oriented) economic policy, the unemployment rate in the new states would only be half as high-i.e. on the level of the western federal states, according to IfW. And: Even in regions of development in East Germany themselves, the GDP per head lies at 55% of the level of West Germany. Cf. Snower, D. J.: Merkl, Chr.: The Caring Hand that Cripples: The East German labour Market after Reunification (Detailed Version), Kiel Working Paper No. 1263, January 2006, The Kiel Institute for the World Economy.
15 According to international analysis 40% of the development clusters worldwide were older than 100 years, almost 20% much older than 200 (!) years. cf. Van der Linde, C.: Cluster und Regionale Wettbewerbsfähigkeit. Wie Cluster entstehen, wirken und aufgewertet werden, in: Cernavin, O. et al. (Hrsg.): Cluster und Wettbewerbsfähigkeit von Regionen, Berlin 2005, S. 26.
23
1982, p.1) [It is the same as if one builds machines without knowing the laws of
mechanics, erecting bridges without employing static examination]. A political action
without theoretical foundation is like curing a symptom.
(2) Input Logic
The conventional aid policy - if at all - bases on pretheoretical input logic. Then
development and innovation are primarily results of material infrastructure
investments (or inputs). Consequently, regional development exhausts out often in
construction and improvement of physical infrastructure (streets and motorways,
regional airfields, harbours, industrial and technology centres, school buildings and
polytechnics, administration offices, fun and sport centres). According to the
underlying development logic, high input is equal to high output. Hence, the current
development aid policy mixes up cause and effect. Source of economic growth is the
implementation of innovations through entrepreneurial talents. And factors, some of
which postulate the conventional aid policies as the causes of the development
process: capital accumulation, additional material infrastructure, technology inputs
are their accompanying manifestation or consequence. In short: the input logic
through the explanation of economic progress must be replaced by innovation logic.
Hence, the conventional regional policy is turned from head to toe. The development
of human capital shifts to the centre of regional policy (instead of physical assets). Its
goal must be to concentrate on the development of entrepreneurial competence and
innovative activities in a wider sense and to broaden implicit and explicit enterprising
knowledge in a region substantially.
(3) Ambivalent human capital policy
Even interventions that do not aim at the improvement of physical assets but rather
of human capital16 are in their effectiveness contestable. “Insgesamt zeigen die
Ergebnisse von internationalen Evaluierungsstudien ein enttäuschendes Resultat
hinsichtlich Effektivität und ... auch der Effizienz - von klassischen
arbeitmarktpolitischen Maßnahmen. Dies gilt sowohl auf der mikroökonomischen
Ebene für individuelle Beschäftgungswirkungen von Maßnahmen und Programmen
als auch auf der makroökonomischen Ebene. Negative indirekte Effekte von AAMP
(= aktive Arbeitsmarktpolitik) sind hoch und Nettobeschäftigungseffekte gering”
16 From example aid for (a) allowance subsidies (b) support of business start-ups (c) supporting
vocational qualifications (d) employment seekers through training.
24
(Konle-Seidl 2005, p.47). [All in all, international evaluation studies show
disappointing results regarding effectivity and ... also the efficiency of classical labour
market policy measures. This is also true on the micro economic level for individual
results of measures and programmes, as well as on the macro economic level.
Negative indirect effects of the labour market policy are high and net employment
effects are marginal]. More convincing results successfully prove an “activating“
AAMP (Work market policy) that combines transfer output with strictly applied search
criteria, which serve test of readiness to work. An efficient link of control (= ‘demand’)
and support of employment search (= ‘aid’) essentially achieves better cost benefit
results than the conventional aid policy (e.g. subsidized employment in the public
sector, youth programmes) with its revolving door effect.17
(4) Watering can principle
Portfolio analyses of the regional support policy (e.g. EFRE, ESF, Solidarpakt II18
etc.) show that aid monies are distributed relatively evenly according to the ‘watering
can principle’ over the region, irrespective of the endogenous development potentials
of the given region. In other words: there are no set priorities and posteriorities, be it
because one wants to run a balanced social policy, be it out of political weakness or
due to the Land District Administrator and Mayor competition. The consequences are
obvious: The structurally weak [and backward] regions receive - laxly formulated -
‘too little to live and too much to die’. An over-proportional share of the aid flows in
existing sectors and branches (agricultural sector, maritime economy, coal and steel,
mechanical engineering, chemistry) (IWH 2004) - and in that sense appears to be
preservative19.’Break-through’ innovations and potential fields of sustainable progress
are under proportionately supported. The aid guidelines set the premium on the
conversation of the economic status-quo. The administration is dominated by security
considerations and the famous personal capital share of projects denies newcomers
without means support from the state.
17 Cf. Konle-Seidl, R.: Lessons Learned. Internationale Evaluierungsergebnisse zu Wirkungen aktiver
und aktivierender Arbeitsmarktpolitik ... a.a.O., S. 47ff. 18 Cf. etwa Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichten Entwicklung:
Jahresgutachten 2004/2005, November 2004, S. 632ff. 19 To add on to that, large segments of the Solidarpakt II- tools are wasted by the Federal States.
Instead of investing in the ‘Build East Initiative’, they are being consumptively used to fill up budget holes, e.g. in order to finance special and extra pensions from the East German times. Cf. Boeker, A.: Zweckentfremdung als Notwehr, in: SZ v. 21.02.2006.
25
(5) Stop and go policy
Since no exact diagnosis of the backward development is present, the therapy – so
to say the regional policy - must restrict itself to a ‘muddling through’ crisis
management. Consequently, the development policy presents a bizarre, partially
contradicting picture from the Go and Stop measures. On one hand, there is a -
meanwhile nearly non-manageable - multitude of SME-Government programmes that
intend to support entrepreneurial initiatives and innovations. On the other hand, these
entrepreneurial initiatives are blocked through bureaucratic impediments, licensing
instructions and administrative regulations.
(6) SME-Support Systems: Supply-sided modernization packages
Although an objective and representative evaluation of the SME-aid programmes is
still missing, three serious arguments exist against Business Development
Programmes (BDS-Programmes):
• The majority of the programmes are aimed at the aid of enterprise and not at
the aid of the enterpriser. “Yet, this approach presupposes that business drive
their entrepreneurs, when, in fact, the opposite is true. If an entrepreneur is
being driven by her business, then something is seriously wrong.” (Gerber
1995, p.21)
• The aid agencies (innovation centres, incubators, SME-support organizations)
often put form ahead of function. Relatively independent from the specific
requirements of the entrepreneur, modernization packages (credit, training, and
marketing) are offered. And as no private competition reigns in between the
parastatal agencies, irrelevant or few demanded outputs, can be adhered to.
• Paradoxically, particularly successful programmes produce a ‘crowding-out’ of
non supported enterprises, since in stagnating markets, an enterprise can only
gain (on market share, profit volumes, yield) if another one looses. There exists
a zero-sum situation. Macro economically, nothing is gained at all, - neither on
value creation nor on employment. Only the tax payers’ money is being wasted
(not to speak of carry off and habituation effects).
The overall record of regional development policy - irrespective of exceptions – is
negative: costs exceed its returns. Conventional regional policy reduces - polemically
formulated - to a policy of ‘halved rationality’, which cures the symptoms instead of
solving the causes.
26
What is demanded is a systemic aid approach, which supports entrepreneurs and
innovative enterprise networks in the promoted region (at least does not impede
entrepreneurial activities).
6. Framework of an Entrepreneurial Regional Policy
Each regional policy that aims at more than just short term subsidy policy or crisis
management has to acknowledge some simple facts and truths (Braun/Pohle 2003,
pp.216):
• In market economies, the “competition as discovery process” (F.A. v. Hayek) is
the one that decides on the direction and speed of the development process,
not the local politicians and the aid bureaucrats.
• The rise of regions is a long-term historic process (“history matters”), which is
driven forward by endogenous location factors (“geography matters”), human
capital, culture, institutions. History and Geography determine – to a great
extent - the path-dependence of development of economic regions.
• Regional development is primarily dependent on a process of “creative
destruction” (J. Schumpeter), which essentially dwells on the innovations of
private entrepreneurs on the spot, on the existence of a dynamic
entrepreneurial class and on their entrepreneurial spirit.
• The existence of competitive (enterprise) networks of human and social capital
(Cernavin 2005, pp.35) is a vital, though not sufficient condition for innovations
and competition capability of a region. Vital, since loneliness is the competition
strategy problem of enterprise and not smallness in the global era. Not
sufficient, since networks always have a subsidiary function and without
enterprising initiatives no innovations can be produced or created. In other
words: networks, clusters, development poles are not those “deus ex machine”
which create the capitalistic development dynamics, but it is the innovative
entrepreneur.
If one follows this line of argument, it follows that:
(1) After decades of excessive expectations and disappointments, a new modesty
is necessary, the insight into relativity of the regional policy as a growth
instrument. The social engineers have to say good by to the illusion, that they
can steer the development of societies with money.
27
(2) The acceptance of the states’ limitation to manage complex societal processes
means avoiding the local state to rely on the “proven” combination of short term
interventionism and long term subsidizing of ‘needy’ branches (agriculture, coal
and steel, ship building etc.).
(3) The sovereign retreat of the state administration on guaranteeing an innovation-
friendly environment would be an important paradigm change, but contradicts
the omnipotence claim of the state apparatus. As a matter of fact, the new
paradigm favours the non-intervention in micro-economic decision processes
under cost-benefit-perspectives of the intervention. In accordance with
experience, interventions in entrepreneurial micro-decisions lead to competition
distortions, unintended side effects and a wrong allocation of resources. It
simultaneously follows that a branch or even an enterprise-specific regional
state policy that believes in ex cathedra (and ex ante) possibility to differentiate
between “innovative” and “non-innovative” production lines and service outputs,
is neither possible nor desirable.20
(4) Substantially, this means:
a) Theoretically: from input to innovation logics,
b) in the growth policy vision: from physical to human capital aid
c) in the regional policy practice: from the direct enterprise support to indirect
cluster and network backup.
6.1 Regional Milieu Policy
The starting points of an innovation oriented location policy are two-empirically
verified discoveries:
• The rivalry of regions is less about markets, than about ‘creative talents’.
Confronted with a secular demographic transformation (shrinking + older
working population), those regions are acquiring a comparative advantage
which manage to be or remain attractive for highly qualified human capital. The
aim of regional (location) policy must therefore be to attract and to hold on to
‘high potentials’ with specialized knowledge and entrepreneurial talents in the
region.
20 The innovation leaders of the New Economy at the beginning of this decade-luC technology, new
media, biotechnology at present look rather non-innovative.
28
• Despite considerable heterogeneity of highly qualified, specialized and
managerial work force (researchers, developers, event managers, innovators,
knowledge workers), it is known that:
a) They are out-weighted younger milieu individuals (up to 40 years),
b) they are qualified above average and globally socialized (university
education, foreign countries experience etc.)21 and
c) they are especially in the service sector, younger, highly educated women.
Investigations22 of these creative classes have shown that they are primarily attracted
by ‘creative milieus’, ‘feelings’ and ‘flow’.
“Creative people are not moving to these places [= creative places] for traditional
reason. The physical attraction that most cities focus on buildings - sports stadiums,
freeways, urban malls and tourism - and entertainment districts that resemble theme
parks - are irrelevant, insufficient or actually unattractive to many Creative Class
People. What they look for in communities are abundant high quality amenities and
authentic experiences, an openness to diversity of all kinds, and above all else, the
opportunity to validate their identities as creative people.” (Stolarick 2005, p.77)
What ‘creative’ talents attracts?
• The higher the ‘Quality of Place’ (“What’s there, who’s there, what’s going on”),
the more the number of highly qualified people in the region. All leading high-
tech regions distinguish themselves through similarly high standards of living
(Quality of Place).
• High standards of living in form of soft factors (art, culture, living and
environmental standards) are considered as compensation for stressful work -
and the habitat develops into a link establishing place for the creative class -
after reduction of family and company relationships. “Orte, die nichts
Bindenswertes aufzuweisen scheinen, können nicht attrahierend wirken.”
(Thießen 2005, p.25). [Areas that cannot produce close ties cannot attract].
21 Stolarick distinguishes between (1) Super Creative Core : Architects and Engineers; Artists,
Designers and Entertainers; Computer and Mathematical Occupations; Educators and (2) Creative Professionals: Management; Business and Finance; Law; Healthcare (Doctors and Nurses); High- and Sales and Sales Management, but not explicitly refers to scientists and independent entrepreneurs. Cf. Stolarick, K.: The “Soft” Factors of Regional Growth: Technology, Talent and Tolerance, in: Thießen, F. et al. (Hrsg.): Weiche Standortfaktoren, Berlin 2005, pp. 74f.
22 From Richard Florida in 49 Metropolitan regions in the US. Cf. Florida, R.: The Rise of the Creative Class, New York 2002.
29
• The culture factor is necessary, but is also to be seen as ambivalent. Passive
consumable high culture (opera, ballet ...) and big-ticket events (Olympics, huge
concerts ...) are relatively unattractive.
• Sub-culture (off-off-theatre) and an attractive night-life scene (urban flair in
evening and night hours) have high value for location quality.
• Attractive locations offer above all ‘announced’ offers to become active, e.g.
outdoor-activities (cycling, swimming, sailing) and lifestyle activities (music
scene, sushi bars ...).
• The access to the adventure world must be easy and possible all the time (‘just
in time’). “A major concern is the accessibility of amenities. Participants
expressed a strong preference for regions where amenities and activities are
easy to get to and available on ‘just-in-time’ basis, with easy access on foot,
bicycle or via public transportation.” (Florida 2000, p.45)
• Water plays the key role of an attraction factor, if free time activities such as
swimming, sailing, and rowing and lakeside nightlife are to be permitted.
(Thießen 2005, pp.25)
It is significant and lies at hand that the individually felt living atmosphere (‘Swinging
London’) cannot be shaped by state interventions to a large extent. Particularly
younger creative people are ready to sacrifice income, if the ‘Quality of Place’ in the
city and region matches their lifestyle.23 A ‘soft’ regional policy that aims at the three
T’s, Technology, Talent and Tolerance can at best try to improve ‘Quality of Place’
using regional milieu policy so as to attract talent. “... talent does not simply show up
in a region; rather, certain regional factors appear to play a role in creating an
environment on habitat that can attract and retain talent of human capital.” (Florida
2002, p.754). Empirical investigations (in the USA) reveal that world openness;
tolerance and diversity attract creative talent. Instead of only concentrating on
23 “The key to understanding the new economic geography of creativity and its effects on economic
outcomes, lies in the three T’s of economic development: Technology, Talent and Tolerance ... Creative people, who power regional growth, prefer places that are diverse, tolerant and open to new ideas. Diversity increases the odds that a place will attract different types of creative people with different skill sets and ideas. Places with diverse mixes of creative people are more likely to generate new combinations. Furthermore, diversity and concentration work together to speed the flow of knowledge. Greater and more diverse concentration of creative capital in turn lead to higher rates of innovation, high-technology business formation, job generation and economic growth ... Measures of diversity and creativity explain regional growth more reliably than conventional measures like high-tech industries or even the level of human capital. Creative capital is even more important to regional growth than human capital or high-tech industries, since both of these things are shaped by it.” Stolarick, K.: The “Soft” Factors of Regional Growth ... a.a.O., p. 73.
30
‘Business-Climate’ it would therefore be necessary to create a ‘People-Climate’, so
that the threshold for creative heads to come to a specific region is lowered.
A talent policy aims at world openness (new ideas and people are welcome, no
discrimination of foreigners); tolerance (respect of differences, no discrimination
according to ethnicity, religion, sex and way of life); and diversity of the life pattern
(values and life pluralism, acceptance of multiculturalism).
“Members of the Creative Class come in all shapes, sizes, colours and lifestyles; and
to be truly successful, cities and region have to offer something for every one of
them.” (Florida 2002, p.86).
Brain gain can accordingly be achieved through a state policy that
(1) propagates world open urbanity as state image 24 (‘world city with a heart’)
(2) offers pluralistic cultural landscapes,
(3) propagates alternative habitats and guards pluralistic life biotopes and
(4) combines this lifestyle package with urban leisure world and revitalized natural
resources.
In other words: The economic development of a region is much too important to be
left to the economic policy decision makers, since the ‘soft’, cultural and life-style
factors are in reality the ‘hard’ location factors.
A soft milieu and talent policy would look in more concrete terms as the following:
• The awareness of urban milieus for competition and around entrepreneurial
talent in strategic groups of the region (interior marketing);
• The propagation and creation of a world-open, tolerant city image (marketing to
the exterior);
• The back up of civil society initiatives and (sub-) cultural environments,
endowments, sponsors, for they contribute to the cultural pluralism of a region;
24 Location decisions from (foreign) investors are downgraded on the basis of strict rules (heuristics),
whereby many application regions are sorted out on the basis of “pictures” from the beginning without any thorough analysis-and only few locations undergo a thorough examination. Cf. Götze, U.: Der Faktor Arbeit in der industriellen Standortlehre, in: Neue Ökonomie der Arbeit, Beiträge zum Management von Kompetenz von Wissen, Düsseldorf 2003. The picture of the city in the heads of the decision makers can influence the regional development, since it acts as a determinant of the prior selection of a location along the regional distribution of enterprises, founders, creative heads, migrants etc. Thereby, one can distinguish among (a) cultural pictures: Semper Opera Dresden, (b) historic pictures: Hanse cities (c) regional pictures: Essen/Ruhr region and (d) economic pictures: Banks: Frankfurt a. M. Cf. Grabow, B.; Henckel, D.; Hollbach-Gröming, B.: Weiche Standortfaktoren, Stuttgart 1995, S. 106.
31
• The support of younger talent incubators. Universities, research institutes and
think tanks are not only centres of regional human capital accumulation. They
are at least as meaningful as agencies of world openness, tolerance and
diversity.25
6.2 Regional Networks and Cluster-Development
The essentially more concrete field of action of a regional innovation policy is the
support of regional knowledge networks and clusters.
The following three findings are important:
• Current experience shows that a network per se does not produce
automatically, only positive or only negative development effects. The
respective outcomes depend on specific spatio-temporal conditions, under
which a cluster exists. “Dies bedeutet, dass es keine pauschal gültigen
Clusterkonzepte für alle Regionen einer Epoche bzw. oder für eine Region zu
allen Zeiten geben kann.” (Sternberg 2005, p.135). [This means that a generally
valid cluster concept for all regions of an epoch or even for a region can not be
there at all times].
• Clusters emerge usually without any policy influence. They depend on the
initiative of private performers26. Therefore - first of all - private initiative in
network development is demanded.
• An aid policy that supports clusters and networks ‘against the market’ (lacking
demand for cluster products/ obsolescence of network organizations and
product structures/ lack of competition ability) leads to the development of a
subvention mentality and to the loss of innovation dynamics in the cluster - if it
ever had been there. In this case a state supported cluster operates as “cover
for unilateral associate interests or the corresponding branch or sector”
(Sternberg 2005, p.132) mostly legitimised by an extensive consultations
industry.
There remains little space for a specific state cluster policy beyond the outlined
knowledge and milieu policy. “Insbesondere vor am Reißbrett und ausschließlich von 25 Interesting here is the difference as per the size, study offer and internationality of universities and
their partner networks. 26 Some high-tech regions are results of a state innovation strategy, whereby the regional cluster
formation would have been an explicit goal (Research Triangle Park in North Carolina) or unintended side-effects of national technology policy (Silicon Valley).
32
Bürokraten entwickelten Greenfield-Konzepten ist dringend zu warnen” (Sternberg
2005, p.132). [It is of particular importance to warn of on the drawing board and
exclusively from bureaucrats developed Greenfield concepts].
Starting points of a cluster policy
Four starting points - oriented on M. Porter’s diamond model - are pointed out
nonetheless: (v.d.Linde 2005, pp.30)
• Strategy and competition
Removing competition restrictions, lowering (cluster) entry barriers for newcomers,
entrepreneurship-start-up-programmes. (Audretsch 2003, pp.11)
• Factor conditions
Encouraging specialized training- and research institutions + cluster specific
information programmes.
• Demand conditions
Development of independent examining, licensing and rating processes for cluster
products and its service performance.
• Supporting and related branches
Support of information and contact forums for cluster specific satellite firms and
associations.
Regional cluster policy must further restrict itself so as to gradually increase
identification and images, to create an innovation friendly environment (deregulation,
privatisation, reduction of bureaucratic regulations) for the performers and to
eventually make clusters (inter-) nationally apparent. ‘Network broker’ and
“community entrepreneurs” (Johanisson/Nilsson 1989 pp.3) can possibly help to build
cooperative networks. Otherwise, the verdict remains: the implicit knowledge in
regional clusters and the socio-cultural network resources are becoming more and
more important for value creation in the new knowledge economy, but they
themselves do develop in the economic process (or maybe not). In summary:
“Regionale Verwaltungen haben wenig direkten Einfluss auf diese Cluster-Prozesse.”
(Cernavin/Führ 2005, p.130). [Regional administrations have marginal direct
influence on these cluster processes.].
33
6.3 Support of Entrepreneurial Personalities
A micro policy that concentrates on the development of the individual entrepreneur
(not enterprise) is relatively new. Entrepreneurial competence and motivation to
innovate (in short: the ’entrepreneurial spirit‘) shifts to the centre of regional growth
policy. The starting point is the - in between irrefutable fact - “entrepreneurs are
made, not born” (Shefsky 1994). It then follows that the potential entrepreneurial pool
in each region is larger than the existing one. Irrespective of entrepreneurial ‘import’
via immigration, an Entrepreneurial Talent Development Programme (ETDP) aims at
development of endogenous entrepreneurial talent for the region. The ETDP bases
on three trivial assumptions: (a) sustainable success of entrepreneurs requires
entrepreneurial competences (above all readiness for risk, courage, internal locus of
control, networking); (b) entrepreneurial capabilities can be developed (even better:
they can improve themselves)27; (c) not all successful entrepreneurs do have a need
of all competences nor is it in all markets the competence portfolio; in other words: a
“one size fits all” aid programme over- or underestimates the individual entrepreneur.
Entrepreneurial Competences Entrepreneurs are apparently successful, if they possess:
a) Specialized competences: occupational/technical + management capabilities;
b) Social competences: communication abilities, persuasive force, networking
tasks;
c) Methodical competences: Setting goals, planning and control, search for
relevant information;
d) Action competences: readiness for risk, richness of ideas, abilities to utilize
market chances (Lichtenstein/Lyons 1996).28
The non-availability of such competence profiles is a key reason for entrepreneurial
failure and innovation weaknesses of areas and entire regions.
The gradual development of the creative spirit or - theoretically formulated -
entrepreneurial self-competence thereby shifts to the centre of entrepreneurship
education programmes (Braun 2005, pp.5). Successful programmes turn the input-
27 To the concept of evolutive self learning, cf. Röpke, J.: Der lernende Unternehmer, Marburg 2002,
S. 31. 28 Lichtenstein/Lyons distinguish: Technical skills, Managerial skills, Entrepreneurial skills, Personal
maturity skills.
34
oriented learning paradigm (“The more the knowledge, the more successful the
entrepreneur”) from head to toe: not the pure accumulation of professional
knowledge, but the self controlled increase of the motivation to innovate is being
aspired.29
• The transformation of a culture of dependence to one of independence can
certainly not be achieved overnight. Since the basis for an entrepreneurial
society is laid quite early, primarily parents and pupils are required to develop
role models and entrepreneurial learning arrangements, which reward
readiness for risk, own initiatives and independent actions. Instead of “courage
for education”, “education for courage” seems to be the real challenge. And this
as a life-guiding concept, useful “from the cradle to the coffin.”
• In parallel, the protagonists of change must try to propagate a positive
entrepreneurial image30 - and take out the fear of entrepreneurial risk and
encourage creative talents to become independent (‘simply start’).
Simultaneously it is important to raise more interest in the new, the foreign and the
international, and in which in the mark of tolerance and world openness is set: the
expansion of vision of the local population is a necessary condition for the
identification of entrepreneurial chances and for the conquest of the international
markets. No less – but also, no more.
29 Empirical inquiries in German universities (whose doctrine bases on input learning paradigms)
have revealed that with increasing semester figures, readiness for risk, courage and will of establishing a new business in students is sinking. Cf. BMBFT (ed.): Studierende und Selbständigkeit, Bonn 2002, S. 7.
30 The largest collateral damages in the entrepreneurial picture have been caused by the entrepreneurs themselves, see the latest scandals with Kirch AG, Deutsche Bank, Mannesmann/Vodafone in Germany.
35
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39
40
The Role of University Education in the Aarhus Region, Denmark Associate Professor Poul Dreisler, Ph.D. Aarhus School of Business, University of Aarhus Department of Management and International Business Haslegaardsvej 10 DK 8210 Aarhus V; Denmark Phone +45 89 486 464 E-Mail [email protected] Contents
Illustrations .................................................................................................................... 42
1. Introduction............................................................................................................. 43 1.1 Definition of terms .................................................................................................. 44
2. General conditions for promotion of entrepreneurship............................................ 44 2.1 The role of universities ........................................................................................... 46 2.2 Learning goals – enterprising behaviour................................................................. 46
3. The County of Aarhus - illustrated by business activities and strategies to promote commercial life ....................................................................................................... 49
3.1 Areas of business developments in the County of Aarhus ..................................... 51 3.2 Actors for promotion of entrepreneurship ............................................................... 52
4. Possibilities for development .................................................................................. 54 4.1 New promotional activities in the region ................................................................. 56 4.2 A brief outline of IDEA ............................................................................................ 56
5. Conclusions and recommendations ....................................................................... 58
Bibliography................................................................................................................... 60
Appendix........................................................................................................................ 62
41
Illustrations Table 1: The County of Aarhus – some key figures....................................................... 49 Table 2: Number of actors with single- or multi-purposes.............................................. 53 Table 3: Model for development of programmes ........................................................... 55
42
1. Introduction
Politicians, the business community, people in charge of educational programmes, and
all others who actively seek to create entrepreneurial development in a region, usually
find it difficult to create coherence between decisions, actions and results. This does not
imply, of course, that actions are carried out blindfold, just that making societal changes
is a rather complex and uncertain process.
This paper attempts to systematize the various activities of entrepreneurial promotion in
the region, in order to draw attention to the strengths and weaknesses that exist in
relation to continued development.
The collection of data has been conducted as desk research. Over the last few years, a
number of entrepreneurial analyses have been carried out, focusing mainly on the
business aspects of entrepreneurship. They all express great interest in
entrepreneurship.
Drawing up indicators of the success of entrepreneurial activities is difficult, which is why
a number of such indicators can be used. The number of newly established companies
could be one indicator; the survival rate of these companies another. Other indicators
can be the number of people seeking advice, education or in other ways participate in
activities aimed at strengthening their competences, or create a positive attitude towards
starting up as self-employed. The number of courses on entrepreneurship at universities
and business schools, as well as the number of students attending these courses, can
also be seen as indicators of successful development of entrepreneurship.
Some aspects of the actions and promotion of entrepreneurship are difficult to monitor,
e.g. the enterprising behaviour an individual wage earner exercises in his/her daily work.
This aspect is, however, important as new definitions of entrepreneurship to a higher
extent regard entrepreneurship as ‘social change’ with several possible results, one of
them being the establishment of new companies, others emphasizing changing attitudes
and behaviour in relation to work organisation and personal efforts etc.
43
1.1 Definition of terms
How do we define the term ’entrepreneurship’? And what do we understand by the word
‘region’?
The term entrepreneurship often refers to “founding a new company”, e.g. ‘Any attempt
at new business or new venture creation, such as self-employment, a new business
organisation, or the expansion of an existing business, by an individual, teams of
individuals, or established businesses” (GEM 1999).
However, we wish to extend the term entrepreneurship to signify not just ”creation of an
organisation (or sub organisation)”, but to include a view of entrepreneurial culture as
something encouraged by education, without necessarily leading to founding a new
organisation/business but referring to more general value addition; what we call
“enterprising behaviour”.
Regions and districts can be defined in various ways, either as administrative entities or
as areas with a high concentration of commerce or industry. In this paper we define
region as an administrative entity, which is the County of Aarhus. The Danish
government is due to make the most comprehensive restructuring of administrate units
ever: in January 2007 the 14 counties will merge into 5 regions and the 276
municipalities will merge into 98, each with more than 30,000 inhabitants. At the
moment, strong forces are mobilized to further entrepreneurship and commercial life
within the existing regions; this tendency is expected to grow even stronger in the new
regions.
2. General conditions for promotion of entrepreneurship
The entrepreneurial actors who are targeted as the most important players for promoting
entrepreneurship must be open and willing to participate in development activities.
Especially educational institutions are important players. Public institutions also have to
contribute with support and counselling as well as planning the framework conditions for
something to grow, i.e. participating in the construction of centres and co-financing more
general activities in cooperation with universities and other educational institutions.
(Matley & Mitra 2002)
44
The educational institutions carry a huge responsibility for promoting entrepreneurship.
Estimates of their activities depend on what is understood by the term entrepreneurship.
If enterprising behaviour is what is meant, then education is important. Also, education is
the best way to change opinions among entrepreneurial actors. But what is missing is
the involvement of staff members at educational institutions. Academics often lack a
clear understanding of the term entrepreneurship. It has to be mentioned, however, that
many interesting initiatives have already been promoted by research parks,
development parks, innovative environments and a number of hybrid organisations and
networks, i.e. the Triple Helix model (Leydesdorff et al. 2000).
The Triple Helix is a metaphor borrowed from biotechnology. It consists of three spirals
and refers to the bio-molecular DNA structures in biophysics. The metaphor is used to
illustrate the three forces or actors in society: academia, enterprises and government.
Government is here to be understood as the actor setting the rules and norms for the
others, but may also be an active player in any cooperation
Improving and strengthening entrepreneurial development in the region, and more
generally in society, is a matter of supporting initiatives which have proved to be
favourable for enterprising behaviour. If we assume that entrepreneurial development
can be classified as “planned societal change”, it means that educational institutions
should play a more active role. Professors and teachers at universities ought to strive to
change attitudes among students, resulting in changed or strengthened entrepreneurial
behaviour. However, this demands changes in didactics, pedagogy and not least in the
educational context in the educational institutions. (Fiet 2000), (Jonsson & Jonsson
1998), (Laukkanen 1998).
As it is not possible to deal with all these topics in brief, this paper has limited its scope
to an analysis of the educational and counselling/guidance offers available for promoting
entrepreneurship in the region. The paper intends to outline recommendations and
improvements of entrepreneurial activities in the region, with special emphasis on the
role of universities.
45
2.1 The role of universities
The universities are brought into focus, because they are now forced to share
knowledge with other productive sectors in society to a higher extent than has been
customary in the European tradition. (Etzkowitz 2003), (GEM 2003).
In brief, this is an attempt to move the universities from being "ivory towers” to becoming
"entrepreneurial universities" (Röpke 1998). The “entrepreneurial university” is expected
both to be have a high academic standard and a responsibility to help create knowledge
that can be converted into commodities and services in the market. Furthermore, it is
important to make its students aware that their competencies can be used in many
different ways, to increase the knowledge input in production.
The great challenge, then, is to promote entrepreneurship in the educational system, in
order to further innovative regional development. The primary concern is to raise public
awareness of entrepreneurship, as well as making new arrangements for the didactical,
pedagogical and contextual framework for education, training and counselling.
Another challenge is establishing new positions for professors in entrepreneurship and
researchers, while those who wish to work in this field often feel marginalized or not
attuned to other stakeholders in the field. Many entrepreneurs, venture capitalists,
counsellors and colleagues in the scientific world consider entrepreneurship to be
anchored in practice, far from academic traditions and self-understanding. (Bouchikhi
2003).
The main object is thus to establish a conscious focus on entrepreneurial education, as
well as realizing that promotion of entrepreneurship is primarily about ‘social change’, or
a necessary change of culture, in order to maintain and strengthen the standards for
welfare and prosperity.
2.2 Learning goals – enterprising behaviour
In the Anglo-Saxon world, a distinction is made between “university” and “business
schools”. Gibb (2002) believes strongly that the universities have been presented with a
challenge by the politicians, and they ought to take it on. This will imply leaving the
narrow entrepreneur definition (business orientation) and instead focus on developing
46
“the enterprising person”, who may turn into a self-employed person owning his or her
own enterprise, i.e. “an entrepreneurial person”, or a person who is able to pursue
entrepreneurship and innovation in a large enterprise (intrapreneurship), or generally be
a person who exhibits “enterprising behaviour”.
Gibb is aware that the distinction between an “enterprising person” and an
“entrepreneurial person” may be difficult to translate and transfer into other languages
than English; he describes the former as a person whose behaviour is characterized by
being creative, full of initiative, and acting on his initiatives, who is able to inspire others
and capable of doing things in a different way. The other type of person, “the
entrepreneurial person” is very similar to the first; however with the slight difference that
this person will in addition contemplate becoming self-employed, starting his own
enterprise.
In the Danish language it has been suggested to use a term meaning “enterprising
imagination”1 , including characteristics such as imagination and creativity, and then to
divide this term into two subcategories, depending on whether the enterprising
behaviour has to do with entrepreneurship, i.e. starting your own enterprise, or with
other kinds of creative activities.
We are dealing with an educational understanding which intends to promote
“enterprising behaviour”, irrespective of whether this leads to a new enterprise,
development of an existing enterprise, or in any other way to stimulating or developing a
person’s inherent or acquired creative abilities.
Investigations in this field show that Danish (and European) universities generally are
not very good at developing entrepreneurs (Erhvervs- & Byggestyrelsen 2004). Many
students would like to found their own businesses, but very few go on to realize their
dreams.
University subjects in entrepreneurship are viewed as extraordinary, most often initiated
on the basis of local interest (Erhvervs- & Boligstyrelsen 2004). Less than 1% of
students in undergraduate and graduate programmes take part in entrepreneurial
1 Quoting the former CEO of Bang and Olufsen, Anders Knutzen, who in a lecture mentioned this concept, which was formulated by the founders of Bang and Olufsen back in 1925, in what would today have been called their vision statement.
47
courses lasting more than one day. The quality of activities is, however, very high, which
means that there is a solid foundation for establishing new initiatives. In 2004 fewer
students than previously took part in entrepreneurship courses; yet more students than
before expressed entrepreneurial dreams (Regeringen 2004).
It is characteristic of teaching in entrepreneurship that the higher one moves up in the
educational system, the more theoretical and general the input gets. Students have
experienced unchanged efforts from the universities in relation to promoting
entrepreneurship. There is little, if any, training for teachers in the teaching of
entrepreneurship. The IT University, DTU (Technical University of Denmark), the
Business Schools in Copenhagen and Aarhus make the most efforts. There is a need to
make entrepreneurship an obligatory part of the Danish educational system, from
primary school to university. Also, better conditions for growth need to be established for
entrepreneurs (Århus Amt 2004).
The above statements based on continual assessments clearly justify our focus on the
educational system, especially the universities. However, new analyses show that things
are improving and there is reason for optimism. Various indicators point in the right
direction, e.g.
• Previous resistance to guiding students into business activities has gone.
• The importance of entrepreneurship has become widely recognized.
• There is growth in teaching activities in entrepreneurship.
• Entrepreneurship has received increasing focus, especially within further education.
• There is an increasing focus on innovative behaviour and personal development,
rather than simple understanding of an entrepreneur’s daily activities – VAT accounts
and business plans etc.
• There has been a change in attitude; Danes are beginning to be more favourably
disposed towards people who set up their own businesses.
• Young people consider life as an entrepreneur as an attractive way to work.
There is an overrepresentation of male entrepreneurs. Among entrepreneurial students,
82% of the new business founders are male. At the moment, founding new businesses
48
is not a problem, but what is problematic is to ensure that the "right” businesses survive
(Bentzen, Dilling-Hansen & Smith 2003).
3. The County of Aarhus - illustrated by business activities and strategies to promote commercial life
Table 1: The County of Aarhus – some key figures
Information box Region Aarhus County No. of counties in Denmark: 14 The area of the region 4,561 km²· Average for DK: 3,078 km² No. of inhabitants in region
657,671 Average for DK: 386,529
Councils in County 26 The 3 biggest councils by no. of inhabitants
Aarhus Council (294,954) Randers Council (62,336) Silkeborg Council (55,080)
The 3 biggest towns by no. of inhabitants
Aarhus (228,547) Randers (55,739) Silkeborg (38,453)
Denmark’s 2nd biggest town Denmark’s 6th biggest town Denmark’s 13th biggest town
Unemployment rate Aarhus County: 7.4% Aarhus Council : 7.7% Randers Council: 8.4% Silkeborg Council: 6.4%
Average for DK: 6.9%
% of population between 18 and 29 years
Aarhus County: 16% Aarhus Council: 22% Randers Council: 15% Silkeborg Council: 14%
Average for DK: 14%
Source: Aarhus Amt 2004.
49
Next to the greater Copenhagen area, the City of Aarhus and the County of Aarhus is
the most competitive region. However, there are great differences within the region.
Aarhus experiences a metropolitan development, whereas some outlying areas such as
Grenaa are among the least developed and have poor competitive power (Indenrigs- og
Sundhedsministeriet 2004).
The County of Aarhus has the highest economic growth in the country. Growth is carried
by a concentration of economic, educational and business-related activities in Aarhus.
The city can be viewed as a generator of growth for the entire region (Deloitte 2004).
Following the structural reforms in the public sector in 2007, the new region Mid-Jutland,
including the County of Aarhus, will continue to have the best conditions for growth
(Ernst & Young 2004). The County of Aarhus has a younger population than regions
normally used for comparison (Nellemann Konsulenterne A/S 2002).
These short statements of facts emphasize that the City of Aarhus and its surrounding
areas match the Copenhagen area. However, the outlying areas of the County of
Aarhus have very little business activity.
50
3.1 Areas of business developments in the County of Aarhus
IT and communications, sensor technology, medico/healthcare/rehabilitation, provisional
area transportation, financial and business services, clothing and furniture industries are
the main fields of research and business development in the Aarhus region.
The favourable regional development is due to strategies that establish synergies
between research- and knowledge-based institutions and businesses. There is a critical
mass of actors, competences and general support in the public and private sectors
(Nellemann Konsulenterne A/S 2002). The metropolitan effect shows that a good
regional and local framework is decisive. It is easy to find specialized workers, suppliers
and customers in Aarhus and Copenhagen and consequently it is attractive to be
located in these areas. At the same time it is possible to share knowledge and develop
competences with research and educational institutions as well as competing
businesses. Aarhus is a university city; there is, however, some criticism from the
business community of educational institutions for developing only behind “closed
doors”. The educational institutions are also criticised for a low willingness to exchange
knowledge (Århus Amt 2003).
Many entrepreneurs in Aarhus have a university degree. It means that Aarhus has a
high percentage of newly established knowledge-intensive businesses. To establish a
business in this field is usually considered more risky than in other fields. Aarhus has a
relatively strong level of entrepreneurial activities in businesses such as consultancy,
research and informatics as well as other services, while traditional business areas such
as manufacturing, building and construction are not as well represented (Bentzen,
Dilling-Hansen & Smith 2003).
Keeping the “smart brains” in the region is vital, because they will be the future growth
generators or employees in knowledge-intensive jobs. The region is a "net newcomer
region”. In 2002 there were 8% more people moving to the region than leaving. This
indicates a centralizing of settlement in cities and large towns and their surrounding
areas.
Both the Municipality of Aarhus and the County of Aarhus pay great attention to
entrepreneurship. All new initiatives with the slightest resemblance to entrepreneurship
51
are supported, especially if originating among students. It is rather paradoxical that this
eagerness to support and develop new initiatives for students comes from the
municipality and county in co-operation with the institutional leaders; these initiatives
seldom originate from the inner circles of the educational institutions.
To summarize: there are good preconditions for entrepreneurial development in the
region. Despite findings in a number of surveys that too few things are happening, there
are some tendencies pointing in a positive direction. Politicians as well as the business
community have great expectations of more, and more active, contributions to
entrepreneurship from the educational institutions in the future regional development.
Many initiatives already exist, but there is room for improvement. The educational
institutions have some difficulties developing new entrepreneurial subjects. Also, it is
difficult to come to an understanding of the necessity to make changes in the didactical,
pedagogical and not least contextual premises for educations, in order to promote
entrepreneurial behaviour.
3.2 Actors for promotion of entrepreneurship
No less than 44 regional actors working to promote entrepreneurship can be identified.
They have been set up in order to encourage and support new entrepreneurs or
companies in a period of growth.
Systematizing the 44 actors by their primary purpose, we discover that they represent a
wide spectrum of promotional functions. Most actors are multi-purpose. Some actors
only have a single purpose, e.g. financing; others have been founded with a certain
population segment in mind, e.g. female entrepreneurs. Finally, many actors are united
by a certain field of interest, such as high technology.
52
Table 2: Number of actors with single- or multi-purposes
Purpose Numbers Financing / Access to capital 3 Training and education, including business plan competition 10 Individual and/or general guidance 11 Promotion for minorities (invalids, immigrants etc.) 3 Female entrepreneurs 1 High technology 14 Networking and sparring 25 Housing and facilities 14
Source: Appendix 1
The most frequently quoted purpose stated in the homepages behind table 1 is
’networking and sparring’, which often comes in a pair with ‘housing and facilities for
entrepreneurs’. It is expected that entrepreneurs housed in the same building will share
knowledge and be able to support each other. In the outlying parts of the region,
‘individual guidance’ often comes along with ‘networking and sparring’. Generally
speaking, the best possibilities of coaching, counselling, sparring and networking can be
found if the new business is founded in an incubator/development park.
About half of the registered actors can be characterized as single-purpose actors.
Among them are the educational institutions, which have education (and research) as
their only purpose. Others are centres and associations focusing on high technology,
with or without connections to the universities or other educational institutions. Besides
one or two development parks offer only housing. Out of 20 single-purpose actors, 13 do
not have entrepreneurship as their primary purpose. However, they are important in this
analysis because they form a context for the interested parties whose preferred field of
work is cutting-edge entrepreneurial development of the region.
At the other end of the scale we find the multi-purpose actors who have 4-6 purposes.
These institutions are mostly funded by public means, either national or EU-based, most
often in combination with regional funding. One institution works mainly on the open
market and another – a provider of seed money – has a mixed financial structure and
provides both public and private capital to borrowers. The most all-round provider is a
business promotion centre in one of the big regional towns (Silkeborg). Besides the
aforementioned activities, this centre also participates in business plan competitions and
53
has special promotion for immigrants. A centre solely for immigrants was founded in
Aarhus in 2005. Finally, a centre founded and partly financed by local, regional, EU
funds and by five educational institutions (universities and colleges) has stated that it
offers “business plan” competition, training, individual guidance and networking.
From this explanatory description we find that the rural areas attempt to establish
networks as well as individual coaching and housing facilities for entrepreneurs. In the
large regional towns all purposes are collected in a single centre, whereas the City of
Aarhus has a huge variation in purpose, activities, structures and specialization.
4. Possibilities for development
The mapping of the regional actors above provides a foundation for working with
development in a more dynamic way. This should be based on stronger coherence
between the existing actors, as well as include a more conscious agreement on the
ways in which the educational institutions can strengthen their entrepreneurial
educations.
The ideal is to establish education in an area with access to, and cooperation with, the
“stakeholder community” and to take part in joint ventures and incubator activities
together with other stakeholders, in order to always look at your own values through the
eyes of the other stakeholders.
Implementation of this ideal demands a good deal of re-thinking of the didactical and
pedagogical methods in the educational institutions; the ideal will demand a lot from the
context of the education as well as changes in what it means to study. For example,
most of the standard elements in education, such as teaching in a certain room at a
certain time, will be questioned. If the ideal is about access to and cooperation with ‘the
stakeholder community”, a study will be more like a regular job with reflections on the
actions. The future education will be based much more on ‘need to know’ than ‘nice to
know’. It is evident that there has to be a mutual understanding and acceptance of the
educational and learning ideals among stakeholders. The model of learning cannot be
understood as a one-way model. The connection between the universities - one of the
stakeholders - and other stakeholders is a mutually commitment.
54
How can we arrange this? The model below (table 2) can be used for analysis of the
‘stakeholder community’ in order to make a mapping and description, as we have
carried out above (table 1). It can also be used as a model for new educational
programmes and subjects which fulfil the ideal. The intention is to illustrate a way of
thought, including some of the entrepreneurial initiatives in the County of Aarhus.
Table 3: Model for development of programmes
Multi-level approach
Actors Roles Goals Processes Resources
Network level Platforms Clusters
Integrated multi-actor programs Regional development strategy
Institutional level
Universities Incubators Regional developing agencies
Programs to facilitate entrepreneurship Programs to stimulate entrepreneurship
Individual level Entrepreneurs Students Teachers Consultants
Educational courses on entrepreneurship Housing facilitation Financial facilitation
Source: BEPARTNER, Twente
If we compare our previous mapping of entrepreneurial actors in the region with the
model (table 2), it is possible - based on the different levels and processes - to establish
programmes and subjects for students who wish to start a “study” or a learning process
leading to a greater exchange of knowledge, reflections and learning than what can be
expected in a traditional education.
The model describes actors and processes at network level. At this level, multi-purpose
actors act together in order to establish a platform for entrepreneurship. The universities
can be found at this level and may be one of the pillars for the platform. Also found at
this level are the high-tech clusters. They put up integrated programmes, a main
ingredients being the university educations. A regional development strategy could also
comprise education in a joint venture with the city as well as rural activities.
At the institutional level, the primary task of the actors is to strengthen interest and
competences among participants in order to prepare them for networks and large
entrepreneurial programmes. However, the single most important task is to make the
55
universities change from being ‘ivory towers’ to becoming ‘entrepreneurial universities’,
to turn them into an attractive partner for other regional development initiatives.
Finally, every person will need to have their expectations fulfilled, in order to be assured
that sufficient resources and contextual framework are available for taking part in the
entrepreneurial process. In this preliminary and not very detailed model, an educational
hierarchy exists. The model contains both education about entrepreneurship, education
through entrepreneurship and education for entrepreneurship (Gibb 1989).
4.1 New promotional activities in the region
The County of Aarhus, from January 2007 Region Mid-Jutland, with its 1.2 million
inhabitants has a huge potential for development. The region has a number of
institutions of higher education. As shown above, there are many entrepreneurial actors
in the region, and the processes in the model are already well-known in the regional
world. A step forward would be to connect the higher educations to these processes,
and make the educations integrated parts of the various actors’ processes. This would
give the student body a chance to experience great learning possibilities, exchange of
knowledge, and to get their hands dirty in the real world, while the universities would be
obligated to guarantee a high level of education.
These ideas fit perfectly into a new and promising program started in 2005. It is called
IDEA – International Danish Entrepreneurship Academy. It is a new initiative, a program
not seen before in Denmark. It could be compared to programs initiated in other
countries, e.g. EXISTS in Germany and regional programs MERCIA in Mid-England
(Blenker et. al. 2004)2. It is the Danish government that has taken the initiative, but the
main purpose, content and structure have been developed by the participating
institutions.
4.2 A brief outline of IDEA
“IDEA’s activities are directed towards (i) strengthening and coordinating contributions
within innovation and entrepreneurship in higher education and (ii) better equipping the
2 A thorough description of the purposes and resources of IDEA can be found at www.IDEA-DENMARK.dk.
56
student body to participate in entrepreneurial society, by providing them with information
and courses of relevance to entrepreneurship”. (www.idea-denmark.dk).
Higher education in Denmark should develop a study and learning environment without
barriers, and which instead supports the interests of young people in acquiring new
competences in entrepreneurship and innovation. Therefore there is a need for a new
approach at the higher education institutions in Denmark, which will enable them to
create more enterprising study environments - and patterns of learning that are strongly
rooted in the surrounding community.
IDEA’s primary target groups comprise of students and graduates from higher
education, growth-oriented entrepreneurs, and entrepreneurial employees in existing
firms and organisations. They have in common the interest, knowledge and areas of
competence which, given the right circumstances and conditions, possess the potential
to initiate productive entrepreneurial activities, of benefit to themselves and society (see
appendix 2).
The organisation of IDEA is based on the new regional structure. The Aarhus School of
Business is the leading partner in the future region Mid-Jutland. Because IDEA is a
countrywide initiative including all higher educational institutions, the Aarhus School of
Business has a special obligation to establish contact to every regional actor involved in
entrepreneurship.
In connection with IDEA, special attention will be paid to developing new entrepreneurial
educations by cooperating across competences and institutions. This will demand a
freer way of teaching, cross-sectional co-operation and a possibility of founding centres
outside the established educational institutions, in order to be able to experiment with
entrepreneurial education and ways of learning among students, and act as meeting
places for other actors in the region.
57
5. Conclusions and recommendations
The County of Aarhus is doing well in the Danish entrepreneurial context. However, it is
necessary to develop better relations between the different sectors in order to realize
wishes and expectations for the future. Also, the universities need to develop their
marketable skills.
The top leaders at the universities acknowledge that it is necessary to take steps to co-
operate closely with their surroundings in a Triple Helix structure and develop a more
entrepreneurial university.
Entrepreneurship is not to be understood as courses in how to make business plans.
What is important is that every student considers how his or her study can contribute
towards creating value for society – and themselves. Promotion of entrepreneurship is
too narrow if it just means ‘how to found a new business’. We have to understand
entrepreneurship as something more inclusive, i.e. developing enterprising behaviour.
The most important investment in the future is to nurture an understanding of the co-
operation between knowledge creation, knowledge sharing and the research process.
Certain research fields should be connected more closely with the business community
and entrepreneurial actors outside the universities. Research and education in future
should be carried out in a closer co-operation between universities and their
surroundings. Ideally, higher educations should be learning processes where students
can develop projects or get practical experience, without lowering the academic
educational standards.
It is necessary that students consider their studies as a regular job and be just as
disciplined about it. They have to think of education and research as a continuous
process, not to be concluded at graduation. They get their diploma showing the
knowledge and competences acquired so far, but their studying does not stop here.
Knowledge, learning and innovation are crucial concepts as the basis of entrepreneurial
regions, nations and continents.
The entrepreneurial project is entirely an educational project. Future research projects
should consider these aspects. The following questions can be asked:
58
• How can we create a new didactical and pedagogical culture at the universities?
• How can we connect the different actors who are involved in practical innovation?
• How can rural districts become fertile soil for entrepreneurial thinking and
development?
• How can enterprising behaviour be defined as something more than market and
money in the future?
• What should be done in order to remove the barriers to knowledge creation and
knowledge sharing in the institutional system of today?
• Is it possible to create a theory or a model helping us to understand the relations
between the different promotional activities and regional development? And in
what other ways can regional development be monitored?
Some cautious answers have been attempted in this paper; other questions will be dealt
with in the coming years, e.g. by IDEA. Generally speaking, we must change our
understanding of university education, first by developing a new understanding of the
terms entrepreneurship and entrepreneurial behaviour, later by applying them to other
subjects, even though they are not labelled entrepreneurship.
59
Bibliography
1. Secondary Literature Bentzen, Dilling-Hansen & Smith 2003, Iværksættere i Århus Kommune – en analyse af
iværksætternes betydning for erhvervsudviklingen. Blenker, Per; Dreisler, Poul; Kjeldsen, John; Færgemann, Helle 2004, En undersøgelse
af uddannelse i entrepreneurship – et studie af fire udenlandske universitetsmiljøer, Working Paper 2004-10, The Aarhus School of Business.
Bouchikhi, Hamid 2003, Entrepreneurship professors and their constituencies: A manifesto for a plural professional identity, Key Note Speech at INTENT conference, Grenoble.
Etzkowitz, Henry 2003, ‘Research groups as ‘quasi-firms’: the invention of the entrepreneurial university’ in Research Policy vol. 32: pp.109-121.
Fiet, James O. 2000, ‘The Pedagogical side of Entrepreneurship Theory’ in Journal of Business Venturing 16: pp.101-117.
GEM 2003 Global Entrepreneurship Monitor, Mick Hancock & Torben Bager, SDU, Kolding. GEM 1999 Global Entrepreneurship Monitor, Paul Raynolds, Jonathan Levie & Erkko
Autio, Babson College, London Business School. Gibb, A.A. 1989, A study of the spirit of enterprise in Europe. Final report of the SME
Task Force of the European Community. Gibb, A. 2002, ‘In pursuit of a new ‘enterprise’ and ‘entrepreneurship’ paradigm for
learning: creative deconstruction, new values, new ways of doing things and new combinations of knowledge.’ in International Journal of Management Reviews, vol. 4, issue 3: pp.233-269.
Jonsson, Christer; Jonsson Thom 1998, Entrepreneurial learning – An Informed Way of Learning – the Case of Enterprising and Business Development, Växjö University
Leydesdorff, Loet; Etzkowitz, Henry 2000, ‘The dynamics of innovation: from National Systems and "Mode 2” to a Triple Helix of university-industry-government relations” in Research Policy vol. 29: pp.109-123.
Laukkanen, Mauri 1998, Exploring Alternative Approaches in High-Level Entrepreneurship Education, paper for the 10th Nordic Conference on Small Business Research, Växjö, Sweden, June 14-15.
Matley, Harry; Mitra, Jay 2002, ‘Entrepreneurship and learning: the double act in the triple helix’, International Journal of Entrepreneurship and Innovation, vol. 3, no.1.
Röpke, Jochen (1998): The Entrepreneurial University: Innovation, academic knowledge creation and regional development in a globalized economy, Department of Economics, Philipps-Universität Marburg, Germany. September 16, 1998.
2. Official Documents Regeringen 2004, Iværksætterbarometer 2004. Indenrigs- og Sundhedsministeriet 2004, Regionernes konkurrenceevne. Erhvervs- og Boligstyrelsen 2004, Iværksætteri i undervisningen – praksiserfaringer fra
det danske undervisningssystem.
60
Erhvervs- og Byggestyrelsen 2004, Iværksætterindeks 2004 – Vilkår for iværksættere i Danmark.
Erhvervs- og Byggestyrelsen 2004, Baggrundsrapport til Iværksætterindeks 2004 - Uddannelse i iværksætteri på universiteter – et benchmarkstudie.
Nellemann Konsulenterne A/S 2002, Kloge hoveder – Rekruttering og fastholdelse af den særlige arbejdskraft.
Århus Amt 2004, Århus Amts erhvervsfremmeindsats – Årsberetning 2002/03. Århus Amt 2004, Regional udviklingsstrategi for Østjylland 2005-2015 – Østjylland –
Vestdanmarks kraftcenter. Århus Amt 2004, Århus Amts erhvervsfremmeindsats – Årsberetning 2002/03. Deloitte 2004, Vækstklimaet i danske kommuner 2004. Ernst & Young 2004, Entrepreneurship i Danmark – 2004 – Status på og analyse af
danske vækstvirksomheder.
61
Appendix
Appendix 1: Actors in the Region (County of Aarhus)
Actor
Bet
ter f
inan
cing
/ A
cces
s to
cap
ital
Busi
ness
Pla
n C
ompe
titio
ns
Trai
ning
and
Ed
ucat
ion
Indi
vidu
al G
uida
nce
Gen
eral
Gui
danc
e
Prom
otio
n fo
r Im
mig
rant
s W
omen
En
trepr
eneu
rshi
p
Hig
h Te
chno
logy
En
trepr
eneu
rshi
p
Net
wor
king
and
Sp
arrin
g
Hou
sing
and
fa
cilit
ies
Østjysk Innovation A/S X X X X X Start & Vækst X X X X Louiz X X X X VækstVærk X X X Kronjyllands Erhvervsråd X X ErhvervsUdviklingsCenter Silkeborg X X X X X X
Iværksætterhusene på Djursland X X X
Odder Ervhervs- & Udviklingsråd X
Djursland Erhvervsråd X X NyVirk X X X X Net-Up.nu / Rosenholm Udviklingspark X X
Udviklingsparken Randers X X MG50 X MenloPark X CONNECT Denmark X X Morgendagens Heltinder X X Plato X Center for Entrepreneurship X X X X
Udviklingsparken A/S X X X Forskerparken i Århus A/S X X X Filmby Århus X X Bindingsværket X X Lynfabrikken X X Erhvervsgruppen Frichsparken Aps X X
Incuba Venture X X Alexandra Instituttet A/S X X BioMedico Forum X X
62
Center for Advanced Visualization and Interaction
X
Center for Internetforskning X
Center for Pervasive Computing X
ISIS Katrinebjerg X IT-Vest X IT-Forum Østjylland X Interdisciplinary Nanoscience Center X
Teknologisk Institut X X X X Eksportklubben Østjylland X ErhvervsInformation X Århus Købmandsskole X Errhervsakadamiet X Århus Universitet X Aarhus School of Business X Ingeniørhøjskolen X Tekniske Skoler Østjylland X Århus kontoret i Bruxelles X Source: www.startogvaekst.dk a.o. 2005
63
Appendix 2: IDEA's model on target groups
Source: www.idea-denmark.dk
64
An Example of Regional Collaboration in Entrepreneurship Promotion and Development – Häme Region Paula Kyrö/ Anna Ripatti University of Tampere RCVE
Hillevi Ahonen/ Jari Kattainen/ Pekka Komulainen/ Marja Laurikainen
School of Economics and Business Entrepreunership Education Korkeakoulunkatu 6 FIN 13101 Hämeenlinna, Tampere Phone: +358-3-614 56 12 E-Mail: [email protected]
Häme Development Centre Ltd. Vanajantie 10 FIN 13110 Hämeenlinna Phone: +358-3 637 1155 E-Mail: [email protected]
Contents Illustrations ............................................................................................................... 66
1. Introduction........................................................................................................ 67 1.1 Point of Departure ............................................................................................. 67 1.2 Terminology....................................................................................................... 69
2. Regional Profile ................................................................................................. 72 2.1 Starting Point..................................................................................................... 72 2.2 Short Description of Häme Region .................................................................... 74 2.3 Information Box / Hämeenlinna Sub-Region in a Nutshell................................. 77 2.4 SWOT –Analysis ............................................................................................... 78
3. Entrepreneurship Promotion in Hämeenlinna Sub-Region – State and Challenges from the Perspective of Education and Training............................. 79
3.1 Fostering and Developing Entrepreneurial Competences ................................. 80 3.2 University of Tampere, Research Centre for Vocational and Professional
Education (RCVE) ............................................................................................ 80 3.3 HAMK University of Applied Sciences............................................................... 81 3.4 HAMK University of Applied Sciences, Vocational Teacher Education Unit ...... 82
4. Activities and Effects of Entrepreneurship Promotion from the Perspective of Entrepreneurs and future Entrepreneurs........................................................... 84
4.1 The Regional EPC (i.e. Regional Entrepreneurship Promotion Cooperation) ... 84 4.2 General Questions and Challenges of Entrepreneurship Promotion in the Häme
Region .............................................................................................................. 85 4.3 The Role of the Häme Development Centre Ltd................................................ 86 4.4 Entrepreneurship Promotion Activities Matrix.................................................... 89
5. Conclusions and Recommendations ................................................................. 93 5.1 Mission: Renewing and improving new regional entrepreneurship culture........ 93 5.2 Towards an Entrepreneurial Region from Matrix to Processes through Proactive
Procedure......................................................................................................... 93
Bibliography.............................................................................................................. 95
Appendix................................................................................................................... 96
65
Illustrations Figure 1: The forms of entrepreneurship .................................................................. 70 Figure 2: Entrepreneurship promotion in the Häme region....................................... 79 Figure 3: Entrepreneurship culture ........................................................................... 93
66
1. Introduction 1.1 Point of Departure
Häme Development Centre Ltd. has provided this report. Our goal is to develop the
Häme region into a more innovating, more efficient, more attractive and more
productive region.
This report represents the core features of networking benchmarking that refers to a
form of benchmarking in which the partners and bench markers are the same with
mutual motives and/or problems and with the aim of learning together from and with
each other in order to create new best practices. As it is a new form of benchmarking
(provided by scientific research in the region) it is an example how scientific research
can help in providing more extended and versatile approaches to regional problems
(Kyrö 2004).
In this report we will try to describe the present situation in our SME-policy and
innovation systems and also to vision will future guidelines. We will study our present
entrepreneurship and innovation strategies and consider future possibilities and
67
scenarios. We will also analyse the best way to link the entrepreneurship and
innovation strategies to the general regional or sub-regional development strategies.
We will also consider ways to link the BEPART project and its operations to our
regional development strategy work as much as possible through networking with
other partners of the project.
We will also try to think of what kind of best practises we might share with other
partners of the BEPART project in the Häme region and at the national level. For this
purpose we have chosen two practices from the local region and four from the
national level:
Regional:
1. Regional cooperation between public business service organisations which is
introduced later on in this article. This type of cooperation has required and still
requires the dissolution, rearrangement and improvement of old and historical
structures of public business services. Our experiences and observations on this
subject may be useful to other partners.
2. Regional cooperation between educational institutions in order to enhance
entrepreneurship education in all school levels. This requires a common
understanding of each institution’s own role and the maturity level of
entrepreneurial competences needed in each school level.
National:
1. Government’s policy programme for entrepreneurship promotion
http://www.hallitus.fi/vn/liston/base.lsp?r=40240&k=en
2. New start-up funding system for students and employees
http://www.mol.fi/mol/en/99_pdf/en/92_brochures/start_up_grant_2005.pdf
3. Government’s policy for improving women entrepreneurship
http://www.ktm.fi/chapter_files/Naisyrittajyystyoryhman_raportti_25.2.pdf
4. Finnish competence-based education system for entrepreneurs
http://europa.eu.int/comm/employment_social/social_dialogue/docs/2ndfollowu
p_en.pdf
In this report we will describe in more detail the regional best practices and the web
pages offer detailed information about national practices.
68
1.2 Terminology
We have explained some of the terms we use in this article to avoid possible
confusion and to clarify how we commonly understand certain terms. The definitions
of the Häme region will also help people foreign to the region understand the
geographical situation of Häme and how it is formed.
The Häme region:
− consists of 3 sub-regions − the sub-region of Hämeenlinna,
the sub-region of Forssa and the
sub-region of Riihimäki − altogether there are 16
municipalities
The sub-region of Hämeenlinna:
− consists of 8 municipalities
− the city of Hämeenlinna, the
municipality of Hauho, the
municipality of Hattula, the
municipality of Janakkala, the municipality of Kalvola, the municipality of Lammi, the
municipality of Renko and the municipality of Tuulos.
Considering the concept of entrepreneurship, we rely on the extended approach to
this concept. It means that there are four different forms of entrepreneurship:
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Figure 1: The forms of entrepreneurship
The forms and nature of entrepreneurship
Entrepreneurship can be looked at in a wider cultural context. Four forms of
entrepreneurship can be defined. The forms have historically developed and still
interact with each other (figure 1.)
1. Entrepreneurship
Small business management and ownership, the interplay between individual and
business
2. Individual entrepreneurship
Self-oriented entrepreneurship, an individual’s self-oriented behaviour
3. Organisational entrepreneurship
Organisations collective behaviour
4. Intrapreneurship
As interplay between organisational and individual entrepreneurship (Kyrö, 2005)
Additionally we will clarify the concepts in the field of entrepreneurship as follows:
Small business owner-manager:
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− A person who owns an enterprise and whose goal is to develop their enterprise
in terms of expanding, employing other people etc.
Self-employed:
− Those drawn from labour market concepts denoted as self-employed, with three
subcategories: employer, own account worker and family member.
Entrepreneurship education:
− Entrepreneurship education can be divided into three categories: education
about, through and for enterprise (Scott, Rosa and Klandt, 1998).
Research areas:
− Develop a scientific knowledge base and competences in entrepreneurial
learning and professional processes
− Research of concepts of entrepreneurship education and new, innovative
methodological solutions
− Research and development of entrepreneurial pedagogy and e-learning
This is mainly the focus of the educational institutions.
Entrepreneurship promotion:
− Service activities by the state-owned, municipally-owned and private
development organisations that carry out economic policy. The goal of the
activity is the customer-oriented announcement of the service and a fluent
process of services that will be reached easily through one service point. At its
best entrepreneurship promotion is a tight network in which the customer moves
within the service system seamlessly and the knowledge of the customer
cumulates.
This is mainly the focus of Häme Development Centre.
Regional EPC:
− Regional Entrepreneurship Promotion Cooperation. (see the page 13, figure 2.)
SME’s:
− In this article we use the definition of SME’s as defined by the Employment and
Economic Development Centre. In that definition, SME’s are categorised as
enterprises that employ less than 250 persons and whose yearly turnover is to a
max of 50 million Euros or whose total balance of trade is to a max of 43 million
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Euros. In addition, the enterprise has to meet the standards of the
recommendation given by the EU about the criterion of the SME. (The Ministry of
Trade and Industry, 2005)
Micro firms:
− Micro enterprises are enterprises that have less than 50 employees and whose
yearly turnover or whose total balance of trade is to a max of 10 million Euros. In
addition the enterprise has to meet the standards of the recommendation as
given by the EU. (The Ministry of Trade and Industry, 2005)
2. Regional Profile
In this paragraph we introduce the present situation on different levels. We also
briefly describe the history of the Häme region and how we have got to this point as
well as the bottlenecks to progress we might have. Then we introduce one regional
marketing project which has done persistent work in creating the Häme brand. We
also provide some key figures of the Hämeenlinna sub-region which is the area
where we operate. And finally, we present the SWOT analysis of the Häme region.
2.1 Starting Point
European level
It is stated in the Lisbon agenda that Europe intends to become the world’s most
innovative and competitive area of commerce. This target will require creating
favourable conditions for the growth of entrepreneurship in regions and townships, in
regional centres and clusters. By offering a creative, challenging and encouraging
ambience for young entrepreneurs, innovators and even creative outsiders, these
areas can be found attractive, which means that they can profit brain-gain in quantity
and quality and in entrepreneurial power, spirit and culture. Therefore, universities,
colleges, incubator and development organisations play an important role in regional
development and attractiveness.
European learning case - what we can learn and what the other partners may learn
from the Häme case?
Business support services are crucial stakeholders in the regional business
promotion and innovation system, however the Häme sub-region has quite a long
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tradition and therefore it also has historical and functional deposits in this sector.
There is a need to improve the efficiency of this intermediate innovation player group
and make its role more dynamic. We think that there is a learning case for us what
kind of structures and systemizing processes the other partners have, also Central
Eastern Europe – areas where the business support service structure is quite new
and therefore may learn from our case.
National level
The Finnish Government has 4 policy programmes and one of them is the
entrepreneurship policy programme. It consists of 5 sub-sectors:
- entrepreneurial training and consultancy
- establishment, growth and internationalisation of enterprises
- entrepreneurial taxes and payments
- regional entrepreneurship and provisions governing entrepreneurship and
- the functioning of markets
This programme also has a direct effect on the entrepreneurship strategies at the
regional level.
The Ministry of Education has also set up its own steering group whose main
purpose is to implement the entrepreneurship policy of the Ministry of Education. The
main goal of the policy is to integrate entrepreneurship education into the current
education system.
The development of gender-equality is also important and in Finland, the female
entrepreneurship policy programme has started. It intends to develop female
entrepreneurship, entrepreneurship education and business activities through social
political means. It is shown in recent research by the Centre of Excellence on
Entrepreneurship Education that the number of female entrepreneurs has grown
faster in the Häme region compared to other regions in the country. However there
are differences between the 3 sub-regions: The number of woman-owned
entrepreneurs is rather high in both the Hämeenlinna and Riihimäki sub-region and
rather low in the Forssa sub-region. Also, the number of enterprises that are still
operating after years is best in the Hämeenlinna sub-region versus the Riihimäki and
Forssa sub-regions. In the near future, it is vital for the municipalities to secure their
own basic services and this is a sector of services that is mostly employed by female
employees or entrepreneurs. This means that in the future, society as well as the
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municipalities has to more strongly support female entrepreneurship by improving
entrepreneurial competences among females.
Regional level
In the Häme region there are 43 enterprises per 1,000 habitants whereas in the
metropolitan area 55:1,000. In the western coast area 51:1,000 and the national
average is 48:1,000. The entrepreneurs are also an ageing group; therefore focusing
on the transfer of family businesses to the next generation will have a very important
role in the near future. The facts provided above prove that we have to improve our
entrepreneurship education, our business services and also to be aware of the
changing situations in business life.
The Häme regional plan sets the stage to the development of the region. The most
essential development area of the plan is to improve and develop the region’s
economy and particularly to enhance the number of new enterprises. The
competition of enterprises has turned into the competition of regions and networks,
which means that our vision is to be among the 3 best regions in Finland by the year
2020.
2.2 Short Description of Häme Region
Historical review
Hämeenlinna was founded on the shores of Lake Vanajavesi which is situated in the
Vanajavesi valley between high moraine ridges. The medieval castle was built at the
end of the 13th century and was the region’s military and administrative centre. First
as a castle village and then as a town from 1639, Hämeenlinna has lived and
expanded around the castle. All throughout its history, Hämeenlinna has been a
central inland trading location.
Historically, the Häme region is a part of the traditional Southern Finland industrial
area. Like the other earlier industrialised areas, structural problems have occurred
during the last 30 years. In the period 2000 – 2006 the Häme region belonged to
ERDF Objective - 2 programme area. The aim of this programme is to support
structural economic changes.
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Industrial structure
Nowadays, the industrial structure is rather versatile. The main industries are: metal
and machinery, tourism, civil engineering and construction, wood processing and
food industry. The fastest growing line of businesses at the moment is social and
healthcare, which will also be a big challenge in the near future because of the age
demographics of the country. Traditionally, administration, education and other public
services also play an important role in the economic structure of the Häme region,
which means that the industry in the region is rather a domestic oriented sub-
contractor or intermediate industry.
The mosaic type of structure is one of the strengths of the Häme region. The region
is not dependent on one division of industry, which means that in the long run the
economic growth of the region is stable. It also means that the long, deep economic
recession in the late 80’s and early 90’s affected the Häme region less than many
other areas in Finland. After the recession, all economic indicators are now positive
and the Häme region is one of the 10 fastest growing areas in Finland.
Due to the region’s history and location, tourism has grown into a considerable
employer (the 2nd biggest employer of the region). However, the situation had not
always been this good. Approximately five years ago the field of tourism was much
splintered. Since then, different actors in the field of tourism have clarified each
others roles and have done persistent strategic development work and product
differentiation. Häme Tourist Service Ltd. is one of the most successful actors in the
country. This fact makes the goal of Häme Tourist Service Ltd. very feasible: To
become the leading region in the field of tourism by the year 2010.
The growth challenges
The bottlenecks of regional economic growth are the low number of enterprises, lack
of investment, labour supply and the unfavourable age demographic of the
population, domestic orientation of the industry and its rather low ratio of research
and development expenditure as well as the low level of education creating a lack of
highly educated labour.
However, the Häme region is gaining inward migration approximately + 0.5 – 1.0 %
per year, especially from the metropolitan area and from the age groups 25 to 34
years and over 55 years. The net profit of new enterprises in the Hämeenlinna sub-
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region has also been rather good for several years now. In 2004, the net profit was
390 enterprises and in a period of four years (2000-2003) its average net profit was
519 enterprises. Also, the turnovers of the region’s enterprises have risen as well as
the number of the staff. The two facts stated above along with a location with good
connections and lower costs of living have attracted more people to the region. This
positive circle of development is getting stronger in the Häme region.
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2.3 Information Box / Hämeenlinna Sub-Region in a Nutshell Location / distances from the city of Hämeenlinna
- In southern Finland (inland) - By the definition of the OECD growth report the city of Hämeenlinna is part
of the Helsinki metropolitan area - 100 km north from Helsinki, 80 km south from Tampere, 150 km east from
Turku - Ca. 1 hour drive from all international airports and harbours in southern
Finland - Within 1 hour drive the ability to reach 2 million people of the Finnish
population - By the Helsinki – Tampere main railway and the Helsinki – Tampere
highway Area - Total area 3080 km²
- Lakes ca. 10 % of the total area - Density of population 277 / km² (the city of Hämeenlinna)
Population - ca. 90.500 habitants in Hämeenlinna sub-region - ca. 170.000 habitants in Häme region
Average income tax (%)
- 18 % (the city of Hämeenlinna)
Lines of businesses The chosen main lines of businesses are: - metal and machinery - tourism - electronics - civil engineering and construction - wood processing and - food industry - culture
New key businesses
eLearning, Healthcare
Rate of employment 66.0 % in the year 2005 (source: Statistics Finland) Rate of unemployment
8.6 % in the year 2006 (source: Statistics Finland)
Development key figures
Primary production 7 % Industry 23 % Construction 5 % Trade 13 % Transportation 5 % Business 9 % Other services 35 % Other 3 %
Education - Secondary level education 35 % - Post-secondary level education 22 %
The biggest employers in Hämeenlinna sub-region
- The total number of enterprises in the Hämeenlinna sub-region is approximately 4.000
- The city of Hämeenlinna (2,490 employees) - The state (2,480 employees) - Communal healthcare (1,460 employees) - Rautaruukki Ltd. (1,030 employees / metal industry) - Huhtamäki Ltd. (700 employees / consumer packaging) - Häme Polytechnics (510 employees) - Aina Group Ltd. (500 employees / media industry) - Tervekoski Ltd. (nearly 500 employees / paper industry) - Patria Vehicles Ltd. (430 employees / defence technology) - Tavastia Further Education College (270 employees) - KCI Hoists Ltd. (250 employees / machinery industry) - Lindström Ltd. (175 employees / B-to-B textile services, laundry services) - The Finnish Defence Forces
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2.4 SWOT –Analysis
Strengths Weaknesses - Versatile industry - Location - Attractive human-size scale - Educational and vocational Centre of
Expertise - Cultural history, nature, landscape - Positive interaction between city and
rural areas - Competitive services
* communal basic services * shops * restaurants * leisure time activities etc.
- Culture and experience services produced by the third sector (associations etc.)
- Age demographic - Level of education (the lack of higher
level education) - Domestic market oriented - Low investment level to research and
development - Lack of investment - Lack of highly educated knowledge-
intensive entrepreneurship intention - An unwillingness to expand among
entrepreneurs - Basic characteristics of people in Häme:
slowness, unwillingness to take risks
Opportunities Threats - Renewing and improving new regional
entrepreneurial culture (development networks)
- Faith in the future and in strengthening of the growth
- Development of the climate of attitudes - Development of the entrepreneurship
education - Co-operation between regional business
service organisations and regional vocational institutions (plus administration)
- Globalisation (new market areas, foreign labour)
- Improving image - Open-mindedness to utilise new
possibilities
- Competitiveness of the enterprises is getting weaker
- Entrepreneurs are ageing (the problem of continuity)
- Globalisation (weakened competitiveness)
- Lack of skilled labour in the future - Increasing level of costs
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3. Entrepreneurship Promotion in Hämeenlinna Sub-Region – State and Challenges from the Perspective of Education and Training
In the Hämeenlinna sub-region, different actors have built a network of
entrepreneurial activities. This network and its activities start from entrepreneurship
education in primary schools as well as in vocational schools all the way to
supporting SME’s operations (figure 2.). Within each step/level there are certain
procedures and certain key actors that are responsible for delivery of the procedures.
Between the steps, there is always a maturing process that ultimately leads to one
becoming an entrepreneur. The challenge is to clarify the roles and resources of
each actor within the network. This improves the dynamics within the network –
which leads to improvement of entrepreneurial activities and therefore the
competitiveness of the region.
The biggest challenge in entrepreneurship promotion from the educational
perspective is the fact that most of the current teachers in primary or in vocational
schools do not have the sufficient competence to teach entrepreneurship. The other
significant challenge is the climate of attitudes towards entrepreneurship among the
students and the general entrepreneurship culture in the Häme region.
Figure 2: Entrepreneurship promotion in the Häme region
Maturing process of entrepreneurial characteristic
Entrepreneurship education *Entrepreneurial pedagogy
Securing the operations of SMEs – A successful enterprise, a successful region * Supporting entrepreneurs and enterprises
Maturing process of a potential entrepreneur
Becoming an entrepreneur * Helping new starting businesses * One-stop shop principle
Learning from entrepreneurship * Entrepreneurship included in the curriculum * Pre-incubator part of learning
Maturing process of a successful entrepreneur
- EU policy - Policy programme of the
Finish Government - National YritysSuomi service
system - Regional network of business
services
- HAMK University of Applied Sciences
- Other vocational institutions - Upper secondary schools
- University of Tampere - HAMK University of Applied
Sciences Teacher Education Unit
- Communal education unit
- National YritysSuomi service system
- Regional network of business services
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3.1 Fostering and Developing Entrepreneurial Competences
There are three main institutions in the Häme region that are strongly involved in
entrepreneurship education:
- University of Tampere has offered Bachelor, Master and Doctoral level teaching
and courses in entrepreneurship education since May 2007
- HAMK University of Applied Sciences, Vocational Teacher Education Unit, in
cooperation with University of Tampere, Research Centre for Vocational and
Professional Education, offers training in entrepreneurship education for teachers
in all school levels.
- HAMK University of Applied Sciences, which has entrepreneurial activities and
studies included in its curriculum and entrepreneurship as well as increased
innovation have a valuable position in its development strategy. HAMK University
of Applied Sciences also has e.g. vivid pre-incubator activities.
Other vocational institutions (Tavastia Further Education College, Kiipula Adult
Education Centre, The Finnish Entrepreneurship Institution) in Häme region are also
active in entrepreneurship promotion but their focus is more in practical training and
fostering the entrepreneurial attitude among the students (see appendix 2).
3.2 University of Tampere, Research Centre for Vocational and Professional Education (RCVE)
The Research centre for Vocational and Professional education belongs to the
Faculty of Education at the University of Tampere (learn more www.uta.fi/aktkk). The
Research Centre is located in the Häme region.
The centre belongs to the region’s science university network that, besides the
Centre, consists of the Teacher Education Unit, Continuous Education Centre and
Open University. Together they provide Tampere University’s regional activities and
support each other’s activities. Future plans involve strengthened collaboration
between the region’s University units and the region’s developers.
The University’s role in Häme is seen as supportive and its impact extends to local
actors in the region. The University provides and develops research from which local
municipalities can benefit. The Universities hold a vast potential in terms of new
scientific knowledge. The challenge is to create a regional culture that is able to
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expand its view and awareness of those opportunities that science university units
offer for enhancing learning, an innovative and international infrastructure that will
support the future success of the region. Entrepreneurship education at the
University of Tampere is based on multi-scientific teaching, which, at its best, can
have an impact on several sectors in society.
In order to gain an innovative regional infrastructure, there has to be an increase in
demand and export. International networks are an effective way to increase cross-
cultural awareness and to bring new knowledge and the ways of acting to the area
when developing an international infrastructure. The University supports the regional
strategy, which enhances knowledge development inside the region. New innovative
ways of action and reform in the university sector can boost the development of the
region. Innovative concepts, which have been invented in the region are the products
by definition and may focus attention to international arenas.
3.3 HAMK University of Applied Sciences
At HAMK University of Applied Sciences (www.hamk.fi), entrepreneurship promotion
has been increasing over the past few years. Entrepreneurship education is both
compulsory and voluntary in the curriculum and the highest amount of
entrepreneurial studies is ca. 75 credits. In 2004 there were 8 pre-incubator units in
different units of the polytechnic: Evo, Mustiala, Forssa, Valkeakoski, Riihimäki,
Hämeenlinna (Hattelmala and Lahdensivu) and Lepaa.
To support the pre-incubator operations, 4 sub-regional development centres –
Technology Centre Innopark Ltd., HAMK University of Applied Sciences and its
student association HAMKO – established a cooperative called Starttihautomo,
where the students can participate and practise entrepreneurial skills and exercise
business activities without losing their student status or benefits. The lines of
businesses in the cooperative are all the available degree programmes of HAMK
University of Applied Sciences. Students from other vocational institutions in the
Häme region are free to participate in the cooperative as well.
The cooperative has its own management, which takes care of the administration of
the cooperative as well as deciding on the acceptance of the student members, etc.
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3.4 HAMK University of Applied Sciences, Vocational Teacher Education Unit
HAMK Vocational Teacher Education Unit trains teachers for work carried out at
vocational institutions and polytechnics. Depending on the subject combinations of
individual graduate teachers, the training may also provide them with pedagogical
qualifications to work at vocational adult education centres and liberal adult education
institutions and as subject teachers at general upper secondary schools and
comprehensive schools. In addition to initial teacher training, the Vocational Teacher
Education Unit trains special needs teachers, guidance counsellors and driving
instructors. The Vocational Teacher Education Unit also supports the continuing
development of HAMK staff.
International projects
The Teacher Education is involved in several European projects on VET teachers
and trainers. The Unit actively seeks opportunities for research and development
activities with partners globally. International cooperation is seen as vital for
developing and benchmarking operations and processes as well as for the
internationalisation of future VET teachers.
Entrepreneurship in VET teacher education at HAMK Vocational Teacher Education
Unit
Conception of entrepreneurship - Entrepreneurship can be learnt: ”you are not born to be an entrepreneur but you
can learn it”
- Learning entrepreneurship is an action process -> learning about entrepreneurship
is not enough, we should learn for and especially through entrepreneurship
- Learning entrepreneurship is primarily about learning to:
• recognise and exploit the opportunities,
• manage and live with the risks (uncertainty vs. insecurity),
• work actively.
- Secondarily it can be about learning to become an entrepreneur
- Entrepreneurial learning is necessary in targeting at entrepreneurship and
entrepreneurial behaviour
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We adopt the following basic idea of entrepreneurial learning (according to Allan
Gibb):
Learning is action that requires
• a holistic view of the world
• a holistic view of the human being
• an understanding that the human being is a unique, risk-taking, creative and
innovative, free and responsible actor
Main activities linked to entrepreneurial learning and pedagogy at HAMK Vocational
Teacher Education Unit
1. VET teacher education programme with a special focus on entrepreneurship and
its development process.
2. Program of teaching and guidance skills for entrepreneurs (26 ECTS-points for
15 entrepreneurs during the year 2007)
3. In the Baltic Entrepreneurship Partners (Bepart) Project, a module for the
Training of Trainers programme is offered to teachers, lecturers, incubator
managers and other entrepreneurship actors within the Bepart network and in
the Hämeenlinna region.
4. Participation in the Entrepreneurship Strategy-process for HAMK University of
Applied Sciences
5. Participation in the new national Kattava project where the VET Teacher
Education Unit will contribute to the planning of “Entrepreneurial Pedagogy” and
the cooperation between educational institutions and world of work.
6. Participation in FINPIN-network (http://finpin.fi/English/Home/tabid/706/Default.aspx).
The Finnish Polytechnics Entrepreneurship Network is a community of people
who are enthusiastic about entrepreneurship and its promotion. We have
planned two international entrepreneurship projects and are currently awaiting
financing.
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4. Activities and Effects of Entrepreneurship Promotion from the Perspective of Entrepreneurs and future Entrepreneurs
There are a few basic problematic challenges in the Häme region – very few
enterprises with ageing entrepreneurs and the problem of continuity of these
enterprises. The second challenge is how to create new and innovative growth-
oriented enterprises which are more productive than the old ones. The last challenge
is to raise the level of knowledge, more specifically business knowledge, such as the
knowledge of sales and marketing, the efficiency of expenses, business planning,
etc. Many entrepreneurs have a lot of knowledge in their field of expertise but have a
lack of business knowledge.
The actors in the region are well aware of these challenges and there is now a
demand to study the current situation. The current situation requires
entrepreneurship education throughout the school system. For this purpose, the
collaboration between entrepreneurship education in the Research Centre and
Teacher Education Unit offers an excellent opportunity to work together to meet the
challenge. In addition, by renewing old structures of business services and building a
new dynamic network, these problems can be used as a catalyst for future
development.
4.1 The Regional EPC (i.e. Regional Entrepreneurship Promotion Cooperation)
In the Hämeenlinna sub-region, 11 business service organisations have formed the
Regional Entrepreneurship Promotion Cooperation (Regional EPC) which covers the
whole sub-region and its’ 8 municipalities. The organisations are the Employment
and Economic Development Centre, Finnvera Ltd. (a financing company), ProAgria
Häme (Association of Rural Advisory Centre), the inland revenue office of Häme,
Hämeenlinna Register Office, the regional organization of the Federation of Finnish
Enterprises, Häme Chamber of Commerce, Häme Development Centre, Jobs and
Society (Häme), Employment Agency (office in Hämeenlinna) and Technology
Centre Innopark Ltd.
The purpose of the cooperation is to deepen the sub-region’s public business service
organisations’ cooperation in providing and distributing client-oriented business
services. The focus is also on making the business services more available,
versatile, higher in quality and easier to find. The main idea of the cooperation is a
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so-called “one-stop shop” principle, where customers can contact one service
location / one person and get all the help that they need there.
In the Häme sub-region there are also 6 Business Advisor who are employed by the
Häme Development Centre. Their offices are located within each municipality near
the enterprises and entrepreneurs. The main task of the Business Advisor is to offer
basic consultation to the enterprises and to provide the services of the Häme
Development Centre and the municipality to the entrepreneurs / enterprises.
In the Häme sub-region there are 9 clusters of different lines of businesses:
machinery and metal, civil engineering and construction, commerce, forest industry,
foodstuff industry, tourism and welfare. Each cluster is the responsibility of one
Business Advisor and ca. 100 people participate in the operations of all the clusters
combined. The purpose of the clusters is to enhance the cooperation within the
specific line of business as well as within different lines of businesses and also to
improve the foundation of operations in all lines of businesses.
4.2 General Questions and Challenges of Entrepreneurship Promotion in the Häme Region
There is a significant challenge in developing customer-oriented business services.
In Finland we traditionally have a very multi-dimensional structure of public business
services. There are a lot of activities layered on top of one another and, in some
cases; the services do not meet the needs of the customer. It has been impossible to
create one inclusive business service organisation which has been a monumental
change in helping the customer find the appropriate service in this jungle of services.
Therefore the Finnish Government has decided that in its policy programme in
Entrepreneurship Promotion, one important issue is to research the needs of reforms
in the field of entrepreneurship promotion.
This report was published 31st of May 2005 by the State Secretary (Ministry of Trade
and Industry) Anssi Paasivirta’s working group. In the report, the working group
suggests that the wholeness of the public business services will be marketed under
the brand of YritysSuomi i.e. EnterpriseFinland (www.yrityssuomi.fi) which consists of
five service processes and the system of personal trainers who guide the customer
throughout the process of business services from the start to the very end of the
process. In this development work, Häme is one of the six pilot areas. Häme is also
operating its own EU development project around this issue (see 4.3).
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Crucial strategic key factors of success in the business services are the competence,
attitude and motivation of the people working in customer service. Only through this
can the successful outcome of the business service process and the satisfaction of
the customer be achieved. The demands within the client base are increasing, the
focus on profitability of the services and the efficiency of the expenses are becoming
more and more important and in the future, the services will be offered with fewer
resources. This presumes more skilful and committed customer service personnel
and also the development of common processes and tools within the entire service
network. In addition, the actors in public business services have to know the actors in
private business services better and actively utilize their services.
The five service processes described in the report by Mr. Paasivirta’s working group
are:
1. Interactive internet-service in nation-wide portal (www.yrityssuomi.fi) which has
regional sites (e.g. www.hame.fi) under it
2. Nation-wide call centre
3. Proactive network of regional business service points
4. Services for growing enterprise/business
5. Innovation services
4.3 The Role of the Häme Development Centre Ltd.
The Häme Development Centre, Ltd. (www.kehittamiskeskus.fi) was established in
2000. The owners of the company are the city of Hämeenlinna and the surrounding
municipalities. The company’s main function is to promote and to develop regional
economic policy and also to arrange and to organize business services in the
Hämeenlinna sub-region.
The company’s main tasks are to serve companies (to provide business services), to
develop the region’s attractiveness and competitiveness, to market the region’s
know-how and strengths, to coordinate the region’s business service organisations
cooperation, to provide and to help establish new companies, to improve the
operating environment of companies and cooperation with each other and to start
and to manage development projects. Three examples of these development
projects are the development of business services in the Häme region, the
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Entrepreneurship Häme project and the Häme network of continuing education
project. They all have been significant developers in their own field of operation.
Development of business services in the Häme region
The project started its operations in September 2005 and will end in August 2007.
The aim of the project is to develop the public business service system in the
Hämeenlinna sub-region. The project pilots the activities planned in the national
EnterpriseFinland business service renewal. The project, for example, designed and
pilots a training programme for business advisors during the year 2007. The training
programme consists of 5 elements / modules:
- current situation in business services,
- the operational environment of the business advisor,
- creativity methods,
- strategic tools,
- business knowledge, consultation, regional success and the future scenarios.
The structure is based on the theory of personal taxonomy by professors Koiranen
and Ruohotie.
Other operations in the project have been clarifying the roles of each business
service organisation and common marketing of the services in a customer-friendly
way.
Entrepreneurship Häme project
The Entrepreneurship Häme project operated during the years 2002-2005. The
project brought entrepreneurs, teachers and students together to try and find the right
entrepreneurial spirit for the future model of entrepreneurship in the region of Häme.
Its aim was to train teachers of vocational institutes and polytechnic to become new
types of entrepreneurial trainers so that students of these institutions may consider
entrepreneurship as one of their career options.
Organisations participating in the project were the University of Tampere, HAMK
University of Applied Sciences and vocational institutions in the area and also the
associations of the local enterprises.
As results of the project, teachers from the vocational institutes and polytechnics
have participated in the “Teaching entrepreneurship 15 credits” education; a pre-
87
incubator has been established at HAMK University of Applied Sciences to support
the studies and practices of entrepreneurship of the students, and at Tavastia Further
Education College every degree programme has a development coordinator
(teacher) who is responsible for entrepreneurial studies and entrepreneurial training.
One important result has been that entrepreneurial studies have been included in the
curriculum of all degree programmes in the vocational institutions. The project has
also built a regional network of development organisations in the field of
entrepreneurship in Häme and the service concept of entrepreneurship has been
built into the internet into www.hame.fi portal (section of Entrepreneurship Häme).
Häme network of continuing education
There is a new co-operational network of professional continuing education centres
in the Häme region. The main purpose of the network is to help enterprises and
customers from the public sector to train their staff. The network offers continuing
education in an accessible way. Its customers are able to contact any of its centres
(6 units) and the process starts immediately.
The network organises tailor-made training for their customers. The emphasis is on
the quality of training and in modern learning methods and the goal of the network is
to improve the level of competence within regional enterprises and their staff. The
network consists of 6 continuing education units.
The network of continuing education also co-operates with event organisers and its
goal is to offer customers added value by arranging training in unforgettable
surroundings which are abundant here in the Häme region.
Technology Centre Innopark Ltd.
Häme Development Centre Ltd's subsidiary Technology Centre Innopark Ltd.
(www.innopark.fi) focuses on organising facilities for companies and promotes
businesses in the Hämeenlinna sub-region. The Technology Centre Innopark has its
own business incubator and also offers expert companies and organisations facilities
a new innovative environment where they have the best possible opportunities to
concentrate on their own field of expertise.
88
4.4
Entr
epre
neur
ship
Pro
mot
ion
Act
iviti
es M
atrix
Mul
ti le
vel
appr
oach
A
ctor
s R
oles
G
oals
Pr
oces
ses
Res
ourc
es /
Tool
s
Plat
form
s -
Reg
iona
l EP
C
- E
ntre
pren
eurs
hip
prom
otio
n -
Mor
e en
trepr
eneu
rs,
mor
e en
terp
rises
-
Bet
ter S
ME
’s p
olic
y
- S
ervi
ce n
etw
ork
- 12
org
anis
atio
ns
in H
ämee
nlin
na
sub-
regi
on
(app
roxi
mat
ely
65
pers
ons)
-
ww
w.h
ame.
fi -
serv
ice
porta
l -
- Ser
vice
poi
nt fo
r en
trepr
eneu
rs
Net
wor
k le
vel
Clu
ster
s -
Met
al &
mac
hine
ry
- To
uris
m
- Fo
od in
dust
ry
- W
ood
indu
stry
-
Con
stru
ctio
n &
civ
il en
gine
erin
g -
Com
mer
ce
- W
elfa
re
- E
nhan
ce th
e co
oper
atio
n w
ithin
th
e lin
e of
bu
sine
ss a
nd
betw
een
the
lines
of
bus
ines
ses
- E
nsur
e th
e av
aila
bilit
y of
sk
illed
labo
ur
- C
oope
ratio
n be
twee
n th
e vo
catio
nal
inst
itute
s an
d en
trepr
eneu
rs/
ente
rpris
es
- P
ublic
-priv
ate
partn
ersh
ip
- Th
e de
velo
pmen
t ac
tiviti
es in
side
th
e cl
uste
rs
- B
ette
r co
mpe
titiv
enes
s w
ithin
the
clus
ter
- E
nsur
e th
e fu
ll em
ploy
men
t -
Gen
eral
dev
elop
ing
in li
ne w
ith th
e re
gion
al s
trate
gy
- R
espo
nsib
ility
of t
he
cont
inui
ty o
f the
in
nova
tions
- N
etw
ork
- D
iscu
ssio
n fo
rum
s -
Bus
ines
s A
dvis
ors
/ 6
pers
ons
- M
anag
emen
t of
the
ente
rpris
es
(par
ticip
atin
g th
e ac
tiviti
es w
ithin
th
e cl
uste
rs)
- Th
e B
oard
of a
ll th
e cl
uste
rs in
the
Reg
iona
l Cou
ncil
of H
äme
/ 9
pers
ons
89
The
Uni
vers
ity o
f Ta
mpe
re
Res
earc
h C
entre
for
Voc
atio
nal a
nd
Pro
fess
iona
l E
duca
tion
ww
w.u
ta.fi
/akt
k
- of
fer s
cien
tific
re
sear
ch a
nd
teac
hing
- E
stab
lishi
ng a
po
sitio
n at
the
regi
onal
and
nat
iona
l le
vel
- C
once
ptua
lisin
g en
trepr
eneu
rial a
nd
met
hodo
logi
cal
lear
ning
- E
ntre
pren
euria
l le
arni
ng
HA
MK
Uni
vers
ity o
f A
pplie
d S
cien
ces
ww
w.h
amk.
fi
- E
nhan
cing
the
entre
pren
euria
l co
mpe
tenc
es
- E
ntre
pren
eurs
hip
in th
e cu
rric
ulum
-
Pre
-incu
bato
r
- To
edu
cate
ski
lled
wor
kers
with
goo
d en
trepr
eneu
rial
com
pete
nces
- E
duca
tion
- P
re-in
cuba
tor
activ
ity
- C
urric
ulum
- P
re-in
cuba
tor
man
ager
s (8
pe
rson
s)
- C
oope
rativ
e S
tartt
ihau
tom
o (th
e B
oard
of t
he
coop
erat
ive
– 7
pers
ons)
-
inte
rnet
H
AM
K U
nive
rsity
of
App
lied
Sci
ence
s,
Voc
atio
nal T
each
er
Edu
catio
n U
nit
ww
w.a
okk.
ham
k.fi
- te
ache
r edu
catio
n -
to d
evel
op th
e en
trepr
eneu
rial
com
pete
nces
of t
he
teac
hers
in th
e re
gion
- te
ache
r edu
catio
n,
train
ing
prog
ram
mes
- ap
p. 1
5 pe
rson
s
Inst
itutio
nal l
evel
U
nive
rsiti
es
Reg
iona
l de
velo
ping
ag
enci
es
Häm
e D
evel
opm
ent
Cen
tre
ww
w.k
ehitt
amis
kesk
us.
fi
- S
ub-r
egio
nal
busi
ness
stra
tegy
an
d bu
sine
ss
deve
lopm
ent
- D
evel
op th
e co
mpe
titiv
enes
s of
th
e su
b-re
gion
- To
be
with
in 1
0 be
st
rate
d su
b-re
gion
s -
95.0
00 h
abita
nts
by
the
year
-
Viv
id
econ
omic
/bus
ines
s lif
e
- B
usin
ess
advi
ce
- B
usin
ess
& to
uris
m
serv
ices
-
Par
tner
ship
-
Dev
elop
ing
proj
ects
- 20
per
sons
-
Boa
rds
of th
e m
unic
ipal
ities
-
inte
rnet
90
The
Reg
iona
l Cou
ncil
of H
äme
ww
w.h
amee
nliit
to.fi
- R
egio
nal s
trate
gy
man
agem
ent
- To
sup
port
the
coop
erat
ion
betw
een
the
acto
rs
- E
nsur
ing
the
posi
tive
deve
lopm
ent o
f the
re
gion
- S
trate
gic
plan
ning
-
Fina
ncin
g -
Eur
opea
n U
nion
pr
ogra
mm
es
- C
lust
ers
- N
etw
orks
-
Inte
rnet
-
The
Cou
ncil
Jobs
and
Soc
iety
w
ww
.ham
eenu
usyr
itysk
esku
s.fi
- S
tarti
ng n
ew
ente
rpris
es a
nd
supp
ortin
g ne
w
entre
pren
eurs
- M
ore
qual
ified
new
en
trepr
eneu
rs
- M
ore
new
en
terp
rises
- D
evel
opin
g th
e bu
sine
ss p
lan
- B
usin
ess
plan
co
mpe
titio
n
- S
oftw
are
- C
onsu
ltant
s (4
pe
rson
s)
- m
ento
rs
- in
tern
et
Em
ploy
men
t and
E
cono
mic
D
evel
opm
ent C
entre
w
ww
.te-k
esku
s.fi
- H
äme
prov
ince
go
vern
men
tal
- B
usin
ess
cons
ulta
tion
- Fi
nanc
ial
cons
ulta
tion
- In
vent
ions
, pa
tent
s fo
r in
vent
ions
- H
ighe
r lev
el o
f kn
owle
dge
of th
e S
ME
’s
- B
usin
ess
advi
ce
- C
onsu
ltant
s -
Con
sulta
tion
prod
ucts
(e.g
. P
roS
tart)
-
Inte
rnet
Ent
repr
eneu
rshi
p A
ssoc
iatio
ns
ww
w.h
amee
nyrit
taja
t.fi,
ww
w.h
amec
ham
ber.f
i
- lo
bbyi
ng
- Th
e su
cces
s of
the
mem
bers
-
Trai
ning
-
Adv
ice
- S
ervi
ces
- B
usin
ess
agen
ts
- In
tern
et
Pro
Agr
ia
(Ass
ocia
tion
of R
ural
A
dvis
ory
Cen
tre)
ww
w.p
roag
ria.fi
/ham
e
- To
sup
port
and
deve
lop
the
agric
ultu
ral
entre
pren
eurs
hip
- S
ucce
ss o
f ag
ricul
tura
l en
terp
rises
-
Dev
elop
men
t of t
he
coun
try-s
ide
- C
onsu
ltatio
n -
Adv
ice
- S
ervi
ces
- A
dvis
ors
- In
tern
et
91
Tech
nolo
gy C
entre
In
nopa
rk
ww
w.in
nopa
rk.f
- D
evel
opin
g hi
gh-
educ
ated
kn
owle
dge-
inte
nsiv
e en
terp
rises
-
Sup
porti
ng n
ew
tech
nolo
gy
ente
rpris
es
- B
usin
ess
incu
bato
r
- E
nhan
cing
and
de
velo
ping
the
tech
nolo
gy o
rient
ed
ente
rpris
es
- P
roje
cts
- In
cuba
tor
- Fa
cilit
ies
- N
etw
orks
- P
rem
ises
-
Incu
bato
r m
anag
er
- In
tern
et
Em
ploy
men
t Age
ncy
(offi
ce in
H
ämee
nlin
na)
ww
w.m
ol.fi
/ham
eenl
inn
a
- E
mpl
oyee
s -
Em
ploy
er s
ervi
ces
- S
tart-
up fi
nanc
e
- E
nsur
e th
e av
aila
bilit
y of
the
labo
ur to
the
busi
ness
life
- E
mpl
oym
ent
serv
ice
- E
mpl
oym
ent
advi
sors
-
Inte
rnet
ser
vice
Ent
repr
eneu
rs
- To
dev
elop
thei
r ow
n co
mpa
nies
-
Ens
urin
g th
e gr
owth
and
pr
ofita
bilit
y
- S
ucce
ssfu
l en
terp
rise
- A
bilit
y to
em
ploy
- P
ersi
sten
t sel
f-ed
ucat
ion
of
busi
ness
kn
owle
dge
- O
wn
entre
pren
euria
l co
mpe
tenc
es
- B
usin
ess
serv
ice
netw
orks
Te
ache
rs
- C
arry
out
the
curr
icul
um
- S
treng
then
ing
the
entre
pren
euria
l co
mpe
tenc
es o
f th
e st
uden
ts
- To
edu
cate
new
ge
nera
tion
of p
eopl
e w
ith p
ositi
ve
entre
pren
euria
l at
titud
e
- C
urric
ulum
-
New
en
trepr
eneu
rial
peda
gogy
Indi
vidu
al le
vel
Stu
dent
s -
Act
ive
citiz
ensh
ip
and
inno
vativ
enes
s
- E
ntre
pren
eurs
hip
as
one
pote
ntia
l car
eer
optio
n
- S
tudy
ing
entre
pren
eurs
hip
- P
re-in
cuba
tor
- M
otiv
atio
n
92
5. Conclusions and Recommendations
5.1 Mission: Renewing and improving new regional entrepreneurship culture
Figure 3: Entrepreneurship culture
Different regional developers have a common goal in the Häme region: to renew an
entrepreneurship culture. In order to do that, the cultural factors and influence need
to be taken into account. The culture of the Häme region is known for its stability
rather than activities with reactionary measures (and it can be seen in the business
culture as well). Creation of a new entrepreneurial culture requires promoting
entrepreneurship and fostering entrepreneurship education in the region.
Expectations can be reached through co-operation.
5.2 Towards an Entrepreneurial Region from Matrix to Processes through Proactive Procedure
In the Häme region there is a genuine willingness to develop the field of business
services, and other entrepreneurial activities, and also to improve the quality of
services. Therefore, the organisation, dissolution and rearrangement of old structures
and institutions have been necessary in order to create a more customer-oriented
model of operation. A good example of this is the cooperation document signed by
different actors in the field of business services and its manifestation, the internet site
www.hame.fi (section of Entrepreneurship Häme) where all the business services
and business service providers as well as entrepreneurship education activities and
Renewing and improving new regional entrepreneurship culture
Renewing entrepreneurship culture
Anticipating future
Past entrepreneurship culture in Häme region
93
its instructors has been gathered into one place. The development work of the
cooperation and the www.hame.fi internet site will be continuous.
The consultation of the starting of new businesses is working rather well as can be
evidenced by the ca. 500 new enterprises per year. However, the problem is that ca.
70% of enterprises end their businesses in the same period of time. The other
challenge is that there are very few enterprises that are innovative and willing or
capable of expanding or internationalizing their businesses.
Because of the age demographic, one challenge is to ensure the availability of skilled
employees in all areas of competence: head office (i.e. technological and business
administration), labour (i.e. production and handicrafts skills) and operations (i.e.
sales, marketing and social contacts).
In order to make sure all these things will happen we have to clarify the roles of the
public business service organisations, to improve cost effectiveness of each actor
and each service and to emphasize the customer-oriented perspective in the process
of business services.
The conclusion is that the scenes of the spectacle are in order but we have to create
the play by ourselves.
94
Bibliography
1. Secondary Literature Ebers, Mark 1997, ‘The Formation of Inter-Organizational Networks’, in: Ebers, Mark
(eds.), The Formation of Inter-Organizational Networks, Oxford University Press. Kyrö, Paula 2005, ‘The Continental and Angloamerican approaches to
Entrepreneurship Education. Differences and Bridges’, in: Fayolle, A. & Klandt, H.2005, Entrepreneurship Education, Cheltenham, Edward Elgar.
Kyrö, Paula 2005, ’Yrittäjyyskasvatus – murrosten kautta yliopistoon’, in: Poikela, E. 2005, Osaaminen syntyy kokemuksesta – työssäoppimisesta ja kasvatuksesta, University Press, Tampere.
Scott M. G., Rosa P. & Klandt H. 1998, ’Educating Entrepreneurs for Wealth Creation’ in: Scott M. G., Rosa P. & Klandt H. (eds.) 1998, Educating Entrepreneurs for Wealth Creation, Ashgate. USA, pp. 11-15.
Kyrö Paula 2003, ‘Revising the concept and forms of benchmarking’ Benchmarking: An International Journal. Vol. 10 No. 3, 2003, pp. 210-225.
Kyrö, Paula 2004, ‘Benchmarking as an action research process’ Benchmarking: An International Journal, 2004. Vol. 11 No. 1.
Kyrö, Paula 2006, ‘Action Research and networking benchmarking in developing Nordic statistics on woman entrepreneurship’, Benchmarking: An International Journal, 2006. Vol. 11 issues 5-6 (To be published).
Paasivirta, Anssi 2005, Suomalaisten yrityspalvelujen kehityspolku maailman kärkijoukkoon. A publication of the Ministry of Trade and Industry, 2005. Available only in Finnish at: http://ktm.elinar.fi/ktm_jur/ktmjur.nsf/All/A36B43365855C5F5C2257034001ECAE6/$file/jul19elo_2005_netti.pdf.
2. Official Documents The Ministry of Trade and Industry (2005), information leaflet.
95
Appendix
APPENDIX 1 – Regional marketing image – case Häme APPENDIX 2 – Other vocational institutions in the Häme region dedicated to entrepreneurship
96
APPENDIX 1 – Regional marketing image – case Häme The logo and the visual image of the Häme
marketing –project / the brand of Häme
In the Häme region, we have a marketing project which started at the end of May
2000 and which would have been operating until the end of 2006. The project is
financed by the EU. It plans and executes regional marketing actions and it is
administrated by the Regional Council of Häme. The manifestation of the project and
its actions is the www.hame.fi website.
The Häme marketing project has been a dynamic tool in developing the cooperation
between different actors, and the website has operated as an expression of the
current structure and it has received a lot of positive attention from the other areas.
Therefore it could possibly be taken as a best practice for others.
The project is a textbook example of systematic marketing in Finland. Its goal is to
improve the recognition of the Häme region, to attract more people to the region and
it is also a foundation for development of tourism in general. The project is divided
into different areas, such as habitation in Häme, tourism in Häme, entrepreneurship
in Häme and knowledge and competence in Häme. Within these areas there are
different types of marketing actions under the complete visual image, a brand of the
Häme region.
Different actors in the Häme region have understood the possibility of communication
and marketing and although there are some rather big marketing events coming up in
the future, it is important to acknowledge that the results of the persistent work will be
not be seen until 5 to 10 years after implementation.
As stated above, marketing-wise, the following few years will be very important to the
image of the Häme region. In the year 2005 there was to have been 2 big events
taking place that would have marketed the Häme region in a high-profile way:
- The main commercial TV channel of the country will film a month-long, daily-aired
and very popular adventure competition programme in the Häme region, which will
be seen daily by ca. 700.000 viewers
- The Häme region will introduce itself in a big market affair in Helsinki in the
beginning of June, which will gather around ca. 250.000 people.
97
The city of Hämeenlinna will also host “The Finnish Housing Fair” in July-August
2007 which is very popular in Finland and which has attracted ca. 200.000 visitors in
previous years.
98
APPENDIX 2 – Other vocational institutions in the Häme region dedicated to entrepreneurship
Tavastia Further Education College
Tavastia Further Education College is, with its 2000 students, one of the largest
upper secondary colleges of its kind in Finland. It provides vocational qualifications in
35 educational fields. As a teacher training college it deals with practical applications
of teacher education in close operation with the Vocational Teacher Education
College of Häme Polytechnic.
The six sectors of education provided by the college are: culture; natural sciences;
social sciences, business and administration; social services, health and sports;
tourism, catering and home economics; technology and transport. With the upper
secondary “general education” schools in Hämeenlinna, the college offers a wide
range of optional – vocational as well as general – studies to the students. The
students of the college also have the opportunity of choosing upper secondary school
studies leading to matriculation examination. The duration of studies leading to
vocational qualifications is three years. The age of the students is 16 – 19 years.
The college provides apprenticeship training in youth and adult education. The
expertise, up-to-date facilities and equipment give excellent possibilities to plan tailor-
made training for the needs of the enterprises. The focus of the college is to develop
its entrepreneurial pedagogy with the help of different actors.
Kiipula Adult Education Centre
Kiipula Adult Education Centre is specialised in educating people with an impaired
ability to work and function. In 2003, the centre organised almost 200 courses, which
gathered 2500 students from different parts of Finland. The centre employs more
than thirty full-time educators and uses services of dozens of experts on a variety of
fields.
The education offered by Kiipula Adult Education Centre is based on the needs and
changes in the work life of contemporary society. Special needs, interests, and the
situation of each student are considered in implementation of the course. The final
success of the education is ensured by co-operation between the student and the
educator, an up-to-date curriculum and the modern facilities of the centre. The fields
99
of education are: technology (computers, metal work); general guidance; service
(trade, entrepreneurship, social and health services).
The largest customer of the centre’s education services is the Labour Administration.
The centre also provides education and development services for the companies and
communities in the region and manages projects funded by the European Union.
The Finnish Entrepreneurship Institution
The Finnish Entrepreneurship Institution also has activities in the Häme region in co-
operation with the regional organisation of the Federation of Finnish Enterprises.
100
Entrepreneurship Promotion from a University of Applied Sciences’ Point of View. The Case of Kajaani University of Applied Sciences in Kainuu Region Päivi Malinen, Kajaani Polytechnic Project Manager Box 52 FIN 87700 Kajaani Phone +358 861 899 455 E-Mail [email protected]
“Kainuu means quality of living achieved through
excellence, enterprise and cooperation.” Kainuu regional programme
(Source:http://www.kainuu.fi/fi_tied04/MAO_Kainuu_Reg_Prog_03_06_summary.pdf)
Contents Illustrations ..............................................................................................................102
1. Introduction .......................................................................................................103
2. Entrepreneurship Promotion from the University of Applied Sciences Point of View..................................................................................................................105
3. Terms of Economic Development and Entrepreneurship (Structure, History and Culture, Practices) ............................................................................................108
3.1 Short Description of the Kainuu Region ............................................................108 3.2 Main Strengths and Weaknesses of the Kainuu Region...................................111 3.3 Regional Planning Strategy and Regional Marketing Strategy of Kainuu .........112
4. State and Challenges of Entrepreneurship Promotion in the Kainuu Region....114 4.1 Promotional Activities in the Kainuu Region .....................................................114 4.2 The Role of Higher Education Institutions.........................................................120 4.3 Strengths and Weaknesses of the Entrepreneurship Promotional Activities in the
Kainuu Region ..................................................................................................120
5. Effect and Impact of Entrepreneurship Promotion ............................................121
6. Conclusions and Recommendations ................................................................123
Bibliography.............................................................................................................124
101
Illustrations Figure 1: Kainuu region in Finland (http://www.kainuu.fi/index.php?mid=1&la=en) 104 Figure 2: Universities´ of Applied Sciences core tasks convergence (Saurio 2004)106 Figure 3: Polytechnics, pre- and incubators in Finland (Saurio 2004) .................... 107 Figure 4: Actors of entrepreneurship promotion in the Kainuu region..................... 110 Figure 5: Swot analysis of Kainuu (Regional Centre Development Programme, 2005;
Regional Council of Kainuu) .................................................................... 111 Figure 6: Chart of strategic planning in Kainuu area............................................... 112 Figure 7: From students to enterprises – problems in the entrepreneurship career
path (Ahola, Honkanen 2004).................................................................. 121 Figure 8: Training preparation for entrepreneurship in Universities of Applied
Sciences: different levels and methods (Saurio 2004) ............................ 122
102
1. Introduction
The main idea of this paper is to describe the strategic planning system of
entrepreneurship promotion in the Kainuu area. The description of Kajaani
Polytechnic’s role is included. According to many statistical facts, the Kainuu area
has not been very successful in entrepreneurship and employment promotion action
(migration from Kainuu). Nowadays, there are some positive signs: cooperation
between education and development organizations and firms as well as larger
development projects in key sectors (Measurepolis in measurement technology and
Snowpolis and Seniorpolis in the wellbeing sector). The Talvivaara Mining company
has started the construction of the mine and the mine is expected to have, when
operating, a workforce of 400 man-years.
Kajaani Polytechnic is an active partner in planning and implementation of
development projects in Kainuu. In Kainuu the structure of the commercial and
industrial sector is very small. That’s why the role of Kajaani University of Applied
Sciences is ambivalent. On the one hand it educates experts to the international
firms of the Kainuu area and to Finland. On the other hand the emphasis of the
entrepreneurship education is at SMEs.
Definition of Entrepreneurship
Internal entrepreneurship Internal entrepreneurship is defined as the creative and entrepreneur-like way of working either when developing one’s own business or when working in the service of another.
External entrepreneurship External entrepreneurship mean setting up and taking care of one’s own business.
Entrepreneur-like working is part of our pedagogical strategy.
Target of BEPART project - How to find prospects - How to encourage them - How to coach them and strengthen their
knowledge and attitudes
103
Opportunity driven Necessity driven Knowledge-based, innovative entrepreneurship
Growth entrepreneurship - strongly based on knowledge - strongly based on networking
Quite small percentage in Finland
Setting up new small size business or taking care of the firms of retired entrepreneurs
Small sized - Based on local purchase
power
Definition of Region In the paper the concept region is mainly viewed from an administrative and socio-
economic point of view. Kainuu region is situated in the geographical centre of
mainland Finland and it shares a 260 km common border with Russia. The land area
of Kainuu is similar to that of Belgium; however there are only 84 400 inhabitants
(2006).
Figure 1: Kainuu region in Finland (http://www.kainuu.fi/index.php?mid=1&la=en)
104
2. Entrepreneurship Promotion from the University of Applied Sciences Point of View
The partners of Kajaani University of Applied Sciences viewed its role in
entrepreneurship promotion as follows (Seppälä 2005):
Laying the Foundation
- the University of Applied Sciences has to maintain its image as an attractive place
of study and work. In doing so, its status as a respected educational institution for
qualified personnel will remain and at the same time, Kainuu’s image will improve
and become even more attractive
- connector between the commercial and industrial life and the higher educational
system
Educator of the core competencies
- produces qualified people to meet the needs of commercial and industrial life
- development of the knowledge level of existing personnel
- further educator of the entrepreneurs
R&D actor
- actor in applied research
Entrepreneurship educator
- basics of entrepreneurship
- leader of the entrepreneurial education in Kainuu area
The complexity of entrepreneur promotion from the UAS’ point of view is drawn in
Figure 2. According to law, core tasks of the University of Applied Sciences sector
are a professionally oriented higher degree education, R&D activities and working
and business life cooperation.
105
Figure 2: Universities´ of Applied Sciences core tasks convergence (Saurio 2004)
The core task of Universities of Applied Sciences (UAS) is more practically oriented.
For example Kajaani UAS is a member of the Finnish UAS Incubator Network. Figure
3 shows that there are pre- and incubator organizations which have connections to
Universities of Applied Sciences in Finland. The incubators are either part of the UAS
organisations or UAS' are co-operators.
Professionally oriented
education
Research and development work
Cooperation with working life and
enterprises
R&D that supports
enterprises and business life
Combining R&D work with studies:
thesis, projects Business
life/enterprise based cooperation
Innovations Student entrepreneurship
Pre- and business incubators Regional development
106
Figure 3: Polytechnics, pre- and incubators in Finland (Saurio 2004)
107
3. Terms of Economic Development and Entrepreneurship (Structure, History and Culture, Practices)
3.1 Short Description of the Kainuu Region
1995 2000 2002 2003 2004 2005 2006 Kainuu Gross Value Added / EU 15 = 100
74.8 67.6
Finland Gross Value Added / EU 15 = 100
97.2 103.2
Kainuu Population with higher education %
8.8 17.4 18.1 18.3
Finland Population with higher education %
13.4 23.3 24.2 24.6
Kainuu Employment Rate % 52.1 55.2 56.1 55.3 54.3 56.9 58.0 Finland Employment Rate % 61.6 67.3 67.7 67.3 67.2 68.0 68.9 Population 95,20
1 89,77
7 87,37
1 86,57
4 85,95
7 85,30
3 84,35
2 Population density 4.2 4.0 Number of firms 3,082 3,147 3,139
Administrative view
The Regional Administration Experiment in the Kainuu region began 1.1.2005. The
regional experimental scheme will try to offer new opportunities for regional
development. The aim is to secure access to public services for the inhabitants, to
implement large-scale development projects and to increase regional decision
making power with regard to state administration. The Kainuu Region Joint Municipal
Board will assume responsibility for the overall regional economic policy and for
planning and development work. The provision of services in the joint municipal
board will be financed by the state and by Kainuu's municipalities. Supreme decision-
making power over the region's operative and financial issues will be exercised by a
39-member regional executive board, which will be selected through public elections
for four year terms. The future on Kainuu is now really in the hands of Kainuu
inhabitants and is a unique system among Finland’s regions.
Socio-economic view
Kainuu’s challenges are unemployment, emigration, future change in population
structure (ageing) and poor economic development. For example about half of the
students who graduated from Kajaani University of Applied Sciences have left the
Kainuu area.
108
The population is ageing and therefore, there is a need for more healthcare and
social services, which has to be financed by taxation. This will also mean creation of
jobs in the healthcare and social service fields and also more prospects for
entrepreneurship in this sector. Besides that, according to the Regional Strategic
Plan, Kainuu trusts enterprises which are highly specialised, networked and export-
oriented.
In addition the region’s entrepreneurs are getting older. According to the Employment
and Development Center for Kainuu, there are about 900 enterprises whose owners
will reach the retirement age shortly. This phenomenon is one of the common
interests of entrepreneurship promoters in Kainuu.
The economic development of the Kainuu area is based on the increasing number of
higher level education graduates whose degrees have focused key clusters (for
example measurement technology, tourism, sports and leisure activities …). Also the
development of innovation organisations is promising. For example, Measurepolis is
a cluster of measurement technology enterprises, the Kajaani University consortium
and Kajaani University of Applied Sciences. Its aim is to promote opportunities for hi-
tech companies by offering to them contacts with field-specific research and training
and by developing cooperation between them.
A new and very promising actor in Kainuu region is the Talvivaara Mining Company.
The Talvivaara deposits in Kainuu comprise one of the largest known sulphide nickel
resources in Europe with 266 million tonnes of ore in measured and indicated
categories. The mine is also expected to produce copper, zinc and cobalt as by-
products of the process. Talvivaara's key technology is bioheapleaching, which is
utilized to extract metals from the ore. (www.talvivaara.com)
The construction of the mine has started and will take place in the years 2007 and
2008 and the mining activity will be likely to begin in 2009. It has been evaluated that
the activity is in process for at least 25 years. The workforce is almost 3200 man-
years in the construction period in Talvivaara, of which about 1500 man-years are
being reached by the people who live in Kainuu. When in operation, the direct need
for labour force will be at most 400 man-years in Talvivaara. (Korhonen , Ponnikas).
The multiplied effect to Kainuu region’s economy is huge.
109
Figure 4: Actors of entrepreneurship promotion in the Kainuu region
KAJAANI POLYTECHNIC Focus on interests of SMEs Faculties: Administration and Business, Tourism, Engineering, Health and WelfareAdult education R&D Networks (FINPIN)
THE REGIONAL SELF-GOVERNMENT EXPERIMENT IN THE KAINUU REGION
City of Kajaani Technology Centre of Kajaani: pre-incubator Intotalo Center of Expertise Regional Centre Development Program Other municipals
Technical Research Centre of Finland
Employment and Development Center
For Kainuu
KAJAANI UNIVERSITY CONSORTIUM Biotechnology operations Continuous Education and Regional Development Department of Information Processing Science, Kajaani unit Kajaani Department of Teacher Education Measurement and Sensor Laboratory Sports technology unit Universities of Oulu, Rovaniemi, Kuopio and Jyväskylä as partners
The Kainuu Regional Development Company
Measurepolis Snowpolis Company
Big enterprises
SME’s
110
3.2 Main Strengths and Weaknesses of the Kainuu Region
Figure 5: Swot analysis of Kainuu (Regional Centre Development Programme, 2005; Regional Council of Kainuu)
Strengths Weaknesses + cluster of measurement technology in
Kajaani + developing co-operation + Kajaani university consortium, Kajaani
University of Applied Sciences + closeness to nature, unspoilt, peaceful
and safe environment + existing entrepreneurship within the high-
technology sector + several projects already in progress
- population development (negative migration and rapid ageing)
- low level of education compared in average in Finland
- lack of economic resources (low GNP) - attitudes, opposition to change - narrow occupational and business
structure, enterprises are small - lack of co-operation between
businesses, educational institutions and public sector (poor networking)
- lack of active operators - shortage of skilled labour - operational environment not attractive to
businesses or young educated people - logistics
Possibilities Threats ! opportunities created by technical
development/telematics ! remigration ! content-oriented production (in broad
terms), a significant opportunity – not affected by distances
! regional network ! availability of educational services ! availability of public services /electronic
services ! internationalisation ! growing rate of persons with high
education ! expanding R&D ! The Talvivaara Mine and multiplikator
effects
? decreasing numbers and changes in the population structure
? businesses relocating elsewhere to more favourable environments
? labour force educated and talent in the region moving elsewhere
? the credibility of Kainuu will not improve ? financial situation in municipal sector is
weak and prevents development
A very crucial problem in Kainuu region is that the region is losing population. Young
people, especially move to other parts of Finland and take with them their educated
and innovative minds as well as their unborn children. With an ageing population, the
result is the local purchasing power will be less than average and this also will affect
entrepreneurial possibilities.
111
Kainuu Regional Plan 2025 ”Kainuu means quality of living achieved through excellence, enterprise and cooperation” Aims: - more companies and work - strength with education - centres of excellences accelerating innovation - the good life in Kainuu
Kainuu Regional Strategic Programme 2006 – 2010 More precise qualitative and quantitative aims including entrepreneurship
Strategic plan for higher educational cooperation 2001 -2007 (Oulu university, Kajaani polytechnic).The first this kind of plan in Finland - concrete actions to foster growing branches of
business by education and R&D - most of the planned actors have realized - entrepreneurship promotion was not emphasised
Municipal industrial policies: for example Kajaani 2005 - Emphasizes cooperation and makes entrepreneurship
promotion processes really concrete (BSC planning) - Process of support existing firms - Processes to support start-ups - Processes to develop innovative ideas to business - Processes to lure companies to Kajaani - Processes to integrate to the growing Oulu region Strategic aims -> critical success factors -> indicators
Industrial and employment policy in Kainuu Region (8.11.2004)
- growth of GNP - more export
Main strategy is the growth of the knowledge-based enterprises.
Towards a knowledge-based northern Finland – Building regional cooperation at tertiary level Focus areas - adult education - promoting
innovations - promoting
entrepreneurship - creative use of
information and communication
3.3 Regional Planning Strategy and Regional Marketing Strategy of Kainuu
Figure 6: Chart of strategic planning in Kainuu area
In Finland, regional planning comprises a regional plan, regional strategic
programme and regional land use plan. The regional plan is drawn-up to indicate the
desired long-term development in the region (20 to 30 years). The regional strategic
programme and regional land use plan, in turn, are used to implement the regional
plan. The regional strategic programme is drawn up for a medium term, and it is
intended to direct and coordinate regional development work in the years to come.
The programme is prepared on the basis of the targets and strategies set in the
regional plan (Ministry of Interior).
Kainuu situates in the area of Eastern Finland Objective 1 Programme (EU), which
strategic priorities are strengthening existing successful businesses, diversifying
business in growth sectors based on expertise and eliminating obstacles to
development. In the Regional plan and in the regional strategic programme in the
Kainuu area, entrepreneurship has an important role. More concrete measures are
112
written in many sectoral and municipal level action plans. The new EU structural fund
period 2007–2013 is supposed to give as much development funding for as the last
fund period.
Kainuu is in a different situation compared to other regions in Finland. Because of the
Kainuu administrative experiment Kainuu itself is responsible via the joint municipal
board, to where to focus developmental resources. The focuses are selected when
the political board approves the annual budget and an action plan. In the other
regions, the regional strategic implementation plan is only considered to be a
guideline, and thus, has no binding legal effect.
Kainuu needs strategic planning in cooperation with other areas, too. First in Finland
Oulu university and Kajaani University of Applied Sciences have made a plan for
higher education cooperation. The plan is well realized. Kajaani UAS is also partner
in northern Finland higher educational planning.
On the strategic level, in every strategic plan entrepreneurship is seen as very
important. The problem is that, when measuring the economical factors, Kainuu has
not succeeded as well as other regions or Finland on average. There are many
sectoral plans, municipal plans and regional plans of different levels, but as the
former headmaster of Kajaani University of Applied Sciences Kari Juntunen said:
“The implementation of those plans has not been effective enough”. Kainuu has
however succeeded in certain key projects, i.e. Snowpolis, Measurepolis,
cooperation between university consortium and University of Applied Sciences.
113
4.
Stat
e an
d C
halle
nges
of E
ntre
pren
eurs
hip
Prom
otio
n in
the
Kai
nuu
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4.1
Prom
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in th
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onal
goa
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cus
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to k
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to ta
ke c
are
of
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anni
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“N
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inan
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entre
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an e
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un
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Uni
vers
ity o
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educ
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tern
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Kaj
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Uni
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f A
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cien
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(deg
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prog
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spor
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nd le
isur
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114
allo
cate
reso
urce
s to
the
area
. -
To e
nsur
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ality
and
exp
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e of
th
e im
plem
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’ de
velo
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s.
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stre
ngth
en th
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-
Uni
vers
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Tech
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UA
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as a
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30 m
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115
Inst
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nal l
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Act
ors
Rol
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d re
gion
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oces
ses
- ed
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scie
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: tea
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f A
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eurs
and
UA
S
stud
ents
hav
e po
ssib
ilitie
s to
co
ntac
t and
tran
sfer
the
busi
ness
to
new
gen
erat
ion
- pe
dago
gica
l stra
tegy
in
entre
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prom
otio
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impl
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s w
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repr
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omot
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sfer
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nera
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in d
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ssio
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tudi
es
can
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cuse
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en
trepr
eneu
rshi
p (h
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car
e,
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ness
adm
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tratio
n, to
uris
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spor
ts a
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isur
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anag
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o-op
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with
incu
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tota
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- ba
sic
finan
cial
re
sour
ces
from
the
gove
rnm
ent
- en
thus
iast
ic
teac
hers
-
EU
-pro
ject
s -
Net
wor
ks
- G
ood
rela
tions
to
ente
rpris
es in
re
gion
116
City
of K
ajaa
ni
ww
w.k
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Pol
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l dec
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Teac
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s, tr
aini
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in s
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by e
ntre
pren
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an
d de
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a b
usin
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idea
3.
Ent
repr
eneu
rshi
p co
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s fo
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uden
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upp
er s
econ
dary
ed
ucat
ion.
Em
ploy
men
t and
D
evel
opm
ent C
entre
Fo
r Kai
nuu
- to
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port
and
advi
se s
mal
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at
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tage
s of
thei
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nolo
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ente
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assi
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mat
ters
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to im
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abou
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lan
and
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lt tra
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labo
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y fra
mew
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Goa
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re s
et in
the
Kai
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Fina
ncia
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ourc
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thro
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Kai
nuu
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boa
rd
-> to
ent
erpr
ises
, ed
ucat
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orga
nisa
tions
, re
sear
ch
orga
nisa
tions
117
- to
pro
mot
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d de
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pris
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influ
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and
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The
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Reg
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Com
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l
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Kai
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mpe
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row
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; to
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to p
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the
deve
lopm
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f the
regi
onal
co
mm
erci
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truct
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- K
ainu
un E
tu O
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pro
mot
ing
busi
ness
dev
elop
men
t and
re
gion
al g
row
th th
roug
h re
gion
al,
natio
nal a
nd in
tern
atio
nal
initi
ativ
es.
- G
oals
giv
ing
in re
gion
al p
lans
-
Focu
s on
inte
rnat
iona
l and
gr
owin
g en
terp
rises
- M
ainl
y th
roug
h pr
ojec
ts
- R
ecog
nitio
n of
the
need
s of
the
grow
ing
key
sect
or e
nter
pris
es
- P
roje
ct p
lans
and
see
king
fina
nce
from
EU
and
oth
er s
ourc
es
- Im
plem
enta
tion
of th
e pr
ojec
t -
Eva
luat
ion
proc
esse
s
- Fi
nanc
ed b
y m
unic
ipal
s of
K
ainu
u R
egio
n -
EU
-fina
ncia
l so
urce
s -
A lo
t of p
roje
ct
know
ledg
e -
Rel
atio
nshi
ps to
en
terp
rises
118
Indi
vidu
al le
vel (
from
the
Uni
vers
ity o
f App
lied
Sci
ence
s po
int o
f vie
w)
Act
ors
Rol
es
Goa
ls
Proc
esse
s R
esou
rces
Ent
repr
eneu
rs
- M
ento
rs
- Le
ctur
es
- C
omm
issi
oner
s (fi
nal y
ear
proj
ects
) -
Pra
ctic
al tr
aini
ng (a
lso
as fu
ture
bu
sine
ss tr
ansf
er to
you
nger
ge
nera
tion)
-
R&
D p
roje
ct
- E
nviro
nmen
t for
pro
ject
lear
ning
- G
et w
ell e
duca
ted
pers
onne
l who
ha
s in
tern
al e
ntre
pren
euria
l at
titud
es
- G
et b
uyer
of t
he b
usin
ess
whe
n re
tired
Teac
hing
in w
ork
plac
e –
proc
esse
s
Som
e lim
itatio
ns, b
ecau
se
entre
pren
euria
l stru
ctur
e of
th
e K
ainu
u ar
ea a
re S
ME
Stu
dent
s -
Lear
ner
- P
re-e
ntre
pren
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Cha
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e st
uden
t’s ro
le to
pre
-en
trepr
eneu
rial p
erso
ns ro
le
Lear
ning
pro
cess
es
Em
phas
isin
g ac
tive,
cre
ativ
e,
coop
erat
ive,
cus
tom
er a
nd
finan
ce o
rient
ed p
erso
ns
- S
peci
al c
ours
es in
cu
rric
ulum
. -
Kaj
abilit
y ltd
– s
tude
nts
owne
d an
d ra
n co
mpa
ny
insi
de K
ajaa
ni
Pol
ytec
hnic
Teac
hers
-
Men
tors
-
Teac
hers
-
Co-
oper
ator
s w
ith e
ntre
pren
eurs
-
Dev
elop
ers
of e
ntre
pren
eurs
hip
educ
atio
n
Mor
e st
uden
ts w
ho w
ill st
art t
heir
own
busi
ness
afte
r gra
duat
ion
- P
edag
ogic
al p
roce
sses
-
Ope
n en
viro
nmen
t foc
us in
te
achi
ng
- C
oope
ratio
n w
ith
ente
rpris
es
- G
ood
rela
tions
with
en
terp
rises
in re
gion
-
Ped
agog
ical
co
mpe
tenc
es in
en
trepr
eneu
rshi
p ed
ucat
ion
119
The evaluation system can be described as follows:
Network / regional level
General economic statistics are available (employment rates, starting and finishing
enterprises …)
Project level
In Kainuu area there has been many EU projects which have aimed to promote
entrepreneurship but evaluation information in not available.
Kajaani University of Applied Sciences; Institutional and personal level
Kajaani UAS make research concerning entrepreneurship as a way of living two
times in one students life: first when student is graduating and then 1 – 2 years after
graduating day. About 50 % of graduated students have left Kainuu area after
graduation. Only 1.3 % of the answered graduated were entrepreneurs after 1- 2
years of leaving polytechnic. The entrepreneurship among those who are near their
graduating day is seldom: in the year 2004 only 0.3 % of graduating students
mentioned that they will be entrepreneurs after graduation. The average percent in
Finnish Universities of Applied Sciences is 2.6 %. This indicator might be a good
evaluative indicator for example in the BEPART-project.
4.2 The Role of Higher Education Institutions
In the strategy of Kajaani University of Applied Sciences, the emphasis is on the
development of knowledge to meet the needs of enterprise. Besides that, one of the
critical success factors of our Balanced Score Card is promoting entrepreneurship.
Success is measured by how many students have made a Business Plan as part of a
portfolio aimed at starting an own company after graduation and how many students
have done the standard Business Plan. Incubator Intotalo is one of most important
partners in the “entrepreneurship path” in Kajaani UAS.
4.3 Strengths and Weaknesses of the Entrepreneurship Promotional Activities in the Kainuu Region
Main strengths
- clear focus of the clusters
atoms-bytes-people (for example measurement applications)
production of experiences - adventure and events for tourists
forestry and wood processing
120
foodstuff production
- developing co-operation between education, research, enterprises (case
Snowpolis)
- focus on opportunity driven entrepreneurial activity.
- young people are interested in entrepreneurship
- media has been active in promoting good examples of young entrepreneurs
- increasing possibilities for entrepreneurship in social and healthcare sector,
project to support and network SM-sized social and healthcare firms
Weaknesses and challenges
- if entrepreneurship promotion activities are EU-projects, are achievements
sustainable?
- Are we able to match the actions of the regional entrepreneurship promoters?
The question is the learning of organisations and networks.
5. Effect and Impact of Entrepreneurship Promotion
Figure 7: From students to enterprises – problems in the entrepreneurship career path (Ahola, Honkanen 2004)
In Figure 7 Ahonen and Honkanen (2004) describe the problematic path of
entrepreneurship. From the point of view of the Universities of Applied Sciences, one
basic problem is how to steer students, and which ones, into the incubation process.
Of the interested, only a fraction may have some kind of business idea worth further
consideration.
▪ Recognition of potential entrepreneurs
▪ Encouragement ▪ Counselling towards
business incubator ▪ Supporting
▪ Recognition of viable business ideas
▪ How to teach, what skills
▪ Timing the exit phase? ▪ Future financing
▪ Industrial and enterprise policies
▪ Social and economic conditions
▪ Sustainable development
potential entrepreneurs?
Students
potential enterprises?
Business Incubators
Enterprises
121
Perhaps the main focuses of promoting activities are procedures to “lure” students
towards an internal entrepreneurship path in UAS', to develop external supportive
actions of other entrepreneurship promoters and develop mechanism to exit stage of
the entrepreneurship path.
The crucial target of development processes is the roles and processes between
students, UAS and other promotion actors. In Figure 8 it is also draw a path and
different kind of promotion possibilities. In recent years Kajaani UAS has developed a
well functioning procedure to accompany students´ entrepreneurship path with
incubator Intotalo.
Figure 8: Training preparation for entrepreneurship in Universities of Applied Sciences: different levels and methods (Saurio 2004)
Training concerning entrepreneurship Increase level of awareness
Training with the help of entrepreneurship
Training into entrepreneurship
Reaches almost all UAS students Increasing awareness of entrepreneurial activities and entrepreneurship
Training and instruction towards setting up one’s own business and acting as an entrepreneur
incubator
Pedagogic process that make use of enterprise-like situations - practice enterprises - simulations - actual business in
training situations - cooperatives
pre-incubators
122
6. Conclusions and Recommendations
From the Finnish national viewpoint Kainuu is seen as a typical region of negative
migration, from where people have moved out to seek work or education. Selective
outward migration is changing the age structure of population in rural service centres
and even in the regional centre, Kajaani. Young people are moving away.
Enterprises are mainly small and micro-sized and entrepreneurs are ageing.
However, there are some promising entrepreneurial prospects: Snowpolis, new
mining industry plans...
Strategic planning is done on many levels, organisations and networks. The problem
of entrepreneurship promotion is implementation of the plans and effectiveness of
many promotion projects.
Finally some general research and development topics can be stated:
1) Better entrepreneurship learning processes: benchmarking of the learning
methods and relationship in entrepreneurship path in partner universities
2) Better local partnership in entrepreneurship promotion
What kinds of models of local partnership are implemented?
How do the models of the local partnership operate?
Are the models efficient in their operation?
What are the obstacles to the local partnership?
3) Implementation of better practices
123
Bibliography
1. Secondary Literature Ahola S, Honkanen V. 2004, Entrepreneursihp education in Finnish polytechnics
Public private co-operation or business to business relationships? Research Unit for the Sociology of Education, University of Turku, Finland. Available at: http://www.soc.utu.fi/RUSE/PDF_tiedostot/CHER2004paper.pdf.
Arenius P, Autio E, Kovalainen A. 2004, Global entrepreneurship monitor 2003. Finland executive summary. Available at:
http://www.gemconsortium.org/download/1113119880968/GEM%20Finland%202003.pdf.
Eronen A. 2005, Student Attitudes towards Entrepreneurship at Kajaani Polytechnic – Values, Attitudes, Images and Motivations in the Context of Entrepreneurship. Unpublished Manuscript. (Only in Finnish).
Korhonen S., Ponnikas J. 2006, Skilled Employees for Talvivaara. Research Report of Demand and Supply of Labour Force in the Talvivaara Mine Project. University of Oulu. Research and Development Centre of Kajaani (REDEC). Regional Development. Available at: http://www.kajaaninyliopistokeskus.oulu.fi/julkaisut/workingpapers/Toihin_Talvivaaraan_REDEC_WP_56.pdf.
Kuvaja S, Saurio S ed. 2004, Generating Knowledge-based Entrepreneurship: Pre- and Business Incubation in Finnish Polytechnics. FINPIN – Finnish Polytechnics Incubators Network.
Saurio S. 2004, ‘Challenges Polytechnic Pre- and Business Incubators Will Face in the Future.’ In: Kuvaja S, Saurio S Generating Knowledge-based Entrepreneurship.
Saurio S. 2004, ’Promoting Entrepreneurship and Business Incubator Operations in the Finnish Polytechnic Environment.’ in: Kuvaja S, Saurio S Generating Knowledge-based Entrepreneurship.
Töihin Talvivaaraan? Selvitys Talvivaaran kaivoshankkeen työvoiman kysynnästä ja tarjonnasta
2. Official Documents Regional Council of Kainuu 2005, KAINUUN MAAKUNTASUUNNITELMAN JA –
OHJELMAN PÄIVITYS V. 2005 (Updating Kainuu Regional Plan and Regional Strategic Plan).
Regional Council of Kainuu 2003, Kainuun Maakuntaohjelma 2003 – 2006. (Kainuu Reginal Strategic Programme 2003 – 2006).
Regional Council of Kainuu ,2004, KAINUUN MAAKUNTAOHJELMA 2003-2006 SEURANTARAPORTTI 2004. (Kainuu Regional Strategic Programme 2003.-20056 Follow up report) Available at: http://www.kainuu.fi/fi_tied04/MAO_Maakuntaohjelman_seurantarap_2004.doc.
Regional Council of Kainuu 2003, Kainuu Regional Plan 2020. Available at: http://www.kainuu.fi/fi_tied04/Kainuu_Regional_Plan_summary.pdf
Regional Council of Kainuu, Kainuu Information Society Strategy 1999 – 2002. Available at: http://www.kainuu.fi/tietoyhteiskunta/strategy.htm#3.2%20SWOT%20ANALYSIS
124
The Ministry of the Interior, Programme Description. Eastern Finland Objective 1 Programme. Available at: http://www.intermin.fi/intermin/images.nsf/files/C60B90F0F0FA128FC2256B8700510862/$file/isengl.pdf.
The Ministry of the Interior, Programme Description. Regional strategic programmes and their implementation plans. Available at: http://www.intermin.fi/intermin/home.nsf/pages/0EE21CB60E73F520C2256FB9006FA9E4?opendocument.
3. Internet Sources The Centre of Expertise Programme Strengthening the use of expertise in measuring
technology and chamber music in Kainuu. Available at: http://www.oske.net/in_english/centres_of_expertise/kainuu/
4. Memos Regional Centre Development Programme. 2005, Innovation environments and
educational co-operation. Seppälä M. 2005, Report: interviews of regional development actors in Kainuu area
125
126
Regional Development Strategies and Entrepreneurship Promotion in the Kaunas Region Assoc. Prof. Pranas B.Milius/ J.Sarkiene Kaunas University of Technology Regional Business Incubator Studentu str. 65 LT 3031 Kaunas Phone: +370-37-333040 [email protected] Contents Illustrations ..............................................................................................................128
1. Introduction.......................................................................................................129 1.1 Terminology: Entrepreneurship and Entrepreneurship Promotion ....................130 1.2 Entrepreneurship Promotion .............................................................................131
2. Regional profile – Kaunas Region ....................................................................132
3. Short Review of the Economic and Social Situation.........................................134
4. Vision of Future Development of the Region and Determination of Priorities ...139
5. SWOT- Analysis of the Kaunas Region............................................................141
6. State and Challenges of Entrepreneurship in the Kaunas Region....................143
7. KTU Regional Science Park’s Entrepreneurial Activities ..................................148
8. Effect and Impact of Entrepreneurship Promotion – General Questions and Challenges .......................................................................................................149
9. Conclusions......................................................................................................150
References ..............................................................................................................151
127
Illustrations
Figure 1: The relationship between enterprise, entrepreneurship and small business 131 Figure 2: The ten counties of Lithuania .......................................................................134 Figure 3: Average annual number of unemployed in 2005 on county level .................135 Figure 4: Average monthly gross earnings in 2005 on county level.............................135 Figure 5: Allocation of FDIs in the Kaunas Region ......................................................136 Figure 6: Transportation Lines in the Kaunas Region..................................................140 Figure 7: Entrepreneurship promotion scheme............................................................146
128
1. Introduction
One of the essential trends of business and economic development in the EU is
entrepreneurship. In a knowledge economy, entrepreneurship is a fundamental factor
for business creation. In addition, the emergence of entrepreneurship in an economy is
the basis for innovative activity. The common goal of the Lisbon strategy, (creation of
favourable conditions for the development of entrepreneurship) is one of the main tasks
for new Member States of the EU, the newly accessed State of Lithuania should
consider this goal while forming conditions for economic development; increasing
employment and promoting and developing innovative activities. In this respect, two
aspects are becoming important: (1) sociological, i.e. societal attitude to
entrepreneurship, and (2) political-administrative-legal, i.e. the question of constraints
and support to entrepreneurship. There are however notable concerns regarding Aspect
#1. The process of affecting change is slow and it is more difficult to affect them directly
by economic and political means. However, it is possible to directly promote
entrepreneurship by political and administrative means thereby reducing administrative
and regulatory obstacles and improving conditions for entrepreneurship in Lithuania.
Thus, the principal goal of the European Union opticians is implementation of a common
entrepreneurship policy in the Extended EU in order to achieve the objectives of
knowledge economy.
The aims of the article are (a) to analyse regional development and entrepreneurship
promotion problems in Lithuania, (b) to define possible models for the implementation of
a regional development policy and entrepreneurial culture promotion in Lithuania, (c) to
ensure the efficiency and integrity of entrepreneurship promotion on a regional level in
Lithuania. Also in answer to the questions: What is right or wrong in the current practice
of entrepreneurship promotion? What is needed for better practice?
This article describes entrepreneurship influence to business and the economy. The first
part represents the current regional situation and policy in Lithuania. A short review of
the economic situation of the Kaunas region is presented in the second part. The third
part considers the strengths and weaknesses of the Kaunas region. The fourth part will
demonstrate the main actors, regarding entrepreneurial thinking working in the Kaunas
region. Following the description of one active actor, working on entrepreneurship
129
promotion in the Kaunas region, - KTU Regional Science Park. The end of this article
offers suggestions for better entrepreneurship promotion in Kaunas region.
1.1 Terminology: Entrepreneurship and Entrepreneurship Promotion
In a world where ideas drive economies, innovation and
entrepreneurship are often seen as inseparable.
Governments around the world are starting to realize that in order to sustain progress
and improve a country's economy, the population needs to be encouraged and trained
to think out-of-the-box and be constantly developing innovative products and services.
The tried methods of doing business are no longer guarantees for future economic
success.
“Entrepreneurship is a dynamic process of vision, change, and creation. It requires an
application of energy and passion towards the creation and implementation of new
ideas and creative solutions. Essential ingredients include the willingness to take
calculated risks - in terms of time, equity, or career; the ability to formulate an effective
venture team; the creative skill to marshal needed resources; and fundamental skill of
building solid business plan; and finally, the vision to recognize opportunity where
others see chaos, contradiction, and confusion.” (Kuratko& Hodgetts, 2004, p. 30). In the view of Drucker (1985), he perceived entrepreneurship as the creation of a new
organization, regardless of its ability to sustain itself, let alone make a profit. The notion
of an individual who starts a new business venture would be sufficient for him/her to be
labelled as an entrepreneur. It is this characteristic that distinguishes entrepreneurship
from the routine management tasks of allocating resources in an already established
business organization. Though the definition tends to be somewhat simplistic in nature,
it firmly attaches the nature of entrepreneurial action with risk-taking and the bearing of
uncertainty by the individual.
Many things fall under the term "entrepreneurship" including an appreciation of
resources, productivity, initiative, responsibility and cooperation necessary for cultural,
social and material innovation.
Specifically, the meaning and the placing of the term “entrepreneurship” within the
social-economical infrastructure of Lithuania was all but non-existent. The term
entrepreneurship in Lithuania was, and still is in some cases, identified as
130
“management” or “business”, but the deepest analysis showed that it differs from the
functional view despite the same economic processes component. The given
prominence to management, which is designated to manage available resources,
doesn’t lend positive results to the country’s economy. Not until recently the term
“entrepreneurship” was started to be used in the Lithuanian language as “innovative
business”.
After digesting the numerous definitions of entrepreneurship, one would tend to see a
strong link between these two terms: entrepreneurship and innovation.
In talking further about entrepreneurship, we defined entrepreneurship as a major driver
of innovation, competitiveness and growth. Due to their strong presence in key sectors
such as service and knowledge-based activities, smaller enterprises and entrepreneurs
today play a central role in the European economy.
1.2 Entrepreneurship Promotion
Entrepreneurship Promotion - various measures to promote entrepreneurial
development. These include the introduction of compulsory business economy and
entrepreneurship fundamentals courses on secondary vocational and higher vocational
and high education programmes, the involvement of chambers of commerce, industry
and crafts in the development of vocational training programmes, high profile awards
programmes and media campaigns to promote the public image of entrepreneurship.
Figure 1: The relationship between enterprise, entrepreneurship and small business
Source: Bridge et al. (1998)
Enterprise
Entrepreneurship
Small business
131
Entrepreneurship is more than the mere creation of business. Although that is certainly
as important facet, it’s not the complete picture. The characteristics of seeking
opportunities, taking risks beyond security, and having the tenacity to push an idea
through to reality combine into a special perspective that permeates entrepreneurs. An
“entrepreneurial perspective” can be developed in individuals. This perspective can be
exhibited inside or outside an organization, in profit or not-for-profit enterprises, and in
business or non-business activities for the purpose of bringing forth creative ideas.
Thus, entrepreneurship is an integrated concept that permeates an individual’s business
in an innovative manner. It is this perspective that has revolutionized the way business
is conducted at every level and in every country.
It is becoming clear that entrepreneurship, or certain facets of it, can be taught. Peter
Drucker, recognized as one of the leading management thinkers of our time, has said,
“The entrepreneurial mystique? It’s not magic, it’s not mysterious, and it has nothing to
do with the genes. It’s a discipline. And, like any discipline, it can be learned” (Drucker
1985). Additional support for this view comes from a ten-year (1985-1994) literature
review of enterprise, entrepreneurship and small business management education that
reported “…most of the empirical studies surveyed indicated that entrepreneurship can
be taught, or at least encouraged, by entrepreneurship education” (Gorman, Hanlon, &
King, 1997, p. 63). Given the widely accepted notion that entrepreneurial ventures are
the key to innovation, productivity, and effective competition (Plaschka and Welsch,
1990); the question of whether entrepreneurship can be taught is obsolete. Ronstadt
(1987) posed the more relevant question regarding entrepreneurial education: what
should be taught and how should it be taught?
2. Regional profile – Kaunas Region
Today, Lithuanian regional policy is quite well formed and the problematic spheres are
rightly defined. Regional development can be treated as development of community’s
social, economic, environmental, health protection, cultural, technological and
recreational issues on the particular location or site. Regional development can be
defined as the set of policy measures aimed to enhance economic development in the
region by efficiently using all local resources. In this case for achieving the final target –
132
increased economic development of the country, the preference is allocated to
economic development, which is the major part of community development because it
guarantees the supply of financial resources to the community which is necessary for
the implementation of all the other issues of community development.
The basic aims and implementation principles of national regional policy are
consolidated in Regional Development Law (2005/May/11):
- Increase in the competitiveness of industrial and business entities of the regional
centres by introducing innovations and new technologies (promotion of relations
between business and science, establishment of innovation and technology parks);
- Creation of favourable conditions for business development and enterprise
cooperation and clusterisation (expansion of industrial areas with modern
infrastructure, development of engineering and transport infrastructure);
- Development of the provision of services to business at the regional centres
(services of business incubators, consulting services, financial aid to small business
development);
- Promotion of human resources’ development (improvement of vocational training,
promotion of educational programs that are focused on high-skilled specialist
training, employee skills’ upgrading);
- Promotion of integration of the regional centres and the surrounding territories
(creation of conditions for labour movement to the regional centres).
According to the regulation 2000/July/20 Nr. VIII-1889 the official definition of the region
- it is an integral part of state territory, where national regions’ development policy is
implemented and support is provided; regions’ development aims are respected.
In general, regions can be divided into administrative, economic, historic, geographic,
and political.
The most frequent definition used in Lithuania is administrative – it’s county. Lithuania is
divided in 10 counties.
133
Figure 2: The ten counties of Lithuania
3. Short Review of the Economic and Social Situation
The Kaunas region is located directly in the middle of the country and has an
exceptional geographical location as well as the intermodal availability of Highway,
Railway, Port and Airport. Kaunas is going to use this extremely important factor for its
future development.
Citizens
The Kaunas region with an area of 8.06 thousands sq. m. is the third largest region in
the country after Vilnius and Siauliai. The population of the region at the beginning of
2005 was 685,800 inhabitants, which constituted 19.9 percent of the total country
population. The population density of the region is one of the highest in the country with
84.8 inhabitants per square kilometre. Population by nationality is homogeneous – 93.3
percent of inhabitants are Lithuanian. Young people between the ages of 16 and 24
make up 13 percent of the Region's population.
A tendency of the disappearance of little towns and the growing of Kaunas suburbs can
be noticed. A star-shape urban system is forming with Kaunas city as the core and
connecting rays to Jonava, Kedainiai, Vilkija, Prienai, Ziezmariai. The level of
unemployment in recent years has ranged between 6 and 10% and it is one of the
134
lowest in the country (average level of unemployment of the country ranges between 12
and 13.5 percents). The highest level of unemployment is in the Jonava region (20%),
which makes this region problematic and in need of additional sponsorship.
Figure 3: Average annual number of unemployed in 2005 on county level
Gross Domestic Product (GDP) produced in the Kaunas region in 2005 constituted
13,792 million Litas or 19.4 percent of the national GDP. The GDP growth rates of the
Kaunas Region and the nation as a whole are comparable. GDP per capita in 2005 was
20.2 thousand Litas and was 3.3 percent lower than the country average; however,
higher rates were seen only in the Vilnius (30.0) and Klaipėda (21.9) regions.
Figure 4: Average monthly gross earnings in 2005 on county level
924
978
1052
977
1250
1009
1339
1009
Birstonas City
Jonava District
Kaisiadorys District
Kaunas City
Kaunas District
Kedainiai District
Prienai District
Raseiniai District
1.88
4.96
1.63
1.92
2.13
1.55
2.01
2.79
0 1 2 3 4 5 6
Birstonas City
Jonava District
Kaisiadorys District
Kaunas City
Kaunas District
Kedainiai District
Prienai District
Raseiniai District
135
Foreign Direct Investments (FDI) of the Kaunas region takes second place after the
Vilnius region. At the beginning of 2006, FDI in the Kaunas region totalled 1,573.4
million Litas. The Klaipeda region fell behind with 1,361.9 million Litas.
Economy
Manufacturing dominates in Kaunas County. About one fifth of all production of
Lithuania’s industry is produced here. Manufacturing of machinery and devices,
metalwork, chemistry, building materials, textiles and hosiery, poligraphy, furniture,
glass and food industry is well explicated in the county.
The most important products are: furniture, yarn, pharmaceuticals, meat and its
products, milk production, flour, combined fodder, sulphuric and phosphoric acids,
lasting food products, building bricks, industrial wood, peat, paper, beer and non-
alcoholic drinks, firewater and liqueur products, mineral waters.
Figure 5: Allocation of FDIs in the Kaunas Region
The amount of sold production in 2005 grew most dramatically in Kaunas city and
Jonava, Kedainiai and Kaisiadoriai districts. According to the amount of sold production,
Kaunas County is leading the country.
Textile products, clothes, fur, electric machines, wood and wood products, furniture are
mostly exported to foreign countries. The main export markets are the EU, the
Direct foreign investments according to the economic activity areas in Kaunas County in 2006
18.7; 1%
1048; 80%
72.19; 5% 5.7; 0%
1.7; 0%
165.6; 13% 18.5; 1% 0.34; 0% Agriculture, forestry,
Fishery Manufacturing
Electricity, gas and Water supply Hotels and restaurants
Education, health care, Social work
Real Estate, rent and other business activity Financial mediation
Other activities
136
Scandinavian countries, Russia and the USA. Integration to the international markets
induced the enterprises to aim for higher quality of products and their correspondence
to the international standards (the products of enterprises meet ISO standards). This is
why the competitive ability of the products of the enterprises is growing in the Eastern
and Western markets.
The main investors in the Kaunas region are the United States of America, Finland,
Germany, Norway, Great Britain, Estonia and Denmark. The main fields which attracted
the most investments are: wholesale and retail trade, light industry, the food and
beverage industry, the petroleum refining industry and the chemical industry.
Material Investments in the Kaunas region also take second place after the Vilnius
region. Third place is taken by Klaipėda region; however, the situation changes in
prejudice of Kaunas region. In 2005, material investments had increased in the Vilnius
and Klaipėda regions, whereas the Kaunas region experienced a decrease of 9 percent.
The decrement of material investments means that investments are decreasing not only
in building, engineering infrastructure, but also in business development as a whole.
This fact can affect the competitiveness of the region.
In 2005, Kaunas Region received 10.9% of all FDI in the country, 2,584.5 million Litas,
and was the second Region that received major investments (after Vilnius Region that
received 56.8% of the country's FDI).
The population at the beginning of 2005 was 696.1 thousand inhabitants, which
constituted 20.1% of the national population. Depopulation is significant in the region. It
is influenced by births decrement; however the main reason is a negative net migration.
Net migration in 2005 constituted 1.6 people per 1000 inhabitants (0.7 per 1000
inhabitants in the country).
Population density in the region remains one of the highest in the whole country and
makes up 86.8 inhabitants per square kilometre. Population by nationality is
homogeneous – 93.3 percent of inhabitants are Lithuanian.
Production
Kaunas has long-standing traditions as the centre for textile and fibre, electronics and
wood processing and furniture industries, and for production of medical, optical and
precision instruments, foods, and chemicals.
137
In the city of Kaunas, light industry (mostly textile) makes up 36% of the production
sector, while machine building constitutes 22%, food processing 17%, chemical industry
6%, wood and paper 5%. Textile, construction, food products and beverages industries
operated mainly by private or small companies generate good profits. The export of
ready-made clothes, furs and footwear makes up 85%, chemical industry 63%,
manufacture of telecommunication equipment 42%. The traditional industry in the city of
Kaunas - electronics - is currently in the process of privatisation and transformation
towards Western market oriented production. Most of the big companies in the machine
building sector are either state owned or in the process of privatisation.
The Kaunas Region hosts 20% of the country's enterprises, and most of them are
located in Kaunas City. 17% of the Region's enterprises export their production. This
rate is higher than the national average (13%).
22% of the exported production is marketed in the EU countries and 52% in the
Commonwealth of Independent States (formerly USSR). Exports to Estonia and Latvia
account each for 6.8% of the Kaunas Region's exported production.
Education / Research and Development
The Kaunas Region is the second largest centre of research and development in the
country, after the country's capital, Vilnius. A number of research institutes throughout
the Region conduct research in the fields of food production, textile, forestry, agriculture,
medicine, water management and others. The institutes have close links with many
foreign institutions and benefit from cooperating with them.
The major and most important institution of R&D in technical sciences is the Kaunas
University of Technology (KUT). 80% of all industrial engineers in the country are
graduates from this university. The university is famous for the accumulation and
application of scientific knowledge and experience for practical purposes, through the
organization of both technical and intellectual resources.
138
4. Vision of Future Development of the Region and Determination of Priorities
Development strategy is projected determining underlying fields of development.
Applying methods of comparative analysis, the following underlying fields of Kaunas
region development were projected:
1. Development of industry, tourism and leisure services, small and medium business
and manufacture infrastructure sector, involving fields of transport, roads and
railways, airports, engineering equipment and economic development centres.
2. Development of agricultural sector, involving fields of traditional and non traditional
products manufacture, alternative businesses, production processing and rural
infrastructure.
3. Development of human resources and public services sector, involving fields of
social services, education and health care.
4. Development of natural resources use and environment protection sector, involving
fields of water use and protection, air quality, noise, landscape treatment and waste
treatment.
Kaunas Region is the central Region in the country. It is the geographical, science as
well as industrial and transport centre of Lithuania. Kaunas County has a well
developed infrastructure of roads, motorways (including Via Baltica – E67) and railway
lines (I and IX Trans-European transport corridors), waterways from the rivers of
Kaunas to Klaipeda seaport are convenient both to passenger and cargo transport;
Kaunas airport meets international standards. Therefore, the Kaunas Region is
attractive both to tourism and business – cargo transport and warehousing. Because of
its exceptional geographic location and transport infrastructure, many logistic
companies are based in the Kaunas Region, forming the Kaunas Logistic Centre – a
component of European significance in the transportation system. The Kaunas Free
Economic Zone (Kaunas FEZ) is a site of about 5 km2 located near Kaunas, the second
largest Lithuanian city, and is stated to become one of the largest free economic zones
in the Baltic Sea Region. The plans include construction of a river harbour a mere two
kilometres away from the territory of the Free Economic Zone.
Different types of communication – auto roads, railway, air, and water transport are well
developed in Kaunas County.
139
Major routes
Kaunas Region has a well-developed network of both local roads and international
motorways. The Region is at the crossroads of the main national motorways criss-
crossing the country from east to west and from north to south: the A1 motorway leads
from the capital Vilnius to the ice-free Klaipeda Seaport via Kaunas City. Vilnius is just
100 km away from Kaunas, and the Klaipeda Seaport is 220 km from Kaunas. Via
Baltica (E67), a European priority transport corridor connecting Helsinki, St-Petersburg
and Warsaw, crosses the Region from north to south. The motorway is integrated into the Trans-European motorway system, serving as a
connection between Nordic countries and Central and Western Europe. The Polish
border can be reached by Route No. 5 leading to Suwalki in Poland via the Marijampole
Region. The industrial centres of Kedainiai and Jonava are both situated on the roads
connecting them directly to the Region's centre of Kaunas and other parts of the
country.
Airports
Kaunas Karmelava International Airport is the biggest cargo airport in Lithuania handling
2/3 of the country's cargo. It is located 8 km northeast from the city of Kaunas, close to
the main Lithuanian motorway Vilnius - Kaunas - Klaipeda. Moreover, the airport is not
far from the main cargo handling railway station of Jonava that is situated at the
transport junction of Central Lithuania. The same Vilnius - Kaunas motorway leads to
the country's largest airport 100 km away from Kaunas. Palanga International Airport
(236 km away from Kaunas) is a small modern regional airport at the country's seaside.
Figure 6: Transportation Lines in the Kaunas Region
140
Rail Services
The Region is criss-crossed by several railway lines leading to the Kaliningrad Region
(Russia), Latvia and the Klaipeda Seaport, and is convenient both for passenger and
cargo transportation. The Jonava railway junction is just 16 km from Kaunas Karmelava
International Airport. The largest industrial enterprises of the Region have convenient
access to railway lines.
5. SWOT- Analysis of the Kaunas Region
Strengths Evaluation Tendency of alteration
1. Developed international traffic infrastructure. 5 ↑ 2. Convenient geographic location. 4 = 3. Direct foreign investments are increasing. 4 ↑ 4. Highly skilled workforce. 3 = 5. One of the lowest unemployment rates in Lithuania. 4 ↑ 6. One fifth of Lithuania’s industry production is created in the region. 4 =
7. Amount of high added value companies and international competition is increasing. 5 ↑
8. Scientific potential’s concentration (7 universities, scientific institutes etc.). 5 ↑
9. International Kaunas (Karmelava) airport ensures excellent air services with Scandinavian countries and Germany. 5 ↑
10. Developed specific industries (sailplanes, repairing of helicopters, and production of mineral water). 4 ↓
11. Natural, cultural physical and cultural intellectual potential gives a possibility to develop various kinds of tourism. 3 ↑
12. There are relatively more modern farms, viable cooperative and agricultural partnerships than in other regions. 3 =
13. A lot of experience gained in ecological agriculture, alternative agriculture activities. 4 ↑
14. Rural community is getting more active, communal movements are forming. 5 ↑
15. There is concentrated agricultural scientific potential in the region. 4 = 16. There are active remote studies in the region. 4 ↑ 17. “E-healthcare” services are being invented and implemented in the region. 5 ↑
141
Weaknesses Evaluation Tendency of alteration
1. Infrastructure of tourism is undeveloped. 4 ↓ 2. Natural, cultural heritage, historical resources are insufficiently used. 3 ↑ 3. Insufficient attention is paid for marketing in tourism field (in Lithuania and abroad). 4 ↑
4. Infrastructure of water transport, small ports and docks is insufficiently developed. 4 ↓
5. Dominated industries requiring a lot of workforce and having low added value (light industry). 4 ↓
6. Weak dialog between business and administrative institutions. 4 ↑ 7. Shortage of economical class hotels and holiday camps meeting up-to-date standards. 3 ↓
8. Shortage of specialized big expo and conference centres. 3 ↓ 9. Shortage of positive information about the region (locally and internationally). 5 =
10. Business Information system is insufficiently developed. 3 ↑ 11. Poorly developed entrepreneurship culture. 3 ↑ 12. There are undeveloped services such as “E-Government”, “E-Democracy” and “E-Business” in the region. 3 ↑
142
6.
Stat
e an
d C
halle
nges
of E
ntre
pren
eurs
hip
in th
e K
auna
s R
egio
n
The
tabl
e be
low
de
mon
stra
te
the
mai
n ac
tors
w
orki
ng
in
the
Kau
nas
regi
on
with
en
trepr
eneu
rshi
p pr
omot
ion
and
entre
pren
euria
l thi
nkin
g.
Mul
ti le
vel a
ppro
ach
Act
ors
Rol
es
Goa
ls
Proc
esse
s
Net
wor
k le
vel
Kau
nas
Cha
mbe
r of
Com
mer
ce, I
ndus
try
and
Cra
fts
Kau
nas
Cha
mbe
r of C
IC
repr
esen
ts in
tere
sts
of th
e re
gion
al c
ompa
nies
and
st
rives
for b
ette
r bus
ines
s co
nditi
ons
and
wid
er e
xpor
t po
ssib
ilitie
s.
Kau
nas
CC
IC h
as it
s vi
sion
to
crea
te m
oder
n bu
sine
ss s
elf-
gove
rnm
ent a
nd to
pro
vide
hig
h qu
ality
ser
vice
s. T
he a
im o
f the
C
ham
ber i
s to
impr
ove
and
mak
e th
e co
nditi
ons
for b
usin
ess
and
inve
stm
ents
mor
e at
tract
ive
as
wel
l as
to u
se th
e po
tent
ial o
f hi
gh q
ualit
y la
bour
forc
e
The
Cha
mbe
r reg
ular
ly
orga
nise
s co
nsul
tativ
e se
min
ars
(~ 6
0 se
min
ars
per y
ear)
, re
ceiv
es b
usin
ess
dele
gatio
ns
from
abr
oad
(~ 2
0 de
lega
tions
pe
r yea
r), a
rran
ges
dire
ctin
g st
udie
s, e
tc. T
he C
ham
ber h
as
sign
ed 3
0 in
tern
atio
nal c
o-op
erat
ion
agre
emen
ts a
nd
parti
cipa
tes
in v
ario
us
inte
rnat
iona
l pro
ject
s.
Kau
nas
Cou
nty
Gov
erno
rs
Adm
inis
tratio
n
Reg
iona
l dev
elop
men
t D
epar
tmen
t – K
auna
s re
gion
‘s d
evel
opm
ent i
n al
l sp
here
s
Reg
ion‘
s S
MS
‘s s
uppo
rting
ac
tiviti
es;
Stra
tegy
of K
auna
s re
gion
‘s
deve
lopm
ent i
mpl
emen
tatio
n
In
stitu
tiona
l lev
el
Kau
nas
Reg
iona
l As
soci
atio
n of
Sm
all
and
Med
ium
E
nter
pris
es
(KR
AS
ME
)
Asso
ciat
ion
is ta
king
act
ive
part
in d
iffer
ent p
ublic
eve
nts,
ex
ecut
ing
daily
act
iviti
es a
nd
varie
s on
-goi
ng p
roje
cts.
As
soci
atio
n ha
s oc
curre
d pr
imar
ily th
roug
h w
ord
of
mou
th, a
s cu
rren
t mem
bers
sh
are
thei
r exp
erie
nces
and
Li
thua
nian
bus
ines
s pe
ople
le
arn
that
they
hav
e a
mea
ns
via
the
Ass
ocia
tion
to
influ
ence
pol
icy
issu
es th
at
grea
tly a
ffect
them
.
To s
top
corr
uptio
n an
d cr
ime
and
to p
ositi
vely
impa
ct p
ublic
pol
icy
by in
fluen
cing
the
crea
tion
and
amen
dmen
t of l
aws
and
regu
latio
ns a
ffect
ing
smal
l and
m
ediu
m s
ized
ent
erpr
ises
(S
ME
s). T
o bu
ild th
e ca
paci
ty o
f bu
sine
ss p
eopl
e of
Lith
uani
a so
th
ey a
re a
war
e of
the
law
s an
d re
gula
tions
affe
ctin
g th
em a
nd
can
be a
voi
ce th
at h
as a
n im
pact
on
thes
e is
sues
.
Ass
ocia
tion
repr
esen
ts
appr
oxim
atel
y 25
0 bu
sine
ss
peop
le th
roug
hout
Lith
uani
a (th
is n
umbe
r var
ies
due
to th
e pr
oble
ms
asso
ciat
ion
tries
to
solv
e at
tim
e).
143
Kau
nas
Reg
iona
l D
evel
opm
ent A
genc
y (K
RD
A)
KR
DA
su
ppor
ts
the
deve
lopm
ent
of
smal
l an
d m
ediu
m b
usin
ess.
KRD
A ai
ms
to:
stim
ulat
e th
e bi
rth-ra
te o
f the
Li
thua
nian
sm
all a
nd m
ediu
m-
size
d en
terp
rises
; In
crea
se c
ompe
titiv
enes
s of
sm
all a
nd m
ediu
m-s
ized
en
terp
rises
; pro
mot
e th
e cr
eatio
n of
new
jobs
; inc
reas
e th
e su
rviv
al
rate
of s
mal
l and
med
ium
-siz
ed
ente
rpris
es in
the
regi
on;
incr
ease
the
leve
l of I
T lit
erac
y am
ong
the
smal
l and
med
ium
-si
zed
ente
rpris
es.
Kau
nas
Hig
h –T
ech
Par
k P
rom
otes
the
crea
tion
of n
ew
inno
vativ
e fir
ms;
S
uppo
rt kn
owle
dge
trans
fer
lead
ing
to th
e ex
ploi
tatio
n of
re
sear
ch re
sults
and
to th
e de
velo
pmen
t of m
arke
tabl
e pr
oduc
ts a
nd s
ervi
ces;
E
stab
lishe
d cl
ose
co-
oper
atio
n be
twee
n tra
de,
indu
stry
and
inno
vatio
n.
The
mai
n ai
m o
f Kau
nas
HT&
ITP
is
to fa
cilit
ate
the
deve
lopm
ent o
f hi
gh te
ch a
nd in
form
atio
n te
chno
logy
indu
strie
s in
Kau
nas.
KTU
Reg
iona
l S
cien
ce P
ark
(KTC
) K
TC h
as m
ore
than
five
ye
ars
of e
xper
ienc
e in
as
sist
ing
and
supp
ortin
g in
nova
tive
and
tech
nolo
gy-
orie
nted
SM
Es,
sta
rt-up
and
sp
in-o
ff co
mpa
nies
in K
auna
s re
gion
and
Lith
uani
a.
Stim
ulat
e de
velo
pmen
t of S
ME
s’
in L
ithua
nia;
C
reat
e a
favo
urab
le b
usin
ess
envi
ronm
ent f
or s
tart-
ups;
P
rodu
ce b
usin
esse
s th
at a
re
viab
le a
nd fr
ee-s
tand
ing
whe
n th
ey le
ave
the
incu
bato
r; S
timul
ate
an e
ntre
pren
eurs
hip
in
high
-tech
sec
tor;
Stim
ulat
e cr
eatio
n of
new
bu
sine
sses
and
jobs
, etc
.
KTC
org
aniz
es re
gula
rly
cons
ulta
tive
sem
inar
s an
d pa
rtici
pate
s in
var
ious
in
tern
atio
nal p
roje
cts.
144
Kau
nas
Reg
iona
l In
nova
tion
Cen
tre
The
Cen
tre is
bas
ing
its
activ
ities
on
the
expe
rienc
es
in in
nova
tive
man
agem
ent,
tech
nolo
gy tr
ansf
ers,
sup
port
to in
nova
tive
SM
Es,
in
tern
atio
nal p
roje
cts
man
agem
ent.
Cen
tre is
non
pro
fit o
rgan
isat
ion
aim
ing
to p
rom
ote
inno
vatio
n in
Li
thua
nia,
tech
nolo
gy tr
ansf
er
from
rese
arch
to b
usin
ess,
de
velo
pmen
t of i
nnov
ativ
e co
mpa
nies
in K
auna
s re
gion
.
Uni
vers
ities
, Col
lege
s A
n ef
fect
ive
inte
rnal
qua
lity
assu
ranc
e sy
stem
of s
tudy
an
d sc
ient
ific
and
tech
nolo
gica
l res
earc
h.
Stu
dent
s an
d U
nive
rsity
sta
ff w
orki
ng a
s pa
rtner
s to
im
prov
e th
e qu
ality
of t
he
stud
ent e
xper
ienc
e, w
ith
stud
ents
invo
lved
in d
ecis
ion
mak
ing
at e
very
leve
l.
The
mai
n ai
m o
f the
Uni
vers
ities
is
to b
e an
impo
rtant
par
t of o
ne
of th
e m
ost s
igni
fican
t cen
tres
of
Lith
uani
an s
cien
ce, t
o be
in
volv
ed in
dev
elop
men
t of t
he
info
rmat
ion
and
know
ledg
e-ba
sed
soci
ety,
and
to a
im fo
r ex
celle
nce
thro
ugh
dive
rsity
.
Indi
vidu
al le
vel
Con
sulta
nts
Expe
rtise
in b
usin
ess
idea
an
d de
velo
pmen
t. Va
rious
sh
ort
term
co
ntra
cts,
ag
reem
ents
145
The region’s development strategy is focused on the most prospective areas for high-
tech and innovation development. Entrepreneurship promotion is targeted at the
stimulation of companies to become more interested in innovations and science
innovations implementation.
Figure 7: Entrepreneurship promotion scheme
Entrepreneurship promotion is one of the most direct ways to create jobs, increase
income, facilitate adjustment to economic change and support economic
competitiveness at the local level. Entrepreneurship promotion in the Kaunas region
decomposes of main parts: entrepreneurship’s society education, features of formatting
Entrepreneurship’s policy, amelioration of business environment tendencies and
Entrepreneurship’s penetration in other policies.
Education of entrepreneurship consists of various elements:
• Education of entrepreneurship at school;
• Education of entrepreneurship at high school programs
• High school studies of innovations management;
• Education of joint engineering and management competencies;
• Motivation of science and business workers’ mobility;
• Motivation of international mobility of high qualified specialists (both scientists and
master’s degree students);
• Mass (media) efforts to form positive image of entrepreneurship.
Entrepreneurship’s society education
Amelioration of business environment tendencies
Features of formating Entrepreneurship’s policy
Entrepreneurship’s penetration in other policies
Entrepreneurship promotion in Kaunas region:
146
The main initiatives that will drive the expansion of human resources to innovation can
be divided into 3 groups: programs of higher education, geared to prepare the best
specialists. The government’s initiatives of education, oriented to temporal
unemployment diminution and SME development. The streaming of education of
entrepreneurship; initiatives from the EU and from other foreign countries.
Understanding how much support to provide entrepreneurs is a major challenge.
Lithuania needs to develop a culture of entrepreneurship and enhance the skill of their
people with regard to entrepreneurial activities.
The government of Lithuania has taken various measures (besides university-level
courses to promote entrepreneurial development. These include the introduction of
compulsory Business Economy and Entrepreneurship Fundamentals courses after
secondary vocational and higher vocational education levels, the involvement of
chambers of commerce, industry and trade in the development of vocational training
programmes, high profile awards programmes (for example, for quality management
and ‘Lithuanian product of the year’) and media campaigns to promote the public image
of entrepreneurship.
In addition, two management training institutions have been established: the
International School of Management (with support from the Norwegian Management
Institute at Kaunas University) and the Baltic Management Institute (with support from
the PHARE programme) offering post-graduate level management education.
The environment in the region surrounding the science park, with its structure
department - business incubator, - KTU Regional Science Park - ,has a great affect on
how the science park operates and, in turn, how effective it is in helping entrepreneurs.
The incubators want to stimulate entrepreneurship and business creation in Lithuania;
however, they need to learn the optimal way to go about this is.
Lithuanian science, technology and innovation policy is closely related to
entrepreneurship policy. The main problem in innovation and entrepreneurship policy is
that there isn’t a coordinated policy system. This philosophy is not limited to science and
research institutions, but also to governmental institutions. These parties have been
acting separately and not in a coordinative way.
Entrepreneurship promotion is a challenge in the Kaunas region owing to the situation in
Lithuania, high costs of starting up and doing own business, the regulatory framework
147
and a lack of activities in the education sphere. The existing actions and measures
promoting entrepreneurship are quite new, compared with the old EU Member States
and the number and the quality of these activities is in need of improvement.
Entrepreneurial thinking should be more stimulated and entrepreneurship promotion
activities need to be fostered in the Kaunas region.
7. KTU Regional Science Park’s Entrepreneurial Activities
KTU regional science park (KTC) is one of the most active actor‘s in entrepreneurial
thinking in the Kaunas region.
KTC has more than five years of experience in assisting and supporting innovative and
technology-oriented SMEs, start-up and spin-off companies in the Kaunas region and
Lithuania. KTC’s services include business and technology transfer consultancy,
technical-administrative services, organisation of workshops and training courses for
entrepreneurs, access to laboratories of Kaunas University of Technology.
One of the science park’s main goals is to promote an entrepreneurship culture among
its firms, the university and the regional authorities, and to join all these organizations
for different joint projects.
KTC activities in the entrepreneurship promotion field:
• Traditional innovative business support;
- Entrepreneurs support program.
• Training programs;
- Entrepreneurship motivation program.
- Entrepreneurship training program.
• Networking activities (BASTIC, Baltic States, SPICE group).
• Project based activities.
KTU regional science park‘s entrepreneurship motivation program‘s the main aims are:
promotion of self-employment and entrepreneurship; creation of outflow of business
plans; creation of new sustainable SME’s; improvement of societal attitudes to
entrepreneurship.
The training courses are comprehensive due to its base of university teaching
competence, focus groups, senior entrepreneurs who have an interest in encouraging
148
younger colleagues’ development and their own development, strong partnerships
involvement (volunteers – private lecturers, mentors; brokerage events).
The Entrepreneurship training program’s aim is to explore the phenomenon of
entrepreneurship and its various forms and to formulate attitudes necessary for
dissemination of entrepreneurship culture. The goals are: bring forth the concept of
entrepreneurship as being a separate entity, explore the mechanism and background of
entrepreneurship’s formation, offer the necessary tools for the formation of
entrepreneurial and intrapreneurial skills and abilities and put theory to practice.
8. Effect and Impact of Entrepreneurship Promotion – General Questions and Challenges
Research studies in the Kaunas region have showed that for the initiation of the
amelioration process of the business environment, attention should be paid to some
critical points - the lack of finance resources for innovation, demand of new products is
low, and it lacks information about technology.
Suggestions for better entrepreneurship promotion in Kaunas region
Priorities:
• Promotion of entrepreneurship culture – more seminars; workshops; dissemination
of information through the media; the possibilities how to get the finance support for
entrepreneurship projects implementation.
• Education of entrepreneurship society.
• Science and business society collaboration – stimulate entrepreneurship abilities
improving quality of studies; to join the theory with practice.
• Entrepreneurship policy formation – foresee tools of strategy for innovations’
implementation in business; perform the public institutions helping to promote
innovations implementation in business; to create the awards system for successful
work in innovations sphere.
• Better the business environment – implement the financing system for projects
promoting entrepreneurship.
149
9. Conclusions
The above review of key policies and issues for SME development in Lithuania gives rise to a number of priorities for future policy development. The main priorities relate to continuing low levels of entrepreneurial activity, shortages in medium and long-term finance for business investment projects and the lack of progress in relation to regulatory reform and the administration of the business taxation system. The review suggests that priority consideration should also be given to capacity constraints within the Ministry of Economy (which may impact on its ability to deliver on the Small and Medium Sized Business Development Strategy and other policy commitments), the rationale for the proposed new state financial institution and issues relating to the financial sustainability of the network of local business advice centres. Existing low levels of entrepreneurial activity in the Kaunas region are a major constraint on the future economic development of the country. Without concerted efforts to tackle this problem, the impact of other reform measures will be limited. Entrepreneurship is, in part, a cultural phenomenon. In Lithuania’s case, measures are needed to address the legacy of attitudes attributable to the former command economy. These measures should be supplemented by initiatives to encourage greater participation in the formal economy. Government should consider how existing measures contained in the Small and Medium Sized Business Development Strategy can be strengthened in this respect. Practically the only sources of medium and long-term finance for SME projects in Kaunas are international donor funded credit lines and more needs to be done to encourage greater competition in this sector. This shortage of finance is most acute in relation to start-up and early stage businesses, which are frequently unable to provide a track record of creditworthiness and to furnish adequate collateral. The government is correct to give this issue priority, although it is not clear that the creation of a new state financial institution to address current market failures is the correct solution (see below). The Ministry of Economy appears to face a number of problems with respect to discharging its policy making function, chiefly a lack of sufficient technical and institutional capacity. This lack of capacity has potentially serious consequences in terms of the implementation of the Small and Medium Sized Business Development Strategy. Many measures identified in the action plan are labour intensive tasks, for example the reform of loan tax agreements, the development of new micro-credit and venture capital schemes (with the Ministry of Finance) and the creation of a media campaign to promote a positive image for entrepreneurs in Lithuania.
150
References
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globals Unpublished Manuscript. Bridge, S., O’Neill, K. and Cromie, S. 1998, Understanding Enterprise, Entrepreneurship
and Small Business, MacMillan Business, Hampshire, UK. Caird, S. 1990a, ‘Enterprise education: the need for differentiation’, British Journal of
Education and Work, Vol. 4, No. 1, pp.47–57. Cannon, T. 1991, Enterprise: Creation, Development and Growth, Butterworth
Heinemann, Oxford, UK. Clark, R. 1986, ‘Towards a national policy for small business education and training’,
Management Forum, Vol. 12, No. 2, pp.52–62. Curran, J. and Stanworth, J. 1989, ‘Education and training for enterprise: some
problems of classification, evaluation, policy and research’, International Small Business Journal, Vol. 7, No. 2, pp.11–22.
Dana, L.P. 1993, ‘An international survey of entrepreneurship education’, Journal of Enterprising Culture, Vol. 1, No. 1, pp. 67–92.
Dunn, C. 1996, Developing more enterprising students. Unpublished Manuscript. Hills, G.E. 1988, ‘Variations in University Entrepreneurship Education: An Empirical
Study of an Evolving Field.’ Journal of Business Venturing, 3: pp. 109-122. Hitt, M., Bartkus, B. 1997, ‘International Entrepreneurship’ in Advances in
Entrepreneurship, Firm Emergence and Growth, Greenwich, CT: JAI Press, pp. 7-30.
Hitt, M.A., Ireland, R.D., Camp, S.M., & Sexton, D.L. 2001, ‘Strategic Entrepreneurship: Entrepreneurial Strategies for Wealth Creation.’ Strategic Management Journal (special issue): 22(6): pp. 479-492.
Hornaday, J.A. 1982. ‘Research about Living Entrepreneurs.’ Encyclopedia of Entrepreneurship, ed. Calvin Kent, Donald Sexton, and Karl Vesper (Englewood Cliffs, NJ: Prentice Hall): pp. 21-22. Ireland.
Kuratko, D.F. & Hodgetts, R.M. 2004. Entrepreneurship: Theory, Process, Practice Mason, OH; South-Western Publishers.
R.D. & Hitt, M.A. 1999. ‘Achieving and Maintaining Strategic Competitiveness in the Twenty-First Century: The Role of Strategic Leadership.’ Academy of Management Executive (January): pp. 43-57.
Ronstadt, R. 1987. ‘The Educated Entrepreneurs: A New Era of Entrepreneurial Education is Beginning.’ American Journal of Small Business, 11(4): pp. 37-53.
2. Official Documents Lithuania Country Assessment. Forum for Enterprise Development. Baltic Regional
Programme. December 2001. 19-26. Development of first division regions (Defris), „Regional WP1 report, Kaunas region“,
2003, 8-11.
151
3. Internet Sources Lithuania - Regional Policy available at:
http://europa.eu.int/scadplus/leg/en/lvb/e40105k.htm www.versloasociacija.lt www.ktc.lt www.kdra.lt www.kaunas.aps.lt
152
Entrepreneurship Promotion in the Małopolska Region by Anna Samborska With the contribution of: Dorota Franczukowska The Jagiellonian University Centre for Innovation, Technology Transfer and University Development (CITTRU) ul. Czapskich 4 31-110 Kraków, Poland www.uj.edu.pl/cittru
Dr. Jacek Klich The Jagiellonian University Institute of Economics and Management ul. Gronostajowa 3 30-387 Kraków, Poland
Contents 1. Introduction...................................................................................................... 154 1.1 Basic Ideas...................................................................................................... 154 1.2 Definitions........................................................................................................ 154
2. Profile of the Małopolska Region..................................................................... 156 2.1 Entrepreneurial Activities and Situation in the Małopolska Region.................. 157 2.2 Main Strengths and Weaknesses of Małopolska Region – Why is
Entrepreneurship Promotion a Challenge?...................................................... 159 2.3 Human/ Social Capital and Migration/ Demography........................................ 160 2.4 Regional Planning Strategy and Regional Marketing Strategy (Image)........... 161 2.5 Structure, History and Promotional Activities in the Małopolska Region ......... 162
3. State and Challenges of Entrepreneurship Promotion in the Małopolska Region........................................................................................................................ 165
3.1 Categorisation of Promotional Activities used in the Research ....................... 165 3.2 The Role of Higher Education and Training Institutions (Universities/ Colleges)
........................................................................................................................ 167 3.3 Success Indicators to Evaluate Quality and Impact of Promotional Activities.. 168 3.4 Strengths and Weaknesses of the Promotional Activities ............................... 169
4. Effect and Impact of Entrepreneurship Promotion – General Questions & Challenges ...................................................................................................... 169
4.1 Activities and Steps taken for Entrepreneurship Promotion............................. 169 4.2 Relation between Entrepreneurship Promotion and Regional Development ... 170 4.3 Which kind of Models and Theories can be used to explain this? ................... 171 4.4 Indicators for Monitoring, Assessing and Evaluating the Regional Impact ...... 171
5. Conclusions and Recommendations ............................................................... 173 5.1 Special Conclusions for the Małopolska Region.............................................. 173 5.2 General Conclusions for Entrepreneurship Promotion on Regional, National and
International Level ........................................................................................... 173
Bibliography............................................................................................................ 176
153
1. Introduction
1.1 Basic Ideas
Entrepreneurship may be supported or limited by the environment: promotion of best
practice models, mental scopes and motivation to increase efficiency. Economic
success depends also on such factors as the ability to use knowledge and
experience of others and the social trust and credibility. Proper preparation of
management, finance and marketing, as well as the understanding of mechanisms
operating within the market and the principles of cooperation within the group are of a
key importance here.
In present research the main promotional initiatives undertaken in the region of
Małopolska will be analysed.
Neither the material preparation in the field of entrepreneurship, nor the promotion of
proper attitudes is at the moment an area of sufficient public, civic and commercial
interest. The situation is especially difficult among employees of the restructured
traditional industries and inhabitants of some rural areas. Crucial for the development
of the region is also the promotion of entrepreneurship and skills among the young
generation.
Currently, over 47.9% (2004) of the Polish GDP is produced by the small and
medium enterprises (SME). By the end of the year 2005, there had been 3,610,929
of such companies registered; 289,359 of them (as of 31 December 2005) in
Małopolska. The importance of this sector is also testified by its share in the total
number of businesses, in Małopolska reaching 99.87% (November 2006).
1.2 Definitions
Entrepreneurship is understood in this paper as creating new areas of economic
activity and increasing effectiveness and productivity of already existing economic
units. Therefore, it is necessary to develop entrepreneurial attitudes, such as
resourcefulness, innovation, sense of responsibility for common future,
improvement of legislation - especially in the field of administrative and financial
matters, expanding the capital market and finally, facilitating access to various forms
of financing, including the micro-loan mechanisms.
154
Education for entrepreneurship includes two complementary elements:
1. a broader concept of education for entrepreneurial attitudes and skills, which
involves developing certain personal qualities (not directly focused on the
creation of new businesses),
2. a more specific concept of training in how to set up a business.
The objectives of teaching entrepreneurship – to be adapted on different levels of
education – will therefore include:
1. promoting the development of personal qualities that are relevant to
entrepreneurship, such as creativity, spirit of initiative, risk-taking ability and
sense of responsibility;
2. raising students’ awareness of self-employment as an career option;
3. providing business skills that are needed in order to start a new venture.
Micro-enterprise is an enterprise which employs up to 9 employees.
Innovation is the ability of enterprises to create and implement innovations and the
actual capability of introducing new and modernised products, new and changed
technological or organizational processes.
Incubator of entrepreneurship is a local structure of equally important members,
which ensures SMEs a wide range of services in running business on favourable
conditions. These services include providing area to run the business and ensuring
help in legal matters, accountancy, logistics, etc. Incubators of entrepreneurship
encourage development of SMEs and support local economic development.
Region corresponds to the term “voivodeship”. The Małopolska Region covers the
area of the former Krakowskie, Nowosadeckie Regions, and parts of the former
Bielskie, Kieleckie, Katowickie and Krosnieńskie and Tarnowskie Regions – in total
comprising 4.8 % of Poland’s area.
The Region came into existence as a result of an administration reform implemented
in January 1999, when Poland has been divided into 16 provinces (voivodeships),
373 districts (poviats) and 2,489 communes (gmina). The voivodeships’ authorities
draw up and implement regional development strategies.
Sub-region is a part of a region.
155
2. Profile of the Małopolska Region
Key facts
• Surface – 15,190 sq. km.
• Region – 3.3 million inhabitants (2006)
• Krakow - capital of the Region –757,957 inhabitants (2004)
• 55 towns
• 289,359 business entities registered (2005)
• Unemployment rate – 13.8% (2005)
• Average gross salary – about 500 Euro (2004)
Key figures:
• 7.4% of Poland’s GDP (2005)
• 7.6% of higher education institutions (2005)
• 12.5% of expenditure on R&D (2004)
• 8.0% of the number of SMEs (2005)
• 289,359 business entities in the region (about 2,500 of these enterprises with a
share of foreign capital)
Małopolska is an economically strong region. It produces a share of 7.4% of Poland’s
GDP, thus situating it in the 4th rank in the country. The most important is the 3rd
sector, especially market services with their participation of 41.6% and non-market
services – 16% of the gross added value.
The economic activity, measured by the number of registered companies is highly
diversified across the voivodeship, the average equals 86 per 1,000 inhabitants in
2005 (national average equals 90 per 1,000 inhabitants). This suggests the existence
of so called „grey economy,” the term denoting economic activity without proper
registration, at least in individual districts (powiats).
The main industrial sectors in Małopolska region: IT, banking, food processing,
spirits, tobacco, chemical, coal, steel.
Labour market
• Total number of employees in the voivodeship according to the official data
provided by the Polish Official Statistics is 1,023,300 (2005)
• Unemployment rate in the voivodeship: 13.8% (2005)
• Total unemployed persons registered: 178,364 (2005)
156
Cultural heritage
The region Małopolska is renowned for the diversity of its historic and cultural space,
both material and nonmaterial and the identity of the Małopolskie Voivodeship is built
on its culture heritage, creative activities, cultural institutions, tradition and the
present situation of tourism and the “culture industry.”
The most significant elements of cultural identity are:
− Common history for the entire region since the 12th century,
− Rich and diversified natural resources such as 5 national parks and 2
landscape parks (unique geographic landscapes)
− System of defence castles built in the Krakow-Częstochowa Jurassic Plateau,
− Traditions connected to the techniques of salt extraction, craft traditions,
agriculture and pastoral activities, rafting,
− Styles of regional construction and craft, especially in Krakow, Podhale,
Podgórze,
− Krakow folk costume considered the Polish national costume,
− Non-material culture traditions, customs, rites and rituals, legends, songs,
cuisine traditions
2.1 Entrepreneurial Activities and Situation in the Małopolska Region
On the regional level there are many examples of entrepreneurial activities, such as:
− Initiative undertaken by Mayor of the City of Krakow, who established
‘Porozumienie na rzecz rozwoju przedsiębiorczości’ (‘Entrepreneurship
Development Agreement’), with the participation of organisations promoting
entrepreneurship development. It is a platform for experience exchange,
consulting, implementation of joint undertakings, especially in the field of
infrastructure, and also a source of information on the activities undertaken by the
local authorities, that has an impact on the functioning of enterprises.
− Assessment of SME in communes (gmina) and associated analysis of the local
labour market - led by the Małopolska Institute of Local Government and
Administration. The project "A European Rational Analysis of Comparing
Enterprises" is lasting from November 2002 until October 2005.
− Comparative analyses of the level of development of particular communes,
e.g. taking into account the criteria of expenditure on financial investments from
the budget, the rate of unemployment, income or investment expenses in
157
communes from the sources outside the budget. They show the ways to the actual
economic development of the commune and help in creating local programmes
aimed at developing SME. Those analyses were prepared by the Department of
Entrepreneurship and Innovations of the Krakow University of Economics, e.g.
‘Innowacyjność Małopolski’ (‘Innovativeness in Małopolska’) by J. Targalski,
‘Wpływ otoczenia regionalnego na rozwój MSP w południowej Polsce’ (‘Impact of
the local environment on the SME competitiveness development in the Southern
Poland’) by K. Wach, `Monitoring konkurencyjości MSP w Małopolsce`
(‘Monitoring of the SME competitiveness in Małopolska) by Dr. Z. Michalik there
are also comparative analyses prepared by Wywiadownia Gospodarcza InfoData
(a business information unit established in 1990 as Department of the National
Chamber of Commerce).
− Special posts in the local administration of communes. They provide
economic information and specialise in the EU funds’ advisory services. In May
2003, Punkt Konsultacyjny dla Przedsiębiorców (‘Consultation Point for
Entrepreneurs’) was created by Izba Przemysłowo-Handlowa (‘Chamber of
Commerce’) in Krakow.
− Websites dedicated to SMEs. They are a source of useful information for
entrepreneurs, e.g. www.e-msp.pl, www.wrotaMałopolski.pl, www.twoja-firma.pl,
www.Małopolska.uw.gov.pl, www.marr.pl, www.przedsiebiorczosc.ae.krakow.pl.
− Developing cooperation between entrepreneurs and inspectorate of work standards and safety, workshops, common publications etc.
− Courses organised for SME, with an objective to prepare entrepreneurs to deal
with business matters (support in overcoming administrative barriers and running
simplified accountancy).
− Organising incubators of entrepreneurship in communes. The aim of this
undertaking is to promote entrepreneurial attitudes among students through
involvement in economic activities; therefore one of the projects is run by the
Students’ Forum Business Centre Club. In Krakow, there is an Incubator of
Entrepreneurship of Wyższa Szkoła Ekonomii i Informatyki (‘University of
Economics and Informatics’) and also by Fundacja Promocji Gospodarczej
Regionu Krakowskiego (‘Foundation of Economic Promotion of the Małopolska
Region’). There was also created a web portal Inkubatory.pl, which is a source of
information and enables joining an Incubator of Entrepreneurship.
158
− Establishing closer cooperation between universities and entrepreneurs. For
example there are firms which organise competitions for the best theses written by
the graduates of the Krakow University of Economics. The winners are awarded
with internships, e.g. ‘Grasz o staż,’ ‘Start do kariery’ (Bank Handlowy w
Warszawie S.A.) (‘Start to career’ – ‘Commercial Bank’) and posts in those
companies or cheques for a certain amount of money for setting up an own
business. Also cooperation on the basis of centres such as Centre for Innovation,
Technology Transfer and University Development (CITTRU).
− Projects in ZPORR 2.5 ‘Promocja Przedsiębiorczości’ (‘Sectoral Operational
Programme on Regional Development’ – ‘Entrepreneurship Development’) such
as ‘Inicjatywa’ (‘Initiative’) started in March 2005 by Edukacja dla
Przedsiębiorczości (’Education for Entrepreneurship’) by the Krakow University of
Economics. The aim of the project is to activate the development of micro-
enterprises. It offers an extensive package of courses, consulting and financial
support - directed to students and graduates under 25.
2.2 Main Strengths and Weaknesses of Małopolska Region – Why is Entrepreneurship Promotion a Challenge?
Basic strengths • Strong science and research potential;
• Presence of high-tech industries in the region;
• Interesting and diversified investment potential;
• Large supply of well-educated, young manpower;
• Demographic structure (migration, natural growth),
• Rich in natural resources; including physiotherapeutic,
• Well-developed banking system;
• Well-developed network of business support institutions;
• Low percentage of the 'end-of-line' industries;
• Relatively low unemployment,
• Attractive tourist destination (landscape, heritage, forests, activities, winter
sports),
• Krakow's role as metropolitan centre for culture, finance, business services,
transport junction;
• Culture and wildlife heritage potential,
• Homogeneous, strong regional and cultural identity,
159
• Stable political situation.
Basic weaknesses
• Large agricultural unemployment (high percentage of persons employed in
agriculture),
• Lack of alternative sources of income for agriculture employees, fragmentation
and low market value of agriculture products,
• Lack of communal infrastructure and environmental protection,
• Low level of urbanization,
• Unsatisfactory number of medium-sized companies,
• Low level of local authorities’ income in Małopolska,
• Too much disproportions in internal region development,
• Institutional incompatibility for assistance means acquisition,
• Low level of export per capita,
• Low level of salaries,
• Small number of companies
Entrepreneurship promotion is a challenge here due to the unstable legal situation in
Poland, high costs of setting up and doing own business, administrative barriers and
not sufficiently adjusted education in that field. Although, there are many actions
taken to overcome the situation, there is still a lot to be done in the area of
entrepreneurship promotion and entrepreneurial way of thinking.
2.3 Human/ Social Capital and Migration/ Demography
Małopolskie Voivodeship is currently inhabited by a population of 3.3 million,
which accounts for 8.6% of the total population (4th among voivodeships) - Krakow –
is inhabited by 23% of the total voivodeship population. Mean population density
equals 214 persons/ km2 (2007) and exceeds the national average (122
persons/km2)
Voivodeship population features a relatively high level of natural growth – the
factor of 2.3/1,000 inhabitants is much higher than the national average (0.5‰); the
high level of natural growth is a result of the high birth rate (11.3‰ – in voivodeship,
10.2‰ – in Poland) and death rate lower than in other voivodeships (9.0‰ – in
voivodeship, 9.7‰ – in Poland.)
160
Positive migration balance may be perceived as an advantageous demographic
process, expressed by the factor value of 1.0/1,000 (2005), thus ranking the
voivodeship second in Poland (after Mazowieckie). It is a clear indicator of
attractiveness of the region.
2.4 Regional Planning Strategy and Regional Marketing Strategy (Image)
The process of formulation of the strategy and implementation of the voivodeship
development policy is conducted in accordance with the Act on Voivodeship
Authorities, Act on Spatial Management and Act on the Principles of Supporting
Regional Development. The development strategy of the voivodeship must prove
compliant to the directions and strategic priorities of governmental documents, as it is
the basis for the acquisition of external financing.
The Act on Voivodeship Authorities of 5th June, 1998 (Gazette of 1998; No. 91,
item 576) is a basic legal act imposing the obligation of determination voivodeship
strategy on the local authorities of the voivodeship. In accordance with its
stipulations, the strategy specifically defines the following goals – in the field of
entrepreneurship support:
− stimulation of economic activity,
− increasing the level of competitiveness and innovativeness in the economy of the
voivodeship,
− shaping and maintaining of the spatial order.
Thus the strategy is an important programme document that is a starting point for the
generation of the voivodeship programme and conducting the development policy of the voivodeship which, in accordance with the Act quoted above, in the
economic area consists of:
− creation of conditions for economic development, including the creation of the
labour market,
− maintenance and development of the social and technical infrastructure significant
for the voivodeship,
− acquisition and combination of public and private funds to implement public utility
tasks,
− supporting the development of science and cooperation between learning and
education and economy, support of technological progress and innovation,
− promotion of development values and potential of the voivodeship.
161
Similarly, the Act on Spatial Management of 7th July, 1994 (Gazette of 1999; Nr 15
item 139) defines the competencies of the voivodeship within the field of defining
social and economic development trends. So the burden of shaping and conducting
spatial policy in the region is on the authorities of the voivodeship. They fulfil the task
through the passing of a development strategy and of the spatial management plan
for the voivodeship, as well as through the coordination of the implementation of
supra-local programmes of spatial management.
The new act on regional policy (Act on the Principles of Supporting Regional Development) of 12th May, 2000 defines the forms of supporting regional
development by the state and the principles of cooperation between government
administration and local authorities in this area. In accordance with the Act, the
development strategy of the voivodeship (together with the voivodeship programme)
are the basic documents for conclusion of the contract and are necessary for the
consultation of programmes and action plans of the agencies and funds within the
voivodeship.
Voivodeship authorities are responsible for the creation (generation) of the
development strategy, the realisation of the region’s development policy
(implementation of the strategy) and monitoring of its implementation, as well as
supervising all the activities in the voivodeship within the field of regional policy.
2.5 Structure, History and Promotional Activities in the Małopolska Region
The structure, history and promotional activities are coherent.
Krakow through certain activities makes use of its main assets, such as excellent
professors, attractive monuments, combining sciences, industry and culture.
Małopolska (besides Lower Silesia, Świętokrzyskie and Wielkopolska) is the region
with the greatest amount and quality of historical architecture. That cultural heritage
is decisive for the national identity of Poles. Although the condition of the most
precious destinations, especially those to be found in Krakow has significantly
improved in the recent years, there are still numerous sites which are either
mismanaged or devastated during the last decades of the communist economy.
These are the factors which led to vast needs for modernisation and preservation.
Shaping cultural environment is a multi-dimensional activity and it is impossible to
obtain positive results with one single action, especially when destructive processes
162
have lasted for many years. The core of the problem is to become aware, that the
cultural and economic values need to be shaped harmoniously.
Promotional activities in this area include:
− creation of an interesting property offer in the central areas of small towns and
villages,
− maintenance of regional diversification of architectural landscape (Podhale,
Orawa, Spisz, Pogórze, Land of Krakow.)
− protection of the most precious urban sites.
− use of open-air architecture museums as tourist attractions and culture centres.
− increase the competitiveness of the Małopolska agro-tourist offer.
− support folklore and rare professions,
− deepen the interest and pride in the regional traditions among residents of villages.
− encouragement of the private sector to support the development of historical sites,
− investment in small architectural forms and better management of greeneries,
− creation of favourable conditions for investments in services.
Another strength and chance for development of the region of Małopolska is the
higher education sector. There are currently 32 universities in the region - 17 are
state-owned and 15 private. Together with their branches and consultation centres,
the number grows to 38 university-level venues of various sizes - and only 12 of them
are situated outside Krakow. In recent years, the number of students in the region
has grown significantly. The labour market changes and the establishment of private
universities were the first impulses for broadening the access to higher education.
Currently, the system of lifelong learning (teaching) goes through the institutional and
programme changes; the process includes professional training of teachers
(trainers). Apart from the public entities that work within the field of lifelong learning, a
number of private ones were established.
The changes and transformations in the education system pose a challenge for the
teachers employed in schools of the Małopolskie Voivodeship. The current
employment of teachers (47,527 in 2005) shows reduction by 5,231 persons, most of
which took place among primary school teachers and is also a result of the
demographic depression.
Promotional activities in this field are:
− Establishment of local educational centres (with libraries)
163
− Shaping university networks outside Krakow, in order to help to balance the
educational opportunities for the young people living in longer distances from the
Krakow academic centre - as an emerging university supports integration of
activities conducted by local institutions, authorities and businesses.
− Increase of the role of the Krakow’s academic centre in the solution of socio-
economic regional and national problems.
− Fostering the international recognition of Krakow as a scientific centre
− With the financial support of public authorities (grants,) launching advanced forms
of academic education: post-graduate and international studies (conducted in
English and also at PhD level)
− Construction of the 3rd University Campus in Pychowice together with the
technology park and the premises of the Polish Academy of Sciences and the
Papal Theological Academy.
− Support of full computerisation of scientific libraries and the development of
operative capacities of the CYFRONET Academic Computer Centre.
164
3.
Stat
e an
d C
halle
nges
of E
ntre
pren
eurs
hip
Prom
otio
n in
the
Mał
opol
ska
Reg
ion
3.1
Cat
egor
isat
ion
of P
rom
otio
nal A
ctiv
ities
use
d in
the
Res
earc
h
Mul
ti Le
vel
App
roac
h A
ctor
s R
oles
G
oals
Pr
oces
ses
Res
ours
es
Net
wor
k Le
vel
Pla
tform
s C
lust
ers
Pro
mot
ion
of A
ttitu
des
and
Ach
ieve
men
ts in
E
ntre
pren
eurs
hip
Org
aniz
atio
n of
rank
ings
and
com
petit
ions
(as
e.g.
−
Naj
wyż
sza
Jakość
Mał
opol
ska
(Hig
hest
Q
ualit
y in
Mał
opol
ska,
) −
Mał
opol
ska
Nag
roda
Jak
ości
(Mał
opol
ska
Qua
lity
Aw
ard,
) −
Naj
bard
ziej
Inno
wac
yjna
Firm
a (M
ost
Inno
vativ
e C
ompa
ny,)
−
Mał
opol
ski P
rodu
kt P
rzys
złoś
ci (M
ałop
olsk
a P
rodu
ct o
f the
Fut
ure,
) −
Naj
wię
kszy
Eks
porte
r wśr
ód M
SP
(Lar
gest
E
xpor
ter a
mon
g th
e S
ME
s,)
and
crea
tion
of in
nova
tive
firm
s,)
Pro
mot
ion
of th
e co
mpa
nies
whi
ch im
plem
ente
d qu
ality
sys
tem
s, n
ew p
rodu
cts
or s
ervi
ces
or
ente
red
new
mar
kets
O
rgan
isat
ion
of c
onfe
renc
es, s
emin
ars,
and
fairs
fo
r gen
eral
pub
lic w
ith p
artic
ipat
ion
of
entre
pren
eurs
In
vitin
g en
trepr
eneu
rs b
y re
gion
al a
utho
ritie
s fo
r co
nsul
tatio
ns a
s im
porta
nt c
ivic
par
tner
s
Incr
ease
in th
e nu
mbe
r of
firm
s es
tabl
ishe
d in
M
ałop
olsk
a, e
spec
ially
in
rura
l are
as.
Hig
h pr
estig
e of
an
entre
pren
eur.
Inte
grat
ed m
ulti-
acto
r pro
gram
mes
Reg
iona
l de
velo
pmen
t st
rate
gy
Spe
cial
ists
: law
yers
, ec
onom
ists
, en
trepr
eneu
rs,
Inst
itutio
nal
Leve
l U
nive
rsiti
es
Sch
ool P
rogr
amm
es fo
r ent
repr
eneu
rshi
p pr
omot
ion
Sch
ool g
radu
ates
wel
l-pre
pare
d to
wor
k w
ithin
th
e fra
mew
ork
of fr
ee m
arke
t eco
nom
y
Dev
elop
men
t of
Ent
repr
eneu
rshi
p-R
elat
ed
Edu
catio
n
Pro
gram
mes
to
faci
litat
e en
trepr
eneu
rshi
p P
rogr
amm
es to
Acc
ess
to m
oder
n te
chno
logy
, hig
h te
chno
logy
, sc
ient
ists
,
165
Incu
bato
rs
Reg
iona
l de
velo
ping
ag
enci
es
Intro
duct
ion
of is
sues
rela
ted
to m
arke
t eco
nom
y to
edu
catio
n cu
rric
ula
in s
choo
ls
Pro
paga
tion
of p
erm
anen
t edu
catio
n In
cuba
tors
of e
ntre
pren
eurs
hip
enco
urag
e th
e de
velo
pmen
t of s
mal
l and
med
ium
ent
erpr
ises
an
d su
ppor
t loc
al e
cono
mic
dev
elop
men
t. In
cuba
tors
sup
port
putti
ng th
eore
tical
kno
wle
dge
into
pra
ctic
e, e
nabl
e de
velo
pmen
t of i
deas
at l
ow
cost
s th
roug
h pr
ovid
ing
prop
er b
uild
ings
, offi
ces,
he
lp in
runn
ing
acco
unta
ncy
Rei
nfor
cem
ent a
nd m
akin
g us
e of
bus
ines
s su
ppor
t ins
titut
ions
. C
onst
ruct
ing
a sy
stem
of a
war
ds a
nd h
onou
rs fo
r en
terp
rises
that
sup
port
nong
over
nmen
tal
orga
nisa
tions
, Lo
cal a
utho
ritie
s’ p
opul
aris
atio
n of
dis
tribu
tion
supp
ort s
tand
ards
for n
on-g
over
nmen
tal
orga
nisa
tions
E
stab
lishm
ent o
f an
info
rmat
ion
bank
con
cern
ing
non-
gove
rnm
enta
l org
anis
atio
ns
Pop
ular
isat
ion
of p
ublic
task
s co
mm
issi
onin
g fro
m lo
cal a
utho
ritie
s to
non
-gov
ernm
enta
l or
gani
satio
ns.
Est
ablis
hing
ow
n ec
onom
ic a
ctiv
ity
Wid
enin
g th
e S
cope
of
Coo
pera
tion
Bet
wee
n N
GO
s an
d P
ublic
and
E
cono
mic
Par
tner
s
stim
ulat
e en
trepr
eneu
rshi
p
Indi
vidu
al
Leve
l E
ntre
pren
eurs
S
tude
nts
Teac
hers
C
onsu
ltant
s
Ent
repr
eneu
rshi
p ch
airs
and
act
iviti
es a
t un
iver
sity
leve
l C
oope
ratio
n be
twee
n un
iver
sitie
s an
d bu
sine
ss
aim
ed a
t the
pro
mot
ion
of e
ntre
pren
eurs
hip
Cre
atio
n of
spe
cial
pos
ts in
the
adm
inis
tratio
n of
th
e co
mm
unes
pro
vidi
ng e
cono
mic
info
rmat
ion
and
serv
ing
the
outs
ide
inve
stor
s
Dev
elop
men
t of C
ivic
E
duca
tion
Coo
pera
tion
betw
een
educ
atio
nal i
nstit
utio
ns
and
the
busi
ness
wor
ld
Trai
ning
of t
each
ers
on th
e su
bjec
t of
entre
pren
eurs
hip
Enco
urag
ing
entre
pren
eurs
hip
and
star
t-ups
at u
nive
rsity
leve
l
Edu
catio
nal c
ours
es
on e
ntre
pren
eurs
hip
Hou
sing
faci
litat
ion
Fina
ncia
l fac
ilitat
ion
Acce
ss to
kn
owle
dge
166
3.2 The Role of Higher Education and Training Institutions (Universities/ Colleges)
The main strength of the Krakow academic centre stems from the universities which
ensure a high level of provided education because of the thorough scientific research
and the persistent education of the academic staff. Universities form the background
of the Polish Academy of Sciences (PAN) and of the specialist research and
development institutes and units. The Krakow scientific centre is, apart from the one
in Warsaw, the strongest academic centre in Poland and a major asset in the
development of Małopolska. It is primarily owing to the Krakow university staff who
expands the operation and activities also of the Polish Academy of Arts and Sciences (PAU). Maintaining the leading position requires intensive efforts related to the highest
quality and competitiveness of the educational and scientific offer. This – up to
certain extent - depends on the improvement and development of the material
resources and technical infrastructure of the Krakow University and research units.
One of the problems is the full computerisation (including libraries) for the circulation
of scientific information.
The development of higher education, both public and private, should form a mutually
supportive system in order to provide access to higher education for all interested
young people. Generally, public and private higher schools should offer bachelor
degree (licencjat) studies, while university school should offer courses at master
(magisterium) level and advanced forms of education: post-graduate and doctoral
courses and international studies. Such division of tasks will support the development
of human capital in the region, development of sub-regional centres and maintaining
the high recognition of the Krakow scientific centre in its capacity of a regional,
national, and international academic hub.
However, there is a lack of a proper harmonization of actions undertaken by Krakow-
based universities aimed at entrepreneurship promotion. Both: the scope and the
substance of entrepreneurship promotion (which in many cases is restricted to
various courses taught at Krakow-based universities) are far from satisfactory. This in
turn may be partly explained by a reluctance inherited from the past universities to
proceed with very practical tasks/problems originated from industry or services. What
is more important is that the universities themselves do not posses necessary
entrepreneurial potential and skills.
167
3.3 Success Indicators to Evaluate Quality and Impact of Promotional Activities
Monitoring of the development of promotional activities is a permanent and
continuous process of quantitative and qualitative observations of the changes of
selected indices, aimed at providing information concerning the justification and
efficiency of operations undertaken. The monitoring covers the basic areas of social
and economic life of the voivodeship. The definition of the principles governing the
monitoring process ensures current and staged control of implementation of the
strategy.
Monitoring of the strategy consists of the following actions:
− systematic gathering of numerical data and information concerning the realisation
of strategic goals,
− comparative and thematic analyses,
− preparation of regular reports showing the degree of strategy implementation in
the major fields of social and economic life,
− evaluation of the results achieved and the definition of the degree of execution of
the actions undertaken and goals assumed,
− evaluation of the divergence between the goals assumed and actions undertaken
on the one hand, and achieved results on the other,
− analysis of the reasons for divergence and identification of the areas requiring
remedial measures,
− planning of changes in the strategy and implementation of actions agreed.
In order to make it possible to evaluate the level of implementation of the strategic
goals, indices for their achievement were determined. For the highest-rank goals
synthetic indices were defined; their achievement will be the consequence of the
implementation of individual goals and strategic activities.
168
Some indicators:
− entrepreneurship rate – businesses (89 businesses per 1,000 residents)
− participation in local elections 48.1%
− participation of the voivodeship in the GDP 7.4%
− sector employment structure 1st (agriculture) – 17.2%, 2nd (industry) – 28.7%, 3rd
(services) – 54.1%
3.4 Strengths and Weaknesses of the Promotional Activities
We would assign the attribute ‘learning’ to those promotional activities. The main
strengths of them are: diversity, creativeness, increase in the number of small and
medium- sized businesses and their development, decrease of the unemployment
rate and also rise in economic activity and broadening knowledge.
The weaknesses include: lack of capital, promotion and information on the
promotional activities that are undertaken, low awareness in the society. A serious
limitation is human mentality and superficial knowledge about entrepreneurship, lack
of deeper understanding of socio-economic mechanisms.
4. Effect and Impact of Entrepreneurship Promotion – General Questions & Challenges
4.1 Activities and Steps taken for Entrepreneurship Promotion
The Centre of Innovation, Technology Transfer and University Development (CITTRU) was created as a unit of the Jagiellonian University aimed at promoting
entrepreneurship among the University's scientific staff and encouraging them to
create businesses within the University. CITTRU provides active support for technology transfer (know-how) cooperates with the business environment and
promotes scientific projects eligible for commercialisation.
At present CITTRU is working on the commercialisation of scientific projects,
mainly in the field of biotechnology, to which it offers business support. In practice,
CITTRU evaluates every project presented by the potential academic entrepreneur
and eventually selects the one running the best chances for commercial success.
CITTRU assist in preparing a business plan for the project and advises on all
formalities related with the creation and operation of the company. If needed,
CITTRU helps in searching for an investor - a partner who will co-finance the project
169
(e.g. ‘business angel’). From the academic entrepreneurs' point of view, CITTRU
undertakes actions of a partner representing their interests in the business world
during the initial stages of project development.
Aiming at broadening the activity range of CITTRU, work on the Technology
Incubator that will function within the Jagiellonian University Campus in Pychowice,
Krakow, was started. The Incubator will provide office space and all necessary
economic, strategic and legal assistance during the primary stages of companies.
Apart from CITTRU, academic entrepreneurship can also be supported by joint
advertising of newly created businesses within the University environment. CITTRU
aims at endorsement linked to the promotion of the University output, carried out on
the local, national and international level.
CITTRU also recognises the importance of educational support for academic entrepreneurship. To fulfil this aim many seminars and workshops were organized –
for example on "Commercialisation of Research and Creating Businesses at the
Jagiellonian University" in co-operation with the Technological Park in Heidelberg
and the University Development Centre in Uppsala.
In order to be able to support start-ups and advise on the commercialisation of
scientific projects – CITTRU deals with the entrepreneurship promotion and
provides assistance also for existing companies via e.g. special meetings – ‘tailor made’ workshops, during which scientists solve real industrial problems,
conferences – annual ‘University for the Industry’, where cooperation details are
discussed and innovative initiatives promoted, data base containing searchable
information on the University's scientific experts, research projects and available
specialist equipment available for the industry etc.
In the phase of creation, there is also a specific tool – data base of innovative
companies’ undertakings that will serve as a source of information, ideas and
promotion.
4.2 Relation between Entrepreneurship Promotion and Regional Development
In our opinion there is no immediate relation between entrepreneurship promotion
and the regional development. CITTRU’s actions are supportive for the local
academic entrepreneurship development. Due to the Jagiellonian University’s strong
regional recognition our activities influence also the regional development. We do not
have any specific quantitative measures to be able to assess that but we obtain
170
feedback information from the entrepreneurs, local government and scientists that
enable us to undertake successfully main activities.
4.3 Which kind of Models and Theories can be used to explain this?
We argue that there is no immediate relation between entrepreneurship promotion
and regional development observed in the Małopolskie Voivodeship.
There are two main reasons for this.
At first, a lack of a proper harmonization of actions undertaken by Krakow-based
universities aimed at entrepreneurship promotion. One even may maintain that both:
the scope and the substance of entrepreneurship promotion (which in our case is
restricted to various courses taught at Krakow-based universities) are far from
satisfactory. This in turn may be partly explained by an inherited reluctance from the
past universities’ to proceed with very practical tasks/problems originated from
industry or services (ivory tower syndrome). To say more, the universities themselves
do not posses necessary entrepreneurial skills (Klich, 2002).
Second is a weak or rather below the expectations regional authorities’ performance
in respect to (just to mention a few):
− creation of financial/economic incentives for entrepreneurs who consider starting
new small companies,
− institutionalization of assistance for entrepreneurs (in various forms, starting from
data base clearinghouses and ending up with one-stop-shops for people starting
their own businesses)
− creation of entrepreneurial culture in the region.
An anecdotal evidence for this can be the result of a survey by J. Targalski
(Targalski, 2002). In 2001 about 400 of the graduates from the “Entrepreneurship
and Innovations Programme” run by the Krakow University of Economics were asked
about their careers and plans. Only 10% were owners and another 20% were co-
owners of a business. Additional 25% of the responding graduates were planning to
start their own business (Targalski, 2002, 134). The majority of the respondents
wanted to work for big, well-established corporations.
4.4 Indicators for Monitoring, Assessing and Evaluating the Regional Impact
Since the main activity of a university (as for the moment) is teaching, the following
comments are restricted to teaching entrepreneurship and innovations at universities.
171
These comments are divided into two groups. One is related to the issue of the
teaching quality and the other to the impact of the teaching activities on regional
development.
Let us start from a general statement that it seems to be inevitable to evaluate
promotional activities of universities by updating syllabi of entrepreneurship
programmes and by monitoring career paths of graduates from main programmes
aimed at entrepreneurship development.
Consequently, keeping a full (and regularly updated) mailing list of graduates is
essential. This in turn should result in keeping contact with the graduates in order to:
− verify the content (i.e. syllabi) of the programme of entrepreneurship
− monitor career paths of the graduates.
Needless to say that as for now, there are not such data available thus one cannot
assess how useful are the currently offered programmes/courses on
entrepreneurship for starting new businesses in Małopolskie Voivodeship.
In respect to the issue of monitoring, assessing and evaluating the quality of teaching
entrepreneurship one may propose the following list of indicators:
− share of lectures in the entrepreneurship programmes should not exceed 30%
− share of workshop and exercise like activities should not be lower than 45%
− practical placements ( i.e. in firms) and apprenticeships should not be lower than
30%
− representatives of business community should be involved in lecturing
− syllabi of entrepreneurship programme should be commented by representatives
of business community (for example: chamber of commerce, associations of
producers, managers from business incubators, etc.)
− the share of graduates starting their own business (not restricted, however, to the
Małopolskie Voivodeship)
As far as the problem of monitoring, assessing and evaluating success of
promotional activities on regional development is concerned, one may mention the
following:
− number of new firms registered in the region
− number of new firms born in university incubators
− number of university graduates among those who started new firms
− number of withdrawals from business (bankruptcies/insolvencies, resignations)
− number of new firms which did not leave university incubators and died
172
− number of local initiatives undertaken successfully by universities and aimed at
entrepreneurship development
5. Conclusions and Recommendations
5.1 Special Conclusions for the Małopolska Region
Special conclusions for our region are:
− On the regional level, it is vital to work out a better system of contacts between the
local government and the representatives of economic environment.
− It is equally significant to prepare a thorough evaluation of SME in communes in
association with the analysis of the local labour market.
− A need to create better financial conditions suitable for undertaking and
developing economic activities.
− Development of entrepreneurship demands interdisciplinary knowledge,
professional experience and sharing this experience with others. One of the
possible ways of activating these professional groups to support entrepreneurship
may be meetings of professionals, such as engineers, economists, lawyers,
sociologists and psychologists. This would be a profitable attempt to make good
use of available knowledge, skills and experience of many people for the benefit of
local development.
− One of the important promotional activities is establishing closer cooperation of
universities and entrepreneurs.
− There is also a need to increase the pace of works on the spatial development
plan in communes and preparing the land for investments. Delays in that respect
do not create favourable conditions for the development of entrepreneurship and
discourage investors, especially external ones.
5.2 General Conclusions for Entrepreneurship Promotion on Regional, National and International Level
Our general conclusions are based on three main levels. The first one is the level of
entrepreneurship, the second one is regional and the last one is national. However,
on all the levels the entrepreneurship promotion activities should be based on
supression of the administrative and legal barriers. It is because that itself the
propensity to set up an own business in Poland is high and it is the omnipresence of
173
discouraging factors that leads to the unfavourable entrepreneurship situation in
Małopolska voivodship.
On the first level of entrepreneurship, it is necessary to carefully pay attention to
the fact that the basis of the development is acting in a group i.e. in an organisation
for lobbying, education, information, specialist consultancy and professional
management. These are indispensable conditions for the development of each
company and a source of competitive advantage - an individual is not capable of
achieving its goals alone.
These entrepreneurial activities are realised partly through particular organisations,
such as Izba Przemysłowo-Handlowa (‘Chamber of Commerce and Industry’),
Małopolski Związek Pracodawców (‘Employers Union of Małopolska’), Izba
Rzemiosła i Przedsiębiorczości (‘Chamber of craft and entrepreneurship’). Some
attention should be also paid to creating a positive image of an entrepreneur.
The regional level has been described in details in the part above.
The expectations towards the national level are commonly known, they include:
improving the quality of ruling the state, lowering the costs of the state functioning
and of company establishment and management. In this situation, it seems advisable
to undertake certain actions in order to support SME and stimulate the development
of entrepreneurship.
Those actions need to take into account that there should be special development
tools created for the SME’s. Micro-entrepreneurs, medium and big entrepreneurs, on
the other hand, belong to two different worlds. Treating them as of equal potential,
without considering obvious differences and not trying to give equal opportunity on
the market will not favour the entrepreneurship development. All solutions which
have been adapted so far are only half measures and are not consistent.
A serious restriction to development of entrepreneurship is a lack of governmental
programmes which facilitate establishing local loan and guarantee funds. The rules
followed by banks are not sufficiently adjusted to the specificity of micro-
entrepreneurs and small firms in Poland.
Also the allocation of the EU structural funds should be executed on the regional
level. The present solution with the Ministry of Economy being the only decisive body
in this area is definitely too centralised. It results in slowing down the pace of
proceedings, increases the costs and does not favour choosing the most
174
advantageous projects to be implemented. Formulating the rules to be observed in
this respect is the sole duty of relevant Polish authorities.
In all of those areas, some progress may be noticed, but still not satisfactory.
175
Bibliography
1. Secondary Literature Cecchini P. 1992, The Benefits of a Single Market. Gawlik L. (2004) Regional Strategy of Innovations of the Małopolskie Voivodeship
2005-2013, Krakow Klich J. 2002, Entrepreneurial universities in Poland: dream or workable solution, in:
Stone I. ( ed) Universities & Entrepreneurship, Northern Economic Review. Special Issue, Vol. 32.
Targalski J. 2002, Graduates of the Entrepreneurship Programme in Polish business, in Stone I. ( ed) Universities & Entrepreneurship, Northern Economic Review. Special Issue, Vol. 32
2. Official Documents Department of Strategy Development of the Office of the Marshal of the Małopolskie
Voivodeship in Krakow with the cooperation of the Agency for the Development of the Krakow Region 2000, Małopolskie Voivodeship Development Strategy. Krakow: Office of the Marshal of the Małopolskie Voivodeship.
European Union 2003, Responsible entrepreneurship: a collection of good practice cases among SME across Europe, Bruxelles.
GUS 2002, Informacja o sytuacji społeczno-gospodarczej kraju. Warszawa „Ustawa o samorządzie województwa” z dnia 5 czerwca 1998 roku (Dz. U. z 1998;
Nr. 91, poz. 576) „Ustawa o zagospodarowaniu przestrzennym” z dnia 7 lipca 1994 (Dz.U. z 1999; Nr
15 poz. 139) 3. Internet Sources Statistical Office in Krakow www.stat.gov.pl www.krakow.pl www.wrotaMałopolski.pl www.Małopolskie.pl www.Małopolska.pl www.um.wrotaMałopolski.pl www.parp.gov.pl www.mgip.gov.pl www.marr.pl www.bip.krakow.pl
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Entrepreneurship promotion in Research Environment. The Case of Oulu University Martti Hyry/ Marianne Mäntylehto/ Gottfried Effe University of Oulu Learning and Research Services Pentti Kaiteran katu 1 FIN 90014 Oulun Yliopisto Phone: +358-8553 7333 E-Mail: [email protected]
Contents
Illustrations ............................................................................................................. 178
1. Introduction .......................................................................................................179 1.1 Entrepreneurship ............................................................................................. 179 1.2 The Oulu Region.............................................................................................. 181
2. Regional profile.................................................................................................183
3. State and Challenges of Entrepreneurship Promotion in the Oulu Region .......185
4. Effect and Impact of Entrepreneurship Promotion – General Questions & Challenges........................................................................................................188
5. Conclusions ......................................................................................................190
References ..............................................................................................................191
177
Illustrations
Figure 1: Interpretations of entrepreneurship (Bridge et al.1998) ........................... 181 Figure 2: The share of high technology jobs of all industrial jobs and from all jobs in
the Oulu Region. ..................................................................................... 182 Figure 3: The Number of Employees in the Technology Park 1982 – 2000 ........... 185 Figure 4: Entrepreneurial actors in the Oulu region ................................................ 186 Figure 5: Public finance and support to inventions and business opportunities.
(Foundation for Finnish Inventions 2004) ................................................ 188 Figure 6: New pre-incubator program for researchers. (Foundation for Finnish
Inventions 2004)...................................................................................... 189
178
1. Introduction
The Finnish economy and business politics have a special policy program on
entrepreneurship. It aims on creating an environment that has a positive impact on
company creation, growth and internationalization. Due to the universities’ third
mission1 their role and responsibility in entrepreneurship promotion is to be
emphasized. Previously, there have not been many entrepreneurship training
courses or programs in the universities that are meant for researchers only. The
need for university based business ideas has been recognized, but researchers are a
special group, where entrepreneurship promotion activities are both needed and
hoped for. It has also been realized that we have to strengthen entrepreneurship in
the whole education system if we want to increase our potentiality for
entrepreneurship. In this report we concentrate on looking at entrepreneurship from
the research based point of view, and especially on how to get university research
into the use of the business world.
1.1 Entrepreneurship
Joseph Schumpeter defined entrepreneurs as individuals and groups that work either
individually or as a part of an organisation in order to execute new combinations.
New combinations are equivalent to innovations. (Schumpeter 1934) Before that
innovations were understood as commercialisation of new products and
technologies. At present many types of innovations are recognized and there are
many different ways of categorizing these innovation types. According to Alarinta
(1998) innovation types can be grouped by the scientific-technological meaning
(basic or radical innovations), the exploitable information or skill (innovations that are
based on technological development and market pull), the meaning of business
economy (innovations that relate to production system), the object (product, process,
technological, organizational, and market or marketing innovations), and according to
the origin of the innovation process (occasional innovations). In the basic grouping
models for innovation systems the very commonly used groups are product, process,
technology, organisational, market and marketing innovations. 1 Finnish national higher education policy has changed in the beginning of the century by starting to consider the third role or task of higher education institutions and by emphasizing their regional engagement as a part of national innovation and competitiveness policy. This responsibility became a clear task for the universities in the new university law and is aimed to strengthen the social and regional impact of universities. (University of Oulu, Markku Joutsenoja)
179
Apart from Schumpeter many others have also described the content of
entrepreneurship and the characteristics of an entrepreneur (e.g. van Praag 1999;
Brouwer 2002). The definitions of entrepreneurship and entrepreneur contain a great
scale of different kind of actions such as:
- New combinations/ innovations (Schumpeter 1934, Drucker 1985)
- Combining production factors – with the entrepreneurs’ activities viewed as
exploiting of labour force, real capital and raw materials. (Say, in van Praag
1999)
- Tolerating uncertainty – Looking at the entrepreneurs’ management and
controlling actions which are used to control uncertainty. (see E.g. Knight 1921;
Sarasvathy 2003)
- Exploring possibilities – the emphasis is laid on recognizing opportunities that
are within the surrounding environment (e.g. Kirzner 1997; Shane &
Venkataraman 2000; Davidsson 2003)
- Building new organisations (companies) and also new organisations in existing
companies (e.g. Gartner 1985; Gartner 2001)
Entrepreneurship can be understood either narrowly or broadly. Different kinds of
emphases are due to the basic assumptions related to this concept. Differing from
the narrow interpretation the broad view of entrepreneurship presents an idea where
the goals of entrepreneurship can be more than only maximisation of the profit. In the
broad way of thinking, the actors have a constant connection to their own
environment, its values, problems and opportunities, and also to other actors working
in the same area.
The broad and narrow ways of understanding entrepreneurship are based on
different assumptions. Model A in the figure 1 is the narrow way; where it is
presumed that only a small amount of people have the characteristics of an
entrepreneur. It is also believed, that these characteristics are somehow stable and
special, and that the number of characteristics varies only among this small group.
On the other hand, model B presumes that entrepreneurship is seen as a common
characteristic for all people but some of them just have it more than others. The
volume of these characteristics might also vary depending on different times and
situations. (Bridge et al. 1998)
180
Figure 1: Interpretations of entrepreneurship (Bridge et al.1998)
Model B is similar to the idea of digesting innovations which believes that eventually
even massive efforts do not increase the amount of innovation exploitation. For some
people new innovations and new working procedures can be difficult to digest.
(Bridge et al. 1998) For example, Finland joined the European Monetary Union and
started to use the Euro on the 1st of January 2002 and still some people count prices
in the old currency first and then convert it into Euro.
In entrepreneurship promotion this means that even though all people have at least
some entrepreneurial characteristics not all will use them. This is remarkable when
targeting at improving and managing actions of organisations that use an
entrepreneurial way of thinking.
1.2 The Oulu Region
The idea of this paper is to demonstrate the innovation transfer from university
research into company start up’s or into commercialisation of these ideas. It is closely
linked to research in fields such as:
- Research in innovation environment and transfer mechanics (such as e.g.
ProAct http://proact.ktm.fi/)
- Research in Knowledge Exchange (such as e.g. SCRI, www.scri.eu.com)
- Research in high technology clusters
- Research in entrepreneurship
It is also linked to the regional development policy of the Oulu Region and also in a
wider context into the Multipolis concept (see http://www.oulutech.fi/index.php?42).
Since the establishment of the University of Oulu in late 1950s, the Oulu Region has
developed to be one of the leading concentrations of high-technology based
181
industries in the Nordic countries. The first technology park in the Nordic countries
was established in 1982 in Oulu, the next was Ideon in Lund in 1983. In the
beginning of the year 2000 the high-tech based industry employed more than 11,000
people in the region (roughly 50 % of all industrial jobs); in particular the information
and communication technology has been very strong. Figure 2 demonstrates the
industrial evolution during last decades.
Figure 2: The share of high technology jobs of all industrial jobs and from all jobs in the Oulu Region.
The share of high-tech labour
0
10
20
30
40
50
1980 1990 1993 1997 2000 2001
year
%
The share of hightechnology jobsfrom all jobs inindustries
The share of hightechnology jobsfrom all jobs
Source: Martti Hyry 2004.
The Oulu Region has gone through the first entrepreneurial era in knowledge based
industries during the 1980s and 1990s and as a result of that there are more than
200 new technology based firms in the region. They specialise in different
technologies such as telecommunication, software, wellness, medical technology and
biotechnology.
Due to the success of this industrialisation process, Oulu has been one of the fastest
growing areas in Finland and has attracted especially young people to immigrate into
the region providing higher education and jobs.
182
2. Regional profile
The city of Oulu was founded by the order
of King Carl IX of Sweden at the mouth of
the Oulu River in 1605. Oulu, which is
located on the shore of the Gulf of Bothnia
in Finland, has been the province's capital
since 1776. Oulu has the sixth largest
population amongst Finnish towns. In
January 2005 the city had 127,213
inhabitants. The area of Oulu is 411.1
square kilometres.
• Coordinates: 65.01° N, 25.28° E
• Elevation: 0 meters (0 feet)
• Region: Oulu, Finland
• Time Zone: East European Daylight Time (GMT + 2:00)
Oulu is considered northern Europe's most significant centre of competence. A
significant amount of high technology ability has been concentrated in the area. The
city, which is the largest employer in the region, employs over 9,000 people. The
inhabitants are provided with high level health and children's day care services. Oulu
has also almost 100 different teaching establishments. The most important one is
Oulu University which was founded in 1958.
The internationalisation history of the city of Oulu began in 1605 with the founding of
the city. After the trading embargo in the Gulf of Bothnia was removed, trade became
free and the sailing fleet of Oulu grew in the 1860's to become the largest in Finland.
Back then the most important exports from Oulu were furs, salmon and later also tar
which was used throughout the world to protect wooden ships. Today the basic idea
behind the city's international activities is to develop Oulu into the leading centre of
competence for the entire north of Europe. The "tar" of the city of Oulu today, is
internationally competitive high level know-how and ability.
Oulu has Finland's second largest university and many public and private research
institutes. The region is well known for its rapidly growing high-technology industry
which sells its products throughout the world. The city is thus also an international
183
growth centre. Oulu is located on the Northern part of the Baltic Sea with good
communication links to the largest European centres and its airport is the second
busiest in Finland. In conclusion, the city is a natural gateway to the Euroarctic
Barents region. The strong and well developed infrastructure of Oulu offers flexible
links both to Europe and to the northern regions of North-West Russia.
Finland's decision to become a member of the European Union in 1994 was
significant, both for Finland and for Oulu. To some extent membership has meant
adaptation to supranational decision making and to common markets which offer
Finnish industry growing production and export possibilities. Over the centuries, the
operating environment in Oulu has changed but the basic situation changed only
slightly. The city has always been, and remains, a gateway to the North between
East and West.
Entrepreneurship in the Oulu region
Along with the growth of new technology based firms and the Technology Park (later
Technopolis Ltd), the regional development policy evolved from planning an active
co-operation with firms, local authorities, higher educating institutes and research
institutes in order to strengthen the skills needed for the establishment of firms and
their growth. Such kinds of activities were:
• Managerial skills
• Risk funding (Local Venture Capital Fund established)
• Incubator close to the University (Oulutech Ltd established)
• Regional Business Development Strategy/ Technology Forums (see
e.g. http://www.mobileforum.org/index.php?37 )
• Innovation services in the University of Oulu
• Multipolis network
In the case of Oulu entrepreneurship and entrepreneurship promotion have not been
strong or visible activities. Anyway, the entrepreneurial spirit has been strong and
most of the new entrepreneurs have graduated from the faculty of technology. For
those, one professor in electronics, setting up a new, later fast growing firm acted as
real example of entrepreneurial behaviour. Later, other similar examples formed the
environment and mental models leading to increase the number of firms. The number
of firms (Figure 3) locating in Technopolis is a good example of that development.
184
Figure 3: The Number of Employees in the Technology Park 1982 – 2000
The Number of Employees in theTechnology Park
010002000300040005000
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
Source: Martti Hyry, 2004.
The promotion of entrepreneurship is embedded into the activities of the
technological forums (e.g. Mobile Forum, Software Forum, BioForum, MediaForum)
but also there are organisations, which are promoting the entrepreneurship at more
general level like the following matrix demonstrates.
3. State and Challenges of Entrepreneurship Promotion in the Oulu Region
Figure 4 demonstrates the major actors that are working in the Oulu area with
entrepreneurship promotion and entrepreneurial thinking. The list of institutional
actors is quite long; so it is rather difficult for people to find the correct contact
person.
185
Figu
re 4
: Ent
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186
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187
In Finland there are lots of different service systems for innovation and business
opportunities support. The public supply is very versatile and it has developed
vigorously, but at the moment it is mainly depending on temporary project funding.
Private supply usually finds its way according to the demand, and also according to
where the best profits can be earned. At the moment, there is no need for either new
services or adding to the volume of the existing services. (Finnish Ministry of Trade
and Industry 2005) Even though there are lots of different actors to support in
different development stages, there has not been any actor like the Research to
Business –Programme (later referred as R2B) is currently operating in Oulu.
Figure 5: Public finance and support to inventions and business opportunities. (Foundation for Finnish Inventions 2004)
Research Idea Evaluation Patenting Development of technology Marketing Market demandPlanning Product development Business planning Business activities
Foundation for Finnish Inventions
Oulutech., TE -Centres
National Technology Agency of Finland (TEKES)
TE -Centres, Finnvera
Finnish National Fund for Research and Development (SITRA) and other VC’s
Technological product development
Evaluation, protection, product development and commercialisation of the invention
Development and entrepreneurship training for inventors
PRODUCT ON THE MARKET
Venture capital
Entrepreneurship funding, guarantees
Research Idea Evaluation Patenting Development of technology Marketing Market demandPlanning Product development Business planning Business activities
Foundation for Finnish Inventions
Oulutech., TE -Centres
National Technology Agency of Finland (TEKES)
TE -Centres, Finnvera
Finnish National Fund for Research and Development (SITRA) and other VC’s
Technological product developmentTechnological product development
Evaluation, protection, product development and commercialisation of the invention
Development and entrepreneurship training for inventorsDevelopment and entrepreneurship training for inventors
PRODUCT ON THE MARKET
PRODUCT ON THE MARKET
Venture capital
Entrepreneurship funding, guarantees
4. Effect and Impact of Entrepreneurship Promotion – General Questions & Challenges
Recent studies in the Oulu region showed that research based firms employ easily
more than “normal” starting companies. In our region we have 19 research based
firms, which employ already 1,550 persons. The number starting new technology
oriented start-ups is only 0-2 per year, but the success rate of the product oriented
spin-offs is as high as 70 %. (Foundation for Finnish Inventions 2004) Therefore,
these companies can make a big difference in the more challenging employment
situation.
The main purpose of our work is to develop an understanding of how to start
research based companies, and also how to get researchers interested in
entrepreneurship and business founding. Since they already have the idea, or a
research result that can be transformed into a business idea, it is important for the
188
university to have an effective support system available. From the small number of
research based start-ups per year we can presume that the availability is not strong
enough.
The University of Oulu has developed a new entrepreneurial programme called
“Research to Business” (see figure 4 and 5) in order to tackle the problems described
above. The aim is to support entrepreneurship and an entrepreneurial way of thinking
among researchers. This programme is open to researchers from the University of
Oulu, VTT (Technical Research Centre of Finland) and Oulu Polytechnic. However,
researchers from other institutions or private businesses may also apply. The key
objectives of the program are:
- to encourage research-based business activities and support the realisation of
new business ideas (start-ups)
- to educate research staff about ways of commercialising research findings
- to equip people having a science and research background with the skills and
understanding needed to operate successfully in a business environment
The programme works with researchers on how they can commercialise research
findings and scientific expertise, how to protect technologies, how to recognize
business opportunities, how to build a management team, how to do a business plan,
what is a knowledge-based entrepreneurship, and also what kind of financial
possibilities there are available.
Figure 6: New pre-incubator program for researchers. (Foundation for Finnish Inventions 2004)
As a student As a Researcher As an Entrepreneur
Business Idea Evaluation
Entrepreneurship training programme
Basic courses in Entrepreneurship
Master degreeDoctoral degree
New start up
Pre-incubator project
Training Period abroadIncubator Phase
R2B R2B --program
As a student As a Researcher As an Entrepreneur
Business Idea Evaluation
Entrepreneurship training programme
Basic courses in Entrepreneurship
Master degreeDoctoral degree
New start up
Pre-incubator project
Training Period abroadIncubator Phase
R2B R2B --program
189
5. Conclusions
Even though the Oulu region has succeeded well during the last years, the amount of
research based companies has not developed at the same rate as other new jobs in
the technical field.
In order to increase the knowledge intensive industry base in our region, we need to
have new ways of co-operation between the different actors that are now working
separately. Like shown in figure 5 the public finance and support system for creating
inventions and business opportunities is very extensive, it is also disintegrated. The
current system requires customers to move from one supporting actor to the other as
for example when a business idea is developed in more detail.
At the moment different supporting organisations work only with their own services
and do not contact other service providers. The line between public and private
services is also very unclear because they all produce the same services as the
others do. Even government and municipalities have similar support services. There
is a real need to reorganize the existing support system and create an integrated
interactive support system that does not wait for the customers to come in like the
current system does.
In the University of Oulu we are building a working method that is based on intensive
co-operation between many different actors. The support system for inventions and
business creation directs the focus on the owner of the business idea. It is very
important to keep the system extremely flexible so that the resources can be directed
as fast as possible according to the real need. The “Research to Business”-
Programme has been introduced only one year ago, so there are no experiences
about the results after the programme is finished. It is important for us to learn about
similar programmes in other countries in order to compare and evaluate the strengths
and weaknesses of the “Research to Business”-Programme.
190
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van Praag C. M. 1999, ‘Some Classic Views on Entrepreneurship.’ De Economist 147(3): 311-335; Sep 1999.
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192
Entrepreneurship Promotion and Regional Development in the Region Middle Mecklenburg/ Rostock (MM/R) Gerald Braun, Ina Brachmann, Pawel Warszycki University of Rostock Chair of Economics and Business Education/ Wirtschaftspädagogik together with the Hanseatic Institute for Entrepreneurship and Regional Development (HIE-RO) an der Universität Rostock Project BEPART Ulmenstraße 69 D- 18057 Rostock Phone: +49 381 498 4561 E-Mail: [email protected] Contents Illustrations ............................................................................................................. 194 1. Introduction...................................................................................................... 195
1.1 Entrepreneurship and Regional Development................................................. 195 1.2 Terminology Applied........................................................................................ 196 2. Profile of the Region Middle Mecklenburg/ Rostock ........................................ 197
2.1 History of the Region Middle Mecklenburg/ Rostock ....................................... 197 2.2 Profile of the Region Middle Mecklenburg/ Rostock ........................................ 200 2.3 SWOT Analysis of the Region Middle Mecklenburg/ Rostock ......................... 204 2.4 Regional Planning and Marketing Strategy ..................................................... 205 3. State and Challenges of Entrepreneurship Promotion in Middle Mecklenburg/
Rostock ........................................................................................................... 207
3.1 Strengths and Weaknesses to Foster Entrepreneurship in MM/R................... 207 3.2 Entrepreneurship Education: Approaches and Effects .................................... 209 4. Effects and Impact of Entrepreneurship Promotion ......................................... 210
5. Conclusions and Recommendations ............................................................... 213
Bibliography............................................................................................................ 217
193
Illustrations Figure 1: Region of Middle Mecklenburg / Rostock (MMR) .................................... 200 Figure 2: Characteristic of the Region Middle Mecklenburg/ Rostock .................... 201 Figure 3: Portfolio of Economic Sectors in MMR .................................................... 202 Figure 4: Opposition of Strengths and Weaknesses of the Region MM/R.............. 204 Figure 5: Opposition of Opportunities and Threats of the Region MM/R ................ 205 Figure 6: Opposition of Strength and Weaknesses in Entrepreneurship in the Region
MM/R....................................................................................................... 208 Figure 7: BDS Performance Measurement Framework* ........................................ 212
194
Source: HIE-RO, Schultz H., 03.2007 1. Introduction
1.1 Entrepreneurship and Regional Development
High regional entrepreneurial activity has never been, and is still not, the panacea for
positive economic development. “Economic institutions do not exist in a vacuum but
rather in a context of social and political structures, cultural patterns, and indeed,
structures of consciousness (values, ideas, and belief systems). An economic culture
then contains a number of elements linked together in an empirical totality.”(Berger
1986, p.24) Hard, as well as soft location factors together can make a region
attractive and foster its economic and social development. The regional
entrepreneurship monitor shows a correlation between positive entrepreneurship
attitudes and regional founding activities. This positive relationship can, next to
Rostock
195
concrete framework factors, be influenced and promoted through initiatives for the
entrepreneur and those who wish to become one. Next to focus regional
development strategy, factors such as education and training play an important part
for up and coming entrepreneurs. Regionally usable conclusions are rare in this area.
There are no regional or national consistent acquisitions or categorisations of facts
concerning start-up, existing or even failed companies that could be made available
to initiatives, institutions and individuals.
Statistics and facts from different origins had to be painstakingly researched and
pasted together. Therefore a first step would be a complete view of the existing
entrepreneurship initiatives and finally, an evaluation of these initiatives based upon
consistent and comparable criteria. These should not only evaluate impact, but also
focus on the data-gathering methods used as to their effect on entrepreneurial
motivation and finally their benefit before, during and after the founding process.
1.2 Terminology Applied
To be an entrepreneur is defined in a general way by the Regional Entrepreneurship
Monitor as: “each attempt to build your own enterprise or to work freelance with
partners or with or without support by employees” (Bergmann/ Japsen/ Tamásy
2002, p.7). According to this source, entrepreneurship should be understood as life
script, which means mobilising capital, work, and resources virtue of ones inventive
intellect (cf. Braun RAP No. 19, p.1)
Generally speaking entrepreneurship promotion comprises deliberate activities which
target the development of an entrepreneurial culture and an enterprising society in
the region irrespective of the type of activities and their target groups or beneficiaries.
Entrepreneurial culture means that the “designs of living” (Kluckhohn), shared by the
majority of the population living in the region are dominated by entrepreneurial values
and attitudes such as risk-taking/ innovative behaviour/, internal locus of control/,
tolerance of ambiguity/, living with uncertainty, etc.
An enterprising society can be defined in quantitative terms as a society with a
maximum of self-reliant and independent economic, social and cultural organisations,
groups or entities. Promotional activities may target members working within
organisations (intrapreneurs/ corporate entrepreneurs) or self-employed persons – in
private business or non-profit organisations (social/ cultural/ political/ humanitarian).
196
The chosen definition of the term “region” is based upon the existing administrative
regional planning concept. This seems appropriate on the one hand to correspond to
regions in Germany and on the other hand to build a framework for regional
development strategies. Regions are smaller than federal states. The state of
Mecklenburg- Western Pomerania consists of four planning regions. The region
Middle Mecklenburg/ Rostock is one of them. It is comprised of the Hanseatic city of
Rostock and the cities Güstrow and Bad Doberan, therefore Middle Mecklenburg/
Rostock can be characterised as an urbanised area.1
2. Profile of the Region Middle Mecklenburg/ Rostock
2.1 History of the Region Middle Mecklenburg/ Rostock
It can be stated that ongoing structural weakness, inferiority and economic
backwardness of Mecklenburg-Western Pomerania can be linked to the historic
absence of an entrepreneurship culture and dynamic entrepreneurs (Braun/
Diensberg 2002, p.123). But even though the area of Mecklenburg- Western
Pomerania has always been structurally weak (“the poorhouse of Germany”), the
Hanseatic cities – such as Rostock – and their surroundings were not devoid of a
middle class of entrepreneurs. These cities could be seen as modern industrialised
islands compared to the areas surrounding them (Braun/ Diensberg 2002, p.123).
Hanseatic League
Due to its naturally protected harbour, the city of Rostock rose to become one of the
leading members of the Hanseatic League, officially designated as the Hansa in
1343. It was a powerful seaport town with 12,000 inhabitants, where ships meant for
cruising the Baltic Sea were constructed. The city’s inhabitants gained their income
from trade – mostly the trading of finished products for raw materials – as opposed to
selling their own products. The founding of the University of Rostock in 1419 further
enhanced the city’s importance.2
During this time, the city of Rostock had quite an international atmosphere, especially
through its connections with the Baltic Sea Region. The expanding network of long
1 cp. http://www.rpv-mmr.de/; on: 04/04/06. 2 cp. http://www.all-in-all.com/1022/geschichte_hro.htm; on: 06/04/06.
197
term business connections and associations formed the basis for several economic,
social and political innovations, such as the Hanseatic credit system.
The process of dissolution of the Hanseatic League began towards the end of the
15th century. With the discovery of America and the sea route to India, the rise and
consolidation of sovereign states in other parts of Europe, and the growth of Dutch
and British sea power, trade slowly diminished the power of the Hanseatic League.
The Thirty Years War, started in 1618, underlined this process.3
In the 19th century, Rostock regained much of its power due to its shipyards,
constructing the first propeller-driven steamers in Germany. The city was, however
almost destroyed in World War II.
The German Democratic Republic
The socialist system which dominated Eastern Germany for 40 years broke with the
hanseatic tradition and strove to undermine individuality, initiative and
entrepreneurship – considering these qualities to be capitalist traits and therefore a
threat to the socialistic system. This influence is still noticeable within the population.
The following developments functioned as motors for this process:
1. The collective education system strived to achieve adherence, system loyalty
and a culture of obedience. The frame of mind thus produced within the society
– combined with the weight placed on respect for authority, assimilation and the
aversion against any form of risk – further undermined those ideals and the
behaviour which characterise entrepreneurial initiative.
2. The German Democratic Republic defined itself as a “Arbeiter- und
Bauernstaat” (state of workers and farmers), and was meant to be a society
without class divisions. The long sought after social restructuring began as early
as 1945/46 with the help of dispossessions within industry and agriculture. The
ordered confiscation of businesses, the “Länderverordnung zur Schaffung
volkseigener Betriebe” and the “Bodenreform” destroyed the livelihood of the
bourgeois upper and middle classes. This led to the migration of mainly middle
class groups out of the GDR (Segert/ Zierke 1998, p.168).
3. Social promotion was paired with political and party loyalty, not with economic
achievements and success (Braun/ Diensberg 2002, p.124-125). Innovation and 3 cp. http://www.blackstudies.ucsb.edu/antillians/hanseatic.html.
198
risk were not desired, and was in a system without competition, hardly
necessary (Judt 1998, p.93).
German Unification and the end of the Cold War
The transition to a market economy triggered a deep and still ongoing structural
transformation process. At present, most of the economic growth is concentrated in
and around the so called “Stadt-Umland-Räume” (city and its vicinity) like the region
Middle Mecklenburg/ Rostock, and also in areas of tourism. The traditionally low
industrial density has sunk even further.
The end of the Cold War unleashed an enormous amount of entrepreneurial activity
in former Eastern Germany, which can be seen as a release of pent up
entrepreneurial potential and also as a means of staying employed. The changes
which ensued during the transition from the command to a market economy were
surely greeted by some, but also left a bitter taste among the people. Many of the
regions inhabitants especially had negative experiences with strict entrepreneurs.
The initial phase after reunification (1990-1992) can be described as a boom-phase,
especially when viewing the founding of new businesses in this time (over 30,000 per
year with only 10,000 market exits). The boom-phase is followed by a period of
consolidation (1993-1997) in which the total number of start-ups sank dramatically to
around 5,000 – 3,000 per year. This is followed by a period of stagnation (1997-
1999). From mid 1999 onwards the number of new founded businesses decreased
as the number of market exits rose sharply. The German economy began a slow
decline into recession from 2000/2001 onwards. The GDP in Eastern Germany
decreased for the first time since reunification, whereas unemployment numbers
stayed high (Braun/ Diensberg 2002, p.131).
199
2.2 Profile of the Region Middle Mecklenburg/ Rostock
Figure 1: Region of Middle Mecklenburg / Rostock (MMR)
Source: HIE-RO, Schultz H., 2007
200
Figure 2: Characteristic of the Region Middle Mecklenburg/ Rostock
Region MM/R urbanized area Area MM/R 3,601 km² Inhabitants Rostock Region MM/R Mecklenburg-
Western Pomerania 1990 248,088 463,908 1,906,678 1995 227,535 445,672 1,823,084 2000 200,506 431,168 1,775,703 2005 199,288 424,904 1,707,266 flow of migration (- migration/ + immigration)
Rostock Region MM/R Mecklenburg- Western Pomerania
1990 total -5.692 42,307 other counties 865 other federal states -5.971 abroad -586 1995 total -4.129 198 other counties -4.615 other federal states -1.477 -4.261 abroad 1.963 2000 total -2.409 -1.569 -9.478 other counties -1.001 1.623 other federal states -1.876 -3.596 -12.271 abroad 468 404 2.7932005 total 528 -444 -7.352 other counties 1.195 1.151 other federal states -624 -1.572 -7.983 abroad -43 -23 631Employees (regarding working place)
Rostock Region MM/R Mecklenburg- Western Pomerania
1991 132.300 215.600 843.000 1995 116.700 199.600 777.900 2000 103.400 191.000 749.700 2004 99.800 183.300 710.500 Unemployment rate (average numbers)
Rostock Region MM/R Mecklenburg- Western Pomerania
1998 19,9 % 20,4 % 20,5 % 2000 16,5 % 18,0 % 19,0 % 2005 21,4 % 21,2 % 22,1 % GDP per capita in Euro Rostock Region MM/R Mecklenburg-
Western Pomerania 1995 19.321 16.873 14.965 2000 23.710 19.575 16.859 2004 24.246 20.277 18.219
Source: http://www.statistik-mv.de/sis/; on: 03/04/06; http://www.rpv-mmr.de/; on: 03/04/06; IHK Rostock (2005): Zahlenspiegel 2005, Rostock;
201
Figure 3: Portfolio of Economic Sectors in MMR
Portfolio of economic sectors in MMR: Development of employment (1999-2005) and percentages of employees in the specific sectors (2005)
-120,0
-100,0
-80,0
-60,0
-40,0
-20,0
0,0
20,0
40,0
60,0
80,0
0,0 2,0 4,0 6,0 8,0 10,0 12,0 14,0
Provision of other services
Machine constructionHotel and restaurant industry
Provision of economic services
Health care, veterinary medicine and welfare
Local and regional administration
Retail
Education
Building and construction industry
Brokering and wholesaling
Shipyard
Data processing and databanks
Research and development Medical engineering, measurement, control engineering, Optik
Kultur, Sport und UnterhaltungOther vehicle construction
Employment development1999-2005 (%)
Percentage of emplyees in the specific sectors in 2005
Standortquotient > 1
Standortquotient ≤ 1
Fishery and fish farming
Wood industry
Metal industry
Property and housing
Source: Bundesagentur für Arbeit 2006, HIE-RO
The region has the densest population in Mecklenburg-Western Pomerania (MM/R:
118 inh. / km² - MVP 80 inh. / km²), containing nearly 25% of the states inhabitants.4
Therefore, the planning region must be seen as the economic centre of the federal
state of Mecklenburg- Western Pomerania. The highest GDP per employee was
obtained here with nearly 46,000 € in 2002. This amount ranges 11% above the
average of the federal state as a whole. The differences in GDP per employee as an
indicator for labour productivity of the region have been affirmed by the various
industrial sectors. Since 1991, there was a rapid development of the service sector in
cities and their vicinities. In the region Rostock 19% of the employees liable to social
security, work in the construction industry, whereas 38% are found working in the
service sector. In contrast to this, industry still plays a great role in the rural districts,
as the numbers prove for the counties of Ostvorpommern, Nordvorpommern and the
Isle of Rügen.
Small and medium-sized businesses (SME’s) form the economic structure and
provide the majority of jobs and apprenticeships in Middle Mecklenburg/ Rostock.5
4 cp. http://www.mv-regierung.de/afrl/main_mittmeck.htm; on: 04/04/06. 5 cp. http://www.rostock.ihk24.de; on: 04/04/06.
202
Traditional lines of business are food trade, shipbuilding industry, production of metal
products and the extraction of raw materials. Potential economic sectors of the future
include biotechnology, tourism, medical- and environmental technologies, services,
modern information- and communication technologies, maritime cooperation, harbour
induced logistics, health system, regenerative energy sources, as well as the
synthetic materials industry (Ministry of Labour, Construction and Regional
Development 2005).
In 2005 Rostock presented itself as „ hanseatic, harbour and high-tech“- around 250
enterprises such as transport and logistic firms are found directly at the harbour.
Some 25 enterprises and 20 research institutes for biotechnology, clinical
pharmacology and a centre for biomaterials have been established in the region in
the past few years.
With 2.25 million passengers passing through the harbour of Rostock annually, it has
become the most important German harbour for passenger ferries. This development
has been fostered by the change from a stop-over to a change-over harbour.
The economic situation in the cities of Bad Doberan and Güstrow is not as positive
as in Rostock. This can be derived from the fact that businesses here entertain fewer
international connections than companies in Rostock.
Besides being the biggest employer in the region, the University of Rostock is a basis
for about 550 businesses including 9,000 jobs, which are rooted in this institution.
Many of the new companies are situated in the vicinity of Rostock and about 90% of
them are located in Mecklenburg- Western Pomerania. This is evidence for the
university being a ‘growth-engine of the region’. Start-up consulting projects such as
‘Gründerflair’, ‘Gründerlotse’ and ‘ROXI’ offer help for establishing own businesses.
Therefore, the Alma Mater can be seen as giving a stimulus to the economy.
Rostock can be seen as the strongest metropolis of Middle Mecklenburg/ Rostock
and is also the economic centre of Mecklenburg- Western Pomerania. All trend
indicators support this perception. Using net migration as an indicator for growth of a
region, a positive trend of development in Rostock is revealed. Meanwhile, the
migration rate in other federal states has fallen sharply since 2000.
203
2.3 SWOT Analysis of the Region Middle Mecklenburg/ Rostock
Figure 4: Opposition of Strengths and Weaknesses of the Region MM/R
Weaknesses Strengths internal/ endogenous/ currently
• low potential within research and development
• low external reputation of the region; negative image among population
• unsatisfactory regional infrastructure • underdeveloped interregional
connections • weak industrial tradition, no tradition of
(private) services • only few innovative networks • underdeveloped entrepreneurial culture • high unemployment rate • low competitiveness of Rostock
University – exceptions: selected departments and HMT (Academy of Music and Theatre)
• University is under increasing financial and governmental pressure, no innovative, consistent strategy
• Rostock (as centre of MM/R) is the most important business location in north-east Germany
• centre for fairs and congresses • demographic increase of 26% in Rostock
and its vicinity • highest density of academics • competence in: maritime industry,
transport, traffic, logistics, services and life sciences
• international reputation of maritime research& development
• internationally accepted excellent basic research in biotechnology
• university with 8 faculties and ca. 13,000 students
• one of Germany’s best stimulating systems of entrepreneurship promotion within universities (REM 2004)
• top location for seaside conferences • precursor in wellness & conference
tourism • highest rate of human capital in the
federal state of Mecklenburg- Western Pomerania
• untouched countryside • population is willing to stay • favourable position between metropolitan
growth centres (Hamburg, Berlin, Øresund, Stettin)
• airport – connections to Munich, Cologne • since 2002 consistent marketing and
focused regional planning • low labour costs • high business founding rates
204
Figure 5: Opposition of Opportunities and Threats of the Region MM/R
Opportunities Threats external/ exogenous/ future
• metropolis and outstanding business location in Mecklenburg- Western Pomerania
• growth sectors: health care & wellness biotechnology - life sciences tourism
• regional management • improved infrastructure • new market opportunities in new EU
member states and especially in Baltic Sea Region
• enforced struggle for investors • weak economic output (ranking of
Rostock and vicinity: rank 49 of 50 or rank 57 of 60)6
• risk of loosing subsidies due to outstanding performance compared to other regions
• rapid economic development of new EU member states, in particular the Baltic States
• EU enlargements – additional competition in trade, industry, services and labour market
2.4 Regional Planning and Marketing Strategy
6 Business Ranking Capital 2005 and Wirtschaftswoche 2004.
Regional Planning alliance Middle
Mecklenburg/ Rostock
Region Rostock- Güstrow-Bad Doberan
Marketing Initiative Public Private Partnership
Society for economic and technology promotion
Rostock Business ltd.
Regional business development
Regional Management Middle Mecklenburg/ Rostock – sustainable regional development
Local Marketing, acquisition of
investors
red1 redn
Planning of regional development and
conflict management Programme for the regional area
Regional agenda
Fields of Action f1 fn
l1 ln
External Marketing
Internal Marketing
p1 pnLead projects
Regional Marketing
205
Three pillars of regional development through regional management of MM/R can be
identified:
Overall concept of the region Middle Mecklenburg/ Rostock
“Middle Mecklenburg/ Rostock - growth region at the Baltic Sea – innovative –
maritime – close to nature!”7
From globalisation and continued European integration, the need for a stronger
outward portrayal, in order to stay competitive compared to other regions was
derived.
Decreased public expenditures lead to sinking financial aid. Therefore, a new
structure for public promotion programmes is needed. The promotional and financial
aid programmes on EU- and state-level demand a regional dimension for financing
single projects in order to be applied goal-directed. Future aid programmes are
expected to be rerouted more strongly to regional lead projects which derive from
regional development concepts (Institute of Environmental History and Regional
Development 2004).
Three major focus points in the regional development of MM/R are:
1. Using the geographical position within the Baltic Sea Region in order to
intensify relationships with Northern and Eastern Europe.
2. Strengthening small and medium-sized businesses through network building,
concentration on production chain, strengthening soft location factors and
improving the quality of hard location factors.
3. Strengthening the region as a science centre in Mecklenburg-Western
Pomerania. Therefore the establishment of research and development
networks is needed.
7 cp. http://www.rpv-mmr.de/Leitbild.15.0.html; on: 03/04/06 (own translation).
First pillar: foundation for the overall concept of the region regarding local marketing, development and planning
Second pillar: concentrating on external/ Internal marketing following the overall concept of the region
Third pillar: marketing and investor acquisition strategies
economic development
206
3. State and Challenges of Entrepreneurship Promotion in Middle Mecklenburg/ Rostock
3.1 Strengths and Weaknesses to Foster Entrepreneurship in MM/R
There are a lot of activities and initiatives to foster entrepreneurship in MM/R. These
initiatives can be divided into formal and informal efforts. However the regional focus
of these initiatives is not limited to the city of Rostock or the federal state of
Mecklenburg- Western Pomerania but also concentrates on an international level,
particularly the Baltic Sea Region. They define visions/goals or concrete tasks for
their intentions and work. All of them try to integrate the regional development
strategy of the federal state and the economic clusters. They all strive to support
entrepreneurship and/ or the entrepreneurs of the region, either directly or indirectly.
For the regional development and marketing in the region MM/R and in the city of
Rostock, we find various chambers, public-private partnerships and associations,
especially business development associations. Altogether, these institutions work as
incubators and offer services for investors, entrepreneurs and business founders.
207
Figure 6: Opposition of Strength and Weaknesses in Entrepreneurship in the Region MM/R
Entrepreneurship promotion strengths Entrepreneurship constraint weaknesses Financing
Rank 9 of 49 in the national comparison of regional trade tax [9]
Founding costs in relation to capita income lies at 5,9% in the international comparison [1] Minimum of capital resources causes small income [5]
General political conditions Business start-up promotion by the federal state as a measure to decrease unemployment [2] Rostock ranks in the medium scope in a study about of the contentment of entrepreneurs with their home towns – rank 32 of 50 [8]
Permission and admission procedures are very long. Until a business is founded can take up for 45 days. [1] Strict bureaucratic and regulation rules. [5]
Public structure Entrepreneurship initiatives of the federal state and the region MM/R itself – concepts of regional development, regional marketing [6]
Non-existent bundling of entrepreneurship initiatives
Knowledge and technology transfer strengthening regional value added through cooperation of enterprises and research institutions [4]
traditionally German universities do not participate in knowledge transfer; focus of knowledge transfer is on technological problems, whereas culture is also important
Further education and education of business founders assessment by regional entrepreneurs in REM 2004: 2nd rank of 10 [5] institutions: ROXI and Institute for HRD, business founding initiative at Rostock University “Gründerlotse”
lacking awareness of the need to acquire entrepreneurial competence; no culture in entrepreneurship education
Business oriented services assessment by regional entrepreneurs in REM 2004: 7th rank of 10 [5]
Infrastructure corresponding to the weak regional profile
(connection to the cities of Hamburg and Berlin takes up to three hours)
Labour market negative development: lack of skilled employees
for newly founded businesses; possible causes include the “brain drain effect” and/ or comparatively poor choices of high quality education at universities, adult education centres or private academies for skilled employees [5] low regional income low demand
Ethics related to business founding only a few effects for failed enterprises, failure is assessed to be mainly caused by the difficult economic context of the region, than by any other reason [5]
minimal willingness to take risks among German entrepreneurs; fear of failure is named by 50% of interviewed individuals as the main reason for not becoming an entrepreneur [3]
Business founding environment about 25 enterprises and 20 research institutions in biotech sector
Sources: [1] OECD, [2] Bundesagentur für Arbeit, [3] GEM 2004, [4] BMBF/DIW, [5] REM 2001/2004 [6] Regionale Agenda MM/R 2002, [7] IHK Rostock 2004, [8] Ranking Capital January 2005, [9] Ranking Wirtschaftswoche May 2005
208
3.2 Entrepreneurship Education: Approaches and Effects
All Entrepreneurship Education Programmes in the region Middle Mecklenburg/
Rostock are based on two assumptions:
1. the promotion of entrepreneurship cannot only concentrate on the adjustment
of the macroeconomic framework (e.g. fiscal policy, financial institutions, and
legal system) but also has to focus on the training of (potential) entrepreneurs
on the microeconomic level.
2. a lack of entrepreneurial competencies and skills – in the widest sense of the
world – is an important obstacle of entrepreneurial development.
Mainly two different types of Entrepreneurship Education Programmes can be traced
in the region MM/R:
Conventional Entrepreneurship Training means Input-Output – or Container
Learning. The entrepreneur is seen as a ‘container’ which has to be ‘filled up’ by
theoretical knowledge, information and business competence. To a great extent the
training is based on theoretical and traditional classroom teaching as well as
focussing on economic (marketing, accountancy, finance, controlling) and juridical
expertise. The objective of conventional Entrepreneurship Education is to improve
the business and management competencies of (potential) entrepreneurs. Learning
is defined as closing the existing gap in expertise - or as Input-Output-Learning: by
increasing the knowledge input, the output will be an ascended number of dynamic
entrepreneurs, who are willing to accept risks and uncertainties. The training is
implemented by Technology and Innovation Centres, SME incubators, the Chambers
of Industry and Commerce, public and private business centres.
Low success rates, disappointing learning results and high drop-out rates in
conventional training courses were some of the reasons to develop modern teaching
methodologies.
Evolutionary Entrepreneurship Training Programmes represent the complete
opposite of conventional container learning. The most important traits are:
They predominantly aim at increasing entrepreneurial motivation - risk-taking, self-
esteem, and networking - and only to a lesser extent, at improving business
competencies. From a didactic point of view the Evolutionary Entrepreneurship
209
Training Programmes are based on action learning, achievement motivation and
project case studies. The self-organised learning processes by the participating
teams target developing entrepreneurial ‘soft skills’. The role of the trainer
fundamentally changes from being a superior expert to a facilitator of learning
processes. As the Evolutionary Entrepreneurship Training Programmes are relatively
new and demand additional didactic and social competencies from participants and
facilitators, only a few of these programmes exist in the MM/R region.
Entrepreneurship Education at Rostock University: The ROXI Model8
The training methods used by ROXI - the business founding initiative at the
Hanseatic Institute for Entrepreneurship and Regional Development (HIE-RO) at
Rostock University - are rooted in the evolutionary competence approach. The main
target groups are students, faculty and researchers of the university itself but also
from the surrounding research institutes. Aim and objective of the ROXI-model is the
development of soft skills and entrepreneurial competencies through action learning
and achievement motivation techniques. It is designed for the needs of future ‘high-
skilled’ entrepreneurs (knowledge intensive areas). The ROXI-model is based upon
practical entrepreneurial experience (development and implementation of a business
plan) directed and accompanied by entrepreneurs, consultants and economists with
business founding experience. The ROXI Model is ranked first among all German
University Entrepreneurship Education programmes (Schmude/ Uebelacker 2003).
4. Effects and Impact of Entrepreneurship Promotion
Developing entrepreneurship is regarded as a means:
(a) of promoting economic growth
(b) ‘catching up’ of structurally weak and peripheral regions
(c) creating employment, innovation and added value as well as
(d) alleviating poverty.
Firstly, a relatively high labour intensity and flexibility when adapting to changing
markets is the potential for SMEs to compensate for the limited financial resources in
8 ROXI is the acronym for “ROstocker EXistenzgründer Initiative” (Rostock initiative for business start-ups). The project has been started in the year 1997. A main pillar of ROXI is an entrepreneurship-training on the base of action-learning methods.
210
order to achieve high rates of output, value added and employment growth.
Secondly, the constant search for innovation by the knowledge intensive high-tech
and high-service sectors can be seen as the motor for heading towards a knowledge
economy and therefore can result in stopping the migration of entrepreneurial
personalities. These are the considerations of the various business promoters (e.g.
governments, technology centres, Chambers of Industry and Commerce) when
assisting business founders through financial assistance, training and
complementary business development services. Moreover, all business promotion
and development measures target enhancing the performance and competitiveness
of regional enterprises.
Although this objective has its roots in economic and/or social factors, it is ultimately
concerned with improving the business process, i.e. more businesses (higher
number of start-ups and survival) which perform better (faster growing, higher
employment and added value).
The great diversity among promotion programmes and services and the purpose of
measuring their effect and impact led SEEP (Small Enterprise Evaluation Project)
and USAID (United States Agency for International Development) to finance the
development of criteria for evaluating the performance of business development
services (BDS) (see figure 7).
Unfortunately, there is a lack of representative evaluation studies concerning Entre-
preneurship Education and Promotion Services in the Region Middle Mecklenburg/
Rostock.
211
Figure 7: BDS Performance Measurement Framework*
Goal 1: Increase Impact Assessing BDS Customers
Objective Indicators Customer satisfaction with a business development service (percentage satisfied)* Repeat customers (percentage of customers who buy more than once)*
Increase customer acquisition of BDS
Reasons for satisfaction and repeat purchase (supplemental) Increase customer application of BDS
Percentage of customers who applied the services as intended by the program and reported by the client.*
Increase customer benefits from BDS
Percentage of customers who experienced business benefits, as defined by the program and reported by the client, as a result of the service.*
Goal 2: Increase Outreach (Scale and Access) Assessing BDS Markets
Objective Indicators (Reported for the Overall Market and for the BDS Program) Number of SEs acquiring a service through any method and purchasing a service through commercial transactions* Amount of sales by BDS suppliers (program only)* Market penetration: percentage of potential SE market acquiring a service through any method and purchasing a service A program’s market share of all services acquired through any method and all services purchased (program only) Awareness: percentage of SEs aware of a service
Expand the market for BDS
Reach: percentage of those aware who have purchased a service at least Percentage market share held by the three largest suppliers Number of BDS suppliers (program only)* Number of BDS products (program only) Retention: percentage of multiple purchasers out of all purchasers (not relevant for some programs) Satisfaction with last service purchase (supplemental)
Develop a high-quality, diverse, competitive market
Reasons for purchase, nonpurchase, and choice of supplier (supplemental) Extent of access: percentage of SE customers purchasing a service that represent targeted populations (women, microenterprises, exporters, and so on)* Increase access of
underserved groups to BDS Target market penetration: percentage of potential SE targeted markets
(women, microenterprises, exporters, and so on) acquiring a service through any method and purchasing a service
Goal 3: Achieve Sustainability and Cost-Effectiveness Assessing BDS Suppliers and Facilitators
Objective Indicators Percentage supplier revenue from SEs* Breakdown of sources of supplier revenue (supplemental) BDS supplier financial sustainability (nondonor revenues/total expenses)* (supplemental) BDS contribution margin ((SE revenues from a service – direct expenses for the service) / total expenses)* (supplemental)
Achieve supplier sustainability
BDS viability (SE revenues from a service / direct expenses for the service)* (supplemental) Ratio of annual program expenses to annual program sales to SEs Improve program
cost-effectiveness Annual program expenses per customer served* * These indicators are used by a fair number of BDS programmes. ** SE = Small Entreprises Source: http://www.seepnetwork.org/files/2263_file_PMF_2001.doc, on: 04/04/06
212
5. Conclusions and Recommendations
Critical assessments of Business Development Services (BDS), including Business
Centres (BCs) come to the following preliminary conclusion:
• The majority of BDS’ offer packages which concentrate on the supply-side and
therefore are less orientated towards the needs of potential entrepreneurs.
• Fees accessed for services are seldom market-prices’, often they are heavily
subsidised.
• Micro-entrepreneurs and small business owners are not prepared to pay
market-prices, consequently Business Centres and Programmes depend on
state budgets (from European to local budgets). In order to secure the financial
and institutional sustainability the BC management has to stay on good terms
with regional politicians and administrators.
• Hardware services offering BDS’ create high costs (sites, buildings, equipment
etc.) and benefits tend to be relatively low, because they only offer unspecific
services or products.
• Generally, all-around BCs cannot compete with specialised agencies or
programmes which focus on one product or service only.
• As the establishment of BCs often is disjointed of the supply of business
services is higher than the existing demand – resulting in competition for
potential clients among the BCs.
• BC management in the MM/ R region often has a “quasi” civil-service status.
Managers are equipped with unlimited contracts and payment is not fully
achievement oriented. So the behaviour, motivation and commitment are
sometimes non-entrepreneurial.
• Generally speaking, the bottleneck or minimalist approach is structurally
superior to the general package approach, because (a) it offers specialised
services and support, (b) has specialists in the respected field of activity and (c)
has a better cost-benefit ratio.
The creation and promotion of an “entrepreneurial spirit” is a long lasting historical
process which depends on the “cultural capital” (Bourdieu) of societies. It is
specifically important and at the same time demanding for societies and regions
which do not have a strong entrepreneurial tradition. This is especially true for
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Middle Mecklenburg/ Rostock where the small existing entrepreneurial class had
been destroyed deliberately by the Communist Regime.
In purely quantitative terms the number of enterprises in the MM/ R region is
growing since the German Reunification, although growth has slowed down
substantially during the last years due to the lacking purchasing power, high
unemployment, migration and stiff competition. Compared to the federal state of
Schleswig-Holstein – which has a similar economic structure as Mecklenburg-
Western Pomerania – there still exist an “entrepreneurial gap” of about 20,000
enterprises. The majority of businesses are micro-enterprises and SMEs with low
turnover, lack of venture capital and low profit margins.
In qualitative terms SMEs are mainly active in the service sector. They are
knowledge extensive, have a weak R&D potential and have therefore a low
number of patents. Those businesses mostly operate in local and regional markets
and often depend on public subsidies.
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Actors in the Region MM/ R
Reg
iona
l m
arke
ting/
m
anag
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t
Tech
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cent
res
Res
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h an
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velo
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t ne
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ks
Uni
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ity o
f R
osto
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Entr
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ship
pr
omot
ion
initi
ativ
es
Inst
itutio
ns
Stat
e/ fe
dera
l st
ate
Marketing initiative: Region Rostock/ Rostock Business X
Argrar Marketing MV X Rostock Innovation and Entrepreneurship Center X
Innovations- und Trendcenter GmbH X
Technologie Zentrum Warnemünde X
Centre for graphical data processing Rostock X
Disease Information and Service Centre DISCO X
BioCon Valley X Facharbeitskreis Information and Communication Technology
X
MariCoNet X McLog X Network Innovative Laser applications NILA X
Centre of Competence for syntactic material MV X
OSInit X Maritime Alliance MAO X Hanseatic Institute for Entrepreneurship and Regional Development (HIE-RO)
X
Chair of Economics& Business Education X
Gründerflair X Steinbeis-Transferzentrum X Patentinformationszentrum X Praktikanten-/ Diplomandenbörse X
MICON Start-Up-Gründer-Labor X
Gründerlotse X Transfer Point X Wissenschaftsverbund X Ressourcen Center X
215
Women into Business X Existenzgründerinnenzentrum X Forschungsverbund X Erfinderberatung X EQUAL Development Partnership PROFILE X
Unternehmerverband Rostock X Chamber of Industry and Commerce X
Chamber of Crafts X Job Centre Rostock X Ministry of Labour Mecklenburg- Western Pomerania
X
Ministry of Economy Mecklenburg- Western Pomerania
X
Landesförderinstitut X KfW-Mittelstandsbank X
216
Bibliography
1. Secondary Literature Braun, Gerald 2005, ‘Lernen aus der Evaluation internationaler Entrepreneurship
Trainingsprogramme’ in: Anderseck, W./ Walterscheid, W. (ed.) (2005): Gründungsforschung und Gründungslehre, Wiesbaden, pp. 177-204.
Braun, Gerald 2004, ‘The University as an Engine of Entrepreneurial Competences’ in: Reichert, Anke; Wilde, Kerstin (ed.): „Entrepreneurship Education – konzeptionelle und didaktische Herausforderungen“ Rostocker Arbeitspapiere zu Wirtschaftsentwicklung und Human Ressource Development No.23, pp. 1-28.
Eich-Born, Marion (ed.) 2004, Innovationen für Mecklenburg-Vorpommern – Strategien für einen Wachstumspfad. Rostocker Beiträge zur Regional- und Strukturforschung No. 17, Rostock.
Institut für Umweltgeschichte und Regionalentwicklung e.V. (ed.) 2004, Perspektiven der Regionalentwicklung in Mecklenburg-Vorpommern. Verlag für Wissenschaft und Forschung. Berlin.
Judt, Mathias (ed.) 1998, DDR-Geschichte in Dokumenten. Beschlüsse, Berichte, interne Materialien und Alltagszeugnisse. Bonn.
McVay, Mary 1999, Measuring the Performance of Business Development Services for Small Entreprises. Committee for Donor Agencies for Small Enterprise Development. ILO’s International Small Enterprise Programme (ISEP).
Schmude, J./ Uebelacker, St. (2003) Vom Studenten zum Unternehmer. Welche Universität bietet die besten Chancen? FAZ-Ranking 2003, Frankfurt.
Schulpen, Lau 2002, Private Sector Development: Policies, practices and problems in: World Development, Vol. 30, No. 1, pp. 1-15.
Wirtschaft & Markt 2004, Sonderheft Unternehmensgründungen 2004. Wirtschaft & Markt 2004, Beilage EINFACH ANFANGEN. Wirtschaft & Markt 2004, Das ostdeutsche Wirtschaftsmagazin. 2. Official Documents Bundesministerium für Bildung und Forschung 2005, Bundesbericht Forschung 2004.
Forschungs- und Technologiepolitik der Länder: Mecklenburg-Vorpommern, pp. 420- 426.
Industrie- und Handelskammer Rostock 2004, Konjunkturbericht zum Herbst 2004: Regionen Rostock-Bad Doberan-Guestrow und Stralsund-Nordvorpommern-Rügen.
Universitäten Köln/ Lüneburg 2004, Regionaler Entrepreneurship Monitor I (REM I) Gründungsaktivitäten und Rahmenbedingungen in zehn deutschen Regionen. Köln-Lüneburg.
Ministry of Labour, Construction and Regional Development 2005, Raumentwicklungsprogramm Mecklenburg-Vorpommern.
Ministry of Labour, Construction and Regional Development 2004, Regionale Entwicklungsunterschiede II, dargestellt am Beispiel ausgewählter Indikatoren. Raumentwicklung in Mecklenburg-Vorpommern. Informationsreihe der Obersten Landesplanungsbehörde No. 8.
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Ministry of Labour, Construction and Regional Development 2002, Initiativen zur Regionalentwicklung. Raumentwicklung in Mecklenburg-Vorpommern. Informationsreihe der Obersten Landesplanungsbehörde No. 6.
Regionaler Planungsverband Mittleres Mecklenburg/ Rostock 2002, Regionale Agenda Mittleres Mecklenburg/ Rostock. Wachstumsregion an der Ostsee: innovativ – maritim – naturnah, Rostock.
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Entrepreneurship promotion in the Stockholm Region 1 Bruce Henry Lambert/ Claudia Hakanen Stockholm School of Entrepreneurship P.O. Box 6501 S 113 83 Stockholm E-Mail: [email protected] [email protected] Contents
Illustrations .............................................................................................................220
1. Introduction ......................................................................................................221 1.1 Background......................................................................................................221 1.2 Aim of the study ...............................................................................................222 1.3 Definitions ........................................................................................................222 1.4 Layout ..............................................................................................................223
2. Regional Profile - Stockholm............................................................................223 2.1 The Stockholm Region.....................................................................................223 2.2 Vision and formulated strategies for the region................................................226 2.3 International and Domestic Rankings ..............................................................227
3. Entrepreneurship and innovation capacities ....................................................228 3.1 Academic base ................................................................................................228 3.2 Research Institutes ..........................................................................................229 3.3 Science parks, business incubators and start houses .....................................230 3.4 Entrepreneurship support organizations ..........................................................232
4. Entrepreneurship promotion – obstacles, framework, SWOT and impact........234 4.1 Obstacles to entrepreneurship.........................................................................234 4.2 Framework for entrepreneurship promotion.....................................................235 4.3 Strengths and weaknesses in a brief SWOT analysis .....................................237 4.4 Impact - Old standards or new approaches? ...................................................237
5. Conclusions & recommendations ....................................................................240
6. References ......................................................................................................243
Appendix.................................................................................................................245
1 Date of this study: January 2006
219
Illustrations Figure 1: Facts and Figures about the Stockholm Region.......................................224 Figure 2: Geographical situation of the Stockholm Region......................................225
220
1. Introduction
1.1 Background
Stockholm is Sweden’s biggest functional region and a major political, academic and
business centre in Northern Europe. Generating one third of the economic growth of
Sweden, the region is ranked as one of the world’s foremost knowledge-based
economies with outstanding institutions for research and development, a good
innovation climate, and important clusters in the fields of information and
communication technologies as well as biotechnology (Regional Development Plan
2001 for the Stockholm Region). Stockholm is also acknowledged to have a well-
established, diversified and future-oriented industry, a very well-educated population
and strong regional R&D capacity (Deiaco & Broström 2004).
Endowed with these strong capacities and prerequisites, Stockholm and Sweden as
a whole are ranked low in entrepreneurship indexes, such as the Global
Entrepreneurship Monitor (GEM 2004). This discrepancy is in particular striking in
view of Sweden’s leading positions in per capita R&D investments and large patent
numbers that are rarely transformed into new companies (Andersson et al. 2002).
This so-called Swedish paradox has enticed numerous studies and reports resulting
in a broad range of explanations. Some of them include:
• A traditional predominance of big companies in Sweden (Johannison 2002)
• Labour market regulations as disincentives for entrepreneurship (Högfelt
2005)
• Negative attitudes towards entrepreneurship and entrepreneurs (Henrekson
2004, Flash Eurobarometer 2004)
• Lack of entrepreneurship culture (EU 2004)
• Lack of early-stage finance / seed capital (De Neergaard 2004))
• Lack of quality entrepreneurs (comment from venture capitalists in different
contexts)
In recent years, entrepreneurship and innovation have become increasingly
recognized on the political and public agenda. The Swedish agency for innovation
systems, VINNOVA, was created in 2001 with the mission to promote sustainable
growth by developing effective innovation systems and funding problem-oriented
research. In 2004 the Swedish government issued “Innovative Sweden – A strategy
221
for growth through renewal” stating the vision that Sweden should be Europe’s most
competitive, dynamic and knowledge-based economy, thus incorporating the Lisbon
agenda in Swedish politics. The Swedish Business Development Agency; NUTEK,
has recently launched a national entrepreneurship program running from 2005 –
2007 with the main purpose to increase the interest for entrepreneurship among
students and young people in general, and also to improve competence among
teachers, trainers, counsellors and other engaged in business development.
In addition to the national policy level, the raised focus on entrepreneurship,
innovation and entrepreneurship promotion has led to a large number of
organizations and initiatives both private and public and at the national, regional and
city level. A drawback is that the initiatives often seem fragmented and could
potentially gain from some kind of coordination.
1.2 Aim of the study
The aim of this working paper is to give a structured overview over the region and
regional entrepreneurship promotion, to analyse the current status and obstacles and
to create a base for a mutual platform in order to grasp synergies and further develop
regional efforts in entrepreneurship promotion.
1.3 Definitions
Entrepreneurship In coherence with the European Commission's Green Paper on Entrepreneurship in
Europe (2003), entrepreneurship is defined as “the mindset and process to create
and develop economic activity by blending risk taking, creativity and/or innovation
with sound management, within a new or an existing organization.”
Entrepreneurship promotion Entrepreneurship promotion can be regarded as a framework of measures evolving
around six key objectives, as introduced by Stevenson & Lundström (2001):
• Raise the profile of entrepreneurship • Increase awareness of entrepreneurship • Present credible role-models • Stimulate favourable attitudes towards entrepreneurship and its role in society • Generate interest in exploring entrepreneurship as an option • Increase societal support for entrepreneurs.
222
Entrepreneurship education Entrepreneurship education is multifaceted and contains theoretical as well as
hands-on approaches, also referred to as applied entrepreneurship. In their national
entrepreneurship program NUTEK (2005) classifies entrepreneurship education in
three subsections, education “for’, “in” and “about” entrepreneurship. As
entrepreneurship promotion is mainly linked to the practical components, i.e. the “for”
and “in”, this paper will focus on these two aspects.
1.4 Layout
The next section will give an overview of the regional profile of Stockholm including
delimitations, data, regional visions and strategies as well as results of international
rankings. The third chapter names some of the actors and initiatives while the fourth
chapter looks at the obstacles and links the initiatives to the promotion framework. In
the last chapter, conclusions are drawn and suggestions re made for continued
research.
2. Regional Profile - Stockholm
2.1 The Stockholm Region
As with most metropolitan capital regions, it is a challenge to define the regional
boundaries. In the case of Stockholm, the options are municipality level (city), county
or the greater surrounding region as defined by the labour market and broader
regional impact and in conformance with the OECD’s use of the term functional
regions as applied for the OECD territorial reviews. For this paper, the Stockholm
County is the point of departure as it gives clear limitations and statistic and other
material are obtainable.
As a display of these three regional dimensions, the following table gives a brief
overview over the City of Stockholm, the County of Stockholm and the broader
functional region often referred to as the greater Stockholm Mälar Region involving
the County of Stockholm and the surrounding counties.
223
Figure 1: Facts and Figures about the Stockholm Region
City of Stockholm* County of Stockholm Greater Region General info Largest of 289
municipalities, popularly elected council collects income tax and operates public services (schools, child and elder care, utilities, housing, and cultural and leisure activities)
One of 21 Swedish counties, comprising 26 municipalities at the regional level. National administration represented by a county governor and a county administrative board.
Stockholm - Mälar Region: five counties (Stockholm, Uppsala, Örebro, Västmanland and Södermanland),
Population Approx 765,000 1.87 million 21% of Sweden’s population 20% of non Swedish origin
2.7 million
Population trend
Increasing over the past 25 years
Increasing Increasing
Surface area 188 sq km plus 28 sq km water
6,500 sq km, 180 km from north to south. Surface area incl. 14% developed land, 17% agricultural, 30,000 islands and 850 lakes
36,500 sq km.
Population density
4,000 people/sq km 285 people per sq km (cf 22 for Sweden as a whole)
74 people per sq km
Education n.a. 38.6% of population completed university
n.a.
Academic base 17 universities/ university colleges
20 universities, 72,000 students (60% female)
30 universities, 110,000 students
Employment 363,823 (Nordstat) 916,889 people n.a. Unemployment rate
n.a. 3.4% n.a.
Foreign citizens 70,584 160,734 n.a. * Statistics for City of Stockholm as per 1 January 2003, Source Nordstat.
** Statistic for the County, County Board Administration
224
Figure 2: Geographical situation of the Stockholm Region
City of Stockholm County and greater Stockholm region
Business and working conditions
Basic working conditions in Sweden are comparatively good – so much so as
perhaps to be a disincentive for entrepreneurialism. Employees have relatively long
holidays, compensated leave for sickness or parenthood and comprehensive labour
legislation protecting employees from job loss.
The Swedish social welfare system has entailed a high percentage of employment in
the public sector, which also becomes obvious from the top five employers in the
Stockholm County (2004):
1. Stockholm Municipality (Stockholm stad)
2. Stockholm County Council (Stockholms Läns Landsting)
3. Ericsson AB
4. Posten Sverige AB
5. Astrazeneca AB
Ultimately, a bottom-line reality for Stockholm and the Nordic / Baltic region is the
economic geography of 60°N latitude. Being on Europe's periphery implies having to
deal with a relatively long-lasting & difficult wintertime environment. If locating in a
fringe area such as Stockholm, businesses interested in Europe's larger market have
extra transport costs and longer transit time. Further climatic costs include paying for
Uppsala
Stockholm
Västerås
Eskilstuna
Södertålje
225
more heat, light and wear-and-tear than in relatively more moderate regions. Further,
the long winter period of short daylight at 60°N latitude is disadvantageous when
seeking to attract top class skilled migrants, who can choose a good place to live
from worldwide options.
2.2 Vision and formulated strategies for the region
Vision The vision for Stockholm as formulated by the Stockholm Economic Development
Agency (2005) is to become Sweden’s and Northern Europe’s leading growth region.
Innovation and entrepreneurship strategies There is no explicit innovation strategy for the city or the county of Stockholm to date.
The overall strategy of the city has historically focused on strengthening the
knowledge economy through political support to innovation environments like Kista
Science City (ICT) and the Northern station area (Stockholm BioScience) close to the
Karolinska Institutet, Stockholm University and the Royal Institute of Technology.
Efforts are also made to create a new design centre just outside the city centre as the
heart of creative industries and innovation in the southern parts of Stockholm.
Innovation-related strategies include measures to take into account the potential of
its young and multiethnic population and to promote cooperation between the
excellent research resources and industry. The City and the County of Stockholm are
currently partners in the BaltMet Inno project, an Interreg III B project to develop
complementary innovation strategies for the metropolitan areas in the Baltic Sea
Region. The County has further received financial support from a national agency for
the development of a regional entrepreneurship strategy.
Regional planning strategy On the regional level, a regional development group (RTP – Regional Growth
Programme) with participation from political and regional actors is working with long-
term strategies for the region, called the “Regional Development Plan 2001 (RUFS
2001) for the Stockholm Region”, with innovation being but one part of the overall
development strategy.
226
Marketing strategy The City has recently launched the new marketing
strategy with the heading “Stockholm – The Capital of
Scandinavia”. The strategy focuses on Stockholm as
being the central, the business and the cultural capital of
the region.
2.3 International and Domestic Rankings
Stockholm and Sweden typically rank highly in innovation and creativity indexes. In
reports on entrepreneurship and business climate the results are not always as
impressive.
The World Competitiveness Knowledge Index 2004 by Robert Huggins Associates
ranks Stockholm as the leading European region. The index is a display of
competitiveness based on four main components, Human Capital Input, Knowledge
Capital Input, Knowledge Sustainability and Regional Economy Outputs.
The European Trendchart of Innovation 2002 included a regional ranking with
Stockholm in first place and the 2005 European Innovation Scoreboard ranks
Sweden first overall.
The European Cities Monitor (2002) ranks Stockholm among the top 15 cities in
Europe. The ranking is based on interviews with senior executives from 506
European companies, and split into a large number of factors with the objective to
facilitate for companies in deciding where to locate. Stockholm ranks among the top
5 in terms of quality of telecommunications (4), quality of life for employees (4),
freedom from pollution (1)
A ranking carried out by German magazine Wirtschaftswoche in 2002 ranks
Stockholm highest of the 214 regions in the European Union. The ranking is based
on 240 components.
Florida and Tinagli’s (2004) newly created Euro-Creativity Index, a composite
based on the Euro-Talent, Technology and Tolerance Indexes, ranks Sweden in first
place before the US and Finland, thanks to high scores in the technology and
tolerance indexes.
227
The Confederation of Swedish Enterprise (2004c) conducted a nationwide survey
of 34,000 businesspeople and 10,000 politicians on the local climate for business,
and the 290 domestic municipalities were ranked using individual replies and
composite values. Most of the overall top 10 communities are part of the Stockholm
region, though the City of Stockholm itself ultimately ranked 114th of the 290
municipalities. Such ranks are in part a function of expectations. Less clear is how
the business climate of Stockholm and Sweden compare with that of Sweden's
neighbours and overseas competitors.
In annual entrepreneurship research conducted throughout Europe and including the
USA (Flash Eurobarometer, European Commission DG Enterprise 2004; Q1, p.7),
Swedes are 23rd of the EU-25 (third lowest) in preference for self-employment,
though strongest in the EU (Q6, p.24) in believing that they could feasibly become
self-employed.
The low inclination towards entrepreneurship is also supported by the annual Global Entrepreneurship Monitor (GEM).
3. Entrepreneurship and innovation capacities
A broad range of actors is today involved in entrepreneurship promotion and often
also some sort of entrepreneurship education or support. The following gives a broad
overview of the entrepreneurship and innovation capacities in the Stockholm region.
3.1 Academic base
The Stockholm County has more than twenty universities and university colleges with
some 72 000 enrolled students. An additional four to five universities and university
colleges are within commuting distance, adding up to a total number of over 110 000
university students in the greater Stockholm Metropolitan Area, including Uppsala
and the Mälar region. Among the most prominent institutions in the county are
Karolinska Institutet, the medical university (7 300 undergraduate, 2 150 graduate
students), Stockholm University (26 200 undergraduate, 1 700 graduate students),
the Royal Institute of Technology (14 200 undergraduate, 1700 graduate students)
and the Stockholm School of Economics (1 500 undergraduate, 200 graduate
students). The over twenty university colleges range from business administration,
arts, music, design, dance, theology, nursing, etc.
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Five of the universities have established holding companies as a consequence of the
government proposition 1992/93:170, entitling them to commercialize research in
project and service companies. The proposition was passed and later reinforced by a
1997 change in the Law for Higher Education (Högskolelagen) that emphasized
“third-stream activities”, i.e. that universities were to actively work with dissemination
of research results and collaborate to a higher degree with society (SOU 1998:128).
Technology transfer offices, incubators and entrepreneurship centres are linked to
these holding companies.
3.2 Research Institutes
The Stockholm Metropolitan Area is home to a large number of national and regional
research and development (R&D) institutes, and a major centre for private initiatives.
Many activities are focused in the vicinity of the Royal Institute of Technology and
Electrum in Kista. The institutes work in close co-operation with Swedish companies
on R&D projects, but also put much effort on facilitating and fostering start-ups and
new firms. Recently a comprehensive consolidation has taken place among the
industry research institutes. Many of these institutes are under the umbrella of
IRECO Holding AB, a limited liability company owned by the Swedish government
(55%) and the Knowledge Foundation (Stiftelsen för kunskaps- och
kompetensutveckling) with the objective to promote Swedish industrial growth and
international competitiveness through ownership and support of industrial research
institutes. Examples of research institutes are ACREO (optics and microelectronics),
KIMAB (the Corrosion and Metals Research Institute), SICS (the Swedish Institute of
Computer Science), etc.
A number of other institutes and centres focus on research closely related to
innovation and entrepreneurship at the national and regional level, e. g. ITPS
(Swedish Institute for Growth Policy Studies), FSF (Swedish Foundation for Small
Business Research), the National Institute for Working Life, IMIT (Institute for
Management of Innovation and Technology), SISTER (Swedish Institute for Studies
in Education and Research) and ESBRI (Entrepreneurship and Small Business
Research Institute), etc.
229
3.3 Science parks, business incubators and start houses
Several start houses, incubators and science parks are linked to and in the proximity
of university campuses. In addition a new private incubator with diversified focus was
recently opened in the city centre. While most incubators offer general services, such
as facilities, coaching and contacts, there are two examples that have developed the
system further and are internationally acknowledged as best practice examples:
Example 1: Karolinska Enterprise Karolinska Enterprise is Karolinska Institutet's system of integrated entities to offer Life Science projects an infrastructure for commercialisation. Each component has developed and refined the skills required for its phase of the commercialisation process.
The incubation component, KIAB, Karolinska Innovations AB, screens and evaluates incoming projects from KI and various top Nordic institutions. A systematic stepwise procedure is used to evaluate all incoming projects. The goal is to identify high-potential inventions and the risks associated with each individual project. When a project satisfies KIAB's acceptance criteria, a project group is assigned to manage preparatory activities and to evaluate whether a new company can be started around the invention or if the invention is more apt for a license deal.
Exit
KI and other
Nordic universities
KIAB
Idea Flow Project evaluation
and packaging
The Karolinska Enterprise System
Start-up and seed KD I KD II
Early growth and expansion
External Capital
KIF I KIF II
Venture Capital
Idea Flow Financing
Scientific IPR Business development
Alliances/ Trade Sales/
IPO’s
Industry/ Capital Markets
Companies
230
Source: http://www.karolinskainnovations.ki.se
Example 2: STING Stockholm Innovation & Growth (www.stockholminnovation.com) Former Kista Innovation & Growth (KIG), in 2005 renamed STING, is a full-scale innovation support system with focus on IT/telecommunications and general technology. STING has its main location at Kista Science Park (www.kistasciencepark.org, www.kista.com) with more than 700 companies, 28,000 employees and 3300 students at university level. Kista is located in the North of Stockholm and has developed into one of the most important IT-clusters in Europe. The heart of Kista Science City is Electrum, a competence centre to encourage active cooperation between education, research and industry in the IT area. The large IT university, a collaboration effort between Stockholm University and KTH was officially opened in April 2002. Since 2005 STING has a separate entity at KTH main campus.
The model is an integrated approach from the idea stage to the profitable company, with four consecutive programs that can be used either stand alone or in combination.
Source: www.stockholminnovation.com In 2002, a separate fund, KTH Seed Capital, (http://www.kthseedcapital.se) was established to support ideas with equity funding of at least some million SEK. Investors are, among others, the Wallenberg foundations, Industrifonden and KTH Holding.
In 2005, Innovation Bridge Stockholm invested 10 million SEK each in in-house (pre-)
seed funds at Karolinska and Stockholm Innovation and Growth.
Medical Research
Consulting
Evaluation Seed Company
Start-up-company
Early growth company
Trade Sale
Business Accelerator
Starthouse
License project
License deal
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3.4 Entrepreneurship support organizations
National actors with a direct impact on the region are the newly created Innovation
Bridge, the national government agencies VINNOVA and NUTEK, and others.
At the regional level, there are a number of collaborative organizations and
taskforces that help to improve the innovative environment and that promote
commercialization of research inventions in the Stockholm Metropolitan Area. They
include public and private actors, and in several cases are built on collaboration
between universities and public agencies. Examples of collaborations are SSES –
Stockholm School of Entrepreneurship, Connect Stockholm, the Science City
Foundation, and Stockholm Academic Forum. Other important actors are industry
associations, such as the Confederation of Swedish Enterprise and the Federation of
Private Enterprise, and the Central Labour Organisations (LO, SACO and TCO).
Business Plan Competitions
Venture Cup is a business plan competition that helps students, researchers and
others to take their business idea from concept to actual start-up. Venture Cup is
organized by the larger universities and McKinsey & Company.
Excitera is a non-profit, student-run entrepreneurship association at KTH, founded in
2000 with the aim to create a greater interest in entrepreneurship, innovation and
commercialization of research results. Excitera has established a successful model
for non-profit student involvement, inspired by the MIT $50K Entrepreneurship
Competition at MIT in Boston, US.
Innovation Cup is a collaboration between the Swedish daily business newspaper
Dagens Industri and the bank and insurance company Skandia.
Financial Support Organisations
Financial support for research can be obtained from funding agencies such as
VINNOVA, the Swedish Research Council and a large number of research
foundations. There are further a number of organizations that supply finance for
company start ups, seed financing and venture capital, most of them operating on the
national level but headquartered in Stockholm.
Innovation Bridge Stockholm, former Technology Bridge Foundation, is an
important financing source for the incubators and start houses in Stockholm and has
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recently assisted both Karolinska Innovation and STING with new seed funds for
early-stage investments.
Almi Stockholm provides advice and financial support for business idea
development and starting up new companies.
The Swedish Industrial Development Fund provides development capital,
competence and networks for growth companies by investing in Swedish small and
medium sized enterprises.
The Swedish Venture Capital Association is an independent, non-profit
association supporting the interests of companies and persons who are active in the
Swedish private equity and venture capital industry. In Sweden today there are about
130 venture capital companies that, combined, have more than SEK 80 billion in
funds under management. The majority of the Swedish venture capital firms are
based in Stockholm.
Business Angels initiatives The number of Business Angels has dramatically increased in Sweden during the
last 3-year period and is still increasing. One of the Business Angel networks has
been initiated by ALMI and one is in the process of being formed as a collaboration
effort between NUTEK and the Swedish Venture Capital Association. Several smaller
networks exist around innovation environments such as Kista Investment Network.
IUC/IDC (Industrial Development Centres IDCs are regional business-financed development centres. There are in total 19
centres in Sweden, whereof the one for the Stockholm Mälar regions is located in
Södertälje.
Other initiatives
Stockholm BioScience is a joint project of KI, KTH, SU, the city of Stockholm and
AstraZeneca with the aim to create new and exciting opportunities for bioscience
breakthroughs.
EuroScience Open Forum was the first pan-European scientific meeting ever
staged to provide an interdisciplinary forum for open dialogue, debate and discussion
on science and technology in society (ESOF2004.org)
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4. Entrepreneurship promotion – obstacles, framework, SWOT and impact
4.1 Obstacles to entrepreneurship
In the context of innovation and entrepreneurship, it is difficult to restrict the historical
and policy background to one single region, as general strategies and policy
decisions, especially in smaller countries, are typically made at the national level.
Historically, Sweden is said to have recognized industry’s dependence on scientific
knowledge rather early. Two concrete measures were the foundation of a number of
industry research organizations in the inter-war years, and the historically close
relationships between industry and research developed through government
procurement (Sörlin & Törnqvist 2000). These tight relations have however to a large
extent contributed to strengthening existing companies and channelling resources
and ideas from universities into existing companies instead of giving birth to new
companies.
According to Johannison (2002), Sweden has a long tradition of big business focus.
The lack of creating new, large business firms is often mentioned as one of the main
Swedish problems and challenges. Of the 50 largest listed firms today, 31 were
founded before 1914, including internationally renowned Swedish multinationals such
as ABB (Asea), Ericsson, SKF, etc. Only eight were founded in the post-war period,
and none after 1970. Two of the companies mostly mentioned as founded in the
post-war period are IKEA and H&M, both regarded as highly entrepreneur-driven
(Högfelt 2005).
After the Second World War, Sweden evolved into a model country for the welfare
state, very much based on the active labour market policies advocated e.g. by the
Rehn-Meidner model. While the Golden Age is said to have come to an end in the
1970s, labour relations in practice have not greatly changed, and are today
considered one of the largest obstacles to entrepreneurship in Sweden. With
legislation such as the Employment Security Act (LAS), employees have elaborate
protection via a corporate security net assuring them of almost life-long employment
as long as they do not change jobs or start their own business. Thus, labour market
regulations are generally regarded as one of the predominant disincentives to
entrepreneurship (Högfelt, 2005). Also the relatively good working conditions can be
234
considered a disincentive for entrepreneurialism as they hardly encourage leaving a
comfortable job for the risk of an entrepreneurial venture.
Another impediment to entrepreneurship in Sweden is the general attitude towards
entrepreneurship. In general, Swedes are considered to be risk averse, (Hofstede
1980). In addition, the Swedish “jante-lag” harkens back to Viking days, the
sentiment that all should basically have the same and no one should be better than
the next; this tends to raise resentments towards entrepreneurs. The general
negative attitude towards entrepreneurship and entrepreneurs is described by
Henrekson (2004) comparing the general public resentment towards entrepreneurs
and high-salaried executives with the idolization of sport superstars, such as Swedish
ice-hockey players in the US or Canada.
In addition, the general understanding of entrepreneurship risks and rewards could
be greatly improved. In Sweden, businesses are often unrecognized as engines of
society and drivers of the economy, but rather are often deemed irresponsible, or as
manipulators of tax loopholes. It can be problematic where society's core is imagined
to be government, which allows businesses to operate, rather than the fact that
government is built upon the efforts, output and taxation of businesses and
employees.
Many studies have also reached the conclusion that a lack of seed capital finance is
partly responsible for the lack of entrepreneurship, particularly in the high-technology
sector. This is however contradicted by venture capital indexes that rank Sweden
high in access to early stage venture capital.
4.2 Framework for entrepreneurship promotion
In general, entrepreneurship promotion activities in Stockholm follow the framework
suggested by Stevenson and Lundström (2001), as briefly introduced above.
Basically most of the actors work actively with raising the profile of entrepreneurship
and increasing an awareness of entrepreneurship. The other four objectives are in
many cases also pursued. Incubators use successfully incubated companies as
credible role-models. An ongoing national program has reserved several million
Swedish crowns for initiatives and programs to generate interest in exploring
entrepreneurship as an option. Encouraging attitudes, supportive objectives and
235
positive spin shine through most initiatives, with further endorsements by a vigorous
business press.
Much work has been done by different actors in order to improve general attitudes
towards entrepreneurship. One example is the Young Enterprise initiative by the
Swedish Confederation of Business, where students in upper secondary class go
through a program to start and terminate their own business. In general, attitude
towards entrepreneurship among students is today higher in Stockholm than in most
other municipalities. On the other hand, a university like KTH noticed in internal
surveys that the inclination to start a company is higher at the beginning of studies
than at the end, a trend shared also by other international benchmarks such as MIT
Cambridge.
A problem surfaces sometimes when media report the names and details of
researchers who are setting up a business on the side, adding a negative tone by
presenting it as an abuse of civil service. This leads to repeated need for
explanations from the side of higher-education institution presidents, who in fact have
as one of their tasks the promotion of entrepreneurship, to support socially relevant
and commercialisable research. Entrepreneurship promotion is thus turned into a
challenge.
236
4.3 Strengths and weaknesses in a brief SWOT analysis
The following table summarizes the strengths and weaknesses with regard to
entrepreneurship and entrepreneurship promotion in Stockholm:
Strengths Weaknesses • Broad academic base • World-class research, Nobel prize • Well educated population • High productivity • Leading multinational corporations as
potential buyers for innovations • Illusion of the perfect welfare state • Good infrastructure • Advanced users and consumers • Easy to start a company • Cultural capital
• Many initiatives and actors • Parallel activities with little cross-
communication • Low degree of collaboration • Insufficient integration of non-Swedes
and achievements / qualifications gained elsewhere
• Main part of R&D investments come from industry, e.g. Ericsson
Opportunities Threats • Collaboration and strategic position in
the Baltic Sea Region and towards St Petersburg
• Capitalize on reputation • Attractive for foreign experts thanks to
high tolerance (Florida & Tingali 2004), tax discounts for foreign experts, high number of multinationals
• Competition from other metropolitan areas, e. g. Helsinki region
• Social system bottlenecks, e.g. hospital and surgery waiting lines, high sick-leave rates
• National tendency to prioritize other than the capital region
4.4 Impact - Old standards or new approaches?
Many of the initiatives in Stockholm import (or imitate with modification) international
models, e. g. the Connect network from UCSD, Jobs & Society, etc. The small size
and scale of Stockholm and Sweden in international comparison make benchmarking
and learning from best practices elsewhere a necessity. But perhaps more
consideration needs to be expended upon effectively bridging the old and the new.
Truly innovative and effective synergies could draw together some of the many
disparate threads into something dynamic and successful.
Stockholm has developed multiple parallel efforts for promoting entrepreneurialism
and innovation. In light of this fact, perhaps the most important such efforts are
coordinating activities that seek to bridge organizations. Both private and public
funding agencies in Sweden (as elsewhere in Europe) are often proactive in
suggesting collaboration between applicants. This can be quite important, as
ultimately Sweden is a small place that suffers from low economies of scale.
237
The pervasiveness of public administration in Sweden does have some benefits for
entrepreneurialism: there is more likely to be communication and perhaps
coordination between different levels of government and adjoining regions than in a
more federal or administratively composite system such as the USA. Administrators
in Stockholm, and in Sweden, recognize the competitive needs of modern society,
but also see and act upon possibilities for generating wider coalitions and cost-
sharing. Nordic region cooperation is an outstanding example of this, perhaps best
displayed in the combined Nordic pavilion at Expo 2005 in Aichi, Japan; or with the
joint Nordic embassy complex in Berlin (both projects created individual national
spaces & shared space, allowing better facilities at less cost than if done
independently)
Foreign students and immigrant entrepreneurs
Stockholm and Sweden attract a large number of foreign students. Such people can
be expected to assist with the flow of new ideas, and at least in some cases to
facilitate future international business relations. The foreign student percentage in
Sweden is 7.8% (which compares favourably with the OECD average of 6.0%), but
there is much room still for expansion. Attracting foreign students can be an industry
in itself. According to NAFSA, the US Association of International Educators
(http://www.nafsa.org/content/PublicPolicy/
DataonInternationalEducation/EIS_summary_2004.pdf), in 2003-2004 a total of
572,509 foreign students studied in the USA, representing 4.6% of total college &
university enrolment. They brought over $12.87 billion (net direct funds) to the U.S.
economy; kept 1 in 20 academics & administrators employed; boosted local
businesses & markets for housing, food and services; etc. While it is impossible to
quantify the overall positive impact of foreign students in terms of energies, flow of
ideas, better mutual understanding, etc., this is also clearly substantial. It would be
good if Stockholm could attract more such people.
Yet attracting mobile experts is only part of Stockholm's challenge. Will they happily
remain? Can the area retain, integrate and make use of such talent? Sweden is not
competitive in allowing resettlement of migrant experts from outside the European
Union. If labour market analysis approves their entry, such people without family ties
to Sweden are admitted only as temporary residents. Regulations allow, however, a
grant of permanent residency after eight years of successful life and work in the
238
country. Citizenship may follow after five more years. In contrast, Germany's new
immigration law grants permanent residency at entry to qualified migrant experts, as
does Australia (which will grant Australian citizenship after a further two years).
Some such people manage to stay on, others come as refugees. A positive Swedish
development has been the allowance since July 2001 of dual/multiple nationality.
Over 20% of the County of Stockholm's inhabitants were born abroad or have one
parent who is an immigrant. The national average is 13%; one in three such people
lives in Stockholm.
"Out of the close to 500,000 companies in Sweden, approximately 97% have less
than 19 employees. Every year nearly 40,000 new companies are formed--a third
of these by women and one fifth by immigrants." -- Confederation of Swedish Enterprise
http://www.svensktnaringsliv.se/index.asp?pn=206763
Among those who have immigrated to Sweden, a higher percentage starts their own
businesses than do native-born Swedes. Anecdotally, there are many claims that this
is due to their being frozen out of the best mainstream jobs; such discrimination is
illegal and difficult to prove. In any event, it is interesting that the entrepreneurship of
immigrants takes place in perhaps adverse circumstances. Business assistance is
available to such people to some extent, but online information in English, for
example, is often sparse or non-existent (Finland has notably more detailed
information available online for non-native entrepreneurs than does Sweden, which
has a much larger population of such people). Sweden's far-northern districts are
also clearly keen in promoting their local opportunities to potential foreign investors or
mobile entrepreneurs; Stockholm, in comparison, is not in as grim a situation, and is
less aggressive in its foreign marketing of itself.
Success indicators, evaluations
Evaluation tools, measures and success indicators used by incubators and science
parks include number of new start-ups, turnover of incubated companies, amount of
external capital generated. Awards and prizes are used to stimulate entrepreneurship
and growth. A danger is that in some cases actors can try to maintain their position or
reputation by more-than-warranted positive news and overly 'forward looking' press
releases.
239
On the regional level statistics on number of new companies, regional attitudes and
cluster development are applied.
In 2005 an evaluation of the business plan competition Venture Cup was published
(Klofsten & Wiklund 2005). The study shows that Venture Cup is considered to be a
cost-efficient instrument for stimulating knowledge-intensive entrepreneurship. One
out of three participating teams has subsequently started a company, but only few
have so far exhibited high growth.
5. Conclusions & recommendations
New science and technology-based firms are generally acknowledged to be one of
the major prerequisites for economic growth (Storey & Tether 1998, Gompers &
Lerner 2001). Stockholm has a very strong academic base with strong research
credentials. The region has put high focus and investment for many years on primary
growth areas, ICT and biotechnology, by building up a strong regional innovation
structure to promote their development. The environments for both ICT and biotech
are well-developed. Their advanced structures and programs for business creation
and development and are often regarded as best practice examples of fully
integrated innovation support systems.
Much of the general debate today evolves around the base for new technology-
based firms, where one important factor is the entrepreneurial faculty and university-
based entrepreneurship. There are a number of key questions, such as how can
regional actors improve the incentives for researchers to commercialize their
research? In what ways can regional actors promote and facilitate academic
entrepreneurship? Do the existing mechanisms create value, for the researcher, for
the university and for society?
Nationally, the Stockholm region is comparatively ahead in surveys regarding general
attitude towards entrepreneurship and inclination to create new start-ups. Although
levels might still be lower than in an international comparison, the main question for
Stockholm might be not the attitude and start-up issue, but how start-ups can be
transformed into growing and prosperous companies? Perhaps Stockholm can make
better use of its cosmopolitan population to better generate both ideas and growth.
240
Finally, as there is a great variety in actors and initiatives dealing with and promoting
entrepreneurship, are there too many initiatives? Do they hinder each other with a
negative net impact perhaps by competing for certain types of entrepreneurs? Is
there a need for consolidation on the regional level, or at least benefits to be derived
from promoting more interaction?
Policymakers often can change the risk and reward components for business. But
business can also benefit when we upgrade terminology and renovate mental
constructs. Consider one common lifecycle of an entrepreneurial venture: it
physically refurbishes and stocks an establishment, hires staff, buys equipment,
trades with local vendors, pays its bills, but ultimately may not generate enough
revenues to continue. A key lesson: it was not a failure – it contributed positively to
the local economy in many ways. The effort simply reached a conclusion. We may
hope that the entrepreneur might now find a more fruitful method or focus, and has
learned from experience. But for businesses that cannot continue to operate, 'failure'
is imprecise. Failure is a bad term nobody would wish to associate with. Human
death is not labelled failure! We need changed terminology: "exhausted business" or
"business death" or concluded business.
Stockholm is highly ranked at present on many global comparative scales. But
complacency and hubris are ever-present threats to future development. Is
Stockholm's position sustainable? Are sufficient energies and investments being
directed toward a competitive and uncertain future? The dynamism and hunger that
exist in some regions elsewhere in the world are difficult to measure, and we have
extensive reporting on traditional investment and R&D. But it would be useful if we
could design better metrics to highlight future-directed efforts and energies. Such
global rankings could inform, and perhaps could scare, those successful today into
better preparing for the future.
The public distrust towards entrepreneurship and business in general. The level of
public distrust toward big business stems from various frictions and fallacies, but at
least part of the fault lies with poor public relations by business itself. For example,
the Swedish state provides large amounts of Official Development Assistance (ODA)
overseas, and Swedish people are known for humanitarianism. But what of Swedish
industry? In 2000 when Swedish international aid was EUR 1.6 billion, Swedish
multinationals invested three times as much in the world's poorer regions (over EUR
241
5.0 billion; Confederation of Swedish Enterprise, 2004b p. 17) and employed 170,000
people in those countries. Wider knowledge of such statistics might help cultivate a
more balanced understanding of both business and public sector social efforts.
242
6. References
1. Secondary Literature Andersson, Thomas, Ola Asplund & Magnus Henrekson 2002, Betydelsen av
innovationssystem – Utmaningar för samhället och för politiken. Stockholm: Vinnova Forum.
Deiaco, Enrico & Anders Broström 2005, ’Kunskapsregion Stockholm på världsmarknaden,’Arbetsrapport 2005:34, Stockholm: SISTER.
Florida, Richard & Irene Tinagli 2004, Europe in the Creative Age. GEM Consortium 2004, Global Entrepreneurship Monitor 2003. Babson Park, MA:
Babson College. Gompers, Paul & Josh Lerner 2001, ’The venture capital revolution’, Journal of
Economic Perspectives, Vol. 15, no 2, pp 145-168 and (2001) The Money of Invention. Boston: Harvard Business School Press.
Henrekson Magnus 2003, ’När en entreprenör aldrig blir medaljör förlorar Sverige’, Axess Nr 9, 2003 and (2004) in Svensk Innovationskraft, Stockholm: FIM.
Hofstede, Geert 1980, Culture's Consequences: International Differences in Work-related Values. Newbury Park, CA: Sage.
Högfeldt, Peter 2005, ‘The history and politics of corporate ownership in Sweden’, forthcoming in R. Morck, (ed) The History of Corporate Governance Around the World: Family Business Groups to Professional Managers. University of Chicago Press; also published as NBER Working Paper #10641.
Johannisson, Bengt 2002, Entrepreneurship in Scandinavia – Bridging Individualism and Collectivism. Växjö: Entrepreneurship/SIRE (Scandinavian Institute for Research in Entrepreneurship).
Klofsten, Magnus & Johan Wiklund 2005, Fem år med Venture Cup – en studie. Stockholm: KAS/FIM.
Stevenson, Lois & Anders Lundström 2001, ‘Entrepreneurship policy for the future: best practice components’, Keynote Presentation at the 46th World Conference of the International Council for Small Business, Taipei, ROC, June 18, 2001, Swedish Foundation for Small Business Research (FSF), Available at: http://www.fsf.se/Stevens-Lunds.doc.pdf
Storey, D.J., & B. S. Tether ,1998, ‘Public policy measures to support new technology-based firms in the European Union’, Research Policy 26, pp 1037-1057.
Sörlin, Sverker & Gunnar Törnqvist 2000, Kunskap för välstånd: Universiteten och omvandlingen av Sverige. Stockholm: SNS Förlag.
2. Official Documents Confederation of Swedish Enterprise. 2004a, Facts about Sweden's Economy, 2004.
(Palinski, Agnes, et al.) Stockholm: Confederation of Swedish Enterprise (Svenskt Näringsliv). Available at: http://sn.svensktnaringsliv.se/sn/publi.nsf/Publikationerview/B4C08EE1E2607972C1256F0A003E1DCE/$File/PUB200409-004-1.pdf.
Confederation of Swedish Enterprise. 2004b, The Role of Business in Society: Questions and answers on the role of business in society. (Norén, Göran, et al.; July 2004) Stockholm: Confederation of Swedish Enterprise (Svenskt Näringsliv).
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Available at: http://sn.svensktnaringsliv.se/SN/Publi.nsf/AutonomyPublikation/a7ddb2db99d05d94c1256ec300311802/$FILE/PUB200406-008-1.pdf.
Confederation of Swedish Enterprise. 2004c, Business Climate 2004. (Annual national surveys of local attitudes toward business) Stockholm: Confederation of Swedish Enterprise (Svenskt Näringsliv). Available at: http://www.kfakta.se/.
European Commission. 2003, Green Paper: Enterpreneurship in Europe. COM(2003) 27 (21 January 2003; Enterprise Publications) Brussels: Commission of the European Communities.
European Commission, DG Enterprise 2004, Entrepreneurship: Flash Eurobarometer 160. (Survey on Entrepreneurial Attitudes in Europe and the US), Brussels: Commission of the European Communities.
Nordstat 2004, Nordic Major City Statistics: Data on 16 Major Cities and their Regions, (from the NORDSTAT database) Stockholm Office of Research & Statistics, USK.
Nordstat 2005, Nordic Major City Statistics: Data on 16 Major Cities and their Regions, (from the NORDSTAT database) Stockholm Office of Research & Statistics, USK.
Nutek 2004, Förslag till utökat nationellt entreprenörskapsprogram, Dnr 480-2004-1907, Stockholm: Nutek (Swedish Agency for Economic and Regional Growth).
SOU 1998,128 (Statens Offentliga Utredningar, Swedish Government Official Reports).
Stockholm Economic Development Agency 2005, Vi satsar på tillväxt, Stockholm 2004/05, Available at: http://www.naringslivskontoret.se/upload/Broschyr_rapport_pdf/årsredovisning_webb.pdf
Stockholm County Council, Office of Regional Planning and Urban Transportation 2001, Regional Development Plan 2001 for the Stockholm Region, Stockholm: Regionplane- och trafikkontoret (RTK). Available at: http://www.stockholmsregionen2030.nu.
3. Internet Sources http://www.stockholm.se (Stockholm City) http://www.ab.lst.se (Stockholm County) http://www.stockholmregion.org (Stockholm Region European Committee, Stockholm-Mälar region excluding Örebro County) http://www.malardalsradet.se (Council Stockholm-Mälar region, incl. Örebro County) http://www.stockholm-malarregion.se (Stockholm-Mälar region, incl. Örebro County) http://www.ab.lst.se/upload/fakta/Folkmang04.pdf (population data) http://www.nordicinnovation.net/article.cfm?id=1-853-205 (Entrepreneurship Policy in the Nordic countries, Nordic Innovation Center, 2003) http://www.ebst.dk/download/entrepreneurindex/link2.html (Entrepreneurship Index, EBST Denmark, 2004) http://www.aluesarjat.fi (NORDSTAT, Nordic Major City Statistics Database) http://www.stockholm.se/files/94400-94499/file_94460.pdf?topcategory=12662 (Nordic Major City Statistics, 2005) http://rru.worldbank.org/DoingBusiness/ (World Bank 2004)
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Entrepreneurship Promotion in Estonia and the Region of Northern Estonia Urve Venesaar/ Ene Kolbre/ Toomas Piliste, Piret Loomets Tallinn University of Technology Department of Business Administration Kopli 101 EE 11712 Tallinn Phone: +372-620 3951 E-Mail: [email protected]
Ministry of Economic Affairs and Communications Harju tn 11 EE 15072 Tallinn Phone: +372 625 6383 E-Mail: [email protected]
Contents
Illustrations ..............................................................................................................248
1. Introduction.......................................................................................................249
2. Business Support Structure and National SME Policy .....................................251
2.1 Development of Business Support Structure....................................................251
2.2 National SME Policy until 2006 ........................................................................253
2.3 New SME Policy Programme ...........................................................................255
3. Profile of the Region of Northern Estonia .........................................................258
3.1 Northern Estonia in the Context of Regional Development ..............................258
3.2 Entrepreneurship Education and the Region of Northern Estonia ....................260
3.3 Entrepreneurship Policy in Northern Estonia....................................................262
4. The Assessment of the Impact of SME Promotion in Estonia ..........................263
4.1 The Overview of Studies Carried Out...............................................................263
4.2 The Analysis of the Impact of Promotion Activities...........................................264
5. Conclusions......................................................................................................266
References ..............................................................................................................268
Annex ......................................................................................................................270
247
Illustrations Figure 1: Characteristics of Regions in Estonia (2004)........................................... 259
248
1. Introduction
The issue of entrepreneurship development and entrepreneurship promotion has
been especially critical in transition economies, being a key component for
supporting the reforms during the transition process from command to market
economy and creation of entrepreneurial climate in the country (Venesaar & Hachey,
1995; Wrobel, 2002). Although the development of Estonian economy in general has
been assessed successful among Central and Eastern European countries, several
studies have shown some backwardness in the development of entrepreneurship
reflected by the firms’ birth rates and creation of jobs compared with developed
countries. There are also significant regional variations in enterprise development,
reflected in the total stock of SMEs and in the rate of new firm formation (Estonia
Country.., 2002). The region of Northern Estonia involves more than half of the
operating businesses in the country. A number of studies have suggested that for a
better understanding of the impact of entrepreneurship promotion in the transition
context it is necessary to recognise changes in the role of government and
entrepreneurship promotion activities over time, linked to different phases of SME
development and its external environment.
Estonia is known for its very liberal and open economic policy during the whole
transition period. A priority in economic policy has been stable monetary policy,
balanced state budget and laissez faire or non-interference in the economy by the
government. Changes in the economic and legislative environment in the early 1990s
led to a rapid increase in the number of private enterprises in Estonia, encouraged by
the relatively simple conditions for setting up enterprises. A relatively successful
privatisation model and active implementation of other reforms also contributed to the
initial increase in the number of private enterprises, so that by 1995, 90% of all Estonian
enterprises were in private ownership. A vast majority of private enterprises are very
small, micro enterprises employing less than 10 persons1. The proportion of the total
stock of enterprises consisting of small and very small enterprises has increased during
the 1990s, particularly those employing less than 10, because of a decrease in the total
stock of enterprises employing 10 or more. As a result, the average size of active
enterprises (excluding sole traders) decreased from 22 employees in 1994 to 11
1 According to the National Tax Board database, 78.2% of active enterprises in 2004 were micro-enterprises (excluding sole traders), 17.7% small and 3.3% medium-sized enterprises.
249
employees per enterprise (excluding sole traders) in 2004, calculated on the basis of
the National Tax Board information. However, the positive effect of these external
factors on the establishment of new enterprises that stimulated entrepreneurship
development gradually diminished and the public sector activities in supporting the
development of small enterprises grew increasingly more significant.
The role of government policy in supporting entrepreneurship and in particular SME
policy development in Estonia has been described and assessed (incl. suggestions for
improvement) by a number of authors through different phases of SME development
(Kuura, 2001; Siimon et al, 2003; Venesaar, 1999; Sepp & Hankov, 2003; Smallbone et
al, 1996; Smallbone & Venesaar, 2004). Mainly based on changes in the institutional
environment, we can classify the development of SMEs into different phases and in
connection with that, also evaluate the government role in entrepreneurship policy.
Though some differences occur in the classification by different authors, they all use
mainly cardinal changes in legislation, e.g. first new legal entrepreneurship forms (since
1986), first joint-stock companies (1990) or monetary reform (1992), banning the
preference of new entrepreneurship forms and equal treatment of all enterprises (1994),
or establishment of a commercial code (1995), changes in taxation of enterprises
(2000). These changes in legislation have significantly influenced particularly the speed
of setting up enterprises, but also other aspects of their activity. However, creation of
the entrepreneurship support system cannot be assessed across these phases, from
what may be assumed that the impact of services rendered by the support system on
setting up enterprises may have been weaker.
In connection with entrepreneurship promotion, the role and responsibility of the
education system should be emphasised, and more specifically, the role of
entrepreneurship education. This is particularly important in a transition context
where, for some years entrepreneurship education and market-related knowledge
and skills have been excluded from the curricula. Currently, the stress has been laid
to the importance of the compliance of aims and content of entrepreneurship
education with target groups and many other issues (e.g. teaching process and
teaching methods; experimental learning) directed to the development of
entrepreneurial initiative among graduates of schools, particularly universities (Hytti
and Kuopusjärvi, 2004; Kyrö, 2003; Blenker et al, 2004). It is necessary to emphasise
the role of universities in the regional development as an initiator of developing a
250
research-intensive enterprise environment and R&D activities, a supplier of
knowledge-based services and other activities needful for fostering entrepreneurship
and regional development.
The next part of the paper describes the current national SME policy supplemented
by new directions of SME policy for the period 2007-2013. This is followed by a
profile description of the development of entrepreneurship in the region of Northern
Estonia, SME promotion policy used in this region and the role of universities in
regional development. The assessment of entrepreneurship promotion is based on a
number of relevant surveys, which have helped to find out the weaknesses of
national policy and possible proposals for its development. The article ends with
short conclusions.
2. Business Support Structure and National SME Policy
2.1 Development of Business Support Structure
The development of an appropriate institutional framework is an important part of the
process of market reform, involving the creation of both private and public sector
institutions, which in the latter case needs to operate in a market-oriented fashion. In
general, the institutionalisation of business support includes the development of
institutions on three levels: macro-, meso- and micro-level (Welter, 1997). At the
macro level, the Ministry of Economic Affairs and Communications is responsible for
the competitiveness of the Estonian entrepreneurial environment and Estonian
businesses. The public sector business support infrastructure is represented by
Enterprise Estonia who is responsible for implementing public business support
measures; including the responsibility for supporting the business development
centres in counties (see Annex). Considerable progress has also been made in
developing the institutional framework for enterprise development at the meso level,
which includes the banking system (characterized by increasingly competitive
market), a number of unions, associations and chambers. The latter refers to the
effective institutionalisation of SME policy, which depends on the development of
business organisations to represent the interests of entrepreneurs and businesses,
acting as an interface between individual businesses and government. A Small and
Medium Sized Enterprise Association (EVEA) was founded in 1988 as a voluntary
union for the promotion, advocacy and lobbying for SMEs, followed by some other
251
organisations (e.g. the Estonian Chamber of Commerce and Industry; the Estonian
Employers’ Confederation). There are the Euro Info Centres that offer information
about EU activities and legislation in the fields of entrepreneurship and the economy,
to help SMEs to find co-operation partners and to enter the EU market.
At the micro-level, institutional development has focused on the development of a
network of business development centres in the counties. Most of these were
founded between 1993 and 1996 with foreign funds, supplemented subsequently
with local resources. However, previous evaluation has identified a number of
weaknesses in the donor-financed network, including poor relationships with local
authorities and other relevant institutions (such as banks) in many cases, and the
overall impact of these business development centres within local business networks
appears to have been weak (Estonia Country..., 2002).
The starting point for coordinated public sector support was in 1997 when the
Regional Development Agency was established to strengthen the supporting network
of SMEs in all counties, and also for crediting firms and arranging the realisation of
regional programmes. This solution was made to guarantee the sustainability and
development of previous foreign aid agencies in Estonia. These Regional Enterprise
Centres offered support schemes and services to local entrepreneurs. In 1997-2000,
several other enterprise support schemes were introduced with the support of EU
Phare Programme (e.g. loan scheme, export support), where several ministries had a
responsibility (5 ministries in total), although not all measures were specifically
directed to the SMEs (but internationalisation, technological development and
innovation etc).
The support structure was reorganised towards its centralisation in 2000 when eight
different foundations were merged into two: Enterprise Estonia (EAS) and Credit and
Export Guarantee Fund (KredEx) under the governance of the Ministry of Economic
Affairs. Hence, as a result of the reform, the multitude of entrepreneurship support
and regulating institutions was liquidated, targeting at using limited resources more
effective and improving the availability of needful information for entrepreneurs. Since
this reorganisation of the business support system, a basis for coordinated national
entrepreneurship policy in Estonia was created.
252
The Business Support Structure can be divided into three levels (Enterprising ..,
2004):
- national level, represented by Enterprise Estonia and KredEx;
- regional level includes several counties represented by regional offices of
Enterprise Estonia;
- county level, represented by a Business Development Centre.
Enterprise Estonia2 is one of the largest institutions (including regional offices) within
the national support system for entrepreneurship in Estonia, providing financing
products, advice, partnership opportunities and training for entrepreneurs, research
and development institutions and the public and third sectors. Besides export credits,
KredEx offers loan guarantees for companies whose self-financing is not sufficient or
if the company lacks a credit history for getting a bank loan. Enterprise Estonia
actively operates in the following areas: the enhancement of the competitiveness of
Estonian enterprises in foreign markets, the inclusion of foreign direct investments,
the development of external tourism and local tourism, the elaboration of
technological and innovative products and services, the development of Estonian
enterprises and the entrepreneurial environment and the enhancement of general
entrepreneurial awareness. Enterprise Estonia is one of the institutions responsible
for the implementation of EU structural funds in Estonia, as well as being the primary
provider of support and development programmes targeted to entrepreneurs.
Business Development Centres are understood as contractual partners of the
Enterprise Estonia base service in the county and their main task is to ensure
implementation of national policies on the county level.
2.2 National SME Policy until 2006
Currently, the main policy documents include:
- The National Development Plan 2004-2006
- The Estonian National Development Plan for the Implementation of the EU
Structural Funds-the Single Programming Document 2004-2006
- Enterprising Estonia. National Policy for the Development of Small and
medium-sized Enterprises in Estonia 2004-2006
- RD&I strategy “Knowledge-based Estonia 2001-2006”
2 http://www.eas.ee
253
The National Development Plan is emphasizing human resource development,
competitiveness of enterprises, agriculture, fishery and rural development. The main
priorities for strengthening the enterprises are as follows:
- Increase enterprise birth, their survival and growth
- Product and technology development, promotion of R&D
- Business infrastructure development, add new services & quality
- Development of labour qualifications (employees, managers)
- Providing small enterprises with better access to finances
- Development of tourism sector
Impending Accession to the EU has contributed to a more active policy formation by
the government. This is reflected in the national business policy or development plan
for the period 2002-2006, which recognises that SMEs may suffer from size-related
market failures in comparison with larger firms and that SMEs have the potential of
contributing to job generation and to regional development. The stated aims of
Enterprise Policy are: to promote entrepreneurship; to create new jobs; to improve
the competitiveness of Estonian businesses (Enterprising Estonia .., 2004).
According to the plan the main priority activities for SME policy at the time of
Estonia's accession to the EU were:
- The development of human resources
- Improved access to finance
- The development of business support infrastructure
- Improved access to business information
- A reduction in administrative burdens
These principles form the basis of annual 3-year action plans, which are co-ordinated
by the state budgeting process. These action plans include short-term objectives and
priorities, together with the required funding sources and the procedures for
monitoring and evaluation. It provides a basis for the government to produce a Single
Programming Document (SPD) to draw down resources from EU Structural Funds.
Enterprise Estonia maintains a web page (government to business portal)3 to provide
information about business start-ups, public support measures, co-operation partners
and information about different business fields and a variety of services. The portal
has become the main communication channel between the public sector and the
3 www.aktiva.ee
254
entrepreneurs in the web environment. The portal has become a platform for forum:
“Entrepreneurship Development in Estonia” to improve access to information and to
have better communication between the business community and the Ministry of
Economic Affairs and Communications as well as the business support and umbrella
organisations. It is a valuable instrument to collect information about the barriers to
entrepreneurship and feedback to public programmes.
In the framework of regional development support, Enterprise Estonia started
accepting applications within the framework of the Programme for Planning Regional
Development. The goal of the Programme for Planning Regional Development is to
improve the preparation quality of projects directed at strengthening regional
competitiveness. The following activities are supported in order to achieve the goals
of the programme:
1. Preparation of strategies for evaluating, determining, and effectively
implementing region-specific resources;
2. Planning the preparation of developmental packages for the preparation of
specific investment projects, including: plans for prospective development;
evaluation of socio-economic profitability; profitability analyses for the
implementation of the package; investment and activity plans; marketing
strategies; environmental impact studies. Applications for receiving support
from the programme’s resources may be submitted by local government
bodies, non-profit associations and foundations, including congregations,
provincial museums, and administrators of state-protected nature sites, if the
planned activities are among those specified in the statutes of the
organisation.
Regional SME policy has attracted much attention in Estonia because regional
development has been strongly polarised to the territory around Tallinn, the Capital City.
The Programmes for economic development exist in all 15 counties. However, since
counties are a part of the central government it makes it questionable whether the
programmes can be classified as regional.
2.3 New SME Policy Programme
Currently a final version of “The Estonian Entrepreneurship Policy for 2007-2013” is
adopted (Eesti…, 2006). The principles of this document are based on various studies
255
conducted during 2004-2005 and compared with the current policy document (2004-
2006) it is a step forward in the development of entrepreneurship and entrepreneurial
initiative through a favourable entrepreneurship environment and appropriate support
schemes. Entrepreneurship policy has established four purposes:
- Strong enterprise culture
- Legal environment favourable to entrepreneurship
- SMEs access to finance
- Capability for SME growth and exports.
Activities aimed at promoting entrepreneurship culture are needed to achieve three
purposes:
- people are entrepreneurial and want to become entrepreneurs
- people have the skills and knowledge necessary for doing business
- positive attitudes towards entrepreneurs and entrepreneurship in society
Activities in the following spheres are undertaken to achieve the purposes:
entrepreneurship education in schools; life-long learning of the entrepreneur; raising
the awareness of entrepreneurship and innovation throughout the society; developing
the ability of enterprises to co-operate.
It is possible to develop an entrepreneurship and entrepreneurial initiative supporting
legal environment with the following sub-purposes in mind:
- low administrative burden for enterprises
- dynamic start-up and exit market
- legal environment favouring fair competition
- a single contact point for enterprises to communicate with the state
In order to achieve the purposes, the activities shall be performed in the following
spheres: application of the regulatory impact analysis on the legislation concerning
entrepreneurship; wider public dialogue in the process of policy-making; single
contact point.
Three objectives have been established in the development of capacities and
possibilities of capital involvement of small and medium-sized enterprises, at which to
direct activities:
- enterprises have the necessary skills and opportunities to obtain finance from
the capital markets
- Estonian investors invest in Estonian SMEs
256
- capital for financing innovation and rapid growth are accessible to SMEs.
Activities in the following spheres are undertaken: developing the skills and
knowledge of new and growing SMEs to enhance their abilities to obtain own and
external capital; reducing the asymmetry of information through investor education
and matchmaking; creation of the national venture capital fund, development of loan
guarantee programs.
So as the Estonian enterprises could realise all of their growth potential and perform
successfully also in international markets, efforts shall be made to achieve the
following aims:
- enterprises have the finance and facilities to develop and bring the skills and
knowledge of their employees up to date
- information on entrepreneurship and innovation are accessible to enterprises
- the management of enterprises is efficient and effective
- enterprises have the skills and knowledge necessary for export activities.
The following shall be done with that purpose: support for the training of employees,
developing the market of training services; dissemination of modern effective
management concepts, management training, information dissemination, consulting
and awareness raising, support to new exporters; export guarantees.
As a result of the entrepreneurship promotion policy development and
implementation, the main prospects are envisaged to achieve in 2013:
- 100% of graduates have received basic knowledge on entrepreneurship
- 15% of population are establishing or have already started a business
- 35 enterprises per 1000 inhabitants
- company registration procedures take at the maximum 20 days
- 50% of enterprises are using consultants and train their employees
- 20% of enterprises are exporting.
Against the background of the new entrepreneurship policy we should emphasise the
growing role of educational system, particularly that of universities, in creating
entrepreneurship culture and particularly in providing high-quality entrepreneurship
education on all levels of education, as well as in the development of advanced
education, raising awareness of entrepreneurship and innovation among enterprise
managers, opinion leaders in the society and the public.
257
3. Profile of the Region of Northern Estonia
3.1 Northern Estonia in the Context of Regional Development
The concept of region is used in Estonia, depending on the context, in various
meanings. The Estonian Regional Development Strategy means by region a part of
an integral territory or area defined on the basis of internal linkage or similar features
for administrative, national policy or analytical purposes. Estonia is a unitary state
with three administrative tiers: national ministries and state agencies; county
governments; and local town and municipal authorities. Currently there are 15
counties, 39 cities, 8 cities without municipal status and 202 rural municipalities. The
county government represents the central government at the regional level, carrying
out state functions, managing state property and acting in a supervisory and advisory
capacity in relation to local governments. The municipalities are responsible for local
administration of public services and economic development. Municipalities vary
greatly in size, infrastructure, economic possibilities and capability of supporting
enterprises’ development. The objective of Estonian regional policy is to improve
ability of local governments and their unions to act as regional development planners
and guides.
With the purpose of optimising national administrative expenses many government
agencies have in recent years started to consolidate activities from counties to
territorial centres. Although there are several models, the division of Estonian territory
into five geographical zones or statistical regions has so far been the most wide-
spread. These regions differ by size of the territory, number of population and
entrepreneurial activity (Table). Entrepreneurial activity across regions indicates
differences in entrepreneurship environment and possibilities. In addition to the
entrepreneurship environment conditions, entrepreneurial activity depends on the
economic structure, demographic situation in the region, institutional development
relevant for entrepreneurship, infrastructure and various other factors. Different are
also people’s knowledge about starting and doing business, and about
entrepreneurship support measures, as well as about individual development and
training possibilities.
258
Figure 1: Characteristics of Regions in Estonia (2004)
Population in regions, thousand
in % of total
Enterprises by regions, % of total
Enterprises per 1000
inhabitants
Employ-ment rate (15-64) in %
Unemployment rate,
in %
Estonia total 1351.1 100 100.0 30 62.6 9.9 North -Estonia 521.4 38,6 60.2 47 66.2 9.9
incl. Tallinn 396.4 29,3 52.0 53 66.9 10.3 Harju County 125.0 9,3 8.3 27 … …
Central-Estonia 142.1 10,5 6.5 19 62.9 8.0 North-East Estonia 174.8 12,9 4.9 11 56.2 18.1
West-Estonia 163.4 12,1 9.8 25 62.7 5.8 South-Estonia 349.4 25,9 18.4 21 59.9 8.4 Source: Statistical Office of Estonia; National Tax Board
The North-Estonian region covers the capital city of Estonia, Tallinn, and its
surrounding Harju County. Harju County covers the coastal area of the Gulf of
Finland from the Keibu Bay to Eru Bay, in some places as far as 56 km from the sea.
The coastal line is 530 km long, including the coastal line of islands with 165 km.
There are 97 inland water bodies and 74 islands in Harju County. Harju County is in
terms of size the second largest county in Estonia with the total area of 4,333km².
Today there are 24 local government units in Harju County, including 6 cities (Tallinn,
Maardu, Keila, Saue, Paldiski, Loksa), one city without municipal status (Kehra), one
township (Aegviidu), 30 small towns and 393 villages.
Tallinn is the business centre of Estonia. With its population close to 400,000 people
(29% of the Estonian population) the capital city is the heart of the national economy
– over half of the Estonian enterprises are located here. They produce all together ca
50-60% of the gross domestic product and nearly 3/4 of enterprises’ profit. More than
half of the foreign capital-based Estonian enterprises are also located in Tallinn,
owing to what the export turnover per enterprise is the biggest in Tallinn. Estimated
on the basis of statistics, the founding of new enterprises is still most intensive in
Harju County and Tallinn. The growth of the number of operating enterprises in
Tallinn has in recent years been constantly slightly higher than the Estonian average,
of 6.3- 6.7% per year. Therefore, the share of Tallinn and Harju County in the total
number of operating enterprises has been gradually rising. Economic activity has
been largely connected with the neighbouring Scandinavian countries. This has laid
foundation for extensive foreign investments, obtaining of contemporary knowledge
259
and skills and enlivening of trade. Local entrepreneurial spirit is concentrated here –
there are 8 registered enterprises per 100 inhabitants in Tallinn, which is more than
the local and the European Union average, though only two-thirds of them are
operating actively. The number of actively operating enterprises (53) is in Tallinn also
highest compared with other regions, which is a reason for the highest employment
rate, though the unemployment rate is in Tallinn slightly higher than the national
average (Table). An entrepreneurial initiative survey of Estonian people (Eesti
elanike…, 2004) also indicated differences in entrepreneurial initiative across
different regions in Estonia. This survey showed that the initiative to set up an own
enterprise is the biggest in Tallinn and Harju County. It also suggested that every
second potential entrepreneur comes from Northern Estonia.
3.2 Entrepreneurship Education and the Region of Northern Estonia
Business administration and entrepreneurship knowledge can be obtained in Estonia
in different forms of formal education and advanced training. There are 20 higher
schools and universities that provide business administration and entrepreneurship
related education on the basis of different programmes in Estonia (bachelor, master,
doctoral degree). However, the programmes for business administration and
entrepreneurship in Estonian higher educational establishments and universities are
almost without exceptions similar, providing broad basic education but not very great
specialisation. Real specialisation begins on the master’s degree level (3+2 system),
being limited to the principal subjects of business administration (marketing,
accounting, finance, administration, etc.).
Entrepreneurship training has been included also in the curricula of vocational and
general education schools containing some business administration or
entrepreneurship courses that provide basic knowledge for starting a business. In
order to improve the entrepreneurship knowledge, the project “Development of
entrepreneurship education” was initiated with the primary purpose of unifying and
updating entrepreneurship education in schools. Within this project entrepreneurship
education modules will be elaborated, an entrepreneurship computer game will be
created, as well as advanced training courses will be held for teachers and
entrepreneurs about the newest teaching materials, active teaching methods and
project management.
260
A number of different consultation and training firms, and universities provide
business training courses (nearly 250 courses). Special entrepreneurship training is
organised mostly for start-up entrepreneurs, whereas most of these programmes are
meant for the unemployed. Most of the managerial training courses are targeted at
those employed in medium-sized and large enterprises, the focus on small
entrepreneurs is quite rare and the connection of the training courses in this sphere
to entrepreneurship and entrepreneurial initiative is not very strong.
While the schools network is quite evenly divided across regions, universities, their
colleges and vocational education institutions are concentrated into major cities. The
largest provider of economic education in North-Estonia is the School of Economics
and Business Administration at Tallinn University of Technology (TUT). Most of the
private higher schools providing economic education are located in Tallinn (Estonian
Business School, University Nord, International University Concordia Audentes etc).
Tallinn University of Technology with more than 10,000 students is the largest
university, where subjects connected with entrepreneurship are included in all
programmes, differences can be find only in the amounts and levels of teaching. The
analysis of entrepreneurship education in TUT programme showed that most of them
are directed to business administration issues and only some of them are including
more subjects of entrepreneurship. Currently, the activities of the School of
Economics and Business Administration at TUT are directed to the development of
new curricula and training courses for students as well as for entrepreneurs and
managers.
Tallinn University of Technology has played an important role in the regional
development in Estonia, being an initiator in developing research-intensive enterprise
environment and one of the founders of Tallinn Technology Park – TEHNOPOL in
cooperation with the City of Tallinn and the Republic of Estonia (Ministry of Economic
Affairs and Communications and Enterprise Estonia). In cooperation with Enterprise
Estonia, TUT has launched the SPINNO Programme, the main objectives of which
are to notably increase the business knowledge of academic staff, to develop a
system of offering knowledge-based services, to enhance the protection and
commercialisation of intellectual property and to develop and support entrepreneurial
activities of its academic staff.
261
TUT is one of the initiators behind the National Programme of Competence Centres.
TUT has also developed industry-university relations carrying out contract research
of large infrastructure companies and in the area of manufacturing supplying training
and re-training activities. Research and development activities are arranged through
departments, research centres and R&D institutions. TUT is open also to
international cooperation through several EU programmes and other international
cooperation activities.
To assess the role of education in entrepreneurship promotion: the opinion of
Bachelor-degree graduates of business administration and non-business specialities
were asked by authors in 2005 in Tallinn University of Technology about suitability of
graduates for starting a business. On the basis of this empirical survey three quarters
of respondents (75%) have thought about starting an own business. The impact of
the programmes and knowledge obtained on starting a firm indicated that what one
has learned in the business administration majors helps most of the interviewees
(80%) to start their own business.
Besides, the analysis of survey results showed that the major the graduates studied
provided knowledge about business and starting a business, but not so much
motivation for starting a business. When graduates were asked about realising their
plans of starting a business in the framework of a specific time, then more than half
(57%) of the students want to postpone starting a business to a more distant future.
A reason here is the orientation of the teaching programmes rather to preparation of
specialists in business administration. In the opinion of the students, the main
reasons that restrict starting a business are insufficient motivation and capital, lack of
practical experience and business idea. This indicates the need for better planning of
programmes of entrepreneurship education to stimulate entrepreneurial initiative
among students. The survey results showed also that the students were not
sufficiently ready to use the entrepreneurship support programmes in Estonia.
3.3 Entrepreneurship Policy in Northern Estonia
Not all municipalities have clear SME development plans. However, Tallinn introduced
a programme for small business development in February 2002. The background was
that the governmental support schemes for small enterprises did not apply to
businesses registered in Tallinn, since the economic growth of the capital region has
not been considered a problem.
262
Small entrepreneurship development programme for the years 2005-2007 in Tallinn
proceeds from two main objectives (Tallinna…, 2004):
- to increase entrepreneurship activity and improve the employment situation
- to increase competitiveness through supporting (particularly technological)
small entrepreneurship.
As a result of implementing the programme, a comprehensive system of benefits and
support measures will be established in Tallinn, in cooperation with national
programmes and measures. This system will cover all enterprise development
phases. Emphasis will be laid on the development and specific features of the
entrepreneurship environment improvement in Tallinn. The main activities for
accomplishing the objectives are as follows:
- to offer financial support and counselling services both to start-up and
expanding enterprises
- to extend the mentor programme to medium-sized enterprises
- to raise gradually the standards and quality of incubation services, and develop
innovation support services.
- to become aware of and inform about entrepreneurship possibilities.
The City was an active initiator in launching an incubation programme (TEHNOPOL) in
cooperation with Tallinn University of Technology and the Ministry of Economic Affairs
and Communications. In 2006 and henceforward there are plans to increase the area
of incubators. So as to satisfy the entrepreneurs’ needs in the best possible way
there is going on intensive development work. The City Enterprise Board in Tallinn, in
cooperation with the private and the third sector, has consolidated its resources to
find out what are the needs of enterprises and improve the environment accordingly.
An entrepreneurs’ information point has also been established with the same
purpose. This should provide entrepreneurship related information and advise
entrepreneurs in issues concerning a particular sphere.
4. The Assessment of the Impact of SME Promotion in Estonia
4.1 The Overview of Studies Carried Out
A number of studies have been carried out in Estonia about regional development of
small enterprises, which have evaluated differences in socio-economic development
263
across regions, sources of regional problems, analysed possible policy strategy
choices, use of support from foreign donors (Regional…, 1996; Estonia Country…,
2002; Raagmaa, 1996; Kudela & Venesaar, 1999). By those studies a kind of
success from establishing a support system and participation of foreign assistance in
this has been mentioned. The studies on manufacturing SMEs in transition countries
and of the influence of internationalisation have helped to indicate the contribution of
SMEs to economic development, characteristics in firms' behaviour and their support
needs for future development (Smallbone et al., 1996, 1999). In recent years, some
studies have been made to assess the results of measures implemented as
entrepreneurship support policies and to identify more precisely entrepreneurs’
demands in the country as a whole as well as in different regions (e.g. Jürgenson et
al, 2003; Eesti…, 2005).
The overall opinion is that indirect support to business development prevailed
through macroeconomic stabilisation and improvement of legal external environment
during a first decade of private sector development in Estonia (Venesaar, 1999;
Estonia Country.., 2002). Direct support measures to support SME development
were almost nonexistent with the role of government best characterised as one of
limited intervention (The State…, 1999). Instead, foreign aid programmes (e.g.
Phare, NUTEK) contributed to the establishment of business support centres, to the
co-operation of countries in SME research and assistance for institutional
development. By the late 1990s government policy was beginning to place more
explicit emphasis on encouraging and supporting SME development (government
support programmes for infrastructure, exporting and regional development since
1997/1998). Since 2000, the aim of SME policy has become increasingly linked to
improving the competitiveness of firms in domestic and foreign markets and today, a
working support system has been developed, based on the entrepreneurship support
principles used in the European Union. This support system has worked almost five
years and some studies have been made to ask entrepreneurs’ opinions about the
impact of entrepreneurship services on setting up new enterprises and
entrepreneurship development (Jürgenson et al, 2003; Eesti väikese…, 2005).
4.2 The Analysis of the Impact of Promotion Activities
To better understand the impact of promotion activities to the entrepreneurship
development, the following analysis draws on empirical evidence from large-scale
264
telephone surveys of SMEs, implemented by a market research companies in 2002
and 2005 on behalf of the Estonian Ministry of Economic Affairs and
Communications (e.g. Jürgenson et al, 2003; Eesti väikese…, 2005). The impact of
promotion activities has been assessed in the next areas:
- access to information and business advice
- awareness and use of public policy measures
- access to financial sources
- the need for training
The most commonly reported source of information about potential business clients
in 2002 was 'word of mouth' (60%), followed by the Internet (30%) and 'other media'
(27%), then in 2005 it was internet (85%), other media (60%) and friends (56%). This
suggests that currently, internet contacts are the predominant means of obtaining
information about customers in Estonia and by SMEs. Formal business support
organisations, such as Chambers of Commerce, business and professional
associations are important sources for larger firms and local enterprise centres for
start-ups and those in small towns and rural areas. The web portal “Activa” is gaining
in importance as an information channel, especially for SMEs.
As for using external advice, 39% of Estonian SMEs reported using some form of
external advice in 2002, but 33% in 2005. Firms who had not used external advice,
86% explained no need for advice in 2002 (84% in 2005) or lack of suitable
consultants (7% in both years). When respondents were asked about any type of
information they need, the most commonly mentioned were information about sales
and marketing, legal advice, business planning and taxation. The most commonly
used sources of advice and consultancy were private consultants, business partners
and friends/family members, rather than banks and accountants. This means that the
market for business advice and consultancy has improved but is still developing in
Estonia. This was confirmed by low level of use of bank managers as sources of
business advice. Presumably, the recognition by Estonian entrepreneurs of the
potential benefits of professional advice and consultancy to the development of their
businesses has improved.
More than three quarters (77%) of enterprises in 2002 (87% in 2005) reported
knowing of the existence of state support measures, although only 10% (20% in
2005) claimed to have a good knowledge. Although the awareness about business
265
support institutions and their services has increased during 2003-2005, one of the
weaknesses of current SME policy revealed by the surveys is still the low level of
entrepreneur's awareness of what is on offer.
The need to improve financing opportunities for SMEs is one of the priorities areas
identified in the current SME policy document. The surveys revealed that, only a
minority of Estonian SMEs received external finance at start-up. This means, that the
vast majority of new business start-ups in Estonia are still reliant on self-financing, in
a context where the scope for accumulated or inherited wealth is less than in most
mature market economies.
When managers were asked what proportion of their employees had been involved
in in-service training during the previous 12 months, similarly in both studies (2002
and 2005) over half of respondents reported having trained at least some of their
employees, and the same part of respondents are planning to train their employees
in the future. There was a high degree of correlation between firm size and the
propensity of firms to have been involved in management and/or employee training.
The need of Estonian firms to have been more likely to be involved in training their
employees compared with western countries might reflect the reported shortage of
workers with the required skills, as well as the legacy of transition in Estonia, where
the labour market is still adjusting to the needs of the emerging market economy. The
main obstacles here are connected with the cost of training, replacement for
employees taking the courses and difficulties to find lecturers with the right
qualification (Jürgenson et al, 2003; Eesti väikese…, 2005).
The studies on the impact of promotion activities conducted during 2004-2005 are taken
as a basis for the development of the principles for new entrepreneurship policy
document (for 2007-2013), being a step forward in the development of
entrepreneurship through a favourable entrepreneurship environment and appropriate
support schemes.
5. Conclusions
Considerable progress has been made in the institutionalisation of SME policy in
Estonia and by today, a working support system has been developed, based on the
entrepreneurship support principles used in the EU. The results of different surveys
are showing a rather modest role of the government in entrepreneurship promotion
266
until 2000, but since then a positive development of the supply of services and their
use by entrepreneurs occurred. The surveys’ evidence suggests that there is still
some way to develop, illustrated by the low level of entrepreneur’s awareness of
what is on offer and significant minority of SMEs using local business centres as a
source of information, advice and/or consultancy. There is a need to more actively
disseminate information about those support programmes that are available, and
offer services, which can better consider the needs of entrepreneurs.
The region of Northern Estonia and the capital city is the heart of the national
economy. Currently, a comprehensive system of benefits and support measures
covers all enterprise development phases with the emphasis on development and
specific features of the entrepreneurship environment development in Tallinn. A
considerable part of universities, their colleges and vocational education institutions
are concentrated in Tallinn playing an important role in the development of the
region. The largest provider of economic and entrepreneurship education in North-
Estonia is the School of Economics and Business Administration at Tallinn University
of Technology (TUT). Tallinn University of Technology has been an initiator in
developing research-intensive enterprise environment and one of the founders of
Tallinn Technology Park. TUT has also developed industry-university relations
carrying out research and supplying training and re-training activities, initiating R&D
activities on national as well as international level.
The analysis in the article suggests that it is needful to increase the role of university
in entrepreneurship education for supporting the realisation of new challenges of
society in the development of innovation and economic growth through developing
students’ motivation, competencies and development of entrepreneurial skills for
fostering entrepreneurship as well as entrepreneurialism in a wider context in the
society. There is a great need to support the cooperation activities between
universities, public support infrastructure and enterprises in fostering regional
development. The analysis of the impact of promotion activities reveals a need to
create an effective promotion system for enterprise development of the country with
the emphasis on development and concrete features of the entrepreneurship
development in the regions.
267
References
1. Secondary Literature Blenker, P. Dreisler, P., Fargemann, H.M., Kjeldsen, J. 2004, Entrepreneurship
Education and University Context. Paper presented to the 14th IntEnt Conference in Naples, Italy.
Hytti, U., Kuopusjärvi P. 2004, Evaluating and measuring Entrepreneurship and Enterprise Education: Methods, Tools and Practices. Small Business Institute, Business research and Development Centre, Turku, School of Economics and Business Administration.
Jürgenson, A., A. Oks, R. Selliov and K. Varno 2004, Development Problems and State Support Measures of SMEs in Estonia: Final Report, University of Tartu (unpublished).
Kudela J.-J., Venesaar U. 1999 An evaluation of Phare SME Programmes. Estonia. Draft Report, European Commission, Brussels.
Kuura, A. 2001, Väikeettevõtlus. Pärnu. Kyrö, P. 2003, Conceptualising Entrepreneurship Education – the current state and
some future expectations. Paper presented in Internationalizing Entrepreneurship Education and Training Conference, Grenoble 7.-10.09.2003.
Raagmaa G. 1996 Majanduskeskkonna globaalsed muutused, Eesti regionaalne areng ja väikeettevōtlus selle kujundajana, Avatud Hariduse Liit, Tartu.
Sepp J, Hankov, M. 2003, ‘Support of Small and Medium sized Enterprises in Estonia’. In: Estonian Economic Policy on the Way towards the European Union. Reports-papers of the XI Scientific and Educational Conference (Tartu-Värska, 26.-28. June 2003), pp.562-580.
Siimon A., Reiljan, A., Kriisa, R. 2003 ’Eesti ettevõtluspoliitikast Euroopa Liiduga liitumise kontekstis’. (Unternehmertumspolitik in Estland und Integration in die Europopäische Union.) In: Estonian Economic Policy on the Way towards the European Union. Reports-papers of the XI Scientific and Educational Conference (Tartu-Värska, 26.-28. June 2003), pp. 573-580.
Smallbone D., Piasecki B., Rogut A., Venesaar U., Rumpis L., Budreikaite D. 1996 The Survival, Growth and Support Needs of Manufacturing SMEs in Poland and the Baltic States. Final Report under Phare ACE Programme, Centre for Enterprise & Economic Development Research, Middlesex University, London.
Smallbone D., Piasecki B., Venesaar U., Todorov K. , Labrianidis L. 1999, ‘Internationalisation and SME Development in Transition Economies: An International Comparison’ Journal of Small Business and Enterprise Development, Henry Stewart Publications, Vol. 5, No 4, pp. 363-375.
Smallbone D., Venesaar U.2004 ‘The Strenghts and Weaknesses of Estonian SMEs in the Context of an Enlarged Europe.’ In: Managing Complexity an Change in SMEs. RENT XVIII Conference Programme and Abstracts, 24-26 November 2004, Coopenhagen, Denmark, Holmen Centertryk, p. 172 (Full paper in CD).
Venesaar U. 1999 Development of SME Policy in Estonia and the Role of Government, Paper to the 22nd ISBA National Small Firms Policy and Research Conference: "Small Firms: European Strategies, Growth and Development", 17-19th November, 1999, Leeds, UK, pp. 1395-1411.
268
Venesaar U., Hachey A. (Eds.) 1995 Economic and Social Changes in the Baltic States in 1992 - 1994. Tallinn, 241p.
Welter F. 1997, Small and medium enterprises in Central and Eastern Europe: Trends, Barriers and Solutions (RWI-Papier Nr. 51.) Essen.
Wrobel, R. 2002, ‘Cultural Factors in the Transition Process: the Development of Internal and External Institutions in the three Baltic States.’ In: Effect of Accession to the European Union on the Economic Policy of Estonia. Reports-papers of the X Scientific and Educational Conference (Tartu-Värska, 27.-29. June 2002), pp. 243-251.
2. Official Documents Eesti Konjuktuuriinstituut 2004, Eesti elanike ettevõtlikkus (elanike küsitluse
tulemused), Tallinn. Majandus- ja Kommunikatsiooniministeerium 2006, Eesti ettevõtluspoliitika 2007-
2013. Tööversioon, Tallinn. Saar Poll OÜ uuringu aruanne 2005, Eesti väikese ja keskmise suurusega ettevõtete
arengusuundumused, Tallinn. Ministry of Economic Affairs, Tallinn. 2004, Enterprising Estonia. National Policy for
the Development of Small and Medium-sized Enterprises in Estonia in 2004-2006.
OECD Forum for Enterprise Development, 2002 Estonia Country Assessment. Baltic Regional Programme.
Estonian Ministry of Economic Affairs 1996, Regional SME Study, Tallinn. Tallinna Linnavalitsus 2004, Tallinna väikeettevõtluse arendamise programm aastateks 2005-2007. PHARE Support to SME Development in Estonia 1999, The State of Small Business
in Estonia. Phare Report 1998, Tallinn.
269
Ann
ex
Mul
tilev
el
appr
oach
A
ctor
s R
oles
G
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Pr
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Res
ourc
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Net
wor
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vel
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m:
Ent
repr
eneu
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p pr
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in E
ston
ia
Web
por
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w.a
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a.ee
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tform
for i
nfor
mat
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di
scus
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the
crea
tion
of
effe
ctiv
e m
easu
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for
entre
pren
eurs
hip
deve
lopm
ent
Col
lect
ing
opin
ions
and
pr
opos
als;
Dis
sem
inat
ion
of in
form
atio
n;
Join
t pro
ject
s
Net
wor
k of
en
terp
rises
; ope
n po
rtal f
or o
pini
ons
Ent
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ise
Est
onia
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rom
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of b
usin
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and
regi
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pol
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s;
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he
com
petit
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ness
of b
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ll re
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suita
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mea
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s to
m
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suita
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fina
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mee
t E
nter
pris
e E
ston
ia’s
ob
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ives
Incr
easi
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war
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Pro
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fin
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dvis
ory
and
cons
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serv
ices
; Th
e pr
ovis
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of
info
rmat
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partn
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Trai
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U
stru
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in
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deve
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cou
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s se
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es
To s
uppo
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sine
ss
deve
lopm
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n th
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info
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diss
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and
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di
ffere
nt le
vels
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duca
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prog
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in
diff
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ours
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rese
arch
pro
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s
Pub
lic a
nd p
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e re
sour
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ser
vice
s;
etc.
Inst
itutio
nal
leve
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Cha
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ndus
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and
Com
mer
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An
activ
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mbe
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on b
ehal
f of t
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To d
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s: c
onsu
ltatio
n (le
gal,
fore
ign
trade
, EU
-re
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mat
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ts,
pres
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tions
), in
form
atio
n se
rvic
es
Net
wor
k of
co
mpa
nies
;
270
Est
onia
n bu
sine
ss
com
mun
ity. T
he E
CC
I al
so h
osts
the
Arb
itrat
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Cou
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c.),
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fore
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ts.
Em
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C
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tion
To re
pres
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he
mem
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in th
e re
latio
ns w
ith le
gisl
ativ
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d ex
ecut
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auth
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pres
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of
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sta
nd fo
r th
e rig
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of it
s m
embe
rs, a
nd to
re
pres
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he m
embe
r or
gani
zatio
ns b
oth
in
Est
onia
and
abr
oad.
S
ME
repr
esen
tativ
e in
th
e co
untry
To ra
ise
com
petit
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ess
of
Est
onia
n ec
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y by
im
prov
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the
econ
omic
en
viro
nmen
t and
pro
vidi
ng
soci
al s
tabi
lity.
To
cre
ate
a cl
imat
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the
coun
try, w
hich
is a
s fa
vour
able
to b
usin
ess-
mak
ing
as p
ossi
ble
Bila
tera
l and
trip
artit
e so
cial
and
eco
nom
ic
polic
y ne
gotia
tions
on
the
issu
es re
late
d to
la
bour
and
soc
ial
rela
tions
Mem
bers
hip
Ass
ocia
tion
of S
ME
s (E
VE
A)
P
artic
ipat
ion
in th
e el
abor
atio
n of
en
trepr
eneu
rshi
p po
licy;
P
rote
ct a
nd d
evel
opm
ent
entre
pren
eurs
hip
as a
life
st
yle
Ser
ving
mem
bers
M
embe
rshi
p
Indi
vidu
al
leve
l C
onsu
ltant
s E
xper
tise
and
sugg
estio
ns fo
r bu
sine
ss e
stab
lishm
ent
and
deve
lopm
ent
To s
uppo
rt an
d he
lp s
tart-
ups
and
exis
ting
entre
pren
eurs
C
ontra
cts
P
rivat
e fu
ndin
g m
ostly
271
272
Entrepreneurial Challenge for University and its Region in a Transition Country: Case of Tartu, Estonia Tõnis Mets/ Janita Andrijevskaja University of Tartu; Faculty of Economics & Business Administration Centre for Entrepreneurship Narva Road 4 – B104; EE 50404 Tartu Phone: +372-737 63 62 Fax: +372-737 63 12 Mail: [email protected] Contents Illustrations ............................................................................................................. 274
1. Introduction...................................................................................................... 275
2. University-Region and University-Industry Relations as a Cornerstone of Entrepreneurial University ............................................................................... 277
2.1 Best Practice: Creating Clusters – Growth Factor of Regions ......................... 277 2.2 Diversity of the Entrepreneurial University....................................................... 279
3. Profile of the Tartu Region and Universities .................................................... 280 3.1 Brief Description of Southern Estonia.............................................................. 280 3.2 Entrepreneurial Situation in the Region........................................................... 283 3.3 Tartu City and its Universities – the Centre for Southern Estonian Region ..... 285
4. Entrepreneurship Promotion in Southern Estonia ........................................... 286 4.1 Innovation and Entrepreneurship Promotion System ...................................... 286 4.2 Role of Tartu University in the National and Regional Triple Helix .................. 288
5. Discussion and Conclusions............................................................................ 292
Bibliography............................................................................................................ 295
273
Illustrations Figure 1: The map and basic facts on six counties of Southern Estonia, year 2004281 Figure 2: Strengths, weaknesses and development opportunities of the region..... 282 Figure 3: Percentages of business unites involved in selected economic sectors, year
2004 ......................................................................................................... 284 Figure 4: Entrepreneurship development system of Southern Estonia................... 287
274
1. Introduction
Over the last two decades, the traditional missions of universities – teaching and
research, have complemented with the third one – economic and social development
of society. Adapting the third mission by university is called the second academic
revolution (Etzkowitz 2004). For universities this means disclaiming the position of
ivory tower and becoming a generator of economic wealth in society. The
entrepreneurial paradigm of university in the triple helix of University-Industry-
Government relations has become the concept leading understanding of innovation
processes in the knowledge economy (Etzkowitz, Webster et al 2000). In the national
innovation system (NIS) the university’s role is growing since they become
entrepreneurial. That also means entrepreneurial reinvention of university collegiality,
autonomy, and academic achievement (Clark 2001).
The entrepreneurial role of the universities is examined mainly in countries where the
market economy is traditionally characteristic (Etzkowitz 2004, Etzkowitz, Webster et
al 2000). The role of national universities in developing knowledge-based
entrepreneurship in countries with post-Soviet economies is studied less. Estonia has
so far enjoyed an excellent reputation in innovation when compared to the other
countries acceding to EU membership (Nauwelars, Reid 2002). It also seems that the
Estonian parliament has done its best by ratifying the Estonian research and
development strategy document “Knowledge-Based Estonia” (2002).
Different innovations have become a part of everyday life in Estonia during the last
10-year period. At the end of 2004 about 50% of the Estonian population were users
of the Internet (http://www.ria.ee/). Mobile parking and banking, e-banking, e-shops,
business and civil e-services are very popular, for example e-tax-declarations are
widely spread. Free and pay wireless Internet connections (WiFi) are widespread in
many regions of the country – totalling more than 550 areas on the territory of 45,000
square kilometres (http://www.wifi.ee/).
Despite the achievements mentioned above we must admit that Estonian companies
are investing in R&D less than 0.2% of GDP, whereas total R&D spending in private
and public sector equals 0.7% of GDP (Kurik, Lumiste et al, 2002).
The subject of the present article is entrepreneurship and entrepreneurial
development in post-Soviet Southern Estonia with the centre in Tartu – the region,
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where economy is dominated by agricultural sector and traditional industries. The
scientific and knowledge creation centre of the region is the University of Tartu (UoT).
Its image is reaching far over the boundaries of Tartu region and Estonia. The
University of Tartu like other famous universities as Cambridge, Heidelberg, Bologna,
Barcelona, Lyon and many more belongs into the Coimbra Group of European
multidisciplinary universities of high international standard. The number of
membership is totalling less than 40 (http://www.coimbra-group.be/index.html).
This paper aims at showing that developing entrepreneurship in a region has to start
with the understanding and solving of already existing regional problems within the
“triple helix”. While discussing the pre-conditions of entrepreneurship development, a
description of the Tartu regional triple helix is given. Trying to find best practice for
this post-Soviet region, the authors evaluate to which extent UoT and Tartu region
are comparable with several successful regions, such as Cambridge high-tech
cluster or Silicon Valley. The authors cover the following topics:
1. Main pre-conditions for knowledge-oriented entrepreneurship and innovation
development in university regions.
2. The role of university in regional development. How can UoT participate in the
third mission: development of society?
3. Acceptance of the entrepreneurial paradigm by UoT. What is the situation of
“second academic revolution” in Tartu?
4. What should be the tasks of UoT on the way toward entrepreneurial
university?
The article consists of five parts. The section following the introduction gives
analytical description of best practices of knowledge-based regions and
entrepreneurial universities in the world. Then the next section presents a short
overview of Tartu region, businesses and local universities. After the presentation of
the region the authors describe entrepreneurship promotion in the area: the system
of entrepreneurship support, the innovative activities and the role of the UoT. At the
end of the article the discussion and conclusions are presented, referring to
challenges for increasing the university’s significance in the regional development.
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2. University-Region and University-Industry Relations as a Cornerstone of Entrepreneurial University
2.1 Best Practice: Creating Clusters – Growth Factor of Regions
Innovation and entrepreneurship development has been seen as the main drivers of
national and regional economic growth for the last 20 years in the US and in Europe
(Bresnahan, Gambardella 2004, Rodrigues 2002). The highest growth is detected in
regions, where development is supported by a number of mechanisms operating
within the clusters, such as “easy access to capital, knowledge about technology and
markets, and collaborators” (Bresnahan, Gambardella 2004: 1).
One of the myths in the high-tech sector is that for creating a cluster it is enough to
posses’ technology (usually coming from university), entrepreneurs, capital and
sunshine. Other opinions say that only unique luck was the driver, which generated
“critical mass” into Silicon Valley around Stanford University in California. Gordon
Moore and Kevin Davis (2004) argue against these simplified approaches, they see
that the learning lies at the core of building up Silicon Valley among the next aspects:
1. Scientists learning to be managers.
2. Commercial science – that means closed relations between R&D and
manufacturing.
3. Identifying, creating and seizing opportunities.
4. Spin-offs and limiting the dimensions of competition. This can be seen as the
result of “wide-open” technology space, where every member/company in the
knowledge cluster/community could specialize for own technology advantages
complementing community knowledge and creating value in vertically
specialized manufacturing organisation.
5. Just a good luck on a clean slate – that means evolving rapidly in wide-open
technology space.
The concept of the Silicon Valley cluster is based on the development of
entrepreneurial spirit and orientation on market need. The university-based high-tech
cluster in Cambridge (Europe) has enjoyed similar success, but its concept is
somewhat different: the driving force of the success is primarily excellent research
capacity and tight connection to the University. It has been a key player in the
Cambridge Science Park with its 959 high-tech establishments, employing 31,000
people in 1999. Even territory and population numbers are roughly similar in
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Cambridge and Silicon Valley. But the first main difference is the economic outcome,
the regional GDP, which is in Cambridge six times less than in Silicon Valley.
Another difference is that Cambridge “has not produced a large number of
outstandingly successful firms that have grown large sizes” as Hewlett-Packard or
Intel. Most surprising is that Cambridge demonstrates roughly the same proportion of
knowledge-based businesses as U.K. average. Some causes of the slow growth of
firms in Cambridge area are the following:
1. Business model based on technology licensing (“good at invention but not
innovation”).
2. Relative unimportance of agglomeration of local businesses.
3. Low direct impact of the university on businesses in the area.
4. The largest market for technology products is in U.S. not in Europe.
5. The lack of good marketing and management skills.
The researcher mentions that Cambridge tried to move toward technology production
based on science from university laboratories with no help from government policies.
It seems that one of the reasons why Silicon Valley’s history has not repeated in
Cambridge is that Cambridge high-tech cluster was started 20 years later (Athreye
2004).
There can be more factors influencing motivation of universities to cooperate with
businesses. One of them is a financing system of research: Cambridge has one of
the first positions in U.K. public funding and a more modest position in getting
industrial research grants and contracts (Lambert Review 2003). Industrial research
grants have a share of about 13 % of the total research funding stream and one can
speculate that university-industry relations and commercial (local, regional) interests
are not very remarkable drivers of research in U.K. universities.
From the two discussed examples of the best practices world-wide one can conclude
that the main pre-conditions for success of knowledge-based high-tech clusters are
related to:
1. Entrepreneurial behaviour of scientists, creators of new knowledge with
commercial value.
2. Tight synergetic relations between local actors creating value to each other in
the different parts of value chain of joint business.
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3. Connections to the market supported by strong management and marketing
skills.
Even though both regions have been successful, these attributes are more
characteristic for Silicon Valley than for Cambridge.
2.2 Diversity of the Entrepreneurial University
The concept of the entrepreneurial university has provoked several theorists to
discuss the content and meaning of the term and its relations to the “triple helix” of
university, industry, government (Martin, Etzkowitz 2000; Röpke 2000; Sporn 2001;
Clark 2003; Mok 2005; et al). “Adaptive” (Sporn 2001) and “innovative” (Vught 1999)
are partly used as a synonym for “entrepreneurial” but also to label a different
context.
An adaptive or innovative context of a university might be a driver for the
transformation of the institution. Two types of driving forces can be mentioned here:
the threats (resulting from necessities) and the opportunities. The first necessity is
connected with moving from mono-disciplinary (Mode 1) to multi-disciplinary or trans-
disciplinary (Mode 2) knowledge-production “in the context of application”. Among the
threats is the globalisation process that gives students freedom to choose the place
and type of studies, and the threat of a possible weakening of the connection
between research and teaching. For the efficiency of teaching it is necessary to
provide students with specific skills required by economy and society. The first
opportunity is related to the growing importance of research as the source of new
knowledge for a knowledge economy. The second challenge for a university is the
growing demand for continuous learning. Thirdly, new information and
communication technologies change teaching and learning places as well as
methods (Martin, Etzkowitz 2000).
Discussing the triple helix model, the authors point out that an entrepreneurial
university combines teaching, research and contributing to the economy particularly
in the local region (Martin, Etzkowitz 2000; Röpke 2000). When becoming
entrepreneurial, a university changes its status in the innovation process: the
previous “science push” model of innovation has seen to be good instrument for
“pumping” governmental money into research. The question occurring now would be:
Does academic research for industry’s interests weaken university’s autonomy or on
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the contrary strengthens it?
University’s autonomy can actually be strengthened as it becomes less dependent on
state funding (Martin, Etzkowitz 2000).
Becoming entrepreneurial, a university develops its relations with the region, the
industry and also the state government. The following indicators are helpful in
assessing the results of cooperation between university and industry: a) spin-offs
based on the new technological ideas from university, b) high-level sales of licenses
for new technologies, c) knowledge spill-over effects (Lambert 2003, Audretsch et al.
2002). From the other side, the university’s cooperation with the government can be
analysed when looking at the structure of university funding, government support for
university’s R&D processes and university’s participation in major state research
projects (OECD 2003, Ruttan 2001).
Some researchers pay more attention on the entrepreneurship aspect of the
entrepreneurial university. According to Professor Röpke (2000) it can mean three
things:
1. The entrepreneurial university as organisation becomes entrepreneurial.
2. The members of the university are turning somehow into entrepreneurs.
3. In relations with region university follows entrepreneurial patterns.
Described attributes were developed in the Twente University (Netherlands). This
university was very near to be closed at the beginning of the 1980s for the reason
that the local economy was declining, and the entrepreneurial behaviour of the
university members could be the main factors re-vitalizing the region (Lazzaretti,
Tavoletti 2003). One can conclude that survival can be an efficient driver for a
university to become entrepreneurial. This indicates that specifying a sufficient list of
drivers and factors of an entrepreneurial university needs a thorough analysis of the
combination of the triple helix. But still it is quite evident that universities need to
rethink their roles and positions in at least three areas: research, teaching and
learning, and knowledge transfer (Vught 1999).
3. Profile of the Tartu Region and Universities
3.1 Brief Description of Southern Estonia
The Republic of Estonia is a country in Northern Europe. The region of Southern
Estonia shares a border with both the Russian Federation and Latvia and is situated
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close to some of the largest centres of north-eastern Europe: Helsinki, Stockholm, St
Petersburg, Riga and the capital of Estonia, Tallinn. Southern Estonia has an area of
15,000 km² (30% of the country’s total area) and a population of approximately
370,000 people (21% of country’s total). The urbanization rate in Southern Estonia is
55%, which is lower than average level in Estonia. Six administrative counties
constitute the region – Tartu, Jõgeva, Põlva, Viljandi, Valga, and Võru (see Figure 1).
The majority of urban people in Southern Estonia live in Tartu – the region’s biggest
city with more than 100,000 inhabitants.
Figure 1: The map and basic facts on six counties of Southern Estonia, year 2004
Source: (Statistical Office of Estonia 2005)
The economy of Southern Estonia is dominated by traditional industries: the region’s
major economic sectors are forestry, agriculture, food processing and machinery.
The city of Tartu in contrast has a large service sector. Even though 21% of the
Estonian population live in Southern Estonia, the region produces only 13% of
Estonia’s GDP. There are several reasons explaining this gap. Firstly, the Estonian
economy is dominated by the area around Tallinn – the capital (Harju County), which
is responsible for approximately 60% of Estonian GDP. Secondly, Southern Estonia
has an agricultural past, which resulted in a business structure with low value-added
production and low innovation capacity. As the table with region’s strengths and
weaknesses show (see Table 1), the region has several serious weaknesses, part of
which are inherited from the period within the centralised Soviet economy and others
intensified because of inadequate education, regional development and enterprise
policies.
Indicator Value Area 15,000 km2
Population 370,000 Urbanization 55% Popul. density 22 per km2 Disposable monthly income
160 EUR
% of Estonian GDP produced
13%
Unemployment 10.1% Major industries Forestry,
agriculture, food processing
Southern
Estonia
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The region has been traditionally dependent on the agricultural sector, but there are
also good conditions for tourism and winter sport. After Estonia became independent
from the Soviet Union in 1991, the cooperation with Russia dropped drastically,
bringing down the demand for agricultural goods exported from Estonia. As the
result, a large number of people employed in the agricultural sector of Southern
Estonia lost their jobs, and also now the unemployment in agricultural regions
remains high. Figure 2: Strengths, weaknesses and development opportunities of the region
Strengths Weaknesses + Tartu city is a national centre of higher
education, science and medicine; + Tartu city has high rate of people with higher
education, + The University’s research enabled
developing first successful bio- , gene-, and material technology businesses,
+ University has extensive international network,
+ competence in traditional fields of business (timber, furniture industries; food processing, machinery
+ beautiful nature appropriate for eco-tourism and eco-agriculture
− aging population, young leave the region − link between the University people and
industry is insufficient. Institutions for higher education contribute few for the development of the region
− vocational teaching is weakly developed, there is lack of specialists, skilled workers
− industry is dominated by traditional sectors − companies have few international links − relatively bad infrastructure − low average income − people’s low entrepreneurship culture − timid development of alternative business
activities beside agriculture − long-term unemployment caused
indifference, apathy among rural people − few investors are attracted so far − lack of cooperation between counties − public sector’s inability to support the region
Development Opportunities • create jobs in industry and tourism, compensating existing unemployment of rural population,• counties with unfavourable agricultural land (Põlva, Võru, Valga) need to be • introduced to alternative activities (tourism, fish-farming etc), • support of knowledge-intensive sectors to increase value-added of the products: • furniture, instrument, food processing, sewing industry, • support science-based sectors: bio- and gene technology, environment technology and ICT • increase technological innovations through intense cooperation between education • and businesses, • for tourism development, it is needed to train people, foster cooperation with Russia • and improve regional infrastructure • Labour Market Board has to be more active in activating long-term unemployed, • foster creative start-ups, growth of existing businesses, retrain middle-age people, • develop vocational curricular for traditional (forestry, furniture) and modern industries (biotech
etc.) Source: Study of entrepreneurs’ needs in Tartu and South Estonia (2003); Development Strategy of South Estonia (2004)
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In Southern Estonia there is a drastic difference between life in cities and in the
countryside. In the counties’ urban areas the unemployment rate is relatively low.
Tartu County where the urbanization rate is much higher than in the overall region,
the unemployment rate is also lower – twice as lower as in Southern Estonia on the
whole (5 % against 10 % for Southern Estonia, Statistical Office…2005). Rural areas
in contrast have a higher rate of unemployment and the qualifications of the people
are also lower. Over the last 10 years, the population in most of the counties has
decreased by 10-25 % (Terk, Raagma 2004). Despite the fact that the economy of
Southern Estonia rests at present mainly on traditional sectors (such as timber, wood
processing and agriculture), there is a potential for rapid regional development based
on competences of scientific centres, situated in the city of Tartu.
3.2 Entrepreneurial Situation in the Region
There are about 90,000 business units1 per 1.4 million inhabitants in Estonia
registered in 2005 (Estonian… 2005). The capital city and its region Harju county
dominate economic life of Estonia: more than half (52 %) of the Estonian businesses
are registered in the region around Tallinn. Southern Estonia counts for about 19,000
businesses (21 %) (Statistical… 2005).
Even though the absolute number of businesses is much greater in Harju County
than in Southern Estonia, the growth of business numbers has recently levelled off in
these two major Estonian regions, and in 2004, the growth rate was bigger in
Southern Estonia (8.4% in Southern Estonia against 7.4 % in Harju County,
Statistical… 2005). The most popular way to start a business in Estonia is to become
a self-employed entrepreneur or the second popular way – to register a limited
liability company.
Taking a look at the industry structure of businesses in Southern Estonia (Table 2) it
is noticeable that this region in contrast to Harju County is dominated by businesses
from traditional sectors such as agriculture and forestry. Companies in Southern
Estonia are mostly oriented towards the local market, thus export activity is not
intensive, reaching slightly more than 1/10 of export of all Estonian companies
(Statistical… 2005).
1 All types of firms plus self-employed entrepreneurs
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Figure 3: Percentages of business unites involved in selected economic sectors, year 2004
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Estonia 14,5 28,9 18,1 9,7 9,7 5,8 3,2 4,2 4,1 100,0
Harju County 2,3 34,8 24,8 9,4 10,8 6,6 2,8 4,5 3,4 100,0
Southern Estonia 28,9 24,5 12,4 10,0 8,0 5,0 3,3 4,0 2,8 100,0 Source: (Statistical Office of Estonia 2005)
Since companies are rarely exposed to tough competition on foreign markets, they
regularly are not interested in applying the latest technology or scientific
competencies developed at universities. Also foreign-owned companies are not very
active in research activity; recent study showed that value-added of foreign-owned
companies’ production grows even slower than the value produced by local
companies. This fact is not surprising: foreign companies mostly establish units
dealing with simple production operations in Estonia, concentrating innovative
activities elsewhere (Study… 2003).
Unfortunately available statistical data does not allow concluding, how big the
percentage of businesses is that operate in knowledge- and technology-intensive
fields. As the Community Innovation Survey showed (Kurik, Lumiste et al. 2002), the
innovation expenditure of Southern Estonia enterprises is comparable with the
average level in Estonia, but it is rather low in comparison to the average European
level – less than 2 % of turnover. Whereas according to experts’ opinion (Study…
2003), most of the region’s innovation costs are spent for purchasing new equipment.
Even though the Southern Estonian companies are mostly involved in agricultural
and forestry business, the companies situated around the centre of the region – Tartu
– are more technology oriented, and their production is more value-added. Strong
scientific competence of Tartu University served the base for several high-tech
enterprises to be established, notably in the fields of biomedicine, material science
and information-technology. About 30 high-tech SMEs were incubated in Tartu
Science Park.
Giving an evaluation of entrepreneurial culture of people in Southern Estonia, it can
be concluded that entrepreneurial attitudes do not differ much from other Estonian
regions or countries such as Finland or Sweden. According to the 2004 survey
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(Enterprising…2004); about 65 % of the people prefer working for a salary, avoiding
being self-employed entrepreneurs. Since the income of the local people is not high,
more than 1/3 of entrepreneurs mention that lack of starting capital is one of the
major problems for starting a business. Another barrier for not starting a business is
the people’s insufficient readiness to take risks. Entrepreneurs in Southern Estonia
are also rather poorly aware of entrepreneurship support centres located in the
region (ibid).
The results of the survey about enterprises’ needs present an overview of regional
problems that a person interested in starting a business or developing an existing
company has to face. Among the most important problems the following were
mentioned (Study… 2003):
1. The local education system is centred on higher education, disregarding
regional needs for specialists and professionals from the technical field.
2. Public support with measures regarding export activities is inefficient.
3. Increased number of requirements to businesses processes and their
administrative control is confusing.
4. Professional associations represent interests of leading companies, leaving
interest of small businesses disregarded.
5. Low labour efficiency, lack of people’s working motivation.
6. Small companies experience difficulties in finding self-financing in order to
apply for public business support measures.
These and other problems of business development and business support measures
are going to be discussed in more details in the following sections.
3.3 Tartu City and its Universities – the Centre for Southern Estonian Region
The table with strengths and weaknesses of the region (see Table 1) shows, that
Tartu city and its universities are considered to be the main source of regional
strength. Indeed, the city of Tartu differs strongly from the surrounding region. The
city is a service centre for the region and is also the centre for academic research,
higher education and medicine in Estonia as a whole. Founded in 1632, the
University of Tartu is the largest university in Estonia with about 18,500 students and
faculties of Theology, Law, Medicine, Philosophy, Biology and Geography,
Economics and Business Administration, Education, Sport Sciences, Mathematics
and Computer Sciences, Physics and Chemistry, and Social Sciences. The
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University’s most remarkable recent research achievements have been in the areas
of gene technology, molecular and cell biology, laser medicine and materials science.
The Estonian Agricultural University (since 1951) - with 5000 students in 2005 has
grown from the agricultural departments of Tartu University. In addition Tartu hosts
two internationally recognized research centres belonging to UoT – the Estonian
Biocentre and the Institute of Physics, which have both been selected as European
Centres of Excellence under EU RTD Fifth Framework Programme.
In Tartu, medical doctors for entire Estonia are educated, and also about 250 foreign
students study medicine here. UoT and its clinics altogether constitute a medical
cluster. Only belonging to public services is the reason, why it is not a business
cluster.
Tartu Science Park established in 1992 was the first science park to be established
in the Baltic States. Among other institutions supporting innovation and
entrepreneurship in Tartu are recently established the Technology Institute and the
Centre for Entrepreneurship of the UoT. There are also several public administration
institutions situated in Tartu, such as the Estonian Ministry of Education and Science
and Estonian Supreme Court.
4. Entrepreneurship Promotion in Southern Estonia
4.1 Innovation and Entrepreneurship Promotion System
The regional entrepreneurship promotion system is a part of the regional innovation
system. Figure 2 demonstrates a simplified system in Southern Estonia of four
groups of actors in entrepreneurship development.
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Figure 4: Entrepreneurship development system of Southern Estonia
The largest Estonian agency for entrepreneurship support – Enterprise Estonia – is
governed by public authorities and financed through state budget as well as through
the European Structural Funds. This organization coordinates activities of the
counties’ business development centres and has a relatively great impact on
Southern Estonia’s business development.
Among the Southern Estonia’s public administration institutions, the most active one
in entrepreneurship promotion has been the Tartu City Government. This institution
has conducted various entrepreneurship surveys (also referred in this article), has
been active in organizing entrepreneurship related events (as the regular Enterprise
Week) and trainings, and in developing the regional strategy. Together with Tartu
Science Park the city administration initiated the Tartu Regional Innovation System
(TRIS 2004). It also coordinates the network on innovation support, bringing together
key persons from various fields.
Public business support organisations
• Counties’ development and business consulting centers
• Enterprise Estonia (Development Agency)
• Tartu Science Park • Business incubators • Kredex (Credit
Guarantee Fund)
Education and research
• University of Tartu • University of
Agriculture • Centers of vocational
education
Start-ups Technology-based spin-
offs Timber, furniture, food processing industries
Other companies
Focus business areas
Private business support services
• Professional & business associations
• Banking, patent offices
• Consultants & Trainers
Public administration
• Municipal Governments
• County Governments
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Within the support of the described system, several clusters have been developed in
Southern Estonia: starting from such traditional sectors as timber industry and
medicine and finishing with yet developing biotechnology cluster.
Another problem about entrepreneurship and regional development concerns policies
on counties’ level. Southern Estonia consists of 6 Counties, whereas each
municipality prepares an own development strategy that usually underlines the
necessity for improvement of the business environment. Unfortunately, due to the
lack of financial resources, regional governments mostly invest only in the
development of plans and strategies, or in the conducting of occasional events and
trainings. Operational plans for strategy implementation are rarely defined. As a
result the elaborated strategies remain to be passive plans and that certainly
hampers regional development.
4.2 Role of Tartu University in the National and Regional Triple Helix
In this section the triple helix relationship of Tartu University is discussed. Thus the
authors evaluate the university’s relationship with industry, region and government.
The proposed subdivision of three factor groups is elaborated by one of the authors
partly based on the theoretical literature discussed in the previous sections (e.g.
section 1.2). In the text below, the titles of subdivisions are followed by the data
regarding the University of Tartu.
The University-Industry& Entrepreneurship relationship group includes mostly:
1. Knowledge creation and transfer for industrial purposes, contract and
collaborative research. UoT has signed about 30 contracts over the last 6
years, which amounts totally to 1.2 million EUR, i.e. on the average 0.7% of its
annual research budget (source: Institute of Technology, http://www.ut.ee).
2. Spin-off processes, new knowledge and technology transfer into start-up
companies. About 15 knowledge-based spin-off companies are established by
professors and graduates of UoT since 1990 in the following fields:
biotechnology (majority of spin-offs), IT, laser, chemical and nano-technology,
healthcare and medicine. None of the spin-offs has made global breakthrough,
though about half of the biotech production and services is exported.
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3. Sales of industrial property: know-how, patents. The University’s license sale
is not remarkable compared with expenses, approximately 2-4 contracts a
year are concluded, mostly for test-production.
4. Business and management consultancy, students’ internship, specialist
change, participation advisory boards. Described activities are very rare for
the University and based on professors’ voluntary efforts, the UoT does not
support and evaluate these activities.
5. University-industry joint research teams and laboratories. Activities are at the
initial phase.
6. Industrial professorship is very new in UoT; the first (and only) tenure was
announced just at the end of 2006.
7. Education and continuous (life-long) learning. There is no official evaluation
done to which extent the UoT matches needs of the region. According to our
estimation, UoT meets the needs of industry for qualified personnel only partly,
there is a lack of specialists in several professions (for example in pulp and
paper production), but from other hand there is also overproduction of
specialists in some fields. Considering the biotechnology sector as an
example, the study showed that there are about 200 people employed in
Estonian biotech sector (Mets 2006a). Whereas the UoT prepares about 100
graduates (bachelor, master and PhD level) yearly (in addition to the
graduates from Tallinn University of Technology), which leads to an
overproduction of specialists.
The University-Region relationship includes:
1. Education and continuous (life-long) learning (see above).
2. Research, strategy and competence creation, and consulting regional
development – temporary participation by universities, not evaluated in
academic system.
3. Facilitation and active participation in the creation of innovation and
entrepreneurship support measures. UoT has membership in Tartu Science
Park; it makes efforts to attract seed and venture capital into the region.
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The University-State Government relationship: 1. Funding education, about 75 % of teaching budget of UoT is obtained from the
government.
2. Funding R&D, public sector. Practically 100 % of UoT research is funded from
the state budget, which makes about 45 % of the total budget of the
University. Research funding proceeds only according to criteria of scientific
value of publications, not the commercial value.
3. Funding innovation and organizational development processes in university
(SPINNO), about 0.8 % of R&D budget.
4. Discussion partner in NIS and state development strategy. Usually
consultation of NIS and state strategy questions take place after completion of
the draft for government (parliament) document by the government officers.
No preliminary research and appropriate funding are offered to university.
The NIS concludes the components of the triple helix. Both are in reciprocal
interconnection. Unfortunately, there is a lack of research and monitoring, and
relevant data of NIS expenses for different innovation phases. Therefore a case of
sectoral system of innovation (SSI) in the field of biotechnology (Mets 2006a) was
selected for a short analysis of the triple helix relations.
Biotechnology was selected also by the reason that all main innovation processes of
the sector – from basic research to commercialisation on the market – are
represented in Estonia. Another reason is that biotech research has a high level and
good traditions in Estonia, since the financial contribution into research equipment by
the Soviet government in the 1970s-1980s. In the re-independency period biotech
research funding was continued according the science criteria. A conducted survey
gave the following results (Mets 2006b):
1. 4.6 million Euros, i.e. 89% of public R&D expenditures are channelled for the
university research and only 0.2 million Euros aims to support private R&D
research in 2004, total public annual expenditure (without education expenses)
exceeds sales of the sector more than 20%.
2. Most of the public R&D expenditures have no relation to the biotech business
sector.
The main conclusion from the example based on the biotech sector is the major
reason for the weak cooperation is a finance system of scientific research which does
290
not facilitate cooperation with industry. The objectives of the universities’ research
groups remain to be focused on personal interests of scientists and professors. Here
one can speculate about the research-based teaching, what students really study for
their professional career, and what is their professional perspective.
It seems that the UoT has a lot in common with Cambridge and other old classical
universities in Europe: a high level of research is combined with a relatively low-level
of entrepreneurial attitude and weak university-industry relations. This last point is
supported by a research funding system which is independent from the commercial
value of results. The major difference between these two entrepreneurial
environments being compared is caused by the facts that the Estonian society is less
wealthy as well as from the fact that Estonia is more distant from technology markets
than the U.K.
Even though Estonian universities have limited experience with a close cooperation
with their region and local companies, there are several initiatives being launched,
oriented on developing entrepreneurship in university itself as well as in the region.
Firstly, Tartu University established the Institute of Technology which is responsible
for contacts with the regional companies, for support of commercialisation of
scientific ideas and technology transfer. Secondly, the Faculty of Economics and
Business Administration (FEBA) started a Master Program in “Entrepreneurship and
Technology Management” in 2002. Thirdly, as a result of the FEBA initiative, UoT
established the interdisciplinary Centre for Entrepreneurship targeted to develop
entrepreneurship and innovation education in the university curriculum and foster
enterprise of university members and students. There are also several
entrepreneurship courses offered to students and employees at the UoT and the
University of Agriculture. A project for the development of academic and vocational
education in innovation has been initiated in 2005.
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5. Discussion and Conclusions
The above-presented description of the region and the analysis of the entrepreneurial
situation pointed at several problems of the diminishing significance of the
universities in developing entrepreneurship in Southern Estonia. Usually the local
companies are less interested in innovative activities, in which a university might be
helpful partner. The analysis of the business structure showed that local businesses
operate mainly in the agricultural sector and other traditional fields such as forestry
and food processing. Companies are mostly focused on the local market and their
innovations mainly limited to renewing the already existing equipment. In contrast to
that, the largest local university – the University of Tartu – has a strong potential in
such high-tech fields as biotechnology, biochemistry, laser medicine and many more.
Thus it may be concluded that the interests of the largest university and local
businesses have little crossing points due to the historically shaped structure of
businesses. As a result, the cumulated number of contracts signed between
university and businesses over the last few years is below 20. There is however a
bigger potential for the University of Agriculture to cooperate with local businesses.
The studies show that local companies that tried to cooperate with universities have
numerous reasons to be dissatisfied (Geomedia 2003). To solve these problems it is
crucial to review the activities of universities departments mediating contacts with
businesses. Firstly it may be necessary for these departments to employ business-
experienced people to help building links between local businesses and scientific
groups. Secondly, universities ought to state clearly their research strengths and
motivate researchers to do applied research. The lead for settling both problems has
to be taken by universities’ top management, since existing traditional attitudes at
universities’ departments would likely suppress proposed changes.
The deeper root for lack of cooperation between businesses and universities can be
the state’s policies on entrepreneurship support. At present the measures of
innovation policy do not support collaboration between universities and enterprises. It
is also very difficult for research groups and small companies to find support for
applied research. Another challenge regarding the entrepreneurship support system
is fragmentation of its elements. There are relatively few interactions between public
support structures, universities and private entities in supporting regional
entrepreneurs. One of the first steps towards integrating elements of the innovation
292
system can be to develop regional clusters that would consolidate companies,
research institutions and public support structures. Two clusters are now being
developed (forestry, biotechnology), but the process lacks consistent coordination
and qualified support.
It is unlikely to expect that countries with post-transitional economies can quickly
reach a remarkably high level of entrepreneurial initiative and enforce university’s
collaboration with businesses over a short period of time. The region of Southern
Estonia has been the place for several successful initiatives in entrepreneurship
development organising entrepreneurship training programs, establishing the
Science Park etc. The present work has shown however, that numerous challenges
has to be overcome in order to build a society with A strong entrepreneurial sector,
where the university plays a significant role as a source of innovation.
Following the conclusions regarding the entrepreneurial paradigm in the University of
Tartu and the triple helix in the Tartu region:
1. The University of Tartu has been the space of origin for 10-15 spin-off
companies in the biotechnology and ICT field. The education and R&D
expenses obtained in some fields still exceed the economic outcome on the
society level in the long-run. The reason for such low results is partly the
inheritance of the Soviet science and economy system, and partly the
maintained inherited practices.
2. Weak connections between enterprises of high as well as traditional
technology and university do not promote creation of knowledge with
commercial value. This is limiting the creation of added value and growing
productivity by industry in South-Estonia, as well as in Estonia as a whole.
3. In the South-Estonian region, as well as in the City and the University of Tartu
the structures are established to foster knowledge transfer and
entrepreneurship development. Comparatively weak integration of RIS actors
does not enable to employ the potential of the UoT for regional prosperity. The
reason for that can be seen in faultiness of NIS.
4. The UoT develops its own infrastructure for employing the entrepreneurial
paradigm. The new paradigm is not well-integrated into the main processes of
the university. The entrepreneurial UoT is still in embryonic phase.
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5. In small countries like Estonia, the national university cannot only behave as
passive actor in NIS. The mission of the UoT should be participation in
designing innovation policy based on entrepreneurial paradigm. That means
an active participation in NIS by the university and a social order for that.
6. In order to be an active actor in the innovation process the UoT must
participate actively in monitoring, research, strategy and methodology creation
for NIS as well as for RIS and SSI. The pre-condition for gearing university’s
potential in entrepreneurial process are agreed will and actions.
The presumption for further development towards an entrepreneurial university is a
growing social capability to absorb entrepreneurial attitudes and competence. Only
the own strategic competence of political decisions assures a balanced development
in a knowledge economy. Some steps towards shaping NIS have already been done
for example the Estonian Enterprise has launched the Competence Centre
Programme to develop joint research of research institutions and businesses. Some
more steps are made to grow the entrepreneurial spirit of researchers and tune
universities into business needs. For example, the innovation programme SPINNO
has directed to “create a favourable entrepreneurial environment within the research
and development institutions […] and applied higher educational establishments of
Estonia” (EAS 2004).
The expectations about the outcome of the innovation and entrepreneurship
development of universities in the short run (three years) are very high. The results
are mostly depending on the motivation and the capability of academic institutions to
change themselves. On the other side – it demands from the industry the capability
to cooperate with each other as well as with universities. Finally, catalyst of the
process is the government with its adjusted policy, i.e. this is a question of political,
organisational and social innovation.
294
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Economic Development and Entrepreneurship Promotion in the Region of Twente Gerben Blaauw, Aard Groen, Gert-Jan Hospers, Paul Kirwan & Peter van der Sijde University of Twente PO Box 217 NL 7500 AE Enschede Phone +31-53-489 4767 E-Mail: [email protected] Contents
Illustrations ..............................................................................................................298
1. Introduction.......................................................................................................299
2. Economic Development in Twente ...................................................................299
3. The Policy Environment in Twente ...................................................................306
4. Entrepreneurship Promotion in Twente: the TOP-Programme.........................310
5. Entrepreneurship Promotion in Twente: other Support Structures ...................313
6. Concluding Discussion .....................................................................................316
References ..............................................................................................................318
297
Illustrations
Figure 1: A map of Twente (source: ITC, 2005)...................................................... 300 Figure 2: Unemployment in Twente and the Netherlands (ING, 2005) ................... 305 Figure 3: GDP per capita in euros in Twente and the Netherlands (ING, 2005) ..... 305 Figure 4: Strengths/Weaknesses of Twente versus Opportunities/Threats ............ 309 Figure 5: Number of Spin-off Companies at the UT (Nikos, 2005) ......................... 310 Figure 6: The Minor Entrepreneurship (Kirwan et al., 2005) ................................... 315
298
1. Introduction
Hundred years ago, the Dutch region of Twente was the largest textiles
agglomeration in the world after Manchester. With its countless factories the area
was a power house of economic development. Fifty years ago, the industrial success
story started to crumble and a heavy economic crisis set in. Gradually, most regional
clothing factories closed with the result that many workers lost their jobs. Although
Twente still copes with remnants of the crisis, as a whole the region is on the move.
Especially in the field of entrepreneurship, the area does score. What is the story of
Twente and how has entrepreneurship contributed to its renewal?
Against this historical background, the article focuses on the economic development
of Twente and in particular on the role of entrepreneurship promotion in this process.
To set the scene, we start with an overview of the economy (section 2) and the policy
environment (section 3) of Twente, resulting in a short regional SWOT-analysis. Then
the article moves to the TOP-programme, an entrepreneurship promotion programme
for which the region is widely known (section 4). After that, we deal with other
mechanisms of entrepreneurship promotion that can be found in Twente (section 5).
The article ends with a short conclusion.
2. Economic Development in Twente
The region of Twente, in the administrative Province of Overijssel, is situated in the
east of the Netherlands near the German border. The region has about 615,000
inhabitants, distributed among 14 municipalities; half of the population lives in one of
the three major cities Enschede, Hengelo or Almelo (Hospers, 2004).
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Figure 1: A map of Twente (source: ITC, 2005)
Twente's strong industrial past
Twente is a so-called ‘old industrial region’ (Hayter, 1997). The present regional-
economic structure has been the result of the area’s peculiar economic history
combined with general, economy-wide developments. Until the 19th century Twente
was a rather rural area with a population of farmers and traders that lived in the
country and in small villages. The soil of Twente was too poor to make it entirely into
an agricultural area (Buursink, 1971). When the farmers could not work in the fields
in winter, they took up spinning and weaving. It was this proto-industry at farms that
laid out the basis for the growth of the regional clothing industry that soon counted
among the largest textiles agglomerations in the world. After the separation of
Belgium from the Netherlands in 1830, King Willem I looked for a place to build a
national textiles sector that could produce cotton for the overseas colonies. The
weaving knowledge of the Twente people and their strong labour mentality settled
the matter (Hospers, 2001). Subsequently, the national government supported the
development of a modern textiles industry in Twente. In Almelo, Borne and Enschede
large textiles factories were built, whereas Hengelo specialized in related industries
such as metal, machinery and electronics. The demand for qualified workers soon
was so high that immigrants from the Northern provinces (Drenthe, Groningen) and
300
Germany came to work in Twente’s industry. To make the hard transition from
country to factory life tolerable, the manufacturers invested in green parks and
decent working class neighbourhoods such as the Garden Villages Pathmos en‘t
Lansink. During the 19th and first half of the 20th century Twente was constantly
growing in textiles and metal manufacturing, providing not only mass products, but
also specialized clothing, synthetic fibres and metal-electronic equipment. Since the
1950s, however, the regional textiles sector entered a period of structural decline:
competition from low-wage countries, the post-war loss of Dutch cotton colonies,
increasing technological efficiency and lack of entrepreneurial alertness led to a cut-
down of 80% of regional employment in textiles between 1955 and 1980 (Lambooy,
1995). To counter the loss of 40,000 jobs, the region’s stakeholders joined forces and
lobbied in national policy circles to get higher education for Twente.
Still recovering from the crisis?
The regional lobby succeeded: in 1964 the University of Twente was opened as a
campus university of technology offering degrees in mechanical, electronic and
chemical engineering as well as applied physics and mathematics (Groenman,
2001). The area’s strong industrial heritage and the technological university were
seen as an ideal combination to build a modern technology-based regional economy.
During the 1970s, it was clear, however, that the region could not grow solely on the
basis of technology. Unemployment was still high, while the enrolments at the
university were stabilizing. To diversify the economic structure, investments were
made in new growth sectors, especially services. That is in line with the university
setting up degrees in social sciences such as management studies, public
administration and educational sciences (Schutte, 1999). Meanwhile, also other
regional higher education institutes were expanding: the Hogeschool Oost Nederland
(now: Saxion Universities), the international training centre for geo-information
sciences and earth observation ITC, as well as the academy of arts AKI. Backed with
European funds the 1980s Twente gradually could recover; the region’s infrastructure
was improved and the area managed to climb back to the third place in the national
league of industrial regions. Manufacturing still has been important in the regional
economy with food (Grolsch, Johma), chemicals (Akzo, Vredestein),
metal/electronics (Stork, Philips), defence industry (Thales, Urenco), transport and
building as well-known examples. Ten Cate, producing fibres like artificial grass, is
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only one of the remnants of Twente’s long textiles history. Consumer and business
services (e.g. finance and communication), which have been at the top of the Twente
planners’ lists since decades, is growing rapidly since the 1990s. The same is true for
public services: thanks to large medical institutes like Roessingh and related
economic/scientific activities, especially Twente’s health care sector is on the rise. In
terms of high-tech clustering, the region is world-wide known for its strong
performance in medical technology, telematics, nanotechnology, safety technology
and tissue engineering.
Towards a more diversified economic base
Due to the diversification tendency of the sector structure Twente has become more
balanced over the last decades. This, at least, can be concluded from the recent
development of the regional ‘concentration index’ (i.e. a sectoral index in which a
higher level indicates a higher concentration of firms, employment and value added
in only a few sectors): twelve years ago this index amounted to 39.6% (Dutch
average: 37.0%) in Twente, but now it is 36.7, which is similar to the national average
of 36.5 (ING, 2005). Nevertheless, the sector employment shares show some
significant differences between Twente and the Netherlands. Although the share of
people working in manufacturing and building declined over the period 1996-2004,
the region still employs many people in the secondary sector (26.3% versus 18.1% in
the rest of the Netherlands). The reverse can be seen in the primary sector: only a
few people from Twente work in agriculture (0.8% versus 1.4%). Despite its recent
rise, the employment share in the tertiary sector has not reached the overall Dutch
level yet. With a share of 72.9% service workers, Twente has 7.6% less service jobs
than the Dutch average of 80.5%. From a national perspective, within the category
‘services’ only the number of jobs in Twente’s public health services like hospitals,
homes for the elderly and specialized medical services (e.g. a heart centre,
rehabilitation), is relatively high (Hospers, 2004). All in all, the long industrial legacy
of Twente seems to be important to the present day.
The sectoral dynamics of Twente’s economy is rather ambivalent. Thanks to leading
knowledge-intensive and export sectors (electronics, metal, machine-building and
fibres) and the leading knowledge institutes, in particular the University of Twente,
the regional innovation potential is high. At the same time, the actual regional
innovative performance lags behind this large potential (ING, 2005). The level of
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R&D-expenditures is 2.1% of Twente’s gross regional product, which is more than
the 1.6% nation-wide. Also the number of patent applications is higher than in the
rest of the country. This innovative potential, however, does not lead to a similar high
level of regional innovation; to be sure, Twente develops slightly more product
innovations than other Dutch regions, but far less process innovations (EIM, 2003).
The rate of new business founding in Twente over the last five years is 0.1% higher
than in the Netherlands, but not in innovative sectors, where start-ups are 0.1% lower
than the Dutch average. Most firms are local SMEs; only 0.41% of all firms are large
companies (Dutch average: 0.43%) and only 0.49% of business come from abroad
(national figure: 0.67%). The solution to Twente’s innovation paradox of high
potential combined with low performance could be that a relatively large share of
regional R&D is carried out by only a few actors. The majority of the patent
applications, for example, come from a small group of knowledge-intensive firms
around the university. Apparently, there is still a missing link between this ‘island of
innovation’ and the rest of the regional economy (RIP, 2005)
Labour-market and long-term performance
The Twente economy counts 3.5% of the total number of jobs in the Netherlands.
The participation level (i.e. the number of workers related to the potential work force)
is 64.6%, which is lower than the Dutch average of 65.1%. Compared with other
regions manufacturing and building offer relatively many jobs in Twente (E,til, 2005).
Although employment growth takes place in the service sector, the rise of jobs in the
region emerges notably from a rise of the regional participation level (ING, 2005).
Unemployment figures show a less favourable development. At the moment, the
level of unemployment in Twente is slightly higher than the Dutch average: in 2004
about 6.6% of the working population in the region was out of work compared with
6.4% in the Netherlands as a whole. Three years ago these levels were about 3.8%
and 3.4%. The rise of unemployment, however, is part of the general downward
economic trend since 2002 that can be felt throughout the nation. Twente’s share of
young unemployed (15-29 years), however, is much larger than in the rest of the
country. In the last two years the regional growth of youth unemployment, for
example, has been about three times higher than the national average (E,til, 2005).
Over this period the unemployment rate among higher educated people has risen
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faster (more than two times) than in the Netherlands. It must be said, however, that
the traditional lower starting level in Twente plays a role here as well.
From 1985 to 2005 the economy of Twente certainly has performed better than in the
sixties and seventies. Nevertheless, the region’s economic development has been
structurally weaker than in the rest of the Netherlands, in terms of employment,
income and added value. In 1985, for example, unemployment in Twente was 18.5%,
while the Dutch average was 15.4% (Timmers, 1997). The unemployment rate in
Twente in relation to the Dutch average has been lower only once over the last
twenty years, to wit in 1996 (see also figure 1). Also in terms of gross regional
income per capita, there always has been a structural gap between the relatively
poor Twente and other Dutch regions (figure 2). Compare, for example, the GDP per
capita in 2002: in the Netherlands this amounted to €27,641, whereas a person in
Twente disposed of €21,966 (ING, 2005). A similar structural lag can be observed in
the development of sectoral value added, that is the contribution of the single sectors
to the regional economy. Over the period 1996 until now, the average growth of the
total regional added value was lower than that in the rest of the country. Twente’s
transport and communications (including information and communication
technology), trade and commercial services realised high growth rates in their value
added, although they by no means have reached the Dutch average. In leisure,
finance and the environmental sector, however, the growth of value added over the
last ten years has been higher than the national average. If anything, these statistics
demonstrate that the long-term performance of Twente continues to be less
favourable compared to the Netherlands.
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Figure 2: Unemployment in Twente and the Netherlands (ING, 2005)
Figure 3: GDP per capita in euros in Twente and the Netherlands (ING, 2005)
305
3. The Policy Environment in Twente
Tasks and responsibilities of authorities
Like all areas in the Netherlands Twente falls under the Dutch system of
administrative governance. The Netherlands is a decentralised unitary state with two
types of ‘lower governments’ besides the national government (‘rijksoverheid’):
provinces (‘provincies’) on the regional/county level and municipalities (‘gemeenten’)
on the local level (De Jong and Schuzler, 2002). The Netherlands disposes of twelve
provinces with approximately 600 municipalities; Twente and its fourteen
municipalities (Enschede, Hengelo, Borne, Almelo, Losser, Oldenzaal, Dinkelland,
Tubbergen, Twenterand, Hellendoorn, Wierden, Rijssen-Holten, Hof van Twente,
Haaksbergen) are part of the province of Overijssel (ING, 2005). The lower
governments have an autonomous position, but the extent of their autonomy is
determined by the national government. The higher administrative levels also
supervise the lower ones and can demand cooperation from them. The set-up of this
system implies that the tasks and responsibilities of Dutch provinces and their
municipalities are largely dependent on the national government. In matters of
macro-economic and social-distributional policies, the national level is in charge.
When it comes to the provision and allocation of local amenities, however, the lower
governments come on the screen.
Generally speaking, provincial authorities have the right to decide on all regulations
they deem important for the development of the province, as long as their policies
stay within the framework of national policies and laws. In effectuating the regulations
municipal cooperation can be required. In turn, municipalities have to submit their
local plans to the province for approval. In practice, the province settles regulations
with a supra-local scope in the field of spatial development, infrastructure and socio-
economic development. Within the limits of these provincial regulations municipalities
have important allocation tasks. The local authorities, for example, take care of public
order, traffic, education, transport, culture, economic development and recreation
within their municipalities. For this purpose, they dispose of only a limited amount of
own financial means (received for example from local taxes), totalling not more than
10% of the local budget; the majority of the municipal funds still comes from the
national government. A large part of these funds is earmarked for special purposes,
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although the trend is to give more autonomy to the municipalities regarding the
allocation of resources.
In conclusion, the different tiers of government in the Netherlands are highly
interdependent (De Jong and Schuzler, 20020. Municipalities have a certain degree
of discretionary power on local matters, but they are subordinated to the national and
provincial government.
Twente’s persistent cooperation paradox
During the last decades several discussions occurred on the status of Twente. It was
argued that Twente could be a province of itself. However, this is not effectuated,
which has led to complaints in Twente about their subordination to the province. One
could claim that this is not just a feeling of regionalism. Interestingly, in all post-war
national plans for spatial administrative reform, Twente has been designated as one
of the areas where such reform should take place. This designation can be seen as
recognition by the national government that Twente – although part of the province of
Overijssel – does have an administrative right to exist. Historically speaking, there is
indeed reason to see Twente as a separate entity: in territorial terms, the region is
clearly defined, it has its own symbols as well as institutions, and, most importantly:
the inhabitants have a strong Twente-based identity (Hospers, 2004). The
recognition and reality of Twente as a single territorial unit, however, has never
resulted in a new, official administrative status for the region. To be sure, Twente has
established a Network City and a Region, but both institutions are just informal
discussion platforms without legal powers. The inability to establish a powerful
regional authority (such as suggested in national administrative plans) is largely due
to the lack of consensus among the regional stakeholders themselves.
As a matter of fact, the historical record of forty years of inter-municipal cooperation
in Twente is a sequence of frustrations, deceptions and failures (Hospers, 2004). In
varying combinations the cities, towns and villages in Twente have tried to join forces
since 1966 and work together more closely for the benefit of overall regional
development. Plans for a City Belt, District Twente, Province of Twente, Twin City
(Enschede-Hengelo) and Twente City all failed because of internal fights and interest
conflicts; at the moment, there is only informal strategic cooperation between
municipalities in the region. Since 2001, Enschede, Hengelo, Borne and Almelo have
met in Network City Twente (‘Netwerkstad Twente’) to develop strategic visions and
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jointly set-up regional flagship projects such as the Knowledge Park Twente. The
emphasis of this cooperation is on the content, not on the cooperation structure.
Besides this city network, there is the construction of the Region of Twente (‘Regio
Twente’) in which all municipalities discuss matters of region-wide importance. To
this body, the members have delegated a few competencies, mainly in the field of
infrastructure and tourism. Enlarging the powers of the region has not been possible
until now, because the participating municipalities fear to loose their individual
autonomy. A factor that may explain the lack of administrative cooperation in Twente
is the absence of a large natural centre city whose leading position is recognized by
all the other municipalities (Timmers, 1997). Thus, due to shortcoming cooperation
Twente still lacks a strong regional authority. These poor results contrast with the
high degree of social capital in the region, which counts among the highest in
Western Europe. Obviously, the solution of this paradox has to be found in the nature
of cooperation: making far-reaching decisions about the region differs from collective
action in social networks.
Governance in the economic and education domain
As in all policy domains, spatial-economic and educational policy at the regional level
(which is important for entrepreneurship promotion) cannot be simply separated from
national and provincial plans in this field. At the moment, the economy of Twente is
subject to national policy (funds within the framework of Dutch regional-economic
policy) and provincial policy (Triangle-strategy and Regional Innovation Platform).
The Triangle is a project of East (‘Oost NV’), the joint regional development
corporation for Overijssel and Gelderland, promoting closer research cooperation
between the universities of Twente (Technology Valley), Nijmegen (Health Valley)
and Wageningen (Food Valley). With the help of all these partly overlapping policies
Twente should develop into a Top Technology Region with a focus on innovation in
clusters like materials, nanotechnology and health technology (RIP, 2005). A similar
goal has been formulated in the Region’s Regional Economic Development Plan for
Twente (‘REOP’), although in this strategy also recreation and tourism receive a
great deal of attention. The municipalities in Twente also have own economic plans
(e.g. health technology in Enschede), but they have to deal more with the day-to-day
matters of economic development, such as providing services. Local authorities may
also sell land and develop business parks in cooperation with private developers and
308
other parties (e.g. the university or schools). Thus, recently an Educational Boulevard
for vocational education could be built. In a similar way, local authorities and the
university are cooperating now to redevelop the Business & Science Park in
Enschede into a Knowledge Campus.
Towards a SWOT-analysis of Twente
Above we have seen that Twente is a region with a distinctive development path. It is
a clearly recognizable region marked by its strong industrial past and is moving now
into a largely technology-based future. Within a European and global context, it is
hard to judge whether the region of Twente can regain its past competitiveness. In an
attempt to assess regional-economic perspectives, researchers often have related
the region’s internal characteristics to the external challenges the area is facing. In
this respect, a number of SWOT-analyses have been made, mapping the
strengths/weaknesses and opportunities/threats for Twente and its economy. Figure
3 lists the main findings from these studies. In general, international developments,
technological change and the demand side of the economy gain importance. Twente
could take advantage of these opportunities in particular by exploiting its strategic
location and its unique position as an area where trend and tradition at the one hand
and city and country at the other are complementary. Such a positive scenario is only
feasible, however, when Twente is able to solve its weaknesses. Investments in
infrastructure and in amenities that keep and attract higher educated people may be
needed for this. But if these investments are made, probably depends in the first
place upon the willingness among the municipalities to join forces and develop
strategies for the benefit of the whole region.
Figure 4: Strengths/Weaknesses of Twente versus Opportunities/Threats
Opportunities for Twente Threats for Twente - further integration/enlargement of EU - technological change/knowledge
economy - growing demand for quality of life
- interregional competition in Europe - dependency of footloose companies - less growth in low-tech/mass production
Strengths of Twente Weaknesses of Twente - strategic position on East-West corridor - highly-developed knowledge
infrastructure - nature & tranquillity in green
surroundings
- bad infrastructural North-South links - lack of a dynamic and vibrant urban
milieu - inability by municipalities to cooperate
well
309
4. Entrepreneurship Promotion in Twente: the TOP-Programme
Undoubtedly, the TOP-programme (Temporary Entrepreneurial Positions) is a
flagship programme within Twente’s landscape of entrepreneurship promotion.
Meanwhile, the programme and variants of it have been copied in other regions
across Europe. The University of Twente started the TOP-programme in 1984 to help
graduates, university personnel and people from business life to start their own
company (Van der Sijde et al, 2004). In the period 1984-2006 375 companies have
been established through the programme. The figure below (Figure 4.1) shows the
number of spin-offs from the university with and without using the TOP-programme
(‘spontaneous spin-offs’). As exhibited in the figure, the total number of spin-offs is
doubled with the help of the TOP-programme.
Figure 5: Number of Spin-off Companies at the UT (Nikos, 2005)
0
100
200
300
400
500
600
700
1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006
Spin-off companies UT 1976-2006
Spontaan TOP
Someone who wants to use the TOP-programme must fulfil the following criteria:
- have an idea of a knowledge-intensive or technology-oriented company that can
be linked to the fields of expertise of the university;
- be available for a minimum of 40 hours a week;
- dispose of a business plan that meets some fixed requirements.
As a rule, the future entrepreneur makes contact with one of the coordinators of the
TOP-programme. In a first meeting, they check whether the business idea does fit
within the TOP-programme. An important criterion is the link of the company with the
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expertise of the university. If this is the case, it is time for a concrete business plan.
This plan should be limited to the fundamentals; first it is discussed with the TOP-
coordinator, thereafter with the TOP-committee. This body determines whether
someone is admitted to the programme. The committee also evaluates the progress
during the year the entrepreneur takes part in the programme.
The contents of the TOP-programme
If a participant fulfils the criteria associated with the TOP-programme, he or she can
make use of several means of support at the University of Twente. The contents of
the TOP-programme may be related to different phases of the entrepreneurial
process. It is important to note, however, that the TOP-programme is tailor-made
(Karnebeek, 2001). After all, no entrepreneur is alike and no one has the same
needs.
a. The TOP-programme supports the recognition of opportunities
As a matter of fact, this stage largely precedes the actual TOP-period. The focal point
of TOP is the future entrepreneur. He or she has an idea for a company that often
has emerged during the study period at the university. The entrepreneur wants to
elaborate on this idea with support of the university. Such an idea is transformed in a
short business plan with an explicit description of the need for financial capital.
b. The TOP-programme supports the preparation of the exploitation of opportunities
If admitted to the TOP-programme, the TOP-committee tests the intentions of the
entrepreneur. He or she gets access to a number of support facilities (since 2003 for
a compensation of 2,500 euros), like:
- Physical space. An entrepreneur gets work space (with office facilities as well) and
– if needed – laboratory facilities (‘facility sharing’ at the university). The last facility
may be provided without extra costs, but this depends on the intensity of use.
- Scientific support. Every entrepreneur is linked to an employee from the scientific
staff. The employee acts as a mentor and uses his network of relationships in
order to introduce the entrepreneur to big(ger) companies.
- Social environment. The work space for the entrepreneur lies in the immediate
proximity of a scientific department at the university. The department can be seen
as the social environment for the ‘lonely’ entrepreneur. This ‘socializing’ is
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important for the starting entrepreneur, because knowledge and experience can
be transmitted via informal contacts and participation in academic activities.
- Marketing advice. Like all business people, also the starting entrepreneur aims to
make a living by selling products and/or services. In this respect, he or she can
learn a lot from an experienced entrepreneur who has an understanding of the
sector and the market, who can give advice and has a large network. Every
participant in TOP can propose such an experienced entrepreneur for coaching;
alternatively, the TOP-committee acts as a ‘dating agency’ by searching for such a
person.
- Personal loan. Any TOP-participant gets an interest-free loan of 12,000 euros.
This loan is transferred in 12 monthly portions of 1,000 euros to the starter. The
goal of the loan is to provide the entrepreneur with a minimum income during the
first difficult year of his or her firm. Because the loan is insufficient to make a living
with, the entrepreneur is stimulated to make a start with selling products and/or
services. The loan has to be paid back in four yearly terms, starting in the second
year.
- Network meetings. On a monthly basis all TOP-participants are invited to meet for
a certain topic. Not only the topic is important, but – as the entrepreneurs are all in
the same situation – also the fact that they can share their experiences.
c. The TOP-programme supports exploitation phase
The TOP-programme is limited to one year. After this year, the company is still in the
start-up phase; therefore not every company can be expected to fully exploit its ideas
already. Nevertheless, the UT has indirect instruments to support the entrepreneur in
this phase, such as the Technology Circle Twente (TKT) (see section 5), the
Business Technology Centre (BTC) and the Business & Science Park Enschede
(BSP). The first network offers a business network, while the BTC and BSP provide
entrepreneurs with additional work space. With courses and trainings offered at TSM
Business School and the Netherlands Institute for Knowledge Intensive
Entrepreneurship (NIKOS) the entrepreneurs can enlarge their knowledge. The
University of Twente also takes part in InnoFonds, a regional venture capital fund for
young starting firms.
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Some final remarks regarding TOP
All departments of the University of Twente have had TOP-start-ups within their
premises, varying from Tetetop in educational technology (e-learning), a high-tech
company producing intelligent sensors, a company in laser engineering and PNO, a
consultancy firm specializing in subsidy advice. Meanwhile, it is remarkable how
many start-ups in the field of ICT the TOP-programme has produced. In the first five
years the TOP-programme was running, only one ICT company was started, in the
period 1989-1993 6, in the period 1994-1998 12 and ever since more than half of the
start-ups fall in the category of ICT (Van Benthem & Van der Sijde, 1999). The TOP-
programme has a broad basis within the university and maintains well-developed
links with entrepreneurs that have made use of the programme. Since recently, a
variant of the TOP-programme is run by the University Student Enterprises (USE).
USE organises a similar programme to TOP for student-entrepreneurs. It provides
more or less the same opportunities as TOP except for the interest free loan.
5. Entrepreneurship Promotion in Twente: other Support Structures
Apart from the TOP-programme, there are other means of entrepreneurship
promotion in Twente. Below an overview of support structures that are available to
entrepreneurs in the region (Kirwan et al., 2005):
- entrepreneurship programmes;
- the Growth Programme;
- network activities.
a. Entrepreneurship programmes. Since 1998, the University of Twente has been
offering a Minor Programme in Entrepreneurship to final year Bachelor students. The
goal of the Minor Entrepreneurship is to stimulate and develop an entrepreneurial
and innovative attitude within students and UT-related entrepreneurs. The minor also
aims to develop academic knowledge on knowledge intensive entrepreneurship. The
programme of the Minor consists of academic and practical modules, which are
offered using the latest developments and insights in terms of education and
entrepreneurship. The minor Entrepreneurship is offered specifically to non-business
students; business students are not excluded but the content is tailor-made to meet
the student’s academic background. The minor consists of the following courses:
313
- Minor Entrepreneurship for non-business students: Part of the academic
curriculum of the University of Twente is the Minor programme on
Entrepreneurship for non-business students. It is an elective course in which the
basics of setting up a company are the central theme. The Minor consists of seven
modules. Students have to write and present a business plan at the end of the
Minor programme. These modules are outlined in the following section.
- Basics of Entrepreneurship: This course provides students with the necessary
knowledge of management science to enrol in the Minor Entrepreneurship. Over a
2-3 week timeframe, in an intensive, compact course, the fundamentals of
entrepreneurship and business are explored. Subjects are Entrepreneurship,
Strategy & Marketing, Finance, and Primary Processes. This course can also be
used as a stepping stone for the Growth course ‘Managing an SME’.
- Market-orientated Entrepreneurship: This course provides students with a purely
technical background with the necessary knowledge to enable them to operate in
a commercial setting. The course deals with the following subjects: What is
marketing, the marketing concept, market segmentation and –planning, service
marketing, international marketing, consumer and business buying behaviour. The
marketing-mix (product/price/distribution/promotion) is examined in detail, as the
instruments with which a company can attract and keep customers by complying
with their needs, wants and desires.
- Financial Management in SMEs: This course provides the opportunity for further
in-depth study of specific topics on financial problems in SMEs, to give an
introduction to entrepreneurship and preparing a business plan, and more
specifically the financial plan. - Legal aspects of Management in SMEs: Business law generally fulfils two
functions in managing a company: an instrumental and a normative function. The
instrumental function provides the management with legal ‘tools’ to promote the
continuity and profitability of the company. The normative function limits the
company’s freedom to pursue its own goals. This course deals with the broad
basics of both functions.
- Entrepreneurship in SMEs: The students get acquainted with many aspects of
entrepreneurship and SMEs in a theoretical sense. Knowledge is acquired by
studying state of the art research and applying it to cases. Subjects in this course
are among other things: the role of SMEs in the national economy; growth -
314
models & strategies; corporate venturing; networking; innovation and support
structures for entrepreneurship.
- Becoming an Entrepreneur: This course is meant for students who are considering
starting their own businesses or who wish to know more about start-ups and help
starting entrepreneurs. The module is open to all students whatever their study
background as well as for entrepreneurs. The course provides the students with
practical knowledge and skills to write a business plan (for their own company).
The business plan is the final outcome of the course at the end of which the
students present their plans to a panel of experts, such as entrepreneurs,
consultants and accountants.
- Managing an SME: Owner-managers of SMEs develop a business plan during this
course. Students act as personal assistants for the managers. This provides a
unique opportunity for them to put theory into practice. During special student
meetings specific experiences and problems are subject of discussion.
Figure 6: The Minor Entrepreneurship (Kirwan et al., 2005)
Growth Programme
As previously mentioned, one of the modules in the minor Entrepreneurship is
entitled ‘Managing an SME’. This is a course for entrepreneurs – it is a course for
Marketing orientated Entrepreneurship
Entrepreneurship in SMEs
Legal Aspects of Management in SMEs
Financial Management in SMEs
Managing an SME To become an entrepreneur
Pre-Module Preparation
Business Plan as a product/ result
Basics of Entrepreneurship
315
owner/managers of small companies who feel the need to reconsider all the aspects
of the company. In just more than six months these entrepreneurs are trained in the
core issues that make up a business plan and together with a student (who is
matched with the entrepreneur) a new business plan is made. The student is either a
business student or a student that has completed the first modules of the minor
programme.
Network Activities
The Technology Circle Twente is an organization of some 120 high-tech companies
in the Twente area. It started in 1989 as a social network, and after some years it
evolved into a business network in which through cooperation the members
developed new business opportunities. Among the projects the Technology Circle
Twente has developed the following projects: the Environmental Initiative, Knowledge
Industry and NetLab Twente.
NetLab Twente is a co-operation between high-tech companies and university
laboratories which aims to promote the Twente region as a centre for R&D expertise,
to undertake cooperative research projects and to formalise and strengthen the
existing networks; it focuses its activities in care and IT. Another network is the
Entrepreneurs Association at the Business & Science Park. Most of the
entrepreneurs on the Business & Science Park are members of this. It is primarily an
association that looks after the common interests of the entrepreneurs (e.g. park
management and infrastructure). Last but not least, the network fulfils a social
function.
6. Concluding Discussion
The region of Twente is an old industrial area par excellence. This means that it had
to cope for a long time with the scars of the crisis in the textiles industry. In terms of
sector shares, manufacturing is overrepresented compared to the rest of the
Netherlands. Twente, however, has been able to combine this industrial tradition with
a substantial track record of creating innovative enterprises. Especially since the
1990s the region is on the move. In this entrepreneurship promotion the University of
Twente has been very important. Its TOP-programme, which runs since 1989, has
been a successful means of fostering entrepreneurship. The effect of this programme
goes beyond the mere number of enterprise creations. Interestingly, the TOP has laid
316
the basis for other measures in Twente that aim to foster entrepreneurship, such as
University Student Enterprises, the minor Entrepreneurship, the Growth Programme
as well as network activities. The TOP programme was originally created as a
standalone activity. However, later TOP and the Business Technology Centre
influenced the formation of the TKT. What has happened suggests that the university
has helped a ‘one-off project’ to cohere over time into a mutually reinforcing network
of regional activities with broader scope than hitherto. The originally vulnerable and
volatile experiment of TOP has been plugged - via the university – into a wider
regional network, which has also helped to stabilise the activities. At the same time,
these activities have extended the scope of the existing regional networks, increasing
the innovation resources available to others. From the perspective of network-
building, the university appears to have been an important actor. Therefore, the case
study of the Twente region shows the importance of a long-time stable actor (as a
university) in transforming an old industrial region into a dynamic, entrepreneurial
region.
317
References
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(red.), Jaarboek voor Twente 2002, Van Deinse Instituut, Enschede, pp. 26-34. Hospers, G.J. 2004, Twente: Een Regio tussen Trend en Traditie, Karmac, Lelystad. Jong, H. de & P. Schuzler 2002, Nederlandse Staatkunde, Countinho, Bussum. Karnebeek, A.J. 2001, Spin-offs and the University of Twente, Twente University
Press, Enschede. Kirwan, P., P. van der Sijde & M. Klofsten 2005, ‘Supporting high-tech companies:
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About the authors
The authors are working as researchers and lecturers at the School of Management
and governance at the University of Twente, Enschede (NL).
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Publication Series at the Chair for Economics and Business Education/ Hanseatic Ìnstitute for Entrepreneurship and Regional Development (HIE-RO) at the University of Rostock
(I) Rostock Contributions to Regional Science/ Rostocker Beiträge zur Regional- und Strukturforschung Vol. 1: Braun, Gerald/ Gerlach, Dirk: Probleme der Regional- und Strukturpolitik in Mecklenburg-
Vorpommern (1994) Vol. 2: Preisendörfer, Peter (Hrsg.): Prozesse der Neugründung von Unternehmen in Ostdeutschland (1996) Vol. 3: Bandelin, Jost/ Braun, Gerald/ Rüland, Jürgen: Wirtschaftspartner Asien. Mecklenburg-Vorpommerns
Unternehmer auf der Suche nach neuen Märkten (1996) Vol. 4: Slawinski, Ursula (Hrsg.): Arbeitsmarkt in ländlichen Räumen Mecklenburg-Vorpommerns (1996) Vol. 5: Bandelin, Jost (Hrsg.): Berlin als Zukunftsmarkt für Mecklenburg-Vorpommern (1996) Vol. 6: Howitz, Claus (Hrsg.): Die ländlichen Räume in Deutschland und deren Besonderheiten in
Mecklenburg-Vorpommern (1997) Vol. 7: Gerdes, Johann u. a.: Das Verschwinden der Arbeitsplätze - wo bleiben die Arbeitskräfte? (1997) Vol. 8: Topan, Angelina: Das Leitbild der europäischen Kohäsionspolitik im Wandel (1997) Vol. 9: Apel, Hans (Hrsg.): Der gemeinsame Binnenmarkt als Herausforderung für die mittelständische
Wirtschaft Mecklenburg-Vorpommerns (1997) Vol. 10: Köhn, Jörg; Gowdy, John (Eds.): Implikationen der ökologischen Ökonomie für die
Regionalökonomie - Implications of Ecological Economics to Regional Economics (1997) Vol. 11: Braun, Gerald (Hrsg.): Mecklenburg-Vorpommern im internationalen Wettbewerb (1997) Vol. 12: Bandelin, Jost/ Dudziñski, Jerzy (Hrsg.): Wirtschaftliche Zusammenarbeit und Außenhandel
Deutschlands und Polens (1998) Vol. 13: Bandelin, Jost/ Braun, Gerald / Hosa, Elise et al.: Der Beitrag der Universitäten und
Fachhochschulen zur regionalen Wirtschaftsentwicklung in Mecklenburg-Vorpommern (1999) Vol. 14: Slawinski, Ursula (Hrsg.): Nachhaltiger Tourismus – Probleme und Perspektiven (1999) Vol. 15: Braun, Gerald/ Voigt, Eva (Hrsg.): Regionale Innovationspotenziale von Universitäten (2000) Vol. 16: Bandelin, Jost/ Braun, Gerald / Heinrichs, Bettina et al.: Regionalentwicklung benachteiligter Räume
in Mecklenburg-Vorpommern unter besonderer Berücksichtigung von Vorpommern und Ostmecklenburg (2001)
Vol. 17: Eich-Born, Marion (Hrsg.): Innovationen für Mecklenburg-Vorpommern – Strategien für einen Wachstumspfad (2004)
Vol. 18: Pohle, Hans (Hrsg.): Netzwerke und Cluster – Neue Chancen für Regionen (2006) Vol. 19: Braun, Gerald/ Diensberg, Christoph (eds.): Cultivating Entrepreneurial Regions – Cases and
Studies from the Network Project ‘Baltic Entrepreneurship Partners (BEPART)’ (2007)
(II) Rostock Working Papers on Economic and Human Resource Development/ Rostocker Arbeitspapiere zu Wirtschaftsentwicklung und Human Resource Development
No. 1: Braun, Gerald: Deutsch-Polnische Wirtschaftsbeziehungen zwischen Transformation, Stagnation und Perspektive (1995)
No. 2: Bandelin, Jost: Mecklenburg-Vorpommern als Standort für Medizintechnik (1995) No. 3: Wetstein, Daniel: Konzepte, Methoden und Perspektiven des polnischen Privatisierungsprozesses
(1996) No. 4: Braun, Gerald: NAFTA und EU: Konflikt oder Kooperation? (1996)
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No. 5: Staudt, Erich: Kompetenz zur Innovation. Defizite der Forschungs-, Bildungs-, Wirtschafts- und Arbeitsmarktpolitik (1996)
No. 6: Hamann, Rudolf: Entfremdung im Beruf. Überlegungen zur Fort- und Weiterbildung von Sozialkundelehrern in Mecklenburg-Vorpommern (1996)
No. 7 Diensberg, Christoph (Hrsg.): Steuerungsprobleme betrieblicher Bildungsarbeit. Ergebnisse des Symposiums vom 4. Juli 1996 an der Universität Rostock (1997)
No. 8: Braun, Gerald: Von der Idee zum Erfolg. Partizipative Trainingskonzepte für Existenzgründer (1997) No. 9: Ahnsehl, Andreas/ Kandziora, Anke: Die Visegrádstaaten in der Weltwirtschaft. Analyse
außenwirtschaftlicher Probleme und Strategien (1997) No. 10: Topan, Angelina: Brain drain in Mecklenburg-Vorpommern. Ein vorübergehendes Phänomen im
Zuge der sozioökonomischen Aufholjagd? (1998) No. 11: Slawinski, Ursula: Qualitätstourismus und Bildungsanforderungen in Mecklenburg-Vorpommern
(1998) No. 12: Braun, Gerald/ Diensberg, Christoph (Hrsg.): Unternehmertum - Eine Herausforderung für die
Zukunft (1999) No. 13: Dorenkamp, Ludger/ Lauks, Kathrin (Hrsg.): Schulentwicklung durch Bildungsinnovationen.
Ergebnisse eines internationalen Symposiums zum Modellversuch DOPKAU (1999) No. 14: Deutsche Gesellschaft für Evaluation e.V. – Arbeitskreis Evaluation in der betrieblichen Bildung
(Hrsg.): Evaluationsbedarf in der betrieblichen Bildung – Tagung in Köln am 30.04.1999 No. 15: Braun, Gerald/ Diensberg, Christoph/ Siebert, Julia: High Tech meets Culture in a Natural
Environment. Entwicklungskonzept AURORA für die Region Mecklenburgische Ostseeküste im Dreieck Wismar – Rostock – Güstrow (2000)
No. 16: Hummelsheim, Stefan: Governmental promotion of company and individual vocational training in Germany (2001)
No. 17: Mechthold-Jin, Michael: Unternehmertum und Unternehmerkultur in Mecklenburg-Vorpommern - Ergebnisse einer empirischen Befragung (2001)
No. 18: Sylke Pundt: Erlebnispädagogik und Entrepreneurship Education – neue Wege im Existenzgründertraining (2001)
No. 19: Braun, Gerald: Entrepreneurship in Mecklenburg-Vorpommern: Auf der Suche nach Selbständigkeit (2002)
No. 20: Zacher, Dirk: Humankapital in der theoretischen und empirischen Analyse bei Gary S. Becker – Darstellung und Kritik (2003)
No. 21: Awad, Dagmar; Braun, Gerald (Hrsg.): The Basic Education System of the Republic of Yemen: Challenges and Responses (2003)
No. 22: Reichert, Anke: Netzwerkbildung am Beispiel des EU-Leonardo-Projekts „Trainerqualifizierung im Call Center-Bereich“ (2004)
No. 23: Reichert, Anke/ Wilde, Kerstin: „Entrepreneurship Education – konzeptionelle und didaktische Herausforderungen“ (2004)
No. 24 Wilde, Kerstin: Entrepreneurship Education – konzeptionelle und didaktische Herausforderungen Kompetenz für Komplexität? – Ergebnisse der Studentenbefragung in Rostock 2003. Eine Studie von ROXI, Rostocker Existenzgründer Initiative in Zusammenarbeit mit GründerFlair, Netzwerk für Existenzgründungen aus Hochschulen in Mecklenburg Vorpommern (2005)
No. 25 Braun, Gerald/ Diensberg, Christoph/ Kadler, Susann/ Reichert, Anke/ Wilde, Kerstin: Entrepreneurship Education – Challenge for Universities in the 21st Century (2005)
No. 26 Anderseck, Klaus/ Braun, Gerald/ Grüner, Herbert/ Neuberger, Lars/ Uebelacker, Stefan/ Voigt, Eva: „Entrepreneurship Education an deutschen Universitäten“ (2006)
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