Urban Studies The evolutionary dynamics of Urban Studies ... · entrepreneurship-oriented human capital has not developed because there are few experi-enced entrepreneurs and educational

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Urban Studies2016, Vol. 53(10) 2118–2133� Urban Studies Journal Limited 2015Reprints and permissions:sagepub.co.uk/journalsPermissions.navDOI: 10.1177/0042098015586547usj.sagepub.com

The evolutionary dynamics ofentrepreneurial ecosystems

Elizabeth MackArizona State University, USA

Heike MayerUniversity of Bern, Switzerland

AbstractEntrepreneurial ecosystems (EE) consist of interacting components, which foster new firm forma-tion and associated regional entrepreneurial activities. Current work on EE, however, focuses ondocumenting the presence of system components, which means there is little understanding ofinterdependencies between EE components and their evolutionary dynamics. To address theseissues, the objective of the present study is to develop an evolutionary framework of EE develop-ment that integrates important components from prior work and describes how critical elementsof an entrepreneurial system interact and evolve over time. The value of this framework in under-standing the evolutionary dynamics of EE will be demonstrated by profiling the EE of Phoenix,Arizona. The evolutionary perspective developed is valuable because it provides a sense of howhistory, culture and the institutional setting impact EE. It also provides stakeholders with actionpoints to help maintain or propel an EE to the next level. This is a distinct improvement over sta-tic approaches that provide a list of EE ingredients with no sense of their relative importance overtime. The proposed framework may also be used in a comparative context to compare and con-trast the evolutionary trajectory of EE to better understand why particular places remain trappedin a specific phase of growth or continue to evolve over time.

Keywordseconomic development, entrepreneurial ecosystem, entrepreneurship, evolutionary, geography,policy, regional milieu

Received September 2014; accepted April 2015

Introduction

Studies of entrepreneurial ecosystems (EE)provide valuable information about the com-ponents of EE (Cohen, 2006; Isenberg, 2010,2011; Neck et al., 2004) with a focus on pro-filing successful EE (Feld, 2012; Oden, 1997;

Corresponding author:

Elizabeth Mack, Arizona State University, School of

Geographical Sciences and Urban Planning, PO Box

875302, Tempe, AZ 85281, USA.

Email: [email protected]

at MICHIGAN STATE UNIV LIBRARIES on August 11, 2016usj.sagepub.comDownloaded from

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Saxenian, 1994). While valuable, more workis needed to characterise EE where the pre-conditions for entrepreneurial activity arenot as favourable as those highlighted in suc-cessful profiles. Additional research is alsoneeded to understand interdependenciesbetween EE components and their evolution-ary dynamics to help evaluate the relativeimportance of EE components over time(Cohen, 2006).

Related work on high-technology districtsnotes the impact of regional culture on thedevelopment trajectory of these districts(Saxenian, 1994; Storper and Scott, 1995) aswell as the evolutionary aspects of high-technology districts (Storper 1993). Saxenian(1994) in particular has noted the importantrole of regional culture in fostering innova-tion and entrepreneurship, which help indus-trial districts evolve over time.Unfortunately, these cultural and institu-tional aspects of regions are ignored in eco-nomic development initiatives, which all toooften employ urban growth machine tacticssuch as industrial recruitment, tax incentivesand lower regulatory barriers to overcomeregional deficiencies and promote economicgrowth (Molotch, 1976). Present work onEE also suffers from this myopia becausemost studies focus on the documentation ofcomponents without considering the evolu-tionary nature of these components.

To address this issue, the objective of thepresent study is to develop an evolutionaryframework of EE development that inte-grates important components from priorwork and describes how critical elements ofan entrepreneurial system interact andevolve over time. This perspective is neces-sary because as EE evolve, the importanceand relative strength of components changes,as do the policies necessary to sustain thesesystems over time. The framework will beapplied to the Phoenix, Arizona EE tounderstand its evolutionary dynamics fromthe 1940s forward using archival data and

content from over 100 semi-structured inter-views of entrepreneurs and stakeholders.This profile will focus on obtaining a broadperspective on the Phoenix EE from 2000forward to highlight how the dynamics ofthis EE impact entrepreneurial activityacross a multitude of industrial sectors.Phoenix makes for an interesting case studybecause it contains a growing entrepreneur-ial presence. It is also known for its growthmachine economic development strategies(Shermer, 2013), which this case study willhighlight, have a limiting impact on EEdevelopment.

The profile of Phoenix using this frame-work unpacks current components, whichsuggest an EE in the birth phase. It is alsoable to diagnose next steps to helping the EEgrow and reach the next phase of develop-ment. From a broader perspective, this studyis valuable because it reveals that attemptsto naturalise urban and regional economicprocesses (Feld, 2012), do not exempt EEfrom the cultural and institutional context inwhich they operate, which are subject toregional politics and the power relations ofurban growth machines (Molotch, 1976).Thus, it is necessary to work within the cul-tural and institutional context of places tofoster more grassroots developmentapproaches in order to develop importantaspects of EE that cannot be formally man-aged, such as local networks of entrepre-neurs and mentors, and a regional culturethat is tolerant and conducive to the creationof entrepreneurial ventures.

Overview of EE

While prior work on high-technology dis-tricts (Storper, 1993; Storper and Scott,1995), has highlighted the importance ofrelational assets in regional economies, afocus on new business creation and theenvironment in which new businesses arecreated – essentially the entrepreneurial

Mack and Mayer 2119



ecosystem perspective – has been missing.New business creation does not only dependon the relational aspects of an economy, butalso on issues related to market develop-ment, human capital, finance, culture, sup-port, etc. In this regard, work that takes asystems approach to understanding factorsthat impact new ventures is a related butimportant step forward. EE are defined asthe interacting components of entrepreneur-ial systems, which foster new firm creationin a specific regional context (Neck et al.,2004). Hubs of entrepreneurial activity arepresent in a variety of locales across theglobe. Examples that have been studiedinclude Boulder, Colorado (Feld, 2012), theCopenhagen pharmaceuticals cluster(Mason and Brown, 2014), Oxford, UK(Lawton-Smith et al., 2008; Mason andBrown, 2014), and Silicon Valley (Saxenian,1994). Owing to the uniqueness of EE, priorwork is dedicated to understanding the key

components and actors within these systems(Bahrami and Evans, 1995; Cohen, 2006;Feld, 2012; Isenberg, 2010, 2011). Isenberg(2011) highlights six domains within EE(human capital, markets, policy, finance,culture and supports) that contain 12 corecomponents. Figure 1 provides more detailabout these six domains and correspondingcomponents (Isenberg, 2011).

Although it is important to distinguishimportant elements of EE, these documenta-tion efforts tend to be prescriptive and retro-spective in nature. They also tend to focuson the components of successful EE ratherthan all EE more generally. To date then,work has not assessed four critical aspects ofEE. First, current approaches provide staticanalyses that do not give information aboutthe initiation and the processes behind thepresent-day state of EE (Mason and Brown,2014). Second, there is a complete neglect ofthe institutional and political context in

Figure 1. Domains of the entrepreneurship ecosystem.Source: Isenberg (2011).

2120 Urban Studies 53(10)



which EE evolve and therefore attention tothe influence of the sociopolitical context onEE evolution seems to be important. Third,work does not highlight the consequences ofmissing elements or deficiencies in the inter-actions between components within thesesystems. Fourth, there is limited discussionof the role of regional policy in acquiringmissing elements and facilitating interactionbetween EE elements.

An evolutionary perspective on EE

While the field of economic geography hasstarted to conceptualise evolutionarydynamics particularly regarding industryclusters (Menzel and Fornahl, 2009), there isa gap in our understanding of the evolutionof systems that thrive because of the birthand death of entrepreneurial ventures andtheir surrounding support infrastructure.Mason and Brown (2014) discuss a point inEE development where spinoffs gatherenough momentum to become a self-reinforcing process. Figure 2 presents anevolutionary perspective on an EE. It con-tains four stages and six core elements asindicated in the domains of Isenberg’sframework (Figure 1). Through such an evo-lutionary perspective it is possible to evalu-ate the relative importance of Isenberg’s sixcore domains across the four stages of EEdevelopment.

The first stage in the framework is thebirth phase, which is characterised by morefirm births than firm deaths. Although firmbirths are low, there are also few firm exitsor deaths, which means that the overall num-ber of firms slowly increases as entrepreneurstake risks and start new companies. Many ofthe core components of EE are also underde-veloped at this time. Underdeveloped ele-ments include markets for entrepreneursbecause existing firms do not yet function ascustomers or incubators for entrepreneurialfirms. There are few success stories because

there are few firm births and the regionalculture is not risk-oriented and conducive tonew ventures. Financial capital is not yetexpansive, but it is emerging and becomingslowly available as investors become risk-oriented. At this stage, specificentrepreneurship-oriented human capital hasnot developed because there are few experi-enced entrepreneurs and educational institu-tions are oriented towards general degrees.There are also few personalities who standout in terms of their ventures, as well as theirengagement and efforts towards building anentrepreneurship-oriented support infra-structure. In this phase, a support infrastruc-ture emerges as pioneering institutions suchas non-profits and incubators are founded.Finally regional economic development pol-icy remains oriented towards traditional eco-nomic development strategies such as firmattraction and retention, real-estate and clus-ter development.

The next stage is the growth phase whereeach element in the EE framework starts tobecome more specialised and targetedtowards entrepreneurship. This benefits thefounding of new firms and firm births exceedfirm deaths. During this phase, marketsevolve to include regional but also nationaland international opportunities. In thisphase the first serial entrepreneurs becomevisible and educational institutions start tooffer entrepreneurship-specific programmes.Thus, human capital becomes more entre-preneurially minded and successful entrepre-neurs begin to function as role models forpotential nascent entrepreneurs. As a resultof this increasing dynamic, financial capitalbecomes more readily available and easier toaccess as investors develop trust in the evol-ving EE. The regional culture strengthensand entrepreneurial networks expand andbecome denser. As a result, societal normsmay change in favour of entrepreneurship.The support infrastructure, as well as theregion’s economic development policy, start

Mack and Mayer 2121



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Mack and Mayer 2123



to become more specialised and targetedtowards new firm creation.

After the growth phase, the EE reachesthe sustainment phase, which is characterisedby a smaller number of firm births and alarger number of firm deaths. In this phase,market opportunities and networks start toweaken. There is also a general decline in thenumber of new ventures, and a severe declinein the number of serial entrepreneurs as theopportunity cost of self-employment risesand entrepreneurs trade self-employment forother types of employment. Investor confi-dence begins to wane and financial capitalbecomes harder to access. Support infrastruc-ture changes as well and programmes thatwere targeted towards entrepreneurship sup-port start to diversify into other realms.During this phase, dedicated leadership andentrepreneurship-specific policies are criticalto sustaining new venture creation. Successstories also become critical as firm deathsstart to rise.

If EE actors are not successful in extend-ing the sustainment phase, the EE will startto decline. In this final phase, firm deaths aresignificantly greater than firm births. Marketconnections and networks disappear.Entrepreneurship is no longer perceived as aviable career option. Financial capitaldeclines and becomes unavailable. There is ageneral decline in entrepreneurship supportand policies in favour of new venture cre-ation. As a result, the regional culture is notconducive to entrepreneurship and the EEeither disappears or begins the cycle anew.

Data and methods

Phoenix was selected as a case to demon-strate the utility of this evolutionary frame-work because it is a metropolitan regionwith some entrepreneurial presence, and atop-down, boosterism approach to economicdevelopment (Abbott, 1981; Gober, 2005;Shermer, 2013). This represents a stark

contrast to other grassroots EE across thecountry, such as Boulder, Colorado (Feld,2012). As this study will show, this approachto development has an impact on the devel-opment trajectory of EE. While a booster-ism approach may be an effective strategyfor assembling some components of EE, it isnot capable of fostering growth in grassrootscomponents such as entrepreneurial andfinancial networks, the availability of men-tors and the presence of success stories.

Data

Both archival data and semi-structuredinterviews are used to better understand theevolutionary dynamics of the EE inPhoenix. To account for evolutionarydynamics, the semi-structured interviewswere conducted at two points in time. Thefirst set of interviews was conducted between21 May and 25 May 2007. Individuals thatwere interviewed in this time interval includeeconomic development officials from theCity of Scottsdale and the Greater PhoenixEconomic Council (GPEC, 2014), as well asexecutives from venture capital and localarea technology companies. These 23 inter-views are used to present information aboutthe building blocks of the EE from a histori-cal perspective. The 2007 interviews are keyto documenting the process of firm buildingin the metropolitan area with a focus on thebiotech and life sciences industries. This wasimportant to evaluate and to understandhow major firms in the area such asMotorola, Intel and General Dynamicsinfluenced the labour pool, entrepreneurialactivity and innovative activity. It alsosought to establish how the defense andsemiconductor industries as well as the lifesciences industry influenced education, taxpolicy and other important aspects of thepublic policy sphere in Phoenix. A secondfocus of these interviews was the intervie-wee’s perception of the Phoenix




entrepreneurial ecosystem and the influenceof policies and initiatives on high-tech andlife sciences startups. The third and finalaspect of these interviews was the documen-tation of critical elements in the formationprocess of the regional innovation and entre-preneurial systems. This was essential todocument innovative and entrepreneurialefforts at this moment in time given theseries of events that transpired and thatlikely had wide-reaching impacts on the EEin the early 2000s.

The second series of 122 semi-structuredinterviews were conducted between Januaryof 2013 and January of 2014. These inter-views aimed to gain a general perspective onthe Phoenix EE rather than the perspectiveof one industry in particular or even of spe-cific groups of firms. The list of people inter-viewed included managers of businessincubation facilities, entrepreneurs locatedin incubation facilities and entrepreneurs notlocated in metro area incubation facilities.Interviews were also conducted with key sta-keholders in the metropolitan area, as identi-fied by archival research and interviewparticipants. Two of the inductive themesthat came out of several of these interviewswere the history of and perceptions of thePhoenix EE. These interviews are valuablebecause they provide both a retrospectiveand prospective view on the development ofthe system over the last decade. They alsosuggest that the legacy of growth machineeconomic development tactics is insufficientto acquire and integrate documented com-ponents of vibrant EE.

Historical perspective of thePhoenix EE

Phoenix is a former agricultural and miningregion (Glasmeier, 1988; Shermer, 2013)whose economic and industrial transforma-tion took off in the 1940s with a large num-ber of branch plant relocations to the area.

A group of influential business elite thatincluded lawyers, retailers, bankers andnewsmen initiated this economic transforma-tion by pursuing industrial recruitmentdevelopment strategies to create a favourablebusiness climate through liberal regulations,low taxes and subsidies for corporations(Shermer, 2013). Between 1948 and 1964,more than 700 firms relocated or opened inthe metropolitan area and manufacturingreplaced agriculture as the second leadingindustry in terms of employment (Shermer,2013: 225). By the 1970s, the Phoenix econ-omy had begun to attract high-technologycompanies such as Honeywell, GTEMicrocircuits, ITT-Cannon, Intel andSperry. While these branch plants creatednumerous production jobs, they ‘failed to sti-mulate the development of an integratedentrepreneurial high tech economy’(Glasmeier, 1988: 291). Firms such asMotorola, but later Intel (which establisheda production plant in 1979 in Chandler,Arizona) also did not contribute to the cre-ation of spinoff firms.

During the late 1980s and early 1990s,economic development leaders in Phoenixstarted to reorient their initiatives and pro-grammes towards a more cluster-based eco-nomic development approach (Waits, 2000)to diversify the economy away from tradi-tional sectors towards a more knowledge-based economy (MB interview 24 May 2007;SW interview 24 May 2007). At this time theneed to diversify the economy gainedurgency as large firms such as Motorola,Honeywell or Intel either scaled back theiroperations or divested business units (MBinterview 24 May 2007; SS interview 5 June2007). These efforts involved the formationof various groups, including a coalition ofpublic and private organisations chargedwith economic development (the ASPEDCoalition), industry cluster advisory groups(such as the aerospace or the biomedicalcluster groups), as well as foundation

Mack and Mayer 2125



working groups. The cluster efforts were notoriented towards fostering innovation andentrepreneurship (SW interview 24 May2007) but greater collaboration among clus-ter members. For example, the biomedicalcluster in Phoenix worked to bring the hos-pitals and the medical device companies inthe same room, yet with limited successbecause many of these organisations andfirms did not have much in common (SWinterview 24 May 2007). Of the cluster-basedorganisations initiated in the 1980s and1990s, only a few remained by the mid-2000ssuch as the nanotechnology cluster inPhoenix and the optics cluster in Tucson(RH interview 24 May 2007).

At the turn of the century, several changestook place within the metropolitan area thatwould strengthen higher education institu-tions in the area, as well as government-based efforts to support research. From the1940s until this point, the emphasis ofuniversity–industry relationships focused oncreating talent for high-tech firms in the area(JF interview 24 May 2007; RH interview 24May 2007; JK interview 24 May 2007).Arizona State University (ASU) also playeda relatively minor role in fostering entrepre-neurial activity. This changed with the arri-val of a new ASU president in 2002 (LCinterview 26 June 2007). In this year,Michael Crow, a former professor of scienceand technology policy at Columbia’s Schoolof International and Public Affair succeededLattie Coor. As ASU president, Crowstarted to redefine the university’s role notonly in the Phoenix metropolitan region, butalso nationally. Through his efforts, ASUopened a downtown campus in 2006, whichadded several buildings to the downtownareas. Several new research institutes infields where the region’s leaders hoped toinfluence the Phoenix economy (e.g. sustain-ability and biosciences) opened around thistime. An example is the founding of theASU Biodesign Institute in 2003.

In terms of government-based efforts tosupport research, three major milestonescharacterise the first decade of the 21st cen-tury. In 2001, the Flinn Foundation pub-lished its Arizona Bioscience Roadmap, inwhich it sketched the plans to establish anew type of industry. A second, related mile-stone occurred in 2002 with the establish-ment of the Translational GenomicsResearch Institute (TGen) in downtownPhoenix (MB interview 25 May 2007).Founded by an Arizona native, JeffreyTrent, who had served for 10 years as theScientific Director of the National HumanGenome Research Institute at the NationalInstitutes of Health in Bethesda, Maryland,this institute involved collaboration by then-Governor Jane Hull to assemble a broadgroup of visionary leaders (including theCEOs, hospitals, foundations and the NativeAmerican community) that raised aboutUS$90 million to attract and help set upTGen in Phoenix. A third milestone duringthis phase was the creation of the ScienceFoundation Arizona (SFAZ) in 2006.Modelled after the Science Foundation inIreland, SFAZ was created by a group ofinfluential business leaders to foster colla-borations between universities and industry.

At the end of the first decade of the newmillennium then, Phoenix had made impor-tant strides in developing some importantprerequisites for an entrepreneurial ecosys-tem such as cluster-based policy efforts,strengthening of higher education institu-tions primarily with regard to labour andgovernment efforts to support research.While important, these components did notyet represent the birth of an EE because sev-eral critical ingredients were missing at thistime, including spinoff companies from tech-nology branch plants (MB interview 24 May2007; BB interview 21 May 2007; BBr inter-view 25 May 2007; SJ interview 21 May2007; JK interview 24 May 2007; MM inter-view 22 May 2007), a labour pool with




management experience that had the skillsto become entrepreneurs and/or serve asmentors for local area startups, and venturecapital remained difficult to access (CLinterview 24 May 2007). Thus, at this timethere was still a perceived gap and need forthe building of a more conducive entrepre-neurial milieu (BB interview 21 May 2007;MH interview 23 May 2007).

Current perspective of thePhoenix EE

Almost a decade later, interviews with incu-bation facility managers and entrepreneursin 2013, and the early portion of 2014, revealan EE in the birth phase of development(see Figure 2 for a theoretical description ofthe birth phase). The general consensus ofthe interviews conducted between 2013 and2014 is that progress has been made in thedevelopment of the EE. One entrepreneurnoted that downtown Phoenix had experi-enced tremendous changes in the last 10 to15 years and they wanted to be a part of therevitalisation that was happening (JI inter-view 12 July 2013). Incubator managersindicated similar sentiments and highlightedthat Phoenix is on the move in terms of itsentrepreneurial ecosystem development (JCinterview 14 August 2013; KM interview 11January 2013).

Interviews also revealed that these devel-opment efforts are being driven by govern-ment programmes, incubation facilities anduniversity-based programmes. As of thistime, there is evidence of support organisa-tions such as non-profit groups and incuba-tors. However, economic developmentpolicy remains oriented towards traditionalstrategies such as clusters and firm attractionand retention. The educational institutionsin the area remain oriented toward standarddegree programmes and there are few visibleserial entrepreneurs and success stories inthe region. Although financial capital is

becoming available, it is limited because ofthe conservative nature of investor attitudes,particularly regarding technology ventures,and the amount of financial support pro-vided to entrepreneurs. Markets for entre-preneurs are also underdeveloped and thelarge firms in the region do not train theirworkers in skills conducive to future entre-preneurial pursuits, nor do they serve as cus-tomers for new firms that have started in theregion.

Government

At this time, the government support offeredis oriented towards classic growth machinestrategies including image marketing, costadvantages and low regulatory hurdles.Interviewed entrepreneurs perceive the areato be a place that appears open to new ven-tures and lacks red tape, which makes thestartup process easier (MS interview 16August 2013). Downtown revitalisationefforts such as the construction of the down-town ASU campus in 2006 and theDowntown Phoenix Inc., which is a commu-nity development group created in 2013 tofurther downtown revitalisation efforts, havealso appeared to improve the image of thearea. This suggests that policy in the form ofgovernment support is positively influencingthe entrepreneurial. Several entrepreneursalso noted that there are people who havemoved from other parts of the country andfind Phoenix a great place to start a businessfrom a cost perspective (SK interview 4October 2013). The following quote high-lights this sentiment (SK interview 4October 2013):

And there’s an incredible task structure that’svery advantageous to do so, versus some ofour competitor places like California, where itis very difficult to start a business and havequite a, cumbersome process to get going anda very heavy tax structure. So it’s nicer here,so at least we have those things going for us.

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We also, I believe that in this state that wehave a pretty natural disaster free area, whichis something a lot of business, like these datacenters and Intel and you know, fabricationfacilities, medical research facilities, that willprobably take into consideration pretty heav-ily. They don’t want to be where an earth-quake is going to be, and all those facilities,they don’t want to be where there’s going tobe landslides or you know, excessive floodingor some other things, we don’t have any ofthat. So it’s kinda nice, there are no tornados

here.

Support infrastructure

An evaluation of business incubation facili-ties in the Phoenix metropolitan area high-lights a growing support infrastructure forentrepreneurs. Based on incubation facilitylists obtained from the National BusinessIncubation Association (NBIA) and theArizona Commerce Authority (AZCA), in2013, there were more than 52 incubationfacilities in the state of Arizona. In Phoenix,there were 22 facilities in operation at thetime the interviews were conducted. Of theseincubation facilities, the oldest space beganoperations in 1998. Most facilities haveopened since 2008 with an even larger per-centage opening in 2010 or later. The inter-views with managers reveal a variety ofreasons behind facility openings. While someof the facility managers discussed a generaldesire to help community entrepreneurs(CKJ interview 29 March 2013; JS interview8 February 2013) two of the managersrevealed that the recession was a reason fortheir facility openings (JN interview 5 March2013; KM interview 5 February 2013). Othermanagers expressed a desire to contribute tothe development of downtown Phoenix (WRinterview 8 March 2013; JP interview 29March 2013). Interestingly, one of the man-agers mentioned that their facility opened togive entrepreneurs a space to operate so they

would not migrate to California (MA inter-view 5 February 2013). Another facilityopened in response to an impact study doneby the city of Peoria, which identifiedunexploited opportunities in medical devicedevelopment that would leverage the agingpopulation and growing medical communityin the area (KN interview 21 March 2013).

While there does appear to be a largepresence of incubation facilities, there isfragmentation to the entrepreneurial assis-tance provided by these facilities (MW inter-view 4 February 2013; MA interview 5February 2013; DS interview 10 July 2013).At this stage, there is a relative lack ofawareness and networking amongst theseactors in the EE. One facility manager inter-view highlighted a siloed, go-it alone strat-egy taken by many of these facilities. Thissiloed approach to assistance results induplicated efforts, an example of which ismultiple entities in Phoenix working onstartup weekends (CKJ interview 29 March2013).1 This information from the interviewssuggests that this form of entrepreneurialsupport needs to be strengthened throughbetter coordination efforts, which might alsohelp improve entrepreneur networks, whichare absent from the EE at this point in time.

Missing elements

While the interviews highlighted a strength-ening of government policies and supportinfrastructure, there are several missing orunderdeveloped elements. Attention to theseunderdeveloped and missing elements isneeded to move the Phoenix EE from thebirth phase to the growth phase. Specifically,grassroots efforts are needed to cultivatelocal entrepreneurial networks, which wouldalso create a regional culture that is risk-tolerant and supportive of new ventures.Non-government support and policy effortsalso need to be oriented towards entrepre-neurship with the goal of creating regional




market opportunities for entrepreneurs, aswell as national and international opportuni-ties. Support and policy efforts should alsofocus on greater coordination amongst EEcomponents and actors.

Markets: Networks. The interviews high-lighted that the Phoenix EE is characterisedby fragmentation in its institutional capacityto connect entrepreneurs and industryexperts. These issues include a lack of men-torship and other difficulties associated withstarting companies in Phoenix. One entre-preneur in particular mentioned issues withfinding mentors for startups in the web/Internet arenas (MW interview 4 February2013):

They [incubators] don’t have the means, theydon’t have the right mentors, they don’t havethem specifically for like web-based stuff, wehave a bunch of engineers that don’t knowwhat the Internet is, so there’s a big knowledgegap with that and they don’t push – they aremore like social events than they are let’s getto business and like build the company and Ihave purposely stayed away from them.

Other comments made by entrepreneurshighlight networking issues in the EE, par-ticularly in the regional technology base.These comments indicated the presence of‘invisible networks’ in which people couldparticipate if purposeful efforts were made.One interviewee mentioned that there was asolid technology base available to local areaentrepreneurs, it was just less visible thanone might expect, and one had to plug them-selves into it intentionally (JO interview 2August 2013).

Financial capital. While financial supportremains scarce, the interviewees highlightedthat progress has been made in providingfunding for new ventures. Some entrepre-neurs highlighted the availability of money

in the form of real-estate funds and peoplewho want to invest in local companies (TAinterview 5 September 2013) while othershighlighted difficulties in obtaining sufficientcapital for their ventures (XK interview 2October 2013; BS interview 11 January 2013;JM interview 23 August 2013; FG interview,4 March 2013). Some of the issues cited byentrepreneurs were related to the source offunds in the form of real-estate money andthe entrepreneurial reputation of Arizonacompared with other places. For example,although there is a lot of real-estate money,entrepreneurs felt that real-estate investorsdid not understand the intricacies of invest-ing in startup companies (BS interview 11January 2013; JM interview 23 August2013). Another issue mentioned by oneentrepreneur was the difficulty in obtainingventure funding compared with Californiacompanies because of a perception thatArizona companies are comparatively lessexperienced than their California counter-parts (XK interview 2 October 2013). A needfor more early-stage support for entrepre-neurs was also mentioned (FG interview, 4March 2013).

Culture: Success stories. Another critical ele-ment of successful EE is the presence of suc-cess stories in the form of visible successes,or ventures that have served as wealth gen-erators for founders and the construction ofan international reputation (Isenberg, 2011).Based on the interview data, these compo-nents of success stories appear to be missingin Phoenix. People highlighted that the EEsuffers from a lack of entrepreneurial recy-cling (Mason and Harrison, 2006) because itdoes not have many startups with successfulexits (BRob interview, 9 August 2013). Thismeans that there is a lack of people in thearea that can provide capital, resources, andexpertise in the form of mentorship to localarea entrepreneurs (BRob interview, 9August 2013).

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A related and particularly interestingtheme that came out of the interviews withentrepreneurs is the notion of a tier structureto EE, which is something addressed inMayer (2011). Related work on high-technology districts also suggests a hierarchyor tiering of regions around the globe thatcontains a few successful regions at the top,with a much larger number of regions in anunderdeveloped state at the bottom (Storperand Scott, 1995). This ‘tiering’ or reputa-tional effect associated with the EE may beimpacting entrepreneurial recycling and theamount of success stories that stay in thearea. One entrepreneur commented thatPhoenix is a fragmented, third-tier marketfor entrepreneurs (SSch interview 27September 2013). Other entrepreneurs com-mented that they started their business inPhoenix but planned to move elsewhere (JIinterview 12 July 2013; SSan interview 21June 2013). One of these same entrepreneurscommented that they wanted to ‘conquerPhoenix first and then move somewhere else’(JI interview 12 July 2013). Thus, thereappears to be a perception that Phoenix is atraining ground for entrepreneurs, but toreally be successful entrepreneurs need torelocate to one of the more traditional hot-beds of entrepreneurial activity (i.e. Boulderor Austin).

Discussion and conclusion

This evolutionary profile of the EE inPhoenix highlighted a boosterism approachthat was successful in acquiring some com-ponents of successful EE. At this time how-ever, the Phoenix EE remains in the birthphase because it has not yet acquired essen-tial components of EE that would propel itinto the growth phase. These missing compo-nents include local success stories, dense net-works of local entrepreneurs and mentors.The acquisition of these core elements is crit-ical to increasing the number of firm births

in the region, which is one of the definingcharacteristics of EE in the growth phase.The development of these elements will likelyrequire a blend of more grassroots strategieswith current top-down approaches. Such anapproach would follow the recommenda-tions of prior work on EE, which suggest ablend of top-down and bottom-upapproaches (Mason and Brown, 2014).

To progress to the growth phase, thePhoenix EE will need to work on helpingentrepreneurs gain easier access to financialcapital. There is real-estate money in thearea, and strategies to help train real-estateinvestors in financing startups may be a wayof funnelling this money to new ventures(BS interview 11 January 2013). Aside fromthe finance piece, more work is necessary tofoster networks between local entrepreneurs.This may be a role for the variety of incuba-tion facilities and educational institutions inthe area. To date, incubation facility manag-ers have highlighted fragmentation in net-working efforts so better coordinationbetween these facilities may be a way of cul-tivating local entrepreneurial networks. Inthis regard, policymakers may be able toserve in a coordination capacity to facilitateinteractions between entrepreneurs. Theymight also be able to identify and grow amentor network to help entrepreneurs whoare not located in incubation facilities acrossthe valley. In terms of success stories, policy-makers and economic development entitiesmight think of creative ways to profile suc-cessful entrepreneurs in the metropolitanarea to highlight that success is possible inPhoenix.

This profile of success stories would add amuch-needed component to the EE besidesthose associated with classic urban growthmachine aspects of the area such as low taxesand regulatory hurdles. While it is unlikelythat Phoenix and other lower-tier ecosystemswill ever be able to compete with first-tierecosystems such as Silicon Valley, who have




had a first-mover advantage in EE develop-ment, which is positively reinforced by adegree of path dependence over time andstrong university connections, vibrant ven-ture capital markets and a highly developedknowledge infrastructure; this case studysuggests advantages that lower-tier EE canoffer entrepreneurs. In fact, an advantagefor entrepreneurs in lower-tier ecosystems,such as Phoenix, is that they are likely toreceive more attention to help nurture theirfledgling ventures than in hyper-competitivefirst-tier EE such as Silicon Valley or Austin.The metropolitan area provides a lower-stress environment with few competitors forentrepreneurs to work through some of theinitial hurdles associated with starting a newventure. Entrepreneurs are also more likelyto have greater latitude in the types of ven-tures started than in other metropolitanareas where specific types of ventures areexpected (i.e. high-technology). Based onthese potential advantages, Phoenix policy-makers need to encourage nascent entrepre-neurship by communicating the nurturingnature of the EE to potential entrepreneursinside and outside the region. This could bedone via marketing campaigns and the net-working events targeted at local area entre-preneurs described above. They could alsocreate incentives for local area employers toprovide on the job training (management,accounting, finance) so that employees thatdecide to start their own business in lateryears are more likely to be successful.

Aside from the identification of gaps inthe Phoenix EE and potential solutions forfilling these gaps, the evolutionary frame-work developed in this study provides usefulbenchmarks for determining the stage ofdevelopment of an EE. As the conceptualmodel highlighted, at each stage of thisframework different EE elements are moreimportant than others. In the beginningphases of an EE, key factors such as market

opportunities, human and financial capitaland culture are important. During laterstages of development, the EE requires morerefined support infrastructure and specia-lised policies. As EE dynamics decline,impulses for reinvigoration are necessaryand a new evolutionary cycle may emerge.This evolutionary perspective provides sta-keholders with action points to help main-tain or propel an EE to the next level. This isa distinct improvement over previous staticapproaches that provided a list of ingredi-ents with no sense of their relative impor-tance over time.

The evolutionary perspective is valuablebecause it provides a sense of how history,culture and the institutional setting impactEE. It is also valuable given the uniquenessof EE around the globe and provides aframework for comparing these diverse EE.That said, more work is needed to under-stand the evolution and performance of EEover time in a comparative context. Giventhis need, future work could use the frame-work developed in this study to evaluatewhether the apparent tier structure of EE(Mayer, 2011) speaks to the strength of par-ticular elements in the framework in highertier EE. Future work could also usethis framework to compare and contrast theevolutionary trajectory of EE in similar tiers,which could be useful in understandingwhy particular types of places remaintrapped in a specific phase. While there areundoubtedly clear components of successfulEEs, it is misleading to interpret these com-ponents as a recipe for creating successfulEE. Instead, the evolutionary perspective ofthis study provides a way of incorporatingimportant components of EE within adynamic framework that can be usedin a case specific or comparative contextto better understand an increasinglyimportant component of vibrant, competi-tive regions.

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Acknowledgements

Thank you to Hannah Szabo who assisted in thearchival research and interviews used in thisstudy. We would also like to thank the threeanonymous referees and editor whose commentswere incredibly helpful and improved the qualityof the manuscript.

Funding

This study was funded by Regional StudiesAssociation grant number 026460.

Note

1. Startup weekends are new to Phoenix. Thefirst startup weekend EDU was held on 25April 2014 (Baldo, 2014).

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