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  • DATE May 13, 2014
  • URL oneinstitute.com/tile/true-or-false/

True or False

Is our understanding of entrepreneurship ecosystems based in reality or in myth?

As has been said before, entrepreneurship never happens in a vacuum—a web of people and institutions are always involved. One of the prominent ways of thinking about those points of connection these days is the metaphor of the ecosystem.

But as Daniel Isenberg of the Babson Entrepreneurship Ecosystem Project warns, “As any innovative idea spreads”—such as that of an entrepreneurship ecosystem—“so do the misconceptions and mythology.” History has shown that various economic strategies were popular for a time before leaving a trail of disillusionment. “If we’re to prevent the enthusiasm for entrepreneurial ecosystems from also fizzling out,” he writes, “we need to get a better grip on what the term really means.”

Writing in the Harvard Business Review, Isenberg presents a brief true-false test as a “reality check” for entrepreneurial leaders. The first true-false statement—“You know that you have a strong entrepreneurship ecosystem when there are more and more startups”—is followed by this answer:

“False. There is no evidence that increasing the number of startups per se or new businesses formation stimulates economic development. There is some evidence that it goes the other way around, that is, economic growth stimulates new business creation and startups. There is also some reason to believe that the number of small businesses is negatively related to national economic health and the Kauffman Foundation recently reported that as the US economy is improving and good jobs are increasing, the number of startups is decreasing. In fact, encouraging startups may be bad policy.”

You may not agree with all of Isenberg’s conclusions, but it’s a helpful exercise to ask ourselves whether our aspirations for “entrepreneurship ecosystems” are based in reality or in wishful thinking.

Read the other nine questions and answers here