Fintech as a Mechanism for Entrepreneurship Ecosystem Development in Emerging Economies

Introduction

Policy makers globally concerned with economic development have invariably pursued the identification of policy levers for supporting high participation in entrepreneurial activities in their locality for economic growth, job creation and poverty alleviation (Audretsch & Link, 2012; Stam & Van de Ven, 2021). The idea that a certain mix of public policy interventions, social attitudes, and financing options can catalyse long-lasting entrepreneurial and innovation activity is an attractive promise to leaders exploring alternatives to create foundations for more sustainable economic growth (Stam & Spigel, 2018). For some time policy makers have proposed and adopted transactional forms of support for high growth productive entrepreneurial firms (HGFs) notably through instruments such as research and development (R&D) grants and tax incentives, business accelerators and incubators, proof-of-concept funds and access to seed funding albeit with limited success (OECD, 2010; Mason & Brown, 2014). In this context, policy makers are increasingly realising merits of more systems-based approaches for supporting high-growth productive entrepreneurship. As a macro level organizational community concept, ecosystems as an approach for comprehending the setting of entrepreneurship is increasingly attracting immeasurable interest globally (Stam & Van de Ven, 2021). Arguably the concept characterises a shift away from time tested company specific entrepreneurial interventions towards more macro-level holistic activities which focus on developing entrepreneurial networks, aligning priorities, building new institutional competences and nurturing synergies between different stakeholders (Rodriguez-Pose, 2013; Warwick, 2013). Hence, the entrepreneurship ecosystem approach has recently arisen as a response recognising that HGFs tend to flourish and conglomerate in distinctive types of supportive entrepreneurial environments.

Entrepreneurial ecosystems represent a set of co-dependent actors and symbiotic factors coordinated in such a way that they empower productive entrepreneurship within a specific territory or region (Stam & Spigel, 2016). Prevailing entrepreneurial ecosystem literature currently provides several lists of factors, which are considered necessary for the success of an entrepreneurial ecosystem in a particular territory (Stam & Ven, 2021; Mason & Brown, 2014). For example, Van de Ven (1993) proposed four broad components of an entrepreneurial ecosystem including: institutional arrangements; communal resource endowments of basic scientific knowledge, funding mechanisms and pools of skilled labour; a critical mass of informed consumers’ market demand; and proprietary business activities. Expanding on Van de Ven model, Isenberg (2010) argues that an entrepreneurship ecosystem model comprises six core pillars including a conducive culture, empowering policies and leadership, availability of appropriate and suitable finance, quality human capital, venture responsive markets, and a system of institutional supports. Similarly, Stam and Spigel (2018) maintain that systemic settings such as networks of entrepreneurs, leadership, funding, talent, knowledge, and supportive services are central in supporting an entrepreneurship ecosystem. Summarising these multiple factors into a single model, Stam and Ven (2021) recommend an integrative model of entrepreneurial ecosystem development comprising ten interacting elements incorporating the previous models and entrepreneurial outputs into three major components: institutional arrangements, resource endowment and proprietary activities - innovation. However in a prior study sponsored by the world economic forum (Foster et al., 2013), entrepreneurs view the following three components of an entrepreneurial ecosystem as of relative significance – accessible markets, human capital/workforce as well as funding and finance. This report provided a first large-scale analysis of entrepreneurial ecosystems by systematically examining which pillars of these ecosystems matter most to entrepreneurs when it comes to fostering companies’ or firms’ growth.