Two recent research papers approach entrepreneurship and innovation from very different perspectives but arrive at a similar conclusion about how regional economies grow and change over time. Keeping technology-based economic development (TBED) initiatives proactively thinking about and addressing that evolution is a central aspect of all SSTI TBED-focused programming. Empirical research, like is discussed below, provides external evidence of how needs are changing and programs may want to adapt.
Historical Roots of Entrepreneurship Ecosystems, by Michael Fritsch and Michael Wyrwich, examines how historical developments and regional culture shape entrepreneurial activity across decades. Complementarity between Hard and Soft Support? The Effects of Place-Based R&D Policy Instrument Mix on Local Innovation, by Hiroyuki Okamuro and Junichi Nishimura, looks at how modern local innovation policies affect business innovation and productivity in Japanese cities. Both papers find that entrepreneurship ecosystems are not created quickly and that TBED policies yielding regional impact require more than funding alone. Relationships, institutions, local culture, and long-term support systems all matter.
Fritsch and Wyrwich focus on a question that economic development professionals have wrestled with for years: why do some regions consistently produce more entrepreneurs and innovative firms than others, when they seem similar in many other respects? Their answer is that history matters far more than many policymakers want to admit. Regions with long traditions of trade, small-scale manufacturing, or entrepreneurial activity often continue to show higher levels of startup formation generations later. In contrast, regions historically dominated by large-scale industries sometimes struggle to generate new business formation even after those traditional industries decline. The authors point to examples such as Kaliningrad and Silesia, where war, population displacement, and decades of socialism dramatically changed political and economic systems, yet historical patterns of entrepreneurship still reappeared later. They argue that this persistence reflects the development of regional culture and collective memory. Entrepreneurial regions tend to develop stronger norms around risk-taking, startups, and inventiveness, along with more visible entrepreneurial role models and networks. These cultural factors become embedded in the region over time, creating cultural, behavioral, or intrinsic advantages that are difficult to replicate quickly elsewhere.
That said, local innovation policy can still make a significant difference. Researchers Okamuro and Nishimura study how Japanese cities support innovation through combinations of financial and non-financial programs. They divide these into “hard” support, such as R&D subsidies and financing assistance, and “soft” support, including networking, consulting, partner matching, marketing assistance, and intellectual property guidance. They show that money tends to move measurable R&D activity (like patents), while hands-on support helps drive productivity and commercialization. A subsidy might boost patenting, but without help in finding partners or customers, those patents may never see the light of day as economic opportunity for the region. The best results were achieved when financial assistance was paired with networking, consultation, and commercialization support. The studies make a strong case for place-based TBED policy. Local governments, despite having smaller budgets than national governments, often understand local business conditions and the regional mindset better than their larger counterparts and can tailor support programs accordingly. The findings also suggest that innovation networks are largely social–optimization networks. Networking, mentoring, consultation, and help navigating procurement or partnerships are important. But so are things like entrepreneurial culture, role models providing local evidence of success, and collective cultural memory. The papers also show that regionally led approaches to innovation policy may be more effective than nationally directed policies. Fritsch and Wyrwich argue that regions differ because of their unique historical development. Okamuro and Nishimura show that local governments can often design more effective support systems because they are closer to local firms and institutions. Another point made in both papers is the importance of universities not only for generating research but also for serving as connectors within regions.
These papers offer some takeaways for economic development professionals and policymakers. First, don’t expect quick wins. A new incubator or grant program can help, but it won’t instantly create trust, networks, or a culture of risk-taking. That incubator, accelerator, or co-work space might also be the wrong intervention if there isn’t an existing appetite for collaborating in that type of environment. Second, policy works best when it strengthens relationships and institutions rather than focusing narrowly on financial incentives. Trying to simply copy policies from another region rarely works. Long-term regional success depends on building durable systems that connect entrepreneurs, universities, local governments, investors, technical experts, and support organizations.
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