The vitality of the local entrepreneurship ecosystem plays a critical role in enabling innovative start-ups, scale-ups and SME innovation in a region. However, local entrepreneurship ecosystems vary in the conditions they provide. Bottlenecks in an ecosystem can be a major constraint to productive entrepreneurship.

The OECD has identified a number of key dimensions that affect the health of a local entrepreneurship ecosystem. These cover access to resources conditions like finance, talent and skills, and knowledge. They also cover institutional conditions like entrepreneurship culture, networks and regulations for start-ups and scale-ups. A bottleneck in any part of an ecosystem can impede the functioning of many other aspects of the system. An analysis of each local entrepreneurship ecosystem is needed to identify the enablers and bottlenecks and suitable policy responses, although there are several common issues across regions, such as lack of an entrepreneurial culture, lack of access to risk capital and weak knowledge exchange networks.
Some regions develop policy in this area through regional smart specialisation strategies. Using this approach, a region can identify, with stakeholders, where it has distinct comparative advantages that can support industrial transition to higher productivity activities. These strategies should pay particular attention to entrepreneurship, skills development and knowledge exchange. With all these conditions right a region is well set for entrepreneurship, innovation and emerging industries.