Entrepreneurial Ecosystem Diagnostics

1. Introduction

Abstract

This chapter provides a brief introduction to the entrepreneurial ecosystem diagnostics report, covering the entrepreneurial ecosystem concept, methodological issues, information gaps and possible future steps for the work.

Scale-ups and growth-oriented start-ups are highly beneficial to economies. They promote innovation by introducing new products, services, and business models (OECD, 2023[1]; Kolev et al., 2023[2]). They create market dynamism by injecting competition, inducing incumbents to innovate, and stimulate productivity growth by encouraging productive reallocation to higher productivity firms (Kritikos, 2014[3]). And they create new jobs and incomes as they grow. This type of entrepreneurship is known as productive entrepreneurship, and it is becoming more important over time as economies become more knowledge-based and shift from managerial towards entrepreneurial capitalism (Audretsch and Thurik, 2000[4]).

Productive entrepreneurship does not occur in a vacuum but is strongly influenced by the institutions and resources of the places that host it, either enabling or hindering its development (Welter, 2011[5]). This is the insight behind the widespread adoption in recent years of the entrepreneurial ecosystems concept, defined by (Stam, 2015[6]) as:

“the set of interdependent actors and factors coordinated in such a way as that they enable productive entrepreneurship.”

This report operationalises this concept for the purposes of benchmarking the determinants and outputs of entrepreneurship in OECD countries. It builds on work conducted since 2008 through the OECD-Eurostat Entrepreneurship Indicators Programme, originally published in the discontinued OECD Entrepreneurship at a Glance series and based on a measurement framework set out by (Ahmad and Hoffman, 2008[7])The current report renews the work, but modifies its structure in line with the more recent entrepreneurial ecosystem approach.

The diagnostics cover ten determinants of entrepreneurship, which we refer to as entrepreneurial ecosystem elements. These are inputs to the generation of entrepreneurship that have each been identified as important by the research literature. For each element, we present individual variables and a summary measure per OECD country. In addition, we benchmark productive entrepreneurship levels across the OECD countries and provide measures of the extent to which levels of entrepreneurship in a country vary across regions and social groups. Finally, examples are provided of entrepreneurial ecosystem development policies as sources of policy inspiration. Biennial data are provided for three periods (2016-2020, 2018-2022 and 2020-2023). It is pilot work, which can be updated, refined and extended in future issues.

The aim is to help policy makers identify bottlenecks in their entrepreneurial ecosystems that may need more or different policy efforts and to track the progress of their ecosystems over time by comparing with other OECD countries. It offers high-level information, which can be used as a starting point for deeper analyses.

The OECD diagnostics fill an important empirical gap. Although some comparative data-driven measures of entrepreneurial ecosystems do exist at international level, they provide only partial pictures. Often, they are based only on selected cities and regions, cover only a sub-set of key entrepreneurship determinants or sub-set of OECD countries, and focus only on a particular type of entrepreneurship, such as venture capital-backed or technology-intensive firms. There is no tool that gives comprehensive measures across all the entrepreneurial ecosystems elements and all the types of productive entrepreneurship outputs in this report at national level for all 38 OECD countries.

Furthermore, the OECD exercise has some key methodological strengths relative to many others. It is transparent about how scores are calculated, clearly separates the inputs and outputs of entrepreneurial ecosystems, and is grounded in academic research that shows the empirical validity and importance of each of the relationships included. More information on the concepts used and the measurement approach is provided in a companion working paper to this report (Crotti et al., 2025 (forthcoming)[8]).

Another strength is the use of the entrepreneurial ecosystem concept as a framework for analysing entrepreneurship. This concept has gained large significance in academic and policy circles in recent years, as witnessed by contributions such as (Audretsch, Cruz and Torres, 2022[9]; Isenberg, 2010[10]; Huggins et al., 2024[11]; Brown and Mason, 2017[12]; Qian and Acs, 2023[13]; Feld, 2012[14]; Spigel, Kitagawa and Mason, 2020[15]), and has strong implications for understanding how governments and stakeholders can strengthen entrepreneurship.

Certain academic criticisms of the entrepreneurial ecosystem concept have been put forward, e.g. (Fritsch, 2024[16]; Naudé, 2024[17]; Fernandes and Ferreira, 2022[18]). These points are recognised in the OECD diagnostics and it can be argued that the responses are the best currently available, although this is an ongoing exercise and improvements can be made in later exercises.

First, it can be argued that entrepreneurial ecosystem processes are largely regional not national. However, both are clearly at play and intertwined. While some factors vary substantially by region, others, like business regulations, largely do not. And national conditions provide a backstop for regional elements, allowing for mitigations and compensations from further afield. Critically also, national information is needed for national government policy actors who develop policy at national level. Both national and regional benchmarking are therefore relevant, and while our diagnostics are currently at national level, regional data could be added in a second step.

Second, it might be argued that there is limited empirical evidence of the inter-relationships that are assumed to occur in entrepreneurial ecosystems that lead to them working as the complex systems we analyse. However, many individual studies show the validity of the input-output relationships we examine, and a recent World Bank paper provides a theoretical model that validates the inter-relatedness of entrepreneurial ecosystem elements and the relevance of examining them as a whole (Audretsch, Cruz and Torres, 2022[9]). By putting together the relevant data in this report, we aim to make it easier to analyse the inter-relationships further in the future.

Third, it is sometimes argued that entrepreneurial ecosystems analysis focuses only on knowledge-intensive, venture-based or growth-oriented start-ups, which are not necessarily the most impactful on the economy. However, entrepreneurial ecosystem work often covers other sectors and kinds of entrepreneurship. In this report, we deliberately include a range of measures of productive entrepreneurship, which may be more or less suited to different country strengths. The framework is also open to tailoring in a second step to different sectors (e.g. deep tech entrepreneurship) and different kinds of entrepreneurs (e.g inclusive entrepreneurship).

A final criticism is that the entrepreneurship performance of a place might be better addressed by other conceptual frameworks like clusters or innovation systems, rather than entrepreneurial ecosystems. However, the advantage of entrepreneurial ecosystem approach that we seek to exploit here is to inform an entrepreneurship policy that puts the entrepreneur and support for entrepreneurs at the centre of the analysis.

Overall, this report therefore offers a fresh perspective, grounded in research evidence, organised around a central concept of entrepreneurship, and addressing the issues with a broader, global outlook than other exercises. However, it is important to view this diagnostics tool as a complement to existing entrepreneurship benchmarking tools, each with its unique scope and focus."

Furthermore, as a pilot, this is a first step in a developing exercise. Further development of the analysis, presentation and data can be expected in subsequent editions. In particular, efforts are expected to refine the indicators, introduce some component of sub-national analysis, and undertake econometric analysis of the relationships between ecosystem inputs and outputs. In addition, deeper qualitative assessments are planned at country level to explore the nature and causes of the possible bottlenecks and to gather stakeholder inputs on possible policy responses. The benchmarking is nonetheless restricted by the quality of data available, and it is to be hoped that the presentation of this report will help stimulate further investments by governments in the relevant entrepreneurship data.

Chapter 2 offers more information on the concept and approach before we go into the results. A companion working paper (Crotti et al., 2025 (forthcoming)[8]) presents additional information on statistical details and methodological choices, including a complete set of robustness tests and correlation analyses comparing results based on alternative specifications.

References

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[9] Audretsch, D., M. Cruz and J. Torres (2022), “Revisiting Entrepreneurial Ecosystems”, Finance, Competitiveness and Innovation Global Practice November.

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[11] Huggins, R. et al. (2024), “Entrepreneurial Ecosystems in Cities and Regions: Emergence, Evolution, and Future”, University of Edinburgh.

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