Entrepreneurship industry helps grow businesses – but slows down innovation

Advisors, accelerators and other support organizations are often described as innovation engines. But new research finds that in practice, the entrepreneurship industry can have the opposite effect.

Researchers have analyzed the role of entrepreneurship industry actors in shaping entrepreneurship, who starts businesses and what results are achieved. The research results point to a clear paradox. Entrepreneurs who use support actors are more likely to move from idea to action and earn more money on average than those who do not. At the same time, their entrepreneurship is less innovative.

The study shows that actors act as influential guides in the entrepreneurial process. They help individuals move from seeing business opportunities as abstract to perceiving them as feasible. Through advice, ready-made solutions and established ways of working, uncertainty is reduced – and the threshold to act is lowered.

Reduces innovation

But this very uncertainty reduction comes at a price. When entrepreneurs are led towards proven business models, standardized approaches and “what works”, there is less room for experimentation and innovation. Instead, a form of standardization emerges where many do similar things in similar ways. The study shows that the use of entrepreneurial industries is clearly linked to lower levels of innovation.

This means that the entrepreneurship industry not only enables entrepreneurship, but also determines the type of businesses that are created. The result is often businesses that are efficient and commercially viable – but rarely challenge existing markets or introduce radically new solutions.

What is most important?

At the same time, the study highlights an important distinction between access to and use of the actors. Having access to support structures increases the likelihood that people will engage in entrepreneurship at all. However, once the support is used, the content of entrepreneurship is influenced in a more controlling direction.

The researchers argue that this has implications for how entrepreneurship is understood and promoted. If the goal is economic activity and quick returns, the entrepreneurship industry works well. But if the ambition is to strengthen innovation capacity and create new ideas, business models and markets, current support structures risk holding back development.

The study thus raises a fundamental question for policy makers, support organizations and ecosystem builders: do we mainly want more companies – or more innovative companies?

More about the article and the authors
The article How enabling is the entrepreneurship industry? EI intermediaries and the spectrum of entrepreneurial action and outcomes is published in the scientific journal Small Business Economics.

The authors are Parul Manocha at The University of Alabama at Birmingham, USA, and Kip Kiefer, Rollins College, Florida, USA.