Category Archives: Research

Institutional Effectuation

Last week, I attended a conference in Dar es Salaam on institutional design for economic development. The conference was organized by REPOA, one of the leading think tanks of Sub Sahara Africa. Since John Magufuli rules Tanzania with a bombardement of institutional reforms, the effects of institutional reform has become very actual in the streets of Dar and beyond. Most ‘development’ partners  are very worried that the process of change will end in a nightmare. The big stars at conference were Lant Pritchett of Harvard, John Sutton of LSE and Francois Bourguignon of PSE, all associated economists with the World Bank. My own paper, by the way, was on connecting institutional reform to the emergence of entrepreneurial ecosystems.
During the conference, across sessions an angry discussion gained traction, to culminate in the last plenary session. African policy makers and academics ‘accused’ the knowledgeable white men of that ‘we know all this’. We know what good institutions are, in what way ‘our’ institutions are bad, and what the effects are of these malfunctioning institutions. We have the right policies for years, however, these have not generated the right institutions let alone the positive effects on economic development. It is implementation and execution stupid!
One young Nigerian economist working at the International Growth Center took up the challenge in his session. His argument was that policy advice should not focus on what institutions should be, but instead focus what they are and start improving what is there. This sounds simple, but actually is a revolutionary idea. in my comments, I called it Institutional Effectuation, after the effectuation method in entrepreneurship. Start with the bird in the hand, leverage what you have, be the pilot in the cockpit and fly your current resources. Clearly it can be useful to know where you are heading, but sometimes you spend a bit too much time and especially donor money to figure that out. And, it is a big difference whether you build capacity for future jobs, or focus to do your current job better.
It reminded me of a discussion some weeks ago at Makarere University in Kampala. I noticed that my modern problem centered entrepreneurship train-the-trainer approach using the Business Model Canvas and Lean Launchpad methods was not catching on as I was expecting. In the discussion, it was quietly mentioned ‘we know all that’…..What we do, we focus on success stories and the ask why they are successful. In Africa there are so many problems to which there are so many obvious but wickedly difficult theoretical solutions, starting from there is useless. What can we learn and scale from the few best practices is a more efficient strategy. Reading Lant’s book Building State Capacity in the plane back home, I was struck by an Albert Einstein quote. ‘Theory is we know everything and nothing works. Practice is everything works but we do not know why. In theory and practice means nothing works and we do not know why.’ Maybe we indeed should build theory a bit more on practice.
REPOA Conference IMG_0266

Call For Papers

Special Issue of Small Business Economics: An Entrepreneurship Journal

Entrepreneurial Ecosystems

Guest Editors:

Allan O’Connor, Entrepreneurship, Commercialisation and Innovation Centre, The University of Adelaide, (

Erik Stam, Chair of Strategy, Organization and Entrepreneurship, Utrecht University School of Economics (U.S.E.) & Utrecht Center for Entrepreneurship (

Zoltan J. Acs, Department of Management, London School of Economics and Political Science (

David B. Audretsch, Indiana University, (


Many governments around the world seem to have openly accepted the functional economic theory of entrepreneurship as a pathway toward economic development (Hannon 2006; Minniti and Lévesque 2008, p. 605). This response by governments is consistent with the argument that a shift in the economic base toward knowledge requires a context and environment supportive of entrepreneurship (Audretsch & Thurik, 2004). However, creating a context and a supportive environment tends to limit the responsibility of government (Stam 2014) and instead opens up a shared responsibility of many who nurture, encourage, support, fund, advise, facilitate and work for, or, with entrepreneurs and their ventures. In other words, the economic outcomes of entrepreneurship sought by governments and the like, are a product of not only policy inputs but also socially embedded factors that underpin the creation, growth and flourishing of new firms and organizations that, if functioning well, can ultimately deliver desirable social and economic outcomes.

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Review on Entrepreneurial Ecosystems

Entrepreneurial Ecosystems and Regional Policy: A Sympathetic Critique
European Planning Studies

Full Paper Pdf

Erik Stam

ABSTRACT Regional policies for entrepreneurship are currently going through a transition from increasing the quantity of entrepreneurship to increasing the quality of entrepreneurship. The next step will be the transition from entrepreneurship policy towards policy for an entrepreneurial economy. The entrepreneurial ecosystem approach has been heralded as a new framework accommodating these transitions. This approach starts with the entrepreneurial actor, but emphasizes the context of productive entrepreneurship. Entrepreneurship is not only the output of the system, entrepreneurs are important players themselves in creating the ecosystem and keeping it healthy. This research briefing reviews the entrepreneurial ecosystem literature and its shortcomings, and provides a novel synthesis. The entrepreneurial ecosystem approach speaks directly to practitioners, but its causal depth and evidence base is rather limited. This article provides a novel synthesis including a causal scheme of how the framework and systemic conditions of the ecosystem lead to particular entrepreneurial activities as output of the ecosystem and new value creation as outcome of the ecosystem. In addition it provides a framework for analysing the interactions between the elements within the ecosystem. This offers a much more rigorous and relevant starting point for subsequent studies into entrepreneurial ecosystems and the regional policy implications of these.