The entrepreneurial ecosystem (EE) literature has attracted much attention, especially in policy circles. However, the concept suffers from a number of shortcomings: (1) it lacks a clear analytical framework that makes explicit what is cause and what is effect in an EE; (2) while being a systemic concept, the EE has not yet fully exploited insights from network theory, and it is not always clear in what way the proposed elements are connected in an EE; (3) it remains a challenge what institutions (and at what spatial scale) impact on the structure and performance of EE; (4) studies have often focused on the EE in single regions or clusters, but lack a comparative and multi-scalar perspective and (5) the EE literature tends to provide a static framework taking a snapshot of EE without considering systematically their evolution over time. For each of these shortcomings, we make a number of suggestions to take up in future research on EE.
The local sourcing of intermediate products is one the main channels for foreign direct investment (FDI) spillovers. This paper investigates whether and how participation and positioning in the global value chains (GVCs) of host countries is associated to local sourcing by foreign investors. Matching two firm-level data sets on 19 Sub-Saharan African countries and Vietnam to country-sector level measures of GVC involvement, we find that more intense GVC participation and upstream specialization are associated to a higher share of inputs sourced locally by foreign investors. These effects are larger in countries with stronger rule of law and better education.
Amendolagine, V., Presbitero, A. F., Rabellotti, R., & Sanfilippo, M. (2019). Local sourcing in developing countries: The role of foreign direct investments and global value chains. World Development, 113, 73-88
Professor of Economics University of Pavia, Department of Political and Social Sciences, and University of Aalborg, Department of Business and Management
The interview transcript
Janna thank you very much for accepting this invitation to have a coffee break with me, how are you doing?
Thank you very much, it’s great to be here and I’m doing very well, thank you
Great to know, I’m enjoying as usual a very nice and dark this time black Colombian coffee, which coffee are you having today?
I have a lovely cappuccino.
Janna I want to talk with you about very interesting paper you wrote in which you do a critical review of entrepreneurial ecosystems, could you please tell me what the paper was about?
sure so the paper is about the concept of entrepreneurial ecosystems, they became very popular and it was mentioned a lot so a lot of policy makers were keen on applying that concept, however it was also a bit confusing and researchers at that time also had hard time to explaining all the bits and parts of that concept, so in our paper we went through systematically different research papers to explain what were the shortcomings of that concept at that time.
That sounds great so I imagined that the key notion of your paper is entrepreneurial ecosystems, do you mind giving us a definition of this concept?
yes of course entrepreneurial ecosystems are ecosystems that support or not entrepreneurship in the region and you could think about Silicon Valley, which is a popular example or another region like Stockholm or Lund, where there are different actors and factors are coordinated in a certain way that they support or not productive entrepreneurship, so we talk about actors, factors, links between them it happens in a region and we promote productive entrepreneurship.
Thank you for that that’s a very important concept indeed, in being in Lund very important to define it there um I want to know now a little bit about the findings of your paper can you tell us something about them please?
yes of course so the findings were about shortcomings as I mentioned and we found that cause and effect in the framework was not really clearly explained, another thing was that we were talking about entrepreneurial ecosystem like a network and we know a lot about networks through network theory and we have network tools but those were not yet applied to that concept, another thing were institutions institutions, such as culture or laws and regulations are very important, we know that, but also that was not really discussed in that concept yet in scientific literature, multiscalar approach was not taking up either, which means that not only looking at networks in one region, but how also how links outside of the region to national and global level play a role, also institutions play a role not only at regional level, but also at national and global levels and that is important to understand how that impact entrepreneurship comparative analysis or comparative approach was not taking up either too much, which means that researchers were focusing on certain regions and explaining that as singular cases and more comparative studies would be good to have and last point was dynamics, many discussions were about static view on entrepreneurship ecosystem, entrepreneurial ecosystem and it’s really interesting to know how we arrived there, how did silicon valley became what it is or how did Stockholm became what it is, how it started um developed their networks and became stronger with time.
So interesting thank you for that I would like you please to tell us a little bit about your personal experience or your personal motivation when you when you wrote this paper?
so this is a concept that supports or not entrepreneurship and of course that is very interesting to know because I’ve been an entrepreneur myself, I had a company and then I studied masters in entrepreneurship so anything that can help entrepreneurs dare to start a company and get support in those questions have been interesting to me.
That’s great to know honestly I’m also an entrepreneur myself and I really enjoyed your reading your paper because of that so, finally I want to ask you about the implications for for policy makers after your paper.
so the relevance to policy is that quality of entrepreneurship differ between different regions and that means that we have different type we can expect to have different types of firms in, as I mentioned Silicon Valley or Ohio or Stockholm or Lund regions and and we should understand not only how the firms themselves act and what they need but also the system they are in the ecosystem they are in, so policy makers should not only stimulate the entrepreneurial firms, but also understand the whole system and address bottlenecks in that system,
That’s really really important indeed and thank you very very much for for that paper for all your valuable insights and of course for having the time to chat with me and I wish you Janna all the best and those were all my questions and hope to see you soon in a coffee break.
My pleasure thank you very much for having me.
Thank you for watching if you’re interested in more details about this academic publication you can find here the link below. Find us on Twitter, Facebook and Youtube or listen to our podcast on Spotify, see you next time bye!
Hi, welcome to Coffee with Researchers. Today we are at the Geography of Innovation Conference in Stavanger and I’m having an actual coffee break with Roberta Rabellotti, she’s a professor of economics at University of Pavia in Italy and also a professor at University of Aalborg in Denmark.
Roberta, thank you very much for accepting this invitation to my coffee break, how are you doing?
I’m very well thank you and thank you very much for your invitation.
We’re very happy to have you here to discuss one of your papers, in which you
examine the relationship between a global value chain and foreign investments in developing countries, could you please tell me what the paper was about?
Yes, the aim of the paper is to empirically assess the relationship between the global value chain involvement and the impact on local sourcing of foreign investors and we do this on, empirically, on 19 sub-saharan African countries and Vietnam.
That’s indeed very interesting and since the notion of global value chain or GVC as you mentioned is so crucial for your paper, could you please define it?
Sure so the global value chain concept is very simple, the idea is that the production process can be divided up in different phases such as research and development, assembly, commercialization and these different phases can take place within one firm or they can be divided up by different in different companies and when these different companies are located in different countries then we have a global value chain.
And based on this definition, which ones were your main findings?
okay we did find that higher GVC involvement has a high impact on the local sourcing of foreign investors, but we also found that the position of the country in the GVC is important, we distinguish between position upstream and the GVC, which means far from the final demand is more important, it’s more beneficial in terms of the impact on the local suppliers than a downstream position, which is far from the final demand, so basically in the assembly phase and this is very good news for African countries, which tend to be specialized in industries such as agriculture or mining, because this gives them an opportunity for a positive impact of the foreign investor on the domestic economy, at the same time is also showing a shortcoming of a specialization like the one of Vietnam in the final phases of a value chain and basically in the assembly phases, I’ve been recently in Vietnam, in a OECD mission and we did find indeed that the huge amount of foreign investor that Vietnam has attracted have had a huge impact in terms of job creation, but very little impact in terms of the domestic economy and the business linkages with the domestic economy are really insignificant. Those are indeed very very important findings.
I come from a developing country so I can copy to that and so, which was main personal motivation to do this research?
I’ve been doing research on GVC for a long time now but in this particular case we did this research for the IMF, the International Monetary Fund and IMF tend to be always very much interested in the macro dimension of the economy so it was very nice to get them convinced, but you could combined a macro and the micro perspective and this is relevant in terms of understanding the implication for a big globalization, for developing countries.
So, based on your findings, which ones would you say are the key policy implications for developing countries?
I think that it’s important to understand that there is this complementarity between GVC and the presence of foreign investors, but it’s also important to realize that is not enough to attract GVC, but it’s also important to invest in institutions in good institution and in education in having a good human capital because this implies attracting foreign investors with intention of getting involved with the domestic economy and so this is much better in terms of the potentiality for spillover of these foreign investment on
the local economy.
Thank you for that, those are very very insightful findings and we wish all the best for your future research and I hope to see you again soon.
Thank you very much, it was nice to be here.
Thank you for watching, if you’re interested in more details about this academic publication find here the link below, see you next time bye-bye.Tags: developing countries, foreign direct investments, global value chains, Local sourcing