Entrepreneurship, Clusters and the Reduction of Poverty in Urban Communities

Abstract

Entrepreneurship and clusters attract a large amount of intellectual energy and financial resources for their promise to foster economic development. However, research on their joint ability to tackle grand challenges – enduring and complex social problems –lacks a rigorous theoretical approach. Based on institutional notions of exchange fields, we develop a discipline-based theoretical model to investigate how clusters moderate the relationship between entrepreneurship and poverty, an enduring grand challenge. Given the nature of poverty as a grand challenge, our model also considers initial conditions, including infrastructure, human capital and institutional legacies. We focus on the urban community level since grand challenges are commonly enacted at the local level. We draw on institutional theory to differentiate between industrial agglomerations (industry fields), non-diversified (mixed industry- professional fields) and diversified clusters (interstitial fields) as exchange fields with different conditions and characteristics. Our model shows that clusters amplify the relationship between entrepreneurship and poverty reduction; subject to environmental discontinuities, urban communities with diversified clusters are more resilient than regions with non-diversified clusters. Our central insight is that entrepreneurship increases its poverty-reducing effect when embedded in highly elaborated exchange fields. Implications for academics and practitioners to understand the field conditions that enable entrepreneurship to solve grand challenges are discussed.