Place-Based Advantages in Entrepreneurship: How Entrepreneurial Ecosystem Coordination Reduces Transaction Costs

Abstract

Academics and practitioners are increasingly lauding the economic and community benefits of entrepreneurial ecosystems: the inter-related forces that promote and support entrepreneurship in geographic areas. Most researchers examining entrepreneurial ecosystems have sought to identify their core attributes rather than isolating the concrete mechanisms by which entrepreneurial ecosystems influence entrepreneurs. We address this omission in ecosystems research by theorizing about a specific set of economic forces through which ecosystems influence the entrepreneurship process: cost-reduction mechanisms. We integrate and extend insights from transaction cost economics and develop a framework for understanding the cost-reducing effects of ecosystems on entrepreneurial activities. We synthesize the fragmented research on entrepreneurial ecosystem coordination and theorize that as coordination increases three types of costs – search, negotiation, and enforcement – decrease, which improves ecosystem participants’ ability to engage in entrepreneurship. Our theorizing contributes to research at the management and entrepreneurship interface and produces actionable insights for entrepreneurs and ecosystem builders.