Entrepreneurial ecosystems and industry knowledge: does the winning region take all?

Plain English Summary Using the entire life of the Internet industry, we show that entrepreneurial ecosystems are composed of local and extra-local service providers. Moreover, as the industry matured, the generic local entrepreneurial support service providers were replaced by those located in the dominant region which also had developed industry knowledge. The dominant region's support providers effectively became service providers for both local and distant entrepreneurs. The principal implication of this study is that local policymakers should understand and explain to local startups the value of EE members that are extra-local, as these actors may have intimate and current industry-specific knowledge necessary to successfully build their firm. Entrepreneurs should weigh carefully whether it is more efficient to use local EE service providers or those in the region with the greatest industry knowledge. Entrepreneurial ecosystems (EE) are composed not only of startups but also the organizations that support them. Theory has been ambivalent about whether an EE is spatially bounded or includes distant organizations. This exploratory study uses a time series of all Internet industry initial public offerings (IPO) to explore the locational changes not only of startups but also four key EE service providers: lawyers, investment bankers, venture capitalists, and board directors. We find that while the startups became only slightly more concentrated, the EE service providers concentrated more rapidly, as an industry center in Silicon Valley emerged. Our results suggest that over the industry life cycle, industry knowledge exhibits a tendency to spatially concentrate, and this results in a concentration of industry-specific EE service providers that is even greater than the more gradual concentration of startups. As a result, startups, wherever they are located, increasingly source EE services from the industrial knowledge concentration.