Inducing heterogeneity in local entrepreneurial ecosystems: the role of MNEs

The role of entrepreneurial ecosystems in fostering economic growth has become a key priority around the globe. To develop such ecosystems, numerous countries have provided significant inducements to multinational enterprises (MNEs) to attract them to locate their operations within their borders. Despite the rise in MNEs’ entry, evidence on their efficacy in invigorating local entrepreneurial systems has been mixed. We propose that this may arise from a lack of focus on local ecosystems’ absorptive capacity, which is essential to spawning different types of entrepreneurial ventures that combine both replicative (imitative) and truly innovative local firms. This occurs as local entrepreneurs in proceed to capture, assimilate, and exploit MNEs’ different knowledge spillovers. Further, we argue that the dynamic interplay between knowledge flows through spillovers from MNEs and absorptive capacity is likely to promote the emergence, evolution, and sustainability of different types of new local firms—in some cases creating conformity and lock-ins and in others enhancing the heterogeneity of entrepreneurial activities. Over time, these developments encourage co-specialization between local new ventures and MNEs. Our analyses highlight key sources of heterogeneity in types of new firms that might emerge in a local ecosystem and how they might develop over time as a result of MNEs’ entry, creating wealth.