Revisiting Entrepreneurial Ecosystems

An entrepreneurial ecosystem consists of the set of complementary factors required to start abusiness with the potential to scale up and innovate in a particular geographic space. This paper develops a frameworkusing an occupational choice model with knowledge-based hierarchies to assess entrepreneurial ecosystems. Theframework shows that improving human capital and managerial capabilities would increase the quality of entrepreneurship,while leading to a reduction in the entrepreneurship rate. Similarly, differences in the structure of output markets,endowments, or the business environment would lead to differences in the selection into entrepreneurship and thesize distribution of firms. The paper combines these elements and proposes a method to conduct entrepreneurialecosystem diagnostics that considers the key gaps at the country level, the potential and variation of localecosystems, and the resources available from public programs and enabling organizations to inform policy recommendations.