Policy Brief:
No. 4/2015
Ekosysteemit
Impact of ecosystems: Key results of the Finnish Entergrow survey
Key questions:
What are drivers and
barriers of ecosystems?
How does corporate
governance relate to
ecosystems?
What is the role of
research and policy for
newcomers in
ecosystems?
Name of the project:
Ecosystem, creation of
new markets and the
growth of newcomers
(EnterGROW)
Researchers:
Matthias Deschryvere
Janne Lehenkari
Juha Oksanen
Nina Rilla
Kaisa Still
Recently the ecosystem concept has become very popular both in policy circles
and academic literature as ecosystem thinking may help to make investments
in a highly complex and uncertain context of new business development. This
first policy brief of the EnterGROW project reports on how decision makers of
firms see ecosystems and how they assess the impact of these ecosystems on
business activities. Research on ecosystems has addressed the question on
how big leading firms manage an ecosystem around them, mainly in the
context of the mobile phone industry (see for example Seppälä and Kenney
2012). But what about the role of ecosystems for smaller firms, and for firms
from other sectors than mobile phones? Are their perceptions on ecosystems
similar?
The EnterGROW study focuses on how newcomer entry creates business and
niche growth at different stages of ecosystem development. Newcomers are
defined as firms that recently started to occupy a niche in a new or existing
ecosystem. Three key questions are addressed: (1) What are ecosystem drivers
and barriers of these newcomers, (2) how do strategic decision makers
(management and board) of the newcomer firms relate to ecosystems, and (3)
what is the role of the research system and innovation policy measures for
newcomers in ecosystems.
Based on the scarce theoretical literature on ecosystems and start-ups we
define an ecosystem as having three main characteristics and use this
definition in our survey (Nambisan and Baron 2013):
* Dependencies between the members,
* Common goals and objectives and
* A shared set of knowledge and skills.
Following this definition, the members of an ecosystem can include firms but
also other stakeholders such as universities, research institutes, financers,
community groups, standard setting organisations or professional associations.
In addition the survey distinguishes between four different stages of
ecosystem development (pioneering, expansion, authority and renewal) as to
be able to source empirical information on the role of ecosystem dynamics
(Moore 2006).
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The aim of this policy brief is to report the key findings of the Finnish
Entergrow survey (N=502) conducted as a part of the EnterGROW project
(2014-2016) funded by Tekes. The first descriptive survey results presented
here focus on how CEOs of Finnish firms understand ecosystems, how they see
their impact on their firms and how corporate governance relates to firm
development
Introduction: coping with ecosystem challenges
Two of the key ecosystem challenges Finnish policy makers are currently facing
are to understand (1) how one can manage, develop and nurture existing and
new ecosystems in Finland and (2) how Finnish players can tap into global
ecosystems? The study contributes to innovation policy by analysing how small
and young firms can get on board and benefit from the right ecosystems to
reach growth. The right blend between big, small, old and new players has to
be found. The survey aims at comparing different kinds of innovative firms,
their ecosystems and their corporate governance as to get insights in how
entry in different stages of ecosystem development creates new business and
growth. Innovative firms are defined as having applied for funding to the
Finnish Funding agency for innovation.
The Finnish Entergrow survey
During September-October 2014 a telephone survey was addressed to the
decision makers (CEO’s) of Finnish innovative firms as to improve our scattered
understanding on:
(1) How firms understand networks and dependencies of the firm,
(2) How ecosystems affect the firm (ecosystem impact), and
(3) How corporate governance relates to the firm development
The survey was first piloted and targeted at all firms that recently (2009-2013)
showed up as a Tekes applicant or as an innovator in VTT’s SFINNO database of
Finnish innovations. The computer aided telephone survey returned 502
completed questionnaire answers (10,5% of the relevant population) out of
which 473 had been Tekes applicants. The remainder of this brief will focus on
the survey results for these Tekes applicants.
Key results
One third of the firms
report they are standalone firms
After the respondents were informed about our ecosystem concept not all
firms reported to belong to an ecosystem and many reported to belong to
several ecosystems. As a matter of fact a considerable one third of the firms
were reported not to belong to any ecosystem. This means that they were not
seen as being dependent on ecosystem members neither as having common
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targets or shared skills and knowledge between ecosystem members. They
basically perceive themselves as stand-alone firms. Most of the firms that
reported to be part of an ecosystem belong to multiple ecosystems (41% of all
firms) whereas only 25% of the firms reported to belong to one ecosystem.
When analysing the role of ecosystems for firms it is therefore important to
recall that firms maybe participating in different ecosystems. In the survey we
focused on the role of the most important ecosystems.
According to the descriptions given in the survey responses, the most
important ecosystems of innovative firms can refer to vastly different types.
From the name and description of more than 300 ecosystems identified in the
survey, one can distinguish ecosystems that refer to industry or sector, to
companies, to supply chains, to clients, to most important players, to
universities and RTO’s, to cities and regions and to an international dimension.
What this actually means is that the ecosystem definition given in the survey
was often interpreted along the lines of more traditional concepts such as
business networks, industries, sectors and supply chains.
As the term ecosystem is a relatively new term for Finnish firms and the risk
existed that the questions on ecosystems would deliver insufficient
information, firms were also asked about their networks and about the key
characteristics that make up an ecosystem: dependencies between the
members, sharing knowledge/skills and having common targets with them.
This information on ecosystem and network engagement is illustrated in the
below figure 1.
Figure 1 Ecosystem and network engagement of
Finnish innovative firms No Yes
Firm participates in ecosystem
66%
One Ecosystem
25%
Multiple Ecosystems
41%
Firm participates in network of external firms
57%
Dependencies to be able to realize company targets
dependent on a firm
34%
dependent on a private financer
13%
dependent on a public financer
17%
dependent on a university or RTO
3%
dependent on an association
5%
Firm sets common targets with other firms one depends on
50%
Financial targets
27%
Non-financial targets
24%
Firm shares knowledge and skills with network
68%
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Phase of development of the ecosystem
As already mentioned ecosystems can be at different stages of development.
In our sample there are relatively more start-ups in ecosystems that are in a
pioneering (44%) or expansion stage than in an authority or renewal stage
(12%). Interestingly, also in maturing ecosystems and even in declining
ecosystems growing firms occur. Therefore when one talks about pioneering,
expanding, maturing and renewing ecosystems one obviously refers to an
average development. Moreover, 31% of the firms do not actually know which
development stage their most important ecosystem has reached. The rest of
the firms either report the ecosystem to be in the pioneering phase (15%), the
expanding phase (28%), the maturing phase (20%) or the declining phase (6%).
Final observation of importance is that one industry (such as software or
mechanical engineering) typically contains several ecosystems at different
stages of development. This means that industry evolution can be better
understood if one knows the different ecosystems (and their stage of
development) constituting that industry.
Assessing ecosystem impact on the firm
Figure 2 The ecosystem impact on Finnish innovative firms
DISAGREE
-100 %
-80 %
-60 %
AGREE
-40 %
-20 %
0%
20 %
40 %
Less extended network without ecosystem
80 %
100 %
88 %
Innovate better
76 %
Slower progress without ecosystem
77 %
Enter new domestic and/or foreign markets
76 %
Increase market share
74 %
Engage in more ambitious projects
66 %
Not developing same level of skills without ecosystem
66 %
Collaborate with knowledge centres
Limited the growth of the company
60 %
43 %
8%
Note: Figure is based on the degree of agreement on nine statements (see left side figure) that
were self-assessed by the firms and that refer to the last 5 years. The original Likert scale from 1
(totally disagree) to 7 (totally agree) was simplified into two categories (tend to) disagree (1 to 3)
and (tend to) agree (5 to 7).
We asked about the role of the ecosystem to which the firms belong. A vast
majority (at least two thirds) of the CEOs agree that the most important
ecosystem has had a positive impact on the firm. It is not straightforward to
measure ecosystem impact and it may take a long time before the benefits of
ecosystem residence translate into objectively measurable performance
changes such as growth in sales and employment. Therefore we incorporated a
set of perceptual measures in our survey that capture intermediate impact
(Falk 2007). From figure 2 one can see that foremost – and this does not come
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as a surprise - ecosystems have had an impact on the network extension of
Finnish firms (88%). Furthermore ecosystems have helped three quarters of
the firms to progress, to engage in more ambitious projects, to innovative
better and to enter new national and international markets. However, some
higher shares of disagreement on the impact of ecosystems also shows up as
one fifth of the firms do not agree that without their most important
ecosystem they could not have developed the same level of skills. In addition
we see comparable shares of firms agreeing (43%) and disagreeing (44%) on
the statement that their most important ecosystem enabled them to network
with universities and public knowledge centres.
Ecosystem barriers to growth
On average there seems to be a clear signal that ecosystems do not block of
the growth of their members. The 8% of firms that do see ecosystems blocking
their growth have identified the following main barriers to growth:
Ecosystem barriers to
growth are listed by 8%
of the firms
Competition between ecosystem members
Use of resources (money, people, time)
Ecosystem dynamics are (too) slow
Limits with who you can work
Scattered or concentrated ownership of ecosystem
Narrowing the scope
Different expectations of the members from different industries
Although these barriers only apply to a minority of firms it can be expected
that the aggregate effect could be considerable. Further qualitative research
on the barriers of firms encounter while residing in ecosystems seems to be
valuable.
Ecosystem impact on start-ups
Ecosystems are more
important for start-ups
especially when it
comes to entering new
markets
Are there differences in ecosystem impact between firms in start-up phase and
other firms? Overall start-up firms tend to agree to a greater extent that
ecosystems have had a positive impact on their activities. In comparison with
older firms, we found statistically significant evidence that ecosystems matter
more for the extension of start-ups’ networks and entrance to new domestic
and foreign markets. Start-ups seem to be more dependent on the ecosystem,
especially when it comes to finding new markets and related growth. Indeed,
especially the youngest firms (less than 5 years) do not agree that ecosystems
have limited their growth.
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National subsidies and knowledge support from universities and RTO’s
Firms that report to receive national subsidies at the time of the survey have
somehow different ecosystem impact than the rest of the firms (see appendix
1.1). For them, ecosystems have helped to progress and to collaborate with
knowledge centres. However, very little evidence shows that the impact on
entering new markets and higher market shares would be different. These
results have to be interpreted with care as the majority of the firms that have
reported not to get currently national subsidies are known to have received
Tekes funding during the 2009-2013 period.
National subsidies
receivers have a
different ecosystem
impact
Firms
that
receive
support
from
universities and public
research centres report
clearly more ecosystem
impact but they do not
differ
in
their
ecosystems impact on
market expansion
When comparing knowledge support receiving firms (firms that receive
support from universities and public research institutes) with other firms in
sample, it was found that their ecosystems brought them statistically more
impact in five out of nine impact dimensions (see appendix 1.2). At the time of
the survey one third of the firms in sample received knowledge support via the
collaboration with public research institutes or universities. For knowledge
support receiving firms, ecosystems brought better innovations, progress, skill
development and not surprisingly better collaboration with universities and
public research institutes. However, knowledge-receiving firms do not differ
from other firms in their ecosystems impact on market expansion (new
markets or higher market share).
High tech firms
High tech firms develop
core
technologies
themselves
At first sight it may be surprising to see that on average high tech firms report
a significant lower ecosystem impact score for the collaboration with
universities and public research institutes (3.44 vs. 4.22). The logic behind
these scores is that high tech firms actually develop their core technologies
often themselves. Indeed only one third of the firms that receive knowledge
support from universities and RTO’s are high tech firms.
Corporate governance
The board of directors can play a role in spreading ecosystem thinking. In
addition the board of directors can include members of different ecosystems.
The composition and diversity of the board can play an important role for the
board performance and for the performance of the firm (Knockaert and
Ucbasaran 2013). However, little is known about the relation between the
board composition, the board performance and ecosystems. Figure 3 shows
that in the Finnish EnterGROW sample the majority of the key organisations of
the firm’s ecosystems are not represented in their board. For almost one fifth
of the firms it is even challenging to answer who is the most important
organisation in the ecosystem.
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Key ecosystem players
are
not
often
represented
in
the
board of directors
Figure 3 Representation of key ecosystem organisations
in the board of directors of Finnish innovative firms
18 %
23 %
YES
NO
MISSING INFO
59 %
The service performance of the board
Start-ups give the board
of directors better
scores for establishing
external contacts
In addition to traditional monitoring and control function boards may engage
in a less well understood service role. Board service involvement may
materialize in enhancing company reputation, establishing external contacts
and giving counsel and advice (Zahra and Pierce 1989). According to Finnish
firms the service role of the board of directors is important and mainly takes
place by giving council and advice. In addition the board also contributes –
albeit to a lesser extent – to the company reputation and to establishing
external contacts. The firms in start-up phase give their board significantly
better scores for establishing external contacts than the other firms.
Diversity of the board of directors
The board of directors in Finnish firms shows some diversity in the functional
background of their members and to a lesser extent in their industry
background. On the level of education, founding experience, executive
experience and international experience the diversity is small. Start-ups show
significantly more industry diversity in their board composition.
Start-ups have more
industry diversity in
their board
Performance of the board of directors versus the advisory board
18%
of
Finnish
innovative firms have
advisory boards
Advisory board often
perform better service
roles than the board of
directors
A new phenomenon in Finnish firms is to set-up external advisory boards (18%
of the sample) in addition to having the obligatory board of directors.
Especially in start-ups and growing firms this practice is observed. In a highly
complex and fast-changing environment it may be needed to get further
trusted regular advice nearby. When comparing the performance of the
advisory board with the one of the board of directors it appears that the
former does better when it comes to giving counsel and advice and when it
comes to establishing external contacts. The board of directors does a better
job in enhancing the company reputation.
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Conclusions
From the perspective of Finnish innovative firms, thinking in the terms of
ecosystems is difficult. Most of these firms actually report belonging to
multiple ecosystems and one third of the firms report not to belong to any, so
to be “stand-alone firms”. Often the reported descriptions of ecosystems
actually refer to older better known concepts such as supply chains, industries,
sectors and networks. Overall the impact of ecosystems seems to be positive
although for about 8% of the firms there appears to be a concern that
ecosystems block their growth. An empirical analysis of what drives ecosystem
impact seems worthwhile while ecosystem growth barriers could be analysed
in more depth with qualitative research. The link between corporate
governance and ecosystems is not well understood and based on the
EnterGROW survey it was found that less than one fourth of the firms have
representatives of the most important organisations of their ecosystem in their
board of directors. A new phenomenon, especially for younger and growing
firms, is the use of an advisory board to complement the board of directors.
For service roles voluntary advisory boards do actually perform often better
than the obligatory board of directors. Further research attention will be put to
the analysis of board performance and the role of ecosystems.
Policy challenges and opportunities
Based on the observations made during the descriptive analysis of the Finnish
EnterGROW survey data the following issues are worth raising and should
stimulate further policy discussions that will benefit the final outcome of the
project.
Policy makers should decide if their policy measures on networks and
ecosystems are different. And if so, why and how?
One third of the Tekes applicants in the sample stated they do not
belong to any ecosystem. As a matter of fact not all CEO’s do
understand the concept well. This raises the concern if ecosystem
thinking should be further spread to Tekes applicants.
There exists a lot of heterogeneity in ecosystems and in how decision
makers of firms understand ecosystems. But which kinds of
ecosystems could qualify for public support? More generally should
policy measures actually target ecosystems and platforms rather than
single firms? Who would the orchestrators and policy measure
beneficiaries of these platforms than be? Or could opting for an
ecosystem orchestration policy be too risky or even harmful. To
improve our understanding on the channels through which ecosystem
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impact is affected we suggest a deeper analysis on the determinants of
ecosystem impact.
Firms that receive support from universities and public research
centres report clearly more ecosystem impact but they do not differ in
their ecosystems impact on market expansion. Is this a result we would
expect or is this worrying?
The main challenge for firms seems to relate to new markets and
expanding market share. For start-up firms the impact of the
ecosystem on entering new markets is higher than for other firms.
Therefore such mechanisms should be promoted that connect small
players to international ecosystems, not in the first place to VC’s but
rather to clients. Should policy facilitate a good relationship with
important clients and which kind of policy measures could work here?
The board of directors may be an important vehicle in stimulating
ecosystems via their composition and service roles. Traditionally the
service role of boards has not been in the focus of policy measures
(apart from some countries such as the UK). Further research will
analyze how board service performance relates to ecosystem and
other dimensions. In addition there seems to be a growing role for
external advisory boards. Policy makers should follow up how these
corporate governance practices are evolving and could be improved
where necessary.
References
Deschryvere, M., Knockaert, M., Lehenkari, J., Oksanen, J., Rilla, N., Still, K. (2015).
Impact of ecosystems: Key insights from the Finnish EnterGROW survey. VTT
Technology Series, forthcoming.
Falk, R. (2007). Measuring the effects of public support schemes on firms’ innovation
activities: Survey evidence from Austria. Research Policy, 36(5), 665-679.
Knockaert, M., Ucbasaran, D. (2013). The Service Role of Outside boards in High Tech
Startups: A Resource Dependency Perspective. British Journal of Management, 24, 6984.
Moore, J.F. (2006). Business Ecosystems and the view from the firm. The Antitrust
Bulletin, 5, 31-75.
Nambisan, S., Baron, R.A. (2013). Entrepreneurship in Innovation Ecosystems:
Entrepreneurs’ Self-Regulatory Processes and Their Implications for New Venture
Success. Entrepreneurship Theory and Practice, September 2013, 1071-1097.
Seppälä, T. and Kenney, M. (2012). Competitive Dynamics, IP Litigation and
Acquisitions – The Struggle for Positional Advantage in the Emerging Mobile Internet.
ETLA Discussion Papers, 1288.
Zahra, S., Pierce, J. (1989). Boards of directors and corporate financial performance: a
review and integrative model. Journal of Management, 15, 291-334.
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Appendix 1.1 Ecosystem impact for national subsidies supported Finnish
innovative firms (n=296) versus the other firms (n=177).
The use of subsidies, loans or capital from Tekes or
other national public financers at the time of the survey
ECOSYSTEM IMPACT MEASURES:
Less extended network without ecosystem
Innovate better
Slower progress without ecosystem
Enter new domestic and/or foreign markets
Increase market share
Engage in more ambitious projects
Collaborate with knowledge centres
Not developing same level of skills without ecosystem
Limited the growth of the company
SUBSIDIES
Mean
5,93
5,43
5,58
5,44
5,11
5,46
4,15
5,01
1,74
NO SUBSIDIES Signif.
Mean
6,10
5,18
5,24
5,14
5,07
5,34
3,53
4,71
1,78
'
*
+
**
'
FULL SAMPLE
Mean
S.D.
5,99
5,34
5,46
5,33
5,10
5,42
3,94
4,91
1,76
0,072
0,087
0,090
0,093
0,091
0,082
0,122
0,099
0,072
Note: Mean should be compared with Likert scale from strongly disagree(1) to strongly agree(7). Statistical significance
of two tailed t-tests in means: *** p<0.01, ** p<0.05, * p<0.10, + p<0.15, ' p<0.20.
Appendix 1.2 Ecosystem impact for firms that receive knowledge support from
universities and public research institutes (n=157) versus the other firms
(n=316).
The use of knowledge support from public research
institutes and universities at the time of the survey:
ECOSYSTEM IMPACT MEASURES:
Less extended network without ecosystem
Innovate better
Slower progress without ecosystem
Enter new domestic and/or foreign markets
Increase market share
Engage in more ambitious projects
Collaborate with knowledge centres
Not developing same level of skills without ecosystem
Limited the growth of the company
SUPPORT
Mean
6,03
5,59
5,80
5,27
5,04
5,63
4,96
5,30
1,68
NO SUPPORT Signif.
Mean
5,96
5,18
5,23
5,38
5,13
5,27
3,26
4,65
1,80
**
***
**
***
***
FULL SAMPLE
Mean
S.D.
5,99
5,34
5,46
5,33
5,10
5,42
3,94
4,91
1,76
0,072
0,087
0,090
0,093
0,091
0,082
0,122
0,099
0,072
Note: Mean should be compared with Likert scale from strongly disagree(1) to strongly agree(7). Statistical significance
of two tailed t-tests in means: *** p<0.01, ** p<0.05, * p<0.10, + p<0.15, ' p<0.20.
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