This presentation delivers initial results from an agent-based computer simulation of new venture formation. We examine the effects of knowledge flows and institutional mediation of these flows on the regional level of new venture formation and survival.

1. new venture knowledge
appropriation and sustainability
of regional entrepreneurial
activity
Mike Provance
Old Dominion University
17 Feb 2011
© Mike Provance and Elias Carayannis, 2010-2011

2. New ventures and regional sustainability INTRODUCTION
How does knowledge appropriation influence the
level of sustained new venture formation in a
region?
Knowledge perspective on entrepreneurship
·∙ Knowledge spillover : agglomeration economies
– Klepper and Sleeper, 2005; Krugman, 1991; Ács and
Varga, 2005
·∙ Overcoming localized spillover : social capital
– Almeida and Kogut, 1999; Rosenkopf and Almeida,
2003, Saxenian, 1994
·∙ Absorptive capacity in new venture formation
– McKelvie, Wiklund, and Short, 2007; Todorova and
Durisin, 2008
·∙ Heterogeneous systems of knowledge flow
– Carayannis and Campbell, 2007; Santarelli and
Vivarelli, 2004
·∙ Leads to regional sustainability of entrepreneurial activity
– Carayannis, 2009 2

3. New ventures and regional sustainability INTRODUCTION
Focus on the sustainability of entrepreneurship in regions
FORMATION
THRESHOLD
A
B
·∙ Entrepreneurship historically a vehicle for economic recovery in
down markets
·∙ Permanent shift in labor base of many cities in U.S. and abroad
(Canada, Europe, Japan)
– Santarelli and Vivarelli, 2004
·∙ Entrepreneurial system of activity
– Carayannis, 2009; Krueger, Reilly, and Carsrud, 2000
3

4. New ventures and regional sustainability SIMULATION DESIGN
(0) Founder commitment and
new venture creation
(1) Capability generation
(2) New venture transition to
incumbent firm
(3) Incumbent firm product
innovation
(4) Product innovation adoption
(5) Buyer resolution
(6) Institutional knowledge
mediation
4

5. New ventures and regional sustainability SIMULATION DESIGN
S TA G E 1 !
S TA G E 2 !
5

6. STAGE 1 RESULTS
6

7. New ventures and regional sustainability SIMULATION STAGE 1
Design specification of Stage 1
·∙ Six configurations of 20x20 LP torus landscape
·∙ Four runs of each configuration – >1,000,000 observations
·∙ ANOVA with Bonferroni procedure identified two focal configurations
for further analysis
7

8. New ventures and regional sustainability STAGE 1 RESULTS
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19
0 0 0 0 0 0 1 0 0 0 1 0 0 0 0 0 0 1 0 1 0
1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
2 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 1 1 1 0 0
3 1 0 0 1 0 0 0 0 0 0 0 0 0 1 1 0 0 0 0 0
4 1 0 0 0 0 0 0 0 1 0 0 0 0 0 1 0 0 0 0 0
5 1 1 1 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0
6 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 1 0 1 0
7 0 1 0 0 0 1 0 0 0 0 1 0 0 0 0 0 1 0 0 0
8 0 0 1 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 1
9 0 0 0 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 1 0
10 1 0 0 1 0 0 0 0 0 0 1 0 0 0 1 0 0 0 0 0
11 0 1 0 1 0 0 1 0 0 0 0 0 1 0 0 1 0 0 0 0
12 0 0 0 0 0 0 0 0 1 0 0 0 0 0 1 0 0 0 0 0
13 0 0 0 1 0 0 0 0 0 0 1 0 0 0 1 1 0 0 1 0
14 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 1 1 1 1 0
15 0 0 0 0 0 0 0 0 1 0 0 0 1 0 0 1 1 0 0 0
16 0 0 0 0 0 0 0 1 0 0 1 0 0 1 0 0 0 0 1 0
17 1 0 0 0 1 0 0 1 0 1 0 0 1 0 1 0 1 1 0 0
18 1 0 0 0 1 0 0 0 0 0 0 0 1 0 0 0 1 1 0 0
19 0 0 0 1 0 0 1 0 1 0 1 0 1 0 1 0 0 0 0 0
Spatial distribution of new ventures in Configuration B
8

9. New ventures and regional sustainability STAGE 1 RESULTS
9

10. New ventures and regional sustainability STAGE 1 RESULTS
10

11. New ventures and regional sustainability STAGE 1 RESULTS
11

12. New ventures and regional sustainability STAGE 1 RESULTS
Results of Tobit Regression Analysis for Conditional Probability of New Venture Formation
CONFIGURATION A CONFIGURATION B
Variable 1 2 3 4 5 6
P [serendipity for knowledge transformation] 0.018** 0.013** 0.010 0.010 0.011* 0.008
Network size -0.127*** -0.265*** -0.125*** -0.268***
Network density 0.081*** -0.288* 0.051** -0.107
Network size2 0.023*** 0.023***
Network density2 0.311** 0.128
Netw. size of new ventures normalized for age -0.207*** -0.235***
Netw. size of new ventures, normalized for age2 0.024*** 0.031***
Number of left-censored observations 664 664 664 667 667 667
Number of uncensored observation 936 936 936 933 933 933
Number of right-censored observations 0 0 0 0 0 0
Pseudo R2 19.970 26.308 14.760 17.445 23.748 13.527
LR Chi2 1,488.19 1,960.36 1,100.19 1,460.36 1,987.96 1,132.35
* p < 0.10, ** p<0.05, *** p < 0.005
12

13. STAGE 2 RESULTS
13

14. New ventures and regional sustainability SIMULATION STAGE 2
Design specification of Stage 2
·∙ Introduces institutional knowledge mediation
·∙ Three configurations of 20x20 LP torus landscape
·∙ Three runs of each configuration – >150,000 observations
·∙ Stability of results across location and configuration
14

15. New ventures and regional sustainability STAGE 2 RESULTS
Prob [New Venture Formation]
Cum. New Venture Formation Level
15

16. New ventures and regional sustainability STAGE 2 RESULTS
Cumulative # of!
New Ventures!
Prob [New!
Venture !
Formation]!
16

17. New ventures and regional sustainability STAGE 2 RESULTS
17

18. New ventures and regional sustainability WHAT DID WE LEARN?
Initial conclusions
·∙ Formal knowledge acquisition more influential (in unexpected ways)
– Smaller, denser networks
– Network building is a cost before it generates returns
·∙ Knowledge diversity leads to localization
·∙ Regional entrepreneurial support can’t build networks for
entrepreneurs – other way around
·∙ Institutions may aid or constrain regional sustainability – depending
on mission
– Knowledge variation inducing  increases probability of formation
– Know. standardizing and producing  decreases probability
18

19. THANK YOU.
19