Software Startup Ecosystems Maturity Model, 1–12

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Software Startup Ecosystems Maturity Model, 1–12 Cukier and Kon Journal of Innovation and Entrepreneurship (2018) 7:14 Journal of Innovation and https://doi.org/10.1186/s13731-018-0091-6 Entrepreneurship RESEARCH Open Access A maturity model for software startup ecosystems Daniel Cukier* and Fabio Kon *Correspondence: [email protected] Abstract Department of Computer Science, University of São Paulo, Rua do Resulting from the digital revolution of the last decades, multiple startup hubs Matão, 1010, São Paulo, SP, Brazil flourished across the globe in the past 10 years. Healthy environments for the development of innovative, nascent digital enterprises require a well-balanced variety of agents and supporting processes, which we collectively call a software startup ecosystem. These ecosystems are fundamental for the insertion of countries in the digital economy of the twenty-first century. However, having all the elements that compose such environments in the most advanced and prolific state is difficult and relatively rare. In this paper, we show that startup ecosystems can evolve over time passing through a sequence of maturity level stages. For that, we introduce a maturity model for software startup ecosystems based on systematic qualitative research around a multiple case study we conducted across three ecosystems. The study was carried out over 4 years and included an extensive array of data collection mechanisms such as literature reviews, expert interviews, and observations in three relevant ecosystems (Tel-Aviv, São Paulo, and New York); all collected data were analyzed with techniques based on Grounded Theory, resulting in a conceptual framework of software startup ecosystems. Finally, we developed a maturity model for startup ecosystems, which helps us understand their evolution and dynamics. Moreover, it can serve as a basis for stakeholders in less mature ecosystems to analyze their environment, identify weak spots, and propose policies and practical actions for improving their ecosystems over time. Keywords: Qualitative methods, Software startups, Startup ecosystems, Maturity model, Entrepreneurship, Innovation Background In the last two decades, we observed the rise and maturation of many software startup ecosystems around the world. The technological revolution has driven society evolution, prompted by broader access to the Internet and the popularization of mobile devices; likewise, society’s progress drives technological evolution in a co-embedded evolution phenomenon. The Global Entrepreneurship Monitor, a long-term study conducted by a consortium of universities, shows that human capital and social capital co-evolve (Reynolds et al. 2000;Singeretal.2015). Given the hundreds of technological clusters present in different countries, it is difficult to identify each ecosystem’s level of devel- opment. This paper proposes a methodology to measure such maturity with respect to multiple factors, enabling the ability not only to compare different ecosystems, but, more © The Author(s). 2018 Open Access This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made. Cukier and Kon Journal of Innovation and Entrepreneurship (2018) 7:14 Page 2 of 32 importantly, to propose practical actions that can lead to meaningful improvements in existing ecosystems. As Daniel Isenberg argues, “There’s no exact formula for creating an entrepreneurial economy; there are only practical, if imperfect, road maps.” Instead of aiming to imi- tate successful ecosystems, each region should identify and develop its own qualities (Isenberg 2010). Isenberg also proposes a conceptual model for entrepreneurship ecosys- tems, which maps different agents in the ecosystem and proposes that they must work together. The entrepreneurship ecosystem can be viewed as a new paradigm for eco- nomic policies (Isenberg 2011). Isenberg’s model is based on the OECD entrepreneurial determinants, which proposes indicators for measuring an ecosystem’s performance in six areas: regulatory framework, market conditions, access to finance, creation and diffusion of knowledge, entrepreneurial capabilities, and entrepreneurship culture. A limitation of this model is that it misses ecosystems’ dynamics and the connectivity aspects. Economic theory shows that entrepreneurs are the prime forces in modern eco- nomic development. Significant changes of economic systems are impossible without them (Schumpeter 1934). Besides creating new jobs and generating wealth in society, entrepreneurs and their startups foster the technological innovation in industries. New venture creation is statistically linked to both job creation (Acs and Armington 2004; Endeavor Brasil 2015) and regional development (Kasturi and Subrahmanya 2014). High rates of entrepreneurial activity are strongly related to the growth of local economies. Entrepreneurial market activity is mostly a decentralized and unplanned process (Lewin 2011; Koppl 2008), in which innovative companies must effectively interact with each other to achieve success (Olsson and Bosch 2015); thus, technological entrepreneurs act in the context of complex entrepreneurship ecosystems, which can be viewed as a new paradigm for economic policies (Isenberg 2011). In our research, we focused on technology entrepreneurs and their software startups: companies with a potential for high-growth and scalable business models (Blank and Dorf 2012). Startups usually have to pivot their strategy, especially in the first 2 years, until they find their product-market fit (Terho et al. 2015). A supportive startup ecosystem can help entrepreneurs during this unstable period. We define a startup ecosystem as a limited region, roughly within a 50-km (or 1-h travel) range, formed by people, their startups, and various types of supporting organizations, interacting as a complex system to create new startup companies and evolve existing ones. Porter introduced the concept of clusters in 1990 (Porter 2011), as a geographically close group of interconnected companies and associated institutions in a particular field. Differently from the cluster concept, which can be viewed as a static asset, ecosystems are dynamic complex structures in which stakeholders co-evolve (Moore 1993)basedonboth competition and cooperation (Peltoniemi 2004). Thus, clusters are components within ecosystems. Besides, we define a startup ecosystem as a limited geographic region, the boundaries of these regions are not perfectly clear, and the ecosystem is not dependent on these borders to exist. Boundaries are useful specially for the purpose of defining limits between different ecosystems that are geographically close. Therefore, for example, San Francisco and San Jose are far enough to be considered two different ecosystems, but at the same time, they are close enough to form a single larger ecosystem known as the Silicon Valley. Similarly, Tel Aviv, Haifa, and Jerusalem are three distinct ecosystems, all of them within the broad Israeli ecosystem. Cukier and Kon Journal of Innovation and Entrepreneurship (2018) 7:14 Page 3 of 32 Any healthy entrepreneurial ecosystem directly impacts on entrepreneurs’ lives (Jayshree and Ramraj 2012). Several studies try to identify gaps in innovation ecosystems and propose practical actions to improve their performance, with examples in Germany (Voss and Müller 2009;Sternberg2013), India (Kasturi and Subrahmanya 2014), Portugal (Vaz et al. 2014), and Israel (Kon et al. 2015). Some industry initiatives such as the Startup Genome1 try to map the characteristics of all startup ecosystems around the globe. This paper is based on a multiple case study (Stake 2013) applying rigorous qualita- tive methods (Corbin and Strauss 2007;Stoletal.2016; Maxwell 2012) and carried out in three different software startup ecosystems: Tel Aviv (Israel), São Paulo (Brazil), and New York (USA). Rather than only mapping the innovation ecosystems’ characteristics and proposing actions and policies for those locations (Frenkel and Maital 2014), the pri- mary objective of this research was to understand their dynamics and explore how they evolved over time. Understanding each ecosystem’s characteristics as a snapshot in time is very important, but evaluating their dynamics allowed us to understand the path that ecosystems followed to grow in a sustainable way. By mapping the road, we can show to ecosystem stakeholders the next steps they need to take to advance in the evolutionary process. The general objective of this research was to advance the understanding of how soft- ware startups work, what are the elements that influence their behavior, and how startups relate with other players in their ecosystem. From this general objective, we derived our specific objectives: (1) achieving a better comprehension of existing startup ecosystems, with the development of a generic conceptual framework of software startup ecosys- tems; (2) instantiating the conceptual framework at, at least, three different ecosystems, in three different regions of the world, analyzing their characteristics, strengths, and weak- nesses; (3) developing a methodology to compare multiple ecosystems, highlighting their similarities and differences; and (4) creating a model to map ecosystem evolution and dynamics. The literature
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