Hybrid Organizations and the Logics of Entrepreneurial Ecosystems

Hybrid Organizations and the Logics of Entrepreneurial Ecosystems Philip T. Roundy UC Foundation Assistant Professor of Entrepreneurship Department of Marketing and Entrepreneurship University of Tennessee at Chattanooga College of Business 615 McCallie Avenue Chattanooga, TN 37403-2598 Tel. 330-206-2458 Fax: 423-425-4158 Email: [email protected] Pre-Print of an article in: International Entrepreneurship and Management Journal Roundy, P. T. (2017). Hybrid organizations and the logics of entrepreneurial ecosystems. International Entrepreneurship and Management Journal, 13(4), 1221-1237. https://link.springer.com/article/10.1007%2Fs11365-017-0452-9 1 Hybrid Organizations and the Logics of Entrepreneurial Ecosystems Abstract Growing evidence suggests entrepreneurial ecosystems are a potent engine for economic and community development. Prior research has identified an ecosystem’s culture as serving a critical role in its creation and functioning. However, it is not clear how the cultural forces in entrepreneurial ecosystems develop and are shaped by individuals, organizational actors, and ecosystem-level institutions. Drawing from institutional theory and theories of multiple logic organizations (i.e., hybrids), this paper combines entrepreneurship and management research to argue that entrepreneurial ecosystems are influenced by two dominant institutional logics: entrepreneurial-market and community. By combining both logics, hybrid support organizations, such as incubators, accelerators, and small business development centers, play a unique role in entrepreneurial ecosystems by exposing participants to the two guiding logics. Furthermore, it is argued that intra-ecosystem variation among hybrid support organizations in the dominance of entrepreneurial-market and community logics, will result in a diversity of entrepreneurship within an ecosystem. This theorizing contributes to the understanding of entrepreneurial ecosystems by shedding light on the role institutional logics and hybrid support organizations play in ecosystem formation, structuring, and function and by explaining the genesis of the cultural values that guide ecosystem participants. Keywords: entrepreneurial ecosystems; regional innovation system; new venture creation; hybrid organizations; institutional logics 2 Hybrid Organizations and the Logics of Entrepreneurial Ecosystems INTRODUCTION Entrepreneurial ecosystems are the geographically-bounded systems of individuals, organizations, physical resources, social structures, and cultural values that generate new venture activity (Adner 2017; Audretsch and Belitski 2017; Autio et al. 2014; Breznitz and Taylor 2014; Isenberg 2016; Mack and Mayer 2016; Neck et al. 2004; Nylund and Cohen 2016; Spigel 2017; Spilling 1996; Stam 2015). Communities with thriving entrepreneurial ecosystems exhibit high concentrations of entrepreneurial activities, including the founding of new organizations, the creation of novel products, services, technologies, and community initiatives, and investments in early-stage ventures (Carayannis et al. 2016; Feld 2012; Saxenian 1994; Spigel 2017). Scholars, practitioners, and policy-makers are motivated to understand the functioning of entrepreneurial ecosystems because of the rapidly accumulating evidence that entrepreneurship can produce economic development, technological advancement, and wealth creation (Audretsch et al. 2006; Leyden 2016; Schumpeter 1934). In addition to entrepreneurship’s function in economic and community development, the increasing attention paid to entrepreneurial ecosystems (EEs) also stems from the growing awareness that, even though entrepreneurship is intimately linked to characteristics and abilities of individuals (e.g., alertness to recognizing and creating opportunities; Kirzner 1979; Roundy et al., 2017), entrepreneurs do not operate in isolation (Autio et al. 2014; Greve and Salaff 2003; Van de Ven 1993). Entrepreneurship is a relationally-embedded, social activity (Granovetter 1985). Entrepreneurial ecosystems encapsulate “certain attributes [that] exist outside the boundaries of a firm but within a region that contribute to the competitiveness of a new venture” (Spigel 2017: 51). 3 Research has focused on identifying the key components of EEs by exploring the creation and functioning of large and established ecosystems, such as Silicon Valley, California (Bahrami and Evans 1995), Boulder, Colorado (Neck et al. 2004), and Austin, Texas (Oden 1997), emerging ecosystems, such as Chattanooga, Tennessee (Motoyama et al. 2016), and even rural entrepreneurial ecosystems, in countries such as Bangladesh (McKague et al. 2017). This work is often built on case studies of EEs, which reveal that ecosystems require a specific set of elements to thrive (Mack and Mayer 2016; Roundy, 2017). For instance, in a study of the Waterloo, Ontario and Calgary, Alberta entrepreneurial ecosystems, Spigel (2017) found that attributes such as strong markets that create entrepreneurial opportunities and attract skilled labor, networking between entrepreneurs that provides skills, support, and mentorship, and cultural orientations towards uncertainty and technology entrepreneurship interact to influence the functioning of entrepreneurial ecosystems. In addition to the material components of EEs, such as transportation infrastructure and the availability of financial capital, the creation and development of EEs is dependent on cultural components of the system (Isenberg 2010). For example, based on experiences in the Boulder, Colorado EE, Feld (2012) claimed that it was important for EE participants to share specific cultural values, such as “giving before you get” and favoring inclusivity. Studies of other ecosystems have uncovered other influential values, which operate as “simple rules” that guide EE participants in their behaviors and interactions (Bingham and Eisenhardt 2011; Roundy et al. 2016). EEs are also dependent on general cultural attitudes, such as tolerance towards risk and acceptance of business failure without stigmatization (Graves 2011). Despite findings pointing to the importance of the cultural components of EEs (Audretsch et al. 2017; Saxenian 1994), a theory of the cultural forces at play in entrepreneurial ecosystems, 4 as well as how these forces influence and are shaped by individuals, organizational actors, and system-level institutions, has not been developed. The lack of an overarching theoretical framework to explain the genesis and effects of cultural forces in EEs produces an important theoretical puzzle: it is not clear where the cultural values that guide EE participants come from or how these values are transmitted to (and among) participants. Thus, it is hard to answer why participants in well-functioning EEs are guided by values that, for example, lead them to “simultaneously cooperate and compete” (Spigel 2017: 51). Prior research also does not elucidate where such values originate or how EE participants learn and adopt them. This is an important omission in the collective understanding of EEs because the shared values in an EE help to provide the coherence and structure which gives it shape and influences its ability to produce entrepreneurial activity (Isenberg, 2010; Roundy et al. 2016). To address this critical gap in knowledge of EEs, in this paper, institutional theory (Thornton and Ocasio 2008) and theories of multiple logics (Besharov and Smith 2014) are introduced to the EE literature. Drawing from work in institutional theory, which emphasizes how institutional logics – "the formal and informal rules of action, interaction and interpretation that guide and constrain decision makers” (Ocasio and Thornton 1999: 804) – influence individuals’ values and beliefs and the structure of organizations, it is proposed that two logics will be dominant in EEs: an entrepreneurial-market logic and a community logic. Together the two logics influence the behaviors and interactions of EE participants and give structure to an ecosystem. If entrepreneurial-market and community logics are potent influences in EEs, it is necessary to understand how and through what mechanisms EE participants are exposed to these two logics. Building on work on hybrid organizations (Battilana and Lee 2014) – organizations 5 that blend multiple institutional logics – it is argued that a specific type of hybrid, hybrid support organizations, play a critical role in introducing and spreading dual institutional logics. Hybrid support organizations include incubators, accelerators, small business development centers, and other organizations that provide entrepreneurship-oriented services to EE participants. As argued, these organizations are hybrids because their operations combine an entrepreneurialmarket logic and community logic. When EE participants interact with hybrid support organizations, oftentimes at formative stages in the entrepreneurial process, they gain exposure to the logics that drive these organizations and that are, in turn, dominant in EEs. By developing a comprehensive theory of how institutional logics and hybrid support organizations play an integral role in the formation, structuring, and functioning of EEs, this paper combines entrepreneurship and management research to detail how institutional theory, and specifically theories of institutional logics, inform the study of EEs. It also responds to calls for further research on how support programs and policies influence the overall effectiveness of ecosystems (Spigel 2016b) by going beyond hybrid support organizations’ function as service providers and examining the role they play in EE construction and development. The remainder of the paper is organized as follows. First, in the next section, a review is provided of relevant research on EEs, institutional logics, and hybrid organizations. Extended attention is given to the substantive omissions existing at the intersection of the three literatures. After reviewing pertinent literatures, theory is developed, first about the role of institutional logics in the formation and development of EEs and then about how hybrid organizations serve a key function in EEs by exposing participants to entrepreneurial-market and community logics and promoting diverse forms of entrepreneurship. The paper concludes with discussions of the implications of the theorizing for scholars, practitioners, and policy-makers and directions for future scholarship. 6 LITERATURE REVIEW The Under-Explored Role of Culture in Entrepreneurial Ecosystems The literature on entrepreneurial ecosystems is populated by studies, usually focusing on single ecosystems, which aim to isolate the critical components of an EE. This research has identified the individuals, such as entrepreneurs, investors, and employees with entrepreneurship-specific human capital, and the organizations, such as incubators, angel groups, venture capital funds, and universities, that are critical to the functioning of an EE (e.g., (Bahrami and Evans 1995; Feldman 2001; Isenberg 2010). These key individuals and organizational actors create and are dependent on three types of resources, which influence entrepreneurial activity (Spigel 2017). Physical resources include transportation and technological infrastructure, such as adequate highway systems and high-speed internet access (Mack and Rey 2014). Social resources include networks of connections among the agents within EEs and to resource providers outside the system through which information and other resources flow (Stuart and Sorenson 2005). For instance, Konczal and Motoyama (2013) examine the important role played by “1 Million Cups” networking events in creating connections among EE participants. Cultural resources have received less attention and include shared narratives of EE participants (e.g., stories of entrepreneurship successes) and shared values (Roundy 2016). Although several studies have called attention to the importance of cultural resources (e.g., Spigel 2016a), their origins and the mechanisms through which they are spread among EE participants are under-explored. Thus, it is not clear from prior research how cultural values, such as towards embracing entrepreneurial behaviors or cooperation, develop in EEs. Institutional Logics and Hybrid Organizations 7 Cultures and the values that constitute them are shaped by institutional logics: patterns of related behaviors, schemas, and goals (Thornton and Ocasio 2008). Logics are directly tied to institutions, “supraorganizational pattern[s] of human activity which constrain both the ends and means of organizational behavior” and “provide vocabularies of meaning and rules determining what is to be valued.” (Friedland and Alford 1991: 243). There are several dominant institutions, such as family, community, religion, and the market (e.g., Thornton et al. 2012), each with an associated logic. Each logic is comprised of a set of values and goals which, depending on the degree to which they are adopted and internalized, influence cognition and action. For example, the market logic (also referred to as an “economic” or “capitalist” logic) consists of values associated with efficiency, competition, wealth accumulation, profit maximization, and value capture (Thornton et al. 2012). Although logics and their underlying institutions can be distinguished from one another, there are some points of commonality. For instance, family, community, and religion logics may all contain behaviors associated with “helping others” (Friedland and Alford 1991; Miller et al. 2011). However, the target of the behaviors (e.g., helping familial relations versus helping members of a larger community) will differ. Also, logics are not monolithic. For example, as will be argued, an entrepreneurial-market logic is a more specific set of actions (involving the pursuit of innovation, creativity, and the development of new business models) than the behaviors associated with a market logic. Thus, each logic contains several “core” values and sets of associated behaviors as well as variations associated with specific manifestations of the logic. Overall, logics shape mindsets and “provide a coherent set of organizing principles for a particular realm of social life” (Besharov and Smith 2014: 366). 8 A stream of research in institutional theory is examining an increasingly prevalent phenomenon: the creation of “hybrid” organizations that pursue multiple, often conflicting, institutional logics (Battilana et al. 2015; Pache and Santos 2013). Organizations that seek to blend multiple logics (i.e., to engage in “institutional plurality”; Skelcher and Smith 2015) can experience logic co-existence, which creates new opportunities, gives an organization access to broader resources, and allows them to be pioneering and innovative (Mair et al. 2015: 715) or logic conflict, which leads to performance declines and organizational demise (Battilana and Dorado 2010; Tracey et al. 2011; Zilber 2012). Most research has focused on how hybrid organizations manage the tensions that arise from attempts to combine multiple logics. For instance, several studies have examined logic plurality in social enterprises, ventures that seek to blend market and community logics through models that address social problems by using business methods (e.g.,Smith et al. 2013). While research is making strides in clarifying how the internal dynamics and operations of hybrids are managed, scholars have paid almost no attention to the effect of an organization’s hybridity on other organizations. Specifically, despite calls for research linking conventional (i.e., new venture) entrepreneurship and institutional entrepreneurship, which includes the founding of hybrid ventures, prior studies have not explored the role that hybrid organizations play in the creation and functioning of EEs (Phillips and Tracey 2007). To address the aforementioned gaps in the EE, institutional theory, and hybrids literatures, in the next section theory is developed about the role of hybrid support organizations in EEs. The Dominant Logics of Entrepreneurial Ecosystems EEs are not defined strictly by geographic boundaries; however, the borders of an EE can be physically determined (e.g., corresponding to the borders of a city or an innovation district; cf. 9 Guzman and Stern 2016). As more recent conceptualizations of EEs have argued, an ecosystem’s boundaries also depend on individuals sharing certain values and goals (Roundy et al. 2016). For example, an entrepreneur is considered “inside” an ecosystem if s/he is both within the geographic bounds of the system and subscribes to the system’s values (e.g., towards cooperation). Geographic location is, thus, a necessary but not sufficient criterion for ecosystem membership. Shared values among ecosystem participants are critical for creating a degree of cohesion among participants, which creates some correlation among their actions and gives structure to the system. Without some degree of cohesion among EE agents, they will operate autonomously, without commonality in their activities, and not like a system of inter-related actors (Roundy et al. 2016). As will be argued in the next two sections, the values that permeate EEs are, in part, the result of participants being influenced by two institutional logics: an entrepreneurial-market logic and a community logic. Working together and independently, the two logics form an institutional latticework that gives shape and structure to an EE. As will be argued, by combining community and entrepreneurial-market logics, hybrid support organizations, such as venture incubators and small business development centers, play an instrumental role in EEs by transmitting and exposing logics to EE participants. Before proceeding, it is important to note that while community and economic logics have an especially important function in EEs, other logics will also be present in the communities that contain EEs (e.g., familial, religious, and bureaucratic state logics); but these other logics generally play an ancillary and supplemental, rather than primary, role in EEs. It should also be noted that not every member of an EE will be driven by both market and community logics. For instance, venture capitalists are guided by a dominant entrepreneurial- 10 market logic; a community logic is unlikely to play a significant role in their decision-making. However, as theorized in the next section, it is critical for certain types of EE participants to be guided by both logics. THEORY DEVELOPMENT Logics that Shape Entrepreneurial Ecosystems: The Entrepreneurial-Market Logic All firms operating in capitalist economies must align, to a degree, with a market logic involving activities such as pursuing efficiency in minimizing costs, profit maximization, competition, and offering “goods or services to obtain a financial return to serve the shareholder [or owner]” (Mair et al. 2015: 715). However, an important distinction can be created between a generalized market logic, which all actors in market economies must internalize to some extent, and a more specific form of this logic – an entrepreneurial-market logic – that is only held by some market actors. An entrepreneurial-market logic encapsulates a related set of goals and behaviors focused on innovation, the creation of new markets, business models, and technologies, the pursuit of opportunities in spite of resource scarcity, and tolerance for uncertainty and failure (Cunningham et al. 2002). Although all business organizations will buy into a market logic, at least partially (for if they did not, their operations would be at odds with the dominant values, behaviors, and goals of the marketplace), not all ventures will exhibit an entrepreneurial-market logic (cf. work on entrepreneurial orientation, which examines differences across firms in entrepreneurial-ness; Lumpkin and Dess 1996). Similarly, while all business communities will exhibit a market logic, not all communities will embrace an entrepreneurial-market logic. An entrepreneurial-market logic is critical for the creation and functioning of an EE for several reasons. First, if EE participants embrace an entrepreneurial-market logic this can lead to 11 entrepreneurial intentions (i.e., intentions to create new ventures) and behaviors (e.g., the creation of novel products)(Krueger et al. 2000). Multiple entrepreneurs engaged in the same activities, such as incorporating new businesses, working on innovative business models, and pursuing early-stage investment, creates coherence among their actions. As individuals begin taking some of the same entrepreneurial actions, their activities become correlated and partiallyoverlapping. Similarly, as entrepreneurs engage in the actions involved in founding new businesses, they generate novel business models, products, and processes that can be adopted and/or adapted by other entrepreneurs through observation, vicarious learning, and other methods (Holcomb et al. 2009). If investments have been made in an EE in a particular technology, such as 3D printing, the entrepreneurial-market logics of entrepreneurs will guide them as they pursue businesses based on this technology. All three of the aforementioned dynamics – entrepreneurs sharing common goals, entrepreneurs adopting similar business models and methods, and entrepreneurs pursuing and creating businesses around the same technologies or in the same industries – are driven by an entrepreneurial-market logic and cause the behaviors of entrepreneurs to be cohesive and related, rather than autonomous. The cohesiveness of activities causes EEs to gain structure, to become a system, and to be more than simply a loose collection of unrelated, autonomous actors. Thus, an entrepreneurial-market logic acts as a guiding force that creates a degree of coherence in members’ intentions and behaviors and, thus, produces and maintains the cohesiveness of the ecosystem. These arguments suggest the following proposition: Proposition 1: An entrepreneurial-market logic is a necessary condition for the creation and functioning of an entrepreneurial ecosystem. Despite the importance of the entrepreneurial-market logic in guiding EE participants’ intentions and behaviors, and creating cohesion among their activities, if this logic permeates an 12 EE, it is a necessary, not sufficient, condition for the formulation and maintenance of an EE. A second institutional logic – a community logic – is also necessary. The community logic is characterized by a focus on community needs, development, prosperity, trust, and value creation (Marquis et al. 2011; Reay et al. 2015; Thornton et al. 2012). The last focus is especially important. Value creation occurs “when the aggregate utility of society’s members increases after accounting for the opportunity cost of all the resources used in that activity” (Santos 2012: 337). Individuals and organizations driven by a community logic aim to increase community value (i.e., social welfare) through cooperation and helping others. Community logics are critical in EEs for at least two reasons. First, values such as cooperation, altruism, and giving before taking are important because they help to provide further structure to an entrepreneurial ecosystem (Feld 2012; Krueger et al. 2013; Motoyama and Watkins 2014; Spigel 2013). In essence, as these values spread and become shared routines and simple rules that guide an increasing number of ecosystem participants, they give form to the entrepreneurial community and help it to operate like an interdependent ecosystem rather than a loose collection of agents. Second, a community logic is associated with a focus on community rejuvenation and development. It will cause EE participants to be community-focused, rather than entirely self-interested, and to value activities that lead to the advancement of the community comprising the EE. This suggests: Proposition 2: A community logic is a necessary condition for the creation and functioning of an entrepreneurial ecosystem. The Role of Support Organizations in Transmitting Logics In the previous two sections, it has been argued that entrepreneurial ecosystems require entrepreneurial-market and community logics. But how are EE participants exposed to these logics, not just in isolation but in tandem? This section explores this question and contains 13 arguments detailing how hybrid support organizations play an instrumental role in exposing EE participants, and particularly those new to the system, to the dual logics that guide ecosystem values. More critically, hybrid support organizations have a powerful influence as transmitters of institutional logics because they simultaneously expose EE participants to both logics. By doing so, support organizations demonstrate how the two logics can co-exist and find balance. Hybrid Support Organizations A key type of organization in EEs is entrepreneurial support organizations. This class of organization includes incubators (i.e., an “enterprise that facilitates the early-stage development of firms by providing office space, shared services and business assistance"; Hackett and Dilts 2004: 55) accelerators (i.e., a fixed-term, often cohort-based program, that includes mentorship and educational components, culminates in a public pitch event or demo day, and offers a small stipend, all in exchange for equity; Cohen 2013; Hallen et al. 2014), small business development centers (Chrisman and Katrishen 1995), and other organizations that provide services to entrepreneurs and early-stage ventures. These organizations are often incorporated as nonprofits; however, they can also exist as for-profit entities (Dempwolf et al. 2014). Regardless of their legal form, support organizations generally exhibit two logics: entrepreneurial-market and community. However, as will be argued, the extent such organizations emphasize both logics will differ, which has implications for the diversity of entrepreneurship in an EE. Hybrid organizations and the community logic. Hybrid support organizations exhibit a community logic in their actions to build and bolster a community of entrepreneurs and other agents (i.e., an entrepreneurial ecosystem). Such organizations help build EEs, in part, by conveying a community logic to EE participants. Specifically, when EE participants interact with hybrid support organizations, by participating in an incubator or accelerator cohort or by serving 14 as a mentor for entrepreneurs, they are exposed to the shared values, conventions, and “simple rules” that are associated with a community logic. For instance, although not all entrepreneurs will pursue services from support organizations1, entrepreneurs that do pursue services, such as business model development courses, will interact with incubator employees and other established EE participants such as mentors and investors. These interactions not only provide participants with the knowledge and human capital necessary to found and grow new ventures but through observation participants are exposed to values like “give before taking” and “be altruistic towards other EE members” (e.g., Feld, 2012). Hybrid support organizations also host events that bring EE members together and introduce new participants to an EE. In doing so, these activities create and strengthen connections among EE participants, which forms the social network that, in part, constitutes the EE (Motoyama and Watkins 2014). Thus, hybrid support organizations expose EE participants to the community logic by coordinating activities that create a sense of community. Hybrid organizations and the entrepreneurial-market logic. An entrepreneurial ecosystem is not simply a community of individuals and organizations; it is an entrepreneurial community in which participants share a focus on activities such as creating new businesses and investing in early-stage companies. EE participants must learn the values, skills, and goals associated with entrepreneurial activities, particularly if they are new to entrepreneurship (StJean and Audet 2012). This suggests that the members of an EE must be exposed to and must internalize an entrepreneurial-market logic. 1 Even though all entrepreneurs will not directly interact with support organizations, the influence of support organizations’ logics are likely to diffuse among a population of entrepreneurs, influencing ventures not directly linked to support organizations (e.g., through isomorphism and homophily pressures among ventures; cf. Guler et al. 2002). 15 Although there are other channels through which EE participants can learn an entrepreneurial-market logic, such as being employed by a startup or through university entrepreneurship programs (Gorman et al. 1997), hybrid support organizations are unique in that many of them are guided by an implicit (and even explicit) mission to teach an entrepreneurialmarket logic (Pauwels et al. 2016). In interactions with hybrid support organizations, EE participants are exposed to the characteristics of an entrepreneurial-market logic in several ways, including when entrepreneurs are residents of incubator or accelerator programs in which they are co-located for extended periods of time with other ecosystem participants, and when entrepreneurs participate in events such as startup classes and pitch competitions (Cohen 2013). During such programs and events, EE members (and aspiring participants) interact with more established and long-standing members of the EE and thereby, directly and vicariously, learn entrepreneurial skills and the values of the ecosystem. Furthermore, interactions with hybrid support organizations expose EE participants to the narratives communicated by other members of the EE (e.g., stories of the EEs’ past entrepreneurial successes and failures), which can further convey entrepreneurial-market and community logics (cf. Roundy, 2016). In addition, when entrepreneurs participate in an accelerator, they form connections with other entrepreneurs, many of whom are at similar stages in the life-cycles of their ventures, and with other participants in the EE, such as mentors, investors, and individuals that provide support services (e.g., legal advice, tax services). The creation of these connections not only increases the density of the EE’s social network, a constitutive part of the ecosystem (Stangler and Bell-Masterson 2015), but these ties also transmit entrepreneurial (and community) logics. In the same way, hybrid support organizations will also reinforce the entrepreneurial and community logics of “mature” ecosystem participants. 16 Hybrid support organizations play another instrumental role in EEs: through their operations, they demonstrate how to strike a balance when organizations seek to combine community and entrepreneurial logics. As described, organizations that juggle multiple logics can experience tensions in effectively combining disparate logics (Greenwood et al. 2011). For example, an entrepreneurial-market logic will emphasize self-interest-oriented goals such as profit maximization, which can be at odds with the other-focused, altruistic goals of a community logic (Smith et al. 2013). By observing the actions and operations of support organizations, EE participants see how to combine the two governing logics. Support organizations, therefore, not only help to spread the simple rules, values, and conventions that knit together the social and cultural fabric of an EE, but they also demonstrate how these elements can effectively co-exist. Thus, it is proposed: Proposition 3: The presence of hybrid support organizations will increase the prevalence and strength of entrepreneurial-market and community logics in EE participants. The Diversity of Hybrid Organizations and Non-Conventional Entrepreneurship Hybrid support organizations provide services and programs that spur and support entrepreneurial activity and community development; however, they are not homogeneous, which has important implications for the composition of EEs. A key characteristic through which support organizations can differ is their diversity in the degree to which they emphasize entrepreneurial-market or community logics. Although hybrid support organizations juggle multiple logics, they will vary in the privilege and emphasis they give to one logic over another – some are more focused on fulfilling an entrepreneurial-market logic and others are more driven by a community logic. For example, a for-profit venture accelerator that has operations funded by the equity received from participants will exhibit both logics but will likely give preference to an entrepreneurial-market 17 logic over a community logic because the sustainability of their organization depends on their ability to produce “hockey stick” growth ventures with the potential for large financial exits (Cohen, 2013). In contrast, hybrid support organizations like small business development centers strike more of an even balance between entrepreneurial-market and community logics because their funding typically comes from a combination of rental fees charged for office space and government grants (Hackett and Dilts 2004). As a third example, consider an incubator targeted at providing startup services to social entrepreneurs who are creating for-profit, nonprofit, and hybrid organizations that seek to address social problems. Such an incubator will provide participants with entrepreneurial skills and values; but its primary focus will be helping entrepreneurs pursue community-oriented goals (Casasnovas and Bruno 2013). As these examples illustrate, hybrid support organizations can be arranged on a continuum based on the degree to which they emphasize a community and/or entrepreneurial-market logic. These variations in the extent support organizations balance dual logics, and how they do so, have implications for the types of entrepreneurship present in EEs. If an EE contains only support organizations that exhibit a dominant entrepreneurialmarket logic, and in which the community logic is secondary, then this is likely to produce an ecosystem comprised primarily of ventures with this same focus because other types of organizations (e.g., ones with dominant community logics and secondary entrepreneurial-market logics) will not receive support services or resources. An entrepreneur seeking to found a community-oriented, nonprofit social venture, for example, is unlikely to find support services in an ecosystem populated by hybrid support organizations that are predominantly focused on scaling for-profit, technology ventures. Thus, the logics that guide hybrid support organizations 18 will lead to the creation of ventures with similar logics. These arguments suggest the following proposition: Proposition 4: Entrepreneurial ecosystems containing hybrid support organizations ranging the continuum from community- to entrepreneurial-market dominant logics will have a greater diversity of venture types than ecosystems with homogenous support organizations. DISCUSSION EEs represent a unique meta-organization (cf. Gulati et al. 2012) that must foster multiple institutional logics to gain structure and promote their continued functioning. A community logic emphasizing values such as cooperation and altruism and simple rules such as “give before taking” is necessary for leading individuals to act as if they are operating in a community, rather than autonomously. Thus the community logic gives shape to an ecosystem and helps it operate as a system. An entrepreneurial-market logic is necessary for the ecosystem of individuals and organizations to function as an entrepreneurial ecosystem; that is, an interrelated set of actors and forces that produce entrepreneurial activity. As theorized, hybrid support organizations play a foundational role in EEs by exposing participants to entrepreneurial and community logics because, as hybrid organizations, they blend both logics. Finally, hybrid support organizations can differ in the extent to which they exhibit a dominant entrepreneurial-market or community logic, which has implications for the diversity of organizations in an EE. This theorizing has implications for other streams of research on EEs and for institutional logics. Implications for Theory Entrepreneurial ecosystems. Scholars are drawing increasing attention to the importance of the cultural characteristics of EEs (Spigel 2016b). Researchers and practitioners have begun to identify the specific socio-cultural components of EEs, such as values, narratives, 19 and the social connections among EE members (Feld 2012; Roundy 2016). These studies have not, however, linked these characteristics to an overarching, established theory. This omission in prior research is indicative of a more general trend in EE research, that it is largely a-theoretical (Stam, 2015). The theory presented in this paper ties together concepts that, in EE research, have been treated as disparate and links them together through a unified theoretical lens: the theory of institutional logics (Thornton et al. 2012). Doing so ties the growing body of research on EEs to institutional theory. Similarly, studies seeking to identify the key components of EEs have noted the importance of support organizations, such as incubators and business development centers (Motoyama and Watkins 2014). However, extended attention has not been devoted to explaining precisely how these organizations influence the creation and functioning of EEs beyond their role as resource providers. As has been argued, hybrid support organizations can serve a function in EEs that goes beyond the provision of services to startup ventures. Indeed, such organizations are responsible for transmitting the institutional logics that form the bedrock of EEs. Examining support organizations through the lens of institutional logics reveals additional layers of these organizations and how they function. Institutional logics. Organizational research examining institutional logics has tended to focus on how hybrid organizations manage the tensions that can exist with multiple logics (Pache and Santos 2013). Many of these studies use the context of social entrepreneurship and social ventures (e.g., Battilana and Lee 2014). The theory put forth in this paper expands hybrids research to include support organizations, which have not traditionally been conceptualized as hybrids but, as argued, embrace multiple logics. 20 The focus of this paper has been to explore how institutional logics influence EEs, which, as a meta-organizational concept, departs from prior research focusing on the intraorganizational outcomes of logic plurality (Johansen et al. 2015). Furthermore, in theorizing about the role of logics in EEs, the paper takes the first steps in exploring how logics can operate across levels of analysis (i.e., at the system-, venture-, and individual-levels). Implications for Practitioners and Policy-Makers The theory presented in this paper has implications for regions seeking to create EEs. One of the most direct implications from the propositions is that, if a city does not foster either an entrepreneurial-market logic or a community logic it should not expect to be able to create or sustain a vibrant EE. Entrepreneurial ecosystems are a phenomenon dependent on the cooccurrence of two logics; thus, if cities or communities seek to encourage EE development, it is necessary to invest in activities, organizations, and events that promote entrepreneurial-market and community logics. Since, as has been argued, hybrid support organizations expose participants to both logics, the theory developed suggests that one specific means of ensuring that an EE contains both logics is by promoting the creation of support organizations. Entities that invest in such organizations, such as private foundations, should recognized that hybrid support organizations do more than provide services and host pitch competitions. Indeed, policy-makers seeking to found and/or strengthen EEs should support initiatives that provide resources for creating hybrid support organizations and that promote the utilization of support organization among entrepreneurs. Such organizations are not simply peripheral agents in EEs, but rather they help to lay the institutional foundations for ecosystems. Furthermore, if policy-makers desire an ecosystem containing a diversity of types of entrepreneurship (e.g., for-profit, nonprofit, fast- 21 growth, slow-growth), which has been suggested to have advantages for the resilience of an ecosystem and its ability to adapt to changes in the marketplace (Roundy et al. 2016), then diversity should be promoted in the types of hybrid support organizations in an EE. At the level of entrepreneurs, the theorizing put forth suggests that individuals that want to be members of entrepreneurial ecosystems, and to contribute to these systems, must align with the EEs’ logics. Furthermore, in the same way that entrepreneurs must ensure that their missions are in alignment with the types of investors they pursue (e.g., traditional angels and venture capitalists versus so-called impact investors), entrepreneurs who are active members of an entrepreneurial ecosystem should also be careful to align the dominance in their logics (i.e., whether their primary logic is entrepreneurial-market or community) with the dominant logics of a support organization. Directions for Future Research The theory presented suggests multiple avenues for future research on entrepreneurial ecosystems. First, the most obvious extension of this work is for future scholars to empirically verify the proposed theoretical arguments. This is an important next step because testing the paper’s propositions could also reveal critical nuances in the mechanisms underlying the theorized effects. It is not clear, for instance, what is the optimal degree of balance in an entrepreneurial ecosystem between entrepreneurial-market and community logics. That is, in vibrant EEs, what is the optimal composition in terms of the proportion of participants that adopt both logics? As work on logic plurality focusing on the internal dynamics of organizations has revealed, there is natural tension that exists between market and community logics. How precisely do the participants of an EE balance such a tension at the community level? Similarly, determining what is proportion of firms in an ecosystem that must be directly influenced by 22 support organizations to create a coherent system is another important empirical question. Lastly, it may be important to explore under what conditions the theorized effects are most potent. For example, since certain industries (e.g., high technology) are more likely to have specialized support organizations than others, the effects of the logics of support organizations may differ across industries. If so, then in some industries, firms will be more likely to be exposed to certain logics and, in turn, will be more likely to pass on these logics to other firms. Future research is needed to probe these and other questions concerning the functioning of EEs and to produce granular insights about how logics interact to influence EEs. Furthermore, it was theorized that entrepreneurial ecosystems function and are built upon two guiding logics: entrepreneurial-market and community. However, research is needed to examine the extent to which other, more ancillary, logics influence ecosystems either directly or through their influence on the two dominant logics. It is not clear, for instance, what role, if any, the values and behaviors of other logics, such as those associated with family, the state, or religion play in shaping the individual and organizational behaviors in entrepreneurial ecosystems. Finally, as described in the review of the literature, most prior studies of EEs have focused on vibrant ecosystems located in large urban areas with populations in the millions (e.g., Bahrami and Evans 1995; Feldman, 2001). Even studies of ecosystems located in peripheral cities, such as Chattanooga, Tennessee (Motoyama et al. 2016), have focused on metropolitan areas with hundreds of thousands of residents. However, the definition of entrepreneurial ecosystems is based on the production of entrepreneurial activity, not the prevalence or amount of such activity, which suggests that growing attention is needed to examine the unique dynamics of EEs in smaller cities and towns (Roundy 2017). Exploring the existence and 23 operation of EEs outside of commonly-studied, heavily-populated urban areas may reveal that institutional logics manifest differently depending on the size or type of an EE (Welter et al. 2008). For instance, perhaps community logics are naturally more prevalent, and even more dominant, in small towns because of their deeper, informal social networks (e.g., Seaton 2008). If so, the density of small town social networks suggests that while hybrid support organizations operating in such towns will still need to exhibit both community and entrepreneurial-market logics, the latter may be particularly under-represented. Thus, a particularly important role of support organizations may be exposing EE participants to the entrepreneurial-market logic. Examining ecosystems in small towns may also be advantageous because their dynamics are presumably less complex, and perhaps easier to study, than entrepreneurial ecosystems in large urban areas (cf. 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