**4. Innovation and entrepreneurship**

Since the eighteen century, entrepreneurship has occupied a prominent position in the economic researchers' agenda. Almost all modern theories of entrepreneurship, however, recognize Schumpeter's theories as their milestone.

In his early conceptualization of entrepreneurship—labeled by the literature as Schumpeter Mark I—the author attributes to the entrepreneur a central role in the society. He is, indeed, the "agent of change" and "persona causa" of innovation and therefore of the economic development. The entrepreneur, by creating a new firm, creatively disrupts the existent equilibrium or "circular flow," prompting radical innovation. Following this line of inquiry, new entrepreneurial combinations destroy the existent equilibrium, prompting the economy to evolve. Thus, ongoing innovation and economic development implies permanent discontinuous change and disequilibrium fostered by the entrepreneurial action.

In his book "Capitalism, Socialism and Democracy" [27], Schumpeter, instead, argued that "the defining characteristic of an entrepreneur is simply the doing of new things or the doing of things that are already being done in a new way" ([19], p. 151). This new definition of entrepreneurship is labeled by the literature as Schumpeter Mark II conceptualization. In this context, the author assigns to the large companies a prominent role in fostering innovation and economic development. They have, indeed, the resources and the capital to invest in research and development. In this context, the innovative function may be assumed not only by the individual but also by every coordinated organization that acts in an entrepreneurially oriented way. Thus, the unit of analysis of the entrepreneurial phenomena shifts from the individual itself to the firm or organizations and their structure.

After Schumpeter's work, most economists accepted his first way of defining the entrepreneur. The entrepreneur is an agent of change that fosters innovation, and he is the fuel of the economic development: "The Entrepreneur is the single most important player in a modern economy" ([39], p. 649).

The revival in the role of the entrepreneur as the driver of economic evolution received a real impetus in the late 90s with the knowledge spillover theory of entrepreneurship. This approach has been highly influenced by Schumpeterian theories.

According to the knowledge spillover theory of entrepreneurship perspective, the production function should include entrepreneurship capital as an additional key factor apart from capital and labor. Entrepreneurship capital is constituted by the set of informal institutions, norms, values, and codes of conduct that, in a local system, encourages the creation of new start-ups or businesses. According to this branch of studies, entrepreneurship may represent a missing link in explaining differentials in economic performance across local systems [40, 41]. Following this line of inquiry, a higher rate of economic growth should result from greater entrepreneurial activity. Entrepreneurship serves as a mechanism that encourages spillover diffusion and the commercialization of knowledge. Knowledge, within this process, is embodied in workers. An employee can have an innovative idea or find out new scientific discoveries.

The exploitation of these new ideas can be realized within the organization, enterprise, or university in which they have grown, or outside by creating new firms, leaving the organization in which they have worked and spilling knowledge in the atmosphere. Large research organizations are often repositories of unused ideas: big firms have natural diseconomies of scope that a cluster of start-ups does not have [42, 43]. In the same fashion, public research organizations often do not have incentives to commercialize ideas. The new entrepreneur, by starting a venture, tries to commercialize certain parts of the incumbent's knowledge that otherwise would not have been exploited. So, the creation of a new business is a response to opportunities coming from knowledge and not commercially exploited by other firms or academic institutions [44]. Therefore, entrepreneurship, serving as a conduit for knowledge and transforming economic knowledge into products to be commercialized, represents the link between knowledge and economic growth. Thus, according to this stream of literature, a higher level of entrepreneurship capital, measured as the number of new entry firms, fosters economic output and increases competition, variety, and creativity [45].

A fundamental feature of this theory is the local dimension of the entrepreneurial phenomenon. Several studies showed that founders of start-ups tend to locate their firm in close spatial proximity to their former workplace or to the place where they reside [46, 47]. Precisely, entrepreneurs prefer to start their ventures in the geographical area in which they have a higher number of connections or where they have long resided. According to the literature, entrepreneurs' location choice depends on their respective endowment of social capital. In this context, the term social capital concerns the number and the strength of social relationships owned by each economic actor. A higher level of social capital may help the potential entrepreneur discover and exploit opportunities by exchanging ideas and information.

The regional dimension of entrepreneurship is also because, as already argued by several scholars (among others, [48, 49]), knowledge spillover does not flow freely, but tends to be regionally bounded and "sticky" in space. Part of the problem resides in the fact that some capabilities and knowledge are only transmittable *via* face-to-face interactions. Polanyi [50] in this sense claims that knowledge is divided into two main categories: tacit and codified. Tacit knowledge is vague and difficult to codify, and it is only transmittable through frequent and repeated contacts. On the contrary, codified knowledge can be formalized and written down, and it is easily transferable across the globe.

Within this framework, regional knowledge becomes a determinant input in shaping local industrial scenarios. Therefore, new firm creation is a local endogenous response to knowledge opportunities available at the regional level and not yet exploited by incumbent firms. Thus, entrepreneurship is argued to be a "regional event" [51] in which regional knowledge plays a key role in fostering the emergence of new businesses.

In the literature, entrepreneurial culture or entrepreneurial capital is defined as the set of informal institutions that, in a local system, encourages the creation of new businesses. Entrepreneurial culture does not depend on contextual economic trends, and it survives to economic crises, wars, and changes of political scenario [52]. In other words, it tends to be persistent over time, encouraging a particular regional attitude toward entrepreneurship. This peculiar type of informal knowledge embedded in the regional history persists for mainly three reasons: the presence of peer effects and the intergenerational transmission of entrepreneurial role models and values, the degree of entrepreneurs' societal legitimacy, and the existence of institutions that encourage new venture creation. These last findings suggest that

### *Resilience and Innovation: A Conceptual Approach DOI: http://dx.doi.org/10.5772/intechopen.113842*

entrepreneurship may be a self-reinforcing phenomenon. To support this theory, Minniti, in 2005, built a model in which entrepreneurial phenomenon is conceived as a nonlinear path-dependent stochastic process, where entrepreneurship creates a "culture" of itself that influences individual behavior in its favor. According to this model, this self-reinforcing effect of entrepreneurship depends on the individuals "possibility to observe someone else's behavior and the consequences of it" ([53], p. 5). In this context, entrepreneurship becomes a phenomenon that reproduces itself out of itself. Consequently, regions with relatively high levels of entrepreneurial culture tend to show more propensities to create new firms than those with low levels of entrepreneurship capital.

Therefore, according to this theoretical framework, there is a strict interdependency between the entrepreneur and the geographical space in which the new firm is located. Following this line of inquiry, Feldman [54] argues that regional endowments provide opportunities and resources to entrepreneurs. At the same time, the entrepreneurs shape the local system. Entrepreneurs, indeed, like in Schumpeterian conceptualization, break the existent equilibrium, and they contribute to building a new innovative regional economic scenario by recognizing opportunities, mobilizing resources, and creating value [54].

An empirical example in which this intertwined relationship between the entrepreneur and the local, regional community is evident is given by Italian industrial districts. Beccattini [55] defines them as "a socio-territorial entity which is characterized by the active presence of both a community of people and a population of firms in one naturally and historically bounded area. In the district, unlike in other environments, such as manufacturing towns, community and firms tend to merge" (p. 38)*.* This peculiar type of industrial organization characterizes some Italian regions like Tuscany and Emilia Romagna. In this context, the production is organized through an agglomeration of small firms, each one specialized in a specific stage of the same production process. The industrial districts are rich of human capital since there is "active co-presence" between the society and the industrial structure and production. Local values, culture, and traditions influence the type of production. At the same time, the industrial output is the result of a system of values that characterize the district. Moreover, spatial proximity encourages relationships and the exchange of ideas between workers and entrepreneurs, both citizens of the same local community. This cross-fertilization between production and society prompts a cultural environment that encourages the creation of new firms. In this context, the region does not only represent the platform through which to organize the economic activities, but its intrinsic features encourage the creation of new ventures and therefore economic growth.
