**5. Resilience, innovation, and entrepreneurship**

Resilience, innovation, and entrepreneurship, as we analyzed in the previous sections, are multifaceted and complex concepts that have been defined using approaches coming from a wide variety of disciplines.

The notion of engineering resilience conceives resilience as a move back to the pre-crisis stable state. In this framework, shocks are transitory and they do not have a permanent effect on the economy [18]. This definition is highly influenced by the neoclassical theories according to which any economy is resilient through self-equilibrating mechanisms. According to this equilibrium-based approach of resilience, innovation is an exogenous event, and the entrepreneur does not have any role in shaping resilience.

In the ecological definition, instead, resilience is considered either an *ex post* or an unmeasurable quality of the economy to recover from unpredictable disturbances. This theory admits the possibility that after a shock, some changes in the economic structures happen to make the system retain the same functions. Entrepreneurship is not mentioned as a determinant of resilience.

The engineering and ecological definitions of resilience, however, fail to grasp resilience as much broader than just assessing the ability of an economy to recover from exogenous shocks and to rebound to pre-crisis conditions [1].

Managerial scholars, on the contrary, focus on the firm in analyzing the concept of resilience. In this framework, resilience capacity is defined as the unique blend of cognitive, behavioral, and contextual properties that increase a firm's ability to respond to shocks. This literature includes innovation (among others, [13]) among the key determinants of resilience since it has an anti-cyclical effect on the companies' performances during and after unexpected downturns. Firms that innovate gain competitive advantages against their rivals, and they are more flexible to adapt to the continuously evolving market conditions. In this framework, entrepreneurship influences firm resilience only if we define it as the organization's ability to manage the company in an entrepreneurially oriented way following Schumpeter's Mark II definition of entrepreneurship.

The adaptive resilience conceptualization is sharply at odds with the argument of the engineering and ecological resilience definition that the system bounces back to the pre-crisis equilibrium conditions. In the evolutionary economic geography literature, resilience concerns "an ongoing process rather than a recovery to a (pre-existing

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

or new) stable equilibrium state" ([3], p. 31). Unsurprisingly, given its Schumpeterian roots, evolutionary economics researchers attribute innovation and innovative entrepreneurship (Schumpeter mark I concept of innovation) a key role in shaping adaptive resilience (see among others, Simmie and Martin, [3]; Martin [2]; Holm and Ostegard, [22]; Boschma [4]). Simmie and Martin [3] suggest that resilience is codetermined by endogenous sources of new knowledge and deliberate entrepreneurial decisions. Thus, according to this theoretical framework, one of the key determinants of resilience is innovation and the entrepreneur becomes the social actor in charge of its commercial exploitation.

In this direction, Schumpeter [5] reconciles the divide in his theory of entrepreneurship by claiming that "for actions which consist in carrying out innovation we reserve the term enterprises; the individuals who carry them out Entrepreneurs" (p. 100).

Following this line of inquiry, we argue that entrepreneurship plays a key role in fostering the region's ability to face recessionary phases only if it is embedded in the new knowledge creation value chain. The knowledge spillover theory of entrepreneurship provides some support in this direction. According to Acs and Audretsch [40]; Amemiya [41], indeed, entrepreneurship serves as a mechanism that encourages knowledge spillover diffusion and the commercialization of innovative ideas. Thus, the creation of a new firm is a response to opportunities stemming from locally generated knowledge not commercially exploited by other firms or research institutions [44].

In this theoretical framework, new knowledge becomes one of the main drivers of the system's resilience. Hence, being part of knowledge tacit and not transmittable, local history and regional specificities are fundamental determinants of regional adaptive resilience.

This is arguably because innovation is possible only if the system is able to support the entrepreneurial efforts of the agents who are facing unexpected shocks (**Table 1**) [8, 58].

Among others, Cambridge high-tech cluster and Sassuolo tile district represent two anecdotal evidence of resilient local systems. During recessionary shocks, indeed, both Cambridge and Sassuolo economies were always able to be resilient by exploiting a dynamic interaction between the local innovative knowledge and entrepreneurs.

Nowadays, the city region of Cambridge is widely recognized as one of the most successful, innovative, high-tech, and knowledge-based local economies. The city is also home to a raft of internationally renowned science centers such as the MRC Laboratory for Molecular Biology, the Babraham Institute for Immunology, and the Wellcome Trust Sanger Institute for Genomic Research.

Until the 1960s, however, Cambridge was only known to be home of one of the most famous English universities. From an economic point of view, it was a town with just a little light industry in the electrical sector.

The so-called Cambridge phenomenon started around 1960 with the foundation of the Cambridge Consultants by a group of newly graduated scientists and engineers from the university. This consultancy firm, one of the UK's first technology transfer businesses, aimed to "put the brains" of Cambridge University at the disposal of the problems of the British industry. The creation of the Cambridge Science Park in 1970 definitely boosted the establishment of several new high-tech enterprises within the city. Therefore, Cambridge economy experienced a deep transformation: it passed from being a service-based market town to be one of the most innovative high-tech clusters in Europe.


#### **Table 1.**

*Different approaches toward resilience, innovation, and entrepreneurship.*

Since then, Cambridge high-tech cluster revealed to be not only dynamic and innovative, but it also proved to be resilient throughout exogenous shocks. During the 80s, indeed, English economy experienced a deep recessionary phase that affected Cambridge as well. At the beginning of the crisis, Cambridge manufacturing unemployment increased slightly, but it soon recovered, and by the mid-1980s, it fell behind its 1980 level. The process of recovery was driven by the generation of new growth path branching out of the existing specialized industries, particularly life sciences, thanks to cutting-edge University research (Garnsey and Heffernan [59]). Moreover, the rate of start-up creation in these sectors dramatically increased, creating new jobs and helping Cambridge economy to recover from the recessionary shock.

A second shock hit Cambridge economy at the beginning of the 1990s. Consequently, the area experienced a significant contraction in employment. Once again, Cambridge cluster economy proved its ability to be resilient during economic downturn. In 1992, indeed, the data registered a significant increase in the employment growth rate in the sectors hit the most by the crisis within the region. This process of recovery was supported, again, by an important increase in the number of new firms thanks to the ability of the local system to continually generate new subclusters stemming from innovative knowledge.

At the end of the 90s, Cambridge economy registered the presence of more than 300 enterprises. At the same time, it experienced a never-ending process of creation of several new sub-cluster specialisms such as the ink-jet technologies, telecoms, biosciences, informatics, and clean technologies [3]. Therefore, Cambridge high-tech cluster is a relevant historical evidence of how a system can be resilient by funding its adaptability and flexibility on the endogenously created new knowledge and on the commercial exploitation of it made by conscious and innovative entrepreneurs. One of the key contributions to the relatively higher adaptability and resilience of the

Cambridge economy was the ability to continually renew its industrial and technological structure by creating innovative path of growth based on strong endogenous knowledge platform. All these elements are essential to create and recreate a resilient local system.

Sassuolo tile district, instead, is well known as one of the largest and most successful ceramic districts in the world. The district, located at the heart of Emilia Romagna valley, is specialized in the production of ceramic tile including tile machinery and automatized production lines suited for the most different needs of the mentioned sector.

The tile industry developed in Sassuolo after the Second World War. Until the 50s, in this area, the most important economic activity was agriculture. In 1951, indeed, there were only 10 firms dedicated to tile production. Nevertheless, at the end of the 60s, there were more than 200 enterprises. They mainly produced ceramic and tile machinery. This proliferation had four main reasons. Firstly, there was a huge national demand for tile because in Italy, there was an ongoing plan of reconstruction. Secondly, capitals coming from agricultural sector were used to fund new firms within the tile sector. Moreover, the Italian government issued two laws: no. 635 in 1957 and 623 in 1959. They aimed to encourage industrial activity in depressed areas by easing the tax burden and making loans on concessional terms [60]. Finally, clay deposits located in the proximity of Sassuolo allowed for low transportation costs of raw materials [61].

In 1973, because of the oil crisis, there was a sharp decrease in tile demand. Sassuolo faced this crisis by prompting a radical change in labor organization and by reorganizing the structure of the ownerships favoring the concentration in a few large groups [61]. Thanks to this intervention, in the 70s, the district was able to produce 55% of the whole European ceramics. In this context, Sassuolo economy demonstrated to be a resilient local system.

In 1979, world economy was hit again by a second oil shock. This worldwide economic downturn negatively affected consumers' demand for ceramics and tile machineries. Sassuolo, in order to face this period of excess of supply, began to export machines to Europe (especially Spain), Latin America (especially Brazil), and Asia, achieving a leadership position at world level. This leading position in the market was conquered through the abilities of the firms in the district to develop and exploit a peculiar innovation in the production process: the single firing. The new method allowed for a more rapid firing of tile body and glaze and therefore to reduce production cost and increase districtual firms' productivity. Also, in this case, again Sassuolo demonstrated to be a resilient local system.

In the 90s, the Italian ceramic had to face new market challenges, still succeeding, however, in holding onto its world leadership.

During the contemporary economic crisis that started in 2008, Sassuolo lost its leading role in tile production. It became the second biggest world producer after China. At the same time, however, data from [62] "Monitor dei distretti industriali dell'Emilia Romagna" registered in 2013 an increase of 7% on an annual base in exports. These increases in volume of exports were registered thanks to the ability of the districtual firm to invest in different forms of innovation, not only linked to the product and to the process but also dedicated to the services offered to the customers. These data are signals of Sassuolo industrial district firms' capacity to be resilient.

The districtual firms, indeed, were able to adapt their core activities to the new needs of contemporary society shifting to an environmentally sustainable way of

producing tile. Moreover, they faced the contemporary economic downturn by prompting innovation and exporting their products to new markets.

The districtual resilience is encouraged in this specific case by the industrial districts' intrinsic features. 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 supports innovation.
