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Aarhus has many of the resources needed to become a thriving entrepreneurial hub: large market
leading companies, strong entrepreneurial spirit, highly skilled labour, and young creative minds.
However, the entrepreneurial ecosystem of Aarhus lacks the collaboration needed among its players to
facilitate an efficient use of these resources. In recent years, the field of entrepreneurial ecosystems has
received increasing attention from academics due to a surge in public interest. Most studies use
quantitative methods to examine ecosystems attributes such as access to capital and new firm creation.
This study proposes a qualitative approach to explore the relationship between these and other
elements of entrepreneurial ecosystems. The research is based on 11 interviews with entrepreneurs,
venture capitalists and policy makers, accompanied by four months of participant observation in the
field. The study finds that the entrepreneurial ecosystem of Aarhus is fragmented. This, in turn, leads to
barriers to collaboration and the city employing valuable resources inefficiently. Among the main
causes of this fragmentation are factors such as a weak internal culture, zero-sum games, and lack of
entrepreneurial engagement. The study is unique because it condenses the current research knowledge
into seven propositions and uses the theory to analyse the entrepreneurial ecosystem of Aarhus.
Moreover, the study compares existing findings to the ones made directly in the field. Based on the
analysis, the paper proposes an inside-out approach to building successful entrepreneurial ecosystems.
The paper concludes by discussing its implications for both policy makers and scholars.

The willingness of 11 interviewees and dozens of other conversations carries a significant stake in this
paper. Two distinct people made this project possible. My supervisor Claus Thrane; without his
guidance and ideas, the study may well have evolved in an entirely different manner, and Lasse Chor;
his network and knowledge of the ecosystem are what made this thesis possible in the first place.

Entrepreneurship, Economic Geography, Entrepreneurial Ecosystems, Economic Systems, Regional
Economics, Networks, Startups, Clusters, Growth-Entrepreneurship

Table of Contents





2.3.7 POLICY































1. Introduction
1.1 Background
At the heart of the central region in Denmark lies the city of Aarhus, the subject of this study. In
popular media, Aarhus is often hailed for its vibrancy and entrepreneurial spirit, an image which
continues to spur high growth for the citys popularity among the Danish population. With a
population of roughly 300,000 people, Aarhus is the second largest city in the country. The university
population of 50,000 has made the city the youngest in Denmark. Multinational companies such as
Arla, LEGO, Vestas, and Bestseller are all headquartered in the area, making the business ecosystem
rich with opportunities. The questions being raised are: how is this fertile soil being used by the citys
entrepreneurs? What does the entrepreneurial ecosystem around entrepreneurs look like in Aarhus?
These types of questions are what this study sets out to investigate to provide answers that will inform
those developing the entrepreneurial ecosystem of Aarhus.
1.2 Context
With the recent growth in entrepreneurial activity around the world (Compass, 2015) the notion of
entrepreneurial ecosystems is increasingly becoming an area of interest for scholars. The amount of
research being published in this field is rapidly expanding. Moreover, the acknowledgement that
entrepreneurial ecosystems play by a different ruleset than traditional economic clusters is becoming
prevalent among scholars (Saxenian, 1994; Storper, 1995; Storper, 1997). This body of research has
provided us with initial insights about how ecosystems form and what matters in building and
constructing them. Work has emerged around areas like academia (Feldman, Francis, Bercovitz, 2005;
cs, Autio & Szerb, 2014), policy (Isenberg, 2010) and practical business (Feld, 2012; Hwang &
Horowitt, 2012) and viewpoints from various schools of thought have emerged (Spiegel, 2015). This
has provided us with an initial setting for investigating ecosystems. With the continuous rise in
popularity among scholars, the field of research will likely sustain its advancements.
Despite the advances in knowledge on entrepreneurial ecosystems, there are still some caveats to be
noted in current research. From an evolutionary perspective, we still know little about how ecosystems
have emerged (Feldman & Braunerhjelm, 2004). The lack of evolutionary knowledge makes the
development of upcoming ecosystems a challenge. Replicating initiatives from the more developed
ecosystem (such as Silicon Valley) rarely provides a high return on investment (Lerner, 2009; Isenberg,
2010). Observing the evolution of young ecosystems is thus key to understanding the time dimension
in ecosystemic development, and inform the development of future ecosystems. Another challenge in
current research is the understanding of connections and relationships inside ecosystems (Motoyama &
Watkins, 2014). Although it has been discovered that the anatomy of an ecosystem matters greatly
(Feldman & Zoller, 2011) scholars have often defaulted to measuring ecosystems by their attributes.
Examining the relationships between components of an entrepreneurial ecosystem can thus lead to a
greater understanding of the underlying connections it contains. Through closing important gaps like
these, we could unlock the secrets of regions like Silicon Valley and Route 128.

1.3 Problem Statement

Scholars do not yet have a great understanding of how entrepreneurial ecosystems are connected and
evolve over time. This paper has been designed around a dynamic approach in which connectivity,
relationships, and evolution are studied. Research has historically focused on top-tier regions like
Silicon Valley, meaning that second-tier regions like Aarhus are poorly understood by scholars (Mayer,
2012). Analysing these second-tier regions is thus important to comprehend less developed regions.
The following research questions guide the study:

How is the entrepreneurial ecosystem connected in Aarhus?

What governs the dynamics of the entrepreneurial ecosystem in Aarhus?

Through answering these questions, we would come closer to an explanation on how to develop the
entrepreneurial ecosystems in second-tier regions like Aarhus. The paper should be able to provide an
in-depth understanding of the inner workings of the entrepreneurial ecosystem of Aarhus to facilitate
more informed decisions about developing it. The research will be limited to focus on the
entrepreneurial ecosystem, rather than the entire business cluster. The reason for this is twofold; 1)
focusing on the whole region is too time-consuming for the constraints of a thesis, and 2)
entrepreneurial ecosystem are characterised by a significantly different ruleset (see 2.3).
1.4 Motivation
Aarhus is an interesting case due to its status as a less developed second-tier entrepreneurial region,
thus resembling most cities. However, at first glance, the Aarhus case may seem uninteresting for most.
The city has no great history of entrepreneurship nor does it have a thriving entrepreneurial ecosystem.
However, this is how most regions look. The similarity to other areas is what makes Aarhus particularly
interesting, especially since the findings could help guide decision makers in similar ecosystems. Aarhus
can be classified as a second-tier ecosystem given its lack of track record regarding entrepreneurial
success. Solely studying pioneering top-tier ecosystems will do little to inform researchers on their
evolution, as their current status is inherently dependent on their past. Conversely, in second-tier
regions, we can observe the development over time and thus more easily understand why they develop
in certain ways. Moreover, Aarhus has an appropriate size for conducting a study like the one outlined
in this paper. With its relatively small size, Aarhus provides the perfect testing ground for research. It is
simple to map, and the data needed to perform analytical work are readily obtained.
To answer both research questions adequately, this study sets out to examine the connections and
relationships between the attributes of the citys entrepreneurial ecosystem. The upcoming section
reviews the current literature in the field and outlines a framework for understanding ecosystems. This
knowledge base will then be condensed into seven unique propositions that provide insights on what
we currently know about entrepreneurial ecosystems. Following the literature review, a methodology
section will discuss the methods used and the qualitative nature of this study. The paper then presents
empirical evidence from the Aarhus ecosystem that will be analysed with regards to the previously
mentioned seven propositions. Based on this analysis, a reformulation of Isenbergs (2010) model will
be proposed, accompanied by a discussion of the models implications for policy makers and scholars.
The study concludes by answering the two research questions outlined in this introduction.

2. Literature Review
In the literature on entrepreneurship there has been a considerable amount of definitions introduced by
both scholars and practitioners. Some of these definitions appear contradictory and may confuse their
readers. This lack of consensus on the subject and need for common ground is widely acknowledged in
the field (Sexton & Smilor, 1986; Venkataraman, 1997; Shane & Venkataraman, 2000 and more). The
reason for this definition problem could be rooted in the heterogeneity associated with
entrepreneurships nature. Entrepreneurship happens at every corner of the planet, from all walks of
life, and across every industry. Creating a definition that captures both Larry Page of Google and thirdworld textile manufacturers is rather challenging. Similar problems arise when it comes to
conceptualising the ecosystem in which entrepreneurs operate. The attempts of theorising areas of high
entrepreneurial activity have been many, due to the job-creation effects and economic growth
entrepreneurial ecosystems offer. However, over-engineering local ecosystems to resemble top-tier
ecosystems is highly inadvisable (Isenberg, 2010). Instead, one should understand the local ecosystem
and embrace the unique conditions it holds within.

2.1. Defining the Entrepreneur

Numerous scholars have tasked themselves with defining entrepreneurship and the entrepreneur.
Several schools of thought have emerged with varying definitions. In his 2010 paper, Gedeon argues
that researchers have applied and created various sub-domains to address the complexity of definition.
These include Corporate Entrepreneurship, Social Entrepreneurship, Necessity Entrepreneurship
and Opportunity Entrepreneurship. Moreover, he notes that the schools of thought historically can be
divided into four major areas, namely: The Risk Theory of Profit, The Dynamic Theory of Profit, The
Behaviour School and The Traits School (For the full list of definitions sees Gedeons review, Table 1).
The origins of definitions stem from the mid-1700s and arguably entrepreneurship has changed since
then. This change also becomes prevalent when examining the evolution of the definitions in academia.
The earliest definitions focus on the entrepreneur as the bearer of risk in the transition period between
inputs and outputs. In bringing the production and price in line with the demand, she earns her
entrepreneurial profits (Cantillon, 1755). Building on top of this first theory is numerous definitions all
assuming risk to be at the centre of every act of entrepreneurship. Hawley (1907) for instance argues
that undertaking the proprietary risk is the essential variable for every entrepreneur, and this is what
sets her apart from managers implementing innovation into their firms. It is thus implied that
entrepreneurs inherently take risks to accomplish a potentially greater profit than could be gained
through employment. More modern definitions also put the profit-risk equation at the heart of what
entrepreneurship is (Hull & Bosley, 1980; Draheim, 1972). The main point of critique to the riskcentric view of entrepreneurship is that it fails to encapsulate the many branches of entrepreneurship
that do not carry an equal amount of risk as opportunity-based entrepreneurship (i.e. non-profit
entrepreneurship, intrapreneurship). Furthermore, it assumes that there is a static pool of opportunities.
It matters less who exercise these opportunities, but rather which individual is willing to carry the risk.
With its roots in the neoclassical economic theories, the Schumpeterian view offers a much more
dynamic approach to entrepreneurship. In his opinion, entrepreneurs are the ones responsible for

carrying out new combinations and form these into new enterprises. In doing so entrepreneurs cause
creative destruction in markets (Schumpeter, 1934; 1942). The underlying assumption in the more
dynamic views of entrepreneurship is the missing link in the market, a disequilibrium, and
entrepreneurs are there to exploit the opportunities this generates. Similar patterns of thought can be
seen in more recent definitions such as the one by Bygrave & Hofer (1991) arguing that entrepreneurs
build organisations to pursue their perception of opportunities. Whereas more dynamic approach
offers a broader and more complete view of the act of entrepreneurship, they fail to tell us much about
who the entrepreneur is and how she acts in the pursuit of opportunities.
In recent periods of research, psychology minded researchers have flocked to the field in the attempt to
discover a common set of characteristics governing whether an individual is entrepreneurial (e.g.
McClelland, 1987; Shaver & Scott, 1991; Lee & Tsang, 2001). Although some studies have found a
connection between parental role models and a preference towards self-employment (Brockhaus &
Horwitz, 1986), these fail to predict the future entrepreneurial performance of an individual (Kolvereid
& Isaksen, 2012). The underlying assumption that all entrepreneurs share common characteristics is
vague and Gedeon (2010) notes studies seem to show that entrepreneurs are as different from one
another as they are from non-entrepreneurs (p. 21). However, he does argue that there seems to be
consensus around the finding that entrepreneurs characteristics, goals, values, and culture can affect
the performance of new ventures.
In modern periods, the most quoted paper on entrepreneurial definitions is the 2000 article The
promise of entrepreneurship as a field of research by Shane & Venkataraman. Their view on
entrepreneurship is based on opportunities. It is argued that the nature of opportunity recognition
varies heavily depending on the eyes seeing it. An accountant will not see similar opportunities in space
discovery as an aeronautical engineer and vice-versa. Furthermore, they argue that opportunity
recognition is not sufficient for defining an entrepreneur. The actual formation of a new venture is
critical to exploit the opportunities. Due to this inherent focus on opportunities, the above definition of
entrepreneurship is the one this study will be guided by going. The definition in itself is not a make-orbreak point for the research in this paper. However, it is important to understanding which sort of
entrepreneurship (namely opportunity-based entrepreneurship) will be the focal point of the study.
2.1.1 A Note on Entrepreneurship
The research carried out in this paper will focus on growth-entrepreneurship. It is important to
understand the distinction between the creation of growth ventures and self-employment/sole
proprietorship. The two generate significantly different types of value and takes varying degrees of risk
(Chatterji, Glaeser & Kerr, 2013). As Steve Blank argues 75% of small businesses are a success. On the
contrary to growth startups, where 75% fail (Blank, 2013). Isenberg (2011) states that sole-proprietors
are non-entrepreneurs. The reason for the distinction lies in value creation. Whereas sole-proprietors
transfer value they would have generated working for other firms, high-growth startups create large
value for societies. This creation happens through employment, taxation, reinvestment in communities,
and role modelling. Furthermore, regarding entrepreneurial ecosystems, the ladder are the ones who
benefits from a thriving ecosystem.

2.2 The Emergence of the Entrepreneurial Ecosystem

Prior to reviewing the entrepreneurial ecosystem, it is relevant to examine how the concept emerged
and how similar theories have shaped todays understanding. Many related concepts have been devised
over the years, to explain why regional clusters develop and benefit firms. The earliest concept in the
field is the concept of agglomeration economics devised by economist Alfred Marshal. A theory
arguing that grouping together companies creates economies of scale and network effects, leading to a
comparative advantage over competing regional economies (Marshal, 1890). In recent periods, the
concept of economic clusters has been popularised by economists Michael E. Porter and Paul
Krugman. Cluster theory argues that grouping similar firms in tight geographical areas will lead to an
increase in competition, more rapid innovation, and the creation of new companies in the field.
Economic regions thus create competitive advantages over other areas and continuously expand that
position into the global economy (Porter, 1990; 1998; Krugman, 1991).
The notion of a business ecosystem is a new idea in the eyes of scientific research. Until the 1993,
ecosystems have mainly been explained through geographical economics, agglomeration economics,
and industrial clusters as described above (Mason & Brown, 2013). The scientific term is originally
crafted by James Moore in an article published in Harvard Business Review in 1993. Moore argued that
young firms do not evolve in a vacuum and that the relational structure of suppliers, customers, and
partners matters greatly for entrepreneurs. Businesses created under these conditions, have a higher
chance of growing (Moore, 1993). In 1994 AnnaLee Saxenian published her highly influential book on
regional advantages, comparing Bostons Route 128 and Silicon Valley. What Saxenian found was that
the open and non-hierarchical culture of Silicon Valley had significantly affected the areas economic
boom in the technology sector. On the contrary, the much more firm-centric and closed Boston lacked
behind. Her conclusions were that a focus on regional innovation and local culture can spur
considerable economic growth (Saxenian, 1994). Her work revitalised the interest in entrepreneurial
ecosystems. It expanded on the neo-classical economic notions of agglomeration economics through
the integration of culture, structure, and sociology to the field. Moreover, it deepened the idea that
economics alone is far from perfect when it comes to explaining the success of ecosystems.
Similar to the views proposed by Saxenian, Michael Storper devised his theories of territorial
development in the global world. He argued that the view of traditional economic systems, where we
measure systems as their input and output, do not suffice. Instead, we should consider regional areas as
networks governing human interactions through informal rules of the system. His theory highlights the
importance of local blocks in the globally networked world (Storper, 1995; 1997). Both Saxenian and
Storper thus focused their research on uncovering these regions to understand better how they
generated economic value through more than the sole presence of specific elements. The concept of
learning economies and knowledge regions similarly emerged during the same period. This approach
highlights the importance of establishing communities in which firms learn from each other.
Furthermore, through engaging in the regional area surrounding them, they develop knowledge as a
regional intangible asset that cannot be duplicated (Lundval & Johnson, 1994; Asheim, 1996; Morgan
1997). Similar to the concept of learning economies, the theory of regional innovation systems (RIS)
was popularised during the same period of research. The RIS research takes a dynamic view of systems,

through describing how knowledge flows via actors in a local cluster. The network is thus governed by
institutions like universities, enterprises, and governments. These systems hold both innovation assets
and a culture of knowledge sharing between its actors. Accordingly, the theory also accounts for how
local systems interact with both global networks of knowledge and markets (Cooke, 1992; Asheim &
Ikasen, 2002). When comparing the research of RIS with modern research in entrepreneurial
ecosystems, we can draw significant parallels between the theories. Both fields rely on explaining the
interactions between the agents in a system and uses intangible assets such as culture, collaboration, and
knowledge sharing as central themes of their theory. It could be argued that research in the are of
entrepreneurial ecosystems is an accurate approach concerning a subset of the RIS that deals with
entrepreneurs. These similarities should become increasingly evident as we continue to uncover the
entrepreneurial ecosystem.
In recent periods, the attention has shifted towards the softer aspects of the business ecosystems.
Storper and Venables (2002) introduced the concept of buzz in urban economies. They argue that the
connections created by face-to-face contact are vital in explaining the evolution of economic clusters.
This interaction increases the strength of human relationships in the area and limits the possible
harmful effects of moral hazard. Related to buzz, Gertler (2003) argues that individuals gain deeper
insights into emerging technologies, cultural habits, and local knowledge flows from being there with a
physical presence in an area. How the buzz is transferred depends on the structure of the social ties in
the area. More tense structures can limit the information flow in a region and diminish the benefits of
presence. On a different note, economist Richard Florida explains the emergence of innovation
systems through his idea of the creative class. He argues that 30% of the population belong to a class
of creatives. Accumulating this sort of class in dense geographical areas will cause innovative clusters to
form. He highlights regions like Silicon Valley and Route 128 as having a dense population belonging
to the creative class. Moreover, the theory argues that specific sectors (technology, design, R&D,
among others) attract more creatives to an area than other industries (Florida, 2002).
The evolution of the field has seen a shift from general economic thinking towards a more anatomical
understanding of regions. Scholars have increasingly adopted an acknowledgement of the intangible
assets in an area. Research suggests that systems are more than the sum of its parts and the underlying
culture, relationships, and interconnectedness must be recognised. The perspective of the
entrepreneurial ecosystem relies on research from previous fields, yet offers a view tailored towards
entrepreneurs, specifically those creating high-growth ventures. Isenberg (2011) devised a model
outlining the factors present in an entrepreneurial ecosystem, consisting of six specific domains
surrounding entrepreneurs. Brad Feld developed four cornerstones of the ecosystem in his book
Startup Communities in which he outlined the story and key ingredients of the thriving ecosystem in
Boulder, Colorado (Feld, 2012). Similarly, a significant amount of research has recently been conducted
by the Kaufman Foundation to explain how ecosystems develop and what triggers success with local
entrepreneurship. All of these and many others will be discussed in the upcoming section as the
entrepreneurial ecosystem is reviewed in depth.

2.3 Unwrapping the Entrepreneurial Ecosystem

Entrepreneurial ecosystems are distinct with unique components governing their behaviour. To fully
grasp the entrepreneurial ecosystem, an understanding of what it consists of must be established. This
explanation provides both a complete picture of what is referred to when discussing an entrepreneurial
ecosystem and a base of consensus for further analysis. Component-based models (see figure 1) are
great at explaining features and mapping out players. Such models are ideal for building an
understanding of the ecosystem, yet fall short when it comes to examining connections and
relationships between the players. Therefore, it is important to realise that a component-based model
cannot be used in a vacuum. Related theories can effectively be used in harmony with them to analyse
the dynamics of an ecosystem.
Several attempts at devising an ecosystemic model have been conducted, and many have a clear set of
similarities. Spiegel (2015) has created a model in which he explains the relationship between three
primary attributes of an ecosystem: material, social and cultural. The model has been applied to the case
study of entrepreneurial ecosystems in Calgary and Waterloo, Canada. Similarly, Thomas Funke has
created an ecosystem-canvas for
mapping out the local players in
an ecosystem. His model attempts
at building a shared understanding
of the problems and opportunities
in an entrepreneurial ecosystem.
The work of Funke has since
been used to help inform the
growth of the ecosystem in the
German capital Berlin (Compass,
2015). An array of lesser know
models has been developed to
explain ecosystems. However,
these will not be taken into
consideration by this paper.
Figure 1: Daniel Isenbergs (2011) model of the Entrepreneurial Ecosystem

The framework used for the

purpose of understanding entrepreneurial ecosystem in this study is highlighted above (figure 1).
Originally developed by Daniel Isenberg (2010), the model is chosen due to its intuitive nature and
encapsulation of all known domains in an ecosystem. As with all models, Isenbergs framework has
pitfalls. It fails to deliver an explanation for why players need a presence, how they interact, and which
are more important. In spite of these pitfalls, the model is more than sufficient for creating a shared
reality of an entrepreneurial ecosystem and its attributes. Based on this understanding, one can then
investigate dynamic factors such as networks, relationships, and connections to explore the interactions
between the different domains.


In the upcoming section, the seven sub-sections representing the current state of research in Isenbergs
domains will be examined. It is crucial to understand each area in depth to conduct research that builds
on the current understanding. From this examination, a series of propositions will be crafted. Each
proposition will serve as best practices knowledge within a particular domain of the entrepreneurial
ecosystem. The unique propositions can later be used to analyse how a particular local ecosystem
performs compared to the current state of research.
2.3.1 Entrepreneurs
At the heart of every ecosystem are its entrepreneurs and their startups. That is an undeniable fact as,
without entrepreneurs no ecosystem would exist. What is being discussed, however, is whether
entrepreneurs also need to be at the centre of leading the ecosystem. Brad Feld argues that successful
ecosystems must be led by its entrepreneurs as they work in networks, rather than hierarchies.
Furthermore, he claims that leaders of an ecosystem need a long-term perspective (+20 years). Giving
shorter sighted players such as capitalists, politicians, and supporters the control can damage the
ecosystem, something Feld labels as feeder-control (Feld, 2012). Feldman et al. (2005) similarly argue
that entrepreneurs are the ones building the ecosystems around them. Entrepreneurs do not rely on
governments and other supporters to create their ecosystem. They argue that the focus of governments
instead should revolve around creating new opportunities for entrepreneurs. Contrary to both these
arguments Isenberg (2014) states that entrepreneurs are not necessarily the drivers in an ecosystem.
Isenberg stresses the importance of having a range of influencers and connectors which can drive the
ecosystem. He uses cases like Boston and Israel to exemplify ecosystems not led by its entrepreneurs.
Isenberg does, however, agree entrepreneurs themselves will sniff out opportunities rather than being
forced towards them, and that ecosystems must evolve organically without being over-engineered
from the top-down.
A notion often believed by many is that the ultimate goal of an entrepreneurial ecosystem is to create
more entrepreneurs. That is in fact not the case. Shane (2008) notes Policy makers believe a dangerous
myth. They think that startup companies are a magic bullet that will transform depressed economic
regions, generate innovation, create jobs, and conduct all sorts of other economic wizardry (p. 4). He
argues that the focus should be on expanding the successful businesses and help these create more
growth opportunities. That is ultimately where the ecosystem supports entrepreneurs and startup
companies. Entrepreneurs do not have large organisations to rely on for guidance, growth, and
learning. Instead, successful entrepreneurs can rely on each others expertise, networks, and knowledge
for growing their companies, thus creating similar benefits to those of large established enterprises
(Aurswald, 2015). The end goal of an entrepreneurial community should thus be to ensure that the
successful entrepreneurs thrive there. Fostering a culture in which more people build mediocre
companies eventually seizing to exist, is an inefficient strategy for policy makers wishing to create
economic growth.
Proposition 1: Creating more startups has a diminishing effect and should not be the goal. Instead
connecting the current entrepreneurs creates growth opportunities through learning.


2.3.2 Finance
The role of risk capital plays a vital role in developing both successful businesses and the local
entrepreneurial ecosystem. However, the area of venture capital (VC) also seems to be surrounded by
certain myths. A lack of risk capital is often cited as one of the most common needs in a startup
ecosystem by its entrepreneurs (Isenberg, 2014). However, in reality very few startups rely on risk
capital to succeed. In fact, only half of the world's VC activity is located outside of California (Hwang
& Horowitt, 2012). Similarly, Feld (2012) argues that instead of the focus on creating VC activity in a
local community, it is much more efficient to concentrate on the community and building stronger
startups. Once this is achieved, investors will be attracted to the ecosystem. That is however not to say
that capital is not impactful in a local area. It has been observed that doubling a citys VC activity will
lead to a 1% increase in employment (Samila & Sorensen 2011). What is important to note is that it
should not necessarily be the focus of community builders. VCs rely on a steady deal flow to keep their
businesses attractive and if communities fail at creating this flow, investing consistently in the
ecosystem will never be profitable. Lerner (2009) instead argues that local communities should focus on
building well-connected startups and lower the outside barriers for international capital to flow to the
ecosystem. Capital is often treated as a silver bullet by the players in an ecosystem, however, what
research reveals is that there is a range of factors needed for VC to be effective.
Proposition 2: Venture capital has a significant impact in an ecosystem. A pure focus on attracting
capital is inefficient, rather ecosystems should build more attractive firms for capitalists.
2.3.3 Culture
Culture seems to have played a vital role in the development of some of the worlds most important
entrepreneurial ecosystems (Saxenian, 1994). Also in modern literature is local entrepreneurship culture
highlighted as an outstanding explainer for a value generating ecosystem. In the sense of
entrepreneurial culture, two paths have been investigated: the general beliefs towards entrepreneurship
(external) and the culture between players of an ecosystem (internal). An example of the ladder is
Aoyama (2009) arguing that local entrepreneurial culture shapes the norms and beliefs in an ecosystem,
in turn influencing how local businesses are perceived. Similarly, Hwang & Horowitt (2012) argues that
actors engaging in an entrepreneurial ecosystem must be driven by extra-rational motivators. Rather
than expecting a monetary compensation for their efforts, they should seek a return-on-involvement
from the ecosystem. Having a strong culture between entrepreneurs and other players in an ecosystem
seems to matter greatly. Feld (2012) mentions the give-before-you-get mentality in the Boulder
ecosystem and that the inclusiveness of the ecosystem has caused it to become an ever-expanding
entity. Moreover, enhancing collaboration and eliminating the zero-sum games between entrepreneurs
is an important aspect, according to Feld. Another key finding is the importance of entrepreneurialrecycling. The term describes successful entrepreneurs who have exited their businesses giving back to
the ecosystem through reinvesting their wealth, knowledge, and experience to create new
entrepreneurial activities (Mason and Harrison, 2006). Highlighting the local stories of these successful
entrepreneurs can also have a powerful effect in inspiring the upcoming entrepreneurs in an ecosystem
(Feldman et al., 2005; Isenberg, 2010).


In a broader sense, we find the general public opinion towards startup companies and entrepreneurship
as a career path. Kibler, Kautonen and Fink (2014) argue that a strong culture towards entrepreneurs in
the general public can be part of creating a normalised outlook towards entrepreneurship. This can, in
turn, support entrepreneurial firms in their development. Several attempts to measure this
entrepreneurial-spirit have been conducted. Most notably by Achs, Autio and Szerb (2014) creating
the Global Entrepreneurship and Development Index (GEDI). Their index is published once a year to
measures a countrys entrepreneurial attributes and culture towards entrepreneurship. Similarly,
Armway (2015) has created an index comparing the entrepreneurial spirit across countries based on the
data from close to 50,000 respondents. Whereas measures like these are useful for assessing the
external cultural norms and attracting new talent to an ecosystem, they are not tackling the internal
social rules of an ecosystem, which create most value (Isenberg, 2010).
Proposition 3: External entrepreneurship-friendly culture is valuable, yet only to a certain extent.
An internal culture of collaboration is what generates the most value for ecosystems.
2.3.4 Supports
The support functions in an entrepreneurial ecosystem play a significant role in acting as connectors for
other players. Besides the notion that modern infrastructure plays a critical role in entrepreneurial
communities, researchers have found some of the highly significant support functions to be mentors,
events, and support professions (legal, accounting, etc.). Mentors, especially, seem to play a crucial role
for entrepreneurs and growth ventures. A startup being mentored by experienced entrepreneurs on
average grows 3,5 times faster than those without mentors (Compass, 2015). The importance of
mentors is also featured in the case study of the St. Louis ecosystem conducted by Motoyama &
Watkins (2014). In this study, they argue that mentoring is the most critical ability of all support
organisations. Their case study also highlights the importance of entrepreneurial events in which
entrepreneurs connect through entrepreneurial activities. Several practitioners have similarly stressed
the importance of events with 'entrepreneurial content' as a vital part of growing entrepreneurial
communities. Engaging the local stack of entrepreneurs is, however, often an overlooked factor by
scholars (Feld, 2012; Hwang & Horowitt, 2012). Lastly, it is important to note that the presence of
support professions in itself is not necessarily sufficient for an entrepreneurial ecosystem. These firms
need to understand the nature of entrepreneurial ventures and pay their services forward for the chance
of a later gain. As Mason & Brown (2014) notes: Such firms are often willing to offer their support to
startups at no charge with the expectation that long-term business relationships will emerge in due
course (p. 12).
Proposition 4: Support functions play a vital role in gluing together the community, mainly through
relevant events, mentoring, and support.
2.3.5 Human Capital
The presence of cheap skilled labour is an essential part of a thriving ecosystem, as startups rely on this
resource to sustain their development. Great examples of this, is the impact Stanford University and
MIT have had in Silicon Valley and Boston respectively. However, it also seems that an over-emphasis
on the importance of having proximity to a top university does not appear to be justified. There are


countless examples of thriving ecosystems that do not possess this (Mason & Brown, 2013), and the
highest performing entrepreneurial workers are often around 40 years old (Chatterji, et. al.). Universities
seem to play two major roles in a startup community. One role is that of creating new entrepreneurial
opportunities through the commercialisation of research, for instance through technology transfer
programs (TTP) (Shane, 2004). The second role is that of a talent-feeder to the ecosystem. By
providing highly-skilled graduates that can be hired by the local business environment, these transfer
the knowledge acquired at universities into the entrepreneurial ecosystem (Wolfe, 2005). Both roles are
necessary for an ecosystems talent-pool and continued growth. Lerner (2009) argued that
entrepreneurship is a global phenomenon and allowing startups to hire skilled labour outside of
national boundaries is an effective way to attract human capital. Lerner does, however, not diminish the
importance of strong local education.
An often debated issue is the effectiveness of entrepreneurial education. It seems that this sort of
education has little to no significant effect on a startup ecosystem (Isenberg, 2014). Conversely, Feld
(2012) argues that the main issue with this type of education is not necessarily its effectiveness. He
states that the problem with this kind of teaching is that it is often located within business schools,
rather than with actual inventors in computer science or engineering. Y-Combinator president, Sam
Altman, has equivalently presented the belief that roughly 33% of entrepreneurship can be taught
through education (Altman, 2014). In an increasingly technical world, there is no doubt that the need
for high-skilled labour is a critical component of any entrepreneurial ecosystem. The means for
cultivating this type of resource is, however, not necessarily an internal ecosystemic process.
Proposition 5: The presence of cheap high-skilled labour is crucial to ecosystems. The flow of labour
can come from both internal and external sources.
2.3.6 Markets
Large established corporations are crucial for the entrepreneurial ecosystem to thrive (Feldman et al.,
2005; Isenberg, 2013a; Ebdrup, 2013). Their ability to attract talent to a local area is unprecedented
(Feldman dubbed them talent-magnets), and a startup ecosystem cannot exist without incumbent
firms. They cultivate an ecosystem through investments in new ventures, as customers, early adaptors,
and potential partners. Furthermore, when big companies in a local area fails they give birth to a new
wave of young startup firms. These are competing over the lost market shares, a dynamic that has been
dubbed whale-fall. Examples of these falls are Nokia, IBM, Blackberry and several other high-tech
firms, giving way to new blood in an ecosystem (Isenberg, 2013). Despite this impact, its been argued
that local policy makers should in turn favour the incumbent firms less and create opportunities for
entrepreneurs (Aurswald, 2015). A complete neglect of incumbents, however, is by no means
favourable for neither of the parties.
Another popular term that has risen in recent years is that of the dealmaker, and their importance has
been discovered in several ecosystems. The original notion was introduced by Feldman and Zoller
(2011). They find strong evidence that having a high degree of dealmakers connecting the players in an
ecosystem is an efficient predictor of the growth of an ecosystem. Accordingly, Napier and Hansen
(2011) argue that having dealmakers act as the missing link between players, though creating


connections across the ecosystem and towards new markets, is crucial for success. Both research papers
point to the fact that the anatomy of a local ecosystem matters greatly and assuming that the presence
of all other actors is not sufficient. Without dealmakers, the crucial connections do not flow across the
local ecosystem. Moreover, the impact of dealmakers proves why solely measuring the components of
an ecosystem does not suffice. Researchers must dig deeper to examine the connections between the
players of an ecosystem to gain valuable insights into local conditions.
Proposition 6: Ecosystems need incumbent firms to thrive and cultivate new ventures. Dealmakers are
essential to connect startups with opportunities across the ecosystem.
2.3.7 Policy
Several ideas have been formulated around the role of policy in entrepreneurial ecosystems, enough so
that policy makers should be able to make informed decisions about their efforts to enable ecosystems.
In his 2009 book The Boulevard of Broken Dreams, Harvard scholar Josh Lerner addresses a range of
reasons why government initiatives to boost startup activity fail. He argues that a top-down approach
to ecosystems and lack of understanding of what entrepreneurship is, are the most common pitfalls for
policy makers. Both observations are very much in line with the findings made by several other
researchers (Isenberg, 2010; Feldman et al., 2005; Chatterji et al., 2013). He instead argues that local
policy makers should be very patient in their efforts to promote entrepreneurship and consistently
measure what has an actual impact on the ecosystem. At the same time, they should remain flexible
enough to change the initiatives that are implemented (Lerner, 2009). Researchers thus seem to agree
that governments must acknowledge the complexity of entrepreneurial ecosystems and stop the pursuit
of quick fixes economic growth. As Isenberg (2010) notes: Ironically, even Silicon Valley could not
become itself today even if it tried (p. 3).
When it comes to the role of national government, there seems to be somewhat more ambiguity among
researchers. Often the argument is that governments should focus on creating framework conditions
for entrepreneurship to thrive. However, research from both Denmark and The Netherlands suggests
that despite creating some of the world's best conditions for new companies, this does not seem to
affect the amount of high-growth ventures established in the countries (Napier et al., 2013; Stam,
2013). Policy makers must, therefore, define their role between the hands-off approach and the topdown approach. Mason and Brown (2014) have proposed four elements of the ecosystem which policy
makers can target; entrepreneurial agents, entrepreneurial resources, connectors, and the
entrepreneurial orientation. They conclude that the ultimate goal of policy makers should be to support
an ecosystem in which high-potential entrepreneurs are favoured, and not over-value their role in the
ecosystem. Furthermore, Motoyama & Wiens (2015) suggest that the main problems with current
public entrepreneurship policies are that policy makers will often try to fill out the gaps in the local
marketplace. Gap filling efforts often happen through the creation of public venture funds and
incubators. However, research suggests that these initiatives are very ineffective. Instead, governments
should help foster learning and connections through initiatives like catalytic events. There is a clear
consensus in the current state of the research that governments should accept their supporting role in
the ecosystem. Rather than trying to lead it, they should seek to engage and grow organically with the
entrepreneurial ecosystem.


Proposition 7: The bottom-up approach is essential for successful ecosystems. Policy makers should
assume a role of supporters and connectors to private initiatives.
As noted at the beginning of the section component models have a range of limitations. However, it
should provide us with a common understanding of what an ecosystem is. An important aspect to note
is that ecosystems do not follow a standardised trend. Rather, each ecosystem develops under a set of
unique local conditions. It should thus not necessarily be the goal for community builders to acquire all
of the above features, but to identify local strengths and specialise around these. As Feldman and
Braunerhjelm (2004) argue, we still know little about how ecosystems historically have emerged and the
time dimension is often neglected. Trying to learn from an ecosystem that has developed over 50 years
and applying that knowledge to younger systems is not efficient. This means that practical ecosystemic
evolution is more a process of trial-and-error learning than it is finding the magical Silicon Valley silver
bullets. As research progresses, a greater emphasis is thus needed towards examining relationships and
the evolution of an ecosystem.


3. Methodology
Aarhus as a region is particularly interesting to study as it resembles most other ecosystems in the
world. Designing a study of complex phenomena like an entrepreneurial ecosystem is a challenging
task. This section will outline the research design, literature search, and the data collection process. The
study has been designed with the previous research in mind, to accommodate for some of the criticised
pitfalls. That should, in turn, contribute to closing some of the knowledge gaps that currently exists in
the field of research.

3.1 Research Design

This paper is set as a single case study of the entrepreneurial ecosystem in Aarhus, with research being
conducted over a four-month period from February to June, 2016. The study seeks to build an in-depth
picture of Aarhus and the dynamics existing inside its entrepreneurial ecosystem. The base design of
the study is exploratory given little prior knowledge of the social phenomenon in the local context
(Stebbins, 2001). The primary goal of the research is understanding the relationships between players of
the ecosystem, rather than a descriptive approach towards components. Inductive reasoning will be the
means of reaching this goal. The inductive method is effective in this type of study, given that little
research has previously been published on the subject matter. Due to the time constraints, a crosssectional study will be performed, with data collected in one-shot within four months. Ideally, this
study would have had a longitudinal component such that the entrepreneurial ecosystem could be
observed as an evolutionary process.
3.1.1 A Qualitative Study
The study is put in a qualitative research frame due to its focus on connections and relationships. It can
be discussed whether quantitative methods would have been appropriate to make observations more
measurable. However, given the narrow local context of this study, the qualitative methodology is the
preferred mode of research (Ragin, 2014). The qualitative approach should provide rich insights about
the entrepreneurial ecosystem of Aarhus, since the data are obtained from local entrepreneurs,
capitalists, and policy makers. The data will be collected in a non-contrived setting, through interactions
with the natural environment (see section 3.3). In part, the study seeks to create grounded theory. The
study began solely with two research questions without preconceived notions of the ecosystem.
Through gathering and coding data to discover patterns, theory emerges. However, it can be discussed
whether the methodology of the study is in fact grounded theory. Due to its reliance on previous
research from the field in analysing the Aarhus case, the method is not grounded theory in its purest
form. Nonetheless, the study contains significant traits from grounded theory, enough justify the use of
the methodology throughout the paper.

3.2 Literature Search

The sources for obtaining the literature needed for this study have been threefold. The starting point
for the search was through reviewing the books Startup Communities (Feld, 2012) and The Rainforest
(Hwang & Horowitt, 2012). Moreover, literature was found through using two main academic

databases; EBSCO and Google Scholar. The keywords used to gather literature were entrepreneurship
ecosystem, startup ecosystem, entrepreneurial ecosystems and entrepreneurship. Given the small
size of the field most literature references to similar papers, meaning that exploration through articles
and journals have been possible. The cornerstone papers for identifying the most relevant research in
the field have been: Entrepreneurial Ecosystems and Growth Oriented Leadership (Mason and Brown,
2013), The Relational Organization of Entrepreneurial Ecosystems (Spiegel, 2015) and The
Entrepreneurship Ecosystem Strategy as a New Paradigm for Economic Policy (Isenberg, 2011). Lastly,
The Kaufmann Foundations online directory has been a significant source of literature, as the
foundation is the most active researchers of entrepreneurial ecosystems.

3.3 Data Collection

The foundation of this thesis is based on rich data from both qualitative interviews and participant
observation. A total of 11 interviews and a fieldwork log with 15 entries acts as the foundation for
analysis. Furthermore, the study relies on secondary data such as OECD and GEDI. This section
outlines how data has been collected, the design of the collection process, and the mode of analysis.
3.3.1 Interviews
Out of 16 interview requests, 11 requests were successful and resulted in interviews. The sample set
represents a broad range of entrepreneurs differing in age, years of experience, and company size. Most
interviewees have founded businesses in the technology sector and the interviews have been conducted
with an unstructured approach. The mix of participants is seven entrepreneurs, two capitalists, and two
stakeholders. The unstructured method has been chosen to support the emergence of grounded theory.
Moreover, due to the exploratory nature of the study, the unstructured approach has been deemed the
most appropriate with regards to the research questions. The table seen below contains an overview of
the participants in the study:




Firm Size


Thomas Laursen

Entrepreneur I1




Morten Larsen

Entrepreneur I2



Simon Staack

Entrepreneur I3




Alexander Christiansen

Entrepreneur I4




Lars Stigel





Rune Mai

Entrepreneur I6




Jan Beyer Srensen


Local Gov.



Camilla H. Lastein

Entrepreneur I8

Lix Technologies 6-14


Finn Sty



Finn Sty



Astrid H. Tyrsted






Claus M. Christensen

Entrepreneur I11






3.3.2 Fieldwork
The second core element of the data collection process is from of participant observation through
involvement with the organisation #AARSOME. The fieldwork log (Appendix 2) contains a series of
observations gathered at events, meetings, and conversations. It consists of a thorough description of
the observation and reflections on the takeaways. The time and date for these observations range from
the 12th of January until the 23rd of May. None of the participants have been explicitly informed that
the conversations would be used for research purposes, ensuring a natural setting.
3.3.3 Data Analysis
Upon ending the data collection process, the data have been organised and made ready for analysis.
The method of analysis has followed Yins (2011) process of 1) compiling data, 2) disassembling data,
3) reassembling data, 4) interpreting, and 5) concluding. The initial step of the process meant compiling
the data into different IDs and organising them in a spreadsheet (Appendix 4). The second phase
involved re-listening to interviews and re-reading the fieldwork log. From there, a series of statements
has been extracted, and patterns have been detected. A list of 220 quotes has been created to support
each of the statements from the interviews. It could be discussed whether full transcription would have
been appropriate. However, given the time constraint a larger sample size was prioritised. From the
rough dissemblance process, the data points and quotes have been ordered into six categories, using
Isenbergs (2011) framework.
The goal of the process has been to ensure the objectivity of the studys findings. Participant
observation is inherently subject to researcher bias, giving the high degree of personal involvement.
Furthermore, the evaluation of the data presents another limitation, given that the assessment becomes
subject to the researchers worldview (Spradley, 1980). Member checking could have been used to
validate the evaluation with the participants. However, this was deemed impossible due to the nature of
the data collected (see Findings).


4. Findings
The fourth section of the study will outline the findings made in the field over the four-month period
this project has run. The results have been sorted into seven distinct domains, each concerned with a
particular area of the entrepreneurial ecosystem (as defined by Isenberg). This structure will ensure that
the complete story of the entrepreneurial ecosystem in Aarhus is told. Given the earlier criticism of
models that are too component based, the approach of these findings has been different to most other
research. Rather than a static view where domains are measured with quantitative data, a dynamic
approach has been taken to discover connections between components of the ecosystem. A lot of
direct quotes will be used in the findings, to ensure the objectivity of the research.

4.1 The Fragmented Ecosystem

An essential part of any ecosystem is the interplay and connectivity between its entrepreneurs. As
already noted startups do not exist in a vacuum, as they depend on each other for sparring, network,
learning, and growth. In Aarhus, however, it seems that startups do in fact live in a vacuum. One
entrepreneur explained: There is not really a special Aarhus-spirit in the city (I11). The lack of an
Aarhus-spirit may have several root causes that can be explained through a variety of factors.
Interestingly, the entrepreneurs who are actively engaging in smaller networks with their peers, take
high value from their connections as noted by several: I like to meet with the other founders in our
CEO network, they understand my challenges and problems (I1) was observed by one. Another
argued: Our founders club has been extremely valuable for both me as a person and my company
(I6). If the local entrepreneurs are aware of the value arising from interacting with each other, the
question of why they are not engaging with the community is natural to ask. Another key point that can
be drawn from this observation is that entrepreneurs are not directly reluctant to engage with each
other and share knowledge.
4.1.1 Lack of Community Value
A story that repeated itself in the interviews is the lack of value the best entrepreneurs feel they are
gaining from actively engaging with their community. One noted: I would like to engage and support
the ecosystem, but we need more professionalism in our approach and initiatives (I2). The lack of
professionalism is evident in the form of the events initiated in the ecosystem. Most events are targeted
towards either inspiring more people to become an entrepreneur or towards helping new entrepreneurs
with the basics of their business (F8). Only rarely do events which favour the high-potentials appear.
That, in turn, makes it less attractive for the best entrepreneurs in the city to engage with the
community. For instance, one argued: Simply put, I just dont have the time to stand down at the local
pub and drink beers with entrepreneurs that are completely new in the game (I1). The fragmented
nature of the ecosystem is in fact quite surprising. Close to all interviewees pointed towards the
relatively small size of Aarhus as a strength, meaning it is easier to get an overview of other relevant
players in the ecosystem. The making of new connections would thus, logically, not be problematic.
The fact that most talented entrepreneurs have decided to abandon the ecosystem has a self-enforcing
effect on their willingness to participate. The less interaction there is from the best entrepreneurs in the

ecosystem the less quality and professionalism new initiatives will have. A negative feedback loop has
been set in motion. A feedback loop that if continued, may threaten to harm the community spirit as
time goes on. The lack of a community feeling may not necessarily directly impact the talented
entrepreneurs immediately. What it does for the community, however, is limit the ability of new,
potentially gifted, entrepreneurs to gain access to peer learning through relationships with and
mentorship from the best entrepreneurs. That dynamic, in turn, slows down the stream of new highpotential startups (F10). Uniting the ecosystem will be a point for discussion in the later sections.
However, the early indicators of a thriving community are starting to emerge: The community would
definitely be more attractive if the initiatives were more ambitious. But its bubbling currently and the
possibilities of getting help are ever increasing (I8) was the comment of one entrepreneur. The idea of
an increasing inflow of new entrepreneurial activities was echoed in several interviews, in particular by
those closest to the community. With a growing ecosystem comes a vast amount of opportunities to
create a more vibrant ecosystem, but the potential pitfall may be a further fragmentation between toptier entrepreneurs and the rest of the community.
4.1.2 Sub-Clusters Dominate
The entrepreneurial ecosystem of Aarhus holds a series of sub-clusters with individual cultures, norms,
and efforts to connect their entrepreneurs. Most of these exist in the form of incubators or
membership organisations, such as Startup Lab, Culture Workspace, and Accelerace. In organisations
like these, young firms have the possibility to connect with peers and grow their businesses. Initiatives
like the ones mentioned above are all recent (within five years), thus supporting the hypothesis of a
growing community around Aarhus-based entrepreneurs. Despite the growth, a narrative often told
was the vacuum created by these organisations, with little interconnectivity between the initiatives (F6).
Having communities that are driven by incubators and accelerators brings a series of structural
problems. Once the successful startups grow, they will eventually move to larger office spaces and the
learning opportunities for the next generation of startups become limited. That is particularly the case,
as long as the growing startups are reluctant to recycle their knowledge back into the ecosystem. As
described in detail earlier, this does not seem to be the case in Aarhus, thus limiting the interactions to
be purely between newer entrepreneurs.

4.2 The Capital-Entrepreneurship Deadlock

Every entrepreneur commented that the lack of capital was a problem for local entrepreneurs. Earlier it
was stated that almost all entrepreneurs will argue that their ecosystem lacks risk capital (Isenberg,
2014), and the entrepreneurs of Aarhus do not differ. One entrepreneur noted Honestly; I think most
people wouldnt even know where to start looking for capital in Aarhus (I6). Several others echoed
this opinion with statements such as: There is virtually no access to capital on the local scene (I1) and
Venture capital is not very accessible here (I4). One would have to be precocious about using these
statements as facts, however, in the case of Aarhus, there is a strong case. Denmark as a country ranks
sixth out of the 34 OECD countries in terms of GDP per capita. Despite this, based on the amount of
venture capital invested in high-growth startups the county ranks 18th, below countries like Hungary
and Portugal. Compared to the neighbouring country Sweden, investors only put up one-third of the
capital for new ventures in the Danish ecosystem (OECD, 2015). Furthermore, a large degree of the

existing venture capital flows through the more developed startup ecosystem in Copenhagen, giving
Aarhus based entrepreneurs a significant challenge in raising capital.
4.2.1 Lack of Investor Knowledge
Some of the strongest opinions were exercised when it came to the topic of the venture capital scene in
Aarhus. The venture capital environment is mainly dominated by public funds Capnova and Borean, as
well as a number of angel investors, more or less organised in syndicates. Most of the private
investment scene is, as mentioned previously, situated in the capital city Copenhagen. Six out of seven
entrepreneurs interviewed have closed investment rounds, only one of which was from the public
funds. Despite this, most of the entrepreneurs seemed to have an opinion on especially the public
funds, their terms, methods, and deal structure (F7). The prevailing narrative from entrepreneurs was
that the funds take far too much equity, contribute with insufficient knowledge, and lack reasonable
terms for entrepreneurs. For instance, one strongly noted:
I think most public funds have completely ridicules terms and they do not at all look at the bigger
picture or the future perspectives. They instead obsess about gaining control and return on investment,
and I have heard several horror-stories from fellow entrepreneurs taking money from public funds. I
would never take money from a Danish VC. Honestly, I think they are kind of laughable (I8).
The stories about the local venture funds were central in most of the interviews with entrepreneurs.
Another entrepreneur stated that: A lot of the public funds still have a hard time knowing anything
about new business models. They are stuck in an industrialised way of thinking (I6) with reference to
the funds inability to understand the next generation of technology startups. The one entrepreneur
who took an investment from a public fund was satisfied with the relationship to his investors, yet still
noted that The short runways from our investors made us take wrong decisions in the early stages
(I1). The lack of knowledge concerned with venture financing contributes with further challenges to
the startup ecosystem of Aarhus. Given that investors in Aarhus lack investment knowledge, this will
only add to the depletion of resources for entrepreneurs in the city, resulting in more startups leaving
the city to find the needed resources elsewhere. Exactly that was the case with significant startups
JustEat (London) and Trustpilot (Copenhagen). The structural problem with the local public funds is
their objective in the market. Most are created with the classical economic incentive of making up for
market imperfections. This results in funds that cannot compete with private investors and are solely
allowed to invest in companies that are unable to raise money elsewhere in (I5). This dynamic skews
the performance of the funds towards more negative results, as they are unable to invest in the best
ventures created in the ecosystem.
4.2.2 Low Quality of Startups
Investors argued that great investment cases are tough to stumble upon in Aarhus and that
entrepreneurs are the reason for the low amount of investments. One investor stated that I think there
is enough capital in the city. All entrepreneurs will tell you that there is no capital, in reality, there are
not enough good investment cases (I9). Several indicators in the ecosystem support the claim that
there is a lack of high-potential startups (F13). A phrase often heard was that there seems to exist a
BMW-syndrome among Aarhus-based entrepreneurs, in which they stop growing their businesses


once they are able to afford a BMW car. The notion of such a syndrome is, however, not shared by the
entire ecosystem and one argued: I think that our low degree of growth companies has to do with a
small home-market, rather than the famous BMW-syndrome (I7). The lack of ambitious and highquality startups where not only noticed by investors. It was noted numerously by fellow players with
statements like The mindset is not really to think big and people are often really short-sighted in their
thinking (I10) and People are not thinking big enough here. There is a tendency to sell companies
early on, rather than taking the risk of going global yourself (I8). Often times the scenario above is
portrayed as a chicken and egg problem in which a deadlock exists between the two parties relying on
each other (investors and entrepreneurs). Breaking this deadlock between investors and entrepreneurs
will be a point for discussion in the coming sections of the study.

4.3 The Positive Attitude towards Entrepreneurs

With the shifts that technology is creating in the world, an increasing number of new entrepreneurs are
emerging to seek out opportunities (Compass, 2015). These shifts in the world of business are creating
a transition in the culture surrounding entrepreneurs, which is growing increasingly positive. According
to Armway (2015), Denmark rated as the world's most entrepreneurship-friendly country on the planet,
based on a sample of 49,775 respondents in 44 countries. One entrepreneur stated that: The culture
has definitely changed. Being an entrepreneur is much more rock star like today. I never meet anyone
thinking: what a fool (I1). Both observations contribute to the notion that the culture surrounding
Aarhus-based entrepreneurs is positive.
4.3.1 Large Inflow of New Entrepreneurs
With an increasingly positive culture towards entrepreneurship comes a significant inflow of new
entrepreneurs seeking opportunities. Its becoming popular to be an entrepreneur in Aarhus, so the
term is a bit vague currently was the claim of one interviewee (I10). The great inflow of new
entrepreneurs is largely visible throughout the city. New incubation spaces are opening at a rapid pace,
and there are daily stories in the local media about recent innovations (F6). Aarhus is seeing a
tremendous amount of buzz around becoming an entrepreneur currently, a trend that may continue to
pick up momentum in coming years. One stated: Entrepreneurship, in general, has a tailwind
currently. A great indicator of the culture is actually how the press talks about them. Compared to 10
years ago you see way more stories today (I7). One could suspect that the impact this inflow has on
the ecosystem is one of dilution, as one entrepreneur noted: Entrepreneurs in Aarhus are put on a
pedestal, and its become a shortcut to becoming an expert (I3). Despite this, the concern of dilution
is not generally shared by the entrepreneurs in the community. Conversely, another argued that: Its
becoming a modern thing to be an entrepreneur. Its a great thing to see so many new entrepreneurs.
However, a lot of them will normally quit their companies once they meet challenges (I4).
Shane (2009) stated that creating more entrepreneurs are not necessarily a positive thing for societies.
In the case of Aarhus and Denmark, the statement holds true. Although an increasing amount of
ventures are being formed by entrepreneurs, their ability to create high-growth firms is lacking behind
similar economies. 26 out of the 5000 fastest growing companies in Europe are based in Denmark
(Inc., 2016). The small home market was previously argued to be the primary cause of this


phenomenon. However, the growth of comparable markets with homogenous geographical features
such as Sweden (555), Norway (204), and Finland (324) suggests that the small home market fails to
explain the entire phenomenon. For an explanation of why Danish startups see limited growth,
decision makers must thus look beyond local market factors.
4.3.2 Fear of Failure
A recurring narrative of unambitious entrepreneurs was observed over the course of the study,
especially from entrepreneurs themselves. The impact that the lack of ambition has had in the
ecosystem, top-tier entrepreneurs lack of engagement and investors reluctance to invest, has already
been addressed. The root cause for the lack of ambition could be the inherent fear of failure that seems
to live inside the ecosystem (F13). Famous traits of the Danish culture are things like an equality
mindset and the notorious Law of Jante. Both traits hinder the process of starting high potential
startups, as observed by one entrepreneur: Here failure is seen as something thats inherently negative.
As long as we have that mentality, we should not expect to see too many good startups in Denmark
(I11). Similarly, another investor (I9) noted that many entrepreneurs have what he dubbed an
employee mindset, and failed to take the necessary risks to succeed.
A downside of disconnected ecosystems is the disconnect occurring between new entrepreneurs and
role models. As those entrepreneurs who are successful, ambitious, and excellent role models are not
seeking to inspire the community, the culture is kept unambitious. This phenomenon was particularly
noted by one young entrepreneur: There are a lot of great startups in the city. However, I wish they
were more accessible as role models for the rest of us (I3). The dynamic of role models in the Aarhus
ecosystem explains how negative feedback-loops become reinforcing. There exist cultural resources in
Aarhus, such as role models, that would spur a greater rate of successful startups if used efficiently. In
second-tier ecosystems like Aarhus, the utilisation of cultural assets like role models is crucial, as
resources are scarce. Changing an entire culture, is often a lengthy and challenging process, requiring
small steps and a long-term view by those encouraging the transition. However, as Isenberg (2010)
encouraged: Tackle cultural change head-on (p. 9).

4.4 The Zero-sum Games

In Aarhus, the limited pool of resources has resulted in supportive participants competing, rather than
collaborating to create more resources (F2). Brad Feld (2012) wrote, that to successfully build
entrepreneurial communities the participants must believe in playing positive-sum games. In secondtier ecosystems where resources are scarce, these games are significantly harder to play. The zero-sum
games are limiting the growth of the ecosystem in several ways, many of which will be outlined below.
These observations come from insides through fieldwork in the community, rather than direct quotes
from the interviews. From the outside, most of the initiatives in the city are both sympathetic and
collaborative, yet behind the scenes, the behaviour is surprisingly Machiavellian (F4).
4.4.1 An Ecosystem Led by its Supporters
It is evident in Aarhus that entrepreneurs have little influence on the activities happening in the
ecosystem. Most initiatives, events, and community building efforts are led by support functions such


as incubators, consultants, and media, all players with a direct interest in the ecosystem. The dominance
by supporters directly impacts the ecosystem in a specific way. Most of the initiatives are created to
maximise the utility of a given support player, rather than benefit the entire community (F3). The
impact of this dynamic can be observed in the type of events created in the city. Often, these are
focused on getting more people to start companies, hence more resources for consultants and
incubators. As previously discussed, this dynamic is limiting the involvement from top-tier
entrepreneurs. There is simply no value for them to gain in through engagement. Understanding this
dynamic in the ecosystem is critical, as throughout the section a series of toxic behaviours will be
explained. One can only understand how these are affecting the ecosystem, through realising that the
entities displaying them are the community leaders rather than their rightful position as supporters to
the local entrepreneurs.
4.4.2 Zero-sum Games Between Community Leaders
The zero-sum behaviour became evident in multiple ways over the time this fieldwork took place.
Examples were seen in cases where new initiatives threatened existing ones managed by the community
leaders (F2). Rather than welcoming an expansion of community initiatives to strengthen the
development of the ecosystem, the players would seek to maintain their position as a local leader. This
behaviour has translated into a community where some new initiatives are being sabotaged behind the
scenes, by the leaders pledging to move the ecosystem forward (F4). The ecosystem thus holds a few
toxic entities that, perhaps unknowingly, are trying to control the ecosystem. The dynamic was noted
several times during the interviews. One story was how incubation spaces would try to poach startups
and convince them to relocate between spaces (F6). Another noted: Particular people are yelling too
loudly in the community. There is often a personal agenda behind everything they do and a lot of the
most dominant people in the ecosystem rarely bring any real value (I10).
Despite the previously described Machiavellian behaviour, in recent years, a series of significant support
initiatives have begun to emerge. Altruistic initiatives like Startup City (incubation), Culture Workspace
(incubation) and #AARSOME (support organisation), were recent efforts all portrayed as providing
value to the community by entrepreneurs. Perhaps less surprisingly, these efforts have all been led by
younger newcomers to the community. One of these noted that: Support organisations give the city a
more entrepreneurial mindset. We do, however, lack more people taking initiatives that stretch beyond
just helping people to get started with their new businesses (I4). Increasing the amount of initiatives
similar to these, where relationships and connections are optimised, will strengthen the ecosystem of
Aarhus and move the community towards collaboration.
4.4.3 Lack of Later Stage Support
The city has a tendency to favour early stage initiatives that rarely helps startups build and scale their
businesses. As noted earlier, this results in successful startups ceasing to engage with the community,
causing little or no interaction between experienced and upcoming entrepreneurs (F10). Another
dimension to the type of initiatives created is that most of the support functions have no experience
with later-stage activities. A recurring theme, for instance, is how the city is lacking an accelerator
programme for young startups. However, those proposing the idea have little entrepreneurial
experience and would thus create little value in such a setting. There are a lot of good intentions from

several community leaders. However, the resources that are needed to lead the ecosystem towards scale
and growth are not activated currently. As long as this resource-base goes unutilised, strengthening the
startup initiatives in the city will continue to be a challenge. Finding ways to employ more experienced
resources is thus critical to creating a stronger connection between the entrepreneurs of the ecosystem.
It could be argued that the ecosystem has excellent infrastructure for starting companies. There are
several offerings to get support from business professionals such as lawyers, accountants and
consultants. Many incubation spaces will have these either as a permanent part of their network or
offer workshops and sparring opportunities. Access to this kind of resources provides tremendous
value for early stage startups. However, their value diminishes over time, as companies grow. As one
entrepreneur argued: There are plenty of people who are willing to help. However, it is important to
cut to the bone. I dont need a consultant to tell me what a business model canvas is; I would rather
have access to state-of-the-art research from the University (I3). Additionally, one entrepreneur stated
that I think today a lot of people know how to start their company, but they need a market, finance,
and human capital (I6). Another issue raised by more seasoned entrepreneurs was the lack of
infrastructure, specifically that the city needs an international airport. In essence, there exists a great
variety of initiatives for starting new businesses in Aarhus. However, when it comes to helping
entrepreneurs scale and grow their startups, the selection is more limited.

4.5 The Strong Access to Skilled Labour

An essential part of the firm formation process is the access to cheap skilled labour. In an increasingly
technological world, the sort of work required is becoming more specialised. The access to these kinds
of skills can drive the growth of a startup, yet solely having access to the labour is not sufficient. If
startups cannot attract skilled employees and compete with larger companies, the access to labour
matters less. At the heart of Aarhus lay the local university with approximately 50,000 students, making
up a significant part of the citys total population. The university provides the business ecosystem in
general with a large inflow of both talented students and cutting-edge research, thus making it an
invaluable asset for the city. The question is then, how the entrepreneurial ecosystem benefits from this
talent mass and whether this resource is employed to its fullest by the ecosystem.
4.5.1 Presence of Early Employees
Getting the first employees to join a startup is often challenging, given the insecurity associated with
young firms. The great stream of talents that annually pour into the ecosystem makes convincing the
earliest employees to join startups less challenging in Aarhus. Often the earliest hires will be newly
graduated students willing to run the risk of joining early-stage companies, and the young employees
play a vital role for entrepreneurs. Our biggest strength in Aarhus is the young people of the city.
There is plenty of talent in town, and there is gold on every street corner (I7) was noted by one.
Another argued that I believe that if you are attractive as a company, you can get good people. Ive
never had trouble hiring good people in Aarhus (I2). Continuous investments in education and
attracting talented students is thus an integral part of supporting the startup ecosystem. However, as
argued by Chatterji, Glaeser and Kerr (2013), the best entrepreneurial workers are typically around 40
years old. What this means is that lots of students will not suffice when accelerating the growth of an


early-stage firm. Aarhus based startups thus need to be attractive for more experienced entrepreneurial
workers as well.
In getting these more experienced workers to join the citys startups, the challenges start to emerge.
Aarhus is not known for its startup culture, and a large part of the highly educated workforce is
accessed in competition with multinational powerhouses such as Arla, Bestseller, Lego, and Vestas.
That gives the entrepreneurs particular challenges when it comes to hiring more experienced
employees. Several entrepreneurs addressed the problem: University graduates are easy to find,
however, more senior people have a hard time taking the plunge into a startup. Its going in the right
direction, but its still hard (I1) was the statement of one. Another argued: Its easy enough to find
newly graduated employees. Finding more senior hires are much more difficult (I4). As observed
earlier, the culture around startups in Aarhus is somewhat risk-averse, and the fear of failing outweighs
the upside of joining a startup (F13). One entrepreneur furthermore noted that the competition from
the more cultivated startup ecosystem in Copenhagen made hiring in Aarhus a difficult task: It has
been harder the last couple of years since everyone believes Copenhagen is the place for startups (I6).
The challenges in Aarhus make an interesting observation. Individually, entrepreneurial firms have
trouble competing with established organisations. However, thriving entrepreneurial communities
become assets that startups can leverage in their search for more experienced employees.
4.5.2 Utilising Specialised Knowledge
A point continuously mentioned was the interplay between startups and research institutions in the city.
The issue that was brought up is the gap that exists between entrepreneurs and the cutting-edge
research at Aarhus University that could be used to build stronger businesses. One argued that It
would be perfect for the local startups if we could use the harder and less accessible knowledge in the
community (I6) referring to the research being conducted at the university. Employing the resources
of the university is crucial in a city like Aarhus, where a large part of the citys activities is built around
its research institution. The university may have the potential to help develop startups through utilising
the research for commercial purposes to grow their businesses. The act of pairing the presence of the
universitys activities with the local startup scene has a series of intriguing prospects. Ecosystems
should be built around local conditions and the human capital in Aarhus is one of the most valuable
resources that the city contains. Finding ways to utilise this resource fully will be essential. Hiring highperforming employees is an issue for most companies and something we know that most entrepreneurs
will mention as a limitation. However, in a city which is so heavily dominated by a large university,
Aarhus-based startups have a better ground for attracting skilled labour than almost anywhere else in
the world. If the citys entrepreneurial community can find ways of recombining the human capital, this
could spur significant advances in growth for its startups.

4.6 The Small Home Market

With a population of approximately six million people, the home-market upon which Aarhus based
startups operate is small in size. The small market forces companies with a desire to grow rapidly to
either make activities global from the offset or relocate their business abroad for scaling. This challenge
is one that every country with a small home market needs to address. The amount of Danish growth

companies underperforms the Scandinavian neighbouring countries with similar home markets when it
comes to scaling companies internationally. The question is whether we can explain this dynamic
through examining the entrepreneurial ecosystem of Aarhus. Moreover, we must investigate how local
markets are enabling growth and whether larger corporations play an active role in the entrepreneurial
ecosystem of Aarhus.
4.6.1 Lack of Global Opportunities
Markets are always complicated to explain; as different markets may have varying dynamics. There are
general trends that can be observed in the markets surrounding Aarhus. One significant challenge
Aarhus based entrepreneurs are facing is global scaling. As one noted: Its extremely limited what you
can do in the local market, and I would love to know more about how to enter international markets.
Investors are saying: 'First you take the U.K and then the U.S,' but how do you do that? (I8). The
quote encapsulates some of the pains local entrepreneurs are challenged with, especially those who are
successful. The phrase Denmark is just a test market before going global is often heard in the
ecosystem, yet the local knowledge on global scaling is limited from both entrepreneurs, advisors,
investors, and supporters (F13). There are plenty of entrepreneurs in the community who have created
international businesses. However, common for most of them is a reliance on their internal network to
scale their startups. For instance, one successful entrepreneur argued: The largest challenge is to find
the first few great people abroad. I didnt need to be connected when starting in other countries; I had
an internal network helping me out (I2). Despite the most successful entrepreneurs being able to scale
their businesses through experience and networks, most founders in the city do not have this option.
The lack of internal networks combined with a disconnected ecosystem makes the creation of these
international connections more challenging for most entrepreneurs.
4.6.2 Early Adaptors and Incumbents
Another crucial aspect of market attractiveness is the access to early adopting customers and large
multinational companies. Attracting early consumers in the Danish market was mentioned as a
challenge by some entrepreneurs. For instance, one noted: The Danish market sounds great on paper
given that everyone has a tonne of devices. However, Danes are somewhat late followers making it
hard to scale and test new products (I4). These market realities may be hindering the growth of
startups, only strengthening the argument of a need for faster internationalisation. However, assessing
the adoption rate of new products, of course, comes down to more than just interviews, as this is
influenced by a number of factors, such as market-fit, product quality, etc.
The incumbent companies in the city have long been disconnected from the startup ecosystem.
However, in recent years, it seems that they are starting to embrace the new wave of local startups.
Accelerator programmes, incubation environments, and collaboration with startups are becoming
increasingly typical for large organisations and one entrepreneur explained: Large companies were
open to trying out our products and giving us an early proof of concept (I1). Despite early signs of
engagement from incumbent firms, their overall connection to the ecosystem is still limited. One noted:
Large companies in Aarhus are rather incumbent and not very entrepreneurial in their mindset (I1).
Many of the companies are willing to engage and collaborate with startups, mainly to a point where it
does not require larger investments. Their efforts are usually depended on specific employees driving

their engagement (F11). However, initiatives like Danish Food Cluster and Stibo Accelerator show
early signs of interest in entrepreneurs from incumbent firms in Aarhus. Getting large corporations to
engage more with the startups comp is a vital resource for the ecosystem and one of the areas holding
the most significant potential for the city and its future entrepreneurs.

4.7 The Hands-off Political Approach

In the Aarhus case, the local government has chosen a hands-off approach to entrepreneurship. Much
of the public activity in the area is driven by the Danish state. As already noted, state driven investment
funds, public grants, and an extended range of sparring opportunities are available for entrepreneurs in
the ecosystem. Most of these initiatives are run with little involvement from the private sector. The
municipalities director of business development noted that: Luckily, we are getting to a point where
the startup ecosystem is starting to drive itself. Our reason for existing is purely based on market
imperfections, and we dont want to be a large landlord for the entrepreneurs like weve seen in other
cities. Rather we are here to secure the resources that entrepreneurs rely upon, for instance the great
talent mass and the attraction of national initiatives (I7). In sharp constant to the strategies of the state
government, the local government is thus trying to limit its role in the ecosystem and leave
development to private initiatives.
4.7.1 A Bottom-up Ecosystem
The regulatory approach results in the ecosystem developing from the bottom-up, with initiatives being
driven by private actors rather than public. The bottom-up approach is relevant for a series of reasons.
It means sustainability for the ecosystem and that the structure, initiatives, and main drivers will not be
altered as a new mayor takes office (Feld, 2012). Furthermore, an ecosystem that is driven organically
will create exactly the initiatives that are needed by the players, rather than politicians. The approach
was noted by most of the entrepreneurs who embraced the small degree of public involvement in their
ventures. One stated: The local government should not be a part of the ecosystem as an active player.
Instead, they could make it easier for entrepreneurs to use them as customers (I3). And several others
echoed this statement with quotes like: I never thought of the local government as an active player. I
would appreciate not to get involved with the public initiatives (I8) and I am not concerned with the
local government and honestly I dont even think they know we exist (I11). However, not taking an
active role in the ecosystem, does not entail no engagement at all. Local politicians do support private
initiatives created in the community, as long as no execution is required. They choose to work with
local community leaders and help those that are close to the grassroots, where the initiatives are
created. This view of supporting efforts, rather than leading them, further contributes to a bottom-up
movement in the ecosystem. The challenge for local policy makers lies in supporting the right initiatives
to achieve a desirable outcome for the ecosystem.
4.7.2 Public Resources
Part of the national initiatives to support entrepreneurship is a series of initiatives to support the
creation of new ventures. The public investment funds have already been addressed. Other initiatives
include sparring opportunities from federal consultants and help setting up new companies. The
regulatory framework around starting new ventures is among the most liberal in the world, something


we know does not impact entrepreneurial activity (Napier et al., 2013). The challenge for these public
resources is that the high-potential entrepreneurs are unwilling to use them. One entrepreneur noted
that: There is a lot of public sparring, but none of them has ever tried to start anything themselves.
The public people know nothing about the new way (digital businesses) of being an entrepreneur
(I1). Similarly, another argued: My company has never used public resources; I think they are generic
(I6). The study of Aarhus thus adds to the body of research suggesting that public resources like these,
are a poor investment for policy makers. Their ability to provide the sparring needed for entrepreneurs
to grow their companies are limited in reality.
The dynamic above highlights why the gap-filling approach is not viable. Rather the approach of
supporting ambitious private initiatives is the most viable path for policy makers, in their desire to
contribute to the development of ecosystems. The simple explanation is that high-potential
entrepreneurs are not interested in direct governmental involvement, as was also argued by Feldman et
al. (2005). One entrepreneur summed up this point by stating: I simply believe that the best people are
in private companies (I8). It is with this dynamic in mind that governments, both national and local,
should design their future efforts to help develop entrepreneurial ecosystems. That being said, the
public efforts towards entrepreneurship are strong in Denmark. A large pool of resources is being
invested into the area. How these resources could be used in a more effective manner, will be discussed
throughout the upcoming sections of the thesis.


5. Analysis
The findings of the research have been presented, and the next step in the process is analysing these.
As previously shown, there are certain best practices when it comes to enabling entrepreneurial
ecosystems. With regards to the findings already made in the field of entrepreneurial ecosystems, the
results from the case study of Aarhus can now be compared to the research in the field. Previously
seven propositions were condensed from the current state of research. These are used in the upcoming
analysis. This analysis can in ultimately be used for recommendations on how to develop the local
ecosystem further, a topic for discussion in the final section of this thesis.
5.1 Proposition 1 (Entrepreneurs). Creating more startups has a diminishing effect and should not be
the goal. Instead connecting the current entrepreneurs creates growth opportunities through learning.
The entrepreneurial ecosystem is fragmented, in particular between its entrepreneurs. The most
experienced entrepreneurs are reluctant to engage with the community due to a lack of value for their
time invested. However, the early signs of unity are starting to show, and several entrepreneurs noted
how their founder-networks are helping them develop their capabilities. A much greater emphasis on
networks like these is crucial to connect the citys entrepreneurs. The problem most of the
entrepreneurs noted was the amount of noise in the community from so-called wantrepreneurs,
causing the best to limit their involvement. Filtering out the noise in the city is thus a vital first step to
uniting the entrepreneurs in Aarhus. Connecting the entrepreneurs of Aarhus is key to cultivating the
ecosystem, as connectivity can spur valuable growth opportunities for entrepreneurs.
The myth that creating more startups will equal a stronger ecosystem seems to exist in Aarhus. Many of
the initiatives that initiated are designed to focus solely on the very early stages of entrepreneurship.
These type of events are crucial to inspire the entrepreneurs of tomorrow, but should not be mistaken
as ecosystemic development. They do little to develop the community and rarely provides value to
existing entrepreneurs. Instead, a greater focus on creating entrepreneurial content for later-stage
entrepreneurs would be valuable towards connecting more experienced entrepreneurs. In turn, this
would make the community more attractive for those that can inspire, mentor and share knowledge.
5.2 Proposition 2 (Finance). Venture capital has a significant impact in an ecosystem. A pure focus
on attracting capital is inefficient, rather ecosystems should build more attractive firms for capitalists.
The capital markets in Aarhus are underperforming significantly against comparable economies. The
question in this sense is then how to view this problem. The venture capital scene in the country is still
quite inexperienced, and it will continue to pick up momentum as it grows in the coming years. With
this in mind, one should not fall into the trap of believing that more venture capital into the ecosystem
would solve all its problems. Statements like: We need entrepreneurs who think completely different.
There are a lot of startups, but far too few hit high growth numbers and become large (I9) points
towards an underlying problem in the ecosystem. As long as this is evident among current investors in
the city, there is a case for developing other areas of the ecosystem as well. That is not to say that the
attraction of venture capital is not a major factor for Aarhus. Rather, the case is whether it is realistic to


attract millions of dollars to a city that is currently not producing a series of high-potential startups. It
seems more convenient to activate the local resources already present in the ecosystem, before
attracting new ones. Instead, the primary focus regarding venture capital should be on 1) enabling
private investors to make more educated decisions about which entrepreneurs to fund (i.e. networks,
training) and 2) activate the knowledge of investors into the ecosystem through engaging with its
entrepreneurs (knowledge sharing, mentoring). The ladder is a challenge mainly due to the obstacles
addressed in the next section. However, over time it is collaborative behaviour like this that could help
investors support their ecosystem, and create a more prosperous environment for investments.
5.3 Proposition 3 (Culture). External entrepreneurship-friendly culture is valuable, yet only to a
certain extent. An internal culture of collaboration is what generates the most value for ecosystems.
The external culture is favourable, and the entrepreneurial spirit in Aarhus is at its highest points in
recent history. The entrepreneurs in the city have a high social status, and the trait is seen as an
admirable career path. This external culture of acceptance is valuable in several ways for the citys
entrepreneurs as it facilitates hiring, PR, fundraising, etc. However, the external culture only makes up a
small fraction of an ecosystem and the challenge for Aarhus is the internal culture in the ecosystem.
The internal culture is dominated by zero-sum games, fragmentation, and a reduced ability to
collaborate effectively. Although, early signs of cooperation are starting to show in the ecosystem, there
is still a long way to connectedness. Promoting a culture of collaboration and tightness is thus crucial
for the city. Cultural changes demand a significant amount of time and switches should not be expected
to happen overnight. However, with the right players stepping forward to promote this cultural shift,
through leadership and engagement, change is obtainable. Another cultural issue for the city is the
eminent fear of failure among its entrepreneurs. The fear is often causing entrepreneurs to stick with
unsuccessful startups due to the embarrassment associated with failing. It means limited risk-taking in
decision making and often entrepreneurs become saturated as the firm reaches a certain size. Tackling
this kind of cultural change is more complicated. It is deeply ingrained in the Danish mindset, which in
all fairness has produced world-leading companies. Addressing this shift will require not only strong
role models promoting big thinking, but also the necessary resources to help entrepreneurs grow their
businesses beyond a certain size.
5.4 Proposition 4 (Supports). Support functions play a vital role in gluing together the community,
mainly through relevant events, mentoring, and support.
Support functions in Aarhus play an interesting role as they are currently leading the ecosystem. This
dynamic means that rather than gluing the ecosystem together, parallel agendas are often set to
accomplish self-interests. The problem is not that these players lead the community (it is vital that
initiatives are created), but rather that parts of the community are being led with bad intentions. We
have seen Feld (2012) argue that a community should always be led by its entrepreneurs. However, it
could be discussed whether it is the intentions of community leaders, that should determine whether
those players should be leading. A key measure of how well a citys support functions manage to glue
together an ecosystem is their ability to engage the entrepreneurs, and currently, the entrepreneurial
stack of Aarhus is not actively engaged. The entrepreneurial content being created in Aarhus is thus


not sufficient for its supporters to fill out the role as connectors. Instead, the citys supporters should
ask themselves how they can engage the entrepreneurs in the ecosystem. Solely focusing efforts on the
creation of new entrepreneurs or very early stages provides little value to the ecosystem. An intensified
focus on later stage initiatives for experienced entrepreneurs would instead spur greater value for the
community. High-potential entrepreneurs need mentoring and learning opportunities from experienced
peers, rather than inspirational talks, consulting, and incubation.
5.5 Proposition 5 (Human Capital). The presence of cheap high-skilled labour is crucial to
ecosystems. The flow of labour can come from both internal and external sources.
The presence of Aarhus University results in a significant inflow of high-skilled labour to the
ecosystem. Talent attraction is a challenge for most companies. The issue for Aarhus based startups lies
in convincing employees to take the risk of joining a startup, especially those with more experience.
However, the possibility of attracting high-skilled labour in Aarhus is highly present in the community,
and human capital is one of the strongest resources in the city. As entrepreneurship continues to gain
momentum regarding popularity, the attractiveness of working with growth firms will continue to surge
in coming years. Thus, what the local startups need are a series of tools for attracting more seasoned
employees. A recent example of such a tool was the government easing regulations on equity-salary
payments. Similarly, the emergence of a nationwide hiring platform exclusively for growth startups has
recently surfaced, making hiring more accessible for startups. The development of such initiatives is
vital to a startups ability to attract top talent, as they are rarely able to rely solely on their company
status. It could be argued that the primary objectives of an ecosystem, with regards to human capital, is
to make its startups attractive for potential talents and leverage the community as an asset.
5.6 Proposition 6 (Markets). Ecosystems need incumbent firms to thrive and cultivate new ventures.
Dealmakers are essential to connect startups with opportunities across the ecosystem.
The presence of multinational companies in Aarhus is high, with several world leading companies
headquartered in the city. Despite this, their engagement with the citys startups remains questionable.
While many founders argued that the big businesses are easy to work with, their overall investment of
time and resources into the ecosystem is at a low level. The root causes for this phenomenon can be
seen from many viewpoints, and investigating it in-depth could have a study of its own. What is often
evident in the community is that large companies are willing to engage and act as clients, but not invest.
An underlying factor explaining this may be the business mix of incumbent companies. Most of the
companies operate within mature industries such as retail and agriculture; fewer is concerned with high
innovation industries, such as technology. A stronger network of dealmakers between the startup
community and large organisations could thus help strengthen the bonds between the two. Moreover,
cultivating dealmakers to enhance connections towards global markets is equally important for the
entrepreneurial ecosystem, as the home market is limited in size. With several recent initiatives in mind,
the early signs of larger companies playing a more active role in the ecosystem are emerging. Finding
ways to connect incumbent firms with startups is a vital task for the ecosystems future growth, as this
is an area that carries significant unutilized resources.


5.7 Proposition 7 (Policy). The bottom-up approach is essential for successful ecosystems. Policy
makers should assume a role of supporters and connectors to private initiatives.
The bottom-up approach employed by the local government of the city has meant that the local startup
ecosystem is developing organically. The current body of research suggests that applying this view is
the most sustainable way of development for policy makers. The fact that most entrepreneurial
interviewees hardly notice the presence of local government should be seen as an upside, as the selfimage as a support function is essential for any governmental institution. A continuous focus on
locating and supporting the right private players in the ecosystem should be the primary objective for
the local government going forward. Cultivating private initiatives is an effective way of supporting the
ecosystem and as the director of business development noted: I tell myself that we are spending our
money wisely, and I do not believe that will change (I7). While the public interest in entrepreneurship
will inevitably continue to rise, the local government should to not be tempted to take charge of the
ecosystem. Rather, continuing to promote entrepreneurship through highlighting the current successes
in the ecosystem towards upcoming entrepreneurs, is advisable. These promotional efforts will thus
help enable the entrepreneurial culture in Aarhus. As noted earlier, the governmental role in a startup
ecosystem is complicated and most successful efforts develop through trial and error learning. As long
as gap-filling and top-down development are avoided, the ecosystem of Aarhus will continue to grow
organically alongside its local government.


6. Discussion and Implications

In the final part of the study, a strategy for enabling second-tier entrepreneurial ecosystem like Aarhus
will be discussed. It encapsulates the lessons learned during the past four months and pairs these with
the current state of research. The result of this is a dynamic view on ecosystemic development, to
create value for entrepreneurs, investors, policy makers, and other stakeholders. The upcoming section
will not be a guaranteed recipe for success; rather it is a theory for developing disconnected ecosystems
like Aarhus. Employing local knowledge of specific components in an ecosystem to implement
initiatives is critical in any development. Combining a dynamic view with local knowledge is thus
advisable. As we know, ecosystems form under local conditions through a trial-and-error process, and
this approach could form the basis for anyone wanting to develop a second-tier ecosystem.

6.1 Bootstrapping an Ecosystem

An entrepreneurial ecosystem is a set of resources that should support its entrepreneurs in creating
more valuable companies. These resources come in many forms, whether they are monetary,
regulatory, or cultural. Common for all is that they are assets used by the entrepreneurs in a local area.
In second-tier ecosystems like Aarhus these resources are scarce as the ecosystem is not very well
developed. The anatomy of the ecosystem is thus what determines how these resources are used, and
how they flow through in the ecosystem. Picture the ecosystem as a giant net surrounding the resources
in the community. These resources can take the form of either tangible assets (money, universities,
customers, employees) or intangible assets (culture, relationships, knowledge). The intangible assets of
an entrepreneurial ecosystem determine how efficient the tangible assets flow through the system, in
deciding the underlying rules for exchanging such resources. The surrounding net of an ecosystem then
determines how much resources are wasted, due to a lack of connectivity. In the case of Aarhus, this
means that while some areas of the ecosystem enjoy a great exchange of resources, other parts of the
ecosystem will not experience the same benefits, due to the fragmented nature of the ecosystem.
What is meant with the bootstrapping approach is that second-tier ecosystems should seek for ways to
employ their current resources more efficiently before attracting new ones. Often, policy makers and
practitioners alike focus intently on the resources not available in the ecosystem, rather than optimising
those already present. Optimisation can be facilitated through a process of increasing the connectivity
in the ecosystem. This interconnectivity is crucial, as it determines the effectiveness of all other
resources in the ecosystem. This, in turn, determines the ease at which the ecosystem can scale to
include more assets. It has always been tempting to solely evaluate regions based on their quantitative
economic factors, yet we must acknowledge that ecosystems are more complex than that. Although this
mindset is more ambiguous to grasp, it provides superior results, as shown in not only research but also
the results of this thesis. Through adopting this mindset, we can begin to discuss how ecosystems can
be built from the bottom-up.


6.2 The Big Idea: An Inside-out Approach

Anyone criticising one approach should be prepared to propose an alternative theory. Throughout this
thesis, the argument against static-measurement approaches to ecosystems has been echoed. It has been
stated that we must view ecosystem as dynamic entities, evolving over time. With this criticism in mind,
the following section contains an alternative view on how ecosystems are built. In other words; a
dynamic view. The approach has its roots in the existing literature on entrepreneurial ecosystems,
paired with the findings made in Aarhus. It has yet to be tested in the real world, as we still know little
about how ecosystems evolve. Rather, the model is an act of connecting the current dots and in fact a
reformulation of Daniel Isenbergs (2011) existing theory. It encompasses the same elements as has
previously been used to analyse the entrepreneurial ecosystem of Aarhus.
Figure 2 showcases the reformulated model that is
described above. The model is divided into four
different phases for successfully growing
entrepreneurial ecosystems. As already noted, all
ecosystems develop under local circumstances, thus
making a general theory more complicated to design.
A larger degree of evolutionary data from several
ecosystems would be needed to test whether the
model has broader implications. However, the model
encompasses data and trends from not only Aarhus
but several other ecosystems facing fragmentation
issues such as Kansas City (Mayer, 2012) and
Hamburg, Germany (F12). This could lead to the
belief that many second-tier ecosystems face the same
type of problems, yet to make that a conclusive theory
would be an overstatement.
The model follows four phases that will be outlined
below and has been dubbed The Inside-out
Figure 2: The Inside-Out Entrepreneurial Ecosystem
Approach. It includes the seven elements from the
original model yet the weight given to their ideal evolution has been changed. The model takes its basis
in the bootstrapping philosophy discussed in the ladder section, meaning the goal is to connect an
ecosystems' current resources. The reasoning behind this approach lies in how ecosystems scale.
Pouring additional resources into an ecosystem that cannot effectively employ those already present is
an inefficient way of building economic systems. Securing the fundamentals of an entrepreneurial
ecosystem before attempting to scale is crucial, and it is this dynamic which the model builds on.
6.2.1 Phase 1: Connecting the Entrepreneurs
The power of connecting the entrepreneurs in an ecosystem with each other have been documented by
several scholars and practitioners alike. It is a vital step in the development of any ecosystem. The
reason fostering this connection is crucial, lies in the amount of peer-to-peer learning and mentoring


benefits that these relationships facilitate. Building collaboration between the entrepreneurs thus holds
lots of value for an ecosystem. From a larger perspective, every time an experienced entrepreneur
decides not to engage with fellow entrepreneurs (either from lack of interest or lack of possibilities),
valuable intellectual resources and connections are lost. Connecting the entrepreneurs is the only free
lunch in startup-land, as both entrepreneurs and their knowledge will always be present in an
ecosystem. As concluded by the case study of St. Louis by Motoyama & Watkins (2014), this valuable
connection is best facilitated through entrepreneurial events that encourage learning and engagement.
These type of events will, over time, promote a culture of collaboration between a citys entrepreneurs.
6.2.2 Phase 2: The Evolving Nature of Culture
Having models that encapsulate culture is a challenge, given its complexity to measure. In the insideout approach this is attempted through mapping culture as a process, rather than an area of the
ecosystem. What this provides is the notion that cultural change happens over time, as other areas of
the ecosystem is evolving. All ecosystems will develop their own distinctive culture and thus it cannot
be measured in a pre-set box. Rather, culture must be acknowledged as an evolutionary process that
over time glues together the development in all other domains of the ecosystem. Defining culture as a
separate phase is thus not as correct as the other phases in the model, yet it showcases the evolution.
6.2.3 Phase 3: The Internal Firm-Based cluster
The third phase of the model holds a cluster of finance, markets, and human capital. The reason for
prioritising these particular elements is that they are internalised by the startups consuming them. These
resources are all critical components to building entrepreneurial ventures and should thus hold a high
priority when developing ecosystems. The third phase is based on the idea that startups will achieve
more efficient growth if they are connected to cultivated markets, high-skill labour, and entrepreneurial
finance. The impact of the three is already well documented in the reviewed academic literature
(Chatterji et al. 2013; Lerner, 2009). Furthermore, these three elements were mentioned by all
entrepreneurs interviewed in Aarhus as being the most critical for scaling their companies. Connecting
startups with these crucial elements is key to creating more growth firms in an ecosystem.
6.2.4 Phase 4: The External Cluster
As building blocks for growth startups have been established, the next step is creating a business
friendly environment. Often the reverse is observed in which the favourable environment is initially set
up with the hope of fostering stronger startups. However, this rarely seems to be useful (Napier et al.,
2013). The idea is not that a supportive environment is negative for startups, far from it. Rather, the
idea is that environments like these become relevant, only once the core building blocks are secured.
Cultivating those blocks should thus be the top priority of policy makers, before investing in a
favourable business environment. Entrepreneurship will happen, whether it is easy to register an
enterprise or locate incubation space matters less. Lowering these barriers becomes critical at a
particular point in any evolution, yet only once the fundamentals have been built.
6.2.5 The Cyclical Nature
As with all systems, the entrepreneurial ecosystem never ceases to evolve. As the ecosystem grow, it
will attract new generations of entrepreneurs that will consume financing opportunities, market

connection, incubation, and governmental support. The challenge for ecosystemic developers is to
determine in which part of the cycle their ecosystem is located, and act with regards to local conditions.
It would be optimistic to believe that entrepreneurial ecosystems can be thoroughly explained in a
linear fashion like this. An explanation like this is not the intention. Rather, it should be used a
guideline to understanding the dynamic development of an ecosystem, beyond its individual attributes.

6.3 Implications: Aarhus and Beyond

The findings, analysis, and discussion, have several implications for various stakeholders in the field of
entrepreneurial ecosystems. The research contributes to the field with unique insights from a less
developed second-tier ecosystem. They contribute to a narrow, but growing field of research that will
continue to expand in the years to come. As the interest in entrepreneurship increases, the field of
entrepreneurial ecosystems will naturally evolve with it. With its qualitative approach, the study
provides deep insights from a second-tier ecosystem facing similar challenges to those observed
elsewhere. The study has the following implications:
6.3.1 For Policy Makers
Policy makers should avoid the temptation of trying to gap-close and correct market imperfections.
Rather, work with understanding both the entrepreneurs and ecosystem to make informed decisions
about sustainable development. As the Aarhus case highlights, this approach supports the organic
evolution of an entrepreneurial ecosystem. Recognising that ecosystems are not built by policy makers
is critical in any city. Seek to enable those initiatives that support the current state of the ecosystem, and
favour those with high potential. Moreover, policy makers should become entrepreneurial advocates
and promote collaboration among the players in the ecosystem.
6.3.2 For Scholars
The case study of Aarhus underscores the importance of understanding the anatomy of an
entrepreneurial ecosystem. As the findings highlight, researchers must seek to understand the
relationships between the attributes of an ecosystem. In Aarhus, many of the attributes that describe
thriving ecosystems are present: strong external culture, large university, young innovators, and big
corporations. Had these been assessed solely through quantitative measures, the conclusions of this
paper would have been significantly different. However, the qualitative approach revealed a range of
elements (connectedness, fragmentation, zero-sum games) contributing to these resources not being
used efficiently. Only through gaining these rich insights can researchers begin to understand the
dynamics of an entrepreneurial ecosystem.


7. Conclusion
This thesis has been a study examining the entrepreneurial ecosystem in Aarhus. The paper initially
stated that the current methods for studying ecosystems rely too heavily on quantitative measures. To
account for this, the following two research questions have guided the study:

How is the entrepreneurial ecosystem connected in Aarhus?

What governs the dynamics of the entrepreneurial ecosystem in Aarhus?

In answering both questions, the study has relied on 11 qualitative interviews with local players and
four months of participant observation in the field. Based on the findings made in Aarhus the thesis
can conclude that:
The entrepreneurial ecosystem of Aarhus is fragmented. This fragmentation is creating barriers to
collaboration among its participants, causing valuable resources to be wasted. The most successful
entrepreneurs are reluctant to interact with the ecosystem, causing the flow of knowledge between
entrepreneurs to be limited. The effect becomes self-enforcing as it creates a negative feedback loop
hindering the ecosystems growth. Connecting successful entrepreneurs in Aarhus holds enormous
potential and should be a top priority for the city.
Every entrepreneur commented that a lack of capital was a constraint for local entrepreneurs.
Moreover, the local investment scene is dominated by public funds, lacking the sufficient knowledge of
entrepreneurial finance. Conversely, investors claimed that deal-flow is poor in Aarhus and firms lack
potential. From a quantitative perspective, both parties have strong cases as the city is underperforming
in both areas. The lack of growth startups is partly the product of a limiting mindset among
entrepreneurs. Often, the fear of failure outweighs the upside of taking significant risks. Cultivating a
culture of risk-taking can be accomplished through activating successful role models in the ecosystem.
The limited pool of resources in Aarhus has resulted in supportive participants playing zero-sum
games. As the supporters currently lead the ecosystem, this mentality is causing additional barriers for
collaboration. Most events in Aarhus focuses on early-stage content, thus limiting the incentive for
experienced entrepreneurs to participate. Local policy makers have employed a hands-off approach to
entrepreneurship, facilitating bottom-up development in Aarhus. Rather than implement public
initiatives, the local government supports grass-root efforts in the entrepreneurial ecosystem.
A valuable resource in Aarhus is the citys highly skilled labour pool. Attracting talented employees in
the early stages of growth is uncomplicated for entrepreneurs in the city. However, hiring more
experienced workers is challenging as these lack cultural and monetary incentives to join startups. The
study theorises that a thriving entrepreneurial ecosystem can be leveraged to attract skilled labour, as
they provide visibility for entrepreneurs. Despite a small home market being a natural constraint in
Aarhus, the city lacks international connections in its network. The connectivity between incumbents
and entrepreneurs is increasing, yet still limited. Cultivating dealmakers in the city would be an effective
way to strengthen both of these connections and facilitate growth in the ecosystem.

Over the recent years, we have advanced our knowledge of entrepreneurial ecosystems significantly.
However, we still know little about their behaviour and evolution over time. Case studies like the one
conducted in Aarhus are thus vital to enhance our understanding of ecosystemic behaviour. Decision
makers are often tempted to draw conclusions based on quantitative data as these provide clear and
measurable results. In the context of entrepreneurial ecosystems, however, such data do not exclusively
suffice. Examining relationships, networks, connections, and dynamics is strongly advisable, as it
provides us with a deeper layer of understanding in a local ecosystem. The inside-out approach
developed in this study is one way of theorising these dynamics; undoubtedly there are numerous other
methods. However, as the field continues to expand, gaining these insights become increasingly crucial.
Ultimately, understanding how entrepreneurial hubs form around local conditions can create
considerable economic prosperity in the global arena and help deprived economies thrive in the future.

7.1 Limitations
A natural constraint for this study has been the four-month period over which it has run. Ideally,
research like this had applied a longitudinal methodology following the participants over several years.
Further research in Aarhus is suggested to observe how the ecosystem will evolve over time.
Conducting fieldwork through participant observation always carries the risk of subjectivity. The goal
of the study has been to present findings with the highest degree of objectivity, yet it remains
questionable whether a different researcher would have drawn an identical conclusion. The study relies
on self-reported data from participants, a source naturally limited by human biases and due to a lack of
previous knowledge of Aarhus has been challenging to filter.


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