2020 Entrepreneurship and The Community A Multidisciplinary Perspective On Creativity, Social Challenges, and Business by Vanessa Ratten

Contributions to Management Science
Vanessa Ratten Editor
Entrepreneurship
and the
Community
A Multidisciplinary Perspective on
Creativity, Social Challenges, and
Business
More information about this series at http://www.springer.com/series/1505
Vanessa Ratten
Editor
Entrepreneurship
and the Community
A Multidisciplinary Perspective on Creativity,
Social Challenges, and Business
Editor
Vanessa Ratten
Department of Entrepreneurship, Innovation
and Marketing
La Trobe University
Melbourne, VIC, Australia
ISSN 1431-1941 ISSN 2197-716X (electronic)

ISBN 978-3-030-23603-8 ISBN 978-3-030-23604-5 (eBook)
https://doi.org/10.1007/978-3-030-23604-5
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Contents
Entrepreneurship and the Community . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Vanessa Ratten
The Other Within as Entrepreneurial Agency for Subsistence
Entrepreneurs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Hans Lundberg and Marcela Ramírez-Pasillas
Effectual Versus Causal International Opportunity Discovery
and Creation: Implications for SMES’ Competitive Advantage . . . . . . . 29
Masoud Karami
Sustainable Crowdfunding for Subsistence Entrepreneurship . . . . . . . . 49
Nadia Arshad, Marcela Ramírez-Pasillas, and Linda D. Hollebeek
A Framework for a Smart City Design: Digital Transformation
in the Helsinki Smart City . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Mervi Hämäläinen
The Dynamics of the Employee Branding Effect: The Valuation
of Interpersonal Relationships in Organizational Results . . . . . . . . . . . . 87
Andrea Sousa, João Pedro C. Fernandes Thomaz, Eulália Santos,
Carlos António P. Francisco e Silva, and Aquilino Manuel Felizardo
The Entertainization of Business Event: The Case of Alibaba
Computing Conference in Hangzhou . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
Guiqiang Qiao, Chris Ryan, Chao Zhou, and Tim Lockyer
Innovation and Entrepreneurship as Tools for Rural Development:
Case Study Region of Vera, Extremadura, Spain . . . . . . . . . . . . . . . . . . 125
Francisco Javier Castellano-Álvarez, Amador Durán-Sánchez,
María de la Cruz del Río-Rama, and José Álvarez-García
v
vi Contents
Entrepreneurship and Innovation Based on the RIEMPEI Model:

Inequality of Opportunities in Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . 141
Martha Ríos-Manríquez, Lizbeth Pérez-Rendón,
and María Dolores Sánchez-Fernández
Social Exclusion in Ecuador with Housing Indicators: A Regional
Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159
Diego Fernando García-Vélez, Mario Andrés Contreras-Jaramillo,
Tania Paola Torres-Gutiérrez, and Ronny Fabian Correa-Quezada
List of Contributors
José Álvarez-García University of Extremadura, Cáceres, Spain

Nadia Arshad Jönköping University, Jönköping, Sweden
Francisco Javier Castellano-Álvarez University of Extremadura, Cáceres, Spain
Mario Andrés Contreras-Jaramillo Universidad Técnica Particular de Loja,
Loja, Ecuador
Ronny Fabian Correa-Quezada Universidad Técnica Particular de Loja, Loja,
Ecuador
María de la Cruz del Río-Rama University of Vigo, Ourense, Spain
Amador Durán-Sánchez University of Extremadura, Cáceres, Spain
Aquilino Manuel Felizardo University of Évora, Évora, Portugal
CEFAGE-UÉ, Évora, Portugal
João Pedro C. Fernandes Thomaz ISLA-Leiria, Leiria, Portugal
ISLA-Santarém, Santarém, Portugal
Carlos António P. Francisco e Silva Universidade Europeia, Lisboa, Portugal
CIEO, Algarve, Portugal
Diego Fernando García-Vélez Universidad Técnica Particular de Loja, Loja,
Ecuador
Mervi Hamalainen University of Jyvaskyla, Jyvaskyla, Finland
Linda Hollebeek Montpellier Business School, Montpellier, France
Tallinn University of Technology, Tallinn, Estonia
NHH Norwegian School of Economics, Bergen, Norway
Masoud Karami Queenstown Resort College, Queenstown, New Zealand
vii
viii List of Contributors
Tim Lockyer The University of Waikato, Hamilton, New Zealand

Hans Lundberg Universidad Iberoamericana, Mexico City, Mexico
Marcela Ramírez-Pasillas Centre for Family Enterprise and Ownership (CeFEO),
Jönköping International Business School, Jönköping University, Jönköping,
Sweden
Lizbeth Pérez-Rendón Higher Technological Institute of Purísima del Rincón,
Guardarrayas, México
Guiqiang Qiao The University of Waikato, Hamilton, New Zealand
Zhejiang International Studies University, Hangzhou, China
Vanessa Ratten Department of Entrepreneurship, Innovation and Marketing,
La Trobe University, Melbourne, VIC, Australia
Martha Ríos-Manríquez University of Guanajuato, Guanajuato, México
Chris Ryan The University of Waikato, Hamilton, New Zealand
Maria Dolores Sánchez-Fernández University of A Coruña, A Coruña, Spain
Eulália Santos CIDMA, Aveiro, Portugal
Andrea Sousa ISMT - Instituto Superior Miguel Torga, Coimbra, Leiria, Portugal
Chao Zhou Zhejiang International Studies University, Hangzhou, China
List of Figures
Effectual Versus Causal International Opportunity Discovery

and Creation: Implications for SMES’ Competitive Advantage
Fig. 1 A conceptual model on the logic of entrepreneurial decision-making,
type of international opportunity and competitive advantage. Source:
Authors own figure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40

in the Helsinki Smart City
Fig. 1 Framework for smart city design (adopted from Hämäläinen &
Tyrväinen, 2018) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Fig. 2 Smart Kalasatama quadruple helix (adapted from the Smart
Kalasatama presentation) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Fig. 3 The development of the Helsinki smart city through four
dimensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81

Computing Conference in Hangzhou
Fig. 1 The 2017 and 2018 music festival posters. Source: Photo courtesy
https://yunqi.aliyun.com . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 114

Case Study Region of Vera, Extremadura, Spain
Fig. 1 Limits and location of the scope of study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130
Fig. 2 Innovative content of the investments made. Source: Authors own
figure . . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . 136
Fig. 3 Innovative content of investments by type of developer. Source: Own
elaboration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136
ix
x List of Figures

Analysis
Fig. 1 Weightings of social exclusion indicators, 2014–2017. Source:
Author’s own figure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 171
List of Tables
The Other Within as Entrepreneurial Agency for Subsistence

Entrepreneurs
Table 1 Overview of data sample with TOW in focus/in use . . . . . . . . . . . . . . . . 13
Table 2 de Certeau paragraph analyzed (1988/1984: 31–32) . . . . . . . . . . . . . . . . 15
Table 3 Deardorff paragraph analyzed (2008: 174–175; references to quotes
within the quote omitted by us) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Table 4 Pennington paragraph analyzed (2005: 27; references to quotes
within the quote omitted by us) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Table 5 Maughan paragraph analyzed (2006: 685) . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Table 6 Yovel paragraph analyzed (2009: 62) . .. . .. . . .. . .. . .. . .. . .. . . .. . .. . .. . 18
Table 7 Elements of the “the-other-within” concept derived from each
setting/text analyzed respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

in the Helsinki Smart City
Table 1 Empirical data collection . .. . . . . . . .. . . . . . . .. . . . . . . . .. . . . . . . .. . . . . . . .. . . . 72
The Dynamics of the Employee Branding Effect: The Valuation

of Interpersonal Relationships in Organizational Results
Table 1 Pearson’s correlation results between the different elements of the
employee brand effect . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . 97
Table 2 Employee branding regression model (EB) and mentoring and aid
relationships (MAR) .. . . . . .. . . . .. . . . .. . . . .. . . . . .. . . . .. . . . .. . . . .. . . . . .. . . 98
Table 3 Regression model between organizational integration (OI) domain
and interpersonal relationships (IR) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Table 4 Model of moderation effect of mentoring and aid relationships on
organizational integration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
xi
xii List of Tables

Computing Conference in Hangzhou
Table 1 The development of Hangzhou Yunqi Computing Conference . . . . 112

Case Study Region of Vera, Extremadura, Spain
Table 1 Distribution by measurements of the investment made in Proder I
and II in La Vera . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131
Table 2 Representativeness of the sample according to the type
of project . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132
Table 3 Typology of public investments addressed by the LAG . . . . . . . . . . . . 133
Table 4 Types of promoters and projects of a private nature . .. . . . . . . . . . .. . . . 133
Table 5 Categories for the classification of projects according to their
innovative content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134
Table 6 Classification of investments made based on their innovative
content . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135
Table 7 Characterization of the projects included in the sample . . . . . . . . . . . . . 137
Entrepreneurship and Innovation Based on the RIEMPEI Model:

Inequality of Opportunities in Mexico
Table 1 Technical data of the investigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
Table 2 Profile of the Engineering students of the IES . . . . . . . . . . . . . . . . . . . . . . . 149
Table 3 Description of the variables of undertaking a business in university
engineering students in the IES of Mexico: personal traits,
self-esteem, need for of achievement, risk assumption,
and creativity . . . . . .. . . . . .. . . . .. . . . . .. . . . . .. . . . . .. . . . .. . . . . .. . . . . .. . . . .. . . 149
Table 4 Association among entrepreneurship variables in engineering
students of the IES of Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
Table 5 Model RIEI .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. . .. .. . .. . .. . .. . .. . .. . .. . 151
Table 6 Indicators of multicollinearity of the Entrepreneurial Intention
model of the engineering students of the IES of Mexico . . . . . . . . . . . 152

Analysis
Table 1 Housing indicators for exclusion social analysis . . . . . . . . . . . . . . . . . . . . . 168
Table 2 Evolution of social exclusion index, by area and by region,
2014–2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
Table 3 Evolution of social exclusion, by category of exclusion,
2014–2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172
Table 4 Index of social exclusion, regional analysis (by province),
2014–2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173
Entrepreneurship and the Community
Vanessa Ratten
Abstract Entrepreneurship is a contextual activity, which is influenced by its

surrounding community. There has been an increased interest in the role communi-
ties play in entrepreneurship due to the increased effort of policy planners to harness
the potential of their regions. Locality in terms of community can help or hinder
entrepreneurship. This chapter discusses the role communities play in entrepreneur-
ship and how to further facilitate engagement with stakeholders. The relevance of
communities for entrepreneurship is explained as a way to understand the proceed-
ing chapters of the book.
1 Introduction
Entrepreneurship has become a buzzword during the past decade and used to
indicate any form of business activity that is considered innovative, risk taking,
and proactive (Ferreira, Fayolle, Ratten and Raposo, 2018). Along with the
increased usage of the term has been a reliance on communities to be entrepreneurial
in order to maintain and build their competitiveness. For this reason, entrepreneur-
ship and the community is a way to describe activities that focus on building social
capital through business endeavours (Johnstone and Lionais, 2004). Most forms of
entrepreneurship have tended to use a specific type such as social or technological
without considering the community environment (Johannisson, 1990). Therefore, it
is important to harness the contextual nature of communities in an effort to build the
entrepreneurship literature. Broadly speaking, entrepreneurship occurs as a
by-product of community engagement and is reliant on community support to get
projects off the ground (Fortunato and Alter, 2015). Communities differ by type and
size but all share a sense of solidarity, which is important to encourage the growth of
ideas that can transform society.
V. Ratten (*)
Department of Entrepreneurship, Innovation and Marketing, La Trobe University, Melbourne,
VIC, Australia
e-mail: v.ratten@latrobe.edu.au
© Springer Nature Switzerland AG 2020 1

V. Ratten (ed.), Entrepreneurship and the Community, Contributions to Management
Science, https://doi.org/10.1007/978-3-030-23604-5_1
2 V. Ratten
In the past, communities were typically geographically based and most people
stayed within the same location for most of their lives. This has changed with the
internet making online communication much easier. In addition, quicker and cheaper
transportation has increased the ability of people to travel. Thus, communities have
changed as a result of technological innovation and also urbanisation (Ratten, 2013).
That is not to say all communities are in urban areas as many are also in rural
locations. This means the concept of a community is constantly in a state of flux
depending on its usage and meaning (Ferreira, Ratten and Dana, 2017b). Tradition-
ally, communities have been important and prided themselves on looking after the
interests of their citizens. Some communities have been more focused on environ-
mental and sustainability practices, which has affected their urban planning (Peredo
and Chrisman, 2006). Other communities have taken a more high growth option to
economic progress and this is evident in the type of businesses located in their
region.
Communities need to be considered in a multidisciplinary way in order to capture
their complex nature. This means using existing theories and practices from diverse
disciplines such as anthropology, sociology to urban planning to build the literature
on this interesting research field. Communities have history and are often path
dependent due to previous decisions being made (Ratten, 2014). Their history is a
distinguishing characteristic that defines their identity but can also make it hard to
develop. For this reason, entrepreneurship has been used as a way to progress
communities and transform them into new identities (Ferreira, Fernandes and Ratten,
2017a). Communities are similar to the term precinct, which is defined as “an urban
area with the distinctive character comprising its internal closure and mobility”
(Yigitcanlar et al., 2008: 11). The term community is similar to a precinct or district
but has more of a social spirit to it. Unlike precincts or districts, communities refer to
locations where people have a sense of belonging. Most definitions of communities
refer to geographic locations, but there can also be online and digital communities
(Ratten, 2017). There are different types of precincts such as education, entertain-
ment, recreation, residential and sport. Educational precincts refer to knowledge
providers such as schools and universities being grouped together. When different
levels of education providers such as primary, secondary and university are located
together, it can have knowledge spillover effects. Entertainment precincts occur
when a number of theatres, playhouses or clubs are located in the same area. This
often occurs in inner city areas that were designed to suit specific entertainment
needs. In addition, due to the need for public transport, some entertainment precincts
are located close to train or tram stations. Knowledge precincts are areas that are for
learning and information communication. Recreation precincts happen when there
are multiple leisure activity providers in the same area. This can include ovals or
parks used for leisure pursuits. Residential precincts involve housing projects des-
ignated for citizens compared to commercial zones. In residential precincts, normally
there are no business or industrial activities so that citizens can maintain the quiet
enjoyment of their homes. Sport precincts are areas specifically for physical activity
and may include playing fields and gymnasiums. Some cities have designated areas
for sporting activities as a way to differentiate the area from other forms of activities.
Entrepreneurship and the Community 3
Each type of precinct has a specific identity that is tied to its purpose. This identity
can help develop an area to suit the interests of citizens and businesses.
Most communities have a central shopping district or recreation facilities such as
a park that act as a meeting place for residents (Ratten and Welpe, 2011). There are
infrastructures in these central locations such as financial and educational that
citizens need in order to function in their daily lives. The spatial proximity to certain
services is often placed in high regard by citizens. This means communities that have
certain services are likely to have houses with higher land value. Spatial proximity to
services is also being needed more since increased numbers of people like to be able
to walk to certain locations. This is why apartments close to infrastructure such as
shops are being built as a way to ensure a vibrant urban life. Other amenities such as
community centres are also valued as a meeting place for residents (Selsky and
Smith, 1994).
2 Entrepreneurship and Communities
Entrepreneurship is more of a business discipline so takes a different approach to the

regional science discipline (Welter, 2011). This new way of thinking about commu-
nities has become popular due to the attention given to places such as Silicon Valley.
Thus, communities are thought of as being entrepreneurial when they take a more
positive approach to changing current practices. This includes being creative in the
way things are done. This creativity does not necessarily mean technology as it can
also include a renaissance approach that considers community spirit as being
important. For example, the city Carmel in California does not use street lights at
night, and this is a characteristic of the type of philosophy towards sustainability
applied in the community. Other communities have used similar policies as a way to
attract people and to differentiate their community from others. Therefore, the type
of services in a community will depend on the needs of citizens living in the area.
The increased usage of online shopping has also transformed communities, which
in the past were based around traditional retail stores. Due to the increased compet-
itiveness of online shopping, many bricks and mortar stores have had to close. This
has affected communities but in a way is part of societal progress. Interestingly along
with the increased usage of online shopping has been an increase in coffee shops.
Therefore, a blending of online and physical shopping experiences has occurred
within communities. People like technology, but they also like the interaction with
other human beings. This has led to more coffee places but at the same time changed
the social interactions in communities.
There are many social challenges related to online shopping and other new
technologies that have impacted communities. Increased usage of apartments and a
trend towards more people living by themselves have further changed the nature of
communities. In the past, there were stereotypes about how and who people lived
with, but this has changed with increased diversity in society. The ageing population
has created a social challenge as in some societies the percentage of retired people is
4 V. Ratten
large. This has changed the dynamics of a community and meant increased attention
placed on older people.
Much of the research on entrepreneurship and its effect on firm performance has
failed to consider the impact of communities. This may be due to the perception
communities are not specifically part of firms but are part of the content in which a
firm operates. The link between communities and firm performance needs to be
addressed in terms of its impact on society. Community relationships are more likely
to impact firm performance by affecting positively or negatively productivity. Thus,
there needs to be proper communication amongst firms in communities about the
commitment needed by community partners. The interactions amongst firms and
different stakeholders in a community represent a distinctive familiarness but also
bond. In simple terms, the community provides the foundation for firms to conduct
business. It can be argued that communities are an important source of capital and
provide the structural relationships needed for entrepreneurship. There are different
levels of ties amongst firms in a community, which affect their performance. Strong
ties exist when firms need other firms as a source of supply or input. Weaker ties
represent less frequent relationships and occur on a sporadic basis. There are
hierarchies amongst entities in a community that differ based on strong or weak
network ties. Firms are better able to utilise their networks when the community is
able to adapt.
Communities need to think about changes from artificial intelligence and auto-
mation. Increased technological progress has reshaped our understanding of com-
munities due to more online services being offered. Communities may not engage in
the same level of entrepreneurship due to different levels of capital (e.g. human,
financial, social). Knowledge intensive businesses will require the use of highly
educated forms of human capital, but manufacturing businesses might need more
low skilled individuals. Thus, the type of business in a community will impact wage
rates and living standards. Financial capital is needed for more large scale infra-
structure projects such as airports that are needed for businesses. Social capital
involves networks amongst people that facilitate the flow of information.
With the rise in interest in social issues, it is important to understand whether
communities help promote social engagement. In general entrepreneurship research,
there has been a shift from purely financial and performance studies to incorporate
more softer issues based on psychology and culture. This includes more emphasis on
motivations and reasons why some regions perform better than others. For example,
territorial inequality has become an issue in terms of understanding why some
regions lag behind others despite government intervention.
Research needs to reflect on the fact that without communities there is no
entrepreneurship. There are many challenges entrepreneurs face in the area of
community development so research needs to delve deeper into these issues. It is
often considered an implicit factor that communities help entrepreneurs but they
need to be made more explicit in the research. Entrepreneurship is more than just
creating a business as it also has societal implications. Whilst the narrowest defini-
tions of entrepreneurship state it is for business creation, in reality it is much broader
than this. Entrepreneurship occurs in a community setting and differs in terms of size
Entrepreneurship and the Community 5
or scope. For many researchers, entrepreneurship is a financial objective due to

necessity reasons, but for others, it is a choice. This means both types of entrepre-
neurs in terms of necessity and opportunity need to be explored in terms of
community development. Whilst finance and resources are needed by entrepreneurs,
there also needs to be a marshalling of other non-financial resources such as
reputation. This includes emphasising social networks and mentors in a community
that can foster an entrepreneurial ecosystem. Reflecting on the way entrepreneurship
develops is part of the reason why a focus on communities is needed.
3 Conclusion
Whilst extant studies have alluded to the importance of communities in entrepre-

neurship, they are often overlooked in terms of their dynamic nature. An alternative
way to look at entrepreneurship that departs from the over reliance on financial
reasons is a community approach. This incorporates financial reasons but also
considers the broader environmental context. This book seeks to address the gap
in the research by highlighting the myriad of ways communities’ foster entrepre-
neurship. This involves exploring how and why communities influence entrepre-
neurship. The concept of communities has received considerable attention in the
economic development literature but less in the entrepreneurship field.
It is my hope that the contributions of this book will move forward the research on
communities and entrepreneurship. I believe it is important to delve deeper into
understanding the unique aspects of communities in terms of processes and chal-
lenges. It is important to take a holistic approach when exploring the impact of
entrepreneurship on communities. There are important questions still yet to be asked
about the role of communities play in informing entrepreneurship practice and
policy. The chapters in this book will feed into the existing research on entrepre-
neurship by extending it to a community perspective. This will help inform practice
but also enable us to understand more about entrepreneurship in communities.
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The Other Within as Entrepreneurial
Agency for Subsistence Entrepreneurs
Hans Lundberg and Marcela Ramírez-Pasillas
Abstract In this chapter, we do a minor close reading of the concept “the other
within” (TOW) with the purpose to delineate potential conceptual advancement
(MacInnis. J Marketing, 75(4), 136–154; 2018) that TOW as a specific form of
entrepreneurial agency for subsistence entrepreneurs bring to entrepreneurship stud-
ies in general and subsistence entrepreneurship studies in particular. TOW is here
elaborated conceptually upon as an entrepreneurial agency practiced subtly, on-going
and insistently in everyday life by entrepreneurs embedded in more constraints (real
and/or perceived) relative to the average entrepreneur. Our point of departure is the
work of Michel de Certeau (The Practice of Everyday Life, 1988/1984; originally
published 1974 as Arts de faire), from which we proceed toward the few other authors
who have explicitly used TOW as a concept. After having derived central properties
of the proposed conceptual construct (TOW) out of these texts, we sum up the core
characteristics for the other within as a specific agency for subsistence entrepreneurs,
a form of entrepreneurial agency practiced by necessity due to constraints and
limitations imposed upon subsistence entrepreneurs out of their control.
1 Research Problem and Purpose
– How come I’ve never seen you people before?

– Because we are the people you do not see. We are ones who drives your cabs. We clean
your rooms. And suck your cooks.
(Excerpt from the movie “Dirty Pretty Things” directed by Stephen Frears)
H. Lundberg (*)
Universidad Iberoamericana, Escuela de Emprendimiento Social e Innovación (EDESI),
Mexico City, Mexico
e-mail: hans.lundberg@ibero.mx
M. Ramírez-Pasillas
Centre for Family Enterprise and Ownership (CeFEO), Jönköping International Business
School, Jönköping University, Jönköping, Sweden
e-mail: marcela.ramirez-pasillas@ju.se

8 H. Lundberg and M. Ramírez-Pasillas
The movie “Dirty Pretty Things” (Frears, 2002) centers around the character
Okwe (played by Chiwetel Ejiofor), an illegal Nigerian immigrant in London, and
the character Senay (played by Audrey Tautou), an illegal Turkish immigrant in
London. The film depicts hundreds of micro social situations that illustrate the
specific type of entrepreneurial agency that we herein conceptualize as “the other
within” (TOW).1 TOW is an operationalization of de Certeau’s concept of “tactics”
(here shortly introduced, elaborated more in detail below): “[tactics] takes advan-
tage of “opportunities” and depends on them, being without any base where it could
stockpile its winnings, build up its own position, and plan raids. What it wins it
cannot keep. This nowhere gives a tactic mobility, to be sure, but a mobility that must
accept the chance offerings of the moment [. . .]. It must vigilantly make use of the
cracks that particular conjunctions open in the surveillance of the proprietary
powers. It poaches in them. It creates surprises in them” (de Certeau, 1988/1984:
36–37). Besides the hundreds of micro social situations in which Okwe and Senay
maneuver the whole spectrum of human behavior and intentions (from endless
urgency management and making it yet another day to acts of dignity and dignifying
in efforts to remain humane during inhumane conditions), the movie also embeds all
these micro social doings and whereabouts in the most entrepreneurial of things; the
overall dreams, visions, and desires that Okwe and Senay have. And with that, the
“big questions” arrive: “One day Okwe discovers by chance an illegal scheme of
surgeries is being led by Juan, his boss in the hotel. Juan quickly comes up with a
tempting proposal: if Okwe accepts to perform the illegal surgeries he makes a lot of
money and gets legalized situation in the U.K. Can Okwe keep his moral values
intact?” (Gonçalves, 2003).
What does it mean to dream big, desire hard, and have vast visions for one’s life
when everyday life is so challenging so that simply making it yet another day,
maintaining one’s dignity, and remaining reasonably sane, ethical, and healthy is a
major challenge in itself? How do subsistence entrepreneurs go about to solve all
challenges that line up in front of them each and every day while maintaining their
dreams, desires, and visions? What can they do? Within the space of opportunities
(Lundberg, 2009) they either have or are able to carve out, how do they go about to
realize opportunities? These are some of the real-world questions embedded in the
construct “entrepreneurial agency” that is the focus of our interest here.
1
A film fan on IMDb make the following concise summary of the film: “An Urban Legend About
the Socially Excluded Immigrants in London. In London, the Nigerian illegal immigrant and
former doctor Okwe (Chiwetel Ejiofor) works as cab driver along the day and in the front desk of a
hotel managed by Juan ‘Sneaky’ (Sergi López) in the graveyard shift. He shares a couch in the
small flat of the Turkish illegal immigrant Senay (Audrey Tautou), who also works in the hotel as
maiden. One night, the Londoner prostitute Juliette (Sophie Okonedo) asks Okwe to fix the toilet of
room 510, where she ‘works’, and he finds a human heart obstructing it. Okwe’s further investi-
gation discloses an invisible world of traffic of human organs of illegal immigrants in London. This
excellent movie has a great screenplay about the urban legend of traffic of organs of the socially
excluded immigrants in London. [. . .] Stephen Frears is one of the greatest directors of the cinema
history and his movies are synonym of quality” (Carvalho, 2004).
The Other Within as Entrepreneurial Agency for Subsistence Entrepreneurs 9
Turning to mainstream entrepreneurship and management literature provides no

solutions. There exists no specific form of entrepreneurial agency therein that
capture the specific conditions and constraints that subsistence entrepreneurs often
are forced to act under. The old and intensively researched principal-agent question
within existing (often large) companies and organizations is of course relevant for
the more or less ordered and predictable lives of established organizations in
reasonably well-functioning societies: “Agency model is considered as one of the
oldest theories in the literature of the management and economics [. . .]. Agency
theory discusses the problems that surface in the firms due to the separation of
owners and managers and emphasises on the reduction of this problem. This theory
helps in implementing the various governance mechanisms to control the agents’
action in the jointly held corporations” (Panda & Leepsa, 2017: 76). Panda and
Leepsa (2017) provide an in-depth and most useful overview of the state-of-the-art
of research focused on agency theory within such contexts.
The problem here though is that such contexts have very little bearing on the
contexts in which subsistence entrepreneurs act; the structures, processes, orders,
rules, and regulations that to various degrees exist in “ordered contexts” simply is
not in place (at all, to a lesser degree, or is in place but in a very different way) in the
“fluid contexts” in which subsistence entrepreneurs act. This is, in part, a conse-
quence of the fact that the research done on principal-agent issues has a major bias
when it comes to geographical context: “most of the studies on agency theory were
concentrated in developed economies like the USA, the UK and few developed
countries. Though there are some studies done in emerging countries, it is very
insufficient in comparison to the developed countries” (Panda & Leepsa, 2017: 91).
One recent and most promising effort to theoretically broadening the literature on
principal-agent issues within the entrepreneurship literature is Vincent and Pagan
(2018), which presents a relational view where entrepreneurs operate on various
“fields,” with differing forms of “capital” (economic, cultural, deep social, shallow
social, symbolic), exchanging these forms of capital in myriad of ways, which in the
end of the day add up to affecting your “habitus,” “the ‘system of dispositions’
(Bourdieu, 1984: 2) that affects agency within fields” (Vincent & Pagan, 2018: 3).
Such a Bourdieusian approach to agency issues is very promising in our point of
view and opens up for what we here have set out to do. The problem with
geographical context bias remains though (their study is done on 25 entrepreneurial
human resource consultants in the North of England), but it does not block the
contribution they are doing in broadening the theoretical base for the entrepreneurial
agency construct. The research programs of de Certeau (that we use) and Bourdieu
(used by Vincent & Pagan, 2018) are also to a large extent compatible (see de
Certeau, 1988/1984, the initial chapters, for an analysis of his own program mainly
in relation to Bourdieu and Foucault). What still is missing, we argue, is a more
precise concept that helps us understand and conceptualize how the exchange of the
different forms of capital (economic, cultural, deep social, shallow social, symbolic)
actually and concretely is done. We therefore elaborate in the remaining of this
chapter upon de Certeau’s generic concept of “tactics” as a distinctly entrepreneurial
way of performing the Bourdieusian exchange of different forms of capital with the
purpose of delineating “the other within” (TOW) as a specific entrepreneurial

agency that de Certeau ascribes to the extraordinary opportunity-oriented persons
described in the introductory quote and so vividly portrayed in the film “Dirty Pretty
Things” (Frears, 2002). Although “tactics” and TOW eventually might be applicable
in other entrepreneurial contexts, we here argue for the need to develop a conceptual
and theoretical base specifically for subsistence entrepreneurial agency, one that
capture the essence of acting entrepreneurial under conditions of oppression, repres-
sion, illegality and/or economically/socially constrained environments.
2 The Concepts of “Tactics” and “The Other Within”
TOW was a methodological concept for de Certeau (1988/1984) and theoretically

thereby an organizing element in his seeing, thinking, reading, and writing. He was
pessimistic about and critical to the totalizing tendencies of modern societies and
their systems, structures, strategies, and superiors: “the powers in our developed
societies have at their disposal rather subtle and closely-knit procedures for the
control of all social networks [. . .] But they are slowly losing all credibility. They
have more power and less authority” (de Certeau, 1988/1984: 179). As counter-
tactic, he saw in the mundane tactics of everyday wo/men potential ways to create
partial and temporary autonomy and place for themselves as the others within such
dominance. de Certeau was not very often explicit with using TOW. Instead, he put
it to analytical use in his own analyzes and writings. A few examples:
1. As a concrete example of the mundane tactics of everyday wo/men mentioned
above, the work of chefs and people in general cooking food is mentioned as an
example on how they, as TOW, create variations and alterations of the structural
given (ingredients) via their ways of going about (prepare and use of ingredients)
when cooking: “In his analysis of culinary practices, P. Bourdieu regards as
decisive not the ingredients but the way in which they are prepared and used”
(de Certeau, 1988/1984: 219; everyday practices of living and cooking is in
extensive detail analyzed in de Certeau, Giard & Mayol, 1998/1994).
2. In elaborating on reading as poaching, de Certeau (1988/1984: 165–176) analyze
the practice of reading as a way for TOW to escape (systems, structures, strate-
gies, superiors. . .) without leaving (them), and by so doing, potentially altering
them somewhat: “to read is to be elsewhere, where they are not, in another world;
it is to constitute a secret scene, a place one can enter and leave when one wishes
[. . .] The reader produces gardens [. . .] in a nowhere between what he invents and
what changes him” (de Certeau, 1988/1984: 173). The entrepreneurs in such
contexts are not the usual suspects but the “poets and romancers who insinuate
innovation [. . .] into the authorized writing that serves them as a framework, but
whose law does not determinate their operation” (de Certeau, 1988/1984: 175).
3. In elaborating on what is unnamable and unthinkable in modern societies, de
Certeau, (1988/1984: 190–198) position literature as TOW relative to science:
“the ‘literature,’ which ever since the eighteenth century the establishment of
‘scientific’ discourse has driven out of its ‘own’ field and constituted as other,
marks in language the return of the eliminated” (de Certeau, 1988/1984: 197).
4. In his extensive note apparatus, he in note 26 to pp. 23–28 gives an example of a
text genre where the male protagonist always acts as TOW when undermining
power and structures: “Thus in gypsy tales, the hero never lies, but he has the
advantage of knowing how to make the orders he receives mean something
different from what the master or the powerful thought they were telling him”
(de Certeau, 1988/1984: 211).
5. In note 45 to pp. 101–108, de Certeau ascribe TOW qualities to photos from trips
etc., as these, when brought back home (“the starting place”), finds its place in our
home and thereby starts to operate within our storytelling at home about us being
away from home, thereby re-arranging nuances, details, and fragments in our
on-going stories about ourselves and our lives: “one could say the same about the
photos brought back from trips, substituted for and turned into legends about the
starting place” (de Certeau, 1988/1984: 220).
In sum; with the examples above ranging from the general condition for everyday
wo/men in modern societies (being human), cooking and reading (mundane human
activities), literature as such (art form), a literary trope for male heroes in gypsy tales
(text genre), and the history-making qualities of photos (mundane human objects),
we conclude that de Certeau ascribe TOW-“status” to various subject positions
(in real life, literature and texts) as well as to objects with “re-qualities”
(re-arranging, re-organizing, re-writing, re-reading, re-thinking, re-telling,
re-living, re-occurring, etc.). With such a broad use and exemplification of TOW,
no wonder de Certeau needed a generic concept—tactics—for the agency he
ascribes to TOW operating in so differing modes, forms, and contexts. In our
reading, he did this in three steps:
First, drawing from historical texts on war and military activities (Dietrich
Heinrich von Bülow (1757–1807) and Carl von Clausewitz (1780–1831), de Certeau
connects TOW with agency as such (and also establish the emerging within-ness of
TOW) via a famous formulation by Dietrich Heinrich von Bülov, “strategy is the
science of military movement outside of the enemy’s field of vision; tactics, within
it” (in de Certeau, 1988/1984: 212).
Second, tactics is then extensively elaborated upon in Chap. 3 (“Making do: Uses
and Tactics,” pp. 29–42), culminating in a concentrated formulation of what tactics
is and how it can be practiced: “It operates in isolated actions, blow by blow. It takes
advantage of ‘opportunities’ and depends on them, being without any base where it
could stockpile its winnings, build up its own position, and plan raids. What it wins it
cannot keep. This nowhere gives a tactic mobility, to be sure, but a mobility that
must accept the chance offerings of the moment [. . .]. It must vigilantly make use of
the cracks that particular conjunctions open in the surveillance of the proprietary
powers. It poaches in them. It creates surprises in them” (de Certeau, 1988/1984:
36–37).
Third, a rare exception, de Certeau explicitly exemplifies tactics as the generic

concept for TOW agency with the tactics of the indigenous Mesoamerican Indians
colonized by Spain as example: “Submissive, and even consenting to their subjec-
tion, the Indians nevertheless often made of the rituals, representations, and laws
imposed on them something quite different from what their conquerors had in mind;
they subverted them not by rejecting or altering them, but by using them with respect
to ends and references foreign to the system they had no choice but to accept. They
were other within the very colonization that outwardly assimilated them; their use of
the dominant social order deflected its power, which they lacked the means to
challenge; they escaped it without leaving it” (de Certeau, 1988/1984: xiii).
3 Methodology
In this paper, we do a minor close reading of TOW with the purpose to delineate
potential conceptual advancement (MacInnis, 2018) that TOW might (or not) bring
to entrepreneurship studies in general and to subsistence entrepreneurship literature
in particular. “Close readers linger over words, verbal images, elements of style,
sentences, argument patterns, and entire paragraphs and larger discursive units
within the text to explore their significance on multiple levels” (Jasinski, 2001: 93).
For space and limitation reasons, we do not focus on larger discursive units or
significances on (too) many multiple levels. With “delineate potential conceptual
advancement,” we refer to the excellent framework for conceptual contributions by
MacInnis (2018:138–139).
Of the four general conceptual goals for conceptual contribution (envisioning,
explicating, relating, debating), we aim for explicating TOW which, with MacInnis
framework, means that we aim to detail, chart, describe, and/or depict TOW and its
relationships to nearby entities (MacInnis, 2018: 138). Via deductive reasoning
“facilitated by theory in use” (MacInnis, 2018: 139), we aim for an actionable
conceptual framework as outcome, where conceptual framework is understood as
“not merely a collection of concepts but, rather, a construct in which each concept
plays an integral role. According to Miles and Huberman (1994), a conceptual
framework “lays out the key factors, constructs, or variables, and presumes rela-
tionships among them” (p. 440). To discourage loose usage of the term conceptual
framework, I propose basing conceptual frameworks not on variables or factors but
on concepts alone. When variables or factors are used, I suggest employing the term
model” (Jabareen, 2009: 51).
Table 1 Overview of data sample with TOW in focus/in use

Author and Discipline/ Included/
Year Title Subject Excluded Motivation
Michel de The Practice of Every- Social History, Included Uses TOW on onto-
Certeau (1988/ day Life Culture logical level
1984) Studies
Daniel The Other Within: The Mythology Included Provides traces to
Deardorff Genius of Deformity in useful aspects of
(2008) Myth, Culture and TOW
Psyche
Brian Was Hinduism Hindu Studies, Included Provides traces to
K. Pennington Invented? Britons, Colonial useful aspects of
(2005) Indians, and the Colo- Studies TOW, especially in
nial Construction of Chap. 2, “The Other
Religion Without and the Other
Within”
Steven Review of Brian Hindu Studies, Included Provides traces to
S. Maughan K. Pennington (2005) Colonial useful aspects of
(2006) Studies TOW
Yirmiyahu The Other Within. The Jewish/Judaic Included Provides traces to
Yovel (2009) Marranos: Split Iden- Studies useful aspects of
tity and Emerging TOW
Modernity
Bent Development and ‘The Peace Studies, Excluded Do not use TOW as a
D. Jörgensen Other Within’. The Development concept but as a gen-
(2006) Culturalisation of the Studies eral term to discuss
Political Economy of non-privileged
Poverty in the Northern vs. privileged groups
Uplands of Viet Nam in Vietnam
Paul Levy The Madness of Psychoanalysis Excluded A cognitive/internal
(2006) George W. Bush: A approach; TOW as the
Reflection of our Col- (potential) darker side
lective Psychosis within ourselves. A
valuable approach, but
our interest is exter-
nally oriented, on how
entrepreneurs as TOW
might go about in the
world in relation to
significant others. So,
to exclude texts with
this approach is a lim-
itation of our study,
not a disqualification
of this approach and
its important focus on
how internalized
aspects might affect
externalized practices
(“inner representa-
tions becoming
flesh”a)
(continued)
Table 1 (continued)
Author and Discipline/ Included/
Year Title Subject Excluded Motivation
Felix The “Other Within” for Psychology Excluded Same motivation as
T. Mikhailov the Psychologist for Paul Levy (2006)
(2001)
Jill Blackmore ‘The Other Within’: Gender and Excluded Same motivation as
(2010) race/gender disruptions Race Studies for Paul Levy (2006)
to the professional
learning of white edu-
cational leaders
Ashis Nandy The Other within: The International Excluded Same motivation as
(1992) Strange Case of Law, Hindu for Paul Levy (2006)
Radhabinod Pal’s Law
Judgment on
Culpability
Source: Authors own table
a
“The enemy, whom we are certain is a despicable ‘other,’ is in fact endowed and littered with parts
cast out from the self. The ‘enemy’ is an inner representation become flesh. The ‘boundary’ is thus a
sacred illusion and delusion. . . by directing all of our respective acuity outward, we can avoid the
painful look inward” (Stein, 1987: 193; quoted in Nandy, 1992: 49). A detailed elaboration upon
TOW with this approach, based on Jung in this case, is provided by Levy at http://www.
awakeninthedream.com/meeting-the-other-within/
4 The Other Within in Use as a Concept: Cohort

and Sample
TOW is neither established within any particular single discipline or subject nor
spread among disciplines or subjects to any distinct extent. TOW as a concept is only
used here and there in singular studies scattered in various corners of the academic
landscape. Accordingly, there is neither any shared understanding nor any consistent
use of TOW in the limited and fragmented cohort (¼ all studies using TOW we have
found) and the sample (¼ out of the cohort, the studies we included in our study),
why this needs to be derived via a close reading, text by text. See Table 1 for an
overview of cohort, sample, and motivation for inclusion/exclusion in the close
reading exercise.
5 The Other Within in Use as a Concept: A Close Reading

of the Sample Data
In this section, we proceed text by text with the five texts included in the sample (see
Table 1). We will focus on one central paragraph per text (“central” in this context
meaning “particularly concentrated or enlightening relative to the topic matter
herein”). There is one table per text, five tables in total (Tables 2–6). In each table,
Table 2 de Certeau paragraph analyzed (1988/1984: 31–32)

Paragraph Our close reading
1. “Thus the spectacular victory of Spanish 1–3. Outlined here, is a nuanced, measured,
colonization over the indigenous Indian cul- subtle, non-violent, non-aggressive, non-
tures was diverted from its intended aims by the polarizing, almost stoic way of practicing
use made of it: making do, that through consistent use gener-
ates outcomes to ends closer to “the Indians”
own intentions and agendas. Also, important to
note, is that this is achieved, without major
repercussions, as the ones having survived the
initial phases of the colonization knew or
learned how to get away with things.
2. even when they were subjected, indeed even 4. “Metaphorizing” as a useful subsistence
when they accepted their subjection, the Indians entrepreneurial practice.
often used the laws, practices, and representa-
tions that were imposed on them by force or by
fascination to ends other than those of their
conquerors;
3. they made something else out of them; they 6. “Diversion” as a useful subsistence entre-
subverted them from within—not by rejecting preneurial practice.
them or by transforming them (though that
occurred as well), but by many different ways
of using them in service of rules, customs, or
convictions foreign to the colonization which
they could not escape.
4. They metaphorized the dominant order; they 5–7. “The Indians” here in question (the
made it function in another register. Aztecan and the Mayan civilization are the
most known) were fierce warrior cultures
renowned for their military and fighting skills
and technological advancement. But where did
these diplomatic skills come from? Out of
sheer necessity (“no other way possible; it is
this, or death”)? Are these subtle TOW prac-
tices then simply a function of very tight con-
straints (the tighter/the subtler)? Or, a more
positive reading; If it is in the doings where
something is achieved—is then this specific
way of doing things particularly well apt to get
something done in extraordinary constrained
contexts?
5. They remained other within the system which 8–10. Context-sensitive entrepreneurship
they assimilated and which assimilated them research should remain so, but can still have
externally. bearing on many other, similar contexts. How
6. They diverted it without leaving it. to actually do this “mid-range generalization”
7. Procedures of consumption maintained their is an open question, though.
difference in the very space that the occupier
was organizing.
8. Is this an extreme example? No, even if the
resistance of the Indians was founded on a
memory tattooed by oppression, a past
inscribed on the body.
(continued)
Table 2 (continued)
9. To a lesser degree, the same process can be
found in the use made in ‘popular’ milieus of
the cultures diffused by the ‘elites’ that pro-
duce language. [. . .]
10. Use must thus be analyzed in itself.”
Table 3 Deardorff paragraph analyzed (2008: 174–175; references to quotes within the quote
omitted by us)
1. “While the liminal life of the Other Within 1. “Liminality” as a useful concept for
will, per force, remain an open question, on the subsistence entrepreneurs’ capacity to con-
inside, in the Big-House, the liminoid massman stantly act and live in-between.
demands the security of a final ‘closure’: the
unbreachable Iron Gates.
2. The needed lesion arrives in the lived reali- 2. Paradoxes, dilemmas, and contradictions
zation of contradiction as reality—permanent are the everyday life for subsistence entrepre-
imbalance, radical uncertainty, not-knowing. neurs, to live with and to find ways to act smart
upon and within.
3. To risk this life is ‘to live the questions,’ as 3. “Living with no fixed answers”—in stark
Rilke advises, living with no fixed answers. contrast with today´s febrile fixation with
metrics, predictability, planning, evaluation,
etc.
4. More to the point, only openly and 4. Life as patchwork and project and the aes-
unashamedly expressing one’s own ‘terrible thetic response—in stark contrast with today’s
incompleteness’ (right there I’m sort of glued management ideals and aesthetics. Leaving the
together)—only by limping, singing, and Western hemisphere, alternatives emerge:
dancing our wyrdness—will the ‘soul gap’ of Wabi-sabi’ as a Japanese aesthetic that
structure’s closure be prised open. embrace “the wisdom that comes from per-
ceiving beauty in impermanence and incom-
pleteness” (SCOS, 2018) vs. today’s fascistoid
management aesthetics of perfection?
5. Those who speak from the ‘soul gap’—the 5. In a video, “Deardorff explains how misfits
Beggar, Blind Man, Drunkard, Suicide, Widow, embody trickster-wisdom, and provide crea-
Idiot, Orphan, Dwarf, and Leper; the Dog- tive benefits to the same society that excludes
people and the Rat-people; ‘the female, the them.”a This “radical otherness” and its trick-
proletariat, the foreign; the animal and vegeta- ster-wisdom has many similarities with the
tive; the unconscious and the unknown; the knowledge form metis that is emblematic for
criminal and failure’—all the vagabond and some entrepreneurs.
outcast, ‘have to sing; if they didn’t sing,
everyone [. . .] would walk past, as if they were
fences or trees’”
a
https://www.youtube.com/watch?v=jmrxRwc-FM0
Table 4 Pennington paragraph analyzed (2005: 27; references to quotes within the quote omitted
by us)
1. “Implicated in colonial policy and practice 1–3. The paragraph as a whole is about TOW
were not just the representations of native as a relational and relative construct on vari-
others, but also the articulation of race, class, ous scales:
and gender in Britain itself. – Construction of native-others vs. British-
2. The development of racial ideologies others.
emerged from “representations of savagery, – Construction of others-of-empire vs. others-
licentiousness, and basic truths about human within-Europe.
nature that joined early visions of the ‘others’ – Construction of colonized subjects and
of empire with the ‘others’ within Europe Britain’s lower classes vs. English middle
itself.” classes.
3. Just as the English middle classes maintained
an ‘intense’ attachment to colonial expansion,
‘for the very good reasons that middle-class
identity had been made dependent on it,’ the
character and identity attributed to working and
lower classes paralleled those of Britain’s col-
onized subjects.”
Table 5 Maughan paragraph analyzed (2006: 685)

1. “Pennington’s book has a more important 1–3. This example from a review of
agenda: bringing both the Christian missionar- Pennington’s book provides an important
ies who were essential to forming British opin- addition to Table 5 and also summarizes the
ion and the Hindu traditionalists who shaped essence of Pennington’s central (for our pur-
Indian identity, nationalist and otherwise, into poses) chapter 2, “The Other Without and the
critical focus not as mere ciphers in a larger Other Within”—that Pennington is re-writing
story of hardening colonial hegemony but as the history for overlooked historical agents and
complex agents with independent, autonomous thereby is re-installing their agency, but with-
agendas. out eliminating their main position as colo-
2. Thus a more apt, though certainly less nized subjects. Exactly this in-betweenness is
catchy, title for Pennington’s book one essence of TOW, they are always both-
(See Table 4) might be “Who Else Constructed and, never either-or. This actualizes two
Hinduism and Why?” important aspects:
3. In emphasizing the ‘who else’ and, more – de Certeau’s phenomenal insight that the
important, the often conflicting ‘why,’ only concept in Western philosophy thought in
Pennington has written an important book that singular is pluralism. . . As alternative to plu-
redirects attention to historical agents that ralisms, he proposes “heterologies” (de
mainstream postcolonial scholarship has Certeau, 1986), a concept of importance for the
largely either oversimplified or passed over” both-and logic that constitute subsistence
entrepreneurs acting as TOW.
– “Agency” as written up in history; how dis-
cursively regulatory or not are historical posi-
tions for a certain agency, for what can and
cannot be thought, said and acted upon today?
Table 6 Yovel paragraph analyzed (2009: 62)

1. “What made this initial success possible— 1–3. This text focus on the period between the
and what backlash did it, inevitably, provoke? massacres and killings of Jews in Spain 1390–
1391 and the Spanish Inquisition (1478–1834),
when Jews in Spain, as a mean to stay alive,
mass converted to Catholicism and thereby (as
a side effect) got a ticket to act as TOW. It
provides us with new insights into to the
“entrepreneurial identity” construct (EI) and
divided subjects; how can we understand EI in
this case, when incorporating an imposed
identity on the surface and maintaining another
one within?
2. The Conversos brought to Christian society 4–8. Images are here evoked of a radical clash
not only Jewish occupations but many of the between a rather degenerated, ultra conserva-
features of Jewish society as well. tive, still-standing Spanish ruling majority in
lack of most mechanisms for development,
progress, and growth on one hand, and a
hyper-enterprising Jewish minority with their
long-standing productive traditions to active
anywhere at any time, if and when given the
chance (see sentence 9–10).
3. While age-old barriers were lifted away, the 4–8. “Drivers and inhibitors of entrepreneur-
Conversos, as former Jews, were also free of ial growth”; can we learn anything new about
many mental and normative inhibitions that this standard question in the light of this his-
impeded Christian Spain. torical example, where inhibitors are in ruling
majority and drivers are in minority and act as
TOW?
4. The Spanish value system was dominated by 9–10. Illustrate classical entrepreneurial skills,
ideals of chivalry, social prestige (honor), and competencies and virtues such as solid knowl-
the aspiration for hidalguía, the basic rank of edge, vast experience, access to networks, and
nobility. thereby various social and cultural capital,
5. These values stress a person’s prestige, solid track record to fall back on, the impor-
based on origin or ‘blood,’ and downgrade all tance of embeddedness plus strive, and ambi-
forms of work, trade, and business. tion to excel.
6. Learning was also not very highly regarded,
for it was considered a form of service.
7. In the fifteenth century, the Spanish elite
were still rougher and less cultured than their
counterparts in Renaissance Italy and France.
8. This view of social value manifested itself in
the amazingly large number of lower hidalgos,
who played a passive and rather negative role
in the Spanish economy. (They were satirized
and attacked in much of the later picaresque
literature, down to Cervantes [. . .]).
9. The Conversos now stepped into that partial
economic void, bringing with them the positive
Jewish outlook on work, personal effort,
learning, and money.
(continued)
Table 6 (continued)
10. Their economic experience and legal acu-
men, sharpened by a long Talmudic tradition,
now sought new avenues in which to assert
itself; and their immense drive to advance and
excel continued to rely on the Jewish tendency
toward mutual help within the family and the
community, a tradition that had often proven
itself in hard times for the Jews and now, when
external barriers were relaxed, played a role in
the Conversos’ leap forward.”
the chosen paragraph from each text is numbered sentence by sentence (left column;
‘Paragraph’), to make later steps (right column; ‘Our close reading’) smoother. In
case of very long sentences, we might draw the line where a colon or semicolon is
inserted if this does not disturb the flow of the sentence too much; if it does, we leave
it be. The end purpose with this exercise is to extract central features of TOW from
each text, and then sum them up in the result section and Table 7. This, to ponder
upon the open-ended question on what elements TOW, as a suggested concept for
entrepreneurial agency for subsistence entrepreneurs, might include.
6 Results
The five tables (Tables 2–6) above have explored TOW as entrepreneurial agency in
five specific settings/texts:
• Mesoamerican “Indians” being colonized, thereby acting as TOW in their own
territory;
• Misfits in general, whose radical otherness is cemented and institutionalized,
thereby acting as TOW in their own territory, a territory that although is “eternally
colonized”;
• Hindu traditionalists being colonized, thereby acting as TOW in their own
territory;
• Pennington as re-writer of that part of British colonial history, acting as TOW
relative to his own discipline and to his own country;
• Jews in Spain as Conversos being in exile, acting as conditioned TOW on
someone else territory.
In Table 7, we transfer the results in the right columns in Tables 2–6 (“Our close
reading”), to thereby provide an overview of various elements of the “the-other-
within”-concept and from which of the five settings/texts analyzed each element is
derived from.
Table 7 Elements of the “the-other-within” concept derived from each setting/text analyzed
respectively
Elements of
Elements of the Elements of the the “the-other- Elements of the Elements of the
“the-other-within” “the-other-within” within” “the-other- “the-other-
concept in de concept in concept in within” concept within” concept
Certeau Deardorff Pennington in Maughan in Yovel
1–3. Outlined here, 1. “Liminality” as 1–3. The para- 1–3. This exam- 1–3. This text
is a nuanced, mea- a useful concept graph as a ple from a review focus on the
sured, subtle, non- for and subsistence whole is about of Pennington’s period between
violent, non-aggres- entrepreneurs’ TOW as a book provides an the massacres
sive, non-polarizing, capacity to con- relational and important addi- and killings of
almost stoic way of stantly act and live relative con- tion to Table 5 Jews in Spain
practicing making in-between. struct on vari- and also summa- 1390–1391 and
do, that through ous scales: rizes the essence the Spanish
consistent use gen- – Construction of Pennington’s Inquisition
erates outcomes to of native- central (for our (1478–1834),
ends closer to “the others vs. purposes) when Jews in
Indians” own inten- British-others. chapter. Spain, as a mean
tions and agendas. – Construction to stay alive,
Also, important to of others-of- mass converted
note, is that this is empire vs. to Catholicism
achieved, without others-within- and thereby (as a
major repercussions, Europe. side effect) got a
as the ones having – Construction ticket to act as
survived the initial of colonized TOW. It provides
phases of the colo- subjects and us with new
nization knew or Britain’s insights into to
learned how to get lower classes the “entrepre-
away with things. vs. English neurial identity”
middle construct (EI)
classes. and divided sub-
jects; how can we
understand EI in
this case, when
incorporating an
imposed identity
on the surface
and maintaining
another one
within?
4. “Metaphorizing” 2. Paradoxes, 2. “The Other 4–8. Images are
as a useful subsis- dilemmas, and Without and the here evoked of a
tence entrepreneur- contradictions are Other Within”— radical clash
ial practice. the everyday life that Pennington between a rather
6. “Diversion” as a for subsistence is re-writing the degenerated,
useful subsistence entrepreneurs, to history for ultra conserva-
entrepreneurial live with and to overlooked his- tive, still-stand-
practice. find ways to act torical agents and ing Spanish
smart upon and thereby is re- ruling majority in
within. installing their lack of most
agency, but with- mechanisms for
out eliminating development,
their main progress, and
(continued)
Table 7 (continued)
Elements of
position as colo- growth on one
nized subjects. hand, and a
Exactly this in- hyper-enterpris-
betweenness is ing Jewish
one essence of minority with
TOW, they are their long-stand-
always both-and, ing productive
never either-or. traditions to
This actualizes active anywhere
two important at any time, if
aspects: and when given
– de Certeau’s the chance.
5–7. “The Indians” 3. “Living with no phenomenal 4–8. “Drivers
here in question (the fixed answers”— insight that the and inhibitors of
Aztecan civilization in stark contrast only concept in entrepreneurial
and the remaining of with today’s Western philoso- growth”; can we
the Mayan civiliza- febrile fixation phy thought in learn anything
tion are the most with metrics, pre- singular is new about this
known) were fierce dictability, plan- pluralism. . . As standard question
warrior cultures ning, evaluation, alternative to in the light of this
renowned for their etc. pluralisms, he historical exam-
military and fighting proposes ple, where inhib-
skills and techno- “heterologies” itors are in ruling
logical advance- (de Certeau, majority and
ment. But where did 1986), a concept drivers are in
these diplomatic of importance for minority and act
skills come from? the both-and as TOW?
Out of sheer neces- logic that consti-
sity (“no other way tute subsistence
possible; it is this, or entrepreneurs
death”)? Are these acting as TOW.
subtle TOW prac- – “Agency” as
tices then simply a written up in his-
function of very tory; how discur-
tight constraints (the sively regulatory
tighter/the subtler)? or not are histori-
Or, a more positive cal positions for a
reading; If it is in the certain
doings where some- agency, for what
thing is achieved— can and cannot
is then this specific be thought, said
way of doing things and acted upon
particularly well apt today?
to get something
done in extraordi-
nary constrained
contexts?
(continued)
Table 7 (continued)
Elements of
8–9. Context-sensi- 4. Life as patch- 9–10. Illustrate
tive entrepreneur- work and project classical entre-
ship research should and the aesthetic preneurial skills,
remain so, but can response—in stark competencies
still have bearing on contrast with and virtues such
many other, similar today’s manage- as solid knowl-
contexts. How to ment ideals and edge, vast expe-
actually do this aesthetics. Leaving rience, access to
“mid-range general- the Western hemi- networks, and
ization” is an open sphere, alterna- thereby various
question, though. tives emerge: social and cul-
Wabi-sabi’ as a tural capital,
Japanese aesthetic solid track
that embrace “the record, the
wisdom that importance of
comes from per- embeddedness,
ceiving beauty in strive to excel.
impermanence and
incompleteness”
(SCOS, 2018) vs.
today’s fascistoid
management aes-
thetics of
perfection?
5. In a video,
“Deardorff
explains how
misfits embody
trickster-wisdom,
and provide crea-
tive benefits to the
same society that
excludes them.”
This “radical oth-
erness” and its
trickster-wisdom
has many similar-
ities with the
knowledge form
metis that is
emblematic for
some
entrepreneurs.
In summarizing all these elements of the “the-other-within” concept (TOW)

derived from each setting/text analyzed, we argue that TOW as a specific form of
entrepreneurial agency for subsistence entrepreneurs is characterized by:
• Being a nuanced, measured, subtle, non-violent, non-aggressive, non-polarizing,
almost stoic way of practicing making do, that through consistent use generates
outcomes to ends closer to the own intentions and agendas of subsistence
entrepreneurs than to their many and variated principals. It is so, at large, out of
necessity; the harder the conditions, the harder repercussions, so one better find
ways ahead that avoid the latter. A central feature then, is that something actually
is achieved without major repercussions, as one knows or learn fast how to get
away with things, for instance via giving any given phenomena at least double
meanings (“metaphorizing”) and/or practicing “diversion” (both are very com-
mon in, for instance, contemporary Mexico still). And that “something achieved”
in one micro social situation become another “something achieved” in another
similar situation some hours later and. . . so on and so forth. It is the repetitive,
incremental, almost monotone capacity to win many micro victories, that over
time erode the original intentions and meanings of the ruling principals and make
things tip over to the subsistence entrepreneur. At least for a moment.
• Paradoxes, dilemmas, and contradictions are the everyday life for subsistence
entrepreneurs, to live with and to find ways to act smart upon and within. The
anthropological concept of “liminality” then emerge as a potentially useful
concept for further clarifying subsistence entrepreneurs’ capacity to constantly
act and live in-between and to get something done therein.
• A consequence of previous bullet is that life as subsistence entrepreneur means
living with no fixed answers and where life itself is a patchwork and endless projects.
These are the very same qualities that are among the ones highest up on Western
Entrepreneurs self-actualization wish-lists, where alternatives are sought to today’s
fascistoid mainstream management aesthetics of perfection. One example is “Wabi-
sabi,” a Japanese aesthetic that embrace imperfection and the inherent beauty
therein, taken up by organizational symbolists: “the wisdom that comes from
perceiving beauty in impermanence and incompleteness” (SCOS 2018). Subsis-
tence entrepreneurs probably couldn’t care less about Western entrepreneurs’ search
for self-actualization or Eastern world responses to it; what is of major interest
though is that two very different entrepreneurial agencies in this respect lands in
acting along the same characteristics, while the reasons therefore differ highly (one is
intentionally sought-for as an alternative to escape the iron cage of today’s main-
stream management; the other is sprung out of sheer necessity, there is not much else
to choose from than to aim for yet another day of making do, or as Deardorff
famously put it: “right there, I’m sort of glued together” (Deardorff, 2008: 174).
• In a video, “Deardorff explains how misfits embody trickster-wisdom and pro-
vide creative benefits to the same society that excludes them” (Deardorff,
undated). This “radical otherness” and its trickster-wisdom has many similarities
with the knowledge form “metis” that we elsewhere have analyzed (Johannisson,
2014a, 2014b; Johannisson, Lundberg & Ramírez-Pasillas, 2015; Ramirez-
Pasillas, Lundberg & Nordqvist, 2012) as being of major importance for entre-
preneurs. We believe the importance of metis is further accentuated for subsis-
tence entrepreneurs, given that metis is about acting cunning and clever in
complex contexts (“street-smart” with modern slang), a knowledge form that
was very revered in ancient Greece, but then forgotten.
• Yovel’s text (2009) focus on the period between the massacres and killings of Jews
in Spain 1390–1391 and the Spanish Inquisition (1478–1834), when Jews in Spain,
as a mean to stay alive, mass converted to Catholicism and thereby (as a side effect)
got a ticket to act as TOW. The “entrepreneurial identity” construct (EI) becomes
something else then, when applied to divided subjects, in this case, Jews incorpo-
rating an imposed identity on the surface and maintaining another one within. The
situation was no less dramatic “on the outside”: Images evoked by Yovel’s text are
those of a radical clash between a degenerated, ultra conservative, still-standing
Spanish ruling majority in lack of most mechanisms for development, progress and
growth on one hand, and a hyper-enterprising Jewish minority with their long-
standing productive traditions to activate anywhere at any time, if and when given
the chance. This example illustrates on one hand that classical entrepreneurial skills,
competencies and virtues such as solid knowledge, vast experience, access to
networks and thereby various social, cultural, economic and symbolic capital,
solid track record, the importance of embeddedness, and a strive to excel are timeless
and unbound by space and place. They count for subsistence entrepreneurs as of
today as well. This example illustrates on the other hand a reversed situation relative
to “normal” circumstances as of today, regarding the question of drivers and
inhibitors of entrepreneurial growth. Here, the inhibitors were in ruling majority
(the Spanish) and the drivers were in minority and acted as TOW (the Jews) at high
existential costs, as they had to endure being divided subjects. Maybe we are looking
for drivers and inhibitors in the wrong places and maybe subsistence entrepreneurs
have some clues for us where to look.
In summarizing the more scientific-internal aspects of the elements of the “the-
other-within” concept (TOW), we argue that TOW as a scientific construct for a specific
form of entrepreneurial agency for subsistence entrepreneurs is characterized by:
• Being a relational and relative construct (it is always “something” in relation to
“something else”) as the Pennington text showed on three different scales. That
rule out certain ontologies and epistemologies and invite yet others.
• If also adding re-writing intentions (we as researchers take on the role of “the
other within” relative to our subject), the review by Maughan (2006) of
Pennington’s book (2005) summarizes the essence in such writing tactics, in
that Pennington is re-writing the history for overlooked historical agents and
thereby is re-installing their agency, but without eliminating their main position
as colonized subjects. Exactly this in-betweenness is one essence of TOW;
always both-and, never either-or. This actualizes two other important aspects:
• Open-ended writing/science in pluralisms: de Certeau’s phenomenal insight that
the only concept in Western philosophy thought in singular is pluralism. . . is of
importance for the both-and logic that constitute subsistence entrepreneurs acting
as TOW. As alternative to plurlasisms, de Certeau proposes “heterologies”

(de Certeau, 1986).
• How has “entrepreneurial agency” been written up throughout history: How
discursively regulated are historical positions for any certain entrepreneurial
agency? What can and cannot be thought, said and acted upon? The field of
subsistence entrepreneurship can and should contribute to elucidating previously
silenced and/or unwritten forms of entrepreneurial agency in various contexts.
7 Conclusions
As a form of entrepreneurial agency specifically derived for subsistence entrepre-

neurs, “the other within” (TOW) is a subject position that is practiced subtly,
ongoing and insistently in everyday life by subsistence entrepreneurs when they
exchange different forms of capital (economic, cultural, deep social, shallow social,
symbolic) that in turn, if they have played their cards right, further broaden the scope
and scale of their agency (“habitus,” if to speak Bourdieusian). A positive spiral that,
if used repetitive and resulting in more micro wins than micro losses over a longer
period of time via smart “tactics,” might carve out more and better spaces of
opportunities (Lundberg, 2009) for an increasingly successful subsistence
entrepreneur.
More scientifically internally, we would like to conclude the following:
• We believe there is a shortage of nuanced in-between positions when it comes to
entrepreneurial agency, while there is no shortage of rather clear-cut positions in
use in the scientific management and entrepreneurship literature. We see TOW as
a promising option so far for these ends.
• We believe a solid amount of theoretically interesting aspects about TOW have
been generated here, enough to in next step test the here theoretically and
conceptually derived concept of TOW more in empirical detail, to underpin the
viability with and usefulness of TOW in relation to subsistence entrepreneurs.
• We are more skeptical at this stage about the overall generalizability of TOW out
of this very limited exercise. Are the examples/settings/texts herein too extreme,
too contextual, too historical?
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for-papers/
Effectual Versus Causal International
Opportunity Discovery and Creation:
Implications for SMES’ Competitive
Advantage
Masoud Karami
Abstract This chapter extends the knowledge of international opportunity by

explaining the role of effectual and causal decision-making in internationalization
of small and medium-sized enterprises. This research aims to explain and compare
the effects of effectual and causal paths of international opportunity development in
terms of firms’ competitive advantage. This study contributes to the international
entrepreneurship literature by shedding light on the association between the logic of
decision-making and firms’ competitive advantage as a key construct in IE research.
1 Introduction
Opportunity is the central concept in international entrepreneurship (IE) research

(Sarasvathy, Kumar, York, & Bhagavatula, 2014). According to Oviatt and
McDougall’s definition (2005, p. 540), IE is about “the discovery, enactment,
evaluation, and exploitation of opportunities across national borders.” From this
point of view, the result of the internationalization process would be new products,
markets, and opportunities (Kalinic, Sarasvathy, & Forza, 2014). Therefore, IE
conceptualizes entering a new market as an international opportunity (Chandler,
DeTienne, & Lyon, 2002).
Considering the central role of opportunity in IE scholarship, some central
questions in this area of query are as follows: How entrepreneurial actions create
opportunities? How do entrepreneurs employ incremental, repetitive, and inductive
approach to decision-making? Are entrepreneurial opportunities a result of a process
of discovery or creation? (Alvarez & Barney, 2013). Indeed, there is a considerable
shortcoming in our understanding of how opportunities are identified and exploited
by entrepreneurs (Shane, 2012), and what is the consequences of different types of
international opportunities for firm’s competitive advantage (Coviello, McDougall,
& Oviatt, 2011; Ellis, 2010).
M. Karami (*)
Queenstown Resort College (QRC), Queenstown, New Zealand
e-mail: masoud.karami@qrc.ac.nz

30 M. Karami
There is an intense overlap between entrepreneurship and strategic management

in explaining the concept of opportunity (Shane, 2012). As mentioned by Sarasvathy
and Venkataraman (2001, p. 3), “entrepreneurship and strategic management repre-
sent two sides of the same coin: the coin of value creation and capture.” Strategic
entrepreneurship is defined as a process in which “the integration of entrepreneurial
opportunity seeking and strategic advantage seeking actions is a key characteristic
and an enabler for innovation, firm’s growth and wealth creation” (Hitt, Ireland,
Camp, & Sexton, 2001). However, there is a critical difference in terms of the lens
they take and the focus of each discipline. While strategic management is looking for
gaining sustainable competitive advantage, entrepreneurship is basically about
exploring and exploiting opportunities (Shane, 2012). However, the concept of
opportunity bridges these areas. The focus of strategic management is the role of
opportunities in gaining and sustaining advantages, and the focus in entrepreneur-
ship is opportunity discovery (McMullen, Plummer, & Acs, 2007). Therefore,
scholarly work in the interface between IE and strategic management can bridge
this gap.
Effectuation theory as a behavioral theory with focus on the individual level of
analysis of entrepreneurial opportunity using cognitive psychology lens has proved
itself as one of the promising theories in entrepreneurship (Alvarez, Audretsch, &
Link, 2016). Effectuation theory explains how entrepreneurial opportunities are
created through the mechanism of networking and learning by doing (Sarasvathy
2001). Jones, Coviello, and Tang (2011) suggested applying entrepreneurial theories
to answer questions about international opportunity development and its conse-
quences for the firm performance. The literature in strategic management also
suggested effectuation as an effective theory in studying the process of opportunity
formation (Alvarez & Barney, 2007).
The concept of competitive advantage has a long history and a huge body of
literature, including neoclassical, industry-based, competence-based, and resource-
based views (Hunt, 2000). Recently, scholars from competence-based and
resources-based views put considerable emphasis on the concept of competitive
advantage in relation to opportunity development. For instance, Alvarez and Barney
(2007) suggest that creation opportunity theory may explain how heterogeneous and
costly to imitate resources can be considered as the source of firms’ sustainable
competitive advantage. They clarify that the main unanswered question in this
context is the origin of these heterogeneous resources. They believe that creation
theory can answer the question by explaining that small differences in the beginning
of the creation process may lead to considerable differentiations during the process
of enactment. Effectuation theory provides an interesting answer to this question.
Hence, there is a strong call for further research in strategic management to answer
how the path-dependent process of opportunity creation can explain sustainable
competitive advantage of firms (Alvarez & Barney, 2007).
This chapter combines the opportunity discovery and creation theory (Alvarez &
Barney, 2007). Effectuation theory (Sarasvathy, 2001) and the Uppsala internation-
alization process model (Johanson & Vahlne, 2009) explain opportunity
Effectual Versus Causal International Opportunity Discovery and. . . 31
development in the internationalization process of SMEs and its outcome in terms of

firms’ competitive advantage.
This chapter will proceed as follows. First, it starts with the concept of opportu-
nity and opportunity in IE literature. Then, it discusses effectuation and causation
logic in the process of international opportunity development. Third, we will discuss
the association between effectual and causal opportunity development paths and
firm’s competitive advantage. And finally, we will present a conceptual model to
explain the above-mentioned associations.
2 Effectuation and Causation: Two Logics of Decision-

Making
Effectuation and causation are two complementary logics of decision-making (Read,

Sarasvathy, Dew, & Wiltbank, 2016; Sarasvathy & Dew, 2005). The causation logic
has been the prevailing logic in literature for a long time. However, recently there is a
developing attention into effectuation logic in entrepreneurship and strategic man-
agement research (Alvarez et al., 2016). From about a decade ago, an emerging
research stream in IE also has started to use effectuation to explain entrepreneurial
internationalization (e.g., Galkina & Chetty, 2015; Kalinic et al., 2014; Schweizer,
Vahlne, & Johanson, 2010).
Effectuation is about how to use existing resources, in combination with com-
mitment and constraints coming from related stakeholders, to create new opportu-
nities, ventures, and markets, in domestic or international markets (Sarasvathy et al.,
2014). Put simply, effectuation process starts with a set of means and selects between
possible effects (Sarasvathy, 2001). From a practical point of view, effectuation is
applied pragmatic approach in the new venture setting as it provides normative
approaches to problem solving in uncertainty conditions (Read, Song, & Smit,
2009).
Effectuation process begins with a generalized aspiration and rests heavily on
co-creation of the future. Effectuation process begins with the existing means,
including the entrepreneur’s identity, knowledge, and personal ties. The process
continues with the expansion of the personal network of relationship to access more
resources (Sarasvathy, 2001). This logic is heavily relied on networks and argues
that market is built together with customers, suppliers, and even potential compet-
itors (Johanson & Vahlne, 2011; Sarasvathy & Dew, 2005), in which relationships
among stakeholders provide knowledge about accessible resources, markets, and
potential opportunities (Vahlne & Johanson, 2017).
Effectuation is a mean-driven approach to decision-making, with a focus on
firm’s existing resources at the beginning of the process (Dew, Read, Sarasvathy,
& Wiltbank, 2008). Therefore, effectuation theory can be considered a resource-
based view (RBV), with a focus on the importance of existing means. However,
effectuation theory is different from the mainstream RBV, in the sense that it does
32 M. Karami
not focus on the value of the existing resources at the beginning of the process.
Instead, effectuation theory is closer to Hunt’s (2000) resource-advantage
(RA) theory and explains the process through which existing resources turn to
valuable resources (Read et al., 2009).
Effectuation theory is the logic of control and design, rather than logic of
prediction and planning (Read et al., 2016). Effectuation is the logic of control by
focusing on the existing means instead of return on investment and trying to control
the unpredictable environment by making commitments among different stake-
holders (Chandler, DeTienne, McKelvie, & Mumford, 2011). In this process, ser-
endipities are welcomed and turned into new resources (Sarasvathy, 2001).
Therefore, there is no discrete definition of success and failure in effectuation theory,
but serendipities are managed in the process of going. Effectuation is also the logic
of design, in which the future is made by actions of agents. There is no desired
future, but stakeholders’ commitment defines the possible futures through the
mechanism of networking and learning by doing (Sarasvathy & Dew, 2005).
In contrast, causation is a goal-driven approach in which future is not controlla-
ble, but it is predictable, and therefore, the efforts are focused on prediction rather
than control of the future. Causation logic starts with a predetermined goal, assumes
the environment as given, and selects between possible means to realize those goals
(Dew et al., 2008). Causation is the logic of prediction in which future is the
continuation of the past and therefore predictable (Sarasvathy, 2001). In causation
logic, there is a clear vision of a desired world which determines goals, commit-
ments, and actions. Therefore, the main question is what resources are needed to
attain the predetermined goals. In causation logic, there is an instrumental view of
stakeholders and partnership takes place to procure some certain resources to
achieve a desired return on investment. Relationships with stakeholders are
constrained and limited to what is necessary (Sarasvathy & Dew, 2005). An
expected return and the best opportunity which is predefined based on expected
return and the calculated risk determines the success. Due to the existence of
predetermined plan, contingencies are unwelcomed, and actors try to avoid them
(Sarasvathy, 2008). Outcomes are already determined, and therefore, success and
failure are defined beforehand.
3 Entrepreneurial Opportunity
From the late 1980s, the research in entrepreneurship started to study the nature and
process of entrepreneurial behaviors rather than personal characteristics of entrepre-
neurs. The main focus of this stream has been studying activities which lead to the
creation of new artifacts with a special attention on opportunity as a core concept
(Sarasvathy & Venkataraman, 2011). IE with a focus on entrepreneurial behaviors in
international context considers international opportunity as the main construct
(Coviello et al., 2011). For instance, the Uppsala internationalization process
model considers opportunities as the main driver of internationalization process
(Johanson & Vahlne, 2009), and the effectual approach to internationalization

explains entering international markets as a process of international opportunity
creation (Sarasvathy et al., 2014). In this context, international opportunity is defined
“as the chance to conduct exchange with new partners in new foreign markets”
(p. 101) the process may lead to formation of exchange agreements with new
partners in new foreign markets (Ellis, 2010).
The literature of entrepreneurial opportunity is divided into two main categories:
opportunity discovery, which is looking for opportunities in environment, and
opportunity creation with a focus on forming opportunities (Alvarez & Barney,
2013; Venkataraman, Sarasvathy, Dew, & Forster, 2012). While opportunity crea-
tion is defined as bringing new means to create new artifacts (Maine, Soh, & Dos
Santos, 2014), in discovery opportunity theory, opportunities are out there in the
market, waiting for alert entrepreneurs to recognize and exploit them. There is a
continuous conversation in this area between scholars from entrepreneurship, stra-
tegic management, and international business (IB) area. For instance, while Uppsala
model stresses on the possibility of both opportunity discovery and creation
(Johanson & Vahlne, 2009), Sarasvathy et al. emphasized that UE model, which is
totally based on Uppsala model, is only about discovery opportunity (Sarasvathy
et al., 2014).
This opportunity dialogue has gained momentum after 2010 AMR decade award
to Shane and Venkataramn’s PROMIS paper (Shane & Venkataraman, 2000). There
is a stream of papers following this conversation, with focus on discovery, creation,
or recently blended approach (Chetty, Karami, & Martín, 2018). In the PROMIS
paper, entrepreneurship is defined as recognition, evaluation, and exploitation of
opportunities (Shane & Venkataraman, 2000). In his reflections on the AMR award
in 2012, Shane again asserts that opportunities are objective phenomena (Shane,
2012) and emphasized the importance of discovery approach to opportunity devel-
opment. In the same vein, Mc Mullen and et al. also have argued for objective
opportunities and the important process of recognition and discovery (McMullen
et al., 2007).
On the other hand, it is discussed that opportunities are shaped both exogenously
and endogenously. That is, opportunities can be both objective and subjective, which
can be discovered by alertness as well as created by entrepreneurial behaviors
(Venkataraman et al., 2012). Although Alvarez and Barney (2007) posit that from
the perspective of creation opportunity theory, opportunity enactment is both objec-
tive and subjective process (Alvarez, Barney, & Anderson, 2013), Garud et al. have
argued that for creation opportunity theory, opportunities are just subjective (Garud,
Gehman, & Giuliani, 2014). Zahra (2008) has distinguished between discovery and
creation opportunities and argued that opportunities may be discovered or created
depending on their contexts. He goes beyond and suggests that discovery and
creation may enrich each other in a dynamic circle (Chetty et al., 2018; Zahra, 2008).
34 M. Karami
4 Competitive Advantage
Opportunity formation and its impact on opportunity exploitation can provide a basis
for gaining and maintaining comparative advantage and finally competitive advan-
tage (Hunt, 2000; Zahra & George, 2002). There is the same emphasis in IE
literature. For instance, revisited Uppsala model (2009) argues that the entrepreneurs
who are able to exploit unintended contingencies and develop knowledge of inter-
national opportunities have a competitive advantage in an uncertain international
environment (Johanson & Vahlne, 2009). However, previous research on interna-
tionalization literature has focused more on the internationalization strategies, and
there is room for more elaboration on the process of development and implementa-
tion of these strategies (Kalinic et al., 2014) and their consequences for firms’
competitive advantage.
According to the RBV perspective, when a firm pursues a value creation strategy
which is not being pursued by competition at the same time and is not imitable by an
existing or a potential competitor, a firm is said to have a sustainable competitive
advantage (Barney, 1991). If firms have comparative advantages in resources, they
might be able to gain competitive advantage in the market (Hunt, 2000). According
to this view, competitive advantage can be sustained because of the nature of
resources that will neutralize competitors’ efforts or endure the gained advantage,
by using imperfectly mobile, inimitable, and imperfectly substitutable resources
(Barney, 1991). In other words, when resources are tacit, causally ambiguous,
socially complex, or interconnected resources or exhibiting mass efficiencies or
time-compression which diseconomies, they are less likely to be quickly and
effectively neutralized and more likely to produce a sustainable competitive advan-
tage (Hunt, 2000, p. 64). Otherwise, the competitive advantage will be neutralized
by competition, and the firm will experience a kind of temporary advantage.
Learning plays a critical role in this context, in the sense that the key determinant
of competitive advantage and firm performance is the speed of learning relative to
rivals. Indeed, we can consider learning and knowledge transfer capacity as a source
of competitive advantage (Tay & Lusch, 2005). These concepts are the major
endogenous sources of competitive advantage.
Some scholars criticize the concept of sustainable competitive advantage by
arguing that no kind of competitive advantage can be sustainable. They argue that
due to the fast competitive actions and reactions, and frequent disruptions of
competitors, gaining sustainable advantage becomes impossible (D’Aveni, Dagnino,
& Smith, 2010); therefore, in most cases, firms face temporary advantages. These
critiques set a ground for deeper discussion about the nature of resources. It is argued
that while common and imitable valuable resources and capabilities don’t result in
competitive advantage, inimitable and rare capabilities and resources can gain at
least temporary competitive advantages (Barney, 1995). However, Fiol (2001) has
challenged the possibility of gaining sustainable competitive advantage even with
inimitable resources and capabilities. Fiol (2001) argues that in today’s environment
both resources and capabilities must change frequently, and therefore, firms have to
deal with temporary advantages instead of sustainable advantages. Therefore, all

competitive advantages are temporary, and firms should consider a series of renew-
able temporary advantages in their business plan (Fine, 1998; Wiggins & Ruefli,
2002). In this vein, gaining sustainable competitive advantage entails firms to
employ factors that enable them to gain a series of temporary competitive advantages
(Sirmon, Hitt, Arregle, & Campbell, 2010; Wiggins & Ruefli, 2005).
5 Effectuation and International Opportunity Creation
Effectuation as one of the dominant theories in entrepreneurship (Alvarez et al.,

2016) has been applied to explain the process of international opportunity creation
by IE scholars (e.g., Crick & Crick, 2016; Galkina & Chetty, 2015; Karami,
Wooliscroft, & McNeill, 2019; Schweizer et al., 2010). Effectual internationaliza-
tion studies explain internationalization of SMEs in terms of learning, networking,
affordable loss, and controlling extant means to create international opportunities
(Sarasvathy et al., 2014). Effectual logic explains the process of internationalization
through leveraging extant resources and developing networks of relationships
(Sarasvathy et al., 2014). In this literature, there is a focus on unplanned interna-
tionalization, based on networks, serendipity, and resource-based analysis (e.g.,
Andersson, 2011; Chandra, Styles, & Wilkinson, 2015). Unplanned internationali-
zation means that firms successfully enter international markets, without having any
exact plan beforehand (Kalinic et al., 2014). The process is unplanned due to the
unpredictability of internationalization environment as an uncertain context in which
internationalizing firms cannot predict the future and therefore cannot plan their
market entry (Sarasvathy et al., 2014).
According to the creation opportunity theory, opportunity is socially constructed,
formed endogenously by entrepreneurs who don’t know exactly about outcomes and
their probabilities ex-ante. Therefore, decision-making is an “incremental, inductive,
and intuitive” process, during which new contextual knowledge is created. These
processes are iterative and rely on trial-and-error (Alvarez et al., 2013, p. 305). The
importance of creating opportunities by SMEs is emphasized in strategic manage-
ment literature, and questions like “how do actions by entrepreneurs create oppor-
tunities?” and “how can entrepreneurs use incremental, iterative, and inductive
processes to make decisions?” are highlighted as important directions for future
research (Alvarez & Barney, 2007, p. 22).
In this vein, internationalization is conceptualized as the process of overcoming
the liability of outsidership (Johanson & Vahlne, 2009). According to this view, to
enter foreign markets, firms enact relationships in business networks and coordinate
their efforts to create opportunities to enter foreign markets (Sarasvathy et al., 2014;
Vahlne & Johanson, 2017). In this sense, when a related network crosses a border,
network members find international opportunities. Therefore, being in a good
network brings opportunities for members even if they are not actively searching
for international opportunities (Schweizer et al., 2010). Learning from other network
36 M. Karami
members plays a critically important role in this process (Karami & Tang, 2019).
Internationalizing firms learn about routines and processes of successful firms within
the network (Vahlne & Johanson, 2017), which enables them to develop new
opportunities to enter foreign markets.
Effectuation logic helps internationalizing SMEs develop network relationships
and turn their initial personal relationships to business networks (Read et al., 2016).
These networks provide complementary resources (Sarasvathy & Dew, 2005) and
provide timely information for members (Vahlne & Johanson, 2017). Indeed,
learning from experience and having access to accumulate internationalization
knowledge within networks facilitate the process of international opportunity crea-
tion for partnering firms (Sarasvathy et al., 2014; Schweizer et al., 2010). Due to the
resource constraints, SMEs in international markets experience three kinds of
liability including liability of foreignness (which is defined in terms of unfamiliarity
with local environment), newness (which is defined in terms of operational chal-
lenges such as financing, staffing, and marketing), and smallness (which is defined in
terms of lack of access to critical resources), which may lead to competitive
disadvantage in competing with domestic firms or MNEs (Lu & Beamish, 2006).
Therefore, having access to related networks may lead to competitive advantage by
providing access to foreign market and by providing local knowledge and experi-
ence and necessary resources for partners (Johanson & Vahlne, 2009). Effectuation
theory argues that the process which turns the initial means into valuable resources
ex post should be considered as source of the competitive advantage (Read et al.,
2009). Developing tacit knowledge in the process of effectuation through learning
by doing and transferring knowledge and pooling resources between parties may
lead to gaining a kind of sustainable competitive advantage.
To summarize, the process of effectuation, by using existing and emerging
networks and creating new networks, is likely to result in opportunity creation in
uncertainty conditions.
Proposition 1 Adoption of effectuation logic by internationalizing SMEs is likely to
result in international opportunity creation.
6 Networking as an Important Mechanism in Effectual

Internationalization
According to the behavioral approach to internationalization, networks of relation-

ships play a critical role in internationalization of SMEs (Coviello & Munro, 1995;
Styles, Gray, Loane, & Bell, 2006). In this perspective, market is defined as a
network of relationships (Johanson & Vahlne, 2011) in which networking capabil-
ities help members perform better (Hunt, 2000). Internationalization of firms can be
explained as an outcome of their efforts to enter related networks in the home and
host country (Johanson & Vahlne, 2009) and improve their position in those network
(s) (Schweizer et al., 2010). SMEs who have access to extended networks
significantly identify more opportunities than entrepreneurs with no access to a

network (Ardichvili, Cardozo, & Ray, 2003; Vahlne & Johanson, 2017). This
advantage comes from the fact that network insiders have better access to market
information and knowledge and other members’ resources and experience which
make them ready to identify and exploit opportunities (Schweizer et al., 2010).
Networking capability plays a critically important role for SMEs to use effectu-
ation logic successfully (Gabrielsson & Gabrielsson, 2013). Both social and business
networks are considered important in the internationalization literature. Ellis (2010)
primarily differentiates between social and business networks, in terms of level of
analysis. He argues that social networks are interpersonal relations, while business
networks are a set of inter-firm relations and both of them influence the process of
internationalization (Ellis, 2010). Sarasvathy et al. (2014) define three types of
networks, including existing, emergent, and actively shaped networks, and posit
that instead of relying on an existing network, entrepreneurs can create their own
networks that can help them successfully create opportunities to enter foreign
markets. Uppsala model emphasizes business networks and considers business
relationships and connections as the critical elements in the process of internation-
alization (Johanson & Vahlne, 2009, 2011).
The extant IE literature knows how networks influence internationalization of
firms, but there is not enough research about the creation mechanisms of networks
(Johanson & Vahlne, 2009). The effectual approach to IE (Sarasvathy et al., 2014)
provides a good framework to answer this question. Hence, there is an important call
for future research to focus on how effectuation logic can contribute to explaining
the process of commitment building and network extending in the process of
internationalization (Kalinic et al., 2014).
7 Causation and International Opportunity Discovery
The literature on opportunity research has focused more on discovery opportunities

than creation opportunities (Alvarez & Barney, 2007). In causal internationalization
process, prior market research, formal contracts, business and marketing planning,
and some other predetermined steps are employed to help the firm reach the
predetermined goal (Alvarez et al., 2013; Johanson & Vahlne, 2011). Formal
contracts and flows of products are important factors in the business relationships.
The process of causation is typified in marketing textbooks. Textbooks describe
the process of marketing strategy formulation in terms of STP—segmentation,
targeting, and positioning. According to this model, the process starts with analysis
of long-term opportunities in the market, selecting target market(s), deciding about
position, developing marketing mix, and implementation and control of strategies
(Sarasvathy, 2001; Sarasvathy & Dew, 2005). The well-known SWOT model of
strategic planning is another typical example of causal approach to opportunity
development, as “O” in this model stands for objective opportunities in the environ-
ment which should be discovered through strategic planning. Causation models
38 M. Karami
focus on maximizing the potential returns on investment by selecting optimal

strategies. Porter’s model in strategy, which emphasizes detailed competitive ana-
lyses, is another example of causal models. This model also relies on analyzing five
forces before deciding about the final strategy. The causation processes imply that an
internationalizing SME should start with considering all potential markets and
develop a business and marketing plan to penetrate the segment(s) with the highest
potential for return on investment (Sarasvathy, 2001). Porter (2008) posits that some
firms can make competitive advantage by perception of totally new market oppor-
tunities or by serving an untouched part of the market.
According to the IB literature, under risky conditions in which the future is
predictable, and therefore, the competitive advantage in an industry is based on
pre-existing knowledge, causation models might be applicable (Brouthers & Nakos,
2004; Sarasvathy et al., 2014). Indeed, internationalizing SMEs may discover an
opportunity to enter a foreign market if they search for an existing opportunity and/or
adapted their existing product to fit existing opportunity (Maine et al., 2014). In other
words, if SMEs believe they are coping with a relatively predictable condition, they
will tend to do some systematic market research to identify opportunities to enter
foreign markets (Brouthers & Nakos, 2004; Sarasvathy, 2001).
To summarize, in relatively known environments, firms are likely to use causa-
tion process to find a way to enter into foreign markets. Indeed, adoption of causation
processes by SMEs in the process of internationalization my result in discovery of
international opportunities.
Proposition 2 Adoption of casual logic by internationalizing SMEs is likely to
result in international opportunity discovery.
8 Applicability of Not Effectual and Causal Logics

in Internationalization
There is a relatively new stream of IE research which emphasizes the simultaneous

applicability of both logics in the process of internationalization. According to this
view, effectuation and causation are not contradictory logics; rather they are com-
plementary logics which are applicable in different conditions (Read et al., 2016).
According to effectuation theory, causation and effectuation are integral parts of the
reasoning, and one would play the dominant role in entrepreneurial decision-making
process based on the decision context. However, according to this theory, effectu-
ation logic is more popular in entrepreneurial decision-making. Therefore, effectu-
ation is not better or preferable to causation per se in developing a new market, firm,
or opportunity, but the challenge is that under what conditions each of these logics
provide more advantages and should be employed by individuals and firms.
Since 2009 that effectuation theory was applied by Frishammar and Andersson
(2009) in IE research, there has been several studies with this dual approach. For
instance, Harms and Schiele (2012) observed that internationalizing firms use both
logics simultaneously, and SMEs which apply effectuation logic pursue opportuni-
ties within the international networks of relationships. Nowiński and Rialp (2013)
applied the same discussion in the context of international new ventures (INVs).
They observed that INVs plan for attending in international markets; however, they
form their networks afterward, which opens new opportunities for them to enter
foreign markets. Ciszewska-Mlinaric, Obloj, and Wasowska (2016) had the same
findings and showed that INVs were formed based on networking as the main source
of complementary capabilities and necessary resources. Nummela, Saarenketo,
Jokela, and Loane (2014) have investigated the decision-making in the context of
born globals (BGs). According to their findings, BGs’ internationalization takes
place both planned and unplanned in which the dealers’ network helps with serving
international markets. Chetty, Ojala, and Leppäaho (2015) focused on the impor-
tance of networking in the process of internationalization of SMEs and observed that
networking as the main mechanism of internationalization takes place both planned
and unplanned. In the same vein, Lingelbach, Sriram, Mersha, and Saffu (2015)
discussed the ambidexterity of causal and effectual decision-making and how
networks of relationships activate this ambidexterity. Laine and Galkina (2017)
considered the role of institutions on internationalizing firms’ social networking
activities. They observed that due to institutional voids, firms were forced to rely on
social networking to find international suppliers regardless of the logic of decision-
making. Finally, Chetty et al. (2018) argued that planned and unplanned opportuni-
ties can enable each other as a duality. That is, each international opportunity enables
another opportunity.
Proposition 3 Adoption of casual and effectuation logic by internationalizing
SMEs is likely to result in international opportunity discovery and creation which
might enable each other.
9 Transformation of Creation and Discovery Opportunities
Some scholars distinguish between opportunity discovery and creation (Alvarez &
Barney, 2007). They argue that a single opportunity cannot have attributes of both
discovery and creation because their epistemological assumptions are mutually
exclusive. They argue that having this distinction between opportunities helps us
better explain entrepreneurial opportunities (Alvarez & Barney, 2010). Different
terminology is used in this stream such as opportunity formation, making, recogni-
tion, identification, exploration, and so forth.
Some scholars blend discovery and creation and believe that they are not sepa-
rable (Garud et al., 2014; Ramoglou & Tsang, 2016, 2017). Creation and discovery
opportunity can transform to one another (Alvarez & Barney, 2010). According to
this view, entrepreneurs encounter with each aspect of the potential opportunity as
discovery or creation. Hence, it is questioned that if the same individual or firm can
effectively involve in discovery and creation of opportunities at the same time
40 M. Karami
International Sustainable
Effectual logic Opportunity Competitive
Creation Advantage
Causal logic International Temporary

Opportunity Competitive
Discovery Advantage
Fig. 1 A conceptual model on the logic of entrepreneurial decision-making, type of international

opportunity and competitive advantage. Source: Authors own figure
(Alvarez et al., 2013). Chetty et al. (2018) investigated the transformation of

discovery and creation opportunity in the context of SMEs’ internationalization.
They observed that international opportunities can be both discovered and created.
According to their findings, discovered and created opportunities enable each other
in the process of FME. Others have observed that experienced entrepreneurs apply
transformation processes to develop more new market opportunities than inexperi-
enced entrepreneurs who invest on formal marketing planning (Dew, Read,
Sarasvathy, & Wiltbank, 2010). In this line, Sarasvathy (2001) observed that in
their early stages, successful firms are more likely to adopt effectual processes such
as alliances and partnerships than causal processes like formulating strategies,
formal market research, competition analyses, and business planning (Sarasvathy,
2008).
“Finally, it is also possible to conceptualize opportunities in different ways so that
what appears as discovered at one point in time may be shown to have been
co-created at another” (Sarasvathy & Venkataraman, 2011, p. 118). Indeed, entre-
preneurial process of new market creation can be either a causal selection or effectual
transformation process (Dew et al., 2010) (see Fig. 1).
To summarize, opportunities are both discovered and created, and the opportunity
which appears to be created in on condition may be discovered in another conditions.
Proposition 4 Discovered and created international opportunities are likely to
transform to each other in different conditions.
10 Effectual Opportunity Creation and Sustainable

Competitive Advantage
Internationalizing can be beneficial for SMEs by providing competitive advantage

such as forming larger markets, gaining economics of scale, and decreasing risk by
diversifying the market (Gallo & Sveen, 1991). The concept of competitive
advantage has been emphasized in IE context, and it is argued that firms basically
internationalize to gain and utilize competitive advantage (Coviello et al., 2011;
Zahra & George, 2002). In this view, addressing and exploiting advantages is
considered as firms’ motivation to internationalization (Child & Rodrigues, 2005).
Considering the vital importance of firms’ performance and competitive advantage
in IE scholarship, the question that needs to be answered is how to gain and retain a
sustainable competitive advantage.
Path dependency and learning by doing as two important concepts in entrepre-
neurial opportunity creation literature could provide a reasonable ground to explain
firms’ competitive advantage. Path dependency as a frequently used concept in
strategy literature refers to “the idea that events occurring at an earlier point in
time will affect events occurring at a later point in time” (Djelic & Quack, 2007,
p. 161). Path dependency in opportunity creation process means that those who
exploit their created opportunities often gain sustained competitive advantages from
doing so, due to the learning that has happened during the path which provided a
tacit inimitable knowledge to the firm (Alvarez et al., 2013; Hunt, 2000). Further-
more, networking as an important mechanism of effectual opportunity creation also
creates path dependency. Considering that networks provide knowledge and expe-
rience to their members, insidership in related networks plays a critically important
role in accessing important information and learning from other members (Vahlne &
Johanson, 2017). It is observed that networks help by facilitating knowledge trans-
fer, information exchange, building trust, improving competencies which result in
developing opportunities to cross the borders (e.g., Galkina & Chetty, 2015;
Johanson & Vahlne, 2009; Karami & Tang, 2019). Therefore, networks play an
important role in gaining sustainable competitive advantage, and scholarship in this
area needs to do more research to better understand how networks improve the
competencies of members which in turn leads to gaining sustainable competitive
advantage (Hoffman, 2000).
RBV and dynamic capabilities’ view provide useful directions to understand the
associations between effectual decision-making and firm sustainable competitive
advantage. RBV and dynamic capabilities’ view focus on identifying resources of
the firm in order to make a competitive advantage. According to these views, the
path-dependent nature of the opportunity creation process which is essentially based
on information and knowledge creation in the process of opportunity creation
(Alvarez & Barney, 2007) often leads to heterogeneous, costly to imitate opportu-
nities which can finally lead to sustainable competitive advantage (Alvarez et al.,
2013; Alvarez & Barney, 2007). However, they have not yet answered the core
question of how to obtain those resources (Kalinic et al., 2014). There is a lack of
research on the process of opportunity formation and its impact on opportunity
exploitation by firms (McMullen & Shepherd, 2006).
Effectuation theory could provide answer to this question by presenting more
practical conceptualization of the means and explaining the highly path-dependent
process through which internationalizing SMEs turn the initial means to valuable
resources (Read et al., 2009; Sarasvathy, 2001). Effectuation theory separates means
from resources as defined in RBV. For effectuation theory, means should not be
42 M. Karami
necessarily valuable and rare at the beginning of effectuation process. For this
theory, the entrepreneur’s identity, values, personality, existing knowledge, and
personal relationships can provide a basis to begin with (Sarasvathy, 2001). How-
ever, the process through which these initial means transform to valuable resources
is explained as a critically important process in which resources are developed and
become a source of controlling an unpredictable future (Read et al., 2016;
Sarasvathy, 2001). Since the effectuation process happens within complicated set
of relationships during the time in which partners add resources and insert some
limitations, the process of effectuation becomes very path dependent. Networking
plays a central role in this process.
Johanson and Vahlne (2011) have defined strategy as a way to deal with an
unknown future, which is very close to the concept of effectuation in dealing with
unknown ends of the reasoning process. According to this definition, strategy is a
way to cope with uncertainty in the process of internationalization. In this sense,
effectuation can be considered as a strategy which leads to international opportunity
creation in an uncertain condition. In effectual process of enacting opportunities,
learning occurs in the process of opportunity formation, the process which leads to
tacit knowledge and hence causal ambiguity. Therefore, the process of opportunity
creation is highly path dependent (Alvarez & Barney, 2007) with quiet unique
consequences. Indeed, managing unintended contingencies in the process of oppor-
tunity creation leads to some idiosyncratic results (Barreto, 2012). As such, due to
the tacit knowledge and causal ambiguity, imitability will be low and hence the
process leads to sustainability of the results (Alvarez & Barney, 2014). See Fig. 1.
Network approach to opportunity development can provide a useful lens to
further investigate the issue. Every strategic factor will become different if we take
the network perspective (Johanson & Vahlne, 2011). According to this view,
availability of resources is more important than their ownership. Indeed, within the
networks, firms have access to the resources of each other and share knowledge with
network parties (Johanson & Vahlne, 2011). Sustainability of a gained competitive
advantage happens because resources are inimitable, mostly intangible, and peculiar
in nature, almost untradeable, context-dependent, and difficult to transfer to firms out
of the network (Katkalo, Pitelis, & Teece, 2010).
Cooperative specialization within the networks could be the source of sustainable
competitive advantage. Cooperative specialization provides access to valuable
resources and capabilities that are inimitable, imperfectly transferable, and
non-substitutable (Dyer, 1996). As argued by Vahlne and Johanson (2017), network
partners co-evolve their processes and business routines which might result in
dynamic capabilities. In business networks, members learn about each other’s
capabilities and resources and consequently build trust and develop their commit-
ments incrementally (Vahlne & Johanson, 2017). This co-evolution process is a
time-consuming and therefore path-dependent process. Within the networks, the
parties learn from each other and adapt their routines, which increases the efficiency
of their internationalization activities (Zollo & Winter, 2002). Hence, the successful
networks have strategic importance in gaining and maintaining competitive advan-
tage. The empirical research shows that international new ventures use network
structures to gain and control critical resources that provide sustainable competitive
advantages (Oviatt & McDougall, 2005). Networks and knowledge is a unique
resource and one of four necessary and sufficient elements for sustainability of
INVs (Oviatt & McDougall, 2005). Therefore, the difficulty of transferring resources
and capabilities is due to the interdependence among the partners and the
co-evolution of knowledge and capabilities within the networks during a period of
time (Vahlne & Johanson, 2017) which makes the resultant knowledge and capa-
bilities and opportunities very tacit, emergent, and path dependent (Ács &
Audretsch, 2006). In this context, the transferability of firms’ resources and capa-
bilities to outsiders is a critical determinant of their capacity to gain sustainable
competitive advantage (Barney, 1986).
To summarize, because of the difficult transferability of resource and capabilities
and high path dependency of the process of effectual opportunity creation inside
networks, it is likely that the gained competitive advantage will tend to be sustained.
Proposition 5 Created effectual international opportunities are likely to result in
gaining sustainable competitive advantage.
11 Causal Opportunity Discovery and Temporary

Competitive Advantage
There is an argument that because of fast changes, and reactions of competitors,

endogenous competitive advantages are not sustainable or enduring but more tem-
porary in nature (D’Aveni et al., 2010). It implies that the value and duration of
competitive advantage lasts as long as competitors do not neutralize the advantage
(D’Aveni et al., 2010). Large environmental shocks also may neutralize advantages
of networked firms (Dyer, 1996). The situation becomes even worse for small firms.
Exploitation of an opportunity by SMEs runs the risk that large firms will copy the
opportunity even before them (Ketchen, Ireland, & Snow, 2007).
In discovery opportunity context, opportunities are independent from the entre-
preneurs and therefore potentially identifiable for everyone who is alert enough to
see the opportunities. Indeed, discovered opportunities are independent from entre-
preneurs and exogenous to firms (Alvarez & Barney, 2007). In this context, actors
have some pre-existing experience and related knowledge (Johanson & Vahlne,
2009), which makes them alert towards opportunities (Tang, Kacmar, & Busenitz,
2012). Therefore, internationalizing SMEs search for information and then analyze
them in order to calculate the related risk and return of foreign market entries (FMEs)
(Shaver & Scott, 1991).
In this context, some of actors who have access to more related knowledge or take
related information before others gain first mover advantage. Gaining first mover
advantage as a result of exploiting an opportunity may result in gaining a kind of
competitive advantage (Ireland & Webb, 2007). However, the gained advantage
may be quite temporary because the source of advantage could be very diffusible
44 M. Karami
(Alvarez et al., 2013; Barney, 1995; Grant, 1996). As such, in discovery opportuni-
ties due to the independency and objectivity of opportunities which makes them
available for competition, it is highly possible that competitive advantage to be
neutralized by competitors or changes in the environment (Dyer, 1996; Ketchen
et al., 2007). Indeed, in discovery context, the information about exploited oppor-
tunity may be diffused quickly and become available for the competitors (Alvarez &
Barney, 2007). In such conditions, firm-specific competitive advantages are tempo-
rary in nature (D’Aveni et al., 2010) and would be easily imitated by competitors,
unless the firm sustains the advantage by speed and secrecy of opportunity exploi-
tation and arising entry barriers (Alvarez & Barney, 2007). Imitation of comparative
advantage by rivals makes it impossible for firms to exploit the discovered advantage
and get back the expected return on their investment. Consequently, when financial
returns of firms are volatile, firms cannot sustain their competitive advantage
(Thomas & D’Aveni, 2009).
Maintaining temporary competitive advantage can be the matter of both internal
and external factors. However, there is no clear evidence about its antecedents.
Therefore, there is a strong call for research in this area in order to recognize if
there are strategic ways to maintain temporary competitive advantages (D’Aveni
et al., 2010). To summarize, due to the independency and imitability of discovery
opportunities, as soon as they are exploited by the first mover firm, it is likely that the
gained competitive advantage will be neutralized by the competition.
Proposition 6 Exploitation of international discovered opportunities is likely to
result in gaining temporary competitive advantage.
12 Concluding Remarks
The conceptual model is based on the existing literature in IE, entrepreneurship, and
strategic management. By blending these literatures, it aims to contribute to answer
an important research gap in these literatures, namely the explanation of interna-
tional opportunity development, transformability of discovery and creation oppor-
tunities, and its implication on sustainability of competitive advantage. Based on
proposed model, we presented six propositions. The steps ahead from this point are
to test and refine the model based on primary data on internationalization process
of SMEs.
Acknowledgement I wish to thank Professors Sylvie Chetty from University of Otago and
Uppsala University, Professor Colin Campbell-Hunt from University of Otago, and Associate
Professor Oscar Mart’ın Mart’ın from Public University of Navarre who provided comments on
the earlier version of this chapter.
I acknowledge the support from Royal Society of New Zealand Marsden Research Grant
(13-UOO-065) which funded this project.
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Sustainable Crowdfunding for Subsistence
Entrepreneurship
Nadia Arshad, Marcela Ramírez-Pasillas, and Linda D. Hollebeek
Abstract Crowdfunding research to date has mainly focused on the nature and
dynamics characterizing platforms containing creative and innovative ideas, while
less attention has been given to subsistence entrepreneurship which centers on
social, environmental, and economic concerns. This chapter develops a conceptual
framework to examine the sustainable crowdfunding process supporting subsistence
entrepreneurship, and then using the framework, the case illustration of Kiva is
presented to describe how sustainable crowdfunding facilitates the development of
ventures created to alleviate poverty and promote sustainability. The proposed
framework combines elements of crowdfunding with aspects of sustainability, as
well as subsistence entrepreneurship. Subsistence entrepreneurship includes the
actions, activities, and processes undertaken by individuals living in the bottom of
the pyramid to promoting sustainability. Crowdfunding acts as a key tool to attract
financial means relevant for subsistence entrepreneurship. The chapter concludes
with a discussion of key implications that arise from this research.
Entrepreneurship has become a solution to sustainability originating research on

sustainable ventures that advance the causes of environmental protection and social
justice (Muñoz & Dimov, 2015). Given the challenges faced by the poor, sustainable
N. Arshad
Media, Management and Transformation Center, Jönköping International Business School,
Jönköping University, Jönköping, Sweden
e-mail: Nadia.Arshad@ju.se
M. Ramírez-Pasillas (*)
Centre for Family Enterprise and Ownership (CeFEO), Jönköping International Business
School, Jönköping University, Jönköping, Sweden
e-mail: marcela.ramirez-pasillas@ju.se
L. D. Hollebeek
Montpellier Business School, Montpellier, France
Tallinn University of Technology, Tallinn, Estonia
NHH Norwegian School of Economics, Bergen, Norway
e-mail: linda.hollebeek@montpellier-bs.com

50 N. Arshad et al.
entrepreneurship-based development and growth are key to overcoming these chal-

lenges (Sarkar & Pansera, 2017). Sustainable entrepreneurship represents an
approach that combines social, environmental, and economic aspects with a concern
for the well-being of future generations (Hockerts & Wüstenhagen, 2010). Sustain-
able entrepreneurship calls for research that helps increase our “understanding of
how and why entrepreneurial action can generate gains for society” (Shepherd &
Patzelt, 2011: 152).
This chapter responds to such a call by focusing on a subset of sustainable
entrepreneurs, subsistence entrepreneurs, defined as individuals living in the bottom
of the pyramid seeking to alleviate their poverty by launching ventures (Bruton,
Ketchen, & Ireland, 2013; Viswanathan, Echambadi, Venugopal, & Sridharan,
2014), which solve social, environmental, and economic concerns in their local
communities. Subsistence entrepreneurship includes the actions, activities, and
processes undertaken by individuals living in the bottom of the pyramid to promot-
ing sustainability.
An important tool to subsistence entrepreneurs is crowdfunding, which represents
the pooling of financial means by a number of people in a project (Mollick, 2014),
thereby providing entrepreneurs with initial financing or small business owners an
opportunity to launch or expand their businesses (Ordanini, Miceli, Pizzetti,
Parasuraman, 2011). The complexity of entrepreneurship-based actions and pro-
cesses that are centered on social, environmental, and economic concerns provides
valuable opportunities for research on crowdfunding (Lehner, 2013), and
crowdfunding, in turn, offers a contemporary phenomenon that introduces further
complexity into subsistence entrepreneurship.
Subsistence entrepreneurship has transformative societal benefits by empowering
the poor to take social, environmental and economic steps to reach sustainability by
means of crowdfunding. Crowdfunding serves as a tool for subsistence entrepre-
neurship to provide transformative services, which aim at improving the well-being
of individuals, communities and the ecosystem by creating uplifting changes
(Anderson et al., 2013; Anderson, Ostrom, & Bitner, 2011).
Crowdfunding research has mainly focused on the nature and dynamics charac-
terizing platforms that support creative and innovative ideas, while less attention has
been given to subsistence entrepreneurship which centers on social, environmental,
and economic concerns (cf. social entrepreneurship, Lehner, 2014). While literature
has recognized crowdfunding as a tool for poverty alleviation by maximizing the
potential of technological interactions (Attuel-Mendes, 2016; Ibrahim, 2012), the
addition of a subsistence entrepreneurship perspective highlights social, environ-
mental, and economic aspects (Lehner, 2014; Meyskens & Bird, 2015). The role of
the “sustainable” in crowdfunding is important to examine the inclusion of com-
bined social, environmental, and economic aspects, which benefit local communities
(e.g., Smith, Fressoli, & Thomas, 2014) and socioecological systems.
Even though there is extensive research on crowdfunding, there is a lack of
insight into the role of sustainable crowdfunding processes in supporting subsistence
entrepreneurship. In response to this gap, this chapter develops a conceptual frame-
work to examine the sustainable crowdfunding process, and then using the frame-
work, the case illustration of Kiva is presented to describe how sustainable
Sustainable Crowdfunding for Subsistence Entrepreneurship 51
crowdfunding supports subsistence entrepreneurs to alleviate poverty and promote

sustainability. That is, while prior research has started to discuss particular aspects of
social and/or environmental sustainability in crowdfunding research, we argue that a
broader crowdfunding framework incorporating social, environmental, and eco-
nomic sustainability is beneficial to advance the current state of insight in this
area. Based on our observations, we propose a sustainability-based future agenda
for crowdfunding research, which aids the development of understanding of sus-
tainable crowdfunding’s link to enterprising actions with human and environmental
systems.
1 Crowdfunding Research
While mainstream crowdfunding research has developed into a well-established

field, the research has generally lacked a sustainability focus. Crowdfunding
research commonly draws on three key elements, including (a) the crowdfunding
initiator who launches the idea to be funded, (b) the crowd or general public that
contributes financial resources to the idea to be funded, and (c) the crowdfunding
platform that connects the initiator and the crowd (Ordanini et al., 2011). While
under-explored to date, the interface of these elements is relevant for contextualizing
crowdfunding in relation to entrepreneurship in developed and developing countries
(Arshad, 2017) which would provide a better understanding for the actions to be
taken for multiple actors’ well-being and the preservation of natural socioecological
systems.
Existing crowdfunding research investigates crowdfunding as an innovative
solution to financing issues for ventures that are unable to secure financing through
personal or traditional banking sources (Belleflamme, Lambert, & Schwienbacher,
2014; Mollick, 2014). Crowdfunding implies entrepreneurs raising a larger amount
of money by aggregating relatively small contributions from individual members of
the general public (Mollick, 2014). In this sense, crowdfunding relies on collective
decision-making by means of a social media-based platform that assesses and
gathers financing for new ventures and projects (Bruton, Khavul, Siegel, & Wright,
2015).
According to Belleflamme et al. (2014), crowdfunding promotes an open call for
money from the crowd or general public through the Internet. Crowdfunding offers a
useful fundraising tool for non-profit and profit-oriented creative and innovative
ventures (Hörisch, 2015). Prior research has examined crowdfunding success fac-
tors, including an initiative’s innovation level and quality (Hervé & Schwienbacher,
2018; Mollick, 2014), rhetoric and narratives (Anglin, Allison, McKenny, Busenitz,
2014; Kim, Buffart, & Croidieu, 2016; Vealey & Gerding, 2016), social and
marketing cues (Allison, Davis, Short, Webb, 2015), and human and social capital
(Aprilia & Wibowo, 2017; Colombo, Franzoni, & Rossi-Lamastra, 2015).
Traditional crowdfunding is mostly supportive of creative ideas (Berndt, 2016).
However, projects offering incremental (vs. radical) innovations level are more
likely to succeed, as the crowd will tend to find it riskier trusting a nascent
52 N. Arshad et al.
entrepreneur in the latter instance (Chan & Parhankangas, 2017). Crowdfunding

campaigns have an inherent challenge of information asymmetry, including higher
level of uncertainty for the crowd due to insufficient information about the initiator
or the underdeveloped product. To mitigate this issue, quality signal and third-party
endorsement are helpful (Burtch, Ghose, & Wattal, 2013; Courtney, Dutta, & Li,
2017; Tang, 2016). In traditional crowdfunding, the crowd members decide to
contribute money based on their perceived quality signals, including crowdfunding
video pitch quality, technical feasibility, project’s market viability, realism of the
funding goal, narratives, and creativity (Aprilia & Wibowo, 2017; Burtch et al.,
2013; Courtney et al., 2017; Davis, Hmieleski, Webb, & Coombs, 2017; Mollick,
2014). Other than project-related factors, the entrepreneur’s perceived reliability and
their internal and external social capital also play a vital role in crowd’s judgment
(Courtney et al., 2017; Skirnevskiy, Bendig, & Brettel, 2017).
Usually, the crowd members are not financial experts (e.g., venture capitalists,
business angels); therefore, their crowdfunding evaluation typically occurs on a
common-sense basis (Howe, 2008); however, Mollick and Robb (2016) note that
the crowd’s decision does not differ much from experts’ decision-making, as the
crowd also looks for quality signals, feasibility, and creativity. In addition to
personal judgment, in traditional crowdfunding, there has been evidence of social
influence on the crowd’s decision-making (Burtch et al., 2013; Kuppuswamy &
Bayus, 2015). In addition, there are free riders who make their funding decisions by
following salient others or social groups (Belleflamme, Omrani, & Peitz, 2015), thus
promoting herding behavior (Bretschneider, Knaub, & Wieck, 2014).
Overall, existing research highlights a need to better understand crowdfunding
and to identify its key constituent concepts and dynamics. In addition, we identify a
lack of insight into crowdfunding from a subsistence entrepreneurship perspective,
as outlined. Based on these observations, we next delve further into sustainability’s
role in crowdfunding research.
2 Sustainability in Crowdfunding Research
Sustainability is the most important topic and goal of our time. Common aspects that
affect the sustainability of the earth systems and that represent threats to humanity
include climate change, biosphere integrity, land change systems, freshwater use,
ocean acidification, stratospheric ozone depletion, and chemical pollution (Steffen
et al., 2015). As stated, an emerging research stream relates crowdfunding to either
social and/or environmental sustainability. Even though this emerging research
shows that a sustainability orientation of crowdfunding projects tends to positively
contribute to crowdfunding performance (Cali & Mosakowski, 2016), academic
knowledge about sustainable crowdfunding remains limited to date. Since traditional
capital markets underserve and underfill the needs of subsistence entrepreneurs,
crowdfunding provides an avenue to access resources in resource-constrained envi-
ronments, including bottom of the pyramid contexts (Cali & Mosakowski, 2016).
What is more, since subsistence entrepreneurs are poor and located in the same
community as their customers living also in poverty, they can create value for their
customers (Viswanathan et al., 2014). Also, subsistence entrepreneurs as sustainable
entrepreneurs are committed to preserving “nature, life support, and community in
the pursuit of perceived opportunities to bring into existence future products,
processes, and services for gain, where gain is broadly construed to include eco-
nomic and non-economic gains to individuals, the economy, and society” (Shepherd
& Patzelt, 2011, p. 137).
Shaped by cultural and local aspects, subsistence entrepreneurs have a desire to
combine sustainability with economic goals (Sarkar & Pansera, 2017). In bottom of
the pyramid contexts, the development of ventures addressing social and/or envi-
ronmental issues is important for their entrepreneurs and related communities as they
can help support a dignified way of living or lifestyle (Hahn, 2012). Therefore,
entrepreneurs focusing on sustainability can adopt a double bottom line or a triple
bottom line by balancing sustainability’s social, environmental, and economic
aspects (i.e., Kuckertz & Wagner, 2010; Chell, Nicolopoulou, & Karataş-Özkan,
2010). This is important since sustainability implies that entrepreneurs find ways to
balance social, environmental, and economic issues.
Emerging crowdfunding research highlights the growth of financing schemes that
support sustainable purposes (e.g., Lehner & Nicholls, 2014; Messeni-Petruzzelli,
Natalicchio, Panniello, & Roma, 2018). For instance, Lehner (2013) links
crowdfunding to social entrepreneurship and suggests the importance of examining
crowdfunding opportunity recognition, networking, investor relations, legitimacy,
functions, reporting, and legal and regulatory aspects. Messeni-Petruzzelli et al.
(2018) propose a five-dimensional framework of sustainable crowdfunding that
comprises the project creator, backers, campaign, crowdfunding platform, and
crowdfunding outcomes. Research investigating sustainable crowdfunding is how-
ever in its infancy. Emerging crowdfunding models have largely overlooked the link
between sustainability and subsistence entrepreneurship when supporting individ-
uals who are unable to obtain financial support via traditional banks, loan organiza-
tions, investment funds, or microfinance organizations. To examine the impact of
crowdfunding in the communities where subsistence entrepreneurs launch their
ventures is therefore important to advance our understanding of sustainable
crowdfunding.
Existing research has also explored the relevance of crowdfunding for environ-
mental projects or environmental ventures. Prior empirical research in this area
shows that crowd funders were more motivated by non-monetary (vs. monetary)
values (Belleflamme et al., 2014). However, prior research also suggests that
environment-oriented projects are less likely to reach their funding targets and
tend to achieve the lowest average share of their respective targeted amounts
(Hörisch, 2015). Despite these issues, Cali and Mosakowski (2016) confirm that a
project’s sustainability orientation has a positive effect on project creativity. Partic-
ularly for projects containing technological components, their environmental and
social sustainability orientation was important toward their success. Overall, these
studies signal a need to better understand sustainability’s role in crowdfunding
processes and performance.
54 N. Arshad et al.
3 The Sustainable Crowdfunding Process: A Conceptual

Framework
To examine sustainable crowdfunding, we consider the following elements:

(a) crowdfunding initiators as subsistence entrepreneurs, (b) the crowd as multiple
stakeholders contributing money or other forms of support, (c) the sustainable
crowdfunding platforms as hybrid organizations, and (d) sustainable microfinance
approaches. We explain these elements and develop a set of related propositions
addressing these concepts in the following sections.
Crowdfunding Initiators as Subsistence Entrepreneurs and their Sustainable
Ventures
Crowdfunding initiators are those actors who launch their venture ideas via
crowdfunding platforms to seek funding. Based on a service dominant logic, we
consider that all human beings are social and economic actors, who integrate their
resources to co-create value (Vargo & Lusch, 2004). Mollick (2014) notes that based
on contribution and reward, crowdfunding initiators can adopt four different models:
(a) the charity model relies on seeking pure donations, (b) the patronage model
centers on the provision of some material reward to the funders, (c) the lending
model is based on obtaining a loan, and (d) the equity model is characterized by
giving the funder equity rights into the venture (Burtch et al., 2013; Gleasure &
Feller, 2016). Extant research has explored initiators’ different types of intrinsic and
extrinsic crowdfunding motives (Allison et al., 2015). Their primary motivation is to
have access to easy capital without being scrutinized by standard financial interme-
diaries (Bruton et al., 2015; Mollick, 2014). However, they also rely on this
mechanism to receive recognition of their work (Gerber & Hui, 2013), along with
marketing benefits (e.g., testing, selling, and promoting their offerings; Brown,
Boon, & Pitt, 2017).
We propose that subsistence entrepreneurs as a particular type of crowdfunding
initiator launches sustainable projects or ventures aimed at supporting their commu-
nities. Subsistence entrepreneurs have societal and environmental motivations
(Shepherd & Patzelt, 2011). Through system-changing sustainable ventures and
the solutions they provide, social and environmental issues can be addressed
(Muñoz & Cohen, 2017). Therefore, considering subsistence entrepreneurs as an
important type of crowdfunding initiator helps broaden our understanding of the
type of projects and ventures started by these initiators as well as their motivations.
The Crowd as Different Types of Stakeholders
In crowdfunding literature, the crowd refers to the general public who individually
contribute a small sum of money that in aggregate amounts to a larger sum (Mollick,
2014). Crowd-based funders can adopt several roles based on their particular
crowdfunding project (Ordanini et al., 2011). For instance, the crowd can act as
donors, buyers, lenders, shareholders, or partners (Mollick, 2014). As failing to get
the crowd’s attention can be disastrous to a crowdfunding campaign (Ordanini et al.,
2011), it is important for the initiator to understand the crowd’s motivation for
contributing funds to a crowdfunding project. Existing research shows that the

funders will tend to primarily participate in crowdfunding projects to support an
idea, back a social cause, be part of a community, or to receive a reward (Gerber &
Hui, 2013).
Given our focus on sustainable crowdfunding, we suggest that different types of
stakeholders engage in the crowdfunding process. Stakeholders’ engagement is important
on crowdfunding (Alexander, Jaakkola, & Hollebeek, 2018; Hollebeek, Jaakkola, &
Alexander, 2018), their contributions can impact the new sustainable venture’s bottom,
double, and/or triple bottom line performance (cf., Belz & Binder, 2015). Here, funders
adopt the role of lenders (Alexander et al., 2018; Hollebeek et al., 2018) when
microfinancing the emerging sustainable venture. In addition, we also argue that local
organizations may adopt the role of partner to the subsistence entrepreneur. These
organizations may co-finance a percentage of the required sum (e.g., via a loan), thereby
endorsing and legitimizing the new sustainable venture’s significance to the local com-
munity. Furthermore, local organizations may also receive the entrepreneur’s loan from
the crowdfunding organization and disburse it to the borrower or subsistence entrepreneur.
Crowdfunding Platforms as Hybrid Organizations
Crowdfunding platforms have a crucial role in the crowdfunding process. The
initiators launch their proposed crowdfunding projects on crowdfunding platforms,
after which crowd-based funders are able to fund these projects (Berndt, 2016;
Hossain & Oparaocha, 2017). Crowdfunding platforms not only facilitate the
crowdfunding process but also help in legitimizing and marketing these projects
(Brown et al., 2017). Most funders would not fund the projects, if they are contacted
directly by the initiator, as they might be skeptical about the initiator’s capacity,
skill, trustworthiness, or the project’s viability (Courtney et al., 2017). Thus,
crowdfunding platforms are a core enabler of the crowdfunding process (Breidbach,
Brodie, & Hollebeek, 2014). Crowdfunding platforms usually have their business
models and guidelines based on a traditional crowdfunding type. This means that
these platforms charge a fee on the money raised.
We posit that sustainable crowdfunding platforms constitute hybrid organizations
(Battilana & Dorado, 2010). This implies that sustainable crowdfunding platforms as
hybrid organizations pursue a combined social, environmental, and economic mis-
sion in an entrepreneurial manner (McMullen & Warnick, 2016). They can adopt
different forms including being (a) a non-for-profit with an earned income,
(b) for-profit with some hybrid elements, and (c) hybrid venture. This implies that
sustainable crowdfunding platforms adopt a social mission while pursuing particular
economic objectives (i.e., Chell et al., 2010).
56 N. Arshad et al.
Sustainable Microfinancing Approaches

This chapter primarily focuses on the lending model of crowdfunding, which centers on
microfinancing to alleviate poverty (Morduch, 1999) or peer-to-peer lending (Bruton
et al., 2015; Culkin, Murzacheva, & Davis, 2016). We argue that the microfinancing
model is favored by sustainable crowdfunding platforms, whose purpose is to provide
small loans preferably interest-free to alleviate poverty (Bruton et al., 2015). These
platforms do not charge any fee on the money raised, as their main purpose is to assist
bottom of the pyramid initiators by providing loans to sustainable ventures likely to
improve their standard of living, contribute to their communities, and sustain resources.
Sustainable crowdfunding platforms can be regarded to go hand in hand with sustain-
able entrepreneurs, whose aim is to bring about social change.
4 Case Illustration
According to Montini, over five billion US dollars was raised on crowdfunding

platforms as early as 2013. Recently, there has been an upsurge of sustainability-
based crowdfunding platforms, thereby differing from the traditional crowdfunding
approach that primarily supports commercial entrepreneurship (Cali & Mosakowski,
2016). Here, we draw on the case of Kiva to illustrate our proposed conceptual
framework. Kiva has been recognized as the largest microfinancing intermediary
employing social media to obtain financing directly from general public-based
individuals (Bruton et al., 2015). We documented our case by collecting publicly
available information about Kiva, including from the Kiva website (Kiva, 2019),
blogs, online articles, and Aaker & Chang’s business case (Aaker & Chang, 2010).
Kiva: A Sustainable Venture
Kiva is a San Francisco-based sustainable venture operating as a non-for-profit
organization since 2005. The couple Jessica Jackley and Matt Flannery were in
East Africa for a 3-month work assignment where they met Ugandan entrepreneurs
and wanted to share their stories with friends and family. This experience moved
them to start Kiva with the mission to “connect people through lending for poverty
alleviation” (Kiva, 2019). As a hybrid organization, Kiva balances a social and
economic mission and is structured as a non-for-profit organization.
Kiva considers that millions of vulnerable people around the globe do not have
access to traditional financing options, as they are considered risky or expensive by
these organizations. These people include smallholders, subsistence farmers, innova-
tive businesses, and students trying to access higher education and families in rural and
remote areas, to name a few. Acknowledging the potential of microcredit and public
financing (i.e., crowdfunding), Kiva has adopted an innovative approach that helps
underserved subsistence entrepreneurs by offering a low-cost service, flexible repay-
ment schedules, training, and other opportunities to connect these individuals to
broader markets, or by providing loans. The key requirement is that borrowers or
subsistence entrepreneurs are to be ineligible for financial assistance from traditional
financial service providers or that they aim to create social good through their business.
Currently, Kiva supports subsistence entrepreneurs across 80 countries on 5 continents.
Different Types of Stakeholders as Social Underwriters

Kiva’s ecosystem of stakeholders consists of subsistence entrepreneurs, lenders and
field partners. Kiva operates with the help of their network of field partners and
trustees. The field partners of Kiva are mainly microfinancing institutions; however,
schools, local NGOs, or social enterprises can also work as Kiva partners. These
field partners post subsistence entrepreneurs’ request for a loan to Kiva after
screening them and to help in disbursing loans and collecting repayments. In case
of field partner absence in a country, Kiva provides an opportunity to get loans
endorsed by their local trustees. To obtain a loan, borrowers or subsistence entre-
preneurs submit a loan request.
Kiva’s unique feature is that its borrowers or subsistence entrepreneurs go
through a social underwriting process. That is, after submitting the request, rather
than having their creditworthiness evaluated on their financial credit history, bor-
rowers are evaluated on their character. For this, borrowers are asked to raise some
portion of the loan from their community during a private fundraising period in the
first 15 days of their idea inception. If they succeed, they obtain social legitimacy and
Kiva goes for public funding to support the subsistence entrepreneur’s venture. Once
the entrepreneurs go through the social underwriting, then their request for
fundraising is launched via Kiva.
Kiva’s microfinancing approach is organized as follows: Kiva aggregates the
small loan funds from individuals and locates them as blocks with Kiva’s local field
partners, the microfinancing organizations. The local field partners are then in charge
of disbursing and managing the loans to the subsistence entrepreneurs. Once the loan
period is over, the subsistence entrepreneurs repay their loans. The lenders on Kiva
can lend as small as 25 dollars, and each dollar goes as a loan which the borrower can
use to start or grow their ventures, or get an education, accessing green energy or
alike. The loans on Kiva are 0% interest, risk tolerant, patient capital. After the
repayment of the loan, the lender either can lend money to another borrower or can
withdraw it. Kiva does not cut off the loan but affords its administrative cost through
clean donations and charity.
Financing Sustainable Ventures
Kiva focuses its mission not only on financial poverty but also on lacking access to
basic services, including clean water, sanitation, or sustainable energy at a domestic
level. To alleviate non-financial and financial poverty, Kiva offers green finance.
Green loans are provided to those borrowers who aim to have a venture that involves
the use of energy, agriculture, transport, and recycling that are environmentally
friendly. The money from the green loan can be used to finance solar panels, organic
fertilizers, high-efficiency stoves, drip irrigation systems, and biofuels. Different
stakeholders around the globe engage in a sustainable crowdfunding process by
integrating their resources, which as an outcome helps reduce poverty for the
borrower (or subsistence entrepreneur) and has a positive impact on the environ-
ment. The sustainable crowdfunding process also brings intrinsic value to the
supporters.
58 N. Arshad et al.
Green loans serve a triple bottom line-related purpose: they create environmental
improvements, provide investment opportunities for a better future, and offer bor-
rowers an opportunity to use environmentally friendly technology to improve
their business and personal lives. As a result, the benefits of green loans are dissem-
inated among borrowers and their communities and thus have a more substantial
impact.
5 Discussion
Based on the sustainable entrepreneurship literature (Muñoz & Cohen, 2017), we

propose that sustainable crowdfunding is driven by social and environmental issues.
As shown, Kiva’s sustainable crowdfunding process results in the creation of
sustainable ventures. Kiva built a hybrid organization that contributes to poverty
reduction as well as preserving the earth’s systems. Kiva understands that entrepre-
neurs require more advanced financing solutions in line with a sustainability orien-
tation. Thus, their crowdfunding platform helps mobilize required resources and
addresses specific social and environmental problems (e.g., see also Arshad, 2017;
Belleflamme et al., 2014; Cali & Mosakowski 2016). Further, Kiva specifically
targets subsistence entrepreneurs with green loans. These entrepreneurs created
solutions capable of protecting the environment and improving the well-being of
individuals in their local communities. Subsistence entrepreneurs developed solu-
tions to finance solar panels, organic fertilizers, high-efficiency stoves, drip irrigation
systems, and biofuels. With the actions of subsistence entrepreneurs, Kiva’s foun-
ders combined their social and economic motivations. Kiva thus built a
crowdfunding platform that worked for the benefit of varied stakeholders by com-
bining their resources (Vargo & Lusch, 2016).
Our case also showed the existence of multiple stakeholders’ engagement (Alex-
ander et al., 2018; Hollebeek et al., 2018) in the sustainable crowdfunding process as
underwriters. The stakeholders shared specific resources (Hollebeek, Srivastava, &
Chen, 2016; McMullen & Warnick, 2016) in the crowdfunding process. When Kiva
targets people living at the bottom of the pyramid, this acquires social significance
since it encourages the poor to become subsistence entrepreneurs. The poor as
subsistence entrepreneurs generated approaches and practices for their customers
and communities that had a relevant sustainability orientation. Kiva helped these
persons recover and/or sustain their dignity by becoming entrepreneurs (i.e., see for
example Hahn, 2012). Since the subsistence entrepreneurs’ venture obtained a
portion of their financial support from within their own community, the community
vouched for the relevance of the sustainable venture and granted the subsistence
entrepreneur’s credibility. Moreover, the inclusion of a local field partner in the loan
disbursement created legitimacy to Kiva and the emerging new sustainable venture.
Our case also showed that the link between complex social, environmental, and
economic problems is best addressed through sustainable crowdfunding processes.
That is, Kiva’s crowdfunding process was designed to incorporate multiple
stakeholder collaboration (e.g., subsistence entrepreneurs, local financial organiza-

tions, communities). This collaboration was central to reshaping business practices
and promoting social and environmental change, which was beneficial for all
stakeholders involved.
6 Conclusions
Only a few studies have examined how crowdfunding considers the balance between
its related social, environmental, and economic aspects. This chapter developed a
conceptual framework to better understand sustainable crowdfunding processes. The
proposed framework comprises subsistence entrepreneurs as crowdfunding initia-
tors, varied stakeholder types, crowdfunding platforms as hybrid organizations, and
a sustainable microfinancing approach. This framework was used to present the case
illustration of Kiva.
Our analyses combined crowdfunding literature (Cali & Mosakowski, 2016) with
literature on sustainable entrepreneurship (Muñoz & Cohen, 2017), thereby offering
an enhanced understanding of sustainable crowdfunding’s contribution to subsis-
tence entrepreneurship and poverty alleviation.
Our conceptual framework is expected to be useful for further research. First,
when addressing subsistence entrepreneurs as crowdfunding initiators, future study
is invited to examine how crowdfunding initiators’ social, environmental, and
economic motivations can inspire the development of hybrid organizations. Our
case also shared insights of Kiva a hybrid organization in the form of a non-for-profit
organization. Other types of hybrid organizations may lead to alternative novel
solutions and processes through their crowdfunding platforms.
Second, by understanding sustainable crowdfunder-entrepreneurs’ motivations,
we offer insights into their linkage to different resource types, activities, and
processes that were coined to support subsistence entrepreneurs. Future research
can examine how different resources are combined and employed to perform
activities in the sustainable crowdfunding process.
Third, sustainable crowdfunding platforms are an important element in the
development of subsistence entrepreneurship aiming to alleviate poverty. Further
research can thus investigate how sustainable crowdfunding provides subsistence
entrepreneurs and the crowd an opportunity to access resources and generate social,
environmental, and economic outcomes.
Based on our analyses, we conclude that compared to traditional crowdfunding,
our suggested framework provides a novel perspective on sustainable crowdfunding
that can help examine poverty alleviation and identify nuances of activities and
processes.
60 N. Arshad et al.
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A Framework for a Smart City Design:
Digital Transformation in the Helsinki
Smart City
Mervi Hämäläinen
Abstract Recently, there has been substantial interest in the concept of a smart city,
as it has been a viable solution to the dilemmas created by the urbanization of cities.
Digital technologies—such as Internet-of-Things, artificial intelligence, big data,
and geospatial technologies—are closely associated with the concept of a smart city.
By means of modern digital technologies, cities aim to optimize their performance
and services. Further, cities actively endorse modern digital technologies to foster
digitalization and the emergence of data-based innovations and a knowledge econ-
omy. In this paper, a framework for a smart city design is presented. The framework
considers a smart city from the perspective of four dimensions—strategy, techno-
logy, governance, and stakeholders. The framework is complemented with
sub-dimensions, and the purpose of this framework is to strengthen the governance
and sustainability of smart city initiatives. Further, the proposed framework is
applied to the Helsinki smart city, the capital of Finland. The objective is to analyse
the Helsinki smart city through dimensions presented in the framework and learn
how the city of Helsinki governs and implements its smart city initiatives.
1 Introduction
Cities are lucrative areas for economic growth, as 80% of the current global GDP is
produced in cities (Dobbs et al., 2011). This trend is likely to continue as urban areas
already provide homes to over half of the world’s population, and the number is
estimated to increase by 66% by 2050. In addition to economic wealth and prosper-
ity, urban areas offer more versatile job opportunities and alternatives for advanced
education. Further, urban areas also provide conducive environments for new
innovations and businesses. The reverse side of urbanization and improved prosper-
ity is an increased volume of consumption, waste, and pollution. According to
United Nations Environment Programme (2013), over 75% of the world’s energy
M. Hämäläinen (*)
Faculty of Information Technology, University of Jyvaskyla, Jyvaskyla, Finland
e-mail: Mervi.a.hamalainen@jyu.fi

64 M. Hämäläinen
and material flows are consumed in cities. Along with rapid urbanization, cities are
likely to consume even more natural and non-renewable materials, as urbanization
sets demands for the construction of new residential areas and improving city
infrastructures and services. As an example, cities must renew and build transporta-
tion, energy, and sewer network infrastructures and systems, as well as build new
premises for hospitals, schools, and day care centres to guarantee fulfilment of their
mandatory functions. It is also worth noting that increased population itself con-
sumes more natural and non-renewable resources to satisfy basic necessities and
accomplish the desires and purposes of individual human life. It is emphasized that
local city governments place strategic focus on sustainable and resource-efficient
urban development. It is highlighted that cities must design denser urban areas and
invest in modern low-carbon infrastructure solutions. Further, it is identified that the
shift from traditional carbon-intensive infrastructure to low-carbon infrastructure
alternatives requires a 5% increase only in infrastructure investments in cities.
Thus, cities must have improved abilities to effectively manage resource flows and
enhance resource efficiency by focusing on smart land use and investing in modern
urban digital infrastructures (IRP, 2018).
The concept of a smart city has been a popular phenomenon, and multiple cities
worldwide have adopted smart city practices in urban development. Further, infor-
mation and communication technologies (ICTs) and novel digital technologies such
as Internet-of-Things (IoT), artificial intelligence (AI), and data analytics play an
integral role in the implementation of the concept of a smart city. The European
Union (EU) defines a smart city as ‘a place where traditional networks and services
are made more efficient with the use of digital and telecommunication technologies
for the benefit of its inhabitants and business’. Alternatively, a smart city is defined
as ‘a city, in which ICT is merged with traditional infrastructures, coordinated and
integrated using new digital technologies’ (Batty et al., 2012). Caragliu, Del Bo, and
Nijkamp (2011) define a city as smart ‘when investments in human and social capital
and traditional (transport) and modern ICT communication infrastructure fuel sus-
tainable economic growth and a high quality of life, with a wise management of
natural resources, through participatory government’. The ITU-T Focus group
(2015) and ISO (2015) summarize that a smart city is an innovative city that uses
ICTs to improve the quality of life of residents, thereby enhancing the efficiency of
urban operations and services and improving sustainable socio-economic and envi-
ronmental outcomes by responding to the challenges of urbanization.
The objectives of smart city initiatives and the use of digital technologies enable
the streamlining of city processes and not only make city services more accessible
for residents but also enhance the resource management and efficiency within the
city (Aguilera, Peña, Belmonte, & López-de-Ipiña, 2017). Further, smart city prac-
tices aim to reduce the costs of city services and improve the return on investments
(Vilajosana et al., 2013), accelerate economic growth, competitiveness, and trans-
parency, as well as stakeholder participation in the cities (Abella, Ortiz-De-Urbina-
Criado, & De-Pablos-Heredero, 2017; Perez, Poncela, Moreno-Roldan, & Memon,
2015; Yovanof & Hazapis, 2009). New digital technologies applied in ‘soft’ city
domains such as education, health and social care, and city administration (Petersen,
Concilio, & Oliveira, 2015) aim to foster knowledge creation and enable the
A Framework for a Smart City Design: Digital Transformation in the. . . 65
emergence of new knowledge-based businesses and digital innovations (Baccarne,

Mechant, & Schuurman, 2014; Li, Nucciarelli, Roden, & Graham, 2016). Smart city
initiatives also aim to enhance social inclusion and prevent inequality among the
citizens.
Deploying novel digital technologies across an organization’s activities is a long-
term process that impacts an organization’s structures, capabilities, and existing IT
infrastructures and systems (Davenport & Westerman, 2018). Thus, the design,
management, and governance of digitalized and interconnected smart city operations
and ecosystems are not a trivial task. Research has identified that numerous smart
city initiatives tend to fade away when project funding is used (Diaconita, Bologa, &
Bologa, 2018; Hämäläinen & Tyrväinen, 2016). The objective of this paper is to
shed light on the elements that are relevant for robust digital transformation,
ecosystem creation, and orchestration in a smart city. In order to achieve this
objective, this paper presents a smart city design framework, which is derived
from prior literature in the area of smart cities and smart city ecosystems and is
adapted from the smart city conceptual model (SCCM) presented by Hämäläinen
and Tyrväinen (2018). The smart city design framework is founded on four dimen-
sions—strategy, technology, governance, and stakeholders—and is complemented
by sub-dimensions. The smart city framework aims to improve the process of digital
transformation within the city and assist smart city stakeholders in the private and
public sectors to clarify complex smart city governance, ownership, orchestration,
and decision-making procedures. The framework also highlights the importance of
technological compatibility, appropriate skills, and resource allocation in smart cities
in order to ensure robust and well-grounded smart city implementation. In this paper,
the smart city design framework (Hämäläinen & Tyrväinen, 2018) is applied to
analyse the smart city of Helsinki in Finland through the above-mentioned four
dimensions and learn about smart city practices and implementation in Helsinki.
The remainder of this paper is structured in the following manner: Section 2
presents the principles of the digital transformation within organizations. Section 3
delves into the conceptual foundation of the smart city design framework, and Sect.
4 covers the research methodology. Section 5 discusses the specific case of the
Helsinki smart city and evaluates smart city initiatives in Helsinki through the smart
city framework. Section 6 summarizes the findings, and Sect. 7 concludes the paper.
2 Digital Transformation
Digital transformation is perceived as a paradigm shift (Berman & Marshall, 2014)

resulting in ‘changes that the digital technology causes or influences in all aspects of
human life’ (Stolterman & Fors, 2004). Digital transformation is also understood as
‘technology-induced change’ (Legner et al., 2017) that may have radical or disrup-
tive features (Morakanyane, Grace, & O’Reilly, 2017) that revolutionize prevailing
practices by disrupting the trajectories of established businesses and change the
structures of industries and value networks (Au, Tan, Leong, & Ge, 2018; Gimpel
et al., 2018; Weill & Woerner, 2015). Digital technology evolution is all the more
66 M. Hämäläinen
embedded in social areas (Legner et al., 2017; Tilson, Lyytinen, & Sørensen, 2010)
and is driven by individual persons (Legner et al., 2017), which makes digital
transformation with digital technologies a complex and uncertain process (Hess,
Matt, Benlian, & Wiesböck, 2016; Sahu, Deng, & Mollah, 2018). Since digital
technologies have ubiquitous impacts on organizations and industry functions, it is
emphasized that a strategic focus must be placed on how to conduct long-term
digital transformation (Chanias & Hess, 2016; Henriette, Feki, & Boughzala, 2016;
Hess et al., 2016; Legner et al., 2017; Matt, Hess, & Benlian, 2015; Ross, Beath, &
Sebastian, 2017; Sebastian et al., 2017).
IT strategies are traditionally developed to manage IT infrastructures, tools,
applications, and IT services (Gerster, 2017; Hess et al., 2016) that support an
organization’s functions and processes (Teubner, 2013). Differentiated from IT
strategy, it is suggested that a specific digital strategy must be created that assists
organizations to reflect on business perspectives and consider the resources, capa-
bilities (technical and human), and financial aspects that are required in digital
transformation (Bharadwaj, El Sawy, Pavlou, & Venkatraman, 2013; Matt et al.,
2015; Mithas, Tafti, & Mitchell, 2013; Ross et al., 2016). Digital strategy evaluates
the influence of digital technologies on the structures and process of organizations
and observes possibilities for new business models and value creation among
existing and new stakeholders (Bharadwaj et al., 2013; Hess et al., 2016; Legner
et al., 2017; Matt et al., 2015; Morakanyane et al., 2017; Prince, 2017; Rauch,
Wenzel, & Wagner, 2016; Ross et al., 2016; Sebastian et al., 2017; Singh & Hess,
2017). Thus, digital strategy is a holistic view for top management to evaluate,
manage, and govern the digital transformation journey (Chanias & Hess, 2016).
3 Framework for a Smart City Design
Along with heterogeneous stakeholder groups from private and public sectors, the
city must perform its statutory tasks and activities around the clock without inter-
ruptions. A holistic overview of how a city transforms itself to a smart city and how
digital technologies are applied in diverse city domains is needed. In the following
account, a framework adopted from Hämäläinen and Tyrväinen (2018) is presented
(Fig. 1). The framework contains four central dimensions—strategy, technology,
governance, stakeholder—and other sub-dimensions. The strategy dimension con-
siders aspects of a smart city’s vision, strategy, and capabilities. The technology
dimension discusses the digital technologies applied in smart cities, as well as the
data, technology experimentation, security, and privacy issues. Vertical and hori-
zontal scopes conclude the technology dimension. The governance dimension
describes the orchestration of the smart city stakeholders and ecosystems and
considers funding and metrics to evaluate smart city performance. Finally, the
stakeholder dimension elaborates on stakeholders and stakeholder value in smart
city ecosystems.
3.1 Strategy
Cities operate under a constantly evolving environment, which puts pressure on the
city’s governance and management. The strategy for a digital or smart city identifies
the changes that occur in both national and global political, legislative, and economic
landscapes and also considers the impact of social and technological changes. As
contemporary urban development relies on modern digital technologies (Lu, Tian,
Liu, & Zhang, 2015), smart city vision and strategy envisions the future state of the
city by means of digital technologies. Smart city strategy sets strategic guidelines on
how a city must develop and integrates digital technologies to diverse urban infra-
structures in order to enhance sustainable city design and performance (Hämäläinen
& Tyrväinen, 2018). From a broader perspective, the smart city strategy also
considers the impacts of climate change and evaluates the manner in which digital
technologies can be employed to enhance material usage and reduce emissions
within the city.
3.1.1 Capabilities
Smart city strategy considers the goals, resources, and capabilities required for the
successful implementation of creating a smart city (Scuotto, Ferraris, & Bresciani,
2016; Tillie & van der Heijden, 2016). The resources and capabilities of a smart city
refer to both technical (Sarma & Sunny, 2017; Schleicher, Vögler, Inzinger, &
Dustdar, 2017) and human capabilities like knowledge to manage smart city design
and orchestrate innovative data-based smart city ecosystems that create value for its
stakeholders (Abella et al., 2017; Baccarne et al., 2014; Komninos, 2011; Komninos,
Pallot, & Schaffers, 2013; Scuotto et al., 2016; Tillie & van der Heijden, 2016).
3.2 Technology
3.2.1 Digital Technologies
Emerging digital technologies such as IoT, AI, cloud computing, big data, and data
analytics are rapidly expanding in urban areas, thereby creating multifaceted digital
and data ecosystems (Aguilera et al., 2017). Schleicher et al. (2017) call smart cities
‘data behemoths’. Rapidly increasing online city services, ICT connected city
infrastructures, and fast adoption of internet-connected technologies like sensors,
video surveillance, and lightning systems are applied in diverse city infrastructures.
Applying modern smart city technologies to diverse smart city infrastructures helps
to accumulate exponentially historical and real-time data from heterogeneous city
domains and activities (Rathore, Son, Ahmad, & Paul, 2018; Schleicher et al., 2017).
Further, positive experiences from cloud computing have encouraged cities to invest
on ‘pay-as-you-go’ cloud computing solutions. The collection of cloud computing
68 M. Hämäläinen
components such as infrastructure-, platform-, and software-as-a-service provide

new dimensions for more affordable, scalable, and easily available ICT service
provisions for cities. One of the main characteristics for cloud-based service pro-
visions is that the user is charged only when using the platform or service
(Hernandez, Larios, Avalos, & Silva-Lepe, 2016; Petrolo, Loscri, & Mitton,
2017). Moreover, scalability and cost efficiency are the undoubted advantages
cloud computing provides for cities.
3.2.2 Data
In recent years, cities have released city data sets such as geographical and location
information for public use. Open city data are used not only by the city’s government
but also by other stakeholders such as citizens, application developers, and third-
party organizations that exploit open city data for personal or public purposes
(Aguilera et al., 2017). However, legislation like the General Data Protection
Regulation (GDPR) in Europe prohibits and prevents cities from publishing data
that is sensitive and critical from privacy and safety perspectives. High volumes and
velocity of the city data add demands related to data management. Capabilities to
process and analyse the city data are needed so that the data are useful for actors in
smart city ecosystems (Khan, Babar, Ahmed, Shah, & Han, 2017; Rathore et al.,
2018). Along with human capabilities, data engineers, and scientists, technologies
such as data analytics and AI speed up data processing and enhance data integrity
and accuracy (Srivastava, Bisht, & Narayan, 2017). In the smart city settings, AI has
been used to analyse data from video surveillance cameras and drones, which keep
an eye on city environments and surroundings (Srivastava et al., 2017).
3.2.3 Technology Experimentations in Smart Cities
The International Resource Panel (IRP, 2018) emphasizes that cities must develop
and apply urban experimentation policies. Cities certainly have environments that
offer multifaceted domains for diverse smart city technology experimentations.
Technology tests and experimentation platforms (TEP) such as testbeds, innovation
and living labs, and prototyping platforms have been dominant facilities for smart
city technology and service development and experimentation (Ballon, Pierson, &
Delaere, 2005; Schaffers et al., 2011). Heterogeneous urban domains offer numerous
advantages for technology experimentations. For smart city practitioners, real-world
city-level experiments not only enable iterative technology and service development
but also provide access to collection of data from real users. During smart city
experiments, developers receive valuable information on product usability and
developers may simultaneously validate feasibility and user acceptance of smart
city technologies and services (Hämäläinen & Tyrväinen, 2016). Ten relevant
dimensions for establishing robust smart city technology experimentation platforms
have been identified. These dimensions are openness, real-world experiments, user/
public involvement, vertical and horizontal scope, scalability, sustainable value

creation, continuity, IoT/data heterogeneity, and system architecture design. These
dimensions prove to strengthen the emergence of the smart city ecosystem and the
duration of smart city TEPs. (Hämäläinen & Tyrväinen, 2016).
3.2.4 Security and Privacy
Information systems are applied to almost all fields in our societies and emerging
digital technologies are an integral part of smart city initiatives. A disadvantage of
the ubiquitous cyber-physical systems is that there is an increase in the potential for
security and privacy vulnerabilities. The term cyber security is defined as ‘the
protection of cyberspace itself, electronic information, ICTs that support cyberspace,
and the users of cyberspace in their personal, societal and national capacity, includ-
ing any of their interests, either tangible or intangible, that are vulnerable to attacks
originating in cyberspace’ (Von Solms & Van Niekerk, 2013). However, the more
the frequency of application of digital technologies in smart city infrastructure, the
greater the potential for vulnerabilities and data breaches. Thus, security and privacy
themes must be placed at the top level in smart city development.
3.2.5 Vertical and Horizontal Scope
Many smart city initiatives focus on improving certain city verticals such as trans-
portation or energy. Emphasizing certain verticals in smart cities may influence the
choice of employed technologies and standards that best support the needs and
requirements of a particular vertical industry (Hämäläinen & Tyrväinen, 2016).
According to Schleicher et al. (2017), city data are isolated and restricted to exist
in silos. If smart city development focuses only on a particular vertical, it may
prevent more extensive technology and data adoption and exploitation in smart cities
(Hämäläinen & Tyrväinen, 2016), thereby resulting in the emergence of data silos.
Schleicher et al. (2017) emphasize the prevention of the emergence of data silos in
smart cities by enabling ubiquitous access to heterogeneous and interconnected city
data. Horizontality in the context of a smart city context implies how a wider set of
data from multifaceted city domains and activities are collected, combined, and
utilized. The horizontal approach contributes to a broader set of city data and
expands the possibilities of creating new services based on integrated data in smart
cities (Hämäläinen & Tyrväinen, 2016).
3.3 Governance
Growing markets in a smart city attract various organizations and stakeholders from
private and public sectors. Smart city governance could be defined as ‘the sum of the
70 M. Hämäläinen
many ways individuals and institutions, public and private, manage their common
affairs’ (Commission on Global Governance, 1995). Smart city governance consists
of multifaceted organizations, processes, and stakeholder relations; it also deals with
legislations and policies (Ruhlandt, 2018). Moreover, smart city governance is a
body that envisions the future state of the smart city, provides strategic leadership
and resources, ensures dialogue and decision-making in smart city ecosystems, and
assesses the performance of a smart city and the quality of its citizens’ lives
(Baccarne et al., 2014; Recupero et al., 2016; Tillie & van der Heijden, 2016;
Veeckman & van deer Graaf, 2015). Further, smart city governance considers
long-term financial needs (Vilajosana et al., 2013) to ensure robust and long horizon
smart city implementation (Komninos, Pallot, & Schaffers, 2013) as well as to
reduce costs and improve resource efficiency in a city (Díaz-Díaz, Muñoz, &
Pérez-González, 2017).
3.3.1 Funding and Metrics
Major (upfront) investments are needed to successfully deliver smart city initiatives
(Díaz-Díaz et al., 2017; Vilajosana et al., 2013). In European settings, digital urban
development is one of the priority agendas and smart city funding is allocated
through the EU to improve infrastructure—such as transport and water networks
and waste management—as well as to improve the energy efficiency of buildings
(European Commission). Globally, international organizations (e.g. United Nations
Industrial Development Organization, UNIDO) provide funding for sustainable
environmental development, such as green industries, sanitation, and waste man-
agement (Adapa, 2018).
Little is known about actual metrics to evaluate smart city performance. However,
organizations such as the International Organization for Standardization (ISO),
British Standards Institutions (BSI), and International Telecommunication Union
(ITU) have developed guidelines and key performance indicators (KPIs) to plan and
measure smart city performance. The aim of the standards and harmonized metrics is
to clarify the complex city processes, urban planning, and needs of multifaceted
stakeholder groups. Smart city standards assist cities to compare procurement pro-
posals and reduce barriers to system integration in complex city organization and
infrastructures. Further, these standards provide practical step-by-step guides and
function as valuable tools for smart city practitioners and stakeholders to transit a
city towards becoming a digitized smart city (BSI, ISO, ITU).
3.4 Stakeholders
Smart cities are described as collaborative innovation ecosystems (Komninos et al.,

2013; Komninos & Tsarchopoulos, 2013) that generate new opportunities for start-
ups, multinationals, academia, and cities themselves. Public organizations like cities
may collaborate with private companies to develop novel city services that optimize
city activities, reduce costs, and save scarce city resources. For enterprises, multi-
faceted smart city domains provide an environment to experiment and employ new
technologies in real-world settings and discover new business and value-creation
opportunities in the context of the smart city context (Hämäläinen & Tyrväinen,
2018; Sarma & Sunny, 2017). Thus far, public–industry partnership has dominated
smart city initiatives; however, lately, integrating citizens and civil society in the
development of a smart city has been emphasized. Quadruple helix (public-private-
people) collaboration pursued to enhance social inclusion as citizens is seen to lead
to the emergence of co-creators and social innovators (Abella et al., 2017; Komninos
et al., 2013; Mayangsari & Novani, 2015; Petersen et al., 2015) in cities. Including
citizens in smart city ecosystems is justified by the perception that citizens may own
specific knowledge and earn social capital as part of their livelihood (Lea et al.,
2015; Mayangsari & Novani, 2015), which may benefit a community’s living
conditions. Further, quadruple helix collaborations further enhance technology
diffusion and reduce technology resistance in cities.
3.4.1 Stakeholder Value
Even though the concept of a smart city has been a popular phenomenon, numerous
smart city projects tend to decline once project funding is obtained (Diaconita et al.,
2018; Hamalainen and Tyrvainen, 2016). It must be noted that smart city develop-
ment is a long-term process, which requires capabilities and resources to generate
added value for the stakeholders involved in smart city ecosystems (Gagliardi et al.,
2017; Hamalainen and Tyrvainen, 2016). Competences to orchestrate and manage
complex technical, human, and business ecosystems are needed to transform a
conventional city from the stage of being a smart city pilot to one of mature smart
city development. A clear understanding of the actors’ roles and responsibilities in
the smart city ecosystem has positive influences on ecosystem health and the
experienced value of stakeholders (Autio & Thomas, 2014; Korpela, Ritala, Vilko,
& Hallikas, 2013; Manikas, 2016). This is also true for smart city ecosystems. The
role of an ecosystem orchestrator is to facilitate the ecosystem, its resources, actors,
and objectives. A smart city orchestrator ensures a harmonious decision-making
process and interaction (Manikas, 2016) so that the objectives of a smart city are
achieved and value-added smart city applications and solutions are created in such a
city (Abella et al., 2017; Adapa, 2018; Bifulco, Tregua, & Amitrano, 2017;
Hämäläinen & Tyrväinen, 2016).
72 M. Hämäläinen
4 Methodology
The foundation for the smart city framework presented in this paper originates from
the prior work presented by Hämäläinen and Tyrväinen (2018). The framework was
applied to the Helsinki smart city. Data for empirical research were collected by
interviewing persons and stakeholders involved in the development of the Helsinki
smart city (Table 1). The semi-structured interview protocol was employed in
interviews, which provided flexibility and the possibility for a deeper understanding
of the development of Helsinki. Interviewee 1 represented the Helsinki environmen-
tal protection unit and was in charge of Helsinki city’s energy and climate statistical
data. Interviewee 2, Deputy CEO, represented the Smart Kalasatama project at
Forum Virium Ltd. Interviewees 3 and 4 represented Helsinki Region Infoshare,
an organization that releases Helsinki city’s open data. Interviewee 5 was a com-
munity manager at Smart Kalasatama project, who was responsible of stakeholder
relations. Interviewees 6 and 7 represented residents of the Smart Kalasatama
district. All interviews were audio recorded and transcribed after the interviews.
Table 1 Empirical data collection

Data collection
Interview Role Unit Date
Interviewee #1 Environmental Helsinki city 23.4.2018
planning
Interviewee #2 Deputy CEO Forum Virium 20.4.2018
Interviewee #3 and 4 Project manager Open Data Helsinki city 26.3.2018
and designer
Interviewee #5 Community Smart Kalasatama 17.5.2017
manager
Interviewee #6 Resident 1 Smart Kalasatama 17.5.2017
Interviewee #7 Resident 2 Smart Kalasatama 17.5.2017
Workshop Place Organizer Date
Open Data Day 2018 Helsinki Open Data Finland 1.3.2018
City Business—Cities Oulu City of Oulu 6.6.2018
as platforms
MyData 2018 Helsinki MyData 29–31.8.2018
Public material Publisher
Helsinki city strategy Helsinki city https://www.hel.fi 2017–2021
ICT Policy Helsinki city https://www.hel.fi 2015–2017
Web page Helsinki Region https://hri.fi/fi/
Infoshare
Web page Forum Virium https://forumvirium.fi/
Agile pilot cookbook Smart Kalasatama
Web page Smart Kalasatama https://fiksukalasatama.fi/en/
Web page Stadin ilmasto https://www.stadinilm.asto.fi/
Web page 6-aika smart city https://citybusiness.fi/
project materiaalit-ja-julkaisut/
Additional data were collected by attending workshops related to smart cities and
seminars in Finland, as well as reviewing official Helsinki city reports, documents,
and websites. Data were collected during the period May 2017–February 2019.
5 The Helsinki Smart City in Finland
The capital of Finland, Helsinki, has over 600,000 inhabitants. The total area of the
city is 719 km2, of which almost 70% is sea (502 km2) and 30% is land (217 km2).
The population density in Helsinki is almost 3000 inhabitants per km2. Smart
Kalasatama is a strategic smart city development district in Helsinki. It is a new
residential area, which is expected to provide homes for approximately 25,000
inhabitants by 2040. As a strategic smart city development area, Smart Kalasatama
provides facilities for agile smart city pilots with a multi-stakeholder collaboration.
The development of Smart Kalasatama is facilitated by Forum Virium Helsinki
(FVH) Ltd., an innovation business unit owned by Helsinki city. Further, Helsinki
is part of the ‘The Six City Strategy’ project, which delivers smart city pilot projects
in fields such as smart mobility, open data, health, and circular economy in the six
largest cities (Helsinki, Vantaa, Espoo, Turku, Tampere, and Oulu) in Finland. ‘The
Six City Strategy’ project was selected as Finland’s flagship project for the EU
Cohesion Policy’s 30th anniversary year. In addition, Helsinki has achieved podium
places in several smart city competitions. Helsinki was elected as the number one
city at the European Capital of Smart Tourism 2019 competition and the best city for
providing digital Mobility-as-a-Service (MaaS) services (Forum Virium Helsinki,
2018; Helsinki City, 2018; 6Aika Project, 2018). In the following account, the smart
city framework presented in Fig. 1 is applied to the Helsinki smart city.
Fig. 1 Framework for smart city design (adopted from Hämäläinen & Tyrväinen, 2018)
74 M. Hämäläinen
5.1 Strategy of the Helsinki Smart City
The updated city strategy for the period 2017–2021 proclaims Helsinki to be ‘The
Most Functional City in the World’. Helsinki commits to take concrete actions to
produce high-quality city services with strong citizen inclusion. The city aims to be a
resident- and user-oriented city, where people may live in a safe and trustworthy
environment. Trust, safety, and social coherence are elements that create a compet-
itive edge for Helsinki (Helsinki City Strategy, 2018). However, as expressed by
interviewee 2, Helsinki city does not have a specific smart city or digital strategy,
but the goal of Helsinki is to be the best city in the world to benefit digitalization
(Helsinki City Strategy, 2018). Interviewee 2 indicated that in the future, the concept
of smart city will be ‘a new normal’. The current Helsinki city strategy includes
numerous smart city elements and development areas. As an example, Helsinki aims
to develop digital solutions that are easy to follow and engage in regardless of who
has created the digital services (Helsinki City Strategy, 2018).
5.1.1 Capabilities
Based on the city strategy, Helsinki aims to improve its personnel’s capabilities in
emerging digital technologies, such as AI and robotics, by providing specific
training and education for digital technologies. A specific Chief Digital Officer
position was established to ensure that digital transformation is actualized in diverse
city domains. Helsinki aims to digitalize city services so that they are available
around the clock. A new data-based concept of ‘smart education’ is set to be
developed around education services. The smart education concept utilizes data
analytics to provide more individual learning design and experiences. The objective
of the smart education concept is to further enhance the learning processes and offer
education services, regardless of time and space, for students of all ages in Helsinki
(Helsinki City Strategy, 2018).
5.2 Technology: Digital Technologies
The ICT and data administration department of Helsinki city operates under Eco-
nomic Development and Planning Division. The ICT department is responsible for
the steering and development of compatible digital technologies in diverse city
domains. The department is also responsible for city-wide enterprise architecture
and ICT infrastructure design and implementation. Helsinki targets to provide
low-threshold technology innovation and experimentation services and enable
digitalized data availability for external stakeholders. The city actively experiments
and benefits from data analytics, AI, sensor, and IoT technologies in multiple city
domains (Helsinki ICT Policy).
5.2.1 Data
The data according to Interviewee 1 play a central role in smart city development.
The key issues in this regard are the content of the data, how information is
distributed to relevant target groups, and how information is utilized in decision-
making processes. As an example, the environmental protection unit of Helsinki
initiated multiple projects to release existing data series for public use. Based on
statistical environmental data series, a 3D model, Helsinki Energy and Climate
Atlas, was created to bring transparency to the energy consumption of city buildings.
A visual tool helps a city to assess and analyse energy consumption in diverse city
buildings and, thus, react to energy leakages and enhance energy efficiency, partic-
ularly in old buildings.
The concept of open data was introduced to the Helsinki administration in the
year 2009. Subsequently, a specific organization, Helsinki Region Infoshare, was
established to organize and manage open data initiatives in Helsinki and its sur-
rounding cities. In European settings, the Helsinki regional public libraries were the
first ones to publish raw data from over 680,000 works for public use in 2010. The
Helsinki city strategy states that Helsinki will be a leading city in terms of releasing
and utilizing public open data. Currently, Helsinki and its regional cities have
published almost 650 data sets and opened almost 120 interfaces for external
stakeholders. Helsinki Regional Transportation, Service Map Application Program-
ming Interfaces (APIs) and geographical data—such as maps and postcodes—have
been the most popular interfaces and data sets that are applied by open data users.
Although Helsinki city has increasingly begun to release public data sets, not all of
its city organizations publish their data for public use. Interviewees 3 and 4 men-
tioned that city organizations such as social and health services have legitimate
grounds that prevent extensive data sharing with the public. For example, a recently
published General Data Protection Regulation (GDPR) in Europe tightens the
protection of personal data and limits city organizations to collect, share, and use
data that contain personal information such as name, address, and social security
number. Other factors such as prejudice, deficiency in capabilities, and lack of time
and money were mentioned as reasons that prevent other city organizations to
implement open data initiatives. However, Interviewees 3 and 4 also mentioned
that strategic focus on open data, successful open data projects, and practices and
improved ICT solutions have lowered the prejudices and resistance towards open
data. Further, the interviewees indicated that the open data concept must be pro-
moted more actively in diverse city domains and that, currently, sufficient resources
are not reserved for these purposes.
5.2.2 Technology Experimentations
Helsinki city has established an independent company, Forum Virium Helsinki

(FVH) Ltd., for developing new digital innovations and city services in collaboration
76 M. Hämäläinen
with private companies, other public organizations, and citizens. City-level strategy
and FVH emphasize that Helsinki will be an attractive and leading city for agile
smart city technology experimentations, thereby stimulating new business activities
in the city. A user-driven approach and agile smart city development are FVH’s key
drivers. Currently, FVH runs digital technology development and experimentations
at Smart Kalasatama as well as at other city districts. During the years 2015–2018,
FVH has organized 21 agile smart city technology and service experimentations in
Kalasatama. Each pilot lasts 6 months and pilots are run twice a year. FVH procures
pilots with a maximum of 8000 euros. The smart city pilot themes have included, for
example, smart-mobility services, effective waste management, food waste reduc-
tion, and co-creation of local well-being services. FVH’s slogan ‘fail fast, learn fast’
indicates that stakeholders may test smart city solutions in a real-world city envi-
ronment with actual users and simultaneously learn if the smart city solution is viable
on a larger scale. Smart Kalasatama agile pilots and technology experimentations
have raised interest not only in Helsinki but also in other cities in Finland and
Europe. Due to high interest displayed towards agile urban development through
technology pilots, a cookbook for Agile Piloting was published in the spring of
2018. The Smart Kalasatama cookbook presents the best practices and lessons
learned in Kalasatama smart city pilots. Smart Kalasatama emphasizes maximizing
learning and integrating diverse stakeholder groups for user-driven smart city devel-
opment (Smart Kalasatama).
5.2.3 Vertical and Horizontal Scope
Numerous smart city initiatives and experimentations in Helsinki have concerned

mobility, environment, and circular economy development. Helsinki has actively
developed functional smart traffic systems to reduce emissions and created advan-
tages for modern technologies and sharing economy principles to modernize urban
mobility (Helsinki city strategy). Mobility-as-a-service is one of the most extensive
efforts that have taken place in Helsinki. As a result of mobility and transportation
development, new data-driven innovations and services have emerged. An applica-
tion called ‘Whim’ aggregates both public and private transportation services in one
place, thereby offering users services such as city bikes, taxi, and private car services
at an affordable monthly fee. Whim liberates citizens from car ownership, thereby
making urban life more flexible and resource-efficient. Another digital service
created by Helsinki city is a digital platform called ‘Service Map’. ‘Service Map’
encompasses almost all city services, thereby making it easier for citizens to browse
and search city services through one digital platform. Both Whim and Service Map
platforms utilize open data sets published on HRI’s open data platform. Helsinki’s
ICT department develops ICT policies that support the implementation of the city
strategy. Further, the ICT department harmonizes ICT systems so that city services
are compatible and digital data content and interfaces are easily available for city
stakeholders. The city actively enhances the emergence of open ICT ecosystems by
offering fair and equal opportunities for third parties to develop new digital city
services (Interviewees 3 and 4, 2018; Open Data Day, 2018).
5.2.4 Security and Privacy
Helsinki’s ICT policy states that new ICT training programmes must focus on smart
city development by enhancing security and privacy issues in diverse city domains.
Interviewee 1 expressed that privacy and data protection issues may prevent exten-
sive use of data in certain cases. Interviewees 3 and 4 indicated that city lawyers are
used to consulting diverse city organizations, for example, with data privacy matters.
Thus, Helsinki considers security and privacy issues and renews ICT procurement
practices in this field.
5.3 Governance
In terms of smart city governance, Interviewee 2 expressed that the notion of a smart
city is currently related to the manner in which cities govern their ICT systems and
data and how they integrate new digital technologies into city infrastructure. Another
strong trend in the smart city development discourse is a participatory and citizen-
driven/centric approach. In the case of Helsinki, an organization that governs the
development of the Helsinki smart city and related initiatives does not seem to exist;
however, instead, the development of the smart city is decentralized. Numerous
Helsinki smart city initiatives run by FVH are project-based and funded by the
EU. Interviewee 2 indicated that due to intensive competition for funding, the
projects are rather arbitrary. Interviewee 2 summarized the development of the
Helsinki smart city in the following manner:
We have put huge efforts for developing agile pilots and creating an experimentation culture
in Helsinki. It has been an excellent way to motivate and mobilize the entire urban society to
develop concrete smart city solutions, for example, related to mobility and health care.
Developing a culture for agile pilots and technology experimentations has activated Helsinki
city officials, citizens, and start-ups to develop and figure out how to benefit from novel
digital technologies and what the future of the city will look like. It is definitely worth it to
continue agile pilot and experimentation activities and consider how to extend and draw
agile pilots on city-level strategic projects and procurements.
Interviewee 2 continues and envisions that

when technologies evolve, we have artificial intelligence, data, robotics and so on, the city
infrastructures and governance must not only adapt to changes, but a city must be governed
and managed in another way. The smart city will be the new normal.
Interviewee 2 also emphasizes combining top-down and bottom-up urban devel-

opment. This implies that a city-level strategy is needed to deliver investments for
infrastructure development; simultaneously, the strategy must engage all
78 M. Hämäläinen
stakeholders from private and public sectors and the civil society to develop urban
areas. In a top-down/bottom-up urban development approach, the city opens up its
data interfaces and develops ICT systems so that each citizen may participate and use
his/her resources to improve the quality of lives of the citizens of the city. In the case
of Helsinki, agile pilots and new technology experimentations are the means for the
development of a smart city. As the development of a smart city evolves in Helsinki,
it could be expected that this development progresses from agile pilots to a more
mature smart city governance approach.
5.3.1 Funding and Metrics
Interviewee 2 indicated that the work of FVH is project-based work. Smart

Kalasatama itself is a city’s strategic development project and is, thus, funded by
Helsinki. However, the agile smart city pilots and experimentations are funded by
diverse EU funds. In addition, local and national public organizations have partic-
ipated and invested in the Helsinki smart city pilots. Due to high competition and
uncertainty of the smart city project funding, Interviewee 2 pondered that a city-level
smart city development might potentially provide a more solid funding base. One
example of the smart city organization or initiatives funded by Helsinki city is
Helsinki Regional Infoshare (HRI) for open data services. HRI is an organization
that receives funding from Helsinki, other regional cities, and public organizations in
Finland. In addition, the digital city services that are developed on the basis of open
data are funded by Helsinki. None of the international smart city standards are
applied in Helsinki. However, metrics to measure smart city agile pilots organized
by FVH are determined by funding organizations. Although the precise metrics to
measure benefits from open data initiatives are not set and measured, Interviewees
3 and 4 estimated that, for example, open procurement data have resulted in 1–2%
savings in city procurement activities.
5.4 Stakeholders
The strategy of creating ‘The Most Functional City in the World’ implies that a
functional city is extended to involve all citizens and stakeholders in Helsinki.
Helsinki is a user- and resident-driven city, which benefits from open data to
stimulate the emergence of start-ups and high-growth companies, and offers an
advantageous environment for agile pilots and experimentations (Helsinki city
strategy). The FVH has executed city-level strategy and actively implemented
quadruple helix smart city collaboration and development in Smart Kalasatama
and other areas in Helsinki. The agile pilots applied in Smart Kalasatama integrate
the entire urban society: city, citizens, start-ups, civil society, academia, and large
companies. The principles of agile pilots and stakeholders involved in technology
experimentations are presented in Fig. 2.
Fig. 2 Smart Kalasatama

quadruple helix (adapted
from the Smart Kalasatama
presentation)
Another environment created for a quadruple helix collaboration in Helsinki is

called Maria 01 area. Maria 01, a co-working area, is a low threshold meeting place
where individuals, third-sector actors, companies, and city officials can collaborate
and co-create solutions for citizens and other customers. Maria 01 aims to stimulate
individual developers and start-ups to create new digital city services based on open
data and accelerate the emergence of new innovations and businesses (Helsinki city
strategy).
5.4.1 Stakeholder Value
Helsinki has managed to create an attractive smart city experiment and agile piloting
culture, which stimulates and integrates diverse stakeholder groups. For Helsinki
city, agile pilots have made smart city development more concrete and visible and
opened up possibilities for learning about which smart city solutions work and which
do not. The ‘fail fast, learn fast’ approach is well adopted in Smart Kalasatama.
Further, agile pilots have stimulated the creation of a smart city ecosystem and trust
among the stakeholders of the Helsinki smart city. Interviewee 5 highlighted the
FVH’s role as a facilitator during agile pilots and emphasized that agile pilots must
create value for the stakeholders of a smart city. As a facilitator, the FVH functions
as a hub for different stakeholders, lowering the threshold for communication and
access for agile pilots. Further, in a facilitator role, the FVH is able to eliminate, for
example, legislative barriers or authorization requests from authorities, which
streamline the process of agile pilots. Interviewee 5 emphasized that stakeholders’
80 M. Hämäläinen
experience contributes to the success of agile pilots and willingness to participate in

pilot activities.
Interviewees 5 and 6 represented Smart Kalasatama residents. Both residents
considered agile pilots to be beneficial and had a positive attitude towards technol-
ogy experimentations. The possibility of influencing and being involved in the Smart
Kalasatama development was a major reason for attending agile smart city pilots.
Interviewee 6 mentioned that certain pilot solutions improved his quality of life.
However, both Interviewees 5 and 6 agreed that they would like to receive informa-
tion regarding the service after the experimentation period is over. They stated that
they would like to know whether a beta version of the service or solution will be
provided and improved upon and whether it would be available later on.
Due to lack of time and resources, this research did not include the experienced
stakeholder value from developers who conducted the agile pilots. Developer data
would have enriched the research in terms of stakeholder value. Similarly, the
experienced stakeholder value from Helsinki open data is limited to Interviewees
3 and 4. From their perspective, public city data have increased transparency and are
expected to increase civic participation and bottom-up urban development. Other
benefits that the city has received from open data are internal savings and resource
efficiency, as data are ubiquitously available for all. The third benefit mentioned by
these interviewees is the hope that the provision of open data stimulates new
business and improves the competitiveness of the companies in Helsinki and Fin-
land. However, clear evidence of new business was not present.
6 Summary
Digital transformation is a multifaceted long-term process that influences an orga-

nization’s structures, processes, resources, capabilities, and stakeholders. This paper
presented a framework for smart city design that was applied to the development of
the Helsinki smart city. The smart city design framework considered the Helsinki
smart city through four dimensions: strategy, technology, governance, and stake-
holders—and their sub-dimensions (Fig. 3). Each dimension is scaled from 0 to
3. Value 0 indicates no activities, value 1 indicates moderate performance, value
2 indicates good performance, and value 3 indicates excellent performance.
In the case of Helsinki, specific digital or smart city strategy is missing, but a valid
city-wide strategy for the period 2017–2021 supports city development through
digital technologies. Interviewee 2 indicated that the smart city will be the new
normal, which implies that digitalization and digital technologies are a natural part of
urban development. The Helsinki city strategy emphasizes digitalization, user-
centric development, civic society engagement, and agile technology pilots. In
order to support digital transformation, Helsinki has recently hired a Chief Digital
Officer to ensure robust digital transformation and smart city delivery in diverse city
domains. Helsinki also educates and trains its personnel in modern digital
Fig. 3 The development of the Helsinki smart city through four dimensions
technologies, but not all city divisions have sufficient resources to fully implement
digital technologies.
Further, Helsinki aims to develop the entire city as a platform where new and
creative city solutions are developed and experimented with. In order to achieve this
objective, Helsinki has established a separate innovation unit called the FVH Ltd.,
for agile digital technology testing and smart city development. The aim of the FVH
is to activate digital innovation and organize agile technology experimentations in
diverse areas in Helsinki. In addition, Helsinki has managed to create a specific
experimentation culture for novel digital technologies like IoT solutions and data
usage within diverse city organizations. The city has initiated numerous initiatives to
exploit existing data series from different city organizations. Helsinki Region
Infoshare (HRI), an open city data platform, is an example of the work Helsinki
has committed to in terms of promoting and using data in the development of a smart
city. The HRI platform systematically releases open city data sets and interfaces for
public use. In order to avoid emergence of data silos and enhance data horizontality,
Helsinki aims to harmonize its ICT infrastructure and eliminate the barriers that
prevent cross-border data flows among city organizations. Security and privacy
issues are of relevance and, in certain cases, may prevent extensive use and publi-
cation of city data.
82 M. Hämäläinen
A major proportion of the development work for the Helsinki smart city is short-
term and project-based. The FVH, as a separate innovation unit, orchestrates indi-
vidual smart city projects and facilitates agile technology pilots in practice. In
addition to quadruple helix collaboration, FVH and other Helsinki city organizations
develop smart city solutions that are relevant for the city, citizens, and other actors in
the city. The development of a smart city in Helsinki is rather scattered, which makes
the governance of the smart city slightly confused. A clear connection between
short-term agile experimentations and long-term smart city development is difficult
to discern. However, smart city initiatives and pilots, particularly in Smart
Kalasatama, are considered valuable for city stakeholders, such as residents and
city authorities. Smart Kalasatama residents expressed that agile pilots are beneficial,
but they would have liked to receive information about the solution after the pilot
was completed. Further, due to time limitations, stakeholders that develop smart city
solutions were not involved in this research.
Numerous Helsinki smart city initiatives are funded through diverse EU funds,
Helsinki city, and private organizations. The metrics to measure the outcomes of
smart city initiatives are determined by funding organizations, but no international
standards for smart city activities are applied in Helsinki. In addition, empirical data
did not reveal information about the metrics used to measure the city-level digital
transformation process.
7 Conclusion
Digital transformation is a complex and long-term process, which influences an

organization’s structures, processes, resources, capabilities, and stakeholders. Digi-
tal transformation is all the more embedded in social areas that influence all aspects
of human life (Stolterman & Fors, 2004). This paper presented a framework for
smart city design. This framework shed light on the elements that are relevant for
robust smart city implementation and enhanced effectiveness of smart city gover-
nance and quadruple helix collaboration. The framework was applied to the Helsinki
smart city and considers smart city initiatives from the four major dimensions of
strategy, technology, governance, and stakeholders, as well as their sub-dimensions.
Helsinki does not have a specific smart city or digital strategy, but the city-level
strategy considers digitalization and user-oriented urban development as one of the
areas that is accorded priority. In the future, a smart city may be considered the new
normal, thereby implying that digital technologies and data are embedded in urban
development. However, specific smart city or digital strategies might enhance digital
transformation and clarify the governance and investment needs for the development
of a smart city. In addition, a specific smart city strategy could consider how to
integrate agile technology pilots with city-level strategic projects and procurements
and, thus, also accelerate the socio-economic aspect of the development of a
smart city.
The agile smart city pilots applied in Helsinki have engendered a strong exper-
imentation culture in Helsinki, which has proven to be an efficient means to enhance
socio-technical systems and technology acceptance within the city. Moreover, the
quadruple helix collaboration is a well-accepted form for agile pilots and smart city
implementation in Helsinki. Drawing closer attention to value-creation aspects
might improve the satisfaction of stakeholders and, thus, the robustness and duration
of smart city initiatives. Applying international smart city standards would improve
the analysis and results of smart city implementations.
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The Dynamics of the Employee Branding
Effect: The Valuation of Interpersonal
Relationships in Organizational Results
Andrea Sousa, João Pedro C. Fernandes Thomaz, Eulália Santos,

Carlos António P. Francisco e Silva, and Aquilino Manuel Felizardo
Abstract Focusing on competency management, the Employee Branding Effect

process results from the increase of catalytic actions of the interpersonal relations
domain, which stem from the informality created in social exchanges both inside and
outside organizations, namely by the introduction of mentoring and aid relations
between chiefs and headed.
The Employee Branding Effect contributes to a real and concrete diagnosis of the
organizational and relational environment of the organizations, being able through
its evaluation to promote and to reinforce the psychological contract between
employees and the organization.
This study covered 30 organizations in the central zone of Portugal that
responded to a questionnaire survey for Employee Branding Effect measurement.
The results statistically show that the moderating effect of mentoring and aid
relationships actions, from the informal domain over the formal domain of the
organizations, confirms a positive increase of the employee branding process results
when promoted by actions within the scope of the interpersonal relations.
A. Sousa (*)
ISMT - Instituto Superior Miguel Torga, Coimbra, Leiria, Portugal
J. P. C. Fernandes Thomaz
ISLA-Santarém, Santarém, Portugal
CEG-IST, Lisbon, Portugal
GP2/CIn/UFPE, Recife, Brazil
e-mail: joao.thomaz@islasantarem.pt
E. Santos
CIDMA, Aveiro, Portugal
C. A. P. Francisco e Silva
Universidade Europeia, Lisboa, Portugal
CIEO, Algarve, Portugal
e-mail: carlos.silva@universidadeeuropeia.pt
A. M. Felizardo
University of Évora, Évora, Portugal
CEFAGE-UÉ, Évora, Portugal

88 A. Sousa et al.
1 Introduction
Strengthening and guiding the organization culture in the sense of valorization and
developing the skills of employees willing to build and give the best of themselves
by the organization should be the concern of the organization’s leadership. The
reason is that employee’s behaviours also convey an image of the organization,
contributing or not through their actions towards organizational efficiency (Lishan &
Yaoqi, 2011; Miles & Mangold, 2004, 2005).
In this sense, there is a need and a preponderance of developing strategies to
promote consistent behaviours based on competencies that lead to the employees’
happiness and loyalty. The emotional state of the internal customer, i.e. the
employee, influences customer loyalty and the organizational reputation mainte-
nance, which in turn reinforces the employee brand image (Lishan & Yaoqi, 2011).
From a perspective of competency management, it is the responsibility of the
leadership that manages the relationship of how employees are treated, to implement
formal and informal programmes that develop social relations among their
employees. This way, interpersonal relationships are enhanced by their dynamics,
which influence the employees’ behaviours and these, consequently, the organiza-
tional results (Blake, 2001; Herington, Johnson, & Scott, 2006).
The importance of developing competency-based strategies, as a set of qualities
and behaviours that mobilize the technical knowledge of the holder, which results in
high performance, lies in knowing “how” this performance was achieved. From the
skills focused on the future and in their development, leading to the maintenance of
the psychological contract, the result is a positive emotional state that enhances
employees’ happiness through the clarification and consistency of what is required
of them (Spencer & Spencer, 1993).
Motivated employees transmit more easily a positive message from the organi-
zation and its brand, reinforcing Ulrich’s (1997) idea that the overarching goal of
implementing a brand strategy in the employees is to lead the organizations to “win
the war for talent”.
Building relationships with the team that generates customer satisfaction and
profit involves (1) concern for the employees’ feelings and needs and (2) the
compliment and supply of a positive feedback, helping them to improve their
competencies, their creativity and autonomy and their work skills through the trust
and emotional affectivity developed by the leadership.
In this context, it is important to understand, to value and to increase organiza-
tional efficiency in the organizations through the Employee Branding Effect process
that, in line with the concept of employee branding, develops the adopting strategy in
the organizations in order to promote interpersonal relationships. The implementa-
tion of employee branding effect process in organizations determines, consequently,
the organizational sustainability, mainly by the evaluation to the loyalty of the
internal customer, but also by the external customer loyalty (Sousa, 2016).
The Dynamics of the Employee Branding Effect: The Valuation of. . . 89
Thus, the overall goal of this study is to verify that Mentoring and Aid Relation-
ships have an effect on the employee branding process. If there is a positive effect, a
new process is obtained, called Employee Brand Effect.
In this sense, this article contributes to demonstrate that organizations, by con-
solidating and valuing informal strategies through the introduction of mentoring and
aid relationships, resulting in social relationships among members, promote the
transfer of knowledge that affects employees and influences the organization’s
performance.
2 The Valorization of Informality in Social Exchanges
The Miles and Mangold (2004, 2005) employee branding process is a functional
package implemented by the organization that depends on the creativity of the
leaders and can create in the employee positive psychological and economic effects,
given the identity that the employee has with the organization (Ambler & Barrow,
1996; Vãleanu, Cosma, & Soficã, 2012).
This way, Wagner and Hollenbeck (1999) and Robbins (1999) have identified
that organizational behaviour allows us to segment the influence and contribution of
the individual, the group and the organizational structure to understand and enhance
the results, namely job satisfaction, organizational loyalty, external customer loyalty
and organizational reputation.
The process of employee branding particularizes the origin of the inputs that
define and contribute to the process, through its formality. However, the day-to-day
people management ends per se the informality, resulting from social exchanges that
are valued in the Employee Branding Effect process.
This new process opens space for the emancipation and importance of the
interpersonal relations contribution in the promotion and reinforcement of the
psychological contract, either by the increase and potentiality of the employees’
commitment and loyalty feeling in the organizational satisfaction or by the increase
of their levels of effectiveness and productivity (Sousa, 2016).
The complicity of the articulation of these informal processes lies in the valori-
zation of the management by competences, which aggregates and considers the
knowledge and learning of the people as a strong sustainable competitive advantage.
This informality strengthens social relations in the organizations and triggers behav-
iours that increase organizational results when increased by the dynamics of
mentoring actions and by the leadership aid relationships to the employee.
The dynamics of mentoring and aid relationships as an attitudinal behaviour
values the importance of the social relationship among members and enforces to
the promotion and learning of this social competence by the organization.
Based on this assumption, for the efficiency of the organizational result, the
human resources practices’ consolidation and its articulation with the internal
marketing and relationship processes is a condition, given the complicity that both
90 A. Sousa et al.
processes seek in the performance of the organization (Kram, 1983, 1985; Schein,
1999, 2009).
The Employee Branding Effect process allows for a diagnosis that incorporates to
the employee branding the actions of mentoring and aid relationships, determining
the influence of the informal domain of social and interpersonal working relation-
ships, seen as a behavioural attitude from the leadership to the employee that
enhances the organization performance (Sousa, 2016).
In this context, we formulate as Hypothesis 1: The informality of mentoring and
aid relationships actions has a positive relation and effect on the employee branding
process.
3 Contributions to the Social Relations in Organizations
Galpin (1997) argues that an appropriate internal marketing strategy should signif-
icantly contribute to organizational success; in other words, it can be used to achieve
higher levels of employee satisfaction in the workplace, aiming to make them feel
happy with their work experiences.
In turn, Aurand, Gorchels, and Bishop (2005) and Vãleanu et al. (2012) state that
the practice and implementation of effective marketing actions have the power to
involve employees with the organizational values and brand identity, making them
loyal to the organization strategy, faithful to those values and satisfied with the work
they perform, i.e. experiencing a pleasant or positive emotional state about their
workplace experiences (Locke, 1976), which generates fidelity, dedication and
commitment in future actions.
This way, for organizations to become more competitive, they must implement
effective programmes to maintain the levels of the employees’ commitment towards
their objectives. These actions undergo by involving people and by implementing
programmes to approach leaders and subordinates, mentors and mentored who value
the communication among pairs and allow the satisfaction and loyalty of the
organization’s first client: the employee.
This employee’s appreciation in the success of the organization places the
emphasis on how the organization strengthens the psychological contract and how
it fosters social relations among employees. In order to achieve a favourable
psychological contract, it must be taken into account that regardless of any agree-
ment between the individual and the organization, each employee has a unique
perception of what the organization is required to provide him/her and what one
should do, in return, to the organization. Thus, its essence lies in the individual’s
perception about the psychological contract (McLean Parks, Kidder, & Gallagher,
1998).
In practice, psychological contracts are seen as the exchange of an employee’s
effort (creativity, flexibility, knowledge, skills and abilities) by compensation,
opportunities for advancement, job security and status, among others. In the back-
ground, an action is exchanged for a certain attitude (Conway & Briner, 2009).
When the employee is the target of an emotionally engaging psychological contract,

he/she stays committed to the organization and its brand, strengthening his/her
loyalty to the organization.
The employees’ beliefs are important to understand their answers in the organi-
zation, regarding the obligations that make up the psychological contract. It is
expected that from a balance between the employee and the organization, it is
possible to observe a positive employees’ involvement (Hui, Rousseau, & Lee,
2004).
This attitude in the organizations promotes the shift from the paradigm of goal-
based management to competency management, which places the focus on people
and their reward for talent, behaviour and attitudes that can create a sustainable
competitive advantage for organizations that increase it (Boterf, 2002; Rebelo, 2011;
Spencer & Spencer, 1993). The way in which an organization treats its employees
interferes with how they later treat the organization customers (Catlette & Hadden,
2001; Herington et al., 2006; Rosenbluth & McFerrin Peters, 1992/2002).
The nature of this interface can be summarized as follows: if the organization
takes care of its employees, the employees will take care of the clients who will
return more often when feeling more satisfied, becoming faithful to the organization.
This internal marketing perspective can favour the employees’ attitude and therefore
will lead to the organization success in the external market (Bitner, 1990; Mitchell,
2002; Tortosa, Moliner, & Sánchez, 2009).
Assuming that the internal client influences and determines the reputation of the
organization through his behaviour, the necessary efforts for its employees to
promote citizenship behaviour must be taken into account, valuing obedience,
loyalty and participation that will shape the organizational behaviour of its members.
On the other hand, Rego (2000) also argues that the level of organizational
effectiveness and efficiency depends on the comprehensiveness of the organizational
citizenship behaviours that the employees voluntarily promote in the organization.
If one considers that the individuals’ spontaneous and extra-role behaviours are
“tied” to the employee’s psychological contract, and that the psychological contract
involvement is also determined by the social exchanges that result from cohabitation
in the workplace between the chiefs and headed and among pairs, then the impor-
tance of interpersonal relations as a catalyzer element of the social process, which
contributes to the promotion and increase of the process of diagnosis of Employee
Branding Effect, expressively emancipates itself.
This way, and from the perspective of management by competence, it can be
observed that employees’ behaviours have an influence on the organization effi-
ciency contributing to the satisfaction, loyalty and customers increase in an organi-
zation (Organ, 1999; Podsakoff & MacKenzie, 1997; Rego, 2000), constraining
strategically the human resources management to value in their practices the welfare
concerns and employees’ emotional satisfaction.
The satisfaction at work is and will always be a concern of the management of any
organization, especially in competitive environments where “the nerve” of
employees who represent their “face” makes a difference.
92 A. Sousa et al.
In this context, we formulate as Hypothesis 2: The mentoring and aid relation-

ships actions have a positive relation with the interpersonal relationships that
characterize the informality of social exchanges in organizations.
4 The Dynamics of the Employee Branding Effect Process
The leadership behaviours, especially of transformational leadership, according to

Wang and Wong (2011) have shown to be strongly related to organizational
citizenship behaviours. The culture and leadership, particularly as exemplified by
the servant leadership, provide employees with the same they give to external
customer: attention to their needs, support and involvement, which promotes thereby
the creation of long-term relationships between customers, leaders and employees
(Cerqueira, 2002), contributing in a decisive way to the promotion of functional
packages in the organization.
The servant leadership is one where the leader assumes a relationship more
focused on the needs of others (Greenleaf, 1977). As a transformational leadership
style option, it is the one that provides decisive conditions for the development of
relations of social exchange, making room for the promotion of mentoring and aid
relationships within the cultural and organizational spheres (Sousa, 2016).
On the one hand, this leadership requires and intends to promote a facilitating
culture, which ensures the commitment of the top management in creating a dynamic
of social exchanges and provides conditions for the dissemination of interpersonal
relations in the organization; on the other hand, the increasing role of mentoring and
aid relationships between chiefs and headed trigger conditions for shaping behaviour
among members.
This action will lead to organizational results that will increase organizational
effectiveness and efficiency, by consolidating the synergy and complicity of human
resources practices and their articulation with the internal marketing and relationship
processes.
In turn, the role of mentoring and aid relationships as a single process must be
rooted in formal and informal processes of human resource management, which
should consolidate and cement the correct verbal and nonverbal communication in
organizations, through the management of emotions and moods that influence the
psychological contract and consequently the successful implementation of the
Employee Branding Effect process, which seeks to value the social competence in
the organization (Sousa, 2016).
The interpersonal relationships’ informality, as a characteristic of the servant
leadership, also creates conditions for the effective promotion of mentoring as a
work relationship, which contributes to personal growth and acts as an important
organizational process, impregnating the employee with a feeling of trust towards
the mentor, who becomes a facilitator in the construction of knowledge and in the
reinforcement of his psychological contract (Kram, 1980, 1983, 1985; Kram &
Isabella, 1985).
Thus, the facilitator of interpersonal relationships, i.e. the mentor, creates in

his/her performance a philosophy of help, that being efficient by the exempted and
impartial form establishes a helping relationship with the individual, group or
organization, promoting an effective dynamics of relationship and empowerment
of employee branding image (Schein, 1999, 2009; Sousa, 2016).
This mentoring attitude that develops the psychosocial functions, when promoted
by leaders and managers, will increase a feeling of trust and affectivity that will
determine the level of affective commitment of the employee, leading him/her to be
emotionally connected to the organization, reinforcing the Effect Employee Brand-
ing process in organizations (Kram, 1985; Kram & Isabella, 1985; Sousa, 2016).
The maintenance of mentoring and aid relationships, cooperation and collabora-
tion actions resulting from informal relations in the relationship processes, is effort-
lessly promoted by those involved, because they do it spontaneously, i.e. it is an
attitude that promotes spontaneous and generous behaviour of others who sponta-
neously acknowledge the need for such help, interfering with the cultural values that
the organization transmits (Sousa, 2016).
Indeed, social relationships in organizations promote the transfer of knowledge
through the relationship constellations, which go beyond work producing bidirec-
tional effects, i.e. influencing the organization performance, either by increasing
customer satisfaction outside the organization and to the brand or by the perfor-
mance and career development of mentored individuals (Kram, 1985; Kram &
Isabella, 1985; Sousa, 2016).
In turn, from the perspective of group process consulting, the fundamental
concepts of the aid relationships during a process of effective help, by means of an
appropriate examination, are based on the group of social processes that foster a
psychological contract among the related parties. In this process, the diagnostic
forms of inquiry recommended (pure or humble, confrontational and process-
oriented) have been shown to be very useful in the evaluation and attainment of
the maximum yield of a group (Schein, 1999, 2009, 2013; Thomaz, 2005).
In this perspective, organizational performance also depends on teamwork, which
must develop actions of reciprocal aid relations among its members, because it is in
these interactions that the dynamics of balance and clarification of the roles played
and where relationships of greater mutual trust are developed, thus promoting
relationship constellations.
In this sense, teamwork is also defined with a state of multiple reciprocal aid
relations that include all members of the group who have to work together (Schein,
2009).
By valuing informality, it is possible to determine the Employee Branding Effect
process, which brings together not only the formal aspects of the organizations
(named Organizational Integration) arising from the employee branding process
but also and especially the informal aspects (IR—interpersonal relations) arising
from social exchanges in the domain of interpersonal relations.
Thus, this process incorporates the perceptions of internal customers (employees)
and the effects of these actions on the internal results in the organization brand image
and external customers.
94 A. Sousa et al.
The promotion of a clear, concise and systematic communication, promoted by

the mentors in the dynamization of mentoring and aid relationships, considering the
psychological contract and organizational citizenship behaviours of members, as
integral elements of the interpersonal relations domain, contributes synergistically in
a significant way to the increase of potential loyalty and satisfaction results, as well
as to organizational success through reputation and customer loyalty, thus consoli-
dating the process of Employee Brand Effect in organizations.
In this context, we formulate as Hypothesis 3: The informality of mentoring and
aid relationships actions moderates positively the formal aspects of the employee
branding process, called organizational integration (OI).
5 Methodology
For the development and consolidation of the Employee Brand Effect process
(EME), the study took place between 27 November 2014 and 30 April 2015, having
participated 30 organizations of central Portugal. Of the 812 answered surveys,
725 were considered valid.
The data were analysed using the IBM SPSS Statistics 24 software. To validate
the Employee Branding Effect process, we applied the factorial analysis, and to test
the hypothesis, the following techniques were applied: simple linear regression
analysis and regression analysis with moderation effect. The uses of these techniques
were based on classical statistics in which the data are at the centre of the analysis,
i.e. the data lead to the deduction of theories, not as a condition for the structural
equations’ application in which theory is the analysis’ engine (Marôco, 2014). Ainda
assim e segundo Klem, Grimm, and Yarnould (1995), a as equações estruturais
aplicam-se quando existe mais do que uma variável dependente e e nas hipóteses em
estudo, só existe uma variável dependente. Even so, and according to Klem et al.
(1995), structural equations apply when there is more than one dependent variable
and in the hypotheses under study, there is only one dependent variable.
6 Instrument
The instrument used (questionnaire survey) consists of two parts: the first one
consists of 79 items that evaluate the EMS process of the employees in the organi-
zations, while the second part requests the identification data of the organizations.
In each item related to the EME process instrument, a four-level forced choice
scale (two reference levels, “True” and “False”, an intermediate level of “Hesitation”
and a “Not applicable” level) was used. The choice of a forced choice scale is based
on the scale developed and tested by Thomaz (2005).
The response scale also considered the use of the determinant technique
(Figueira, Greco, & Ehrgott, 2005; Roy, 1990; Roy and Mousseau, 1996) in order
to define the statements that in each dimension/construct are a sine qua non condition
for the definition and diagnosis of EME.
In order to quantify human subjectivity inherent to the adopted scale, the Tversky
and Kahneman’s (1981) theory of propensity or aversion (Prospect Theory) was
applied, which studied how people react to risk and uncertainty and how they
evaluate their gains and losses, from a subjective point of reference (Sousa, Thomaz,
Ferreira, Jorge, & Santos, 2016).
In summary, and according to Sousa et al. (2016), the implemented instrument
contemplates four constructs: the interpersonal relations (IR) construct that belongs
to the informal domain; and management support (MS), organizational socialization
(OS) and brand socialization (BM) that belong to the formal domain, which together
determine the organizational integration (OI) of the employee branding process.
The dimension indices of the different constructs were obtained by performing
the arithmetic mean of the items that make up each dimension. From these results,
indices of the different constructs carrying out the arithmetic average were obtained.
7 Validation of the Employee Branding Effect Process
To set the factor structure of the process of employee branding effect, employee
branding and the organizational integration domain (OI), we realize that it makes
sense to apply the factor analysis since the Employee Branding Effect (0.83) and
employee branding (0.87) processes KMO measures are considered good, and the OI
domain (0.71) KMO measure is considered reasonable (Marôco, 2010).
The Bartlett sphericity test also revealed a good factorial adequacy (p < 0.01).
Thus, for the extraction of the factors, we used the principal components method and
the varimax rotation and, in order to measure the minimum number of factors to be
retained, we used the Kaiser criterion.
From the application of the factorial analysis, we obtained the following results:
• the OI domain is constituted by three constructs (OS, BS and MS) and explains
78.49% of the variance;
• the employee branding process is constituted by three constructs (OS, BS and
MS) and two dimensions of the interpersonal relations construct (psychological
contract and citizenship elements) and explains 72.28% of the variance;
• the Employee Branding Effect process is constituted by four constructs (OS, BS,
MS and IR), which are the synergy result of employee branding process and
mentoring and aid relationships dimension and explains 77.95% of the variance,
so there is an increase of 5.6% when using Employee Branding Effect process
compared to the employee branding process.
The two processes and the OI domain are considered reliable measures, since the
Cronbach alpha values of the Employee Brand Effect and employee branding
96 A. Sousa et al.
processes are 0.898 and 0.896, respectively, and that of the organizational integra-
tion domain is 0.709. These values allow us to affirm that both processes have a good
internal consistency and the OI domain has a reasonable internal consistency
(Pestana & Gageiro, 2008). To obtain the values of the two processes and the OI
domain, we realized the arithmetic mean of the variables that constitute them.
8 Correlation of the Elements that Make Up Employee

Brand Effect
According to Table 1, all correlations between the different elements that are part of
the Employee Branding Effect are statistically significant (p < 0.01) and positive.
The lowest correlation (r ¼ 0.510) occurs between the brand socialization
(BS) construct and the mentoring and aid relationships dimension, and the highest
correlation (r ¼ 0.998) between the employee branding process and the Employee
Branding Effect process.
Considering only the four base constructs of the study (OS, BS, MS and IR), the
highest Pearson correlation value (r ¼ 0.819) is found between the constructs
interpersonal relations and management support, and the lowest value (r ¼ 0.571)
between the constructs brand socialization and interpersonal relationships. In any
case, according to Pestana and Gageiro (2008), all correlations present values that
are mostly strong and in some cases moderate.
If we consider the relationship between the mentoring and aid relationships
dimension and the different constructs, the highest correlation (r ¼ 0.958) is found
with the interpersonal relations construct and the lowest (r ¼ 0.510) with the brand
socialization construct.
The mentoring and aid relationships dimension is an action that occurs between
one or more people, being the brand image (portrayed in the BS construct) from a
collective construction that results from the promotion that top management
increases throughout the organization, regardless of the image the mentor transmits
to the mentored. In other words, it can be reinforced that the dynamics of mentoring
and aid relationships have a micro-organizational impact, and the brand image is the
result of a holistic view of the organization, thus macro-organizational.
It is also between the mentoring and aid relationships dimension and the inter-
personal relationships (IR) construct that the highest correlation is found (r ¼ 0.958).
This high correlation is the confirmation that a mentor performance, by promoting
mentoring and aid relationships to their collaborators, enhances the existence of an
interpersonal relationship that fosters informality, and through the inertia of this
relationship, gathers the commitment between the parties, enhancing the psycholog-
ical contract, which is one of the pillars in employee loyalty in the Employee
Branding Effect process.
Table 1 Pearson’s correlation results between the different elements of the employee brand effect
R IR OS BS MS MAR OI EB EBE
Pearson IR 1.000 0.797 0.571 0.819 0.958 0.835 0.905 0.914
OS 1.000 0.631 0.779 0.751 0.904 0.906 0.904
BS 1.000 0.617 0.510 0.816 0.873 0.876
MS 1.000 0.822 0.930 0.922 0.930
MAR 1.000 0.803 0.852 0.877
OI 1.000 0.988 0.987
EB 1.000 0.998
EBE 1.000
Note: p < 0.01
The Dynamics of the Employee Branding Effect: The Valuation of. . .
IR Interpersonal Relations, OS Organizational Socialization, BS Brand Socialization, MS Management Support, MAR Mentoring and Aid Relationships, OI
Organizational Integration, EB Employee Branding, EBE Employee Branding Effect
97
98 A. Sousa et al.
9 Testing the Hypothesis
To find out if the informality of mentoring and aid relationships actions positively
influence the process of employee branding (Hypothesis 1), we applied the simple
linear regression model between the employee branding process and the mentoring
and aid relationships dimension.
The results found in the linear regression model and described in Table 2 allow us
to state that 72.5% of the total variability of the employee branding process is
explained by the actuation of the mentoring and aid relationships dimension.
Through ANOVA, it can be observed that the adjusted model is highly significant
(F(1, 723) ¼ 1907.354; p <0.01), so it can be inferred that it is adequate and there is
a linear dependence between the employee branding process and the mentoring and
aid relationships dimension. The mentoring and aid relationships dimension statis-
tically influences (t(724) ¼ 43.673; p < 0.01) the employee branding process, with a
positive variation (β ¼ 0.514) due to mentoring and aid relationships.
All the assumptions of the regression model were validated, i.e. normality,
independence and homoscedasticity of the residues, confirming Hypothesis 1.
Aiming to determine if the OI domain that characterizes the formal aspects of the
employee branding process will be positively influenced by the introduction of
interpersonal relationships, as formulated in Hypothesis 2, we applied the simple
linear regression model.
Analyzing the results of the linear regression model (Table 3), we can say
that 69.8% of the total variability of the OI domain is explained by the
dynamics of interpersonal relationships. The adjusted model is highly significant
Table 2 Employee branding Model summary R R2 ANOVA

regression model (EB) and
F p
mentoring and aid
relationships (MAR) EB e MAR 0.852 0.725 1907.354 0.000
Model coefficients t Test
β t p
Constant 0.341 41.333 0.000
MAR 0.514 43.673 0.000

p < 0.01
Table 3 Regression model Model summary R R2 ANOVA

between organizational
F p
integration (OI) domain and
interpersonal relationships OI e IR 0.835 0.698 1669.712 0.000
(IR) Model coefficients t Test
β t p
Constant 0.129 10.792 0.000
IR 0.696 40.862 0.000

p < 0.01
(F(1, 723) ¼ 1669.712; p < 0.01), so it can be inferred that the model is adequate
and there is a linear dependence between the OI domain and the interpersonal
relationships construct.
To test whether the interpersonal relationships construct influences the OI
domain, we applied the t Student’s test, and it has been verified that the influence
is statistically significant (t(724) ¼ 40.862; p < 0.01), so there is a positive variation
(β ¼ 0.696) in the OI domain by the interpersonal relationships construct.
All the assumptions of the regression model were validated, i.e. normality,
independence and homoscedasticity of the residues, confirming Hypothesis 2.
In this study, and as stated in Hypothesis 3, we intend to investigate whether the
influence of the interpersonal relationships construct without the mentoring and aid
relationships dimension in the organizational integration (OI) domain is moderated
by mentoring and aid relationships.
To test Hypothesis 3, a new regression model was constructed, where the term
that reflects the interaction is added. To obtain this new term, the product of the two
independent variables was made, which are quantitative (Marôco, 2010).
The model results, presented in Table 4, have revealed that 70.2% of the total
variability of the OI domain is explained by the independent variables in the
regression model. Through ANOVA, it can be observed that the adjusted model is
highly significant (F (3, 721) ¼ 570.185; p < 0.01), so it can be inferred that the
model is adequate.
Given that the interaction coefficient (product between the variables in this case,
the mentoring dimension and aid relationships and the interpersonal relationships
construct without the mentoring dimension and aid relationships) is statistically
significant (t(724) ¼ 3.677; p < 0.01), we can affirm that the influence of interper-
sonal relationships without mentoring and aid relationships in the organizational
integration domain is moderated by the mentoring and aid relationships dimension.
Table 4 Model of moderation effect of mentoring and aid relationships on organizational

integration
Model summary R R2 R2adjust: F p
MAR moderator 0.839 0.703 0.702 570.185 0.000
Model coefficients t Test
β t p
Constant 0.105 5.211 0.000
MAR 0.282 5.511 0.000
IR without MAR 0.476 11.556 0.000
Product 0.130 3.677 0.000

p < 0.01
MAR Mentoring and Aid Relationships, IR without MAR Interpersonal Relations without Mentoring
and Aid Relationships that includes psychological contract and citizenship’s elements, Product
product between Mentoring and Aid Relationships and Interpersonal Relations without Mentoring
and Aid Relationships (psychological contract and citizenship’s elements)
100 A. Sousa et al.
Only the mentoring and aid relationships variable have values slightly higher than
5 (MAR with VIF1 ¼ 6.364, IR without MRA with VIF ¼ 4.132 and Product with
VIF ¼ 3.029), which according to Myers (1986) expresses no concern about the
possible presence of multicollinearity, as quoted in Marôco (2010). The remaining
assumptions, normality, independence and homoscedasticity of the residues, are
verified, confirming Hypothesis 3.
10 Conclusions
The Employee Branding Effect process, through the dynamic and catalytic action of
interpersonal relationships among its employees, with the introduction of mentoring
and aid relationships between chiefs and headed, not only increases but also boosts
the organization brand image inside and outside the organization.
With respect to the effect and influence of the variables, it is observed that
mentoring and aid relationships has a moderating effect on the organizational
integration (OI) domain, as well as the mentoring and the aid relationships dimen-
sion which allows a positive variation in the process of employee branding.
Social relationships in organizations promote the transfer of knowledge that affect
employees and influence the organization performance, i.e. if the relationship con-
stellations in the workplace have an impact on organization and employees,
manifesting mainly in the employees’ performance, then the organization should
be alert to its influence.
If an organization wants to value its brand image, then it has to internally value it
first. If the internal client (collaborator) believes in this image, he/she will sell it more
eloquently and spontaneously to the external client. However, and as it turned out,
the organization does not need only formal procedures, since spontaneous informal-
ity between peers and headship will allow not only an increase in loyalty but also a
greater organizational commitment with reflections on the brand image.
In addition, the organizational reputation achieved by the valorization of the
brand that the organization represents requires the increment of the functional
processes of employee branding that when associated with informality allow a
diagnosis of Employee Brand Effect.
This organizational reputation is and can be further enhanced if there is an action
based on the principles of mentoring and aid relationships between chief and headed
that informally increase the quality of the work and aid relationship, the exchange of
knowledge (skills) and personal growth. The construction of a more stimulated
relationship between managers and employees is also based on the psychological
contract and by the existence of citizenship behaviours.
1
VIF—Variance Inflaction Factor.
The dynamics of job satisfaction is and will always be a concern of the organi-
zations management, especially in competitive environments where differentiation is
made by the “nerve” of employees.
With this new Employee Brand Effect process, it is possible to diagnose the
“strength” of social exchanges informality among members and their influence on
the organizations sustainability. However, this valorization of interpersonal relation-
ships will require the interdisciplinarity of management practices, through a leader-
ship based on mentoring and aid relationships actions between chiefs and headed,
which will require a new management perspective in organizations.
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The Entertainization of Business Event: The
Case of Alibaba Computing Conference
in Hangzhou
Guiqiang Qiao, Chris Ryan, Chao Zhou, and Tim Lockyer
Abstract The nature of conferences, trade shows, and entertainments has evolved,
particularly in China, to become a hybrid event combining the features of all three
hitherto separate forms. A specific example that has attracted attention is the
Hangzhou Computing Conference hosted by Alibaba. Within eight years, this
event has grown from nothing to be a mega business affair in China and a globally
influential hi-tech event. In 2018, it attracted 120,000 onsite attendees from 81 coun-
tries and 10 million online viewers. This study describes the evolution of the
Conference and suggests that the practice of entertainization has been a critical
factor in satisfying different stakeholders and the event’s continuing success.
Other variables of importance include the strong levels of personal support, harmo-
nious government-organizer relationships, the sophisticated supporting supply
chain, and the well-received destination image. The paper also delineates the nature
of entertainization, both positive and negative, and how the concept of
entertainization has been implemented.
1 Introduction
The event market is becoming more competitive (Bauer, Lambert, & Hutchison,
2001; Dwyer, Mistilis, Forsyth, & Rao, 2001; Kim, Sun, & Ap, 2008; Yang & Gu,
2012) and that pressurizes organizers to change and innovate. Event product/service
consumers are thus facing a great variety of choices (Bauer, Law, Tse, & Weber,
G. Qiao (*)
Waikato Management School, The University of Waikato, Hamilton, New Zealand
e-mail: gq7@students.waikato.ac.nz
C. Ryan · T. Lockyer
Waikato Management School, The University of Waikato, Hamilton, New Zealand
e-mail: chris.ryan@waikato.ac.nz; tim.lockyer@waikato.ac.nz
C. Zhou

106 G. Qiao et al.
2008; Mitchell, Schlegelmilch, & Mone, 2016; Wood, 2009). Hybrid forms of event
activities, especially if including entertainments, is one means to increase the
attractiveness of an event and catch the attention of potential attendees. One reason
for integrating entertainment into events is the social trend of entertainization as
illustrated in the consumption of entertainment products (Chen, 2012; Information
Centre of MIIT PRC, 2018; Peterson & Malhotra, 1999); the city as an entertainment
machine (Clark, 2004; Peña, Hales, Peterson, & Dessibourg, 2018); technology
development (Barnouw Erik & Kirklana, 1992; Postman, 1985; Silberer, Constien,
& Mau, 2008); and social value changes (Barnouw Erik & Kirklana, 1992; Clark,
2004).
The A.T. Kearney 2018 Global City Report argued that the “right mix of factors
such as business activity, human capital, information exchange, political engage-
ment, and cultural experiences” of influential cities, like New York, London, and
others, have used their reputation to attract the “best companies, the top talent, and
the most investment dollars” (p. 1). The report further pointed out that the progress in
city development achieved by Chinese key cities is attributable to “business activ-
ity,” “human capital,” and “cultural experience” (p. 2). Research also indicates that
the practices of entertainization makes consumers, partners, and employees more
engaged, more excited, and more attached to the event product or services (Paharia,
2013). In response, Tiwsakul and Hackley (2006, p. 69) discovered that “Many
contemporary consumers enjoy mediated entertainment such as television drama,
films, and video/computer games every day as an intimate part of their lives.”
Literature indicate that entertainization has been widely applied in different
business practices and sectors (Armstrong & Landers, 2018; Clark, 2004; Landers,
2014; Petersen, 2013; Robson, Plangger, Kietzmann, McCarthy, & Pitt, 2016;
Tiwsakul & Hackley, 2006). However, the nature of business events, which are
usually considered as being formal, serious and formularized business activities,
have not been much studied to the authors’ knowledge. Certainly little, if anything,
has been published on entertainment in business events in China, which traditionally
embrace the culture and philosophy of Confucianism as social norms that respect
order and maintain hierarchical societal relationships.
Contrary to this traditional stance, a Chinese business event has adopted
entertainization since the event commenced 2009. More importantly, this practice
of entertainization has transformed this locally generated business event into a
worldwide mega business phenomenon. As reported, in 2017, it attracted 50,000
attendees from more than 60 countries; while in 2018, more than 120,000 came to
the event from 80 different countries and online viewers exceeded 10 million
(Aliyun, 2017; Zhu, 2018). What accounts for the success of this business event?
What forms of entertainization have been applied? How does the organizer success-
fully cooperate with different stakeholders and what impacts will this practice
produce? With these questions, this paper aims to investigate the development of
the Alibaba Computing Conference in Hangzhou using a longitudinal perspective to
explore the methods of implementing entertainization and to answer the question of
why the event is a success in terms of attracting delegates.
The Entertainization of Business Event: The Case of Alibaba Computing. . . 107
2 Literature Review
2.1 Entertainization as a Social Trend
Entertainment, from a consumers’ perspective, is product that is “whatever people

are willing to spend their money [on] and spare time viewing” (Kaser & Oelkers,
2008, p. 18). Similarly, Barnouw Erik and Kirklana (1992) conceptualized that
“entertainment is any narrative, performance, or other experience that can be sold
to and enjoyed by large and heterogeneous groups of people” (p. 50). To deepen the
understanding, Chen (2012) added that entertainment is “something that is so
universally interesting and appealing” (p. 44).
Different entertainment products exist (Toubia, Iyengar, Bunnell, & Lemaire,
2019) and compete for consumers (Peterson & Malhotra, 1999). Meanwhile, con-
sumers demand entertainment products or services that liberate them from con-
straints, responsibilities, chores, and boredom of routine life and provide them
with activities that they “enjoy and look forward to doing, hearing, or seeing”
(Chen, 2012, p. 44).
The consumption of entertainment products or services has reached more than
one trillion US dollars globally, being US$280 billion in the United States (Chen,
2012) and US$818 billion in China (Information Centre of MIIT PRC, 2018).
Therefore, the entertainment industry is globally recognized (Neale, 2010; Toubia
et al., 2019), both for its significant social impacts (Barnouw Erik & Kirklana, 1992)
and economic scale (First Research, 2019; Toubia et al., 2019). The enormous
expenditure on entertainment products and services, both in the world and in specific
countries, signifies the social trend of entertainization (First Research, 2019).
Clark (2004) argued in his book, City as Entertainment Machine, that previous
paradigms that prevailed among city developers are too simple and incomplete.
Nowadays, city administrators, business, and non-profit leaders are “using culture,
entertainment, and urban amenities to . . . enhance their locations—for present and
future residents, tourists, conventioneers, and shoppers” (Clark, 2004, p. 1). City
administrators are encouraged to adopt entertainment measures to develop their
cities, to compete with other cities in the world, and to make their cities a place
with lots of “fun” and “meaning” (Oliver & Raney, 2011).
Contemporary digital technology empowers the entertainment media and aids a
fusion of entertainment products and services. Formerly, the digital entertainment
industry was primarily found in developed economies, but with the development of
technology and reductions in costs, developing countries are also benefiting from the
entertainment media and industry (Cheok, Romão, Nijholt, & Yu, 2014). In the
context of the Chinese economy, a pan-entertainment concept is proposed, which
takes the Internet or rather the mobile Internet as a platform, crosses different sectors,
and creates a fan economy that encompasses movies, TV series, literature, music,
video games, performances, sports, blogs, and other forms of entertainments (Infor-
mation Centre of MIIT PRC, 2018). Thus, today e-games have been proposed as a
potential Olympic sport (Stefani, 2019; Yang, Ye, & Kang, 2011).
108 G. Qiao et al.
Changes in social values and norms of behavior also contribute to the

entertainization of society. Some “moralistic observers” insist entertainments are
immoral; while many radicals considered entertainment to be an “opium for the
people that should be fought” (Clark, 2004, p. 2). However, such views are those of a
minority and entertainment has become a daily expectation for most in a modern
society (Oliver & Raney, 2011; Peterson & Malhotra, 1999).
The consumption of entertainment products, the importance of entertainment for
the growth and competitiveness of cities, the development of digital technology, and
the change of social perceptions of entertainment have promoted the popularity of
entertainization. Specifically, entertainization has been practiced in many sectors,
politics and urban development (Clark, 2004), entertainment marketing (Tiwsakul &
Hackley, 2006), business entertaining (Petersen, 2013), education and learning
(Landers, 2014), HR management (Armstrong & Landers, 2018), services (Hamari
& Koivisto, 2015; Insley & Nunan, 2014; Shi et al., 2017), work (Robson et al.,
2016), and daily life (Cairns, 2009; Rana, 2018). The implementation of different
forms of entertainment potentially creates higher efficiency or better results for
marketing, work, management, and politics; it also increases the attractiveness of
urban destinations and makes life and society more meaningful and entertaining.
Not surprisingly, the entertainment recipe is also slowly being applied to business
events (Schmidt, 2011). Damm (2011) stated that entertainment is a part of an event
and is a priority when designing an exhibition. For business events, entertainization
has become a new trend for conference management and design (Expo Logic, 2019).
However, entertainment must serve the goal and ultimate purpose of an event,
especially business events. Though usually practiced and applied in business
event, the study of entertainization has been relatively neglected.
2.2 Entertainization as a Business Event Innovation
Like other economic sectors, the event industry shares the same conventional
innovation categories: product, process, organizational/managerial, and market
innovations. As part of the service industry, the event sector also practices innova-
tion in product distribution and within organizations (Hjalager, 2010). Business
events (e.g., conference, exhibition, or product lunch) are usually formal, simple,
and business goal-oriented. Though field trips/travel and gala dinners are regular
activities in the business event schedule, many forms of entertainments are often
considered too challenging for business event organizers to employ.
According to Hjalager (2010), there are four categories of innovation, and
entertainization falls into the first category, that is, product or service innovation.
This category of innovation is described as “changes directly observed by the
customer and regarded as new; either in the sense of never seen before or new to
the particular enterprise or destination” (Hjalager, 2010, p. 2). In respect of event
innovations, Larson (2009) identified ten factors for an event (festival) innovation
network: the festival organization, the audience, the city/municipality, the relative
sector, restaurants, market vendors and voluntary associations, the media, suppliers
of goods and services, sponsors, allied festivals partners, and the public
(pp. 290–291).
For his part, Mackellar (2006) argued that networks possess significant innova-
tive capacity for creating attractive event products and services. Networks can be
utilized to generate a creative and interactive environment among the stakeholders
because inter-organizational cooperation is a potential source of innovative thinking
and the utilization of new technology (Hjalager, 2009; Huxham, 1993). Adding
different forms of events, such as sports, music, and games to the business events
schedule, as practiced by the computing conference described later in the paper,
displays the importance of this form of interactive and collaborative environment
that creates an entertaining and memorable experience for the attendees. The inno-
vative and inspiring Copenhagen ski project is another example of entertainization
that transforms waste into energy that produces more exciting opportunities for the
city (Basulto, 2011).
2.3 Theoretical Lines of Entertainization
While obviously, entertainment has been an inherent part of human society for
millennia, it was not until the appearance of modern media (e.g., Radio, TV) that
concepts such as entertainization emerge. In Amusing Ourselves to Death, Postman
(1985) mentioned the entertainization of politics, religion, education, and people’s
life. He stated that Boston used to be the focal point of an American sense of joie de
vivre, but it then shifted to Las Vegas, which stands for the national character and is
entirely devoted to the idea of entertainment. This social entertainization trend was
also discussed and supported by other researchers (Cheok et al., 2014; Clark, 2004;
Rana, 2018), although in the case of the USA, the film and theme park industries
may mean Hollywood and Los Angeles may claim to be the entertainment center.
Entertainization is symbolic of a new stage in the development of the society. One
can extend a line from McDonaldization, Disneyization to entertainization that
describes an evolution of society by which different sectors are adding entertainment
to their business operations to promote their products and attract higher demand.
Initially proposed by Ritzer (1993), the concept of McDonaldization refers to “the
process by which the principles of the fast-food restaurant are coming to dominate
more and more sectors of American society as well as the rest of the world” (p. 3).
However, McDonaldization is not merely about the spread of fast-food restaurants
but is also about the practices of design and management that were formulated earlier
but brought together in McDonald’s restaurants (Bryman, 1999). Grounded in
theories of rationalization, McDonaldization emphasizes efficiency and formalized
control.
In parallel with McDonaldization, Bryman (1999) defined Disneyization as “the
process by which the principles of the Disney theme parks are coming to dominate
more and more sectors of American society as well as the rest of the world” (p. 26).
110 G. Qiao et al.
Disneyization is based on the theories of consumerism and consumer culture with

the purpose of advocating the spread of principles and practices exemplified by the
Disney theme parks.
Following Ritzer (1993) and Bryman (1999), entertainization can be defined as
the process by which the principles and practices of the entertainment business are
coming to dominate more and more aspects and sectors of global society. The
philosophical foundations of entertainization are consumerism, hedonism, and iden-
tity theory (Neale, 2010). The rich variety of entertainment forms provide many
innovative ways to realize entertainization, which includes, but is not limited to,
storytelling, music, drama, dance, sports, different performance, films, video games,
conventions, and expos (Barnouw Erik & Kirklana, 1992; ScienceDaily, 2015).
3 Research Methods
By reviewing some of the related literature on the entertainment industry and

entertainization, this paper will introduce a case study to demonstrate how
entertainization has been applied to a business event in Hangzhou, China. Through
the implementation of this mode of innovation, the locally rooted event has grown
into a large-scale international technological business event of global significance.
First, a brief history of this business event is provided. This will describe the
impacts of entertainization, the forms of entertainments or events that have been
integrated into this business event, and the manner in which formalization of the
ways of entertainization in event development has been developed.
Additionally, the paper will (a) discuss the reasons for the success of this business
event; (b) delineate the impacts of entertainization, both positive and negative; and
(c) indicate the significance of this practice for business event organizers and
destination.
4 The Profile of the Case Conference
As a locally generated large-scale international business event, the Hangzhou Com-

puting conference originated from an industry forum in 2009, which was small and
had minimal influence. With the title of 2009 The First Forum of China Local
Website Development, it attracted 200 website owners and content generators from
over China. This initial one-day event mainly included forums and award giving,
which was hosted in a hotel in the downtown area of Hangzhou. At this time, though
it was not explicitly claimed as such, the award presentation was primarily a way of
entertaining the participants, and in hindsight could be considered as the first stage of
the entertainization of this event.
Anticipating growth in the numbers of attendees, the venue changed to a down-
town conference center in 2010 for the second hosting of this conference. The major
scheduled activities remained the same (forums and award presentation). However,
this time Aliyun (Alibaba Cloud) joined Alibaba Group and PHPWind as a
co-organizer of the event. In this year, the number of attendees exceeded 400.
With the increasingly important position of Aliyun for the sponsorship and
organization of the event, the name of the forum was changed. In 2011, the event
was renamed as China Mobile Internet Summit 2011 (also as the 1st Aliyun
Worldwide Developer Conference), which signaled the turning point in the event’s
development. This name was kept for 4 years, and then in 2015, the current name
Hangzhou Computing Conference was employed. Additionally, a new venue, the
Yunqi International Conference Centre, was specially designed and constructed for
this event. With the change of the name and the establishment of the new purpose-
built venue, the development of the event became faster and its influence dramati-
cally increased. For example, in 2017, the event attracted more than 50,000 attendees
from more than 60 countries; in 2018, the number of attendees reached more than
120,000 from 80 different countries.
It is now almost a decade since Alibaba took the hosting rights, and the event has
grown into a mega technological business forum of global significance. As claimed
by the company, the computing conference has become a “top technological event in
the world” (Aliyun, 2017), while other media have identified it as a “carnival-style”
business event (YF Financial, 2017). Table 1 summarizes the pattern of change.
Currently, together with the World Internet Conference, the World Leisure Expo,
the Westlake Expo, this international conference has become a landmark event in
Hangzhou and attracted attention both at home and abroad (facebook.com, 2017;
Horwitz, 2017; Liu, 2017).
5 Research Findings
In trying to account for the success of the event, it would appear that entertainization
is the primary critical factor. Entertainization differentiates this event from others by
creating an amusing and entertaining experience for conference attendees with
business purposes. Consequently, together with other important favorable factors
possessed by this event (the strong levels of personal support, harmonious
government-organizer relationships, a sophisticated supportive supply chain, and
the well-received destination image), entertainization has made it a world-class
influential mega business event with unique features. However, as discussed
below, despite the many positive features, there are also potential disadvantages
associated with entertainization.
112 G. Qiao et al.
Table 1 The development of Hangzhou Yunqi Computing Conference

Entertainization
Year Name Event venue Event size forms
2009 2009 Development Forum of Zhijiang Hotel 200+ Award
China Local Websites attendees presentation
1 forum
1 themed
entertainment
2010 2nd Summit of China Local and Hangzhou 400+ Award
Industry Websites Haiwaihai Int’l attendees presentation
Conference 1 forum
Centre 1 themed
entertainment
2011 China Mobile Internet Summit As above 1000+ Competition
2011 (The 1st Aliyun Worldwide attendees
Developer Conference) 20+ forums
1 themed
entertainment
2012 Aliyun Worldwide Developer As above 3000+ Competition
Conference attendees
20+ forums
1 themed
entertainment
2013 Aliyun Worldwide Developer Yunqi Town 3000+ Competition
Conference attendees Entertainment
20+ forums (Developers’
2 themed night)
entertainment
2014 Aliyun Worldwide Developer Yunqi Town 7000+ Competition
Conference attendees Entertainment
0.8 m online (Developers’
d/int’l visitors night)
20+ forums
2 themed
entertainment
2015 2015 Hangzhou Computing Int’l Confer- 22,000+ Competition
Conference ence Centre at attendees Music festival
Yunqi Town 2.2 m online
d/int’l visitors
30+ forums
2 themed
entertainment
2016 2016 Hangzhou Computing As above 40,000+ Competition
Conference attendees Sports events
9.6 m online Music festival
domestic and Badge
int’l visitors collection
100+ forums
4 themed
entertainment
(continued)
Table 1 (continued)
Entertainization
Year Name Event venue Event size forms
15 m online Music festival
domestic and Badge
int’l visitors collection
140+ forums
4 themed
entertainment
10 m online Music festival
domestic and Badge collec-
int’l visitors tion
170+ forums Tech show
5 themed
entertainment
Source: Aliyun (2017), XAJH (2016) and YF Financial (2017)
5.1 Forms of Entertainization
As noted above, entertainization started at the very beginning of the event’s history.
Since then the entertainments have been different in number and forms during
different stages of its development. However, the event has succeeded in embracing
various forms of entertainments and has integrated them into its schedule. These
activities include competitions, music festivals, sports events, meeting business
celebrities, and a much-favored game of badge collections, all of which have
generated amusement, excitement, and pleasure (Oliver & Raney, 2011). Each is
described below.
1. Competition
To attract professional IT people, especially programmers, the conference organized
competitions for them nationally in China in the first years. With the international-
ization of this event, a global “Maker Competition” was held for website designers
and those who use and learn practical technology-based skills and apply them to
reference designs. The final is hosted during the conference, and the winner is
crowned as the world final winner.
This type of competition entertains those who directly participates and possesses
interest for their peers. Also, the resultant media are available to the public and
provide further opportunities for public entertainment, especially when the new
software relates to gaming. With the application of this form of entertainization,
the event catches the attention of professionals domestically and internationally,
which helps the event to entice international business exhibitors and professional
attendees while also attracting attention from printed media, television and bloggers.
114 G. Qiao et al.
2. Music Festivals
In 2015, the event embraced a popular music festival as a scheduled activity for the
attendees. Consistent with the high-tech theme of this event, the singers, musicians,
bands, songs, and music were decided by AI devices (Alibaba Cloud, 2016), and
many of the acts were accompanied by AI features during the performances.
The music festival was initially for one night in 2015 and 2016. In 2017, this was
extended to three nights (see Fig. 1). As observed in 2017, the music festival
attracted many young people to this business event, although some came solely for
the music festival. A number of ticketing options existed including the purchase of a
one night, two-night, all three-night music shows, or alternatively not to buy tickets
for this form of entertainment. Tickets are sold online through the event website and
listed VIPs are automatically allowed to attend all the music shows, which added to
the appeal of the concert for many delegates.
The event has featured many IT “gurus” in addition to entertainers, and the
President of the Alibaba Group, Jack Ma, has conventionally sung several pop
songs to entertain and interact with the audience. For many years, his performance
on the festival almost became a reserved item and was highly anticipated by his fans
in China. To some extent, his spirited vocalizations allied with his role in organizing
IT innovations are footnotes to the entertainization of this business event and a
determinant of its success.
Fig. 1 The 2017 and 2018 music festival posters. Source: Photo courtesy https://yunqi.aliyun.com
3. Sports Activities
Besides music festivals, another important and well-recognized form of entertain-
ment is sporting competition. Seeing the positive response to the use of music in
organization of the business event, the organizers decided to add sports to the list of
scheduled activities.
On the one hand, sports, especially running, has been regarded as indicative of a
healthy lifestyle (Xu & Quan, 2017), and many attendees have adopted this as part of
their daily or weekly routines. It was thought that the adoption of a night run as a
scheduled activity would appeal to those attendees who run regularly while enter-
taining others. Marathon running has become reasonably popular in China. Indeed,
Wang (2015) writes of a “marathon fever” that not only symbolizes people’s needs
of a healthy lifestyle after their income growth, but the marathon has the obtained
status of a cultural event that, in many cities, has a role to play in festivals and
functions as an urban carnival.
From the viewpoint of the conference organizers, by incorporating sports activ-
ities, the event is branded as being healthy, fashionable, and vibrant, which distin-
guishes it from other routine events, and creates excitements, pleasure, and meaning
for the attendees.
More importantly, the sports activity is again well matched with the high-tech
theme of this event. The night run, named as “TechGo” by its designers, integrates
AR, big data, and Neon devices. The “TechGo” records the data of each runner,
which allows participants to check their performances each time they pass the Data
Screen. In a sense, one runs with others, also with oneself (as portrayed by the data).
4. Business Celebrity Speech
As previously noted, entertainments generate amusement and pleasure, but they
create meanings and significance as well (Oliver & Raney, 2011). The speech
delivered by successful business celebrities is itself a form entertainment, which
brings inspiration, knowledge, encouragement, motivation, and possibly hope for
the future.
Every year on the first day of the event, famous or successful business, and
technological celebrities take to the forum to deliver informative and inspiring
speeches. In 2017, for example, for the keynote forum, the celebrity speakers were
Jack Ma (Executive Chairman of Alibaba Group), Jeff Zhang (CTO of Alibaba
Group), Jianwei Pan (Member of China Academy of Science), Gerry Pennell (Chief
Information & Technology Officer for the International Olympic Committee), and
Jeannette M. Wing (Professor of Computer Science, Columbia University) among
others. Although all the selected speakers present valuable and good quality
speeches, Jack Ma’s speech is often the most anticipated, and generally, he does
not fail to be inspiring and entertaining. To a large extent, his appearance, speech,
and performance are an inherent component of the event’s pulling power.
While attendees are not supposed to choose speakers, nonetheless the organizers
are alert to the need for qualified, sophisticated speakers who will present entertain-
ing, enriching, and informative speeches that are crucial for satisfying the demand-
ing professional attendees (Zhang, Leung, & Qu, 2007).
116 G. Qiao et al.
5. Badge Collection Game

Another exciting activity is the badge collection game. This activity was
implemented through a collaboration of exhibitors and the organizers with the
purpose of encouraging the attendees to have more interaction with the exhibitors,
to explore more the exhibited products, and to diversify the event experiences. The
principles underlying this are those of gamification. Robson, Plangger, Kietzmann,
McCarthy, and Pitt (2014) define gamification as “the application of lessons from the
gaming domain in order to change stakeholder behaviors and outcomes in non-game
situations” (p. 352).
Most exhibitors/companies bring their badges (usually the company logo) to the
event. Attendees are tempted to collect more badges, and on obtaining a certain
number of individual badges, they can gain a T-shirt or cap designed for the event. In
addition, they keep the badges as souvenirs. However, to get each badge from an
individual exhibitor, they are requested to scan the exhibitor’s bar-code or answer
some simple questions, which usually are easy and pleasant. In turn, to obtain a
conference cap or t-shirt is regarded as a status symbol.
The organizers also design and order a large number of badges with different
patterns for each year. Most attendees usually do not have access to them, and if they
intend to have one, they need to exchange with the event staff or volunteers with a
given number of collected badges. From the onsite observation, most young
attendees quite enjoy the process, and many take “selfies” with the collected symbols
and post pictures on their social media.
As Hamari (2017) points out, the adoption of gamification will better engage the
consumers/attendees, improve service quality, and turn traditional business services
into something that is entertaining and fun (Hsu & Chen, 2018; Robson et al., 2014),
and this has proven to be the case in this instance. These games are scheduled forms
of entertainization for this event, but other forms also exist. These include watching
the state-of-art high-techs, experiencing new products, and collecting gifts/souve-
nirs. All these forms of entertainization supplement the serous side of the conference/
exhibition and not only make the event a world top high-tech conference but also
transform it into a “programmers’ carnival” (Alibaba Cloud, 2016).
5.2 The Support of the Stakeholders for Entertainization
To implement these forms of entertainization requires the support or collaboration

from different stakeholders at this business event. Reid (2011) categorizes event
stakeholders as either primary or secondary. The first category includes “employees,
volunteers, sponsors, suppliers, spectators, attendees, and participants,” and the
second comprises “government, host community, emergency services, general busi-
ness, media, and tourism organizations” (p. 22).
Among the stakeholders associated with event entertainization are onsite staff and
volunteers, event partners, performers and speakers, invited exhibitors, and local
government. Onsite staff have an important role in the application of
entertainization, no matter in what form. They organize the crowd, page the
participants, explain the rules, communicate with the audience, prepare the facilities,
and coordinate with partners, speakers, and performers. They are the hub of infor-
mation and actions. After 8 years of designing and having operational practices of
large-scale events, the event team has grown to be a professional, innovative, and
sophisticated crew, which helps to guarantee service quality.
What is notable about the organization of Hangzhou Computing Conference/
Exhibition, the actual numbers of organizers are relatively few. As one of the leading
administrators of Alibaba Event Department stated, from the event designing,
planning, marketing, ticketing to staffing, and coordinating on site, all these jobs
were completed by 20 full-time employees (Zhu, 2018). Therefore, they are very
dependent on recruiting many volunteers to support their events. Volunteers facil-
itate the process and practices of entertainization by providing entertainment infor-
mation, creating a positive environment, ensuring the smooth running of the
operations and providing hospitality. In the recognition of their importance, the
event organizers first select qualified volunteers and then offer them detailed training
before they become involved with the event activities.
Volunteers work side by side with onsite staff. At the same time, other partners
such as booth builders, music support teams, and invited exhibitors contribute to the
event’s success by assuming their own responsibilities that are integral to the success
of entertainization. The exhibitors are the providers and creators of the entertain-
ments even as they promote their company and product as a commercial activity.
Booth builders and music support teams provide the facilities, sound systems, and
musical equipment for the operations of different forms of entertainments. In order to
assure the quality of these services, the event organizer has established criteria for
the selection of booth builders and other supporting teams.
The last link in the process are the speakers and performers on stage. Yet while
the quality of the speech and performance are vital factors for the satisfaction and
amusements of the consumers, they are dependent on the “back up” of other
stakeholders. Given the nature of the event, as noted above, the organizers employ
AI to choose performers and the music pieces to play, but the selection of speakers is
subject to more tight criteria. Yet, as the reputation of the event has grown, to be
selected as a speaker or performer is a much-sought position, and hence a symbiotic
relationship has emerged where the speaker’s reputation enhances the attractiveness
of the event for attendees, even as providing such a speech enhances the speaker’s
own reputation.
Local government support is another important factor to practice entertainization
of this business event. As noted, in 2015, the event moved its venue to Yunqi Town,
which was specially designed and allocated to Alibaba for this flagship event. Only
with this infrastructure could the organizers promote entertainments like the sports
event “TechGo,” the music festivals, and other large-scale gamified activities.
Interestingly, it was not until 2015 when the event attracted more than 22,000
attendees and had become well established, did the local government offer to
co-host the event. However, the local government’s support of Alibaba and its
business events can be traced back many years. That the local municipal govern-
ment, and later the provincial government, co-host the event is indicative of the
118 G. Qiao et al.
conference/exhibition’s importance as well as the importance of event industry to the

destination. In conclusion, the favorable relationship between the local government
and the organizers has won rights of land use and infrastructure investment that
comfortably accommodates the different forms of entertainization.
The last factor that needs to be discussed is the media. First, media itself is often a
form of entertainment. The media helps to spread and transmit the image and story of
the event while not directly interfering in the operation and implementation of
entertainments activities. However, media exposure of the event has proliferated in
recent years. Searching with the key words of “2015 Alibaba Computing Confer-
ence” in Chinese with Baidu (the primary Chinese search engine), it seemed that
most of the national media initially ignored the event. However, in 2018, using
similar key words with the same engine, the results showed that not only the local
authority media but also the major national official media were all displaying keen
interest in this event (e.g., CCTV, Xinhua News, People’s Daily, and China Daily).
Meanwhile, it attracted the attention of international media, such as media in
Australia, US, Europe, India, etc. That wide-ranging use of media may also help
to account for the number of 2018 attendees cited above.
5.3 Impacts of Entertainization
The study also indicated that the implementation of entertainization has potentially
positive and negative effects on different stakeholders. With the support of different
stakeholders, the practice of entertainization has created an entertaining and gamified
atmosphere that allows the attendees to enjoy the event and have a memorable
experience. Given this, the event product/service can meet or even exceed the
consumers’ expectations and increase their attachment to the event. It also permits
the event to differentiate itself from other similar events, thereby making it more
attractive and contributing to its rapid growth. From an organizational perspective,
the event management can accumulate entertainization expertise that may be trans-
ferable to other events. Finally, the application of entertainization to the conference
has enhanced the reputation of Hangzhou as conference and tourist city, and as a city
seeking talent and investors.
However, as discussed before, to be successful, this approach requires seamless
collaboration with, and strong support from, different stakeholders. If these condi-
tions are hindered, the adoption of entertainization can quickly turn into a disaster. In
the first place, it is a time-consuming process to communicate and co-ordinate across
so many actors. The introduction of many forms of entertainments to an event is also
costly. The question here is, how did the organizers reach a win-win result without
too many changes of its original budget?
In this case of the Alibaba Computing Conference in Hangzhou, the organizers
met their original budgets primarily because of the financial support from Alibaba
Group and the local government. Alibaba itself started its diversification from simply
being an online selling Internet portal into entertainment nearly a decade ago and
covers the sectors of film, sports, music, computer games, and tourism. This means
that for the most part, the sponsors of the event are generally using in-house
resources in a way that reinforces coordination within the company while at the
same time gaining exposure for each of its activities. The conference/exhibition is
therefore not merely a promotional event, but one that encourages intra-company
collaboration. At the same time having in-house expertise and being able to draw on
trained volunteer labor who wish to be associated with the conference permits
significant costs savings.
Government support has also proven essential. The provision of land and plan-
ning permission for a convention center to the organizer’s own specifications
permitted the construction of the venue on a green field saving significant construc-
tion costs and freedom from planning constraints.
In addition to the cost-related impacts, the practice of entertainization has two
potential risks. One is the inherent risk of promoting entertainments within the
conference/exhibition that fails to be congruent with the major themes of the
conference and the audience it attracts. Should this happen, it represents a waste of
resources, creates minimal value for the stakeholders and represents potential dam-
age to the brand reputation of the sponsors and the event. The second risk is the loss
of event focus. Observations and interviews discover that many high-level business
administrators are immune to these entertainments, except for the keynote speeches
and other idea sharing forums. They also complained that “Though the entertain-
ments are creative and entertaining, we care more about the business opportunities
and the knowledge delivered by the invited speakers.” For these people, time is more
important, and they claimed that more interactive activities might generate good
experience but also meant it required them to stay longer than they would have
preferred. Equally, with the concerts now being open to the public, there is a danger
of attracting personnel for whom the main event is peripheral—an attitude that may
deter the primary market for the event. In short, careful planning is essential.
6 Conclusion and Implications
Contemporary society is experiencing the stage of entertainization, which may be

viewed as an evolution from the previous stages of McDonaldization and
Disneyization. Indeed, all three social practices coexist. However, as the economy
becomes one based upon experience (Pine & Gilmore, 1999), the pervasive nature of
entertainment combined with Internet access and the growing popularity of
gamification has emerged to form a social trend of entertainization that is now
being utilized in business for marketing, branding, human resource retention, and,
as in this case, conferences and exhibitions.
This case study treats entertainization as a form of product/service innovation in a
business event. Indeed, the significant success of the Hangzhou Computing Confer-
ence/Exhibition is premised on this form of service design. By integrating
gamification, sports, a music festival, celebrity business speakers, and game design,
it is suggested that the conference has become a “carnival” creating experiential
values for different stakeholders. More significantly, the organizers have succeeded
120 G. Qiao et al.
in maintaining the coherence of the event process through adding or embedding

technological elements in these activities, ensuring that the entertainments are not
intrusive but are an integral part of this fashion-leading, creative high-tech
conference.
Other factors also contribute to the success of the event. These factors include but
are not confined to the following: the selection of proper forms of entertainments, the
seamless collaboration among stakeholders, the growing “reputation” of Alibaba
and Jack Ma, the support of local government and related governmental organi-
zations, and the standards established for the selection of qualified event suppliers. In
addition, the event organizer has been able to avoid the potential pitfalls of this
innovative practice.
The findings of this study indicate that business events, besides their traditional
values, can be more entertaining, engaging, and inspiring by adopting the innovative
practice of entertainization. However, the factors mentioned above are prerequisites
for successful implementation of entertainization. Robson et al. (2014) also empha-
size that the success of entertainization relies on the understanding of the “player
experience” and correctly identifying the nature of those who are to be entertained.
This “requires not only an in-depth understanding of the current experience the
player has but also of the emotions and dynamics players for which they yearn”
(Robson et al., 2014, p. 355). Only if these factors are considered, might the positive
impacts of entertainization overweigh the negative.
It can be concluded that entertainization can help business events to create and
shape a unique image that will contribute to their success in this competitive
marketplace. It creates customer value that can exceed customer expectations of
any event product. Consequently, it assists to increase the attendee attachment with
specific events.
Both the entertainment industry and the event market have been well explored,
but the integration of the two remain relatively unnoticed in the literature. For future
research, a more complete theoretical analysis can be conducted to support this
popular practice. Further, the topology of entertainization and the principles for
implementation are also required with more empirical studies that can more precisely
identify and measure the importance and impacts of this practice to the different
stakeholders.
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Innovation and Entrepreneurship as Tools
for Rural Development: Case Study Region
of Vera, Extremadura, Spain
Francisco Javier Castellano-Álvarez, Amador Durán-Sánchez,

María de la Cruz del Río-Rama, and José Álvarez-García
Abstract In the mid-1980s, within European institutions, a concern for economic

and social cohesion of the territory becomes increasingly important, and the possible
effects that the future reforms of the Common Agricultural Policy (CAP) could have
on the rural environment. In this context, the European Commission, on an experi-
mental basis, launches the LEADER Community Initiative (acronyms that
corresponded to the French term Liaison Entre Actions de Développement de
l’Economie Rurale), which, in the Spanish case, is complemented by two editions
of the PRODER Programme (Programme of Development and Economic Diversifi-
cation of Rural areas). The main objective of these programmes is the creation of
employment in alternative sectors to agriculture with the aim of retaining, in rural
areas, the population driven out from the primary sector. To achieve this objective, a
novel approach is used, which, among other issues, gives essential importance to the
promotion of innovative projects by small local promoters. Thus, innovation and
entrepreneurship become the instruments chosen by endogenous rural development
programmes. Based on the methodology of the case study, this research aims to
analyse the practical application of this type of programme in the region of La Vera,
Extremadura (Spain), focusing its attention on those investments that, thanks to the
initiative of modest promoters, sought the promotion of small and medium-sized
enterprises, the provision of services and the promotion of crafts. This research
provides interesting conclusions regarding the projects implemented, their type of
F. J. Castellano-Álvarez
Faculty of Business, Finance and Tourism, Economy Department, University of Extremadura,
Cáceres, Spain
e-mail: fcocastellano@unex.es
A. Durán-Sánchez · J. Álvarez-García
Faculty of Business, Finance and Tourism, Financial Economy and Accounting Department,
University of Extremadura, Cáceres, Spain
e-mail: amduransan@unex.es; pepealvarez@unex.es
M. de la Cruz del Río-Rama (*)
Faculty of Business Administration and Tourism, Business Organisation and Marketing
Department, University of Vigo, Ourense, Spain
e-mail: delrio@uvigo.es

126 F. J. Castellano-Álvarez et al.
promoters, the innovative content of the investments, as well as the long-term

viability of the projects carried out within these two lines of action.
1 Origin and Characteristics of Endogenous Rural

Development Programmes
At the beginning of the 1980s, the exhaustion of a productivist agrarian model that
had defined the functions assigned to the European rural environment since the end
of WWII became evident. Proof of this was the report “Perspectives on the Com-
munity Agrarian Policy” (European Commission, 1985), better known as the “Green
Paper of the Common Agricultural Policy (CAP)”.
Although in the aforementioned report, the Commission insists on the need to
address the new reforms of the CAP, in order to correct the problem of agricultural
surpluses and their huge associated costs, the most significant novelty of the “Green
Paper” was that the agrarian problem is no longer understood as something sectorial
and is regarded as an issue that concerns the rural environment as a whole. Based on
this new conception, it was necessary to replace the approach based on agrarian
development with another one focused on rural development.
The Communication “The future of the rural world” (European Commission,
1988) represents a milestone in the approaches of the community institutions with
regard to the rural world. In this document, the Commission is concerned about the
effects that three elements could have on the rural environment: (1) the imminent
reforms of the agrarian policy; (2) the growing disparities between rural and urban
areas, which were shown in an increase in backward rural areas; and (3) the
deterioration of the environment and natural heritage.
The Commission recognizes that although agriculture still had great relevance in
rural areas, it could no longer articulate the rural economy on its own (Pisani, 1994).
In this scenario, in which the Leader I Community Initiative (European Commission,
1991) arises, with which it aimed to contrast the validity of a development model,
based on a novel approach, it had to promote the development and economic
diversification of rural areas with the ultimate goal of preventing the emigration of
their population.
Despite its experimental nature and its limited resources, the results of Leader I
were generally rated as positive (Beltrán, 1995). This represented the consolidation
of the development model implicit to the so-called Leader approach and the
approval, years later, of the second call of this Initiative (European Commission,
1994).
Thanks to the dissemination achieved by Leader I, the Initiative takes a quali-
tative leap and in its second edition, acts in more than half of the community terri-
tory. Thus, it goes from the 217 Local Action Groups (LAGs) that managed the first
edition of Leader to about 1000 in its second phase (AEIDL, 2000).
Due to the limited resources and the high expectations generated by the second
call of the Leader Initiative, some countries approve similar programmes. In Finland,
Innovation and Entrepreneurship as Tools for Rural Development: Case. . . 127
the POMO Programme was designed, and Spain developed the PRODER I
Programme (MAPA, 1996), so that the objective 1 regions that had not been
beneficiaries of Leader II could apply rural development strategies inspired by the
Leader model.
The celebration of a Conference on Rural Development (1996) in Cork would
mark another milestone in the dissemination of the rural development model advo-
cated by Leader by opting for extending the application of rural development
programmes to all rural areas of the European Union, regardless of whether they
were objective 1 regions or not.
A year later, Cork’s conclusions would have an impact on Agenda 2000
(European Commission, 1997). This new positioning of the Commission raises
rural development policies to the category of second pillar of the CAP; it confirms
the commitment of the rural environment to economic diversification and insists on
the need to integrate the primary sector within that philosophy. With the generali-
zation of the Leader approach, the rural development policy acquires relevance that
even today is maintained within community discourses.
In general, those who study the resources assigned to this type of policy within
the community budget (Álvarez-Coque, 2004; Compés, 2010; García Grande, 2005;
Viladomiu & Rosell, 2009) are critical about the correlation between the apparent
relevance that the community institutions grant to endogenous rural development
programmes and the resources that are actually assigned to them. Nevertheless,
leaving aside this issue, to frame the temporal scope of this research, note that
during the 6-year period 2000–2006, both the Leader Initiative and the Proder
Programme would continue.
In April 2000, the call for the Leader + Initiative (European Commission, 2000)
was approved, and in Spain, the Proder Programme continues to be applied thanks to
its second and last edition (MAPA, 2002). This research focuses on analysing some
implicit aspects of the application of the two editions of the Proder Programme to a
specific territorial area: the region of La Vera (Extremadura, Spain).
Despite their limited resources and clearly subsidiary nature with regard to
regional policy or agrarian policy, endogenous rural development programmes
achieved significant territorial presence and aroused the illusions of the majority of
Europe’s rural environment.
The explanation for this apparent contradiction between resources and expecta-
tions lies in the interest generated by the methodology applied. The model proposed
by the Leader Initiative, known as the “Leader approach”, is the one that serves as a
reference to the Spanish authorities to design the Proder Programme. Both from a
theoretical and empirical point of view, the peculiarities of this development model
have been the object of study of numerous investigations (Cebrián, 2003; Garrido &
Moyano, 2002; Navarro, Woods, & Cejudo, 2016; Nieto & Cárdenas, 2017; Nieto &
Gurría, 2010; Ramos & Garrido, 2014; Zapatero & Sánchez, 1999).
The Leader and Proder programmes are not great investment programmes but
promote the implementation of modest business projects characterized, among other
things, by their innovative content and the use of territory resources. Ultimately, the
objective of European institutions is to demonstrate the viability of these
entrepreneurship projects, and with that, encourage their replication and dissemina-
tion by other promoters in different rural areas of the community.
The European Observatory of Innovation and Rural Development distinguishes
up to seven “specificities” in the development model proposed by these programmes
(AEIDL, 1999). For the purposes of this investigation, the following specificities
must be highlighted: the territorial approach, the decentralized management system
and the relevance given to the concept of innovation.
When applying these programmes, a correct definition of the territory is essential.
In the face of a local (too small) or regional (very broad) scope, the region is
understood as “that territorial area homogeneous enough to share problems and
solutions” (Guiberteau, 2002, p. 95). The territory is valued not as a mere container
of resources and population, but as a factor, whose multiple characteristics, tangible
and intangible, condition its own competitiveness (Esparcia & Noguera, 1999).
Based on the regional scope, Local Action Groups (LAGs) are the instrument
designed to channel the participation of the population in development processes.
Their composition must be a faithful reflection of the society of the region, as they
are composed of three sectors: the institutional sector (with the presence of all the
municipalities in the region); the economic sector (representation of businesspeople
and economic agents); and the cultural/associative sector (cultural, social, environ-
mental associations, etc.). Within a decentralized financing system, the LAG is
responsible for the definition of development strategies and the application of the
economic resources allocated to the development programme.
In rural development programmes and especially in the Leader Initiative, inno-
vation processes play an essential role. To understand the dimension that they
acquire, they must be framed within those specificities to which reference has been
made. Only based on this assumption, can innovation be understood as a collective
learning process, capable of evolving “the techniques, the products and the working
methods; but also the symbolic representations, the customs and the capacity of the
agents” (AEIDL, 1997, p. 30). This concept contrasts with the concept of those who
understand innovation as the result of a scientific activity, created in specialized
centres, with significant investments, and concentrated in urban and industrial
environments.
Between the possibility of importing technology or innovating and its creation by
local agents, the Leader Initiative—already since its first call—opts for the second
option when defending “an endogenous and local approach based on the capacity of
action and technical knowledge”, with the aim of “applying innovative solutions that
can serve as a model for all rural areas” (European Commission, 1991).
In Leader, the innovation processes generated by the local population play an
essential role. This is shown by the European Commission (1991) when it includes,
as one of the evaluation criteria of the Programmes, its innovative nature, or when
the success of the Initiative is determined by “the capacity of local agents to exploit
local resources in an innovative way and assimilate the new practical knowledge”.
Interest in innovation will be a constant in the calls of this Initiative, with the
purpose that “the funded programmes add a real surplus value compared to other
interventions co-financed by operational programmes or other forms of intervention

of community support frameworks” (European Commission, 1994).
However, it is a fact that in the first editions of the Leader Initiative or Proder
Programme, the application of the proposed development model was regarded an
innovation in itself. In later editions, this fact is considered insufficient and requires
the innovative nature to be “present in the technical content of the project, being
possible to find it in the product, in the manufacturing process, in the market, or in
another element” (European Commission, 1994). Leader understands the concept of
innovation in a broad sense, and with this, seeks to encourage the assumption of risks by
project promoters, in order for them to be capable of questioning their reality, exploring
new ideas and new methods, that add value to the resources existing in the territory.
In this context, by using the methodology of the case study, this research aims to
analyse the practical application of rural development programmes. Specifically,
those projects promoted by modest local promoters were aimed at the promotion of
SMEs, crafts and the provision of services.
Thus, the objective of the research is to analyse these types of projects, putting
emphasis on several issues such as (1) the typology of their promoters; (2) the
innovative content of the investments made; and (3) their long-term viability.
This chapter is structured as follows. In the introduction, the context of the
investigation is discussed, analysing the origin and characteristics of rural development
programmes, and the objectives are specified. In the following section, the methodo-
logical aspects are detailed. In the third section, the results of the investigation are
addressed. Finally, in the fourth section, its most relevant conclusions are discussed.
2 Methodology
2.1 The Choice of the Region of La Vera as an Object

of Study of the Case
Within a region such as Extremadura, which in itself constitutes an ideal scenario to

analyse the application of rural development programmes (González, 2006), the
region of La Vera has a series of characteristics that make it be considered a
paradigmatic case study.
The choice of the Case is a decision of great importance that determines the
success of an investigation of this type. From the methodological point of view, it is
essential
(a) For the chosen case to have clear limits.
Located in the northeast of the province of Cáceres, with an area of
885.98 km2, and composed of a total of 19 municipalities, the region of La
Vera borders to the north with the southern tip of the Sierra de Gredos and the
Valle del Jerte; to the east with the provinces of Ávila and Toledo; to the south
with the Tiétar River; and to the west with the region of Plasencia (Fig. 1).
Fig. 1 Limits and location of the scope of study
(b) For it to be a relevant case, valid to contrast what one wishes to study.
The evolution of this region is representative of the trend followed by the entire
rural area of Extremadura and Spain. Since the 1980s, La Vera has had to face a real
structural change in circumstances where the economy was characterized by its low
diversification, the same as many other rural areas. In addition, there has been
excessive dependence on employment and income from the primary sector,
scarcely qualified human resources, a substantial lack of infrastructure and unem-
ployment rates higher than the regional and national average, etc.
However, in order to face this conversion process, there are a series of
resources in La Vera that make it an ideal framework to implement the rural
development programmes analysed. The following are included: (1) a large
number of natural, landscape and cultural resources, which result in a great
potential for rural tourism development; (2) La Vera has a long tradition in
developing a series of products, which are very typical of the area, of high
quality, and that are even distinctive elements of the region, such as paprika,
tobacco or goat cheese; and (3) the existence of a local business fabric charac-
terized, precisely, by its modest dimension, in line with one of the main lines of
action of these types of programmes.
2.2 Approach to Research and Sample Selection
In relation to the time horizon of the research, studying a rural development strategy
requires perspective. Therefore, the proposed analysis will refer to a sufficiently long
period so that such programmes can bear fruit and be long enough in time to be able
to analyse the viability that in the long term, the projects driven by it may have had.
Table 1 Distribution by measurements of the investment made in Proder I and II in La Vera

Proder I % Proder II %
Operation of the CEDER and technical assistance 608,532.98 11 666,967.20 12
Recovery and conservation of the environment 1,227,340.71 23 1,097,471,54 20
Total non-productive measures 1,835,873.69 34 1,764,438.74 32
Promotion of rural tourism 2,157,490.16 40 2,072,606.99 38
SMEs, crafts and services 943,459.43 17 722,488.60 14
Valorization of agricultural production 483,272.34 9 886,140.89 16
Total productive measures 3,584,221.93 66 3,681,236.48 68
Source: Own elaboration based on the data provided by ADICOVER
Therefore, the temporal scope of the investigation will cover the two editions in
which the Proder Programme was applied, from the second half of the 90s to the first
half of the 2000s. A decade seems a reasonable period of time for the action of this
type of programme to be materialized on the territory.
In their development strategies, these programmes try to take advantage of all the
productive activities that are carried out, or can be carried out, on the territory. This
multisectorial nature is applied to the programme structure. Although there are
differences in the denomination of the different measures in the two editions of the
Proder Programme, Table 1 groups them.
Due to the productive nature of the projects implemented within the scope of
SMEs, crafts and services, most of the investments made within this line of action
will have a promoter and a private nature. However, there are also a certain number
of actions led by the Local Action Group itself and financed mainly by the public
resources of the programme.
To analyse some of the issues raised in the research objectives, it was necessary to
resort to a qualitative methodology based on extensive fieldwork. The main source
of information was conducting interviews with private promoters who implemented
their projects within the measure indicated.
The information obtained from the “in situ” evaluation of each of the projects that
were part of the sample should also be emphasized. The decision to hold the interviews
at the investment location (despite having to do many journeys, both to the region and
its different locations) was very useful as it provided direct contact with the key people
of the Case Study, it made it possible to understand—first hand—the objective of the
investments made and, where appropriate, their innovative nature.
When conducting interviews, to obtain a sample of the most interesting actions
promoted by private promoters, the following criteria were applied:
(a) The drive and the main source of financing for the action were private.
(b) The Proder subsidy had a minimum entity of €12,000.
(c) The contribution of Proder represented at least 20% of the final investment.
According to their typology, Table 2 classifies the projects under analysis, details
the investment and the number of projects carried out, as well as, in the case of
private projects, the representativeness of the sample, based on the criteria.
Table 2 Representativeness of the sample according to the type of project

Total Projects Investment
projects Investment sample sample %
Projects of a public 5 29,999.14
nature
Promotion of crafts 3 24,524.41
Other projects of a public 2 5,474.73
nature
Projects of a private 28 1,635,948.89 12 1,113,372.27 68.05
nature
SMEs linked to crafts 4 284,217.80 2 267,557.31 94.14
SMEs for the provision of 14 1,032,667.0 7 659,317.51 63.84
services
SMEs of industrial 10 319,063.29 3 186,497.45 58.45
character
Source: Own elaboration
Investigations based on Case Studies do not justify their representativeness based

on conducting a large number of interviews. In this type of analysis, representative-
ness cannot be justified in statistical terms, because the same methodology used
limits the fieldwork to the case object of investigation, but must be justified in
analytical terms, proving (as done) that “the case is appropriate for the type of
theoretical discussion that is to be explained” (Coller, 2000, p. 56).
Based on this premise, conducting interviews with a sample of private promoters
allows for the qualified opinions of those who directly participate in the management
and implementation of practically 68% of the investments made by private pro-
moters. In addition, it should be noted that, in relation to public projects,
interviewing members of the technical team of the LAG is performed in order to
collect relevant information regarding the objectives and content of this type of
project.
3 Results of the Investigation
3.1 Typology of the Promoters
One of the objectives of this research was the analysis of the type of promoters, who
make different investments by taking advantage of Proder funds. Although the
emphasis of the research focuses on private projects, as already mentioned, in the
productive measures, there will also be a certain number of actions promoted by
public entities such as the Local Action Group itself, City Councils or several kinds
of Social groups.
Unlike what happened in other productive measures, it is worth noting that
among these possible promoters, in this measure, all actions of a public nature
Table 3 Typology of public investments addressed by the LAG

Projects SMEs Crafts Services
Projects of a public nature 5 4
Projects at fairs and meetings 3 3
Editing material, technical reports 1 1
Other transversal projects 1 – – –
Table 4 Types of promoters and projects of a private nature

Self-
employment Other companies (SMEs with
Projects Microenterprises employees)
Projects of a sectoral nature 24 17 7
Projects oriented to industrial 8 7 1
SMEs
Projects oriented to SMEs 12 8 4
services
Projects oriented to SMEs 4 2 2
crafts
Computer modernization 4 – –
projects
have been promoted by the LAG itself. Based on that premise, the following table
classifies the investments made according to their orientation, confirming that the
fundamental purpose of these types of actions was the promotion of crafts (Table 3).
As noted, the measure of SMEs, crafts and services has a productive nature, so the
majority of promoters are private. Of these, more than 70% of the projects were
implemented by very small enterprises, with the fundamental purpose of creating or
consolidating the employment of the promoters themselves. This can be a good
example of the coherence between the philosophy of the measure and its
implementation.
It is also necessary to refer to the sectorial distribution of the projects. Half of
them are aimed at the provision of services, although those that are of an industrial
nature and modernize their businesses supported by Proder funds are noteworthy.
Finally, the fact that craftsmanship is the only activity in which projects led by small
enterprises are not a majority is striking (Table 4).
In line with the measure analysed, four actions aimed at the purchase of computer
equipment are carried out. Even if it is an eligible expense, both due to the purpose of
the investment (the mere acquisition of that equipment) and due to its small amount,
to avoid this type of project conditioning the correct interpretation of the sectorial
distribution from the rest and the nature of its promoters, the decision was to
differentiate them in the previous table.
3.2 Innovative Content of the Investments Made
As stated in the first section, in the call for the Leader II Initiative, the European
Commission increases its demands regarding the innovative content of the financed
projects. In this endeavour, it differentiates between those innovations related to the
product, the production process or any other consideration (European Commission,
1994). Based on this criterion, this research aims to classify the investments made
based on their innovative content. Thus, the three categories described in the
following Table 5 will be used.
Classifying projects based on their innovative nature requires analysing the
investment objectives and the means devised to achieve them: acquisition of
machinery and/or technology, construction of facilities, redefinition of products,
market research, etc. At the same time, this requires knowing the circumstances,
nature and implementation of the investments. Therefore, it is necessary to accom-
pany this classification exercise with a brief explanation of the presence of some of
the aspects indicated in the implemented projects.
None of the projects managed directly by the Local Action Group shows a
significant innovative component. The majority of these are modest actions to
promote crafts, complementary to those of a private nature, but without a significant
or appreciable added value on them.
Of the eight projects carried out by industrial SMEs, half of them have a high
innovative content. Although they are related to very diverse activities (confection-
ery, textile or carpentry), their characteristics are very similar: investments that
improve production spaces and involve technological advances that result in the
benefit of the final product. This type of investment involves an improvement, both
of the manufacturing processes and of the manufactured products; although the
profile of industrial actions with average innovative content is similar, their improve-
ments only affect one of these two aspects.
Regarding the provision of services, it should be noted that of the 12 projects,
only three have a high innovative content. However, these three actions are those
that involve a greater investment and were aimed at the new construction of
endowments and the acquisition of specialized machinery. Regarding the type of
activity, two of these three actions were addressed by each graphic printing
Table 5 Categories for the classification of projects according to their innovative content
Innovative
content Description of the innovation
High The investment made means advances in both the product and the
manufacturing process
Medium The investment made implies advances in the manufacturing processes or in the
manufactured product, but not in both elements at the same time
Low The investment made has a certain value by itself, but it does not imply
advances neither the products nor in the manufacturing processes
Source: Compiled from European Commission (1994)
Table 6 Classification of investments made based on their innovative content

Projects High Medium Low
Projects of a public nature 5 29,999.14
Projects at fairs and meetings 3 14,098.75
Editing material, technical reports 1 13,225.39
Other transversal projects 1 2,675.00
Projects of a private nature 28 1,057,371.13 340,456.69 238,121.07
Sectoral projects 24 1,057,371.13 340,456.69 213,781.52
Projects oriented to industrial SMEs 8 127,089.57 172,448.79
Projects oriented to SMEs services 12 764,194,49 151,347.41 112,311.28
Projects oriented to SMEs crafts 4 166,087.07 16,660.49 101,470.24
Computer modernization projects 4 24,339.55
Total projects 33 1,057,371.13 340,456.69 268,120.21
company, and the third one consisted of the construction and equipment of a training
centre (Table 6).
In figures, half of the projects in the service sector have an average innovative
content, although the investments implicit to them represent only a fifth of the
previous ones. The diversity of these types of activities is broad: pre-cooked food,
photography, food distribution, etc. These are modest projects that involve improv-
ing the provision of services but are aimed at activities that, by themselves, do not
have a high technological component.
Despite the investments being scarce, the four investments aimed at the promo-
tion of crafts are very heterogeneous in innovation. Almost 60% of the resources of
these actions are concentrated in a single project aimed at the restoration of works of
art; the acquisition of technology and the creation of the precise facilities for the
practice of this activity are the fundamental purposes of an action characterized by its
high innovative content.
In contrast to that action, there is another investment of a considerable amount,
aimed at the creation of a showroom of wooden crafts. The purpose of the project is
limited to the creation of that physical space, without this implying any relevant
change in the production processes or the final product. Finally, on average, in terms
of their innovative content, there are two modest projects that involve the modern-
ization of the machinery used, but which do not change the final result of the product
(on the other hand, something logical in the case of a handmade product).
It is worthy of mention that none of the four actions aimed at the mere acquisition
of computer equipment provides any added value for the companies that
implement them.
Regardless of the public or private nature of the project, Fig. 2 classifies the
innovative content of the investments according to the three categories described; the
fact that only 16% of the investments had a low innovative content accounts for the
presence of an innovative component in the majority of the projects promoted. On
the other hand, it is also worth mentioning the fact that 65% of the investments made
0.16
0.2
0.64
HIGH MEDIUM LOW
Fig. 2 Innovative content of the investments made. Source: Authors own figure
1,200,000.00
1,000,000.00
800,000.00
600,000.00
400,000.00
200,000.00
0.00
GAL Self employment Others companies Computer Equipment
High Medium Low
Fig. 3 Innovative content of investments by type of developer. Source: Own elaboration
resulted in a simultaneous progress in the production processes and in the products

obtained.
If the innovative nature of the projects is related to the type of promoter,
interesting conclusions are obtained. The first one, and most obvious, is that prac-
tically all the investment (97%) is promoted by two types of agents: microenterprises
(they implement 28%) and, especially, larger enterprises with employees, which
commit 69% of the total resources of the measure. In turn, this last type of enterprise
drives projects with a greater innovative content: 93% of the most innovative
investments are promoted by large enterprises (Fig. 3).
Regarding the innovative nature of those projects that are aimed at self-
employing their promoters, it should be noted that most of the investment (60%) is
characterized by having an average innovative content. It is also worth highlighting
the fact that all the projects promoted by this type of developer with a high
innovative content are carried out in industrial activities.
Unlike the previous case, if in relation to larger companies, the sector in which
investments with a greater innovative content are implemented is analysed, it is
found that most of them (almost 80%) are engaged within the service sector.
Finally, although quantitatively they are not relevant, the fact that the projects
undertaken by the LAG have little innovative value is worth mentioning.
3.3 Long-Term Viability of the Investments Made
As explained in the section referring to the methodology, in the analysis of this third
question, all the projects carried out are no longer taken into account, but rather a
sample of them, based on the criteria set forth in the aforementioned point. The study
of the type of promoters and their innovative content enables to start with a
characterization of the projects included in the sample. Table 7 reflects this clearly.
The sample seems representative of all sectorial investments made since (1) it
includes projects in the three sectors and, in addition, in a similar proportion to the
one they hold within the total of implemented actions; (2) both types of promoters
are part of it; and (3) it includes actions of diverse innovative content.
Regarding conducting interviews, it should be clarified that it was not possible in
two of the projects: in one case, the transfer of an industrial activity by the original
promoter (however, it should be noted that at the time of completion of the
investigation, that project was still operative). In the second case, it is a service,
self-employment project and with an average innovative content that had ceased its
activity. Therefore, ten promoters are finally interviewed.
Table 7 Characterization of the projects included in the sample

Number of Promoter and innovative
Project type projects Investment content
Projects oriented to industrial 3 14,594.91 Self-employment
SMEs 93,661.29 Self-employment
52,857.82 Other companies
Projects oriented to SMEs 7 50,470.90 Self-employment
services 101,151.28 Self-employment
Projects oriented to SMEs crafts 2 166,087.07 Other companies
In relation to the feasibility of the projects carried out, the results of the interviews
could not be more enlightening, since all the interviewees who had carried out their
projects in activities specific to the industrial sector and the service sector confirmed
their satisfaction with the investments made and, therefore, their viability.
The fact that this response is the same, regardless of the type of promoter or the
innovative content of the project, may be an indication that these two factors do not
significantly determine the viability of the investments. This could be a consequence,
to a greater extent, of the opportunity, of the virtue itself of the project carried out; it
could even be influenced by the sector or the type of business associated with the
investment, since the viability of some projects or others is not homogeneous among
the different lines of action typical of rural development programmes.
Leaving aside the fact that several researchers agree with this same diagnosis
(Navarro, Cejudo, & Cañete, 2016, 2018; Navarro, Cejudo, & Maroto, 2012), the
results of this investigation corroborate this, given that in a sense opposed to the
previous one, the answers provided by the promoters of craft activities also leave
little room for interpretation. None of the two projects selected in the sample were
considered viable. In fact, at the time of drafting these lines, both projects had ceased
their activity.
4 Conclusions
When applying their strategies, rural development programmes are based on a series
of measures whereby they aspire to promote the economic diversification of their
areas of intervention. Among these measures, this research focuses on the analysis of
investments aimed at the promotion of SMEs, the provision of services and the
enhancement of crafts. To do this, we resort to the case study methodology.
The choice of La Vera as a field of study is justified, given that this region can be
considered an ideal framework in which to implement rural development policies. In
particular, given the measure under analysis, it is worth noting the existence of a
business network based more particularly, on small and medium-sized enterprises.
The research shows that when applying these programmes and promoting their
projects, the entrepreneurial capacity of small local entrepreneurs is especially
relevant. More than 70% of private projects had a small local businessperson as a
promoter and, as their purpose, creating and/or consolidating their own jobs or of a
close family member.
Rural development programmes are set up as instruments capable of promoting
innovation among the local productive fabric. More than 60% of the investments
involved improvements in the production systems and in the final products. In
addition, another 20% of the committed resources implied improvements in one of
those two aspects.
If the promoter and the innovative content of the projects are related, it is possible
to point out some ideas of certain interest, such as (a) the projects managed directly
by the LAG are characterized by their low innovative content; (b) most of the
investment with high innovative content is driven by companies with employees,

while in the actions led by micro-enterprises, investment with a high innovative
content is concentrated in industrial projects; (c) in self-employment projects, most
of the investment has an average innovative content.
Regarding the viability of investments, a distinction must be made between those
made in the industrial sector and the services sector, where all the promoters
interviewed consider their investments viable regardless of their innovative content
or the type of promoter. In the crafts sector, the opposite occurs: in the case of two
projects with different innovative content, none of the promoters considers their
business viable.
In this last respect, to assess the relevance that the amount of investments could
have on the non-viability of these projects, it would have been interesting for the
criteria of the sample to have allowed us to use a smaller project.
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Entrepreneurship and Innovation Based
on the RIEMPEI Model: Inequality
of Opportunities in Mexico
Martha Ríos-Manríquez, Lizbeth Pérez-Rendón,

and María Dolores Sánchez-Fernández
Abstract To be able to meet the needs of students and society in general, univer-
sities have changed their substantive activity by modifying the way they educate
therefore significantly changing their mission (Başçı and Alkan, Procedia—Social
and Behavioral Sciences 195:856–861, 2015; Munuera and Gómez, Opción
8:329–348, 2016) and making innovations in education (Olokundun, Ibidunni,
Falola, Salau, and Oyafunke-Omoniyi International Journal of Entrepreneurship 22
(1), 1–10, 2018). As Martin (El papel de las universidades en la comunidad de
emprendimiento, 2017) points out, universities are looking for the generation of
entrepreneurs which in turn creates the tendency of universities to include entrepre-
neurship in the professional training of their students (Din, Anuar, and Usman,
Procedia—Social and Behavioral Sciences 224, 117–123, 2016; Palomares and
Chisvert, REDU Revista de Docencia Universitaria 12(2), 205–230, 2014). Through
the development of these activities, it is possible to offer opportunities to university
students to overcome some of the inequalities that occur in the country (Mexico).
The objective of this study is to establish a reference model on the influence of the
following variables: self-esteem, need for achievement, risk assumption, and crea-
tivity in the innovation traits of future entrepreneur engineering students in the
Public Institutions of Higher Education in Mexico.
In order to respond to the objective posed in this investigation, a questionnaire
consisting of two sections using a sample of 368 engineering students from the
Public Institutions of Higher Education (IES) in Mexico between the ages of 18 and
34 years was designed. The first section includes the student profile. The variables
which influence the innovation traits of future engineering entrepreneurs from the
M. Ríos-Manríquez
University of Guanajuato, Guanajuato, México
L. Pérez-Rendón
Higher Technological Institute of Purísima del Rincón, Guardarrayas, México
e-mail: lizbeth.pr@purisima.tecnm.mx
M. D. Sánchez-Fernández (*)
University of A Coruña, A Coruña, Spain
e-mail: msanchezf@udc.es

142 M. Ríos-Manríquez et al.
IES in Mexico can be seen in the second section: self-esteem (four items), need for
achievement (four items), and risk assumption (eight items)—Íbañez (Actitudes
emprendedoras de los estudiantes universitarios de la CAPV, Universidad de
Deusto, Bilbao, 2001), creativity (eight items), and the dependent variable: innova-
tion traits (eight items)—Capella, Gil, Martí, and Ruíz (Pedagogía Social
28, 169–188, 2016).
This research follows a quantitative approach by means of a descriptive, corre-
lational, and linear regression analysis, creating a proposal called the RIEMPEI
model (features of enterprising innovation in engineering students in the IES in
Mexico). The statistical analysis shows that the RIEMPEI model meets the require-
ments of all the tests to which it is submitted, making it an appropriate model to
evaluate the objective posed in this investigation.
1 Theoretical Framework
Entrepreneurship has become more and more important due to globalization

(Aceituno, Landlord, Squire, & Bousoño, 2018; Godínez & Canales, 2018; Rocha,
Arévalo, & Cocunubo, 2018). The growth of the population is at a higher rate than
the growth of the economy (Ovalles-Toledo, Moreno, Olivares, & Silva, 2018). The
increase of commercial treaties (Barragán & Ayaviri, 2017) which has evolved,
revealing itself as a success factor for the impulse of the economy of the nations
(Garcidueñas, Rodríguez, & Licona, 2017), hence, influences the social and cultural
evolution of the countries (Minialai, Bossenbroek, & Ksikes, 2018).
The term “entrepreneurship” means new companies which offer products and
services, thus encouraging the creation of jobs which in turn allows for the decrease
of economic instability by widening the supply of job positions but also allowing us
to channel individual creativity to promote innovation (Godínez & Canales, 2018;
Ovalles-Toledo et al., 2018). Economic development depends on the introduction of
innovations to the business fabric. There is a great theoretical background which
supports innovation as the central axis of development (Barragán & Ayaviri, 2017),
converting entrepreneurship into the strategic driver of a virtuous circle for economic
development (Álvarez & Grazzi, 2018; Blázquez, Zaldívar, & Leite, 2018;
Marulanda & Morales, 2016; Ovalles-Toledo, et al., 2018; Martin, 2017).
The capacity of economic galvanization is the reason why entrepreneurship is of
great interest to this investigation. It is of great importance for the university to
understand its background and consequences (García, Déniz, & Cuéllar, 2015) as it
plays an important role in entrepreneurship training (Aceituno et al., 2018; Vega &
Mera, 2016).
Entrepreneurship is the means of capturing new knowledge and converting it into
business opportunities. During this process, it is the entrepreneur who intervenes as
an exchange agent by taking advantage of the dissemination of this knowledge
(Sánchez, García, & Mendoza, 2015). What clearly emerges on this basis is that in
order to achieve the success of entrepreneurship, the aspirations, motivations, and
competencies of the entrepreneurs themselves play a key role (Marulanda &
Entrepreneurship and Innovation Based on the RIEMPEI Model: Inequality. . . 143
Morales, 2016), thus acquiring great importance in their ability to promote their
orientation in the university environment. (Aceituno et al., 2018). Entrepreneurial
talent can be developed within institutions of higher education (Vega & Mera,
2016); however, there are still many weaknesses in university education in reference
to innovation and entrepreneurship. It is clear that there is still a lot of work to be
undertaken within universities (Nikulin, Viveros, Dorochesi, Crespo, & Lay, 2017).
Broadening the knowledge of the characteristics of entrepreneurs will allow us to
make future decisions to encourage entrepreneurship (Aceituno et al., 2018).
For this reason, entrepreneurship is a current topic of special relevance. It creates
great and equal interest on behalf of the decision makers of public policy and
investigators (Ovalles-Toledo et al., 2018). Making the right decisions on entrepre-
neurship within universities is critical for making the correct use of the limited
resources it has (Aldrich & Ruef, 2018; Jansen, van de Zande, Brinkkemper, Stam,
& Varma, 2015).
An important consideration to be taken into account in countries with growing
economies is that of innovation. This is given predominantly at the level of processes
and not in research and development activities (Rocha et al., 2018), the latter
promoting greater economic development (Alvarez & Grazzi, 2018). For this reason,
entrepreneurship must be oriented toward innovative activity which can materialize
into new products and markets (Aldrich & Ruef, 2018), highlighting the demand for
innovative people who have the ability to identify needs and convert them into
market opportunities (Blázquez et al., 2018).
Due to the fact that the person is the backbone of the venture (Marulanda &
Morales, 2016), it is easy to understand why there is a large number of research in the
literature aimed at identifying the characteristics of the entrepreneur (Escat & Romo,
2015; García et al., 2015; Maluk, 2014; Ovalles-Toledo et al., 2018; Salati, Sadao, &
Pedro, 2018; Sánchez et al., 2015; Shirokova, Osiyevskyy, & Bogatyreva, 2016) and
entrepreneurship at the university (Ahmad, Abdul, & Mohd, 2015; Başçı & Alkan,
2015; Beraza & Rodriguez, 2014; Bergmann, Geissler, Hundt, & Grave, 2018;
Berríos & Espina, 2014; Cao & Zhou, 2018; De la Cruz & Berdugo, 2016; Din,
Anuar, & Usman, 2016; Dodescua, Pop-Cohut, & Chirilla, 2014; Ferrerira, Loiola,
& Guedes, 2017; Fichter & Tiemann, 2018; Goyanes, 2015; Goyanes & Serra, 2016;
Huber, Sloof, & Praag, 2014; Jansen et al., 2015; Kirkwood, Dwyer, & Gray, 2014;
Medina, Bolívar, & Lemes, 2014; Mirani & Yusof, 2016; Oganisjana & Laizans,
2015; Olokundun, Ibidunni, Falola, Salau, and Oyafunke-Omoniyi, 2018;
Palomares & Chisvert, 2014; Paz & Pulgar, 2017; Sanabria, Morales, & Ortiz,
2015; Sánchez & Rodríguez, 2015; Shih & Huang, 2017; Shirokova et al., 2016).
However, although it is common to find studies relating to entrepreneurial intent
(Adekiya & Ibrahim, 2016; Álvarez & Grazzi, 2018; Barba & Atienza, 2018;
Farhah-Fazira-Binti-Shamsudin, Mamun, Che-Nawi, Azwin-Binti-Md-Nasir, &
Zakaria, 2017; Ismail et al., 2015; Maluk, 2014; Maresch, Harms, Kailer, &
Wimmer-Wurm, 2016; Martinez, Garcia, & Duarte, 2018; Miranda, Chamorro-
Mera, & Rubio, 2017; Salati et al., 2018; Yurtkorua, Kabaday, & Doğanay, 2014),
no studies were found to identify the innovative features of people, entrepreneurs, or
future entrepreneurs.
It is also of vital importance to point out the importance of distinguishing between

attitude, intention, and entrepreneurial behavior. The organization of resources in
business activity is part of the entrepreneurial behavior (García et al., 2015), which in
turn is expected to be seen as a result of the development of entrepreneurship
(Marulanda & Morales, 2016) and not any kind of entrepreneurship but the one
related to innovation, which is what will allow economic growth (Sánchez, et al.
2015). This is a precedent for entrepreneurial behavior. The best indicator (Adekiya
& Ibrahim, 2016; Romero-Martínez & Milone, 2016) is entrepreneurial intention
which refers to the will of the person to have business activity for in the future. On
the other hand, it should be noted that the antecedent of the intention is the attitude
that refers to the cognitive state which favors entrepreneurship (García et al., 2015).
There is evidence suggesting that companies created by university students are
those which have a higher growth rate in Latin America (García, Canton, &
Torreblanca, 2015). Therefore, taking this statement into account, identifying inno-
vative traits in students will allow universities to invest their limited resources
(Aldrich & Ruef, 2018) to enhance entrepreneurial intent (Ismail et al., 2015).
This will result in companies not only promoting economic growth by increasing
the number of companies (Paz & Pulgar, 2017) but also promoting the true economic
development based on innovation (Barragán & Ayaviri, 2017).
This becomes even more important in Latin American countries, which is in fact
the region with the greatest inequality in the world, Mexico being no exception
(Moreno-Brid, Garry, & Krozer, 2016). In general, the economy in this region has
had little development, while countries with emerging economies from other regions
have been able to develop at the level of developed economies. In general, Latin
American countries have not achieved this development due to the lack of innova-
tion and entrepreneurship, which is a condition that has been maintained throughout
history (Alvarez & Grazzi, 2018).
In Mexico, there are also circumstances of regional heterogeneity in quality and
access to education as well as being a country with very low social mobility, low
labor incomes, low growth, and a significant gender wage gap (COLMEX, 2018).
Commercial opening hours have only benefited some regions (Germán-Soto &
Escobedo, 2011).
In this context, university acquires an important role in the economic develop-
ment of the country, from the perspective that knowledge is the key factor for the
creation of competitive advantage (Walter & Block, 2015). If the university cannot
dedicate itself exclusively to the promotion of entrepreneurship, it will, however,
become a fundamental part of its mission (Munuera & Gómez, 2016).
1.1 University Entrepreneurship
Within the knowledge of economy, the promotion of innovation and entrepreneurship

in universities has become a guideline in university education (Cao & Zhou, 2018)
not only in degrees oriented to administration and economics but in all university
studies (SHIH & Huang, 2017).
However, this is not a new practice. Since the 1980s, entrepreneurship has played
an important role in universities around the world (Garcidueñas et al., 2017). In the
same way, innovation has acquired greater importance in universities. The latter has
become a link with the industry for the generation of innovation (Zisis, Moya, &
Molina, 2017).
Educational programs are an important element that can channel and promote the
entrepreneurial orientation of students. It is of such high importance that, in fact, the
support given to university students by the university could even substitute family
influences in the entrepreneurial decision-making process of the students (Minialai
et al., 2018).
In addition, the cognitive contribution made in entrepreneurship programs ben-
efits the viability of the business projects (Aceituno et al., 2018). On the other hand,
it should be noted that the university also favors innovation as part of the entrepre-
neurship (Godínez & Canales, 2018).
Governments have made great efforts in supporting entrepreneurial activities in
universities, visualizing it as the means to meet the growing demand for jobs
(Ovalles-Toledo et al., 2018).
1.2 Higher Studies: Engineering
In the 2017–2018 school year, there were a total of 1,014,500 students enrolled in
the 1863 engineering programs in the different public university institutions of
higher education (ANUIES, 2018) in Mexico. The training of engineers is a funda-
mental factor in the development of nations (Zisis et al., 2017). In this way, the
university can promote innovation and entrepreneurship through its actions of
generating and exchanging knowledge, which in turn allows future companies to
have a sustainable competitive advantage (Fichter & Tiemann, 2018; Walter &
Block, 2015). For this reason, the generation of jobs through entrepreneurship has
often been manifested as one of the activities being promoted in the university
(Castiglione, Licciardello, Sánchez, Rampullo, & Campione, 2013). Although the
operations of the university are not limited to entrepreneurship (Sanabria et al.,
2015), it is of great importance since the correct training of professionals will
enhance the development of society in general (Olokundun et al., 2018).
1.3 Entrepreneurial Variables Which Influence Future

Entrepreneurs
1.3.1 Innovative Traits
The entrepreneur is characterized by a perpetual state of innovation (Tovar, Victoria,

Tovar, Troncoso, & Pereira, 2018). In addition to literature, a great deal of empirical
evidence can be found, which demonstrates that entrepreneurship and innovation
play a key role in increasing productivity, research, and development (Alvarez &
Grazzi, 2018).
Innovation and entrepreneurship are ingrained in the entrepreneur who seeks to
change the way things are done (Aceituno et al., 2018). Innovation changes products
and business models (Garcidueñas et al., 2017), influencing long-term economic
growth through creative destruction (Godínez & Canales, 2018).
It is important to note that innovation and creativity are by no means synony-
mous. Creativity is related to the ability to generate new ideas while innovation
implies that these ideas are anchored in the market (Aldrich & Ruef, 2018).
How innovative a society is depends to a great extent on the economic and social
conditions that promote or inhibit the creation of companies. Conditions influence
people and overall social and personal conditions promote innovation (Ovalles-
Toledo et al., 2018). Entrepreneurs have apparently greater opportunities for the
development of creativity and innovation, compared to employees of established
companies. This is due to the fact that they do not work within a bureaucratic
structure, which in turn allows them to have greater freedom of action. However,
they are also forced to seek creative solutions with the resources available. There-
fore, it is reasonable to use the presence of innovation as a marker of entrepreneurial
spirit (Aldrich & Ruef, 2018).
1.3.2 Self-Esteem
Self-esteem has a multifaceted character and is constituted by elements such as self-

concept, self-image, and self-efficiency. Considering self-esteem as an attitude is a
factor of great importance in explaining the behavior of individuals since it includes
value judgments which the person makes of oneself which through approval or
disapproval promotes a sense of capacity, significance, success, and value (Núñez,
2015).
The entrepreneur must have the skills which allow them to detect opportunities
and take advantage of their own capacities and resources available hence the need of
self-confidence (Aceituno et al., 2018).
Assuming that the behavior of people is contingent on intentions which turn into
motivational factors, as posed by the theory of planned behavior, the success of
companies is closely linked to attitudes and control behavior of the individual who
undertakes it, thus showing the relationship between self-esteem and entrepreneur-
ship (Núñez, 2015).
1.3.3 The Need for Achievement
Although entrepreneurship is closely associated with the establishment of compa-

nies, the truth is that the concept is much broader. In fact it is an attitude which gives
the individual the capacity and motivation to start projects. This attitude is a search
engine, which joined to other behaviors, creates companies. It is important to note
that what defines entrepreneurs is the need for achievement and self-realization
(Blázquez et al., 2018).
1.3.4 Risk Assumption
Entrepreneurship requires that individuals make an investment in resources to be

able to take advantage of a market opportunity without having guaranteed success.
Therefore, the assumption of risk is indispensable for the existence of the entrepre-
neurial activity (Blázquez et al., 2018). In fact, the term of entrepreneur in its first
definitions referred to the person taking risks (Garcidueñas et al., 2017).
1.3.5 Creativity
Creativity is a fundamental component in entrepreneurship (Adekiya & Ibrahim,

2016). It refers to the ability to generate new ideas (Aldrich & Ruef, 2018) and to
discover ways of putting those ideas into action (Parra, Rubio, & López, 2017;
Zubillaga, 2015).
2 Methodology
The sample considered in this study was of 368 engineering students in the public
IES institutions in Mexico. There is statistical confidence level of 95% and a 6%
margin of error (see Table 1).
The question that gave rise to this study was the following: are self-esteem, the
need for achievement, risk-taking, and creativity, factors which determine the
innovation traits of future entrepreneurial engineers in higher education institutions
in Mexico? Therefore, the objective of this study is to establish a reference model of
the influence of the variables of self-esteem, need for achievement, assumption of
risk, and creativity in the innovation traits of future entrepreneurs, engineering
students in the higher education institutions of Mexico.
Table 1 Technical data of the investigation

Characteristic Data
Country of México
origin
Population 1,014,500 engineering students
Sample 368
Sample error 6%
Confidence level 95%
Sampling Simple random sample
method
Data collection The questionnaire was sent by email directly to the engineering students of the
public IES (Higher Education Institutions) of Mexico
Statistical Descriptive analysis, linear regression analysis by the ordinary least squares
techniques method, using the tests: Kolmogorov-Smirnov, Durbin-Watson, Breusch-
Pagan, Ramsey, and the Variable Inflation Factor tests (FIV) and Tolerance
(TOL)
Statistical SPSS Version 23 and STATA 13.1
program
Source: Authors’ own table
The following hypotheses were established based on the review of the previously
mentioned literature:
H1. The innovation traits of future entrepreneurs, engineering students in the
higher education institutions of Mexico, are determined by self-esteem, need for
achievement, risk assumption, and creativity.
In order to respond to the hypothesis posed, a questionnaire consisting of two
sections was designed. The first section was student data and the second section was
the variables which influence the innovation traits of future entrepreneurial engineers
of the IES of Mexico: self-esteem, need for achievement, and risk assumption by
Íbañez (2001), creativity and dependent variable innovation traits by Capella, Gil,
Martí, and Ruíz (2016).
This research follows a quantitative approach, by means of a descriptive analysis,
of linear regression with the Ordinary Least Squares Method, using the following
tests: Kolmogorov-Smirnov, Durbin-Watson, Breusch-Pagan for detecting
heteroscedasticity, Ramsey test for model specification, and variance inflation factor
(IVF) and tolerance (TOL) tests to detect that there are no multicollinearity problems
in the proposed model.
3 Results
The profile of the engineering students of the IES of Mexico is shown in Table 2. It is
notorious that engineering students are mostly of male gender (63.3%). The degrees
of the students who participated in this study were Business Engineering and
Business Management 1.4%, Financial Engineering 0.8%, Biomedical Engineering
Table 2 Profile of the Gender

Engineering students of
Age Female (%) Male (%) Total (%)
the IES
18 to 24 33.4 55.2 88.6
25 to 34 3.3 8.2 11.4
Total 36.7 63.3 100.0
1.9%, Automotive Mechanical Engineering 1.6%, Mechanical Metal Engineering

1.4%, Biotechnology Engineering 2.2%, Project Management Engineering 5.7%,
Energy Engineering 7.3%, Sustainable and Protected Agriculture Engineering 2.2%,
Telematics Engineering 1.1%, Information and Communication Technology Engi-
neering 21.5%, Chemical 0.5%, Nanotechnology 0.5%, Industrial Engineering and
Manufacturing 4.3%, Logistics 3.5%, Mechatronics 15.5%, Environmental Tech-
nology Engineering 7.6%, Production Systems Engineering 4.6%, Industrial Main-
tenance engineering 4.3%, Plastics and Polymer engineering 1.4%, Food and Agri-
food Processes Engineering 4.1%, Metallurgical Engineering 1.1%, Electronic
Engineering and Telecommunications 0.8%, Industrial Design 0.8%, Computer
Systems 1.4%, Agrotechnology 0.5%, Aeronautics 1.1%, and Industrial Metrology
0.8%.
The internal reliability of the instrument was 0.791 using the Cronbach Alpha
test, consistent with that established by Nunnally (1978) and George and
Mallery (2003).
3.1 Descriptive Analysis
Analyzing the variables proposed in the study, it can be seen in Table 3 that the
variables which are given most importance by engineering students in their intention
to set up a business once they finish their university studies are the need for
achievement (5.594) and innovative traits (5.101). The variable that respondents
value the least is their self-esteem (2.986). It is noteworthy that students who come
Table 3 Description of the variables of undertaking a business in university engineering students

in the IES of Mexico: personal traits, self-esteem, need for of achievement, risk assumption, and
creativity
Variables of undertaking a business in university Engineering Standard
students in the IES of Mexico Medium deviation
Innovative traits 5.1012 0.63973
Self-esteem 2.9857 0.86108
The need for achievement 5.5944 0.46989
Risk assumption 3.6352 0.60269
Creativity 4.3907 0.63233
from higher education in engineering almost partially disagree that their self-esteem
influences the start of a business.
3.2 Association Among Entrepreneurship Variables

in University Students
Analyzing the correlation among entrepreneurship variables in the engineering

students of the IES of Mexico, the results are shown in Table 4; it is deduced that
innovative traits are positively and significantly associated with p < 0.001, with the
need of achievement (r ¼ 0.710, creativity (r ¼ 0.718), and the variable which is
least associated with it is risk assumption (r ¼ 0.213), and it should also be noted that
it is associated negatively with the variable of self-esteem (r ¼ 0.230).
3.3 RIEMPEI Model
The RIEMPEI model (entrepreneurial innovation features in the engineering stu-

dents of the IES in Mexico) is proposed to determine the influence of self-esteem,
need for achievement, risk assumption, and creativity variables in the innovative
features of the engineering students of the IES of Mexico. The methodology applied
in this research was multiple regression, using the Ordinary Least Squares Method
(OLS). In order to ensure that the variables proposed in this study are the best, Linear
Unbiased Estimators (LUE) were applied in which the Kolmogorov-Smirnov,
Durbin-Watson, Breusch-Pagan tests were used for the detection of
heteroscedasticity, the Ramsey test for model specification, and the variance infla-
tion Factor (VIF) and tolerance (TOL) tests to detect that there are no
multicollinearity problems in the following proposal:
Table 4 Association among entrepreneurship variables in engineering students of the IES of

Mexico
Innovative Self- The need for Risk
Variables traits esteem achievement assumption Creativity
Innovative traits 1
Self-esteem 0.230 1
The need for 0.710 0.245 1
achievement
Risk assumption 0.213 0.167 0.032 1
Creativity 0.718 0.141 0.503 0.300 1

The correlation is significant at the level 0.01 (bilateral)
RIEMPEIi ¼ β0 þ β1 AUTEIi þ β2 NLEIi þ β3 AREIi þ β4 CREEIi þ εi
Where:
• RIEMPEIi ¼ entrepreneurial innovation features in the engineering students of
the IES in Mexico
• AUTEI ¼ Engineering students’ self-esteem in the IES of Mexico
• NLEI ¼ The need for achievement in engineering students in the IES of Mexico
• AREI ¼ Risk assumption in the engineering students in the IES of Mexico
• CREEI ¼ Creativity in engineering students in the IES of Mexico
• εi ¼ Random error term
The analyzed regression RIEMPEI model (see Table 5) explains 68.1% of
variance of the dependent variable (R2:0.681) with the independent variables. The
T-test reveals that the variables contribute significantly to the prediction model. Test
F was also applied (197.195), which indicates that jointly, the independent variables
are relevant when explaining the features of entrepreneurial innovation in engineer-
ing students in the IES in Mexico. A significance level of p < 0.001 was reached. It
has been ruled out that there is correlation between errors. In order to do so, the
Durbin-Watson test (2.063, with a significance level of 1%) was applied. The results
indicate that there is not enough statistical evidence to show that there is autocorre-
lation. Checking the normality of waste, the non-parametric test Kolmogorov-
Smirnov ¼ 0.041 was applied.
Table 5 Model RIEI

Factors influencing innovation resources in the engineering students of the IES of General
Mexico model
Innovative traits 0.048
Self-esteem 0.631
The need for achievement 0.077
Creativity 0.459
Constant 0.583
R2 adjusted 0.681
F 197.195
Prob > F 0.000
Kolmogorov-Smirnov 0.041
Prob > Z 0.187
Breusch-Pagan 1.07
Prob > c2 0.301
Test Ramsey 1.95
Prob > F 0.122
Durbin-Watson 2.063
Observations 368

, , Indicate significance levels of 10, 5, and 1%, respectively
Table 6 Indicators of Variable Collinearity statistics

multicollinearity of the
Tolerance FIV
Entrepreneurial Intention
model of the engineering Innovative traits 0.390 2.565
students of the IES of Mexico Self-esteem 0.302 3.317
The need for achievement 0.370 2.702
Creativity 0.531 1.885
The homoscedasticity test was applied using the Breusch-Pagan test to verify that
the OLS model estimators are the Best Linear Unbiased Estimators (BLUE). The
results reached indicate that there is no heteroscedasticity in the proposed model
(Breusch-Pagan ¼ 1.07, with a Prob > C2, 0.301). To ensure that none of the
proposed variables were excluded in the model, the Ramsey test was applied. A
specification of 1.095, with a Prob > F 0.122, was obtained in this study, indicating
that no variables were excluded in the model.
In order to detect that there are no multicollinearity problems among the variables
of the model, the Variance Inflation Factor (VIF) and Tolerance (TOL) tests were
applied. From the results, it follows that all the explanatory variables have a VIF of
less than 10, which indicates that there are no multicollinearity problems (see
Table 6).
Determining the RIEMPEI Model (entrepreneurial innovation features in engi-
neering students of the IES in Mexico), the proposed formula is as follows:
RIEMPEIi ¼ 0:583 0:048AUTEIi þ 0:631NLEIi þ 0:077AREIi

þ 0:459CREEIi
4 Results Discussion
In accordance with the theoretical framework, it is observed that innovative features

are closely linked to entrepreneurs (Aceituno et al., 2018; Álvarez & Grazzi, 2018;
Tovar et al., 2018). Moreover, engineering students from public universities show
high intensity of innovative features.
However, in contrast to theoretical support (Aceituno et al., 2018; Núñez, 2015),
it can be deduced from this study that engineering students do not consider self-
esteem to be so important for entrepreneurship, because they give more importance
to the need for achievement and creativity. In academic literature relevant variables
for entrepreneurship have been considered (Adekiya & Ibrahim, 2016; Aldrich &
Ruef, 2018; Parra et al., 2017; Zubillaga, 2015).
As for the association between the variables, it was seen that there are significant
bilateral relations among them. However, while authors such as Núñez (2015) in
their study see a positive relationship between entrepreneurship and self-esteem, the
result revealed in this study is that the bilateral relationship between innovative traits
and self-esteem is negative.
Finally, the proposed model showed that self-esteem, the need for achievement,
risk assumption, and creativity are good predictors of innovative traits of engineering
students.
5 Conclusions
The objective of this study was to establish a reference model of the influence of the
self-esteem, need for achievement, risk assumption, and creativity variables in
innovation traits of future entrepreneurs, engineering students in the higher educa-
tion institutions of Mexico.
Due to the importance of entrepreneurship at university (Cao & Zhou, 2018) and
innovation in economic development (García et al., 2015), this research is consid-
ered to be of special relevance. Its main contribution is to give a vision of innovation
traits using an entrepreneurship intention model of the engineering students of the
IES of Mexico.
The hypothesis “Innovation traits of future entrepreneurs, engineering students in
the institutions of higher education in Mexico, are determined by self-esteem, need
for achievement, risk assumption, and creativity” was raised. Based on the results
obtained, it was accepted, since all the proposed variables maintain a significant
relationship with the innovative traits.
The findings here will allow public policy decision makers and administrators
within universities to detect students who show innovative traits. These results will
allow them to make a rational use of the available resources in order to promote
entrepreneurship and through this improve the conditions of inequality and the
economic delay.
CONEVAL (2015) places Mexico among the countries with greatest inequality in
income distribution. That is the reason why all studies which propose improvements
in public policies in developing countries are very important. The proposals for these
improvements give rise to specific actions which need to be carried out in order to
overcome the inequality of opportunities in Mexico. These actions should be aimed
at reinforcing the areas in which institutional efforts need to be doubled, with the
purpose of overcoming inequality, reinforcing entrepreneurship, and promoting
innovation.
The Youth of Mexico (15–29 years of age) account for 26% of the population
(UNDP, 2016), who require special attention. Creating opportunities for young
people is one of the existing formulas such as mechanisms aimed at promoting
entrepreneurship among this group. By putting these actions into practice, it makes it
possible to provide solutions for the main obstacles that young people face and,
therefore, develop successful career paths in order to overcome the inequality of
opportunities in Mexico.
The limitations of this study suggest research challenges in studies to be carried

out in the future. The results of this study cannot be generalized, so it would be better
to obtain a higher representation of the entities under study from other geographical
areas in order to be able to cover a wider representation. On the other hand, it is also
suggested for future research to broaden the study to private universities by applying
quantitative methodologies. In addition, it is also suggested to expand this research
with a qualitative study (for example, interviews, focus groups), in which it would be
possible to understand how innovative traits explain entrepreneurial behavior.
Another study proposed to broaden this research is to collect the viewpoint of several
stakeholders, not just students, in order to obtain more quantitative and qualitative
information to achieve a global understanding of the innovative trait of entrepre-
neurs. It would also be interesting to collect the model applied to other sciences, in
order to adapt it to other areas of study. The purpose of proposing these studies is to
obtain appropriate formulas for promoting both innovation and entrepreneurship in
developing countries, in which the inequality of opportunities is present. With all
this, it is intended that by applying these new formulas, which lead to innovation and
entrepreneurship, the inequality of opportunities can be reduced, based on the
development of studies applied in future research.
Conflict of Interests The authors declare that there is no conflict of interests
regarding the publication of this paper.
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Social Exclusion in Ecuador with Housing
Indicators: A Regional Analysis
Diego Fernando García-Vélez, Mario Andrés Contreras-Jaramillo,

Tania Paola Torres-Gutiérrez, and Ronny Fabian Correa-Quezada
Abstract Social exclusion is a major concern in developed economies and it is of

great importance in developing countries. Exclusion directly impacts different
aspects of the individual’s well-being making social exclusion a phenomenon of
multidisciplinary interest. Therefore, the objective of this research is to analyze the
social exclusion in Ecuador considering one of its dimensions, in this case housing
and its conditions. For this purpose, a group of housing indicators is selected and,
from them, a composite indicator is constructed. This composite indicator reflects
the level of social exclusion of the Ecuadorian population at the national and regional
(provincial) levels. Data used come from the National Survey of Employment,
Unemployment and Sub-employment (ENEMDU), which was drawn up by the
National Institute of Statistics and Censuses (INEC) for the years 2014 and 2017.
The main results indicate that the exclusion situation improves nationally and
regionally (in all provinces). It can also be seen that the levels of social exclusion
are higher in the rural area and in the Ecuadorian Amazon provinces.
1 Introduction
Social exclusion directly affects different aspects of the individuals’ welfare. Since it
has effects on economic, social, and psychological factors, social exclusion also has
a multidisciplinary interest. In the literature review, it is common to find its for-
mulation as a multidimensional, multicausal, structural, and dynamic phenomenon
(Arthurson & Jacobs, 2003; Enriquez, 2007; Jiménez, 2008; Leyton Navarro &
Muñoz Arce, 2016; Hernández Pedreño, 2010).
Social exclusion is also linked with other aspects such as the inability to partici-
pate in social and political activities, the physical or emotional isolation, be ignored
D. F. García-Vélez · M. A. Contreras-Jaramillo · T. P. Torres-Gutiérrez ·

R. F. Correa-Quezada (*)
Universidad Técnica Particular de Loja, Loja, Ecuador
e-mail: dfgarciax@utpl.edu.ec; macontreras@utpl.edu.ec; tptorres@utpl.edu.ec;
rfcorrea@utpl.edu.ec

160 D. F. García-Vélez et al.
by society, the dependence of low-income (compared to the society’s average-

income) (De Haan & Maxwell, 2017; Wesselmann et al. 2016). This situation,
according to Hernández Pedreño (2010), makes difficult to establish a general con-
cept of social exclusion and a single measurement.
According to Jiménez, Luengo, and Taberner Guasp (2009), in contrast to
poverty and its references to distributive aspects, social exclusion focuses on the
agents and processes that exclude people from social participation, from access to
power, from social equity, from the basic rights of all citizens, allowing them to be
socially recognized. Another significant difference is that poverty can be analyzed
from two approaches: the absolute (mainly in middle- and low-income countries)
and the relative (high-income countries). On the contrary, social exclusion intrinsic-
ally has a relative focus, since it is based on comparing the individuals’ well-being.
According to Beck (1998), since the 1980s, social exclusion tends to replace the
term poverty. In the scenario of the new modernity, the term social exclusion
incorporates emerging processes that interfere with the social integration of a large
number of social collectives, and not just because of economic inequality. The term
social exclusion is naturally in constant construction. In the future, new studies will
be presented that contrast current concepts, proof of this is the comparison made
with notions such as, inter alia, marginalization, segregation, poverty.
The objective of this research is to analyze the social exclusion in Ecuador. In
particular, the study considers housing and its conditions, which are vital factors for
the population. The research tries to include most of the theoretical and empirical
contributions on exclusion, taking into account the Ecuadorian reality. For this
purpose, in the present work, a group of housing indicators is selected and, from
them, a composite indicator is constructed. This composite indicator reflects the
level of social exclusion of the Ecuadorian population. In addition, based on the
social exclusion index, a comparative analysis is carried out at the provincial level to
identify territorial and regional differences in Ecuador.
To measure social exclusion, the synthetic social exclusion indicator proposed by
Domínguez and Núñez Velázquez (2009) was applied, based on the works of Cerioli
and Zani (1990) and Dagum, Gambassi, and Lemmi (1992), which measure poverty
through a fuzzy-set approach. In Ecuador, there is no specific survey available to
measure social exclusion. For this reason, we consulted between different databases
and decided to work with the National Survey of Employment, Unemployment, and
Sub-employment (ENEMDU), conducted by the National Institute of Statistics and
Censuses (INEC). With this database, the evolution of social exclusion can be
measured, including the largest number of housing indicators available.
After this brief introduction, the paper is organized as follows: in Sect. 2, a
literature review on social exclusion is carried out. Next, in Sect. 3, an empirical
review on social exclusion particularly on housing is presented. Section 4 describes
in detail the data and methodology used to construct the composite index. In Sect. 5,
results are analyzed. Concluding remarks are addressed in final section.
Social Exclusion in Ecuador with Housing Indicators: A Regional Analysis 161
2 Conceptual Framework
2.1 Background (Context) and Theory of Social Exclusion
The notion of social exclusion dates back to 1960s and in the early 1970s in France
achieving great relevance in the European Union welfare policy in the early 1990s.
The term “the excluded ones” was applied to describe that fraction of the population
that had been left out of social progress prevalent in the society (Massé, 1965;
Lenoir, 1974 cited by Enriquez, 2007).
In subsequent years, in Latin American context, the term social exclusion was
used with reference to policies against poverty, due to the influence of the Inter-
national Labour Organization (ILO), and it led to the establishment of institutions
and/or social programs focus on social groups into a situation of poverty and
exclusion. In this region, according to Leyton Navarro and Muñoz Arce (2016), it
is assumed that the concept of social exclusion in its critical approach, proposed by
the works of Peter Townsend, John Veit-Wilson, and Ruth Levitas, as “(. . .) a
process carried out for some individual or institutions over certain groups of
population.”
Four characteristics of the Latin American context are identified to justify the adoption of
such a concept in the debate: i) the colonial trauma and the monopolization of channels of
influence; ii) the fragility of welfare systems and the limited coverage of rights; iii) the
deficits of citizenship and the weakness of democratic systems; and iv) the inequality gaps
(Leyton Navarro & Muñoz Arce, 2016, p. 51).
Social exclusion suggests a dual image of society, a binary interpretation. Levitas

(1996) argues that the discourse on exclusion tends to slide in the elision of concepts
(inclusion/integration). In the same vein, Tezanos (1999, 2001) distinguishes
between “an integrated sector and another excluded,” also indicating that exclusion
should be understood as part of a process in which there are various status ranging
from high degree of social integration to the most complete underestimation. For
Mascareño and Carvajal (2015), individuals satisfy specific criteria of social con-
sideration, i.e., these criteria define if they are in or out, or they are located upper or
lower certain limits which define the difference. Ratcliffe (1998) states that it is a
mistake to observe exclusion as a dichotomy, i.e., present or absent; instead, it could
be preferable to adopt the more diverse approach. From both points of view, in fact,
there exists not either a status of complete inclusion or complete exclusion, rather
situations where both conditions coexist.
Literature recurrently suggests that social exclusion is a multidimensional,
multicausal, structural, and dynamic phenomenon defined by an accumulation of
deficits interrelated with each other (Arthurson & Jacobs, 2003; Enriquez, 2007;
Jiménez, 2008; Leyton Navarro & Muñoz Arce, 2016; Hernández Pedreño, 2010),
indicating that there are different causes of inequality and such a phenomenon
incorporates societal specific characteristics where the exclusion emerges. Causes
of social exclusion are, inter alia, the difficult access to the labor market, joblessness,
poverty (referred to income levels), lack of access to education, homelessness, and
inadequate housing; consequently, dimensions of social exclusion are diverse, they

are economic, labor, formative, residential, relational, etc., evincing; one the one
hand, its relationship with process more linked with the basic citizenship, i.e., those
of fundamental rights and liberties associated with people’s well-being, but on the
other hand, it has a structural character, and not just causal or individual.
Nonetheless, from a classic point of view, social exclusion has been analyzed
from an economic dimension, associated to poverty (Jiménez, 2008). Moreover, all
social exclusion is not derived from lack of economic resources, although lack of
resources raises the possibility of getting into situations of exclusion. Also poverty is
neither necessary nor sufficient condition in order to consider exclusion, albeit it is
often present. In a sense, poverty and exclusion should understand as comple-
mentary concepts (Leyton Navarro & Muñoz Arce, 2016). Nowadays, the strictly
economic view of social exclusion has been overcome by one more dynamic in
nature, which affects each individual in a different way depending on her
potential and social context.
With respect to the application, social exclusion had adopted innumerable aspects
and social substantive processes (Ratcliffe, 1998; Silver, 1994), leading to various
definitions in order to comprise new groups and new social problems, which result
has been diffuse connotations. Social exclusion is also located in a specific socio-
historical context and articulated to models de policy applied to different periods. In
this view, (Enriquez, 2007) attributes to The Neoliberal State, in force in the 1980s,
the emergence of social exclusion because it applied policies tending to generate
dynamics of exclusion. Consequently, social exclusion, “(. . .) as a break of socio-
economic ties and decomposition of the social fabric, it is always the consequence of
a socio-political and economic system” (Enriquez, 2007).
2.2 Relevance of Housing in the Social Exclusion Studies
This research focuses on housing due to its ongoing social relevance in the Latino
American cities, characterized by a generalized rise of tenancy and a significant
increase of prices, as in Ecuador where housing policy, in the last two decades,
shows progress in terms of housing investment and a quantitative deficit reduction;
notwithstanding, cities continue redeveloping by means of informal building strat-
egies, marginality, and inadequate urban infrastructure, thus, replicating socio-
spatial patterns of segregation (Córdova, 2015).
Processes associated to housing can promote social inclusion or contribute to
exclusion. Somerville (1998) states that social exclusion, via housing, can be
grouped in process of production and distribution. With regard to planning and
production, the author cites that, as an example, housing could be organized so that
there are continual housing shortages, or so that poor housing conditions persist, or
so that the price of housing remains beyond the reach of certain types of household.
In each of these cases, the opportunities for those households who lose out are
systematically reduced relative to the rest of the population. Somerville (1998) cites
that a long historical process of social inclusion through housing has been followed
by a process of increasing social exclusion. In terms of distribution, housing tenure is
the source of social exclusion widely discussed.
Marshall (1950), cited by Ratcliffe (1998), states that exclusion in the housing
context literally means lack of house or even homelessness, emphasizing that,
although there are studies that suggest that minorities may suffer disproportionately
in both directions (Cheeseman, 1992; Friedman & Pawson, 1989); the matter in
question is how access to good quality, affordable housing in areas that provide a
safe environment to live. It is essentially a matter of differential access to the basic
rights of citizenship.
Ratcliffe (1998) states:
One could argue that on the boundaries between ‘exclusion’ and ‘non-exclusion’ lie such
factors as access to the necessary financial resources; ‘necessary’, that is, as a pre-requisite
for ‘inclusion’ within certain sectors of the housing market. This partly relates to processes
and degrees of ‘exclusion’, ‘marginalisation’ or ‘inclusion’ in other institutional spheres;
notably education and the labour market. Also central are housing market institutions which
make potentially ‘exclusionary’ decisions partly on apparently ‘objective’ criteria such as
occupational status, degree of job security and actual and projected earning capacity. (p. 816)
From this perspective, two key aspects are recognized. First, processes of exclu-
sion are complex phenomena with multiple causes. Second, no exclusion in an
institutional area led to or increased significantly the probability of no exclusion in
other place (Ratcliffe, 1998).
On the other hand, Jiménez (2008) formulates housing with emphasis on its
spatial character and habitat connotation, determining as exclusion factors: the
lack of private housing, the difficulty of accessing housing, housing poor in infra-
structure, bad conditions of habitability (for instance, overcrowded housing. . .),
housing located in marginal neighborhoods and depressed urban and/or rural areas
and the run-down residential environment. In contrast, property-owning families,
housing with adequate infrastructure, housing location in areas of cultural and social
development, and the establishment of residence in expansion areas are taken into
account as factors of integration by the author.
In terms of the urban economics, economic activities are increasingly inter-
dependent and how urban areas can integrate into regional, national and global
markets are contributing factors for social cohesion and the sustainability of cities.
This trend envisages a social framework characterized by high percentages of
vulnerable population, especially in urban areas. Consequently, the economic
growth of cities is currently accompanied by an increase in social exclusion.
In this line, the Sustainable Development Goals (SDG) recognize the role of
housing as a decisive element of urban development, at the same time identifying its
contribution to the fulfillment of the 17 SDGs seeking to impact several aspects,
among others, the creation of sustainable cities and communities, poverty eradi-
cation, the fighting against climate change, and the reduction of inequality.
Regarding to the housing policy, social exclusion is inadequate when it is just
used to describe the pockets of poverty and social disadvantage instead of presenting
a set of ideas about social phenomena and the processes that lead to such social
disadvantages; therefore, the challenge is to make consistent the realization of eco-

nomic objectives with the function of social integration. Following Mira Grau
(2001), it is convenient to integrate innovation in urban action, based on three
perspectives: First, all urban intervention is both an intervention on the physical
environment and on the social environment. Second, the principle of participation
itself in local action. Finally, the need to create permanent centers or observatories to
detect risk factors in urban development. With these perspectives, the binomial
quality of life and the fight against social exclusion can be achieved, which are so
pressing in Latin America.
3 Empirical Evidence of Social Exclusion: Housing
Talking about social exclusion, a single factor cannot be considered or even be

illustrated as a special case because it is a long term and common problem, and it is
an omnipresent problem through society, territory, or country. Starting with the
general concept of social exclusion: the impossibility or severe difficulty of access to
mechanisms of personal development and socio-community insertion. In this sense,
it is clear that social exclusion cannot be dissociated from any dimension due to the
“implicit” and “comprehensive” dimension of the problem. And one of the large
dimension affected is undoubtedly in the housing.
The study of social exclusion in the field of housing should be a priority for all
governments or public administrations, but this does not happen for lack of rele-
vance, but because of the lack of studies or research that strengthens or evidences
this social problem. Studies and evidence on the social exclusion phenomenon in
different areas are burgeoning; however, on the particular topic of housing, research
is still low. The idea here is to rely on the available evidence from distinct places and
realities of those of Ecuadorian one that allows us to understand with high precision
what constitutes housing social exclusion through their experiences. In spite of that,
some studies have covered, to some extent, the social exclusion and housing issue.
These studies are presented below:
3.1 Chile (Santiago)
The city of Santiago de Chile is a particular case to analyze inequality in terms of

housing since housing policies have led to a steady reduction of the housing deficit
by more than 50% in recent years, as shown by Hidalgo (2007) in his/her work: Is
the end of land in the big city? However, this quantitative reduction in housing
shortage for the poorest people has brought a series of externalities in Chilean cities
that are often manifested in processes of social segregation and physical fragmenta-
tion of the urban space. In other words, in the metropolitan areas of Chile, social
housing no longer has the possibility of being built on the urban spot’s edge. Rather,
it is built on geographically distant areas outside the city’s borders, both in

rural areas and in small cities, specifically in the limit of large conurbations.
Marcuse and Van Kempen (2000) states that segregation, understood as a forced
and involuntary process of residing in a specific place, conducts to a position of
inferiority with respect to the dominant society, an issue that leads to an exclusion
and specific discrimination of those living in social housing. Even if the state
provides goods and services and solves the housing problem, these solutions are
located in the periphery where it denies access to the advantages of living in the city,
ranging from the accessibility to a variety of goods and services to the contact with a
diverse social environment, basic to opt for better living conditions.
3.2 Spain (Madrid)
In “Social segregation and housing markets in large cities,” Leal (2002) finds a
correlation between changes in housing prices in the Metropolitan Area of Madrid
and changes in the distribution of social categories in the urban space.
In the furthest periphery, there is a growing demand for housing transforming it
from rural into urban. But in most areas, the highest increase of prices corresponds to
an increase in the demand from the middle class, the change in the social recompo-
sition observing a “gentrification” process in central areas reinforcing their character
as middle class areas. The process of relative variation in housing prices in a
metropolitan area can be complex. Housing prices per square meter grow at a higher
rate in areas with a higher socioeconomic level than in areas with lower social value.
Here, the salient point is that the inequality in the value of housing has increased in
Madrid.
This implies an increase in the inequalities patrimonial of the inhabitants, gener-
ated from the change in the values of the house. This increase in the patrimony
distribution inequality leads to profound consequences, since the seeming equality of
opportunities in education access and even some convergence in the distribution of
income would be neutralized by this divergence. Patrimony takes on a relevant value
in a risky and insecure society, with unstable employment and where the increase in
private services requires to make adequate provision for granting access to goods,
such as the own housing, and expensive services.
3.3 Uruguay (Montevideo)
In the Uruguayan case, Veiga (2008) in “Socio-territorial fragmentation and inequal-

ities in the Metropolitan Area of Montevideo” offers a link between social exclusion
in terms of housing and socio-territorial fragmentation, sometimes called “spatial
social differentiation.” This study also shows the (displacement) expulsion of
low-income population to places outside the metropolitan area of Montevideo.
These places are characterized by a damaged infrastructure by decades of lack of

policies and a rapid increase of precarious settlements. This happens to the
lower class of Uruguay due to the urban segregation.
3.4 Mexico (Mexico City, Guadalajara, Monterrey,

and Puebla)
Schteingart (2001), in his research “The social division of space in cities,” analyzes
four cities of Mexico, in their metropolitan areas. The author points out that
Monterrey is found in a socio-spatial situation more favorable than the other
metropolises in Mexico. On the other hand, Puebla faces up to the most negative
situation, meanwhile Guadalajara and Mexico City are placed in an intermediate
situation. The term “favorable spatial situation” alludes to the access to quality
housing, access to quality basic services, among other aspects that reflects a
good quality of life in the dwelling inside an area.
In terms of distribution of housing, Mexico City concentrates the highest per-
centage of inhabitants in the lowest stratum, which would indicate a greater polar-
ization of the society. Another aspect that evinces the inequality between “spaces” is
the piped water supply; in Mexico City a more unpleasant situation than in Guada-
lajara and Monterrey is observed, mainly because the percentages of homes with this
service decreased much more sharply in the three lowest strata in the capital city.
Finally, there is a marked centrality in the higher strata with the exception of the case
of Monterrey.
3.5 Ecuador
The empirical review shows a lack of concern for the study of social exclusion in
Ecuador; this is evidenced by the limited amount of research on this phenomenon.
The main motivation could be that the topic of strong interest is absolute poverty,
like the research of Correa-Quezada, García-Vélez, Del Río-Rama and Álvarez-
García (2018) for Ecuador, while social exclusion is studied with relative views of
the population, i.e., research on social exclusion will not be a priority before the
basic problems of the population are solved (poverty).
Nevertheless, some works can be cited, such as León (2003). The results of this
study show that more than 61% of the indigenous and afro-descendant population
are constantly experiencing social exclusion as opposed to the mestizo population,
either access to basic services at the level of education, work, indicating that
ethnicity is affected by exclusion. In another study on social exclusion in Ecuador,
García-Vélez and Contreras (2019) conclude that for the period 2006–2014, the
highest levels of social exclusion occur in the eastern part of the country and in a
sector of the Ecuadorian coast, while that the provinces with the least social exclu-
sion are concentrated in the Andean zone.
As we can see, the above-mentioned studies reflect, to some extent, the issue of
inequality around housing according to their respective realities. However, the lack
of this type of research is tangible making difficult to have evidence to deal with this
type of problems.
4 Data and Methodology
Provided that Ecuador have not conducted any official survey exclusively aimed to
measure social exclusion, a review is carried out on all surveys undertaken by the
Statistics and Census National Institute (INEC) with relevant information on exclu-
sion. Based on this premise, it was selected the National Survey on Employment,
Unemployment and Underemployment (ENEMDU), because it has indicators
related to housing. This survey also has a provincial (regional) disaggregation, and
it is the most updated survey due to the quarterly questionnaire. We use the
ENEMDU surveys at December 2014 and 2017, because they possess representative
data for the 24 provinces of the country. The total sample is 31,092 homes. From the
above-mentioned surveys, 11 variables were selected providing information on
housing (see Table 1).
From the identified variables, a synthetic social exclusion indicator is utilized, this
indicator is proposed for Spain by Domínguez and Núñez Velázquez (2009) and
applied for Ecuador by García-Vélez and Contreras (2019). It is constructed, from
the works of Cerioli and Zani (1990) and Dagum et al. (1992), in order to measure
poverty through fuzz set models.
For the description of the social exclusion indicator, from now on, the notation
proposed by Domínguez and Nuñez Velázquez (2010) is followed as the reference.
Taking into consideration a set of k indicators that reflect social exclusion (Y1,
Y2, . . ., Yk), Yij is considered as the result of the Yj indicator that corresponds to the
individual i; therefore, consider a set of n individuals and a subset A of them
consisting of the excluded and, [μA(i), (i ¼ 1, 2, . . ., n)] denote, for each individual
i, a grade of membership in the subset A. Then:
• μA(i) ¼ 0 if the ith individual is certainly not excluded;
• μA(i) ¼ 1 if the ith individual completely belongs to the excluded set;
• 0 < μA(i) < 1 if ith individual exhibits only a partial membership in the
excluded set.
Subsequently, the membership function is obtained for the situation of social
exclusion, then it is mandatory to know if all indicators will be equally relevant in
the final index or, for the contrary, each indicator will have a different relevance.
This research considers that each indicator has a different level of contribution, thus,
Table 1 Housing indicators for exclusion social analysis

N Indicator Categories Membership function
8
1 Housing status 1: Unrecoverable >
<3 0 if x¼3
2: Recoverable x
μA ðX i1 Þ ¼ if 1x3
3: Acceptable >
: 3 1
1 if x¼1

2 Overcrowding 0: Home does not have 0 if it is not excluded
overcrowding μA ðX i2 Þ ¼
1 if it is excluded
1: Home have
overcrowding

3 Without energy 0: Home has access to 0 if it is not excluded
services electricity μA ðX i3 Þ ¼
1 if it is excluded
(electricity) 1: Home has not access to
electricity
8
4 Without water 1: Water from a well, >
< 3 0 x if x¼3
services river, water spring, μA ðX i4 Þ ¼ if 1x3
(piped) watercourse or other >
:3 1
source 1 if x¼1
2: Water from a pile or
public tap, other sources
by pipe or by a delivery
truck
3: Water from public
network within the home

5 Without sew- 0: Home has a toilet and 0 if it is not excluded
age treatment sewage system μA ðX i5 Þ ¼
1 if it is excluded
1: Home has not a toilet
and sewage system
8
6 Environmental 1: Three environmental < 4 0 x if x¼4
problems problems μA ðX i6 Þ ¼ if 1x4
2: Two environmental :4 1
1 if x¼1
problems
3: One environmental
problem
4: No environmental
problems

7 Principal road 0: Main access is a main 0 if it is not excluded
access road, paved road, or cob- μA ðX i7 Þ ¼
1 if it is excluded
bled street
1: If the main access is
not a main road, paved
road, or cobbled street

8 Tenancy status 0: All the homes have 0 if it is not excluded
their own housing and μA ðX i8 Þ ¼
1 if it is excluded
this is a house, villa, or
flat
1: All the homes have not
their own housing or this
in not a no house, villa, or
flat
(continued)
Table 1 (continued)
N Indicator Categories Membership function

9 Cooking fuel 0: Cooking with gas or 0 if it is not excluded
electricity μA ðX i9 Þ ¼
1 if it is excluded
1: Cooking with wood,
coal (charcoal), or other
material (except gas or
electricity)
8
10 Type of shower 1: Does not have a >
< 3 0 x if x¼3
shower μA ðX i10 Þ ¼ if 1x3
2: Shared shower with >
:3 1
other homes 1 if x¼1
3: Shower exclusively for
the home

11 Waste disposal 0: Have the municipal 0 if it is not excluded
waste collection services μA ðX i11 Þ ¼
1 if it is excluded
1: Do not have the
municipal waste collec-
tion services
Source: Author’s own table
the membership function is constructed by adding a different weight to each indi-

cator, as follows:
Pk
j¼1 Y ij w j
μA ðiÞ ¼ P k , i ¼ 1, . . . , n ð1Þ
j¼1 wj
Therefore, μA(i) is defined as the weighted average of all indicators Y1, Y2, . . .,
Yk, in the individual i, where wj represents the weighting of the indicator Yj. To
identify the weighting wj, an inverse functional relationship between the weighting
system and the frequencies corresponding to each indicator is considered, such that:
Number of times that the Y j indicador takes a value greater than 0

fj¼
n
Pn
Y ij
fj¼ i¼1
, j ¼ 1, . . . , k:
n
where fj is the relative frequency of each indicator Yj and n is the number of indi-
viduals. Then, it is considered a more stability function than the inverse of the fre-
quencies (Dagum et al. 1992):
!
1
w j ¼ log , f j > 0 j ¼ 1, . . . , k ð2Þ
fj
we substitute out the function (2) in (1) and obtain the final membership function:
Pk
Y ij log f1
j¼1
μA ðiÞ ¼ P j , i ¼ 1, . . . , n ð3Þ
k 1
j¼1 log f j
with the membership function, the social exclusion index is defined as follows:
1 Xn
I ES ¼ μ ðiÞ
i¼1 A
ð4Þ
n
where μA(i) is the membership function of the individual i for a fuzzy set of social
exclusion. As a result, IES 2 [0, 1] and represents the social exclusion level of the
population. If IES is closer to 1, the level of social exclusion is higher; if it approaches
the 0, social exclusion is lower, then, both IES ¼ 1 and IES ¼ 0 are results of that in
the population either there is complete exclusion or there is non-exclusion.
5 Results
5.1 Social Exclusion in Ecuador
In the methodology section, it was mentioned that each indicator has a different level
of contribution, it implies that the weighting of each indicator is obtained from the
inverse function of the relative frequency, such that, if the indicators have higher
weightings, then there is a minor number of excluded individuals, that is, when less
individuals share exclusion, the feeling of social exclusion is greater.
The results of the weightings for the years 2014 and 2017 reveal that, aside from
energy services, cooking fuel and overcrowding are the two most relevant indicators
in order to measure social exclusion. Meanwhile, the housing condition is the least
relevant, since 50% of the population lives in homes that eventually can undertake
essential repairs, say in recovery status (partial exclusion) or in non-recovery status
(completely excluded), thus fulfilling the premise: “if more individuals share exclu-
sion, the feeling of social exclusion is lower, or vice versa.” Furthermore, it is worth
mentioning that there are no significant variations in any indicator in the selected
years; therefore, it could be inferred that housing public policies have not prioritized
any of the variables considered (see Fig. 1).
Considering that the social exclusion index allows to take on values ranging from
0 to 1, where “closer to 1” means “greater exclusion” and vice versa, it can be
interpreted that social exclusion in the national context is low and there is a relative
9.2% 9.3%
8.4% 8.7%
15.5% 14.0%
6.3% 5.2%
4.7% 4.7%
4.5% 5.5%
8.2% 8.1%
6.9% 8.1%
22.8% 22.5%
10.1% 10.1%
3.5% 3.7%
2014 2017
Housing Status Overcrowding

Without energy services (electricity) Without water services (piped)
Without sewage treatment Environmental Problems
Access Road Tenancy Status
Cooking fuel Type of shower
Waste disposal
Fig. 1 Weightings of social exclusion indicators, 2014–2017. Source: Author’s own figure
reduction of 8.3% for 2017. The results also show that more than twice the number
of rural sector inhabitants than the urban sector ones suffer social exclusion and this
figure remains unchanged during the study period. By Natural Region, evidence
points to Insular Region population have lower levels of social exclusion while the
Amazon population is greater affected by exclusion (see Table 2). It can be inferred
that in Ecuador, there is a greater probability of social exclusion for people living in
the Amazon’s rural sector.
The fuzzy-set approach used here to measure social exclusion does not allow us to
obtain rates of social exclusion since this approach does not seek to make a
dichotomous identification between excluded and non-excluded. Instead, it offers
grades of social exclusion for each individual; thus, according to this categorization,
the population can be classified into four groups (see Table 3). Results indicate that
11.7% of the total population can be considered as non-excluded; that is, they do not
present exclusion in any of the 11 indicators from the proposed index. Also,
approximately half a million of the population pass from having some degree of
exclusion in 2014 to be non-excluded in 2017. A remarkable result is that only 1% of
the population is in a high exclusion status. In contrast, as a negative aspect, it is
observed that from 2014 to 2017, the number of people in high exclusion has
increased by approximately 30,527.
Table 2 Evolution of social exclusion index, by area and by region, 2014–2017

2014 2017 2014–2017 absolute 2014–2017 relative (%)
National 0.156 0.143 0.013 8.3
Area
Urban 0.105 0.093 0.013 12.0
Rural 0.277 0.233 0.044 15.8
Natural region
Ecuadorian Sierra 0.143 0.120 0.023 16.1
Ecuadorian Coast 0.174 0.148 0.026 14.7
Ecuadorian East 0.264 0.223 0.041 15.5
Insular 0.125 0.116 0.009 7.4
Table 3 Evolution of social exclusion, by category of exclusion, 2014–2017

2014 2017 2017–2014
Groups Millions Relative (%) Millions Relative (%) Millions
Non excluded 1.46 9.0 1.98 11.7 0.52
Low exclusion 12.61 78.1 13.13 77.4 0.52
Middle exclusion 1.90 11.8 1.65 9.7 0.26
High exclusion 0.18 1.1 0.21 1.2 0.03
Total 16.15 100.0 16.96 100.0
5.2 Social Exclusion: Regional Analysis
The index applied here satisfies the property of subgroup decomposability, allowing
us to measure the social exclusion through different subgroups; in our case, the
decision is to carry out a regional analysis. We consider the 24 provinces of the
country plus the non-delimited zones as regions giving 25 subgroups to study social
exclusion (at a regional level) in Ecuador. Regional results are indicated by means of
the index for each province, the provincial ranking and the quantile denoting the
respective province social exclusion situation.
Table 4 shows that the social exclusion index decreases for all provinces between
2014 and 2017. This reduction indicates that the levels of exclusion have improved
in all provinces, additionally, 60% of provinces are above the national index and
40% of them are below. The non-delimited Zones (Q5), Morona Santiago (Q5), and
Sucumbíos (Q4) exhibit the largest absolute reduction, while El Oro (Q2), Azuay
(Q1), Pichincha (Q1), and Galápagos (Q2) are the provinces with the lowest absolute
reduction. This shows a tendency toward the reduction of disparities between
different regions of the country, since the provinces with the highest levels of social
exclusion are the ones that further reduce their exclusion.
From the regional (provincial) ranking, there are minimal changes from 2014 to
2017 for most provinces, although it can be emphasized that Loja and El Oro fall two
Table 4 Index of social exclusion, regional analysis (by province), 2014–2017

Index Index Ranking Ranking Ranking Quintile Quintile
Province 2014 2017 2014 2017 variation 2014 2017
Tungurahua 0.094 0.068 2 1 1 Q1 Q1
Pichincha 0.089 0.080 1 2 1 Q1 Q1
Azuay 0.099 0.092 3 3 0 Q1 Q1
Imbabura 0.119 0.099 5 4 1 Q1 Q1
Carchi 0.122 0.099 6 5 1 Q2 Q1
El Oro 0.115 0.108 4 6 2 Q1 Q2
Galápagos 0.125 0.116 7 7 0 Q2 Q2
Guayas 0.132 0.118 8 8 0 Q2 Q2
Santa Elena 0.153 0.125 10 9 1 Q2 Q2
Cañar 0.150 0.133 9 10 1 Q2 Q2
Chimborazo 0.188 0.143 13 11 2 Q3 Q3
Santo 0.160 0.144 11 12 1 Q3 Q3
Domingo
Manabí 0.190 0.157 14 13 1 Q3 Q3
Loja 0.169 0.158 12 14 2 Q3 Q3
Cotopaxi 0.212 0.168 15 15 0 Q3 Q3
Zamora 0.215 0.177 16 16 0 Q4 Q4
Chinchipe
Los Ríos 0.222 0.193 17 17 0 Q4 Q4
Sucumbíos 0.245 0.198 19 18 1 Q4 Q4
Esmeraldas 0.241 0.203 18 19 1 Q4 Q4
Bolívar 0.245 0.213 20 20 0 Q4 Q4
Napo 0.246 0.214 21 21 0 Q5 Q5
Pastaza 0.274 0.235 22 22 0 Q5 Q5
Orellana 0.288 0.246 23 23 0 Q5 Q5
Morona 0.310 0.262 24 24 0 Q5 Q5
Santiago
Non- 0.335 0.278 25 25 0 Q5 Q5
delimited
Zones
Source: Author’s calculations based on ENEMDU surveys 2014 and 2017
positions and Chimborazo rises two positions, while the provinces of Q5 show no
variation (see Table 4).
The provinces with the lowest social exclusion (Q1) for 2017 are Tungurahua,
Pichincha, Azuay, Imbabura, and Carchi. All of them belong to the Ecuadorian
Sierra and are located mainly in the northern center of the country. In turn, provinces
with the highest social exclusion (Q5) are Napo, Pastaza, Orellana, Morona Santi-
ago, and the Non-delimited Zones, located in the east of the country and belonging to
the Amazon region. It is without surprise that the provinces of the Amazonia have
historically been excluded from development, despite being the territories where oil
extraction is concentrated, the main commodity of the Ecuadorian economy.
Regarding the evolution of social exclusion by quintiles, there are only two
changes from 2014 to 2017; these correspond to the El Oro province that goes
from Q1 to Q2, that is, from the very low exclusion group to the exclusion group.
The province of Carchi improves its situation by going from low exclusion to very
low exclusion, Q2 to Q1.
6 Conclusion
Social exclusion is conceived as an urban structural process determined by eco-

nomic, social, and political dimensions. Since the 1990s, it has been a benchmark for
Latin American countries in terms of social policies. The term social exclusion has
been progressively consolidated, incorporating, at the same time, more processes
related to basic citizenship, that is, with those fundamental and individual rights
related to their well-being.
In the housing context, social exclusion is caused by a clear breach of housing
rights. Here, it is necessary to formulate policies that transcend the mere description
of pockets of poverty and disadvantage and that generates a set of ideas about social
phenomena and those processes that lead to such disadvantages. Moreover, from
these diagnoses, it is possible to develop concrete proposals for these problems
at hand.
Both poverty and social exclusion are susceptible to measure, and these mea-
surements allow us to evaluate the quality of life of the population. However, these
are neither comparative nor substitutive. Poverty and social exclusion can be com-
plementary measurements: the former is measured in an absolute value (mainly in
middle and low-income countries), that is, an individual can be poor without
considering the situation of the rest of the population, while the latter is measured
in a relative value. Thus, in the present work, the socially excluded are those that
show deprivation in housing indicators compared with the rest of the population.
Social exclusion cannot be exclusively seen as a problem of regions in precarious
development situation. As noted in the empirical review, there are developed
economies that continuously experience marginalization, exclusion, and inequality
in all areas. In most of the cases analyzed in the housing context, the common
denominator to explain why most people felt excluded (of the benefits and services
that every home should have) was that they were located in rural or peripheral areas
of the city. More surprising is that this situation occurs not by own will but because
the uncontrolled “urbanism” forces the population to be located in the peripheries of
the city.
In this research, social exclusion was measured in Ecuador considering housing
as one of its primary dimensions. The main results indicate that the exclusion
decreased for the whole country allowing approximately half a million people to
abandon the social exclusion situation. The population with the highest levels of
exclusion is concentrated mainly in the rural area of the country and in the Amazon
region.
Social exclusion decreased for all provinces. The provinces that have higher
levels of exclusion are those that present greater absolute reductions in the index,
which contributes to the reduction of territorial disparities in the country. The
provinces that have lower levels of social exclusion, ranked Q1, belong to the Sierra
region (Tungurahua, Pichincha, Azuay, Imbabura, and Carchi). The provinces with
the highest social exclusion, grouped Q5, correspond to the Amazon region (Napo,
Pastaza, Orellana, and Morona Santiago).
Finally, housing policies should be prioritized by taking into account access to
energy services, cooking fuel, and overcrowding and should focus mainly on the
rural area and the provinces of the Ecuadorian Amazon.
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Contributions to Management Science

ISSN 1431-1941 ISSN 2197-716X (electronic)

© Springer Nature Switzerland AG 2020

Entrepreneurship and the Community . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Entrepreneurship and Innovation Based on the RIEMPEI Model:

José Álvarez-García University of Extremadura, Cáceres, Spain

Tim Lockyer The University of Waikato, Hamilton, New Zealand

Effectual Versus Causal International Opportunity Discovery

A Framework for a Smart City Design: Digital Transformation

The Entertainization of Business Event: The Case of Alibaba

Innovation and Entrepreneurship as Tools for Rural Development:

Social Exclusion in Ecuador with Housing Indicators: A Regional

The Other Within as Entrepreneurial Agency for Subsistence

A Framework for a Smart City Design: Digital Transformation

The Dynamics of the Employee Branding Effect: The Valuation

The Entertainization of Business Event: The Case of Alibaba

Innovation and Entrepreneurship as Tools for Rural Development:

Entrepreneurship and Innovation Based on the RIEMPEI Model:

Social Exclusion in Ecuador with Housing Indicators: A Regional

Abstract Entrepreneurship is a contextual activity, which is inﬂuenced by its

© Springer Nature Switzerland AG 2020 1

2 Entrepreneurship and Communities

Entrepreneurship is more of a business discipline so takes a different approach to the

or scope. For many researchers, entrepreneurship is a ﬁnancial objective due to

Whilst extant studies have alluded to the importance of communities in entrepre-

Johannisson, B. (1990). Community entrepreneurship-cases and conceptualization. Entrepreneur-

Hans Lundberg and Marcela Ramírez-Pasillas

1 Research Problem and Purpose

– How come I’ve never seen you people before?

© Springer Nature Switzerland AG 2020 7

Turning to mainstream entrepreneurship and management literature provides no

purpose of delineating “the other within” (TOW) as a speciﬁc entrepreneurial

2 The Concepts of “Tactics” and “The Other Within”

TOW was a methodological concept for de Certeau (1988/1984) and theoretically

Third, a rare exception, de Certeau explicitly exempliﬁes tactics as the generic

Table 1 Overview of data sample with TOW in focus/in use

4 The Other Within in Use as a Concept: Cohort

5 The Other Within in Use as a Concept: A Close Reading

Table 2 de Certeau paragraph analyzed (1988/1984: 31–32)

Table 5 Maughan paragraph analyzed (2006: 685)

Table 6 Yovel paragraph analyzed (2009: 62)

In summarizing all these elements of the “the-other-within” concept (TOW)

as TOW. As alternative to plurlasisms, de Certeau proposes “heterologies”

As a form of entrepreneurial agency speciﬁcally derived for subsistence entrepre-

Abstract This chapter extends the knowledge of international opportunity by

Opportunity is the central concept in international entrepreneurship (IE) research

© Springer Nature Switzerland AG 2020 29

There is an intense overlap between entrepreneurship and strategic management

development in the internationalization process of SMEs and its outcome in terms of

2 Effectuation and Causation: Two Logics of Decision-

Effectuation and causation are two complementary logics of decision-making (Read,

(Johanson & Vahlne, 2009), and the effectual approach to internationalization

deal with temporary advantages instead of sustainable advantages. Therefore, all

5 Effectuation and International Opportunity Creation

Effectuation as one of the dominant theories in entrepreneurship (Alvarez et al.,

6 Networking as an Important Mechanism in Effectual

According to the behavioral approach to internationalization, networks of relation-

signiﬁcantly identify more opportunities than entrepreneurs with no access to a

7 Causation and International Opportunity Discovery

The literature on opportunity research has focused more on discovery opportunities

focus on maximizing the potential returns on investment by selecting optimal

8 Applicability of Not Effectual and Causal Logics

There is a relatively new stream of IE research which emphasizes the simultaneous