Resilience and Innovation: A Conceptual Approach

Abstract

This chapter examines the relationship between resilience and innovation. In the current period of economic uncertainty, resilience is an emerging concept that has been employed by both researchers and policymakers to explore systems’ responsiveness to exogenous shocks. Drawing on the evolutionary economic literature, we argue that resilience is more than a process of return to a pre-crisis equilibrium. It involves, instead, mechanisms of transformations, and therefore, we argue that innovation is among its key determinants. This idea has important antecedents, Schumpeter already claimed that innovation drives economic recovery following phases of recession. However, literature grounded in this topic does not provide a single definition of the term innovation. Some scholars focus on the organizations’ ability to break away from their routines built over time. Others instead, place the entrepreneur at the heart of his theory of innovation. Therefore, to fully comprehend the complex relationship between the different conceptualizations of resilience and innovation, we develop a conceptual framework. To better interpret the insights offered by this conceptual approach, we then analyze the anecdotal evidence of the Cambridge high-tech cluster and Sassuolo tile district resilient local systems.

1. Introduction

The recessionary phase that started in 2008 and is still ongoing in most European countries has significantly affected firms, sectors, and regions’ ability to grow. Therefore, policymakers are increasingly interested in finding solutions to overcome the crisis and to ensure long-term competitiveness and growth.

In this context, the term resilience has emerged in the social sciences to investigate how an entity or a system responds to a destabilizing shock. Resilience has been defined by several disciplines, and it has been applied to a wide variety of contexts, from regions and provinces to firms and individuals.

In the recent economic literature, the engineering and ecological approaches have developed an equilibrium-based concept of resilience, in which resilience is regarded as a response to an exogenous shock and a move to a steady state. These definitions, however, fail to conceptualize resilience as much broader than just assessing the sensitivity of an economy to disturbances [1].

Thus, this work focuses on the adaptive resilience definition. According to Martin [2], it concerns “the ability of a system to undergo an anticipatory or reactionary reorganization of form and or function to minimize the impact of a destabilizing shock” (p. 6). In this evolutionary framework, resilience becomes an ongoing process rather than a mechanism of recovery to a (preexisting or new) stable state [3]. In an economic system that is restless, adaptive resilience involves the ability of the system to recover from an exogenous disturbance as well as the ability of its industrial and technological structure to evolve by creating an innovative growth path. This is arguably because the necessity for economic renewal is felt more pressing during recessionary phases [4].

Unsurprisingly, given the Schumpeterian root of the evolutionary economics literature, Simmie and Martin [3] suggest that resilience is co-determined by endogenous sources of new knowledge and deliberate entrepreneurial decisions. This idea has important antecedents: Back in 1939, Schumpeter, the father of evolutionary economics, in his book “Business Cycles” [5], argued that innovations drive economic recovery following cyclical phases of recession and depression.

In Schumpeter’s early works—labeled by the literature as Schumpeter Mark I conceptualization—innovation is characterized by a process of “creative destruction” with technological ease of entry and a major role played by entrepreneurs. The author, indeed, attributes to the entrepreneur the role of “agent of change” and “persona causa” of innovation. The entrepreneur, by creating a new firm, introduces radical innovations that disrupt the existent equilibrium or “circular flow.”

According to recent evolutionary literature, instead, innovation relies on the organizations’ ability to break away from their routines built over time. Nelson and Winter [6] define routines as the set of skills owned by an organization and claim that they represent the unit through which analyze the whole economic evolution. In this context, innovative performances become “a key element in the competitive struggle” among companies ([6], p. 34). Following this line of inquiry, differently from Schumpeter Mark I, innovation involves a wide variety of different agents and can be either radical or incremental. Innovation is a complex knowledge-driven process based on the development and commercial exploitation of new ideas for a product or process that contributes to wealth creation and profitability [7]. In light of the aforementioned scenario, new knowledge is endogenously generated, shared, and recombined through continuous dynamics of interactive learning among co-localized agents. As a consequence, innovation is a cumulative and collective process with evolutionary trajectories [6] and geographically grounded roots.

Due to the prominent position that entrepreneurship occupies in the Schumpeterian theory of innovation, we also need to analyze the literature on entrepreneurship to shed light on the complex relationship between the different conceptualizations of resilience and innovation.

By revising the recent economic literature on entrepreneurship, it emerges that there is no agreement in defining the unit of analysis through which to investigate entrepreneurship. Some researchers following Schumpeter Mark II argue that it does not coincide with the homo economicus who creates a new firm but with entrepreneurially oriented coordinated organizations. Conversely, according to Schumpeter Mark I, the focus is on the entrepreneur who can create a new company. In the knowledge spillover theory of entrepreneurship, instead, the focal point became the local system in which the entrepreneur/worker is embedded. This ambiguity, however, needs to be resolved.

By developing a conceptual framework in which we highlight the link between the different conceptualizations of resilience, innovation, and entrepreneurship, we argue that innovation is among the key drivers of resilience. In this context, differently from the previous literature, we claim that entrepreneurs play a key role in fostering the regional economy’s ability to face recessionary shocks only if the creation of a new venture is embedded in the new knowledge creation value chain. Moreover, according to Antonelli [8], the generation of an innovative path of growth is possible only if the system can support the entrepreneurial efforts of the agents who are facing unexpected shocks [8]. To better interpret this conceptual approach, we present the anecdotal cases of the Cambridge high-tech cluster and Sassuolo tile district resilient local systems.

Thus, this chapter contributes to the literature firstly by clarifying the meaning of resilience, innovations, and entrepreneurship. These multifaceted concepts, indeed, have been used in different contexts and with several connotations. This has generated some conceptual ambiguities, which need to be resolved in the interest of clarity and ease of implementation of empirical studies and ad hoc policies. Moreover, this research, by highlighting the role of innovation and innovative entrepreneurship in fostering resilience, allows us to draw some recommendations for the agenda of contemporary policymakers.

This chapter is organized as follows. In the next section, we clarify the meaning of the term resilience in a wide variety of disciplines, focusing in particular on the adaptive resilience definition. Then, we analyze the concept of innovation following an evolutionary approach. In the fourth section, instead, we present the literature on entrepreneurship. The fifth section focuses on the link between innovation entrepreneurship and resilience and presents the anecdotal cases of Cambridge high-tech cluster and Sassuolo tile district as well. The last part is dedicated to the conclusions and to address possible policy implications.

2. Resilience

Resilience is a complex and multifaceted concept that has been employed to describe how an entity responds to shocks and disturbances by several disciplines (psychology, management, economics, physics, engineering, and ecology).¹

In strategic management literature, some scholars (among others, Lengnick-Hall and Beck, [9]) refer to a firm’s ability to cope with unforeseen disturbances as resilience capacity. According to the capability-based [10] and the resource-based theory of the firm [11, 12], resilience is defined as the unique blend of cognitive, behavioral, and contextual properties that increase a firm’s ability to respond to sudden environmental changes. In this framework, innovation, others thing being equal, is one the key determinants of firm resilience. In this context, Geroski and Walker [13] empirically shows that during the recessionary phase, the growth rates of non-innovative firms fall much more than those of innovative companies. This is arguably because innovation immediately gives rise to competitive gains. Furthermore, the innovative processes involving firms’ ability to continuously transform their endogenously created competencies and knowledge into viable products improve firms’ internal capabilities, making them more flexible and adaptable.

The meaning of “resilience” has been the subject of a lively debate, also, among economic scholars. In the recent economic literature, indeed, there have been several ways of defining economic resilience.

According to mainstream economists, it assumes the meaning of “engineering resilience.” This stream of research focuses on the stability of a system near the equilibrium or the steady state [14, 15]. Therefore, resilience is defined as the ability of a system to return to a preexisting stable equilibrium state following a disturbance and takes the literately meaning of the Latin verb “resilire” that means to leap back or to rebound. Economies, according to this theory, are characterized by a self-equilibrating mechanism: the so-called “invisible hand” that evokes Adam Smith’s work. Every time that a disturbance moves the market away from its equilibrium, the system activates a compensating mechanism that brings back the organization to its original configuration. Every economy is resilient because of its innate structure. Thus, a lack of resilience is a signal of the presence of “market failures” or “frictions,” and the local environment does not play any role in explaining resilience.

Ecological resilience, on the contrary, refers to “the capacity of a system to absorb disturbance and reorganize while undergoing change so as to still retain essentially the same function, structure, identity and feedbacks” ([16], p. 2). Resilience was originally introduced in this field of research by Holling [17] as a concept that aims at studying the capacity of ecosystems with alternative attractors to persist in the original state during perturbations. Thus, this definition of resilience, different to the previous one, incorporates the idea that the reorganization of a system hit by a shock involves some degree of transformation. In particular, if the disturbances break the ceiling of the local economy’s capacity to absorb the shock, the system does not bounce back to its previous equilibrium, but it moves to another equilibrium. Therefore, the definition of ecological resilience admits the possibility that local economies can evolve and reach multiple equilibria. Nevertheless, the environment in which the economic agents are embedded is not considered as a key explanatory variable of the local level of resilience.

Recently, a new interpretation of the concept has gained traction in the evolutionary economic geography literature: adaptive resilience. Simmie and Martin [3] define it as “the ability of a system to undergo an anticipatory or reactionary reorganization of form and or function to minimize the impact of a destabilizing shock” (p. 6). In context, resilience involves the capacity of the system to recover from an exogenous disturbance as well as the ability of its industrial and technological structure to evolve by continuously creating innovative growth paths. Following this line of inquiry, resilience is about the regional ability to continuously create and recreate an innovative process that allows the local economy to be more adaptable and flexible to be able to face external and unforeseeable shocks. It can also be considered as the ability of the regions to take advantage, during the recessionary phase, of their local specificities to bounce their economies forward. This idea is sharply at odds with the argument of the engineering resilience definition that the system bounces back to the pre-crisis equilibrium conditions. Following a Schumpeterian approach, the adaptive resilience conceptualization foresees, instead, that economic shocks may trigger economic agents to innovate and therefore to push the system to evolve. In this context, resilience is considered as a process that involves transformations rather than a recovery to an (pre-crisis or new) equilibrium state [3]. This need for economic renewal is felt more pressing in times of crises [4].

In his 1947 essay, Schumpeter² already hypothesized that all changes in factor markets as much in the levels of the aggregate demand have a role in pushing firms to try to innovate and that the introduction of new technologies alters a system’s intrinsic features.

The definition of adaptive resilience recognizes the importance of the geographical area in which the external shock occurs that, with its unique and non-replicable characteristics, becomes the real unit of analysis. The context in which the economic system is embedded does not only represent the platform through the production and all the economic activities are organized. However, its intrinsic features, historically and sociologically determined, encourage (or discourage) the creation of resilient systems based on the continuous interaction among all economic actors of the local society. The notion of adaptive resilience is rooted in an evolutionary economic geography perspective. According to Schumpeter [19], indeed, the intrinsic characteristic of the system determines the ability to innovate. Thus, the ability of regions to face economic downturns is the result of the collective effort to react creatively to the shocks [8].

The notion of adaptive resilience is also influenced by complexity economics. Local economies, according to the literature (among others, [20]), can be seen as composite and multifaceted complex systems. These organizations are, indeed, composed by numerous heterogeneous firms, workers, and institutions, each one with complex connections and links to the “external environment.” Complexity theories portray the economy not as a deterministic and predictable mechanism, but as a dependent, organic process that is always evolving. Complexity sees economies as “systems comprising large numbers of elements, the results of which are modifiable as a result of environmental interaction” ([21] p. 11). Therefore, local systems and society itself can be seen as complex adaptive systems. Society, indeed, is composed of many elements, and the interactions between them are crucial to determining each element’s behavior.

In the recent literature, many relevant conjectures have emerged to understand what the determinants of adaptive resilience are. Simmie and Martin [3] suggest that “creative and flexible response to shocks depend on the innovative capacity of local firms, on entrepreneurial capabilities and new firm formation, institutional innovation, access to investment and venture capital, willingness of workers to reskill and similar factors” (p. 33). Unsurprisingly, given the Schumpeterian root of evolutionary economics, it emerges that innovation and innovative entrepreneurships are among the key determinants of adaptive resilience. Back to 1939, Schumpeter, in his book “Business Cycles” [5], already hypothesized that during the phases of economic depression, innovation is the key driver of recovery. In this book, by using both statistical and historical analyses, he identified a four recurring phases that characterize the evolution of capitalistic economies: prosperity, recession, depression, and recovery. His results showed that booms are due to technological novelty or other innovations whose implementations at first seem to promise high profits. After a while, more and more companies copy the strategy of the pioneer firms until the point in which no one earns any more competitive gains because of the introduction of the innovative activity. Thus, recessionary cycle begins, contributing to sweep away old unproductive activities through “gales of creative destruction.”

Schumpeter in 1947 argued that innovation not only takes place as a special form of reaction to unforeseeable shocks but is also the result of positive feedback occurring in the interactions between and among firms and the intrinsic characteristic of the system in which they are embedded [8].

In this framework, entrepreneurship also assumes a key role in fostering resilience. According to Schumpeter Mark I conceptualization, indeed, the entrepreneur is the economic agent who, by creating a new venture, can spill innovative knowledge within the region. Moreover, he can actively contribute to the regional process of adaptation by identifying and capturing new market opportunities, converting new knowledge into commercial products, and creating new job opportunities. Following this line of inquiry, Martin [2] argues that adaptive resilience depends on a mix of factors including entrepreneurship, the firms’ willingness and ability to absorb or trigger change, and the technological and skill endowments of the region. Other studies (among others, [2, 22, 23]) stress the role of technological or knowledge base variety in shaping regional economies’ abilities to face external shock.

According to Boschma [4], resilient regions are the ones able to overcome the trade-off between adaptation and adaptability, as embodied in their technological (related and unrelated variety) structures. In this context, adaptation concerns specializations within already existing paths, while adaptability is about creating new paths of growth by recombining old and new ideas.

Adaptive resilience concerns a restless process of transformation rather than a return to pre-crisis equilibrium. This is rooted in a system’s ability to take advantage of an expected event to create new growth paths. In this framework, the characteristics of the system, in which the agents are embedded, play a fundamental role in shaping the ability of the economies to react by innovating [24].

3. Innovation

Several authors (among others, [2]) hypothesized that innovation is among the key determinants of adaptive resilience. However, there is no one single definition of innovation. It has been investigated by a wide array of disciplines, with economic approaches alone adopting different theoretical perspectives.

In the neoclassical models, before the 1960s, innovation and technological change were treated as “manna from heaven” and approached as being largely exogenous to the economy. Technological change was purely the result of a scientific discovery that was not driven by any economic incentive. In the neoclassical approach, knowledge, or a particular advance in knowledge, can be applied widely among firms. All the companies have equal abilities in transforming such knowledge into production capability since it is codified, context-independent, and characterized by negligible transmission cost.

Joseph Schumpeter, instead, by placing innovation at the heart of his theory of economic development, has greatly influenced the economics of innovation literature. Schumpeter, indeed, argued that “economic development consists primarily in employing existing resources differently, in doing new things with them” ([25], p. 68). In this study, he also proposed a list of five main types of innovations:

1. Introduction of new products

2. Introduction of new methods of production

3. Opening of new markets

4. Development of new sources of supply for raw materials or other inputs

5. Creation of new market structures in an industry

Whereas product innovation is linked to the development of a brand-new product or improved product or services, process innovation involves, instead, changes in the production method. It concerns discovering a novel way of achieving an output, which was traditionally done differently.

As Antonelli [26] argues, Schumpeterian innovation is a fundamental component of a dynamic process that cannot be analyzed with any equilibrium approach.

Schumpeter’s theories about innovations can be classified under two labels: Schumpeter Mark I and Schumpeter Mark II. The Schumpeter Mark I conceptualization of innovation proposed in The Theory of Economic Development [25] is based on a creative destruction model in which individuals (the entrepreneurs), or uncoordinated groups, prompt radical innovations that disrupt the existent equilibrium. Radical innovations occur when new products, services, processes, or strategies are introduced to a market, replacing existing technologies and methods. On the contrary, in Schumpeter Mark II theory—firstly formalized in the book “Capitalism, Socialism and Democracy” [27] —the innovative process is based on highly coordinated approaches of incremental accumulation undertaken within very large firms [7]. Incremental innovations consist of a series of small improvements made to a company’s existing products or processes. This leads us to argue that in this context, innovation assumes a recombinatory nature. This is arguably due to the fact that, according to Weitzman [28], new knowledge does not fall like “manna from heaven,” but it is the results of a process that combine already existing pieces of knowledge in a new way.

Schumpeter’s works highly influence evolutionary economics literature. In this theoretical framework, since the seminal contribution of Nelson and Winter [6], the traditional starting point to explain the innovative process is the firm, which competes on the basis of its routines (knowledge) and core competences that are endogenously built up over time. Evolutionary economics scholars argue that routines are the most appropriate unit of analysis through which to explain the decision-making process under bounded rationality. As highlighted by Herbert Simon [29] in his Nobel Memorial Lecture, decision-making in organizations typically involves heuristics because the conditions for rational models rarely hold in a heterogeneous and uncertain world. The classical model for rationality, instead, foresees the perfect knowledge for all the agents among all the relevant alternatives. Therefore, in this theoretical framework, market is always in equilibrium.

This idea is sharply at odds with the argument of Schumpeter that economic growth has to be understood as a process involving disequilibrium. Economic evolution is the process by which existing structures of knowledge, such as markets, firms, technologies, institutions, and industries, endogenously change through a selective process of “creative destruction” [27]. Following this line of inquiry, Winter [30] defines routine as “a pattern of behavior that is followed repeatedly but is subject to change if conditions change” ([30], p. 263). Routines (and the supporting skill packages) are a key repository of knowledge in the firm ([31], p. 152) in the sense that they “represent successful solutions to particular problems” ([32], pp. 191–192). In this context, an organization’s innovative process is driven by a learning behavioral mechanism where the search for new problems and new problem-solving procedures enhances the creation of new routines that break away from the past pattern of behavior. Thus, in the evolutionary models, economic dynamics show only temporary convergence toward equilibrium to be “upset” by endogenously determined innovative firm behavior [6]. The disequilibrium tendency caused by deviant firms becomes the fundamental driving force underlying economic development.

In this scenario, evolutionary economists view the search for supranormal profits by innovation, called Schumpeterian competition, as the primary dynamic in the economy (moving away from equilibrium), while the erosion of profits due to price competition is only considered a secondary dynamic (converging to equilibrium). In the evolutionary economics theoretical framework, market competition acts indeed on the variety of routines (old and new) as a selective device by determining which firms survive and prosper and which ones decline. Thus, in a dynamic economy, the selected routines become dominant over time, enabling the firms endowed with fitter routines to grow and to gain a competitive advantage against their rivals. The diffusion and imitation of innovative routines, however, is not a straightforward process. This is arguably because the set of competencies and the knowledge that make up organizations’ routines are both historically and locally determined (among others, Teece and Pisano [33]). Routines present, indeed, both a cumulative and tacit nature. It is well recognized by the literature (among others, Nelson and Winter [6]) that routines change in a path-dependent manner and are shaped by history. The set of competencies may adapt incrementally in response to feedback, and firms do so based on the knowledge they have built up in the past.

Moreover, routines are credited with being able to store tacit knowledge, which is hard to codify and transmit across different geographical contexts. According to Glaeser et al. [34], this is because “intellectual breakthroughs must cross hallways and streets more easily than oceans and continents” (p. 1226). Firms located in the same circumscribed geographical and technological area may, indeed, benefit from tacit knowledge spillovers only transmittable through repeated interactions. Thus, from this evolutionary process of firm dynamics based on competition, innovation, and selection, an emergent spatial pattern of economic activity arises.

In this context, evolutionary economic geography is increasingly gaining attention. It, indeed, deals with “the processes by which the economic landscape the spatial organization of economic production, distribution and consumption is transformed over time” ([35], p. 539). This field of study, by applying the core concepts and methodologies from evolutionary economics in the context of economic geography, recognizes the importance of place-specific elements and processes. In particular, it investigates how the spatial distribution of routines evolves. Boschma and Frenken [36] argue that we can classify the application of the evolutionary economic geography scholars into three main levels of analysis: firm, industry and network, and spatial systems. The applications that employ firms as units of analysis mainly focus on the firms’ locational choices. Sectors instead are mainly analyzed through models of stochastic growth, on spin-offs and agglomeration economies. Networks, on the contrary, are considered the vehicles for knowledge diffusion, and one of the main topics investigated at this level of analysis is whether knowledge diffusion and innovation is more a matter of being in the right network or in the right place, or in both. Finally, spatial systems are obtained by aggregating the meso-level actors to the related macro level. The localities in spatial systems, be it cities, travel-to-work areas, provinces, or regions, are characterized by a dynamic interplay among sectors, networks, and the real place. According to the literature [37], the process of structural change is determined by the sectorial logic underlying the evolution of spatial systems.

In light of the aforementioned framework, to sum up, we can argue that innovation is a complex knowledge-driven process based on the development and the commercial exploitation of a new idea for a product or process that contributes to wealth creation and profitability [7]. In this context, new knowledge is endogenously generated, shared, and recombined through continuous dynamics of interactive learning among co-localized agents. Accordingly, innovation is a cumulative process with evolutionary trajectories [6] and geographically grounded roots. This is arguably because economies are based on and driven by knowledge, and knowledge is never static, but it is constantly being created [38]. Thus, economies are always evolving through the process of adaptation and transformation rendering capitalism restless.

4. Innovation and entrepreneurship

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

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

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

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

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

According to the knowledge spillover theory of entrepreneurship perspective, the production function should include entrepreneurship capital as an additional key factor apart from capital and labor. Entrepreneurship capital is constituted by the set of informal institutions, norms, values, and codes of conduct that, in a local system, encourages the creation of new start-ups or businesses. According to this branch of studies, entrepreneurship may represent a missing link in explaining differentials in economic performance across local systems [40, 41]. Following this line of inquiry, a higher rate of economic growth should result from greater entrepreneurial activity. Entrepreneurship serves as a mechanism that encourages spillover diffusion and the commercialization of knowledge. Knowledge, within this process, is embodied in workers. An employee can have an innovative idea or find out new scientific discoveries. The exploitation of these new ideas can be realized within the organization, enterprise, or university in which they have grown, or outside by creating new firms, leaving the organization in which they have worked and spilling knowledge in the atmosphere. Large research organizations are often repositories of unused ideas: big firms have natural diseconomies of scope that a cluster of start-ups does not have [42, 43]. In the same fashion, public research organizations often do not have incentives to commercialize ideas. The new entrepreneur, by starting a venture, tries to commercialize certain parts of the incumbent’s knowledge that otherwise would not have been exploited. So, the creation of a new business is a response to opportunities coming from knowledge and not commercially exploited by other firms or academic institutions [44]. Therefore, entrepreneurship, serving as a conduit for knowledge and transforming economic knowledge into products to be commercialized, represents the link between knowledge and economic growth. Thus, according to this stream of literature, a higher level of entrepreneurship capital, measured as the number of new entry firms, fosters economic output and increases competition, variety, and creativity [45].

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

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

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

In the literature, entrepreneurial culture or entrepreneurial capital is defined as the set of informal institutions that, in a local system, encourages the creation of new businesses. Entrepreneurial culture does not depend on contextual economic trends, and it survives to economic crises, wars, and changes of political scenario [52]. In other words, it tends to be persistent over time, encouraging a particular regional attitude toward entrepreneurship. This peculiar type of informal knowledge embedded in the regional history persists for mainly three reasons: the presence of peer effects and the intergenerational transmission of entrepreneurial role models and values, the degree of entrepreneurs’ societal legitimacy, and the existence of institutions that encourage new venture creation. These last findings suggest that entrepreneurship may be a self-reinforcing phenomenon. To support this theory, Minniti, in 2005, built a model in which entrepreneurial phenomenon is conceived as a nonlinear path-dependent stochastic process, where entrepreneurship creates a “culture” of itself that influences individual behavior in its favor. According to this model, this self-reinforcing effect of entrepreneurship depends on the individuals “possibility to observe someone else’s behavior and the consequences of it” ([53], p. 5). In this context, entrepreneurship becomes a phenomenon that reproduces itself out of itself. Consequently, regions with relatively high levels of entrepreneurial culture tend to show more propensities to create new firms than those with low levels of entrepreneurship capital.

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

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

4.1 Managerial approach

Corporate entrepreneurship is a concept that has increasingly gained traction among managerial scholars in recent years. This emerging field of research focuses on the entrepreneur strategy. According to this branch of studies, the concept of entrepreneurship is not associated with individuals, but with the entrepreneurial activities within the firm. In this context, [56] argues that entrepreneurs are individuals or groups of individuals acting independently or as part of a corporate system, who create new organizations or instigate renewal or innovation within an existing organization. Thus, the focus shifts from individual to coordinated organizations, and consequently, the unit of analysis becomes the firm or the organization that acts in an entrepreneurially oriented way. Following this line of inquiry, the entrepreneur can be identified either in the figure of the founder of a new start-up or in the manager of a firm. This conceptualization found its root into the Schumpeter Mark II legacy. In this context, Schumpeter [25] defined the entrepreneur as the economic agent that “is able to carrying out of new combinations” ([25], p. 68). Therefore, according to this theory, the entrepreneur is not only the individual who creates a firm: “many financiers, promoters, and so forth are not, and still they may be entrepreneurs in our sense” ([25], pp. 74–75). The implication connected with this definition is that the entrepreneur does not coincide anymore with individuals endowed with the special Unternehmergeist, German for “entrepreneur-spirit,” but he becomes a professional who needs some skills to do his job. These skills are trainable. This means that entrepreneurship is, according to this branch of research, both teachable and learnable [57].

5. Resilience, innovation, and entrepreneurship

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

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

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

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

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

The adaptive resilience conceptualization is sharply at odds with the argument of the engineering and ecological resilience definition that the system bounces back to the pre-crisis equilibrium conditions. In the evolutionary economic geography literature, resilience concerns “an ongoing process rather than a recovery to a (pre-existing or new) stable equilibrium state” ([3], p. 31). Unsurprisingly, given its Schumpeterian roots, evolutionary economics researchers attribute innovation and innovative entrepreneurship (Schumpeter mark I concept of innovation) a key role in shaping adaptive resilience (see among others, Simmie and Martin, [3]; Martin [2]; Holm and Ostegard, [22]; Boschma [4]). Simmie and Martin [3] suggest that resilience is co-determined by endogenous sources of new knowledge and deliberate entrepreneurial decisions. Thus, according to this theoretical framework, one of the key determinants of resilience is innovation and the entrepreneur becomes the social actor in charge of its commercial exploitation.

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

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

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

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

Type of resilience	Theoretical background	Main authors	Idea on the equilibrium	Entrepreneurship	Innovation	Unit of; analysis
Engineering resilience	Neoclassical economics	Hollngage [14]; Fingleton et al. [18]	One possible equilibrium	The entrepreneur does not have any role in shaping resilience	“Manna from the heaven”	Whole; economy
Ecological Resilience	Ecology	Walker et al. [16]; Holling [17]	Admits the possibility of multiple equilibria	Does not attribute any role to entrepreneurship	It admits the possibility that changes happen in the system	Whole; economy
Adaptive Resilience	Evolutionary and complexity economics	Simmie and Martin [3], Martin [2], Boschma [4] and Holm, and Ostergaard [22]	No equilibrium.; The local system is always evolving	The entrepreneur is persona cause of innovation	Innovation is one of the main drivers of resilience	System
Resilience capacity	Strategic management and evolutionary economics	Dosi [10] and Lennick-Hall and Beck [9]	No general equilibrium.; The focus is the firm	Organizations’ ability to manage the company in an entrepreneurially oriented way	Innovation is one of the main drivers of firm resilience	Firm

Table 1.

Different approaches toward resilience, innovation, and entrepreneurship.

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

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

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

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

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

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

At the end of the 90s, Cambridge economy registered the presence of more than 300 enterprises. At the same time, it experienced a never-ending process of creation of several new sub-cluster specialisms such as the ink-jet technologies, telecoms, biosciences, informatics, and clean technologies [3]. Therefore, Cambridge high-tech cluster is a relevant historical evidence of how a system can be resilient by funding its adaptability and flexibility on the endogenously created new knowledge and on the commercial exploitation of it made by conscious and innovative entrepreneurs. One of the key contributions to the relatively higher adaptability and resilience of the Cambridge economy was the ability to continually renew its industrial and technological structure by creating innovative path of growth based on strong endogenous knowledge platform. All these elements are essential to create and recreate a resilient local system.

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

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

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

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

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

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

The districtual firms, indeed, were able to adapt their core activities to the new needs of contemporary society shifting to an environmentally sustainable way of producing tile. Moreover, they faced the contemporary economic downturn by prompting innovation and exporting their products to new markets.

The districtual resilience is encouraged in this specific case by the industrial districts’ intrinsic features. Spatial proximity encourages relationships and the exchange of ideas between workers and entrepreneurs, both citizens of the same local community. This cross-fertilization between production and society prompts a cultural environment that supports innovation.

6. Conclusive remarks

In this chapter, we have sought to review and analyze the links between the concepts of resilience and innovation.

During the Great Recession, which started with the financial downturn of 2008, the term resilience had increasingly gained traction in the social sciences to investigate how an entity responds to a destabilizing shock. The notion of resilience has been studied by using a variety of approaches. The definitions of engineering and ecological resilience, however, fail to grasp resilience as much broader than just assessing the capacity of an economy to recover from an unforeseeable disturbance and to bounce back to the pre-crisis equilibrium conditions. Therefore, in this essay, we focused particularly on the evolutionary conceptualization: adaptive resilience. According to evolutionary economic geography scholars, it involves the regional economies’ capacity to recover from an exogenous disturbance as well as the ability of their industrial and technological structure to continuously evolve by creating new growth path. Following this line of inquiry, Simmie and Martin [3] argued that resilience is “an ongoing process rather than a recovery to a (pre-existing or new) stable equilibrium state” (p. 31).

Following an evolutionary approach, we argued that innovation is among the key drivers of economies’ abilities to be resilient throughout external shock. This idea has important antecedent: Schumpeter [5] claimed that innovation drives economic recovery following phases of recession. Nonetheless, the notion of innovation has been investigated by a wide array of disciplines, with Schumpeterian theories alone adopting different perspectives. Schumpeter, indeed, proposed two different conceptualizations of innovation. The first (Schumpeter Mark I) places the businessman as the agent of change that, by creating a new firm, prompts radical innovations in the economic system. On the contrary, in the Schumpeter Mark II theory, the innovative process is based on highly coordinated approaches of incremental accumulation undertaken within very large firms.

Following this line of inquiry, evolutionary scholars claimed that innovation is a complex process driven by knowledge based on the development and on the commercial exploitation of new ideas for a process or product that plays a fundamental role in generating wealth and profitability [7]. In this context, new knowledge is endogenously created, shared, and recombined through endless dynamics of interactive learning among co-localized agents. As a consequence, innovations involve a wide variety of agents, and it turns out to be a collective and cumulative process with evolutionary trajectories [6] and geographically grounded roots.

Entrepreneurship occupies a prominent position in the Schumpeterian theory of innovation as well as in the research agendas of several literatures. Thus, to fully comprehend the complex relationships between resilience and innovation, we examined the ample spectrum as well of meaning that entrepreneurship assumes according to the economic, approaches. Contrary to previous research (among others, [3]), we argued that entrepreneurship influences adaptive resilience only when involves the exploitation of innovative knowledge. In this context, we claimed that entrepreneurship shapes regional economies’ ability to create innovative growth path only in the case that the decision to set up a new company is embedded in the local new knowledge value chain. This conjecture finds its root in the latest Schumpeter works. The author, indeed, in his book Business Cycle [5] argued that entrepreneurship identifies with the specific function of introducing innovations [8]. In this context, a system’s intrinsic features play a fundamental role in enabling (or disabling) the generation of innovative growth paths. According to Schumpeter [19], creative responses are based both on entrepreneurial actions and on adequate levels of knowledge externalities at a system level [19].

Cambridge high-tech cluster and Sassuolo tile district represent anecdotal examples of a local system that, thanks to the dynamic interaction between the endogenously created new knowledge and a class of conscious entrepreneurs that commercially exploit it, has been able to be adaptively resilient throughout exogenous shocks.

Drawing from this last evidence and our conceptual framework, policies that aim at fostering resilience should be characterized by intentional and careful coordination mechanisms between the agents that, through research and innovation efforts, create new knowledge and the ones that, by creating a new firm, transform it into marketable products. Thus, policymakers should implement ad hoc strategies favoring, at the same time, the emergence of innovative routines based on local specificity and the creation of a class of entrepreneurs able to exploit them.

The conceptual framework developed in this article provided one possible, albeit limited, ground for further theoretical developments and empirical explorations on this intriguing topic.

Classification

JEL codes: B52, D80, O, O30