• Economy
    Oct 04, 2022

    Local Entrepreneurship Ecosystems and the Survival of Rural Economies

    • Lina S. Maddah
    Local Entrepreneurship Ecosystems and the Survival of Rural Economies
    Souk El Tayeb

     

    Given the structural problems in the Lebanese economy today, building a consensus on what might help local entrepreneurship is urgent and necessary. Increasing the average number of small businesses can boost the economy only when local cultures are capable of cultivating their growth and when there are local opportunities that can be well-exploited.

     

    Theoretically, an entrepreneurial culture is an environment/context that encourages business activities involving “a set of interconnected entrepreneurial actors (both potential and existing), entrepreneurial organizations (e.g. firms, venture capitalists, business angels, banks), institutions (universities, public sector agencies, financial bodies), and entrepreneurial processes (e.g. the business birth rate, numbers of high growth firms), which formally and informally coalesce to connect, mediate and govern the performance within the local entrepreneurial environment.”[1]

     

    In the Lebanese context, it is easy to diagnose weaknesses in the aforementioned bodies, coupled with an interrupted interconnection. Necessity-driven entrepreneurs (NDEs), like any other entrepreneurial ventures, need to be studied in a local context. What are then the missing linkages in Lebanon’s rural areas for these entrepreneurs, and cultures, to thrive?

     

    Entrepreneurial cultures and local institutions in rural areas can form the infrastructure to influence growth dynamics and exploit opportunities emerging for NDEs. In Lebanon, there is a need to enhance quality and use of digital tools in rural regions, which can foster better linkages between rural and urban areas. Also, change in consumption habits towards a preference for local products and local destinations for tourism, mainly eco-tourism, coupled with a reshoring of strategic industries that were once delocalized, in addition to strengthening local networks and cooperative structures to face current crises.

     

    Policymaking in Lebanon must be based on rural strengths and existing opportunities, rather than a set of prearranged assumptions about specific sectors. Only a deeper understanding of local contexts will allow for the identification of an area’s advantages and disadvantages, upon which policies can be directed to foster the development of new economic activities, especially in times of crisis that deepen already existing economic and social asymmetries in most countries, and Lebanon is no exception.

     

    Disparities among regions, and structural weaknesses within each region, cause rural entrepreneurs to be hit the hardest in times of crisis. Low-density economies, and the NDEs operating in them, are challenged more than ever. Still, they offer new opportunities which can contribute to the survival and growth of NDEs and facilitate the inflow of productive human resources from cities back to their villages. Only with well-fashioned, bottom-up development strategies that support local entrepreneurs—their ecosystem, institutions, and culture—will these areas be able to generate the economic activity required for recovery and sustainable development.

     

    The willingness to incur risks associated with investing, launching, and managing NDEs is tied to trust in government efficacy. It is true that each government assessment varies depending on distinct features, however, these evaluation tools engender various effects on the growth of NDEs and constitute important indicators on whether to increase business investment or not. National, regional, and local government institutions in Lebanon can shift to multi-stakeholder initiatives to tackle the challenges confronting NDEs.

     

    In dynamic rural areas in Lebanon, NDEs might have more opportunities to prosper and create employment. This sheds light on the need to diversify policies according to the geographical location of municipalities, local particularities, and available change actors. Norms, collective culture, and trust (even safety in rural neighborhoods) reward entrepreneurial action and provide additional resources to enhance cooperation between local institutions and entrepreneurial communities.[2]

     

    In addition, physical infrastructure and amenities (parks, theaters, museums, cinemas, tourist attractions, art galleries), along with transportation links, either foster or constrain collaboration between the agents of the entrepreneurial ecosystem and influence the availability of opportunities in rural areas.[3]

     

    Advanced physical infrastructure and capacity building bring proactive people together, including policymakers, researchers, universities and technical institutes, NGOs, and local organizations, thus generating “third spaces” in an entrepreneurial ecosystem.[4] Viable entrepreneurial cultures foster income creation and strengthen social, environmental and economic sustainability in rural areas, as well as achieving a balanced geographic development of rural communities.[5]

     

    Identifying the priority investment sectors in national development strategies is essential to boost a real market demand and a vibrant ecosystem. We highlight the urgent need to improve rural communities’ capacities to survive external and internal challenges. Li et al. (2019) have proposed a framework that we can depart from:

     

    • Supporting rural livelihood diversification, the construction of market-oriented institutions, and strong social capital that is favorable for NDEs to diversify and flourish.

     

    • Considering the future shift towards a knowledge economy by developing new economic activities that are consistent with local characteristics and capacities to respond to potential rural demand and create new opportunities for NDEs.

     

    • Investing in a social capital that can sustain local entrepreneurship by facilitating access to credits, labor, human capital, external markets, and external knowledge for learning and innovation.[6]

     

    It is essential to consider different local contexts in rural areas in Lebanon and identify the “change” actors, the place-based characteristics, and related variety among economic sectors, to allocate local resources in supporting new businesses. Therefore, empowering NDEs locally, fostering economic growth (particularly in agriculture, manufacturing, creative industries, and eco-tourism), enhancing regional networks, engaging the youth, and empowering women can be extremely beneficial for the case of Lebanon.

     

    In the Lebanese context, tackling the current challenges confronting rural economic development in general—and NDEs more specifically—requires a strong commitment to strategic planning in these areas. This can only be achieved by creating synergies across several policy dimensions: rural development, labor market and skills, financing, spatial planning, transportation, urban-rural linkages, environment, and solidarity economy.

     

    Spurring economic development dynamics can happen through an efficient multi-level governance that facilitates cooperation and creates “smart villages” capable of surviving and growing. Leveraging digital innovations can create new opportunities and alter the way we produce and consume as a society.

     

    Having emphasized the importance of entrepreneurship ecosystems and cultures, the government should promote an inclusive democratic engagement in the fashioning and implementation of any targeted policies, coupled with transparent monitoring and accountability for better outcomes in rural communities.

     

     

    [1] Moore, J.F., (2006). Business ecosystems and the view from the firm. The Antitrust Bulletin, 51(1), pp.31-75.

    [2] Beinhocker, E. (2007). The Origin of Wealth: The Radical Remaking of Economics and What it Means for Business and Society. London: Random House Business Books.

    [3] Audretsch, D. B., Heger, D., & Veith, T. (2015). Infrastructure and entrepreneurship. Small Business Economics, 44(2), 219-230.

    [4] Stam, E. (2014). The Dutch entrepreneurial ecosystem. Retrieved October 19, 2021 at: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=24734 75 

    [5] European Commission, 2021. Rural development. European Commission - European Commission. Available at: https://ec.europa.eu/info/fo od-farming-fisheries/key-poli cies/common-agricultural-pol icy/rural-development_en [Accessed November 23, 2021].

    [6] Li, Y., Westlund, H. & Liu, Y., 2019. Why some rural areas decline while some others not: An overview of rural evolution in the world. Journal of Rural Studies, 68, pp.135–143.

    Lina S. Maddah is an Economic Researcher at the Lebanese Center for Policy Studies (LCPS). Her areas of work include economic development, regional economics, industrial location, firm dynamics, and cultural and creative industries (CCIs). Maddah holds a Ph.D. in Economics from Universitat Rovira I Virgili (URV), Spain. Before joining LCPS, she was a visiting researcher at the Organisation for Economic Co-operation and Development (OECD) in Venice, Italy; and at the Regional Economics Applications Laboratory at UIUC, USA.
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