The Making of the Urban Entrepreneur

Source: Sage Journals | Pablo Muñoz, Boyd Cohen

The United Nations estimates that by 2050, more than two-thirds of the world’s population will be living in cities. One decade from now, there will be nearly 30 cities with more than ten million inhabitants, with some of them reaching 20 million. It is estimated that 1.3 million people move to cities every week. Because of their density, it is assumed that cities offer a more sustainable lifestyle than that found in the countryside; however, city immigration also requires moving more food, energy, and water into the city, and removing an increasing amount of waste and carbon emissions. The promise of a higher quality of living standard in cities puts pressure on city welfare provision systems, creating a demand for access to education, housing, transportation, and health care for a growing population. Rapid urbanization requires that scholars, policy makers, and businesses alike seriously consider the implications emerging from this trend.

The growth of urban areas requires an unseen investment in hard and soft infrastructures as well as in improving extant systems of welfare provision. Cities face dramatic challenges but at the same time open a wide array of opportunities that carry our hopes for a sustainable future. In addressing such challenges, entrepreneurship literature argues that new venture formation can be seen as a solution to, rather the cause of, environmental degradation and social inequality. This is because social and environmental problems represent opportunities for achieving profitability while simultaneously reducing socially and environmentally degrading economic behaviors.1 These are opportunities worthy of serious pursuit.2

In general terms, the emerging field of social entrepreneurship has proven successful in dealing with pressing social and environmental issues. For social entrepreneurs, the most attractive opportunities for positive social impact are more likely to occur where there are significant socioeconomic, cultural, and environmental problems.3 Ventures with social and environmental missions are equipped with enough resources and strategies to deal with urban challenges, at least in theory. However, current challenges in cities prove otherwise. In recent years, cities have seen an emerging type of entrepreneurial activity that is focused on improving urban well-being through the opportunities residing in public or private good failures. Urban entrepreneurship creates solutions resulting in economic and non-economic gains for the urban ecosystem, the public and private sectors, and the entrepreneur. This form of enterprising uses the city as a living laboratory where collaborative, innovative solutions are developed and tested. The city is thus the host and the recipient of such venturing efforts.

An entirely new infrastructure and entrepreneurial ecosystem is emerging that defies social entrepreneurship practice and theory.4 A number of recent developments in cities illustrate this. Points of Light, out of Atlanta, launched an accelerator for city ventures in 2011. Code for America launched a city-venture accelerator out of San Francisco in 2012. A local entrepreneur and the City of Jackson Hole, Wyoming, created a sustainable agribusiness to increase community participation. A group of entrepreneurial moms and the City of Bristol (United Kingdom) are reopening public spaces for children to play on the street. The City of San Francisco has an Office of Civic Innovation, whereas the city of Boston has an office of New Urban Mechanics. City-oriented crowdfunding platforms such as Neighbor.ly, Spacehive, and Citizinvestor have emerged to support neighborhood projects and city ventures around the globe.

In light of this phenomenon, it is unclear whether current social entrepreneurship practice and theory are capable of accounting for what actually occurs when the urban infrastructure and welfare systems of cities are improved through entrepreneurial action. The venturing context and processes in urban-driven enterprising require further examination. In responding to such a challenge, we set out to discover distinct features and mechanisms of urban-focused entrepreneurship.

We engaged in qualitative, inductive research of 21 urban-focused new ventures and city entrepreneurship accelerators. We centered our analysis on those unique features of the context, process, and actions of urban entrepreneurs that differentiate them from other types of entrepreneurs, namely, social or purely commercial entrepreneurs. Our research findings suggest four distinct factors. First, urban entrepreneurial action aimed at improving well-being in cities draws on extensive private-public-people collaboration—one that moves the traditional policy logic of “problem to solution” to one of “opportunity to venturing.” Second, throughout the venturing process, urban entrepreneurs articulate a unique logic that defies the traditional market logic structured around formal institutions. Instead of searching and scanning opportunities residing exclusively in market failures, they take a broader view to also include public and private good failures. They do this to create solutions for bridging the gap between inadequate welfare provision and individuals’ search for well-being in urban contexts. Third, we found that urban entrepreneurship occurs in multiple contexts (neighborhood, city, and multicity), which finally leads urban entrepreneurs to articulate distinct market entry strategies.

Socially Oriented Entrepreneurship: Transforming City Problems into Opportunities

Observing entrepreneurship entails focusing on the sources of opportunities; the processes of discovery, evaluation, and exploitation of opportunities; and the set of individuals who discover, evaluate, and exploit them.5 At the heart of entrepreneurship is the notion of opportunities,6 which are situations in which new goods, services, raw materials, markets, and organizing methods can be introduced through the formation of new market mechanisms.7 These emerge as a result of perceived anomalies or changes in the individual’s context, and they vary depending on the locus of change, the source of change, and the initiator of the change.8

Generally, social entrepreneurs are external actors who scan, evaluate, and make judgments about the conditions of their surrounding social and natural environments, and who then elaborate solutions accordingly. They act as problem solvers in distinct ways according to their perceptions of the nature and severity of the problems at hand.9 Variance in the intensity of social and environmental problems thus plays a central role in fostering socially oriented entrepreneurial activity. Current problems and challenges facing cities around the globe represent a rich source of opportunities for those socially oriented, city-minded individuals wanting to engage in commercial activities that address such things as migration, overpopulation, traffic, food supply, housing, transportation, jobs, and education.

In tackling these issues, governments have traditionally used public-private partnership (3P) models to cooperate with the private sector in the hopes of stimulating economic development and improve public service delivery to citizens.10 The 3P models stem from the need for alternatives to traditional financing of public infrastructure projects and seek to move the financial burden associated with projects from local, regional, and national governments to one or more private sector firms under a structured procedure for the delivery of public services. 3P models can be structured in several ways, from the simple public infrastructure “design and build” contracts to more complex alliances that also include finance, operation, maintenance, and transfer. In spite of their complexity, these partnerships have been unable to incorporate other societal actors because they simply narrow collaboration down to long-term contracts in which a private firm controls and manages a public asset over an extended period of time in exchange for user fees.

City challenges are rather unique given the relevance of social life and territory in shaping development. Facing these challenges requires multiple actors working collectively toward common goals.11 Emergent streams such as collaborative public management,12 collaborative governance,13 and public entrepreneurship14 have already emphasized the need for, and role of, multiple actors in managing governance processes in cities, including improvements to infrastructure and welfare provision. They highlight the role of certain individuals that resolve city issues by acting upon perceived opportunities. The delivery of public goods to citizens is no longer the exclusive responsibility of a single actor (i.e., government) but rather results from a combination of efforts.15 Collaborative public management stresses the relevance of this process because it facilitates the operation of multiorganizational arrangements capable of remedying problems that cannot be solved—or solved easily—by a single organization.16

The City as a Context: Urban-Focused Entrepreneurial Action

Some social entrepreneurs operate in the periphery, tackling deep social problems in rural settings, whereas others are using the city as a platform for sustainable innovation. The latter recognize rapid urbanization and exponential demographic growth as a major challenge in fostering livable, healthy, and sustainable cities.

Through the lens of traditional policy and business tools, the challenge seems unbearable because the growth in the number of cities and the expansion of existing ones require major investments in infrastructure. As people move in, new transportation, water, energy, sewage, food distribution, educational, housing, and recreational systems need to be built.17 The challenges associated with population growth and urbanization are impressive, but so too are the opportunities, which are currently being pursued by enterprising individuals who react to such anomalies by articulating new ventures collectively.