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6th International Conference for Entrepreneurship Innovation and Regional Development. Regional Economic Resilience through Innovation and

Enterprise.

"Social Interaction Spaces for Entrepreneurship at the Micro Urbanism level: Basque City-Region Diagnostic Mapping Case study"

Dr. Igor Calzada, Ph.D. Future of Cities Programme. InSIS & COMPAS. University of Oxford.

64 Banbury Road, Oxford,OX2 6PN (UK) E-mail: igor.calzada@insis.ox.ac.uk

Ikerbasque, Basque Foundation for Science. Alameda Urquijo 36,5. 48011 Bilbao (Spain)

Mondragon University. Ibarra Zelaia, 2. 20560 Oñati, Spain.

Maite Sagasti

University of Deusto. Avenida de las Universidades 24. 48007 Bilbao. Spain. E-mail:

maite.sagasti@deusto.es

Abstract:

City Regions (Dickinson, 1964) are the engines of development and the activators of recovery in Europe. Entrepreneurship flourishes at micro urbanism levels in specific urban spaces. City authorities, in partnership with local organizations and agents, are well placed to define the most appropriate strategies to create a favorable environment for the development of entrepreneurship. The aim of this paper is to analyze the effects the physical and digital social interaction spaces for entrepreneurship have on the creation of entrepreneurial and innovative activities and their impact on the regional development. After mapping the total amount of social interaction spaces for Entrepreneurship located at the Basque City-Region/Euskal Hiria as a fieldwork research and following a qualitative approach through in-depth interviews detailed information about this region’s networks, its social capital, the creation of entrepreneurial and innovative activities and their subsequent social and economic impact at micro level on the region has arisen. The data obtained during the research shows and looks into the relevancy of the need to implement new business and social models and suggests new managerial and organizational structures that would optimize the use of the existing capital and propose alternative funding models as required by the current context. This paper proves the importance of the existence of these physical, digital and social interaction spaces for entrepreneurship and their influence on the recovery at micro-urbanism level in the Basque City-Region/Euskal Hiria.

Key words: Entrepreneurship, business and social model, micro urbanism, space for interaction, regional development.

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"Social Interaction Spaces for Entrepreneurship at the Micro Urbanism level: Basque City-Region Diagnostic Mapping Case Study"

1.- Introduction

Since the beginning of the 21st century we have been undergoing a generalised global crisis which is impacting on various economic and financial structures, social capital and the Welfare State in both developed and developing countries.

1.1 Demographic Crisis

Since the end of the last century there has been a state of demographic stagnation, as well as an ageing population, something which raises questions and contradictions regarding intergenerational solidarity, pension systems and the capability of regional and national economies to maintain the mechanisms of the Welfare State.

This demographic crisis is also causing difficulties for create national social capital stock and local social capital reserves as workers are being forced to move to cities, regions or nodes which have a demand for qualified personnel. The training of human capital will suffer when the individuals decide or are forced to deploy their resources in places that are not their own. As a result of this, public administrations at European, national and regional level are devising strategies and policies aimed at progressing towards an economy of innovation and knowledge that is both sustainable and inclusive [1]. This favours policies that prevent a brain drain and also serve to attract research workers, entrepreneurs and innovators from other regions, thus promoting cultural exchange and integration. Putnam & Goss (2003: 24-25), Calzada (2011:36).

1.2 Social Capital Crisis

The emergence of fluidity (both rapid and constant social and economic changes) Bauman (2006, 2010), globalisation Castells (1997), the individualisation of lifestyles Putnam (1996), forming part of large-scale national, international, virtual and social networks Castells (1997), Echeverria (1994), Mitchell (2000), the lack of feeling of belonging to your immediate space-environment, Putnam & Goss (2003), Calzada (2011), has been accompanied by a weakening of social cohesion, Bauman (1996), Guest & Wierzbicki (1999), Fukuyama (1999).

1.3 The Economic-Financial Crisis

National governments and supranational agencies and entities are finding it difficult to provide solutions to the current situation.

The reigning economic model is undergoing a recession and is being subjected to a restructuring. Authors like Kaletsky (2010) [2] speak of the emergence of a new model of capitalism known as capitalism 4.0, which will replace the hegemonic one from the period of 1980-2008. During this new period several contradictory phenomena will occur; these will have to be taken into account. According to Kaletsky, this economic model will coexist alongside other capitalist models for a time, such as the Chinese one, in the form of a liberal capitalist or Keynesian model. Capitalism 4.0 is a less ideological and more nuanced kind of capitalism in which there is a relationship

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between the logics and dynamics of markets and their regulation from the public sphere.

On the other hand, authors such as Latouche (2003, 2006, 2009), Toibo (2008), Gorz (2008), Harvey (2012), Calzada (2012) speak of total crisis in the capitalist model and stress the urgent need to seek new economic and social models capable of contributing towards the creation of an alternative society to market society, calling this new paradigm post-development. According to Serge Latouche, “It will be necessary to search for means of collective expansion in which material welfare is not privileged and one that does not destroy the environment or the social fabric (…) it is a new culture that has to be built a new culture” Latouche (2003:16).

2.- Social Interaction Spaces for Entrepreneurship

City-regions are characterised by having certain features as regards their production structures, business fabric and socio-cultural organization, which are divided into networks and maintain an interdependent relationship Lizarralde & Irizar (2005:286). These networks share similar rules of conduct, values and codes, which promote cooperation and collaboration in carrying out entrepreneurship and innovation activities, Putnam (1995:67), De Souza Briggs (1997:112) Curbelo, Parrilli & Alburquerque (2011).

Territories have different types of agents that favour the development of social, economic and business relations. Interaction between all these agents leads to the territory’s development, Putnam (1993) Larrea; Aranguren y Karlsen (2011), Barandiaran & Korta (2011). The following agents stand out in the Basque City-Region:

• Public Administration. They have the power to influence the region, thus maximising entrepreneurial processes. In the case of the Basque City-Region, public administration can have an influence on the regulatory framework and promote government programmes so as to back entrepreneurship and social innovation, which, in turn, will increase the number of entrepreneurial activities. The action of public institutions in the Basque City-Region favours entrepreneurship and is inspired by the relationship existing between entrepreneurial activity, the creation of employment, innovation and local development. In this City-Region there are various levels of public institutions with programmes aimed at enhancing (social) innovation and entrepreneurship.

• Public-Private Agents. Agents of a mixed or private form promoting and aiding entrepreneurship and innovation can be found in the Basque City-Region. These agents provide their services and support to entrepreneurs wishing to develop their ideas; they conduct viability studies and look for or provide funding for the development and setting in motion of the entrepreneurial project.

Among these developmental agents, the following can be identified: Chambers of Commerce, Confederations of Employers, business incubators, private initiatives, development agencies located in the central nodes and outlying areas of the Basque City-Region. Some examples of these could be: Innobasque, Foro de Emprededores Adegi, CEBEK-Emprende, Eutokia.

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• Universities and research centres. These are of a mixed and private character and promote and support entrepreneurship and innovation. These agents provide entrepreneurs with their services and support for the development of their projects, carry out feasibility studies, search for or provide funding for development, and also provide training programmes for people in entrepreneurship and innovation processes, as is the case of the Innovadis project run by the University of Deusto and the Mondragon Team Academy, for example.

• Social Agents & Social Movements. Social agents and social movements are capable of detecting problems and the need for change (15M movement, degrowth movements, ethical banking, participatory budgeting, sustainable mobility, environmental groups, neighbourhood associations, etc), thus empowering civil society, which demands a partial or total change in the economic and social systems. Analysis of these movements has meant that, on occasions, a solution has been found to problems that governments and other institutions have not been able to come up with. Mulgan (2006:150) states that empathy and the ability to see and listen form the starting point for the creation of innovative ventures. In addition, David Harvey (2012) points out the capacity that collective action can have when it comes to generating realities that are radically different from those we have known up to now.

In this turbulent situation, the city-regions, such as the Basque City-Region, are striving to find solutions, activate economic recovery and strengthen social capital and social cohesion through various strategies and projects which provide a growth process aimed at enhancing the welfare of the local population, by employing the physical, human, financial and social capital resources existing in the territory.

Communication, interaction and collaboration between agents is necessary for the development of processes and projects creating physical and/or digital meeting and interaction spaces, spaces which favour the exchange of ideas that will lead to the creation of social entrepreneurship and innovation projects.

Joseph Schumpeter[3] (1962) coined the term “process of creative destruction” to refer to innovation. According to Schumpeter, innovation was an essential feature of capitalism, with the innovator as its key player. Creative destruction made it possible to describe the innovation process that takes place in a market economy where new products destroy traditional companies. Schumpeter describes the innovator (person) as a vital energetic being, even in unfavourable circumstances. He is characterised by his perseverance and ambition rather than his genius; the Schumpeterian entrepreneur could be identified by having created an economic empire, a business dynasty.

The definition of a social innovator or entrepreneur defies the abovementioned definition. Here we are talking about an individual or group of people who undertake projects or create materials that favour the search for solutions to the problems and needs of local communities. Their main aim is to create a society that is more equal, fairer, sustainable and balanced, Mulgan (2006), Bornstein (2005), Nicholls (2006), Harvey (2012).

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Social innovators can also succeed when they are capable of informing and convincing the different social agents, administration, businesses and academics that the creation of another fairer world is possible. The process of change is long and risky, but not impossible, Mulgan (2006:149).

This process of change can be developed from top to bottom, that is, starting with the local sphere and going as far as the global sphere. Enzio Manzini (2010) believes in creating sustainable local communities and describes what he calls SLOC or the Small, Local, Open, Connected scenario. According to Manzini, small can become influential in global nodes, and local might break its isolation by being open to global, the influx of people, ideas and information. In other words, according to Manzini, today small is no longer small and local is no longer local, at least in everyday terms. What is small has major implications for better or worse. Perhaps the greatest benefit is that global networks make it possible to work highly efficiently at both local level and on a small scale, since the acquisition of this dimension enables one to be far more adaptable to the changing and risky situation we are experiencing nowadays.

Continuing with this global vision, social entrepreneurship actions are being conducted in the Basque City-Region, with the following aims: the enhancement of social capital, the recovery of customs, strengthening of the leading sector, strengthening of the (local) social capital networks, promoting collaborative economies and responsible consumer behaviour; actions that have a direct impact on society’s well-being.

Spaces for meeting and interaction are necessary for these processes to come about[4]. Habermas (1984) and Viñoly (2003) define them as spaces that favour open encounters and rational dialogue between different people and groups. Calzada (2011) points out that these spaces should facilitate flexible, interactive and dynamic processes which could become an appetising environment able to attract talent. On the other hand, Jordi Borja defines these meeting and interaction spaces as occasions for relating to others and identification, for making contact with other people, urban enjoyment and, at times, communal expression, Borja (1998).

Salcedo[5] (2002) defines these spaces as a place for fostering citizenship and a social meeting point; spaces for presentation of ideas, critical debate and interaction between different members of the society.

These places could be defined as physical or digital, public or private places, located in rural zones, suburbs or central nodes, which support interaction between different people, social groups or movements that are interested in the same area of work or intend to find a solution to a common problem.

These spaces promote:

• The gathering of different public-private agents. • Interaction, communication, participation and exchange of ideas between

different people/groups. • Connectivity by generating social networks within and outside the Basque City-

Region or enhancing the already existing ones. • Joint working methods between public-private agents, social movements and

educational institutions that work on the development of ideas, projects and the

 

MAP 1 SSocial Interaction Sp

aces for EnRegio

ntrepreneuon

urship at thhe Basque

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City-

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creation of resources, and whose objective is that of improving the welfare of the inhabitants in the region by supporting a change in the social and territorial model.

• Promote the co-working practices among the different public and private agents.

3.-Changes in the Management and Financing Model for Spaces for Social Entrepreneurship and Innovation.

3.1. Changes in the management model for spaces for social innovation and entrepreneurship.

Few organizations can afford to stand still in the structural crisis we are currently experiencing. Therefore, both public and private institutions (companies, cooperatives, research centres) are working on the transformation or generation of new organisational and management models that allow them to adapt to new realities.

a) Cooperativism. We are witnessing public initiatives within the Basque City-Region (social and business movements) that are seeking alternatives to the rather dehumanising current economic system, as is the case with one of the largest and most important cooperatives in the Basque City-Region and the Spanish state: the Mondragon Cooperative. They are looking for formulae to apply to systems that will promote communal development, based on cooperative capacity and self-management of the person. The Mondragón cooperative has an integral vocation, in other words, it is concerned about the person (worker) and the community (business, local community). It could be said that it is an fundamental project that does not start and end in the company itself but includes other spheres, like that of finance (Caja Laboral savings bank), education (ikastolas [schools in which all subjects are taught in the Basque language], Mondragón University), social security, agriculture, etc

The Mondragón cooperative [6] is characterised by its social commitment. In the year 2006 the group plotted out three points for reflection: a) work in historical social commitment to education, university and small-scale community initiatives; b) commitment to emerging social initiatives focused on two specific lines: development of the use of Basque in companies and cooperation with other cooperatives in developing countries; c) working in specific areas: housing, the elderly, environment, ecology, integration of immigrants and family reconciliation.

Co-development. The spaces for innovation and entrepreneurship should have a co-development model that helps to improve the organisational model of these spaces, since this leads to relations between more than just one company and thus fosters the creation of new products, technology and services, Chesbrough & Schwartz (2007). The cooperative system among different companies helps reduce costs in R+D+I, expand innovation output and open up new markets to sell products in [7].

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b) Open innovation [8]. Open innovation can take place on several levels. 1.- Open innovation between the different company departments (intra-organisational). The entrepreneurial and innovative businesses must be able to build joint decision-making processes. Decision making must be carried out together and efficiently, steering clear of bureaucratic and hierarchical systems. They should also be able to combine common responsibility with autonomy, thus facilitating actions in favour of entrepreneurship and innovation, Bonet & Donato (2011) Mulgan, Steinberg & Omar Salem (2005), Maxwell (2006). 2.- Inter-organisational Innovation. Businesses and governments must keep up-to-date with what is going on in society as they will therefore be able to detect new needs and introduce the changes needed to bring about change. Mulgan (2007:22). 3.- Open innovation between the company and the consumer. There is a tendency to regard meeting space users as passive members and as mere consumers of the products and activities carried out there. The new organisational models should take the users into account as they can provide ideas with added value, ideas on how to improve a product/service proposed by the meeting space, information on the needs they have and the institution has been able to cater for, and ideas for the development and enhancement of the product, Jantz (2012); Rowley (2011); Bonet and Donato (2011). 4.- Open innovation between public administration and society. Through this system, the civil population has the chance to gain access to politics and express their ideas, suggestions, complaints and assessments of the decisions made in the different public institutions making up the region. In the case of the Basque City-Region, an open innovation initiative called Irekia [9] has been set in motion by the government.

c) Governance. Elinor Ostrom’s concept, local empowerment, is of key importance as it describes the possibility of communities self-managing local resources as their ability to autonomously define the rules of using and applying the common good. According to Ostrom, the community is a complex ecosystem based on reciprocity and confidence among its members. The operating rules made up are not immovable but a framework for reference, since their application implies a dynamic participative process that fosters the common interest of the various participating agents. Elasticity is a necessary feature as it ensures the acquisition of new knowledge and information given rise to by interaction and common interest.

d) Collaborative models between public-private institutions. It is important to create or strengthen joint projects between cities, governments, companies and NGOs so as to enhance and favour the capacity to formulate products that sustain the needs of society. (Mulgan, 2006:148)

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3.2 Changes in the Financial Models for Spaces for Social Entrepreneurship and Innovation.

Entrepreneurs and innovators (bees) need technical, financial and legal support from public institutions (agencies, governments), as well as private institutions (companies, universities, banks) (trees), in order to carry out their entrepreneurial actions. (Mulgan 2006:135)

In recent years entrepreneurship and innovation projects in the Basque City-Region have been financed through the following channels:

a) Public Capital. The regional and local governments have several budget allocations for funding entrepreneurial and innovation processes as they are aware of their great strategic value in supporting the development of the region and generating employment and wealth. Some of the subsidies and aid that are available can be seen in Table 1. The various regional governments making up the Basque City-Region offer business and social entrepreneurs subsidies so that they can carry out their entrepreneurial task. This financial aid has decreased due to the economic crisis we are currently going through, which is why it is necessary to search for collaborations between public and private administrations to face up to this situation. The aim is to ensure that the funding of social entrepreneurship and innovation continues in the Basque City-Region.

b) Private capital. Investments made by private companies or institutions in R+D+I.

c) Risk capital management in the Basque Country. The provision of financial resources through temporary participation in company capital. During the year 2011 the region had a budget capital of 690,000 Euros, distributed as follows: SPRI 70%, KUTXABANK 20% and Mondragón Inversiones SPE S. Coop. 7%.

In addition to traditional funding systems, we should also mention other types of alternative funding that have been created with the aim of financing entrepreneurial projects and are steadily growing in strength.

d) Crowdfunding. This is an alternative system for funding social entrepreneurship and innovation projects. Crowdfunding describes the collective effort of individual or collectives who invest their money in support of projects of all kinds: investments in renewable energy projects, financing infrastructures and technology (sensors for measuring pollen and pollution levels, etc.) Transactions are made via internet and serve to fund social entrepreneurship projects. In the case of the Basque City-Region, this system is being used to fund small-scale projects through digital platforms, such as Goteo Euskadi or Joint Projects, but in such countries as the USA they are now financing public infrastructures or projects intended for renewable energies.

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4.- Conclusions

Few organisations can afford to stand still in the midst of the structural crisis we are currently going through. Therefore, both public and private institutions (businesses, cooperatives, research centres and universities), as well as civil society must work together on the transformation, optimisation and generation of new models for management and funding of human, social and financial capital. Collaboration between public and private agents is going to be necessary if solutions to difficulties are to be provided and new models of management, organization and funding found and the encountering and interaction spaces can help to speed up the process. In the case of the Basque City Region this interaction spaces are located on the main cities and the smaller ones and that facilitates the communication and the interaction of the different public (politicians, public organizations, agencies, social movements,..) and private agents.

The entrepreneurship and innovation process that are appearing at the micro-regional scale favour the economic reactivation of the city-regions, as well as an improvement in social, environmental and cultural conditions in the region. In some cases the innovation and entrepreneurship processes being produced within the city-regions are distancing themselves from the growth and competiveness processes that have served as models until now. And new models, one of whose main aims is that of building a more sustainable and just society, are being set in motion.

These processes find themselves being promoted by the gathering and interaction of the various city-region agents, which takes place in either physical or digital spaces found in both the central nodes and outlying areas of the Basque City-Region. In most cases, these are neutral spaces (open and without restrictions) that promote connections and collaboration between different agents by creating networks distributed all around the geography of the Basque region. These spaces support the creation of collaborative, open work dynamics that promote innovation and entrepreneurship.

References

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[2] Mentioned in CURBELO, J.L; PARRILLI, Mario Davide; ALBURQUERQUE, F (Coord): Territorios Innovadores y competitivos. Madrid: Ed. Pons; 2012.

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