314317 K. Wennberg, C. Sandström (eds.), Questioning the Entrepreneurial State, International Studies in Entrepreneurship 53, https://doi.org/10.1007/978-3-030-94273-1_17 Z. J. Acs

318companies in the United States in 2021—Apple, Amazon, Microsoft, Facebook, and Google—are valued at or near $2 trillion each (Berne, 2020; Yardeni & Abbott, 2021). Two new political economy frameworks emerged in the 1990s to explain how the evolution of the ITR undermined Europe’s approach to startups. The first was the National Systems of Innovation (Edquist & Johnson, 1997; Lundvall, 1992; Nelson, 1993) framework. Its main theoretical underpinnings were (1) that knowledge is a fundamental resource in the economy; and (2) that knowledge is produced and accumulated through an interactive and cumulative process of innovation that is embedded in a national institutional context. National Systems assumed this all took place in existing firms, so there was no need for new firms or entrepreneurship to bring the technology to market. The second conceptual framework was the Porter Diamond Theory of National Advantage that identified an interactive system that propelled a country to prominence (Porter, 1990). The four facets of the Porter Diamond represented four interrelated determinates: firm strategy, structure, and rivalry; demand conditions; related and supporting industries; and factor conditions. Porter emphasized factor conditions because a country can create these for itself. They included but were not limited to knowledge, a large pool of talent, technological innovation, infrastructure, and capital, all embedded in regional clusters.3

The Theory of National Advantage and National Systems of Innovation had three assumptions in common: (1) they agreed that knowledge was a fundamental resource in the economy; (2) they agreed that knowledge is produced through an interactive process that is institutionally embedded; (3) they relied on existing firms to implement the new technologies! Both approaches had large theoretical literatures, empirical research, and policy recommendations. However, because they both excluded the role of new firms in their analysis—which was Jovanovic’s great insight—their usefulness for understanding the new information technologies was limited because incumbent firms did not implement the new technologies (Jovanovic, 1982, 2001, 2019; Evans & Jovanovic, 1989).

The National Systems perspective was not without a role for entrepreneurs; the problem is rather that it contained everything and hence, it lacked explanatory or predictive value. In a corporatist environment, such a non-theory that contains all actors is bound to drift toward supporting the corporatist approach, with public private partnerships and large R&D programs to support industry. To overcome this lack of focus, Acs et al. “introduced a novel concept of National Systems of Entrepreneurship and provided an approach to characterizing them. National Systems of Entrepreneurship are fundamentally resource allocation systems that are driven by individual-level opportunity pursuit, through the erection of new ventures, with this activity and its outcomes regulated by country-specific institutional characteristics.”

3These approaches were both underpinned by endogenous growth theory (Romer, 1990).

319The Digital Platform Economy and the Entrepreneurial State: A European Dilemma

The entrepreneurship literature also missed the importance of entrepreneurs in bringing information technologies to market via new firms, as suggested by Hobijn and Jovanovic (2001), and by Joseph Schumpeter almost a century earlier (Lundstrom & Harirchi, 2018). To the extent that the entrepreneurship literature did study new firms, it focused on self-employment, both in terms of business ownership and sole traders. This was partly a result of industrial restructuring and the rise of unemployment (Parker, 2004). Job creation became the immediate focus of entrepreneurship research, especially in Europe (Birch, 1981).4

Sussan and Acs (2017) recognized this shortcoming and argued that a significant gap existed in the conceptualization of entrepreneurship in the digital age, precisely because it ignored the fundamental role of knowledge as a resource in the economy. To address this gap, Sussan and Acs proposed the Digital Entrepreneurial Ecosystem (DEE) framework, integrating two separate but related literatures on ecosystems: the digital ecosystem and the entrepreneurial ecosystem. This new framework situates digital entrepreneurship in the broader context of users, agents, infrastructure, and organizations, such that two biotic entities (users and agents) actuate individual agency, and two abiotic components (digital infrastructure and digital organizations) form the external environment.5 Sussan and Acs integrated the DEE framework into the digital marketplace, including but not limited to e-government, e-transportation, e-education, e-commerce, and e-social networking-based businesses.6

Acs et al. (2021a, b) further develop the concept of the digital entrepreneurial ecosystem by introducing the global digital platform economy and measuring the firms that populate it (Kenney & Zysman, 2016). First, using a unique database of over five decades of surviving firms (Audretsch, 1991), they tested the Hobijn and Jovanovic (2001) thesis that the 1970s incumbents were unable to harness new technologies and that the entry of new firms was needed to create the DPE. Second, they developed a conceptual framework for the DPE that integrates (1) the platform-based organization; (2) their platform-based ecosystem; and (3) the digital technology infrastructure (Sussan & Acs, 2017; Song, 2019).7 Applying the DPE framework to the global economy, Acs et al. (2021a, b) identified and measured platform economy firms that have publicly available data. They estimated that the global DPE consists of billions of supply-side and demand-side users, millions of app developers, thousands of digital infrastructure firms, and hundreds of multisided platform firms.8 This chapter examines the European Union’s platform economy dilemma by using the new DPE Index to focus on Brexit and the electric car industry (Acs

4An exception to this was the Knowledge Spillover Theory of Entrepreneurship (Acs et al., 2009). 5Nambisan et al. (2019) approached the subject from the digital transformation side and discussed how it has transformed entrepreneurship and innovation. 6Malecki (2018) emphasized the regional aspect of entrepreneurial ecosystems and Cavallo et al. (2019) focused on present debates and future directions. 7See Nambisan (2017), Nambisan et al. (2018), and Sahut et al. (2021). 8For a comparison across countries.

320Z. J. Acs

et al., 2021a, b). The European lag in platformisation (the penetration of digital platforms into different economic sectors) stems from the facts that incumbent firms in Europe have not introduced new technologies in sufficient volume and startups have remained small and not scalable (Naudé, 2016). While most of the world has focused on a balanced approach to the digital revolution with the state playing a constructive role to promote the private sector, the European Union and Japan have chosen an unbalanced approach vis-à-vis public policy. Mazzucato (2013) suggests that U.S. success resulted not from entrepreneurship (a private initiative), but rather from the actions of the entrepreneurial state (a public effort). In her view, it is the state that drives entrepreneurship and not the solo entrepreneur or entrepreneurial team. No one would deny that state spending on R&D is important, always has been, and continues to be so. However, the state as entrepreneur is a necessary but not sufficient condition for economic growth (Acs et al., 2018; Lafuente et al., 2021). The European platform deficiency stems from a strong entrepreneurial state and a weak private sector. This precisely contradicts the Mazzucato argument.

The rest of this chapter is as follows: Section two outlines the evolution of managerial capitalism as it has existed from the twentieth century to the digital age in the twenty-first century. Section three presents the analysis of the DPE Index, and section four discusses why new firms are needed in light of the information technology revolution. The conclusion reports a strong correlation between the depth of the digital entrepreneurial ecosystem and economic development.