City policies to promote entrepreneurship: A cross-country comparison of Poland and Germany.

• Author: Fazlagic, Jan

INTRODUCTION

Interest is growing on the impact of entrepreneurship on urban economic development (e.g., Alvarez & Busenitz, 2001; Glaeser, 2007; Isenberg, 2011; OECD, 2018). Scholars have identified entrepreneurship as a process of recognizing opportunities, understanding an idea's or invention's commercial potential, and converting the resulting intellectual capital into successful businesses that create value through innovation (Schumpeter, 1912; Shane, 2007). Moreover, research demonstrates that entrepreneurship is a key factor through which knowledge spillovers stimulate knowledge-based economies. Audretsch et al. (2015) argue that a policy to promote entrepreneurship plays a central role in the strategic management of cities, because knowledge-based entrepreneurship is the key to global competitiveness.

The knowledge spillover theory of entrepreneurship indicates that the level of knowledge-based entrepreneurship is determined by new knowledge creation and whether entrepreneurial absorptive capacity exists to exploit it (Acs et al., 2013). The effectiveness of knowledge spillovers and entrepreneurship has frequently been suggested to depend on factors like a region's enterprise policy and strategy, including start-up strategy (Huggins & Williams, 2011) and public cluster policy (Porter, 1998; Audretsch et al., 2018). Despite the recognition of the importance of new firm formation in urban economic development, a widespread theme in the existing literature is defining the need to support cities' cultural entrepreneurship (Qian & Liu, 2018) and social entrepreneurship (Simon et al., 2016). An example of this theme is the typology proposed by Spencer and colleagues (2005), who adopted a contingency theory to explain differences in national policies' impact on social entrepreneurship, innovation, and venture creation.

Stough (2003) argues that political and social changes in Central and Eastern European (CEE) countries reduced their investment risk and opened more advanced countries' access to highly skilled and significantly lower-cost workers. These changes resulted in higher-wage, developed countries being forced to invest in new firm creation and jobs in technology-intensive and knowledge industries. Consequently, contemporary regional development policies in those countries focused mainly on innovation, entrepreneurship, firm formation and industrial clustering. By contrast, in CEE countries, growth and development are not necessarily propelled by companies' research and development (R&D) activities (Marelba, 2010). Hence, Poland and Germany were chosen for comparison because of their geographic proximity, strong economic ties and Polish aspirations to catch up with the most developed economies of Western Europe within the next two decades. As Germany is the largest and one of the most advanced economies in terms of technological development in Europe, it offers many opportunities for benchmarking and learning for Poland, including city management practices. The primary purpose of this study is to evaluate current regional development policies in Poland and Germany in their efforts to develop successful innovative environments and provide some insights for the Polish cities, which could allow them to imitate the best practices and follow the path of their most successful German counterparts. As no single policy can be copied and implemented universally to improve regions' performance (Audretsch, 2015), we aim to answer the following research question:

RQ) How do urban policies in Poland that support knowledge spillovers and entrepreneurship--the key drivers of regions' innovative capacity development to sustain global competitiveness--differ from German cities' policies? To answer this question, we have adopted a multiple-case study methodology relying on multiple sources of evidence, primarily the strategic documents of 11 largest Polish cities in the context of cross-country, which were compared with seven selected large cities in Germany. We conducted a series of semi-structured interviews with the decision-makers representing municipalities from the analyzed cities in Poland. Building on the concept of the knowledge spillover theory of entrepreneurship, we refer to the approach described by Agarwal et al. (2010), in which spillovers of knowledge are a strategic lever through which firms distribute innovation and have profound implications for the region's entrepreneurial activities development.

This article is organized asfollows: it begins with this introduction, followed by a review of the theoretical strategic orientation of cities' background, the importance of social and cultural entrepreneurship for city development, and actions to promote creative and innovative companies. The methodology is presented in the next section, and the last section reflects on the findings of the study in the context of future policy development.

LITERATURE REVIEW

Enterprise policy and strategy as a key of urban economic development

There is voluminous literature both on entrepreneurship and city development. The special role of regions in the development of innovative capacity to sustain global competitiveness has been a source of inquiries that have recently increased considerably. Starting from the work of Smilor and Wakelin (1990) on key factors in the development of smart infrastructure (talent--technology--capital--know-how model) supported by policy implications, authors have concentrated on company formation and entrepreneurship-oriented policies (Stough, 2003). In pursuing beneficial outcomes of entrepreneurship, governments and regional development organizations enact policies to stimulate entrepreneurial activity (Roundy & Feyard 2019). Scholars consider entrepreneurship to be the most reliable driver of economic growth and community development (Audretsch et al., 2015; Baumol & Strom, 2007; Valliere, 2016). Entrepreneurial activities support job growth and social development (Malchow-M0ller, 2011) and economic growth (Galindo & Mendez, 2014; Mumby-Croft & Brown, 2006).

The taxonomy of entrepreneurial theories has been condensed into three major traditions, defined by Hebert and Link (1989). However, the Schumpeterian tradition, which emphasizes the role of the entrepreneur and innovations in the process of economic development, had the greatest impact on further theory development. Similarly, Schumpeter's idea of creative destruction has dominated the framework for entrepreneurship and economic development (Agarwal et al., 2007). According to the Knowledge Spillover Strategic Entrepreneurship (KSSE) theory, introduced by Acs et al. (2008), knowledge is created endogenously. Consequently, industries and regions can grow due to KSSE and can further attract additional human capital as well as its supporting infrastructure.

Cities and regions with higher entrepreneurial activity will introduce greater knowledge spillovers and the resultant commercialization of knowledge, which will lead to economic growth and new jobs creation (Agarwal et al., 2007). Some cities are much more entrepreneurial than others (Glaeser, 2007). Hart (2003) argues that entrepreneurship policy raises the level of entrepreneurship, concentrating not only on existing entrepreneurs but also on those who consider starting a new venture. Therefore, entrepreneurship policies within regions consist of measures taken to stimulate more entrepreneurial behavior in a region or country (Lundstrom & Stevenson, 2001). Entrepreneurship policy intends those measures to directly influence the level of entrepreneurial vitality in a country or a region (Lundstrom & Stevenson, 2005). Regions with their innovative firms and entrepreneurial individuals are henceforth the key contributors to innovation (Breshsnahan & Gambardella, 2004).

Research that explores KSSE through questions related to cities' strategies may be properly addressed by comparisons between two countries. For this purpose, our research analyzes regional policy in selected Polish and German cities to the extent to which such policy accounts for entrepreneurship issues influencing regional competitiveness; these attempts are the first that can significantly contribute to the literature.

Brooks et al. (2019), who examined the role of public policy in the formation of entrepreneurial ecosystems in three Polish cities, argue that Polish attempts to foster entrepreneurial activity had some successes; however, the entrepreneurial ecosystems have still not been created. Previous studies, including Poland in the framework of The Innovative Policy Research for Economic Growth (IPREG) project, were based on an estimation of the total net cost of public expenditure on entrepreneurship policy and the description of the comprehensiveness of these policies (Entrepreneurship and SME Policies across Europe report, 2011). According to Lundstrbm et al. (2014), expenditure on entrepreneurship policy constitutes only 16% of total policy expenditure in Poland, and we observe the same numbers for Flanders. Also, it is broadly similar per capita for Austria, Flanders and Sweden, taking into account differences in wealth. However, entrepreneurship education, policy relevant research, promotion measures and especially innovative entrepreneurship and target policy groups mean values were lower in Poland as compared to Sweden. Hence, our research draws a comparison in the areas that require special intervention. For example, Audretsch et al. (2007) have shown that one area where public intervention can enhance entrepreneurial culture of residents, especially in European countries, is the entity's education policy. Education influences young people's mindsets, skills and attitudes for turning ideas into actions, so that they can be prepared for entrepreneurial careers; it therefore has become a priority in European Union strategy (European Commission, 2010). Similarly, government policy through...