Entrepreneurial experimentation: a key function in systems of innovation

The literature on innovation systems focuses on the supply side (the creation of technology) rather than on how innovations are converted into economic activity and growth via the market (the demand side, and the interface between supply and demand). One implication of this is that there is a dearth of research on the links between innovation systems and economic growth. The purpose of this paper is to begin to fill this gap in the literature. We articulate the function of entrepreneurial experimentation as an essential mechanism for translating new knowledge into economic activity and growth created in innovation systems. We argue that entrepreneurial experimentation comprises both “technical” and “market” experimentation. Spinoffs and acquisitions are proposed as micro-mechanisms that give rise to system-wide entrepreneurial experimentation. Our framework suggests that entrepreneurial experimentation is central in driving both the supply- and the demand-side dynamics of innovation systems, hence linking both innovation systems and entrepreneurship to economic growth.