1. Accordingtoarecentreport*fromtheMITEntrepreneurshipCenter,
more than 25,000 active companies founded by MIT alumni have
generatedabout3.3millionjobsand$2trillioninannualrevenues.If
they formed a nation, these companies would constitute the world’s
11th largest economy, ranking between Brazil and Russia. What
accounts for this extraordinary success story?
Some might view the concentration of brain power on campus,
coupledwithoneofthebesttechnologylicensingofficesintheworld,
as enough to make MIT the economic powerhouse that it is. But the
MIT Technology Licensing Office has enabled the creation of only
about 22 startups per year in the past decade, a small fraction of the
hundreds of companies launched annually by MIT alumni.
“It’snotjusttransferringtechnologyoutoftheuniversitythatcre-
ates these innovation-based companies; it’s actually the knowledge
that’s gained in how you create companies,” says William Aulet,
Entrepreneur-in-Residence at the MIT Entrepreneurship Center (E-
Center) and senior lecturer at the MITSloan School of Management.
“As Ed Roberts (professor of management of technology at the MIT
SloanSchoolofManagement,founder/chairoftheMITE-Centerand
lead author of the aforementioned report) explained so elegantly in a
class I took from him fourteen years ago, ‘Innovation = invention +
commercialization.’At MIT it’s the marriage of the School of Engi-
neeringwiththeentrepreneurialspiritoftheSloanSchoolthatcreates
these great companies.”
In extensive studies of the MIT-based economy and more than a
dozen other regional “business innovation ecosystems” around the
world from Ireland to Pakistan, Aulet and his colleague Ken Morse
(managing director of the MIT E-Center) have teased out seven key
factors that make these regions successful or unsuccessful at fusing
inventionwithcommercialization.Bypayingcloseattentiontothese
factors, nations and businesses across the globe could boost their
competitiveness considerably, even in today’s economy.
Aulet will discuss these seven components of a robust regional
business innovation ecosystem—and additional considerations for
thecleanenergysector—atthe2009MITInnovationsinManagement
Conference, which convenes May 5-6 on the MITcampus. Co-spon-
sored by the MIT Industrial Liaison Program and MIT Sloan School
of Management and designed for executives, managers and other
business leaders, the conference will examine the causes and effects
ofthefinancialmarketscrisis,itsimplicationsfortheglobaleconomy
and its impact on strategic planning across all business functions.
Seven Habits of Highly Successful Business
Innovation Ecosystems
AsAuletseesit,aregionalbusinessinnovationecosystemneedsseven
well-functioning components to be successful: 1) infrastructure,
including roads, telephones, Internet access, and legal, accounting,
and other professional services; 2) funding sources, such as lines of
credit or equity; 3) invention, emerging from individuals, universi
ties, 4) corporate R&D centers, and other sources; demand for its
products;5)aculturethatcelebratesentrepreneurshipandacceptsthe
risksinvolved;6)askilled,well-educatedlaborpoolofentrepreneurs;
7) and a supportive government that provides innovation-friendly
regulations, tax incentives, bankruptcy laws, and other policies.
Failed regions often focus heavily on infrastructure, funding,
invention, or demand, while paying insufficient attention to culture,
entrepreneurs,andgovernment,Auletmaintains.WhileheandMorse
determined that all seven components needed to run smoothly to
produce a well-oiled business innovation ecosystem, they found the
last three especially critical.
“First,youneedaculturethatcelebratesentrepreneurs,thatallows
peopletotakechancesandthatrecognizesfailureaspartofthelearn-
ing process,” saysAulet. “In a lot of places we went, the culture was
‘Go work in a big company or the government and don’t make any
mistakes,andyouwillhaveajobforlife;ifyoufail,you’redonefor.’
Second, you need a pool of skilled and well-trained entrepreneurs.
You can’t send people out to battle without being well-armed.Third,
you need a government willing to take an appropriate role. Govern-
ment cannot drive entrepreneurship, but it can be supportive of it.”
Government can help, for example, by passing bankruptcy laws
that enable citizens to start businesses without putting their families at
risk;byprovidingseedmoneytoeducatefirst-generationentrepreneurs
Clusters of Excellence
How to build a robust regional business innovation ecosystem
by Mark Dwortzan
FROM THE EDITORS OF TECHNOLOGY REVIEW
WilliamAulet,picturedabove,willsharetheseven
componentsofarobustinnovationecosystematthe
2009MITInnovationsinManagementConference.

2. and celebrating their success thereafter; and by offering ongoing net-
working and skill-building opportunities for entrepreneurs.
Aulet and Morse found that three other components—demand,
invention,andfunding—whileessentialtoaninnovationecosystem’s
success, packed less punch. In today’s more interconnected world,
businesses can increasingly obtain these components outside the
region.
“The world’s now flat for demand,” he observes. “If you make a
good product, you can sell it anywhere in the world. I’m on the board
of a company in Pakistan that sells tickets here in Boston for the Celt-
ics games.” Many companies likewise obtain inventions and funding
outsidetheirowngeographicregionandcanoperatehighlyeffectively
within their own vibrant innovation ecosystem.
Aulet and Morse also found infrastructure to be far less critical to
the success of a business innovation ecosystem than they expected.
“Infrastructureasitturnsoutisprettybinary,eitheryouhaveitoryou
do not,”Aulet maintains. “While some are better than others, it made
much less of a difference than we thought – once it met a minimum
criteria.”
Clean Energy Sector Considerations
As citizens in the U.S. and other nations strive to reduce their depen-
dence on foreign oil and address global climate change, many view
thecleanenergysectorasapromisingsourceofregionalemployment
and economic growth. But creating a successful business innovation
ecosystem around clean energy entails complexities that go beyond
the seven components described above, saysAulet.
These include price, scale and policy considerations. “Because
energyisfundamentallyacommodity,itspricefluctuatesandiscyclic
in nature,” he explains. “Asecond crucial consideration for energy is
thehugemarketsize.Tosurvive,companieshavetoscaleveryquickly
and this requires large sums of money—much larger than needed to
launch an IT company. And thirdly, because energy is a service pro-
vided to all levels of society, public policy considerations are very
important.”
AsAulet sees it, new technologies can only take the clean energy
sectorsofar.Itssuccesswillcomeasmuchfromlabbreakthroughsas
it will from creative business and policy experts finding sustainable
ways to produce and distribute clean energy—strategies that account
for the complexities of price, scale and policy.
Cultivating Innovation Within Business
Lessonslearnedfromthesuccessesandfailuresofbusinessinnovation
ecosystems can be applied within companies as well as regions. For
instance, successful innovative companies tend to promote cultures
that promote experimentation and celebrate risk-takers.
“Whetheryou’regoingforincrementalinnovation,whichyoucan
apply to your core business, or for disruptive innovation, which you
apply to new parts of your business, these techniques work,” says
Aulet, who consults on innovation and entrepreneurship to some of
the world’s largest companies and co-founded Cambridge Decision
DynamicsandSensAbleTechnologies.“Theycanbeusedtopromote
intrapreneurs—innovators in large companies—as well as startups.”
Aulet believes that ongoing support for entrepreneurship will be
essentialtothesuccessofsmallandlargebusinessesseekingtoremain
competitive in today’s harsh economic climate.
EdRobertsagrees.“Largecompaniestodaymustbetterunderstand
how new enterprises are generated, and must get closer to them for
linkageofideas,technologies,andhumanenergy,”hesays.“Stronger
ties by large and new firms can be fostered via investment, alliances
andacquisitions,butallthesehavetorestuponenhancedunderstand-
ing of the culture and behavior of entrepreneurs and their compa-
nies.”
2009 MIT Innovations in Management Conference, May 5-6, Wong
Auditorium, Tang Center, http://ilp-www.mit.edu/events/
MGT2009.
*“Entrepreneurial Impact: The Role of MIT” is available at http://
entrepreneurship.mit.edu/impact.php.
MoreinformationabouttheMITEntrepreneurshipCenterisavailable
at http://entrepreneurship.mit.edu.
ilp-www.mit.edu
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