Hidden champions and unicorns: a question of the context of human capital investment

Abstract

The Silicon Valley model of high-tech entrepreneurship has been placed in the spotlight by academics in the past at the expense of the plenitude of Main Street businesses-businesses beyond the high-tech and ICT sector and the highly scalable platform economy. This study aims at resolving this one-sidedness contributing to unexplained aspects of entrepreneurship theory. Our focus lies on a subgroup of Main Street companies, known as hidden champions, as the counterpart of Silicon Valley high-growth firms, the unicorns. In spite of a worldwide distribution, just as unicorns are highly skewed to a few countries and regions, so are hidden champions. On a snapshot, it appears that unicorns and hidden champions are substitutes rather than complementary to one another. We illustrate that the emergence and skewed distribution of these two types of firms can be explained by the institutional context, in particular the provision of human capital. In an explorative approach, our line of reasoning puts forward that the centralization (public provision) vs. decentralization (individual investment) in organizing the accumulation of human capital helps to explain the different and path dependent evolution of both, the Silicon Valley and the Main Street model of entrepreneurship.

Vocational training choice from a regional perspective

“…In summary, rural locations suffer from a reduced selection on ability due to their lower attractiveness for USS graduates; but they benefit from young graduates' adaption to the local opportunity structure. This applies specifically to the successful small and medium manufacturing enterprises with few academically trained employees that are characteristic for German rural regions with low in-migration and that exploit the advantages of stable employment relationships (Lehmann et al 2019). Nevertheless, while short-term effects of mobility restrictions on the local industry development might be positive, medium and long-term effects on the individual and general economic welfare can be detrimental and remain ambiguous at best.…”

Have we oversold the Silicon Valley model of entrepreneurship?

“…The second problem with the singular and exclusive view of entrepreneurship is that it marginalizes and deems less relevant large and robust literatures focusing on main street entrepreneurship. For example, the large and robust literature on self-employment (Parker 2009), business ownership (Wennekers and Thurik 1999), and family business (Chua et al 1999;Lehmann et al 2018;and Wright et al 2014) are clearly not included in the Silicon Valley model of entrepreneurship.…”

“…Similarly, strong and compelling evidence suggests that different institutional contexts (Guiso et al 2006;and Bruton et al 2010), such as the German Mittelstand, result in a high performance of not just the companies, and even Hidden Champions (Simon 1996;Pahnke and Welter 2019;and Lehmann et al 2018), but also for their regions (Audretsch and Lehmann 2016). The fourth problem is that the exclusive and singular view of entrepreneurship may contribute to a warped policy, where the focus and priority is solely on policies and instruments to spur high-tech, high-growth innovative companies at the expense of main street entrepreneurship (Lerner 2012).…”

The Performance of High-Growers and Regional Entrepreneurial Ecosystems: A Research Framework

“…business incubators, technology parks, seed funds, venture capitalist (Cumming, Werth, & Zhang, 2019;). High qualifications of human resources and their mobility among firms enable knowledge spillovers and creativity (Bhawe & Zahra, 2019;Hodges & Link, 2019;Lehmann, Schenkenhofer, & Wirsching, 2019). Consequently, the basis for competitive advantage are differentiation and product innovations rather than scale economies (Hodges & Link, 2019;Schröder, 2013).…”