How can innovation ecosystems emerge despite ineffective bureaucracy, resource constraints, and conflicting agendas of government and university agencies? Our study of the Israeli nanotechnology ecosystem, published in the Journal of Management Studies, reveals how dedicated units that are free from organizational deficiencies and the transition to simultaneous competition and cooperation helps unblock bottlenecks and supports the emergence of the ecosystem. This enables us to offer insights into the missing link between technological discovery and commercialization. 

Innovation ecosystems are essential but often face challenges at inception  

An innovation ecosystem brings together government, university, and other actors to promote the commercialization of a core technology such as nanotechnology, artificial intelligence, or cleantech. The emergence of the innovation ecosystem sets the ground for entrepreneurs and firms in subsequent phases of evolution. However, technological discovery does not ensure the successful emergence of the ecosystem, which requires coordination among actors with conflicting agendas that may lack the needed resources for commercialization. For example, the commercialization of nanotechnology in India has fallen short whereas in Israel it has been delayed for a couple of decades. Little is known about how innovation ecosystems come about. Prior research focused on business ecosystems and on the actions of firms that join only in subsequent phases of evolution. Needed is a better understanding of the dynamics that hinder or enable the emergence of an innovation ecosystem.   

Organizational bottlenecks hinder ecosystem emergence 

We studied the nanotechnology ecosystem in Israel for a decade, conducting dozens of interviews with directors of university nano centers, prominent university scientists, government officials, and company founders. We also surveyed close to 300 scientists in university research centers and collected extensive archival data including reports, meeting minutes, memos, news articles, patent applications and publications. We used this rich data to compile a chronicle of events that reveals a complex interplay of the government and universities involved in the emergence of the ecosystem.  

Our findings uncover that it is organizational bottlenecks rather than technological bottlenecks that hinder the ecosystem’s emergence at that phase. These bottlenecks involve ineffective bureaucracy that takes many shapes: fragmentation of responsibilities across organizational actors; inflexible objectives, structures, and tasks; short-term and narrow focus of decision makers; impaired ability to orchestrate joint activities; and administrative void, that leaves no one in charge of carrying out certain tasks. These bureaucratic hurdles were amplified by resource constraints: the allocated funds were insufficient for performing essential tasks, in part because they were scattered across multiple actors with conflicting interests, while available resources were assigned based on suboptimal priorities. These barriers prevented the ecosystem from emerging for almost two decades. 

Unblocking the bottlenecks through metamorphosis and coopetition 

The unblocking of the bottlenecks that delayed the emergence of the innovation ecosystem required an innovative organizational solution, one that enabled actors to leave behind their formal roles and coordinate their actions for the shared mission of promoting the nanotechnology initiative. For example, the Forum for Research Infrastructure was established to compensate for the government ministries’ shortcomings. It operated alongside existing formal structures, gathering the government officials who then operated as a collective to pool their resources. Whereas such metamorphosis facilitated organizational alignment, the resource pooling and the pursuit of joint interests was motivated by the realization that competition had prevented the actors from implementing their private agendas, so cooperation was inevitable. Gradually, government units and universities began to engage in simultaneous competition and cooperation, i.e., co-opetition. For example, after Israel’s top science university – the Technion received a donation that required matching funds from the government and the university to support the establishment of a nano research center, all other universities followed to pursue this triangle donation model to set up their own research centers. These centers were coordinating their actions vis-à-vis the Israel National Nanotechnology Initiative that administered the funds, with the aim of bridging the conflicting interests and finding the right balance between promoting basic academic research and commercializing applied research. At that point, enabling and governing mechanisms were devised which facilitated and directed the emergence of the ecosystem, while promoting its legitimacy. One of the insights was that actors needed to strive for a common mission, create a shared identity, and coordinate actions, before they could pool their resources. Such “meeting of the minds” and the formation of mutual perceptions are organic to the process of resource sharing, which extends the notion of co-opetition as discussed in the literature.  

The takeaways for policy makers and entrepreneurs 

Our study can guide policymakers, universities, and entrepreneurs who seek to identify bottlenecks that delay commercialization and who wish to shape the evolution of innovation ecosystems. We underscore the role of informal voluntary organizations in overcoming bureaucratic hurdles and advocate cooperation among actors that typically compete but strive to promote a shared mission. Our study identifies specific practices that these actors can implement, and which facilitate commercialization in an innovation ecosystem following a technological discovery. We demonstrate how policymakers can strive to unblock bottlenecks by engaging in organizational design that eliminates fragmentation, rigidity, myopia, discoordination, and administrative void in their units, which is essential to support the emerging ecosystem. Our study also explains how to combine and prioritize resources which are scattered across organizational units. If this is insufficient, policymakers can achieve organizational alignment by pursuing metamorphosis and coopetition, as illustrated in our study. Finally, governing and enabling mechanisms can be selectively applied, putting in place regulation, monitoring, roles, and forums among other mechanisms that facilitate the emergence of the innovation ecosystem.