Innovation hubs: Catalyst for entrepreneurship & economic growth

By Bernard BEMPONG 

Historically, entrepreneurs encountered obstacles in acquiring information and mentorship owing to travel restrictions, guarded practices, and apprehensions regarding the sharing of trade secrets. The absence of digital platforms further impeded collaboration. Nonetheless, technological advancements and ubiquitous internet access have transformed the landscape. Innovation hubs now serve as pivotal platforms fostering innovation and economic development.

These physical entities, ranging from office suites to entire cities, support startups by promoting innovation, experimentation, and access to investment. They provide venues where entrepreneurs, academics, investors, and organisations convene to convert ideas into products and services. Acting as facilitators, they stimulate interactions that frequently lead to collaborations among technology start-ups, promote risk-taking, and regard failure as a stepping-stone to growth.

Globally, the rapid proliferation of Innovation Hubs reflects their growing importance in nurturing entrepreneurial ecosystems. According to the 2016 World Bank Development Report, Africa has over 117 technology hubs. Across Ghana and the broader African continent, these hubs serve a crucial function in fostering the development of ICT-oriented entrepreneurship like the Silicon Valley in the United States, renowned for producing technology giants like Facebook and Google. In Ghana, prominent examples include Impact Hub and InnoHub.

Innovation Hubs-Models

Indeed, innovation Hubs create environments that accelerate innovation and entrepreneurial growth. These include various models such as:

• Incubators – Focused on early-stage ventures, providing space, mentorship, and essential business services.
• Accelerators – Provide structured, time-limited programs designed to quickly grow start-ups. Programs like Techstars and Seedcamp have effectively helped start-ups achieve major milestones.
• Co-working spaces – Shared work environments like WeWork foster collaboration, especially among freelancers and small businesses.
• Technology Parks – These large-scale innovation hubs promote collaboration between industry and academia.

The Role of Hubs in Entrepreneurial Ecosystems

The shared goal of Innovation or Tech hubs is to support entrepreneurs in thriving through two main functions: building businesses and fostering communities. The main reasons behind the creation and expansion of tech hubs include:

• Access to Resources: Tech hubs provide access to essential resources, including angel investment, venture capital, and public funding. Some of the hubs studied in case reports received external funding from major organizations such as the World Bank, CSIR, and UNICEF. These funds helped support entrepreneurs within the hubs.
• Networking and Collaboration: Hubs facilitate field building and connections across startup ecosystems (van Rijnsoever, 2020). Tech hubs are central to the functioning of entrepreneurial ecosystems – networks of entrepreneurs, investors, institutions, and policies that foster innovation and business development (Mago & van der Merwe, 2023).
• Learning and Capacity Building: Tech hubs offer platforms for aspiring entrepreneurs to develop products and services. They improve both entrepreneurial and technical skills through structured training programs and informal knowledge-sharing activities. Hubs use various strategies such as increasing user engagement, mentorship (linking start-ups with experienced professionals) and targeted training to promote ongoing learning and innovation.

To increase access to resources, hubs also expand their outreach to secure funding and encourage experimentation and improvisation with available assets.

• Funding access – Direct funding or connections to investors (Pierrakis & Owen, 2023)
• Ecosystem Anchors: Tailored strategies are needed, as a one-size-fits-all approach is ineffective across diverse entrepreneurial contexts (Liu et al., 2021).
• Product testing – Providing platforms for prototyping and market validation (Cohen et al., 2019)
• Infrastructure Providers: Hubs offer the necessary infrastructure for startups to experiment and grow (Autio et al., 2018).
• Knowledge Intermediaries: They connect startups with mentors, investors, and academic institutions, promoting knowledge transfer and innovation (Hayter, 2016).
• Catalysing Innovation: Hubs foster creative thinking through dynamic environments that encourage experimentation and iteration.

Challenges Facing Innovation Hubs

Tech hub failures often stem from a misalignment, which is either between an organisation’s goals and its business model or between its goals and the needs of its local ecosystem. Beyond this limitation, innovation hubs face some challenges that weaken their effectiveness and long-term sustainability:

Funding and Sustainability: Funding sources are often unstable. Hubs depend on public funding, private sponsorship, and service revenues, but these can fluctuate. Economic downturns or policy shifts can disrupt government or corporate funding.

Competition among many hubs for limited resources further strains budgets and may degrade service quality. Sustainability issues arise when there is a disconnect between a hub’s mission and its operational model. Misconceptions about what a hub is or does can hurt stakeholder buy?in. Hubs must educate partners, the government, and the public about their role and value.

Retention of Talent and Brain Drain: Human capital is often limited: recruiting, developing, and retaining staff with the right combination of technical, managerial, and entrepreneurial skills is challenging. Talented people are often pulled toward more established ecosystems or abroad and stronger opportunities. Hubs need compelling value propositions: chances for career growth, good pay, and a lively entrepreneurial culture. Working with universities or industry can help by anchoring talent locally and creating clear career paths.

Regulatory and Policy Barriers: Cumbersome regulations, inconsistent policy enforcement, and bureaucratic hurdles hinder startups and hubs from operating smoothly. Common obstacles include business registration, intellectual property (IP) protections, and tax incentives. Many hubs advocate by working with the government to reform policies or negotiate more favourable conditions.

Implications for Stakeholders

The success of hubs and start-ups is closely linked to the strength of the ecosystems they operate in. Policymakers can play a key role in shaping these ecosystems, especially in resource-limited environments. Co-investment models (government plus private sector) can help ease the financial burden on any single party, particularly when private equity is limited.

1. Building a Strong Foundation– A functional entrepreneurial ecosystem requires reliable infrastructure and accessible markets. Government can provide incentives to early-stage entrepreneurs and other ecosystem actors to foster the formation of innovation communities.
2. Creating an Enabling Environment for Hubs

With a projected global shortfall of 4.3 million tech workers by 2030, attracting and retaining skilled talent is critical. Hubs must be empowered to help bridge the digital gap. Governments can support hubs by:

• Offering tax incentives and preferential procurement for locally produced digital goods and services
• Introducing policies can lower operational costs, attract investment, and stimulate innovation.
• Streamline business registration, improve IP rights and offer stable incentives favourable for innovation.

3. Cultivating Pioneer Start-Ups to Drive Spillover Effects

The success of early-stage start-ups can catalyse entire ecosystems. Entrepreneurs who exit successfully often reinvest as angel investors, venture capitalists or mentors by helping to build human capital and entrepreneurial knowledge. To increase the survival rate of pioneer ventures, governments could:

• Offer early access to public sector contracts
• Develop frameworks that foster innovation by reducing risk.
• Visible success stories also help shift cultural norms, positioning entrepreneurship as a viable and respected career path.

4. Co-Creating Policy with Ecosystem Actors

Entrepreneurial ecosystems are complex and interconnected. Effective policy needs input from those actively building and navigating these environments. Policymakers should:

• Regularly consult with start-up founders, tech hubs, and ecosystem builders
• Prioritise bottom-up approaches that reflect local realities, rather than importing models from mature ecosystems that may not apply
• Engaging stakeholders ensures that policies are relevant, inclusive, and responsive to real-world challenges.

Conclusion

Innovation hubs have emerged as transformative catalysts for entrepreneurship and economic growth, especially in emerging markets. Evolving from mere physical spaces into dynamic ecosystems, these hubs provide crucial infrastructure that enable startups to thrive.

Through various models, they support the commercialisation of new ideas. However, the success and sustainability of innovation hubs are contingent on several factors and addressing them require policies with a coordinated effort of stakeholders. In all, innovation hubs are vital engines for driving inclusive economic development and represent more than just support structures for entrepreneurs. When nurtured effectively, they will not only launch successful ventures but also stimulate broader societal change by building resilient and knowledge-based economies.

Further Reading:

International Trade Centre (2024). Tech Hubs in Africa: Accelerating start-ups for resilient growth (3rd Edition). ITC. Geneva.

BERNARD BEMPONG 

Bernard is a Chartered Accountant with over 14 years of professional and industry experience in Financial Services Sector and Management Consultancy. He is the Managing Partner of J.S Morlu (Ghana) an international consulting firm providing Accounting, Tax, Auditing, IT Solutions and Business Advisory Services to both private businesses and government.

Our Office is located at Lagos Avenue, East Legon, Accra.

Contact: 233 302 528 977

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 Website: www.jsmorlu.com.gh

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