The large firm dilemma: anchor embeddedness and high-technology competition

Abstract

Abstract Do large firms support or suppress regional entrepreneurship? Comparing Ottawa and Waterloo, two entrepreneurial ecosystems dominated by large, flagship firms, Nortel and Research in Motion (RIM), we demonstrate how an anchor firm’s relationship to the entrepreneurial community shapes entrepreneurial activity. In Ottawa, an engaged anchor delivered the public goods to overcome the negative externalities associated with large firm growth. In the long run, however, this vibrant, startup scene proved surprisingly vulnerable to Nortel’s decline. In Waterloo, in contrast, new firm formation plummeted under a detached anchor. RIM’s isolation, however, enabled Waterloo to construct the independent, entrepreneurial infrastructure it needed to capitalize on its collapse. Illuminating the mechanisms behind ‘entrepreneurial recycling’, or the reallocation of labor from declining anchor firms, we argue that regions confront a strategic dilemma in how they engage large firms.

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