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Ecosystems aren't naturally occurring. Innovation only translates into sustained economic impact when leaders intentionally align and re-wire the many institution and systems that shape the regional economy. This ecosystem-building work is essential to long-term growth but is often invisible and misunderstood.
Ecosystem building requires sustained, coordinated efforts to strengthen economic networks and align regional workforce and economic development systems where growth potential is highest.
Achieving economic transformation is no simple undertaking. It requires a re-wiring of the complex array of actors and institutions that make up and shape the regional economy – from startups and anchor firms to universities and other research institutions, community colleges, state and local government, among others – to enable focused, collective action in support of a long-term economic strategy.
The field, including NSF Engines, has come to refer to this work as “ecosystem building,” recognizing the many interdependent actors that need to be in sync to take technologies from research to commercialization and to nurture nascent industries into thriving economic drivers. The term is useful: “ecosystem building” foregrounds the diverse and varied networks of actors – as opposed to individual entrepreneurial heroes – that enable regional innovation.
But the term can also be misleading. It’s used in regions to refer to many different things, from formal partners in an initiative to groups of entrepreneurs to entire industry clusters, which causes confusion. But more importantly, by evoking natural ecosystems, the term suggests that ecosystem building is basically an act of setting natural processes in motion. It inspires images of tending to a garden, rather than capturing the strategically and strenuous work that’s required to build systems that encourage the economy to do something it does not naturally do. This leads partners to undervalue and underinvest in ecosystem building, even though it’s essential to the success of more attention-grabbing programmatic investments.
In this piece, we challenge two common assumptions that shape how people understand and invest in “ecosystem building.” Both assumptions were always shaky, but, today, given changes in how innovation and regional economies actually function, they are increasingly wrong.
One of the core tasks of ecosystem builders across the country, including NSF Engines, is to confront these assumptions head on and make clear to partners and funders that ecosystem building is not a natural byproduct of innovation activity, but a difficult and essential form of work in its own right. Our aim is to equip ecosystem builders and their coalitions across the country with a clearer rationale for why the often-invisible work of ecosystem building deserves sustained investment.
The first assumption that shapes how partners interpret “ecosystem building” relates to the “eco” part of the term, which is that economic networks are as natural and self-regenerating as ecological ecosystems. Even if largely invisible, nature is full of complex webs of interaction – plants, animals, soil, and sunlight exist in balance with one another, each playing interdependent roles and cycling nutrients. Many assume these invisible webs exist in the economy too: seed entrepreneurship, add capital, convene actors to cross-pollinate, and knowledge will circulate “in the air,” yielding growth. Alfred Marshall famously wrote about this economic dynamic in 1920, noting that in industrial clusters: “The mysteries of the trade become no mysteries; but are as it were in the air… if one man starts a new idea, it is taken up by others and combined with suggestions of his own; and thus it becomes the source of further new ideas.” More modern scholars have referred to this natural exchange of tacit knowledge as “buzz”, the result of which is “knowledge spillovers” that are available to any entrepreneur in the ecosystem.
This assumption no longer holds. Dense concentrations of innovators do not reliably produce open, dynamic knowledge exchange. In fact, evidence suggests that dense concentrations of innovators are increasingly unlikely to engage with one another in ways that create knowledge spillovers that power regional innovation ecosystems. Evgenii Fadeev's analysis of patent citations found that knowledge exchange is increasingly happening in highly intentional, controlled ways among formal business partners – in contrast to the imagined situation in innovation ecosystems, where knowledge is supposed to move “in the air”.1 Lukas Mewes' analysis of technology combinations in patents finds that the advantage large cities once had in producing novel, atypical technology combinations – a key indicator of knowledge spillovers – peaked in the 1970s and has been declining steadily since.2 Mikko Packalen and Jay Bhattacharya's research found that patents from big cities are no longer more likely to cite newer technological concepts, suggesting weakening knowledge circulation even in dense innovation centers.3 Raj Chetty and colleagues have famously pointed out one reason for faltering economic networks, which is that social networks are highly influential in shaping propensity to innovate but are highly fragmented: people in the top income decile tend to have few, if any, friends in the bottom half of the income distribution.
In short, economic networks do not self-assemble simply because the right actors are close by; they must be actively built and maintained.
The second assumption concerns the “system” part of ecosystem building: the belief that regional economic and workforce development systems naturally self-organize around the parts of the economy where growth potential is highest. In ecological systems, each species’ role is encoded and reinforced through natural selection, producing a functional equilibrium over time. Many assume that regional institutions behave similarly; despite differing incentives, economic development organizations, workforce development organizations and universities will collectively gravitate toward productive roles in supporting emerging industries.
This assumption, again, leads to the belief that ecosystem building is basically about relatively light-touch interventions – convening, coordinating, intermediating – to gently guide actors that want to play the right roles in the right parts of the economy. But that assumption has never been true.
Regions lack any mechanism that systematically ensures gaps across institutions and service providers are filled, redundancies are eliminated, or collective effort aligns with long-term opportunity.
Organizations respond to their own incentives, not to system-level needs. As a result, regions can become stuck over-investing in familiar activities while failing to coordinate around new ones—even when they possess substantial innovation assets. Path dependence is not an anomaly; it is a common outcome. Michael Storper and colleagues argue persuasively that this is exactly what happened in Los Angeles from 1970-2010.
These assumptions are especially problematic in the context of NSF Engines and similar kinds of coalitions, because engines are explicitly designed to work against prevailing market forces. Their purpose is to accelerate technologies that are critical for national security and long-term prosperity regardless of perceived market value—and to ensure that production and manufacturing occur in regions that have historically been excluded from those activities. These coalitions should strongly emphasize the market potential of the technologies that they are working to develop, but they should also make it clear that they exist to work against prevailing market forces.
Yet when regional stakeholders hear that engines are “ecosystem builders,” many interpret that role as secondary or supportive—a light-touch activity that sits alongside more tangible work like running accelerators, funding research, or training workers. Ecosystem building is seen as a byproduct rather than a core function.
NSF Engines must make a different case. Ecosystem building is an effort to rewire the operating systems that underpin regional economies: to rebuild the networks that connect researchers, entrepreneurs, firms, investors, workforce institutions, and public agencies in ways that enable collective problem-solving. This work runs counter to powerful trends that have made knowledge exchange more siloed, less dynamic, and less accessible. It is slow, difficult, and often invisible—but it is precisely what distinguishes an ecosystem from a loose collection of projects.
If ecosystem builders like NSF Engines can elevate ecosystem building as a central, intentional activity—rather than an assumed backdrop—they have a real opportunity to build the durable partnerships, investments and system-level capacity required to invent, scale, and produce the technologies the country needs.
Reflection Questions
This post is the first in a series of six blogs describing key elements of ecosystem-building, with an emphasis on system-building, grounded in the experience of engines. The series is authored by Ryan Donahue and Francie Genz, who have spent years studying the essential capabilities that allow regions to change their economic future by getting organized across public, private and nonprofit sectors.
These blogs are designed to highlight some of the most essential and difficult aspects of ecosystem-building, describing key strategies as well as what they look like in practice, drawing from examples within the engines network and beyond.
