The entrepreneur and the ecosystem: extending and operationalizing EE theory from an embeddedness perspective

Why do entrepreneurs leave their current entrepreneurial ecosystems to relocate elsewhere? While entrepreneurial ecosystem (EE) theory tends to assume that entrepreneurs remain embedded within their ecosystems, this study challenges that notion by examining ecosystem “leakage” and highlighting the permeability of EE boundaries. Drawing from an embeddedness perspective, we extend EE theory by developing hypotheses on relational, structural, family, and societal embeddedness. In doing so, we integrate both traditional and non-business-related inputs that influence entrepreneurial relocation decisions. Particularly, we provide a novel operationalization of EE inputs, also including those related to private well-being systems (e.g., cost of living, family support) and societal development (e.g., public safety, technological advancement). Using survey data from 522 entrepreneurs and applying adaptive LASSO and random forests, we find that non-business inputs significantly shape relocation decisions. Entrepreneurs weigh multiple dimensions of embeddedness when considering relocation. As well as business-related inputs contribute to retention, the presence of private well-being systems and advanced societal development significantly reduces the likelihood of leaving. When these non-business factors deteriorate, even ecosystems rich in traditional EE inputs may experience leakage. Overall, our findings suggest that ecosystem retention strategies must extend beyond economic incentives to address the broader social and institutional factors that sustain entrepreneurial embeddedness.