Enhancing Regional Development with Startup Ecosystems
Regional development based on innovation plays a significant role in stimulating economic growth in the wartime and postwar periods. The creation of innovative ecosystems that support the development of startups and small innovative enterprises ensures the formation of a favorable business climate i...
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Інститут економіки промисловості НАН України
2023
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| Цитувати: | Enhancing Regional Development with Startup Ecosystems / R. Lytvynskyi // Економічний вісник Донбасу. — 2023. — № 4 (74). — С. 101-113. — Бібліогр.: 42 назв. — англ. |
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irk-123456789-1977452024-07-06T13:57:49Z Enhancing Regional Development with Startup Ecosystems Lytvynskyi, R. Economic recovery Regional development based on innovation plays a significant role in stimulating economic growth in the wartime and postwar periods. The creation of innovative ecosystems that support the development of startups and small innovative enterprises ensures the formation of a favorable business climate in the regions and attracts investment, reduces the dependence of regions on traditional industries, creates highly skilled jobs and develops entrepreneurial talent. The purpose of the study is to determine the features of startup ecosystems, their impact on regional development, and to identify the factors of successful functioning of such ecosystems based on the analysis of foreign experience. The article analyzes the experience of formation and development of startup ecosystems in Sweden and Finland, identifies their unique advantages, historical achievements, and current trends. Sweden has a high level of global competitiveness due to active support from the public sector and a favorable business climate. Finland is known for its innovative potential, stable business environment, and attractive conditions for startups and investors. The results of the study demonstrate the sustainable success and prospects for further growth of both ecosystems on an international scale. The study found that despite Sweden and Finland's tremendous achievements in the field of startup development, most of these structures are in the capitals of the countries. It is concluded that although this practice is effective on a national scale, it does not have a qualitative impact on regional development. In the post-war period, Ukraine has a unique opportunity to intensify regional development by mobilizing the potential of specialists who have relocated from the occupied and frontline territories to other regions of the country. The process of forming startup ecosystems around these professionals can give impetus to the development of new types of business or innovative transformation of traditional sectors of regional economies. To successfully implement this approach, a set of appropriate regulatory, organizational, and infrastructural measures must be implemented. Значну роль у стимулюванні економічного зростання у воєнний та післявоєнний періоди відіграє регіональний розвиток на інноваційних засадах. Створення інноваційних екосистем, що підтримують розвиток стартапів та малих інноваційних підприємств, забезпечує формування сприятливого бізнес-клімату у регіонах та залучення інвестицій, зменшує залежність регіонів від традиційних галузей, створює висококваліфіковані робочі місця і розвиває підприємницькі таланти. Метою дослідження є визначення особливостей екосистем стартапів, їхнього впливу на регіональний розвиток та виявлення факторів успішного функціонування таких екосистем на основі аналізу зарубіжного досвіду. У статті проаналізовано досвід формування й розвитку екосистем стартапів у Швеції та Фінляндії, виявлено їхні унікальні переваги, історичні досягнення та поточні тренди. У Швеції спостерігається високий рівень глобальної конкурентоспроможності, зокрема завдяки активній підтримці державного сектору та сприятливому бізнес-клімату. Фінляндія славиться своїм інноваційним потенціалом, стабільним бізнес-середовищем, привабливими умовами для стартапів та інвесторів. Результати дослідження свідчать про стійкий успіх і перспективи подальшого зростання обох екосистем у міжнародному масштабі. У ході дослідження виявлено, що не зважаючи на величезні досягнення Швеції та Фінляндії в сфері розвитку стартапів, більшість таких структур розташовано в столицях країн. Зроблено висновок, що хоча подібна практика є результативною в національному масштабі, але не дає якісного впливу на розвиток регіонів. В умовах повоєнного періоду в Україні існує унікальна можливість для активізації регіонального розвитку через мобілізацію потенціалу фахівців, які релокувались з окупованих та прифронтових територій в інші регіони країни. Процес формування екосистем стартапів навколо цих фахівців може дати поштовх розвитку нових видів бізнесу чи інноваційній трансформації традиційних секторів регіональних економік. Для успішної реалізації такого підходу необхідно впровадження комплексу відповідних заходів регуляторного, організаційного та інфраструктурного характеру. 2023 Article Enhancing Regional Development with Startup Ecosystems / R. Lytvynskyi // Економічний вісник Донбасу. — 2023. — № 4 (74). — С. 101-113. — Бібліогр.: 42 назв. — англ. 1817-3772 DOI: https://doi.org/10.12958/1817-3772-2023-4(74)-101-113 http://dspace.nbuv.gov.ua/handle/123456789/197745 332:330.341.1:338.246.8 en Економічний вісник Донбасу Інститут економіки промисловості НАН України |
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Digital Library of Periodicals of National Academy of Sciences of Ukraine |
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DSpace DC |
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English |
| topic |
Economic recovery Economic recovery |
| spellingShingle |
Economic recovery Economic recovery Lytvynskyi, R. Enhancing Regional Development with Startup Ecosystems Економічний вісник Донбасу |
| description |
Regional development based on innovation plays a significant role in stimulating economic growth in the wartime and postwar periods. The creation of innovative ecosystems that support the development of startups and small innovative enterprises ensures the formation of a favorable business climate in the regions and attracts investment, reduces the dependence of regions on traditional industries, creates highly skilled jobs and develops entrepreneurial talent.
The purpose of the study is to determine the features of startup ecosystems, their impact on regional development, and to identify the factors of successful functioning of such ecosystems based on the analysis of foreign experience.
The article analyzes the experience of formation and development of startup ecosystems in Sweden and Finland, identifies their unique advantages, historical achievements, and current trends. Sweden has a high level of global competitiveness due to active support from the public sector and a favorable business climate. Finland is known for its innovative potential, stable business environment, and attractive conditions for startups and investors. The results of the study demonstrate the sustainable success and prospects for further growth of both ecosystems on an international scale.
The study found that despite Sweden and Finland's tremendous achievements in the field of startup development, most of these structures are in the capitals of the countries. It is concluded that although this practice is effective on a national scale, it does not have a qualitative impact on regional development.
In the post-war period, Ukraine has a unique opportunity to intensify regional development by mobilizing the potential of specialists who have relocated from the occupied and frontline territories to other regions of the country. The process of forming startup ecosystems around these professionals can give impetus to the development of new types of business or innovative transformation of traditional sectors of regional economies. To successfully implement this approach, a set of appropriate regulatory, organizational, and infrastructural measures must be implemented. |
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Article |
| author |
Lytvynskyi, R. |
| author_facet |
Lytvynskyi, R. |
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Lytvynskyi, R. |
| title |
Enhancing Regional Development with Startup Ecosystems |
| title_short |
Enhancing Regional Development with Startup Ecosystems |
| title_full |
Enhancing Regional Development with Startup Ecosystems |
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Enhancing Regional Development with Startup Ecosystems |
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Enhancing Regional Development with Startup Ecosystems |
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enhancing regional development with startup ecosystems |
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Інститут економіки промисловості НАН України |
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2023 |
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Economic recovery |
| url |
http://dspace.nbuv.gov.ua/handle/123456789/197745 |
| citation_txt |
Enhancing Regional Development with Startup Ecosystems / R. Lytvynskyi // Економічний вісник Донбасу. — 2023. — № 4 (74). — С. 101-113. — Бібліогр.: 42 назв. — англ. |
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Економічний вісник Донбасу |
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R. Lytvynskyi
101
Економічний вісник Донбасу № 4(74), 2023
DOI: https://doi.org/10.12958/1817-3772-2023-4(74)-101-113
UDC 332:330.341.1:338.246.8
R. Lytvynskyi,
PhD student,
ORCID 0009-0008-3360-6873,
e-mail: romanlitvinsky1990@gmail.com,
Institute of Industrial Economics of the NAS of Ukraine, Kyiv
ENHANCING REGIONAL DEVELOPMENT WITH STARTUP ECOSYSTEMS1
In the aftermath of armed conflicts, the importance
of rebuilding devastated economies and strengthening
stability cannot be overemphasized. Security is a key
component of the post-war environment. However,
security without development leads to economic
stagnation and civil society dissatisfaction, just as
development without security threatens economic
growth and can lead to complete economic collapse.
Post-war reconstruction goes beyond mere physical
reconstruction; it must include economic
modernization, social cohesion, and the creation of
effective governance structures.
Regional development on an innovative basis plays
a significant role in stimulating economic growth in the
wartime and postwar periods. The creation of innovative
ecosystems that support the development of startups and
small innovative enterprises contributes to the formation
of a favorable business climate in the region and attracts
investment. The development of new technologies and
the use of innovative approaches can reduce the region's
dependence on traditional industries and resources,
making it more resilient to economic fluctuations and
changes in the global market. The exchange of
knowledge, experience, and resources between regions
can enhance innovation potential and accelerate
development, and the entrepreneurial network created
within the innovation ecosystem can become a platform
for the exchange of ideas and joint projects,
strengthening interregional ties. In addition, innovations
contribute to improving the quality of life of the
population, expanding access to education, healthcare,
and other social services.
Many countries have already achieved significant
success in regional innovation development after armed
conflicts. For example, South Korea, thanks to its
emphasis on science, technology, and innovation, has
demonstrated significant economic growth since the
Korean War.
There are many bright examples of successful
startup ecosystems in post-war regions. For example,
the Iraqi city of Erbil has become a thriving startup hub,
where initiatives such as the Five One Labs accelerator
provide mentoring, training, and funding for
entrepreneurs, fostering a vibrant entrepreneurial
community [1]. Kigali in Rwanda is an innovation city,
1 The article was prepared within the scope of the research work of the Institute of Industrial Economics of the National Academy
of Sciences of Ukraine "Strategic directions of smart specialization of industrial regions of Ukraine" (state registration number
0121U114107).
a flagship project aimed at creating an ecosystem
focused on high technology, innovation, and talent
development to accelerate Rwanda's transition to a
knowledge economy [2]. Sarajevo (Bosnia and
Herzegovina) is one of the world's top 1,000 startup
ecosystems. Sarajevo's startups are particularly
prominent in the software and data sectors, as well as in
the areas of medical technology, hardware, and the
Internet of Things [3]. The island of Sri Lanka is a major
trading center in the Indian Ocean and has one of the
most liberal economies in South Asia. The startup
ecosystem supports many international projects in
various industries, including financial markets,
manufacturing, transportation, telecommunications,
retail, fashion, food and beverage, aviation, travel and
hospitality, healthcare, and education. The ecosystem is
developing advanced technologies and practices such as
artificial intelligence, robotics, drones, blockchain,
cybersecurity, intelligent automation, etc., technology
services, technology products and knowledge, and other
professional services. Sri Lanka's transformation into a
global technology and Business Process Management
center is the result of several compelling advantages that
now also make the country a very interesting destination
for international companies looking to find talent and
opportunities in various technology sectors [4].
One of the mechanisms of innovative development
that is gaining popularity around the world is the
creation of startup ecosystems. These ecosystems serve
as catalysts for economic growth, the creation of highly
skilled jobs, and the development of entrepreneurial
talent. Therefore, the role of startup ecosystems in the
innovative modernization of regions, as well as the tools
to facilitate and strategies for their successful
development are relevant.
Several different approaches to research in the field
of startups have been formed in Ukrainian economic
science. Among the latest publications, it is worth
highlighting the works of A. Kasich [5], O. Salikhova
[6], T. Galakhova [7], N. Ivanchenko [8], M. Dyba [9],
N. Sytnyk [10], and others. Most of these studies focus
on analyzing the peculiarities of the organization and
functioning of startups, their strategies and success
factors. However, the external component of startups as
part of the regional innovation ecosystem has not
R. Lytvynskyi
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Економічний вісник Донбасу № 4(74), 2023
received enough attention. This leaves a gap in
understanding how startups affect economic dynamics,
innovation activity, and social well-being in the regions.
At present, research aimed at studying the role of
startup ecosystems in the post-war economic recovery
of Ukrainian regions is of particular importance [11-15].
The startup ecosystem includes a wide range of actors,
such as entrepreneurs, investors, accelerators,
universities, and government. Understanding the
dynamics and interaction of these actors in the context
of regional development is key to creating a favorable
environment for startups and maximizing their
contribution to regional economic revitalization.
In many countries, startups are playing a
significant role in regional development after armed
conflicts. A study of international experience reveals
several key principles of successful startup ecosystems.
First, it is the existence of favorable legal and tax
regulations that facilitate investment and
entrepreneurship development. Second, it is the
availability of qualified personnel and access to
educational and scientific resources. Finally, it is a well-
developed startup support infrastructure, including
accelerators, incubators, investment funds, etc.
The purpose of the study is to identify the features
of startup ecosystems, their impact on regional
development, and to identify factors of successful
functioning of such ecosystems based on the analysis of
foreign experience.
Ukraine must take global trends into account and
compete in the global business environment. Studying
the experience of foreign startup ecosystems allows us
to learn the best international practices, increase the
competitiveness of territories and ensure their dynamic
development.
Until relatively recently, the term "startup" was
used as a definition of every newly created enterprise
and was usually associated only with e-business.
However, in recent years, many international business
schools have developed an academic definition of what
a startup is.
The most popular definition of a startup was given
by the creator of the Lean Startup methodology, Eric
Rice: "A startup is a human organization designed to
create a new product or service under conditions of
extreme uncertainty" [16, p. 24].
The famous American entrepreneur, founder of
eight successful startups, Steve Blank, noted that a
startup is "a temporary organization that is looking for a
scalable, repeatable, profitable business model", while
existing companies implement them [17, p. 14].
As defined by the European Startup Network, "A
startup is an independent organization that is less than
five years old and aims to create, improve and expand a
scalable, innovative, technological product with high
and rapid growth" [18].
Thus, startups play a different role in economic
development, in particular, they are seen as engines of
new technologies and challenges for existing economic
structures (Fig. 1).
The decline in the number of startups is already
being equated with the future non-viability of entire
countries or individual regions, based on the following
considerations.
Fig. 1. The role of startups in economic development
1. Startups often represent major innovations and
new technologies. They can develop and provide
services that were not previously products and improve
existing solutions. A decline in the number of startups
could mean that a region or country is losing its ability
to innovate and develop new ideas.
STARTUP
Contribution to gross
domestic product
New employment
opportunities
Attracting foreign
investment
Competitiveness of the economic
system
Bringing innovative products
to market
Creation of new markets
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Економічний вісник Донбасу № 4(74), 2023
2. Startups create jobs for young professionals and
entrepreneurs. They help to increase employment and
reduce unemployment. This, in turn, can increase
consumption and GDP. A decline in the number of
startups could lead to fewer opportunities for young
people and professionals in the labor market.
3. Startups can be catalysts for economic growth.
They attract investments from venture capitalists, angel
investors, and other sources of funding, stimulate
consumption, and generate tax revenues that can be used
to finance city programs and infrastructure projects.
This, in turn, can enhance the economic well-being of a
country or region.
4. Startups are often a source of new ideas, digital
innovations, and technological progress that determine
the competitiveness of a country or region on the global
stage. They can offer innovative products, services, and
business models that compete with foreign companies
and promote exports of goods and services. A decrease
in the number of startups may reduce interest in the
territory, which may affect the availability of capital for
new projects.
5. Exports and international competitiveness:
Successful startups can expand their operations on the
global market and become competitive on the world
stage.
In recent years, a growing number of startups have
been driven by modernization and creativity and have
great potential to change the global economy. They can
be founded anywhere, and often the greatest
opportunities are in countries with the greatest need:
underdeveloped countries, countries in conflict, and
countries where entrepreneurship is new, so a small
startup idea can grow into a big innovative solution that
can change the future of a developing country.
Therefore, supporting and creating an enabling
environment for startups, including access to finance,
education, and infrastructure, plays a key role in
facilitating their contribution to a country's GDP.
Startups can contribute to the formation of an innovation
ecosystem. In turn, a strong startup ecosystem provides
access to the resources, mentorship, and funding needed
for startups to thrive.
Article [19] is a good reminder of the famous
American economist Michael Rothschild, who was one
of the first to use the analogy of biological ecosystems
in the economy. He equated the economy with
biological ecosystems in the sense that both are systems
in which there is interaction between participants,
because in business, companies depend on customers,
suppliers, competitors, and other business entities, and
their success is determined by innovation. Startups play
an important role in such an ecosystem by supplying
other participants with innovative products.
James F. Moore introduced the concept of a
"business ecosystem" in his article "Predators and Prey:
The New Ecology of Competition" published in the
Harvard Business Review in 1993, where he presented
ecosystems in twenty industries and competition [20].
The main ideas presented by James Moore in this article:
– Ecosystem as a biological analogy, where
different species coexist and interact with each other to
survive and thrive, so do companies in an ecosystem
compete and collaborate to create and capture value.
– In an ecosystem, companies interact with each
other through networked relationships: as competitors,
partners, suppliers, users, and other participants.
– Shared value arises from the interaction between
flows in the ecosystem that can join forces to offer
products or services that were difficult or impossible for
individual companies;
– Dynamism and evolution: ecosystems are
dynamic and constantly evolving, new companies can
enter the ecosystem and old ones can leave it, and this
creates constant changes in the dynamics of ecosystems.
– In an ecosystem, companies understand each
other and interact to ensure their own success, and
interdependence can contribute to collective
development and growth.
In general, J. Moore called for considering the
business ecosystem as a system, not as a set of different
companies. This concept of a business ecosystem has
influenced the current understanding of how companies
compete and collaborate in the digital age and helped to
understand how interactions and collaborations between
companies can enable innovation and idea creation in
the more complex and dynamic realities of modern
business.
J. Moore's definition of an ecosystem was later
refined by Ron Adner, who emphasized the special role
of certain conditions under which an ecosystem turns
into an economic ecosystem [21]. Such conditions
include economic relations, competition between
organizations, and the presence of interest groups that
are directly or indirectly interested in the development
of the economic ecosystem, and any success of a project
or innovation depends not only on the company that
develops it, but also on how it enters the ecosystem and
interacts with other participants.
R. Adner presented innovation ecosystems as
networks of companies, suppliers, customers, and
partners that cooperate to achieve innovation goals [22].
This includes both direct participants and all those who
contribute to the development of innovation processes.
He also proposed a number of tools and methods for
analyzing and managing innovation ecosystems to
enable a company to participate more effectively in
innovation processes and cope with challenges. His
work has led to an understanding of how companies can
successfully interact in today's environment where
innovation is becoming increasingly complex and
interdependent.
The startup ecosystem can be seen as one of the
subsystems of the innovation ecosystem. The innovation
ecosystem includes a wide range of organizations,
institutions, resources, and relationships that jointly
contribute to the creation and development of
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Економічний вісник Донбасу № 4(74), 2023
innovations [23; 24]. The startup ecosystem includes not
only the startups themselves, but also all other elements
that influence their activities and growth, such as
investors, mentors, experts, as well as regulatory
authorities and, as a result, entrepreneurship support
programs. Innovation networks and their digital support
also play an important role here [25; 26]. Together, they
create an environment in which startups can operate
successfully and make an additional contribution to the
innovative development of the economy and society.
A startup ecosystem is a set of entities that form a
system of relationships in the process of identifying,
supporting, developing, and commercializing startups
[12]. The ecosystem includes incubators, accelerators,
venture capitalists, business angels, service providers,
and educational institutions. The need for a startup
ecosystem stems from the fact that most startups fail.
According to statistics, only one in ten startups will be
successful. This high failure rate is due to a number of
factors, including the fact that most startups are founded
by people with no prior business experience. This lack
of experience can lead to a number of mistakes that can
lead to the failure of a startup.
The following are the main arguments in favor of
creating a startup ecosystem:
1) access to resources needed for growth and
scaling.
2) community and collaboration, because when an
entrepreneur or innovator is part of an ecosystem, he or
she is surrounded by like-minded people who are
passionate about startups and innovation.
3) access to experienced mentors who can support
startups in the early stages, provide access to capital, and
help attract the best talent by connecting them with
experienced professionals.
Thus, a strong startup ecosystem can somewhat
reduce certain risks associated with starting a new
business.
StartupBlink is the world's most comprehensive
map of startup ecosystems and a research center
working to identify the dynamics of startup ecosystems
around the world and accelerate their growth, containing
tens of thousands of registered startups, coworking
spaces, and accelerators, creating a reliable benchmark
for innovation around the world [27]. According to the
Global Startup Ecosystem Index 2023: Top Countries,
the first 3 places are occupied by the United States, the
United Kingdom, and Israel (Table 1). Ukraine ranks
49th. Each country has an overall score, which is the
sum of three components that measure quantity, quality,
and business environment.
Table 1
Global Startup Ecosystem Index 2023: Top Countries
Country
rating
Country
Rating change
(since 2022)
Total rating score
1 USA - 198,080
2 United Kingdom - 51,218
3 Israel - 49,573
4 Canada - 34,490
5 Sweden - 27,074
6 Singapore +1 26,571
7 Germany -1 25,939
8 France +1 22,916
9 Australia -1 21,503
10 Netherlands +1 21,423
… … … …
48 Slovenia -1 4,720
49 Ukraine +1 4,634
50 Hungary +1 4,438
Compiled according to [27].
In a regional analysis of StartupBlink rankings, the
two dominant regions, North America, and Europe, saw
their combined share drop from 72.4% in 2022 to 70.1%
in 2023, while the two smallest regions, LATAM and
MENA, increased their overall share of the top 1000
from 11.7% to 14% (Fig. 2).
Fig. 3 shows the number of cities in the ranking by
region and their distribution in the top 1000 cities in
2023.
It should be noted that although North America is
not the region with the largest number of cities in the top
1000 (Fig. 2), it dominates the top 100 cities, leading
both in terms of the number of cities ranked between 1-
30, with 12 cities (40%), and in terms of the number of
cities ranked between 31-100, with 27 cities (38.5%).
For comparison, Europe, which leads the way in terms
of the number of cities in the ranking (41%), has only 6
cities in the top 30 (20%) and 22 cities in the 31-100
range (31.4%). Similarly, North America clearly
dominates the top charts of all 11 startup industries
analyzed: Software & Data, Healthtech, Fintech, Social
& Leisure, Ecommerce & Retail, Hardware & IoT,
Marketing & Sales, Edtech, Foodtech, Energy &
Environment, Transportation.
R. Lytvynskyi
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Економічний вісник Донбасу № 4(74), 2023
Fig. 2. Regional analysis by StartupBlink rating
Fig. 3. Number of cities in the ranking by region and their distribution
Let's analyze in more detail the experience of two
Scandinavian countries – Sweden and Finland – in
developing startup ecosystems.
Sweden is consistently ranked 5th in the world, 2nd
in Europe, and 1st in the European Union (EU), and
Stockholm's ranking has increased by 4 positions,
bringing the country into the global top 20 in 2022-2023
(Fig. 4).
The startup ecosystem in Sweden capitalizes on the
country's unique advantages, such as high quality of life,
gender equality, strong business climate and global
competitiveness.
Historically, Swedish entrepreneurs have created
high quality global startups such as Spotify, Minecraft,
Klarna, and King. Few European ecosystems have such
achievements, which demonstrates Sweden's ability to
become a leader in technological innovation in Europe.
With a population of just over 10 million people,
Sweden is a textbook example of how small countries
can have a huge impact.
Ambitious entrepreneurial mindsets, high-speed
internet connections, excellent English language skills,
and public sector support make it easy for Swedish
entrepreneurs to move forward globally. The support for
the startup scene is reflected in the number of events,
coworking spaces, and accelerators in Sweden, as well
as the Nordic Demo Day, which brings together
startups, investors, and corporations [28]. In addition,
the Swedish innovation agency Vinnova stimulates the
climate of entrepreneurship in the country [29].
The country has 19 cities in the global 1000, down
from 21 in 2022. However, there are now 6 Swedish
cities in the top 500, not 5 last year. Funding and the
number of startup deals in Sweden have fallen during
the COVID-19 pandemic, but the country has not lost its
strong position in global and European rankings (Fig. 5).
41%
29%
16%
8%
6%
Europe
North America
Asia Pacific
LATAM
MENA
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50
100
150
200
250
300
350
400
450
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ur
op
e
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P
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if
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291
159
7 63
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Fig. 4. Sweden's position in the world and Europe according to the Global Startup Ecosystem Index
Fig. 5. Financing and number of deals with startups, Sweden
According to StartupBlink, Stockholm is the most
powerful startup ecosystem in Sweden, with 728
startups [30], which is approximately 62% of all
Swedish startups. In 2023, Stockholm's startup scene
developed significantly and moved up 4 positions in the
Global Ecosystem Index to join the global top 20
ranking, registering the best momentum among this
level and approaching the best European cities (3rd city
in the EU), such as Berlin and Paris (Fig. 6).
Fig. 6. Ranking of the startup ecosystem in Stockholm, Sweden
1
2
3
4
5
6
7
8
9
10
11
12
2020 2021 2022 2023
Global rating European rating
0
1
2
3
4
5
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9
2020 2021 2022
0
50
100
150
200
250
300
350
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450
500
Number of deals Funding in USD, billion
National rating Regional rating Global ranking
1st place in Sweden
4th place in Western
Europe
19th place in the world
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The gap between Stockholm and other Swedish
ecosystems continues to widen: the capital now has an
overall score 7 times better than Malmö, Sweden's
second-ranked ecosystem.
Stockholm's most popular industry is Fintech,
where it ranks 9th in the world. Notable growth was
registered for Stockholm in Hardware and IoT (11th)
after moving up 19 positions and in Transportation
(20th) after moving up 6 positions.
One of the challenges facing the growth of
ecosystems is the high cost of living in Sweden, which
makes it harder for startups to consider relocating if they
do not receive investment at the initial stage. The
country is taking steps to attract and support
international talent to keep the Swedish startup
ecosystem globally competitive. Initiatives such as the
Swedish Residence Program for Self-Employment
allow potential entrepreneurs to start a business in
Sweden, as well as provide them with free access to
higher education and a number of other benefits. In
addition, Sweden remains a great place for
entrepreneurs to test their ideas, expand them and go
global.
Compared to Sweden, Finland is also famous for
its innovative achievements and technological
advantages. Both countries offer a developed
infrastructure and actively support startups through
government support programs. However, unlike
Sweden, Finland may be a slightly better place for
venture capital investment due to more limited access to
capital. However, Finland's entrepreneurial culture is
also strong, and the country is actively developing its
startup ecosystems, providing a favorable environment
for innovation and growth.
After two years of being ranked 14th in the world,
Finland regained its ranking in 2020, moving up one
place to 13th (Fig. 7). Finland also jumped up one
position in the region, overtaking Estonia to rank 5th in
the EU and 7th in Europe [27].
Finland boasts a thriving startup ecosystem,
supported by key advantages such as world-class
technology, a talented workforce, and excellent R&D
capabilities. Finnish society is renowned for its stability
and transparency, low bureaucracy and high openness to
new technologies.
Fig. 7. Ranking of Finland in the world and Europe according to the Global Startup Ecosystem Index
Of course, the public sector plays a significant role,
offering numerous incentives. In addition to low tax
rates, the government offers financing and services for
innovative companies in the early stages of development
and supports universities in commercializing their ideas.
For example, the Finnish startup permit allows
international emerging entrepreneurs to set up a startup
company in Finland. The permit is intended for founders
of innovative startups from countries outside the
European Union.
In general, Finland's business environment is
attractive for foreign investment. Finland has a dynamic
ecosystem of accelerators, angel investors and venture
capitalists, which are strongly supported by the
government.
Thanks to all of the above, Finland has a proven
track record of success in many industries, despite its
small market size. Historically, Finland has
demonstrated its unique ability to create cutting-edge
global solutions through years of dominance by Nokia
in the early days of the mobile phone industry. Even
after Nokia's decline, new Finnish innovations continue
to emerge. The country has consolidated its share in
video games and has more and more technological
innovations aimed at developing this sector. The gaming
industry has spawned some prominent startups, such as
Supercell and Rovio (creators of the Angry Birds game)
and has attracted a lot of talent to Helsinki. In addition,
Finland offers opportunities for company development,
especially in the areas of bioeconomy, clean and smart
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4
5
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15
2020 2021 2022 2023
Global rating European rating
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technologies, health and wellness, ICT and
digitalization, and travel and tourism. For example, in
2022, the food delivery startup Wolt was acquired by its
American competitor DoorDash for €7 billion.
Today, Finland is overtaking Sweden in some
positions in the rankings: in 2023, Finland will have two
cities in the top five Scandinavian countries, while
Sweden, Denmark, and Norway will have only one
each. Finland is ranked 12th in the world and 4th in the
EU in terms of business indicators, which indicates a
friendly business environment for startups. Finland's
startup ecosystems had a good year overall, as 6 of the
8 cities ranked in the top 1000 cities in the world had
positive momentum (Fig. 8).
Fig. 8. Financing and number of deals with startups, Finland
Helsinki is one of the three cities with the largest
jump in the TOP 50 (along with Munich and
Guangzhou), moving up 5 positions in the Global
Ecosystem Index and ranking 43rd in the global ranking
(Fig. 9). According to StartupBlink, Helsinki's startup
ecosystem has 483 startups [31]. This is about 71% of
startups and the strongest startup ecosystem in Finland.
In Europe, Helsinki is currently ranked 8th (between
Barcelona and Madrid), having pushed Dublin. In the
Scandinavian countries, Helsinki retains the second
place, ahead of Copenhagen and Oslo.
Fig. 9. Ranking of the startup ecosystem in Helsinki, Finland
Finland has 2 cities that made it into the top five,
after Oulu gained 2 positions and is ranked 5th,
overtaking Sweden's Malmö and Gothenburg, it entered
the top 150 at 135th place after a huge jump of 60
positions. Oulu is now ranked 5th in Northern Europe.
In the EU, Oulu has risen 21 places and is now ranked
26th with a very small gap to Budapest (25th). Thus,
Finland now has two cities among the top 30 EU cities.
Finland is represented by Helsinki in the top 25 for
Foodtech, where it ranks 15th, up 3 positions from 2022.
Oulu ranks 52nd in the Healthtech ranking, a great
achievement considering the city's global ranking.
In addition to its talented and successful
entrepreneurs, Finland recognizes the importance of
promoting its business environment through global
events. Slush, one of the world's largest events for
startups, attracts tens of thousands of participants,
boosting the country's ranking.
With most of Finland's startups located in the
capital, the city is becoming a major startup hub in
Northern Europe, and organizations such as Helsinki
Partners are working to attract and unite ecosystem
stakeholders.
Table 2 shows the best ecosystem startups in
Sweden and Finland.
0
0,2
0,4
0,6
0,8
1
1,2
1,4
1,6
1,8
2
2020 2021 2022
0
50
100
150
200
250
Numner of deals Funding in USD, billion
National rating Regional rating Global rating
1st place in Finland
8th place in Western
Europe
43rd place in the world
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Table 2
Famous startups and ecosystem champions in Stockholm and Helsinki
Stockholm, Sweden Helsinki, Finland
– Polarium – offers lithium batteries for telecommunications.
– Epidemic Sound is a music company that creates music for
online creators.
– Einride is a technology company that develops and
provides solutions for the transportation of goods based on
electric and autonomous vehicles.
– Spotify is a digital music, podcast, and video service that
provides access to millions of songs and other content from
creators around the world.
– SoundCloud is a social audio platform where people can
create and share sounds.
– Klarna is an e-commerce payment platform for merchants
and customers.
– Fidesmo – unites the world of contactless capabilities into
a single secure platform for device manufacturers and service
providers
– RELEX Solutions provides an integrated retail and supply
chain planning system.
– ŌURA is a wellness app used to improve sleep.
– Aiven is an information technology company that manages
open data.
– Supercell is a mobile game developer.
– Nokia is a multinational communications corporation that
manufactures mobile devices and network infrastructure.
– Wolt is a food delivery company that specializes in real-
time logistics optimization
Compiled according to [27].
Compared to the European countries in question
before the outbreak of full-scale war in 2022, Ukraine
ranked 34th in the StartupBlink ranking. At the same
time, Kyiv was ranked 23rd out of the 25 best cities in
the world for marketing and sales, software, and data.
Many world-famous startups were born in the country,
such as Grammarly, GitLab, People.ai, Ring, and
Bitfury.
In 2022, Ukraine dropped 16 positions in the
StartupBlink ranking. However, already in 2023
Ukraine improved its ranking. This became possible due
to the implementation of a number of projects to support
startups and innovations and the reform of some
institutions. For example, the Innovation Development
Fund (another name for the Fund), established in 2018.
The Innovation Development Fund (also called the
Ukrainian Startup Fund), established in 2018, was
transferred to the Ministry of Digital Transformation in
2022 [32], which simplifies bureaucratic procedures and
expands support for the country's startups. Projects and
initiatives to support Ukrainian startups are also
regularly implemented, both in collaboration with funds
from other countries and directly by government
agencies [33]. According to Pavlo Kartashov, Director
of the Ukrainian Startup Fund, under martial law, this
institution focuses on supporting innovative projects
aimed at the priority needs of the state. For example, a
grant support program for dual-use projects was created
to increase the country's defense capability and post-war
reconstruction [34].
Despite the ongoing war, Ukrainian startups and
the country's IT sector have demonstrated resilience,
and entrepreneurs continue to run their businesses and
remain committed to success even in these difficult
circumstances. Some Ukrainian startups have relocated,
but 95% of startups at least partially remain in Ukraine,
and 55.7% continue to operate exclusively from Ukraine
(according to a survey by TechUkraine in partnership
with the Ukrainian Startup Fund, the Ministry of Digital
Transformation of Ukraine, Emerging Europe, Tech
Emerging Europe Advocates, Global Tech Advocates,
and TA Ventures) [35]. The most popular destinations
abroad are the European Union (38.6%) and the United
States (10%). Nine out of ten startups confirm that they
need financial support to continue operations and/or
expand. Nevertheless, many startups said they plan to
expand their operations in the short term.
Even in the crisis, there are many promising
startups developing in Ukraine. Some of them are
presented in Table 3.
Table 3
Examples of Ukrainian startups that received investments in Q1 2023
Name Business area Attracted investments, USD million
DressX Virtual clothing store 15
Kolibrio Automated auction system on the blockchain 2
Fuelfinance Software for financial management and planning of startups 1
Deus Robotics Warehouse robotization 1,5
GeekPay
Solutions for mitigating risks and tracking payments in
digital currencies
N/A
Awesomic Service for finding designers for business 0,8
Harmix A service that automatically matches music to videos 0,5
Aspichi Virtual reality solutions for surgery and prosthetics 0,5
Compiled according to [36].
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Ukraine is developing military and technical
solutions at a rapid pace [37]. Projects that used to take
1.5-2 years to implement are now being completed in 2-
3 months. Compared to 2014, the military-technical
solutions industry has grown three to seven times,
depending on the region. The Ministry of Digital
Transformation has identified military tech as a priority
area for the coming years. The Ukrainian Startup Fund
supports this area and provides grants for projects
related to the development of military technology,
cybersecurity, and defense. Dozens of advanced
military-tech startups have emerged in Ukraine during
the war, including:
– Griselda is a software system for collecting,
organizing and analyzing intelligence from open and
closed sources.
– ST1 is an autonomous drone for searching and
marking explosive objects, which speeds up the
demining process and saves the lives of sappers.
– Khyzhak (Predator) is an infantry tactical system
that increases the effectiveness of machine gunners in
modern mobile combat.
– Airlogix is a reconnaissance system designed for
reconnaissance and artillery adjustment of the GOR
UAV.
– Temerland – Scorpion-2 unmanned robotic
platform that can be used in the defense and civilian
sectors.
– FuelWell – equipment to reduce fuel
consumption [38].
In April 2023, the Defense Tech cluster Brave1
was launched – a single platform for cooperation
between companies, the state, and the military, offering
organizational and technical support for development,
as well as access to accelerators and incubators [39]. An
important advantage of Ukrainian military-tech startups
is the fact that their developments are tested on a real
battlefield and meet the needs of a state at war. This
allows companies to adapt to the military environment
faster and demonstrate the effectiveness of their
innovations in practice.
Despite the war, the state has invested UAH 4.7
billion in the development of small and medium-sized
businesses under the government grant program
eRobota, launched by the Ministry of Economy together
with the Ministry of Digital Transformation, the
Ministry of Agrarian Policy, the State Employment
Service, and the Oschadbank to support Ukrainians who
want to become self-employed and promote
entrepreneurship in difficult economic times [40; 41].
"These are investments not only in business
revitalization – new companies have been opened,
existing ones have increased production and are
mastering other areas – but also more than 20,000 new
jobs for Ukrainians in these companies", said Economy
Minister Yulia Svyrydenko.
The eRobota grant program consists of six
different programs:
– "Svoya Sprava" – grants for any microbusiness
in the amount of up to UAH 250 thousand.The grant
recipient must create at least one job;
– "Novyi Riven’" – grants of up to UAH 8 million
for the expansion or creation of processing enterprises.
The goal of the program is to increase the share of
processed products, in particular in exports. The grant
recipient is obliged to create up to 25 jobs;
– “Sviy Sad" – grants for the creation or
development of horticulture, berry growing and
viticulture – up to UAH 400 thousand per 1 hectare.
Employment of 6-10 permanent and 125-425 seasonal
workers, depending on the crop and planting area.
– “Svoya Teplytsia” – grants for the construction
of new greenhouses – up to UAH 7 million for 2
hectares.The grant recipient must create at least 14 jobs;
– "IT startup" (under development);
– "Start v IT" – grants for training new skills in the
field of information technology (under development).
One of the ways that Ukrainian startups can receive
assistance is through separate funding programs from
international companies. For example, the USAID
Competitive Economy of Ukraine program has
supported the participation of 348 Ukrainian businesses
from the IT, creative industries, food and furniture
sectors in 31 international trade missions in countries
such as the United States, the United Kingdom, France,
Spain, and Germany since the beginning of the full-scale
war [42]. The grant program is being implemented in
partnership with the Ministry of Economy of Ukraine,
the Ministry of Digital Transformation of Ukraine, the
Ukrainian Startup Fund, and the Office for
Entrepreneurship and Export Development.
A study of the startup ecosystems of Finland and
Sweden shows that there are additional opportunities for
innovative development of Ukraine's territories during
the war and post-war periods. These Scandinavian
countries have successfully overcome difficult periods
and implemented strategies that promote innovative
growth and economic development. Considering the
experience of Sweden and Finland, Ukraine can
implement a number of measures to improve the
preconditions for regional innovation development:
1) Lessons from the experience of Sweden and
Finland point to the necessity of creating a startup
support infrastructure, including accelerators, incuba-
tors, technology parks, and state support programs.
2) Ukraine should pay special attention to
education and research to ensure access to qualified
personnel and innovative technologies.
3) Reforms in legislation, taxation and legal
protection of investments can make Ukraine more
attractive to investors and entrepreneurs.
4) It is important to stimulate the development of
startups in the regions, especially those affected by the
war, which contributes to accelerated development and
reduction of social and economic inequality.
5) Ukraine can use the experience of Sweden and
Finland to develop partnerships and international
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cooperation in the field of innovation and
entrepreneurship.
The research has shown that despite Sweden and
Finland's tremendous achievements in the field of
startup development, most of these structures are
located in the capitals of the countries. This suggests that
although this practice is effective on a national scale, it
does not have a qualitative impact on regional
development.
On the other hand, it should be noted that the
population of Sweden is about 3.5 times smaller than
that of Ukraine, and Finland is about 7 times smaller.
The same applies to the number of populated areas and
large cities.
In the post-war period, Ukraine has a unique
opportunity to intensify regional development by
mobilizing the potential of professionals who have
relocated from the occupied and frontline territories to
other regions of the country. These professionals have
valuable knowledge and experience that can be used to
create new startups and innovative projects.
The process of forming a startup ecosystem around
these professionals can give impetus to the development
of new businesses or the innovative transformation of
traditional sectors of regional economies. However, in
order for this initiative to bear maximum fruit, a set of
appropriate regulatory, organizational, and infra-
structural measures must be implemented to ensure
favorable conditions for the work and development of
such specialists.
The development of specialized support programs,
a focus on education and research, and the creation of
communication platforms and communities for
professionals can stimulate innovation and
entrepreneurship in the regions. This will help
strengthen the technological and digital components of
regional economies and their competitiveness, create
new jobs and high value-added activities.
Thus, the use of the potential of specialist reloca-
tion is a promising and effective tool for stimulating
regional development in post-war Ukraine. With the
right approach and support from the authorities, it can
become an important factor in the accelerated recovery
and modernization of the Ukrainian economy on an
innovative basis.
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R. Lytvynskyi
113
Економічний вісник Донбасу № 4(74), 2023
Литвинський Р. В. Посилення регіонального розвитку за допомогою стартап-екосистем
Значну роль у стимулюванні економічного зростання у воєнний та післявоєнний періоди відіграє регіональний розвиток
на інноваційних засадах. Створення інноваційних екосистем, що підтримують розвиток стартапів та малих інноваційних
підприємств, забезпечує формування сприятливого бізнес-клімату у регіонах та залучення інвестицій, зменшує залежність
регіонів від традиційних галузей, створює висококваліфіковані робочі місця і розвиває підприємницькі таланти.
Метою дослідження є визначення особливостей екосистем стартапів, їхнього впливу на регіональний розвиток та
виявлення факторів успішного функціонування таких екосистем на основі аналізу зарубіжного досвіду.
У статті проаналізовано досвід формування й розвитку екосистем стартапів у Швеції та Фінляндії, виявлено їхні
унікальні переваги, історичні досягнення та поточні тренди. У Швеції спостерігається високий рівень глобальної
конкурентоспроможності, зокрема завдяки активній підтримці державного сектору та сприятливому бізнес-клімату.
Фінляндія славиться своїм інноваційним потенціалом, стабільним бізнес-середовищем, привабливими умовами для стартапів
та інвесторів. Результати дослідження свідчать про стійкий успіх і перспективи подальшого зростання обох екосистем у
міжнародному масштабі.
У ході дослідження виявлено, що не зважаючи на величезні досягнення Швеції та Фінляндії в сфері розвитку стартапів,
більшість таких структур розташовано в столицях країн. Зроблено висновок, що хоча подібна практика є результативною в
національному масштабі, але не дає якісного впливу на розвиток регіонів.
В умовах повоєнного періоду в Україні існує унікальна можливість для активізації регіонального розвитку через
мобілізацію потенціалу фахівців, які релокувались з окупованих та прифронтових територій в інші регіони країни. Процес
формування екосистем стартапів навколо цих фахівців може дати поштовх розвитку нових видів бізнесу чи інноваційній
трансформації традиційних секторів регіональних економік. Для успішної реалізації такого підходу необхідно впровадження
комплексу відповідних заходів регуляторного, організаційного та інфраструктурного характеру.
Ключові слова: інноваційний розвиток, стартап, повоєнне відновлення, регіон.
Lytvynskyi R. Enhancing Regional Development with Startup Ecosystems
Regional development based on innovation plays a significant role in stimulating economic growth in the wartime and postwar
periods. The creation of innovative ecosystems that support the development of startups and small innovative enterprises ensures the
formation of a favorable business climate in the regions and attracts investment, reduces the dependence of regions on traditional
industries, creates highly skilled jobs and develops entrepreneurial talent.
The purpose of the study is to determine the features of startup ecosystems, their impact on regional development, and to identify
the factors of successful functioning of such ecosystems based on the analysis of foreign experience.
The article analyzes the experience of formation and development of startup ecosystems in Sweden and Finland, identifies their
unique advantages, historical achievements, and current trends. Sweden has a high level of global competitiveness due to active support
from the public sector and a favorable business climate. Finland is known for its innovative potential, stable business environment, and
attractive conditions for startups and investors. The results of the study demonstrate the sustainable success and prospects for further
growth of both ecosystems on an international scale.
The study found that despite Sweden and Finland's tremendous achievements in the field of startup development, most of these
structures are in the capitals of the countries. It is concluded that although this practice is effective on a national scale, it does not have
a qualitative impact on regional development.
In the post-war period, Ukraine has a unique opportunity to intensify regional development by mobilizing the potential of
specialists who have relocated from the occupied and frontline territories to other regions of the country. The process of forming startup
ecosystems around these professionals can give impetus to the development of new types of business or innovative transformation of
traditional sectors of regional economies. To successfully implement this approach, a set of appropriate regulatory, organizational, and
infrastructural measures must be implemented.
Keywords: innovative development, startup, post-war recovery, region.
Received by the editors 16.11.2023
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