Inductive modelling of an entrepreneurial system

We describe the development of a novel approach to generating theory about the behaviour of an entrepreneurial or start-up system. The new technology business creation system in and around the cities of Bath and Bristol in the UK was analysed using an inductive modelling approach that hybridises grounded theory with system dynamics, a technique we have called grounded systems modelling. Three models that represent the stages of development of an idea through to successful exploitation have been derived from the data – i) Spotting an opportunity, testing and validation; ii) Realistic equity position, and iii) Scale up and exit. From these models a number of useful dynamic hypotheses have been developed which can be tested by suitable longitudinal studies. The results are discussed in the context of entrepreneurial research and a critique of the methodology is offered.