The Impact of Entrepreneurial Ecosystems and Innovation Policy on New Startup Sustainability

Abstract

Entrepreneurial ecosystems and innovation policies are increasingly recognized as critical drivers of startup sustainability in dynamic economic environments. Entrepreneurial ecosystems encompass networks of actors, institutions, and resources that facilitate entrepreneurial activity, including access to finance, mentorship, human capital, infrastructure, and market linkages. Innovation policy, defined as governmental strategies and regulatory frameworks supporting research, development, and technology commercialization, further shapes the ability of startups to survive and scale. This study investigates the combined impact of entrepreneurial ecosystems and innovation policy on the sustainability of new startups, emphasizing how ecosystem quality, policy incentives, and institutional support contribute to long-term viability. A mixed-methods approach was employed, integrating survey data from 350 startup founders across multiple regions with semi-structured interviews of policymakers and ecosystem stakeholders. Structural equation modeling using SmartPLS was applied to examine the relationships between ecosystem factors, innovation policy support, and startup sustainability outcomes. Results indicate that strong entrepreneurial ecosystems (β=0.71, p<0.001) and effective innovation policies (β=0.68, p<0.001) positively influence startup sustainability, including financial performance, market penetration, and survival rates. Access to mentorship, venture capital, research infrastructure, and regulatory support mediates these effects, highlighting the importance of both systemic and policy-level interventions. Findings suggest that startup survival is contingent not only on individual entrepreneurial capabilities but also on the enabling environment created by coordinated ecosystem actors and innovation-focused policies. Policy implications emphasize the need for integrated ecosystem development, supportive innovation legislation, funding mechanisms, and knowledge-sharing platforms to enhance startup resilience. This study contributes to entrepreneurship theory by linking ecosystem quality and innovation policy to tangible sustainability outcomes, providing empirical evidence for governments, incubators, investors, and academic institutions seeking to strengthen startup performance. Future research should explore longitudinal impacts of ecosystem maturity, sector-specific dynamics, and regional variations in policy effectiveness.