We discuss the role of ethics in both the entrepreneurial state and governments' development of entrepreneurial ecosystems. This is a topic to which scholars have paid little attention in the scholarly literature despite the negative impact that policy can have on generally disenfranchised groups.
We use the historical case method to examine the Chapel Square Mall redevelopment in New Haven (1954–1979), drawing on primary sources (archival documents, government records) and secondary literature (urban planning, entrepreneurial ecosystems and public choice theory). We combine insights from urban studies, political economy and entrepreneurship research to assess government's role in entrepreneurial ecosystem shaping.
Our findings include that government-led redevelopment often creates gains for economic elites at the expense of marginalized citizens' rights that “public benefit” narratives justify. In addition, exclusion, not just collaboration, can shape entrepreneurial ecosystems, especially when efficiency is pursued without justice. We challenge the romantic view of government as a neutral enabler, arguing that governments act with interests, biases and unintended consequences.
We add a discussion of ethics into entrepreneurial ecosystem research by blending moral philosophy to critique policy beyond economics by offering a place-based historical analysis.
Scholars increasingly view governments as entrepreneurial ecosystem architects, public actors whose interventions shape the interlocking domains of finance, culture, human capital, markets and policy (Wurth et al., 2022). Yet we know little about the ethical trade-offs that arise when such actors deploy “big bang” urban renewal projects to jolt an ecosystem into growth. In this paper, we address that blind spot by revisiting New Haven's Chapel Square redevelopment (1954–1979) as a historical thought experiment in extreme utilitarianism (Muldoon et al., 2024). We ask: How do opaque, government-led redevelopment schemes influence an entrepreneurial ecosystem's moral legitimacy and long-term vitality?
In his work, the Tyranny of Experts, Easterly (2014) provided a stunning description of a government relying on technocrats' advice to remove an entire population of 20,000 farmers forcibly from their homes to spur economic growth. He pointed out that if such a movement had occurred in the United States of America, there would have been protests, complaints and lawsuits. Instead, there were none because this occurred in Uganda. Easterly pointed out that this arrangement could not occur in the United States of America because it violates our notions of property rights. However, he was wrong because such behaviors occurred and continue to occur within the United States of America under provisions of eminent domain, the process through which the government takes over property (with reasonable compensation) for the purpose of supporting the common good (Munch, 1976; Schäfer and Singh, 2018). Numerous examples illustrate the common good, such as the building of roads to justify taking property from property owners. Such arrangements are often legitimate; however, businesses take advantage of and collaborate with concerned government agencies to expropriate property to create more favorable economic circumstances (Mueller, 2003). Often, they take advantage of those who lack the political power needed to protect themselves.
The nature of private gain versus public gain is a complicated question for entrepreneurship scholars because we must examine the government's crucial role in providing opportunities for economic growth, a point that receives little recognition in entrepreneurial ecosystems literature (Spigel, 2020). We are currently witnessing a debate over whether the government should act as an investor in nascent businesses in what Mazzucato (2015) referred to as “the entrepreneurial state.” Another role that the government plays is in building infrastructure that can construct or reconfigure an entrepreneurial ecosystem. These conversations have become important because of the lower-than-average rates of growth in the United States of America and elsewhere (Wennberg and Sandström, 2022). Accordingly, we have witnessed calls for the government to act as an investor in the economy.
This idea relies on the notion of market failure, i.e., some of the projects needed to produce entrepreneurial ecosystems are so large that no business, regardless of its size, has either the financial resources or the risk tolerance to pull it off (Wolfinger, 1974). Whether it is the construction of infrastructure, communities or recruiting companies, scholars have emphasized the need for such actions to promote economic development and health. Such a perspective is defended on utilitarian grounds where governments should pursue economic actions that provide the greatest good for the greatest number in that city now have increased tax revenue to fund welfare programs.
However, there is another side of this story, namely those who are left behind. Usually, these individuals are the unknown, people who lack the power to prevent the taking of their property (Jackson, 2008). Chapel Square Mall in New Haven was the mayor and his aides' attempt to transform retailing downtown. In theory, the mall would serve as an ecosystem that would allow suburban shoppers to come into the city and enjoy shopping and entertainment options (Cohen, 2019; Roundy and Fayard, 2020). The mall's ostensible purpose was to reverse New Haven's deep economic and population decline. This has been a common theme in history, political science and entrepreneurship literature. Although some of these writings have been negative, there has been less attention on those people who lost their homes and livelihoods. This paper provides a case study on the limits of extreme utilitarianism.
Our contribution is not purely historical. Rather, we extend the growing interest in entrepreneurship's social, institutional and ethical dimensions by demonstrating how entrepreneurial ecosystems may be constructed through exclusion as well as collaboration. While much of the ecosystem literature focuses on coordination, resource mobilization and public–private partnership, the Chapel Square Mall case reveals how the same mechanisms can create moral dilemmas when the government rewards some individuals while harming others. We connect research on entrepreneurial ecosystems and public policy with the recent discussions on ethics, legitimacy, resource access, inequality and entrepreneurship's dark side.
Not a question of “could it be done” but “should it be done”
This paper builds upon, but is distinct from, Muldoon et al.’s (2024) and Muldoon and Yonai’s (2023) work. They used New Haven's Chapel Square redevelopment to examine the entrepreneurial state's limits. Their central concern was institutional and economic: whether local governments, even when led by talented and sincere public officials, can successfully act as entrepreneurs building on previous work (Wennberg and Sandström, 2022). The answer the scholars offered there was skeptical. New Haven's then mayor Richard C. Lee and development administrator Edward Logue had ambition, political skill, access to federal money and a clear desire to rescue New Haven from decline. Yet, the project still failed to create durable economic value. The mall declined, the expected retail revival did not materialize and public authority was used in ways that imposed real costs on the city and its residents.
In this paper, we ask a different question. The issue here is not simply whether the entrepreneurial state works but whether it can be morally legitimate when its chosen instruments require coercion, secrecy, displacement and the redistribution of value from less powerful citizens to more powerful public and private actors. That distinction matters. A policy can fail economically and still raise only questions of competence. However, a policy that uses public authority to take homes, weaken local businesses, privilege selected firms and then describe the entire process as “public benefit” raises deeper questions of justice and ethics. The problem is no longer only whether government officials made a bad investment but also whether the language of entrepreneurship and redevelopment can become moral cover for rent-seeking, exclusion, wealth redistribution from the vulnerable to the privileged and the violation of ordinary citizens' dignity.
We shift the analytical focus from mere performance to ethical legitimacy. Muldoon et al. (2024) treated Chapel Square Mall as a cautionary case about the entrepreneurial state's limits. In this paper, we treat Chapel Square Mall as a case in the ethics of ecosystem construction. In that sense, the same historical case becomes evidence for a different theoretical contribution. Muldoon et al. (2024) examined the failure of government entrepreneurship; we examine government-led ecosystem formation's moral structure.
This distinction also changes the paper's contribution to entrepreneurship research. Much of the entrepreneurial ecosystem literature emphasizes coordination, resource mobilization, collaboration and institutional support. Those are important concepts, but they can hide the basic fact that resources are scarce and political authority not neutral. Land, capital, infrastructure, permits, subsidies and public legitimacy are all allocated to some actors rather than others. When the government performs that allocation, it does not merely “support” an ecosystem. It helps decide winners and losers. The Chapel Square Mall case shows that ecosystems can be built through exclusion as well as cooperation, through displacement as well as investment and through public narratives that make private advantage appear to be a civic necessity.
We also develop the ethical implication that was present, but not fully theorized, in Muldoon et al.’s (2024) article. They noted the use of taxpayer money, the displacement of communities and the problem of rent-seeking. We bring those issues to the foreground and evaluate them through public choice, moral philosophy and the distinction between economic efficiency and justice. Kaldor–Hicks efficiency may tell us that a project is efficient if the winners could hypothetically compensate the losers. But hypothetical compensation is not the same as justice. A family removed from its home, a shopkeeper stripped of location and livelihood or a neighborhood cut apart by a highway has not been made whole merely because planners can point to projected tax revenue or a more attractive downtown.
Therefore, we extend and reframe Muldoon et al. (2024). They showed that New Haven's model-city project exposed practical limits in the entrepreneurial state. We show that the same case exposes moral limits in entrepreneurial ecosystem construction. This distinction is important because entrepreneurship scholarship should not measure ecosystem success only by activity, investment or growth. It must also ask whether the path to those outcomes respects the people whose lives and property become the raw material of someone else's plan.
Methodology
Entrepreneurial ecosystems
Entrepreneurial ecosystems comprise the interlocking actors, institutions and cultural forces that enable productive entrepreneurship in a region (Isenberg, 2010); a relational view further stresses how these elements co-evolve through dense social networks and shared narratives (Spigel, 2017). Within this architecture, government actors often play the role of system architects, shaping formal rules, channeling capital and convening stakeholders in ways that reconfigure resource flows (Ács et al., 2014; Cohen, 2006; Feld, 2012). While scholars have probed the effectiveness of such interventions, they have seldom engaged in their moral legitimacy, a gap that Alvedalen and Boschma's (2017) critical review highlighted. Responding to calls for longitudinal, place-based research that traces ecosystems over time (Malecki, 2018; Roundy, 2019), we revisit New Haven's Chapel Square redevelopment, a government-led, mid-century megaproject, as a historical thought experiment; doing so allows us to weave ethics into ecosystem evolution, showing how opaque, utilitarian decision-making can create a lasting “legitimacy residue” that shapes entrepreneurial dynamics even 50 years later (Ács et al., 2014).
Scholars are unclear regarding the exact nature of the government's intervention into the ecosystems. A lack of government involvement can create redundancies and a lack of coordination (Acemoglu and Robinson, 2012; Spigel, 2020). Too much government involvement can lead to top-down problems such as over-government and the picking of winners and losers. However, there appears to be a consensus that governments should serve as brokers (e.g. put parties together) and provide money for infrastructure (e.g. roads) that allow commerce to occur (Audretsch and Belitski, 2017; North, 1990) However, these roles are somewhat contradictory, in that the government has a “narrow corridor” to be wealth generating versus wealth expropriate. When the government does get involved as a broker, it could easily get involved in determining market outcomes. That is, politicians could direct resources to some groups at the expense of others because of the principle of self-interest (Mueller, 2003). To expand, elected officials are potentially susceptible to those who can provide resources, whether campaign contributions or potential votes. This self-interest lends itself not only to corruption but also to politicians who seek fame or power.
A more realistic approach to urban development comes from Molotch (1976), who argued that a coalition of elites forms financial resources in competition from other stakeholders in the region as well as those outside the ecosystem. The net result is that “localities attempt to maintain the kind of ‘business climate’ that attracts industry: for example, favorable taxation, vocational training, law enforcement…” (Molotch, 1976, p. 312) Due to the financial resources available through taxes and other outcomes, social costs are publicized, but social benefits are privatized. This is not true economic growth, but a shifting of resources from one group of stakeholders to another. The natural outcome is boosterism: “Government funds support ‘boosterism’ of various sorts: the Chamber of Commerce, locality-promotion ads… stadia and professional sports teams…” (Molotch, 1976, p. 315). However, those groups who are on the outside, such as those living in poverty and minorities, will often find themselves in a worse position. In addition, business leaders and policy wonks provide intellectual justification and social legitimacy for those who wish to transform the city.
Scholars have conducted comparatively little research directly on government interventions in entrepreneurial ecosystems (Spigel, 2020), despite nearly every serious scholar of entrepreneurial ecosystems arguing that the government must play a key role. Indeed, this silence is notable because of the clear policy implications inherent in entrepreneurial ecosystem design. Providing empirical evidence for this intuition, Mujahid et al. (2019) found that human resorce (HR) development is the most critical dimension, followed by finance, support and industrial network relationships as the most important relationships. On the subdimension level, the government's regulatory role emerges as an important factor. Likewise, scholars have found that corruption and good governance also drive healthy entrepreneurial ecosystems (Ceresia and Mendola, 2019). There is a strong argument that the government should serve as an educator, financier, broker and builder of infrastructure – but there is also an admission that ecosystems contain elements that the government cannot influence, such as path dependence, which limits interventions.
Public choice analysis
The city of New Haven has a rich and varied history that has been widely chronicled over the years due to its proximity to Yale University, one of the world's premier universities. This attention especially occurred during the years 1950–1970, a period of rapid decline in urbanism in the area and the rise of new suburban communities in the surrounding area. We consulted a large body of secondary literature on the subject (Cohen, 2019; Dahl, 1961; Jackson, 2008; Powledge, 1970; Rae, 2003; Talbot, 1967; Wolfinger, 1974). Based on this, the lead author visited the Yale archives in the summer of 2023 and the fall of 2024 to review Mayor Lee and Development Director Logue's papers that chronicled their viewpoints on their various development plans.
Public choice
In our analysis, we will use public choice economics and its methodological reliance on rational choice theory. This will also provide a normative framework to highlight the potential ethical shortcomings of the “public benefit” rationale for the Chapel Square Mall project. Broadly defined, public choice is the application of economics to politics (Tullock et al., 2000, p. 3). Unlike traditional political science, public choice begins by assuming that political actors are self-interested just like nonpolitical actors are and that the notion of “the public good” that political actors use is illusory (Tullock et al., 2000, pp. 5-7).
A specific application of public choice is rent-seeking analysis. Rent-seeking applies to a situation where resources are invested to obtain a wealth transfer, special perk or special privilege. Rent-seeking is inefficient because no new wealth or value is created through the investment. Rather, the investment merely shifts ownership of wealth (Tollison, 1997, p. 508). This inefficiency is exacerbated because a rent-seeker has an incentive to invest up to the transfer's full value to obtain it, from a marginal benefit–marginal cost perspective (Posner, 1975). Examples of rent-seeking in the business world would be lobbying government to obtain property through the eminent domain (Yonai, 2005), lobbying local governments for tax incentives to build a new data center or sports teams' lobbying for new stadiums.
The foundation for all these rests on rational choice methodology (Little, 1991, p. 66). Rational choice argues that all actors will do their best to pursue their self-interest given their state of knowledge and constraints (Little, 1991, p. 41). This implies that political actors are no different from a businessperson or some other random person on the street when it comes to their basic decision-making; they will only do things in pursuit of their goals. Within this framework, two types of rationality describe human behavior: thin rationality and thick rationality.
Thin rationality is a broader and more forgiving approach to examining human behavior. It assumes that all actors attempt to maximize their utility. In this case, utility is subjective, difficult to measure and broadly defined (Little, 1991, p. 45) [1]. Hypothetically, if we examine an efficient use of property case, the potential utility gain from buying the property for development would be counterbalanced against the potential utility loss to the current owner. In this case, subjective potential gain is compared to subjective potential loss. In a purchase and sale agreement, if the potential developer is willing to compensate the property owner fully, a sale will occur and at a profit if the potential gain exceeds the purchase price. This is a standard, voluntary, mutually-beneficial trade that economists see as efficient. However, this approach is abstract and may not be useful in real-world situations given that we have no objective measure of utility.
This change under thick rationality. Given utility's nebulous nature, one can methodologically argue that instead of maximizing utility, people and society should maximize something more concrete, such as wealth or money (Little, 1991, p. 45). Applying thick rationality to the same example, the efficient use of property would be one where wealth is maximized (Posner, 1985). While one can arrive at the same conclusion we did before, given the purchase and sale of property between two voluntary parties, things change if voluntary trade is not possible.
Suppose the property owner does not want to sell their land. It does not matter how much money the developer offers because the sale will never take place. Suppose someone concerned with numerical data calculates that the land would create more wealth to society if they were sold to the buyer than if the owner kept it. Under thin rationality, it does not matter because the owner's behavior demonstrates that their utility of ownership is greater than the utility gain from the buyer. The efficient criteria used in the thin rationality approach is Pareto efficiency, where no party can be made worse off in an exchange regardless of the gain on the other side (Hirshleifer et al., 2005, p. 498).
However, for some people, this is unacceptable because, from a wealth perspective, money is literally being left on the table. Thick rationality focused on wealth maximization opens the door to a different efficiency criterion, Kaldor–Hicks efficiency. Under this criterion, a thing is efficient if the benefit received would potentially compensate those who lost (Miceli, 1997, p. 6). Under this approach, if the benefit of the property development is greater than the wealth transfers to developers and the harm to those who lost their land, then the cronyism and taking is efficient. The problem here is multifaceted. First, because only potential compensation is required, the losers are never made whole; they essentially “took one for the team.” Second, putting a monetary value on the degradation of the public and private sphere through cronyism and on the destruction of a community is difficult. The inability of putting it in money terms does not mean that harm does not exist, and it must be morally addressed. Third, given that real compensation is never made, Kaldor–Hicks efficiency could be used to justify any type of horrific outcome, including slavery, if the benefits exceed the potential compensation to the losers (Miceli, 1997, pp. 6-7). This efficiency approach now opens the door to an inherent moral dilemma because value is no longer subjective and represents what the property owners (in this case) care about; instead, it is arbitrarily defined as wealth, which may or may not be an accurate measure of value, making the determinations based on it just as arbitrary and potentially unjust.
In recent entrepreneurship research, scholars have increasingly examined the institutional, ethical and social dimensions of entrepreneurial activity (human impact) rather than focusing solely on venture creation and economic outcomes (technical impact; Lee et al., 2023). The shift to a more human focus on entrepreneurship rather than purely technical outcomes opens the door to questions of legitimacy, resource access, institutional inequality and entrepreneurship's potential dark side (Khosravi et al., 2023; Pérez-Morón et al., 2024; Simarasl and Dutta, 2024; Simmons et al., 2024). The Chapel Square Mall case directly addresses these concerns by demonstrating how public policy, ecosystem development and entrepreneurial opportunity can become intertwined with displacement, exclusion and the redistribution of wealth, where the losers are never compensated for their loss.
New Haven
Puritan settlers founded New Haven in 1638 (Maynard and Noyes, 2004). During most of the 19th and 20th centuries, New Haven was known for three things: Yale University, its manufacturing core and its retail industry (Rae, 2003). A diverse group of immigrants attracted by manufacturing jobs and hoping to achieve the American dream drove the manufacturing core (Maynard and Noyes, 2004). This inflow of immigrants also provided New Haven with demographic diversity that created a vibrant community of both ethnic and economic diversity. This hub of manufacturing workers also created a market for retailers and drove New Haven's retail industry.
Over time, as in most major U.S. cities, the automobile revolution and explosion of highways changed New Haven's character. As with Boston, Los Angeles and Chicago, New Haven also experienced flight from the downtown core to the suburbs as automobiles and roads enabled families to flee the city and expand in the suburbs. This meant jobs, homes, and retail left the downtown core as well. This urban flight led to the development of larger suburban shopping centers; for example, between the 1950s and 1970s, over 3.3 million square feet of retail space was built in New Haven's suburbs with major retailers relocating there (Rae, 2003). What remained in the downtown core were the retailers who could not afford to move or those attached to the city, such as bars, auto repair shops, jewelers and restaurants. The businesses left behind failed to attract affluent shoppers, and the city's tax revenue declined. Unfortunately, in addition to urban flight, New Haven also saw its manufacturing core collapse due to unionization and corporate mergers. Coupled together, these events caused New Haven's downtown core to decline economically relative to its surrounding exploding suburbs.
The construction of the mall
To respond to the decline, in both absolute and relative terms, as compared to their neighbors, New Haven's people elected Richard Lee mayor (Talbot, 1967). Previously, Lee had served as the director of public relations of Yale University, a major economic force in New Haven, especially with the decline of its manufacturing core. As stated above, Lee and his staff faced the collapse of retail and a loss of middle-class business leaders, professionals and entrepreneurs who were leaving the city in droves (Cohen, 2019; Rae, 2003). The remaining businesses – mostly bars, auto repair shops and small neighborhood shops – did little to increase the city's tax revenue or prestige. Accordingly, Lee and his chief lieutenant Edward Logue commenced a major rebuilding plan for the city (Cohen, 2019).
The project's crown jewels were the Chapel Square Mall (which was to be one of the first urban malls) and the Oak Street Connector (which would connect the mall with the suburbs) [2]. The mall featured two anchor stores: Malley's, the local department store; and Macy's, the famous New York-based department store. In addition to the mall and the connector, the city also undertook several crucial infrastructure improvements, such as widening the roads and building a parking garage (Talbot, 1967; Wolfinger, 1974).
Lee and Logue were not only visionaries but also practical men well attuned to the city's political environment – comfortable with both the city's various ethnic groups (Irish, Italians, African Americans and other groups) and the highest levels of power (Dahl, 1961; Wolfinger, 1974). Lee, a consummate politician with deep roots in New Haven, understood party politics better than previous reforming mayors did and had a vision of a “New New Haven” that previous mayors lacked. Because of these attributes, Lee was able to marshal tremendous support and resources from federal, state and local actors. Logue was a double Yale graduate (undergraduate and law school graduate) who combined a technocrat's eye for meticulous planning and a general's eye for ruthless, autocratic action. Each complemented the other; Lee provided local political legitimacy and salesmanship, Logue the technocratic expertise. Both men were completely honest, and despite the tremendous criticisms leveled against them in more than a half-century, no one has accused them of being corrupt.
Despite their personal scrupulous honesty, we must note that Lee and Logue provided businesses free “goodies” under the guise of “the greater good”, while lesser politicians would have sold them for a price. Accordingly, New Haven's people would be moved out due to the ability to exploit loopholes. Lee and Logue took advantage of a loophole in the Fair Housing Act of 1949 that granted cities the ability to condemn housing as slums, eliminate the blight and rebuild new homes. Despite the communities that lived in Oak Street, the functional commercial zone of Chapel and Church Streets, Lee and his aides successfully argued that they were slums and had the land repurposed for development (Cohen, 2019; Wolfinger, 1974).
Unfortunately, the definition of a slum leads to ambiguity (Boorstin, 1973). At the time, and to this day, politicians, community leaders, scholars and homeowners have intensely debated what exactly constitutes a slum. Whatever the case may be, this debate is somewhat pointless because the Fair Housing Act's purpose was to commence the construction of adequate housing (Talbot, 1967; Wolfinger, 1974). However, Lee and Logue destroyed homes for the purpose of building both the mall and the connector. Under the guise of a bill to aid families living in poverty, they provided opportunities for wealthy businesses to create economic growth for the city. In essence, they shifted resources from one stakeholder (those living in poverty) to another (big business). The Oak Street community's destruction remains a festering wound for many in New Haven because the Oak Street Connector had cut through the dense working-class neighborhood of immigrant and African American communities. This destruction occurred without the affected residents' meaningful input (Jackson, 2008).
This approach was both designed and implemented to be top-down. Lee and his supporters sought to produce a consensus that the houses were slums; they provided little information to the homeowners and held no hearings for them. When business owners in the condemned area sought to make improvements, the city blocked these attempts and withheld information about which areas were targeted for demolition (Logue, 1957a). When the city did provide information, it came in the form of propaganda such as the Progress Pavilion, whose exhibits sought to dazzle citizens as “a model for all America (Jackson, 2008; Powledge, 1970).” While these efforts were heralded under the banner of “public benefit,” they were executed behind a veil of secrecy, public propaganda and the exclusion of dissenters. New Haven purposely put on a dog and pony show of fancy blueprints and pretty visual models, and it manipulated the media to showcase only the project's upside rather than authentically engaging the public in dialog regarding a project supposedly for their benefit. To help execute this agenda, the city called sham meetings during times when most working people could not attend, and urban renewal boards were packed with yes-men. If this was not underhanded enough, the Redevelopment Agency used expert testimony to demonize the displaced residents as being anti-progress and modernization when the residents (mainly minorities and the impoverished) attempted to defend their homes and property (Jackson, 2008).
Another key to the plan were allowances made to the city's designer, Roger Stevens, a real estate developer with connections in Washington, DC (Lewis, 2007). This appointment was strategic because Stevens brought with him credibility to open access to federal agencies and other sources of funding for the project. A tit-for-tat relationship is highlighted in internal correspondence and legal documents indicating that New Haven would offer Stevens prime downtown parcels in exchange for his leadership and support of the project. Those property owners and other displaced parties saw this as favoritism and backroom dealing between New Haven and Stevens (Wolfinger, 1974). Regardless, Stevens's involvement offers evidence of New Haven's commitment to combining government subsidies and private development to create a new commercial district, essentially using government funds to create an artificial benefit for private business at taxpayer expense.
Some may argue that the benefit the project created would be greater than the harm of providing a wealth transfer to private business and the harm to the people who lost their land; therefore, Lee and Logue did the right thing for the “public benefit.” The problem with this assessment is that, even if true, it problematically relies on the notion of Kaldor–Hicks efficiency. Under this approach, if the mall's benefit is greater than the wealth transfers to private businesses and the harm to those who lost their land, then the cronyism and taking is efficient, thus for the “public benefit.” In essence, it provides license for people such as Lee and Logue to put anything under the banner of “public benefit” while never having to deal with the harm of rent-seeking created by passing out favors and the destruction of lives left in their wake from wiping out a community for a mall (Miceli, 1997, p. 7).
Lee and Logue's defenders could justify their approach in that, given the divided New Haven polity, there was a great need for secrecy. The city official mirrored this point, aptly referring to their headquarters in 177 Church Street as “the Kremlin,” a nickname both admiring and damning (Wolfinger, 1974). There, Logue seemingly operated with a dictator's authority because he had the authority to bypass traditional bureaucratic and political constraints. Lee created this arrangement because the widespread plans, which he sought to implement, required a heavy hand. Likewise, Logue had low opinions of the business leaders – he often felt that his university-trained staff possessed greater knowledge and insight into business and the community than the business leaders did (Cohen, 2019). This arrogance resulted in the fact that business leaders, even those who initially supported Lee, found themselves blindsided by announcements and that meetings to discuss the plans were more symbolic than substantive. In fact, the largest stakeholders were 48 economic notables who provided greater influence over redevelopment and stood the most to gain (Wolfinger, 1974).
If the political avenue failed the people, so did the courts. Many commercial tenants were not property owners, but leaseholders who lacked the rights to defend their property. Even those businesses, such as Savit Jewelers, who owned their property, faced an uphill battle in protecting their businesses (Logue, 1957b). The courts never seemed to rule against the government, whose urban planning was less a tool for revitalization and more a mechanism to privilege upscale retail at local businesses' expense. In addition, the costs of the lawsuits would be prohibitive to many small businesses, especially those who were not property holders. Even Savitt received a payment from the government, which might have been lower than if he had sold on the free market.
Lessons
Government involvement in shaping ecosystems is a complex one, as the previous historical case highlights. First, we need to remove the romanticism of government as a group of dispassionate politicians and view it, economically, as a self-interested entity that seeks to expand and justify its power. Both Lee and Logue sought to increase their power at the expense of usual democratic processes that were designed to limit unwarranted encroachment into economic life. That they did so because of the “greater good” does not excuse the damage that occurred during their term. This is not to suggest that they were corrupt; they were not. What we do suggest is that they destroyed lives in the name of the “greater good”; Lee and Logue's motives are irrelevant. In fact, had they been corrupt, perhaps the idea of government entrepreneurship would have lost its air of legitimacy.
Second, underpinning much of the theorizing in ecosystems is the idea that resources could be shared. While possible, entrepreneurs must also compete for resources such as land and funding. The government's actions are often the result of balancing interests between disparate actors. We also cannot assume that reformers and rent-seeking businesses will be antagonistic. Often, they might find themselves on the same side of an issue for different reasons. The reformers will seek to make things better; the rent-seeker will seek to capture a wealth transfer. We can see this behavior today when states spend tax revenue on motion pictures, stadiums and other industries they seek to attract. For example, numerous professional sports stadiums have been built with taxpayer support, such as an estimated $1.19bn of projected taxpayer burden for the new Yankee Stadium (Haddock et al., 2013, p. 8). Perhaps such expenditures can be justified if they provide positive tax revenue, but the record is bleak and says nothing about the malinvestment that occurs.
Previous literature about the entrepreneurial ecosystem and government highlights the problems of top-down planning and the idea of greater collaboration between stakeholders and government officials. Once again, we witness recurring issues where influential actors displace less powerful ones, as politicians prioritize those with greater resources to uphold their positions of authority (Mueller, 2003). Nor is collaboration easy because, if the government is acting like an entrepreneur, it presumably will need to act in secret, lest others bid up the price of property. Lee and Logue were not petty dictators; they were dedicated servants who subverted democratic processes in the heartfelt belief that they could make improvements (Muldoon et al., 2024).
The final and important issue to note is that entrepreneurship and aspects such as the entrepreneurial state do not produce just winners; they can also produce losers. As entrepreneurship scholars, we have a strong handle on this issue when it comes to innovation. After all, Schumpeter's gales of creative destruction are a well-noted force in economics and innovation. However, if we consider government involvement, we should eliminate the romantic notions that the government will protect the weak at the expense of the powerful and well-connected in the same manner that we must recognize that governments do play a key role in shaping outcomes. Likewise, we must also recognize that bureaucrats are either trained by or members of the professorate, like scholars. Accordingly, we must not allow their credentials or claims of expertise to take on face value their claims.
Synthesis of findings, propositions and future research directions
Table 1 summarizes the central findings of the Chapel Square Mall case study. We connect historical events to the paper's broader contribution to the research on entrepreneurial ecosystems, public policy, ethics and entrepreneurial activity's darker side. Rather than treating government intervention as entirely beneficial or harmful, we illustrate how ecosystem-building efforts can generate economic opportunity for some actors while redistributing costs to less powerful stakeholders.
The Chapel Square case also allows us to develop formal propositions for future theoretical development. These propositions are not universal laws; rather, they are historically-grounded claims that can guide future empirical work on entrepreneurial ecosystems, public policy and the ethics of government-led development, as we can see in Table 2.
These propositions suggest that future entrepreneurship researchers should examine not only how ecosystems are built, but also how they are morally justified, politically governed and socially experienced. Table 3 outlines several future research directions that follow from the case and that connect the paper to current New England Journal of Entrepreneurship (NEJE) conversations about ethics, legitimacy, institutional context, resource access, gendered constraints and entrepreneurship's dark side.
Together, the tables demonstrate that the Chapel Square case contributes to entrepreneurship research in three ways. First, it shows that entrepreneurial ecosystems are not only economic systems but also moral and political systems. Second, it demonstrates that government-led ecosystem construction can produce entrepreneurial opportunity through mechanisms that simultaneously generate exclusion, displacement and uncompensated harm. Third, it provides a historically grounded platform for future research on the ethical limits of the entrepreneurial state, especially in contexts where public authority is used to redistribute resources in the name of growth, revitalization or public benefit.
Further research
We would like to raise the following questions for future research. First, what other aspects of ethics have entrepreneurial researchers ignored? Although entrepreneurship is deemed to be highly legitimate and beneficial, nevertheless, there are numerous limitations that one could point out from history. The evidence here suggests that government officials ignored voices from the community's less influential and disgusted members and paired up with big business – this suggests that government is not the benevolent being that its defenders claim it is. Second, we pointed out where the government did not work – scholars should find examples where it did and how it worked to provide us with a pathway through the “narrow corridor.”
Notes
It means that, when determining efficient outcomes using thin rational choice, everyone's utility matters in the marginal benefit and marginal cost analysis.
This section of the highway connected I-95 and I-91 and enabled individuals from towns to the West (Milford) and East (Branford) to shop at Chapel Square Mall.
