International Business and DevelopmentAccemic Year 2013/2014

Cooperation and competition among firms

Università Degli Studi Di ParmaDipartimento Di Economia

ProfessorAlessandro Arrighetti

StudendsMassimiliano TodaroPaolo Renna

I n n o v a ti v e M i l i e u a n d S o c i a l C a p i t a l —C o m p l e m e n t a r y o r Re d u n d a n t C o n c e p t s o f

C o l l a b o r a ti o n - b a s e d Re g i o n a l D e v e l o p m e n t ?

Several theoretical concepts emphasize the importance of socially embedded collaboration for innovation driven regional development. The notions of innovative milieu and social capital both focus on this factor of economic success.

Researchers have looked at evolutionary aspects linking industrial district approaches or influences of milieu characteristics on the localised production systems of industrial districts and other qualities of successful localities.

Social Capital and Innovative Mileu look widely complementary with the common denominator of ephasizing the benefit of socialy embedded interaction.

Introduction

What is Social Capital

The concepts of innovative milieu and social capital

Social capital is the expected collective or economic benefits derived from the preferential treatment and co-operation between individuals and groups

The nature of Social Capital is linked with formal and informal

relationships.

“social networks have value”

Social Capital: two different standpoint

The notion of social capital, which was constructed in analogy to the idea of human capital, bears qualities that get close to milieu characteristics. Basically, social capital is defined as:the sum of the resources, actual or virtual, that accrue to an individual or a group by virtue of possessing a durable network of more or less institutionalised relationships of mutual acquaintance and recognition.

In the Sociocentric Approach Benefits are regarded as being particularly high when people manage to bridge 'structural holes' that exist between previously unconnected communities. The notion is often associated with ideas of civil society and peoples' deliberate engagement in associations, parties or other institutional forms that aim at supporting societal groups or the population of a locality.

Innovative MilieuThe set, or the complex network

of mainly informal social relationships on a limited geographical area, often determining a specific external 'image' and a specific internal 'representation' and sense of belonging, which enhance the local innovative capability through synergetic and collective learning processes.

(central definition by GREMI)

Three main sets of element mark innovative milieu

1. Effective actor relationship within regional framework

2. Social contacts that enhances learning processes

3. Regional image and sense of belonging

Do both concepts complement each other?

Complementary aspects of the notions of innovative milieu and social capital can be identified with respect to four categories, which represent important relational elements in innovation-based regional development:

Our focus: Industrial district in Italy

Industrial district was initially introduced as term to describe an area where workers of monolithic heavy industry live within walking-distance of their places of work.

The succes of sme-based italian district was one of the main factors that motivated economic developement organizations across the world to adopt cluster promotion as an approach to stimulate growth and job creation.

Innovative Milieu and Social CapitalTecnology in region of Aachen

Aachen suits well to illustrate the importance of both cretive mileu and social capital for succesful regional economic restructuring.

Aachen has managed to evolve from a region dominated by old industries to an outstanding agglomeration of new tecnology-driver firm.

The collaboration of various actors has fundamentally supported this trasformation

Distinctive Mileu and social capital play a key role for the Regional Economic Restructuring

Process of Economic Restructuring

A comparative investigation for 1993-1995 shows that the regionwas particularly successful in generating new high tecnology firms.

Start-up centres have been set up in the wider area, which have supported the foundation of over 450 innovation-oriented firms alone, altogether employing the (more realistic) number of about 3,700 people new high technology firms.

Empirical evidences highlight positive correlation between, the collaboration for innovating firm, and high innovativness.

Since the mid-1980s it is started the formation of new enterprises, predominantly in the fields of information technology, engineering consulting, medical and biotechnology.

Regional Economic RestructuringSome data:The region's outstanding academic

and research institutions, notably the University of Technology (RWTH) Aachen (close to 30,000 students), the Polytechnic College (FH) of Aachen and the public Research Centre (FZ) Jlilich (about 4,300 employees), have been the major basis from which industrial restructuring could successfully emerge.

“Aachen features as an outstanding example of industrial transformationto an innovation 'hot spot' at least on the national scale”(Beise & Gehrke, 1998).

Aachen: Manifestations of innovative milieu“Regional restructuring has been associated with positive milieu effects”

Common objectives of regional development, triggered by the urge to restructure the economy, harmonize differing interests and add to the milieu-like features of the contact network.

Impulses come from new co-operative approaches by key actors representing different regional institutions: industrial chambers , institutions of higher education and research, banks.Combing competencies and resources based on pre-existing personal relationships.

AGIT regional association for promoting innovation and technology transfer

By virtue of pre-existing personal friendships of some key actors, a first major step could be implemented by founding the agency AGIT that combining the strengths and complementary competencies of its various participants from institutions of industrial promotion, industrial chambers, higher education, research and industry.

AGIT created new infrastructural and programmatic approaches that gave a decisive initial push to regional economic restructuring.

One central activity of the agency has been the establishment of technology and start-up centres in the region.

Aachen: Manifestations of social capital

When companies growing out of the start-up phase, technology firms often face sector-specific difficulties with respect to work routines, management organization or marketing which can hardly be overcome by virtue of those milieu structures and their services.

Additional support becomes vital which appears to better rely on socially embedded relationships among more homogeneous actors: companies of the same sector or age that share common problems and objectives.

It is required the stabilising effects of social capital,

“business friends” belong to the most important sources of entrepreneurial consulting for technology firms, it is seen as an

important asset in the Aachen region

Aachen: Manifestations of social capital

the formation of several institutionalized communities of firms in terms of sector-specific industrial associations that have come up in the region in the last decade.

REGINA is a combination of more than 100 Aachen-based companies, educational establishments and research institutes. Although competitors in some areas, the mainly small to medium-size enterprises which make up the network have embraced the concept of forming an alliance to bring mutual benefit to all its members. (Regina website)

who works closely with some of the industry associations, has noticed a reduced spirit of competition and increased

collaboration among member companies. This straightaway refers to social capital implications

Our Focus: The Silicon Valley innovative milieu

Introduction:Silicon Valley is one of the leading high-tech

regions in the world,Silicon Valley’s success can certainly be traced to

the breakthroughs achieved by a group of innovators and entrepreneurs unique regional culture and its special ecosystem have been stressed as prerequisites for its success.

The importance of a set of rules and behaviours that provide a framework for the interactions among individuals with diverse country cultural backgrounds to create Silicon Valley’s innovative milieu.

Silicon Valley

Silicon Valley has become the symbol for the ability of regions to become leaders of technological change.

The importance of local milieus for the creation of cutting edge technologies introduces a geography perspective in global technology competition.

A report by JOINT VENTURE SILICON VALLEY NETWORK (2001b) stresses that “geographic clustering of people, companies, and institutions is a powerful mechanism for transferring and augmenting personal knowledge, skills, and experience quickly".

Silicon Valley

the orientation of the study is socio-economic. Three crucial assumptions of the study are:

• 1. Multinational companies are often characterized by a set of behaviours and norms that are influenced by the business culture of their home country or region.

• 2. Silicon Valley’s dynamics are based on the intensive interaction of a set of relevant decision-makers. The common visions and interests. The creation, of a local community and that have been described as Silicon Valley’s regional culture.

• 3. When multinational companies open up branches in the Valley, their local integration requires comparably high investments to build up social capital.

Silicon Valley: Cultural mix and the dynamism

Silicon Valley is one of the most diverse regions in the world in terms of immigrant entrepreneurs, human capital and multinational companies.

“Silicon Valley is notoriously a world of strangers; nobody knows anybody else’s mother there. There is no deep history, little in the way of complex family ties, and little structured community…Silicon Valley would be hard-pressed to present the image of the close-knit

society. There are different situations and dimensions of the culture and interest we can find:

Power distance (relationship between boss and subordinate in a hierarchy), Uncertainty, Individualism versus collectivism, specific versus diffuse relationships

Dynamism, opposition and common interest

Silicon Valley: Cultural mix and the dynamism

Sharing tacit knowledge through interactive processes based on trust, willingness to share, and mutually beneficial exchange over time is the key.

One major basis for this information exchange are intensive connections between all the relevant players in different forms.

The complex interaction between companies and individuals in Silicon Valley and the tendency to compete and share information at the same time has been described with the term co-opetition.

The most famous example Microsoft VS apple

Silicon Valley: Cultural mix and the dynamism

• Silicon Valley environment encourages entrepreneurs to take risks.• Moreover, it is underlined that there is a right to fail “Risk is good,

failure is not bad.”, which is not as strongly accepted in many other regions of the world.

"Creativity is just connecting things. When you ask creative people how they did something, they feel a little guilty because they didn't really do it, they just saw something. It seemed obvious to them after a while. That's because they were able to connect experiences they've had and synthesize new things".

Steve jobs

Thanks For Your Attention

Paolo RennaMatr. 250462

Massimiliano TodaroMatr. 248522