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IM Week 9: Clusters and social capital/Networks of Innovation: the Role of…
IM Week 9: Clusters and social capital/Networks of Innovation: the Role of Social Capital
Learning objectives
Refer to different types of clusters and what makes them efficient
Refer to specific sector innovation systems and how technological trajectories affect innovation
Discuss the importance of social capital for innovation at different levels individual, organisation, inter-firm, and how to best manage it.
Refer to specific dimensions and drivers for social capital
Refer to different types of clusters and what makes them efficient
a. Regional systems: Clusters
“Geographical concentrations of interconnected companies and institutions in a particular field” Porter (1998: 78)
xm: silicon valley is becoming the focus of the cclusters
b. Tech clusters in UK
xm.also active in the uk
c. What characterises clusters?
Geographical concentration
High degree of specialisation
Large number of mainly small and medium-sized firms
Ease of entry and exit
High rate of innovation
xm
d. What makes clusters so efficient?
Labour market pooling
Transmission of knowledge between nearby firms
Firms specialising in the intermediate stages of production
Supportive socio cultural attributes associated with working practices
A network of public and private institutions supporting firms
An intense set of backward, forward and horizontal linkages
Easy access to physical infrastructure
xm sharing of ideas, and specialising at what they are good at, supportive working practices, network pan p so lots of trading between these organisations
e. Different types of clusters
Different types of classifications found in the literature, e.g.:
i) Cohesive clusters, ii) New industrial districts and iii) innovative millieu
The framework presented here: Neo-Marshallian industrial districts, Satellite Platform cluster, State anchored cluster is taken from your textbook; Managing Innovations (Smith, 2010, 2015).
1. Neo-Marshallian industrial districts
Characterised by the presence of small, locally owned firms
Inputs sourced locally, creating strong inter-links between firms
Outputs may be exported from the region
Labour will be recruited locally
Presence of high proportion of workers engaged in design and development type activities ensures that such clusters are seedbeds for innovation
Examples: Silicon valley
xm: silicon valley
2. Hub and spoke cluster
Characterised by large firms or facilities that act as a hub around which many small firms are tied, either by origin or on-going relationship
Hub firms typically large firms
-Vertically integrated, incorporating several distinct stages of the production process
-Likely to be oligopolistic and dominate a single industry
Relations unlikely to be collaborative and cooperative. Instead Linkages between the hub firm and the smaller firms take form of supply contract
Examples: Seattle region, where Boeing acts as the hub firm
3. Satellite platform cluster
Characterised by a concentration of branch plants of large externally owned and headquartered organisations
The firms within the cluster can range from routine assembly to relatively sophisticated research
One distinguishing characteristic is that they are ‘stand alone’ facilities detached in spatial terms, with few linkages with other firms in the cluster
Despite the absence of many cluster features that foster innovation, satellite platform can nonetheless prove to be important centres of high technology activity
Examples: Bengalore software cluster
xm: less interaction going in , its more to big companies branch es
4. State-anchored cluster
Similar to hub and spoke clusters but where a public sector or not-for-profit organisation acts as an ‘anchor tenant’, e.g. a military base, large defence plant, public laboratory, government offices
Due to the anchor’s nature, it is likely to be immune to downturns in business cycles etc.
Indigenous firms are likely to play a smaller role than in neo-Marshallian industrial districts or in hub and spoke clusters, though supplier sectors are seen to group up to meet the demands of the anchor over time
Examples of anchor tenant: Cambridge university
f. Cluster development
Difficult to identify the emergence of a cluster before it occurs
Location factors, though element of chance to the initial location of geographical clusters of firms
Sometimes originate from a single fast-growing and successful new start-up firm
Firms have an incentive to cluster
In high-technology hot spots competitors form intricate networks of interdependencies
Ties to
-research base
-skilled labour pool
-network of highly qualified suppliers
-venture capitalists
Interrelationships encourage the initial formation and hold the cluster together over time
g. What are the advantages?
Networking
Specialisation
Ease of entry and exit
Resource mobility
xm:
h. As a result…
Advantages over non-clustered competitors
Agglomeration economies and shared resources increase the probability of economic survival of the cluster as a whole
Competitors outside of the cluster struggle to maintain competitive parity with the clustered competitors
xm
i. Are there any disadvantages?
Refer to specific sector innovation systems and how technological trajectories affect innovation
a. Sector innovation systems
An industry-specific innovation system such as those of the pharmaceutical or aerospace industries
b. 5 major technological trajectories
xm: suplier-dominated, scale intensivem science-based, information-intensive, specialised intensive
Discuss the importance of social capital for innovation at different levels individual, organisation, inter-firm, and how to best manage it.
a. What is social capital?
Social capital – ‘the sum of the actual and potential resources embedded within, available through, and derived from the network of relationships’ (Naphiet and Ghoshal, 1998)
The formation of network relationships is intimately related to the creation of social capital.
xm: relate back to clusters, networking as a way to find opportunities for social capital, social capital helps organisaiton to be innovative
b. Why is it important?
c. Concepts of social capital
d. Corporate Social Capital
xm: the enterprise internal social capital, value generated from social capital, monitor and standardise behaviour, more willingness to work together
e. The importance of inter-unit collaborations
Tsai and Ghoshal (1998) find a positive relationship between the various dimensions of social capital, resource exchange and product innovations within the company. In particular, they find social interaction and trust significantly related to inter-unit resource exchange
Centrality of a business unit is positively associated with its perceived level of trustworthiness
The extent to which a business unit shares a vision with other units and with the organisation as a whole is positively associated with its perceived trustworthiness
The level of trustworthiness is positively associated with the extent resource exchange and combinations the unit engages in with other units in the organisation
The centrality of business unit in inter-unit social interaction is positively associated with the extent of the resource exchange and combinations the unit engages in with other units in the organisation
The extent of resource exchange and combinations a business unit engages with other units will be positively associated with the unit’s level of product innovation
Refer to specific dimensions and drivers for social capital
c. Case 1: The power of social capital
Argument 1 The strengths of the weak ties (Granovetter)
Strong vs weak ties
Frequency of interaction
Emotional closeness
Duration of contact
xm: strong ties: you want to have different stimuli, people who are more objective
Argument 2 Structural holes (Roald Burt)
A structural hole refers to a gap between two individuals in a central actor’s network. They serve as insulators of information between separate social groups.
Who will do better?
XM
b. Drivers of social capital
Stability – the length of time that members of a group have had to develop their relationships
Closure – the existence of dense social network boundaries that distinguish members of a group from non-members
Interdependence – shared goals and the concern for the success of the business that members of a collective have, as well as the need for cooperation in order to accomplish their own objectives
Interaction – frequency with which members of a network communicate with each other
a. Relationships between the dimensions of social capital
xm: 3 main elements: cognitive, structural, relational
d. Networks as a source of information
Large Network
Non-redundant contacts
Weak ties over structural holes
e. Shape of the network
Smaller, tighter networks vs lots of loose connections
Connections to a variety of networks vs many connections within a single network
f. The problem is… the rule of 150
The size of a genuine network is limited to about 150 members (Dunbar’s number)
Average human ability to recognise member and track emotional fact about all members of a group
5.Case study: Silicon valley v London Tech
a. Clusters (neo-marshallian districts)
Characterised by:
Intensive interactions among local firms
The local labour market
Willingness to learn
Its success depends on:
A region’s ability to stimulate intensive co-operation
High quality relationships among the local scientific, operational and financial systems
b. Silicon valley
Relationship between Stanford University and a group of entrepreneurs in 1930
60s and 70 San Jose State University training as many engineers as Stanford and Berkley
Venture capitalists had prior careers with technology firms in the region
The network of overlapping board members
High turnover – diffusion of technological capabilities and know how
c.
London Tech City
Significant participants:
Barclays
BT
Cisco
Facebook
Google
Intel
McKinsey
Vodafone
Qualcomm
UCL
Imperial College
City University
Loughborough University
d. Is London Tech a successful cluster? Why/why not?
e. Tech city criticism
had little focus and could be counter-productive
concerns over a skills shortage, connectivity, lack of mentoring and rising costs
on the wrong side of London (away from Heathrow Airport)
many of the companies are not technology producers, but media companies that are consumers of technology produced elsewhere
