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Collaborations and networks in the Costa Rican ICT cluster

Luciano CiravegnaPhD CandidateDESTIN – Development Studies InstituteThe London School of EconomicsVisiting scholar, INCAE Business School

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Costa Rica….

…and Costa Ricans

Within Latin America:

•Low poverty

•Low inequality

•No army

•Stable democracy since ’48

•High literacy and life expectancy

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What is Costa Rica’s economic structure and insertion in the global economy?

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1998 onwards

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Figueres – president of Costa Rica in 1995

Splinter – CEO Intel Corp.

Intel facilities in…Costa Rica!

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From Coffee to the knowledge economy?

Intel invests 390m. US $ by 1999, other 100m. US $ in 2003 to manufacture chipsets.

Employes over 3000, of which about 100 engineers working in R&D.

Attracts other MNC Electronics becomes first export, before coffee,

bananas, palm oil… Electronics = 50% of exports from Zonas Francas

(free trade areas) Costa Rica = 1° Latin American producer and exporter of ICT (per capita)

Only Latin American country where most FDI did not go to privatized utilities and natural based resources

but to greenfield high tech plants

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Hopes…

Structural change? Leapfrogging?

Combination of Washington consensus

policies (FDI attraction, tariffs lowering,

macro stabilization) with strong public

investment in education to push ICT

industry/cluster…new policy model?

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Few local providers Few multinational (MNC) providers Procurement indexes (Ferraz, Rush, and Miles, 1992) =

low local purchases (about 17%) of “knowledge diffusers” 87% of MNC imports (Paus, 2006; Ciravegna and Giuliani,

2006) = “knowledge diffusers”

…Intel works in its own production system, global but disembedded from local reality….as a “Technological enclave”

What about the rest of the cluster? FDI – dominated cluster, or high tech maquiladora?

But…

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Contribution of this research

Propose collaborations as analytical concept:

meeting point for literature on innovation, clusters,

SMEs, MNC/FDI impact on development

Explain interactive processes (knowledge

exchange, collaborations) taking into account

social embeddedness: how social ties, social

networks and communities affect actors’ decisions

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Elements of the production system

22 MNC

150 Local firms

2 universities

Business association

FDI attraction agency

Export promotion agency

Free trade areas

Venture K

Central Valley

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Assumptions…

FDI can be a key motor for technological and organizational learning (e.g. Lall..)

Systemic interactions among actors promote innovation in a local production system (Our Globelics stuff..)

Joint actions (together with proximity) can promote “collective efficiency” (e.g. Schmitz and the IDS school)

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What are we looking for: collaborationsOther actors (than Intel) involved in the ICT local

production system establish networks not captured by procurement indexes

Collaborations as unit of analysis:

“interactions between two or more economic actors aimed at the production, development, or commercialization of ICT”

a) Characterized by some degree of reciprocityb) Involve the sharing of some of the actors’ resources,

or the organization of joint actions, or both.

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…Why collaborations matter?

1) Clusters and industrial districts scholars (Becattini, Schmitz, Porter…) = spatially proximate SME can overcome their resource constraints if they collaborate…

2) Systemic innovation = local firms’ generation of new products, processes, and technologies is affected by their pattern of interactions with other actors of the local production system..research labs, government agencies, users, suppliers

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Research questions

Do agents collaborate in the Costa Rican ICT cluster? Exploratory fieldwork = some do, and some do not.

Why some decide to collaborate and others do not? How do institutions and social embeddedness affect the outcome?

How do they structure their collaborations? (Formal, informal, governance, regulations)

What is the role of such collaborations for the local production system?

How do the collaborations affect the capabilities and performance of the firms involved? What is their meaning for industrial development?

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Methodology: how have I researched collaborations

Extended fieldwork: over 120 semi structured interviews with all of the MNC that produce ICT, 70% local firms, all investors, research universities and local government agencies

Embedded research: participation to sectoral events, informal conversations with several industry participants and observers

Use of actors’ discourse to understand the determinants of their behaviour

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PhD Chapters: types of collaborations between local firms and other actors in the production system

Local firms – Investors (venture capital) Local firms – Local firmsLocal firms – Multinationals (MNC)

subsidiariesLocal firms/MNC subsidiaries –

research institutions Local firms – actors located outside of

the cluster

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Collaborative networks

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Types of collaborations..

Type What do they do

Local firms - investors

Financing of local firms, provision of managerial advice

Local firms – Multinational subsidiaries

Different types: ….infrastructure sharing, product distribution, technology development

Local firms, MNCs - and R&D centres

Transfer of academic research to commercial applications

Local firms – local firms

Marketing, infrastructure sharing, technology sharing; complementary network strategies

Local firms – external actors

Distribution, joint product adjustment, co-development of services, co-development of techologies

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Key findings:

1. Social embeddedness determines actors’ strategies, affecting interactions, or collaborations in the local production system

2. Within each category (e.g. MNC – local firm) there are sub types of collaborations…

3. Question is not only why actors collaborate, but why a they structure a given type of collaboration, and what implications each collaboration has for the development of local technological and organizational capabilities

4. Literature focuses on why MNC may not work with local firms, but sometimes local firms do not want to work with MNC…or with universities and other actors

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How do we explain the results: why some actors collaborate and others do not?

they respond to incentives generated by institutions, e.g customary rules of the local academic community.

BUT:

1) Social embeddedness (social ties and connections) affect access to information

2) Information transmitted by social ties tends to be converted more directly into behavioural incentives because perceived to be “filtered” or “processed”

3) Closed communities strengthen customary rules (as argued by Burt and Granovetter)…which can lead to both collaborative and NON collaborative outcomes

4) Actors with external ties respond to multiple incentives, and introduce non redundant information in the social communities where they operate…

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Learning in MNC – local firms collaborations

Type: Joint Actions Shared resources Learning

1. Client network Marketing, distribution.

MNC brand, local firms’ market knowledge and client portfolio

Market and marketing knowledge

2. Product adaptation

Development of products and services for local markets

Brand, resources for the R&D of products and technologies for local markets

Organizational techniques, work practices, non cutting edge technologies

3.Technology development

Development of core technology

Brand, clients, resources for core technology R&D

State of the art technology, global standards…