Costa Rica….

1. Collaborations and networks in the Costa Rican ICT clusterLuciano CiravegnaPhD CandidateDESTIN – Development Studies InstituteThe London School of EconomicsVisiting scholar, INCAE Business School

2. Costa Rica…. …and Costa Ricans • Within Latin America: • Low poverty • Low inequality • No army • Stable democracy since ’48 • High literacy and life expectancy

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

4. 1998 onwards Figueres – president of Costa Rica in 1995 Splinter – CEO Intel Corp. Intel facilities in…Costa Rica! -

5. 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

6. 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?

7. But… • 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?

8. 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

9. Elements of the production system Export promotion agency Central Valley FDI attraction agency 2 universities 150 Local firms Free trade areas 22 MNC Business association Venture K

10. 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)

11. What are we looking for: collaborations Other 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” • Characterized by some degree of reciprocity • Involve the sharing of some of the actors’ resources, or the organization of joint actions, or both.

12. …Why collaborations matter? • Clusters and industrial districts scholars (Becattini, Schmitz, Porter…) = spatially proximate SME can overcome their resource constraints if they collaborate… • 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

13. 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?

14. 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

15. PhD Chapters: types of collaborations between local firms and other actors in the production system • Local firms – Investors (venture capital) • Local firms – Local firms • Local firms – Multinationals (MNC) subsidiaries • Local firms/MNC subsidiaries – research institutions • Local firms – actors located outside of the cluster

16. Collaborative networks

17. Types of collaborations..

18. Key findings: • Social embeddedness determines actors’ strategies, affecting interactions, or collaborations in the local production system • Within each category (e.g. MNC – local firm) there are sub types of collaborations… • 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 • 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

19. 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: • Social embeddedness (social ties and connections) affect access to information • Information transmitted by social ties tends to be converted more directly into behavioural incentives because perceived to be “filtered” or “processed” • Closed communities strengthen customary rules (as argued by Burt and Granovetter)…which can lead to both collaborative and NON collaborative outcomes • Actors with external ties respond to multiple incentives, and introduce non redundant information in the social communities where they operate…

20. Learning in MNC – local firms collaborations