High Tech Innovations Local versus International Knowledge Network
Case study Israel
Michiel Dijk
[email protected]
Summary In this summary the major outcomes will be presented of an empirical study about Israeli high tech companies which are traded on foreign stock markets. This research is part of a joint research headed by Tamar Almor of the College of Management about knowledge intensive small and medium sized companies.1 This is also my final doctoral paper for my studies International Economics & Economic Geography at the University of Utrecht. In the first part of this thesis an overview is given of the literature on innovation, networks, the position of SME’s in the economy and the role of the region in the innovation process. The two main questions in this thesis are: To which extent and how is the knowledge network of small and medium sized Israeli high tech companies localized? And are locally networked companies more innovative? It can be argued that for the majority of the companies their knowledge network is more internationally orientated. Companies with a more localized knowledge network tend to be more innovative. When this is controlled for the influence of other variables, like size and age, this connection turns out to be not significant anymore. Companies which are locally networked are only half the size of the companies with an more international knowledge network. So, the difference in innovativeness is partly due to ‘size’ and partly due to their local ‘knowledge network’. To conclude this we first examined how the knowledge network of the Israeli high tech companies is organized. It turn out that external knowledge is not of big importance for the innovation process of these companies. About 80% of the companies did use external knowledge for innovations developed in the last three years, but on average the external knowledge is of little importance. Most companies use external knowledge or technologies which are developed by other companies. They also source knowledge and technologies from universities and government institutions, but to a less extent. The most important motives for using external knowledge or technologies are in the first place ‘access to complementary technology’ and second ‘saving developing time’. The most common way to acquire external knowledge or technologies is through some sort of cooperation agreement. Different forms of cooperation are distinguished and for each category is examined whether the knowledge or technology is from Israeli origin or from foreign origin. On average most cooperation is with foreign companies. Only in the category ‘Joint Ventures and Joint Research Corporations’ there is more cooperation with Israeli companies. Only eight companies turned out to be more locally networked and 46 companies have a more international orientated knowledge network. The companies with a local knowledge network are on average 1.32 more innovative than companies with a more international knowledge network. Correlation between the two variables is low; there is only a weak connection. When this connection is controlled for the influence of ‘size’ and ‘age’ the correlation is not significant. The hypothesis that locally networked companies will be more innovative has to be rejected.
11
Dr. Tamar Almor, Head Organization and Management and Integrative Studies. College of Management, Academic Studies.
After the empirical analysis some implications will be given for theory, region’s and companies. This study shows us that the importance of the region in the innovation process is limited. The knowledge network of high tech companies is mainly organized through different forms of cooperation. Which form of cooperation and whether a local or international partner is chosen, can be adequately explained by the transaction cost theory. Although the knowledge network is for the biggest part internationalized, the firms are still for a large part dependent for knowledge and technology on Israel. The internal knowledge base is still the most important for the innovation process and this is mainly localized in Israel. There are not many companies in this sample with substantial R&D operations overseas. Companies that want to expand their external knowledge network do not have to take in account all kind of local synergistic and cultural factors. For the choice between a local or foreign partner, companies should weigh out the extra transaction and coordination costs a foreign partner brings against the extra benefits a foreign company can give. Extra benefits to cooperate with a foreign company can be technological, but as turned out in the interviews also marketing considerations are important.
Michiel Dijk International Economics & Economic Geography Faculty: Spatial Sciences Utrecht University, Utrecht, februari 2001
[email protected] In cooperation with Prof. Dr. E.Wever & Dr. T.Almor