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III' Global Strategy and Entrepreneurship Lecture 7: Taiwans Recent Dilemma

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Title: III' Global Strategy and Entrepreneurship Lecture 7: Taiwans Recent Dilemma


1
III. Global Strategy and Entrepreneurship Lecture
7 Taiwans Recent Dilemma
  • Part One Industry Cluster

2
BW We are the victim of our own success. UND
Doom days for us in the near future
????????????????????????/?? 2005/11/07 ???
http//udn.com/NEWS/NATIONAL/NATS3/2993912.shtml
3
I. Facts in Taiwan
  • What is the last PC Taiwanese company relocating
    to China?
  • ?????????????!????????????????,???????????????????
    ???????????????????????

4
?????????
of manufactures
5
Impacts
  • Number of firms drop more than 6000, 2003-2004.
  • Unemployment Jobs in manufacturing industry have
    decreased by 24,000 from 2000 to Aug. 2005.
  • Export growth to HK and Mainland 28 in 2004 and
    8 in previous three quarters in 2005.

6
Future Concerns
  • ????????????????????,???????????,?????????????????
    ????????????

IC designs chips
Cell phones
Intel CPU
Components Cell phones
HP, Dell,
PC Notebook
Nokia,
Components PC, Notebook
Digital Camera
7
Future Concerns
  • ????????????????????,????,????????,???????????????
    ???(??????????????????,???????????????)
  • ???????,?????????

8
Potential Solutions
  • Upgrading and reaching a higher value chain
  • II. Reviewing the Global Commodity Chain
  • Causes and evidence of growth in GCC
  • Unequal shares of value
  • Key questions
  • III. Industry cluster approach to economic
    development

9
II. Root Causes of Rapid growth of GCC
  • More intense competition arising mainly from
    reduced trade barriers. To reduce costs and
    innovate more rapidly, firms have responded by
    focusing on their core competencies (Venkatraman
    and Henderson 1998) and contracting-out less
    significant activities (Quinn 1992 Kotkin 2000).
  • Digital technology has enabled the rapid
    communication of information across time and
    space, facilitating more efficient, faster
    economic transactions (Tapscott 1999).
  • On account of differential national factor
    endowments and associated cost structures, global
    firms are concentrating their knowledge-intensive
    activities (strategic planning, design, product
    development and marketing, etc.) in developed
    countries and locating their more routine
    activities (manufacturing) in selected developing
    countries (Reich 1990).

10
(No Transcript)
11
Evidences of integration GCC
  • Collaboration between companies in the form of
    global commodity chains
  • PCC rapid growth of intra-firm trade (between
    subsidiaries), and FDI.
  • BCC rise in inter-firm, cross-national
    agreements. Between early 1980s and 1996
    cross-national agreements increased by nearly two
    and half times
  • (UNCTAD 1998)

12
Who gets a larger share?
  • Various points in the commodity chainproduction
    of raw materials, industrial processing and
    finishing, and marketing. Different values are
    added among them.
  • In BCC, the commodity chain is dominated by
    buyers (namely, large retail stores, Wal-Mart, JC
    Penneys, Tesco, etc.), who have a comparative
    advantage in labeling, packaging, and
    advertising.
  • In PCC (automobiles, steel), oligopolized
    industrial producers dominate the market. The
    effects of trade liberalization are therefore
    contingent on the strategies and actions of such
    corporations.

13
Example cotton and cotton products industry in
Pakistan
  • (Banuri, 1998)
  • According to survey figures for 1995, the
    production cost on one hectare (ha) of cotton was
    approximately Rs18,000 (about 400).
  • The finished cloth produced from this cotton sold
    for about Rs180,000 (about 4000).
  • The garments produced from the cloth would sell
    for up to Rs1.8 million (about 40,000).

14
The critical questions
  • What role Taiwan might play in internationally-dis
    persed but functionally-integrated economic
    activities.
  • What implications would the GCC have for both the
    potential for upgrading, and policies aimed at
    upgrading local productive systems?
  • We need to recognize the different ways in which
    small firm clusters in Taiwan can be inserted
    into global value chains so that we may gauge the
    nature and scope of local development strategies.

15
III. Cluster Approach to Economic Development
  • Key messages
  • Be more strategic / be a more intelligent player
  • A more enriched way of analyzing the economy
  • Location still mattersbut for different reasons.

16
Competing on Innovation
Prosperity international success (rising real
income per capita)
Y/NY/LL/N APL
Productivity/Competitiveness strong competitor on
the international market (increased output per
worker)
APL Q/L
  • Innovation
  • increasingly higher-value products and services
  • produced more efficiently

QF(K, L, A) MPK MPL
17
Place Still Matters But for Different Reasons
  • The enduring competitive advantages in a global
    economy lie increasingly in local
    thingsknowledge, relationships, motivationthat
    distant rivals cannot match.
  • This role of location has been long
    overlooked, despite striking evidence that
    innovation and competitive success in so many
    fields are geographically concentrated.
  • Michael Porter

18
What is a Cluster?
  • A cluster is a geographically proximate group of
    interconnected companies and associated
    institutions in a particular field.
  • - Porter, 1998

19
Porters Diamond Model
Chances
Governments
competition
policy
Enabling Innovation The Regional Competitive
Environment
HO
consumer
Attitudes/Norms
Networks, Linking Institutions
Attitudes that support innovation willingness to
partner, risk-taking, tolerance of diverse people
and perspectives, openness to new ideas
Formal and informal networks that generate key
relationships and foster innovation
Associations, Chambers, Tech Transfer Offices
suppliers
Source Professor Michael E. Porter, Harvard
Business School, Council on Competitiveness
20
Whats So Good About Clusters?
  • Increase Efficiency
  • Efficient access to information, specialized
    inputs and employees, institutions, and public
    goods
  • Easier to achieve complementarities across
    businesses
  • Spur Innovation
  • Improved ability to perceive and respond to
    innovation opportunities
  • More rapid diffusion of improvements
  • Facilitate New Business Formation
  • Easier to identify opportunities for new
    businesses
  • Lowers barriers to entry (including perceived
    risk)

Source Professor Michael E. Porter, Harvard
Business School
21
Knowledge-Based Industrial Cluster
  • No clear definition
  • Could be
  • region (Silicon Valley)
  • technopole (Japan, Ottawa)
  • industrial research park (Hsinchu)
  • Common features proximity and linkages among the
    players.

22
Industrial Clustering The Theory
  • No firm captures all the economic benefits of its
    innovation process
  • Spillovers can be captured by other firms
  • Geographical proximity of firms increases the
    potential of capture and
  • A supportive local infrastructure nurtures the
    process.

23
Where Are Clusters? Everywhere...
Boise Information Tech Farm Machinery
Boston Mutual Funds Medical Devices Mgmt.
Consulting Biotechnology Software and
Networking Venture Capital
Wisconsin / Iowa / Illinois Agricultural Equipment
Minneapolis Cardio-vascular Equipment and Services
West Michigan Office and Institutional Furniture
Western Massachusetts Polymers
Omaha Telemarketing Hotel Reservations Credit
Card Processing
Seattle Aircraft Equipment and Design Software Cof
fee Retailers
Rochester Imaging Equipment
Michigan Clocks
Warsaw, Indiana Orthopedic Devices
Detroit Auto Equipmentand Parts
Hartford Insurance
Oregon Electrical Measuring Equipment Woodworking
Equipment Logging / Lumber Supplies
Providence Jewelry Marine Equipment
New York City Financial Services Advertising Publi
shing Multimedia
Silicon Valley Microelectronics Biotechnology Vent
ure Capital
Pennsylvania / New Jersey Pharmaceuticals
SV
Las Vegas Amusement / Casinos Small Airlines
Pittsburgh Advanced Materials Energy
North Carolina Household Furniture Synthetic
Fibers Hosiery
Los Angeles Area Defense Aerospace Entertainment
Wichita Light Aircraft Farm Equipment
Cleveland / Louisville Paints Coatings
San Diego Golf Equipment Biotech/Pharma
Baton Rouge / New Orleans Specialty Foods
Dalton, Georgia Carpets
Dallas Real Estate Development
Southeast Texas / Louisiana Chemicals
Nashville / Louisville Hospital Management
Colorado Computer Integrated Systems /
Programming Engineering Services Mining / Oil and
Gas Exploration
South Florida Health Technology Computers
Source Adapted from Professor Michael E. Porter,
Harvard Business School
24
International competitive clusters in Netherlands
  • (second half of 1980s)
  • Agriculture and food cluster cut flowers, cocoa
    powder and butter, dairy products and dairy
    industry machinery.
  • The chemical cluster plastics and polymers,
    industrial textiles.
  • The electrical engineering cluster recorded
    sound media, copying machines.
  • The transport cluster road haulage, lorries,
    yacht building.

25
Some Canadian Clusters
  • Montréal IT, Biotech, Multimedia, Aerospace
  • Ottawa IT, Telecom, Photonics
  • Toronto IT, Biotech, Multimedia/Film, Finance
  • Kitchener-Waterloo IT
  • Saskatoon Biotech
  • Calgary IT, Telecom
  • Vancouver IT, Film

26
????????????
27
Ranking of Clusters in North America
Municipality Private
Sector Employment
(firms with more than 100 employees)
  • Silicon Valley, CA 1
    300,000
  • New York 2
    170,000
  • Boston 3
    145,000
  • Dallas 4
    120,000
  • Los Angeles 5
    110,000
  • Washington, DC 6
    100,000
  • Toronto 7
    90,000
  • Chicago 8
    80,000
  • Montreal 9
    70,000
  • Atlanta 10
    60,000
  • Philadelphia 11
    50,000
  • Houston 12
    45,000
  • Seattle 13
    40,000
  • Ottawa-Gatineau 13 40,000

HSIP
Source FAB DATA - 2001
28
IPOs in Information Technology Biotech (1995-99)
Source Montreal Techno Vision 2000
29
Innovation Process in High-Technology Firms
Ideas RD
Engineer Production
Market
Universities Colleges Research Labs
Suppliers Competitors
Customers
Financing VC ADR Banks Bonds Advanced
Physical Infrastructure (Communications)
Quality of Life
30
Characteristics of Success
  • Recognition of Potential by Local Leaders
  • Support of Specific Local Strengths and Assets
  • Entrepreneurial Drive
  • Various Sources of Financing
  • Information Networks
  • Educational Research Institutions
  • Staying Power

31
Recognition of Potential by Local Leaders
  • Recognition of the Opportunity Usually Comes out
    of Meeting a Need
  • Terman wanted job opportunities for Stanford
    graduates in California
  • Frêche wanted to diversify the Montpellier (in
    France) economy from tourism and
  • Japans Technopolis program was aimed at regional
    development and alleviating pressure on Tokyo.

32
Promoting Government Policies
??? ?????? ????? ?????
??? ?????? ????? ?????????
Entrepreneurs
???????? ????? ?????????? ?????? ?????
??? ???? ?????? ??????????
33
Support of Specific Local Strengths and Assets
  • Technological strengths ( universities,
    government laboratories and major firms)
  • Local market strengths (e.g.- government
    procurement, banking) and
  • Social, cultural and entertainment infrastructure
    are important assets because skilled people are
    Foot-Loose and migrate to areas with good
    quality of life.

34
Entrepreneurial Drive
  • Central to firm and cluster development
  • Found in individuals whether they are growing
    firms (e.g., Terry Matthews of Newbridge/March
    Systems, UK) or in supporting organizations
    (e.g., Gerry Turcotte in the early days of OCRI,
    Canada) http//www.marchnetworks.com/company/tmat
    thewsbio.asp
  • Ottawa Carleton Research Institute (OCRI) was
    established to enhance research and development
    activity between the participating organizations,
    academic institutions, government and industry,
    contributing to the growth of a world-class
    technology infrastructure in Ottawa. (information
    and communications, microelectronics and
    bioscience)
  • Where it is weak clusters stagnate (e.g., Tsukuba
    in 1970s, Sophia-Antipolis in 1960s).

35
Various Sources of Financing
  • Full spectrum of instruments is needed
  • Angel and venture capital and government funds at
    the start-up phase and
  • Debt/equity instruments for the growth where
    about 1of working capital is needed to support
    1of sales.

36
Information Networks
  • Can be
  • Informal where the focus is on the transfer of
    tacit knowledge (e.g., Il Fornaio Restaurant in
    Palo Alto Starbucks at the corner of KF Rd. in
    Hsin Chu)
  • Formal (e.g., Industry Associations, Chambers of
    Commerce)
  • Where such structures are weak clustering suffers
    (e.g., Route 128)

37
The Decline of Route 128 and the Rise of the
Silicon Valley
  • The Route 128 firms had an early dominance of the
    electronics industry in the 1950's, both in
    vacuum tube and transistor technology.
  • In 1959 the employment in electronics in the
    Route 128 area was almost triple the employment
    in electronics in the Silicon Valley.
  • But thereafter employment in electronics in the
    Silicon Valley was rising exponentially whereas
    employment in the Route 128 area, although
    fluctuating, was on a steady decline.
  • Source http//www2.sjsu.edu/faculty/watkins/regad
    v.htm

38
The Decline of Route 128 and the Rise of the
Silicon Valley
  • By 1980 employment in electronics in the Silicon
    Valley was more than three times that of the
    Route 128 area. Why?
  • The technology in electronics began to change so
    rapidly that there was not much advantage to
    being an established business in the industry.
  • For example, the Philco Corporation created an
    automated line for manufacturing transistors in
    1958 but by 1963 its technology was obsolete and
    the investment was not recoverable. Philco left
    the industry.
  • And there were other things for instance
    semiconductor devices

39
Educational Research Institutions
  • Necessary to provide skilled people and
    technological expertise
  • But, not sufficient for success unless there are
    strong linkages to industry (e.g., Silicon
    Valley) and
  • Where linkages are weak clustering stagnates
    (e.g., Taedok, Baltimore Johns Hopkins U.).
  • http//korea.park.org/Korea/Pavilions/PublicPavili
    ons/Government/most/taedok.html

40
Staying Power
  • It can take 30 () years for a cluster to reach
    maturity (e.g., Ottawa)
  • Growth can be supported through sustained
    government support (e.g., Hsinchu) and
  • Growth can also be accelerated by attracting the
    design functions of multinational firms (e.g.,
    Bangalore).

41
Four Models
  • Laissez-Faire Ottawa, Canada
  • Planned Hsinchu, Taiwan
  • Design Centres of MNEs Bangalore, India
  • Production Functions of MNEs Ireland

42
Homework Short Essay 2
  • Case studying a local or multinational
    globalizing enterprise
  • This essay can be extended to be a final group
    research report
  • References see the Syllabus, page 5
  • GPN
  • China Strategy

43
Ottawa - A Laissez-Faire Cluster
  • The Ottawa cluster is a post-war phenomenon which
    now has some 1400() firms and 63,000
    professionals, mainly in Telecommunications. 75
    of Canada's Telecom research is undertaken in the
    region.
  • The two main drivers were government laboratories
    and Nortel Networks. The two universities became
    players only recently.

44
Ottawa - A Laissez-Faire Cluster (contd)
  • Local government recognized the potential only in
    the 1980s and established the Ottawa Centre for
    Research and Innovation (OCRI) in 1984 to
    stimulate interactions among the players.
  • The cluster is remote from major markets. Its
    focus is mainly design rather than production.

45
Ottawa - A Laissez-Faire Cluster (contd)
  • Recognition of Potential by Local Leaders a
    relatively recent phenomenon
  • Support of Specific Local Strengths and Assets
    government labs, Telecom RD, quality of life
  • Influence of Champions McClaren brothers, Denzil
    Doyle
  • Entrepreneurial Drive developed over the years

46
Ottawa - A Laissez-Faire Cluster (contd)
  • Various Sources of Financing full spectrum of
    mechanisms
  • Information Networks well developed through
    OCRI
  • Educational and Research Institutions two
    universities two colleges concentration of
    government and private sector laboratories and
  • Staying Power 50 () years.

47
Hsinchu Science-Based Industrial Park - Taiwan
  • Established in 1980 to emulate Silicon Valley and
    to lure back Taiwanese researchers working
    abroad. About half the firms in the park are run
    by returned Taiwanese
  • More than 220 firms with 60400 employees and
    revenues of 12 billion
  • 2 universities and a technology institute

48
Hsinchu Science-Based Industrial Park - Taiwan
(contd)
  • Specialization in computers, semiconductors and
    telecommunications
  • Major incentives offered 5 year tax exemptions,
    prefabricated factories, generous grants, etc.
    and
  • Government investment has been 500 million since
    1980.

49
Hsinchu A Planned Cluster
  • Recognition of Potential by Local Leaders
    Government
  • Support of Local Strengths and Assets Government
    Labs (e.g., ITRI)
  • Influence of Champions Politicians
  • Entrepreneurial Drive Returning Ex-Patriots

50
Hsinchu A Planned Cluster (contd)
  • Various Sources of Financing Government programs
    dominate
  • Information Networks Catalyzed by ITRI
  • Education and Research Institutions Two
    universities and ITRI
  • Staying Power nearly 20 years of sustained
    support

51
A Bastion of Laissez-Faire Admits That
  • Taiwans Hsinchu Park is an example of
    intelligent government intervention
  • This year the government will break even on the
    project's 40 million a year running costs.

The Economist March 9 - 15, 1996
52
Bangalore India A Design Centre
  • State Government of Karnataka created the
    Electronics City, a 300 acres industrial park
    in the early 1980s, despite the lack of basic
    infrastructure (e.g., transportation,
    electricity)
  • In 1985, Texas Instruments, attracted by the low
    costs skills base set up a design centre and
    exported its software via satellite
  • Software Technology Park set up in 1991

53
Bangalore India A Design Centre (contd)
  • Currently there are about 180 companies with
    20,000 skilled professional exporting 85 of its
    software products as merchant exports (350
    million U.S. in 1996-97, growing at 64 per
    year)
  • Karnataka has a long history of supporting the
    development of higher education and research and
    development. There are
  • 51 engineering colleges
  • 186 polytechnics
  • 249 industrial training institutions
  • 712 general collegesand
  • 10 universities
  • Government incentives offered include duty free
    imports and 5 year tax exemptions.

54
Bangalore A Software Design Centre for MNEs
  • Recognition of Potential by Local Leaders State
    Government of Karnataka
  • Support of Local Strengths and Assets low cost
    software skills base
  • Influence of Champions Politicians, scientific
    leaders (e.g., Tata) early-on
  • Entrepreneurial Drive developing with more
    indigenous firms

55
Bangalore A Software Design Centre for MNEs
(contd)
  • Various Sources of Financing mainly government
    programs and MNEs
  • Information Networks limited
  • Educational and Research Institutions well
    developed
  • Staying Power early days yet (17 years since
    Texas Instruments came)

56
Ireland Assembly / Production Functions Moving
Towards Design
  • Ireland is now the second largest exporter of
    software after the U.S.
  • Transformation began in 1973 when Ireland joined
    E.U. and accessed major funds to build new
    infrastructure including two new technical
    universities
  • Attracted MNEs with incentives (e.g., 10
    corporate tax rate) including Intel in mid 1980s

56
57
Ireland Assembly / Production Functions Moving
Towards Design (contd)
  • Encouraged strategic partnerships between MNEs
    and local suppliers - especially for design and
    development
  • Encouraged the development of indigenous firms
    600 firms today with 40 - 50 start ups each year
  • Encouraged export of software and
  • Consensual decision-making.

57
58
Ireland Assembly / Production Functions Moving
Towards Design (contd)
  • Recognition of Potential by Local Leaders
    government
  • Support of Local Strengths and Assets education,
    infrastructure
  • Influence of Champions political level
  • Entrepreneurial Drive improving with new firm
    creation

58
59
Ireland Assembly / Production Functions Moving
Towards Design (contd)
  • Various Sources of Financing mainly government
    and E.U. programs
  • Information Networks improving linkages
  • Educational and Research Institutions two new
    technical universities
  • Staying Power about 15 years since Intel

59
60
(No Transcript)
61
Relative Status of Three Clusters
Recognition of Potential
Regional Strengths
10


Silicon Valley

5
Champions
Staying Power



Ottawa-Hull
Education and RD Institutions


Entrepreneurship





Hsinchu
Information Networks
Financing
62
Relative Status of Three Clusters
Regional Strengths
Recognition of Potential
10
Silicon Valley



5
Staying Power
Champions



Ireland





Education and RD Institutions
Entrepreneurship


Bangalore
Information Networks
Financing
63
Some Lessons and Directions
  • The eight characteristics of success need to work
    together at the level of the cluster
  • Laissez-faire clusters take a long time to reach
    critical mass
  • Cluster development can be accelerated through
    planning and sustained support

64
Some Lessons and Directions
  • A commercial rather than a scientific orientation
    is needed to stimulate cluster development.
  • Capture design functions of MNEs where possible
    and
  • Move to higher value-added functions in clusters
    where assembly / production functions dominate.

65
Eye-popping FDI in the East India
  • October Cisco would plow 1.1 billion into India
    over the next three years
  • Dec. 5 Intel would pump 1 billion into its
    India RD and venture-capital funding over the
    next five years,.
  • Dec. 7 Microsoft will be making a 1.7 billion
    investment in India over the next four years
    following the lead of Cisco and Intel
  • BW, News Analysis, By Jay Greene, 12/8/2005

66
Central Europe Tech Hot Spot
  • As early as the mid-1990s Microsoft, Nokia, and
    Intel invested for RD sites.
  • After 2000, as infrastructure improvements,
    economic reforms, and preparations to join the
    European Union made the investments more alluring.

Source BW, 12/8/2005
67
Central Europe Tech Hot Spot
  • Advantages growth opportunities and the local
    talent (excellent language and technical skills)
  • Sales of info-tech hardware, software, and
    services across the region are set to 10 annual
    growth about twice the rate in Western Europe.
  • wages roughly half typical levels in Western
    Europe some provide support to nearby customers,
    while others develop or customize products for
    markets in the region.
  • Telecomm Motorola, Siemens
  • IT IBM, Indias Tata Consultancy Services
  • Could the RD boom in Central Europe be slowed by
    its own success?

68
Central Europe's Passion for Design
Personal Water Cleaner by Studio Parabureau,
Croatia
  • Chameleon 4 a vehicle with many faces garbage
    truck by day, ambulance by night,
  • a student at the Hungarian University of Arts
    Design, worked with the Mercedes-Benz Design
    Center on the truck

69
Globalization with a third-world face
  • Global Development Finance 2005 Mobilizing
    Finance and Managing Vulnerability

70
Reported FDI outflows from developing countries
billion
percentage
71
Some Cases third world multinationals
  • In 2000, Tata, an Indian company, bought Tetley,
    a British tea firm.
  • In recent months (April, 05), MG Rover, an ailing
    British carmaker, has courted Shanghai Automotive
    Industry Corporation, a Chinese company, for a
    life-saving infusion of cash.
  • Denmark and Sweden have set up offices in China
    in pursuit of Chinese investment capital.

72
Why FDI? Horizontal FDI
  • Firms hop over the trade barriers that still
    divide many poor countries from each other.
  • Pepkor, South Africa's biggest retailer, has
    expanded into Zambia and Mozambique.
  • World Bank reports that after South African
    Brewery bought a controlling share in the
    state-owned Tanzanian Brewery in 1993, output
    tripled in five years.

73
Why FDI? vertical FDI
  • Foreign investors are interested in a country's
    workers, not its consumers.
  • It allows firms to locate different stages of
    production wherever they are best suited
    marketing where consumers are close at hand,
    research and development where workers are smart,
    assembly where they are cheap.

74
Some Cases third world multinationals
  • China's own multinationals are eager to take
    advantage of even cheaper labor elsewhere.
  • investing in bicycle production in Ghana and
    video players in South-East Asia
  • China has oil investments in more than a dozen
    countries, from Kazakhstan to Sudan.
  • Ramatex, a Malaysian textile firm, has built a
    plant in Namibia, from which it serves the
    world's garment market.

75
Factors of Production
  • Two groups
  • Natural or inherited labor, capital, land,
    infrastructure, and natural resources.
  • In advanced economies, created factors human
    capital, infrastructure and research capacity.
  • Porters view
  • successful industries do use intensively the
    abundant national production factors (as in HOS
    model)
  • available created factors of production. diamond

76
Consumer demand
  • It is important as an incentive
  • To innovate
  • To obtain advanced knowledge and competitive
    advantages.
  • It has important positive influence on
    competitiveness
  • If industry knows consumer preferences
  • If consumers are critical and force entrepreneurs
    to innovate.
  • If domestic consumers preferences anticipate
    global demand. diamond

77
Suppliers and related industries
  • They give to their domestic consumers access to
    new information, new ideas and innovations.
  • Occurrence of external economies of scale.
  • Suppliers must also be internationally
    competitive. (Vertical integration) diamond

78
Business strategy, structure and competition
  • The objectives set by employees and businesses.
  • The prestige attached by a country to certain
    industries.
  • Both determine the direction of capital flows and
    of human capital.
  • The presence of local competition
  • The most important factor in Porters diamond.
  • It explains why businesses turn to foreign
    markets especially in cases of economies of
    scale. diamond

79
National Governments
  • Example of Japan and NICs
  • They can play a role in the improvement of
    national business climate.
  • Stimulating educational activities
  • Imposing clear rules and standards
  • Preventing all kind of distortion of competition
    (competition law)
  • Stimulating investment in innovation
  • Promoting flexibility on the labor and capital
    markets. diamond

80
Silicon Valley map-us
Sources CA Employment Development Department,
Economy.com
81
Silicon Valley map-us
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