Paper prepared for Presentation at the 44th Annual ISA Convention on “The

Construction and Cumulation of Knowledge”, February 25th – March 1st 2003,

Portland, Oregon

Innovating Nations and Regions 1

For the panel entitled “Globalization of Knowledge, Regionalization of Power”

Lee W. McKnight, Syracuse University

Pratana Vongpivat, Thai Ministry of Science and Technology
Audrey Selian, Tufts University
Diana Anius, Tufts University

Introduction

‘Mobile regions’ are defined by their information infrastructure, and by the nature

of the policies, regulatory frameworks, and social capital that underpin the existence of

that infrastructure. (McKnight, Vaaler, Schrage, and Katz, 2002) They are built upon the

activities and attitudes of venture capitalists, entrepreneurs, small/medium- sized

enterprises, and larger private sector players that differentiate the national and regional

innovation systems that lie at the core of these critical infrastructures. This paper* will

argue that political and economic environme nts have a critical impact in defining levels

of technology adoption and innovation in a given nation or region, and that this

innovation in turn is a determining factor in industrial growth and national development.

1
Based on a previously published paper entitled Mobile Regions and Nations: Entrepreneurship in
Information and Communication Technologies in National Innovation System Models for Trends in
Communication Special Issue on “ICT Clusters: Entrepreneurs, Venture Capital, & Networks”
*
This paper builds upon and applies the theoretical framework of the national innovation system developed
by Pratana Vongpivat (See: Pratana Vongpivat, A National Innovation System Model: Industrial
Development in Thailand, Unpublished Ph.D. dissertation, Fletcher School of Law and Diplomacy, Tufts
University, May 2002), and applies it at the regional level of analysis to better understand the roles of ICTs
within technology innovation and economic development.
 This paper addresses the main issues surrounding the role of technology (and

specifically of ICTs) in the formation of national and regional systems of innovation and

entrepreneurship, and specifically analyzes the relationship and interactions of system

components on technology and economic growth. A regional system of innovation is

both a source and a by-product of dynamic economic and socio-political environments.

In other words, information and communication technologies (ICTs) are both in and of

themselves the products of innovation, as well as the critical tools that create the

interfaces, linkages and knowledge networks between the main players in an innovation

system. This article addresses these points and considers their implications for regional

innovation systems, which we term ‘mobile regions’ - hinting at both the critical role of

mobile and nomadic information systems, as well as the importance of mobilizing human

capital and entrepreneurial spirit, if an innovative region is destined to emerge.

Following a description of the components and functioning of a National

Innovation System model, various examples of successfully incubated ‘mobile regions’

in the United States will be articulated including the case of Dialout.net, the Delta

Technology Zone/Emerging Markets Partnership (with operations in 58 counties and

parishes in the Delta regions of Arkansas, Louisiana, and Mississippi), The CASE Center

of Syracuse University/New York State, TeleCom City (in Everett, Malden, Medford,

Massachusetts), and Universal Talkware Corporation. A more detailed case of the

development of the Thai electronics industry will then be used to illustrate the dynamic

functioning of a national innovation system. This paper will then examine the

development of a regional system of innovation by focusing on a subsystem of states of

the Caribbean region, specifically discussing the development of the telecommunications

sector by these countries as a foundation for creation of a ‘mobile region’. Various

examples of successful ‘clusters’ will be also be referred to in order to help continue the

development of the ‘mobile region’ concept.

Theories of Growth Through Technology

Prior to discussing the theory and components of national innovation systems, it is

necessary to briefly mention their broader ‘macro- level’ function in the context of those

countries that seek to advance them: growth. Pinpointing the key determinants of

economic growth is a difficult task, because as much depends upon the ‘unit of analysis’

(i.e., a retrospective examination of an industrialized nation versus forecasting future

growth for a developing nation), as upon the identification and measurement of key

growth drivers, the complex interplay of political leadership and innovation, and what

some call purely fortuitous circumstance.

Attempts at building a single model that is applicable and relevant to all nations

have since been largely discontinued. A few basic economic models remain that can

adequately demonstrate the dynamics of key growth factors such as savings, investment,

and technological advancement. Indeed, many theorists such as Robert Solow, Paul

Romer, Peter Evans, Robert Evenson, Gustav Ranis, Richard Nelson, and Sidney Winter

have identified technology and knowledge as essential factors in a long run and dynamic

theory of growth (Vongpivat, 2002, pp. 2-3). A great deal of research has been done

refining and empirically testing theories of growth that identify the many complex

variables comprising the phenomenon of technology innovation, which cannot be fully

reviewed in this article. Suffice it to say that the creation of a ‘blueprint’ for regional or
national success incorporating all relevant factors remains an elusive goal. This article

attempts to make a modest contribution toward that goal.

The impact of Information and Communication Technologies (ICTs) specifically

on economic growth was discussed in “The Global Information Technology Report 2001-

2002: Readiness for the Networked World”, a report prepared by the Harvard Center for

International Development [HCID]. According to its synthesis of current research and

forecasts, by 2005 more than two billion people may be linked by networked systems of

mobile communications devices (HCID, 2002, Ch.1). In a recent Organization for

Economic Cooperation and Deve lopment study (OECD, 2001), Sam Paltridge’s analysis

of twenty-one OECD countries over twenty years yielded evidence of a significant

positive causal link between telecommunications infrastructure and economic growth.

Overall… it is possible that basic information and communication

technologies could provide a higher path of income growth, not just a one-
time income gain. This optimistic prediction has empirical support…
Research shows that productivity flows from the development of marketplace
infrastructure and integration. (OECD, 2001)

According to the HCID (2002, Ch. 1), three fundamental technical changes in ICTs are

responsible for the explosion in their use to promote economic development: plummeting

cost, expanding access to the network, and more powerful human-to- machine interfaces.

The importance of technological advancement as a source of economic growth

has long been articulated in the field of development economics, although the exogenous

vs. endogenous nature of its force has been often debated, in particular by economists like

Solow (1960s), Cass (1965), Uzawa (1965), Arrow (1962), Romer (1986), Lucas (1988),

and others. Given the extent of growth disparity across nations - as economies of the

world have responded differently to techno logical change - compelling evidence has been
formulated to support endogenous growth theories that can more fully appreciate the

importance of idiosyncrasy in the process of growth. The ways in which different

nations are able to leverage their various idiosyncratic resources such that technology can

be absorbed and used to generate growth are manifold. While it is difficult to derive

metrics through which one could measure the impact of information and communications

upon economic output, there is little doubt that ICTs do in fact stimulate gains in total

factor productivity (of labor and of capital), and that this is among the primary

motivations for investors who may have high hopes for a particular regional innovation

system.

The stages theory as articulated by Gonsen (1998, p.10), Lall (1995), Enos (1991,

p. 49), and Fransman (1984, p. 9) among others, is important because it categorizes

technology into many skill levels, from quest, operation, minor improvement, major

improvement, and production to innovation. This means that national technology

capability not only incorporates the generation, but also the acquisition, utilization, and

exploitation of technology from any source (Nelson, 1990). It is clear that various levels

of industrial development require different technologies and skills related to the needs of

specific industrial sectors within a nation. For developing countries, the basic absorptive

capacity to operate and perhaps improve or adapt from foreign imported technology is

defined as technology, even though it is not formally considered R&D from the

developed countries’ standpoint. The “Evolution of Technology Capability

Development” illustrated in Figure 1 is a basic pictorial description of the stages theory

of both national and industrial development (National Science and Technology Initiatives

Subcommittee for Production Restructuring, 1999).

 Figure 1 Evolution of Technology Capability Development

Evolution of Technology Capability Development

Level of
Technology
Capability R&D
R&D
Intensive
Intensive
Technology
Technology
Intensive
Intensive
Skill
Skill
Intensive
Intensive
Labor
Labor
Intensive
Intensive

Time

Source: National Science and Technology Initiatives Subcommittee for Production

Restructuring, 1999.

National Innovation System Theory

In a new world in which technology clearly plays a key role in economic success

and national prosperity, the workings of a national innovation system are becoming more

relevant, especially in political and economic development. With increasing trends in

cross-border cooperation and alliances, the boundaries of national innovation systems

may become harder to define, at least in the business and technology spheres. Economic

liberalization and the free flow of goods, services, and people have made private sector

entities the main actors on the world stage. As opposed to the trend toward more

permeable national boundaries, differences in history, stage of development, time to

industrialization, and size and endowments of respective nations has shaped each one

with a different set of institutions, government roles, and relations among all components,

as well as different national focuses (Cassiolato & Lastres, 1999).

 Intensified global competition has led to neo-protectionism at the end of the Cold

War, drawing countries toward focusing more on their domestic development rather than

upon ideology (Tonelson, 1995). At the same time, the growth and deployment of ICTs

are contributing to a force majeure type of situation in which nations pursuing links with

the New Economy are simply required to opt for access to global knowledge networks if

they hope to reap the various benefits of new technologies. According to Raymond

Vernon (1971), sovereign-at-bay theory champions an emphasis on home power benefit,

although much is to be said for the tenuous relationship that develops along with the

presence of multinational enterprises in developing (host) countries. To capture such

benefits domestically, immobile resources such as absorptive capacity, and infrastructure,

as well as other governmental trade policies and incentives play a big role in inviting

foreign and local investment that will create huge spillover inside national boundaries, no

matter the nationalities of the firms in question (Arrow, 1962). Moreover, the level of

national technology investment is still a key to national economic development and

growth (Mowery, 1983).

The technology capability of a country refers to the availability of skills for local

utilization regardless of its origins, including that which is the product of indigenous

development as well as of international import or transfer (which can serve as a critical

access point for countries to be able to understand, master, adapt, and develop new

technology within their borders). The basic absorptive capacity of a nation can be

defined as national technology capability even if it originates from outside, because some

posit that there is no need for developing countries to waste resources for innovation in

areas in which they do not posses a distinct comparative advantage (Babatunde, 1979, p.
5). This is particularly relevant in cases where technology transfer from abroad is a

viable option. Moreover, foreign firms operating locally must also adapt to fit local

conditions and regulations. The spillover benefits of operation, adaptation and

competition can be useful for other local firms as they seek to rise along the learning and

experience curve for continued productivity and hence profitability growth (Dahlmann,

1984, p. 322).

Various countries have adopted different methods of devising strategies for ICT

development, perhaps in part to establish a preparatory backdrop for industrial progress;

… Korea has emphasized a large- firm internalization model through its

chaebol conglomerates, Taiwan a small and medium enterprise-led innovation
networks model, and Singapore a model that leverages FDI through
multinational corporations... even the Hong Kong administration, once the
paragon of laissez-faire capitalism, has begun investment efforts in R&D.
(Lim & Wi, 2001, p. 11).

In the wake of financial crises in Asia, Lim and Wi (2001, p. 1) believe that less-

developed countries in the region are likely to scale back on ICT investment, while those

with well-developed infrastructure will likely move forward at fast pace in the effort to

leverage what they have, whilst taking advantage of lower export demand (and hence

prices) to upgrade and improve. The extent of hardware production (referring to the

production of ICT goods, including components such as memory chips, accessories and

peripherals, and electronic equipment like PDA’s) and software production (referring to

the production of applications, development of sys tems, database programming and

web/multimedia content design and development) in the various countries of the region

mirrors ICT infrastructure and internet/e-commerce activity, with countries like

Malaysia, Thailand and Japan showing clear production fronts. The capacity of these

nations to support this kind of production is contingent upon the ICT labor market
(influenced strongly by English language capability, and higher education in technical

skills areas), and on broader national information infrastructure (NII) programs.

The systematic problems of innovation and overall climate for technology

development can be solved not only by firms or any research institute, but also by the

whole knowledge base and social cohesion (including relationships, linkages, trusts, and

understanding) in order for firms to gain from spillover and cooperation (Hambraeus,

1982, pp. 118-22). Government has a major role in designing incentive and reward

systems in order to correct market failure through the management of macroeconomic

conditions and other infrastructure support (such as information flow). Jane Fountain

(1998, pp. 85-111) reflects similar thoughts in Investing in Innovation by using “social

capital” as a term to explain innovation in the social system that allows trust and social

understanding to bridge and glue collaboration, information flow, and industry-

university-government linkages. Fountain seems to use Robert Putnam’s (1995) original

definition of ‘social capital’ as the trust, reciprocity, information, and cooperation

associated with social networks in a way that applies specifically to the interaction of the

major entities of civil society. That said, however, Putnam’s use of the term did

incorporate information flows of all kinds, including norms of reciprocity (mutual aid)

that build trust, and incentives for collective action that increase the potential risks

associated with opportunism (upon which game theory premises about cooperation are

based). According to Gera, Lee-Sing and Newton (2001, p.15), an economy’s ability to

take advantage of international knowledge transfers has been found to depend

particularly on its level of human capital development and rate of capital formation.
A National Innovation System (NIS) Model

The complexities and costs inherent to the phenomenon of innovation help to

precipitate the formation of alliances and partnerships that help create a base of shared

knowledge for collaborators; hence the emergence of clusters or networks that join

together competitors, go vernments/regulatory agencies, and academia in a grand effort

towards cost minimization. The effectiveness of these linkages is strongly correlated to

the understanding that investors and lenders have of innovation, as well as to the ability

of a nation to flourish with its innovative capabilities. By the 1980s, studies of inter- firm

collaboration (Piore & Sabel, 1984) in Italy found that the local economy prospered due

to patterns of networking that allowed firms to focus investments and skills on a

particular market or industrial sector. Attempts at the replication of this phenomenon of

cooperation have been numerous and geographically widespread.

As opposed to the concept of technology as a black box that contributes to the

efficiency of total factor productivity (TFP) in a nation, Figure 2 depicts a National

Innovation System (NIS) model as a light into the black box of technology creation.

Major components and determinants are divided into two major levels of analysis: macro

and microenvironment, and a two-way technology creation process: input (demand) and

output (supply).
 Figure 2: The National Innovation System Model

Input
Environment,
Components,
and interactions

SUPPLY Network DEMAND

Externalities

Output
Environment,
Components, Pratana Vongpivat
and interactions May 2000

The National Innovation System is a systemic model that shows dynamic

interactions and pattern of processes that facilitate technology flow in the system,

incorporating variables and players from all directions that affect the innovation process.

The outcome of the relational interactions among variables within the boundary of a

national innovation system, summed up as national idiosyncrasy, will influence the

national technology capability that conveys strengths and weakness of the innovation

system of industries or countries. National idiosyncrasies can be said to encompass

certain network clusters, which reflects the unique factors of productivity and facets of

social capital that can make one nation distinctive from its regional counterparts, for

example. This notion of idiosyncrasy can be a rather ephemeral one, but is undoubtedly

vital to an understanding of an NIS; in a sense, it can be regarded as that which lubricates

the gears of differentiated innovation machines. It may be incorporated at nearly every

interface between components of the model, falling as naturally into the category of
‘network externalities’, as into the category of environmental factors that impact both

input and output.

Within the NIS model, variables such as control of industries, macroeconomic

conditions, trade and industrial policies, and international conditions shape the Macro

environment in which industries and firms in the Micro- level environment operate (See

Figure 3). Vongpivat (2002) posits that the macro environment affects market and

industry structure, as well as the technology behavior within each industry on the micro-

firm level. The micro- level model structure is comprised of the types and characteristics

of technology, as well as market and industry structure. The macro and

microenvironment produce input in the form of demand variables and competitive

conditions that trigger actors or components in the national innovation system to bring

their needs into active behavioral demand for technology (Vongpivat, 2002). Since

supply will react to demand and vice versa, many times, problems of low technology can

come from a lack of demand rather than from insufficient supply (SPRU, 2000).

Referring back to Figure 2, those factors that do not derive directly from demand

for technology or technology stock supply of the system are often referred to as network

externalities. These are determinants affecting the macro and microenvironment of both

input/demand and output/supply side that may not be captured by measuring input and

output factors. They refer to existing physical and system infrastructure, skill base,

networks of firms (i.e., suppliers’ networks), information flows, educational base,

linkages as factor conditions provided by governmental and non- governmental entities, or

un-traded spillover from arm’s length relations in the network. They can be

preconditions for countries to successfully acquire and accumulate knowledge and

technology. It is the network externalities that support the supply side of the economy to

respond and fulfill demand from the user side. Technology output supply in Figure 2 can

be measured in the form of proxy indexes for technology performance, and other

measurable economic outcomes of technology behavior can indirectly represent

technology improvement. Changes in the national stock of supply and level of capacity

serve as a feedback loop, bringing new pressure, incentives, and competitive conditions

into the input side of the economy.

Analyzing and Applying the NIS Model

While the supply and demand dynamic of the NIS model is important to clarify,

the task of illustrating that which comprises a ‘mobile region’ and successful cluster is

better suited to a closer look at the interaction of ‘input’ and ‘output’ components as it is

depicted by Figure 3 below. This also allows for a more effective incorporation of the

notion of aforementioned ‘network externalities’, that facilitate the workings of

successful technology clusters.

Figure 3: Major Level of Components Analysis of the NIS Model

M a c ro Environm e nt
(e x t e rna l)

M ic ro

De c ision-m a k ing
Firm s/ SOEs

Industry
I nt e rna l produc t ive unit s

The main framework components of the model are divided into three parts:

policy- makers (macro sphere incorporating government and regulatory bodies), the

production arena (micro sphere incorporating the private sector and state-owned

enterprises), and the research sphere (externalities contributing to effective linkages

between government, research institutes, academia and policy- makers). Here,

components analysis will assume that actors in the micro- level system from demand-side

users to supply-side producers are in fact the same, with possibly varied roles in the

generation of technology demand and supply. Components analysis is composed of the

public, private and academic arenas wherein reside the main actors that decide and create

actions in the system.

The three illustrated subsets were named after the Argentine physicist, Jorge

Sabato, in his technology policy model called the “Sabato Triangle” (Rosenblatt, 1979, p.

15) – also known as the “Triple Helix” model (Leydesdorff & Etzkowitz, 1998, pp. 195-

203). While the first category of actors comes directly from the government sector

locally and internationally, the other two categories can come from private sector
institutions and associations, as well as from the government sector and as a result of

dynamic international conditions. That which is deemed key is the interaction between

the broader macro-environment and the micro-industry level. Macro-level analysis

implies that state intervention and government policies will have an effect both on the

broader environment and on the technology capacity/ability of industry at the micro level.

A closer look at each of these components is helpful toward understanding what it is that

characterizes the optimal functioning for each of them, particularly for the purpose of

examining/appraising nations with significant innovation potential.

The Macro Sphere: Government and Policy-Makers

The role of governments, in particular, has been relegated to the sphere of

creating a climate conducive to investment in scientific, public- funded/private research –

characterized by a stable macro-economy, smoothly functioning labor and financial

markets, a strong skills-oriented educational system, and optimal conditions through

which collaboration between institutes, firms and regulators can occur. Attempts to

facilitate venture capital flows between these various entities, and to ease intellectual

property rights such that federally funded research can be patented, for example, all help.

Some like Saxenian (1994) argue that climate, culture, and mentality can be as (if not

more) important to the development of successful technology clusters as specific

government actions, for they define how competing yet interdependent industries thrive

on the social and technical networks that compel firms to form their cooperative linkages.
 Government should be able to use ICTs in its own administration and planning,

develop locally relevant content to stimulate ICT use, promote ICTs through the

enablement of legislation, and ultimately help precipitate the liberalization of markets.

Even if it cannot finance the building of a broad base info-communication

infrastructure, it should coordinate its long-term development so as to reduce
excluding different sectors of the population, such as the rural areas and the
urban poor. However political will and an efficient government are crucial
for the government to take the lead role in ICT development. (Lim & Wi,
2001, p. 33)

The management of macroeconomic fundamentals such as growth rates, interest

rates, exchange rates, and labor unions are all part of this role. Also included is the

determination of trade and industrial policies, including tariff protection and local content

requirements, and various technology policies (i.e., vis-à-vis technology transfer

regulations for MNCs, local learning requirements in joint ventures, and deve lopment

work with foreign affiliates). Broader tasks requiring mediation and negotiation by

governments include the development of international treaties, trading blocs, as well the

interpretation of domestic law of other countries (such as the US and Japan) vis-à-vis the

activities of MNCs.

Several free-standing examples of top-down successful approaches to innovation

systems for start- up creation exist in the United States, and it is interesting to examine the

main economic challenges/opportunities faced, as well as the role academia has played as

business generator and source of human capital. The U.S. experience in creating and

deploying IT and Communications technologies has led the world and continues to be the

catalyst and engine in creating new ICT-based companies in electronic commerce

markets (McKnight & Parker, 2002, p. 2). And yet, according to Saxenian (1995), it is

critical to point out that Silicon Valley does not look much like the rest of the American
economy, since most of American industry is organized around self-sufficient,

hierarchical corporations that are largely independent of the surrounding environment.

Silicon Valley, by contrast, has pioneered a decentralized industrial system in

which firms specialize and compete intensely, while collaborating in informal
and formal ways with one another and with local institutions, like universities,
to learn about fast changing markets and technologies. The successes of
Silicon Valley firms thus depend as much on being a part of local social and
technical networks as on their own individual activities. (Saxenian, 1995)

A good example of a project that has benefited from top-down federal, state as well as

bottom- up local support ($100m in environmental clean- up and road construction) is

the ‘Telecom City’ project, a Massachusetts Public/Private Partnership in the United

States focusing on a Tri-City area (Everett, Malden, Medford), and including industry

research space and room to incubate new firms/university spin-outs. Work on this

project has included research on the ‘wireless grid’, facilitating the potential exchange

of services and resources like computation, database access, distributed data, and

storage on a network which includes the provision for mobile devices.

The Micro Sphere: Firms and Entrepreneurs

Technological innovation, as the basis for the development of ‘mobile regions’, is

indispensable to the capacity of firms to introduce new products, services and processes;

without it, the potential to gain market share, attain economics of scale, and increase

profits cannot be fulfilled. Cycles of innovation (and arguably the firms that set their

course) have been referred to, in fact, as the “… heartbeat of OECD economies” (Guinet

& Pilat, 1999, p. 63). While it has been possible in the past for firms to insulate

themselves from the requirements of heavy commitments to innovation (and perhaps to

the R&D partially supporting it), and to rely on existing, successful product lines, the
interactivity of the global competitive market no longer allows for such equivocation.

Certainly, depending upon the industry in question, according to Guinet and Pilat (1999),

R&D investment plays only one part - complemented in large part by training, marketing,

equipment investments and licenses.

To be sure, the capacity of a firm to be competitive is contingent upon a number

of interactions up and down along the supply chain (with customers, distributors,

suppliers), with banks and shareholders, with private and public sector research institutes

(academia), and with government policy-makers and standard-setters. “The productivity

of a strong national innovation infrastructure is higher when specific mechanisms or

institutions, such as a strong domestic university system and funding mechanisms for

new ventures, migrate ideas from the common infrastructure into commercial practice”

(Stern, Porter, & Furman, 2001).

According to Roger Voyer, consultant at PricewaterhouseCoopers (1999),

innovative firms possess a combination of technological competencies (internal R&D

capability, the ability to rapidly adopt new technologies, focus on core technologies),

marketing competencies (market driven, rapid product migration, first-to- market, quality

over price), and organizational competencies (including project-based structure, non-

bureaucratic culture, and R&D linked to marketing). Bailey, McKnight and Bosco (1995,

pp. 255-277) believe that the ability of a firm to innovate must also in part be contingent

upon the extent to which it is able to reap the rewards from its innovation; depending

upon the interoperability in a standards environment, incentive might be diminished if

firms perceive that users can interconnect with competing substitute goods.
 Entrepreneurs build value based on opportunity and personal motivation to

innovate, and venture capitalists provide the means by which they can develop their ideas

toward becoming functioning, value-generating entities of the private sector (McKnight

and Parker, 2002). Therefore, in a sense, the way that firms manage to attract partners

and incite cooperation and collaboration while strategically positioning themselves is

critical. Lim and Wi (2001, p. 31) state that ICTs open up resources - such as

communication channels - for risk-takers and innovators to evolve such ways of

enhancing interaction amidst civil society entities (and potential partners). McKnight and

Parker (2002, p. 2) see such ‘risk-taking’ entrepreneurs as central to firm and cluster

development, and as instrumental in seeking out the full spectrum of instruments (angel

investors, venture capital, and government grants) needed to fund start- up work. Skilled

people and technological expertise is fundamental to innovation systems, and the

informal information networks that allow for flows of tacit knowledge – alongside the

ICT linkages to well-connected educational and research institutions – are imperative.

Entrepreneurial networks are networks of individuals who seek to share ideas, learn from

one another, and do business together, which expand beyond the goal of nurturing inter-

firm alliances.

Interesting cases involving local communities and broad collaborative initiatives

are worthy of mention here – one being the Council for Entrepreneurial Development

[CED] in North Carolina, USA, which is one of the largest local entrepreneurship support

programs in the United States, serving what is known as the Research Triangle (including

the cities of Raleigh, Durham, Chapel Hill and other surrounding North Carolina

communities). Research Tria ngle Park, in particular, was a result of this program; it is a
public/private, planned research park created in 1959 by leaders from business, academia

and industry, for the purpose of diversifying the local economy away from reliance on

textiles and tobacco toward from research and development-oriented activities (National

Commission on Entrepreneurship [NCOE], 2001, pp. 19-20). As firms like IBM, Nortel

and Cisco entered the region, and as the membership of the CED evolved (even as the

support from local service providers remained strong), specialized networking groups

emerged, and direct training and mentoring grew out of these networks. Part of the

reason for the success of CED lies in the strong tradition of regional cooperation between

the three sizable cities mentioned above, the general lack of zero-sum competition

between local communities for jobs and business, the niche possibilities available for

entrepreneurs, and the ‘breathing space’ afforded to them for creativity and

experimentation (NCOE, 2001, pp. 22-25).

Another public/private partnership that has enjoyed success is called the Ben

Franklin Technology Partners of Southeastern Pennsylvania (BFTP/SEP), founded in

1983 as part of a statewide strategy to ease the pain of cutbacks in Pennsylva nia’s

manufacturing industries. According to the NCOE (2001, p. 27), it is one of four state-

wide centers designed to support local economic development (including Pittsburgh,

Bethlehem, and University Park). This program is among the oldest-state sponsored

initiatives in the country, and sought to link universities and industry to help solve

individual company problems around technology, finance, or other issues. It has

succeeded in brokering existing resources and contacts in support of start-ups, providing

seed money, and building alliances by linking various groups around the region into new

coalitions. Formal networks have been forged, encompassing ‘success teams’ of top
CEOs from young companies, and creating ‘University Centers of Excellence’ for the

transfer of scientific expertise in specific areas (NCOE, 2001, p. 28); moreover, further

initiatives to ‘network the networks’ – in cooperation with the Delaware Valley Industrial

Resource Center (DVIRC) and the Philadelphia Industrial Resource Center (PIDC) have

been undertaken. Further examples from Eastern Idaho (The Eastern Idaho Economic

Development Council), Oklahoma (The Tulsa Metro Chamber of Commerce), and Texas

(The IC2 Institute in Austin) help to accentuate the importance of building, supporting

and sustaining local leadership as well as promoting cooperation through institutionalized

networks.

Finally, the Universal Talkware Corporation is another good example of the

results of collaboration in the micro-sphere: it is an ‘internet appliance’ start- up that has

succeeded due to the work of an experienced team with a strong regional talent base (in

Minneapolis), and due to a secured relationship with Ashbourne International, Ltd., a UK

investment bank, for market launch fundraising. It also has relationships with US media

companies as partners, whilst developing a global manufacturing alliance.

The Research Sphere: Externalities Contributing to Effective Linkages

As mentioned above, the realm of network externalities extends broadly across a

variety of factors that are intrinsic to the determination of market conditions for

innovation; these include the necessary skills, infrastructure, capital and network of

suppliers. These can also be applied to analyses of the diffusion and adoption of ICTs,

such as the Internet, as well as to understanding the benefits derived from

standards/systems interoperability (Bailey, McKnight & Bosco, 1995, pp. 255-277). The
necessary skills referred to in the model are factors such as formal education, vocational

capacities, in- firm training, etc., while necessary infrastructure refers to the research

facilities, information technology resources, transportation and access to/management of

knowledge of a research community. Required capital is contingent upon formal and

informal credit market, venture capital, and subsidies. Networks of suppliers are based

upon the existence and relationships between upstream and downstream industries,

supporting industries, and local and international players.

It has been argued convincingly that education, together with technology – in

particular, technological training and exposure to ICT – are the necessary ingredients that

equip human [social] capital for the ICT revolution, and are possibly the single most

valuable development intervention (Lim & Wi, 2001, p.19). This is amply supported by

findings in a regression analysis study by N.S. Mahmoud (2001, p.10) of the Fletcher

School of Law & Diplomacy and Alexandria University, illustrating through estimated

regression coefficients that the role of adult literacy (x3 ) is extremely important relative to

the number of internet users (y). Vocational schools, colleges, and universities happen to

fall out as crucial elements to this education variable.

Table 1: Impact of Literacy on Internet Use (Technology Adoption)

Elasticity of y with respect to x

Industrialized Developing
Countries Countries
Y Internet Users (per 1,000 persons)
X1 Main Telephone lines 1.914 1.149
X2 Personal Computers (per 1,000 0.899 1.170
persons)
X3 Adult Literacy Rate (%) 24.246 4.192
X4 Real GDP per Capita (PPP$) 1.836 1.445
That education and literacy have a strong bearing on the promulgation of ICTs for

economic growth is supported by the fact that a national skills base has much to do with a

nation’s productive capacity, and therefore with export capacity. For example, “China’s

literacy level of 80% falls far short of Japan’s almost 99%. With advanced research and

development (R&D) capabilities, Lim and Wi (2001, p. 9) argue that Japanese ICT

workers are also engaged in production activities that are higher in the value chain,

compared to the overwhelming majority of ICT workers in China whom are engaged in

low-skilled, labor- intensive assembly and production.

Generally speaking, the vast workings of the public sector – including research

and development laboratories, technical services, science and technology agencies,

related ministries and boards are all part of this sphere. One example of a result of the

functioning of this sphere is Dialout.Net, a venture- funded service provider with patented

technology for Internet-based modems based in Southern New Hampshire, USA, with

more than 20 customers on- line. While it had no direct link to an incubator or university

at the time of start-up, a link established with the Fletcher School of Law and Diplomacy

(Tufts University), and its eventual successful leverage of human capital helped to clarify

its business model and achieve its goals.

The Delta Technology Zone is another such project that engaged numerous

players, and addressed issues such as awareness of available resources, the promotion of

demand for services and of continued technical training, and the increased flow of

investment dollars for telecom-related projects. It consisted of an assessment of the

requirements necessary for the Mississippi Delta region to ‘move up the technology

ladder’, looking initially at factors and means of primary production, and then at labor-
intensive and medium/high-tech production prior to looking at what it would take for it to

reach ‘technology leader and innovator’ status. Highlights of this work included the

renewed importance of political leadership and the value of importing human capital in

order to spur new ways of thinking.

The Computer Applications and Software Engineering (CASE) Center, as one of

fifteen State Centers for Advanced Technology (CAT’s) in New York, USA, is an

incubator for high- tech start- ups, conducting applied research programs in IT, and

specializing in information & distributed system design and molecular electronics. It

contributes to the New York State economy through applied research and business

incubation, and has led to significant numbers in terms of new jobs created, jobs retained,

acquired financing, capital expenditure, new revenues as well as cost savings. Graduates

of the CASE Center include Jencourt Inc, which was acquired by Siemens in 2000,

Coherent Networks (merged with a holding company), and Textwise Labs (a subsidiary

of Manning & Napier Information Systems since 1999). The work of this center in

particular highlights the importance of consensus, commitment, and persistence in the

process of revitalizing a stagnant region through the presence of an incubator.

A Case Study: Thailand

The exa mple of the development of Thailand’s electronic industry is a useful

illustration of the dynamics of supply and demand referred to in Figure 1, and of the way

in which the juxtaposed components of the macro, micro and research spheres of Figure 2

concomitantly function to affect a nation’s competitive positioning vis-à-vis the ICT

sphere. The impact of increased supply – in the NIS model – in physical (hardware)
equipment and the creation of jobs that solidifies the infrastructure of a developing NIS,

has enabled the propagation of knowledge networks and the strengthening of the nation’s

IT sector export base. Presuming that most countries (having understood the futility of

import substitution policies) subscribe to an export-oriented economic growth strategy,

one could postulate that involvement in the production, manufacture, and export of the

components of ICT growth is a sensible move. Not only is savoir-faire enhanced and a

labor force indoctrinated to a technology-oriented skills base, but policies of openness are

also by default encouraged - such that the necessary cross-pollination of information and

(often, cross-border) collaboration that is vital to innovation can occur. One could argue

that even a weak NIS in a particular sector of a country can be looked upon as an impetus

toward the creation of more effective linkages and the eventual creation of a well-

functioning technology cluster. Identifying and analyzing macro and micro short-

comings within a region or nation can well be a first step toward amalgamating the

factors of ‘innovation supply’ created by a given sector, translating it effectively into

appropriate and relevant ‘clusters’ that can help generate demand.

The Electronics Sector of Thailand as By -Product of ICTs

The four major groups specifically in the electronics industry of this country are

divided into consumer electronics, industrial electronics, electrical components, and

software. The top highest production and growth shares among the four are electronic

components and telecommunication equipment. This is because the two sub-sectors rely

on proven mature technologies and also serve as input materials into downstream

booming computer and communication industries. The nature of the national

idiosyncrasies unique to the innovation system of the Thai electronics industry can best
explain the fact that most of the production structure of the Thai electronics industry

depends mostly on imported technologies and raw materials.

The lack of industrial development policy up until 1995 allowed trade and

investment policy to lead by promoting export, without sufficient concern for local

technology development and international technology transfer. Foreign direct investment

into this area focused exclusively on the export market rather than on negligible local

demand, thereby rendering local suppliers inefficient and finally extinct under foreign

control of the Thai electronics industry. The lack of local technological foundation in

terms of both infrastructure and active local actors toward the development of the Thai

electronics industry is also a result of poor communication-oriented network externalities.

This refers to poor capital markets, a lack of coordination and good linkages between

government agencies and private institutions, a shortage of skilled labor and a network of

suppliers and supporting industries, and a mismatch between university research and

industrial/commercial needs. As a result, there is low local innovation and design, and

limited access to technology via parent companies. High electronics exports are coupled

with high import content and low added value.

With rising wages and eroding government promotion and protection in Thailand,

the lack of local technology development and over-reliance on labor- intensive activities

and foreign partners in the Thai electronics industry are not likely to attract investment.

Taiwan owns the strong supporting industries. Singapore has clear technology policy and

good infrastructure. Japan is equipped with the dynamic private sector. The Thai

electronics industry possesses a NIS with weak supporting national idiosyncrasies: weak

technology development policy, low linkages among system actors, a lack of network of
local suppliers, and poor network externalities, thereby placing its competitive position at

a disadvantage to countries with lower wages and higher technological foundations.

A Case Study: Caribbean

The Organization of Eastern Caribbean States (OECS) presents an interesting case

study as its member states move toward the development of a regional system of

innovation. The examination of its macro, micro and research spheres (Figure 2) is

important in evaluating the ability of a developing region, with essentially a virtually

non-existent system of innovation, to successfully move towards the concept of a ‘mobile

region’.

The OECS is a subsystem of Caribbean states comprising the island nations of

Antigua and Barbuda, Dominica, Grenada, Montserrat, St. Kitts and Nevis, St. Lucia and

St. Vincent and the Grenadines, with Anguilla and the British Virgin Islands as associate

members. These states are all part of the English-speaking Caribbean, possess a similar

cultural history, exhibit a high degree of political stability, and share some physical

characteristics (such as their physical size and population). The OECS also possesses

common regional institutions such as the Directorate of Civil Aviation (DCA), Eastern

Caribbean Central Bank (ECCB) and the Eastern Caribbean Supreme Court. However

the region has a weak innovation system exacerbated by inadequate harmonized regional

policies, lack of skilled labor, and low linkages between regional system actors.

The creation of a ‘mobile region’ is a goal strived for by the member states of the

OECS that have inherently realized that regional aggregation of resources is the only

solution for building an effective innovation system since the activities of one member
state within the group would affect other member states of the region. This is

exemplified by Scherer (1994) who states that “when one nation produces goods or

‘bads’ that significantly affect other nations, individual governments acting sequentially

and non-cooperatively cannot deal effectively with the resulting issues. In the absence

of explicit cooperation and political leadership, too few collective goods and too many

collective bads will be supplied”. In adopting a regional solution these small states can

capitalize on collective productive capacity to meet global demand, minimize the impact

of external crises within the sector, aggregate financial resources for expansion of the

sector, create an efficient regional knowledge base for efficient exploitation and

sustainability within the sector, and implement a single regional regulatory authority for

effective negotiation with international institutions.

The region’s first move in the development of a regional system of innovation

was through the development of the Eastern Caribbean Telecommunications Authority

(ECTEL), a regional telecommunications regulatory authority established to create

harmonized regional communication policies (including competition and pricing

policies). However the structure and functions of the organization are still new, as the

region continues to pursue reform within the telecommunications sector and move

towards the building of a ‘mobile region’. The role and development of this macro

sphere is especially critical as these countries move from the existing TDMA network to

a GSM (Global System for Mobile) communication network. According to Chris

Pearson, Executive Vice President of 3G Americas2 , there are numerous compelling

factors for migration to a GSM network, namely “increased voice capacity, high-speed

2
The 3G Americas organization addresses convergence of networks using the wireless technologies
TDMA, GSM, GPRS, EDGE and UMTS (WCDMA).
packet data, smooth and cost-effective migration to 3G and global scale” especially for

the developing countries of the OECS where such action is likely to support the region’s

short-, medium- and long-term developmental aspirations 3 .

The OECS as a region can increase its competitiveness on a global scale by

improving its technological capability and building effective linkages between regional

actors. The foundational steps taken by the member states in moving to the development

of an effective system is essential to the future innovative capacity of the region. The

first step has been the creation of an effective regulatory body. The level of innovation of

the region can only be enhanced by aggregation of its limited resources 4 , thus for many

developing countries in building linkages and increasing productivity (micro- and

research spheres), regional capacity building is the single most effective solution.

The Emergence of Technology Clusters & Mobile Regions Around the World

Based on the above theory and examples, it appears indeed that the foundation of

what we call a successfully functioning ‘mobile region’ is contingent upon the existence

of a fully viable system or network of innovation that can facilitate favorable access to

technology resources and financial/social capital. This type of ‘access’ has been deemed

crucial for the attainment of sustainable industrial development, and usually must be

viable for a number of closely related technology sectors such that a true ‘clustering’ can

be feasible. This is particularly well illustrated by the emergence of successful

technology clusters in the United States and in select areas around the world. To a

3
Several authors such as William Martin (1997) have pointed to the link between telecommunications
investment and economic growth in terms its contribution to fields such as telemedicine and its role in
decentralization of economic activities (away from urban areas to rural areas).
4
For example through the development of a regional wireless telecommunications system as proposed by
Diana Anius, which would help the region achieve its developmental goals.
certain extent, there are cycles of commitment and investment at play in the process of

innovation: in order to attain the improvement of technology infrastructure and desirable

rates of IT adoption, the creation of clusters of high technology is necessary to help jump-

start the process. These clusters require intense cooperation between private/public

sector and an appetite for risk by investors in those nations not endowed with stable

economies, yet predisposed enough toward potential IT adoption that commitments in the

first place can be feasible.

Accordingly, in terms of ICT development, the two main areas in which

developing countries are weak concern largely the enforcement of Intellectual Property

rights and consolidated ICT educational policies, which lead primarily to lower ICT

literacy rates and damaging levels of corruption and piracy. Thankfully, change is

occurring today, slowly but surely, in developing nations as well as in developed ones.

However, technology is also moving forward at a fast pace, and technology adoption

gaps between developed and developing nations are sometimes increasing rather than

decreasing (HCID, 2002, Ch. 6).

While there is no single rigorous internationally agreed- upon definition of a

knowledge-based cluster, good examples around the world abound and range from large

regions like Silicon Valley, to famous technopoles like Ottawa, to Research and

Industrial Parks like Hsinchu. It is interesting to note that both attracting multinational

firms as well as growing indigenous ones in a region, as in the respective cases of Ireland

and Bangalore, can serve to enhance existing capital resources and ultimately accelerate

growth. There are various policy models from around the world which characterize the

relationship of government in situations to different types of innovation systems or

clusters – ‘laissez- faire’ (as illustrated by that which has occurred in Ottawa, Canada),

‘planned’ (as in Hsinchu, Taiwan), or ‘collaborative’ - in other words, those that appear

to have emerged in the wake of cross-border investments of multinational enterprises, as

they seek to outsource their design centers and production functions (in Bangalore, India,

and Ireland, respectively).

That which has transpired in Canada is something of a post-war phenomenon that

today incorporates the activities of nearly 1,000 firms focused mainly on design (rather

than production). The two main drivers of this have been said to be government

laboratories and Nortel Networks; local government established the Ottawa Center for

Research and Innovation (OCRI) in 1984 in order to stimulate interactions between

regional players. The two universities in the area have more recently become involved,

joining the existing concentration of government and private sector laboratories, and

partaking in a regional information network strengthened through the OCRI.

Ireland, on the other hand, began its transformation in the early 1970’s, upon

being granted access to EU funding that supported the construction of new infrastructure,

including two new technical universities. Multinational enterprises, like Intel, were

quick to recognize the potential in the country, particularly in light of the various tax and

other incentives offered, and formed strategic partnerships with local suppliers – often for

design and development work.

The Hsinchu Science-Based Industrial Park in Taiwan was established in 1980 to

create a focal point of research intended to reverse the damage caused by ‘brain drain’

trends; major incentives were offered to lure Taiwanese back, including prefabricated

factories, generous grants and tax exemptions. More than 200 firms with more tha n
60,000 employees function concomitantly with two universities and a technology

institute, specializing generally in computers, semiconductors and telecommunications.

The government has thus far invested more than $500 million in this cluster since 1980,

recognizing potential leaders, supporting local strengths, and encouraging entrepreneurial

drive. According to The Economist (March 9-15, 1996), Taiwan’s 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. Taiwanese firms have largely

made their own way, helped by a large pool of talent, relatively easy access to capital,

and a critical mass of like- minded companies; “the average Taiwanese electronics

company has managed to embody practically every globalization trend going, from

horizontal integration to virtual organizations” (The Economist, Nov. 5, 1998).

In Bangalore, India in 1980, the state government of Karnataka created a large

industrial park called the “Electronics City”; by 1985, Texas Instruments, recognizing the

low cost skills base, invested in a design center and decided to export its software via

satellite. Karnataka has an extremely good track record with the support and

development of higher education institutions and R&D, supporting a plethora of

engineering colleges, industrial training institutions and universities, whilst providing

numerous incentives to potential investors (including duty- free imports and long tax

holidays). This high level of local education has been instrumental in the development of

indigenous technology companies, which sets Bangalore apart from other cluster

counterparts around the world. According to industry estimates (HCID, 2002, Ch. 6),

Indian software services as a percentage of global software services will more than triple

from 1.6% in 1999 to around 5.4% in 2004. Between 2000 and 2001, Indian software
exports accounted for an impressive 14% of the country’s total exports (HCID, 2002, Ch.

6). During 2001, the number of quality-certified software companies from India

increased to over two hundred fifty; twenty-seven Indian companies now have the unique

distinction of a CMM Level 5 certification, which is the highest number from any one

country in the world (HCID, 2002, Ch. 6).

Conclusion

The creation of Mobile Regions and Mobile Nations will require macroeconomic

and regulatory reform around the world to continue to improve technology infrastructures

and IT service adoption rates. Without suc h reforms, the gaps associated with and

exacerbated by the emergence of digital technologies and ICTs (i.e., ‘digital divide’ or

‘broadband divide’ or ‘mobile divide’) will continue to widen, as some nations find

themselves unable to generate or replicate the conditions vital to empowering effective

systems of national and regional innovation.

Across the various examples in this paper, one critical theme emerges based

chiefly upon the value of knowledge networking, that is forging strong links between

private and public entities, as well as between institutional and individual players through

the use of ICTs 5 . In particular, we observed a need in all cases for an increased density

of links between those who could help start- ups to clarify business plans, increase

awareness about available resources, promote technical training, address policy issues

impacting service availability, identify means of importing necessary human capital and

develop methods of cooperation for innovation that are all vital components to success.

5
Annalee Babb has proposed a six-layer model of access for developing countries in building a regional
knowledge network using ICTs
In many ways, it is the aforementioned notion of ‘access’ that underlies the core of the

innovation phenomena in ‘mobile regions’, such that the actual work associated with

import/export in the ICT sector is facilitated by ICTs themselves.

Fortunately, information and communications technologies are particularly apt, if

not necessarily sufficient, for enabling the establishment of the fundamental deep and

rich linkages essential to innovation. The bounds of human inventiveness are limitless

wherever a commitment to economic growth, innovation and its various enabling factors,

exists. This article has shown that Mobile Regions and Mobile Nations can be created,

where they have not been born. Significant further research will be required however to

more precisely tune a model and weight the factors involved in the creation and

sustenance of mobile regions and nations.

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