Advantage: Towards State-of-the-art Regional Innovation Systems Policies in Europe?â ..... 1 Due to data limitations, the data for Ostrava region relate to the whole ..... the production of tailor-made software products and quality support and ...
Where does the knowledge for knowledge intensive industries come from? The case of biotech in Prague and ICT in Ostrava Jiří Blažek1, Pavla Žížalová1, Petr Rumpel2, Karel Skokan3 1
Charles University in Prague, Faculty of Science, Dept. of Social Geography and Regional Development University of Ostrava, Faculty of Science, Dept. of Social Geography and Regional Development, Centre of Town and Regional Management 3 Technical University of Ostrava, Faculty of Economics, Dept. of European Integration 2
Abstract The primary aim of this paper is to contribute to current discussion, concerning the role of geography of knowledge sources in knowledge-intensive industries from the perspective of a post-communist country (the Czech Republic), with its specific cultural and historical heritage, as well as its specific institutional and policy context. This particular context makes testing the extent, to which the theoretical conceptualisation of analytical and synthetic knowledge bases could be relevant for knowledge sources, within the emerging ICT and biotech sectors, in two selected regions of the Czech Republic. The selection of case studies also allows for comparison of the early stages of the formation of regional innovation systems in these two different types of regions, i.e. in the capital city of Prague and in the old industrial region of Ostrava, which is undergoing rapid restructuralization. The article is an outcome of the international project “Constructing Regional Advantage: Towards State-ofthe-art Regional Innovation Systems Policies in Europe?” Key words: regional innovation system, technological and market knowledge, analytical and synthetic knowledge bases, interactions at different spatial scales, local buzz, global pipelines, the Czech Republic. Introduction The primary aim of this paper is to contribute to current debate concerning the role of geography of knowledge sources in knowledge-intensive industries from the perspective of a post-communist country (the Czech Republic), with its specific cultural and historical heritage, as well as its specific institutional and policy context. This particular context makes testing the extent, to which theoretical conceptualisations, used within the regional innovation systems approach (see Asheim, Boschma, Cooke, 2010), such as analytical and synthetic knowledge bases or the “local buzz and global pipelines” model (Bathelt et al, 2004), could be relevant within the emerging ICT and biotech sectors, in two selected regions of the Czech Republic. This article is an outcome of the international project “Constructing Regional Advantage: Towards State-of-the-art Regional Innovation Systems Policies in Europe?” The two case studies focus on analysis of principle sources of knowledge based on the example of firms from two knowledge intensive industries, located within distinct regional, historical and institutional contexts. The Prague and Ostrava regions present examples of imperfect (or emerging) innovation systems – Prague is an example of a fragmented RIS (Blažek, Uhlíř, 2007), while a bundle of initiatives, aimed at supporting innovation and competitiveness (Skokan, 2006, Rumpel, Waack, 2004), were recently launched in Ostrava (the regional capital of an old industrial region, undergoing rapid but painful restructuring) so the key elements of RIS seem to be in place.
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The objective of this paper is to analyse the sources of knowledge and the spatial organization of interactions, in the biotech and ICT sectors, and to asses to what extent network character is influenced by specific national and regional contexts and to what extent this character resembles the generalized pattern of local buzz and global pipelines model (Bathelt et al 2004). The paper will be organized as follows. It begins with a brief outline of the primary research questions, placed in the context of theoretical concepts, recently developed within regional development and innovation research. The subsequent section describes the methodology of the empirical research, on which the article is based. In the next section, the knowledge bases of the two studied city-regions are compared, on the basis of a multi-criteria analysis. This section also briefly compares the institutional and policy context for the emergence of regional innovation systems in these two city-regions. The main section follows, presenting key results from the empirical survey of biotech firms in Prague and ICT firms in Ostrava and comparing the geography of knowledge sources, in these two city-regions. Finally, the key findings are summarized and confronted with our hypotheses. Theoretical Framework: from dichotomous ideal types to more fine-tuned theoretical concepts? Given the fact that all papers within this special issue use the same theoretical framework, which is developed in detail in an article by Asheim, Boschma and Cooke (2010), only a brief summary of the key theoretical concepts will be provided, in order to place the research questions in a proper context. Recent theoretical advances, concerning the geography of knowledge generation and knowledge sources, can be characterised by a growing awareness of the heterogeneity of key factors and mechanisms, as well as the heterogeneity of actors relevant to knowledge economies and societies. This contrasts with original conceptualizations, which often resulted in a dichotomous description of key theoretical concepts. For example, already in the 1960s, Polyani distinguished between tacit and codified knowledge (Polanyi 1967). More recently, Asheim and Gertler (2005) elaborated a number of distinctions between analytical and synthetic knowledge bases. Jensen et al. (2007) identify two basic models of innovation creation, namely: science, technology, innovation (STI) and doing, using, interacting (DUI). Likewise, Bathelt et al. (2004) developed what has become a frequently–used, dual concept: local buzz - global pipelines on the basis of an article by Storper and Venables (2003). In this article, the authors introduced the term local buzz, defining it as the combined effects of several key features of face-to-face contacts, such as highly efficient technology of communication, a means of overcoming coordination and incentive problems in uncertain environments, a key element of socialisation and a direct source of psychological motivation (Stoper, Venables, 2003). On the other hand, global pipelines (Bathelt et al, 2004) are defined as channels of communication to selected knowledge providers, located outside the local milieu. However, subsequent research has demonstrated a need for additional fine-tuning and differentiation of these (often dichotomous) concepts. For example, Boschma and Ter Wal (2007) argue not only that “firms value internal knowledge creation as a more important source of knowledge for innovation than external relationship” (Boschma, Ter Wal, 2007, p. 179), they also confirm the existence of important differences in the knowledge sources of footwear firms in Italy (i.e. within a relatively narrow industry), according to the type of
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knowledge, specifically between market and technological knowledge. Moreover, these authors stress different patterns of knowledge sources, according to firm size, and highlight the unequal position of various firms, according to their power in relation to their position in the knowledge networks, at different spatial scales. Tödtling et al (2010) utilise the example of the ICT sector in Vienna and Salzburg to demonstrate that firms within this sector cannot be uniformly assigned to a single knowledge base, due to the fact that characteristics of both analytical and synthetic knowledge bases can be found, even within the same sector. Modysson and Martin (2010) go so far as to show that elements of all three different knowledge bases (i.e. analytical, synthetic and symbolic) can be identified within a single firm. Likewise, Asheim (2009) argues that the notion that the STI model is related to analytical knowledge base, while the DUI model is relevant for synthetic knowledge base is overly simplistic. In other words, due to reasons that can be easily understood, early theoretical concepts, used in geography of knowledge and in regional innovation system research, tend to describe a kind of ideal or opposite types (of knowledge, innovation models, scales, etc…), while in reality the situation is rarely so clear-cut and can be better conceptualized as something of a continuous spectrum of different combinations of these ideal types. Therefore, all of these recent results suggest an acute need for further testing of the theoretical concepts in different contexts, in order to asses the scope of their relevance and to develop more differentiated, but realistic, concepts. Therefore, this paper shall attempt to address the following research questions. First, we would like to test the extent to which the theoretical conceptualisation of tacit and codified knowledge, along with their respective links to analytical and synthetic knowledge bases, as described above, are relevant for knowledge sourcing in knowledge-intensive industries, within a post-communist institutional and policy context. Specifically, this research explores the case of the ICT and biotech sectors in two selected regions of the Czech Republic. The capital city of Prague, as the city region with the highest concentration of biotech firms within the Czech Republic was selected for the case study, in spite of the fact that, in an international context, the biotech sector in Prague is only in its embryonic stage. As the second case study, the city of Ostrava, the regional capital of an old industrial region, was selected. According to regional decision-makers, the ICT sector should play a strong role in bringing about the sought-after diversification of Ostrava’s regional economy and, consequently, this sector receives considerable attention and support, not only from national and European support programmes, but also from a variety of regional actors (regional universities, the Regional Authority of the Moravian-Silesian Region, the Regional Development Agency in Ostrava, etc.) (Rumpel, Waack 2004). Consequently, we would like to discover whether more intensive local linkages will be found among firms in Ostrava’s ICT sector than among the biotech firms in Prague. In this case, we consider the ICT firms in Ostrava to be an example of a synthetic knowledge base, due to their specialization, which is primarily engineering in nature (for a critical discussion of whether the ICT sector fits into the analytical or synthetic knowledge base, see Tödtling et al 2010). Despite great internal heterogeneity within the biotech industry, the biotech sector is primarily viewed as an example of an analytical knowledge base (see e.g. Asheim, Gertler, 2005). Therefore, due to the larger role assigned to codified knowledge in the knowledgeintensive branches of an analytical knowledge base (Asheim, Gertler, 2005), we expect to see more intensive links to the global level, in the case of the biotech sector in Prague than in ICT firms in Ostrava.
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Second, we would like to add a national dimension to the “local buzz and global pipelines” model (Bathelt et al, 2004) and to compare the relevance of three basic hierarchical levels (i.e. of local/regional, national and international) for knowledge transfer through labour mobility as well as through various co-operative links. In the case of co-operative links, our analysis will distinguish - in accordance with Boschma and Ter Wal’s (2007) distinction concerning two different types of knowledge - between knowledge about markets and knowledge about technologies. Nevertheless, in accordance with our above-mentioned assumption about the existence of a much more continuity, in reality, than the often dichotomous theoretical concepts suggest, we expect to find not profound but rather modest differences between these two sectors, as well as significant variability, within the sectors themselves, according to size, type and additional key characteristics of particular firms. Contrasting the regional contexts of the Prague and Ostrava regions The Czech Republic is the only Central-East European member state included in the Constructing Regional Advantage project consortium. Therefore, the two regions selected as case studies could add insights, concerning the role of specific cultural and historical factors in constructing regional advantage, in the institutional and policy context of a post-communist country. Moreover, the Czech Republic represents a country, which, on the one hand, ranks among less developed EU countries (77% of the EU27 average in terms of GDP per capita in 2006), and which, on the other hand, represents one of the relatively more developed countries, among the post-communist states, with clear potential for a gradual switch to a high-road strategy for competitiveness, based on the extensive use of knowledge and innovation. Blažek and Uhlíř (2007) show that Prague is a prime example of a fragmented metropolitan regional innovation system (see also Žížalová, forthcoming). Fragmented innovation systems are characterised by the strong presence of knowledge and innovation infrastructure elements (i.e. universities, research institutes, innovating companies, support infrastructure, etc.), while they are subject to a general lack of local networking, co-operation and knowledge transmission (Tödtling, Trippl, 2005). At the same time, Prague is quite successful economically. It can be considered as one of the most developed regions in the EU – in 2008, it ranked 12th among all EU27 NUTS II regions – and it functions as a gateway not only for the Czech economy, but, from the perspective of many investors, also for Central Europe as a whole (Pavlínek, 2002). This economic success, along with Prague’s relative wealth and its (inter-) national role, has to a large extent diverted attention of the city decision-makers away from the local economy and its needs. This is evident, for example, in the very weak implementation of the regional innovation strategy, as well as in low levels of local cooperation (Žížalová, 2009). Ostrava, on the other hand, is an example of an old industrial region. Such regions face the problem of excessive clustering, as they are overspecialized in mature industries that are subject to economic decline. Old industrial regions, similarly to metropolitan regions, often have a highly developed and specialized system for knowledge generation and diffusion, which remains, however, primarily focused on the traditional industries and technology fields. According to Hassink (2005), old industrial regions suffer form three negative lock-ins:
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functional, cognitive and political, which frequently hamper the development of new (industrial) activities and thus the necessary restructuring. Evolutionary regional economics, as well as path-dependency and lock-in concepts, stress that in order to foster future development, regions need to overcome their key weaknesses and unlock and unlearn their former developmental path. According to Maskell and Malmberg (1999, p. 179), “in regions the process of unlearning often necessitates the disintegration and removal of formerly important institutions” and this capability to inaugurate new institutions while, at the same time, dissolving impeding institutions turns out to be a key ability in sustaining and enhancing their competitiveness. Both the ICT and biotech sectors represent new and emerging activities for the two Czech regions selected, which exhibit relatively strong knowledge intensity. The activities in question started to develop during the 1990s and experienced more intensive development after 2000. In addition, both sectors are, generally, characterized by strong co-operation – via both informal local knowledge linkages and formal (and informal) global networks (Bathelt et al, 2004). The ICT sector can be considered a young industry with low entry barriers (Weterings, Boschma 2006). As a result, a key feature of the ICT sector is its dual structure – the industry consists of a few major players and a large number of small, niche companies (Nowak, Grantham 2000). According to these authors, the same applies to the biotechnology industry. It is characterized by collaboration between a few major firms (e.g. in pharmaceuticals) and small, research-based, dedicated start-ups (often university spin-offs). This specific structure of both of the sectors in question implies that inter-organisational networks are highly important. The Prague region is one of the most economically developed regions in the EU, with potential for further economic growth. With a population of 1.2 million inhabitants, Prague generates approximately 24% of the Czech Republic’s GDP (2007). The service sector, which accounts for 82% of Prague’s GDP and 80% of its employment, is the dominant sector of the economy (CZSO, 2008). Prague is also home to a highly skilled workforce – the portion of the population holding a university degree is more than 20%, i.e. twice the national average – and it represents the main academic and research centre of the Czech economy. Currently, the city encompasses 8 public universities, with about 80,000 university students, 40 institutes of the Academy of Sciences of the Czech Republic and 50 other research institutes (Žížalová, 2009). All these characteristics combine to generate enormous innovative potential, which, on the other hand, is not reflected in the current institutional and policy context. At the same time, however, while Prague clearly displays strong innovative potential, it lacks one of the key characteristics of a successful regional innovation system, namely, intensive connectivity among relevant local actors (Blažek, Uhlíř, 2007). In contrast, the Moravian-Silesian Region is an old industrial region undergoing rapid restructuring and transformation, as well as the modernisation and diversification of its regional economy. It is classified as an economically lagging region. Despite its unfavourable economic structure, the Moravian-Silesian Region recently succeeded in accelerating its growth. Between 2004 and 2007, it ranked among the fastest growing regions, in terms of economic growth, in the Czech Republic. During the same period, unemployment decreased significantly, although it remained above the national average. Table 1: Basic characteristics of the Prague and Ostrava regions, 2007
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Population GDP per capita (EU 27 = 100%) Tertiary education employment (%) Employment in secondary sector (%) Employment in tertiary sector (%) R&D employment (as % of Czech Rep. total) Rate of unemployment (ILO, 2008)
Prague 1.2 mil. Inhabitants 162.3% 22.0% 18.2% 81.3% 43.0% 2.0%
Ostrava region1 1.25 mil. inhabitants 64.6% 9.4% 38.5% 54.5% 5.6% 6.8%
Source: Czech Statistical Office (2009)
Institutional and policy framework for innovations in the Prague and Ostrava regions Preparation of Prague’s regional innovation strategy (BRIS) can be considered the first serious attempt to initiate debate on innovation policy among relevant actors in the Czech Republic. The BRIS was prepared under the initiative of the Technology Centre of the Czech Academy of Science, in co-operation with the Centre for Regional Development and Prague’s City Authorities, between 2002 and 2004, with the support from the 6th Framework programme. Discussions, during preparation of the BRIS also impacted the draft process for the first generation of the National innovation policy of the Czech Republic, which the Government accepted in July 2005 (the Czech Republic was among the very last EU countries to approve such a policy document). The national innovation strategy openly admits that the Czech Republic lags significantly behind the EU average in many key areas, such as the innovation activity of private firms, technology transfer, human resource development, co-operation in the realm of R&D, the allocation of venture capital, etc. Moreover, until recently, responsibility over the realm of innovation and R&D was divided among more than dozen governmental bodies. Consequently, the institutional and policy framework for innovation can be considered to be weak or – more precisely – to be just emerging (for more see Blažek, Uhlíř, 2007). In this context, the BRIS can be regarded as an important stimulus for designing innovation policy at the regional as well as the national level. Nevertheless, in spite of the considerable efforts of key drivers (i.e. the core team at the Technology Centre of the Academy), the BRIS has several significant weaknesses, such as the lack of a time-schedule and responsibility for various measures, no existing link to the Prague City budget, excessive emphasis on SMEs, etc. (for more see, Blažek, 2007). However, the fundamental weakness of BRIS is weak political support from leading Prague officials, who are clearly more interested in different (more tangible or more prestigious activities, such as large infrastructure projects or bidding for the Olympic Games – unsuccessfully). On the other hand, perhaps the biggest strength of the BRIS is the fact that programming documents, drafted for the sake of EU cohesion policy, correspond with the BRIS strategy. As a result, these programming documents actually became the primary tools for putting the BRIS into practice. Nevertheless, as of yet, any progress achieved can be considered rather limited. According to Klusáček and Váchová (2007), who summarize the results achieved during the first phase of BRIS implementation, only 8 pilot activities have been implemented out of the 14, originally envisaged. The most important actions implemented included the establishment of the Centre for Technology Transfer of the Academy of Science (CeTT) as well as the Innovation Centre and Enterprise Incubator, which, according to its website, currently (2009) houses more than 30 companies 1
Due to data limitations, the data for Ostrava region relate to the whole Moravian-Silesian region NUTS II, not only to metropolitan region of Ostrava.
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from a wide range of industrial sectors, from biotechnology, IT and renewable energy sources to tourism and consulting. On the other hand, several important actions, such as the establishment of the Prague Innovation Council and a number of sectoral clusters have not been realized. Therefore, pro-innovation activities in Prague are just now emerging and their development into tangible results can only be expected after considerable time has passed. The regional innovation strategy for the Ostrava region was prepared in 2003, at the initiative of the Regional Authority of the Moravian-Silesian Region along with Ostrava’s Business Innovation Centre; however, it did not result from the activities of a wider regional R&D platform but merely from a narrow group of consultants. Consequently, it did not become an effective document, it was not linked to the regional budget and its proposed measures were not included into the implementation plans of relevant actors. Nevertheless, under the leadership of the Regional Development Agency of Ostrava, VSB Technical University of Ostrava and the Union for Development of the Moravian-Silesian Region many innovation initiatives, envisioned in the regional innovation strategy, were launched, including ClusterNet, which groups together all of the key players in cluster-related activities, the ForTech Initiative, which seeks to attract young people to study technical and engineering professions at secondary and tertiary levels of education and the InOva Initiative, a regional development partnership for research, development and innovation. Following these initiatives and partnership based on the Triple Helix concept, the most recent decade saw the establishment of science-technology parks, innovation centres and business incubators in the region. Moreover, the Ostrava region, with 10 new cluster initiatives, including “IT cluster”, “Engineering cluster”, “Automotive cluster” and others, has become the Czech Republic’s leading region in terms of industry clustering. Development of new versions of both the Regional Development Strategy for the Moravian-Silesian Region and the Regional Innovation Strategy for the Moravian-Silesian Region began in 2009. The parameters of the innovation environment in the Prague and Ostrava regions are summarized in table 2. Table 2: Selected parameters of regional innovation systems in the Prague and Ostrava regions Key actors
Mode of co-operation
Innovation policy
Prague A dozen public and private universities, headquarters of vast majority of institutes of the Academy of Science, several Science and Technology Parks and business incubators, technology transfer centres, few venture capital funds The lack of a platform for enhancing co-operation among these actors at a regional level; however, a grassroots biotech cluster has been established at the national level, due to the initiative of small, Czech-owned biotech firms, in 2009 BRIS – mostly formal document, lacking a time schedule and responsibility assignments for outlined actions, as well as any link to the City of Prague’s budget, weak
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Ostrava Four public universities and two private colleges, headquarters of large companies, Science and Technology Park, business incubators, business innovation centres, Proactive Regional Development Agency, Regional Chamber of Commerce, the Union for the Development of the Moravian−Silesian Region. The co-operation platform is relatively strong with a long tradition. The region is a leader in cluster initiatives (10 regional clusters have been established), annual investment forum organized, development programmes and strategies upgraded. Regional Innovation Strategy for the Moravian-Silesian Region, prepared in 2003. Mostly formal document without links to regional budget and without any clearly designated responsibility for
Innovation policy implementation
political support, the BRIS combines general pro-innovation support with preference for certain sectors (gastronomy).
implementation or for co-ordination. Up-dating of the Regional Innovation Strategy for the Moravian-Silesian Region undertaken in 2009.
Measures implemented only partially via EU supported operational programmes.
Measures implemented only partly. On the other hand, the existence of regional initiatives for innovation support, cluster development.
Source: prepared on the basis of own interviews, BRIS (2005) and RIS Ostrava (2003) Methodology The biotechnology industry cannot be easily distinguished through traditional industry classification. Biotechnology, as such, is not even an industry, but refers to a set of technologies that profoundly affect existing industries such as agriculture, food-processing and human health (Gilsing, Nooteboom, 2006). Therefore, our main source concerning Czech biotech firms is the relatively recently published Czech Biotech Report (2008), along with the Czech Biotech Database, which comprises part of the international Biotech Gate Company Database. According to these databases, we identified 21 dedicated biotech companies in the metropolitan region of Prague of which 18 gave their consent to our interview. The biotechnology industry is, naturally, quite diverse, according to the industry that its results and technologies are used for. Usually, biotech activities are divided into 5 categories – healthcare, chemicals, veterinary, food/agriculture and environmental industries (Leibovitz, 2004). The Prague biotech firms encompass essentially all of these activities. There are even cases, in which applications for several different industries can be found within one company (e.g. in case of those specialized in molecular biology and genetic engineering). However, as confirmed later in this analysis, in light of the early-stage of development of these firms, it does not significantly affect the analysed issues. A typology of firms, according to their specialization, is presented in table 3. Table 3: Typology of biotechnology firms in Prague Application field Human health Industrial processing Veterinary Food/agriculture Environmental industries
Number of firms 11 2 6 4 4
Note: Some firms are active in more than one research field; therefore, the sum of firms exceeds 18. Source: prepared on the basis of own interviews
On the contrary, ICT activities can be distinguished directly through traditional databases – NACE 72 includes information technology activities, divided into 5 subclasses. This category includes a total of 2 742 firms located in the Moravian-Silesian Region (hereinafter, we refer to this territory as the Ostrava region, to emphasise comparison of the city regions in this paper and because the firms are primarily concentrated in the region’s core, surrounding the city of Ostrava). Nevertheless, most of these firms are one-man, or micro-firms, which are difficult to pinpoint in the course of research activities and often exist only formally. Only 59 firms have 10 or more employees, yet these firms comprise 40% of total ICT employment in the region. Consequently, these 59 firms were selected as the target group for this case study. Additionally, one third of these are members of a regional cluster initiative named “IT cluster”, which was established in 2006. The majority of firms in the case study provide a 8
variety of services, which can be assigned to multiple subclasses in NACE 72. Specifically, they are customer-oriented, ICT service companies, providing services and specialised software to firms and other clients, across a broad and very heterogeneous range of economic sectors and branches, such as metallurgy, machinery, energy production, wholesale and retail and even public safety services. Table 4 provides a typology of interviewed ICT firms in Ostrava, according to establishment type. Over the last four years, the number of employees in ICT firms from our sample increased from 909 (in 2006) to 2311 (in 2009), while the number of employees per company ranges from 1 to 1250. This means that more than half of total ICT employment in the Ostrava region is concentrated within a single firm (the Finnish company TietoEnator). Table 4: Typology of interviewed ICT firms in Ostrava, according to origin Type of firm Number of firms Spin-offs 4 Newly established regional SMEs 18 Branches / subsidiaries of large firms (partly FDIs) 8 Total 30 Source: prepared on the basis of own interviews
The empirical analysis of this paper is based on in-depth interviews regarding knowledge and innovation networks in the biotechnological and ICT companies, identified above. Altogether we interviewed 18 biotech firms in Prague (out of the 21 biotech firms located in the Prague region) and 30 ICT firms (out of 59) in Ostrava. Although the portion of interviewed firms differs in the two cases (86% in Prague and 51% in Ostrava), both samples can be considered representative, not only because of the relatively high response rate, but also due to the fact that all of the largest and most important companies in both regions were covered. Managers or research specialists were selected for interviews. Due to the fact that most of the interviewed firms (especially in the Prague biotech sector) are small in size, the key researcher of a firm often doubles as its manager. The interviews consisted of a standardized questionnaire, covering general company features (innovation activities and firm performance) and the company’s knowledge sources, distinguishing – in accordance with Boschma and Ter Wal (2007) - between market and technological knowledge. Table 5 summarises the basic characteristics of both samples. Table 5: Basic characteristics of interviewed companies Biotech in Prague metropolitan region 18 734 54% 24% 26
Number of interviewed firms Total number of employees (in 2009) Share of tertiary-educated employees (%) Share of R&D personnel (%) Number of patents
ICT Ostrava region 30 2 316 62% 11% 0
Source: Own interviews performed during 2009
Key research results Embedded biotech cluster within the fragmented metropolitan region of Prague? The biotechnology industry emerged in the Czech Republic, as well as in Prague, during the first twenty years of transformation, on foundation of knowledge accumulated, during communism, in research institutes as well as in some state-owned companies. In spite of
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relatively strong and positive development, over the past 20 years after the collapse of communism, the Czech biotech sector continues to lag behind the world’s leading companies, as a result of its very limited and still somewhat non-competitive research and the almost nonexistence of biotech intellectual property that could be formally protected by patent(s). This results from the isolation of Czech research under communism, which, in many ways, was forced to start from scratch after 1989. In contrast, Czech research had previously been quite strong in traditional biotechnology (e.g. crop and animal breeding, the fermentation industry, breweries, wine, ethanol, baker’s yeast production, fodder yeast, etc.). According to interviews with one of the leading scientists in Czech biotech research, the Prague biotech sector is still 10 to 15 years behind the advanced world biotech, but the situation is improving quite rapidly. Figure 1 presents the primary activities and sources of competitiveness for the interviewed firms. The answers conform to our previous description, concerning the fact that, at present, most Prague biotech companies conduct their own research and/or development activities, while at the same time producing tailor-made products primarily for large customers from abroad (Žížalová, Blažek, 2010). All interviewed firm representatives stressed that R&D (even though it is only seldom cutting-edge in nature) is a key source of competitiveness for their products and services. This fact also manifested itself in the structure of firm turnovers, wherein new or fundamentally improved products accounted for one-third of all profits. In addition, 8 of the 18 interviewed firms have applied for a patent, while the remaining 10 lacked specific knowledge that could be patented. Figure 1: Primary activities of the interviewed biotech firms in Prague for achieving competitiveness (multiple selections were allowed) 20
16
12
8
4
0 Product and process development
Tailor made products
Standardised products
Marketing
Design
Other activities
Note: Size of sample – 18 firms. Source: Own empirical survey performed in 2009.
All firms agreed that they require both internal and external knowledge sources to sustain their competitiveness. As for internal knowledge sources, their own, highly skilled employees were consistently mentioned as being crucial. Our survey also confirmed this trend – on average, 55% of employees have an education level higher than a bachelor’s degree and there are even 7 firms, in which all employees have obtained at least a master’s degree. Another essential characteristic of the interviewed biotechnology firms in Prague is the relatively high ratio of fresh graduates in the newly recruited workforce. In the survey, the 10
share of such recruits is approximately 50% of all R&D employees. On the other hand, the remaining half of the workforce is made up of employees that entered the companies with several years of experience. Most of them came from public institutions, such as research institutes, universities or hospitals. At the same time, many of them only work part-time as researchers or university teachers, thus retaining their previous jobs. This ongoing connection with academia allows such part-time employees to involve students in relevant research, even during their studies (sometimes as early as their second year of university study), and to identify talented individuals for further co-operation. Even in cases when company representatives are no longer active in academia and are dedicated full-time to their company, they have a wide range of colleagues and friends from the research institutions or universities, where they previously worked. These personal contacts and acquaintances, along with direct co-operation with students are key channels for finding new recruits. Very often students are hired for short periods, for instance, when it is necessary to temporarily increase human capacities for a certain research project, as a means of avoiding the long and inflexible process of hiring and tutoring new employees. As personal links are key sources for finding new employees, it is not surprising that the spatial structure of the recruitment of new, highly skilled employees targets the local (regional) level. Prague universities are the most significant source of new employees for 13 companies. Other Czech universities or research institutes are the second most significant source of new, highly skilled workers. These are more important for larger firms, particularly for the largest one in our sample, which also has several branches in other Czech regions. Figure 2: Recruitment of employees by biotech firms in Prague – the average importance of various sources at three spatial levels Universities, research institutes
Technical universities
5
Firms – same sector
Firms – other sectors
5
Weighted average
Simple average 4
4
3
3
2
2
1
1
0 Prague
Other Czech regions
International
0 Prague
Other Czech regions
International
Note: Relative importance ranges from 1 (not important) to 5 (very important). The weighted average score was calculated as a weighted average, in which a firm’s number of employees in 2009 was used for weighting. Size of sample – 18 firms. Source: Own empirical survey performed in 2009.
In addition, most of the entrepreneurs and company managers have also graduated from one of Prague’s universities and have lived in Prague for a significant part of their lives. According to the interviewees, these personal reasons or factors also play a significant role. To sum up, both personal and professional links and acquaintances, along with the need for a highly skilled workforce motivate entrepreneurs and firms to locate in the same region, i.e. in the capital city of Prague, which concentrates approximately 40% of all university students in the Czech Republic (CZSO 2008). On the contrary, international sources of new workers have, as of yet, not proven significant – so far, none of the interviewed firms has recruited workers from abroad.
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Naturally, all interviewed companies consider their knowledge sources and their own research and development activities to be of prime importance. However, a great part of R&D (in many cases the major part) is carried out in co-operation with other subjects (universities, research institutes and/or other companies) and such sources are often considered to be vital. In order to better understand factors influencing the spatial organization of external knowledge sources, we distinguish between market and technological knowledge. This coincides with relevant literature (Boschma, Ter Wal 2007), which considers the type of knowledge being searched to be one of the key factors influencing the nature of co-operation. Generally, firms act on the basis of their market knowledge: their knowledge of customers and competitors. Economists have long suggested that markets operate as a means of disseminating information rapidly to all interested parties (e.g. von Hayek 1989). However, not all new market information is, in fact, quickly available to all interested actors and, therefore, knowledge about markets becomes an important part of innovative processes. The reason for this is the fact that innovation is defined (in a simplified way) as the commercially successful application of new knowledge. However, it is necessary to point out that the companies were not willing to provide information about their market partners, which are, in most cases, their customers/clients. They consider this information to be strategic for their business competitiveness and this characteristic is similar to general findings concerning the Czech innovation system (Žížalová, 2010). Specifically, there is a lack of trust in the Czech business environment and in the higher “closeness” of the companies. Besides this, the majority of companies began to answer this question by stating that they themselves (and their employees) represent key sources of market knowledge. This fact is also reflected in the overall market knowledge network, where only a limited number of partners were mentioned. Among such partners, global customers and local competitors were mentioned most frequently (see Table 6). It seems, therefore, that the market knowledge network of Prague biotech firms displays a pattern that is very comparable to the standardized observation – a combination of local and global knowledge links. On the other hand, co-operation in Prague is in no way intensive and 5 companies even failed to mention the existence of any partner whatsoever as source for market knowledge. Table 6: Key partners of the interviewed biotech firms in Prague, according to type and location – market knowledge sources (multiple selections were allowed) Prague Universities Suppliers Customers Distributors Competitors (biotech companies) Other businesses Business associations Total
2 1 1
Other Czech regions 1
5
Europe
World
4 2
1 4 1
1
1
7
7
1
2 11
2
Total 3 2 9 3 6 2 2 27
Source: Own empirical survey performed in 2009.
Several differences were identified, in terms of the geographical dimension of the companies’ networks. On the one hand, there are several firms which still rely extensively on their own internal knowledge activities and sources. External knowledge links were established slowly if at all, primarily as new links established with very specific goals, e.g. to gain access to new
12
customers, suppliers or markets or to scientific and technological knowledge, lacking within the company. On the other hand, primarily younger, spin-off firms or firms established by researchers themselves, who retained their previous jobs, exhibit a much greater intensity of contacts, even for very young firms. These links are, to a great extent, based on the previous, “personal” biography of the firms’ managers and thus the majority of their networks are similar to the “professional” networks of their (top)-managers. Many of the interviewed firms also co-operate with each other, because their representatives are current or previous colleagues or due to the fact that they have been previously or still are involved in joint research projects through their academic positions. Table 7 summarizes the co-operation patterns of the interviewed firms, according to partner type and geographical location, when scientific and technological knowledge is being exchanged or when research, development and innovation activities are involved. The highest number of partners is located within the metropolitan region of Prague and includes research institutes, particularly research institutes under the Czech Academy of Science, Prague’s universities and other biotech companies. Only one fifth of the partners are located abroad – in other European countries or elsewhere Table 7: Key partners of the interviewed biotech firms in Prague according to type and location – technological knowledge sources (multiple selections were allowed) Universities Research institutes Other biotech companies Other business Business associations Total
Prague 20 21 14 1 3 59
Other Czech regions 10 2 12
Europe 3 4 1 5 2 15
World 1 2 3
Total 34 27 17 6 5 89
Source: Own empirical survey performed in 2009.
Thus, it appears that the co-operation pattern of Prague biotech firms, concerning technological knowledge sources, does not correspond with the standardized observation combining local and international networks. The Prague biotechnology firms are located in the vicinity of centres of knowledge production – Prague universities and research institutes – and these centres play a momentous position in their knowledge network strategies. Many of the companies remain, to some extent, in the formation period and their competitiveness is based on a combination of highly skilled personnel and lower production costs rather than on the ownership of cutting-edge know-how. In such a context, local knowledge centres (which double as national centres) are adequate for their current business activities. Nevertheless, nearly all interviewees stressed the importance of remaining in contact with distant, global knowledge, which, in many cases, determines the future development of the industry. Indirect contacts are an interesting alternative to direct contacts to global players, and about half of the firms in our sample employ such contacts. Biotech firms, in which key employees or managers maintain a close personal relationship with academia, utilise indirect contacts. Specifically, these persons use their simultaneous involvement in research institutes to develop contacts with distant knowledge sources usually via international research projects, in which the research institute participates (for more see Žížalová, Blažek, 2010). An emerging platform for ICT activities in the old industrial region of Ostrava?
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In general, the term ICT sector (industries producing information and communication technologies) describes a combination of ICT manufacturing and ICT service industries, which are associated with the production and/or distribution of information and communication technologies and the provision of related services. Our research merely covers computer and related services (CZ NACE 72), primarily software delivery/supply and related consulting. As stated above, the Ostrava metropolitan region is an old industrial region, which developed around the beginning of the 20th century as a centre for anthracite coal mining, coke, iron and steel production and related branches of heavy industry, such as heavy machinery and chemicals. Attempts to develop and apply information technologies were made, even under communism, yet such attempts were subject to technological blockade by “Western” countries (the prohibition of the export of hardware and software into communist countries) and, under such conditions, had little chance at success. Therefore, one cannot claim that the development of ICT services began suddenly, after the Velvet Revolution in 1989, because a certain – though very limited – knowledge capacity had been built up earlier. A significant development phase for the ICT sector in the Czech Republic came in the period from 1990 to 1995, especially in relation to the dynamic development of the ICT sector in the most developed countries and in connection with the possibility of the transfer of technological know-how, subsequent to the fall of the Iron Curtain. Urgent need for modernization, both in public and private sectors, along with a strong inflow of FDI increased demand for ICT services. So far, such services have developed particularly in the capital city of Prague, followed by the South-Moravian Region and the Ostrava region, as well (according to the headquarters of companies registered in the Czech Commercial Register). Recently, especially after 2003, a new wave of modernisation has come to the Ostrava region, where the emergence and growth of new ICT service firms has contributed significantly to the diversification of the area’s economic base. Three basic types of ICT firms can be distinguished in Ostrava according to their origin. The first type includes new companies, established in the region by ICT experts, who originally worked in the ICT departments of large state-owned companies, during the late 1980s. The second type is made up of new branches of foreign companies that have been established here. The third type of firms consists of those companies, established by young university graduates. The Faculty of Electrical Engineering and Computer Science, founded in 1991, which is growing rapidly, not only in terms of the number of students (more than 3500 in 2009) but also in involvement in research activities at both national and international levels, plays a key role in this area. The Faculty also initiated the establishment of an IT Cluster and continues to play a key role in this initiative, the president of which is the dean of the Faculty himself. Increasing employment in the ICT sector has evoked optimism on the part of regional political, economic and academic elite, who view ICT services sector development as a significant opportunity to diversify and modernise the structure of the regional economy. As a result, ICT activities enjoy relatively strong support from several regional actors, such as the Regional Authority of the Moravian-Silesian Region, the Union for the Development of the Moravian-Silesian Region, the Regional Chamber of Commerce, the ICT cluster initiative and large employers in various industrial branches, which has, so far, been accompanied by support, for instance, for “IT4Innovation”, a European funded project for large einfrastructure, further development of the Faculty of Electrical Engineering and Computer Science and for the ICT cluster initiative.
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Most ICT companies in the region are seated in the core of the Moravian-Silesian Region – in the regional capital Ostrava. One of them, the Finnish company TietoEnator, can be considered the regional flagship and the most dynamic ICT firm in the region, in terms of growth in the number of employees over the past three years. Before elaborating on the results of our research, several types of ICT companies in the region should be distinguished, according to size and type of activity. First, micro ICT companies have a small number of employees, low turnover and are often characterized by the temporary (i.e. not permanent) business activities of the entrepreneur. Hundreds of these micro companies exist and they have little impact on the overall ICT sector. In spite of this, one such micro company has been included in our in-depth interviews to cover the entire spectrum of ICT firms. Second, small or medium-sized regional companies, established by local entrepreneurs, encompass a broad range of business activities. These companies are relatively young, innovative and successful, both in Czech and Central European markets, with their software products and services. Third, there are branches of international companies, often with very limited autonomy, concerning product development as well as customer selection. The most significant evidence, concerning the improved innovation performance and competitiveness of ICT companies in the Ostrava region, is the dynamic growth in the number of employees in the sample of 30 interviewed companies, from 909 employees in 2005/2006 to 2 316 employees in 2008/2009. This can be viewed not only as a contribution to the improvement of regional competitiveness, but also as the diversification of an old/traditional industrial economy. Moreover, most of the companies (70%) implemented a new business strategy and/or significantly improved their organizational structure, during the past three years (2006-2008), confirming the dynamic nature of the ICT sector in the Ostrava region. The introduction of new software products to the Czech or regional market (recognised as significant by 83% of the companies) can be considered the most important source of competitiveness for the ICT sector in Ostrava. For 65% of companies, their software products were new not only for the firm, but also for the relevant market and nine of the 30 firms have even introduced a new or dramatically improved software product, during the past three years. The turnover structure also confirms this, as more than one-third of the companies’ profits were generated by new (37% of turnover) and improved products (41%). Only about 21% of the companies’ profits are attributed to unaltered software products. Due to the ongoing necessity of fundamental or at least partial improvements in the ICT sector, 24 firms out of 30 have employees dedicated to R&D and seven firms even have their own R&D department (ranging in size from five to 30 full-time employees). However, none of the companies has applied for a patent, during the past three years, because, according to respondents’ statements, this is not feasible in the software industry. Respondents declared that the most important activity for achieving firm competitiveness is the production of tailor-made software products and quality support and maintenance for individual customers (27%), often combined with the production of standardized software (20%). A practically identical share of respondents considers product development to be the primary driving force of firm competitiveness, as shown in Figure 3. Figure 3: Primary activities of the interviewed ICT firms in Ostrava for achieving competitiveness in ICT (multiple selections were allowed)
15
30 25 20 15 10 5 0 Product and process development
Tailor made products Standardised products
Marketing
Design
Other activities
Note: Size of sample – 30 firms. Source: Own empirical survey performed in 2009.
According to our interviews, software design plays a less significant role in achieving competitiveness. Regional SMEs declared marketing activities to be very important, while “daughter companies” and branches of firms, with headquarters in Prague or abroad, do not see marketing as a driving force behind competitiveness, due to their dependence on the marketing activities of the parent company. Five companies declared and emphasised that the most important factor for competitiveness is the quality of communication with customers and the quality of permanent support activities. As something of an exception (an interesting and significant exception), one company declared contacts made during EU Framework research programme projects as crucial to the competitiveness of the firm. Informal communication with project partners, from all over Europe, is considered to be an especially valuable source of technological and market knowledge, contributing to innovations. Figure 4 summarises the importance of educational level and recruitment. New, highly skilled employees are predominantly recruited at the regional level. Figure 4: Recruitment of employees in Ostrava ICT firms – average importance of various sources at three spatial levels Universities, research institutes
Technical universities
5
Firms – same sector
Firms – other sectors
5
Weighted average
Simple average
4
4
3
3
2
2
1
1
0
0 Ostrava
Other Czech regions
International
Ostrava
Other Czech regions
International
Note: Relative importance ranges from 1 (not important) to 5 (very important). The weighted average score was counted as a weighted average where the number of firms’ employees in 2009 was used for weighting. Size of sample – 30 firms. Source: Own empirical survey performed in 2009.
In terms of the educational level of employees, 62% of the firms’ employees possess a master’s or bachelor’s degree, mainly in technical studies and from technical universities (primarily from the Technical University of Ostrava, less frequently from TU Brno or Prague – for the most part, these employees grew up and have social ties in the Ostrava region), and
16
social – science graduates do not play a significant role. Approximately 20% of employees are graduates from technical high schools or business academies in the region. Most interviewed managers spoke of the importance of the Technical University in Ostrava, especially its Faculty of Electrical Engineering and Computer Science, in the recruitment of new employees and the importance of a technical education combined with a good command of the English language. However, for ICT companies in the Ostrava region, the recruitment of highly skilled employees at national or international levels does not play a significant role, though the observed pattern of labour recruitment is considerably less uneven than is the case of Prague biotech (compare Figures 2 and 4). In this context, the fact that Ostrava suffers from a significant brain drain to Prague, due to the dominance of Prague, both economically and culturally, should be stressed. On the other hand, only limited evidence exists concerning the immigration of skilled experts into ICT firms in Ostrava from Slovakia, Ukraine and Poland. Therefore, in Ostrava, the recruitment of highly skilled employees is carried out, predominantly, at the regional level, from firms in the same sector as well as from technical universities, with an engineering background. When assessing the relative importance of “internal” and “external” knowledge sources, one gets a very heterogeneous (or even confusing) picture. In general, smaller and younger companies acquire more knowledge from outside, while medium-sized firms and technologically more developed companies, with an R&D department, generate knowledge inside the company. Our research results suggest that generation of its own know-how, along with the simultaneous utilisation of external knowledge sources, is very important for the development of a new ICT company. The more employees a company has and the more technologically advanced it is, the less important external knowledge sources seem to be. For the ICT SMEs, operating in the region, knowledge from outside, especially from abroad (the USA, Germany, and other highly developed EU countries), is more important than local knowledge, with some exceptions, depending on the particular business activity of the firm in question. Market knowledge is acquired primarily through personal contacts with customers from the Ostrava region (confirmed by 68% of respondents) and from within the Czech Republic (48% of respondents). Companies from other businesses as well as suppliers – predominantly branches of global software and hardware providers, located in Prague, comprise the second most beneficial source of market knowledge. Regional subjects, such as regional suppliers and competitors and other companies in the region, appear to be less important (see Table 8). Local buzz is very important to regional SMEs in the Ostrava region for acquiring market knowledge and for achieving market innovation. Surprisingly, the internet plays a significant role in regional SMEs’ acquisition of market knowledge. Regional SME managers stated that they become inspired by seeing what (and for whom) their foreign and domestic competitors are offering. Such knowledge can serve as inspiration for regional SMEs to provide similar software, with higher quality services and consulting, at lower prices. The problem with this approach is that on the Internet they can see “what”, but not “how”, which is the most important factor for innovation. Nevertheless, they could acquire new market knowledge regarding trends and new business contacts at professional conferences, workshops or via involvement in research projects at the European level. For the third type of ICT companies, (i.e. the “daughter companies” of large, often foreign, firms), market knowledge for innovation is unimportant, because they receive orders concerning work contracts from the parent company abroad and do not have the capacity or time to conduct their own market
17
research activities. In this sense, they are entirely dependent on the parent company’s needs and “merely” deliver the required software, services and consulting to customers. Table 8: Key partners of the interviewed ICT firms in Ostrava according to type and location – market knowledge sources (multiple selections were allowed) Ostrava Universities Suppliers Customers Competitors (ICT companies) Other business Total
7 14 56 4 17 98
Other Czech regions 3 13 23 3 14 56
Europe
World
3 1
1 1
5 9
3 5
Total 10 31 81 7 39 168
Source: Own empirical survey performed in 2009.
Members of the “IT cluster” initiative mentioned that the formal and informal meetings, organized by the cluster leader/manager, have certain, but limited importance in terms of finding new partners and acquiring market knowledge. Few respondents stated that workshops and expert meetings (for example during trade-fairs and exhibitions) can be an interesting source of market knowledge. Some companies try to use personal contacts with the Chamber of Commerce or with trade sections of Czech Embassies in order to acquire information concerning foreign markets, especially in Poland, Hungary, Slovakia and Ukraine. Market surveys are not used as a means of acquiring knowledge about new markets, due to their high cost and rather limited value for the SMEs. Specialised magazines and academic journals do not play any significant role in the process of acquiring market knowledge. Technological knowledge is required as input for production, the development of new products/processes and technological improvements. The ICT firms in the Ostrava region acquire technological knowledge primarily from outside the Moravian-Silesian Region, from international suppliers (59%), which are considered to be strategic partners. They offer the basic/platform software, which is subsequently utilised and customised/tailored, in accordance with the customer needs, by ICT companies in the Ostrava region. Prague, as the Czech Republic’s gateway city, is the main location of such global suppliers and organizations, which include Microsoft CZ, Oracle, SAP and Hewlett Packard. More specialized technological knowledge is acquired from global suppliers with headquarters in other European gateway cities, such as Paris or London. Table 9: Key partners of the interviewed ICT firms in Ostrava according to type and location – technological knowledge sources (multiple choices were allowed) Ostrava Universities Supplier Customer Competitor Other business Total
9 8 7 2 14 40
Other Czech regions 1 62 5 5 10 83
Europe
World
7
1 1
2 9
2 4
Total 10 78 13 7 28 136
Source: Own empirical survey performed in 2009.
Other business companies, from a similar sector within the region or from outside the region in the Czech Republic, are the second most significant source of technological knowledge (25%). Contacts with customers in the region also play a certain, limited role in the 18
acquisition of technological knowledge. Altogether, about 50% of technological knowledge providers, of all types (mostly suppliers and practically no universities), are located in Prague. Some companies stated that trade-fairs and professional specialized journals – frequently in electronic form on the Internet - can be considered very important information sources. The “IT Cluster” as an intermediary organisation was very frequently named by companies as a potentially important organization and partner network for acquiring new technological knowledge. However, at the moment, the activities of the IT cluster are being assessed rather critically in this particular arena. Likewise, universities in Ostrava only play a marginal role in the provision of technological knowledge to ICT companies, a fact which displays a sharp contrast to their important role in labour recruitment. Conclusions – contrasting patterns of knowledge sources in the Prague biotech and Ostrava ICT sectors The primary objective of this paper is to contribute to current discussion concerning the relevance of local/regional versus global knowledge sources for the competitiveness of firms. We focus specifically on analytical and synthetic knowledge bases from the perspective of one of the new member states - the Czech Republic. Two case studies were selected for the analysis: first, the emerging biotech cluster in the Czech Republic’s capital city of Prague and, second, the ICT cluster in Ostrava (the regional capital of an old industrial region that has undergone extensive restructuring over the past 20 years). In accordance with Asheim and Gertler (2005), we expected to see more intensive local interactions in the case of ICT firms (representing a synthetic knowledge base, drawing heavily on tacit knowledge) than in the case of biotech firms (representing an analytical knowledge base, using predominantly codified knowledge), where more intensive global links can be expected. At the same time, we tried to extend the “local buzz and global pipelines” model (Bathelt et al, 2004) by adding the national level and, consequently, comparing the relevance of the three basic hierarchical levels (i.e. of local/regional, national and international) for the transfer of market and technological knowledge, as defined by Boschma and Ter Wal (2007). However, in accordance with our assumption, concerning the much higher presence of continuity in reality, than is suggested by the often dichotomous theoretical concepts, we also expected to find minor rather than fundamental differences between the two analyzed sectors, as well as significant variability among firms within these sectors, depending on firm size, type and other key characteristics. Finally, we supposed that, due to the early phase of RIS formation in these two regions, different factors would be more relevant than those arising from a standard conceptualisation of knowledge bases and their relation to the “local buzz – global pipelines” model. Specifically, we expected that local institutional context and local knowledge sources would play the most significant role for these new, emerging, knowledge-intensive activities. In addition, during our in-depth interviews, we also sought information concerning several other key aspects of firm competitiveness, such as the methods employed for human resource recruiting and the resulting spatial patterns of labour recruitment. Nevertheless, our research confirmed that neither Prague biotech firms nor Ostrava ICT firms can be considered firms performing cutting-edge activities, at the global level. The fact that in
19
both cases, the share of fundamentally improved products, developed over the past three years, represented an average of only about 1/3 of the firms’ profits illustrates this reality. Several important differences in the competitiveness strategies of firms, from the two respective case studies, were identified. Specifically, the ICT firms in Ostrava devote much more effort to the development of standardised products, design and marketing than the biotech firms in Prague, which are more focused on product and process development and on tailor-made products. These differences can be attributed primarily to sector specifics. For example, the types of clients differ considerably between the two sectors, a fact which also implies different roles for marketing and design. Discernible differences between the two cases were also observed in human resources recruitment. Prague’s biotech firms recruit a decisive share of their labour force from universities, especially from universities in Prague. This is due not only to the high concentration of universities in Prague, but also to the strong role of personal links in the process of new labour recruitment. Approximately 50% of the new employees are fresh graduates from universities, at which managers of biotech firms were or still are employed, e.g. part-time. Therefore, it is not surprising, that the recruitment of new, highly skilled employees occurs primarily at the local/regional level. The ICT firms in Ostrava have a much more balanced structure of labour recruitment. The most significant sources of their labour force include technical universities and other ICT firms, followed by universities and firms from other sectors. The spatial pattern of labour recruitment by the firms of the two analyzed sectors is also quite different. ICT firms in Ostrava hire their labour force primarily from Ostrava (both from universities and firms), but then from abroad, while other Czech regions (including Prague) seem to be the least important source of labour. However, this finding can be to a great degree attributed to the labour recruitment strategy employed by the largest ICT firm in Ostrava (a foreign multinational firm) as Figure 4 verifies by comparing the simple average of firm responses with the responses, weighted by the number of employees represented. Consequently, perhaps the most surprising finding in this context is that none of the Prague biotech firms interviewed recruited a foreign specialist; while the ICT firms appear to be, at least partially, open to foreign recruiting. This finding contrasts with the image of Prague as the capital city, which should play a “gateway” role. Concerning our research questions related to the geographic scales of knowledge sourcing, the following contrasting patterns were identified (see Table 10). First, in terms of technological knowledge, the following spatial structure of key partners has been observed. For Prague biotech firms, other actors from Prague (i.e. from the local/regional level) seem to be the most important. European actors were shown to be slightly more important than actors from the other Czech regions. This pattern could be interpreted as “local buzz, and patchy global & national pipelines”. An entirely different picture was obtained from the ICT firms in Ostrava, where the primary source of technological knowledge is actors from other Czech regions (Prague seems to play an especially strong role here). Actors from Ostrava seem to be quite important as well, while foreign partners scored much lower. This pattern could be interpreted as “local buzz with strong national pipelines and scanty global pipelines”. Table 10: The location of key partners providing technological and market knowledge of the interviewed firms in Prague and Ostrava according to geographical scale (as a %) Prague/Ostrava
Other Czech regions
20
Europe
World
Total
Prague – biotech firms – technological knowledge Ostrava - ICT firms – technological knowledge Prague - biotech firms – market knowledge Ostrava - ICT firms – market knowledge
66.2
13.5
16.9
3.4
100.0
29.4
61.1
6.6
2,9
100.0
40.8
7.4
25.9
25.9
100.0
58.3
33.3
5.4
3,0
100.0
Source: Own empirical survey performed in 2009.
In terms of market knowledge, the biotech firms in Prague seem to pursue the following pattern: relatively intensive local/regional interactions, a nearly complete absence of partners in other Czech regions, with the primary source of market knowledge consisting of foreign partners (esp. customers and distributors) both from within and outside Europe. In contrast, partners from Ostrava itself, followed closely by partners from other Czech regions are considered the dominant source of market knowledge for ICT firms in Ostrava, while foreign partners are only rarely considered an important source of market knowledge. Therefore, our findings confirm the existence of significant variation in the geography of knowledge sources, according to the type of knowledge base (analytical versus synthetic) and the type of knowledge itself (technological versus market knowledge). At the same time, our results only partly coincide with the local buzz-global pipelines model. While more intensive global linkages have been confirmed in the case of the analytical knowledge base (the biotech firms) for both types of knowledge, as expected, the intensity of “local buzz” varied significantly, not only between the Prague biotech firms and the Ostrava ICT firms, but even according to the type of knowledge. However, the largest variation by far describes knowledge sources at the national level. While for ICT firms in Ostrava, sources of both market and technological knowledge at the national level are highly relevant (and, according to our interviews, contacts with the branches of multinationals located in Prague - at least partially - stipulate global knowledge sources); in the case of biotech firms in Prague, sources from the national level seem to only be of marginal importance. Therefore, the position of a region within the regional structure of a particular country seems to be a very important factor as well (for more on the role of centres and development axes in regional development, see, Blažek, Netrdová, 2009). Specifically, our results suggest that, in the case of capital cities like Prague, the role of the national level seems to be much less important (as suggested by the local buzz – global pipelines model), while for other regions, the national level (i.e. knowledge accumulated within the various institutions of the capital and of other major cities) could be of key importance. To summarise, while Prague’s biotech sector seems to follow the local buzz – global pipelines concept (though the global pipelines seem to remain rather weak and are lacking entirely in terms of labour recruitment), the case of the ICT firms in Ostrava is more complicated in that it does not follow the pattern outlined by the dichotomist concept mentioned above. That is to say, while local buzz has been confirmed in the case of labour recruitment and market knowledge exchanges, the most important spatial level, from which Ostrava ICT firms acquire technological knowledge, appears to be the national level. Contrary to Prague, international links have been identified for Ostrava ICT firms in all three arenas (labour recruitment, market knowledge and technological knowledge), but in the case of both types of knowledge, they appear to be less intensive than in Prague. In other words, the current pattern of knowledge sources for ICT firms in Ostrava can be characterised as “emerging local buzz, national pipelines and patchy direct global ties”. 21
Acknowledgements The paper was prepared with financial support from the Grant Agency of the Czech Republic (grant no. CRP/07/E005) and Research Programme No. MSM 0021620831, sponsored by the Czech Ministry of Education, Youth and Sport.
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