Martin Kenney

Venture Capital, High Technology and Regional Development∗

FLORIDA R. L. and Kenney M. (1988) Venture capital, high technology and regional development, Reg. Studies 22, 33–48. This paper explores the role of venture capital in technological innovation and regional development. Both aggregate data and a unique firm level data base are employed to determine the location of major centres of venture capital, flows of venture capital investments, and patterns of investment syndication or coinvestment among venture capital firms. Three major centres of venture capital are identified: California (San Francisco–Silicon Valley); New York; and New England (Massachusetts–Connecticut): as well as three minor venture capital centres: Illinois (Chicago); Texas; and Minnesota. Venture capital firms are found to cluster in areas with high concentrations of financial institutions and those with high concentrations of technology-intensive enterprises. Venture capital firms which are based in financial centres are typically export-oriented, while those in technology centres tend t...

Venture capital-financed innovation and technological change in the USA

Abstract Venture capital has transformed the innovation process in the US. Venture capitalists provide funds and assist in the formation of new high technology business. They actively cultivate networks comprised of financial institutions, universities, large corporations, entrepreneurial companies and other organizations. These networks and the information flow at their disposal enable them to reduce many of the risks associated with new enterprise formation and thus to overcome many of the barriers that hold back innovation. Venture capital-financed innovation is a “new model” of innovation which goes beyond both classical entrepreneurship and corporate-based innovation. Venture capitalists forge important linkages among a variety of organizations which are important to the innovation process and act as “technological gatekeepers” accelerating the process of technological change. The venture capital industry is organized in a series of relatively self-contained complexes — technology-oriented, financial-oriented and hybrid — which play distinct roles in the process of venture capital-financed innovation. While venture capital catalyzes technological change, it also generates costs, most notably the disruption of established research organizations and the establishment of strong incentives for “breakthroughs” as opposed to other types of innovation.

THE NEW GEOGRAPHY OF AUTOMOBILE PRODUCTION: JAPANESE TRANSPLANTS IN NORTH AMERICA

Japanese automobile firms have constructed substantial complexes of manufacturing plants in North America. The complexes include over two hundred and fifty components factories as well as twelve as...

Venture capital and high technology entrepreneurship

Abstract Venture capital clearly plays an important role in high technology entrepreneurship. The purpose of this article is to explain the differences among various venture capital complexes focusing on where venture capital is important to innovation and entrepreneurship and conversely where it is not. We do so through an empirical and historical examination of the seven most important venture capital complexes: California (San Francisco/ Silicon Valley), Massachusetts (Boston), New York, Illinois (Chicago), Texas, Connecticut, and Minnesota (Minneapolis). We establish a three-part tripartite typology for explaining the differences between these venture capital complexes: 1) technology-oriented complexes are located close to concentrations of high technology intensive businesses, invest most of their funds locally, and are net attractors of capital; 2) finance-oriented complexes are located around financial institutions and export their capital; and 3) hybrid complexes mix characteristics of both technology and finance-oriented venturing. Our findings have a series of important practical implications. Although venture capital is not absolutely necessary to facilitate high technology entepreneurship, well-developed venture capital networks provide tremendous incentives for entrepreneurship by lowering the difficulties of entering an industry. Venture capitalists use both their experience and their contacts to reduce many of the information and opportunity costs associated with new business formation. The importance of contact networks and information to both deal flow and investment monitoring goes a low way toward explaining why venture capitalists cluster tightly together. The availability of venture capital also attracts entrepreneurs and high quality personnel to a region creating a virtuous circle of new enterprise formation, innovation, and economic development. Private, nonprofit, and subsidized public efforts aimed at providing venture capital and stimulating high technology entrepreneurship must confront the fact that venture capital alone will not magically generate entrepreneurship and economic development. It is important that such efforts recognize the nonfinancial side of venture investing and attract experienced personnel who can tap into established entrepreneurial networks and secure coinvestors. More significantly, establishing public venture funding in an area lacking the requisite entrepreneurial climate or technology infrastructure may create a “catch 22” situation where locally oriented funds invest in bad deals or where venture capital is simply exported to established high technology regions.

Beating the Clock: Corporate Responses to Rapid Change in the PC Industry

Competition in the personal computer industry is predicated upon the careful management of logistics, particularly those aspects concerned with time. This is due to the need to mitigate the loss-of-value dynamics of the critical components utilized in PCs. PC firms have developed various value chain models for controlling this devaluation process. Direct marketers such as Dell have organized their production activities to manage and benefit from the constantly falling prices. In contrast, their more traditional competitors continue to lose market share because they have been unable to manage time as effectively.

The organization and geography of Japanese R&D: results from a survey of Japanese electronics and biotechnology firms

The paper reports the results of a mail survey of and personal interviews with R&D managers of the largest Japanese electronics and biotechnology firms regarding the organizational and geographic dimensions of their R&D activities. The results indicate that the importance of multi-functional teams for Japanese R&D has been overemphasized. The transfer of employees between R&D and manufacturing and joint meetings are judged as being the most important factors in ensuring the information transfer between the two corporate functions. The findings indicate that basic research facilities have significant locational flexibility. However, applied research and production engineering need to be in close proximity to manufacturing. The differences between the electronics and biotechnology industries were only rarely significant.

Creating an Environment for Venture Capital in India

Abstract The institution of venture capitalism is a difficult one to initiate through policy intervention, particularly in developing countries with unstable macroeconomic environments and histories of state involvement in the use of national capital and in the composition of production. India has all these constraints. The emergence of a thriving software services industry after 1985 created the raw material that venture capital could finance, thus achieving a critical precondition for venture capitals growth. It was followed by efforts to create a venture capital industry. After several setbacks, some success has been achieved largely due to a slow process of moulding the environment of rules and permissible institutions. The process was assisted by the role of overseas Indians in Silicon Valleys success in the 1990s. Yet, in terms of what is needed, most of the work remains to be done. Inevitably, this will be the result of joint work by policymakers and practitioners.

Towards a new theory of innovation management: A case study comparing Canon, Inc. and Apple Computer, Inc.

Abstract This paper argues that innovation can be best understood as an information process which is then concretized as a product that meets demand. Two very different firms, Canon Inc. and Apple Computer Inc., are used as case study illustrations. Innovation does not proceed through logical deduction, but rather is furthered by the use of metaphors and analogies. The bureaucratic and staid structures of the firm can be challenged and broken up to provide the space for innovations to emerge. The leaders role in the innovating firm is as a catalyst and facilitator, not as an allknowing despot. The importance of innovations is not merely in the new product, but also the “ripple” effects of innovations which can propel the firm into a self-renewal process.

Silicon Valley and Route 128 Won't Save Us

Many Americans regard Silicon Valley and Route 128 as symbols of Americas economic and technological success; they are held out as models for the rest of the American economy. But their success is misleading. In fact, the U.S. microelectronics industry is too fragmented; very few start-ups ever become large enough to compete effectively in global markets. More importantly, because these firms have not been able to develop close working relationships with their customers, who are primarily traditional manufacturing companies, the latter continue to slip further behind. The innovations of Americas high-tech firms are not being diffused throughout the rest of the American economy.

Japanese maquiladoras: Production organization and global commodity chains

Abstract During the last decade at least 66 Japanese maquiladoras have been established in Mexico employing in excess of 20,000 workers. This paper examines the organization of production in these plants and the insertion of these production activities in the global commodity chains of these firms. Managers at 17 firms were interviewed either in person or by telephone and 10 of the plants were visited. The results indicate that the production organization and labor-management relationships resembled that of temporary employees in Japan. Most of the activities undertaken in the maquiladoras are relatively low-skill level, labor-intensive activities. In Tijuana there are now at least 31 Japanese maquiladoras most of which are in the electronics industry and these include a number of Japanese suppliers, thereby creating a proto-industrial complex.