The strategic value of oscillating tie strength in technology clusters.

SUMMARY

This paper focuses on the innovation networks of high-technology Small and Medium-sized Enterprises (SMEs) within a Science and Technology Park (STP). More specifically, the study examines the role of network ties in high-technology SMEs by focusing on the linkages employed by small businesses to learn, adapt to technological change, and innovate. The paper presents evidence from a recent survey of Brisbane Technology Park (BTP) and this illustrates how the competitiveness of local high-tech firms will be enhanced by the suggested model, which describes the need for oscillation between weak and strong ties at different stages of the innovation process and diffusion.

Key Words

science and technology parks; strong and weak ties; innovation networks; clusters; Brisbane Technology Park; high-tech SMEs

Introduction

In order to ensure future longevity, nations and companies alike must adapt to changes in the environment, and focus their efforts on the process of innovation and the development of competitive advantage (Lalkaka 2002; Hamel & Valikkangas 2003). It is now widely recognised that innovative outcomes do not occur in isolation, but are best achieved through interactions with other environmental actors, particularly those with complementary skills and resources (Hattori & Lapidus 2004; Horn 2005). Chesbrough (2003) has referred to this expanded approach to information and resource sharing through interactions as 'open innovation' system and stressed the importance of such a model in the development of accelerated technology outcomes and their wider diffusion.

Indeed, a growing body of research has demonstrated the success of the emergent inter-organisational arrangements such as networks, collaborations and various forms of innovation clusters in the development of innovation across a wide field of interest (Huxham 1996; Dewick & Miozzo 2004; Powell et al. 1996). Science and Technology Parks (STPs) are examples of this emphasis on clustering for innovation. While some STPs have emerged spontaneously over time (most famously 'Silicon Valley'), a vast majority have been formed deliberately in an attempt to emulate the perceived ability of such entities to derive spill-over effects at the regional and national level through innovation and Research and Development (R&D) efforts (Phan et al. 2005).

Through their participation in clustering within STPs, Small and Medium-sized Enterprises (SMEs) are able to exploit the benefits of geographical and sectoral concentration (such as the division of labour and specialisation resulting in normally unattainable scale economies), leading to the creation of an environment that is conducive to knowledge sharing, joint-action, and ultimately innovation (Schmitz 1995). Entering clusters and networks also allows for the formation of linkages and relationships between people and organisations. The structure and strength of these linkages is important--weak ties are said to foster access to new and novel information, while strong ties provide the coherence (trust, commonality) necessary to achieve collective goals (such as innovation). While some suggestion exists that firms should concentrate on developing either strong or weak relational ties, a growing understanding is emerging that both strong and weak ties are necessary for innovation (see for example, Elfring & Hulsink 2003).

Despite the agreement in the literature on the need for differentiated tie or relationship strength for innovative outcomes, how these intersect and role of the other relational mediating factors for diffusion of innovation have remained largely unexplored. This paper examines the duality role of network ties and by using a case study of a South-East Queensland STP to provide insights, the paper will focus on the nature of relationships and exchanges between SMEs of a technology park and their stakeholders. It argues that the nature and strength of the linkages between firms and their stakeholders, and across sectoral boundaries, influence the scope and purpose of various business activities and the innovation process. In fact, the nature and characteristics of these linkages often help to determine the effectiveness of the innovation process and diffusion. For this purpose, firstly the paper will look at the literature related to networks, innovation and network ties highlighting the factors necessary to support the process. Following this literature review, the methodology used to build the case study and key findings are presented. Finally a discussion of the relationships within the BTP network cluster and mediating factors, and its application to the model derived from the literature will be presented, with some concluding comments.

Literature review

Networks and innovation

While innovation is viewed from a number of different perspectives by a range of interest groups (such as economists, researchers, managers, geographers, and government departments), Marceau and Dodgson (1999) highlight the importance of its systemic nature, either within internal organisational systems made up of various departments which encompass an overall innovative 'team effort', or of more significance to this study, the view of innovation as an outcome of complex network interactions between innovating firms and a range of other entities, such as suppliers, customers, universities and government. Through such interactions, innovation can be developed to effectively meet the needs of a range of stakeholders, thus increasing the likelihood of its success.

Given the often unclear perceptions that exist about innovation, particularly from the perspective of organisational leaders, Ulrich (2002) presents three premises of innovation:

1. 'Innovation matters'--it is critical to growth and survival.

2. 'Innovation is multifaceted'--influenced by a variety of different factors, and affecting organisations at various levels.

3. 'Innovation is a culture, not an event'--highlighting the importance of innovation being considered a cultural issue within an organisation.

Recognition of these premises, it is suggested, will allow for a greater understanding of the nature of innovation and its benefits. These views are consistent with Tushman and Nadler's statement that 'organizations can gain competitive advantage only by managing effectively for today while simultaneously creating innovation for tomorrow' (1986: 92).

With regard to the drivers of innovation, Hyland and Beckett state that 'amidst the diverse views relating to innovation is a recurring theme, namely that innovation is a people-centred process, which commonly involves technology and requires some kind of systematic approach to achieve consistent results', suggesting that innovation is invariably driven by people (demand-driven innovation) or technology (supply-push innovation) (2004: 36-37). Another commonly identified driver of innovation is that of location, which has gained considerable interest over the past several years within research on technology clustering. One of the main reasons that location is said to influence innovation is that close proximity to other innovators and stakeholders facilitates knowledge transference, which is particularly important when much of the knowledge to be transferred is tacit in nature, making it difficult to be articulated and shared between geographically dispersed actors, in contrast to easily documented explicit knowledge (Nonaka 1994). It is argued that the outcome of the transference of knowledge between different actors is the creation of new knowledge, some of which may later become innovations (Ibrahim & Fallah 2005).

Furthermore, new product development, particularly in high technology industries, can be driven through co-operation between individuals with 'partially overlapping tacit knowledge of a technical source' (Lawson & Lorenz 1999: 310). Therefore, to quote Baptista and Swann (1998: 528):

So long as much technological knowledge has

a tacit nature and cannot be codified through

plans, instructions or scientific articles, it

seems reasonable to expect a greater geographic

concentration of innovators.

Recognising the highlighted benefits of knowledge exchanges within geographical regions, Ulhoi (2004) has proposed the greater adoption of open-source based innovation, particularly in cases where proprietary licensing is costly or ineffective, and the speed of technological development is crucial (such as in high technology industries). If such ideals are to be adopted, the establishment of stable social relationships between innovators and other interest groups will be necessary, providing the opportunity for the dynamic patterns of communication that form part of the knowledge generation process (Ulhoi 2004). These relationships may be formal or informal in nature and can be characterised as a 'network'.