Vol. 10, No. 1 (March 2006) pp. 47–63 © Imperial College Press
THE BOSTON ROUTE 128 MODEL OF HIGH-TECH INDUSTRY DEVELOPMENT
JARUNEE WONGLIMPIYARAT
Boston University, 704 Commonwealth Avenue, Boston, MA 02215, USA The National Science and Technology Development Agency
Ministry of Science and Technology, Thailand [email protected]
Received 18 February 2005 Revised 25 June 2005 Accepted 28 June 2005
This study applies the concept of industrial clusters to explain the development of techno-logically sophisticated region of Boston Route 128. It is argued that the success of Boston, Massachusetts, is rooted in innovation, entrepreneurial management and the policy towards technology commercialisation. To consider the argument, the paper proposes the cluster model to capture the specific features of Boston Route 128. It represents a model of the universities working with industries to form a cluster of high-technology-based firms. The venture capital accelerates the process of technology commercialisation, giving rise to a new Boston model of innovation management. Policy makers may use the Boston model as a benchmark to evaluate their performance in supporting high-tech industries.
Keywords: Boston Route 128; high-tech industries; venture capital; industrial clusters; incubators; entrepreneurial finance.
Introduction
This paper is concerned with the success case of Boston Route 128 in commercial-ising technology and creating high-tech innovation and jobs. Boston is the premiere technological concentration with a clustering of universities, research institutions and industries, which promote the development of high-tech industries. Section 2 presents the literature review on the role of clusters in the innovation process and venture capital financing. Section 3 analyses the development of Boston Route 128 and venture capital investment in Boston, Massachusetts. Section 4 proposes the cluster management model to capture the specific features of Boston Route 128.
Policy implications for business strategists and policy makers as well as conclusions are drawn in Section 5.
Theoretical Framework
The role of clusters in the innovation process
The rise of high-technology clusters started with Porter’sCompetitive Advantage
in 1985 (Porter 1985). Porter (1985) argues that the cluster of collaborating busi-nesses helps in the rapid dissemination of innovations. His Diamond Model (Fig. 1) provides a framework for understanding collaboration/networking between the gov-ernment sector and the industry sector in the form of “clusters” (Porter, 1990, 2001). The cluster is a geographically proximate group of interconnected companies and associated institutions in a particular field linked by commonalities and complemen-tarities (Porter, 1990, 2001). The four attributes: (1) factor conditions, (2) demand conditions, (3) context for firm strategy and rivalry and (4) related and supporting industries) are self-reinforcing and catalyse the process of continuous innovations. The model focuses upon the conditions that support firm competitiveness at the national scale. It is argued that geographical concentration enhances interaction processes within the competitive Diamond Model.
The cluster approach provides an understanding of regional growth processes. Clusters lead to increased levels of productivity, growth and employment (Porter, 1990, 2001; Steiner, 1998; Feldman, 2000). Saxenian (1994) coined the concept of regional advantage to promote the clusters/regional networks for creating network-based industrial system. The cluster-network-based policies facilitate innovation and support transdisciplinary research networks among academics and entrepreneurs through
Support of cluster-specific industrial park
Availability of capable suppliers and firms in related fields
Supportive
education/training system Scientific and technological infrastructure
Context for firm strategy and rivalry
Related and supporting industries Factor (inputs)
conditions
Demand conditions
Sophisticated and demanding customers
Local demand in specialized segments that can be served globally
Local context that fosters competition Location of public investments Foreign Direct Investment (FDI)
Fig. 1. Porter’s Competitive Diamond Model: determinants of regional productivity (Source: Porter, 1990, 2001).
information and knowledge exchange. The degree of linkages within the clusters matters, since it influences the regional development. Clusters are a practical means of linking research to marketable innovations. It is argued that the concept of clusters provides a framework for making small businesses more competitive and successful in the long run (Porter, 1990, 1998, 2001; Saxenian, 1994).
Regarding the impact of clusters of innovation to the societies, the economist — Joseph Schumpeter (1934, 1964) argued that the technological innovations pio-neered by entrepreneurs have strong band-wagon effects. His notion stresses the ability of entrepreneurial firms to innovate. His concept of entrepreneurship focuses on risk taking, innovation and proactiveness to improve an entrepreneurial perfor-mance. In other words, it is the swarms of innovations that set the stage for economic growth (Schumpeter, 1939, 1967; Covin and Slevin, 1991; Brown, 1996; Lumpkin and Dess, 1996).
Venture capital financing
Venture capital (VC) is a high-risk, potentially high-return investment to support business creation and growth. It is a source of funds that typically finance new and rapidly growing companies through equity participation (Bygrave and Timmons, 1992; Gompers and Lerner, 2001). The concept of modern venture capital is defined by Megginson (2002) as a professionally managed pool of money raised for the purpose of making equity investments in growing private companies with a well-defined exit strategy.
Given that innovations often follow a life cycle, Fig. 2 shows the funding require-ment linked to the stages of the innovation process in the life cycle. The difficulties of entrepreneurial firms to acquire risk capital vary depending on the stages of the
High Risk profile Low Low Source of funding High Seed
Rate of growth
Time Source of funds : Private
innovators, Seed funds, Venture Capital Financing
Source of funds : Commercial banks, Capital markets
Fig. 2. Funding requirement along the life cycle of the technology-based firms (Source: Wonglimpiyarat, in press).
innovation process. At the seed, start-up and early stages, entrepreneurs seeking a bank loan are pressurised with collateral, which makes start-ups especially diffi-cult. It is the project risk at this stage that entrepreneurs face difficulties in finding much-needed financial backing. Given that there is a lack of risk capital to help tech-nology entrepreneurs at the beginning of the innovation life cycle, the VC financing is, therefore, necessary to draw investments into the local economy.
The “industrial cluster” concept explains the role of VC investments to com-plete the commercialisation of innovation and effectiveness of innovation (Porter, 1990, 2001). Hellmann (1994), Kaplan and Stromberg (2001) and Prowse (1998) define venture capitalists as investors who finance and actively support a portfo-lio of entrepreneurial companies. As Fig. 2 shows, VC financing is very important during the emergence stage since this phase is often clouded with uncertainties. Venture capitalists play an important role in the innovation process by providing funds and helping to organise embryonic technology-based companies. Venture capitalists exchange capital for an equity or ownership stake in the companies they finance. The structure of VC financing generally comprises the stage of financing, ex-post refinancing and exit monitoring (IPO, acquisitions, new financing, failure) to achieve high-efficiency ventures (Gompers, 1998; Marx, 1998; Cornelli and Yosha, 2001; Schmidt, 2002).
The importance of VC financing in the configuration of a geographical concen-tration is the regional capacity to engender economic advantages. The VC invest-ment (clustering) plays a vital role in creating phenomenal economic growth. Porter (1990, 1998, 2001) argues that the cluster supports competition by increasing the productivity of companies within the cluster. It is a policy to assist firms at early stage of development by using risk capital that provides a potential to boost the industry. VC has emerged as the most common form of financing for high-tech start-ups in the U.S. and is frequently referred to as an important factor in the tech-nological leadership of the U.S. economy. The successful VC backed firms in the U.S. are, for example, Cisco, Cray, Genentech, Lotus, Apple and Microsoft.
VC markets are influenced by many factors including a country’s legal and institutional structure, size and liquidity of the stock market, investor sophistication and ability to supply VC finance to entrepreneurial firms (Cumminget al., 2005). The study undertaken by Hellmann and Puri (2000) shows that VC financing is related to the growth of start-ups. The supply of venture capital is determined by investors’ willingness to provide funds to venture firms. This willingness is, in turn, dependent upon the expected rate of returns on investments. Given the risks associated with new enterprise formation, many governments attempt to overcome the barriers that hold back innovation by establishing the scientific and technological incubator to exploit and commercialise the technological opportunities. VC markets are of particular interest to policy makers since this type of investment is used to
fund high-tech companies with the potential to grow rapidly, thereby creating a positive impact on regional development.
Boston Route 128 — The High-Tech Region in Massachusetts Boston Route 128 is a technologically sophisticated region in the U.S. The devel-opment of Boston Route 128 is shown in Fig. 3. The success of Boston is mainly attributable to the business start-ups by Massachusetts Institute of Technology (MIT)
Year The development of Boston Route 128
1940s 1960s 1970s 1980s 1990s Up to 2005 Boston Technology Commercialisation Institute The Boston Photonics Centre High technology manufacturing in computers, medical devices and software MIT Industrial Liaison Program MIT’s policy towards cooperation with industry Palmer Greylock Charles River Partnership Morgan Holland Successful investment e.g. Digital Equipment Corporation (DEC), Lotus Development Corporation, Wang, Data General, Prime, Polaroid Creation of a group of bankers and industrialists
American Research and Development (ARD) Boston Financial Institutions Boston Route 128 High Technology Centre
The Venture Capital Fund of New England
First National Bank of Boston Boston Capital Corp Incubators Finance technology-based firms Small Business Investment Corporations (SBICs) Massachusetts Institute of Technology Industries Boston University Harvard University The 128 Corridor Technology base development of the Boston region with company spinoffs from MIT, Harvard, Boston in areas of Computers Medical devices Software Massachusetts Department of Economic Development
The most dynamic biotechnology clusters in Boston.
The Massachusetts Biotechnology Council Massachusetts General Hospital • • • • • • • • • • • • •
graduates to capture the benefits of close proximity to MIT and other local institu-tions. This has fuelled the growth of new defense-related industries along Boston Route 128 in the 1970s, the growth of mini-computer and data storage companies such as Wang, Digital and Data General in the 1980s; software and telecommuni-cations companies and the bio-science companies in the late 1990s.
Boston Route 128 represents an integration of industries, universities and gov-ernment, leading to a cluster advantage. The universities’ strong science-based research at MIT, Harvard University, Boston University, Massachusetts General Hospital and others lay the ground for the most dynamic biotechnology clusters in Boston. The entrepreneurial biotechnology firms are mostly the spin-outs from universities’ research. Many new start-up firms arise from the MIT Entrepreneur-ship Centre, Boston Photonics Center, Harvard Industry-Sponsored Research Pro-gram. The leading biotechnology firms are, for example, LeukoSite, Transkaryotic Therapies, Alphagene, ProScript, Millennium, Endogen, Hybridon and Cambridge Neuroscience. The commercialisation of biotechnology is due in large measure to the capacities of venture capitalists to recognise and capitalise on the potential of commercial biotechnology.
In 2001, the United Nations’ Human Development report ranked Boston behind only Silicon Valley. The number and dollar amount of VC investments are shown in Tables 1 and 2. The major VC investments in Boston, Massachusetts, are in soft-ware, biotechnology and networking and equipment. Behind the successful devel-opment of Boston economy are the structures of integrative networks of universities, technology-oriented companies, public/private research organisations, suppliers and manufacturers who facilitate information exchange and technology transfer (Fig. 4). Also, the local access to VC supports entrepreneurs’ conversion of ideas into eco-nomic prosperity.
Boston Clusters of Venture Capital Investment
To understand the Boston Route 128 Model of high-tech industry development, it is helpful to draw a cluster map of the region. The empirical analysis of Boston Route 128 model is based on 87 interviews with a range of individuals including faculties, researchers, venture capitalists, governmental officials, entrepreneurs and policy analysts. The interviews were conducted in the U.S., particularly in Boston and Cambridge between September 2004 and January 2005, using the semi-structured questionnaires with open-ended questions. The ultimate intention of interviews is to understand the critical factors in making Boston a high-tech industry development model and to demonstrate that institutional interactions seem to be an important factor in the process of technology commercialisation and efficient spin-offs. The interviews are useful for detailed and comprehensive understanding on the issues
T abl e 1 . N umber and dol la r amount of V C di sb ur sement s in the st at es w it h th e m ost V C act iv it y ( Sour ce : B ased on ta b u la ti ons of V ent ur eX per t and unpubl is hed V ent u re E conomi cs d at abases, ci te d in G omper s and L er ner (2004, p. 15) ). S tat e 1965–1969 1970–1974 1975–1979 1980–1984 1985–1989 1990–1994 1995–1999 2000–2002 Number of V C in vest m ent s C al if or ni a 6 5 179 310 1863 2645 1138 3192 3209 Massachuset ts 45 93 155 708 1014 352 894 908 T exas 1 8 7 1 8 4 373 584 215 525 575 N ew Y or k 2 8 9 0 7 3 311 324 108 531 658 N ew Jer se y 1 5 3 5 4 7 171 291 102 257 261 C o lo ra do 5 2 2 3 1 194 258 112 269 245 P ennsyl v ani a 8 21 32 120 290 125 343 298 Il li noi s 1 6 2 9 3 1 133 214 99 242 244 Mi nnesot a 12 34 42 170 186 79 164 159 C onnect ic ut 3 2 0 3 7 136 217 74 200 177 T o ta l al l st at es 302 847 1253 5365 8154 3376 9202 9257 A m ount of V C in vestments (US$ million) C al if or ni a 268 672 849 8251 11, 889 9517 54, 603 76, 169 Massachuset ts 75 191 243 2389 3478 2846 13, 089 19, 252 T exas 4 6 172 182 1427 2669 2907 7922 12, 223 N ew Y or k 3 9 190 199 846 1726 1072 8223 11, 294 N ew Jer se y 4 0 101 94 455 1493 1305 3511 7444 C o lo ra do 15 62 56 606 989 858 4567 6651 P ennsyl v ani a 2 2 5 1 143 455 1881 1215 4078 4991 Il li noi s 7 3 165 144 353 1485 917 3463 4429 Mi nnesot a 8 111 54 332 499 379 2034 2542 C onnect ic ut 1 3 9 104 392 1799 755 2473 2976 T o ta l al l st at es 845 2379 2777 18, 762 37, 796 28, 281 143, 561 191, 974
Table 2. Venture capital investment in Boston (as of 30 September 2004) (Source: PricewaterhouseCoopers/Venture Economics/NVCA MoneyTree Survey).
Year No. of companies No. of deals Investment (US$ Million)
1994 83 101 358.8 1995 135 160 569.8 1996 184 222 968.1 1997 223 274 1157.1 1998 262 324 1621.2 1999 386 492 4102.0 2000 546 664 8836.3 2001 369 449 4048.2 2002 244 302 2062.9 2003 244 307 2169.4 2004 177 197 1781.4 13% 11% 10% 5% 5% 4% 3% 9% 22% 18% Telecommunications Retailing/Distribution Biotechnology IT Devices
Media & Entertainment Medical Devices & Equipment Computers & Peripherals Other
Software
Networking & Equipment
Fig. 4. Distribution of venture capital investments in Massachusetts — Year 2001 (Source: Massachusetts Technology Collaborative).
relating to the process of technology commercialisation. Interviews were based on the prepared questions and focussed on eliciting views on the factors contributing to the success of Boston Route 128. The interviews indicate that the success of Boston Route 128 is characterised by the VC network, the high concentration of organised research institutions and networked universities, and efficient technology transfer to corporations (note: the questionnaire is not included here and can be ordered with this report from the author). The cluster map of Boston Route 128 (Fig. 5) can serve as an interesting model to characterise the development of innovation system.
Some of the studies associated with the biotech clusters can be seen in the works of Salman and Saives (2005). They test the hypotheses linking the indirect network position of a firm to its innovation capacities by using network analysis, centrality
Innovative institutions: Boston Technology Commercialisation Institute Boston Photonics Center
MIT Industrial Liaison Programme
Harvard's Office for Technology and Trademark Licensing Harvard Medical School's Office of Technology Licensing and Industry-Sponsored Research
Supporting infrastructure:
Yankee Tek incubation fund supplying seed capital to MIT/Harvard spin-outs Small Business Investment Companies program (SBICs) providing risk capital to help small firms with commercial potential.
Biotech parks: One Kendall Square, Cambridge Center, Charlestown Navy Yard, Longwood Medical Area, Kendall Square Project (Cambridge Research Park), Biosquare.
Related and supporting organizations: Massachusetts Biotechnology Council, Massachusetts Department
of Economic Development Core of Boston clusters: Biotechnology Medical devices Computers Software Sophisticated markets: high-technology enterprises
Fig. 5. The cluster map of Boston Route 128 Model (Source: The author’s design). measures and hierarchical regressions. Their findings suggest that by occupying a central position in a network of indirect ties, a firm is more likely to access useful knowledge from its direct partners and increase innovation. Whereas the present study (the Boston Route 128 model of high-tech industry development) provides an understanding of the technology commercialisation process and innovation man-agement, the use of other methodologies would assist in this understanding. In this respect, the research will be more useful if further studies use statistical methods to support an analytical procedure. Although the extensive statistical analysis will not provide an in-depth picture of the research, it does have the advantage to help this research to be more comprehensive and more systematic in order to achieve the results that are more convincing as well as to give us a firmer understanding of the research on industrial clusters.
Route 128 embraces the Greater Boston area in Massachusetts. It represents a model of the universities working with industries to form a cluster of high-technology-based firms. There are 74 colleges and universities in Boston, which provide quality workforce to the region. The cluster map of Boston Model shown
in Fig. 5 would fill out the picture of the success of Route 128. Most companies in Boston and Cambridge, Massachusetts establish themselves as spin-offs from the MIT, Harvard University, Boston University and Massachusetts General Hospital. These universities have engaged in world class scientific research and produced some of the best engineers in the country. Table 3 lists the activities at the major universities which accelerate the innovation process.
Table 3. Activities at the major universities which accelerate the innovation process (Source: The author’s design). Universities Activities Massachusetts Institute of Technology (MIT)
• MIT is a leading centre for biotechnology research and commercialisation: campus incubators and technology parks. • The MIT Industrial Liaison Program introduces the companies to MIT
faculties and programmes. The companies benefit from the MIT R&D community through research collaboration with MIT faculties that could affect the business undertakings. MIT also has the benefits in terms of developing educational programmes meeting the industry needs. • MIT Technology Licensing Office identifies technologies suitable for
start-ups and introduces technology to potential investors (especially venture capitalists).
• MIT Enterprise Forum provides services to support small technology-based companies. The supporting programmes include professional seminars, start-up clinics, case presentations, and business plan workshops.
• MIT Entrepreneurship Centre has launched an annual “$50K business plan competition” to encourage scientists in entrepreneurship. Boston University • Boston Technology Commercialisation Institute promotes cooperation
between academic and business world to improve and accelerate university-based technology commercialisation.
• The Boston Photonics Center is an incubator to license technology from Boston University. The Center has developed a programme that focuses and accelerates the development and commercialisation of Photonics technologies.
• Boston Entrepreneurial Management Institute sponsors research and develops curriculum in Entrepreneurship. The Institute helps students develop a successful business plan and links them to the leading venture capital sources in the Boston area.
• Boston Community Technology Fund provides venture capital and access to the university’s scientific and technical resources for the businesses. The programme provides direct investments in venture deals and acts as a limited partner in Venture Funds.
Table 3. (Continued)
Universities Activities
• The Office of Technology Transfer at Boston University assists faculty in identifying, protecting, and commercialising Boston University’s intellectual property.
• Bio Square Technology Park focuses on Boston’s biomedical research. It allows biomedical research companies and businesses the opportunity to work in tandem with investigators from the Boston University Schools of Medicine, Dental Medicine, and Public Health.
• The Health Care Entrepreneurship Program supports entrepreneurial business development in health care and advises start-up businesses. The programme helps the medical students to learn about the early stages of business development and career options in the business world. • The Fraunhofer USA Center for Manufacturing Innovation provides
manufacturing solutions to local and international industry in areas of automation technology, manufacturing systems design, and machining technologies. The centre aims to improve current manufacturing operations and benchmark against the world’s best practices.
Harvard University • Harvard University’s Office for Technology and Trademark Licensing and Harvard Medical School’s Office of Technology Licensing and
Industry-Sponsored Research work cooperatively to transfer University technology to the commercial sector for development of products. • Collaborative Science and Technology VC Fund enables the university to
seed science and technology projects in fields such as nanotechnology and neuroscience.
• The GSAS Harvard Biotechnology Club attempts to bridge the gap between industry and academia by building relationships with companies operating in the biotechnology and healthcare sphere.
• Entrepreneurial Management Unit undertakes empirical research, course development, teaching, and publication in Entrepreneurship to develop outreach opportunities in VC investments.
• Harvard Industrial Outreach Program collaborates with leaders in academia, industry, and government to foster future discoveries and scientific applications of Harvard University.
• The Harvard Industrial Partnership provides a stimulating and interactive forum for sharing the latest advancements of Computer Science and Electrical Engineering. The programme encourages industrial collaboration with Harvard University research groups.
• Harvard Technology and Entrepreneurship Centre supports opportunities for the innovation community to gather and exchange knowledge. The centre aims to advance the practice of translating science and technology into societal benefits.
5,354 3,848 3,318 1,691 1,511 144 202 Software Innovation services Computer Healthcare technology Industrial support Textiles & apparal Defense
Fig. 6. Total R&D spending by sector in Massachusetts — Year 2001 (Source: Massachusetts Technology Collaborative).
Figure 6 shows total R&D spending by sector in Massachusetts. An economic performance and innovative activities of Boston are shown in Table 4. It can be seen that Route 128 is the location of an advanced industrial complex in Massachusetts. Interestingly, the factors contributing to Route 128’s success are:
1. The presence of strong science- and technology-based research institutions in Cambridge like MIT helps form the high-tech industries and support the prolifer-ation of spin-offs. Of the 4000 MIT-related companies worldwide with revenues of US$232 billion, 1065 are headquartered in Massachusetts and employ over 125,000 employees. High technology manufacturing firms in Boston Route 128 are specialized in computers, medical devices and software. Given that biotech-nology is a research- and capital-intensive industry, the business incubation cen-tres benefit from the universities’ research. In other words, Biotech’s R&D thrives on links to the Massachusetts academic community. The close cooperative work between the universities and industries helps commercialise research and pro-mote the spin-offs.
2. The set up of industrial park and business incubators within the universities are an effective tool for creating jobs, encouraging technology transfer and launch-ing new business ventures. As the corporations are located at university-based incubators or science parks, the close proximity makes it easier to withdraw knowledge from the universities to the industries. In Route 128, Novartis AG and Merck Research Laboratories have opened the research centres near the university campus for knowledge networking and transferring research results to commercialisation; MIT has focussed its policy towards cooperation with industry to develop spin-out firms; MIT and Harvard faculties have set up Yan-kee Tek incubation fund to supply seed capital to MIT/Harvard spin-outs in the telecommunications industry; Boston University has set up the Photonics Center as an incubator to bring business and academia closer together for commercial exploitation. Other specialised biotechnology incubators and research parks of
Table 4. Economic performance and innovative activities of Boston (Source: Impresa/The New England Economic Indicators database).
Economic performance Boston Rank Average Highest Lowest
metro area
Total employment (1997) 3.8 million 2nd 1.8 million 3.8 million 700,000
Employment growth 1.20% 13th 2.3% 4.9% 0.8%
(1990–1997)
Manufacturing growth −1.60% 15th 0.5% 6.2% −0.7%
(1990–1997)
High-tech Employment Rank by Location Rank by
Employment (1997) employment quotient location
quotient
Computer and electronics 71,715 2nd 2.2 6th
Software publishers 25,211 1st 4.8 2nd
Information services/ 11,355 2nd 1.6 4th
Data processing
Computer systems design 25,464 4th 1.7 8th
Total high tech 133,745 3rd 2.2 5th
Innovative activity Boston metro area Rank Average Highest Lowest
Patents (1998) 3687 2nd 1549 4931 289 Patent rate (1997) 57.8 6th 62.8 121.7 32.7 Growth in patents 7.3% 11th 10.7% 17.5% 6.5% (1990–1998) VC investment counts 1048 2nd 1518 17 (1995–1999)
Share of U.S. total 10.5% 2nd 15.2% 0.2%
(1995–1999)
Largest high-tech firms Product specialisation Employment
Raytheon Co. Defense, Electronics 15,400
Compaq Computer Corp. Computers 8000
Lucent Technologies Inc. Telecommunication 5600 equipment
Lotus Development Corp. Software 4050
EMC Corp. Software 3600
Route 128 include MBIdeas Innovation Centers, Massachusetts Biotechnology Research Park, BioSquare, Tufts Science Park, University Park at MIT, One Kendall Square, Cambridge Center, Charlestown Navy Yard, Longwood Med-ical Area, Kendall Square Project (Cambridge Research Park) and BioSquare.
These incubators are important resources in bridging the culture gap between the academic and industrial world.
3. The government policy has direct influence in supporting innovations. For example, the Bayh–Dole Act of 1980 (Public Law 96-517) legislation allows universities to lay claim to innovations developed within their environs. The leg-islation requires that inventions arising from Federal Government sponsorship and assigned to the university must be actively transferred to the private sector for the benefit of the general public. There are many intermediary bodies sup-porting the industry at state level, for example, the Massachusetts Biotechnology Council and the Massachusetts Department of Economic Development. These organizations play a key role in business and trade development to improve the business climate (e.g., R&D tax credits, investment tax credits). Also, there are the government programmes like the Small Business Innovative Research (SBIR), the Small Business Investment Companies programme (SBICs) pro-viding an important source of seed and start-up capital for high-risk research projects to help small firms with commercial potential.
Policy Implications and Conclusions
An analysis of Boston Route 128 provides insights about the key characteristics defining the successful development of high-tech industries. The study has shown that the industrial base of electronics and technology of Boston Route 128 has sprung from the clustering of university research institutions and entrepreneurial finance. Boston Route 128 provides a model of innovation management and the highway in developing long-term economic success. The study offers policy implications for business strategists and government policy makers as follows.
1. The Boston Route 128 Model shows effective linkages between the strong science- and technology-based research universities of MIT, Boston, Harvard and others. Massachusetts’ emphasis upon convention of forums and networking workshops facilitates the innovation process, for example, the Entrepreneurial Management Institute at Boston University, the MIT Entrepreneurship Cen-ter, Harvard Technology and Entrepreneurship Center. There are a number of forums for knowledge exchange and debate. For example, the Springboard Enter-prise VC Forum and French–American Transatlantic Partnerships and Financing Workshop are organized to open up the opportunities for the new business ven-tures. As Porter stated: “Our task is to preserve our leadership … the region’s advantages include the existing concentration of companies, organizations, and
institutions with a presence in the field, the highly educated work force, and the flow of technology among institutions and companies …”.1
2. In terms of cluster management, the economic advantages come from a geograph-ical concentration. Boston Route 128 can be a benchmark in terms of integration and networking model. The success of Boston is based on the strengths of the biotechnology industrial sector, which help build and strengthen competitive-ness of the region.2Boston’s existing pre-eminence in the biotech field and its
regional advantage are based on the concentration of companies, organisations, and institutions with great expertise. Geographic proximity promotes effective intellectual networking, thereby making the university research useful to soci-ety. In other words, the geographical proximity between university researches and industries fosters efficient technology transfer and knowledge exchange, supports technological industries, and facilitates innovative commercialisation. The present findings confirm the study of Luis (2002) focussing on the Los Angeles metropolitan region. His study examines the assumptions of clustering and its impacts for high-tech innovation and performance. The evidence from the geographical clusters in three electronics industry groups, of advanced computers, telecommunications, and electromedical equipment manufacturing, points to the need to consider the larger metropolitan context in order to understand the relation-ship between high-tech clustering and the internal performance of manufacturing.
3. VC serves as an efficient mechanism to improve local business climate, create high-tech innovation and jobs. The VC funding in Massachusetts (Boston) ranks second only to California. The VC investment in high-tech companies helps produce valuable research results in Boston. For the governments and policy makers around the world to follow the model, the creation of science parks, business incubators with VC financing mechanisms would provide a vehicle for enhancing commercialisation of research outcomes and facilitate the potential of university technology transfer. Sako (2003) examined essential elements of the high-tech clusters in the U.S. economy, arguing that Silicon Valley is possibly a national replication model for entrepreneurial start-ups. In terms of replication, she offers a framework for analysing how the Silicon Valley model might be replicated, with or without modifications.
1Life sciences loom large in Boston’s future: Harvard summit draws leaders to strategy session, Alvin
Powell, Harvard News Office.
Acknowledgements
The author would like to thank the interviewees involved with this study and Prof. Michael E. Porter, Bishop William Lawrence University Professor, Harvard Busi-ness School for professional advice on the concepts of clusters and National System of Innovation.
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