Complex spaces: Global innovation networks & territorial innovation systems in information & communication technologies

Cooke, Philip Article Complex spaces: Global innovation networks & territorial innovation systems in information & communication technologies Journal of Open Innovation: Technology, Market, and Complexity Provided in Cooperation with: Society of Open Innovation: Technology, Market, and Complexity (SOItmC) Suggested Citation: Cooke, Philip (2017) : Complex spaces: Global innovation networks & territorial innovation systems in information & communication technologies, Journal of Open Innovation: Technology, Market, and Complexity, ISSN 2199-8531, Springer, Heidelberg, Vol. 3, Iss. 9, pp. 1-23, https://doi.org/10.1186/s40852-017-0060-5 This Version is available at: https://hdl.handle.net/10419/240868 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. https://creativecommons.org/licenses/by/4.0/ RESEARCH Open Access Complex spaces: global innovation networks & territorial innovation systems in information & communication technologies Philip Cooke Correspondence: [email protected] Center for Innovation and Regional Development, West Norway University of Applied Sciences, Bergen, Norway Abstract This paper brings together two related bodies of theory that assist understanding of processes of socio-technical system change on the global scale. These are, first, the Global Value Chain perspective (GVC) that has now mutated into Global Production Networks (GPN) and, more recently, Global Innovation Networks (GIN). Examples of why this should be are exemplified (e.g. Scandinavia’smobile telephony ‘creative destruction’). The second perspective is that of Territorial Innovation Systems. This addresses the innovative core of ‘creative destruction’ events which, in turn, explains economic growth and development. In recent times this has been significantly undergirded by means of concepts like ‘relatedness’, ‘proximity’and ‘path dependence’. These perspectives are combined to produce a framework for analysing the contribution of an increasingly commoditised ICT assembly industry to high-value, customised ‘chipset’and ‘apps’design around smartphones, netbooks and flat panel display (FPD) technologies that express the GIN/TIS complex in global ‘value curve’integration. Here ‘creative destruction’ recombinations arise because, from an evolutionary perspective, the regions in which they emerge display technological ‘relatedness’and regional ‘regimes’that foster co-innovation, in this case ICT-based co-innovation. Introduction This paper will home in on a spatial understanding of today’s rapidly changing ICT technology platforms in convergent ICT in the smartphones, tablets, netbooks and flat screen products businesses in key innovative growth and transitioning regions of northern Europe, California and Asia Pacific, notably China, Taiwan and South Korea. The paper is set at something of a trisection among economic geography, international business and development studies (on aspects of this, see Beugelsdijk, McCann & Mudambi, 2010). In regard to the first, the paper examines the process of transition in global system architecture. In brief, this means exploring change processes in complex adaptive systems, seen as ‘systems that have large numbers of components, often called agents, that interact and adapt or learn’(Holland, 2006; see also Kauffman, 2008; Cooke, 2012). In this instance, the focus is upon the inheritance of the global ICT industry from a hierarchical, linear, multinational corporation (MNC) orchestrated ‘global value chain’(GVC) evolved into a still-linear, hierarchical ‘global production network’(GPN) different for two reasons. First, because states, through their national © The Author(s). 2017 Open Access This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made. Cooke Technology, Market, and Complexity (2017) 3:9 DOI 10.1186/s40852-017-0060-5 innovation systems (NIS), both guaranteed foreign (often US) direct investment (FDI) agreements and potentialities (e.g. regarding research, skills and hardware investments in support of FDI). Second, NISs also arrange the elaboration of subsidiary GPNs such as those elaborated by Singapore in hard disk drives among Malaysia, Thailand, the Philippines and India or Taiwan in components regarding its silicon foundry, FDI acquisitions and cross-straits relations with China’s‘world factory’. From the second viewpoint, that of international business, of key interest in the paper is the erosion and change in roles of firms in the eclipse of GVC and GPN relationships at the global scale. A key part of this erosion and change is technological, organizational and cultural evolution in market demand and innovative response. Sufficient has changed, even in the past four or five years or so to render some of the conclusions of insightful accounts of experts such as Mudambi (2008) open to question and revision. In particular, this paper concurs that a big shift in business relations, market demand and the culture of ‘new combinations’of commercial modularization (e.g. wireless radio, camera, music, video, film, computing, Internet, etc. and integrative systems design) testifies to the emergence of an ICT ‘global innovation network’(GIN). This has the characteristics of a complex adaptive system with non-linear and distributed innovation characteristics without the single hierarchical force of the Western MNC driving it. Rather, innovation occurs in distinctive territorial innovation systems (TIS) clustered at key nodes in the GIN. The term TIS is preferred to NIS, first, because neither South Korea nor Taiwan are officially nations, both being disputed parts of a greater geopolitical whole. But second, key parts of the rest of the current ICT GIN are not national either but elements of regional innovation systems (RIS). This is true of epicentres at Silicon Valley in the US, where Apple and Google prevail; Eastern England and particularly Cambridge where ARM and CSR similarly prevail with 99% of the market for smartphone chipsets; the regions of Sweden, Denmark and Finland that are today being eclipsed by smartphone innovation, and the Pearl River and Yangtse Delta regional systems of China that are doing much of the eclipsing. In this part of the paper, the eclipsing and dawning of firm influence is analytically paramount. The third body of literature that is tangentially addressed in this paper concerns development studies. It is tangential primarily because few of the political players are classic ‘developing countries’though China has some such characteristics. Most are, accordingly, developed countries, newly industrialised countries or –China again - ‘emerging markets’. However, what is of more central relevance is changing conceptual frameworks. Fundamentally, as will be seen in more detail later, development studies is wedded to a linear and hierarchical view of the global value system, which is captured in the ‘chain’terminology. As is also shown below, this has been subject to an autocritique which elaborates five more or less complex variants on the basic ‘chain’metaphor. This is partly because the GVC discourse seeks to be able to generalise about different globalized industries. But because it retains a notion of MNC domination at every link of the chain, it arguably loses leverage in advanced technology industries like ICT, and conceivably also automotives, where globally regionalized innovation systems such as Sao Paulo in Brazil produce more advanced bio-engines for cars and trucks than the West or China does. In the same way, the paper’s focus on ICT points to South Korea and Taiwan definitely, and RISs in China, probably, producing superior innovations in implementing chip-integration than US leaders like Texas Instruments and Cooke Journal of Open Innovation: Technology, Market, and Complexity (2017) 3:9 Page 2 of 23 Broadcom. This is an extremely valuable insight for development studies in showing the varied ways development to the point of surpassing western innovation hegemony actually occurs. Accordingly, the key intention of the paper is to seek to divulge key elements and processes by which in the ICT global network, TIS set-ups assisted indigenous firms and, especially, firm ecosystems to innovate in significant ways that enable agents to interact or adapt and learn. To do this the paper aims to show, analytically, how the torch of innovation was passed to a new generation of innovative Asian businesses at the expense of the Western (radical) innovators who pioneered mobile telephony (Alcatel, Siemens, Motorola, Ericsson, Nokia - and in GSM infrastructure, Denmark’s NorCOM cluster). The open question, which the paper inclines to answer in the negative at present, is to what extent are the emergent torch-carriers in Asia likely to emulate Western radical innovation in ICT or any other industry? The inclination to the negative arises for three reasons that may be advertised beforehand. First, Western radical innovation is embedded in an extremely deep cultural earth that lends itself to global understanding and heightening demand. Western popular digital electronic culture has a unique capability of self-reflexivity and reincarnation as a next-generation globally commercial good. Second, the power of this influence is signified even where a rising pioneer like China’s animation segment of its emergent computer games culture reveals eight of the top ten games companies registering on Apple’s expensive App Store rather than cheaper domestic equivalents (Cooke, 2013). Hence maximization of returns and/ or reputational capital remains at the behest of Western dominated rather than indigenous markets. Finally, radical innovation in the West has shifted into significant novelty with ICT support in advanced, knowledge-intensive services. One only has to think of innovations like the ‘servicization’of ICT led by IBM and Honeywell, later to be dallied with by the likes of Hewlett-Packard. Indeed, existentially, the question of whether Apple, let alone Google, are in any significant ways manufacturing firms falls in this self-same category. Elsewhere, as in structured finance with collateralized debt obligations (CDOs) or credit default swaps (CDSs) Asian institutions were often the end-ofthe-line purchasers of the toxic bonds or lifeboats for their failed originators rather than in any way financial innovators (Lewis, 2010). The paper is structured as the following narrative. The section which follows introduces the broad outlines of the GVC> > GPN> > GIN shift registering winners and losers. The section which follows that is concerned with theory, outlining the elements of complexity theory that help us get a better grasp on the non-linear, considerably ‘self-organizing’evolution of ICT’s complex GIN than previous, linear approaches The third and fourth sections explore the economic geography of the transition from GVC through GPN to GIN by reference to anatomies of the key TIS nodes in the GIN for ICT. For ease of reading, the upper reaches of the ‘smiling curve’of value in the GIN are dealt with first, the rising elements, second. There follows a final section of discussion and conclusions. Outline of complex system adaptation in global ICT The paper goes beyond the inherited view of globalization in ICT while recognising that a conflict perspective (Buckley and Ghauri, 2004) may be too strong to capture subtle design shifts that entail positive feedbacks. For modest stability, these require Cooke Journal of Open Innovation: Technology, Market, and Complexity (2017) 3:9 Page 3 of 23 tempering by negative feedback effects (reorganization, control, regulation) but subtle shifts may entail larger global impacts. The paper thus prefers a discourse of displacement, emergence and evolution. The case in point is the amplifying shift from a desktop PC-based, MNC-dominated GPN that is currently being displaced by an emergent GIN based on smartphones and tablets (Chen & Wen, 2011; Chen et al., 2011; Ernst, 2009). In this GIN arrangement MNCs dominate some (increasingly ‘servicized’)innovationphases but not all. Advanced country small and medium-sized enterprises (SMEs) control some, while SME and larger firm ecosystems in emerging markets dominate innovation in other global spaces. It would be too crude to say ‘services in the West, manufacturing in the East’ but that captures elements of the shift. This is because the picture is characterized by complexityandadegreeof‘self-organization’in the manner of GPN displacement and GIN emergence in the global system. It happens but no ‘global controller’planned it (Holland, 1998). The paper also goes further than perspectives that rightly stress the striving of emergent economies to innovate and thereby displace current incumbents (Mudambi, 2008). It does this by showing that in ICT this has become an accomplished fact. New networks undermine the linear notions of GVC and GPN in this complex global rearrangement. As noted, from this perspective there is no single ‘creative heart’but rather a distributed intelligence. Accordingly, a complexity viewpoint questions the existence of a single ‘global controller’omnisciently directing events from on high. Geographical dispersion of the broad kind in focus here was observed early for mobile handsets (Mudambi, 2007) but as we have seen already a ‘smartphone’or ‘tablet’bundles more distributed modules than any mobile telephony handset. Stan Shih, former CEO of ACER, in 1992 coined the term ‘smiling curve’(see below) to capture both the geographical distribution and the innovation intensity of modularization in terms of its unequal value return (Mudambi, 2007). This is changing such that some lower parts of the value curve increase their value realisation (Taiwan, S. Korea) while newer entrants (China) occupy the lowest positions. Value constellations thus characterize new products and the underlying TIS arrangements in the ICT GIN (Normann & Ramirez, 1993). In other words, modularization, which began with the vertical disintegration of the chip industry (Grove, 1996) has been a significant driver of both the GPN but more extensively the GIN for ICT. In brief, this paper testifies to a shift back a little from firm to regionalized system in comprehension of the complex changes now under way. Accordingly, it concurs with the following observation: ‘In the early development of the international business field, the focus of attention moved from the country level to the firm level……………The locational composition of the international network for knowledge sourcing of a given MNE depends upon the extent of institutional compatibility between the locations in which the MNE is active. This compatibility between locations in turn affects the capacity of the MNE to become an insider in local business systems, and to influence the local institutional environment (Cantwell, 2009) Except that, the paper pushes further to say that, for some activities in the implementation of innovative elements of the ultimate product service, the influence has moved from inside certain innovative ecosystems outward to the MNC. Such dynamism is not unusual in the ICT industry. Accordingly, once-important flagship firms like Motorola, formerly a global innovator and market leader, first, Cooke Journal of Open Innovation: Technology, Market, and Complexity (2017) 3:9 Page 4 of 23 utilised the Google Android software platform for its handsets, before its struggling Motorola Mobile arm was itself acquired by Google. Other former top competitors that succumbed to faster-moving rivals include Ericsson,Palm,Siemens and Alcatel. Ericsson, which competed with Motorola and Nokia in the top three throughout the 1990s, combined its phone unit with that of Sony in 2001 to help regain lost market share; SonyEricsson slipped to sixth before its break-up in late 2011. Siemens and Alcatel,bothin the top five a decade ago, never recovered from market-share losses and ended up selling or giving their mobile-phone businesses to Asian rivals. Motorola’s handset business, which occupied second spot globally as recently as 2007, fell to seventh, and was spun off in early 2011 from the rest of the company in a bid to recover. Motorola Mobility (in 2011 acquired by Google) offered tablet devices with sevenand ten-inch screens. In the increasingly crowded tablet market, the larger device would compete unsuccessfully with the iPad and the smaller device would compete similarly with RIM’s planned PlayBook tablet and Samsung’s Galaxy Tab, which also uses Android. As can clearly be seen, the ICT inside these convergent communication devices is now a cheaply produced, commodified technological input (chips, PCBs etc.) assembled in locations such as Shenzhen, China by giant overseas contract manufacturers such Foxconn and Mediatek of Taiwan. The key value of the products shipped lies almost entirely in the software, system and services supplied on smartphones and the innovative applications (‘apps’) increasingly produced by start-up businesses in the West. These constitute the corners of the ‘smiling curve’GIN value-added line as described in Chen & Wen (2011; Fig. 1). Important here are the higher value segments of the GIN, where advanced services like design and marketing are concentrated in the West, compared to the lower value manufacturing segments, largely in Asian territorial innovation systems (TIS). The importance of TIS is further discussed in section below. Allocation of TIS to regions and countries is implemented in "Outline of Complex System Adaptation in Global ICT". In the paper, an account is given of the main innovative elements of this rapidly evolving industry, demonstrating how the division of labor among tasks has been distributed, but narrowly and in territorial innovation systems (TIS), over the globe. In Fig. 1 The ‘Smiling Curve’of ICT Global Value Segments. Source: S. Shih, ACER Cooke Journal of Open Innovation: Technology, Market, and Complexity (2017) 3:9 Page 5 of 23 this, the West retains the leading edge in software, systems, services to some extent, and ‘apps’but Asia Pacific dominates hardware and in South Korea hardware engineering and design where there remain innovative applications to be exploited. Thereafter, a different account is given of the utilization of commoditized computation using ICT componentry in new applications that frequently utilise ICT technologies as derived parts of a new demand for ICT enabled devices in new markets. These accounts are preceded by a theoretical section which frames the evolutionary economic geographyinfluenced analysis of global ICT in relation to innovation interactions between the West and Asia Pacific. A note on research methodology Because of the nature of the complex adaptive systems that are the object of analysis of evolutionary complexity theory (ECT) it is in social scientific terms characterized by a distinctive but recognizable research design and methodology. This differentiates it for the present from methodologies typically deployed in complexity analyses of physicochemical or biological processes. These involve either quantitative analyses of billions of data runs, or large scale or number simulations of real-world processes like evolution utilising, for example, cellular automata (Mitchell, 2009). By contrast, the approach adopted here is the following. To deepen understanding of an emergent, complex and evolving environment involves adopting ‘co-creating’methods (Kingdom, 1984) or as Eve Mitleton-Kelly puts it: ‘……….complex problems cannot be explained using mono-causal explanations, that is why it is essential to identify the multiple interacting dimensions, which together create and re-create the problem-space. These multiple causalities coevolve and change the problem space. Any ‘solution’must therefore also coevolve, hence the importance of co-creating an endogenous enabling environment that will coevolve with its exogenous broader social ecosystem (Mitleton-Kelly, 2011, 3) Moreover, while this may seem daunting, Mitleton-Kelly’s (2011) key conclusion regarding methodology to understand co-evolving system or network processes, which is also routinely utilised in innovation, governance and policy research (see, for example, is as follows: ‘…….the use of complexity principles and the methodology can be used quite effectively by non-academics to identify the problem-space, with only some basic training and introduction to the theory, as most of the methods are familiar. It is their combination and particular perspective which is different, as well as the use of the theory as an explanatory framework….’(Mitleton-Kelly, 2011, 2) Her preferred methods in five different projects described in the quoted paper were semi-structured interviews with representative firms and support agencies, individual and group analyses and a small number of reflect-back workshops. This methodology is closely aligned with that deployed typically in regional innovation systems (RIS) research (see, for example, Tödtling & Trippl, 2005; Trippl, 2011). In summary, this involves selection of leading innovative industries, with assistance of secondary databases; selection of representatively scaled and proportioned regional firms by industry; administration of innovation-focused questionnaires; similar process for representative regional innovation intermediaries (e.g. public –appropriate government departments, Cooke Journal of Open Innovation: Technology, Market, and Complexity (2017) 3:9 Page 6 of 23 development agencies, innovation agencies; private –venture capitalists, management consultants, incubators); selection of illustrative respondents for face-to-face interview; analysis, modelling and reflect-back workshop presentations of data and results. The TIS in this paper is an open system composed of knowledge exploration and exploitation sub-systems. The former is a mostly public ‘regime’, the latter a predominantly private technological paradigm or mix of paradigms. The sub-systems meet at the intermediaries that link them, such as knowledge transfer, intellectual property and venture capital actors (Cooke et al., 2000). Clearly, the RIS approach is both quantitative and qualitative whereas the evolutionary complexity theory (ECT) approach is largely qualitative. The latter is considerably cheaper; for example the nine region innovation systems project described in Cooke, Boekholt & Tödtling (2000) cost the European Union some €1 million at 1996–8 prices. Accordingly, given the global scale of the research task essayed in this paper, the latter approach was inspirational but the former was the more practical. The methodology adopted was thus dependent on semi-structured interviews with representative firms and support agencies, individual and group analyses and a small number of reflect-back workshops. First, key ICT ecosystems were identified. For example, in Europe this involved secondary documentation and data analysis to identify these, then meetings were set up with key firms and agencies (e.g. cluster manager) where semistructured interviews were held involving two interviewers. Individual and group analyses were then conducted for interpretation and triangulation purposes. Finally, in the European-based research, which also involved inquiry into global shifts in ICT, results were reported to two reflect-back workshops with ICT firm and agency representatives and respondents from the regional ecosystems. In Asia and north America, ICT research documentation was accessed and expert interviews conducted with knowledgeable respondents from industry, government or academe as appropriate and available. On most occasions reflect-back opportunities occurred at workshops and seminars where forerunners of this paper were presented. Although dualistic, with more formalised and direct face-to-face firm and agency interviewing in the first part and co-present, but for practical reasons, more distanced interactions in the second, the results nevertheless (after Geertz, 1973) provide rich, thick descriptions of real phenomena and action instances, theory testing and facilitation of communication to governance, managerial and academic audiences (Birkinshaw et al., 2011; see also Marschan-Piekkari & Welch, 2004). Theoretical perspectives on GVC-GPN-GIN interactions in Asia Pacific’s ICT rise In this section the paper indicates the theoretical nature and intent of the account of shifting global relational geographies in ICT. Of course, as Juarrero (2000) puts it, the observer of any complex phenomenon is also an influence upon that phenomenon and its representation to others. Metaphor is ubiquitous in science from DNA to GIN. So the paper is using theory as all science does to communicate the deeper simplicity underlying what can appear a chaotic and certainly complex reality. Fundamentally, there was, for many years, a single metaphor for globalisation in relation to industrial organisation. Accordingly, in the 1990s, the discourse of Global Value Chains (GVC) was being worked out (Fig. 2). This displayed a linear, mostly hierarchical set of Cooke Journal of Open Innovation: Technology, Market, and Complexity (2017) 3:9 Page 7 of 23 relationships, held to apply more or less similarly for all globalizing industry customersupplier relations, irrespective of content or technology. Clearly this monocular perspective could not continue and it gradually gave way to two conceptual developments: the first concerned Global Value Chains 2.0; the second, GPN. GVC 2.0 conceived how five different kinds of relationships might be chosen to understand the interactions among incumbents in a variety of industries (Gereffi et al., 2005). This yields a different kind of ‘curve’to that denoted by the ‘smiling (value) curve’shown in Figs. 1 and 4. Gereffi et al. (2005, 84–86) developed a theory of value chain governance based on three factors: the complexity of the knowledge transfer required to sustain a particular transaction; the extent to which this knowledge could be codified; and the suppliers’ capabilities in relation to such transactions. On the basis of these three factors, they identified five different governance patterns: 1) market-based chains characterized by low complexity of transactions, simple and easily codified product specifications and capable potential suppliers, 2) modular chains characterized by highly codified links simplified by technical standards, where suppliers make products to a customer’s specifications and take full responsibility for process technology, 3) relational chains characterized by complex transactions and highly idiosyncratic relationships which are difficult and time-consuming to re-establish with new value chain partners, 4) captive chains characterized by suppliers with low capabilities, dependent on larger, dominant buyers, who exert a high degree of monitoring and control, 5) hierarchy implying vertical integration when transactions are complex and not easy to codify and the competence of suppliers is low. Drawing on their model and on some other works that address the relationship between transaction costs and firms’capabilities over time Elola et al., (2011) usefully depicted the relationship between the complexity of transactions and the suppliers’capabilities and its several different outcomes according to types of value chains depicted in Fig. 1. The main advantage of this ‘networking curve’is that it allows us to show the relative position of each value chain type regarding the others. Fig. 2 The networking curve for types of global value chain performance. Source: Elola, A, Aranguren, M. & Valdaliso, J. (2011) Cooke Journal of Open Innovation: Technology, Market, and Complexity (2017) 3:9 Page 8 of 23 and creative ‘search’integration. Similar platforms exist in London’s‘silicon roundabout’, Malmö’s Western Harbour, Toronto’s downtown creative district and other places, both in Canada (e.g. Ottawa; Waterloo) and elsewhere (e.g. New York’s Silicon Alley). Cambridge, UK software and systems design excellence In GINs an intriguing issue arising concerns the importance of (possibly small) firms as system integrators in or among innovative clusters. In an industrial world characterized by lean production, open innovation and modular clusters (as Andy Grove, former CEO of Intel refers; Grove, 1996) such ‘hub firms’become crucial actors. They play major roles in aggregating ‘relatedness’of knowledge, business model and industry. Clearly, the question of how there might be an interface or complementarity between what firms do regarding orchestration of a value chain changes over time. One of Cambridge’s software successes is logistics software from firms like 2011 IPO Ubisense; another is customer data quality. Thus in 2011 Datanomic, a leading provider of customer data quality software and related applications for risk and compliance screeningwas acquired by Oracle for just $80 million, while later in the year data-mining software flagship Autonomy was purchased for $10 billion by Hewlett Packard and seen as an indicator of HP’s then policy of seeking to leave hardware and develop as a services firm with the mooted sale of Compaq. However, a palace revolution in HP removed CEO Apotheker, architect of this strategy and such a move is now on hold. We may understand how transformative systems integration became by noting how crucial the role of modularised system and software services and products became in ICT even in the 1990s by referring to Grove’s diagram explaining that historic shift in industry organisation from ‘vertical silos’to ‘modular clusters’in Fig. 3 (right side). Clearly, Cambridge has a relatively small but crucial role in the contemporary smartphone and tablet GIN. It is a significant centre for ICT research and innovation, notably through its ‘fabless’chip design companies such as ARM Holdings and CSR (Cambridge Silicon Radio). These supply some 99% of smartphone chip designs that are subsequently turned into componentry by the firms discussed earlier as suppliers to Apple’s evolving generations of smartphones. ARM’s new strategy is to design processors that power the networks that run smartphones as it steps up competition with Intel in a $9billion global market.ARM already partners Hewlett Packard to create chips for computer servers; accordingly the same processor will also be directed at the base Fig. 3 Vertical to Horizontal Transition in ICT. Source: after Grove, 1996 Cooke Journal of Open Innovation: Technology, Market, and Complexity (2017) 3:9 Page 15 of 23 stations and wireless network equipment which are intended to embody the ARM architecture. ARM’s low-power semiconductor blueprints are increasingly found in larger devices including tablets and other mobile computers as the company competes with Intel, the world’s largest semiconductor maker. ARM will use its faster processor in server farms to help companies rein in energy costs. In connection with such ecofriendly chip designs, US company LSI signed a licensing agreement to use ARM’sfaster processor in mobile broadband networks, while Texas Instruments is also using the ARM blueprint to build chips for base-station infrastructure. ARM’s smaller compatriot CSR also occupies a high point on the ‘smiling curve’as an implementer of analogue designs for Bluetooth integrated circuits. As the world’s leading supplier (ten million so far) of Bluetooth silicon CSR achieved its position by designing products that put a full 2.4GHz RF front-end on the same chip as the digital baseband circuitry. Successive generations of product have seen the company add flash memory, ROM and even a digital signal processor to its single-chip Bluetooth devices to support a variety of market needs. The Asian mid-and lower reaches of the ‘smiling curve’: South Korea South Korea’s presence relatively high up the ‘smiling curve’of value creation in the global innovation network for ICT rests on chip, touchscreen and flat panel display innovation. One of the fields ‘picked as a winner’by the national innovation system was, as with Taiwan, Flat Panel Display (FPD) technology. In 1995 Asan-Tangjiung was selected as a site where Samsung and a further 153 firms, including three Samsung affiliates would locate as an LCD (Liquid Crystal Display) megacentre. Nowadays Samsung controls 45% of the South Korean market and 17% of the world market from this location. More than a decade later, LCD and plasma screens generally have given way to LED (Light Emitting Diode) and specifically AMOLED (Active Matrix Organic LED) technology because far less energy-intensive when powered up as TV or other kinds of FPD screens. With Asan-Tangjiung as Samsung’s fiefdom, the South Korean government in 2002 selected Paju as the site for a competitor FPD development for LG Display, successor company to the former LG-Philips joint venture. This megacentre began with eighty firms, including four LG affiliates and two foreign firms. These were Nippon Electric Glass (NEG) to provide LCD glass substrates, some 20% of product added value, and Sony in partnership with Samsung for early LCD technology transfer. Close to the demilitarised zone with North Korea, Paju has grown enormously in population and GDP as the megacentre itself has grown. A further Gyeonggi province mini-centre supplying both Samsung and LG hosts a further group of foreign firms of consequence to South Korea’s FPD industry, including Asahi, NEG and Hoya from Japan and Schott from Germany. The role of the state was significant in these developments in declaring Asan-Tangjiung an official Company Town Project and relaxing planning control by the Seoul SMSA to facilitate the Paju complex. This exemplifies the directional manner in which the national innovation system swiftly translates policy into reality, in this case close to the purlieus of the national capital Seoul (Lee, 2011). This proved a strategic industry into which to make an intervention by the TIS as the following demonstrates. Three upcoming trends will secure the fortunes of these Cooke Journal of Open Innovation: Technology, Market, and Complexity (2017) 3:9 Page 16 of 23 megacentres: transparent displays, flexible displays and colour eBook-readers. Regarding transparent displays, Samsung’s 46-in. touchscreen portrays pictures, movies and graphics on a window the contents of which are movable in a manner comparable to that on a smartphone. Although aimed first at the domestic market, transparent displays also allow retailers to show dynamic content on shop-windows. Other applications are in heads-up displays on car windscreens and transparent OLED notebooks. Samsung Mobile Display also leads LG, as it does with transparent displays, in flexible displays. These are basically bendable displays that can be rolled out of a holder like a drawer, printed on flexible materials, or wrapped around facilities (e.g. as photovoltaic panels). Finally, there is a trend towards coloured eBook readers, led by Chinese firm Hanvon, although Fujitsu was the initial innovator. Problems with quality and reliability of these more agile and flexible FPD displays are the main obstacles to their diffusion in global markets. To summarise, South Korea’s insertion in the ICT GIN is a good example of a TIS-Corporate led establishment of a significant value-adding growth element in an ICT market segment requiring huge upfront innovation investments, leaving only limited competition until even larger incumbents, such as Hanvon, enter the fray. Singapore’s GPN in the face of a rising GIN Singapore is one of the most developed territories of south-east Asia, in large measure due to adoption by its TIS of successive ICT strategies. Unlike other ‘tiger’economies in the georegion, Singapore impressed its locational value for inward investment upon MNCs rather than nurturing local firms, as in Taiwan, to develop endogenous technological capabilities. This also applied to research where instead of promoting indigenous R&D, Singapore relied upon MNCs to generate external economies like knowledge spillovers and knowledge transfer. This enabled an indigenous firm like MMI to become a close alliance partner of Seagate,atfirst fulfilling expectations of technological development. In a different segment of the market, Singapore’sVenture Corp supplied printers to Hewlett-Packard,fromwhom it was a spin-off firm, for many years. As we have noted, Hewlett-Packard has been on the verge of forsaking hardware for ICT services markets (e.g. acquisition of Autonomy,above).Singapore’s locational approach earned admirers from a development perspective, especially when it involved attracting then leading edge platforms in computing such as Hard Disk Drives (HDD) and urging foreign ICT component assembly firms to divert to developing Johor and Penang in Malaysia. This was also seen as politically astute, given Singapore’s asymmetry with its large neighbours whointurnwereemerginginSingapore’s wake. However, the legacy has turned out to be something of a lock-in from path dependent evolution based on overseas controlled computing (especially global HDD leader Seagate). A possible alternative path was endogenous control of rapidly changing global demand for notebooks, tablets and ‘convergent’smartphone applications. As we have seen, these innovations are led by US MNCs Apple and Google (Android) who neither have a presence nor significant smartphone or tablet supplier relations with Singapore. The same can be said for Penang and Johor in Malaysia’s similarly locked-in to desktop PC platform technology, the markets for which have been under disruptive attack from Taiwan’s and increasingly China’s innovative mega-clusters around Taiwanese Cooke Journal of Open Innovation: Technology, Market, and Complexity (2017) 3:9 Page 17 of 23 OEMs like Acer,Asus and HTC, Taiwanese modular suppliers like Mediatek, Wintek and Foxconn based in China, and Chinese all-purpose telecoms corporations like Huawei and ZTE. According to Yeung (2011) in an effort to establish Singapore as a regional R&D and innovation hub in the global electronics industry, local firms in Singapore were encouraged to be able to access the know-how of ‘modular flagship’firms in Singapore TISdesigned local clusters. Thus in the hard disk drive (HDD) industry, local precision components suppliers such as MMI developed technological know-how and market expertise through their global production network (GPN) supplier relationships to global lead firms such as Seagate (in April 2011 adding Samsung HDD to its consolidated US acquisitions like Conner Peripherals,Control Data,DEC and Maxtor)andWestern Digital (in 2011 acquirer of Hitachi Global Storage Technologies). Seagate and Western Digital thus have approximately half the global HDD market each; Western Digital supplies HDDs from south-east Asia to the likes of Apple and Dell while Seagate supplies Hewlett-Packard,Dell and IBM. The advent of ‘cloud’computing is one important source of the de-stabilisation of HDD markets, the 2011 floods in Thailand exacerbated this, affecting Western Digital’s Thai production plants and Seagate’s component supplier base, both located on the Chao Phrya floodplain in Bangkok. Singapore was a global mainport for HDDs in the 1990s but lost its previous locational advantage in global HDD production networks. Taiwan’s cross-straits platform with China’s‘world factory’ Of interest here is the integration in the GIN of the Taiwanese ICT sector and the role of Taiwanese R&D performed by the firms becoming embedded within the GIN. In general, Taiwan’s ICT sector is characterized by modularisation and the pursuit of OEM/ODM contracts for brand marketers or ‘flagships’. Accordingly, flagships focus their own R&D on product concept initiation and product architecture, while delegating some R&D to Taiwan-based ODM suppliers. Such offshore collaboration results in a network form of inter-organizational, cross-border collaboration for global innovation. But, crucially, this capability is significantly enhanced by being embedded in a TIS, in the Taiwanese case facilitated by innovation agency ITRI, a dense network of other firms, large and small, university research and co-location in science and technology parks, notably Hsinchu in Taipei. Accordingly, Taiwan-based ODM suppliers typically establish separate R&D teams to serve different customers. As a case in point, Quanta, a leading ODM supplier of netbooks has some six R&D teams, serving different flagships for both system products and key components. The position is similar for Taiwan-based manufacturers of inverters for LCD TVs who also provide customized solutions to different flagship LCD TV companies. Moreover, Taiwan-based ODM suppliers in that part of their GIN-TIS set-up began shrinking local manufacturing and assembly operations and exploiting their offshore sites in China and elsewhere. Such GIN “decomposition of production”(Schmitz & Strambach, 2009) or “de-linking of manufacturing and R&D in terms of location”(Chen & Wen, 2011) swiftly became prevailing practice. Clearly this repeats ‘flagship’practice by Western and Japanese OEMS a decade or more earlier consequent upon ‘modularisation’(Fig. 3). For such ODMs Taiwanese headquarters focus upon R&D and administrative functions and their Cooke Journal of Open Innovation: Technology, Market, and Complexity (2017) 3:9 Page 18 of 23 offshore subsidiaries perform manufacturing and assembly operations. This business model, which Ernst (2009) refers to as “Asian offshoring”rests on a firm innovation governance system (the exploration ‘regime’of a TIS, in our terms) and the evolution of intra-firm divisions of labour allowing domestic prototype development followed by mass production in “world factory”set-ups across the Straits of Taiwan. In this way, Taiwanese ICT took advantage of swift TIS evolution to become a network of innovators as well as assemblers of ICT products novel to the global market. Thus Taiwanese firms supplied the top three netbook/notebook flagships (HP, Dell and Apple) as key innovators as well as suppliers of the key sub-systems, modules and parts integrated through their TIS and global logistics networks. This is evident in the practices of ODMs like Hon Hai,Quanta,Wistron and Inventec who, according to Chen & Wen (2011) follow the 98–2 formula of global sourcing. Set by the flagship firms, this consignment system requires 98% of ‘build-to-order’volume reaching end-users within two days of the order being issued. Clearly, all partners, from flagships to key suppliers and parts contractors have to collaborate closely to ensure development and design of successive generations and varieties of, for example, notebook computers or ‘smartphones’. Hence, Apple’s success in iPhones benefited from and was augmented by the R&D efforts of a variety of Taiwanese ICT firms and their innovation, production and logistics networks. According to Isaacson (2011) ARM was preferred for chipset design and Taiwanese firms for innovation because Intel was ‘too slow’. This illustrates the passage of what had begun as a GPN set-up from that rather linear, flagship-led production network (GPN) to the ‘emergence’(in the complexity theory sense) of a move to a higher order of complexity, of a non-linear, flagship-orchestrated GIN in which the role of Taiwan’s TIS and ‘Asian offshoring’were crucial interlocutors in the process. The ‘potential’of the TIS to innovate, because of its ‘requisite variety’of creative companies, alongside its incumbents’‘connectivity’capabilities (networks, logistics, efficiency) enabled space to be compressed by time represent a milestone in GIN-TIS convergence and spatiality. Other players In Fig. 4 can be seen other players, more peripheral than core to the innovation leading edge in the GIN under discussion but often sharing two features: the first, as recipients in their development of significant FDI; and second their role as ‘back-office’assembly, trialling and testing, adapting or checking capabilities. Approximately level with such original design manufacturers (ODMs) as Mediatek and Wintek from Taiwan are India, Israel and Ireland. India is an important research as well as back office design and testing location for outsourced software and systems implementation initiated, first, in Bangalore by western firms like Texas Instruments,IBM and Cisco Systems andmorerecentlybyChinesetelecomgiants like Huawei (e.g. Huawei has its own R&D center in Bangalore; it also sourced telecom software testing from the likes of Infosys and Mind Tree). This company is active in all spheres of telephony from traditional landline infrastructure through ground stations for cellphones to the Chinese TD-SCMDA standard, lower-end mobile phones and, increasingly, more expensive smartphones. As noted, Huawei has developed offshoring software links to Indian software companies (the former ‘body shops’)aswellasmakinginroadsin European markets (e.g. traditional infrastructure upgrading in the Netherlands, UK and Cooke Journal of Open Innovation: Technology, Market, and Complexity (2017) 3:9 Page 19 of 23 Finland) and hiring redundant telecom engineers from Ericsson in Sweden (Lund, Gothenburg and Stockholm) and possibly in future Nokia in Finland. Israel is expert in software and systems design, especially in security software (‘firewalls’) and optical systems utilised in smartphones and gaming devices. Ireland hosts software development (e.g. Customer Relations Programming/ Management –CRP/CRM;SAP,Symantec), administrative functions for the likes of Google, PayPal and McAfee,and‘cloud’computing services (HewlettPackard, Dell). Discussion and conclusions This brings us, conveniently, to the final reflections on the relatively loose ties that bind the emergent GIN to a variety of TIS set-ups, signifying a further upward twist in global capabilities, shifts in centres of innovation gravity and assessment of concepts that informed thinking in this paper. The sub-text has been the global ‘Convergent Media’ patent wars among the flagships in contemporary ICT. The geographical and developmental narrative has focused on the deeper global, possibly ‘self-organizational’system adaptations that increasingly turn knowledge exploration ninety degrees from the vertical to the horizontal dimensions as firms seek to innovate by searching adjacent ‘white space’possibilities for solutions and opportunities. This ambition is for future applications away from the ‘red ocean’of cut-throat competition fuelled by litigation described above into the ‘bluer ocean’of shared value, social need and more ‘democratic’ innovation that, as the brief sojourns in Sweden, Cambridge (UK), California, S. Korea, Singapore, Taiwan and China showed have now evolved in integrated fashion. The co-evolution of (regional) institutional regimes and related (regional) paradigms in a TIS is an extremely fruitful way to conceive of regionally and globally adaptive systems of innovation. A clear instance of this was the Skåne, Sweden region’s resilience faced with multiple downturns even in its modern industries like cellular telephony. The most recent blow struck here is the termination of Ericsson’s presence in mobile telephony with the purchase of the SonyEricsson brand by Sony, itself intent on emulating Apple’s integrated iPlatform of digital content (Palmer & MacCarthy, 2011).The Fig. 4 ‘Smiling Curve’of Value in ICT Global Innovation Network (GIN). Source: Author, after Shih, S. ACER Cooke Journal of Open Innovation: Technology, Market, and Complexity (2017) 3:9 Page 20 of 23 cross-pollination of technology and creativity pioneered in Apple’s integrated, closed platform business model contrasts vividly with the competing ‘modularisation’model that underpinned Microsoft’s successful era and associates with Google’s Android model. But does the fact that Nokia’s‘burning platform’had to be extinguished by alliance with Microsoft signify another important turn in the global ICT innovation spiral? It is the interaction of these multi-level and path dependent knowledge flows that produces innovation (Geels, 2007). Arthur (2009) calls this ‘combinative evolution’in his treatise on the nature of technology and innovation. For Martin (2010) this constitutes ‘path interdependence’a far more dynamic concept than ‘path dependence’because it is in such ‘collisions’that all innovation lies. The world of ICT is nowadays an arena of global tournaments around technological advancements in the services and systems design software business, on the one hand, and low wage assembly platforms to bring affordable products to market, on the other. From an evolutionary perspective, there are many collisions and shocks provoking litigation and the vacating of markets by former Western European leaders in important aspects of ICT like ‘Convergent Media’and, less in focus here varieties of computing. We presented a picture of how the GIN collision in one small Nordic country, Finland, that happenedonce to be a leader in mobile telephony played out in the face of rising and overwhelming upper ‘smiling curve’capabilities, on the one hand, and endogenous innovation through ‘technological diversification’at the lower GIN levels, on the other (Fig. 4). In most cases, as this paper has shown, the GIN-TIS integration has powered recent global ICT innovation and evolution. The paper gave limited support for the ‘sense of place’advantage of MNC location (Zaheer & Nachum, 2011) in mapping locational shift with the TIS-inflected emergence of the GIN in contemporary ICT. Acknowledgements Research for this paper was based on key actor interviews in Europe with secondary documentation inquiry and scholarly expert interviews in California and Asia. The author is grateful for advice and assistance in this effort from Arne Eriksson, Carin Dahl and Lennart Svensson in Sweden, Johan Wallin in Finland and Kristian Reinau in Denmark. In California, Allen Scott and Mike Moritz were invaluable guides, while in Asia my lead interlocutors were Shin-Horng Chen in Taiwan, Jun He of China Academy and S. Yaowu, Yong Sook Lee and H. Kim in Korea and Henry Yeung in Singapore. Finally thanks are due to the two anonymous referees. The usual disclaimer applies. While Foxconn was dogged by eighteen suicides of young workers at its giant Shenzhen plant, Wintek has seen scores of young workers in the city of Suzhou poisoned by the chemical n-hexane, used to clean Apple components including iPhone touch screens. 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