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This chapter analyzes the role that accessing external finance plays for entrepreneurial firms. It differentiates between access to bank loans and equity provided by venture capital. It is shown that equity finance and bank finance are substitutes for knowledge-based entrepreneurial firms. The likelihood of an entrepreneurial firm being financed by venture capital is positively related to the degree of human capital incorporated in the board of management. Similarly, entrepreneurial firms in high-technology and science-based industries are more likely to be financed by venture capital.

This chapter explores the decline of the IT sectors in Britain and France, showing how the foundations and structure of the industry there experienced long-term inertia and contained fault-lines within it, but was also subject to short-term strategic mistakes which hastened its eventual relative demise. It is shown that the computer industry, certainly in its formative phase, was internally connected to the government — both in Britain and France. The chapter focuses on development in the 1960s when a sense of crisis pervaded both countries, and the fate of both economies was deemed to hinge on their ability to maintain or regain a position of global competitiveness in high-technology industry. The IT sector was singled out as the primary focus of this process.

By penetrating the knowledge filter and trying out ideas that might otherwise never have made it through, entrepreneurship serves as the missing link to innovation and ultimately economic growth and job creation. Entrepreneurship is an important mechanism permeating the knowledge filter to facilitate the spillover of knowledge and ultimately generate economic growth. Entrepreneurship provides the missing link to innovation and growth in virtually every context where people have ideas and starting a new firm is not blocked or impeded. For example, universities can be interpreted as being hotbeads for generating new knowledge and ideas. Entrepreneurship provides the vision to use this knowledge. If there is no vision there is no entrepreneurship. If there is a vision, but no action or activity, there is also no entrepreneurship.

Innovation systems and local global networks of high‐technology industry in Korea are examined with regard to the evolution of the knowledge‐based economy. Major data for the study are derived from a recent questionnaire survey of SMEs (small‐ and medium‐sized enterprises) conducted for the IMF in 1997, and from an interview survey conducted in 1995 for the high‐technology industries in Korea. Changes are outlined in Korean industry since the rapid industrialization period of the 1970s, when chaebols (conglomerate business groups) rather than SMEs emerged as the leading actors in industrial development; the chaebol system was broken up following the foreign exchange crisis of November 1997. The main sections of the chapter cover regional variation of innovation performance, local innovation networks of SMEs, and local and global networks of high‐technology clusters in Kyonggi and Kumi.

Anti‐trust economics has not sufficiently recognized the nature of competition and innovation in high‐technology industries, the evolution of those industries and the implications for public policy. This chapter presents some conceptual frameworks and methods for understanding, in particular, issues of monopoly and monopolization. Understanding issues such as the nature of technological change, competition, barriers to entry, and market power are important for anti‐trust policy. Without understanding the limitations of the existing analytical tools for analysing the economics of innovation, antitrust agencies may harm competition in high‐tech industries.

This chapter has two main sections, which contrast the post‐war development of managerial control in the USA in the mass production industries, and the high‐technology industries––as exemplified by the electronics industry. The first, Sect. 4.2, The post‐war governance of mass‐production enterprises, discusses the trend towards strategic segmentation––the emergence of conglomerations and resulting impact on performance, and the emergence of core corporate enterprises. The second, Sect. 4.3, The electronics complex and the governance of innovation, discusses the roles of the federal government and of venture capital, and the abiding importance of the innovative corporation.

Beginning in the 1970s, the previously dominant US corporate enterprises faced an intensification of competition in both the mass‐production and high‐technology industries. The nature and gravity of the competitive threat varied, partly because of differences in resource allocation governance, yet in both types of industry, fundamental challenges to the technological and economic supremacy of the USA were posed by enterprises in different social environments that developed and utilized broader and deeper skill bases to generate higher‐quality, lower‐cost products. In the case of the Japanese especially, the challenges came from enterprises that integrated into processes of organizational learning not only managerial employees (as the Americans had done), but also shop‐floor employees and employees of subsidiary enterprises that functioned as suppliers and distributors. These competitive challenges demanded a response from US corporate enterprises, but as they struggled with what was going on in the productive sphere, the ground had also shifted in the financial sphere: in particular, with the rise of institutional investors, and the increasing pressures that they placed on corporate enterprises to deliver higher returns on their corporate stocks, the commitment of financial resources to corporate strategies came under considerable pressure. The two main sections of this chapter address these issues: Sect. 5.2 discusses the productive challenges and the rise of the new competition, and Sect. 5.3 discusses the growing pressures for financial liquidity, which manifested themselves in a particularly aggressive form in the 1980s with the rise of a market for corporate control, and when that market collapsed in the late 1980s, in leading institutional investors seeking other levers for influencing corporate resource allocation in a movement that has been characterized as the rise of institutional investor activism.

This chapter compares types of organizations obtaining patents in the US and Japan. The principal difference between US and Japanese applicants is that universities and new companies account for significant proportions of domestically originating patents in the US, but much smaller proportions of domestically originating patents in Japan. The relative contribution to innovation of US small or new companies is not diminishing. In Japan, there is no indication that this proportion is increasing. Compared to Americans, Japanese inventors rarely apply for patents on their own. Affiliation with a large company seems to be necessary for inventive Japanese to realize the patenting and commercialization of their discoveries in many fields of technology. Japanese universities and government research institutes (GRIs) do play an important and increasing role in innovation, although probably not as great as their US counterparts. An overview of the subsequent chapters is also presented.

This chapter looks directly at Japanese high technology ventures and describes their present situation and future prospects. It presents twenty case studies of ventures in biomedical and nonbiomedical fields. Several conclusions are drawn based on these case studies. Among them is that (i) the unwillingness of pharmaceutical companies to engage bioventures is hurting them; (ii) most bioventures arise from universities and many of these continue to depend on them for key discoveries; (iii) government support is pervasive; (iv) venture capital is vital for the growth of bioventures; and (v) patents are important.

Low levels of angel financing and the unwillingness of large companies to engage ventures have compelled greater reliance on venture capital (VC) and public equity markets to finance the growth of high technology ventures in Japan. This is especially true in the case of bioventures. As for nonbiomedical ventures, the successful ones have managed to obtain substantial revenue through sales. Yet even these usually depended to some degree on VC financing in their early years. Thus, the small number of nonbiomedical ventures, particularly startups, may be in part the result of the inadequacy of VC financing to support promising new companies. The system of VC financing has matured greatly since the mid-1990s, although problems remain. This chapter argues that even if all problems were to be solved, VC financing probably cannot substitute for the lack of financing from sales, angels, and investment and joint research by larger companies.

This chapter considers the evidence (and also the circumstances) under which independent ventures can, in many industries, be superior innovators in new fields of technology. The chapter is organized as follows. Part I compares the innovative capabilities of ventures and established companies. Part II discusses whether these findings are likely to be applicable to other industries. Part III explores whether venture companies undercut the innovation capabilities of large companies, particularly by poaching employees. Part IV discusses whether ventures are capable of sustained innovation even though many companies are narrowly focused and lack broad integrated learning and organizational capabilities. Part V suggests that Japan's dearth of venture companies probably is hurting its innovation capabilities in a number of fields. Part VI analyzes some of strengths of Japan's manufacturing industry: the behind-the-scenes role of small companies and personal management policies based on a system of lifetime employment, as well as the purported benefits of government-organized R&D consortia. Part VII examines whether the system of lifetime employment, autarkic innovation in large companies, and preemption of university research is likely to change in the near future, and concludes that the likelihood is low.

This chapter defines and explores high technology and how it changed the world. High technology is considered ‘high’ not because it is nearer to God than ordinary technology, but because it involves high risk and possibly high return, a high rate of change, and especially, high information intensity. There is no agreed definition of high technology, nor is there a definitive understanding of what a technology park may be. However, technology parks are used synonymously with science park, research park, science centre, and combinations of these.

To determine what encourages young local scientists and engineers to follow entrepreneurial paths in the Greater Boston area, this chapter provides a broad discussion of the influences of the Greater Boston environment, and especially the Massachusetts Institute of Technology (MIT) environment, on the formation of new companies. It traces the evolution of Boston's high technology community. The author cites in this chapter Cooper's argument for six different potential environmental influences and provides support for all of Cooper's variables in his discussion. Further, this chapter identifies several more critical aspects of culture and attitude that have built a local environment that fosters entrepreneurship. Some environmental forces that “push” young local scientists and engineers away from entrepreneurship are also demonstrated in this chapter.

Once up and operating, most of the technology-based companies develop, discover and admit to a larger and growing need for funds beyond their initial financing. This chapter investigates the need for additional financing of high-technology firms, and the time-consuming efforts by their entrepreneurs to raise the funds. It examines the subsequent capital acquisitions by the technical enterprise, including the search processes employed by the entrepreneurs in seeking venture capital, the role of business plans, and the nature of venture capitalist decisions of venture capital organizations.

Companies that historically show product strategic focus perform considerably better over extended periods than those that implement multiple technologies and/or seek market diversity. This chapter closely examines the product strategy of high-technology companies and its connection to success using a separate group of studies to trace the full multiproduct sequences developed and marketed by a number or computer-related companies. It is divided into three sections. The first displays some of the author's own perspectives and convictions on the related field research studies. Next, the author describes a framework that evolved during the research for envisioning a company's product history in a manner that may reveal its de facto product strategy. The last section illustrates several of the statistical results from the field studies which support the importance of “strategic focus” in new product development to achieving success in the technological firm.