FDI, Social Ties and Technological Learning in New Silicon Valley Clones. Evidence from the Costa Rican ICT Cluster

Abstract 

This study, based on qualitative evidence collected through 150 interviews with local entrepreneurs, multinational corporations (MNC) directors, and other actors, contributes to the understanding of the effects of foreign direct investment (FDI) by showing that the social ties of local entrepreneurs and MNC directors affect technological learning in the Costa Rican information and communication technologies (ICT) cluster in ways that are often overlooked by the literature on technological capabilities. It illustrates that the social disembeddedness of MNC directors and the low endowment of transnational social ties of local entrepreneurs contribute to explain the limited effect of FDI on technological learning in the Costa Rican Silicon Valley clone.

Acknowledgements

The author would like to thank the INCAE Business School for contributing to financing this research, and also CAMTIC and PROSIC for providing logistical support. Ideas, comments and advice from Roberto Artavia, Arturo Condo, Elisa Giuliani, Luis Lopez, Ana Maria Majano, Alexander Mora, Renata Seldin and Manuel Villasuso were essential for completing this research. Opinions and any errors are solely the responsibility of the author.

Notes

1. Interview with the ex President of Costa Rica Jose Maria Figueres shown in the video attached to Porter and Ketelhohn (2002). Interview: Oscar Arias, President of Costa Rica, 22 February 2005.

The paper focuses on producers of ICT-related goods and services, ranging from microprocessors to software packages. Providers of ICT-using services, such as call centres, have not been included in the definition, although they are often included in the national statistics on the ICT sector.

Social embeddedness also plays an important role in explaining the emergence of Silicon Valley. The latter, which is the most famous ICT cluster, started as a backward region in contrast to the Boston area, where most high technology research was carried out up to the 1960s. It caught up and surpassed the Boston area thanks to the decisions of a group of individual researchers to establish themselves in California and create the company Fairchild semiconductors. Most of today's semiconductor MNCs, such as Intel, emerged directly or indirectly from companies created by engineers that worked at Fairchild. Social contacts among them helped creating networks of interlinked companies (including MNCs and start ups) that were functional for the industrial development of Silicon Valley (Sturgeon, 2000).

Interview: name withheld, CEO of domestic firm, 14 August 2006.

Interview: name withheld, CEO of domestic firm, 10 April 2007.

Interview: name withheld, CEO of domestic firm, 8 July 2007, parenthesis added by the author.

This excludes the firms involved in product adjustment and product development linkages, and also two local companies that collaborate with universities.

Interview: name withheld, CEO of domestic firm, 21 August 2006.

Interview: name withheld, CEO of domestic firm, 11 June 2006.

Interview: name withheld, CEO of domestic firm, 23 April 2007.

Interview: name withheld, CEO of domestic firm, 25 November 2006. BBB=Fictional name assigned to the MNC partner as required by the entrepreneur interviewed.

They are the six firms that have transnational social ties who ranked MNC subsidiaries as an important but not the most important source of technology for them (Table 6, third row, second column).

Interview: name withheld, director of MNC subsidiary, 15 July 2007.