Point number two is that a company that learns how to connect the knowledge found within those various clusters in a smarter, faster, and more efficient way than other companies is going to gain a tremendous advantage, way beyond what would be available to companies that rely only on a single cluster.
So our message to Silicon Valley companies is not, “You guys should move out of there.” Not at all. The message is really much more, “We know that Silicon Valley is extremely strong, but don’t be too provincial. Look at the rest of the world as well, and think about what you can learn and bring home from the rest of the world.”
s+b: What of the classic research centers, like Xerox PARC and Bell Labs? Does the failure to thrive of Xerox and Lucent suggest that such centers are relics?
DOZ: My gut feeling is, “I hope not.” The real issues are twofold. One is that some of these centers, like PARC and Bell Labs, have become kind of gated communities, isolated islands, looking pretty much inward, and not always having the richness of external contacts they would benefit from. On the other hand, one of the things we certainly do not advocate, and that has been done by some companies, is to set up relatively large research establishments overseas. They then find that the local companies are already connected to the local communities and have first pick of the best local students, the best local researchers, and so on. That’s what happened to a number of Western companies that opened research centers or R&D centers in Japan, only to be disappointed.
And then the second problem, if you look at the history of Xerox and Lucent, is that unless you also work very actively on the absorptive capacity of the rest of the organization — its ability to put to good use what is developed in the labs — then someone else might benefit instead. Which is exactly what happened with both of these centers. Big companies have been fairly reluctant, and in many cases not so much reluctant as unable, to absorb the new knowledge created in their research centers, which at the end of the day leads entrepreneurial companies like Apple in the 1980s to basically get the benefits. But I don’t think one should draw the conclusion that this is the problem of the labs. To my mind that is much more the problem of the rest of the organization. And whether you look at Xerox, Lucent, IBM, and so on, I think it would be very unfortunate if at the end of the day that knowledge got dispersed or got lost.
s+b: If Nokia or ST’s successes suggest that the next metanational superstar could as easily emerge from Iceland as Palo Alto, why have European startups, like Business Objects in software or SangStat in biotech, included a Silicon Valley base and a Nasdaq listing as integral parts of their strategy?
DOZ: I think we need to separate the two sides of the question. Is the Nasdaq listing going to remain essential to companies? The answer is yes, for all kinds of reasons that have to do with venture capital funding, standards of reporting, the way you look at stock valuations, and so forth. So I would expect a lot of companies started by Europeans to essentially be transformed into American companies, in order to have a Nasdaq listing and in order to have U.S. appeal.
The second point is a different one. If you are in a catch-up mode, like many companies have been, starting with big companies in Korea and small European companies like Business Objects, and you basically say, “I need to learn from the leaders, and I know where the leaders are,” then you want to go and set up more than just a listening post. You want to set up a substantial operation, and I think you will continue to see a lot of that taking place.