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

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 physico-chemical 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 data-bases; 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, 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 semi-structured 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).

The upper reaches of the ‘smiling curve’: Skåne region, Sweden

Let us look first at the regional TIS for mobile telephony in southern Sweden’s Skåne region. Large firms like Ericsson and Ericsson Mobile, later SonyEricsson, used to animate this region’s ICT paradigm, but increasingly global competition led to their initiation of ‘open innovation’ SME and GIN activity. Such engagement was carefully promoted by the regional development agency. Included here are various localised cluster initiatives: first, for mobile telephony (‘Mobile Heights’); second, new media (‘Media Evolution’); and third the Skåne film industry (Wallander detective films), including computer gaming. These nowadays constitute the core of a globally interactive regional ‘Convergent Media’ platform. During the 2000s, the Swedish market and production home base were invaded by rapidly expanding Asian smartphone producers from South Korea (Samsung), Taiwan (HTC) and China (Huawei). This led SonyEricsson to begin reducing shipments of hardware and focusing more on managing global network services to mobile telephony suppliers such as Telenord and Telia. This led to Telia itself cutting employment after the mid-2000s, also filing no more patents. Finally, SonyEricsson disbanded in late 2011. ST Ericsson, the telephony infrastructure arm of the Ericsson Group also seems vulnerable as a stand-alone company, Chinese telecoms flagship Huawei being a likely suitor. Global rivalry in markets is one thing but in core mobile telephony design and contract assembly SonyEricsson mostly feared Huawei, which located a third Swedish research centre in Lund, Skåne for the development of basic components for mobile phones. This augmented their earlier locations at Kista Science Park in Stockholm and Gothenburg, together employing 250 engineers. In Lund SonyEricsson cutbacks had made further hundreds of qualified engineers available. Huawei spans the telecoms range from base stations to mobile Internet modems and its own telephone handsets. Open innovation came too late even though Skåne TIS clusters had spawned quality entrepreneurial firms such as user-interface maker The Astonishing Tribe (TAT), acquired by RIM (BlackBerry), the similarly troubled Canadian smartphone flagship and Polar Rose, another start-up with a facial recognition programme that linked into Facebook photos, which was bought by Apple for $29 million, both in late 2010.

Nokia, Finland

In January 2008, Nokia announced it was closing its factory in Bochum, Germany. Altogether, some 4300 workers lost their jobs (2300 workers employed directly by Nokia, another 1000 temporary workers, and a further 1000 working at suppliers to Nokia). Production was shifted to a new factory in the Romanian city of Cluj. But already by September 2011 Nokia announced that it would be transferring the manufacturing of the low-end phones made in Cluj to larger factories in China and South Korea, where production costs and economies of scale were more favourable. The Cluj factory was subsequently closed in late 2011. But this was almost certainly too little, too late. Nokia’s problems lay in a cognitive lock-in, on the one hand and a failure to develop the necessary internal and external ‘radar’ for effective foresight, on the other. Myopia meant Nokia failed purposefully to anticipate ‘convergence’ trends in the industry. Such attentiveness would have shown mobile telephony, the company’s core competence, to have become possibly the least important function on a contemporary ‘smartphone’.

Thus for some twenty years Nokia had enjoyed being the undisputed global market leader in mobile handsets. It is, nevertheless, the view of industry experts like Jon Andersson (2011) that this situation ended with the arrival on the market in 2007 of Apple’s smartphone – iPhone, iPod and related iTune platform for music and applications (‘apps’) of all kinds. Apple and Google’s (Android) mobile platforms nowadays attract a global network of developers the main focus of whose innovation is the creation of new applications (‘apps’). In addition, as chips for mobile handsets became more and more powerful the mobile handset changed from a mobile phone to a mini computer with increasing possibilities for software applications ranging from banking to gaming and city maps. This explains why the physical mobile handset is today the least important part of a mobile phone and where the least added value accrues. Nokia got locked-in to an operating system – Symbian - that was once state of the art and retains robust functionality but lacks the flexibility for convergence of the kind exploited by Apple and Google Android. It acquired this Cambridge (UK)-based consortium operating system in 1999 which reinforced Nokia’s telephony-led path dependence. Nokia’s early successes were closely integrated with the activities of Finland’s TIS, led by innovation and research agencies Tekes and VTT but its spectacular growth led it to undervalue its TIS, both nationally and regionally, where managers of innovation agencies, at the outset attractive co-creation partners, were sacrificed for the most important corporate customers.

For the first time in its history the Finnish firm appointed a non-Finn as CEO, choosing Canadian former Microsoft executive Stephen Elop in 2010. In early 2011, Elop referred to Nokia as a ‘burning platform’ in recognition of its failure to keep up with the ‘smartphone apps’ generation. Elop’s announcement admitted that Nokia had been comprehensively out-manoeuvred by Apple’s iOS and Google’s Android (2009) platforms. Nokia’s profits were eroding at 20% per quarter in late-2010/early-2011 and it still at that time had no competitor platform to those of the two global leaders. A tie-up with Microsoft meant its Windows Phone 7 operating system now had a much-needed platform company on which its system product could, in principle, reside. However, with Nokia’s smartphone market share halving in two years from 47% (end 2009) to 38% (end 2010) and 24% (end 2011), its future as a global competitor was not helped by industry opinion that its new Microsoft-powered Lumia 800 smartphone was ‘disappointing’ (Naughton, 2011). Microsoft-powered devices had 5% global market share at end-2011 (LMS, 2011).By late 2011 not only had Nokia been closing relatively new cheaper labor zone production facilities but it had announced a 40% cut in its global R&D payroll. Earlier downsizing in software design had resulted in thousands of Symbian-related software developers being transferred to consulting and outsourcing firm Accenture who hired eight hundred in Finland alone. Some 2300 employees from China, Finland, India, the United Kingdom and the United States (a good portion of the ICT GIN) were to transfer to Accenture by 2016.

NorCom, Aalborg, Denmark

This is a brief sketch of regional cluster rise and demise in a sphere of mobile telephony addressed above in relation to the early days of this pioneering technology (Stoerring & Dalum, 2007). The key lay in the Nordic communication standard eventually being adopted by the EU, giving European cellular service providers the advantage of a uniform GSM standard before anywhere else in the world, notably the USA, could achieve this. Infrastructure electronics was a centre of research and teaching excellence in the University of Aalborg. Research showed that this was because of the region’s fishing tradition and early innovation in ship-to-shore communication with local firms specialising in this technology that grew with the emergent field. But the NorCom cluster itself grew because of proximity to Aalborg University’s NOVI science park and research expertise in radio communications that readily translated into spinout companies. By the 1990s these had mostly been acquired by MNCs like Texas Instruments, Motorola, Siemens and Amstrad alongside smaller but ‘born global’ ICT firms like Cambridge Silicon Radio (CSR). This is nowadays one of the mainstays of Cambridge’s toe-hold on the ICT GIN through its expertise in ‘fabless’ chip design, particularly for ‘smartphones’. The MNCs quarried the knowledge base and one by one they all left, making hundreds of engineers jobless each time. From this some new start-ups emerged but the base station infrastructure had become a commodity item sold into, for example, the Nordic and UK markets by the likes of Huawei. NorCom is by now an undifferentiated element in a diffused software and systems design ecosystem of niche businesses in the broader north Jutland region (Reinau, 2010).

California: home of the ‘smartphone’

Whereas the Nordic story is one of decline, the Californian is one of replacing them at the design and marketing peaks of the ‘smiling curve’ of value realisation in contemporary ICT. The global power of the smartphone ‘apps’ platform is testified to in the following narrative. Thus Apple and Google in 2011 ended a ‘phoney war’ to engage in an all-out contest, the victor in which would be the one attracting the most desirable apps for the smartphone and tablet platforms that used their proprietary operating systems. Industry experts expected Google to prevail, which in 2011 it did in terms of market share, because of its open source and open innovation model. This meant the quantity (if not the quality) available on its Android system with 46% global market share by late-2011 ensured it overtook Apple’s 28% smartphone share (LMS, 2011). A counter-argument favouring Apple was that ‘apps’ entrepreneurs interested in profits rather than experiencing the glory of publication on Google would prefer Apple’s closed innovation model (iOS system) because of its superior IPR regime. This allows for contractual appropriation by suppliers of income streams (e.g. digital newsprint). Apple’s newsprint ‘app’ scheme charged 30% of subscription fees and disallowed data sharing (e.g. subscriber addresses). Google’s model charged publishers only 10% of subscription fees and subscriber information was passed along. It is basically a scope versus scale contest in which Apple’s App Store runs on tight control, high vetting and censoring of apps, while inducing high customer loyalty. Google’s approach is more liberal but also less quality-minded since Android has been an open source project from the start. Thus customers buy Android through buying an HTC, Huawei, Samsung or LG smartphone rather than from Google itself. Global Android sales were also pushed up by extremely low cost devices including a ZTE Android device that is sold for just $20 in China. Contrariwise, to access its IPR assets Google in 2011 acquired Motorola Mobile whose Droid 4 device competed with Samsung’s Galaxy Nexus powered by its new Android 4.0 Ice Cream operating system.It is worth bearing in mind that while key ‘apps’ customers (Apple especially) are based in California, many more ‘apps’ start-ups are also located elsewhere, optimizing on ‘related variety’ among software, system design 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 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 eco-friendly chip designs, US company LSI signed a licensing agreement to use ARM’s faster 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 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, at first fulfilling expectations of technological development. In a different segment of the market, Singapore’s Venture Corp supplied printers to Hewlett-Packard, from whom 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 who in turn were emerging in Singapore’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 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 TIS-designed 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) and Western 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 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 and more recently by Chinese telecom giants 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’) as well as making inroads in European markets (e.g. traditional infrastructure upgrading in the Netherlands, UK and 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 (Hewlett- Packard, Dell).