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Edited by David B. Audretsch, Oliver Falck, Stephan Heblich and Adam Lederer
Chapter 9: The New Argonauts and the Rise of Venture Capital in the ‘Periphery’
9 The new Argonauts and the rise of venture capital in the ‘periphery’ AnnaLee Saxenian and Charles F. Sabel The emergence of technology entrepreneurship and innovation outside, but closely connected to, the advanced core of the world economy is one of the most striking features of contemporary capitalism. Israel and Taiwan, both small, peripheral agricultural economies in the postwar period, became home to dynamic clusters of entrepreneurial experimentation in the 1980s and 1990s. Today Taiwan’s specialized producers define the state-of-the-art logistics and flexible manufacturing of low-cost, high-quality electronic systems. Israel, with a population of just over six million, is home to more than a hundred internet security and software-related technology companies listed on NASDAQ, more than any other country outside North America. In both countries venture capital systemically encourages the proliferation of companies that in effect codesign specialized components or subsystems for firms in the core economies. The emergence of clusters of, for example, software firms in mid-income developing economies like China and India is if anything more striking still. Vital urban hubs like Bangalore and Hangzhou are not only peripheral to the world economy, but also located in large national economies that – (partial) liberalization of trade policy aside – lack most of the institutions economists view as preconditions for growth: the rule of law, secure property rights, good corporate governance, flexible labor markets, transparent capital markets and so forth. If it is surprising that firms in the ‘periphery’ can co-design crucial components with firms in the core, then it is...
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