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UNIVERSITY OF LJUBLJANA
FACULTY OF ECONOMICS
MASTER ’S THESIS
THE ROLE OF THE NEW ARGONAUTS IN THE SLOVENIAN
ENTREPRENEURIAL ECOSYSTEM
Ljubljana, September 2014 NEJC SLOVNIK
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TABLE OF CONTENTS
INTRODUCTION .................................................................................................................... 1
1 NEW ARGONAUTS ............................................................................................................. 3
1.1 Definition of new Argonauts ................................................................................................ 3
1.2 Emergence of new Argonauts .............................................................................................. 4
1.3 The role of new Argonauts in the development of Silicon Valley and U.S.
economy ............................................................................................................................... 5
1.4 Related concepts of the new Argonauts phenomenon ......................................................... 6
1.5 The impact to the global economy ....................................................................................... 8
1.5.1 Benefits to the local economy ....................................................................................... 8
1.5.2 Benefits to the home-country counterparts ................................................................... 9
1.6 New Argonauts’ common characteristics .......................................................................... 10
1.7 New Argonauts and Slovenia ............................................................................................. 11
2 BRAIN CIRCULATION .................................................................................................... 13
2.1 Evolution of brain circulation ............................................................................................ 13
2.2 Social networks and cross-regional collaborations ............................................................ 16
2.3 Best practices of brain circulation in the case of new Argonauts ...................................... 17
3 ENTREPRENEURIAL ECOSYSTEM............................................................................. 19
3.1 Definition of the ecosystem ................................................................................................ 19
3.2 Silicon Valley’s entrepreneurial ecosystem ....................................................................... 21
3.2.1 The supportive environment ........................................................................................ 22
3.2.2 The institutional environment ..................................................................................... 23
3.3 Slovene entrepreneurial ecosystem .................................................................................... 24
3.3.1 The supportive environment ........................................................................................ 25
3.3.2 The institutional environment ..................................................................................... 27
4 AN EXPLORATORY RESEARCH ON THE ROLE OF THE NEW
ARGONAUTS IN THE SLOVENIAN ENTREPRENEURIAL
ECOSYSTEM ...................................................................................................................... 28
4.1 Research questions and hypotheses.................................................................................... 28 4.2 Methodology ...................................................................................................................... 29
4.2.1 Model design and the questionnaire ............................................................................ 29
4.2.2 Data collections ........................................................................................................... 30
4.2.3 Data analysis ............................................................................................................... 30
4.2.4 Limitations .................................................................................................................. 31
4.3 Results and findings ........................................................................................................... 31
4.3.1 Slovene entrepreneurial ecosystem and the factors influencing the role of the new
Argonauts .................................................................................................................... 31
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INTRODUCTION
It is well known that Silicon Valley is the most famous high-tech industrial cluster (Mann &
Luo, 2010) and that it has one of the most ethnically diverse workforce in the world
(Saxenian, 2002a). More than a quarter of Silicon Valley’s skilled workers are immigrantsfrom China, Taiwan, India, the United Kingdom, Iran, Vietnam, the Philippines, Canada and
Israel (Saxenian, 2002a). Based on its diverse ethnical population, Silicon Valley has built a
strong two-way bridge with the home countries of immigrant professionals and developed an
environment for entrepreneurial development. The foundations lie in collaboration of
immigrant professionals and entrepreneurs with their home-country counterparts. We refer to
the members of these networks as the new Argonauts; an allusion to the ancient Greek myth
Jason and the Argonauts, who searched for the Golden Fleece (Saxenian & Sabel, 2008). The
new Argonauts are foreign-born, technically skilled entrepreneurs who travel back and forth
between Silicon Valley and their home countries (Saxenian, 2006). Furthermore, new professional and social networks that link new immigrant entrepreneurs were created and
have become global institutions that connect new immigrants with their counterparts at home.
These new transnational communities have mobilized the shared information, know-how,
contacts, skills and capital to start technology firms (Saxenian, 2002a).
From this perspective, we are no longer talking about “brain drain”, but rather about “brain
circulation”. Majority of people assume that the movement of skilled and talented
professionals benefits one country at the cost of another. But oppositely, the brain circulation
of high-skilled professionals increasingly benefits both sides and their economies (Saxenian,2002a). Brain circulation has become a powerful economic force for development of formerly
peripheral regions like China, India and Taiwan. It is important that a country identifies the
value of brain circulation and creates a stimulative environment for their skilled and talented
professionals, and entrepreneurs to mobilize all of its benefits.
Silicon Valley’s o penness and diversity has strengthened its economy and entrepreneurial
ecosystem and the new Argonauts have made the U.S. richer and not poorer (Saxenian, 2006).
An author believes that Slovenia should learn from this practice and try to develop an
entrepreneurial ecosystem, which would enable brain circulation of Slovene new Argonauts,who begun emerging in recent years. Currently, many Slovenes are leaving the country,
seeking better job opportunities and working environment. According to Statistical Office of
the Republic of Slovenia (n.d.), in 2012 and 2013 15,980 Slovenes moved abroad.
Unfortunately, the country still does not recognise the opportunity of migration; rather sees it
as brain drain (Zupanic, 2012). Therefore, the goal of master’s thesis is to discover potential
methods and processes for transmission of business experience, know-how, skills, and
connections back to Slovenia, whereas focusing on the Slovene new Argonauts.
The purpose of master thesis is to contribute to understanding of the role of new Argonautsin today’s economy and to identify the role of new Argonauts in the Slovene entrepreneurial
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ecosystem. Furthermore, the author tries to identify the potential for future development of
entrepreneurial networks and how Slovene new Argonauts could make a contribution to the
ecosystem.
The goal is to identify Slovene new Argonauts and to search for established entrepreneurialnetworks and cooperation with home-country counterparts. Current Slovene initiatives, which
encourage collaboration between environments, are analysed. Furthermore, the author tries to
identify motivational factors of immigrant entrepreneurs and professionals working in Silicon
Valley for building a strong two-way bridge. Moreover, the goal of the empirical study is to
discover potential methods and processes for transmission of business experience, know-how,
skills, and connections back to Slovenia in order to boost development of Slovene
entrepreneurial ecosystem. In addition, the author searches for possibility of even stronger
brain circulation of highly skilled and talented Slovene professionals and entrepreneurs.
Methodology. In order to achieve the objectives of the master thesis three different research
approaches are used. Firstly, with the descriptive approach author made a literature review
on the paradigm of new Argonauts and related concepts. Furthermore, the analysis of Slovene
and Silicon Valley's ecosystems, with an emphasis on entrepreneurial environment, has been
made using secondary sources. Secondly, the exploratory research approach is used to help
the author identify the present and the future role of new Argonauts in the Slovene
entrepreneurial ecosystem. This is achieved through five (5) in-depth interviews with new
Argonaut representatives working in both environments - Slovenia and Silicon Valley (the
U.S.). The unique geographic area was selected in order to be interconnected with the roots ofnew Argonauts’ phenomenon and since many Slovene entrepreneurs choose Silicon Valley,
or the U.S., as a first choice of their movement. Furthermore, for the purpose of
comprehensive research three (3) in-depth interviews with representatives of entrepreneurial
environment have been performed to discover potential relationships and similar views on the
role of new Argonauts in the Slovene entrepreneurial ecosystem. The interviews were
conducted in August 2014 and the average duration was 30 minutes. To analyse the obtained
primary data, author used software package NVivo to code, classify, sort and arrange
information, and additionally to examine relationships in the obtained data.
It needs to be emphasised that the number of representatives working in both environments is
very limited and small. Therefore, the study covers almost entire population and the author
has achieved as close as 100% response rate. It is worth mentioning that the topic of this
research study is fairly new and unexplored, and has never been studied in the case of
Slovenia.
Structure of the thesis. The master thesis is divided in three main parts.
The first and second parts focus on the review of the existing secondary literature on the paradigm of new Argonauts and related concepts. Furthermore, Silicon Valley's and Slovene
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ecosystems were analysed and compared in order to find applicability of Silicon Valley's
practices for the development of entrepreneurial networks and cooperation between Slovene
new Argonauts and home-country counterparts. An emphasis of the analysis and comparison
is held on supportive and institutional environments of the both ecosystems.
In the second part, methodology and results of empirical research are presented. The
methodology was prepared, and is based, on extensive secondary literature review, and serves
as a basis for exploratory research. Based on the analysis and findings, the results chapter is
divided in eight interconnected topics.
The third part consists of presentation, analysis and discussion of results, followed by final
conclusions of the master thesis, which could lead to important contribution to understanding
knowledge and best practices transfers through new Argonauts and accompanying
entrepreneurial practices.
Limitations. The first limitation of this master thesis is that the author was not able to
investigate both environments with the same depth and from the same research perspective.
As a Slovene resident the author was able to develop a deeper understanding of Slovene
entrepreneurial ecosystem and was able to search for country’s specifics and insights. On the
other hand, this was not possible in the case of Silicon Valley, as author has not yet visited the
Bay Area and was not able to observe environment’s characteristics in person. Furthermore, it
would be beneficial to make a research and to conduct in-depth interviews with
representatives of Silicon Valley’s entrepreneurial environment and its immigrants. These twoadditional analyses would help to deepen and reach a comprehensive understanding of new
Argonauts phenomenon and entrepreneurial networks of immigrants in Silicon Valley and
beyond.
1 NEW ARGONAUTS
1.1 Definition of new Argonauts
In the post-World War II period rapid growth of the foreign-born workforce to the U.S.emerged (Saxenian, 2002a; Saxenian, 2007), specifically to Silicon Valley (Saxenian, 2007).
Skilled and talented students left to take advantage of educational opportunities abroad
(Saxenian, 2006). Most people believed that movement of skill and talent must benefit one
country at the expense of another (Saxenian, 2002a). The countries thought they suffered from
a “brain drain”, but at the time, nobody foresaw that these emigrants might become an
important asset in the next century global economy (Saxenian, 2006).
These same individuals or their second-generation of immigrant families, who once left their
homes for a better life abroad have started returning home and transforming “brain drain” into
“brain circulation” (Saxenian, 2007). At home they established new business relationships or
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started new companies, while retaining their professional and social ties with the United
States. The pioneers of these transformations and business ties are professionals and
entrepreneurs who travel back and forth between Silicon Valley and their home countries
(Saxenian, 2006). We refer to these members as the new Argonauts, an allusion to the
ancient Greek myth Jason and the Argonauts, who searched for the Golden Fleece (Saxenian& Sabel, 2008).
The new Argonauts have built a strong two-way bridge between Silicon Valley and home
countries to develop the environment for entrepreneurial development (Saxenian & Sabel,
2008). Those who remain in America often become part of transnational communities that
link the U.S. to their home-country counterparts. These new transnational communities have
mobilized the shared information, know-how, contacts, skills and capital to start new
technology firms (Saxenian, 2002a). Furthermore, they have influenced policies of their home
countries, using best practices and models from Silicon Valley to work with public officials toadapt and redesign relevant institutions and firms in their native countries (Saxenian & Sabel,
2008). The new Argonauts are ideally positioned to search beyond prevailing routines to
identify opportunities for cross-national participation and can quickly identify promising
market opportunities, raise capital, build management teams, and establish partnerships
(Saxenian, 2006).
1.2 Emergence of new Argonauts
As claimed in the first chapter, the new Argonauts emerged soon after the Second World War,when foreign-born immigrants started coming to the U.S, many of them as students (Wadhwa,
Rissing, Saxenian, & Gereffi, 2007). It was not until early 1980s, when new Argonauts
phenomenon started to flourish. At that time it was observed that many Taiwanese, Israeli,
Indian and Chinese professionals and entrepreneurs began returning from Silicon Valley to
their home countries after studying and working abroad. These native-born brought cultural
and linguistic know-how, technical and operating experience, knowledge of new business
models, and networks of contacts from the U.S. Furthermore, as U.S.-educated immigrants
returned home, either temporarily or permanently, they transferred the institutions of
entrepreneurship to their home countries. It should be stressed that this was not a one-way process, but a far more complex and decentralised two-way process of business skills, capital,
connections and technology (Saxenian, 2006).
Many of the ones who stayed were important players and contributed to the U.S. economy,
generated jobs, exports, and became leaders in innovation (Saxenian, 2002a; Wadhwa,
Saxenian, Rissing, & Gereffi, 2007; Wadhwa et al., 2007). They stayed after graduation and
many of them founded companies an average of thirteen years after their arrival (Wadhwa et
al., 2007). These individuals, at some point started to collaborate with their home-country
counterparts and started transforming developmental opportunities for formerly peripheralregions (Saxenian, 2007).
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Immigrant founders initially came to the U.S. primarily for a higher education, as high as 52.3
percent of immigrants and 39.8 percent entered the country because of a job opportunity
(Wadhwa et al., 2007). Later, many of them accepted jobs in Silicon Valley rather than
returning to their home countries where job opportunities were far more limited (Saxenian,
n.d.; Saxenian, 2007). Today 38.8 percent of companies have an immigrant as a key founderin Silicon Valley’s companies (Wadhwa et al., 2007). Between 1995 and 2005 almost 80
percent of companies founded by immigrants in the U.S. were within just two industry fields:
software and innovation related services. It becomes clear that immigrant professionals have
become a powerful driving force in the creation of new businesses and intellectual property in
the U.S. (Wadhwa et al., 2007).
1.3 The role of new Argonauts in the development of Silicon Valley and U.S.
economy
Today Silicon Valley is one of the most diverse high-tech industrial clusters (Saxenian, 2002a;
Mann & Luo, 2010) with one-third of foreign-born scientists and engineers working in the
region’s high-tech industries by 1990 (Saxenian, 2006).
Wadhwa et al. (2007) analysed immigrant populations in engineering and technology startups
founded from 1995 to 2005 and discovered that major tech centres usually have a higher
concentration of immigrant-founded startups than their state average. On the top of the chart
are: Silicon Valley with 52.4 percent of its technology and engineering firms having
immigrant key founders, followed by New York City at 43.8 percent and Chicago at 35.8 percent (Wadhwa et al., 2007). The immigrant founders come from all over the world, lead by
Indian founders at almost 26 percent. They combine more than immigrants from U.K., China,
Taiwan and Japan put together (Wadhwa et al., 2007). In general, it was found there was at
least one immigrant key founder in 25.3 percent of high-tech companies established across the
U.S. It was estimated that observed pool of immigrant-founded companies generated more
than $52 billion in sales and created just under 450,000 jobs in 2005 (Wadhwa et al., 2007).
Presented data and diverse workforce collaborating with home-country counterparts have
measurable economic benefits. Saxenian (2002a, p. 30) claims: “For every 1 percent increasein the number of first-generation immigrants from a given country, for example, California's
exports to that country go up nearly 0.5 percent.” U.S. economy has historically been
flourished from its openness and diversity. Based on today’s global economy we could expect
that highly skilled and motivated immigrants and transnational entrepreneurs could even
substantially contribute to the U.S. economy in upcoming decades (Saxenian, 2002a; Kenney,
Breznitz, & Murphree, 2013).
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1.4 Related concepts of the new Argonauts phenomenon
In scientific literature we can find a couple of similar expressions and concepts, which relate
to the phrase of the new Argonauts. These are returnee entrepreneur and transnational
entrepreneur.
Returnee entrepreneurs (in short returnee) are defined as skilled individuals who finished
their studies and/or work abroad, and returned to their native countries to re-settle or to set up
domestically owned, or self-started, venture (Kenney et al., 2013; Pruthi, 2014). Dai and Liu
(2009) added that returnees are scientists, engineers or students who were trained in OECD
countries before returning home to one of developing countries. Furthermore, returnees are
mainly oriented towards home-country markets, even though they have created good
foundations to act internationally, since established connections with host countries are strong
(Lin & Tao, 2012). Based on Dai and Liu (2009) returnee entrepreneurs differentiate fromlocal entrepreneurs in several important expects. Firstly, they possess certain skills, education
and knowledge (human capital), which were acquired when living abroad. And secondly,
during their stay they were able to develop international business ties and social relationships
through working, commercial environment, and by living in another country (social capital).
Nevertheless, these characteristics should be seen as important capital in favour of returnees.
Solimano (2007) sees returnees as ideal participants to collaborate with domestic
policymakers and businesses to recognize appropriate market niches, mobilize domestic skill
and knowledge, connect to international markets, and to co-create strategies to overcome
obstacles for country’s further development and growth.
In comparison to returnees, transnational (diaspora) entrepreneurs are immigrant business
owners who are engaged in border crossing business activities between home and host
country counterparts. They are more likely to cooperate with both home and host countries
depending on characteristics of their business and networks (Riddle, Hrivnak, & Nielsen,
2010; Lin & Tao, 2012). It is believed that transnational entrepreneurs are a distinct type of
international entrepreneurs as their entrepreneurial activities span national business
environments. It is common they are circularly migrating between two nations, which foster
to create very specific opportunities for diaspora entrepreneurs as they run their business. Byexploiting resources from various locations, they serve as agents of international business in
order to promote and facilitate bilateral trade and investment (Riddle et al., 2010).
Next to transnational entrepreneur the term diaspora entrepreneur is many times jointly used
in scientific literature, and therefore an important one to understand. A diaspora is often
described as a network of people and refers to any ethnic population forced or motivated to
leave their ethnic homelands. By being dispersed throughout other parts of the world diaspora
people are motivated to help its homeland, especially when the country is less developed
(Mahroum, Eldridge, & Daar, 2006; Kotabe, Riddle, Sonderegger, & Täube, 2013).
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In order to understand immigrant economic adaptation and transnational linkages in better
way, Lin (2010) conceptualised a framework which distinguishes four contemporary modes
(Lin & Tao, 2012):
Ethnic economy; Wage employment;
Returnee businesses;
Transnational entrepreneurship.
As we can observe and as it was already described above, transnational entrepreneurs are
internationally oriented and active between home and host country, while returneeentrepreneurs are largely focused only on countries of their origin. In addition, ethnic
economy is described as a business that is either owned or controlled by co-ethnic owners
who are privileged to access a low-cost immigrant labour on a domestic consumer market. It
is common that immigrants maintain limited interactions with both host society and home-
country counterparts. In comparison to ethnic economy, wage employment refers to an
immigrant’s employment in a predominant business. By this mode, immigrants are oriented to
the host countries only and are completely assimilated. The practice is common in the
Western world, when countries who witness little population growth are consequently
oriented to attract high-skill immigrants to fill in various jobs (Lin & Tao, 2012).
Figure 1: Immigrant economic adaptation and social embeddedness
Source: X. Lin & S. Tao, Transnational entrepreneurs: Characteristics, drivers, and success
factors, 2012, p. 52.
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To sum up, this chapter has offered a comprehensive review of immigrant modes and related
concepts to a phenomenon of new Argonauts. The author believes that the concept of
transnational (diaspora) entrepreneurs uniforms new Argonauts and represents a core concept
of this master thesis. As author’s master thesis focuses to analyse linkages between Silicon
Valley’s and Slovene entrepreneurial ecosystems, the scope of this research will refer solelyto new Argonauts, since the term originates from Silicon Valley and it was created by
professor AnnaLee Saxenian from University of California, Berkley.
1.5 The impact to the global economy
The important aspects which contributed to the evolution of new Argonauts are globalisation
and technological advancements, which have diminished geographical boundaries resulting in
increased immigrant entrepreneurship. Migrants in today's globalized world benefit from
developments in transportation and communication technologies in order to collaborate withtheir home-country counterparts, which was not possible in the past. These advancements
have enabled the emergence of diaspora or ethnic population communities that directly link
their host country with their country of origin (Saxenian, Motoyama, & Quan, 2002;
Vertovec, 2002; Teferra, 2005; Riddle et al., 2010; Kotabe et al., 2013; Pruthi, 2014).
Nowadays, one of the most diversifying networks and communities is Silicon Valley, since it
is the largest and most sophisticated market, and a leading source of new technologies
(Saxenian, n.d.). Nevertheless, emerging technology regions like Hsinchu, Bangalore, and
Shanghai are quickly developing and represent extensions of Silicon Valley, as they are co-evolving with the Silicon Valley economy (Saxenian, 2007). Couyoumdjian (2012) proposed
that in today’s globalized world entrepreneurship should be seen as a mobile resource since
entrepreneurs have endless possibilities to consider where and how to run their
entrepreneurial activities, and which institutional environment is more favourable.
1.5.1 Benefits to the local economy
As mentioned, the beginnings of new Argonauts’ phenomenon go back to the period after
World War II, when the U.S. became extremely attractive to foreign students. WhenImmigration Act, which removed national quotas came into practice in 1965, immigration of
skilled professionals became even more attractive and was further reinforced (Kenney et al.,
2013). As a consequence, there was a fast increase in the immigration of scientific and
engineering personnel from less-developed countries seeking a better and more stable future
(Azmat, 2010; Kenney et al., 2013). Furthermore, based on increased immigration an increase
in the number of immigrant entrepreneurs has been detected as well (Azmat, 2010). Although
the primary objectives of immigration were limited to labour supply and wage effects, the
implementation of Immigration Act had far more broader effects on global trade and economy
(Saxenian, 2000).
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In recent years several researchers discovered that these immigrants have heavily contributed
to the development of new technologies in the U.S. economy and have had positive effect to
the local economy (Chellaraj, Maskus, & Mattoo, 2005). Some of the positive economic
benefits on the development of Silicon Valley and the U.S. were already presented in chapter
1.3. Anyway, the positive economic benefits were not just locally based, rather have crossednational boundaries. For example, the U.S. businesses invested in Taiwan primarily to benefit
on its low-costs manufacturing labour and, furthermore, like Indian immigrants became key
contributors in linking the U.S. businesses to low-cost software expertise in India (Saxenian
2000; Saxenian, 2002b). These newly established transnational collaborations have had
positive effects on local economy as well as to the home-country counterparts of immigrants.
1.5.2 Benefits to the home-country counterparts
In the early 1980s, returning immigrants from Silicon Valley started to transfer information,know-how, contacts, skills and capital back home. They were establishing new ventures or
helping national economies in building entrepreneurial ecosystem (Saxenian, 2007).
Dai and Liu (2009) consider international orientation of entrepreneurs as significant, and
positively related with companies performance. Education, working experience, international
networks, technological, and commercial knowledge from abroad are characteristics, which
enable new Argonauts to form new ventures on different managerial mindset in comparison to
local entrepreneurs. Broader and internationally gained experience contributes to international
vision and international orientation from the start. International orientation of new Argonautsis based on their company’s overall innovativeness and pro-activeness in the search for
domestic and international markets. In addition, new approaches from abroad bring fresh
breeze to domestic economy and entrepreneurs play an important role in transferring business
practices to the local economy (Dai & Liu, 2009).
Another benefit, claimed by researches, is that new Argonauts have a significant advisory
influence on the political system. They may help with transmission of well-established and
foreign policy practices in building new entrepreneurial ecosystem back home. For example
the new Argonauts played a crucial role in strengthening Israeli and Taiwanese economy afterlocal industries experienced initial success. They were part of the initiative, which improved
the local environment and offered resources and opportunities to attract broader number of
returnees back home. It is important to emphasise that majority of professionals returned
home only after the economy had already achieved international success and did not take a
part of its initial development. Anyway, people who returned home played a significant role
on domestic and international success of their countries and have changed national economies
to the great extent (Kenney et al., 2013). The result is seen in generation of new jobs,
increased income, internationalisation of domestic companies, and increase in foreign
investments (Kotabe et al., 2013).
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One of the most notable benefits for home-country counterparts was also a formation of
venture capital investments enhanced by stronger cross-national social ties. In addition to
operational experience, knowledge of new business models and new businesses creation, new
Argonauts have also transferred the Silicon Valley model of venture capital industry to their
domestic countries. Today Israel and Taiwan represent the largest venture capital industriesoutside North America (Saxenian, 2007). New Argonauts are often motivated to invest into
home-grown companies to contribute to the economic development and to provide domestic
communities opportunity for a new venture creation (Riddle et al., 2010). They invest through
direct and portfolio investments or by establishing new ventures (Kotabe et al., 2013).
Moreover, older generation of new Argonauts play an active role in financing and mentoring
younger generations of domestic entrepreneurs. They act as angel investors, invest
individually or jointly and are more accessible to co-ethnic entrepreneurs than foreign venture
capital (Saxenian, 2002b).
1.6 New Argonauts’ common characteristics
Up to this point the author has done a broad review of relevant literature to cover the
phenomenon of new Argonauts. Nevertheless, it would be beneficial to form a comprehensive
illustration of new Argonauts common characteristics in order to make a good foundation for
further elaboration of this paper.
Based on Chinese immigrants in Canada Lin and Tao (2012, p. 65) found “a typical new
Argonaut is a men who is at least 45 years old and is married with one child, has completed aMaster’s or higher education programme, and does not have a full-time job.” However, if we
incorporate findings up to this point we could specify the following characteristics of new
Argonauts:
they participate and work in cross-national environment (Riddle et al., 2010; Lin & Tao,
2012);
are members of transnational communities and agents of international business (Saxenian,
2002a ; Riddle et al., 2010);
transfer information, know-how, contacts, skills and capital between two economicenvironments (Saxenian, 2002a; Saxenian, 2006);
are professionals and entrepreneurs who are involved in collaboration with foreign and
home-country counterparts (Saxenian, 2006; Riddle et al., 2010; Lin & Tao, 2012);
are motivated to build a two-way bridge in order to boost further entrepreneurial
development of their country of origin (Saxenian, 2006; Saxenian & Sabel, 2008);
are foreign-born immigrants who return home or at some point start to collaborate with
their home-country counterparts (Dai & Liu, 2009; Kenney et al., 2013);
are able to identify promising market opportunities (Saxenian, 2006);
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are well educated individuals who have completed one of the higher education
programmes (Lin & Tao, 2012).
In today’s global economy new Argonauts also serve as role models to younger generation of
entrepreneurs and heavily contribute to the creation of the new era ventures (Saxenian, 2007).It is important to understand that improvements of informational systems, advances in
transportation and communication technologies enabled collaboration and efficient transfer of
technical and institutional knowledge between foreign and home-country counterparts
(Saxenian, 2002b; Saxenian et al., 2002; Riddle et al., 2010; Kotabe et al., 2013; Pruthi, 2014).
And based on past technological improvements prerequisite for new Argonauts creation was
established and slowly started to show an impact to the global economy.
1.7 New Argonauts and Slovenia
Taking into consideration our findings we can quickly observe that New Argonauts can be
found in almost every economy around the world. If a breakthrough of phenomenon was
made in early 1980s, the author believes that Slovene new Argonauts have had a broader
impact on Slovene entrepreneurial ecosystem for the past 10 years. For the purpose of this
research the author will focus solely on Slovene new Argonauts connected to Silicon Valley
or the U.S. entrepreneurial ecosystems.
The author recognised 3 distinctive groups of Slovene new Argonauts based on working
environment and strength of collaboration:
Immigrated new Argonauts;
Foreign-based new Argonauts;
Home-based new Argonauts.
Immigrated new Argonauts are Slovene professionals or entrepreneurs who live and work in
Silicon Valley, or the U.S., but their connections with the country of origin are diminished.
They have established strong connection with the host country and their work is mainly
focused on their local environment. Based on its characteristics they are the closest to the
mode of wage employment mentioned before, whereas immigrants are oriented to the host
countries. They have founded or co-founded startups, work for one of the local enterprises,
usually multinational one, or are researchers and teachers at universities. Representatives of
this group are e.g. Layer, Inc., Azumio, Inc. founded by Bojan Bostjancic and Peter Kuhar, dr.
Jernej Barbic (University of Southern California), and others. Their interactions with home-
country counterparts are for now, only occasional.
Similar to Immigrated new Argonauts Foreign-based new Argonauts also live and work in
Silicon Valley, or the U.S., but in comparison to the first group they are actively dispersed
between two environments – foreign country and country of origin. They travel back and
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forth between two environments and closely collaborate with home-country counterparts;
therefore, we could relate them to the mode of transnational entrepreneurs. They are
transmitting business experience, know-how, skills and connections back to Slovenia.
Representatives of this group are e.g. Celtra Inc., Iddiction Inc., Zepppelin Inc. with branches
in the U.S. and Slovenia, dr. Jure Leskovec (Stanford University), Niko Klanjsek (Fly Kly,Inc.), Jugoslav Petkovic (entrepreneur and angel investor), and others.
Like Foreign-based new Argonauts Home-based new Argonauts are also actively dispersed
between two environments - country of origin and foreign country and mainly possess
characteristics of transnational entrepreneurs. However, Home-based new Argonauts are
Slovene entrepreneurs and professionals who worked or studied abroad for a certain period of
time, but have returned home. By that they have brought business experience, know-how,
skills and connections back to Slovenia. However, they still work in close collaboration with
foreign environment or have branches in Slovenia and in the U.S. Representatives of thisgroup are e.g. Zemanta Inc., Toshl Inc., Hekovnik Startup School, Marko Jaklic (University
of Ljubljana) and others.
Slovene entrepreneurs and supportive environment believe there should be a strong two-way
bridge between Slovene ecosystem and Silicon Valley, which would enable Slovene
entrepreneurs a strong connection with the most advanced and technological environment,
and would open new opportunities for Slovene startups and professionals. In 2012 five
startups have partnered up to establish a Slovene house in San Francisco for a testing period
of 6 months. It was opened between September 2012 and March 2013 (Ivanc, 2012; Kordis,2012; Borstnik, 2013). The initiative served as a meeting point for entrepreneurs, startups,
Slovene companies with partners based in Silicon Valley, researchers, professors and
students, who had an opportunity to live, meet, socialize and work in the house
(BoundBreaker, n.d.). As planned by the initiators, the project offered many new
opportunities to participants and was well accepted by the community. Based on the project
learnings, partners are already thinking to establish a permanent system for future
collaboration with the environment (Interviewee 3).
Since 2014 Slovene new Argonauts have been part of another initiative, which is veryimportant for development of Slovene entrepreneurial ecosystem. They are part of a group of
Slovene and the U.S. entrepreneurs, who launched Silicon Gardens Fund, which is one of its
kind collaboration between Slovene and the U.S. investors. The goal of this micro fund is to
invest in early stage technology startups coming from Slovenia and broader region, which
have a high growth potential and need to explore international markets to validate their ideas
and to prepare them for further rounds of funding. The fund focuses on providing experience,
coaching (a mentor is assigned to every startup) and to offer business connections to
entrepreneurs. In the first year the fund is prepared to invest 20,000 to 40,000 € in 5 to 10
startups for 5 - 15% of equity share (Silicon Gardens - Silicon Gardens Fund, 2014).
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Additionally, in 2014 the Slovene new Argonauts established the American Slovenian
Education Foundation – ASEF to enable continued exchange between the U.S and Slovenia.
The foundation aims to enhance research, innovation and entrepreneurship in both countries,
and to provide the U.S. businesses opportunities, to invest and expand their presence in
Slovenia and other CEE countries. It offers grants and endowment programs to support highlytalented and prospective students, in order to form a community of educators and leaders
(ASEF - About, 2014; ASEF - Goals, 2014). In 2014, the foundation has already awarded 3
scholarship winners and research fellows (ASEF - Board, 2014).
There are some other initiatives, which connect Slovene entrepreneurial environment with
Silicon Valley like BoundBreaker Business Club, Coinvest, and an established collaboration
between Slovene entrepreneurial representatives and Skydeck – the Berkeley University
startup accelerator. Both, BoundBreaker, which operates in Silicon Valley, and Skydeck aim
to help entrepreneurs from Slovenia to bridge the gap and to start operating in Silicon Valley(BoundBreaker - BoundBreaker Business Club, 2014; Startaj.si, 2014). The first two
generations of BoundBreaker secured an investment up to $3.8 million, on average $425,000
per startup. Every startup enrolled in BoundBreaker programme becomes a member of alumni
club and is encouraged to share their business experience and know-how with younger startup
teams (BoundBreaker - BoundBreaker Business Club, 2014). Furthermore, Coinvest is a high-
tech investment conference bringing investors from Europe and the U.S. together in order to
offer SEE startups an opportunity to explore ways to foster growth and development (Cobik -
Coinvest, 2014).
2 BRAIN CIRCULATION
2.1 Evolution of brain circulation
The AnnaLee Saxenian theory of new Argonauts is closely related to the theory of brain
circulation, which has developed from increased migration flows of skilled labour in the last
20 years (World Bank and IZA, 2005; Schmitt & Soubeyran, 2006), and is a modern
phenomenon of a former more renewed theories such as brain drain, brain gain and brain
strain.
Authors described brain drain as a negative impact on the source country’s prosperity and
when skilled, qualified and competence people leave their countries and emigrate (Baruch,
Budhwar, & Khatri, 2007; Pieretti & Zou, 2009; Zhatkanbaevaa, Zhatkanbaevab, &
Zhatkanbaev, 2012). However, the impact of migration is not always negative for the country
of origin, if seen from another perspective. Since the 1990s a new way of thinking suggested
that for developing countries brain drain was actually a positive phenomenon. The new
perspective called brain gain raised attention and argued that when former emigrants
returned home they transferred knowledge, practices and their international network back to
their home countries (Kenney et al., 2013). Dunnewijk (2008) proposed that migration can be
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either positive or negative for the countries of origin and saw a concept of brain strain as a
road in the middle, as both, destination or country of origin, may profit from migration of
highly skilled people. Furthermore, Dunnewijk (2008) sees brain circulation as a synthesis
of highly skilled people migrating in circular process, in which everyone might be better off.
As migration and mobility of highly skilled people across countries boundaries have grown,the concept of brain circulation was a result of its development and consequently surpassed
concepts of brain drain and brain gain (Tung, 2008; Zweig, Fung, & Han, 2008; Daugeliene
& Marcinkeviciene, 2009). However, the concept of brain circulation stands only if seen as
circular process and if host and home countries both benefit from the mobility in equitable
and comparable mode (Teferra, 2005). Therefore, brain circulation is a two-way process, in
contrast to one-way brain drain or brain gain, of skilled workers between home and host
countries (Daugeliene & Marcinkeviciene, 2009). Daugeliene and Marcinkeviciene (2009, p.
52) describe brain circulation as: “The movement of highly skilled persons between different
countries, institutions, with the main purpose to create, share, spread the knowledge and thusstimulate nations knowledge-based economies development.”
Nowadays, brain circulation is an emerging global phenomenon, which arose from the global
mobility, ethnic diaspora and international competitiveness, and affects the socio-economic
and socio-cultural progress of a society and the global economy (Teferra, 2005; Tung, 2008).
Today immigrants, especially entrepreneurial driven ones, are transferring technical and
institutional know-how between countries’ economies faster and more flexible than most
multinational corporations (Solimano, 2007). By that they foster creation of new knowledge
and countries competitiveness, and stimulate world’s economy development and growth(Daugeliene & Marcinkeviciene, 2009).
At this point it is important to stress that brain circulation has developed and become possible,
because of several fundamental advancements (Tung, 2008). Firstly, globalization has
lowered immigration and emigration barriers for the movement of people (Tung, 2008), and
secondly a major and fast developments in information and communication technologies
(Teferra, 2005).
Additionally, Daugeliene and Marcinkeviciene (2009) identified four factors that stimulate brain circulation in today’s globalised world:
globalization;
boundaryless career;
no movement barriers;
dual citizenship.
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Although brain circulation is more or less a novel phenomenon, a new phenomenon, based on
the latest technological advancements, already started to evolve. Teferra (2005) argued that
mobilization of talent and skills across borders and time zones without physical movement
started to show some traction. He named a phenomenon “Virtual Intellectual Diaspora”
meaning that people migrate at a speed of light intersecting multiple boundaries in a virtual
space. Interestingly, it has been developing beyond influence of national governments and
institutional managers (Teferra, 2005). Anyway, the rise of phenomenon should be seen as a
sub-concept of brain circulation evolution.
The author believes that countries should recognise an importance of brain circulation as it
will soon become, if not already is, one of the key factors for countries development and
competitiveness in the global economy. By pursuing brain circulation initiatives countries
could benefit from technology transfer, cross-cultural learning, entrepreneurship, financial
aids for startups, etc. (Daugeliene & Marcinkeviciene, 2009).
Figure 2: The model of factors which stimulate brain circulation
Source: R. Daugeliene & R. Marcinkeviciene, Brain Circulation: Theoretical Considerations, 2009, p.
51.
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2.2 Social networks and cross-regional collaborations
In scientific literature related to brain circulation we could notice that researches put a strong
emphasis to social networks and ties (Saxenian, 2002c; Vertovec, 2002; Dai & Liu, 2009;
Pruthi, 2014).
Boyd (1989) argued that social networks connect migrants across time and space. Once
networks between migrants in host country and friends or relatives in domestic country are
established, networks of information become self-sustaining and ensure that movements are
constantly emerging (Vertovec, 2002). In today’s globalized world, volatile and fast-changing
economies social networks based on personal connections are far more flexible and
responsive than multinational corporations, and impact at least two economies at a time
(Saxenian, 2002c). Local markets can become linked through specific social networks of
personal and business ties surrounding migrants (Vertovec, 2002), and on the other handsocial networks provide a developing country with connections to the world’s leading
technology corporations (Saxenian, 2002c). Additionally, Zweig et al. (2005) perceive
entrepreneurs who return home as a capital of transnational network resulted from overseas
links, foreign education or work and as a resource which can enhance firms business
performance (Dai & Liu, 2009). Vehovec (2002) believed high skilled groups of immigrants
rely more on networks of colleagues or organizations and less on kin-based networks than
unskilled workers. Furthermore, Dai and Liu (2009) also discovered that complementary
effect between knowledge and social networks exist.
Development of social networks and ties should be seen as a form of brain circulation, where
talent goes abroad, but information circulates back to domestic country. It is important to note
that cross-regional networks develop only when skilled immigrants are both willing and able
to return to their home countries or are motivated to participate in the economic and scientific
development at home (Saxenian, n.d.; Solimano, 2007; Daugeliene & Marcinkeviciene,
2009). Political stability, economic openness, a certain level of economic development and as
well as high level of technical education are prerequisites, which need to be fulfilled for cross-
regional networks development (Saxenian, n.d.; Solimano, 2007). A critical variable are
political leaders, who need to be prepared to collaborate with new Argonauts to develop ashared vision and remove institutional and political obstacles for entrepreneurship-led growth
(Solimano, 2007).
Up to date, brain circulation initiatives were beneficiary for countries that have tremendously
invested in higher education, most commonly in technical education, and were politically and
economically stable enough that immigrants considered to start cooperating or returning
home. Again, it is crucial to emphasise that immigrants from Silicon Valley diaspora have not
built business and professional ties for political reasons only. For instance, most of Silicon
Valley's Iranian and Vietnamese immigrants are political refugees and are not motivated toreturn or to cooperate with native countries as long as countries lack the economic stability
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needed for technology investment or entrepreneurship (Solimano, 2007). Similarly, Russia,
some parts of Eastern Europe and Latin America also suffer from lack of political or
economic stability (Saxenian, n.d.). Countries should consider that brain circulation is
possible only, if capabilities of immigrants are valued in their home native environment as
well. Only like that, countries could benefit from brain circulation and new Argonautsadvantage (Sternberg & Müller, 2007).
2.3 Best practices of brain circulation in the case of new Argonauts
Countries like China, India and Taiwan represent good examples of brain circulation in the
case of new Argonauts. These countries have created and implemented successful policies,
and initiatives, which helped to pull their scientists, researchers, workers and entrepreneurs
back to their motherlands (Daugeliene & Marcinkeviciene, 2009).
In the case of Taiwan Silicon Valley's diaspora engineers have built a vibrant two-way bridge
connecting the U.S. businesses with Taiwanese technology community (Teferra, 2005).
Additionally, the U.S. businesses played significant role as well, as they invested in Taiwan to
take advantage of its low-wage manufacturing labour (Saxenian, 2002c; Saxenian, 2006).
One of the best practices emerged when in the early 1980s domestic policymakers organized
collaborations with large financial institutions from the U.S. to facilitate the transfer of
relevant financial and managerial expertise, and start a venture capital industry. Furthermore,
Taiwan also sent business professionals to the U.S. to be qualified in managing a venturecapital business and put into practice a series of initiatives to encourage domestic firms to
enter the industry (Solimano, 2007).
In the case of India, Indian diaspora has contributed to the emergence of a globally
competitive software industry and has become key middlemen linking U.S. businesses to its
low-cost software expertise in India (Saxenian, 2002c; Teferra, 2005). Among the first to
outsource software services to India were senior Indian engineers in the large U.S.
corporations who consequently contributed to Bangalore’s reputation as the ‘‘Silicon Valley
of India” (Saxenian, 2002c; Tung, 2008). Besides Bangalore, city of Hyderabad developed togreat extent. Both cities have made significant investments in improving their digital
infrastructure, developing technology parks and business districts on the city outskirts, to
follow the demand of developing transnational industries and its workforce (Daugeliene &
Marcinkeviciene, 2009). In comparison to Taiwanese, fewer of highly skilled Indians have
returned home. As mentioned, today most of them play a role of middleman linking the U.S.
firms with India's software industry (Saxenian, 2002c).
In the case of China, China’s government worried about the brain drain for many years.
Starting with year 1992, China began to encourage students who studied abroad to return forshort visits and engage them in various programmes at home. Furthermore, in 2001 was time
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for a new approach. The government adopted a new policy and started to motivate emigrants
to contribute to China’s modernisation, even if they stayed abroad. Chinese government
realized that brain circulation strategies and policies could benefit the country in order to
overcome the loss of talented people (Zweig et al., 2008; Daugeliene & Marcinkeviciene,
2009).
Daugeliene and Marcinkeviciene (2009) summarised the major policies of China’s
government in order to attract highly skilled immigrant workers. Their paper was based on
Zweig’s, Fung’s and Han’s (2008) work “Redefining the Brain Drain: China’s “Diaspora
Option”, which highlighted China’s policy actions between 1988 and 2007. The presented
actions should be seen as a case of practices, which should be considered when preparing a
national brain circulation plan. The main actions of China’s government policy, while trying
to attract highly skilled immigrant workers, were (Daugeliene & Marcinkeviciene, 2009, p.
53):
“creation of postdoctoral centres in order to attract overseas PhDs to return for
postdoctoral positions on the mainland”;
“implementation of new regulations on “incubators” in hi-tech zones for overseas
returnees”;
“formation of research funds – funding returnees”;
“establishment of world-class universities”;
“formation of job introduction centres; preferential policies giving for returnees
especially better living and working conditions”; “application of beneficial legislation system for a researcher ”;
“creation of good domestic conditions for returnees”;
“implementation of programme “Serve the nation” without “returning to the nation” – a
policy to encourage Chinese who remain abroad to engage in seven types of activities
that can help China”;
“establishment of regulations that simplify entry and exit for highly talented mainlanders
and investors holding overseas citizenship”;
“creation of technology parks for overseas returnees”.
Chinas’s, India’s and Taiwan’s best practice examples in brain circulation policies were
presented in this chapter. Analysed countries applied number of actions to stimulate brain
circulation, beginning with cross-regional collaborations to start a venture capital industry,
establishment of technology parks and improvements in digital infrastructure, and ending with
the creation of beneficial legislation to attract highly skilled immigrants to return to their
home native environment. It could be observed that two components are critical in brain
circulation development: existence of motivated immigrant diaspora, and a mixture of
positive economic development and political system oriented towards brain circulation.
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3 ENTREPRENEURIAL ECOSYSTEM
In this chapter the author presents a concept of entrepreneurial ecosystem, understanding of
which will contribute to the elaboration of empirical research and the key findings in
subsequent chapters.
3.1 Definition of the ecosystem
The term “ecosystem” originates from ecology, where the term is most commonly applied to
the natural habitats of animals. It refers to a complex community of organisms and their
environment interacting as a unit (Valdez, n.d.; Vogel, 2013). In entrepreneurship
environmental factors gained attention in the later part of the last century (Suresh & Ramraj,
2012). Prahalad (2005) defined entrepreneurial ecosystem as an environment which enables
individuals, companies and society to interact in order to generate economic wealth and prosperity (Suresh & Ramraj, 2012). Maybe the most up to date description of entrepreneurial
ecosystem was provided by Vogel (2013, p. 6), who defined the entrepreneurial ecosystem
as “an interactive community within a geographic region, composed of varied and inter-
dependent actors (e.g. entrepreneurs, institutions and organizations) and factors (e.g.
markets, regulatory framework, support setting, entrepreneurial culture), which evolves over
time and whose actors and factors coexist and interact to promote new venture creation.”
In scientific literature many different factors, which comprise entrepreneurial ecosystem are
presented. Anyway, while some factors emerge frequently, others are rarely mentioned byresearchers. The factors, which are observed on most occasions and the author would like to
point out, are (Cohen, 2005; Isenberg, 2010; Suresh & Ramraj, 2012; GEM, 2013):
financial support;
general government support and regulations;
infrastructure and technology support;
entrepreneurship education;
entrepreneurial culture;
informal networks;
formal networks;
talent pool.
In his research Vogel (2013) presented a comprehensive model of an entrepreneurial
ecosystem, which is divided in three overarching categories (non-entrepreneurial factors,
entrepreneurial factors, entrepreneurs) and composed of multitude components, which are
believed to strongly influence entrepreneurial activities in a specific ecosystem (Figure 3).
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If competition and cooperation between these entrepreneurial ecosystem factors exist, these
factors will have a strong and positive effect on venture creation. The cooperation results inhigher productivity of companies based on their increased access to inputs, information,
technology and institutions. Additionally, the factors stimulate the entry of new companies or
startups (Suresh & Ramraj, 2012). An entrepreneurial ecosystem should also contain
supportive resources in order to establish continues entrepreneurial development (Zacharakis,
Shepherd, & Coombs, 2003). Many researches argue that entrepreneurship is the driving force
for economic progress in stable economies, but Suresh and Ramraj (2012) emphasise that
entrepreneurial ecosystems can even act as the prime mover when it comes to rescuing
economies that have faced a sharp decline.
Figure 3: Entrepreneurial Ecosystem Framework
Source: P. Vogel, The Employment Outlook for Youth: Building Entrepreneurial Ecosystems as a Way
Forward, 2013, p. 7.
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We cannot pass the importance of entrepreneurial ecosystem measurement and assessment. It
is crucial to measure the effectiveness of the ecosystem as a whole and its components in
order to improve existing policies and programs, and put in place new and complementary
ones (Vogel, 2013). Each entrepreneurial ecosystem should be considered as unique unit since
the components combining an ecosystem are quite diverse around the world and cannot becontrolled spontaneously. It is important to understand regional strengths and weaknesses for
the purpose of effective entrepreneurial ecosystem creation (Vogel, 2013).
Based on extended literature review the author believes that institutional and supportive
environments, which could be assigned to non-entrepreneurial and entrepreneurial factors
(Figure 3), respectively, are the key ingredients for successful establishment of new
Argonauts phenomenon and brain circulation practices. Therefore, the author in continuation
focuses its investigation to institutional and supportive environments of the Silicon Valley’s
and Slovene entrepreneurial ecosystems.
3.2 Silicon Valley’s entrepreneurial ecosystem
Silicon Valley is located on the San Francisco peninsula and is a part of the San Francisco
Bay Area (Wonglimpiyarat, 2006). The name itself got recognition in the early 1970s (Zhang,
2003), and since then Silicon Valley has become the world’s leading incubator for high-tech
firms (Adams, 2011) and a role model of successful entrepreneurial habitat for many
economies (Suzuki, Kim, & Bae, 2002). The crucial development of Silicon Valley started
after World War II (Felsenstein, 2003; Wonglimpiyarat, 2006), when military fundingrepresented one of the key elements for its high-tech transformation (English-Lueck, 2000;
Ibrahim, 2008). It is highly questionable if Silicon Valley would exist in its present form,
without extensive defence support and spending (Ibrahim, 2008). Furthermore, many authors
argue that an establishment of Stanford University has played a major role in the development
of this area (Dobkins, 1997; Moore & Davis, 2001; Wonglimpiyarat, 2006; Adams, 2011), as
the university combined their supporting resources with key high-tech industries such as
electronics, semiconductors, computers, and aerospace (Moore & Davis, 2001; Adams, 2011).
The transformation of Silicon Valley's economy throughout the history is at result of effectiveuse of university resources, especially strong university research base, dense industrial
networks, knowledge intensity, entrepreneurial-driven corporate culture, high-quality labour,
venture capital markets and supportive government (Felsenstein, 2003; Wonglimpiyarat,
2006). Network of institutions, entrepreneurial spirit and constant supply of venture capital
encouraged experimentation and a new firm formation (Feldman, 2001; Wonglimpiyarat,
2006), which have resulted in creation of some largest technology companies in the world
(Zhang, 2003).
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3.2.1 The supportive environment
It is somehow obvious that the basis of strong supportive environment should be established
at the very beginning. In the case of Silicon Valley Stanford University and University of
California, Berkeley have a powerful effect on production of highly-skilled entrepreneurs,who stay in close touch with the universities and share their business experience onward with
future generations of entrepreneurs. Intimate collaboration between academic institutions and
industry matters; therefore, Stanford Research Park, where many of the startups are housed, is
an integral part of such collaboration and results in knowledge spillover running in both
directions (Ibrahim, 2008).
Since the 1980s, a new form of support has emerged in terms of business incubators.
Primarily, free office space and business support was offered to high-tech companies with the
potential of rapid growth. Through evolution many of them have transformed into businessaccelerators, still providing free office spaces, but are now accompanied with capital
investments up to $100,000 in order to boost initial phase of startup development. Today the
most renewed ones consist of Y Combinatory, 500 Startups and Plug and Play business
accelerator (Fidelman, 2014).
Quick and easy access to the venture capital and strong financial support is one of the critical
pieces in the Silicon Valley’s ecosystem (Zhang, 2003; Ibrahim, 2008; Hwang & Horowitt,
2012). The venture capital industry has grown in close association with the high-tech
industries. Angel investors, and since the late 1960s also venture capitalists, have beeninvolved in every major successful company (Zhang, 2003; Ibrahim, 2008). On average, it
takes 11.6 months for Silicon Valley’s startups to finalise their first round of venture finance,
which is five months faster than the national average (Zhang, 2003). The environment is
favourable as venture capitalists are heavily concentrated in high-tech regions like Silicon
Valley. Data for the ten-year period (1997-2006) show that as high as 42.6 percent of all
venture capital was located in California (Ibrahim, 2008). Strong financial support played a
vital role in creation phenomenal economic growth in this part of the world (Wonglimpiyarat,
2006). Close look into data reveals that other regions are home to talented entrepreneurs who
often move to Silicon Valley to be close to financing sources. The reason lies in poorfinancing of local environment; therefore, these regions must establish mechanisms and
funds, which would prevent entrepreneurial relocation (Ibrahim, 2008).
Furthermore, the cultural impact of the entrepreneurial ecosystem cannot be ignored (Suresh
& Ramraj, 2012). For Silicon Valley an open and sharing entrepreneurial culture, even among
high-tech competitors, is a typical virtue (Ibrahim, 2008). In such manner entrepreneurship
developed from “bottom up”, and in addition cultural characteristics influenced a rise of
entrepreneurial potential (Lee & Peterson, 2000). Lee and Peterson (2000) believe that a
national culture, which supports and encourages entrepreneurial activity, is needed, and thatdevelopment of an entrepreneurial culture should be among the primary objectives for the
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emergence and success of entrepreneurial ventures like it is in the case of Silicon Valley
(Samli, 2009).
Silicon Valley’s entrepreneurial culture, access to capital and supporting institutions are a
magnet for other engineers and aspiring entrepreneurs (Zacharakis et al., 2003). As indicatedin the previous chapters, as high as 35 percent of the Silicon Valley labour force was foreign-
born in 2000, and aspiring immigrant entrepreneurs move to Silicon Valley from all over the
world (Felsenstein, 2003). Consequently, this combines into creation of a dynamic ecosystem
that continues to support innovation (Zacharakis et al., 2003). Based on established trust and
performance Silicon Valley enables newcomers to enter the ecosystem easily, as long as they
deliver on their promises (Inkpen, 2002). Therefore, the degree of labour mobility is high and
allows experiencing repeated bursts of innovation over time (Ibrahim, 2008).
3.2.2 The institutional environment
In the early years of Silicon Valley state and local governments played only a minor role and
were not actively involved in the region. In contrast, Silicon Valley’s development was driven
by industry and university networks (Zhang, 2003). Anyhow, at the later stage US federal and
state governments have formulated policies to fund the university research and support private
sector investment continuously by building incubators and technology parks in order to create
knowledge, intellectual and technology connections (Wonglimpiyarat, 2006).
In the early years government’s largest effect on Silicon Valley’s ecosystem was probably the purchase of defence products during the Cold War era (Zhang, 2003). Between 1958 and
1974 the defence contracts for semiconductors were worth a total of $40 billion; therefore, an
influence of government in seeding the region should not be denied. Furthermore, the internet
fundamentally started as a government and defence project (Felsenstein, 2003). In order to
facilitate the commercialisation of early-stage technology the government presented the Bayh-
Dole Act of 1980 and the Federal Technology Transfer Act of 1986, as well as policy
initiatives to fill the gaps in venture capital financing. Additionally, the government
established the mechanisms to promote the venture capital industry and entrepreneurial
innovation through tax policy, for example by lowering tax rates on capital gains(Wonglimpiyarat, 2006).
A lesson, which could be learnt at this point, is that the government did not play an investor
role; rather its role was a complementary to the private sector funds by establishing the right
programmes and providing the right incentives presented earlier. Anyway, the availability of
financial resources is crucial in order to boost entrepreneurial growth and establishment of
new businesses (Wonglimpiyarat, 2006).
Another strong advantage of Silicon Valley lies in a unique support institutions, including lawfirms, investment banks, marketing consultants, executive search firms, and intellectual
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property liquidators (Inkpen, 2002; Ibrahim, 2008). Although these institutions can be found
elsewhere, their operation in Silicon Valley is unique as they are part of the entrepreneurial
ecosystem and have specialised for the development of high-tech firms (Ibrahim, 2008). For
example, law firms and lawyers have had a significant impact on the entrepreneurial
ecosystem, as their role is multifaceted and much deeper than simply providing legal advice(Inkpen, 2002). However, when institutions are involved in supportive environment they
promote decentralized process of mutual learning and trust, and foster the innovation and
economic growth (Saxenian, 1994).
State government and federal authorities also played an important role in attracting talented
and skilled individuals to the region. In 1965 the Immigration Act that removed national
quotas came into practice and enabled an inflow of human capital (Kenney et al., 2013). Local
universities and high-tech industries kept their doors opened and, as it has proven throughout
the Silicon Valley’s history, these talented and highly-skilled immigrants embody the majorsource of region’s innovation (Zhang, 2003).
In the case of Silicon Valley the state government has encouraged creation of firms and their
funding by enabling labour mobility, offering favourable tax breaks, opening industrial parks,
building high-tech incubators, and providing seed capital for commercialization of research
(Zhang, 2003). While the government has helped to foster a favourable business environment,
the companies and industries have mainly performed business functions, boosted innovation
and economic growth (Wonglimpiyarat, 2006). The result is clear; Silicon Valley has become
the world’s most famous high-tech industrial cluster (Mann & Luo, 2010).
3.3 Slovene entrepreneurial ecosystem
Before 1980, entrepreneurship in Slovenia was not considered as an important factor for
economic and social development (Dimovski & Znidarsic, 2004). It was not before early
1990s, when some policy measures and changes in Slovene legislation opened doors to
entrepreneurship and free market economy (Bernard, 2006; Voert, 2010). Slovenia has a
diverse history and before its independence in 1991, Slovenia was a part Austro-Hungarian
Empire (1867-1918) and Yugoslavia (1918-1991). These transition and changes in thegovernmental and economic systems also influenced its economy and entrepreneurship in
particular. At that time, entrepreneurship was mainly based on craftsmanship and handcraft,
and before the Second World War almost two thirds of Slovene population was still employed
in agriculture (Bernard, 2006). In addition, in 1945 a centrally planned economy was
established, and fifty years of socialism and collectivism have not created a typical
entrepreneurial environment and culture (Dimovski & Znidarsic, 2004; Bernard, 2006). If we
compare it to the United States, where entrepreneurial liberal culture was introduced after the
American Civil War (1861-1865), Slovene entrepreneurial ecosystem lost almost a century of
its development (Bernard, 2006).
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In general, entrepreneurship has a negative connotation in Slovenia, as the mindset is still
strongly connected with the previous system, collectivistic culture and economic transition.
Majority of Slovene population still does not see a real value in entrepreneurial activities and
initiatives, which are often put aside on the government’s agendas (Erbeznik, 2010). Arising
from the previous system, the psychological profile of Slovenian entrepreneurs is closer to the profile of employees than to dynamic entrepreneurs, which are more common in western
cultures (Dimovski & Znidarsic, 2004).
According to the Global Entrepreneurship Monitor (GEM) research, only 6.5% of Slovene
adult population was included in early-stage entrepreneurial activities, which rank us below
the average among other developed and innovation-driven economies (Rebernik & Jaklic,
2014). Dimovski and Znidarsic (2004) argue that high-tech development and fast growing
economy can be achieved by educating potential young entrepreneurs, where we still lag
behind. However, the last data showed some traction of the Slovene entrepreneurialecosystem, as it was found that in 2013 there were 147 startups, which employed 1,400
people and growing, and that since 2007 Slovene startups have gathered at least $53 million
of capital investments (Silicon Gardens - Ecosystem 2013, 2014; Rebernik & Jaklic, 2014).
3.3.1 The supportive environment
In the last 5 years the Slovene supportive environment has seen a strong development. Basic
infrastructure, namely university and regional incubators, and technology parks were
established, as well as mentorship programmes and support services. These entities present anexcellent foundation for promotion of entrepreneurship and will enable future growth of
Slovene entrepreneurial ecosystem (Start: up Slovenia, n.d; Institut za raziskovanje
podjetnistva, 2011).
In 2012 the main actors of Slovene supportive environment (technology parks, incubators,
region development centres, etc.) have connected into initiative called Start:up Slovenia, with
Technology park Ljubljana and Tovarna podjemov as leaders of this initiative. In the last two
years the initiative has organised more than 400 events, with more than 13,000 entrepreneurs,
and helped around 800 startups develop their business idea or helped them with their furtherglobal expansion (Start:up Slovenija, 2014). The initiative most renewed projects are PODIM,
a two-day entrepreneurial conference, Start:up of the year, national competition for the best
startup in Slovenia, and SGH and Go:Global accelerators (Start:up Slovenija, n.d.).
The SGH and Go:Global started as programmes, which just recently transformed to business
accelerators, and, in cooperation with the Slovene Enterprise Fund, are offering 50,000 and
200,000 € of investment capital, respectively (Pavlin, 2014; Racunalniske novice - 2,4 mio €
za financiranje slovenskih start-upov, 2014). SGH accelerator focuses on startups, which are
in search of a product-market fit, and offers working space accompanied with entrepreneurialmentors and consultants (Geek House - 50.000 EUR convertible funds, 2014). Similarly,
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Go:Global accelerator offers the same services, however, it focuses on startups with
opportunities for global expansion and growth (Go:Global - Vsebina pospesevalnika, 2014).
Until now the main weakness of Slovene entrepreneurial ecosystem was seen in poor
investments in innovation and startup companies (GEM Slovenija 2012, 2013; Rebernik &Jaklic, 2014), but in 2014 we came to a turnaround. The Slovene Enterprise Fund is
establishing new initiatives and is allocating more and more funds to Slovene startup
companies (Pavlin, 2014; Racunalniske novice - 2,4 mio € za financiranje slovenskih start-
upov, 2014). In addition, Silicon Gardens Fund was established in 2014, and its goal is to
invest between 20,000 and 40,000 € in 5 to 10 early-stage technology startups from Slovenia
and broader region (Silicon Gardens - Silicon Gardens Fund, 2014). Several other initiatives
have been active for a number of years, namely P2 subsidy funds for innovative companies
(in domain of Slovene Enterprise Fund), 4 venture capital funds and three business angels
(Initiative Start:up Slovenia - Kapital, 2014)
Based on the map of Slovene startup ecosystem, more than 100 other programmes, incentives,
institutions, associations, incubators, media, events and competitions, which are part of the
supportive environment or are involved in the development of the Slovene entrepreneurial
ecosystem, can be found (Internet Week - Startup ekosistem v Sloveniji, 2014). Consequently,
in the last 5 years, 15 Slovene startups have joined the world’s most renewed business
accelerators like 500 Startups, Y Combinator, Techstars, Wayra and others (Silicon Gardens -
Ecosystem 2013, 2014). Nevertheless, the further advancements of the supportive
environment have to be made. To further develop of entrepreneurship, Slovenia needs higherquality support services and stronger integration with supportive institutions around the
world. Slovene supportive environment is highly fragmented and should focus on integration
of services based on the models from abroad, where services are joined into business
accelerators, representing a combination of funding, mentoring, consultancy and
infrastructure products in one place (Start:up Slovenija, n.d.; Rebernik & Jaklic, 2014).
As already mentioned, and based on historical backgrounds, entrepreneurial culture is not
well developed in Slovenia (Bernard, 2006). According to the GEM Slovenia 2012 (2013) the
majority of national experts see cultural and social norms as the main drawback for thedevelopment of entrepreneurship in Slovenia. Entrepreneurship suffers from a negative
national perception and intolerance towards outstanding and successful individuals.
Entrepreneurship is often underestimated and Slovene society still does not connect
entrepreneurial activity with development and economic progress. Other cultural and social
factors, which are seen as the main weaknesses and hinder entrepreneurial activity, are
unwilling to take risks, fear of failure and increase of corruption in business (GEM Slovenia
2012, 2013). A strong entrepreneurial culture has a crucial role in developing a successful
entrepreneurial ecosystem and only when it is well developed, young graduates will have
courage to become job creators instead of job seekers (Vogel, 2013). Therefore, it is
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important that Slovenia creates quick success stories, which could change the mindset and
serve as an inspiration for the new generations of entrepreneurs.
3.3.2 The institutional environment
Voert (2010) claims that Slovene institutional environment is not suitable for
entrepreneurship. According to the GEM Slovenia 2012 (2013), interviewed national experts
see the main drawbacks in bureaucratic barriers and burdensome administrative procedures,
poor government policies, inefficient educational activities among youths, and nonexistence
of academic-business collaboration and knowledge transfer. On the other hand, business and
professional infrastructure, as well as simple procedures for setting up a business, and
existence of incubators and technology parks, are among the most positive effects that
promote entrepreneurial activity in Slovenia (GEM Slovenia 2012, 2013). An improvement
was made when the government established VEM points, which simplified and shortened procedures for a new company creation (Erbeznik, 2010).
Some of the most important public institutions, with an important effect on the development
of Slovene entrepreneurial environment, identified by the author are:
SPIRIT Slovenia - Public Agency of the Republic of Slovenia for the Promotion of
Entrepreneurship, Innovation, Development, Investment and Tourism;
Slovene Enterprise Fund;
SID Bank (providing insurance and financing of export for Slovene companies).
In the last two years we could see an improvement and strong progress of entrepreneurial
education among youths. Although Ustvarjalnik is a privately held company, the government
(SPIRIT, Ministry of Economic Development and Technology) has financially backed the
institution. In the last year, they have organized more than 50 entrepreneurship workshops in
Slovene secondary schools, and have helped many youth entrepreneurs to establish their own
companies (Ustvarjalnik - Ustvarjalnikovi podjetniski krozki, 2014).
In Slovenia, there are many organizations of institutional environment. Anyway, theseorganizations are not centrally managed and controlled, but are in domain of various
ministries, which usually follow their own policies and commitments (Erbeznik, 2010).
Consequently, many public held agencies operate individually and perform activities, which
were already carried out by institutions of supportive environment (Start:up Slovenija, n.d.).
Supportive environment initiatives still present the main driver of the entrepreneurial
ecosystem, and lack a strong support of governm