2. Development of Industrial Clusters and Intermediate Organizations

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Dec 5, 2012 (4 years and 11 months ago)

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i





CONNECT, a Catalyst of Regional Resurgence: Story of its Emergence and Evolution








Kim, Sang
-
Tae


Affiliated Institution: Small & Medium Business Administration of Korea

Email:
he0224@gmail.com

Telephone: +
82
-
10
-
2832
-
7965

Fax: +
82
-
10
-
42
-
472
-
7929



ABSTRACT

I
n the recent decades, regions and cities around the globe have committed to and invested in
building high
-
tech clusters, where groups of institutions and actors collaborate to create and
share knowledge as a way to boost innovation and entrepreneurship. To bring in synergy effects
of industrial clusters, as the literature on clusters and regional

innovation systems emphasizes,
regions need a catalyst or initiator, which enable and enhance stakeholders to collaborate and
interact with each others. While the significant role of network
ing

or intermediate organizations
is well recognized, however, th
e literature has not accounted for the creation and evolution of
such organizations.

Nor has it addressed the impacts and engagements of intermediate
organizations in shaping innovative regions considering the growing interests in and efforts of
creating s
uch organizations.
This is a case study highlighting the historical development and role
of a networking organization,
CONNECT
, which is now recognized one of the most successful
platforms
fostering
collaborations

and interactions of the San Diego region
.
By looking at this
case in its historical context, this study seeks to provide theory and policy implications to the
development of innovative milieu.


Keywords

Intermediate organization, cluster, CONNECT, San Diego, regional economic development


Highlig
hts

CONNECT, an intermediate organization of the San Diego high
-
tech clusters, has developed
through collaborative efforts of the community during the last few decades. Drawing on the

2


long
-
term practices and interactions, CONNECT has developed its programs

to foster
entrepreneurship and a culture of collaboration.


Biographical Statement

Sang
-
Tae Kim
recently earned a Ph.D. in Planning, Policy and Design from the University of
California, Irvine with a dissertation titled ‘an emergence of a biotechnology c
luster: Knowledge,
practice and culture of the San Diego biotechnology community.’


* This manuscript is based on the author’s doctoral dissertation, ‘an emergence of a
biotechnology cluster: Knowledge, practice and culture of the San Diego biotechnology
community”

3



1.

INTRODUCTION


San Diego
has
transformed itself as

one of the most dynamic and vibrant biotechnology
clusters

during the last few decades

(Cortright & Mayer, 2002; DeVol et al., 2004; Ernst &
Young, 2010)
. San Diego used to be a
sleepy navy
town
,

which lacked
any

significant base of
innovation
or

tradition of technology entrepreneurship until the 1980s.
In addition,
San Diego
was also
named as
the
cul
-
de
-
sac

of California
.
1

To be more,
San Diego lacked any material
or

financial resources nece
ssary to launch heavy industries
,

as well as any significant tradition to
nurture
manufacturing industries

(Heiges, Stutz & Pryde, 1984; Stutz, 1992
; Davis, 2003
)
. Until
the 1980s, the most important parts of the local economy were military
, agriculture an
d
tourism.



The region recovered from its worst economic downturn

caused by
the shrink of the
federal defense budgets in the mid
-
1980s
, and converted itself into an entrepreneurial region
(Innovation Associates, Inc., 2000)
.
Particularly, San Diego has
grown to be a biotechnology hub
as measured by various indicators. For example, in terms of the number of public biotechnology
companies, San Diego is ranked third with 35 companies (Ernst & Young, 2011)
2
. In the case of
venture capital investments in and
employment by the biotechnology and pharmaceutical sectors,
San Diego accounts for a significant ration as indicated in Table 1 and Table 2 respectively. It is
widely recognized for having built its
culture of collaboration

and institutions for
entrepreneu
rship
.
Delegations,

not only across this country but
from around
the globe
,

visit San



1

This refers to the geographic and economic isolation of this region from the main part of the country
until the last few decades. In terms of geography, San Diego is still an isolated territory: an international
boarder to south, a military base (Pendleto
n) to north, the Pacific Ocean to west and a desert mountain
(Anza
-
Borrego Desert) to east

2

According to Ernst & Young (2011), the San Francisco Bay area (which refers to the Silicon Valley
region) has the most public biotechnology companies (65) and 45 p
ublic biotechnology companies are
located in New England.


4


Diego to
learn about
the ingredients of its economic transformation

into a high
-
tech and
biotechnology clusters
.


<
Table
1, 2

about
here>

A non
-
profit organization,
CONNECT
,

is widely recognized as one of the key ingredients
for San Diego’s transformation into an entrepreneurial region (Scott, 2006;
Smilor, O’Donnell,
Stein & Welborn
III,
2007
;
Walcott, 2001; 2002; Walshok, 1999).
CONNECT

was founded in
1985 to promot
e commercialization of academic research
based on partnership of
UCSD

and its
business community, and it has evolved into one of the most
successful
intermediate
organizations

(
Walshok, 1999;
Scott
,

2006)
3
.

Table 4 provides the overview of CONNECT
including its organizational status, source of revenues and main achievements.

<
Table
3

about
here>

This paper seeks to understand the creation, evolution and functions of CONNECT, as an
exploratory case study. It

draws on the literature on the role of intermediate organizations in
creating industrial clusters and stimulating their entrepreneurship. The main research question,
therefore, is
how CONNECT, as an intermediate organization,
has emerged
, evolved and been

engaged in creating a
biotechnology cluster

in San Diego
. This study draws on an interpretive
case study, which involves narratives and interpretations of interviews and historical archives.
Along the way, this research aims to provide a storyline, which
help policymakers understand
how a networking organization could be built and play its role in developing an industrial cluster.
It aims to deepen understanding on cluster supporting organizations or networking platforms
drawing on the case of CONNECT.




3

In 2010, CONNECT received the Innovation in Economic Development Awards by the U.S. Economic
Development Administration (EDA) under the category of
Innovation in Regional Innovation Clusters
.
3

R
ec
ently,
San Diego and CONNECT were featured in T
IME

magazine (Katz, 2010) as a case
of r
einvigorating metropolitan
economies.

CONNECT is the benchmark for 41 similar programs around the world (Global CONNECT, 2010).


5


M
any regions and nations are eager to build organizations like CONNECT as a facilitator
of industrial clusters or a catalyst for economic development. According to Feldman and Lowe
(2011), 42 states have embarked on economic development initiatives with qua
si
-
public
organizations. These initiatives to experiment technology
-
based economic development
strategies with quasi
-
public organizations or programs have resulted in building up the following
platforms: Ben Franklin Partnership by the State of Pennsylvani
a, Colorado Advancement of
New Bioscience Initiative by the State of Colorado, Kansas Bioscience Initiative by the State of
Kansas, and North Carolina Biotechnology Center. However, compared to the rise of interests
and investments in cluster stimulating o
rganizations, the literature has not paid enough attention
to the functions and pathways of intermediate organizations (Feldman & Lowe, 2011). Although
CONNECT is a unique organization functioning and having grown under a particular regional
contexts
4
, thi
s study seeks to provide implications to policymakers in constructing functional
intermediate organizations for their own economic development, and broadens the horizon of
literature on the cluster
-
nurturing intermediate organizations.


2
.

Development of

Industrial Clusters and Intermediate Organizations

2
-
1.
Functions of
Intermediate
Organizations in Nurturing Industrial Clusters

Even though, Marshall (19
1961[1890])

did not give specific accounts on the function of
intermediate organization, it is meaningful to overview the development of concepts on
industrial clusters.
Marshall's (1961[1890]) concept of industrial districts intended to explain
the
underlying econom
ic principles of
a spatial
agglomeration of interrelated companies
, which he



4

Different from the above mentioned inte
rmediate organizations, CONNECT was founded by a
university (UCSD) funded by its local business community. It is an independent non
-
profit organization
funded mostly by its member fees and operated by its board members.


6


termed
the localization of industry
. With regard to the causes of the localization of industry,
Marshall identified three factors: natural advantages, political leadership and
his
torical events.

Along with the combination of the three factors,
Marshall (1961, p. 271)
gave
further attention
to
learning process in the industrial districts, which fuels the formation of startups and stimulates
innovation.

About one century later

i
n
Europe, a group of scholars and policy practitioners were
involved in developing a
novel
concept

for
industrial cluster
,
regional innovation systems
, as a
theoretical and policy framework to understand and nurture regional economies.
Cooke (2001)
argue
d

th
at the sources of regional economic
development

lie in its innovative capacity
,

which is
built on the combination of
infrastructural and institutional environment, and how regional
actors

capitalize on their
regional
advantage
by nurturing
interactions and

an effective
governance

system. The concept of
national innovation system

also attributes economic prosperity at the
national level to
the
country
-
wide
institution and structure
for fostering invention and
entrepreneurship
(Lundvall

& Maskell, 2000).
Porter
(
1990;
2000)

identified two factors as the
underpinnings of the
generation and development of
industrial districts: static economic gain
of
employing
business resources

at lower costs;

and dynamic

advantage
s

originating from more
robust competition,

localized
knowledge spillovers, and
favorable
local
institutions
.

A group of scholars attribute the dynamics of industrial clusters to the social process of
learning by interactions and doing
(Amin, 1999; Cooke, Uranga & Etxebarria, 1998; Morgan,
1997).
T
he group of researchers argues that
social process of learning and innovating depends on
social institutions
. In this regard
, robustness of entrepreneurial and innovation activities is, to a
great extent,
dependent on how
regional institutions and strategi
es

favor or deter the social
learning and collaborating process.


7


Among a wide array of case studies on industrial districts, research by
Saxenian (1994)
has significantly contributed to shifting attentions to social institutions from economic
mechanisms
.
Her primary inquiry was to explain why
Silicon Valley
was able to fuel
entrepreneurial activity
while the
Route 128

region had lost its dynamism from the 1980s. The
answer, according to Saxenian, was the presence of network
-
based industrial system in Silic
on
Valley, which facilitated knowledge spillover and social learning. Compared to Silicon Valley,
the closed corporate structures and autarkic culture in the Route 128 region deterred local
companies from absorbing
new knowledge
and adapting to the ever
-
ch
anging environment.
Saxenian’s perspective goes along with
Lee, Miller, Hancock and Rowen (2000
),
Brown and
Duguid (2000)
,
Cohen and Fields (1999)
, and

Castells and Hall (1994)

in their emphasis on the
collaboration

and interactions.

Particularly,
Castell
s and Hall (
1994, p. 234) emphasized the role of intermediary
organization
s for cluster development and

concluded that "without an innovative local

society,
supported by adequate professional organizations and public institutions, there will be no
innovati
ve milieu
.
"

As the literature acknowledges, intermediate organizations such as trade
associations, professional groups and networking programs are an essential part or a
collaborative platform for multiple stakeholders interact (Cooke, 2001; Morgan, 1997;
Porter,
1990; Sabel, 1982; Saxenian, 1994; Scott, 2006).
Piore (2001)
, e
ven further,
regard
ed

an
industrial district as a community with dense social relations built on social intermediaries.

However, a large pool of research papers does not pay much attention to the function and
effect of intermediary organizations. Even more, the terms for the local associations are not
decided in common. In Porter’s (1990) exploration on the formation of ind
ustrial clusters, the
role of intermediary organizations or public agencies remains marginalized.


8



2
-
2
.

Genesis and Growth of Networking Organizations

Regarding the creation or emergence of local institutions stimulating interactions, the
literature coul
d be divided into two lines: the one that emphasizes that such institutions emerge
organically and endogenously; the other line of studies identified the cases which were designed
and nurtured by policy interventions.

The first stream of studies focused

on the interactions and exchanges of local actors
including entrepreneurs and venture capitalists. The networking and culture of collaboration,
according to this part of research, simultaneously emerge as participants share understanding and
practices thr
ough frequent face
-
to
-
face interactions.
Saxenian (1994) attribute
d

the formation of
production models in Silicon Valley to entrepreneurial pioneers who worked under the early
cultural and geographic context of this region: freedom from conventional norms
and geographic
proximity between
firms
.
During the decades of
1970s and 1980s, the creative reactions by high
-
tech
nology

companies and entrepreneurs to the rapidly changing markets and technological
environment shaped an idiosyncratic culture and
routines

of Silicon Valley.

Moore
(Moore &
Davis, 2004), cofounder of Intel,
is in line with Saxenian’s perspective by contending that a

group of technology entrepreneurs at Fairchild Semiconductor created the springboard for the
Silicon Valley mode of collaboratio
n.

The other line of studies gives more emphasis on the significant roles of intermediary
bodies and contrived efforts by the public sector. In the case of t
he Research Triangle Park in
North Carolina
is generally recognized as the product of intervention
s by mediating
organizations.
TUCASI
,
the Triangle University Center for Advanced Studies
,

promoted
collaborations between local universities,
and the North Carolina Biotechnology Center
has been

9


critical in nurturing
the
local
biotechnology industry

(Link
, 2002)
.

Feldman and Lowe (2011)
chronicled the engagements and supports of the statement government in structuring the
Biotechnology Center of North Carolina: the statement government’s initial funding of a few
thousand dollars, its efforts for structurin
g an organization and its ongoing supports for the center.

Some studies on the early development of Silicon Valley give credit to the role of the
federal government and Stanford University.
Leslie (2000
, p. 50
)
wrote, for example, that
“the
Department o
f Defense was the original
angel

of Silicon Valley
.


Scott (2006) also drew
attention to the roles of local governments in
supporting high
-
tech industry: the one is creating
innovative urban environment with the development of science parks or special econ
omic zones
;
the

other one is to support regional businesses by building infrastructures, providing tailored
services and arranging public institution
s
, which
local firms tap into. Am
ong significant players,
public agencies and trade associations
could be an important constituent of the collaborative
system by establishing
social ties and trust
as they promote interactions and engagement.

However, compared to the role of intermediate organizations in formulating and
maintaining the social networks
and
an innovative local society
, the emergence and evolution of
such organizations have not drawn enough scholarly attention yet. In many ways, it is still little
known how intermediary bodies emerge and operate to fulfill the role of networking and
coordi
nating multiple actors in their regional context. Indeed, it is still controversial whether a
regional network system evolves organically or could be formulated by policy interventions.
Furthermore, there is little consensus in the literature concerning t
he role and contributions of
intermediate organizations in developing high
-
tech industrial centers.


3
.

RESEARCH METH
O
DOLOGY
AND DATA


10


3
-
1.
Interpretive Approach

This study draws on data from interviews, archives and field observations. This study
involves a large body of narratives from interviews and archives, which provide detailed and
specific accounts by the participants and stakeholders of the historical proc
ess. In other words, I
focused
on people’s experience, and their accounts of experience represented in narratives and
communal artifacts

as
narratives represent how
people make sense of
the social world and their
actions

(
Feldman
,

Skőldberg, Brown & Horner
,
2004)

T
his
is a
n exploratory

case study

that
mainly seeks to construct a conceptual
framework
to explain the rise of
an organizational structure
, and
the construction of
local governance

through exploring the complexity and dynamics of a single phenomenon (Eisenhardt, 1989; Yin,
2003).
In this regard,
the authors

chose one locality
,
San Diego
, and

its networking program,
CONNECT,
not only to explore the
development of CONNECT,
but also to

shed light on the
emergence and role of networking programs or organizations in shaping industrial clusters and
their social institutions.
In conducting this research,
the main focus was to understand the
emergence and contributions of intermediary bodies

like San Diego’s CONNECT under the
historical and social contexts.


3
-
2.
Data
Collecti
on and Analysis

The author utilized three types of data; interviews, field observations and archives. I
conducted 43 in
-
depth interviews with biotechnology entrepreneurs
, venture capitalists,
academic scientists, technology transfer officers, angel investors, affiliates of networking
organizations like CONNECT. All interviews lasted more than thirty minutes, and were recorded
for complete transcription with one exception.

The interviewees include the current CEO of

11


CONNECT, four out of seven co
-
founders of the program, and one staff member who was
involved in organizing it in the early years. Most interviewees have been engaged with
CONNECT in various ways such as entrepre
neurs
-
in
-
residence and board members, thus
virtually all interviewees provided valuable experience and insight on the organization.

In addition to interviews, the study involves field observations on events or meetings of
the
San Diego community

from 2008

to 2010. Most events observed were hosted by or affiliated
with CONNECT. Those field participations include events like
Connect with C
ONNECT
, a
networking event, in 2008
and
2010,
and
Most Innovative New Product Awards (MIP)
,
which
has been held annually

by
CONNECT

to recognize the endeavors and contributions of the
community members
,

in 2008 and 2009.

The experience of participating dozens of such events
provided contextual understanding on the community and opportunities to build rapport with
interviewees.

Another source of data was archives, mostly newspaper articles and historical records
from var
ious organizations. Every edition of two local newspapers, San Diego Tribune and San
Diego Union


which merged in 1992 as San Diego Union
-
Tribune
-

from 1983 was searched.
Another part of archives was collected from a weekly business journal, San Diego Bu
siness
Journal.
In addition to these local journals,
I

also
depended on
several other periodicals
:
San
Diego Metropolitan Magazine, and Xconomy San Diego
,
an
internet
-
based news

media

focusing
on the technology industries
, to name a few.



Throughout this

research, a large part of data collection, analysis and writing was
conducted iteratively. The analy
sis

process often redirected foci of interest, which resulted in
revising interview questions,
identifying
interviewees and realigning efforts of collectin
g
archival data (Corbin & Strauss, 2008
;
Yanow, 2006). New concepts and feelings
that
appeared

12


during interview meetings or field observations were written as memos
and often they
were
developed into diagrams

(Lofland,
Snow, Anderson & Lofland
,
2006).
Alon
g
with
collecting
archival data,
the author

chronicled events and accounts into each category, and added analytical
memos for the emerging ideas or concepts. On the one hand, the theories have guided the data
collection and analysis
process
,
and,
on the ot
her hand, the data rejuvenated
our

interest in the
literature

(Corbin & Strauss, 2008; Glaser & Strauss, 1967).
In sum, it was this iterative process
which led to the understanding and creation of concepts in this study.


4
.

Creation and Contributions of
CONNECT

4
-
1. P
erspective

Shift: From Recruiting to Home
-
growing

Until the
mid
1980s,
the local government and San Diego Economic Development
Corporation (SDEDC) focused mainly on attracting large companies and research consortia, and
they paid most
attention to expanding

the military base,

which was their main economic engine
at that time
.
To achieve this goal, local governments and
business community led their efforts by
advertising and marketing San Diego.

Despite these efforts,
San Diego
remained
as
a branch
office town

without any substantial tradition of
or
resources for a self
-
sustaining
and self
-
expanding
economy. San Diego, as a journalist wrote, was "in a sense a third
-
world colony of the
big financial and corporate interests with their home
base elsewhere in California, in other parts
of the United States, or abroad
" (Fredman, 1984)
.

T
he civil and business community initiated communal endeavors to locate consorti
a

in
1984 and
again in
1985. In 1984, SDEDC led a communal effort
to
attract the
Software
Productivity Consortium (SPC)
, which
was a joint venture of thirteen aerospace companies to
boost computer technologies by combining their capacity and resources. SDEDC and the region

13


expected
that the consortium could be an anchor drawing the par
ticipant companies to San Diego
as well as a nursery
for spinning off
startups.
Unfortunately,

however,

the consortium went to
Virginia
at the end, mainly due to its proximity to Pentagon
(Coleman, 1985).
Undeterred,
SDEDC set their sights on another conso
rtium.
In the following year, SDEDC with the support
of the city government and UCSD
embarked on
another initiative to lure the Microelectronics
and Computer Consortium (MCC) to San Diego.
T
his consortium
also went elsewhere
,
Austin
,

mainly due to
the Texa
s state government's pledge to build world
-
class R&D capacity at the
University of Texas (Castro, 1985b).
In the following years, San Diego still kept its efforts to
bring outside enterprises into the region.
In 1987,
SDEDC and the local
business
community

commenced an endeavor to attract another research consortium, the Semiconductor
Manufacturing Technology
, which also turned out to be another failed endeavor.

In addition to the bitter experiences, San Diegans began to realize the challenges of
bring
ing
in

established companies
,

because
the cost of doing business in San Diego exceeded
most competing regions
,

and
its

regional advantage

was
were eroding as more regions were
building up
their own
innovation capacities such as universities and
industrial
infrastructure.
Due
to these reasons, the
marketing efforts
by SDEDC failed to bring in any company in 1984, and
turned out to be disappointing through the mid of 1980s
(Lowe
,

1985
). The CEO of SDEDC,
Daniel Pegg, noted the difficulties
: "
[b]
ut they don't
locate here for various reasons. There
include possible water shortages, the cost of housing and utilities, etc

They
[other regions]
're
becoming more competitive by building up their academic base and infrastructure too. Almost
every week a raider from oth
er states comes here trying to lure our business away"
(
Lowe 1985).

F
ailures to attract research
consortia and established firms from outside in the mid 1980s
were critical to turning attention and strategies to nurturing startups

locally. T
he community


14


s
lowly began to
recognize the importance of home
-
grown high technology and biotechnology
companies, as indicated in
an entrepreneur’s
account: "There is recognition that if San Diego is
going to continue to grow in terms of jobs, then the growth will come f
rom businesses that are
started and built here" (Perry, 1987)
.

Instead of spending energy on attracting large companies,
SDEDC
and the local community began to focus on creating a platform for nurturing local
startups.
Mary Walshok
, co
-
founder of CONNECT,

(
Eger & Walshok, 2008
) recalled the new
platform th
at the community began to enact:

I think what we understood in San Diego 25 years ago, a lot of other communities are only
now beginning to understand is that
you can build a robust economy on small compan
ies.

You don't just have to have big companies and that knowledge is what's gonna drive new
forms of economic development… What San Diego did was it realized the future was in
the small companies, and it realized that you had to link all these wonderful re
searchers
from the military, the university and elsewhere with entrepreneurs and investors. And we
created a new economy.

In addition to the importance of locally driven entrepreneurship,
the local people

also
realized the importance of partnership between

academia and industries
, and the role of a
research university in promoting technology
-
based industries.
Daniel Pegg
, CEO of SDEDC,

noted, "the lesson that the community learned from losing the MCC was that it had to pull
together" (Innovation Associates
Inc., 2000, p. 40)
.

Similarly
,

David Hale, president of
Hybritech
, which was the first biotechnology company in San Diego
, commented: "The
community has realized that for San Diego to attract high
-
tech companies there needs to be a
concerted effort among i
ndustry, academic and business interests" (Castro, 1985a)
.

B
usiness,
academia and public leaders reached a consensus that they could build a prospering economy by

15


nurturing a mass of small biotechnology and high technology companies. They turned their
atte
ntion and resources to enabling and encouraging entrepreneurs and scientists to nurture
startups.

Additionally, a group of entrepreneurs were inspired by the evolution of Silicon Valley
with its high
-
technology entrepreneurship during their trips to the b
ay area. Learning from these
experiences and insights, civil and business leaders in San Diego
began to understand that the
community should build up leadership and partnership to
nurture
startups

in the region
. An
address by an entrepreneur is
illustrative of the appreciation: "If we are to create Silicon Beach,
we have to generate a community commitment backed by the technology and the educational
base that already exists here" (Berger, 1984a)
.


4
.2

Formulation of
CONNECT,
a New Platform for
Collaboration

and Networking


In
1985, a series of communal efforts were embarked
upon
to support small high
technology and biotechnology companies.
As one of these efforts, CONNECT was conceived
and constructed, mainly, to foster interactions between indu
stries and academia. D
uring a series
of discussions to locate
research consortia,
participants recognized that the university and
industry were separated from each other
, and they needed to be bridged
. Daniel Pegg
(interview)
said of the recognition:

Out
of that competition for MCC, came recognition that we really didn't have the
connection to our university resources. We needed to bridge between the private sector and
the university. The concept was to help bring the university leadership, internal talent

and
the scientific resource together with their counterparts in the private sector.


16


Daniel
Pegg did research on
how to capitalize on research universities

and
academia
-
industry partnership
. He
discussed with Atkinson, then chancellor of UCSD,

how to con
nect the
university with the local industry.
He

said
of
the initial discussion with Atkinson

in an interview
:
"we sat down with and discussed with Dick Atkinson
,

who was very open and receptive to the
idea." Atkinson
organized
a group by asking "some of hi
s key staff to explore a proper route for
the university to assist in reinvigorating the regional economy" (Walshok, Furtek, Lee &
Windham, 2002, p. 36)
.

The group held a series of discussions to find ways to facilitate the
interactions between UCSD and in
dustries.
Pegg
(interview)
recounted the process of initiating a
new program
:


We got together, and discussed different possibilities and different ways to approach the
issue and to finance. It just grew from there. Then, shortly after, we had an initial c
oncept,
and it was
,

in great part
,

the work of Mary Walshok and those who originally sat around the
table and discussed the issue.

They started contacting local business leaders and scientific entrepreneurs like Irwin Jacobs,
founder of Linkabit and Qualc
omm, and Ivor Royston
, founder of Hybritech
. According to
Walshok
et al.
(2002, p. 36), "one
-
on
-
one interviews and round tables yielded a number of
creative ideas about how the university and the community could collaborate on this issue." Out
of
40

people who
m

the staff had contacted, thirty responded. Based on the discussions and 17
company sponsors, a new program was embarked
on
with $75,000 seed funding (Castro, 1985a;
Rose, 1989).
Irwin Jacobs, founder of Qualcomm and also one of the cofounders
of CONNECT,
explained why he and the business community participated in and led efforts of launching a new
program:


17


At the time, it was a lot harder to start a company here in San Diego. There weren't many
people: some defense companies here, but the ba
nks, the lawyers and the accountants
weren't used to be here.
There was a need for a community of support, a whole eco
-
structure

It was useful having a community of support. Some folks at UCSD also were
thinking along the same line and suggested that we s
tart an organization to do this. So, I
certainly supported

that and put together CONNECT.

Walshok
(interview)
emphasized the
importance of the
bottom
-
up approach of the new
program
: t
he core ideas and values came from the local people, and the organizers a
nd advisers
were mainly composed of scientist entrepreneurs and local businessmen
, as she explained:
"It
wasn't governments, it wasn't professors of business, it wasn't outside experts. It was the local
community organizing and taking
the
advice
of
these e
arly entrepreneurs who were so
successful
.
"

William Otterson joined the program as an executive director in 1986.
Otterson

had
developed solid management knowledge
and expertise based on his own business
experience
5
.
He emphasized that the program should

be a stepping stone for
first
-
time
entrepreneurs and
scientists by linking them with the resources and expertise of
seasoned entrepreneurs
. During the
early years, Otterson focused on enlisting and encouraging experienced executives to work with
startup e
ntrepreneurs who had not gained solid base of experience.
He also led efforts to promote
collaborations between research institutions. An interviewee described Otterson’s efforts and
capacity in this way:




5

Before joining C
ONNECT in 1986
, William Otterson was already recognized as a successful
entrepreneur: He turned around the almost bankrupt company, Cipher Data Products, the maker of
magnetic tape peripherals for computers, while serving as the CEO, and took it public in 1981. Later, h
e
led Lexocorp, a word processor manufacturing company. He also served as a member of boards of
directors
at

several companies.
He served as the director of CONNECT until he died of cancer in 1999.


18


As entrepreneurs and startups formed, he had them
talking to each other and
collaborating. He was also very successful in engaging research institutes to collaborate
among themselves.

(interview)

He began
t
he

Bill Otterson Biotech Letter
,’

which was faxed weekly to the local business
community. The newsl
etter "was
an
important part of the community
,

which made sure
everybody kn
o
w what
was

go
ing on and recognize successes
" (
an interviewee
)
.

E
ntire budget
came from the business community
,

including its sponsors and members, while the involvement
of UCSD was

limited to
its
participation in the program's scientific board of advisers (Rose,
1989). The organization began to institutionalize its efforts of linking startup entrepreneurs with
resources and veteran entrepreneurs. They

gradually

introduced specific
programs,

whereby
people

with

competence
,
specialties
and resources
would
be engaged with individuals with
entrepreneurial passion and technological expertise, as presented in Table 5.

<
Table
4

about
here
: Historical milestones of CONNECT
>


4
-
3
.

Programs
and Activities of CONNECT

In the early phase
,
CONNECT
launched

two programs
,

Meet the Researchers

and

Meet
the Entrepreneur

in 1986

t
o
link the
scientific discoveries
with
experiences of entrepreneurs. In
the following year, CONNECT launched an award cerem
ony, the Most Innovative Products
Awards (MIP).
The ceremony, in words of an early staff,

was
to "let people know about the
innovations that are taking place" and to "give

the inventors some recognition
" (Douglass, 1988)
.


In 1989, in response to a
suggestion of David Hale, C
ONNECT

started the San Diego
Biotechnology/Biomedical Corporate Partnership Forum (Kupper, 1998). Selected life sciences
companies could present their
entrepreneurial schemes
to a group of invited investors of

19


pharmaceutical comp
anies, investment bankers and venture capitalists.
In 1990, CONNECT took
charge of t
he San Diego High Technology Financial Forum
, which had been originally started by
a group of service providers in 1985 to boost investments in local technology
-
based compa
nies
by inviting investors to a 2
-
day presentation event. .


At the beginning, the participants did not expect that the program would be the incubator of
a stream of startups and collaborative initiatives. What the business community initially expected
w
ith the program was to increase its local visibility
, as
David Hale stated:

The program is not necessarily going to cause companies to be successful or not be
successful. But it will create a good environment for high tech in that it can be a
mechanism for

establishing an image across the country that San Diego is a good place for
high tech. That's going to be very worthwhile to attract new people and benefit those
companies already operating here. (Castro, 1985a)

Yet, i
n 1994, CONNECT
expanded its activity

and
launched its flagship program,
Springboard Program, as a platform linking a group of veteran entrepreneurs with newcomers.
In
this program,
startup entrepreneur
s

give short presentation
s

to a panel of experts, which
identifie
d

obstacles and opportunit
ies, and provide
d

guidelines.
Through these engagements
, the
young
entrepreneur
s or scientists become
co
nnected
with seasoned entrepreneur
s,

who
would
coach
for six to twelve months (Chamber, 2007). Particularly, this program has helped scientists
with tec
hnological expertise but lacking experience in business
turn into entrepreneurs: t
hey
are

introduced to the community of entrepreneurs and investors through this program as well as
a

stock of business knowledge.

One of the early staff (interview)
, who had

worked to formalize Springboard
,
told the key
impact of the Springboard
P
rogram was
to
create and maintain the network of people:


20


What we were doing at the Springboard program with early stage entrepreneurs was
getting everybody around the table to help t
hem think through the process and talk to each
other. The people met each other across the table at the program, and it made sure that
they had a very well networked community.

By participating
in
a line of programs, the novice could become a member of the

community
to

which they would
belong

and on which they would draw resources.

Primary ongoing
programs appear in Table 6 with their beginning years.

<
Table
5

about
here
: Primary Programs of CONNECT
>

In addition to the programs, CONNECT and Otterson created a space where industry,
academic and public people could interact with each other. Through the programs of CONNECT,
the participants learned how to collaborate to achieve mutual goals.
To be more, t
he experience
and encounters at CONNECT resulted in forming a
number
of networking and
learning
communities
.



4
.4

Contributions of CONNECT

to Stimulating Local Entrepreneurship

The efforts and activity of CONNECT and its leadership have been one of the mo
st
fundamental factors which turned a
sleepy navy town

into one of the most vibrant biotechnology
and high
-
technology centers. The impact of CONNECT goes beyond providing business services
to individual companies; the program has been the anchor of collabo
rative efforts and
interactions of the local community since its establishment. In other words, the program has not
only been critical to helping entrepreneurs and academics embark on their own ventures, but it
has also been influential in creating the reg
ional governance system for entrepreneurship and
innovation.
According to a series of reports, which trace down local startup activity, a continuous

21


number of technology startups emerge in San Diego, as shown in Table 6. The impact of
CONNECT in stimulatin
g entrepreneurship and, in the end, transforming San Diego into a
entrepreneurial region, could not be quantified, but it has played a pivotal role as evidenced by
the literature (
Scott, 2006;
Smilor, O’Donnell, Stein & Welborn
III,
2007
;
Walcott, 2001; 20
02;
Walshok, 1999)

and a stream of narratives of interviews and archives. The CONNECT’s
conduits for promoting entrepreneurial dynamism include its engagements in constructing a
collaborative community, connecting academics with entrepreneurs and organizin
g resources for
entrepreneurship.


<
Table
6

about
here
: Startup Activities of San Diego
>

First of all,
CONNECT

created a sense of community
and build a social capital foundation
on which high
-
technology cluster can emerge. It

has also played as a repository and activator of
shared meanings. Because most entrepreneurs have benefitted from activity and advocacy of
CONNECT and Otterson

during the 1980s, many of them would be willing to make
contributions to the community. A ventur
e capitalist
said

of his motivation of participating in
programs like the Springboard Program
:

I
n my case, my companies and personally I benefitted a lot from C
ONNECT
. Especially, in
the very early days of Corvas when the community wasn't as large as it is

today, and it
wasn't as strong, we really did benefit from that association… I wanted to take some time
off to be involved with the community.
(interview)

CONNECT is
recognized
, mostly,

for its role of resourcing
,

but
,

more importantly, it has
been a plat
form for organizing talent to facilitate
the
learning process at the
entire
community
level.
Walshok
(interview)
accounted for the role of CONNECT:


22


If you look at C
ONNECT
's programs, you see how everybody who participates in the
ecosystem. It's always lea
rning new things. There is much more shared knowledge about
new economy strategies, opportunities and challenges, and lots of trust and familiarity.
What we call in sociology

pre
-
transactional relationship
’.

Lots of scientists know attorneys,
accountants,

and lots of marketing people know chemists and biologists before they do a
deal together

and
they ever work together officially to grow a company. And I think that
is
the secret of C
ONNECT
.

CONNECT provides the space and creates the cause where many volunteers
and newcomers
can
settle down

and mingle with entrepreneurs
. Every year, CONNECT organizes a few hundreds of
events and initiatives that connect local entrepreneurs and celebrate their
endeavors by
convening the entire local community.



Second, as originally envisioned, CONNECT worked as a catalyst for transforming
invention into innovation. It has successfully bridged between the local industries with academic
institutions and boosted

commercialization of academic research.
People on the industry side
began to visit the UCSD campus to
attend
the programs of CONNECT. CONNECT
has run
a
series of seminars
,

where academic and industrial scientists presented their discoveries to public.
A C
ONNECT staff (interview),
described the impact of the program:

We got hundreds of people from the community into those events. That opened up what
academics were doing, what were happening in the business community. It also soon
networked more people from the research side with people from the business side. It was
op
ening the door.

Various activities organized by CONNECT helped open the gate of the university to the
local community, and it also contributed to exposing faculty to the
entrepreneurs’ community
.

23


Involvement
s

and
communications
through
a line of
programs
by
CONNECT helped people
from one side know, understand and trust people from the other side. The familiarity, trust and
shared knowledge have been pivotal in starting university
-
industry partnership initiatives as well
as
nurturing
technology
-
based startu
ps.


Third, CONNECT has been critical in creating and attracting business resources.

Business resources


by which
I

mean venture capital, angel funding and specialized services

to
name a few



are a crucial factor for fueling
high
-
technology
startup ac
tivity.
As the region in the
1980s lacked the venture capital funding, angel investments and other specialized business
services, CONNECT focused on attracting business resources from outside by hosting events
like San Diego Technology Financial Forum. As
narrated by startup entrepreneurs, the
opportunities of meeting and pitching to venture capitalists from Silicon Valley and other regions
were the most significant source for attracting investment funding. Even to date, a part of
CONNECT’s efforts is conce
ntrated in attracting and organizing resources from outside,
although the focus has shifted to networking and learning (see Table 5).

Another channel for attracting and creating business resources was to provide space for
interactions and learning to entr
epreneurs. Most specialized practitioners like patent attorneys,
public relations personnel and real estate developers developed their skills and expertise by
participating in events hosted by CONNECT and by engaging with entrepreneurs. As an example,
San
Diego has a solid base for angel investments due to the organization of the San Diego Tech
Coast Angels, which is affiliated with CONNECT in various ways. Many members of this
organization came to and settled down San Diego due to the robust interactions a
nd
entrepreneurial activity, of which CONNECT has been a critical component.


24


Fourth, CONNECT has been the nursery of a number of trade associations, research
consortia and local initiatives. As the regional high
-
technology and biotechnology sectors
expand
ed and diversified, trade associations and networking organizations have spun out to
provide tailored services to their member companies (see Table 7 for the list of such
organizations in San Diego). These local organizations or programs were created by CO
NNECT
or, at least, were affiliated with CONNECT. For example,
BIOCOM
, which, as pointed out in
the previous chapter, was organized in 1991 as a trade association of biotechnology industry,

has
been another nexus of interactions
. According to Joseph
Panett
a

(interview)
, CEO of B
IOCOM
,

this trade association hosts about 100 events each year to boost face
-
to
-
face interactions.
Like
CONNECT and BIOCOM, organizations
such as
the San Diego Tech Coast Angels
, the
CleanTECH San Diego and
the San Diego Venture Grou
p have been
another channel for
engagements, interactions and participations.

CONNECT was involved in embarking on
collaborative research initiatives like the San Diego Center for Algae Biotechnology and the
Sanford Consortium for Regenerative Medicine as
a catalyst. These initiatives have been critical
to promoting collaborations between local research institutions and universities.

<
Table
7

about
here
:
Trade Organizations & Networks Created by or Affiliated with
CONNECT

>



5. Conclusions and
Implications


CONNECT was the product of a communal paradigm shift and collective actions of local
leaders both from public and private sectors. It took years for the local community to understand
the need to nurture startups and to establish an organizati
onal setting where people could interact
with and encourage each other. After the establishment of CONNECT, it took another several

25


years before the program developed its initial line of programs. As accounted in the previous
chapter, the development of a
networking organization was not straightforward, but it involved
series of improvisations and improvements.

Most of all, m
uch of CONNECT’s success is attributable to the extraordinary
commitment of Otterson and its cofounders.
He worked with local trade g
roups in their efforts to
change the attitudes and routines of the university and the City of San Diego

during the

1980s,
when
social capital
for entrepreneurship was
not sufficiently accumulated. A journalist of San
Diego Union
-
Tribune described Otterson’
s role as follows: “
As the longtime director of UCSD
Connect, Otterson strived to create a supportive community for biomedical researchers,
engineering professors and other aspiring entrepreneurs unsure how to turn their ideas into
companies" (Bigelow, 199
9)
. An entrepreneur, David Hale, president of Hybritech, also
remembered Otterson’s contribution:

He made it a cause celebre to be a supporter of the high
-
tech industry. When I first got
here with Hybritech, there wasn't anybody around who cared about bio
tech or knew
about anything about it… Back when biotech was nothing, Bill was able to get the
lawyers and the accountants and the other support people to get behind us (Bigelow,
1999)
.


In this sense, at the very beginning phase of cluster development, pol
icymakers should
give more attention to leadership and commitment. An innovative and collaborative medicating
organization like CONNECT is not the product of legal or financial ingenuity, but that of a long
-
term devotion and engagements of participants and

stakeholders. In building the leadership team
of intermediate organizations, it should be taken into account that leaders constantly
communicate with the private and public sectors.


26


Second
, CONNECT
succeeded in building a social community of shared knowl
edge and
trust.
Through its many programs, veteran entrepreneurs meet young entrepreneurs, and they
engage in discussions and workshops. These daily interactions and conversations around
entrepreneurial endeavors have produced a set of shared values and no
rms. Since all participants
stand on shared interests, values and practices without bureaucratic interference or control, they
could have created
a
learning and supporting community. To create collaborative culture and a
problem
-
solving platform, face
-
to
-
f
ace meetings and daily interactions are essential. Networking
meetings like a beer party or an award ceremony are not a waste of time or money, but a
platform for social interactions.

Third, although it is not sufficiently discussed in this paper, the
biotechnology cluster of
San Diego and CONNECT case show that t
he resurgence of San Diego's economy reflects the
importance of growing small enterprises and startups

organically
. These companies are firmly
rooted in the local environment,
and are
the main
players of sharing understanding and
knowledge.

Once the number of home
-
grown companies reaches a critical mass, virtuous circles
of accumulation might take place. It implies that c
ountries and regions
focusing on
invest
ing

in
physical infrastructure and a
ttracting large corporations

need to shift their attention to
promoting
indigenous
startups and connecting them.


In sum, the early momentum for CONNECT came from the paradigm shift of the
community, which turned its attention to the locally emerging star
tups and entrepreneurship. T
he
case of the San Diego biotechnology community and CONNECT reflect what Florida (2002, p.
xxiii) pointed out: “growing a creative ecosystem is an organic process,” and “the solution lies in
the hands of each region


in the kn
owledge, intelligence and creative capacities of its people.”

27


To build up a productive networking organization should involve participation and engagement
from multiple communities of a
region
.


28



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33


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34



Table
1.

Venture capital investment
s

in the biotech
nology
industry in San Diego,
1995
-
20
12

($ millions)

Year

San Diego

U.S.

S.D. % of U.S.

1995

77.1

829.6

9.29

1996

134.4

1,186.4

11.33

1997

141.9

1,408.7

10.07

1998

176.3

1,587.7

11.10

1999

259.0

2,105.7

12.30

2000

610.2

4,253.0

14.35

2001

565.8

3,492.1

16.20

2002

453.0

3,188.0

14.21

2003

348.0

3,544.0

9.82

2004

589.0

4,224.0

13.94

2005

625.0

3,772.0

16.57

2006

557.0

4,416.0

12.61

2007

976.0

5,317.0

18.36

2008

441.0

4,567.0

9.66

2009

411.0

3,718.0

11.05

2010

446.0

3,927.0

11.36

2011

498.0

4,873.0

10.22

2012(Q1)

170.0

780.0

21.79


7,478.7

57,189.2

13.08



35



Table 2.

Employment in Biotechnology & Pharmaceuticals Industries of San Diego


Year

Employment in

Biotechnology
&

Pharmaceuticals

Growth Rate(%)

1990

11,497


1991

12,851

11.8

1992

12,756

-
0.7

1993

14,127

10.7

1994

13,457

-
4.7

1995

13,198

-
1.9

1996

12,732

-
3.5

1997

13,878

9.0

1998

15,385

10.9

1999

16,937

10.1

2000

18,134

7.1

2001

20,708

14.2

2002

21,236

2.5

2003

20,953

-
1.3

2004

20,670

-
1.3

2005

21,768

5.3

2006

22,300

2.4

2007

22,662

1.6

2008

23,812

5.1

2009

24,510

2.9

2010

29,781

21.5

3rd Q. 2011

30,237

1.5


Note
:

The number of employment is the sum of
the North American Industry Classification
System (NAICS) coding

32541(Pharmaceutical &

medicine manufacturing), 541380(Testing
laboratories), and 60% of 541710(
Research & Development in the Physical, Engineering & Life
Sciences
)

Source
:
The Quarterly Census of Employment and Wages (QCEW), or ES202, program by the
The Employment Development
Department of California. Accessible at
http://www.labormarketinfo.edd.ca.gov/?pageid=1016.





36



Table
3.

Overview of CONNECT




Description

Legal Entity

-

501c6 trade organization(CONNECT Association)

-

501c3 charitable foundation(CONNECT Foundation)

Year

Founded

1985* (As Part of UCSD Extension)

Governance System



501c6: About 80 Board Members



501c3: 14 Board Members

Executive: CEO & President

Employees

About 20 Staff

Budget

Around $3 million

Sources of Revenue

Membership dues, Sponsorship, Ticket &
Table sales, Grants from
Private Foundations

Achievements

(Assets)



Assisted to more than 3,000 companies in attracting $10
billion investment capital



Having been benchmarked by about 50 programs



About 500 Entrepreneurs
-
in
-
Residence & Domain Expert


* In 2005, CONNECT
was
converted
to
the current
organizational form,
non
-
profit organization
,
from an
affiliate program
of
UCSD

Extention

Source
:
CONNECT
Website(
www.connect.org
) and Other Sources
.






37



Table
4.

Historical
Milestones of CONNECT


Year

Description of Event & Programs Launched

1984



EDC failed to locate Software Productivity Consortium(SPC)

1985



EDC and the local community failed to attract Microelectronics and
Computer Consortium(MCC)



‘San Diego High Technology Financial Forum’ founded by local
扵獩湥獳⁣潭浵湩tyI⁕䍓䐠a⁅ C⁡猠s渠楮ne獴se湴楡楳潮⁰牯ira洠



‘MIT Enterprise Forum’ launched partly by MIT alumni to give experts’
a摶楣d⁴漠 潣a氠捯浰a湩ns



CONNECT founded

by UCSD and business leaders including
Atkinson, Walshok, Pegg and Jacobs (with the name of ‘Program in
Technology and Entrepreneurship’)

ㄹ㠶



William Otterson joined as founding director



‘Meet the Researchers and Meet the Entrepreneur’ program

ㄹ㠸



‘San Diego Technology Financial Forum’



‘Most Innovative New Product Awards’

ㄹ㠹



‘Biotechnology/Biomedical Corporate Partnership Forum’



Launched Athena, a networking platform for female executives

1994



Springboard program began

2001



2
nd

Director, Fred Cutler, inaugurated

2005



3
rd

Director, Duane Roth, inaugurated



Converted into an independent non
-
profit organization

2007



Started ‘CONNECT Innovation Report’ to trace down startup activities

㈰㄰



Opened its Washington D.C. office to
raise interest on innovation &
entrepreneurship


Source
:
CONNECT
Website(
www.connect.org
), CONNECT Celebrates 25 Years of
Innovation(a booklet published by CONNECT) and Other Archival Sources





38



Table
5.

Primary
Programs of CONNECT



Program

Description

Year Started

Springboard

C
oaching and mentoring

by veterans
to startup entrepreneurs

1994

Technology Transfer Roundtable

(Commercialization Council)

Forums and assists to facilitate
technology transfer

2009

CONNECT
-
Assist

Platform to attract research institutes
and talent

2009

Venture Roundtable

Showcases of early
-
stage companies
to invited investors

2006

Financial Forum

Education series on financial issues


CEO Strategy Forum

Education series on
management
issues

2007

Frameworks Workshop

Half
-
day curriculum for business
basics


Frontiers in Science &
Technology

Presentations of scientific discoveries
to business community

1986*

Connect with CONNECT

Networking event


Entrepreneur Hall of Fame

Recognition of community leaders

2005

Most Innovative New Product
Awards

Ceremony awarding newly developed
products

1988

CONNECT Innovation Report

Tracing down startup & innovation
activity

2007



* It started in the name of “
Meet the Researchers and
Meet the Entrepreneur” in 1986

Source
:
CONNECT
Website(
www.connect.org
) and Other Archival Sources




39



Table
6.

San Diego Start
-
up Companies 2007 to 2011




2005

2006

2007

2008

2009

2010

2011

Pharma/Bio/Medical

107

61

96

85

110

71

67

Communications

44

37

36

38

44

48

54

Computer &
Electronics

37

27

75

34

25

36

24

Defense and
Transportation

6

15

4

11

5

9

12

Environmental
Technology

39

22

14

16

25

10

21

Recreational Goods
Manufacturing

0

1

8

14

10

23

25

Software

99

78

99

84

100

80

109

Total

332

241

332

282

319

277

312


Source
:
CONNECT Innovation Report
s
,
f
rom
www.connect.org
.


Table
7.

Trade Organizations & Networks Created by or Affiliated with CONNECT


Organizations

Year
Founded

Arena & Members

Athena

1989



Female executives

BIOCOM

1991



Biotechnology industry (biotech companies &
service providers)

San Diego Software
Industry Council

1994



Software industries

CommNexus San Diego

1998



Telecommunications
industry(originally ‘San
Diego Telecom Council’)

pa渠䑩ng漠呥c栠h潡獴s
䅮来汳

㈰〰



Angel investors (affiliated with CONNECT in

Wireless Life Sciences
Alliance

2005



Wireless health industries

CleanTECH San Diego

2007



Green energy & environment industries

SD Sport Innovators

2008



Sports industry



Source
:
CONNECT
Website(
www.connect.org
) and Other Sources