the role of the new argonauts in the slovenian entrepreneurial ecosystem, nejc slovnik

8/17/2019 The role of the new argonauts in the slovenian entrepreneurial ecosystem, Nejc Slovnik

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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

the role of the new argonauts in the slovenian entrepreneurial ecosystem, nejc slovnik

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