96 -Does the Silicon Valley Concept 

Work in the Czech Republic?


Possible Culture Reasons for innovation Success.

 

Journal of Enterprising Culture, Vol.9, No. 4, (March 2001), 49-66

 

MIROSLAV PIVODA

University of New York/ Prague

 The Czech Republic

Abstract

The case of an innovative Czech software company provoked broader research about the pro-innovative environment in a post-communist country. Creative potential and a drive for wealth are present in the nation as well as a few negative factors influencing the current business environment. Necessary changes have already been undertaken from the governmental level to upgrade the National, Corporate and Professional cultures and to foster innovation. However, a bottom-up initiative may be decisive for any future business success. Historical as well as current positive business cases may serve as useful role models.

 

INTRODUCTION

 

American Sun Microsystems from Silicon Valley bought the innovative software company NetBeans in August 1999. A group of about forty young Czech programmers, headed by 34-year-old Roman Stanek, was selected for acquisition out of an initial 50 potential candidate companies in the business of Internet development tools. Is this case exceptional, or may it become a quite frequent event? Does this mean that it is possible to compete successfully from a post-communist country with its slow growing economy, with companies like IBM, Microsoft, Oracle, Sybase, Symantec, and Freebuilder? Do Czech entrepreneurs have access to venture capital like entrepreneurs in Silicon Valley?

These questions represent the natural reaction of a researcher to this surprising business event. In 1993, there was another positive surprise in an international survey of university students. Czech students emerged as the most entrepreneurially oriented out of 18 countries (Luytjes, 1994) (Pivoda, 1994). From the research point of view, can these two surprising events be considered as mutually supporting evidence about an excellent business environment in the Czech Republic? How really strong is an innovative and entrepreneurial culture in a post-communist country, and how strong is its supporting environment? How can we upgrade it?

There are four levels of a business investigation: reporting, describing, explaining, and predicting with the aim of possible future control. This article provides a more than perceptual account, but overall, a less than rigorous testing of academic scientific theory. The subject is complex, and the research question framework too broad. Also research effectiveness, i.e. a practical yield from research reached versus the total costs of the investigation matters. Usually, the more precise, the more costly research is. See the author’s suggestion below:

 


                    High

                        (Rigorous)

 

Research

- Method

Precision

 

                        Low

                       (Intuitive)                                                   

       High                                                            Low

                                                    Practical Research Results Yield Related to Effort Spent

 

Our research will start with an analysis of the Czech national business environment. Facts, results from other related surveys and general statistical data will be combined, and both deduction and induction will be applied.

Then, we will focus our research on the Czech Information Technology (I.T.) industry. Its experience with venture capital applications will be analyzed. The surprising case of the NetBeans, a software company, will be presented as an illustration of how innovation trends are taking place in the Czech Republic. Finally, a few general conclusions will be drawn and recommendations will be made.

 

 

THE PROFESSIONAL, CORPORATE AND NATIONAL CULTURES

 

Ulijn, 2000 suggests how to measure innovation culture in an economy. It is an intersection of professional culture (R&D, marketing, finance), corporate culture and national culture. To date, there has been no such empirical research carried out in the Czech Republic, and very probably nor in any post-communist country. We can only collect a few important facts, related surveys, and qualified opinions here.

 

The Entrepreneurial Mind-Set of University Students

 

The entrepreneurial mind-set of university students was tested in 1993, in a global survey that was organized by the Florida International University. 324 Czech students (from five Czech Universities) participated, out of a total of 2,041 students from 18 countries.  (Luytjes, 1994), (Pivoda, 1994). Four selected question-orientated statements and answers follow:

 

Question/Statement
Answer

The market system gives everybody opportunities and so people should learn to fend for themselves

94% students in the Czech Republic

85% students in the U. S. A.

64% students in Sweden

Cooperation is more desirable than competition

95% students in Finland

86% students in England

78% students in the U. S. A.

63% students in the Czech Republic and Romania

I would rather cooperate than compete when making a livelihood

85% students in former Communist Countries.

Comments of Luytjes: This seems to contradict the responses made to previous questions on this issue by respondents from the Czech Republic and Romania”

53% students in the U.S.A.

My personal philosophy in dealing with an organization would be:

-          If you don’t look out for yourself, no one  else will

-          It is better to give than to receive

All European students strongly preferred the first philosophy, namely students from former Communist countries. Comments of Luytjes:

“It appears therefore that in these countries there is a significant lack of faith and loyalty to the existing organizational structures.”

Students in Panama and Chile preferred the second philosophy.

 

It might be instructive to see the answers of students from then-transforming post-communist countries after a few years of their personal experience of real capitalism1, of real competition, and of real unemployment. Their values might have changed. For example in a quick survey of 50 students in Zlin in April 2000, we received 60 percent (as against the previous 94 percent), 28, 88, and 88 percent of positive answers to the rest of the questions in the order above. The first two answers show a substantial difference to the 1993 results.In 1994, the principal investigator, Dr. Jan B. Luytjes, evaluated the Czech students as the most entrepreneurially oriented persons in the survey. As he fully trusted the research results, he spoke about the possibility of investing his own money in the Czech Republic at that time. If it had been done selectively, into companies like NetBeans, it might have been the right decision. Not in general, however.

 

Ten Years After the Velvet Revolution

 

After the so-called Velvet Revolution in November 1989, we might have expected that a new source of creative energy of human potential would be unleashed. In concordance with this assumption and the above mentioned survey, we might have expected that ten years later, the Czech economy would be flourishing, and that the number of inventions would jump. Unfortunately, after the decrease in GNP at the end of 1990s, the Czech economy has stagnated2, and the number of patents filed followed a similar pattern (see Table 1).

 

Table 1.  Invention Applications - 1993 to 1998 in The Czech Republic (ANNUAL REPORT, 1998).

 

 

1993

1994

1995

1996

1997

1998

 

Domestic

880

756

627

617

585

626

Foreign

2 053

2 593

2 892

3 241

3 652

3 761

PCT/Designations

5 558

11 695

18 104

23 624

28 875

37 447

Total

8 491

15 044

21 623

27 482

33 112

41 834

 

On top of all (or because of all) at the end of 1999, former student leaders of the 1989 Velvet Revolution attacked the top political leaders in a widely supported political proclamation “Thank you, leave!” What had gone wrong with the Czech economy and society? A simplified answer is: Institutional/corporate failure as a consequence of mismanagement of the privatization process, slow progress in infrastructure development, and general political irresponsibility. This situation however, may not be so very different from that pertaining in the other post-communist countries.

 

Professional Culture

 

In 1998, an International survey carried out in 20 OECD countries (Functional Literacy, 2000), put the Czech population (ranging from 16 to 65 years of age) on the highest levels in numerical literacy, an average level in document literacy, and an under average level in prose literacy. Generalized preliminary results suggested an average or lower level capability in managing practical information.

In another survey that was carried out in 41 countries in 1995, (TIMMS), Czech students at basic schools (the 8th grade) placed 6th in mathematics and 2nd in the natural science subjects. A very unusual fact in the international survey was a substantially worsened evaluation of the Czech secondary-level-school students in the same subjects. It seems that the Czech secondary-level-schools place stress on theory rather than on practical tasks. Czech grammar school students achieved the best survey results, however. Unfortunately, only 3 percent of these students planned to study at technical universities.

Similar surveys at the university level are missing. In a survey carried out by the author at two Czech business universities (Pivoda, 1999), out of 165 Czech students 78,5 percent considered future work that would demand creativity as very important, in comparison to 47 percent of American students (out of 2000, in 1998).

 Historically, the Czech people have been considered as better inventors than traders. Czech historical cases of famous entrepreneurs, (Krizik, Skoda) prove the tendency towards “technology push” rather than “market pull” innovations. This may distinguish Czechs from the neighboring Poles3 for example, who by nature, have been more gifted traders. Both nations however, experienced more than 40 years of an “economy of deficiency” where marketing was not important. The case of NetBeans, which based its success on an excellent marketing strategy, shows that traditional national traits and the communist heritage are not insurmountable obstacles. People are learning quickly. How many people are doing so, however?

The development of domestic business schools4 was relatively slow and this might also have implications for the future professional business culture. Statistical data showed that domestic “Economics and Management” sciences had the worst publishing results in international journals and conference proceedings in comparison to any other Czech field of science. We have to take into account that a majority of the Czech professors had received their degrees for different skills than for the market economy. In spite of that, they have occupied influential positions at Czech business schools and their outdated degrees are still valid. It can hardly be expected to change from the inside. (As the Czech proverb says “Do not expect the fish themselves to discharge their own pool”).

Fortunately, graduates from technical and natural sciences schools (like the graduates who joined NetBeans) receive a very good university level education. In addition to this, they are able to complement their technical orientation by self-study of modern business and economic skills and by work-experience.

 

Corporate Culture

 

The corporate culture of privatized companies suffered a lot, namely under those new Czech owners who turned into modern robber barons, obsessed with ownership and not development (after decades of shouting noble ideas of social justice, a classless society, satisfying social needs, etc.). Sharing ownership with key specialists was an out-of-the-question topic. As a result, the best people left corporations. Unfortunately, they did not encounter enough support, which would enable them to start their own, new, innovative companies, thereby offsetting the wave of bankruptcies of privatized companies. Only joint Czech–foreign companies showed positive results. Skoda–Volkswagen (now Skoda Auto), manufacturers of cars, represents the most noticeable success. A clash of national cultures and historical reminiscences were successfully overcome, even though it took a substantially longer period than was originally anticipated by the German side.

There again, another Czech company - the truck manufacturer Tatra Koprivnice, was unable to recover economically even under a top management team comprised of three American managers. This is not to cast doubt on the professional competencies of the managers but the post-communist business environment was quite different. It has been noted elsewhere several times, that in post-communist countries (just like under communism) “know-who” might be more important than “know-how”. And the “more advertisement more sales” rule does not always apply in the local market as does in the U.S.A.

 

The National Culture

 

Czech and Austrian societies are rather closed societies. Normally, long-lasting deep confidential friendships originate between schoolmates, and only rarely later. The high expectations of Czechs in November 1989 turned into a hangover ten years later. The nominally non-aggressive Czech national culture (no war has been initiated since 1620) received another shock. In 1999, almost 50 percent of the Czech GNP represented bad bank-loans and losses by so-called “tunneling” (asset stripping) of funds and companies. Although many court causes have been instituted, little investigation culminated in punishment. In March 2000, President Vaclav Havel himself intervened to speed up the legislation and investigation processes. These negative events have strengthened arguments supporting the historically ingrained national conviction that it does not pay to be honest. Mistrust has been the key word.

“American presidential candidate George Bush, Jr. says  he is going to avoid political concepts that suppose changes in human nature. Is this not a problem of your future political party5?” In an interview, M. Mejstrik (student leader in November 1989, and a co-author of the political proclamation “Thank you, but leave” in November 1999) answered: “This would be based on the conviction that we have the government we deserve. We are convinced that this is not the case. The current opposition-agreement based government is much worse than the rest of society.” (Mejstrik, 2000).

The above seems to imply that the Czech Republic would need social and economic innovation first of all, or at least their full implementation after November 1989. Is the top-down approach to changes necessary in all post-communist countries with “underdeveloped social institutions” (PIPES, 2000)? History matters, and in a country which has lived in the more than 300 year shadow of an Imperial Monarchy and that of the forty-odd year Communist State, people expect these changes to come “from the top”. The top-down changes should also bring about needed profound changes in the corporate culture.

 

 

THE ROLE OF VENTURE CAPITAL AND ATTITUDE TOWARD RISK

 

The 1999 McKinsey Award winning article by G. Hamel’s article (Hamel, 1999), sends a clear message: “To capture the Valley’s entrepreneurial magic, your company has to move from resource allocation to resource attraction”. Although relatively expensive, the presence of venture capital is a necessary condition for entrepreneurial start-ups in the Silicon Valley.

In February 2000, while giving an interview to The (Czech) Economist, NetBeans Director, Roman Stanek, informed them about an underdeveloped entrepreneurial ecosystem in the Czech Republic. In his opinion, venture capital was not yet sufficiently utilized, and risk was widely misunderstood here:

 

“… on the first ten pages, (good) business plans, including our own, have a list of possible risks. Only then, on the next two pages is the proper business plan presented. In the Czech Republic, we prefer to put on pink eyeglasses: everything is just a business plan, and there are no risks involved.“ (Fiala, 2000).

 

Successful venture capitalists are usually specialized in certain types of businesses. This smart money can be obtained only within the European Region, not in a country with ten million inhabitants. Financing by venture capital proceeds mostly in a few rounds. In the U.S.A., the usual volume of money invested in such a round is US$ 20 million. Due to the current exchange rates, this dollar amount represents big money in all post-Communist countries.

 

Venture Capital in the Czech IT Industry

 

NetBeans was not the first company in the Czech IT industry to be financed by Venture Capital (VC). For example in 1995, a Czech company DC Telecommunications was offered a VC financing opportunity. The CEO of the company made a few blunt public statements:

 

“Since our founding, our company has been prosperous without any foreign financial help. I can not see any reason why we should join a group of people who do not even know what telecommunications in the Czech Republic are …we can manage it ourselves … we have close collaboration with the US Hudges Network Systems”.

 

A few months later, he stated regarding VC funds:

 

“Our company has no need to be financed by any fund. We are no beggars, to be asking for money from any European fund.”

 

These strong public statements hurt the company’s future very much. Then, as it over-invested in advanced technology, and because a financially stronger competitor entered the Czech market the following year (using identical technology), DC Telecommunications was finally pushed out of the market in 1997 (Kompert, 1999).

The APP Group, a company specialized in providing information systems services, was a different case. In 1997, it signed a contract for a US$ 23 million venture capital investment with E.M. Warburg, Pincus & Company. At that time, APP Group also added several experienced, foreign managers to its executive team to help the firm with its planned rapid expansion, and relocated its headquarters to The Netherlands. (Pivoda, Mike and Hoy, 1999).

Contrary to the two above-mentioned companies, however, NetBeans offered VC investors its own innovative and world wide disseminated software product: “The Cross-Platform JAVA IDE (Integrated Development Environment)6”. The other two Czech companies only carried out the transfer of advanced technology from the West to the domestic or Eastern markets, and tailored it to the specific needs of their customers. Another Czech company - NASIT specializing in “data mining”, acquired a relatively small investment (USD$ 300 000) from a domestic VC fund in 1999 “If you start small, you will end up small” was Roman Stanek’s opinion.

1997 saw a Czech software company Illusion Softworks being financed by two VCs, The Cash Reform Group (42% ownership) and BMP (10% ownership). Illusion Softworks produced the successful strategy game Hidden and Dangerous (400 000 copies sold), a license of which was sold to the British publisher, Take 2 Interactive Europe Limited in London. Illusion Softworks and NetBeans are typical representatives of the New Economy in the Czech Republic followed by several other worthy young “dot-com” start-ups on the domestic market. Venture capital financing and a global market focus are Silicon Valley attributes.

 

 THE NETBEANS CASE STUDY

 Financing The Start-Up

 

Roman’s goal was to gradually increase the value of his company, and to bring in multi-stage financing (see the graph below). NetBeans’ selling price was never disclosed. However, in an interview for The (Czech) Economist, Roman indicated:

 

“To avoid losing control of their companies after a few rounds of financing, entrepreneurs who make use of venture capital financing could offer a maximum 20 percent ownership for US$ 20 million. If somebody offers you 20 percent ownership for a US$ 20 million investment, it means that at that moment, despite the company not yet producing anything, it has a market value of US$ 100 million.”

 

Additional investors in NetBeans were able to buy smaller ownership percentages for the same of amount of invested capital because the venture risk was gradually decreasing (see graph below).

NetBeans was founded as a shareholder company from the very beginning, and it was located in the British Virgin Islands under British Law, with only one branch, located in Prague. Due to VC financing, Roman correctly supposed frequent ownership changes might occur. Registration of NetBeans Company was sent by fax to the British Virgin Islands, and within two days, the company was in existence. This would have been impossible under existing Czech Law. Later, the company made flexible changes in the rulebook, re-dividing shares and raising equity.

Initially, Roman held the major portion of NetBeans shares despite all the first 15 employee/founders having stock options, as did early investors. All 40 employees (in 1999) had the right to stock options, though not all of them actually exploited this opportunity. It brought about strong motivation and represented a major stabilizing factor in the company‘s personnel. After the acquisition, all these shareholders became simple employees.

 

 

¡

¡

¡

Company

Value,

 

Entrepreneurial

Risk

Company Value

 

Entrepreneurial Risk

Roman

Stanek

Ester

Dyson

Other

Investors

Time,

Investment Stages

 


 

Key NetBeans Decisions

 

From the very beginning, Roman pursued his global market ambitions. His key decisions were of the “What” and ‚ “How” type.

 

The “What” Decision

 

i.e. business and product selection. In autumn 1997, Roman left a management post in Sybase Company. On the Internet, he searched for what was available. There, he noticed a www-page “The Xelfi Product” produced by five Czech students from the Faculty for Mathematics and Physics. In view of it being student’s work, the product looked quite interesting and promising to Roman. It also had many shortcomings, mainly from the marketing point of view. However, was it a viable business opportunity?

A major business advantage was a generic product; i.e. it was possible to use it without modification throughout the world. Furthermore, programmers (end-users of the product), all over the world have a tendency to create virtual communities. They could communicate mutually without any cultural or technical barriers over the Internet right from the start. Thus, promotion of the product was quite simple and inexpensive. Within a single week, 20 percent of the relevant market knew about it. After placing the product on the Internet, it was in use in about 60 countries within a short time. On top of that, none of the customers knew it was a Czech programmers´ product. They might have had the impression that they were using a product from Silicon Valley, at least during the first half year.

Unfortunately, there was also a substantial disadvantage that would prevent Roman from undertaking this business again in future. It was a one-time, unrepeatable and non-profitable business.

 

The “How” Decision

 

i.e. market strategy: To sell the product for about US$ 20,000 to a few customers or not to fix a price? The decision to provide the product free-of-charge was influenced mostly by the existence of virtual communities. The goal of the marketing strategy was to maximize dissemination of the product. Therefore, NetBeans signed a contract with a publisher in the United Kingdom to include the IDE product free-of-charge on a CD-ROM in books on Internet subjects. Via this distribution strategy, NetBeans disseminated about half a million copies of the IDE product. The first VC investor, Ester Dyson, approved this market strategy.

 

Critical Success Factors in Hindsight

 

The concept of critical success factors dates back to the 1960’s. Half a dozen really important factors should be kept under strict control, but no standard list of critical success factors for all situations was ever specified.

What are the success factor behind the NetBeans IDE product, and the company as a whole?  There are examined below.

  

A Free of Charge, High-Quality, User-Friendly Product

 

A Free of Charge Product

 

There were about 50 competitors in this business in the world when NetBeans started to develop the IDE product. The list of competitors got gradually shorter, however. Competitors were selling their products and customers were gradually loosing interest to charge things to their credit cards. On the contrary, the IDE product was available free of charge.

 

A Combination of “Technology Push” and “Market Pull”

 

The beginning of the product can be characterized as “technology push” because the product was initiated by a small group of student-technicians. For further product development, an intensive collaboration with the virtual community of programmers (end-users) was necessary. Discussion groups of potential users on the Internet were created that generated additional suggestions for product improvement, and users tested initial versions of the product (i.e. Beta testing). This represented “market pull” that added to the quality of the final product.

 

A User-Friendly Product

 

Roman set in NetBeans metrics, that the IDE product had to be able to install itself on the user computer within 3 minutes, and by using only three clicks of a computer mouse. In comparison to many others, up to hour-long installations of competing products, the IDE product was really something new. At the beginning, Roman‘s colleagues had a different opinion on such strictly imposed criterions; however, Roman persuaded them that the human attention span did not last longer than five minutes. These five minutes were to be spent maximizing the customer’s favorable impression.

 

Effective Communication with Potential Customers

 

Rules of communication with potential customers were codified. A five-minute maximum response time, 24 hours a day was set. Every potential customer received a letter that was always signed by somebody from NetBeans. The customer might gain an impression of the personal touch even though many times, an e-mail answer was simply generated by computer. The feeling of the personal contact was maintained even when the community grew up to 100,000 members. NetBeans never asked about customer’s credit cards, but about their jobs and their interest in the IDE product. All this was something new, and it represented an innovation in Internet business communication.

In general, NetBeans took special care of its virtual community; it tried to create a pleasant experience for its members. For this purpose, NetBeans hired additional employees. The virtual community grew itself without any additional promotional expenditure. There was to be an easy entry into the community while the exit was to be more complicated.

 

Job Performance and Efficiency

 

Roman was interested in high job performance by his colleagues. A small team of highly motivated people could be more effective than a large group of programmers. As a standard in NetBeans, people worked more than 12 hours a day. If people were in the company, they got food and drink gratis (typically pizza and Coca-Cola), and also some other services. A Ping-Pong table was installed in a large room on the premises, so those employees could get rid of work-related-stress by physical exercise. Often, people went home after midnight; sometimes they even slept on-site and worked through the weekends.

At the same time, the company advanced very efficiently. Besides one old car used for transporting computers, the firm had no company car. Furniture and computers were obtained cheaply second hand. Only Roman had a mobile phone, so as to be accessible at all times. Instead of salaries, people received shares. It resembled the working style of start-ups like Apple Computers or Microsoft.

 

Why Just NetBeans?

 

Top management of Sun Microsystems knew that in Prague, they could get high-qualified people at a relatively low price. It was the time difference of 8 hours between Prague and Silicon Valley that could cause more potential problems than the location in a post-communist country. At the beginning of 2000, acquisition of NetBeans was considered as a great success by the Sun Microsystems’ top managers.

 

What Would Follow?

 

The Prague branch of Sun Microsystems was to be enlarged by 80 employees, and there were plans to continue in the further development of the IDE product. From a longer-termed perspective, Roman wanted to create a large Technological Center in Prague: “There will be many people who will know how a leading American company works, they will travel, they will learn about development trends. Gradually, some of them may become entrepreneurs who will start with quite different initial experiences (than the rest of the Czech population).”

 

 

 CONCLUSIONS

 

 Does the Silicon Valley Concept Work in the Czech Republic?

 

The Silicon Valley concept has never worked in the Czech Republic itself. Of course, the domestic pool of creative, educated, and highly motivated7 technical people has always been here. As an organization however, NetBeans had to locate itself in the British Virgin Islands to become more flexible. Venture capital was obtained from the U.S.A., and customers throughout the world. Only this clever combination of factors, enabled Silicon Valley type results being reached in the Czech Republic. Since November 1989, there has never been a completely pro-innovative environment here. In this form of combination, lies the answer for the future: The Internet and internationalization represent a new competitive dimension, and it is now available practically to one and all.

Not only post-communist countries have an insufficient pro-innovative environment. The strong Germany economy has had problems in developing radical innovations at home as well. For example BASF and Hoechst conducted their research programs in their U.S. subsidiaries (Porter, 1990). For Siemens, it would be easier to acquire a new branch in Silicon Valley, rather than to try to reorganize one in Germany (Kogut, 1999).

 

The Brain Drain Implications?

 

A few hundred Czechs are already working in Silicon Valley itself. Sun Microsystems has decided to locate a branch in the Czech Republic. New work permits for 30,000 foreign workers from Eastern Europe and India (mainly programmers, systems analysts, web designers, and database specialists) was approved by the German Parliament in March 2,000. There was an assumption that due to favorable exchange rates, an obvious brain drain to Germany would surely follow. A year later in the Czech Republic, however, only a small number of such cases were reported.

From a static, short-term viewpoint, the brain drain might be interpreted as a disadvantage for the Czech economy. From the long-term (dynamic) perspective however, and according to M. E. Porter’s Competitive Advantage of Nations conclusions (Porter, 1990), this static disadvantage might be turned into an advantage in the future. The Czechs might gain badly needed foreign experience, market orientation, and thus become more competitive. Only then would more companies like NetBeans appear in the Czech Republic.

 

The New and Old Economies

 

Should we have more companies like NetBeans in the Czech Republic, just like in the U.S.A., we would not expect the Silicon Valley concept to prevail in all industries and all companies. The concept of the new economy probably will not completely replace but only to complement the existing economy.

 

Possible Solutions: Fostering Innovation Culture

 

Governmental Level

 

On 5 January 2000, the Czech Government stated its National Policy for R&D. It has been decided that the percentage of the GNP devoted to R&D could gradually be increased from 0.5 percent in 1999 to the targeting 0.7 percent over the following three years. The acceptance of the EU´s laws and standards (which are more sophisticated than the Czech ones) could speed up introduction of a generally pro-innovative environment in the economy. It has been possible to see a positive development here over the past year, however. The media has re-iterated, that it was in the proper interest of the Czech people to accept and fully implement EU legislature, even if the Czech Republic were not to join the EU in the near future.

 

Corporate Level

 

American innovative companies like 3M or Thermo Electron may serve as useful role models for Czech companies, showing how to organize for an internal innovative environment. Such cases are known, however, there has not been enough willingness to listen, let alone to act upon such knowledge. There are no quick solutions on the horizon for established Czech companies. Start-ups have higher chances to learn, innovate and succeed.

Business ethics is another hard topic to be solved in the short term. Readers cannot expect to find a panacea in this article. Simply recommending business ethics courses, represent a naive approach that has already been unsuccessfully tested in the Czech Republic. It is not the only country to fail at this. It is said that the Harvard Business School received USD 2 million, for the preparation of a business ethics course a decade ago. After spending ten percent, the rest of the amount was returned to the donor. The influencing of business ethics simply by means of a university level course only, remains a fiction because human being’s value systems are formed much earlier than when students enter the university environment. We are however morally obliged to try to do something, if only in this way, and we shall.

 

Professional Level

 

Here, university level courses have a much higher probability of success. For example, “Innovative Entrepreneurship” subjects have been gradually tested and introduced at Czech universities. An initiative by the Association for Innovative Entrepreneurship was organized to write a collective book on the subject, and awards for “The Innovation of the Year” were started a few years ago. TV series on successful Czech innovators have been produced and widely broadcast. A pride in innovation must ultimately win-out.

 

 

FOOTNOTE

 

[1]        To be precise about the perception of “real” capitalism as perceived in a post-communist country: President Vaclav Havel coined  the name “mafia capitalism” for the Czech economy and society in March 2000. A heated debate followed in the media about the relevance of the term. Over one half of the Czech population expressed their true conviction about a penetration of collusive behavior (the so called mafia) into the Czech political life and economy.

 

2        In May 2000, the OECD economic prognosis stated: “The Czech economic crisis has ended, you can expect modest growth”. Actual GDP growth in 2000 was 3.1 percent. In April 2000, the IMD placed the Czech economy 37th in the world in competitiveness. From 8 partial criteria, Czech management had the worst rating.

 

3        Another difference between the two nations is Poles’ stronger identification with their State and Nation.

 

4        The slow response of business schools to changing market conditions may, however, be general throughout the world. viz. A recent note by the distinguished specialist on discontinuous innovation, C. M. Christensen: “Medical and business schools are struggling – and failing – to change their curricula fast enough to train the types of doctors and health managers their markets need (Christensen-Overdorf, 2000).

 

5        No new political party has been established, however. Another group of people planned to establish a new party in summer 2001.

 

6        The product was designed to increase programmer’s productivity when creating Internet applications by means of the JAVA programming language. IDE represented a set of tools: a visual design of user interface, a tool for error identification, a tool for monitoring the relationship between individual programs, etc.

 

7        These people may represent at most 20 percent of the Czech population, however. In May 2000, the STEM survey proved a stable values system: 80 percent of the Czech population prefer life without risk and tension, 68 percent want to devote their life to family and children (The People’s Newspaper, 2000).

 

 

REFERENCES

 

Czech Industrial Property Office (1998). Annual Report of The Industrial Property Office of The Czech Republic. pp. 24.

Christensen, C. M. (2000) – Overdorf, M.: Meeting The Challenge Of Disruptive Change. Harvard Business Review, pp. 67-76, March-April.

Fiala, Z. (2000). Smart People And Smart Money Are More Needed Than An E-Signature. The (Czech) Economist, 7: 11-13.

ETS, (2000). Functional Literacy (Preliminary results). ETS Princeton, Canada.

Hamel, G. (1999). Bringing Silicon Valley Inside. Harvard Business Review, pp. 71-84, September-October.

Kogut, B. (1999). What Makes a Company Global? (Review of “The Myth of the Global Corporation by Doremus, P. N. et al, Princeton University Press, 1998). Harvard Business Review, pp. 165-170, January-February.

Kompert, Z. (1999). A Radical Way of Increasing Efficiency of DC Telecommunications. Bc. Thesis. Social Economic Faculty, University of J. E. Purkyne in Usti n. L.

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