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Regional Advantage: Culture and Competition in Silicon Valley and Route 128 – AnnaLee Saxenian

The topic of the book is apparently about the factors that lead two competing industrial clusters to greatly different outcomes and evolutions. It is hence focused on business and competition, but (indirectly?) it is also about innovation: Silicon Valley is one of the more innovative cluster in the world and the factors responsible for its success are automatically strongly tied to the process of innovation. The great finding of the book is that innovation (and adaptation to market, but this is of minor importance for us) strongly depends on culture and social environment.

The story in this book is about the two biggest electronic and ICT industrial regions in USA, Silicon Valley and Route 128, from their beginnings to the first years of ‘90s. The author describes their development (increasingly successful for Silicon Valley, declining for Route 128) using a deep investigation and face-to-face interviews with primary actors. As I already wrote, the difference between success or failure depended on culture and social environment. This marks a very distinctive point in respect to the studies of innovation from a “national” point of view, like Nelson did in the famous “National Innovation Systems. A Comparative Analysis” ( Oxford University Press, 1993), in fact Silicon Valley and Route 128 are part of the same “national system” but they regional differences make them having different evolutions. The same can be said about those “sectoral” approaches that study how some sectors react, adapt and innovate better than other because of their structure and organization: here both regions belong to the same sector but adapt very differently.

The resulting picture is absolutely not obvious and clearly defines the reasons for the rise of Silicon Valley as a global leader in ICT innovation and for the wane of Route 128. Some of them are:

  • For both, a kickstart backed by big government investments for defense and aereospatial sector: lot of funds in 50’s and 60’s with a relatively low degree of market competition, this helped their beginning
  • For Silicon Valley a strictly interdependence between Stanford University and local companies even in the early days when those companies were not the most affirmed ones, and impulse from Stanford University to promote the creation of new companies, VS for Route 128 the preference by MIT of favouring relationship with big and affirmed companies
  • in Silicon Valley an attitude to accept risks, vs. Route 128’s attitude of seeking stability
  • a network structure of firms interdependence in Silicon Valley (and venture capitalists acting as hubs connecting different firms for business and services) vs firms independence and strong vertical integration in Route 128
  • openness and collaboration between competing firms in Silicon Valley, and informal exchange of information between people that brought to spillover of knowledge. VS closure and secrecy for Route 128’s firms
  • High job mobility in Silicon Valley that spread new knowledge: moving to another firm was not seen as being unfaithful but as a common thing. New companies made to develop projects that were not possible in other companies: employees that exited to create startups were not badly considered but instead their previous employer could start to be client or supplier of the new firm . VS in Route 128 people stayed in the same firm for 20 years or more and employees were seen as traitors if they exited to start their own company.
  • basically two very different cultures in the two regions: the successful one (Silicon Valley) was open, permeable, and collaborative, with the firms bounds not well defined and workforce able to find new employment quickly: in these environment firms were able to learn collectively and exchange know-how, they were able to well adapt to changes in the market. Route 128 on the contrary had more “traditional” culture not oriented towards collaboration and networking but instead inspired by neat bounds, independence and strict hierarchy.

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