Globalization of the Silicon Valley Ecosystem

AnnaLee Saxenian

UC Berkeley School of Information

TRIPLE HELIX IX CONFERENCE

Palo Alto, July 11-14 2011

Today’s plan:Research findingso From self-sufficient corporations to

specialists and regional ecosystems

o Local and global networks support innovative recombination

Policy lessonso There is no recipe for growth o Compete by differentiatingo Create global search networkso Monitor progress closely

20th century company

Hierarchy Vertical

integrationLong term

planningInternal job

laddersCorporate

secrecy & loyalty

20th century innovation: R&D lab

Regional ecosystem advantage

Vertical unbundlingMinimal hierarchyOpen boundaries:

education & industry

“Job hopping”ExperimentationLearning via failure

SMEs dominate in Silicon ValleyOver 29,000 companies started in 1990s; one-quarter have 5 or more employees, most have 1-4

Local networks as coordination

Venture capital networksProfessional and technical networks

◦Alumni networks◦Ethnic associations

Informal social networks

Growth via innovative recombination

1960 1950 1970 1980 20001990

Internet, Ecommerce

Personal computer

Integrated Circuit

Defense

Value added

2010

Cloud, Web & Mobile apps

Silicon Valley --technology evolution

Global competitive environment

Information technology revolution means:1. Dramatic increase in potential solutions

to problems – end of fixed technology trajectories

2. Innovative solutions can come from anywhere

Rise of global supply

chains

New regions link to global value chainsDiaspora as a

powerful global search

network

Diaspora networks in former “periphery” scan globally for partners and solutions –link into global value chains

Not replicas, more like extensions of Silicon Valley ecosystemThe New Argonauts

Global supply chain: iPad

Today’s plan:Research findingso From self-sufficient corporations

to specialists and regional ecosystems

o Local and global networks support innovative recombination

Policy lessonso There is no recipe for growth o Compete by differentiatingo Create global search networkso Monitor progress closely

Lesson 1. There is no recipe

Recipes

Recipe 1. “Growing Silicon Valley”

Ingredients:Technology parkUniversity researchVenture capitalLots of engineersIncubatoretc.

Recipe 2. Perfect “free” markets

Remove trade barriersMinimize regulationPrivatize state-owned businessesMacro-balance: “get prices right”Protect property rights

Recipe 3. Invest in national model

Create post-national “champions” Target investment in leading firm(s)Fund strategic sectors in isolation

Lesson 2. Partner to differentiate. . . and lower costs later

Cost-cutting doesn’t offer sustainable advantage and undermines regional ecosystem

Identify distinctive local strengths

Build partnerships in order to: • Identify unique local capacities

and promising markets • Explore new market

opportunities

Public-privatepartnerships

Invest in local capacity-building

o Invest to build local capacities e.g. Training, technical assistance,

education, standard setting, research, export promotion, etc.

o Experiment and seek feedback o Aggregate lessons

Agricultural extension as model

Lesson 3. Create global search networksDiaspora as a powerful global search

network

The New Argonauts

Bangalore, India

Tel Aviv, Israel

Diaspora and innovative search

Help define appropriate policyLink to distant customers and partnersTransfer global “best practice”Broker technology or institutional

adoption

Taiwan in 1960s &1970s

Poor GDP per cap < $2,500Minister of Industry consults with

Overseas Chinese in Silicon ValleyExecutive Yuan creates STAG - Science &

Technology Advisory Group which includes special overseas advisors

=> Major investments in higher education,

=> Establish ITRI, public-private industrial research organization

Learning from global best practice

Ministry of Economy establishes venture capital industry

STAG helps overcome political opposition from established interests

Overseas Chinese set up first venture funds in 1985

From SV imitator to SV partner

1980s- Reverse engineer and clone PC & Mac

1990s- Entrepreneurship, stock market boom

2000s- Leads global IT manufacturing ◦ Perfects flexible, high quality, low cost

systems◦ Pioneers and dominates silicon foundry

business

10,000 electronics-related firms

The SV-Hsinchu-Shanghai network

Ireland: Inward FDI as a search network

Lesson 4. Monitor long term progress

Set measurable goals, assess progress often

Identify & address obstacles to further growth

Adjust based on results and iterateDevelop institutions to sustain external

search Taiwan’sElectronicsProduction2005-2010

Incremental upgrading via specialization, collaboration, recombination: local and global —cumulates to sustained growth

Key: Continuous monitoring and adaptation

Requires time and patience!!

Goal is sustained innovation and growth

Questions and comments

Professor AnnaLee Saxenian anno@ischool.berkeley.edu