A Fluke or a Formula? : Silicon Valley Thrives, but Can It Last--and Can Others Follow?

Not long ago, people always talked about Route 128 in Massachusetts and California’s Silicon Valley in the same breath. Both were virgin territory on the frontier of computer technology, near sources of capital both financial and intellectual.

That’s not true anymore. Silicon Valley, the strip of sunshine north of San Jose, has badly eclipsed its forested eastern counterpart. Silicon Valley companies such as Apple Computer and Intel are thriving, while Massachusetts computer concerns such as Wang and Digital Equipment Corp. are in trouble.

The employment figures paint a stark picture. In 1959, Silicon Valley high-tech employment was 58% of that along Route 128. Thirty years later, it was 158%.

In the world of computers, Silicon Valley is more than ever where the action is. Why that appears to be the case, and whether the circumstances that make it so can be duplicated elsewhere, are crucial questions for the future of the California economy.

Unfortunately, the answers don’t suggest that it will be easy to cover the landscape with Arugula Valleys, Fiber Optic Dells and Intravenous Plains. Moreover, the success of Silicon Valley and the flagging of Route 128 raise scary questions about the natural life span of any region that appears built around a given technology.

The differences between Silicon Valley and Route 128 are explored in fascinating research by AnnaLee Saxenian, a professor of city and regional planning at UC Berkeley. She has spent a decade studying the two cradles of American high technology and will publish her findings in a book early next year.

According to Saxenian, the key to Silicon Valley’s success is quite simply the way the place is organized.

“Silicon Valley has a decentralized, network-based industrial system that has allowed its producers to adjust more successfully to fast-changing markets and technologies than Route 128,” he says.

Silicon Valley firms tend to be highly specialized, she found, and adroitly balance competition and cooperation, fostering reciprocal innovation by forming useful alliances with one another. Saxenian cites cooperation between Hewlett-Packard and Weitek Corp. in making a new math co-processor--an add-on chip--for desktop computers. H-P supplied its state-of-the-art chip making facilities and Weitek provided the design. Saxenian says H-P uses the chip in its workstations and Weitek sells it elsewhere--even to H-P rivals.

The result of such deals is a thriving industrial infrastructure in which firms spring up to design and manufacture chips, hard drives and other computer parts.

Saxenian also says that in Silicon Valley, taking risks is a way of life. Entrepreneurs are revered, people like start-ups, and no stigma is attached to failure. The culture shuns fancy offices, executive dining rooms and other corporate hocus-pocus in favor of innovation, flexibility and what you know, not what you wear.

Saxenian reports that Silicon Valley engineers share information remarkably freely, and their loyalty is often to the technology rather than the firm. People think nothing of changing jobs often, with the result that skills and knowledge, the lifeblood of the Valley, are constantly circulating.

Route 128 firms, by contrast, are more rigid, more vertically integrated and more traditional, Saxenian found. People stay put longer, and those who leave are treated as pariahs. Saxenian herself dressed up when visiting Massachusetts firms.

Apparently, even geography counts. Silicon Valley firms are packed in the small space between Palo Alto and San Jose, promoting chance encounters and casual get-togethers. Sports clubs and the like abound. Route 128 firms, on the other hand, are scattered across a much larger area.

John Ison, a marketing specialist at Silicon Graphics who has also worked in Massachusetts, says Route 128 companies are much more hierarchical and secretive, perhaps reflecting the defense contracts that many of them grew up on. In Silicon Valley, he says, people act more like hobbyists.

Gordon Bell, a Los Altos-based consultant who headed computer design at Digital Equipment, says another big difference is the universities. He says Stanford and Berkeley have much more interaction with the industry than do MIT and Harvard.

Silicon Valley and Route 128 aren’t the only regions where a technology and a locale have come together to produce innovation and prosperity. Hollywood--a state of mind that stretches from Burbank to Century City--has the same role in movies and television. Ditto Detroit in autos.

But what happens when the technology becomes passe? Massachusetts was the cradle of the minicomputer--big, expensive machines somewhere between a mainframe and a PC. As desktop machines continue to make quantum leaps in power, the future of the larger computers pioneered along Route 128 looks bleaker.

It’s an old story. Paterson, N.J., was once a crucible of textile manufacturing. The Monongahela Valley near Pittsburgh was the place for steel. Both places are technological orphans now.

Will the same happen someday to Silicon Valley? Intel is there, but Microsoft and Nintendo are in the Seattle area. More and more software is coming out of Utah. Can the Valley’s adaptable style save it from obsolescence?

Just as important, can California replicate Silicon Valley’s success? Not exactly, but Saxenian figures that you can create the right conditions. She urges backing for industrial extension programs, training, applied research and forums that promote joint learning among firms. And universities have to get more involved.

It might work. But aside from Paterson, which was Alexander Hamilton’s idea, it is hard to think of an instance in which something like Silicon Valley has been willed. And unfortunately, costs in California today are such that it is hard to imagine it happening here again.

Of course, the way home prices are going, that may not be a problem forever.

Silicon Valley vs. Route 128

Venture capital investing during the 1980s tells the story. It’s one way California’s technology corridor has far outstripped its Massachusetts counterpart.

Source: AnnaLee Saxenian and Venture Capital Journal