Silicon Valley's Lead

by Shane Mahoney


In 1994, AnnaLee Saxenian, a Berkeley professor, published Regional Advantage, a comparative study of economic development in the Silicon Valley and the Route 128 corridor in Massachusetts. Her findings are most intriguing and may have application to the Spokane area.


In general, Saxenian concludes that the key factor in regional economic development is culture. An intellectually inquisitive, open, industry-university culture in the Silicon Valley has permitted it to flourish, reinventing itself with new ideas, products and start-up companies through the normal business cycles. On the other hand, the culture of the Route 128 region tends to be one of closed, vertically integrated organizations that are information- and product-protective and tend to interact poorly with one another. From Saxenian's point of view, Massachusetts needs to learn from the Silicon Valley; perhaps Spokane does as well.


What would the central lessons be? Saxenian's examination of development factors in the Silicon Valley underscores the critical importance of spontaneity. Regional economic development in the Silicon Valley is not the outgrowth of planned, government-sponsored business initiatives. Nor does it flow from university curricula that are technical in nature. Rather, it is primarily sparked by the formal and informal interaction of bright, university research faculty with one another and with industrial product designers, engineers and managers in the region. Naturally, as this process evolves, interaction with vocational training schools is important in order to assist with the supply of a capable work force. But the process does not begin there. Nor should it include government-sponsored bets on particular products.


The implications for Spokane seem clear. More investment in vocational training is not the place to begin. A well-developed community college system stands ready to train the work force. Adding to this sort of regional capability merely detracts from needed investment elsewhere. It is the substantial presence of a committed, engaged and accomplished research faculty that is absent. Without such people, no amount of entrepreneurial capital, trained work force or targeted, government-sponsored initiative will permit the sort of ongoing development and redevelopment that sustained economic growth requires. Massachusetts, with its long history of defense-related companies, proprietary products and government investment, has been unable to transform itself successfully into an ongoing, self-sustained, growth economy. As it turns out, the so-called "Massachusetts Miracle" became a very ordinary failure -- while the Silicon Valley has recreated itself in the face of a variety of challenges.


Observers will be quick to note that Massachusetts is certainly not lacking in research universities and accomplished faculty. True -- and this draws attention to the second important lesson. While the intellectual-development culture of Silicon Valley tends to be open, that of Massachusetts is closed by comparison. Spontaneous interaction among companies themselves and with university research faculty is poor. Organizations are vertically integrated and not open to horizontal interactions with one another or with university research faculty. In fact, a recent study in the Boston area reports that MIT's innovative work, rather than being developed locally, now tends to flow to Silicon Valley.


The reasons for this cultural attitude seem varied, partially the result of traditional management systems in New England's past and partially attributable to the heavy involvement with classified, defense-related hardware development. In any case, the consequence of such an outlook is a corporate attitude that seeks advantage through product protection. It results in industrial organizations that are closed to innovation.


Finally, Saxenian's study draws attention to the importance of regional politics. While the product aspect of economic development is largely the responsibility of those with expertise in the physical sciences and the availability of risk-inclined, entrepreneurial capital, social and political expertise is essential for putting into place the public policies that help to sustain an economy. This would include intelligently designed and well-funded systems of education, especially research-oriented higher education. It would also incorporate progressive systems of taxation, well-developed public transportation, sophisticated communications networks and publicly supported colloquies.


In all of this, from Saxenian's point of view, government wisely avoids involvement in so-called product development partnerships. As she notes, "It is notoriously difficult for public officials, with or without the collaboration of business, to 'pick winners' and effectively concentrate national resources on future technologies." Instead, those public officials interested in regional development should encourage and promote the decentralized and spontaneous networks that permit an open flow of ideas and information.


When it comes to Spokane, Saxenian's study doesn't absolutely prove anything. For Saxenian, even with respect to the Silicon Valley and Massachusetts, may be wrong. Or there may be something about Spokane that precludes transferring her conclusions into this region. On the other hand, if Saxenian is correct, then the issues her study raises deserve our local attention. If the Silicon Valley constitutes a fundamental model for regional economic development, then it would not be difficult to assemble a list of things this region is doing wrong, funding that is being badly spent and opportunity costs that are unacceptable. And it would be equally easy to point to a host of public and private initiatives that deserve action. At the very least, Saxenian's findings seem worthy of both public and private discussion in this region.





Shane Mahoney is a professor of government at Eastern Washington University.