1. Globalization of the Silicon Valley Ecosystem AnnaLee Saxenian UC Berkeley School of Information TRIPLE HELIX IX CONFERENCE Palo Alto, July 11-14 2011

2. Today’s plan: Research findings o From self-sufficient corporations to specialists and regional ecosystems o Local and global networks support innovative recombination Policy lessons o There is no recipe for growth o Compete by differentiating o Create global search networks o Monitor progress closely

3. 20th century company 20 th century company Hierarchy Vertical integration Long term planning Internal job ladders Corporate secrecy & loyalty

4. 20 th century innovation: R&D lab 20 th century innovation: R&D lab

5. Regional ecosystem advantage Vertical unbundling Minimal hierarchy Open boundaries: education & industry “Job hopping” Experimentation Learning via failure

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

7. Local networks as coordination Local networks as coordination Venture capital networks Professional and technical networks ◦ Alumni networks ◦ Ethnic associations Informal social networks

8. Growth via innovative recombination 1960 1950 1970198020001990 Internet, Ecommerce Personal computer Integrated Circuit Defense Value added 2010 Cloud, Web & Mobile apps Silicon Valley -- technology evolution

9. 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

10. New regions link to global value chains New regions link to global value chains Diaspora 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 ecosystem The New Argonauts

11. Global supply chain: iPad

12. Today’s plan: Research findings o From self-sufficient corporations to specialists and regional ecosystems o Local and global networks support innovative recombination Policy lessons o There is no recipe for growth o Compete by differentiating o Create global search networks o Monitor progress closely

13. Lesson 1. There is no recipe Lesson 1. There is no recipe Recipes

14. Recipe 1. “Growing Silicon Valley” Ingredients: Technology park University research Venture capital Lots of engineers Incubator etc.

15. Recipe 2. Perfect “free” markets Remove trade barriers Minimize regulation Privatize state-owned businesses Macro-balance: “get prices right” Protect property rights

16. Recipe 3. Invest in national model Recipe 3. Invest in national model Create post-national “champions” Target investment in leading firm(s) Fund strategic sectors in isolation

17. Lesson 2. Partner to differentiate... and lower costs later Cost-cutting doesn’t offer sustainable advantage and undermines regional ecosystem

18. Identify distinctive local strengths Identify distinctive local strengths Build partnerships in order to: Identify unique local capacities and promising markets Explore new market opportunities Public-private partnerships

19. 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

20. Lesson 3. Create global search networks Diaspora as a powerful global search network The New Argonauts Bangalore, India Tel Aviv, Israel

21. Diaspora and innovative search Diaspora and innovative search Help define appropriate policy Link to distant customers and partners Transfer global “best practice” Broker technology or institutional adoption

22. Taiwan in 1960s &1970s Poor GDP per cap < $2,500 Minister of Industry consults with Overseas Chinese in Silicon Valley Executive Yuan creates STAG - Science & Technology Advisory Group which includes special overseas advisors => Major investments in higher education, => Establish ITRI, public-private industrial research organization

23. 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

24. 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

25. The SV-Hsinchu-Shanghai network The SV-Hsinchu-Shanghai network

26. Ireland: Inward FDI as a search network Ireland: Inward FDI as a search network

27. Lesson 4. Monitor long term progress Set measurable goals, assess progress often Identify & address obstacles to further growth Adjust based on results and iterate Develop institutions to sustain external search Taiwan’s Electronics Production 2005-2010

28. 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

29. Questions and comments Questions and comments Professor AnnaLee Saxenian anno@ischool.berkeley.edu