Peter is chair of the graduate computer science and mathematics department at Rivier College in New Hampshire. He can be contacted at pvarhol@mighty.riv.edu.
When I started reading Regional Advantage, I was inclined to go along with Annalee Saxenian's view that the all-too-obvious differences in culture and attitude between the people inhabiting Route 128 in Massachusetts and California's Silicon Valley have resulted in different business models and different reactions to changing technologies. Further, she claims, the Silicon Valley culture and approach to high technology have made it more adaptable to change and less prone to economic downturns.
As with most books dealing with the history of high technology in the U.S., Saxenian (who, as a professor of city and regional planning at the University of California at Berkeley, has close ties to the Silicon Valley) traces the development of both Route 128 and Silicon Valley to defense dollars from as far back as World War II. The difference was that Route 128 (which as a highway did not even exist at the time) was the R&D Establishment, accounting for one-third of all defense R&D dollars spent. As a result, Route 128 companies came to depend upon bureaucracies such as the Federal Government, while Silicon Valley firms had to depend on one another. This dependence on Federal money made Route 128 firms big and slow-moving. Winning lucrative government contracts, therefore, became a part of the prevailing mindset, instead of scraping together a few thousand to work in an old mill with a few friends to develop a new product.
Dependence upon government grants and contracts clearly prevents companies from developing the infrastructure and attitudes necessary to effectively compete in commercial markets. Doing business with the Federal government requires a certain mindset, and a certain set of business systems that are not easily transferable to commercial activities, especially in high technology. For example, "marketing" in the world of government contracting more often than not means hiring an insider to make contacts in the maze of government agencies so that your company becomes a known quantity. This is so unlike commercial marketing as to be laughable.
Then there is the regional culture. Leaving your employer in Route 128 is a traumatic event, according to Saxenian, and don't expect to ever be invited back. I've known people in new jobs who were told they were not permitted to talk to friends at a former employer. In Silicon Valley, however, would-be entrepreneurs often maintain close relationships with old employers and may even have a standing offer to return if things don't work out. In Route 128, such a person quickly becomes a nonentity.
Most people I encounter in New England are intensely loyal to their employers, and the way to become successful in New England is to rise to the top of an established company. Northern Californians, in contrast, appear to be far more likely to pursue innovations outside of their existing companies. New Englanders attempt to sell innovations within the system, if at all. This leads to less stable companies in California, but arguably more vitality.
It is difficult to pin down reasons for these cultural differences. For instance, one person I consulted thought that the climate might influence regional culture. New England winters, he claimed, will make anyone conservative, because if you lose your shirt, you can't heat your home next winter. From more of a business perspective, the culture of the small, high-tech startup-made-good also leads to the greater availability of venture capital, since successful entrepreneurs are likely to risk funding those like themselves. In New England, venture capital for computer startups is virtually nonexistent, because the old money in the region values tradition, which is primarily geared to capital preservation.
Saxenian goes on to make some interesting observations regarding corporate organization in the two regions. Route 128 companies, she claims, tend to be vertically integrated, performing virtually all engineering and support functions in-house. Silicon Valley companies tend to be smaller and more specialized, and need one another to produce a product. The relationships between supplier and customer during product design and development are intimate, even though the same firms may be competitors on other product lines, or on similar products in the future.
Her obvious example in New England is Digital Equipment Corp., which at one time made virtually every component for virtually all of their systems. To many, it was heresy when the company adopted, however briefly, the MIPS processors for its first RISC systems. Because of DEC's early success, other startups had to emulate its business model to look respectable, and the capital investment needed to do so probably discouraged many would-be entrepreneurs.
This is like beating a dead horse, however. For better or worse, DEC, the region's largest employer, had a profound influence on the area's attitudes towards high technology. Virtually everyone I knew (including myself, in my younger days) wanted to work for DEC, because the company had the best of everything. Now, the firm is simply irrelevant. Most of the bright people I know don't even consider DEC to be a part of the computer industry today.
I finished reading Regional Advantage with a sense of disappointment. Social scientists are good at explaining what has already happened, but their analyses rarely have predictive power. I couldn't get over the feeling that, were circumstances different, the argument could be made in the other direction just as convincingly. Consider this fictional version:
Vertical integration was the key to success in Route 128. Silicon Valley, with small, specialized companies, became too narrowly focused, and failed to see the overall technological landscape. The too-easy flow of information reduced competitive advantage_.
Furthermore, Saxenian is an unabashed cheerleader of Silicon Valley. She ignores or glosses over some of the very real disadvantages of doing business in Silicon Valley, such as crowded highways, high taxes, and cost of living (not to mention the certainty of earthquakes). Because of issues such as these, high-technology enterprises are moving out of Silicon Valley, and even out of the state, to emerging technology meccas such as Boise, Salt Lake City, and Phoenix. The litany of praise for the Silicon Valley ways of doing business gets tiresome after a while.
There is also an underlying spirit of entrepreneurism in New England that Saxenian does not even seem to be aware of. It is more of an underground culture, less out in the open, and it perhaps does not get the same respect as the analogous culture in Silicon Valley. Within a stone's throw of my backyard, the success of once-startup companies such as Cabletron, Softdesk, and Serif offer proof that New England entrepreneurs can and do succeed. Mostly, these people are looking for ways to communicate with one another, because in one way Saxenian is right. There is no well-known pub, or restaurant, or informal professional organization in the Route 128 area, where techies can gather to exchange ideas or enthusiasm.
Nevertheless, Saxenian does say some important things concerning the relationship between regional culture and economic vitality. Does the regional culture play a role in the development of business models, and do these business models influence the economic vitality of the region? Probably. Does the Route 128 region have cultural characteristics that inhibit high-technology development? More than likely. Can we do anything about it? I suspect not. Indeed, her conclusion, that government institutions cannot produce or manage, but can contribute to technological vitality, is mild and reasoned.
I suspect we can do even less than Saxenian thinks. As individuals, we can't look in the mirror in the morning and say, "Today I'm going to become an entrepreneur." Either we naturally feel comfortable in that role or we don't. The same holds true at the institutional level; it takes an upheaval of monumental proportions for an established company (or government bureaucracy) to accept constant change as the norm. More often they don't, and simply fail.
But the ambitious goal of a book such as Regional Advantage, as stated by Saxenian herself, is to define and explain a formula for continued regional excellence in high technology. In other words, the positive lessons of Silicon Valley, and the negative lessons of Route 128, can be applied to any region. I remain unconvinced that Regional Advantage accomplished this goal, and whether this goal is even attainable.
Copyright © 1995, Dr. Dobb's Journal