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A New Silicon Valley ? The State Vs Spontaneous Order

A New Silicon Valley ? The State Vs Spontaneous Order. Pierre Desrochers University of Toronto - Geography. Overview. Introduction 1) Geography & Economic Development 2) Silicon Valley & Clusters - SV: Facts & Myths - Replicating SV & Creating Clusters

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A New Silicon Valley ? The State Vs Spontaneous Order

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  1. A New SiliconValley?The State Vs Spontaneous Order Pierre Desrochers University of Toronto - Geography

  2. Overview Introduction 1) Geography & Economic Development 2) Silicon Valley & Clusters - SV: Facts & Myths - Replicating SV & Creating Clusters 3) Case against Regional Economic Specialization Conclusion

  3. Introduction

  4. But Success? What do we Know? First, back to the basics of regional economic development…

  5. 1. Geography & Economic Development Economic Activity in a Spiky World (Florida et al.)

  6. Nordhaus et al. Canada

  7. USA

  8. France

  9. Russia

  10. India

  11. Japan

  12. Key Point: Cities ~ EconomicDevelopment SCHEDEL, Hartmann , Nuremberg, 1493

  13. Why (large & diversified) Cities? • Conventional explanations: • Trade (marketplace) • Urbanization economies Towns = crossroads

  14. Élisée Reclus(1895) « Wherethereis city growth, humanity moves forward…; Where they flounder, civilization itself is in danger. »

  15. InternalSpecializations

  16. Birmingham (UK)

  17. 1990s

  18. Alfred Marshall, Principles of Economics(1890) “In Russia… there are an immense number of villages each of which carries on only one branch of production, or even only a part of one.”

  19. Russialate 19th C (Marshall) « There are for instance over 500 villages devoted to various branches of woodwork; one village makesnothing but spokes for the wheels of vehicles; anothernothing but the bodies and so on; and indications of a like state of things are found in • histories of oriental civilizations • chronicles of medieval Europe »

  20. Why Industrial Specialization? Combination of factors • specialized labour pool • localized economies of scale (specialized suppliers & infrastructure) • knowledgespillovers • research institutions

  21. Academic Understanding & Policy:Problems • Chicken (cities/clusters) or Egg (economic development)? • Tautology (cities/clusters & agglomeration economies) • Proximity & smart people (and then what?)

  22. « Local DevelopmentPolicies » • State Vs Markets: • Decades of experience(s) • What have welearned?

  23. 2. SiliconValley& Clusters

  24. Silicon Valley

  25. Facts Earlydecades 20th C: • San Francisco - radio technology & maritime hub; • Local businesses: Federal Telegraph (1909), Magnovox (1917), Heintz & Kaufman (1921), Kolster Radio Corp (1928), Litton Engineering Laboratories (1932), Eitel & McCullough (1934) Mid 20th C: • Cluster of vacuum tube manufacturers • Stanford U & Frederic Terman • Bill Shockley& transistors (left Bell Lab NJ for Palo Alto – family & business (« buzz ») reasons • Spin-offs: « TraitorousEight » - Fairchildsemiconductors • « Fairchildren » and others: Intel, H-P, Apple…

  26. Uniqueness of SiliconValley? Growthprocesses? • Same as elsewhere (Detroit/Akron/Italy/Germany) Government Interventions? • Militarycontracts (but typically building on existingfirms) University? • StanfordUniversity – applied and very good / best

  27. Silicon Somewhere & Clusters Many • policy makers • intellectual entrepreneurs • real estate promoters have tried to create • “growth poles” • “high-tech parks” • “industrial districts,” • “clusters” Charles de Gaulle

  28. François PERROUX (1903-1987) • (1955) “Note sur la notion de pôle de croissance,” ÉconomieAppliquée 8: 307-320 • « GrowthPoles » climax: 1965 – 1975

  29. Main Outcomes • Political and Economic/Geographic Logics incompatible… • « Targeting » and « PlannedExternalEconomies of Scale » don’tdeliver… • Spontaneous « GrowthPoles  » keptappearing…

  30. Science Parks

  31. Michael PORTER(1947- ) 1990 • Clusters (pro-specialization, but with nuances…)

  32. Lessons? Successes few and far between Main factors of success • Prior locations (near thriving areas) • Formalization of spontaneous growth • Exceptional locations & sustained public efforts (Raleigh-Durham; Sophia-Antipolis), but mostly relocations of large firm operations Most overhyped factor: • “World Class” academic institutions

  33. Recurring Problems • What is a cluster? • Politicians picking winners? • stealing from Peter to pay Paul • everyone targets same trendy industries • Politics (corruption) as usual… • selection of locations • favored businesses

  34. Fundamental Problem: The Case for Local Diversity • Urbanization economies • Multiplier effect • Stability & resiliency • Jacobs’ externalities

  35. Urbanization Economies:

  36. Regional Multiplier

  37. Stability & Resiliency Putting all eggs in one basket?

  38. Knowledge Spillovers Local Economy Specialized Diversified │ │ │ │ │ │ │ │ │ │ │ │ │ │ │ │ │ │ │ │ │ │ │ │ │ │ │ Monopoly Several small Firms ____________________________________________

  39. Jacobs’ Key insight...

  40. Innovation = New Combination +

  41. =

  42. Case for Jacobs’ Spillovers If • innovation = new combinations; then • diverse region = more opportunities; then • more opportunities = more innovative • more innovative = more economically prosperous Can you plan “diversity” and “Jacobs spillovers”? • Can you plan spontaneity? • Growth poles experience • How does cross-fertilization actually occur?

  43. “Collective” Creativity (Desrochers & Leppala) 1) Multidisciplinary teams within a firm; 2) Employees adding to, or switching, product line; 3) Individuals moving between different lines of work; 4) Individuals observing a product/process in another setting and incorporating it into their main activity; 5) Individuals possessing different skills and working for different firms collaborating with each other.

  44. Probably most important process… Why do people move? bored job loss better opportunities lack credentials / interest administrative work Key issue: Remove obstacles to job mobility Job mobility between industries in the same diversified local economy

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