Regional Advantage: Culture and Competition in Silicon Valley and Route 128

by AnnaLee Saxenian

Why is it that in the ’90s, business in California’s Silicon Valley flourished, while along Route 128 in Massachusetts it declined? The answer, Annalee Saxenian suggests, has to do with the fact that despite similar histories and technologies, Silicon Valley developed a decentralized but cooperative industrial system while Route 128 came to be dominated by independent, self-sufficient corporations. The result of more than one hundred interviews, this compelling analysis highlights the importance of local sources of competitive advantage in a volatile world economy.

Genres: Economics, Business, History, Nonfiction, Cities, Technology, Entrepreneurship

240 pages, Paperback

First published March 1, 1994

Reviews

[Frank Stein · Rating 4 out of 5]

A well-done ethnographic study of the different cultures in the high-technology industry in Silicon Valley and the Boston region, coupled with a short history of each.

The Route 128 industry actually started first, after WWII, boosted by the power of MIT and its star pupil Vannevar Bush, who went into the federal government and managed to steer 1/3 of all scientific research contracts into MIT's businesses (how convenient). In 1946 MIT professors even created America's first venture capital company in order to fund these start-ups. The military soon became the single largest buyer of semiconductors and circuits from Route 128 and the region boomed. After Vietnam ended the area transfered all its energies into successful "minicomputers."

Silicon Valley was basically created by MIT-refugee Frederick Terman, who moved to Stanford determined to end the West's reputation for being a semi-colonial backwater. He started the Stanford Industrial Park, along with a number of Stanford-based continuing education programs for businesses (e.g. the Stanford Honors Cooperative Program) and he funded Hewlett Packard out of his own pocket. The region got some high-tech military contracts, but its distance from DC kept it undercapitalized.

In the 1970s, however, Silicon Valley's semiconductor industry surged ahead of the then dominant Route 128, and Saxenian shows why. Silicon Valley had an informal culture, one that rewarded constant innovation, mobility, and disrespect for authority. Most of its corporations were headed by 20- and 30-somethings who had already failed at other ventures and yet who managed to create small, nimble companies that operated in large networks of suppliers. Route 128 businesses, on the other hand, tried to mimic General Motors and General Electric, and had older Harvard-educated leaders. They created vertically-integrated behemoths that could not evolve with the times.

East Coast culture and history also exerted a powerful pull against innovation. One simple contrast demonstrates the difference. Hewlett Packard famously created its audio-oscillator in its founders' garage in Silicon Valley, while the now-defunct Digital Equipment Corporation along Route 128 started in the 200 year-old Assabet Mill of the American Woolen Company. As one employee pointed out, in the East everybody knew everyone's family going back decades, and failure was personally devastating. In the West, no one knew where anyone came from and there were no expectations of immediate success.

Often Saxenian belabors this contrast, and she can get fairly repetitive. She also seems to ignore the success of Apple, which operated by closing itself off and yet created innovative proprietary systems.

Still, this is one of the better books on why some industrial regions evolve and thrive and some die out.

[TΞΞL❍CK Mith!lesh · Rating 5 out of 5]

In her book Regional Advantage: Culture and Competition in Silicon Valley and Route 128 (1994), Saxenian proposes a hypothesis to explain why California's Silicon Valley was able to keep up with the fast pace of technological progress during the 1980s, while the vertically integrated firms of the Route 128 beltway fell behind. She argues that the key was Silicon Valley's decentralized organizational form, non-proprietary standards, and tradition of cooperative exchange (sharing information and outsourcing for component parts), in opposition to hierarchical and independent industrial systems in the East Coast.

[Mark Moran · Rating 4 out of 5]

A very good study comparing and contrasting Silicon Valley and Route 128. I felt like it spent much more time on Silicon Valley than Boston, but it was still very insightful. At 30+ years since its original printing, the book has aged very well. Would be interesting to read an epilogue now of how Kendall Square has grown up much more in the image of Silicon Valley than Route 128 did.

Book does an excellent job looking at the structural differences in the two great digital innovation ecosystems of the second half of the 20th century. I had not really realized how much of a natural experiment they were.

[Nicholas Little · Rating 3 out of 5]

Why did Silicon valley supercede Route 128? Even the book's 168 pages seemed a bit more than was needed to explain it. California's open culture, willingness to share information, lack of reliance on government contracts and tolerance of failure were all big factors. Interesting but no surprises.

[Carter · Rating 3 out of 5]

Another re-read for me; the author, deliberately, steers clear of controversy, and lacks a certain incisiveness. There are some parallels between the two communities, but I suspect the outsider/insider distinction, is phrased in such a way, that the point is made, but the deep reasons, are not discussed.

[Yisu Z. · Rating 4 out of 5]

区域经济研究的奠基之作，把之前单维度的external economies拓展成了复杂的网络（很有趣的是她并没有引用这方面的文献），塑造了industrial system，嵌入在地区里面：本地机构与文化，产业结构，以及公司组织（p7）。R128的早期成功事后限制了它在个人计算机时代的转型（是不是很熟悉？）硅谷的成功则来自于「新」，没有历史负担，没有路径依赖，有远见的人（Frederick Terman）。同样面临二战之后的经济转型，就迅速得多。从今天来看这个研究不乏后见之明，但依然很开阔思路。

[Connor O'Brien]

Interesting ethnographic study of Silicon Valley in the 80s and early 90s. Gave me a few research ideas for work.

[Adam Calhoun · Rating 4 out of 5]

As I sit in one of the largest concentration of biotech in the country - and probably the largest per capita - I wonder, how did this happen? Certainly there were competing centers that could have become these same hubs. In Regional Advantage, Saxenian sets out to answer this question for the computer and hardware industries. Why did Silicon Valley beat Route 128 so drastically? While she offers a few different arguments for the superiority of Silicon Valley, it's hard to disentangle what, precisely, made Silicon Valley so special. How do we weight the different options?

As best I can recall, the main reasons for Silicon Valley superiority are as follows: increased university/industry cooperation, a history of autarkic businesses in the east, cultural differences allowing those in the west to change businesses more frequently and be more accepting of failure, and businesses in the West being more open to sharing than the East.

It's difficult to sort these out, but for my money I'd give the following explanation. Silicon Valley got a head start on the university/industry cooperation shtick that never really went away, and it really was much larger from the beginning to boot. What kept Silicon Valley was the free flow of ideas between constantly shifting businesses. The East was constrained by a semi-monopsonistic labor arrangement where employees stayed at one or two large businesses for life (they hoped), making it difficult for skilled employees to move to new, more exciting and useful, businesses.

That's what I got out of this: large universities pumping out many skilled graduates are required for the labor force - sheer variance will give more top employees - with an emphasis on businesses being created as quickly and easily as possible. Free flow of employees and information is a plus, which makes the role of patents and copyrights dubious at best.

[JW · Rating 2 out of 5]

Read Frank Stein's excellent review for the gist. Some other thoughts:

Context:
in the US, the early 1990s saw the emergence of a new school of economic development research, arguing that factors such as regional culture and institutions, and the nature of local economic networks, were as predictive of local growth as the more traditional, quantifiable factors of size and # of firms, capital invested, output value, avg unit costs, etc. -- ie, all those clean and tidy measurables that you'd undoubtedly limit your attention to with standard macroeconomics training. In short, this new thinking signaled the return of a "political economy" approach -- local growth and stagnation depended as much on place-specific factors of the "social relations" variety, as on factors based in classical metrics. While this thinking is received as gospel today, it was marginalized and scorned in the early 90s.

Bullet points:
-the thinking flowed from "economic geography" and "city planning" scholars, with little to no traction in economics departments (yes, the irony)
-especially strong and productive bases at Berkeley and UCLA
-Saxenian's research was one of the most celebrated studies of this new "regionalism" approach, using a compare/contrast that vividly illustrated the different economic trajectories born of factors rooted in political economy

The problem:
Uhh, the book isn't that great. The case study approach, the supporting research - brilliant and inspired; the finished product - not so much. I was told that Saxenian was rushed to publish, Regional Advantage being her all-important book to gain tenure as an overworked, spread-too-thin Assistant Prof. Life happens. A masterpiece in theory, if not execution.

[Kangning Huang · Rating 4 out of 5]

This book analyze the difference between Silicon Valley, CA and Route 128, MA. The author tries to answer why did Silicon Valley survived the recession and competition from Japanese competitors during 1980s, but Route 128 did not.

Silicon Valley:
"A regional network-based industry system that promotes collective learning and flexible adjustment among specialist producers of a complex of related technologies."
"Encourage horizontal communication among firm divisions and with outside suppliers and customers."
"The boundaries within firms, between firms and location institutions are porous in a network system."
-------Networks based industrial systems-------

Route 128:
"Dominated by a small number of relatively integrated corporations."
"Corporate hierarchies ensure that authority remains centralized and information tends to flow vertically."
-----------Independent firms systems-------------

[Akrabar · Rating 3 out of 5]

The book examines the differences between Silicon Valley and the high tech industry in Massachusetts. The author pins it down mostly to 1) MIT etc being too dependent on government defense funding, and 2) Silicon Valley companies being private industry driven and also investing heavily in local supply networks. I felt the book was not a comprehensive study of what is a very complex system with complex cause and effects.

[Luis · Rating 4 out of 5]

This book is very useful to understanding the structural causes of Silicon Valley’s success, showing that it was increased interpersonal and intercorporate sharing that made Silicon Valley continue to succeed after the shocks of the ’80s hammered both Silicon Valley and Boston’s Route 128. Definitely something I recommend to all newcomers to SF/the Valley.

[Antonio Baclig · Rating 4 out of 5]

Interesting thesis on the cultural and institutional differences between Silicon Valley and the Greater Boston area that allowed the former to flourish.

[Sarah · Rating 3 out of 5]

Can be difficult to follow, but draws a clear distinction between the practices between the two regions that led to success in Silicon Valley and a slow down in Route 128.

[Nick Doty · Rating 5 out of 5]

Excellent, both as a history of Silicon Valley, and as an analysis of the distinctive characteristics of places and organizations. (I'm biased, she's our Dean!)