Transcript A New Silicon Valley? The State Vs Spontaneous Order

Pierre Desrochers
University of Toronto - Geography
Introduction
1) Geography & Economic Development
2) Silicon Valley & Clusters
- SV: Facts & Myths
- Replicating SV & Creating Clusters
3) Case against Regional Economic Specialization
Conclusion
First, back to the basics
of regional economic development…
Economic Activity in a Spiky World (Florida et al.)
Nordhaus et al.
Canada
USA
France
Russia
India
Japan
SCHEDEL, Hartmann , Nuremberg, 1493
Conventional explanations:
 Trade (marketplace)
 Urbanization economies
Towns = crossroads
Élisée Reclus
(1895)
« Where there is city growth,
humanity moves forward…;
Where they flounder, civilization itself is
in danger. »
Birmingham (UK)
1990s
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.”
« There are for instance over 500 villages devoted to various
branches of woodwork;
one village makes nothing but spokes for the wheels of
vehicles;
another nothing 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 »
Combination of factors
 specialized labour pool
 localized economies of scale
(specialized suppliers & infrastructure)
 knowledge spillovers
 research institutions
 Chicken (cities/clusters)
or Egg (economic development)?
 Tautology (cities/clusters & agglomeration economies)
 Proximity & smart people (and then what?)
 State Vs Markets:
Decades of experience(s)
 What have we learned?
Silicon Valley
Early decades 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: « Traitorous Eight » - Fairchild semiconductors
• « Fairchildren » and others: Intel, H-P, Apple…
Growth processes?
• Same as elsewhere (Detroit/Akron/Italy/Germany)
Government Interventions?
• Military contracts (but typically building on existing firms)
University?
• Stanford University – applied and very good / best
Many
• policy makers
• intellectual entrepreneurs
• real estate promoters
have tried to create
•
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“growth poles”
“high-tech parks”
“industrial districts,”
“clusters”
Charles de Gaulle
(1955) “Note sur la notion de pôle de
croissance,” Économie Appliquée 8: 307-320
« Growth Poles » climax: 1965 – 1975
 Political and Economic/Geographic Logics
incompatible…
 « Targeting » and « Planned External Economies
of Scale » don’t deliver…
 Spontaneous « Growth Poles » kept appearing…
1990
 Clusters (pro-specialization, but with nuances…)
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
 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
Urbanization economies
Multiplier effect
Stability & resiliency
Jacobs’ externalities
Regional
Multiplier
Putting all eggs in one basket?
Local Economy
Specialized
Monopoly
Firms
Several
small
Diversified
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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?
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.
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
 work experience individuals acquire and sectors in
which know-how will likely be transferred
 network of knowledgeable people
 tacit knowledge
 agglomeration economies
Alceus
~ 600 BC
“Not
 houses finely roofed
 nor the stones of walls well built
 nor canals
 nor dockyards
make the city,
but men able to use their opportunity.”
Adam Smith, 1755
Little else is requisite… but
 peace,
 easy taxes,
 and a tolerable administration of justice:
all the rest being brought about by the natural course of
things.
Crucial (except for world cities)
 Reasonably affordable housing
 Good schools
 Decent infrastructure
 Safety/security (personal – property rights)
 Entrepreneurial mindset
 Reasonable taxation and regulation
Not crucial
 Location (transport, weather)
 Public transportation
 World class universities
 Cluster or Silicon Valley-inspired policies…