Transcript Document
The Innovation Region Doug Henton President Collaborative Economics 1 Silicon Valley’s Growing Contribution to California’s Economy 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% 1990 2003 SV Share of CA Population 2 SV Share of CA GDP Silicon Valley’s Long Term Advantage: Highest Productivity per Employee 200 180 GDP per Employee (Thousands) 160 140 120 100 80 60 40 20 0 1990 1991 1992 1993 1994 United States 3 1995 1996 1997 California 1998 1999 2000 Silicon Valley 2001 2002 2003 Evolution of Silicon Valley 1950 - 2000 Internet Value Added Personal Computer Integrated Circuit Defense Time 1950 4 1960 1970 1980 1990 2000 The Valley is Driven by Waves of Innovation • New technologies drive dynamic waves of innovation • Entrepreneurs take advantage of new opportunities • Swarm of new firms cluster around new technologies creating short term bubbles • New products eventually become commodities and investment leads to breaking of bubbles. • New technologies emerge from the convergence of old technologies and the process of “creative destruction” begins again • Next wave of innovation builds on prior waves of innovation 5 Recent Short-Term Bubble 6 Silicon Valley Employment Waves: A Boom, Bust, Build Pattern 1000 Internet Commercialization 900 Semiconductor competition intensifies 800 700 Cold War: defense cuts Commercialization of the Integrated Circuit Third Wave: Personal Computer 600 End of Vietnam War Fourth Wave: Internet Second Wave: Integrated Circuit 500 400 First Wave: Defense 300 70 7 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 Silicon Valley Jobs Return to Pre-Bubble Employment Levels 8 Current Silicon Valley Industry Portfolio: Led by Biomedical, Five Silicon Valley Industry Clusters Grow in Employment Concentration Relative to the Nation 9 …VC Shifts Toward Medical Devices and Biotechnology 10 Innovation is the Key to Valley Success 11 Innovation is the key to success in today’s global economy across all industries Continuous reinvention is required to keep pace with the rapid pace of change. The basis of increasing productivity is innovation not competing on cost Productivity is the basis for prosperity. Competing on Innovation Prosperity (rising real income per capita) Productivity (increased output per worker) Innovation 12 increasingly higher-value products and services produced more efficiently Regional Leadership Makes the Difference in Innovative Regions 13 Build fundamental intellectual assets. Connect entrepreneurs to these assets. Promote a habitat for innovation and entrepreneurship. Make quality of life an innovation asset. Invest in the future Silicon Valley Has Higher Proportion of High Skilled, High Pay Occupations Compared With the Nation 14 Talent is the Most Critical Innovation Asset in the Valley Talent is Based on Skills and Training Technology Is Created by Talent Quality of Life Attracts and Retains Talent 15 Housing Transportation Environment Creative People Want to Live in Creative Places Risks to the Innovation Region Valley risks losing talent because of Requires investing in future as well as addressing cost issues 16 Declining Educational Quality Housing Costs Declining Quality of Life Transportation Congestion K-12, community colleges and universities Affordable housing Transportation initiatives A Balanced Approach to Innovation: Add the “Positives” and Remove the “Negatives” Add Productivity Enhancing Factors Mitigate Cost Factors 17 K-12 Education College and Universities Community Quality of Life Housing Costs Health Care Costs Regulatory Costs Create a High Value, Innovative Region Next Wave May be a Convergence 1990s Convergence Next Convergence INFO HARDWARE ? Revolution Internet Revolution SOFTWARE BIO MEDIA NANO 18 Examples of Convergence 19 Preparing for the Next Waves: State and Regional Responses 20 Do leaders understand the opportunity? What must we do to ensure it happens here? What are the requirements? How can local people and communities benefit? Can we avoid some of the pitfalls of past waves? Key Points 21 The recent bubble has broken, so let's learn and move on. Goal: sustain habitat advantages in productivity and innovation. We can anticipate a next wave: a new convergence building on prior waves Silicon Valley is well-positioned, but there is no permanent franchise. Must work together to ensure that next wave happens here, works for us.