Technology, entrepreneurship and path dependence: industrial clustering in Silicon Valley and Route 128

Abstract

Silicon Valley and Route 128 have been the centers of innovation and commercialization for the electronics, computer and data communications industries in the postwar period. However, since the 1960s Silicon Valley has grown more rapidly and from approximately 1985 through 1995 Route 128 experienced retarded growth. Their success has diverged dramatically in the last decade. The most common explanations for this divergence are differing cultures, interfirm relations or/and internal organizational style organization. This paper builds upon path-dependent and dominant design explanations of technical and industrial change, arguing that the technological trajectories of the industries underlying the two regions were different and this led to their differential destinies. To explain the dynamics of the two regions, an analytical separation is made between the economy of the existing firms and a separate economy of institutions that evolved to nurture new firm formation.

A corporation’s culture as an impetus for spinoffs and a driving force of industry evolution

“…Hence, the proliferation and success of spinoffs originating from only a couple of parent firms drove the growth of Silicon Valley. A similar role of spinoffs as the driving-force of industry evolution is shown by Klepper (2002) for the automobile industry and by Kenney and von Burg (1999) for the LAN industry. Given that pre-entry experiences of founders play a crucial role and that existing firms with cooperative corporate cultures are an ideal training ground for new entrants, an industry or region endowed with many firms of this kind can profit from the availability of a great number of entrepreneurially skilled agents as potential spinoff founders.…”

“…Given that pre-entry experiences of founders play a crucial role and that existing firms with cooperative corporate cultures are an ideal training ground for new entrants, an industry or region endowed with many firms of this kind can profit from the availability of a great number of entrepreneurially skilled agents as potential spinoff founders. The exodus of this personnel from established firms can then initiate a self-reinforcing processes of firm creation, exploitation of business opportunities, and regional or industrial development (e.g., Kenney and von Burg, 1999). Although many regions have, for example, universities that provide well-educated, creative agents that may become entrepreneurs, the additional existence of a number of firms that offer the opportunity to gain on-the-job entrepreneurial experiences is essential to trigger such a development.…”

Cluster Life Cycles - Dimensions and Rationales of Cluster Development

“…These institutions include beneficial associations such as cluster organisations, but also research and educational facilities that are the basis for innovation networks and human capital. Companies and institutions are therefore the basic units of a cluster and they cannot be separated from each other, since their respective developments are closely connected (KENNEY and VON BURG, 1999;MASKELL, 2001). …”

Creating an Environment for Venture Capital in India

“…For this reason, the venture capitalist is a temporary investor and usually a member of the firm's board of directors only until their investment is liquidated. The firm is a product to be sold, not retained (Kenney & von Burg, 1999). The venture capital process requires that investments be liquidated, so there must be the possibility of exiting the firm.…”

“…This investment has funded generations of graduate students in the sciences and engineering, and from this research has come trained personnel and innovations, some of which have resulted in the formation of firms that have been funded by venture capitalists. US universities, such as MIT, Stanford, and UC Berkeley, played a particularly salient role (Kenney & von Burg, 1999;Saxenian, 1998).…”