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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

A New SiliconValley?The State Vs Spontaneous Order

Pierre Desrochers

University of Toronto - Geography

overview
Overview

Introduction

1) Geography & Economic Development

2) Silicon Valley & Clusters

- SV: Facts & Myths

- Replicating SV & Creating Clusters

3) Case against Regional Economic Specialization

Conclusion

but success what do we know
But Success? What do we Know?

First, back to the basics

of regional economic development…

1 geography economic development
1. Geography & Economic Development

Economic Activity in a Spiky World (Florida et al.)

key point cities economic development
Key Point: Cities ~ EconomicDevelopment

SCHEDEL, Hartmann , Nuremberg, 1493

why large diversified cities
Why (large & diversified) Cities?
  • Conventional explanations:
  • Trade (marketplace)
  • Urbanization economies

Towns = crossroads

slide16

Élisée Reclus(1895)

« Wherethereis city growth, humanity moves forward…;

Where they flounder, civilization itself is in danger. »

slide20

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.”

russia late 19th c marshall
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 »
why industrial specialization
Why Industrial Specialization?

Combination of factors

  • specialized labour pool
  • localized economies of scale

(specialized suppliers & infrastructure)

  • knowledgespillovers
  • research institutions
academic understanding policy problems
Academic Understanding & Policy:Problems
  • Chicken (cities/clusters)

or Egg (economic development)?

  • Tautology (cities/clusters & agglomeration economies)
  • Proximity & smart people (and then what?)
local development policies
« Local DevelopmentPolicies »
  • State Vs Markets:
  • Decades of experience(s)
  • What have welearned?
facts
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…
uniqueness of silicon valley
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
silicon somewhere clusters
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

fran ois perroux 1903 1987
François PERROUX (1903-1987)
  • (1955) “Note sur la notion de pôle de

croissance,” ÉconomieAppliquée 8: 307-320

  • « GrowthPoles » climax: 1965 – 1975
main outcomes
Main Outcomes
  • Political and Economic/Geographic Logics incompatible…
  • « Targeting » and « PlannedExternalEconomies of Scale » don’tdeliver…
  • Spontaneous « GrowthPoles  » keptappearing…
michael porter 1947
Michael PORTER(1947- )

1990

  • Clusters (pro-specialization, but with nuances…)
lessons
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
recurring problems
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
fundamental problem the case for local diversity
Fundamental Problem: The Case for Local Diversity
  • Urbanization economies
  • Multiplier effect
  • Stability & resiliency
  • Jacobs’ externalities
stability resiliency
Stability & Resiliency

Putting all eggs in one basket?

knowledge spillovers
Knowledge Spillovers

Local Economy

Specialized Diversified

Monopoly

Several small

Firms

____________________________________________

slide48

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?
collective creativity desrochers leppala
“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.

job mobility between industries in the same diversified local economy
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
local diversity matters for
Local diversity matters for…
  • work experience individuals acquire and sectors in which know-how will likely be transferred
  • network of knowledgeable people
  • tacit knowledge
  • agglomeration economies
slide53

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.”
slide54
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.

Adam Smith, 1755

in the case of cities
In the case of cities…

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…