Silicon Valley and Route 128:
Two Faces of the American Technopolis
by Paul MackunSilicon Valley, CA and Route 128, MA are two of the premiere technological concentrations, not only in the United States, but in the world . These are regions that since World War II have been devoted to the creation of new information technology. Comparing the two regions enables us to observe the different means by which an economic areal unit can attain success in the information revolution and indicates which strategies are most conducive to long-term success.
Geographically, Silicon Valley is an area of Northern California that contains a thirty-mile by ten-mile strip of land in Santa Clara County between the cities of San Francisco and San Jose. This economic region begins in the Northwest of the Valley in Palo Alto, where the bulk of theoretical and practical technological research in the area occurs at the Stanford University and the Stanford University Research Park. Traveling to the southeast, one finds the bulk of semiconductor firms ensconced in communities such as Sunnyvale, Cupertino, and Mountain View. Labor, much of it foreign and poor, is concentrated in the southern end of the valley in San Jose.
Until the middle of this century, this agriculturally rich region of Northern California was better known for its apricots and walnuts than for its Apples (Rogers and Larsen 1984). Even at the end of World War II, the predominant industry around San Jose was small-scale food-processing and distribution. A combination of regional advantages and historical accidents conspired to produce one of the greatest "science parks" in the world. Observers have identified the following regional advantages: world-class academic institutions (Stanford University and the University of California at Berkeley), brilliant scientists, military procurements of semiconductors and the pleasant climate of Northern California (Rogers and Larson 1984).
Many people have attributed the success of the Valley primarily to the influence of nearby institutions of higher education, particularly Stanford University. In the 1920's, administrators at Stanford sought to improve the prestige of their institution by hiring highly respected faculty members from East Coast universities. One important recruit was Fred Terman, an electrical engineer from MIT. Like many of his colleagues, he performed cutting-edge research in electronics. Unlike many other members of the faculty, though, he encouraged his students to sell applications of these new-technologies in the marketplace. By providing funds and equipment, Terman enabled two of his first recruits, David Hewlett and William Packard, to commercialize the audio-oscillator in the late 1930s. After selling their first oscillators to Disney Corporation, they reinvested their earnings and expand both their products and their range of customers (Rogers and Larsen 1984).
In 1950, twelve years after its founding, Hewlett-Packard had 200 employees and sold 70 different products with sales over $2 million. It pioneered the formation of a distinctive Silicon Valley management style, treating workers as family members. Numerous workers have sought to duplicate Hewlett-Packard's management style. In 1954, they accepted an offer by Stanford University to rent part of Stanford Research Park for their operations. This began the agglomeration of industries in Palo Alto. Many other firms subsequently rented other plots of land to take advantage of proximity to the university. Stanford Research Park, through the efforts of a few influential professors and university administrators, became the nucleus of the budding Silicon Valley. By the 1980s, the entire park had been rented out to area firms (Rogers and Larsen 1984).
The 1950s also witnessed the birth of the semiconductor industry. Again, the efforts of one individual stand out. Dr. William Shockley, a Cal Tech trained engineer, revolutionized electronics by developing the transistor to magnify electronic images and replace the much bulkier and energy-wasting vacuum tubes. He and some talented young scholars from the East Cost formed Shockley Industries, in Palo Alto, one of twenty that sought to manufacture transistor technology. Unfortunately, his stubbornness and lack of tact soon alienated many of his colleagues and caused them to resign from his firm and form their own company, Fairchild Semiconductor Corporation. It became the first firm to manufacture exclusively in silicon and rapidly developed into one of the largest firms in the California electronics industry. Rogers and Larsen (1984) estimated that more than 70 high-tech companies are direct or indirect descendants of the Fairchild corporation.
The roles of government and the natural environment of Northern California can not be underestimated. The relocation of a major military contractor, Lockheed, to California in 1956 brought federal defense dollars to the area. Semiconductors procurements by the defense agencies amounted to approximately two-fifths of total production. Pleasant climate and availability of space were other factors in attracting individuals and firms to Silicon Valley and holding them there once they arrived. A survey of Silicon Valley area companies in the area disclosed that more than two-thirds of the corporations rated amenities and climate as outstanding. The presence of major research universities and the concentration of high-trained workers also ranked high (Rogers and Larsen 1984).
This rapid rise of technology reflects itself in the organization of Silicon Valley. The people who began or were employed in these new firms considered themselves as technological trailblazers and the formal and informal "communities" that they developed are in some ways akin to the pioneers who settled the West in the 19th century. The residents of this technological society were, originally at least, a strongly homogenous group: white, male, Stanford or MIT educated engineers who migrated to California from other regions of the country. As modern-day pioneers, they were especially responsive to risky ventures that had the potential for great rewards. Saxenian (1994, 317) notes, "Silicon Valley's heroes are the successful entrepreneurs who have taken aggressive professional and technical risks: the garage tinkerers who created successful companies."
Along with sharing the same type of risks, the entrepreneurs also shared a camaraderie unsurpassed almost anywhere else in American industry. Even engineers and scientists who work at competing firms during the work day remained close friends off the job. According to an account by Tom Wolfe (1983), the manager of one semiconductor firm would not hesitate to call a competitor for assistance on technical matters. After work, the engineers and programs would meet at popular drinking establishments in the Valley to share high-tech "war stories." These after-hours discussions enabled the individuals to share industry gossip as well as facilitate employment searches in the region (Saxenian 1994).
Job mobility statistics show the extent of success of these networks: the average turnover rate for small-to medium sized firms was 35% and the average job tenure (in the 1980s) was approximately two years (Saxenian 1994). Geography probably played as critical role in this rate as the informal social contacts. The spatial concentration of a large number of technology-based firms enabled people to change employers without altering other aspects of their lives. When a person left one firm in Palo Alto for another, there was no need to move one's residence or take one's kids out of a particular school district to enter a different firm. The attitude of the Valley served as a catalyst for this risk-taking. In many cases, a small coterie of employees in a firm dissatisfied with their current place of employment would gather together after work to tinker around with some of their own ideas. They would then develop a business plan, acquire funds from venture capitalists, and seek advice from local academic sources. If they succeeded they were heroes. If they failed, many employers were located in the same town or in a neighboring community (Saxenian 1994).
As people in the region became occupationally mobile, their roles became interchangeable: employers become employees and co-workers can become competitors. The result is that the engineers developed strong loyalties to technology and their fellow engineers and scientists while possessing far less allegiance to a single firm (Saxenian 1994). Although it may seem paradoxical that such cooperation would occur under such obviously competitive circumstances, Saxenian (1994) notes the motto of the region: " competition demands continuous innovation, which in turn requires cooperation among firms." Rapid flows of practical information became the currency of choice. Applied scientific research was constantly reworked to develop market goods. It is not surprising that rapid changes led to industrial diversification and contributed to the flexibility and resilience of the economic region (Saxenian 1994). The lack of rigid hierarchies extended to the firms themselves. The traditional delineations between employers and employees were not so sharp as on the East Coast, and in some cases they disappeared entirely. Beginning with Hewlett and Packard, many of the Silicon Valley companies sought a much more interactive environment between employers and employees. Decentralization of powers followed: major divisions of firms were given a large amount of autonomy (Saxenian 1994).
"In short, Silicon Valley has a regional-based industrial system -- that is, it promotes collective learning and flexible adjustment among companies that make specialty products within a broad range of related technologies. The region's dense social networks and relatively open labor markets encourage entrepreneurship and experimentation" (Saxenian 1994).
Although similar to Silicon Valley with respect to its industrial emphasis (electronics), the Route 128 region around Boston presents a study in contrast in terms of its historical development, geography, community life, and degree of interconnectivity between firms.
Like Silicon Valley, the development of electronics-related companies on the 65-mile highway surrounding Boston and Cambridge in the area's major research universities was influenced by academia, industry, and government. The professors and graduate students in the universities devote their energies toward a greater understanding of the world around them. The government, particularly federal agencies such as the Department of Defense and the National Science Foundation, provides the financial support for the academicians to test the hypothesis and perform the experiments. The firms would then produce the physical manifestations of these ideas for the marketplace.
The Massachusetts Institute of Technology, like its counterpart in Palo Alto, has engaged in world class scientific research and has produced some of the best engineers in the country. The Institute has sought to provide the theoretical and practical foundations for its students to make major contributions to society. While doing so, it has engaged in a seemingly endless number of advancements and has sought to reach out to large companies in Massachusetts and outside the state (i.e. DuPont, Kodak, Xerox) as well as participate in many federal and state-run projects (Rosegrant and Lampe 1992).
The Federal government, to a much greater extent in this state than in California, has provided the fuel for the region's expansion. By the late 1990s, Massachusetts was one of the top five states in terms of federal research resources granted (Rosegrant and Lampe 1992). The Department of Defense itself has accounted for over 60% of federal research and development spending in the state (Saxenian 1991). As might be expected, the large firms have profited most. In the 1970s and 80s, Raytheon became one of the most important contractors for the Department of Defense; EG&G Incorporated has filled several contracts for NASA. Some smaller organizations in this Beltway have been created to solely fill government orders. Organizations ranging from the National Science Foundation (NSF) to the National Aeronautics and Space Administration (NASA) to the Department of Energy (DOE) provided universities and firms millions of dollars for research. Whole new industries have sprung up from these efforts: computers, biotechnology, and artificial intelligence, among others.
The third leg of this technological triangle, complementing the universities and government agencies, is industry itself. By 1990, the state contained over 3,000 high-technology firms (Rosegrant and Lampe 1992). Some companies stand as the pillars of the 128 community: Digital Equipment Corporation, Raytheon, and Lotus Development. These companies produced a disproportionate share of the region's income generation As they grew, so too did the accompanying service firms.
At this point, one could be excused for thinking that this section is simply a repeat of the first part of the paper, with only the names of the universities and companies changed. A closer look, though, reveals some starker contrasts with the attitude of the Silicon Valley. In direct opposition to the Silicon Valley's reliance on risk-taking and partnerships is eastern Massachusetts' emphasis upon convention, decorum, and self-reliance-reliance. The communities in which the high-tech enterprises sprung up, towns such as Burlington, Lexington, and Cambridge have established roots in eastern Massachusetts (and American historical lore) going back centuries. Companies such as DEC and Lotus Development are in many ways just descendants of other industrial titans that have crowded this area for over 150 years.
The structures of Boston society have resulted in relatively stable and conservative hold on certain aspects of its residents' life. Engineers who have worked on both coasts report a much greater divide between work and play on the East Coast. Whereas a dinner among company employees in Cupertino or Palo Alto could include talk of RAM and megabytes, an after-hours meeting of friends in a Boston establishment would include just about anything but computer and semiconductor jargon. Entrepreneurs such as Ken Olsen at DEC and An Wang at Wang industries who succeeded did not change their lifestyles in any radical way. Olsen, for example, avoided most social gatherings, remained a teetotaler, lived in a small home, and continued to drive an old Ford to work. He and other area CEOs did not live the same high profile lives in Boston that their counterparts did in Silicon Valley. The lack of role-models and less developed informal social contacts may have constrained the amount of new companies that were created in the 1970s and 1980s and certainly placed obstacles to rapid occupational mobility (Saxenian 1994).
The defense industry, hiring practices, and the region's geography all conspired to reinforce this traditionalism. The volume of military purchases encouraged corporate separateness (Saxenian 1994). The long-held sway of military purchases in the Massachusetts economy encouraged "corporate autarky." Serving the Department of Defense, oriented contractors such as Raytheon to much more toward Washington, DC than toward their own region; secrecy held much higher priority than partnerships. The hiring of management differs substantially from Silicon Valley. In Massachusetts, older individuals, usually wedded to the status-quo, are often selected for executive positions Managers in Silicon Valley, often in their twenties and thirties, are much more likely to experiment with organization alternatives (Saxenian 1994). Geography also plays a role. The firms were more spread out around metropolitan Boston than comparable companies in California, lessening the probability of interaction. Communication between company and town is even less prevalent. Many large companies such as DEC have almost no ties to the towns in which they were located (Saxenian 1992).
Not surprisingly, the hierarchies within companies are extremely rigid. The manager created firms with complex and sophisticated organizational patterns that employed individuals loyal first and foremost to the company. In return for the loyalty, employees expected that hard work would enable them to stay employed in the firm and rise through the ranks, culminating in retirement with a large pension. Employers are generally wary of hiring an engineer or programmer who has left another firm after only a few years. At the same time, significant status differences exist. The hierarchy of positions and the means of formal communication within the firm, along with the structure of salaries and benefits, developed strong delineations within the firm. At DEC, for example, the company centralized many of its prominent functions and a small group of individuals made the decisions, namely Ken Olson (the CEO). The companies attempt to internalize many of their procedures. This vertical integration often includes: software design, component, peripheral, and subsystems production, and final assembly.
In short, Route 128 firms are much more staid and centralized affairs than the loose confederations of scientists and engineers in northern California. Their histories, attitudes, and strategies have created technological societies similar in products manufactured but very different in their economic and social manifestations.
Rogers, E.M. and J.K. Larsen (1984) Silicon Valley Fever NY: Basic Books.
Rosegrant S. and D. Lampe (1992) Route 128 NY: Basic Books.
Saxenian, A.L. (1994) Regional Advantage: Culture and Competition in Silicon Valley and Route 128 Cambridge, MA: Harvard University Press.
Wolfe, T. (1983) "The Tinkerings of Robert Noyce: How the Sun Rose on the Silicon Valley," Esquire 100: 346-374.