Business

Silicon Valley is the southern section of the San Francisco Bay Area in Northern California (Weiss and Delbecq 1987). Originally, the term referred to the parts large number of silicon innovators and producers, but later came to cover all the high-tech corporations in that place. The term is presently generally used as a metonym for the high-tech business. In spite of the development of other high-tech business centres in the United States, Silicon Valley continues to be number one concerning the quantity of cutting edge entrepreneurs, venture capitalists and engineers. Since the beginning of the 20th century, Silicon Valley has been the centre of the vibrant, expanding electronics industry. The industry came about through experimentation and innovation in the sectors of radio, TV and military electronics (Kenney 2000).

Route 128, is a partial beltway around Boston, Massachusetts. About three-fifths of the highway is a part of the Interstate Highway System. Route 128 came to symbolize Boston high-tech community because of the fast development of the high-technology business in the suburban areas along it, from 1960s to the 1980s (Saxenian 1994).  

Silicon Valley and Route 128 attracted the international attention as the leading centres of innovation in electronics globally in the 1970s (Kenney 2000).  As the conventional industrial sectors and regions fell into crisis, planners and policy-makers all over the world looked at these regions as models to revitalize their industries. The industrial system of Silicon Valley is a decentralized industrial system organized around regional networks. Route 128 was marked by conservatism in social and business practices, and self-sufficient corporations. In the years that followed the high-tech manufacturing slouch of the 1980s, Silicon Valley bounced back strongly. At the same time, Route 128 was unable to recapture its lost glory. Silicon Valleys experience exhibited ability to offer a source of competitive advantage even as production and marketing hit the global level (Saxenian 1994). In the 1970s Californias Silicon Valley and Bostons Route 128 were celebrated for their technological energy, entrepreneurship and abnormally high economic development. The two were often compared as well as imitated, because they shared origins in university-based studies and post-war military spending (Granovetter and Swednerg 2001).

Their charm waned in the early 1980s, as the major producers in both places faced the crisis. The chip makers of the Silicon Valley gave up the market for semiconductor memory to Japanese producers. At the same time minicomputer companies of Route 128 observed consumers shift to personal computers and workstations (Saxenian 2009). Both regions experienced the worst effects in their histories. Analysts predicted that the two would follow the way of Detroit and Pittsburgh to long-lasting decline. It seemed that the high-tech industry in the United States that was once seen as invincible, might not survive confront of deepened international competition (Saxenian 2009). The economic performance of Silicon Valley and Route 128 soon deviated. In the Silicon Valley, a fresh generation of semiconductors came up. There were new computer firms coming up alongside development of companies. There was the radical success of the new firms, like Sun Microsystems, Cypress Semiconductor and Conner Peripherals. There was also renewed vitality in large companies like Hewlett-Packard and Intel. It was clear that Silicon Valley was regaining its former energy. In contrast, Route 128 exhibited very few signs of reversing its predicament. The once celebrated Massachusetts miracle had vanished abruptly and newly established firms failed to compensate for ongoing lay-offs at set up minicomputer companies, like Digital Equipment Corp., Prime, Data General and Wang (Castilla 2003).

Silicon Valley currently has one-third of the top 100 high-tech companies in the United States created since 1965. The market value of high-technology firms in Silicon Valley went up by 25 million dollars between 1986 and 1990 (Saxenian 2009). This is contrast to the increase of one million dollars in Route 128. Even if the Silicon Valley and Route 128 employed the same size of workforce in 1975, Silicon Valley companies produced some 150,000 net new technology-oriented jobs over the following 15 years. This was three times the number created in Route 128. In 1990, silicon valley companies sold oversees electronic products worth more than 11 billion dollars. This amounted to almost one-third of the countrys total. In contrast, Route 128 exported only 4.6 million dollars worth of products. In the same year, Silicon Valley had 39 of the countrys 100 fast-growing electronic companies while Route 128 had only four. At the beginning of 1990s, Route 128 was surpassed by Southern California and Texas as regions of fast-growing electronic firms (Castilla 2003).

Despite having common origins, Silicon Valley and Route 128 evolved basically different industrial systems after the Second World War (Wood 2000). They had different responses to the 1980s crisis, revealing differences that were once seen simply as superficial discrepancies between the more buttoned up East Coast and the laid back California. The contrast between the two regions exhibited the contrast between success and failure in the period of fast technological transition. The contrast was far from being superficial (Harrison 1994).

Industries in Silicon Valley were established in a decentralized industrial system that was organized around local networks. Silicon Valley, like companies in Japan, some regions of Germany and Italy, draws on local knowledge and co-operations to establish new market, products and applications (Wood 2000). These specialist companies compete powerfully while at the same time extracting knowledge from one another about developing markets and technologies, the regions deep and developed social networks and open markets boost experimentation and entrepreneurship. The limits within companies are permeable, just the same way as those between companies themselves and between companies and local institutions like trade unions and universities (Granovetter and Swednerg 2001).

Northern California regions networks came up as a result of the region coming into electronic manufacturing later. In the 1940s and the 1950s, researchers at Massachusetts Institute of Technology and Northern California led the economic transformations of eastern Massachusetts and northern California (Saxenian 1985). This was made possible due to the fact that those researchers were the beneficiaries of defence and aerospace contacts. The Boston area already had a rich history of industrialization that enabled it to have an edge in competition for government contracts. By the time of the Second World War, Massachusetts had many electronic manufacturers, while Santa Clara and its surrounding remained an agricultural economy. Apart from a few electronic firms like Hewlett-Packard, Litton Engineering Laboratories, and Varian associates, the only local industry was food processing and distribution. Pioneers of Silicon Valley sought to imitate the technology of Boston but unsuspectingly transformed it in the process (Castilla 2003). Unrestricted by industrial traditions, the regions pioneers established a distinctive technological system. While Massachusetts Institute of Technology focused on creating relations with government agencies and finding financial support from existing electronics manufacturers, Stanford leaders, devoid of government or corporate relationships and nearness to Washington, boosted the establishment of new technology enterprises and relationship with the local industry. For instant, in the 1950s, Stanford allowed local companies to enrol through the Honors Corporative Program (Weiss and Delbecq 1987). The university supported engineers in the electronic industry to enrol in graduate classes directly or indirectly through a televised instructional program that forwarded Stanford courses into the companys classes. This program strengthened connections between the companies and the university helping engineers to be updated and build professional agreements. The university sponsored Stanford industrial park, one of the pioneers of such projects in the nation. By the year 1961, the park had covered 652 acres and had 25 companies that benefited 11,000 employees (Granovetter and Swednerg 2001). After three decades Silicon Valley had changed itself into a dynamic technology complex. While establishing a centre for electronic manufacturers, the pioneers of Silicon Valley had established an industrial system that was more flexible than that of Massachusetts. Silicon Valley engineers had strong commitments to one another and to the course of enhancing technology. The regions culture was one that encouraged taking of risks and accepting failure. This was in contrast with the eastern region that had typical financial professionals. Silicon Valley capitalists were basically entrepreneurs who made money by producing and selling technologies. Silicon Valley industrial system was united in part by various formal and informal practices and institutions. These co-operations were carefully calculated decisions relating to business. Semiconductor businesses joined up in ventures and freely cross-licensed their patents to competing firms ensuring that the industry as a whole developed regardless of the luck of individual businesses (Castilla 2003).

While the manufacturers of Silicon Valley in the 1970s embedded in social and technical networks, Route 128 came to be controlled by a few self-sufficient corporations. Route 128 firms tried to maintain their independence by internalizing a vast range of actions (Saxenian 1985). This resulted to firms, and their customers, suppliers, and competitors being governed by secrecy and corporate loyalty (Storper 1989). In the 1970s and 1980s, when the two regions were booming economically, it was hard to tell the relative advantages of an industrial system that was based on regional networks against one that was based on independence (Harrison 1994). Major market shifts experienced in 1980s put these two systems to a test, leading the largest producers of the two regions to a crisis. In 1984, Japanese manufacturers took an early lead and held virtually all of the market. When the United States started the high-volume production in 1985, price cutting led to unprecedented losses in finances. By the end of that decade Japan had become a leading producer of semiconductors. Due to the distance that had developed between the customers and the producers, Silicon Valley could not identify markets and trends. They also failed to capitalize on major developments. At the same time Route 128 was also experiencing its share of tough times. They reported major drops in earnings and lost around 50,000 jobs (Granovetter and Swednerg 2001). The reason why Silicon Valley was able to redeem itself was that it easily went back to its principles of cooperation and united innovation on which the success of the region was initially based. The start-ups established a model of semiconductor production that re-built the social and technical networks in the region. They re-introduced specialized, design-incentive applications that allowed the defining of new markets and evaded the price conflicts that had plagued commodity producers (Saxenian 1994). Many of the manufacturers sub-contracted the production of the products to avoid high costs and risks of fabrication of the semiconductors (Wood 2000). Semiconductors and computer start-ups of Silicon Valley avoided the cumbersome organization structures of their pioneers. They sought to establish structures that would reward personal initiatives and maintain the focus and responsiveness of the newly established firms. The newly established organizational innovations led the new companies in Silicon Valley to come up with state-of-the-art products that came up faster than those of their competitors. The diversification of the economy in Silicon Valley was a clear sign that the region was adapting successfully. In bleak contrast to Silicon Valley, Route 128 firms were restricted by their self-sufficient structures leading to slow adjustment to market conditions (Kenney 2000).