I was reading Vivek Wadhwa’s post on Chile’s Grand Innovation Experiment and although I agree with him that many have tried to replicate the Silicon Valley formula (and failed) by creating Government funded tech-clusters I am not too sure he has hit on the secret ingredient with the model he has helped to shape in Chile.
Vivek’s secret ingredient is the Startup entrepreneur. Others believe it is the sponsors and investors (i.e. the Angels and the VC’s) who attract the entrepreneurs. While others think it is the number of established global tech brands in the valley (i.e. potentential downstream buyers and highly qualified skill pool) that underwrite all the creative activity. There was also access to “cheap” money thanks to Wall St and the position of the US dollar as the benchmark global currency.
I suspect that perhaps the real reason why the Valley’s innovation model has failed to ignite in other parts of the world is simply that the statistical evidence doesn’t support the general consensus that the model actually works.
A cursor glance at Fast Companies Top 50 Innovative companies for 2011 indicates that 7 out of the top 10 are from the valley. Earlier this year 7 of the Top 10 in the Forbes list of Most Innovative Companies were leading US technology brands. While last year the Businessweek Top 50 Innovative Companies indicated the Top 4 companies were Apple, Google, Microsoft and IBM.
However when we scratch the surface of the Valley’s innovation story and take a look at the patent activity being undertaken in the US market we discover a very different story. For example, if we take a look at the 2010 PatentPower study by the ieee.org we discover that 7 out of the top 10 electronics innovators are Japanese corporations. We see a similar pattern emerging in the Business Insider’s Top 15 Innovative Companies of all time. Based on US patent office records only two US companies (IBM and GEC) are in the top 10. The rest are from Japan and South Korea.
What each of these studies suggests is that contrary to popular belief the new breed of 21st Century innovation leaders are not to be found in Silicon Valley but in Asia. This evidence also tends to suggest that the Valley’s innovation model is more attune to creating a close network of smaller specialist niche players than delivering the next generation of global game changers.
More importantly it suggests there may be less of a correlation between the number of start-ups in a location and global market leadership than there is between the level of business investment in R&D and global market leadership.
Nor is this a short term trend. Back in 1996 the USA ranked 6th to Japan and South Korea’s 2nd & 3rd GERD/GDP. The leader was Sweden.
While at the time of the launch of the iPhone Japan’s ratio of patents per million population was 3.5 times higher than that of the United States.
We see a similar story in relation to the model’s often stated ability to create new high-tech jobs. The Valley is frequently represented as the US’s boom economy and yet a recent study by PWC indicates there has been no new net creation of jobs in Silicon Valley in the last 15 years.
The same applies to the Valley’s funding model where we discover that the Wall St Journal reported back in 2009 that the number of active VC’s had fallen by 31% in the period 2000-2008.
One thing we do know is the endless commentary on the myriad of start-ups and personalities that operate in Silicon Valley’s innovation economy generates a lot of page views in the tech media and this is probably the true measure of the runaway success of the Valley’s innovation model.
It is a great success story full of heroes, the occasional heroine and great achievements… and like any great success story accomplished against seemingly great odds people enjoy reading and dreaming about it.
As for the secret recipe that will allow you to replicate the success of Silicon Valley in your part of the world? Well let’s just say that even if you have more days of sunshine than they have in Southern California you will struggle to be the next Hollywood.
Further Reading
Posted on July 19, 2011
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