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Regional Strategies > Interviews > Asian Networks Will Be The Next Big Force In Silicon Valley >

Asian Networks Will Be The Next Big Force In Silicon Valley

Madanmohan Rao interviews AnnaLee Saxenian, scholar of regional economics

Berkeley, February 1998

"Silicon Valley is built on ICs. That doesn't stand for 'Integrated Circuits', it means 'Indian and Chinese' engineers," says regional economic development scholar AnnaLee Saxenian. Her book "Regional Advantage: Culture and Competition in Silicon Valley and Route 128" (Harvard University Press) is widely acclaimed by social scientists, policymakers and technology planners as THE classic scholarly exposition on the difference between high-technology regions such as California's Silicon Valley and Boston's Route 128.

Saxenian is a professor in the Department of City and Regional Planning at the University of California at Berkeley. She has held teaching positions at the Massachusetts Institute of Technology (MIT), Harvard University, and the Chinese University of Hong Kong.

Q: Many regions and governments around the world are pursuing the lure of gold in IT-space, and in your work you have compared and contrasted the approaches of Silicon Valley, Route 128 around Boston, the North Carolina Research Triangle, the Texas incubation centre, Cambridge University in England, and hi-tech centres in Germany. What makes Silicon Valley so successfully different - and special - as compared to these?

A: Key factors in regional technological innovation are the density of communication networks, group affiliations, cooperation between competing companies, fluid organisation structuring, mobility of the workforce, local discussion forums, venture capital leadership, collaboration with world-class universities, and international connections. Silicon Valley has excelled in each of these, and has been able to spawn start-ups much faster and successfully than anywhere else. Network-based social and professional structuring are key here.

Hence almost 40 per cent of the venture capital funding for infotech companies in the U.S. finds its way towards Silicon Valley, but only about 15 per cent towards the Boston belt where the IT industry has been far more insular.

The area around Cambridge University in England had a very different political-industrial infrastructure - large firms allied themselves with the state, creating an environment where it was difficult for indigenous startups to thrive.

Germany too has an environment geared more towards large firms like Phillips, Siemens and SAP, and not towards start-ups. These examples seem to show that it is more than know-how that guarantees success in the Internet age.

Q: You have commented in the past on the growing power of Asian networks in Silicon Valley. Can you flesh out some of your observations regarding networks of professionals from countries like Japan, Taiwan, India and Korea?

A: While most of the success in Silicon Valley is being driven by White males, I see that a growing role will be played by Asians in Silicon Valley and by Asian Americans.

The Taiwanese, for instance, have been remarkably successful, proactive, and politically savvy in harnessing IT potential from across the Pacific. They have cracked the chips and PCs market, have well-cemented networks, and are now acting as middlemen for the gigantic market in mainland China. They have successfully stemmed the "brain drain" that seems to plague countries like India.

The Taiwanese network in Silicon Valley is geared more towards small and medium enterprises, unlike that of Japan. The Japanese are trying hard to understand the success of Silicon Valley; my book, for instance, has now been translated into Japanese by economics guru Kenichi Ohmae. But the Japanese are also beginning to realise that the model of cloning does not work well for start-ups. Korea has begun to experiment with top-down venture capital models.

 Indians have a tremendous advantage in areas like software; their level of comfort with the English language is an added bonus.

Q: You have visited India a few times - how would rate our start-up culture for Internet companies?

A: Actually, the Indian environment too seems geared more towards large IT companies like Wipro, TCS and Infosys; smaller companies are still struggling. Currently venture capital fund companies seem more interested in Indian start-ups in Silicon Valley than in India.

Two big challenges here are the infrastructure and the bureaucracy. The bureaucracy is depressing, to put it politely. And the business culture needs to be more open in terms of sharing ideas as an industry, and more willing to take risks and accept failures.

Q: Many budding Asian high-tech regions, such as the MultiMedia SuperCorridor in Malaysia and "Cyberabad" in Andhra Pradesh, are looking to set up universities and science parks as focal points for creating fresh local talent. What is the next step after the founding of such institutes?

A: Just the presence of an educational institute is not enough - the structuring of the institute is also important. They must not be isolated from regional industry the way MIT sometimes was. Stanford, in contrast, has been much more open. The boundaries between academia, research and industry need to be more open.

Furthermore, these institutes need to set up synergistic relations with small start-ups, not just established big players. The University of California at Berkeley has been jumping into the start-up environment; in contrast, MIT has worked largely with big companies like Digital. Britain and the east coast region of the U.S. were  living in an ivory tower for far too long.

Q: What do you see beneath the glamour and glitter of Silicon Valley? Is there a dark lining to the silver cloud?

A: Issues of social upliftment are not being addressed adequately. Beneath the glamour of Hollywood and Silicon Valley lies the fact that some of the worst income inequality in the U.S. is in California. The infotech industry needs to seriously look at the inequalities and disparities surrounding the islands of prosperity.

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The interviewer can be reached at madan@techsparks.com

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