A Core of the Enterprise: What Makes Silicon Valley an Innovation Factory in the World?

Many people are familiar with Silicon Valley. When people talk about Silicon Valley, it has too many labels. What are the natural and cultural characteristics of the San Francisco Bay Area that have bred the innovation highland of global attention?

Similarly, Silicon Valley is changing the world with its products and innovative spirit. After 130 years, Silicon Valley has already become the spiritual landmark of the World Science and Technology Innovation World (ICANN, 2011). The landmark events and thinking modes created by Silicon Valley in each era are valuable, which also constitute the important core of Silicon Valley culture today.

At present, Silicon Valley has more than 30000 technology enterprises, such as Apple, Google, Intel and Facebook. They not only affect all aspects of people’s lives, but also lead the global science and technology industry forward. Therefore, Silicon Valley is the starting point of innovators, the kingdom representing the electronic industry and digital platforms, and the paradise of the world’s high-tech industry.

Silicon Valley” by alifaan is licensed under CC BY-NC-SA 2.0.

A pluralistic and inclusive cultural atmosphere

The population of Silicon Valley has experienced four times of colonization and immigration. The globalization perspective of Silicon Valley companies is the product of multicultural influence, just like the famous Peninsula Conflict Resolution Center (PCRC). The population structure here is completely different from that of the United States as a whole. For example, the proportion of Asians in the population of the United States is only about 4%, but in Silicon Valley, one third of the people are Asians (PCRC, n.d.). Of course, there are a large number of Hispanics and African Americans here. The special population structure is the foundation of Silicon Valley’s diversification, multi-culture is one of the important factors for Silicon Valley to attract outstanding talents from all over the world.

In a sense, although Silicon Valley is the territory of the United States, it belongs to the world economically and culturally. This inclusive culture includes a culture that encourages entrepreneurship and tolerates failure, encourages wise failure, and is not afraid of failure. Silicon Valley has a very broad population, which was established slowly after four times of colonization and immigration, its population composition is completely different from that of other parts of the United States (PCRC, n.d.). In a sense, although Silicon Valley belongs to the United States, its economy and culture belong to the world. The root cause of the globalization perspective of Silicon Valley companies is the product of the multicultural influence here.

Relative freedom of law and policy

As people all know, the United States is relatively strict in the protection of intellectual property rights, and there is competition avoidance. However, California has a lot of freedom in this respect, there are non competition clauses in the employment contract, and laws on trade secrets and private information have not been actively implemented here. This allows the company to split rapidly and create a strong atmosphere of innovation and entrepreneurship. Job hopping is constantly happening in Silicon Valley, and engineers out of control are constantly building new companies. The information released from the PSMA (2010) website shows that:

“The Roots of Silicon Valley” by PSMA is licensed under the psma.com.
  • Non competition clause: If you work in a high-tech enterprise, once you change jobs, you may not be allowed to work in the same industry for one to two years.
  • In 1957, eight young employees of Shockley Semiconductor Laboratory collectively changed jobs and established Fairchild Company, Spock and Raymond also left Fairchild soon to establish their own National Semiconductor Company. In 1968, Sanders, the marketing manager of Fairchild, left, which led to the emergence of AMD in the world. In the same year, Noyce, Moore and Grove left Fairchild and founded Intel Corporation. The famous best seller Silicon Valley Fever published in the early 1980s wrote: “About half of the 70 semiconductor companies in Silicon Valley are direct or indirect descendants of Fairchild. Working in Fairchild is the way to enter the semiconductor industry throughout Silicon Valley” (LéCuyer, 2001).

Gold Rush and Adventure Spirit

USA, CALIFORNIA GOLD RUSH, GOLD 1852 —HALF DOLLAR a” by woody1778a is licensed under CC BY-SA 2.0.

Since the discovery of the San Francisco gold mine, a large number of people have ventured into the West Coast of the United States from the east and other regions in an attempt to become rich overnight through gold mining (Petersen, 2017). The descendants of gold miners inherited their ancestors’ desire for wealth and adventurous spirit. The western development brought about by the gold rush promoted the development of transportation and communication industry. Until now, people in Silicon Valley have the attitude of provocation, destruction and disregard of authority. Everyone’s challenge to tradition and authority has inspired many new ideas, which can be respected. Here, a maverick and individualistic thinking mode is respected, and technology enthusiasts have established their own unique culture.


Natural Port and Military Demand

Map of ‘Silicon Valley‘, Undated” by nathanh100 is licensed under CC BY 2.0.

San Francisco Bay is a good natural harbor, which can effectively avoid the storms in the Pacific Ocean. It is relatively stable and calm, and is very suitable for naval garrisons. In 1933, the naval NAS base was established here, the naval base has brought a lot of demands, and maritime training has a necessary condition – maritime communication (ICANN, 2011). The military provided contracts to Stanford University and surrounding companies to research and develop radios and specific projects related to maritime radios (Lusoli & Turner, 2021). The intervention of military demand has greatly improved the development of communication technology and related industries in Silicon Valley.

The cooperation process between Silicon Valley and the military can be roughly divided into three stages:

  • The first stage (the 10-40s of the 20th century): government led and cooperated with the US Navy. For example, in 1912, the United States Navy provided Paulson Wireless Telephone and Telegraph Company with a large number of procurement contracts (Blank et al., 2022);
  • The second stage (from the early 1940s to the late 1950s): government intervention and military purchase. For example, in 1941, the U.S. government set up a scientific research studio to help the military in scientific research. Professor Terman of Stanford University was responsible for electronic warfare and attached importance to basic research (Blank et al., 2022). In 1946, the products of the California Leighton IndustrialCompany were sold only to the US national defense (Blank et al., 2022). In the following decade, the first users of all computers were military departments.
San Francisco Fleet Week 2011 [Image 4 of 5]” by DVIDSHUB is licensed under CC BY 2.0.
  • The third stage (1960s to the end of 1970s): mutual benefit and win-win cooperation between the military and Silicon Valley. In 1977, the US Department of Defense hired Bill Perry, the former founder of the electromagnetic laboratory and Perry leads his scientific research and engineering laboratory (Blank et al., 2022). In the new generation of weapons, the military budget has increased dramatically, and these projects are all rely on Silicon Valley.

Opportunities for venture capital

When people talk about Silicon Valley, they always talk about those venture capital companies, which are an indispensable part of Silicon Valley. On the one hand, venture capital has contributed to the financial miracle of Silicon Valley, on the other hand, these venture capital companies have made continuous progress because of the emergence and development of Silicon Valley (ICANN, 2011). There is no doubt that Silicon Valley is the most concentrated area of venture capital in the United States.

Silicon Valley Financial Center” by christian.rondeau is licensed under CC BY 2.0.

Why is Silicon Valley so famous for venture capital? First of all, it has a long history, advanced technology and high returns. Venture capital in Silicon Valley began in the late 1950s, which should be regarded as a new thing at that time, many other regions in the world learned from Silicon Valley in similar investment methods (Lusoli & Turner, 2021). According to the blog written by  Clarke (2022):

  • In the 1960s, four major venture capital companies were established successively, including Davis & Rock(Intel, Apple), Anderson Horowitz (Hotmail, Skype, Baidu), Mayfield Investment Company (Amgen, Atari, Compaq, Genentech). At the same time, American venture capital centers began to shift from New York and Boston to Silicon Valley (Clarke, 2022), mainly investing in emerging semiconductor industries.
  • In the 1970s, three real venture capital companies were established one after another: KPCB (invested in Genentech), Sequoia Capital (invested in Apple, Cisco, Yahoo), and NEA (invested in Immunex, Juniper Networks, and Powerpoint). These venture capital companies have developed and formed a group of venture capital companies in Silicon Valley (Clarke, 2022). It has become the center of world venture capital, mainly investing in biotechnology and personal computer industry.

The Past and Future of Silicon Valley

Silicon Valley in 2020 witnessed a lot. In Murphy’s (2020) report on December 3, HP announced that it would move its global headquarters from San Jose, California, to Houston, Texas, and Oracle also announced that it would move its headquarters from Silicon Valley to Austin. The removal of several technology companies has led to various comments on the decline of Silicon Valley. However, Silicon Valley has become a synonym for technological innovation. The recreated Silicon Valley everywhere also confirms that it still has the core power to guide the industry.

Up to now, the growth mode of Silicon Valley has become stable. Relying on the interaction of schools, enterprises and venture capital, Silicon Valley has formed a complete innovation system. For hundreds of years, the spiritual gene of Silicon Valley has always carried a pursuit of products and technology, just like the slogan that has been shouted for countless times: Silicon Valley is changing the world.



Blank, S., Felter, J., & Shah, R. (2022). The US must harness the power of Silicon Valley to spur military innovation. TechCrunch. https://techcrunch.com/2022/02/24/the-us-must-harness-the-power-of-silicon-valley-to-spur-military-innovation/ 

Clarke, H. (2022). The history of Silicon Valley and the venture capital industry. Harrison Clarke International. https://www.harrisonclarke.com/devops-sre-recruiting-blog/the-history-of-silicon-valley-and-the-venture-capital-industry 

ICANN. (2011). About Silicon Valley. https://archive.icann.org/en/meetings/siliconvalley2011/about.html

LéCuyer, C. (2001). Making Silicon Valley: Engineering Culture, Innovation, and Industrial Growth, 1930–1970. Enterprise & Society, 2(4), 666–672. https://doi.org/10.1017/S1467222700005310

Lusoli, A., & Turner, F. (2021). “It’s an Ongoing Bromance”: Counterculture and Cyberculture in Silicon Valley—An Interview with Fred Turner. Journal of Management Inquiry, 30(2), 235–242. https://doi.org/10.1177/1056492620941075

Murphy, K. (2020). Oracle joins HP and Elon Musk in California-to-texas move. POLITICO. https://www.politico.com/states/california/story/2020/12/11/oracle-joins-hp-and-elon-musk-in-california-to-texas-move-9424903 

Petersen, S. (2017). “49” reasons Silicon Valley cannot be cloned. HuffPost. https://huffpost.netblogpro.com/entry/49-reasons-silicon-valley_b_12424714 

Peninsula Conflict Resolution Center (PCRC). (n.d.). Silicon Valley Multicultural Awards Program for BIPOC Nonprofit Leaders. https://www.pcrcweb.org/svmap

PSMA. (2010). A Company with Nimble Focus on Energy Efficient Power Solutions and Mobile Connectivity. https://www.psma.com/HTML/newsletter/Q2_2010/page4.html