Covering nearly two thousand square miles and with a population of nearly 3,000,000, Silicon Valley is home to a large number of startups and top companies and is located in the Bay Area of Santa Clara and San Mateo counties (Maas & Ester, 2016). This technology hub ranks 19th in the world economy in terms of GDP compared to the national economy, and it is home to the largest number of the US and global Fortune 500 companies outside of New York (Maas & Ester, 2016). Silicon Valley is the product of a confluence of factors. History, opportunity, geopolitics, talent, environment and talent from all over the world have all mixed together to make Silicon Valley what it is (O’Mara, 2019). This article analyses why Silicon Valley has been successful and considers some of the negative effects, and presents a case study of the negative impact of Silicon Valley on the online world.
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Government and military-industrial investment have driven Silicon Valley’s growth. What Silicon Valley has achieved has been built on massive government investment before, during and after the Second World War – from defence contracts during the space race years to university research funds, to road building, the tax system and public schools. Public spending fuelled the explosive growth of science and technology and laid the foundations for future generations of start-ups (O’Mara, 2019). In order to determine how Silicon Valley came to be, it is necessary to trace the origins of governmental relations in the area (Adams, 2017). During World War I, the region located in Silicon Valley entered the modern American military industry as a source of radio technology (Adams, 2017). The emergence of the ‘military-industrial complex, the Federal Telegraph, which received its first contract from the United States Navy in 1913, set the pattern that has driven the region’s development and growth for over fifty years (Adams, 2017). set the pattern that has driven development and growth in the region for over fifty years (Adams, 2017). US military interests not only drove institutional relations but also technological innovation (Adams 2017). World War II led to an unprecedented military race, massive Cold War defence spending, Cold War priorities shaping and defence policy assuming industry-academia relationships, federal spending patterns, corporate strategies and technological innovation equipped Silicon Valley to become what it is today (Maas & Ester, 2016). Silicon Valley’s technological developments in World War I, World War II and the early post-war years built and enriched its innovation infrastructure for the semiconductor revolution that followed (Maas & Ester, 2016). This allowed Silicon Valley to become a major centre of silicon device manufacturing in the United States and is the reason for its name (Maas & Ester, 2016). Technology hotspots do not appear suddenly but are rooted in long-term economic and geographic developments. The original vacuum tube radio technology provided the basis for the development of technologies such as integrated circuits, semiconductors and microwave tubes (Maas & Ester, 2016). These later technologies in turn laid the foundation for modern hardware and software breakthroughs that led to an uninterrupted stream of smartphone and other mobile device applications (Maas & Ester, 2016).
Silicon Valley is the successful masterpiece of free market economics combined with government macro-regulation. To attribute Silicon Valley’s success entirely to the free market is as much a false guess as to suggest that it is the result of government operations. It was the combination of entrepreneurial passion and government control of the wider environment that ultimately led to Silicon Valley (O’Mara, 2019). Although the success of the US is seen as business-led wealth creation, it is actually the government that is actively involved in business innovation (Maas & Ester, 2016). In terms of funding, the Small Business Innovation Research (SBIR) programme was designed to help small businesses access early-stage financing, a gap that venture capitalists were overwhelmingly reluctant to invest in early-stage businesses and which the government filled (Maas & Ester, 2016). The largest research fund in Silicon Valley is the Federal Research Fund, a funding role that is still present everywhere in Silicon Valley today (Maas & Ester, 2016). In terms of policy, the government is also the rule and lawmaker, stimulator of small business participation, and initial customer and visa provider to ensure a collective innovation agenda and stimulate innovative entrepreneurship (Maas & Ester, 2016). The US federal government has also developed rules to ensure distributive justice and protect a level playing field, aiming to address the competitive needs of a variety of players (Maas & Ester, 2016). These reflect the role of the US government in actively intervening in innovation markets. Over time, government policies have been continuous and stable and have taken into account actual needs (Maas & Ester, 2016).
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The culture of Silicon Valley, forged by geography and history, has wonderful chemistry with the unique business culture of the United States. Silicon Valley’s achievements are the result of a collective effort. The technological changes of the times are the result of a combination of group effort and individual breakthroughs. The success of individual entrepreneurs is achieved through collaboration with other people, networks and institutions, and the success of Silicon Valley comes from a world of talent (O’Mara, 2019). Culture affects countries and regions at the macro, meso and micro levels. It influences each aspect of innovation and entrepreneurship in Silicon Valley (Maas & Ester, 2016). Cultural comparisons are important to understand how entrepreneurs who move to Silicon Valley integrate their business beliefs and innovation values and how they experience their dominant culture (Maas & Ester, 2016). With regards to the business culture in the US, firstly it is argued that government influence should be minimised and that the government is softly involved by providing support (Maas & Ester, 2016). Secondly, Flandrek Terman of Stanford University set a precedent for industry-university collaboration (Maas & Ester, 2016). In his view, universities, businesses and governments, among others, should be strong partners, a view that became one of the pillars of the Silicon Valley innovation model (Maas & Ester, 2016). With more than half of Silicon Valley startups stating that their main founders are immigrants from around the world, the Bay Area culture, with its defining characteristics of tolerance and openness, is very conducive to immigration (Maas & Ester, 2016). And the cultural diversity that comes with immigration is conducive to innovation (Maas & Ester, 2016). Companies in Silicon Valley have access to marketing talent, technical talent and management knowledge from around the world, which is rare elsewhere in the world (Public Broadcasting Service, 2005). And the Silicon Valley culture, with its emphasis on passion, dedication and work ethic, is unparalleled anywhere in the world, teaching entrepreneurs that anything is possible (Maas & Ester, 2016).
Silicon Valley is an industry with profits that is now beginning to pursue them in more sophisticated ways, such as creating an advocacy group on behalf of immigration reform in Washington, but the National Security Agency scandal has put them in the spotlight. The government may have this information, but Silicon Valley already has it, and it is a big question whether a for-profit agency is better placed to entrust you with your private secrets than a security agency. Silicon Valley has created smarter machines and robots at the expense of American jobs. Their interests are actually in some ways the opposite of those of the American middle class (Bloomberg, 2013).
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Adams, S. B. (2017). Arc of Empire: The Federal Telegraph Company, the U.S. Navy, and the Beginnings of Silicon Valley. Business History Review, 91(2), 329-359. https://doi.org/10.1017/S0007680517000630
Bloomberg. (2013, June 27). Why Hasn’t Silicon Valley Spread Across the U.S.? [Video]. Bloomberg. https://video.alexanderstreet.com/watch/why-hasn-t-silicon-valley-spread-across-the-u-s
Maas, A. & Ester, P. (2016). Silicon Valley, Planet Startup: Disruptive Innovation, Passionate Entrepreneurship and Hightech Startups. Amsterdam University Press. https://doi.org/10.1515/9789048532834
O’Mara, M. P. (2019). The code : Silicon Valley and the remaking of America. Penguin Press.
Public Broadcasting Service. (2005, October 24). Silicon Valley’s Past and Future. [Video]. NewsHour Productions. https://video.alexanderstreet.com/watch/silicon-valley-s-past-and-future-october-24-2005