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How Globalization Strengthens the Tech Economy
By Scott Duke Harris Mercury News (Abridged)

  • In an age of converging technologies, Silicon Valley - a nickname coined in the early 1970s from the silica used in semiconductors - is at the vortex. It's a technocratic melting pot where ideas are sparked, shared, blended and refined; where bootstrapping and angel investing may ultimately lead to multibillion-dollar companies; and where personal Google Campusrelationships are forged that lead to payoffs years down the road.
  • Silicon Valley's status as the world's pre-eminent tech center has been strengthened by the evolving global market.
  • The same high-tech tools that radically diminished the significance of location and distance have, ironically, enhanced the valley's position as a test lab and marketplace for innovation and industry.
  • The rise of tech hubs in China, India, Israel and elsewhere has reinforced the valley's leadership, not threatened it. 
  • The valley has long been home to the world's largest collection of tech companies, including 17 of 30 listed on the Amex Computer Tech Index. Many of those are racking up strong revenue, both in the United States and abroad, enabling them to invest in research and development, make acquisitions and fund start-ups.
  • The start-up culture is flourishing again. In the third quarter of 2007, venture capitalists invested more than $2.48 billion in more than 260 valley companies.

  • Venture funding to valley companies - from VCs inside and outside the region - has long dwarfed the amounts in other regions, including many large, developed nations.
  • The valley remains vital to the Web's continuing evolution. In less than two years, YouTube went from an idea to a $1.65 billion acquisition by Google.
  • Within the bustling social-networking sector, Facebook, LinkedIn and Ning, as well as "virtual worlds" Second Life and Gaia, are headquartered between San Jose and San Francisco. 
  • Several sites that target audiences elsewhere are based in the valley or close by. Bebo - the top social-networking site for the United Kingdom, Ireland, Australia and New Zealand - is headquartered in San Francisco.
  • The top sites for the Philippines (Friendster), Brazil (Google's Orkut) and Turkey (Yoonja) primarily operate from the Peninsula, thousands of miles from their users.
  • Facebook recently disclosed that 60 percent of its users were outside the United States.
  • The valley's magnetism remains strong. Multinationals like Nokia and Microsoft have expanded their presence here, and many overseas start-ups are moving operations to the valley to be closer to potential investors, partners, ideas and customers.
  • Recent arrivals include major law firms with global reach, such as DLA Piper, eager to partake in international deal-making.
  •  The valley is bullishly diversifying and expanding its influence. Adapting to the Internet, Apple dropped "Computer" from its name to reflect how it has branched into iPods, iTunes and iPhones.
  • Hardware stalwarts Applied Materials and Cypress Semiconductor, meanwhile, have moved into solar technology, angling for a piece of the huge global energy market.
  • While the valley may be best known for its computer industry, it also has become a center for biotech, medical devices, nanotech and especially "clean tech" - a sector covering energy generation, storage and efficiencies, as well as water purification and air pollution.
  • Valley executives predict a tenfold increase in solar power jobs locally over the next decade.
  • For veteran valley technologists, the most recent waves of innovation and entrepreneurial action fit a pattern. Since the 1950s, the valley economy has ridden a succession of powerful waves: semiconductors, software, personal computers, networking, the Internet. 
  • "Proximity matters," explained Marguerite Gong Hancock of the Stanford Project on Regions of Innovation and Entrepreneurship. For all the business handled via the Internet phone system Skype and Webexteleconferencing, "the highest value-add is face-to-face," she said. "When you're doing your ultimate negotiation, it's face-to-face and unscripted." Even the most sophisticated video-conferencing tools, such as HP's Halo or Cisco's TelePresence, can only approximate eye contact, much less a handshake.
  • The existing bedrock of older tech companies, collaborations with research universities, venture funding and supportive legal institutions all contribute to the valley's success. Another critical ingredient, many agree, is the valley's bold, risk-taking culture, including a high tolerance for failure.
  • In a new era of capitalist collaboration, observers such as Cisco Chief Executive John Chambers and University of California-Berkeley scholar AnnaLee Saxenian say emerging tech hubs are more partners than rivals. One tangible measure is the rise of cross-border co-patenting: The valley has participated in a sixfold increase in such filings from 1993 to 2005.

  • Globalization in the second half of the 20th century was mostly driven by large multinational corporations, including HP and Intel, notes Saxenian, dean of the UC-Berkeley's School of Information.
  • Saxenian says in her book "The New Argonauts," globalization is increasingly influenced by foreign technologists who came to the valley as students or engineers and returned home to start companies.