History of the Global Clusters of Innovation movement

Economic growth in the developed world is driven to a large extent by the ability of businesses to innovate: in markets served, products and services offered, technology adopted and exploited, business models and forms of organization deployed. The process of successful innovation increasingly requires short cycle experimentation and quick response to validated opportunities. This capacity for innovation is not evenly distributed. Some regions are hotbeds of innovation while others are deserts. What explains these anomalies? What strategies can be deployed by businesses and entrepreneurs to exploit the advantages of such innovation hubs and overcome the challenges of building businesses in their absence? What can governments do to foster the creation and growth of regional and national innovation economies?

Summarize INTRODUCTION CHAPTER—how you discovered SV was different from industrial cluster

These questions are not new. As early as the late 19th century Alfred Marshall was studying the comparative advantages of various industrial districts. Moe recently great contributions were made by Porter (1990), Krugman (1991), Saxenian (1994), Fujita et al. (1999), Bresnahan and Gambardella (2004). However most of these authors, with the notable exception of Saxenian, are not commenting on the unique intricacies of entrepreneurial innovation. Saxenian’s insightful comparison of the distinctions and similarities between Boston and Silicon Valley’s cultures and practicesi and her later work on the role of global emigrationii whet my appetite, but did not slate my thirst for understanding the underlying process and how they might be enabled to the benefit of those bold enough to act.
My desire to understand innovation clusters was driven by a desire to understand my personal experience. Moving to Silicon Valley mid-career in 1980, I was struck by the contrast of the Valley’s business environment with my previous milieu in the northeastern US corridor. Instead of being dominated by mature corporations with 100+ year legacies, Silicon Valley was, by comparison, a tumultuous ecosystem of large and small companies with a common bond; whether big or small, they shared a hunger to create new products and services that would dominate new and growing markets. Rather than competing over a fixed market, in a win-lose contest, they tended to vigorously compete in growing markets which, in spite of the fierce competition, contributed to a sense of shared community and shared destiny. Experiencing this through the fresh eyes of an emigrant made me keenly aware of the unique role of the community and its various participants. My profession, as an advisor and consultant to venture funded companies, gave me a privileged vantage point from which to observe and engage with the entrepreneurs that drove this ecosystem and the extensive support network that provided the enabling lattice. I was daily professional contact with entrepreneurs, venture capitalists, investment bankers, lawyers, engineers, scientists, and government regulators – indeed the entire ecosystem. The nature of my firm’s services led to long-term relationships stretching over many years, with intermittent and intense engagement. This privileged perch gave me a personal perspective on two things: the longitudinal development of entrepreneurial ventures and the community that supported them.

When I joined the faculty of the University of California, Berkeley in 1991 to establish the Lester Center for Entrepreneurship and Innovation at the Haas School of Business it was natural for me to turn to the academic literature to explain the environment that I had observed and lived in, this vibrant, effervescent ecosystem of innovation through entrepreneurship and new venture creation. It was an exciting time in the literature with an explosion of contributors sharing rapidly evolving concepts describing the power and benefits of industrial clusters. They identified the powerful role of geography and the benefits derived from the concentration of like firms. The capability of industrial clusters to generate benefits and provide a competitive advantage to cluster participants was profound. This insight has had a dramatic effect and remains a driving force for much government economic development policy around the world.

While helpful in many regards, the industry cluster construct did not address a core element of my experience of Silicon Valley: the advantage new ventures had in getting started and their increased likelihood of success. Why was Silicon Valley able to support the continuous emergence of start-up high growth entrepreneurial firms almost independent of industry alignment? Why were new industries emerging within dense and highly specialized clusters? An early example for me was the rapid emergence of the biotech industry in Silicon Valley in the early 1980s. Traditional cluster theory would have predicted that biotech would have emerged where existing pharmaceutical companies concentrated. In the U.S. that would be in the northeast corridor, particularly the northern New Jersey region. Why did this new industrial cluster arise instead among the semiconductor and computer companies in Silicon Valley?

While dramatic, this was not an isolated example. In Silicon Valley this process of new industry creation recurred again and again. Sometimes the process seemed evolutionary, such as those that extended the semiconductor industry (computers, software, and related electronics industries) or the Internet and its spawn of applications (search, new media internet commerce, and social networking). But often there arose seemingly unrelated new industrial concentrations such as biotechnology, nanotechnology and – more recently – biofuels, solar energy, and other ‘green’ industries. Traditional industry cluster theory did not account for this new industry emergence.

There were other shortcomings in existing cluster theory. It did not address why these innovation clusters were comprised and dominated by start-up firms that had rapidly grown into mature enterprises, rather than by mature incumbent firms and their spin-offs. It did not explain how new technology clusters, such as Israel and Taiwan, emerged so rapidly and robustly in indigenous environments, attracting large concentrations of venture capital. Nor did it explain my personal observation that forming business relationships with other ventures was often easier to arrange with others from a similar community where entrepreneurial firms were the drivers of market and product innovation. This increased facility was apparent even when the communities were geographically dispersed, even across international borders and multiple time zones.

These failures of traditional cluster theory to explain what was so apparent in my day-today experience led me to want to capture the insight and explain the process. In the early 2000s, this desire took on greater urgency as the unintended consequence of a collaboration with Intel Corporation. Intel sought to strengthen technology-entrepreneurship education in key communities around the world. They selected our UC Berkeley entrepreneurship curriculum as the model, and sponsored us to lead a series of over 40 faculty development seminars all around the world over a period of three years. I conducted many of these seminars personally, and this gave me the opportunity to travel to many of the leading and some of the nascent technology clusters, to meet with my colleagues and to glean from them their understandings of how Clusters of Innovation arose and behaved. This experience affirmed my suspicion that traditional ‘agglomeration’ cluster theory did not adequately describe the phenomena I was observing. I also came to understand that while individual clusters are unique, Clusters of Innovation do share certain fundamental characteristics.

With the encouragement of some of these same colleagues, I undertook to organize a new theory of the structure and operation of Clusters of Innovation [COI}, proposing a structure that was clearly distinct from the pure industrial cluster comprised of an agglomeration of firms participating in a single industry. Further it hypothesized how COI interconnected to form global networks [GNCOI] (Engel & del-Palacio, 2009). With my co-author I then tested the analysis against the case of Israel and Silicon Valley (Engel & del-Palacio, Global Clusters of Innovation: The Case of Israel and Silicon Valley, 2011), and ultimately undertook a collaboration with nineteen practitioners and scholars from twelve communities around the world to identify the attributes of COI and GNCOI and to tease out examples of how entrepreneurs and businesses operate to take advantage of these environments (Engel J. S., Global Clusters of Innovation: Entrepreneurial Engines of Economic Growth around the World, 2014), e.g. how business strategy is affected. Further we identified how the development of COI could be enhanced and accelerated through public policy and private action. This article highlights our findings that bear directly on the two key actors that can make a pro-active difference in the creation and enhancement of COI: [1] business strategy for established and emerging firms, and [2] government policy for enhancing the competitiveness of regional and national economies through the support of the emerging Clusters of Innovation.
*Regional Advantage
*The New Argonaughts