Silicon Valley, America's Innovative Advantage

Five Reasons Why No One Can Copy Silicon Valley's Success

Silicon Valley
••• Photo: Marlyn Goddard/Getty Images

Silicon Valley is the U.S. center for innovative technology companies. It's located south of San Francisco, California. It's home to 2,000 tech companies, the densest concentration in the world. This proximity to suppliers, customers, and cutting-edge research gives each a competitive advantage.

Even more important, most of them are also leaders in their industries. These include software, social media, and other uses of the internet. Its companies also produce lasers, fiber optics, robotics, and medical instruments.

Silicon Valley was named for the silicon needed to make semiconductor computer chips. 

Silicon Valley creates a center for innovative companies to become highly profitable. That creates jobs, more tax revenue, and higher stock prices. It gives the United States a comparative advantage over other countries. 

Unfortunately, not all the benefits of Silicon Valley go to U.S. citizens. Many tech jobs are outsourced to foreign-born workers who have the engineering skills needed. There aren't enough American-born software engineers who graduate from U.S. universities. That is one reason the U.S. is losing its competitive advantage.

Where Is Silicon Valley?

Silicon Valley includes the cities and towns south of San Francisco. It originated in the Palo Alto/Menlo Park/Stanford University area. It was originally the nickname for the Santa Clara Valley.

Silicon Valley is bordered by the San Francisco Bay on the east. The Santa Cruz mountains are on the west, and Redwood City is to the north. The south shares its border with several cities. These include Los Altos, Mountain View, Sunnyvale, Cupertino, Santa Clara, and San Jose. The Coast Range Mountains are in the southeast area. 

Five Reasons for Silicon Valley's Success

The main reason for Silicon Valley's success is its spirit of cooperation. For example, many founders of local companies went to school together. That makes them more likely to promote each other regardless of company affiliation. Personal loyalties override corporate ones.

Professional networks led to easy information exchange. Companies found that collaboration between them made them all more successful.

The State of California prohibited non-compete clauses. As a result, star performers could leave a company to start their own to test out new ideas. As a result, employees focus on helping each other solve problems.

An often-overlooked reason is Silicon Valley's cultural diversity. Between 1995-2005, more than half of its start-ups were founded by immigrants. Why? The Valley attracts top engineers from around the world, especially India and China. Diversity leads to innovation as long as everyone focuses on their shared goals. 

Top-notch universities surround the Valley. Many company founders graduated from Stanford University. Other local universities contributed the trained technical support staff. These included the University of California at Berkeley, San Jose State, and community colleges. 

Silicon Valley Companies

The most well-known Silicon Valley companies are Apple, Facebook, Google, and Netflix. The area also launched Tesla, Twitter, Yahoo!, and eBay. There are many business support companies such as Cisco, Oracle,, Hewlett-Packard, and Intel. Other companies include Adobe, Intuit, and Zynga. 

History of Silicon Valley

The idea for Silicon Valley began during the Great Depression. Stanford engineering professor Frederick Terman decided to create more jobs opportunities for his students. He encouraged two of his them, William Hewlett and David Packard. He even got grants for them so they could create the high-tech company named after them.

After World War II, Terman became Dean of the engineering school. He encouraged faculty to sit on the boards of new enterprises. He used contacts in Washington to get Federal grants for school research. He founded the Stanford Industrial Park to cross-fertilize research between Stanford and local businesses.

The University leased land to Varian Associates, Eastman Kodak, General Electric, Lockheed, and Hewlett-Packard. In 1955, Terman became provost of Stanford. He expanded the Park to include biotech companies. In 1957, Fairchild Semiconductor launched, spawning 38 companies including Intel.

The name "Silicon Valley USA" was first used in 1971. Don Hoefler chose the name for a series of articles published in Electronic News.

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