The New Economy in East Asia and the Pacific

Juan J. Palacios

One of the most distinctive features of the Silicon Valley model is the continuous creation and development of high technology firms within a particular locale. High technology firms are those dedicated to the design, development and production of new products or processes through the systematic application of scientific knowledge and the most advanced technologies, and which thus have both a high proportion of scientists and engineers and a large expenditure in research and development (R&D) operations.

The continuous generation of synergy that drives this process of firm creation is often described as the Silicon Valley phenomenon. It is the result of a complex interaction of social, institutional, organisational and economic factors and territorial structures that together make up an enabling milieu for technological innovation. 'Silicon Valley' is essentially an innovative milieu, a place where innovation is generated from the sheer flow of information over production and communication networks connecting scientifically oriented individuals across a wide spectrum of public and private entities (Castells and Hall 1994).

The critical ingredients in the emergence of the Silicon Valley cluster in California were originally the boom of aeronautics and space industries in Southern California after World War II, the presence of a first-rank research university (Stanford), the creation of one of the first industrial and technology parks in the United States, the existence of an abundant supply of cheap migrant labour, the availability of an abundant supply of venture capital from both private firms and military institutions, and a pleasant natural and cultural environment.

Silicon Valley is not, of course, the only kind of innovative milieu in history. Innovative milieux have developed in old, large cities of the world such as London, Paris, Tokyo, Berlin and New York. Nor, according to Castells and Hall (1994), is the Silicon Valley model necessarily replicable. It is a model in the sense of an experience that illustrates the essential elements underlying the formation of leading technological milieux, as well as the forms and sequencing of their combination (Castells and Hall 1994).

Going beyond Silicon Valley implies both replicating the Silicon Valley phenomenon elsewhere and transcending it, in a conceptual sense. There

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