Annalee Saxenian, Regional Advantage: Culture and Competition in Silicon Valley and Route 128 (Cambridge, MA: Harvard University Press, 1994), 226 pp.

Regional Advantage, Annalee Saxenian's penetrating study of the two leading centers of the electronics industry in the U.S., deserves careful attention from social scientists as well as a wider public interested in economic development and technological change. Saxenian draws extensively on ideas about network-based industrial systems developed by Michael Piore and Charles Sabel, Marc Granovetter, and others. But by focussing on two high-tech-- and high-profile--industrial centers, her book highlights the contribution of dense communication networks to high rates of technological innovation. The web of group affiliations, it turns out, has a bigger payoff in sustaining innovation than either classical sociology or classical economics anticipated.

The problem Saxenian sets herself is to account for the continued vitality and growth of the electronics and computer industry in Silicon Valley compared to the relative stagnation and decline of the industry along the Route 128 corridor in Massachusetts in the 1970s and 1980s. The pivotal differences, she finds, lie in Silicon Valley's open networks of communication and exchange across firms compared to the more autarkic and vertically integrated structure of Route 128 companies.

For example, engineers and other professionals in Silicon Valley often changed firms or quit their jobs to start firms of their own, and such decisions enjoyed widespread support. In Massachusetts, leaving one firm for another, much less for a startup, was infrequent and frowned upon as disloyal. Silicon Valley firms collaborated with one another in formal and informal ways, developing alliances, contracting for components and services, or simply sharing information. Employees of different firms mixed frequently at local business and social gatherings. In contrast, Massachusetts firms were highly secretive and self- contained, and employees had fewer interfirm contacts. Boundaries among firms were blurred in California but sharply etched in Massachusetts.

Saxenian locates the origins of these differences in the history and culture of the two regions in the period after World War II. University, corporate, and venture-capital leadership may have been key influences. Both regions had universities with leading research and training programs in engineering. But, compared to MIT, Stanford encouraged wider participation in its activities by local firms. Hewlett-Packard also helped to set the tone in Silicon Valley by welcoming and even helping start-ups, while its 128 counterpart, Digital, was largely closed to the regional economy. In addition, the venture-capital leadership in Silicon Valley played a role in transferring skills and knowledge among firms, whereas in Boston the more traditional sources of finance had little technical expertise. In almost stereotypically Californian fashion, the corporate culture in Silicon Valley was "laid back" about sharing of information and skills, whereas firms in Massachusetts anxiously sought to protect their intellectual property--and ironically ended up with less to protect.

These different industrial systems, Saxenian shows, affected the rate of new start-ups and time-to-market for new products. From decade to decade, start-up rates rose in Silicon Valley but fell along Route 128. It was easier for new Silicon Valley firms to find venture capital, professional talent, and technical services from an unmatched regional base of vendors. The fluidity of the system enabled people with innovative ideas to develop them and bring them to market more quickly.

In the 128 area, by contrast, a few large vertically integrated firms "locked up" technical capacities and skill; start- ups lacked access to fabrication or design services, for example. In fact, some entrepreneurs moved from Massachusetts to Silicon Valley to take advantage of the environment. Ultimately, one Massachusetts firm after another--Wang, Prime, Data General, ultimately even Digital--plunged into crisis, unable to keep up the pace with its faster and more flexible competitors. And although idiosyncratic factors about each firm may help explain its difficulties, Saxenian persuasively implicates the regional system as a whole. Technological innovation was simply moving too fast for large, vertically integrated firms to keep up in all components or to adapt quickly to new markets.

Silicon Valley, too, experienced a crisis in the early 1980s after its semiconductor firms had opted for a more traditional mass production approach. But the region's industrial system soon recovered with a wave of new startups and a reassertion of its more flexible, network-based organization.

Regional Advantage has obvious interest for policy makers: What state would not like to have the "next" Silicon Valley? But while Saxenian has some pertinent advice about policy (including the role of universities), it is not at all obvious how to reproduce the patterns that have made Silicon Valley successful. Investing in technology centers is relatively easy; creating a regional economic culture of trust, collaborative relationships, and open communication is a more elusive target. Still, those who want to understand economic growth in the information age can hardly do better than to read Regional Advantage.