Technology, entrepreneurship and path dependence: Industrial clustering in silicon valley and route 128

Abstract

Silicon Valley and Raute 128 have been the centers of innovation and commercialization for the electronics, computer and data communications industries in the postwar period. However, since the 1960s Silicon Valley has grown more rapidly and from approximately 1985 through 1995 Route 128 experienced retarded growth. Their success has diverged dramatically in the last decade. The most common explanations for this divergence are differing cultures, interfirm relations or/and internal organizational style organization. This paper builds upon path-dependent and dominant design explanations of technical and industrial change, arguing that the technological trajectories of the industries underlying the two regions were different and this led to their differential destinies. To explain the dynamics of the two regions, an analytical separation is made between the economy of the existing firms and a separate economy of institutions that evolved to nurture new firm formation.