Pierre DesrochersUniversity of Toronto - Geography

Introduction

1) Geography & Economic Development

2) Silicon Valley & Clusters- SV: Facts & Myths- Replicating SV & Creating Clusters

3) Case against Regional Economic Specialization

Conclusion

First, back to the basics

of regional economic development…

Economic Activity in a Spiky World (Florida et al.)

Canada

Nordhaus et al.

USA

France

Russia

India

Japan

SCHEDEL, Hartmann , Nuremberg, 1493

Towns = crossroads

Conventional explanations:

Trade (marketplace)

Urbanization economies

« Where there is city growth, humanity moves forward…;

Élisée Reclus (1895)

Where they flounder, civilization itself is in danger. »

1990s

“In Russia…

there are an immense number of villages

each of which carries on only one branch of production,

or even only a part of one.”

Alfred Marshall, Principles of Economics (1890)

« There are for instance over 500 villages devoted to various branches of woodwork;

one village makes nothing but spokes for the wheels of vehicles;

another nothing but the bodies and so on;

and indications of a like state of things are found in •histories of oriental civilizations •chronicles of medieval Europe »

Combination of factors

specialized labour pool

localized economies of scale (specialized suppliers & infrastructure)

knowledge spillovers

research institutions

Chicken (cities/clusters)

or Egg (economic development)?

Tautology (cities/clusters & agglomeration economies)

Proximity & smart people (and then what?)

State Vs Markets: Decades of experience(s)

What have we learned?

Silicon Valley

Early decades 20th C: •San Francisco - radio technology & maritime hub;•Local businesses: Federal Telegraph (1909), Magnovox (1917), Heintz & Kaufman (1921), Kolster Radio Corp (1928), Litton Engineering Laboratories (1932), Eitel & McCullough (1934)

Mid 20th C: •Cluster of vacuum tube manufacturers•Stanford U & Frederic Terman •Bill Shockley & transistors (left Bell Lab NJ for Palo Alto – family & business (« buzz ») reasons•Spin-offs: « Traitorous Eight » - Fairchild semiconductors•« Fairchildren » and others: Intel, H-P, Apple…

Growth processes?•Same as elsewhere (Detroit/Akron/Italy/Germany)

Government Interventions?•Military contracts (but typically building on existing firms)

University?•Stanford University – applied and very good / best

Many • policy makers • intellectual entrepreneurs• real estate promoters

have tried to create• “growth poles”• “high-tech parks”• “industrial districts,”• “clusters”

Charles de Gaulle

(1955) “Note sur la notion de pôle de

croissance,” Économie Appliquée 8: 307-320

« Growth Poles » climax: 1965 – 1975

Political and Economic/Geographic Logics incompatible…

« Targeting » and « Planned External Economies of Scale » don’t deliver…

Spontaneous « Growth Poles  » kept appearing…

Clusters (pro-specialization, but with nuances…)

1990

Successes few and far between

Main factors of success•Prior locations (near thriving areas)•Formalization of spontaneous growth•Exceptional locations & sustained public efforts (Raleigh-Durham; Sophia-Antipolis), but mostly relocations of large firm operations

Most overhyped factor:•“World Class” academic institutions

What is a cluster?

Politicians picking winners? stealing from Peter to pay Paul everyone targets same trendy industries knowledge of time and place

Politics (corruption) as usual… selection of locations favored businesses

Urbanization economies

Multiplier effect

Stability & resiliency

Jacobs’ externalities

Regional Multiplier

Putting all eggs in one basket?

Local Economy

Specialized Diversified

Monopoly

Several small

│││││││││││││││││││││││││││

____________________________________________Firms

+

=

Case for Jacobs’ SpilloversIf innovation = new combinations; then diverse region = more opportunities; then more opportunities = more innovativemore innovative = more economically

prosperous

Can you plan “diversity” and “Jacobs spillovers”?

• Can you plan spontaneity?• Growth poles experience• How does cross-fertilization actually occur?

work experience individuals acquire and sectors in which know-how will likely be transferred

network of knowledgeable people

tacit knowledge

agglomeration economies

Alceus ~ 600 BC

“Not houses finely roofed nor the stones of walls well built nor canals nor dockyards make the city,

but men able to use their opportunity.”

Crucial (except for world cities)

Reasonably affordable housingGood schoolsDecent infrastructureSafety/security (personal – property rights)Entrepreneurial mindsetReasonable taxation and regulation

Not crucialLocation (transport, weather)Public transportationWorld class universities Cluster or Silicon Valley-inspired policies…