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January 30, 2007

« Quality of Place | Main | Davos does demography »

The new 2007  Index of Silicon Valley is out. This year's effort by Doug Henton and the terrific team at Collaborative Economics is the best one yet.  In addition to tracking trends in high-tech and venture investment, it includes a detailed section on Silicon Valley in a spiky world, with  new data on the global distribution of patents, IT employment, and venture investments. This special section has a detailed analysis of talent and diversity which concludes that "Silicon Valley’s diverse ethnic composition will be its chief asset in the global marketplace, where new technology regions in Asia, Israel, and Europe are emerging as competitors and collaborators."   The report includes a detailed analysis of the externalities of the creative economy, including worsening economic inequality and deepening problems of housing affordability, noting  that: " the region faces significant challenges... the percentage of first-time home buyers who can afford the median-priced home is 26 percent, down from 31 percent in 2005."

The report  concludes that Silicon Valley is: "growing as a global center for creativity in business and technology, defining our advantage by being creators of new products, services, companies and business models. This is a fundamental restructuring, away from the old manufacturing model toward a new idea economy. We can see it happening very clearly, and our region’s companies are taking full advantage.  The question for Silicon Valley is whether there will be broad participation in these activities—particularly for the rising generation—or whether we’re looking at a future where our companies prosper through their global networks but the region doesn’t feel better off.”

The full report is here.

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Comments

Sanjay Dalal

Significant Upward Trends in Creativity and Innovation.

In particular, Creativity and Innovation is growing across the board in new products, processes and business models.

For instance, the productivity increased at the rate of 4.1% in Silicon Valley, versus 1.9% in rest of the country; each employee is producing increased value for Silicon Valley companies through creativity, more than twice the rate of increase in rest of the country.

Also, Silicon Valley accounts for 11% of the total U.S. patents granted; San Jose led all cities with 1,960 patents in 2005. Clean Technology investments are on the rise, with the Silicon Valley poised to lead the nation.

Finally, VC investments in new and emerging companies topped $5.2 billion in only three quarters in 2006 - compared to $4.6 billion in first three quarters in 2005. Silicon Valley leads the nation with 27% of total VC funds in 2005.

All in all, substantial upward trends that could result in better economy in Silicon Valley in 2007 and beyond.

Richard

Sanjay - Thanks for your comment. I saw Vinod Khosla interview this weekend where he talked about the coming discontinuity in resources and the Valley's position in alternative energy technology. He said basically, who would have thought GM or Ford would have been eclipsed. He also said incumbent firms have an opportunity to catch on, pointing toward IBM's ability to take up computers and IT. The productivity and innovation statistics you cite are why the Valley continues to be the globe's center for innovation and technology despite relatively high housing costs. Richard

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