How The World Is Taking On Silicon Valley

InsideSources.com, Washington, D.C.

Silicon Valley has been at the forefront of innovative tech, but regions around the world are hoping to emulate and surpass it as an entrepreneurial superpower.

The San Francisco Bay Area is home to some of the most successful tech companies in the world. It’s also the starting point of countless startups and innovative ideas. The valley has exemplified what it means to be a successful tech center, and now regions around the globe want their own shot at the top.

“We can name New York, London, Los Angeles, Tel Aviv, Beijing, Bangalore, Berlin, London, Singapore as top startup cities besides Silicon Valley,” Mustafa Ergen, a professor at Koç University in Istanbul, Turkey, told InsideSources. “Seoul, Barcelona, Dubai, Istanbul, Rio, Dublin are few more to cite as thriving.”

Silicon Valley and other successful tech hubs have similar characteristics that have helped them thrive. They all have an entrepreneurial culture, investors, and the right infrastructure. The Valley has been successful because it mixes a very entrepreneurial culture with eager investors.

“Today, most of the developed and developing countries are active to promote the entrepreneurship,” Ergen, who teaches entrepreneurship and technology management, said. “We are in the entrepreneurial economy and past information economy that succeeded industrial economy. New era requires entrepreneurial mindset, execution capability, and venture capital.”

Education and training is also another critical component behind successful tech centers. A tech center needs people with advanced computing and engineering skills. Silicon Valley has used foreign work programs to fill its skill gap, but regions around the globe are structuring their education system around those sought after skills.

“Today, to foster the entrepreneurial mindset, the education system is being converted and an entrepreneurial university system is being designed,” Ergen said. “Still, Silicon Valley universities are spearheading and the U.K. is following. Governments are creating great incentives, and local procurement power is on the table for startups to foster.
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Ergen has seen firsthand how governments have promoted startup communities. The Turkish government, for instance, funded a mobile base station to provide 4G wireless networks in local regions. Sometimes tech centers compensate in areas they’re lacking through government initiatives.

“In China, the way the government works is, the government does whatever it wants,” University of Southern California Prof. Kyle Mayer told InsideSources. “They’re not bogged down by compromise, and agreements, and those sort of things. They can pretty much put whatever policy they want in place.”

Mayer adds that the government has been able to invest in projects and establish business friendly regions. China has been successful in this regard because they started laying the groundwork decades ago. Zhangjiang Hi-Tech Park in Shanghai was specifically developed to be a leading tech hub.

“A lot of people around the globe are looking at Silicon Valley and trying to emulate many of the lessons behind why Silicon Valley grew,” Mayer, who teaches business management at the USC Marshall School of Business, said. “The one that clearly has the most traction, in many ways, is what China is doing in Shanghai.”

The Chinese government has built up public investments to make up for a lack of venture capital. It also adopted reforms to make the region more attractive to businesses. The government has worked to build tech hubs in other cities like Beijing and Shenzhen. China is in a very strong position but still faces some problems.

“It’s harder for them to build but they can still provide money, at least through government-controlled aspects,” Mayer said. “Of course, China has the added challenge of the intellectual property regime. Here you have patents, trade secrets, you have various ways to protect what you do. In China, that’s much harder because they don’t really respect intellectual property as much.”

India has successfully positioned itself as having some of the best internationally known tech hubs. The country has designated several regions just for tech development. The regions have adequate infrastructure and available talent to make them competitive. Furthermore, the talent also tends to be cheaper.

“Clearly, India is trying to do a lot of things also,” Mayer said. “Bangalore particularly, but also other places as well. And they’re doing the same thing in trying to attract tech companies.”

Electronic City was established as a tech hub in Bengaluru, India. It was founded following efforts by the government to liberalize the economy is the early 1990s. HITEC City in Hyderabad, India, has been a leader in fields like information technology, engineering, health informatics, and bioinformatics.

“There’s a lot of tech-based labor that is there,” Mayer said. “It’s not just having people who are engineers, it’s having the right kind of engineers, and having some star engineers instead of just having good engineers. India has made its mark in the IT community in having cheap and capable engineers.”

India has several leading tech centers spread out across the country. Mayer adds the government is also working to ensure its universities are providing needed skills. Nevertheless, Silicon Valley is likely safe for now despite all the successful and eager tech centers around the world.

“I don’t think any other region would compete with the Silicon Valley in the near future,” Ergen said. “It is all about culture, subjectivity, relationships, talent, venture financial power, and acquisition culture, etc. This creates an engine that updates itself with time.”

Foreign tech centers have found ways to successfully compete with the Valley. Some regions have started to specialize in more specific aspects of tech. Specialization allows competitors to corner off a part of the overall market when competition is fierce.

“We can pretty much consider how they should leverage the Valley,” Ergen said. “For instance, India is trying to become the software workforce of the Silicon Valley startups to let them scale; Israel is leveraging Silicon Valley for its startups’ exit strategy; China is their manufacturing base and trying to attract the venture capital to replicate the successful business plans with China’s humongous customer base. Ireland was successful to become the startup hub to enter E.U. market as the Celtic Tiger.”

Japan is unique in that it has a tradition of innovation but little in the way of a startup community. The country is more focused on a large-firm economy. Tokyo, for instance, has been a leader in robotics and telecommunications. The country has been working to build up a more robust startup community.

“I suppose we should mention Tokyo because there’s a lot of tech,” Mayer said. “We shouldn’t discount Tokyo. It’s more established, and Japan is obviously not growing as fast as an economy as China and India are, but clearly, they have a lot of established tech in Japan.”

The Japanese government has designated a few regions as tech hubs. Tsukuba Science City was established as a science park as early at the 1960s. Yokosuka Research Park in Yokosuka City, Japan, is home to many wireless and mobile related research and development centers.

Silicon Valley should still be weary of being overthrown as the tech leader. While such an upset is unlikely anytime soon, the world is becoming increasingly competitive. Federal policies might even be hurting the Valley by keeping out needed skills with work visa restrictions.

“One of the other issues that is a potential problem for Silicon Valley, which is not a problem for Hyderabad or Tel Aviv or any other foreign city, is the president trying to reduce the number of H-1B visas,” Dr. Gad Selig, dean of industry outreach at the University of Bridgeport, told InsideSources. “But I don’t think Silicon Valley is going anywhere anytime soon.”

Israel tends to pass under the radar for many, but its contributions as a tech innovator are undeniable. Silicon Wadi is a large area along the coastal plains with a high concentration of high-tech industries.

“One that comes to mind is Tel Aviv, Israel,” Selig said. “You probably wouldn’t think that way, but the answer is they have more per capita entrepreneurs, and business loans have probably been, I think, probably on par, relative to the population, with Silicon Valley.”

Intel, IBM, Google, Facebook, Hewlett-Packard, Cisco Systems, Oracle Corporation, Microsoft, and many other leading tech companies have offices in the region. Selig adds Silicon Wadi has been leading in areas like security and media space.

“Europe hasn’t been great in this regard,” Mayer said. “Europe is just a tough nut to crack because you have in so many countries, Germany, France, to a degree Italy, they’re such strong pro-employment countries, union based countries, that you have to be careful how much work you put in there because you can’t pull a lot of that stuff back out.”

European countries have tried for decades to gain a foothold in emerging technologies. They have plenty of successes when it comes to tech but have lagged behind other regions around the world. France, Germany, and the United Kingdom have established some of the more successful tech hubs in Europe.

“If I had to bet on a city in Europe emerging over the next 10 or 20 years, I would actually be tempted to say Berlin,” Mayer said. “They have some solid universities, they have cheaper real estate than some of the other places in Europe where people can still go, and there’s a lot of young people moving to Berlin.”

Silicon Valley also faces plenty of competition domestically. Silicon Beach within the Los Angeles metropolitan area has been able to attract some of the biggest tech companies.

Google, YouTube, BuzzFeed, Facebook, Salesforce, AOL, and Electronic Arts all have offices there. The area is known for its electronic entertainment industry.

“On the domestic side, L.A. is clearly trying to do something with this,” Mayer said.

“They’re trying to build more of a startup community here. A lot of it geared towards entertainment to a degree, but not all of it. L.A. is very much working to turn the downtown and west side into much more of a hub for innovations.”

Domestic based tech centers have been established throughout the country. Redmond, Washington, is known for having a thriving tech scene and is even where Microsoft is headquartered. New York City is also working to become the next major tech center.

“New York City is truly trying to create a technology super city as well,” Selig said. “They have incentives, they have incubators, they have all sorts of things.”

New York City is now on the verge of an educational experiment aimed at providing needed skills and a tech research center. Cornell University is planning to open up a tech-focused campus in the city later this year. The idea is to mix faculty who are involved with technology and entrepreneurship strategy with management professionals.

“The really interesting one is going on in New York,” Mayer said. “You have Cornell which is building a tech campus on that island there in the middle of New York which is going to house both engineering, science, and business all together under one roof.”

The Kauffman Foundation released a report last year which found Austin, Texas, ranked number one in metro areas with the most startup activity. Silicon Prairie near Dallas has a high concentration of semiconductor manufacturing, telecommunications, and other tech companies.

Texas also has a thriving commercial space industry with companies like SpaceX.