Archives for July 2006

Recently I attended a very interesting conference about high-tech innovation and public policy, with experts in various fields. (Such a conference will be either boring or fascinating, depending on who exactly is invited. This one was great.)

One topic of discussion was how innovation clusters form. “Innovation cluster” is the rather awkward term for a place where high-tech companies are concentrated. Silicon Valley is the biggest and best-known example.

It’s easy to understand why innovative people and companies tend to cluster. Companies spin out of other companies. People who move to an area to work for one company can easily jump to another one that forms nearby. Support services develop, such as law firms that specialize in supporting start-up companies or certain industries. Nerds like to live near other nerds. So once a cluster gets going, it tends to grow.

But why do clusters form in certain places and not others? We can study existing clusters to see what makes them different. For example, we know that clusters have more patent lawyers and fewer bowling alleys, per capita, than other places. But that doesn’t answer the question. Thinking that patent lawyers cause innovation is like thinking that ants cause picnics. What we want to know is not how existing clusters look, but how the birth of a cluster looks.

So what causes clusters to be born? Various arguments have been advanced. Technical universities can be catalysts, like Stanford in Silicon Valley. Weather and quality of life matter. Cheap land helps. Some argue that goverment-funded technology companies can be a nucleus – and perhaps funding cuts force previously government-funded engineers to improvise. Cultural factors, such as a general tolerance for experimentation and failure, can make a difference.

Simple luck plays a role, too. Even if all else is equal, a cluster will start forming somewhere first. The feedback cycle will start there, pulling resources away from other places. And that one place will pull ahead, for no particular reason except that it happened to reach critical mass first.

We like to have explanations for everything that happens. So naturally we’ll find it easy to discount the role of luck, and give credit instead to other factors. But I suspect that luck is more important than most people think.