5
Discussion

An Economist magazine survey in April 19971 explored the secret of the success of Silicon Valley as the incubator of successful high technology enterprises, emulated throughout the world. Silicon Valley has been an undisputed success in these terms, but it is a model that few other jurisdictions have successfully duplicated. Nevertheless, it is instructive to examine briefly the factors that The Economist considered key to the proliferation of profitable high technology companies, studied and copied around the world. A surprisingly similar list is given by David Landes describing the factors that led to the growth of industrial society in England that was noted by Adam Smith.2

According to The Economist, the four classic conditions are:

  • the size and flexibility of the labor pool;
  • the breadth of the network of suppliers;
  • access to venture capital;
  • excellence of the education facilities and research institutions.

The Economist also identified several cultural factors that distinguish Silicon Valley from other centers of technological progress less successful in the development of new local enterprises:

1  

A Survey of Silicon Valley: Future Perfect, The Economist, March 29-April 4, 1997, following p. 60.

2  

David Landes, The Wealth and Poverty of Nations, W.W. Norton and Co. 1998. p. 215ff.



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--> 5 Discussion An Economist magazine survey in April 19971 explored the secret of the success of Silicon Valley as the incubator of successful high technology enterprises, emulated throughout the world. Silicon Valley has been an undisputed success in these terms, but it is a model that few other jurisdictions have successfully duplicated. Nevertheless, it is instructive to examine briefly the factors that The Economist considered key to the proliferation of profitable high technology companies, studied and copied around the world. A surprisingly similar list is given by David Landes describing the factors that led to the growth of industrial society in England that was noted by Adam Smith.2 According to The Economist, the four classic conditions are: the size and flexibility of the labor pool; the breadth of the network of suppliers; access to venture capital; excellence of the education facilities and research institutions. The Economist also identified several cultural factors that distinguish Silicon Valley from other centers of technological progress less successful in the development of new local enterprises: 1   A Survey of Silicon Valley: Future Perfect, The Economist, March 29-April 4, 1997, following p. 60. 2   David Landes, The Wealth and Poverty of Nations, W.W. Norton and Co. 1998. p. 215ff.

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--> Tolerance of failure (ability to recover from bankruptcy and try again, sadder but wiser); Tolerance of disloyalty (capacity to move from company to company without losing status); Risk seeking spirit; Reinvestment in the community (many of the profits went into new local companies); Enthusiasm for change, or nimbleness to adapt to changing circumstances; Promotion on merit; openness to immigrants and women; Obsession with the product (the engineering mentality); Collaboration (mutual assistance and discussion); Variety (a mix of different types of companies in the cluster; if one doesn't make it, another might); ''Anybody can play" attitude (lack of jealousy, because anyone might make it big). One additional factor was proposed during the Knowledge Assessment discussions in PEI. Many of the successful enterprises that arose in Silicon Valley were described as a marriage of a technology with a medium: information technology with Hollywood. Thus we may add one more to the Economist list: A medium or a message that provides a content link among firms. Silicon Valley is not to be proposed as a model for Prince Edward Island, but it is instructive to see which factors are indeed present, and to attempt to make the most of them. Silicon Valley is one form of economic ecosystem that breeds certain kinds of companies; others will have different environmental conditions and may be suitable for different types of enterprises. In particular, the indices for Silicon Valley must be scaled down to correspond to the population, and indeed the aspirations, of PEI—Silicon Valley does not have a notable tourist industry nor a majority of long-term residents who wish to preserve their way of life. With this caveat, let us examine the "classic" indicators. Labor Pool As an island with a small population, PEI can not pretend to have a large labor pool, but there is a presumed reserve consisting of graduates, who leave the Island for work or advanced study because they find limited opportunities, and the Islanders-away (and others), who would welcome an opportunity to return or settle in the PEI environment. The existing PEI workforce is described as inventive, loyal, and reliable, and wage levels are low in comparison with the rest of North America.

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--> Network Of Suppliers In the analysis of the five vanguard enterprises, it was found that nearly all the suppliers and contractors required could be found on the Island or, at worst, elsewhere in Atlantic Canada. Products for which component suppliers could not be found on the Island were judged impractical for other reasons related to market or transport; one example was high output wind turbines. Venture Capital Venture capital is available on the Island. In addition, there are official or unofficial sources of financing for knowledge-based enterprise such as Enterprise PEI, ACOA, and the Immigrant Investors Fund. However, the private sector venture capital funds, or "business angels" tend not to support the kind of startups, or "gazelle firms" that are the core of Silicon Valley, and the government sources may be inappropriate for proprietary reasons for a new firm with a technology to protect. A proposal in this regard is described below. Educational Facilities And Research Institutions This area is perhaps a weakness in PEI. The university system's research facilities and programs are concentrated in veterinary medicine, and government laboratories, while first rate, are oriented to serving paying customers and responding to the priorities of their funding sources, which are largely external to PEI. The cultural factors listed by The Economist can only serve as a backdrop to the discussion of the cultural factors that characterize PEI. Pride in and loyalty to the place ranks high in the attributes of the work force. Its translation into return of investment to the Island takes the form of investment funds supported by prominent families or by new residents determined to build the Island's economy. On the other hand, government spending accounts for nearly half the economy, and a substantial fraction of the population is seasonally employed and frequently relies on unemployment insurance. Some entrepreneurs complain of the basket of crabs syndrome: the successful individual is pulled down by others not so fortunate or less ambitious. It must be noted, however, that the Silicon Valley counterpart, the "anybody can play" attitude, was fostered no doubt by the visible examples of success of a generation of young entrepreneurs, and is not an inborn cultural trait. The one is as natural as the other in a different business climate, and is more a positive-feedback response to the presence or lack of opportunities. The same is true of so-called tolerance of failure and tolerance of disloyalty, although these have a basis in law—bankruptcy laws and industrial espionage laws. Neither has been identified as an obstacle to enterprise creation in PEI. In collaboration, PEI is high on the list, and several industries, including aerospace, potatoes, in-

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--> formation technology, and swine, are highly organized, with powerful producers' organizations which provide key technical services to members. The last category that arose during a discussion precisely of Silicon Valley in the course of this Knowledge Assessment was the question of message. The participants in the virtual case study on electronic commerce were led by the foreign visitors to consider a consistent theme for a set of commercial activities that would unify them and anchor them to the charm and reputation of Prince Edward Island, that of Anne of Green Gables, a concept explored further in the Recommendations section below. The idea of a trademark for PEI has its dangers, such as the vulnerability of the reputation of all parties to poor quality products by one. Overall, the risk would seem to be minimal and the benefit great, and it is suggested that more consideration be given to developing a "PEI brand" for the province's products and services.