1

Silicon Valley Competitive Advantage and Knowledge

Transfer

Silicon Valley Competitive Advantage and Knowledge

Transfer

William Y. Jiang, Ph.D.William Y. Jiang, Ph.D.

Professor and Department ChairProfessor and Department Chair

of Organization and Managementof Organization and Management

San José State UniversitySan José State University

408-924-3551408-924-3551

Email: jiang_w@cob.sjsu.eduEmail: jiang_w@cob.sjsu.edu

October 11, 2009October 11, 2009

William Y. Jiang, Ph.D.William Y. Jiang, Ph.D.

Professor and Department ChairProfessor and Department Chair

of Organization and Managementof Organization and Management

San José State UniversitySan José State University

408-924-3551408-924-3551

Email: jiang_w@cob.sjsu.eduEmail: jiang_w@cob.sjsu.edu

October 11, 2009October 11, 2009

2

Presentation at A Glance

Presentation at A Glance

• High Tech DevelopmentsHigh Tech Developments• Entrepreneurship and Entrepreneurs Entrepreneurship and Entrepreneurs • Silicon Valley and Other High Tech Silicon Valley and Other High Tech

CentersCenters• Venture Capital InvestmentVenture Capital Investment• Knowledge TransferKnowledge Transfer

• High Tech DevelopmentsHigh Tech Developments• Entrepreneurship and Entrepreneurs Entrepreneurship and Entrepreneurs • Silicon Valley and Other High Tech Silicon Valley and Other High Tech

CentersCenters• Venture Capital InvestmentVenture Capital Investment• Knowledge TransferKnowledge Transfer

3

High Technology and US Economy

High Technology and US Economy

High Tech Serves asHigh Tech Serves as

• The Engine of GrowthThe Engine of Growth

• Productivity EnablerProductivity Enabler

High Tech Serves asHigh Tech Serves as

• The Engine of GrowthThe Engine of Growth

• Productivity EnablerProductivity Enabler

4

Major US High Tech Centers

Major US High Tech Centers

• Silicon Valley Silicon Valley • San Francisco’s “Multimedia Gulch”San Francisco’s “Multimedia Gulch”• L.A.’s “Digital Coast”L.A.’s “Digital Coast”• Seattle’s “Silicon Forest”Seattle’s “Silicon Forest”• Austin’s “Silicon Hills”Austin’s “Silicon Hills”• Boston’s “Route 128”Boston’s “Route 128”• Washington D.C.’s “Silicon Dominion”Washington D.C.’s “Silicon Dominion”• New York’s “Silicon Alley”New York’s “Silicon Alley”

• Silicon Valley Silicon Valley • San Francisco’s “Multimedia Gulch”San Francisco’s “Multimedia Gulch”• L.A.’s “Digital Coast”L.A.’s “Digital Coast”• Seattle’s “Silicon Forest”Seattle’s “Silicon Forest”• Austin’s “Silicon Hills”Austin’s “Silicon Hills”• Boston’s “Route 128”Boston’s “Route 128”• Washington D.C.’s “Silicon Dominion”Washington D.C.’s “Silicon Dominion”• New York’s “Silicon Alley”New York’s “Silicon Alley”

5

Major US High Tech Centers

Major US High Tech Centers

6

The Treaty of Guadalupe

The Treaty of Guadalupe

7

The Treaty of Guadalupe

The Treaty of Guadalupe

8

The San Francisco Bay Area

The San Francisco Bay Area

9

The Concept of Silicon Valley

The Concept of Silicon Valley

• A Geographic ValleyA Geographic Valley• A High Tech PhenomenonA High Tech Phenomenon• A Technology CivilizationA Technology Civilization• The Engine of Economic GrowthThe Engine of Economic Growth• A High Tech MeccaA High Tech Mecca• A Symbol of Creativity and OriginalityA Symbol of Creativity and Originality• A Frame of MindA Frame of Mind

• A Geographic ValleyA Geographic Valley• A High Tech PhenomenonA High Tech Phenomenon• A Technology CivilizationA Technology Civilization• The Engine of Economic GrowthThe Engine of Economic Growth• A High Tech MeccaA High Tech Mecca• A Symbol of Creativity and OriginalityA Symbol of Creativity and Originality• A Frame of MindA Frame of Mind

10

The Concept of Silicon Valley

The Concept of Silicon Valley

11

Silicon Valley MapsSilicon Valley Maps

12

Geographical ProfileGeographical Profile

• CaliforniaCalifornia• Northern CaliforniaNorthern California• Southern CaliforniaSouthern California• The Bay AreaThe Bay Area

– San Francisco, Peninsula, East Bay, & South BaySan Francisco, Peninsula, East Bay, & South Bay

• Santa Clara Valley (Silicon Valley)Santa Clara Valley (Silicon Valley)

• CaliforniaCalifornia• Northern CaliforniaNorthern California• Southern CaliforniaSouthern California• The Bay AreaThe Bay Area

– San Francisco, Peninsula, East Bay, & South BaySan Francisco, Peninsula, East Bay, & South Bay

• Santa Clara Valley (Silicon Valley)Santa Clara Valley (Silicon Valley)

13

What Is Said of Silicon Valley

What Is Said of Silicon Valley

““Throughout Human History, the Enhanced Throughout Human History, the Enhanced Availability of Information Has Created Availability of Information Has Created Quantum Leaps in Human Achievement. Quantum Leaps in Human Achievement. From Microwave Radar to Integrated From Microwave Radar to Integrated Circuits to Disk Storage to Circuits to Disk Storage to Microprocessors to Internet and E-Microprocessors to Internet and E-Commerce, It All Started in Silicon Commerce, It All Started in Silicon Valley!” Valley!”

““Throughout Human History, the Enhanced Throughout Human History, the Enhanced Availability of Information Has Created Availability of Information Has Created Quantum Leaps in Human Achievement. Quantum Leaps in Human Achievement. From Microwave Radar to Integrated From Microwave Radar to Integrated Circuits to Disk Storage to Circuits to Disk Storage to Microprocessors to Internet and E-Microprocessors to Internet and E-Commerce, It All Started in Silicon Commerce, It All Started in Silicon Valley!” Valley!”

14

110 -Year Renaissance110 -Year Renaissance

• Silicon Valley, Formed by a Constellation Silicon Valley, Formed by a Constellation of Cities, Companies, Research and of Cities, Companies, Research and Education Institutions, Has Impacted the Education Institutions, Has Impacted the World More Than Any Other Occurrence World More Than Any Other Occurrence Since the Renaissance. Since the Renaissance.

• Silicon Valley Is a Phenomenon of Silicon Valley Is a Phenomenon of Continuous Outpouring of Creativity, Continuous Outpouring of Creativity, Inventions, and Discoveries.Inventions, and Discoveries.

• Silicon Valley, Formed by a Constellation Silicon Valley, Formed by a Constellation of Cities, Companies, Research and of Cities, Companies, Research and Education Institutions, Has Impacted the Education Institutions, Has Impacted the World More Than Any Other Occurrence World More Than Any Other Occurrence Since the Renaissance. Since the Renaissance.

• Silicon Valley Is a Phenomenon of Silicon Valley Is a Phenomenon of Continuous Outpouring of Creativity, Continuous Outpouring of Creativity, Inventions, and Discoveries.Inventions, and Discoveries.

15

Historical ProfileHistorical Profile

• CaliforniaCalifornia• Silicon Valley (Santa Clara Valley)Silicon Valley (Santa Clara Valley)

– Before 1848 (Before 1848 (Spain/Mexico, San José MissionSpain/Mexico, San José Mission))

– 1850-1890 (stage coach, railroad, orchard)1850-1890 (stage coach, railroad, orchard)

– 1890-1950 (Stanford, Moffett, HP, & IBM) 1890-1950 (Stanford, Moffett, HP, & IBM)

– 1951-1960 (Lockheed, Fairchild, IBM, SIP)1951-1960 (Lockheed, Fairchild, IBM, SIP)

• CaliforniaCalifornia• Silicon Valley (Santa Clara Valley)Silicon Valley (Santa Clara Valley)

– Before 1848 (Before 1848 (Spain/Mexico, San José MissionSpain/Mexico, San José Mission))

– 1850-1890 (stage coach, railroad, orchard)1850-1890 (stage coach, railroad, orchard)

– 1890-1950 (Stanford, Moffett, HP, & IBM) 1890-1950 (Stanford, Moffett, HP, & IBM)

– 1951-1960 (Lockheed, Fairchild, IBM, SIP)1951-1960 (Lockheed, Fairchild, IBM, SIP)

16

Historical ProfileHistorical Profile

• 1961-1970 (Semiconductor/Computer) 1961-1970 (Semiconductor/Computer) (Fairchild,Intel, & Apple)(Fairchild,Intel, & Apple)

• 1970-1980 (LSI, AMD, &Oracle)1970-1980 (LSI, AMD, &Oracle)• 1980-1995 (Cisco, Applied Mat., etc.) 1980-1995 (Cisco, Applied Mat., etc.) • 1996-1999 (Internet Era: AOL, Yahoo & Ebay)1996-1999 (Internet Era: AOL, Yahoo & Ebay)• 2000 -Present : Beginning of the E-Century: 2000 -Present : Beginning of the E-Century:

Google and Internet New Boom and Prosperity)Google and Internet New Boom and Prosperity)

• 1961-1970 (Semiconductor/Computer) 1961-1970 (Semiconductor/Computer) (Fairchild,Intel, & Apple)(Fairchild,Intel, & Apple)

• 1970-1980 (LSI, AMD, &Oracle)1970-1980 (LSI, AMD, &Oracle)• 1980-1995 (Cisco, Applied Mat., etc.) 1980-1995 (Cisco, Applied Mat., etc.) • 1996-1999 (Internet Era: AOL, Yahoo & Ebay)1996-1999 (Internet Era: AOL, Yahoo & Ebay)• 2000 -Present : Beginning of the E-Century: 2000 -Present : Beginning of the E-Century:

Google and Internet New Boom and Prosperity)Google and Internet New Boom and Prosperity)

17

Demographic ProfileDemographic Profile

Silicon ValleySilicon Valley• 1860: Population: 35001860: Population: 3500• 1960: Population: 350,0001960: Population: 350,000• 1970: Population: 1,064,0001970: Population: 1,064,000• 1980: Population: 1,200,0001980: Population: 1,200,000• 1990: Population: 1,500,0001990: Population: 1,500,000• 1999: Population: 2,100,0001999: Population: 2,100,000• 2009: Population: 2,200,0002009: Population: 2,200,000

Silicon ValleySilicon Valley• 1860: Population: 35001860: Population: 3500• 1960: Population: 350,0001960: Population: 350,000• 1970: Population: 1,064,0001970: Population: 1,064,000• 1980: Population: 1,200,0001980: Population: 1,200,000• 1990: Population: 1,500,0001990: Population: 1,500,000• 1999: Population: 2,100,0001999: Population: 2,100,000• 2009: Population: 2,200,0002009: Population: 2,200,000

18

Racial Breakdown Racial Breakdown

• Caucasian: 38%Caucasian: 38%

• Asian and Pacific: 26%Asian and Pacific: 26%

• Latino: 27%Latino: 27%

• African American: 3%African American: 3%

• Other: 6%Other: 6%

• Caucasian: 38%Caucasian: 38%

• Asian and Pacific: 26%Asian and Pacific: 26%

• Latino: 27%Latino: 27%

• African American: 3%African American: 3%

• Other: 6%Other: 6%

19

Brain Power

Diversity

Culture

&

Climate

Venture

Financing

Government Support

Stanford

San Jose State

Berkeley

Why the Growth in High Tech?

Why the Growth in High Tech?

20

Characters That Have Shaped Silicon ValleyCharacters That Have Shaped Silicon Valley

• Lee De Forest (Start Electronic Age, 300 Patents)Lee De Forest (Start Electronic Age, 300 Patents)• Frederick Terman (Father of Silicon Valley)Frederick Terman (Father of Silicon Valley)• William Hewlett & David PackardWilliam Hewlett & David Packard• The Varian Brothers The Varian Brothers • William Schockley (Nobel Laureate)William Schockley (Nobel Laureate)• The Fairchild Eight (Robert Noyce, Gordon Moore, etc.) The Fairchild Eight (Robert Noyce, Gordon Moore, etc.) • Steven Jobs and Stephen WozniakSteven Jobs and Stephen Wozniak• Larry Page and Sergey BrinLarry Page and Sergey Brin

• Lee De Forest (Start Electronic Age, 300 Patents)Lee De Forest (Start Electronic Age, 300 Patents)• Frederick Terman (Father of Silicon Valley)Frederick Terman (Father of Silicon Valley)• William Hewlett & David PackardWilliam Hewlett & David Packard• The Varian Brothers The Varian Brothers • William Schockley (Nobel Laureate)William Schockley (Nobel Laureate)• The Fairchild Eight (Robert Noyce, Gordon Moore, etc.) The Fairchild Eight (Robert Noyce, Gordon Moore, etc.) • Steven Jobs and Stephen WozniakSteven Jobs and Stephen Wozniak• Larry Page and Sergey BrinLarry Page and Sergey Brin

21

Valley Wizards Shaping the Future of High TechValley Wizards Shaping the Future of High Tech

• Andy Grove/Craig Barrett (Intel)Andy Grove/Craig Barrett (Intel)• Scott McNealy (Sun)Scott McNealy (Sun)• Steven Jobs (Apple and Pixar)Steven Jobs (Apple and Pixar)• Larry Ellison (Oracle)Larry Ellison (Oracle)• John Chambers (Cisco)John Chambers (Cisco)• Jerry Yang (Yahoo)Jerry Yang (Yahoo)• Carly Fiorina (HP)Carly Fiorina (HP)• Mark Andreeson (Netscape/Loudcloud)Mark Andreeson (Netscape/Loudcloud)• Meg Whitman (Ebay) Meg Whitman (Ebay) • James Morgan (Applied Materials)James Morgan (Applied Materials)

• Andy Grove/Craig Barrett (Intel)Andy Grove/Craig Barrett (Intel)• Scott McNealy (Sun)Scott McNealy (Sun)• Steven Jobs (Apple and Pixar)Steven Jobs (Apple and Pixar)• Larry Ellison (Oracle)Larry Ellison (Oracle)• John Chambers (Cisco)John Chambers (Cisco)• Jerry Yang (Yahoo)Jerry Yang (Yahoo)• Carly Fiorina (HP)Carly Fiorina (HP)• Mark Andreeson (Netscape/Loudcloud)Mark Andreeson (Netscape/Loudcloud)• Meg Whitman (Ebay) Meg Whitman (Ebay) • James Morgan (Applied Materials)James Morgan (Applied Materials)

22

Valley Wizards Shaping the Future of High TechValley Wizards Shaping the Future of High Tech

23

High Technology Sectors

High Technology Sectors

Semiconductor, Software & Hardware

The Internet &

E-Commerce

Network &

Telecom

Biotech &

Healthcare

24

Internet SectorsFrom Silicon Valley to Internet Valley

Internet SectorsFrom Silicon Valley to Internet Valley

Access

Bandwidth

Content

Distribution

Architecture

Infrastructure

E-Commerce

B2B&B2C

25

History of Venture CapitalHistory of Venture Capital

• 1960s: Angel Emergence1960s: Angel Emergence

Private Investment in Silicon ValleyPrivate Investment in Silicon Valley• 1971: First “Venture Capital” Fund1971: First “Venture Capital” Fund• 1975: Huge Success in Tandem Computers 1975: Huge Success in Tandem Computers

($1mil. was turned into $3 bil. in three years)($1mil. was turned into $3 bil. in three years)• 1978: Capital Gain Tax Reduction ($750 mil. VC)1978: Capital Gain Tax Reduction ($750 mil. VC)• 1980s: low tide in VC1980s: low tide in VC• 1991: low interest rate spurred VC ($1.5 bil.)1991: low interest rate spurred VC ($1.5 bil.)

• 1960s: Angel Emergence1960s: Angel Emergence

Private Investment in Silicon ValleyPrivate Investment in Silicon Valley• 1971: First “Venture Capital” Fund1971: First “Venture Capital” Fund• 1975: Huge Success in Tandem Computers 1975: Huge Success in Tandem Computers

($1mil. was turned into $3 bil. in three years)($1mil. was turned into $3 bil. in three years)• 1978: Capital Gain Tax Reduction ($750 mil. VC)1978: Capital Gain Tax Reduction ($750 mil. VC)• 1980s: low tide in VC1980s: low tide in VC• 1991: low interest rate spurred VC ($1.5 bil.)1991: low interest rate spurred VC ($1.5 bil.)

26

Venture Capital Investments

Venture Capital Investments

• 1995: $6.2 Billion1995: $6.2 Billion

• 1998: $14.3 Billion1998: $14.3 Billion

• 1999: $39.7 Billion1999: $39.7 Billion

• 2000: $98.0 Billion2000: $98.0 Billion

• 2008: $120 Billion2008: $120 Billion

• 1995: $6.2 Billion1995: $6.2 Billion

• 1998: $14.3 Billion1998: $14.3 Billion

• 1999: $39.7 Billion1999: $39.7 Billion

• 2000: $98.0 Billion2000: $98.0 Billion

• 2008: $120 Billion2008: $120 Billion

27

Stages of VC InvestmentStages of VC Investment

• Seed StageSeed Stage• First RoundFirst Round• Second RoundSecond Round• Third Round (Mezzanine Stage)Third Round (Mezzanine Stage)• Bridge FinancingBridge Financing

• Seed StageSeed Stage• First RoundFirst Round• Second RoundSecond Round• Third Round (Mezzanine Stage)Third Round (Mezzanine Stage)• Bridge FinancingBridge Financing

28

Why VC Flourishes in the US?

Why VC Flourishes in the US?

• Uniquely Robust IPO MarketUniquely Robust IPO Market• Efficient Secondary MarketsEfficient Secondary Markets• Legal, Accounting, and Financial InfrastructureLegal, Accounting, and Financial Infrastructure• Flourishing EntrepreneurshipFlourishing Entrepreneurship• Lead in information and medical technology Lead in information and medical technology

• Uniquely Robust IPO MarketUniquely Robust IPO Market• Efficient Secondary MarketsEfficient Secondary Markets• Legal, Accounting, and Financial InfrastructureLegal, Accounting, and Financial Infrastructure• Flourishing EntrepreneurshipFlourishing Entrepreneurship• Lead in information and medical technology Lead in information and medical technology

29

Role of VC in US EconomyRole of VC in US Economy

• Catalyst in the Entrepreneurial ProcessCatalyst in the Entrepreneurial Process• Fundamental Value Creation That Sustains Fundamental Value Creation That Sustains

Economic Growth and DevelopmentEconomic Growth and Development• John Doer: “Largest Legal Creation of Wealth.”John Doer: “Largest Legal Creation of Wealth.”• Vital to the Formation and Commercialization Vital to the Formation and Commercialization

of New Industriesof New Industries• Job Creation, Innovative Products/services, Job Creation, Innovative Products/services,

and Competitive Vibrancyand Competitive Vibrancy• The Essence of Capitalism: Risk-taking and The Essence of Capitalism: Risk-taking and

EntrepreneurshipEntrepreneurship

• Catalyst in the Entrepreneurial ProcessCatalyst in the Entrepreneurial Process• Fundamental Value Creation That Sustains Fundamental Value Creation That Sustains

Economic Growth and DevelopmentEconomic Growth and Development• John Doer: “Largest Legal Creation of Wealth.”John Doer: “Largest Legal Creation of Wealth.”• Vital to the Formation and Commercialization Vital to the Formation and Commercialization

of New Industriesof New Industries• Job Creation, Innovative Products/services, Job Creation, Innovative Products/services,

and Competitive Vibrancyand Competitive Vibrancy• The Essence of Capitalism: Risk-taking and The Essence of Capitalism: Risk-taking and

EntrepreneurshipEntrepreneurship

30

Venture CapitalVenture Capital

“One Half of All Venture Capital in America Pours Into Silicon Valley, the Unchallenged High Tech Capital of the World.”

“One Third of All Venture Capital in America Comes From Venture Capital Firms Located Along Sand Hill Road in Menlo Park.”

31

Venture Capital MeccaVenture Capital Mecca

Menlo ParkMenlo Park• Benchmark CapitalBenchmark Capital• Mayfield FundMayfield Fund• Institutional VentureInstitutional Venture• InterWest InterWest • Kleiner PerkinsKleiner Perkins• SequoiaSequoia• Menlo VenturesMenlo Ventures• US Venture PartnersUS Venture Partners• New EnterprisesNew Enterprises

Menlo ParkMenlo Park• Benchmark CapitalBenchmark Capital• Mayfield FundMayfield Fund• Institutional VentureInstitutional Venture• InterWest InterWest • Kleiner PerkinsKleiner Perkins• SequoiaSequoia• Menlo VenturesMenlo Ventures• US Venture PartnersUS Venture Partners• New EnterprisesNew Enterprises

Palo AltoPalo Alto• Garage.ComGarage.Com• NorwestNorwest• PatricofPatricof• Summit PartnersSummit Partners• TA AssociatesTA Associates

Palo AltoPalo Alto• Garage.ComGarage.Com• NorwestNorwest• PatricofPatricof• Summit PartnersSummit Partners• TA AssociatesTA Associates

32

Symbiosis of Entrepreneurs and Capital

Symbiosis of Entrepreneurs and Capital

Entrepreneurs:Leading Edge IdeasProven ManagementTechnical TalentRisk Tolerance Silicon

Valley

Capital Getting Access to:Management TalentTechnical TalentTech Savvy Lawyers/AcctsBusiness Partners

33

Lessons to Be LearnedLessons to Be Learned

• Entrepreneurship and Its EncouragementEntrepreneurship and Its Encouragement

• Develop and Open the Financial MarketsDevelop and Open the Financial Markets

• Encourage Venture Financing ActivitiesEncourage Venture Financing Activities

• Second Chance for Risk-TakersSecond Chance for Risk-Takers

• Entrepreneurship and Its EncouragementEntrepreneurship and Its Encouragement

• Develop and Open the Financial MarketsDevelop and Open the Financial Markets

• Encourage Venture Financing ActivitiesEncourage Venture Financing Activities

• Second Chance for Risk-TakersSecond Chance for Risk-Takers

Viva Entrepre-neurship!