The limits of silicon valley: a critique of network theory

Abstract

During the 1980s, the idea ofthe dynamic network was putforward as a new model of flexible production and applied to Silicon Valley, the home ofthe US semiconductor industry. This paper arguss that the Silicon Valley network (a collaborating group of high technology firms incapable of realizing the main rewards from its innovations. Although the dynamic network may be appropriate for the early stage of the product life cycle, it lacks the necessary complementary assets to secure the Profits generakd during the growth and maturity stapes. The network lacks the scale-intensive process capabilities, the global marketing outbts and the large financial resources needed to capture the rewards om mass market innovations. These assets, by necessity tend to be embodied in large integated corporations. A simple model is offered to show the limits of the networkform compared with the integrated ‘Chandlerian’ corporation. During the 1990s, large firms will continue to capture the profits from innovation, not only in saiconductors but also in other important global industries.