Does top-down, state-led innovation work? Just ask Silicon Valley

It was the 1950s and ’60s, and tensions between the world’s superpowers at that time – the US and Russia – were running high.

Photo credit: USDA / Lance Cheung

As one national government was funding elite research institutes and enlisting its country’s top scientific minds to develop military technology, it likely had little inkling the move would form the basis of a broader, civilian technology industry in the coming decades.

The force behind this state-led initiative – a style of innovation commonly associated with China – was the US government, which seeded California’s Silicon Valley with funding for military research at Stanford University.

It was there that the dean of engineering, Frederick Terman, actively encouraged students to launch companies to exploit these technologies for profit – the most famous of his disciples being Hewlett-Packard founders Bill Hewlett and Dave Packard.

“Most people who came here after the 1980s just assumed it’s all silicon and chips,” said Steve Blank, a Silicon Valley entrepreneur and adjunct professor at Stanford.

“But innovation in Silicon Valley actually started in Stanford University, thanks to a single professor who changed the entire culture.”

After the Second World War, Terman, whose background was in electrical engineering, drew upon his wartime experience heading a radio research lab at Harvard University to help turn Stanford into a top-tier university specializing in electronic warfare and with government contracts.

Since then, Silicon Valley has been seen as the mecca of technology innovation, producing some of the world’s largest tech companies, such as Intel, Amazon, Facebook, and Google.

The region has been lauded for its culture and openness, with countries globally hoping to learn from its success and emulate it by design.

“There’s something special that happens in a city or a region when people are able to pursue new ideas in a very free way,” said Eric Ries, author of the book The Lean Startup.

“When I first came to Silicon Valley, I had a failed startup on my resume … nobody saw that as a negative, they saw it as a sign that I showed initiative, tried to do something new.

“It’s not that Silicon Valley embraces failure, but it has a different understanding of the likelihood of success of anything new.”

The fact that Silicon Valley also had its beginnings in federal funding suggests that the state has an important role to play when it comes to fostering innovation.