Are innovation clusters local or global?

Social media has, it seems, taken over the world. Partly as a result of this ‘connectedness’, it is possible in this modern world to collaborate and create businesses more easily across international borders.  So are tech hubs and clusters really relevant, or is the whole world one big tech cluster?

Attending Social Media Week last week in New York, one would have got the impression that New York is the centre of the tech universe. In particular, during one keynote, venture investor Jalak Jobanputra quipped that Silicon Valley entrepreneurs from San Francisco were asking her ‘how do I get to New York?’, referring to the fact that more was happening in ‘Silicon Alley’ (New York) than in ‘Silicon Valley’. Apart from the obvious answer that came from someone in the room (fly JetBlue), it seemed to be that panel of speakers were all convinced that New York now had more going for it than the Valley.

When you look at deals, the volume of deals is still higher in Silicon Valley (by about five times more than New York), but when comparing 2011 numbers to 2010 numbers, VC investments in New York rose 64.3 percent in terms of dollars and 10.2 percent in terms of deals, while investment in California rose only 24.4 percent in terms of dollars and 5.0 percent in terms of deals (see ‘Venture capitalists favor Silicon Valley, but Silicon Alley is rising fast’). So one can see where the New York tech community representatives were coming from.

Silicon Valley also saw significant jobs and wealth growth – according to the 2012 Silicon Valley Index, more than 42,000 jobs were created in the region in 2011, and Silicon Valley’s per capita income in 2011 expanded by four percent to reach $66,000. The index also revealed that patent registrations leapt by 30 percent over 2009 with 13,311 new patents registered in 2010, largely in computers, data processing and information storage.

Given the title of this publication, we often get asked “Where is the next Silicon Valley”.  Actually as we have established above, Silicon Valley might set the global benchmark, but given the question posed at the beginning of the article, it might not actually be a relevant question, given that it is possible to collaborate using social and online collaboration tools. What seems more relevant is whether a good innovation ecosystem can be formed locally that can connect with the global network.

In this scenario, and it already happens extensively, start-up and fast growing tech (and non-tech) companies are building teams in the relevant locations where there is expertise and where the customers are located – these are increasingly in different and multiple locations – and then exploiting the benefits of online tools and social media to build globally dispersed teams from the outset.

And some investors are beginning to recognize the fact that they need to venture to other innovation hubs (for example Dave McClure going to New York and various parts of South America last year) and not just in their back yard.

So the question is not about whether you should be in Silicon Valley vs Silicon Alley, or Bangalore vs Recife: the question is more about how you can build across multiple innovation hubs simultaneously. Innovation is now global not just local.

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