Train Wreck

Every so often, I wonder if Silicon Valley is all it's cracked up to be. Sure, the confluence of venture capital, universities, and lawyers make it a veritable petri dish for the formation of technology companies, but there are a lot of other great places for innovation, right?

Well, if you go strictly by market capitalization, and look at the top 10 information technology companies, 6 of them are based in Silicon Valley: Cisco Systems, Google, Intel, Hewlett-Packard, Apple, and Oracle. In fact, if you map these company's headquarters, they'd all be inside a circle with a radius of just 10 miles. Amazing, when you think about it.

And these companies are far from just "headquartered" in Silicon Valley.

Google and Apple are very much centralized from a product and technology development standpoint.

Intel has research-and-development facilities in Oregon, Arizona, and Israel, but a significant amount of its R&D occurs at or near its Santa Clara, Calif., headquarters. The same is true of Cisco, though the networking giant owns several large subsidiaries--such as Scientific Atlanta--that are based elsewhere. Likewise for Oracle.

HP is somewhat more diversified, with product development for its Compaq unit in Houston, plus R&D facilities in Idaho, Oregon, and additional cities around the globe. But still, more of its R&D occurs in northern California than anywhere else.

Three of the four companies not based in Silicon Valley have research and development consolidated near their corporate headquarters: Microsoft in Redmond, Wash.; Qualcomm in San Diego; and Nokia in Finland.

IBM, on the other hand, is the most distributed company of the 10, with R&D facilities in New York, Massachusetts, Vermont, North Carolina, Texas, Minnesota, and a number of international locations, including London.

What does all this mean? Well, the data's essentially useless, unless you compare these companies to the same group, say 5 or 10 years ago. Luckily, I've got a good memory. It's not necessarily obvious from the data, but there does appear to be a trend toward more distributed R&D among large companies--if not domestically, then certainly internationally.

Although there are a number of new and growing U.S. technology hubs, none appears to be in a position to unseat Silicon Valley as the tech mecca.

Internationally speaking, China, India, Israel, Japan, and the United Kingdom each have technology development centers with tremendous growth potential. South Korea and Taiwan are nothing to sneeze at, either. Sure, they all have a way to go to match the confluence of resources and talent that Northern California offers. But the trend is there.

And while our qualitative analysis consists only of 10 companies, I do believe that it represents the industry as a whole.

In summary, as information technology penetrates further into the lives of more and more people, it stands to reason that innovation hubs will become more and more geographically distributed, if not also technically specialized.

And someday, a new technology may take root and ultimately supplant electronics as the driver of human innovation. It might be a form of biotechnology, nanotechnology, or something else entirely. In that case, all bets are off.

Updated 5/29/08 12:23 PM - Modification to paragraph on Intel R&D.