Transient labor is nothing new in Silicon Valley. In 1956, eight engineers abandoned a fledgling transistor company run by Nobel Prize winner William Shockley and founded the Fairchild Semiconductor Company. Some of those same engineers then repeated the process, striking out on their own in ensuing years and creating such titans of Silicon Valley as the microprocessor giant Intel and the venture capital firm Kleiner Perkins Caufield & Byers.
Silicon Valley folklore refers to the Fairchild engineers as the "traitorous eight." But future generations have deemed their example to be anything but evil. One specialist on the Silicon Valley economy, University of California professor AnnaLee Saxenian, actually argues that the Silicon Valley worker's propensity for changing jobs has helped make the region's economy so resilient.
"People move between firms at a staggeringly high rate in Silicon Valley, much higher than elsewhere," says Saxenian. "I'm not sure I would say contingent labor was the most important factor in the Silicon Valley economy, but it's an important factor."
Job mobility is not synonymous with contingent labor, however. A temp worker shuttling willy-nilly from firm to firm does not occupy the same economic niche as a top-notch semiconductor designer able to gather millions of dollars of venture capital. The advantages that Silicon Valley reaps from mobile labor are not confined to the familiar cost-cutting and benefit-shedding associated with the nationwide move toward temporary labor.
Or at least that's how Saxenian sees it. In her 1994 book "Regional Advantage: Culture and Competition in Silicon Valley and Route 128," she sought to understand why the two most famous high-tech industrial centers in the United States, California's Silicon Valley and Boston's Route 128 corridor, responded so differently to economic downturns and foreign competition.
Her answer is that Silicon Valley thrived while Route 128 stagnated because Silicon Valley operated as a "networked economy" where a highly mobile talent base shared information, and where firms contracted out most non-essential processes and maintained fluid organizational structures. Route 128, on the other hand, was populated by autocratically run firms like DEC and Data General, which strove to keep every part of the manufacturing process in house and avoided communication with the outside world.
"This subcontracted, vertically disintegrated, network structure is a great source of flexibility for the regional economy," says Saxenian. "The fact that people don't stay at a firm, even if they're not temporary workers, can provide an advantage."
People who move from company to company are like insects spreading pollen -- bringing fresh ideas and know-how along with them. Contracting out as many jobs as possible allows firms to focus on what they do best and move quickly when the market changes.
"The independent contractor phenomenon is happening everywhere," says Saxenian. "I don't think this is unique to Silicon Valley. But I think Silicon Valley has the advantage of having a set of institutions that support it uniquely."
Those institutions include the nearby engineering powerhouses of Stanford and Berkeley, the informal networks between engineers that promote constant communication and the thousands of tiny firms that handle extremely specific elements of high-tech manufacturing processes.
Saxenian notes that many regions have tried to duplicate the Silicon Valley success story by creating science parks near universities and luring high-tech companies in with tax incentives. But few have succeeded, and she believes that one of the main reasons for their failure is that they lack the historical and cultural support for flexibility so deeply ingrained in the Silicon Valley psyche.
There's a commitment to the region that transcends the fortunes of individual firms, says Saxenian. "The way I like to think about Silicon Valley is as one giant firm that is decentralized internally. People say that when they wake up, they think, 'I work for Silicon Valley,' rather than for a particular company."
Saxenian's analysis offers a useful caution to those who propose the Silicon Valley style of corporate organization as a model for capitalist enterprises everywhere. The virtual corporation can only work in an environment where the populace is geared to think in terms of independent contracting, permanent flexibility and an ever-flowing network economy.
It is of course possible that Silicon Valley is the vanguard of the 21st century, the model for how business should be conducted in the future. But it could also be a one-of-a-kind oddity -- a local fluke.
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