Abstract

When Japanese competition forced the U.S. semiconductor industry into crisis during the mid-1980s, most observers predicted the demise of Silicon Valley. Yet the region's economy is once again flourishing. By building on the dense networks of social relationships which were created and then abandoned by the established semiconductor firms, a new wave of semiconductor start-ups is creating a new Silicon Valley-one which fosters reciprocal innovation among networks of specialist producers. However, the Silicon Valley economy remains vulnerable. While today's producers are better organized to respond to volatile markets and technologies than their predecessors, they have yet to recognize the social basis of their dynamism and create local institutions which allow them to respond systematically to shared challenges.