Foreign Investment and Technological Development in Silicon Valley

by David Teece



This article examines foreign investment in high-technology industries in Silicon Valley. It describes the extent of this investment and then explores the implications for the future global role of the American economy. Significant foreign investment signals the inability of U.S. high-tech firms to grow to maturity without infusion of capital and other resources from elsewhere. The solution is not to impede the flow of foreign investment, but in building the infrastructure--education, skills, savings, employee commitment, and the like--needed to support the development of later-stage capacities in the innovation process. Failure to do so may enable firms outside the United States to disproportionately profit from the pioneering activity for which the "the Valley" is so famous.

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