An Alternative Perspective
New Horizons in Institutional and Evolutionary Economics series
Edited by Erik S. Reinert
Chapter 10: Diversity: Implications for Income Distribution
David B. Audretsch As recently as the early 1990s scholars and industry observers predicted, if not the death of Silicon Valley, then its slowdown.1 For example, in a muchcited article in the Harvard Business Review Charles Ferguson (1988, p. 61) argued: Fragmentation, instability, and entrepreneurialism are not signs of well-being. In fact, they are symptoms of the larger structural problems that aﬄict US industry. In semiconductors, a combination of personnel mobility, ineﬀective intellectual property protection and tax subsidies for the formation of new companies contribute to a fragmented ‘chronically entrepreneurial’ industry. US semiconductor companies are unable to sustain the large, long-term investments required for continued US competitiveness . . . Personnel turnover in the American merchant semiconductor industry has risen to 20 percent compared with less than 5 percent in IBM and Japanese corporations . . . Fragmentation discouraged badly needed coordinated action – to develop better process technology and also to demand better government support. A decade later, not only is Silicon Valley thriving but, as The Economist pointed out, average pay in Silicon Valley rose between 1995 and 1996 by 5 per cent in real terms, to $43,510, compared to a mere 1 per cent increase to $28,040 for the rest of the country.2 Despite high production costs, environmental destruction and overall congestion, reports of Silicon Valley’s demise were premature. The purpose of this chapter is to suggest that diﬀerences in the distribution of income across regions are likely to grow. As a result of globalization, those regions whose economies...
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