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Michel Ferrary and Mark Granovetter

The failure of several policy-makers around the world to reproduce the Silicon Valley cluster reveals the misunderstanding of the innovative dynamic in Silicon Valley. This study uses complex network theory to analyse the complex innovative capability of Silicon Valley and to understand the heterogeneity of agents and the multiplexity of ties that support the creation and development of high-tech start-ups. Silicon Valley is a complex network, whose nodes are companies and whose links represent the various economic and financial ties connecting them. In a systemic perspective, the presence of a specific agent in a network induces specific interactions with other agents that could not take place if this agent were not there. Thus, the diversity of agents influences the dynamics of the system. The presence of venture capital firms in an innovative cluster opens potential specific interactions with other agents in the network (universities, large companies, laboratories) that determine a particular dynamic of innovation. What is distinctive about Silicon Valley is its complete and robust complex system of innovation supported by social networks of interdependent economic agents in which the VC firms have a specific function. Our perspective examines five different contributions of VC firms to Silicon Valley: financing, selection, collective learning, embedding and signalling.