How to build a Silicon Valley-like digital talent pool

Government leaders often say they want to replicate the world-class innovation ecosystem of Silicon Valley. But it’s easier said than done.

Like other locations that have hatched innovative start-ups and technological breakthroughs, Silicon Valley is less a place than a complex interplay between different but complementary factors. There’s no magic set of policy prescriptions that guarantees the ability to spawn a thriving tech sector.

Yet there are steps governments can take to help innovation take root and flourish. The most important is to create and maintain institutions of higher learning: places where future generations can obtain the skills needed to thrive in a global economy beset by rapid technological change.

Silicon Valley’s pool of technical knowledge was initially provided by the engineering schools of nearby universities like Stanford and the University of California at Berkeley. Both went on to establish world-leading computer science and business schools as the tech boom got underway.

But another driver was the fact that Nobel Prize winner William Shockley, founder of Shockley Semiconductor, had grown up in Palo Alto, California. He wanted to move back to the area from Cambridge, Massachusetts, to be closer to his ailing mother, leading him to establish his company in the same town where Stanford is located.

There are other examples of universities and technical institutes making certain locales attractive for the establishment of tech firms that go on to become household names. When Jeff Bezos chose Seattle as the location for an online bookshop called Amazon in 1995, he made the decision partly on the basis of U.S. tax laws.

But there was already a deep pool of tech talent available in Seattle thanks to the presence of older companies like Microsoft and Boeing— which, in turn, had benefited from the presence of institutions such as the University of Washington, established in 1861. As with Shockley Semiconductor, Microsoft co-founders Bill Gates and Paul Allen had ties to the Seattle area, leading them to move the company there after initially launching it in Albuquerque, New Mexico.

There are many other examples of innovation clusters forming around universities. Innovation ecosystems in biotechnology, software, and electronics formed around the University of Cambridge in the United Kingdom. Or take Munich, Germany, which has seen a strong technology ecosystem emerge in industries such as automotive, biotechnology, and software, thanks to the presence of the Technical University of Munich and the Ludwig Maximilian University.

But other factors also provided the enabling conditions for the emergence of these ecosystems. In the case of Cambridge, it was various government initiatives and funding programs, such as those provided by Innovate UK (Britain’s national innovation agency), the European Union’s Horizon programs, and those of other regional development agencies.

Similarly, Munich hosts many well-established global companies, particularly in the automotive, electronics, and aerospace industries. Companies such as BMW, Siemens, and Airbus led to the creation of positive feedback loops between universities and multinational companies.

And it didn’t hurt that Cambridge and Munich offer a good quality of life, making them more attractive to highly skilled global talent and their families.

This dynamic applies not just in advanced industrialized countries, but in emerging markets as well. For example, the thriving technology ecosystem in Bangalore, India, is centered on institutions such as the Indian Institute of Science (IISc), the Indian Institutes of Technology (IITs), and the National Institutes of Technology (NIT).

In China, Beijing's Zhongguancun district is home to a vibrant technology ecosystem fueled in large measure by its proximity to some of China’s oldest and most prestigious universities, including Tsinghua University and Peking University.

Indonesia’s thriving app developer community has sprung up around the Bandung Institute of Technology. As a consequence, some of the world’s largest technology companies, including Apple and Facebook, have chosen to open R&D centers nearby.

But it’s not just in technology that we see this symbiosis of talent pools and entrepreneurial success. Paris is the center of the global fashion industry thanks to prestigious institutes such as the École de la Chambre Syndicale de la Couture Parisienne, the Institut Français de la Mode (IFM), and the École Duperré. Milan is a global hub for design, particularly in the field of furniture and industrial design, thanks to the presence of institutions such as the Politecnico di Milano, Domus Academy, and NABA (Nuova Accademia di Belle Arti).

For governments looking to replicate these success stories, the lessons provided by other ecosystems are clear:

First, establish and fund institutions of higher learning, particularly in those disciplines you’re looking to cultivate.

Second, create a business environment and investment climate that make it easy and attractive for entrepreneurs to locate near these centers of learning.

Finally, provide a good quality of life for the tech talent you want to attract, including their families.

Again, this is all easier said than done, and it takes time—usually decades—to accomplish. But for governments with the necessary determination and a long-term time horizon, the rewards are well worth the effort.