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Boston Versus Silicon Valley: Advantage Beantown

A few decades ago, Silicon Valley beat out Boston for tech dominance. Today, Boston is emerging as the epicenter of a new economic era.
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Urban Rochester, New York, as seen from the air. (Photo: Tomkinsc/Wikimedia Commons)

Urban Rochester, New York, as seen from the air. (Photo: Tomkinsc/Wikimedia Commons)

Scholar AnnaLee Saxenian famously explained how Silicon Valley bested Boston in the battle to be the world's center for the innovation economy. But economic eras rise and fall, as agriculture and manufacturing have done. As manufacturing descended into geographic convergence, innovation ascended into geographic divergence. Industry would cluster in handful of places, which economist Enrico Moretti noted in his book, The New Geography of Jobs. Moretti doesn't allow for a flattening world of tech. Instead, he frets about entrenched winners and losers. The inequality gap will only get wider. Instead, tech is already diffusing to other metros across the country and around the world. The race is on to be the next Silicon Valley concerning the same economic era. More and more places will get a slice of a shrinking employment pie. As innovation descends into geographic convergence, the intangible economy will ascend into geographic divergence. This time, Boston holds the regional advantage.

During the 1970s, Boston was known for electronics (Route 128) and Silicon Valley was known for semiconductors. The main difference between the two regions concerned open innovation. In Silicon Valley, Fairchild Semiconductor broke the mold for how a company would operate. The established East Coast industries were rigidly hierarchical and secretive. Fairchild did the exact opposite. Hence, Silicon Valley boomed while Boston muddled along.

During the 2000s, the Bay Area was known for Apple, apps, and social media. Boston was known for life sciences. Which region will win this time around? Once again, the regional advantage concerns openness. MIT and its knowledge production is this new economic era's Fairchild Semiconductor:

Some say the local life sciences industry may prove more stable — and more broadly adaptable — than its minicomputer forebear of a generation ago. They cite, among other things, the durability of the world-class universities and academic medical centers that have made Massachusetts the largest per-capita recipient of NIH grants. Such institutions have been a magnet for entrepreneurs who license their discoveries, pharmaceutical giants that partner with biotechnology startups, and venture capital firms that bankroll early-stage drug discovery businesses.

Why are Boston's world-class universities and academic medical centers a magnet for Big Pharma and venture capital? A life science company outsourcing the costs of research and development provides one explanation. In fact, "Roughly 75 percent of research in America now takes place on university campuses." That said, all a large pharmaceutical company needs is a research university. Many regions fit the bill, not just Boston.

Sean Safford compared the knowledge networks in Akron, Ohio, with those in Rochester, New York. The quality of the network in each region was quite different. The University of Rochester facilitated knowledge transfer to small firms, which could commercialize the ideas. Whereas the University of Akron worked hand-in-hand with large corporations. But Goodyear and the like weren't interested in university R&D. Talented graduates would suffice. Innovation remained in silos, just like Boston's minicomputer firms of the 1970s.

Is life science research in Boston more like Akron or Rochester? Big Pharma could kill the goose laying the golden egg, which would be the Akron curse. Others are more optimistic:

“The more that we insist on being open-minded and creative and collaborative, that’s going to help us continue our leadership in life sciences,” said Daphne Zohar, founder and managing partner of PureTech, a Boston research and venture capital firm that nurtures a dozen health care startups. “Our community tends to be a small network where people know each other. So being open to others is important, reaching out and welcoming people from other disciplines. Food companies like Nestle and tech companies like Google are moving into health care, and we have to engage them.”

Rochester it is. Google and others are attracted to open knowledge networks like moths to a flame. That flame burns brightest in Boston.