In her book, Regional Advantage, AnnaLee Saxenian (1994) makes an argument for “two models of industrial systems – the decentralized regional network-based system and the independent firm-based system.” The two models come out of her case studies of two regional economies in the United States, one centered on high technology industries along Route 128 in Massachusetts and the other centered on high technology industries in Silicon Valley in Northern California. An astute ethnographer and not a formal modeler, Saxenian uses these case studies inductively to make a theoretical point: Differences in economic organization create decisive differences in the course of economic development.

Generalizations reached from two contrasting ethnographic studies do not provide much evidence for a theory, but anecdotally the cases are very persuasive. In the 1960s, the East Coast region with its mammoth, vertically integrated corporations, such as IBM, RCA, Digital Equipment Corporation, Wang, Honeywell, and General Electric, pioneered the move into high technology industries and quickly built a formidable technological and corporate advantage over firms elsewhere in the rest of the country. “By 1975,” says Saxenian (1994, p. 19), “the technology complex along Route 128 employed close to 100,000 workers and was poised for a decade of explosive growth.”

On the other side of the country, in the area around Stanford University south of San Francisco, the 1960s had also been a decade of expansion into high technology industries. Unlike the East Coast mega-corporations, the firms in the Silicon Valley were mainly small and narrowly focused.