Excerpts from books by Indergaard and Neff describe Silicon Alley: a new media hub located in downtown New York City from the early 1990s with ambitions to become a regional innovation hub like Silicon Valley in California. Silicon Alley grew rapidly during the dot.com boom but failed to withstand the dot.com crash at the end of the nineties. A number of start ups focused on the NY media and advertising industries were successful such as Razorfish and DoubleClick, but the majority of start-ups could not convert their creativity into commercial corporate value, and many of their clients used them as contract labor and eventually built their own in-house capability.
So why was Silicon Alley unable to thrive as Silicon Valley did? From this weeks readings I can find three possible causes: homophilous networks, lack of resiliency to economic downturn, and hype rather than real industry.
The kids of Silicon Valley were young, hip and edgy. Their version of networking was clubbing and partying, they even called their community “The Scene”. Their networks were dense and homophilious, because being able to network till late created strong friendships but at the same time created exclusive cliques, as it was not something people who lived in the suburbs, or older people or those with family responsibilities could do. But regional innovation hubs need diverse, heterogenous networks to build bridging social capital, that can rapidly diffuse technological change, spark innovative ideas and foster partnerships and collaboration. This is very different to Silicon Valley, which was a tech hub with businesses from all industries, and employees from all over the world, which made it extremely diverse as explained by English-Lueck in our week 4 readings.
Not to mention that all that partying does not make you resilient. Schrock and Neff describe how the lines between work and personal time are blurred by the idea of Silicon Valley, which can cause people to burn out. People were also not geographically mobile, because who you knew was so important in Silicon Alley, so it wasn’t easy to import or export people from the Alley. In addition, Silicon Valley’s reliance on the media and advertising industry as clients of their creative output and lack of manufacturing base made it vulnerable to economic downturns. The creative Silicon Alley initially were able to “rise with the tide” of the dotcom boom, but the bust really hurt Silicon Alley, whereas Silicon Valley was more resilient.
Lastly, Silicon Alley was a victim of its own hype. As Dr Schrock states, Silicon Valley was a promise not a place. Silicon Valley situated in Santa Clara Valley California was absolutely the site of an incredibly productive and profitable regional innovation hub. In “Silicon Valley’s old money”, O’Mara also describes the long heritage of successful people mentoring the next generation of innovators, which really helps them learn directly from their mentors and in turn be very successful. But the export of Silicon Valley was a promise. When, as Indergaard describes, wealthy real estate investor Rubin began wiring vacant buildings in the financial district and offering them to new media start ups for low rents and short leases, he was banking on this promise. The area was branded Silicon Alley to strengthen the brand. Further hype was created by the establishment of associations and newsletters. But at its core, the creativity, edginess and non-confirmity of the Silicon Alley start ups was difficult to convert into business leverage. Established businesses doubted their business acumen from so much publicity around partying. Therefore, a strong business model was never realized and Silicon Alley never really recovered after the dot.com bust.