“Social Capital and Capital Gains in Silicon Valley”

Social capital is a term that Robert Putnam used in his book to explain how economic actors in a local region develop trust from their shared history and experience. Network of Civic Engineering is the process making economic process in those local areas easier due to trust and cooperation among players.

But when these two concepts are applied on Silicon Valley, they fail to explain what has been going on in Silicon Valley or how this region has become somewhere so special and successful. Since the notion of social capital is supposed to be coming from trust through out shared history, Silicon Valley is far from having that kind of a ‘history’. Valley is a place where strangers all around the world is coming and did not know each other or have much in common etc. Silicon Valley is not an isolated place, always open to new comers and there is nothing like a community whether new comers will be accepted or not.

Thus, we need something different from Putnam’s classic social capital description to explain Silicon Valley’s social capital. Network environment in Valley is resulted from collaborations among entrepreneurs for innovation. Collaboration among those people, institutions like universities and firms created a commercialized innovative technology production. Starting with microelectronics and semiconductors, Silicon Valley is now specialized in hardware and software computer networking.

Main social capital networks in the area are composed of productive interactions among universities, venture capital firms, law firms. Also, labor market is attractive in terms of highly qualified people from all around the world and headhunters actually look for them and Valley offers opportunities to entrepreneurs even if they fail in their start-ups.

Another issue is link between economic performance and social capital as Putnam claims that there is a strong positive correlation. Social capital is a pre-condition for a region to have good economic performance. Marshall advocates that since concentration of firms in a specific region creates proximity and therefore those firms can easily find skilled labor, supplier and know-how from each other when they become clustered. Veblen goes one step further, evolutionary perspective in economic development of firms; whether they stay same or adapt to the environment. Adaptation enables innovation and brings economic development, she argues.

Michael Piore and Charles Sabel worked on Italian districts and come up with the comparison between former mass production and new trend of small companies operating in specialized areas. They support the idea small size companies are more innovative and flexible. Also Sabel claims that trust comes from mutual confidence they no one will ever exploit other’s vulnerability. Silicon Valley has been able to build trust due to mutual confidence to each other’s performance. So, trust is open to be extended and people are welcomed even they have different ideas, roots or cultural backgrounds in Silicon Valley



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