Abstract: Domestic Direct Investment and Entrepreneurship in American Second Mover High-Tech Regions

Stephen B. Adams


This paper examines Research Triangle and Silicon Valley as second movers—high-tech regions that did not build on existing capabilities nearby. For such regions, only after a critical mass of scientists and engineers is built from foreign direct investment (FDI) or domestic direct investment (DDI) does entrepreneurship become a dominant part of a region's development. As of 1980, about 90 percent of employees in Research Triangle worked for companies based elsewhere. As of 1970, nearly two-thirds of high-tech employees in Silicon Valley worked for satellite operations of firms headquartered elsewhere. FDI and DDI have been associated with external exploitation, especially regarding resource-based economies. America's strongholds of information technology have turned that power relationship on its head, with most of the long-range value accruing wherever the workers happen to be. A critical mass of engineers and scientists in proximity to a research university in places such as Silicon Valley and Research Triangle represents a first step toward competitive advantage in the knowledge economy. Attracting FDI does not represent an abdication of local power and control—so long as an academic anchor acts like a magnet holding the region together as it makes the crucial transition to indigenous entrepreneurial enterprise.