Top-Down Tech Clusters Often Lack Key Ingredients

Russia's planned 'science city' is a fresh example of centrally planned innovation, which historically falls short of its goals

By Vivek Wadhwa

Russia recently announced a government-planned "science city," to be located outside Moscow, that it hopes will one day rival Silicon Valley's creative engine. The country plans to spend $200 million to turn a muddy field of birch groves and warehouses into a technology hub bursting with innovation and competitive companies. The government will dole out money to companies that it selects, powerful oligarchs will develop real estate, and government-appointed administrators will run it.

Russia isn't alone in trying to engineer new technology centers. China has invested billions of dollars to launch tech parks across the country, as have nations including Spain, Singapore, Finland, and Malaysia. The U.S. Congress is considering legislation to encourage new science parks by providing loan guarantees—never mind that U.S. office space vacancies are running at record levels in many cities.

Most of these projects are well-intentioned efforts to boost national competitiveness. But as I've written before, top-down clustering doesn't tend to work nearly as well as when hubs of commerce and academia spring up from private efforts.

Many of the hundreds of cluster-development projects that have been started around the world since the 1980s have either failed or are on life support, including Tsukuba, Japan's science city, and Egypt's "Silicon Pyramid." Because they typically die a slow death, you don't read about the failures on the front pages of newspapers. Political leaders long ago held press conferences to claim credit for advancing science and technology, management consultants earned hefty fees, and real estate barons reaped fortunes. Taxpayers were left holding the bag.

Slight evidence for cluster theory

Academics, including Harvard Business School's Michael Porter and many management consultants, have been prescribing central-clustering development plans for decades. The plans are based on the idea that governments or economic development bodies can create hubs of activity in specific industrial sectors by bringing businesses, suppliers, and researchers together in buildings or industrial parks. Build great infrastructure, offer financial incentives, and the magic will happen, the thinking goes.

Yet regional planners and academics get defensive when asked to produce evidence of cluster theory's success. They typically tout Silicon Valley and North Carolina's Research Triangle Park as examples of the success of government-supported clusters. In Silicon Valley though, the government can't take credit for success.

One way to understand the Valley's success is to compare it to the Route 128 ring around Boston. University of California Berkeley professor AnnaLee Saxenian's 1994 book, Regional Advantage: Culture and Competition in Silicon Valley and Route 128 documented the evolution of both tech centers. She noted that during World War II, the government provided funding to the Massachusetts Institute of Technology and Stanford University for research on aerospace and electronics. Boston had a huge advantage because of its proximity to East Coast industrial centers and helped build General Electric (GE), RCA, Westinghouse Electric, and Raytheon (RTN). Silicon Valley produced Hewlett-Packard (HPQ), but the 128 belt maintained an advantage through the 1970s.

Business Exchange

Track and share business topics across the Web.