Palo Alto Networks is a high-technology start-up with ample funding and ambitious plans. But despite its name, the company has no offices in Palo Alto, California, Silicon Valley’s unofficial capital.
Instead, it is based about 12 miles, or about 19 kilometers, farther south, on the outskirts of San Jose. The Alviso company is developing technology to protect computer networks from hackers and misuse, so it chose to be where engineers with networking expertise are clustered: around big companies in the field like Cisco and Juniper Networks.
Nir Zuk, its founder and chief technology officer, notes that Palo Alto is synonymous with high-technology innovation, and he was living there when he came up with the name.
“But in Silicon Valley, you locate a company where the engineers are,” he explained. “You would never locate a networking company in Palo Alto.”
Silicon Valley, the wellspring of the digital technologies fueling globalization, is itself a collection of remarkably local clusters based on industry niches, skills, school ties, traffic patterns and ethnic groups.
“Here, we have microclimates for wines and microclimates for companies,” said John Shoch, a longtime venture capitalist.
Silicon Valley, home of Stanford and other universities, has long been the model of success for a modern regional economy, and policy makers worldwide have tried to emulate it by nurturing high-technology companies around universities. There have been a few winners, like the semiconductor manufacturing hub in and around Hsinchu Science Park in Taiwan.
Yet a look at the microclusters within Silicon Valley demonstrates the business relationships, the social connections and the seamless communication that animate the region’s economy. It also suggests the human nuance behind the Valley’s success and shows why that success is not easy to copy, export or outsource.
“These microclusters turn out to be a very efficient way to innovate, to…