Transience and Innovation

From yesterday's NY Times, a report of a study that concludes that Silicon Valley tech professionals really do change jobs more frequently than professionals in other regions, or in other fields. The question -- still unanswered -- is whether that phenomenon is related to vitality of the Valley's tech sector:
After all, the argument that Silicon Valley's job hopping fosters innovation contradicts economists' common assumptions. "It didn't feel right to me," James B. Rebitzer, an economist at Case Western Reserve University, said in an interview.

When employees jump from company to company, they take their knowledge with them. "The innovation from one firm will tend to bleed over into other firms," Professor Rebitzer explained. For a given company, "it's hard to capture the returns on your innovation," he went on. "From an economics perspective, that should hamper innovation."

He found a possible answer to the puzzle in the work of two management scholars, Carliss Y. Baldwin and Kim B. Clark. In their book "Design Rules: The Power of Modularity" (MIT Press, 2000), they argued that when there is a lot of technological uncertainty, the fastest way to find the best solution is to permit lots of independent experiments. That requires modular designs rather than tightly integrated systems.

"By having a lot of modular experimenters, you can take the best, which will be a lot better than the average," Professor Rebitzer said. Employee mobility may encourage productive innovation, as people quickly move to whichever company comes up with the best new technology.

Link: Virginia Postrel, "In Silicon Valley, Job-Hopping Contributes to Innovation"

Link: The Rebitzer (et al.) paper


6 Responses to "Transience and Innovation"

Anonymous said... 12/02/2005 8:09 PM

A book that addresses this is
Working in Silicon Valley
It discusses the idea of the labor markets as information markets in Silicon Valley, and the notion that it allows new technologies to leap from company to company with little delay.

Mike Madison said... 12/02/2005 10:25 PM

Hyde's book depends heavily on the earlier, seminal Regional Advantage by Annalee Saxenian.

Anonymous said... 12/03/2005 3:25 PM

Thank you for the reference, I will take a look at it.

Mark Rauterkus said... 12/05/2005 10:26 AM

A year on the internet used to be counted more like 'dog years.' One year on the net was like seven years in real life. The net moved quickly. The net was fast paced. Live was sucked out of the people and at times, the companies, that ran in those domains.

So, if people move from job to job frequently in S.Valley -- are they just keeping up with the dog years pace?

Perhaps job-hops among net-centric (i.e., tech) companies is just one aspect of many among the life on the net.

Hooman said... 12/06/2005 12:52 AM

Mike, I definitely believe that the rapid turnover rate in Silicon Valley contributes to the economic development of the region insofar as it contributes to the diversity index associated with their social network structure. Unlike other regional economies, Silicon Valley has an extremely dense social network characterized by agents with relatively high numbers of cross-sector, weak ties. This type of network structure is conducive to economic progress because it bolsters one of the key drivers of development, Recombinative Innovation. Recombinative Innovation is a term I use to describe the reorganization of capital into value-generating structures that attract further capital and contribute to positive feedback mechanisms and agglomeration effects. Put simply, the more ties there are between economic agents (lawyers, engineers, financiers, etc) with diverse resources (capital, ideas, etc), the higher the rates of innovation in a region. This type of network structure, coupled with the decentralized nature of market-driven economic development, has resulted in a flow of capital to the region. Accordingly, I believe that policies and actions promoting this type of network structure will be integral to the future success of Southwestern PA.

Amos_thePokerCat said... 12/07/2005 7:54 PM

Cynical me. I would expect the typical Allegheny Conference reaction to the Postrel NYT article to be something like this: On the whole, I am glad we do not have a problem with all that job hopping".

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