A report just released by the Bay Area Council Economic Institute with Booz and Company is attempting to answer that question definitively. The report is called The Culture of Innovation: What makes San Francisco Bay Area Companies different? And the answer comes down to talent. Not talent itself but the cycling of talent that only the Bay Area’s culture can create.
The Bay Area has dominated the field of innovation for quite some time. One measure of this is in terms of patents granted. The Bay Area leads the nation in total patents issued in 2010, percent of total patents issued, and in number of patents per million inhabitants.
One of the critical factors that supports this culture of innovation is infrastructure. By infrastructure, the report is referring to the top five laboratories and the five best research universities in the nation:
- Lawrence Livermore
- NASA Ames
- SLAC (Stanford’s Linear Accelerator)
Top Research Universities
- UC Berkeley
- UC San Francisco
- UC Davis
- UC Santa Cruz
In addition to (or because of) these resources, a number of private companies have placed their research and development arms in the area, such as Agilent, Apple, Google, IBM, Intel, and Lockheed.
According to the report, the depth and diversity of all of the many research efforts in the region provide a core of basic science and technology, as well as a large pool of faculty, students, and scientific entrepreneurs who staff and build companies based on these technologies.
One result is that the Bay Area has captured between a third to one half of all U.S. venture capital dollars for the past ten years. Other areas of the country, such as Austin and Seattle, have attempted to recreate the Bay Area’s results with limited results.
So what is the secret? The culture of entrepreneurship, which has proven difficult to reproduce. Some features of the culture of innovation are:
- Failure is not a bar to success. The area is filled with
- “Serial entrepreneurs”, many from overseas, who mentor new generations of companies
- The spirit of acceptable risk
- Willingness to invest in future markets
- Creation of new paradigms in business
These factors are present to a larger degree and throughout the companies in the Bay Area, compared to the rest of the nation. This turned out to be a better predictor of innovative success than money spent on R&D.
What made the difference, the report concludes, in top-down culture that supports innovation strategy as part of its overall business strategy. Bay Area companies constantly seek new sources of ideas by nearly constant hiring. Entrepreneurs are always in need of fresh talent and ideas in areas like product development, the way the business is run, what the public wants, and even in imagining what is possible.