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Developing Future Innovation Hubs Through the Case Study of Silicon Valley

By Dandi Li

Thesis Advisor: John Kennedy, Lecturer, MIT Center for Real Estate


In today’s innovation economy, the development of innovation hubs is viewed as a strategic undertaking to nourish the entrepreneurial ecosystem and to enhance economic vitality. The study uses Silicon Valley, one of the most successful innovation hubs in modern history, as a case example to find the factors that have contributed to its success, and how these factors will evolve over time. Using existing literature and in-depth interviews, the study produces a framework of key factors that will influence the development of such hubs in the future.

Silicon Valley case shows that the foundation element of a successful innovation hub is people – the human capital. Adding to this element, five hardware ingredients – Universities & R&D Centers, Venture Capital, Major Corporations, Service Providers, and Government – have an irreplaceable role in sustaining the vitality of such hubs. The intangible software, culture with its four dimensions – entrepreneurial mentality, mobility of resources, global perspective and shared vision, acts as a catalyst that brings the foundation element and hardware ingredients together, allowing them to interact and cooperate. Ultimately, an effective entrepreneurial ecosystem is formed from the combination of all these factors.

The findings from in-depth interviews suggest that the original culture of Silicon Valley will continue to play a key role in future innovation hubs. This entrepreneurial mentality, especially in terms of openness, supportiveness, forgiveness and risk-taking attitude, remains highly desired by today’s entrepreneurs.

Simultaneously, recent shifts in the demographic landscape have changed the nature of the foundation element – people. Millennials and the Creative Class have become a dominant pool of talented workforce, and they possess different values and preferences compared to other generations. Together with urbanization, this creative workforce shows high appreciation towards the role of place and urban lifestyle. Thus, in order to successfully attract and retain such talents, urban location will play an increasingly important role in future innovation hubs. It is estimated that the “place element” will become a new addition the innovation hub hardware system, supporting the overall development of entrepreneurial climate.