Any Way You Slice It: Silicon Valley’s Innovation Industries Continue to Lead the Nation

By John Melville

As we stated last year, The Silicon Valley Competitiveness and Innovation Project (SVCIP) focuses on a subset of industries in the regional economy that are important export-oriented sectors with positive ripple effects on other parts of the economy.  We call them “innovation industries” because innovation is their shared core business.  While their products and services vary widely—from software to hardware, internet-based services to biotechnology, and many more—what they also share is a core need to operate in a supportive community environment, including talent, financing, and other resources.   They directly account for 26% of the jobs in Silicon Valley, and their success is an important measure of how well Silicon Valley and other regions are providing an effective “innovation ecosystem.”

We hear a lot about competition for jobs, and how innovation industries are thriving in other regions like Seattle and Austin.  What we find is that innovation is not a zero-sum game.  Many regions can and do participate and thrive in the innovation economy.  As the chart below shows, Silicon Valley and all the comparison regions continued to grow their innovation industries in 2016.

Indexed Growth - 11.30.2017While there were individual sectors that grew and declined in every innovation region, the net effect was a continued upward trajectory across the innovation economy of these regions.  How did Silicon Valley do?  It led all other innovation regions with a 5.1% growth rate, well ahead of second place Seattle’s 3.6% increase.

Moreover, in the decade between 2006 and 2016, Silicon Valley’s innovation industry jobs grew 53%, while those in Seattle and Austin each grew 41%, and in Boston 22%, while innovation industry jobs in New York City increased 17% and in Southern California by 9%.

By the end of 2016, Silicon Valley had for the first time surpassed 500,000 innovation industry jobs (503,966).  The region is closing in on much larger population centers such as Southern California (571,135) and New York City (525,651), and has a substantially bigger pool of innovation industry jobs than Boston (311,603), Seattle (271,264), and Austin (103,576).  As a result, as the chart below illustrates, Silicon Valley outpaces all the innovation regions in jobs in innovation industries per capita.

EmploymentPer10000 - 11.30.2017

There has been a slight deceleration of growth in the innovation economy in Silicon Valley between 2015 and 2016.  However, as the chart below shows, all of the specific industry sectors that comprise the innovation economy in the Valley continued to grow in 2016, except for medical devices.  Whether the overall deceleration can be chalked up to volatility or lifted up as evidence of the beginning of a slowdown is too early to tell.  What we do know is that over the long-term, despite the enduring challenges of housing, transportation, and educating a skilled workforce, Silicon Valley has continued to thrive as an innovation economy.  Let us know what you think is likely to happen next.

1yrGrowthTable - 11.30.2017






 John Melville is CEO of Collaborative Economics.