Networks of venture capital firms in Silicon Valley

By comparing the network structure of venture capital (VC) firms in Silicon Valley (California) to that of VC firms in Route 128 (Massachusetts), the present study challenges any market-centred theory of regional development. I show that there are advantages in examining the structure of social networks of cooperation within the venture capital industry to understand the level of development of a region. I support two distinctive propositions regarding the regional advantage of Silicon Valley over other US high-technology regions such as Route 128. First, collaboration among VC firms in Silicon Valley is more pronounced and dense than in Route 128. Second, the number of investments and amount of money invested by VCs in Silicon Valley staying local are much higher than the number of investments and moneys invested locally by Route 128 VC firms. I argue that historical development as well as the particular structure of the social networks in Silicon Valley is precisely what has fostered relatively higher growth and development of the region compared to many other regions of the world.