ABSTRACT
The competitive advantages of regional clusters have become a focal point of scholarly and policy attention. This chapter compares California's Silicon Valley with the Route 128 beltway around Boston, Massachusetts, to suggest the limits of the concept of external economies and to propose an alternative network approach to analyzing regional economies. The common notion of external economies is based on an assumption that the firm is an atomistic unit of production with clearly defined boundaries. A network approach can be used to argue that, despite similar origins and technologies, Silicon Valley and Route 128 evolved distinct industrial systems in the postwar period. The differences in productive organization have been overlooked by economic analysts or treated simply as superficial differences between "laid-back" California and the more "buttoned-down" East Coast. The successes of the 1980s generation of startups were the most visible sign that Silicon Valley was adapting faster than Route 128, but changes within the region's largest firms were equally important.
