This chapter examines those external factors that have influenced the growth and decline of Silicon Valley. It begins with a review of competitiveness and examines the global economic transformation. A nation's ability to produce goods and services for domestic and foreign markets partly determines its international competitiveness. The United States was a major export country before the 1970s. Since then, imports into the United States have exceeded the exports from the United States, with a major increase in imports in the 1980s. During the 1980s, the United States gross domestic product growth was the lowest in comparison to Japan and other newly industrialized countries in Asia. As the world continues to move towards globally interdependent economies, intense global competition, and market driven economies, businesses and industries worldwide face tremendous challenges to survive beyond the second millennium. Many American corporations and industries are facing onerous times due to their lack of appropriate responses to the changing global economic competitive environment.