Associate Editor: Francisco Gil-White

In high-performance economic communities, industrial clusters are tightly linked with community assets in a vital cycle of continuous improvement, innovation, and change, generating increasing productivity for companies and per-ca pita income growth for people. Not only do companies improve and change but the role of government also changes, as well as the relationships between the public, private, and the independent sectors (The latter is comprised of universities, associations, labor councils, etc.).

What follows are the findings of a group of social scientists who were formerly at SRI International and are now engaged in practice and research at Collaborative Economics, serving as the principal consultants to the Joint Venture Silicon Valley Netwo rk. The findings, which go beyond the analysis of industrial clusters, are based on experience with more than twenty local economic development projects in the United States and more than a dozen international projects. Each project had its own indiv idual characteristics; its own economic and political history, its own industrial clusters, and its own cultural identity. Nonetheless, there are some characteristics common to their successful undertakings.

Overall, in the successful projects, we see a convergence and collaboration between the political, economic, and community leadership that leads to a higher economic performance and quality of life.

In the pages that follow, we will discuss the reasons for the shift of economic power from the national level to regions within the nation state, the rise of private sector leadership at the community level, the new roles adopted by local governments, and finally the lessons learned from Silicon Valley's recent efforts at economic development called Joint Venture Silicon Valley.

The Economic Power Shift from National to Regional Level

The 1980s have seen the rise of new views and practices related to economic development. Regions within the nation state ­ cities, counties, townships, states, and regions covering several political jurisdictions ­ have become the focus of economi c development. These regions have been driven by necessity and opportunity to take charge of their own economic well-being. "Since the early 1980s, when the decline in direct federal aid to cities began, municipal officials have begun to develop an entr epreneurial style of government. Moving beyond their traditional role as service providers and regulation enforcers, cities (and regions) borrowing techniques from the private sector, have begun to embrace fundamental innovations in their operatin g practices designed to pare down bureaucracy, decentralize authority, and promote economic development." This is not only a U. S. phenomenon. We see these efforts in Europe, Asia, and across North America.

The demise of socialism as a political-economic system signaled the recognition that governments had to pay attention to the efficiency (market) side of the economy in order to be a competitor in the world economy. Previously, gove rnments had largely concerned themselves with the equity side of the political economy and the private sector had been responsible for the efficiency (market) side. In the last half century the private sector began to pay attention to the equity side, an d modern companies now deliver enormous amounts of social services (health, retirement, education) to their employees. Governments were slow to recognize that in order to better deliver social services, it is necessary to have an efficient economy. This recognition began taking hold in the late 1970's and led to new thinking throughout the socialist and capitalist worlds.

The demise of the Cold War also had an effect. Although earlier there had been burgeoning efforts at local development, the end of the Cold War reduced one of the strong political forces holding the center together. Of course, central governments still play a major role, but the reduced threat of global confrontation has had the psychological and political effect of reducing dependence on the central government.

The New Globalism, based on global sourcing and distribution of products and ,services, leads to localism. Because of the multi-technology character of modern products and the intimate interdependence between suppliers, producers, a nd distributors, comparative advantage results from industrial clusters and their interrelationships. This leads to the development of regions.

Other factors contributing to the shift of economic power to regions are tax revolts and competition from other regions. The latter first took the form of enticing companies to relocate from one region to another. This was soon recogn ized as both short term and a zero-sum game, which led to a new attitude of building on existing clusters and developing new products and services - improving the "habitat" for business and community.

Private Sector Civic Entrepreneurship

A key factor in the building of a total quality communality is private sector leadership. There are many outstanding examples of this as detailed by Henton and Walesh. They refer to these private sector leaders as "civic entrepreneurs." These leaders are both visionary and action oriented. Although they believe in the importance of private sector leadership, they also understand the importance of government and implementing organizations. As successful private sector entrepreneurs they have a network of industrialists, financiers, lawyers, and other service business people. They link the people in their network to those ill other networks such as government and political, or academic and professional.

These civic entrepreneurs recognize the power of collaboration. They have often utilized total quality management (TQM) within their own companies and are at home with the techniques of TQM. They apply these techniques at the communit y level. They call meetings of friends and other leaders, they break down boundaries and make introductions. They often commit resources from their own companies to initiate activities and inspire others to take risks. These civic entrepreneurs initiat e collaboration between the private sector and the public sector, between private sector companies to carry out public service activities, and between the public, private, and the independent sectors in order to bring resources to bear on civic problems. In a forthcoming book Henton, Melville, and Walesh identify and discuss civic entrepreneurs across the U.S. and internationally.

The last decade or two has seen many local experiments and variations in how the various sectors collaborate. Civic entrepreneurs need implementing organizations that are neither public nor private. Some of these public-private pa rtnerships were focused on specific problems such as housing, transportation or education. Others were more broadly based, directed toward overall development of the economy and the economic infrastructure. This local experimentation is providing valuab le lessons for other communities and for the encouragement and improvement of existing ongoing initiatives.

Public Sector Recognizes New Roles

Public sector leaders in Total Quality Communities recognize the opportunity for their communities to seize control of their own destinies through collaboration and power sharing. As elected officials have recognized the need to pa y attention to the efficiency (market) side of economics, they turned to the private sector for partnership in these initiatives.

Regions of economic activity most often cross political jurisdictional boundaries and therefore require collaboration of several governments - cities, counties, states - in order to effectively serve the economic region. It is the econ omic imperative ­ the recognition that the private sector is the engine for growth ­ that is driving this collaboration.

The public sector role is becoming one of fostering a good business climate as well as engaging in traditional public service activities. Governments are learning that they too can streamline their decision- making and reengineer their processes so that businesses as well as individuals can function better in their communities.

The public sector role shifts from one of control to one of supporting, facilitating and empowering others to act.

Known worldwide as an innovator in technology, Silicon Valley has pioneered a new collaborative approach to regional rejuvenation. The best-kept secrets in Silicon Valley are not the entrepreneurship of the private secto r and the drive of its new start-up companies. These facts are widely known. What is not well known is the extensive collaboration between companies, between the public and private sectors, and between Silicon Valley and other communities.

Joint Venture: Silicon Valley (JVSV) is in the fifth year of a collaborative effort among business, government, education, and community leaders to create "a community collaborating to compete globally." Joint Venture: Silicon Valley be gan in 1992 as a response to an unprecedented economic downturn in the region. Over 40,000 jobs had been lost since 1988, businesses were expanding in other regions, and the rate of new business formation was declining. This economic slowdown followed d ecades of rapid growth in Silicon Valley, the home of the semiconductor and personal computer industries. Business confidence had fallen to an all-time low. Community leaders were concerned about the economic future of the region.

Business leaders from the high-tech and service sectors joined forces to create Joint Venture as the community response to this economic challenge. The first step was to better understand what was really happening to the Silicon Valle y Economy and to learn how other regions had responded to their own economic challenges.

The initial analysis, titled An Economy at Risk, analyzed trends in the regional economy, identified major threats and opportunities, and identified the best practices in comparable regions. The report found that Silicon Valley was slipping because the community had not responded effectively to the massive restructuring taking place in the region's economy. While the region was deeply impacted by major defense cuts, it was also undergoing a major transition from a hardware-driv en to a software-driven economy with a shift in the requirements for industry success. The community's economic infrastructure (including its educational system, tax and regulatory environment, and new enterprise support networks) had not kept up with th e rapid structural economic change.

An Economic At Risk benchmarked Silicon Valley's capacity to respond to change against comparable regions. Most significant was the finding that Silicon Valley was suffering from a "culture of blame" while these other region s had created a "collaborative advantage" based on cooperation among business, government, education, and the community.

Joint Venture designed a collaborative strategy based on the best practices from other regions. A widely participatory community process involving 14 working groups and over 1,000 people produced an explosion of creative ideas, from wh ich 11 specific recommendations for new initiatives emerged. Joint Venture established seven industry cluster groups that identified common issues and developed action plans. These groups included semiconductors, computer/communications, softwar e, bioscience, defense, environmental technology, and business services. Joint Venture also created infrastructure working groups focused on education/workforce, technology, regulatory process, tax policy, and physical environment.

One of the most exciting initiatives that emerged from the process was Smart Valley, a collaborative effort among business, government, education, and the community to created an electronic community. Another of the major Joint Venture efforts is the 21st Century Education Initiative which is involving business and educational leaders in an innovative effort to spark a renaissance in K-12 education. The Challenge 2000 effort that emerged from a year of design provides "v enture capital" type funding to local schools that agree to fundamental redesign. Business and foundations have provided $20 million in cash and in-kind support for Renaissance Teams that will affect over 20,000 students.

To support implementation of the 11 initiatives and promote ongoing collaboration, Joint Venture created a new non-profit "Intermediary organization." (For its first one and a half years, the San Jose Metropolitan Chamber of Commerce serv ed as fiduciary for the Joint Venture movement.) The organization is a network of people in business, government, education, and the community who have joined together to act on regional issues affecting economic vitality and quality of life (See F igure).

Joint Venture became a "state of the art" model of regional rejuvenation because it learned from the best and applied those lessons to the unique situation facing Silicon Valley. Joint Venture now has documented the lessons learned and identified prac tices that can

be shared with other regions.

Funded by the San Francisco-based Irvine Foundation, The Joint Venture Way: Lessons for Regional Rejuvenation documents the lessons learned by the civic entrepreneurs who guided the collaborative effort. The six underlying principles and five operational lessons teamed are summarized in the following chart. [For copies of The Joint Venture Way, contact Joint Venture: Silicon Valley Network at (408) 271-7213.]

CHART

The Joint Venture Way: Lessons for Regional Rejuvenation

Six Principles

The Joint Venture Way identifies six underlying principles that guide the collaborative effort to address regional economic issues and opportunities in Silicon Valley,

* Civic entrepreneurs are the catalyst - Civic entrepreneurs provide

Five Lessons Learned

The document also highlights the five key lessons learned about the collaborative process:

* Take time to build momentum for collaboration - The collaborative process moves through several stages before delivering results. If the process had been short-circuited at any stage, the strength of the eventual initiat ives, and the commitment to their implementation, would have been comprised.

* Balance top-down influence with bottom-up innovation - It is necessary to connect grassroots innovators with top-level leaders to produce real breakthroughs in community problem solving. By not tipping too far to wards either an elitist decision-making model or an expansive citizen participation model, Joint Venture has achieved a balance that avoids the excesses of either model in its purest form.

* Encourage big ideas and achievable first steps - Joint Venture has learned it can spark unprecedented collaborations - far beyond what many people thought possible - by encouraging expansive visions of ch anges that have tangible first steps.

* Always look for new ways to connect ideas and people - It is important to continuously create new ways to bring people together around issues of community concern. Remaining open to new paradigms, opport unities, and creative combinations of ideas,

people, and organizations is one of the hallmarks of Joint Venture's success.

Source: The Joint Venture Way: Lessons for Regional RejuvenationIJoint Venture: Silicon Valley Network

Each community can and will develop its own particular style and structure for economic development. There are important lessons for all of us to share in analyzing and describing all of these initiatives. Overall, the secret is o ut! Communities can take charge of their own destinies and through collaboration all sectors of the community can become a Total Quality Community.