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The 2006 Index of Silicon Valley

2006 Silicon Valley Index cover Joint Venture’s latest annual report says the region’s core assets remain a competitive advantage in the global economy

San Jose | January 15 – The eleventh annual Index of Silicon Valley contains good news: the region had its first net increase in jobs in four years; per capita income is rising; productivity is high and growing; and the community will continue building on its core assets as it repositions itself in the global economy.

The 56-page report will be released to the public by Joint Venture: Silicon Valley Network at its State of the Valley conference on January 20, held at Parkside Hall in San Jose. A line-up of CEOs and a panel of the region’s University presidents will discuss the report; former U.S. Representative and White House Chief of Staff Leon Panetta will be the keynote speaker.

“This year’s Index addresses the fundamental question: what is Silicon Valley’s competitive advantage in the global economy,” says Russell Hancock, Joint Venture’s president and CEO.

What are the Valley’s core assets? First, the report emphasizes, are people. There is a diverse, well-educated population, including significant foreign talent -- 38 percent of Silicon Valley residents are foreign born as are 53 percent of engineers and scientists in the key industry clusters here. More than 40 percent of the Valley’s population holds a bachelor’s degree.

Next, the Index points out that Silicon Valley receives 26 percent of all U.S. venture capital investment. Its share of patents issued to local inventors is almost 11 percent; the value added by local employees is $123,000 and is increasing at more than twice the national rate.

“Building on these strengths,” Hancock says, “we are growing as a global center for creativity in business and technology. We are reinventing ourselves once more by defining our advantage as creators of new products, services, companies, and new business models. As we move away from an industrial economy toward an idea economy, the region is undergoing another fundamental restructuring.”

As products rapidly become commodities and companies build value chains globally to make and sell these products, Silicon Valley can add value by staying on the creative edge of design, marketing, and production management, according to the report’s findings.

Morphing from an industrial economy to an idea economy raises questions about whether Silicon Valley residents are ready to meet the new challenges of the global economic environment, the report states. “Not everyone has benefited from this change and many are not prepared to participate.” Hancock asks, “Are we preparing our people, our businesses, and our community for this new reality?” The Conference is designed to find effective ways to answer these questions.

The report points out some key shortcomings: while the region’s overall educational performance has been improving, there are still variations by race and ethnicity. Only one-third of all students in 10th and 11th grade are enrolled in intermediate algebra, and 55 percent of third-grade students score below the national median in third-grade reading.

Economic progress also hinges to a significant degree on the perception and reality of Silicon Valley as a good place to work and live. The Index reports that Silicon Valley is preserving open space, increasing housing density, the share of new housing approved near transit increased to 39 percent, and the percentage of households that can afford to purchase median-priced homes increased slightly to 23 percent, which is now above the California percentage of 19 percent.

Hancock sums up the report with some probing questions for the region’s leaders: “how serious are we about holding center stage in the creative economy? Are we preparing our people with the tools they need? Do our institutions meet the needs of a transitioning workforce?”

Hancock concludes “the answers to these questions—and the action we take—will determine our place in the global economy.”

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