For much of the last three decades, the world of business and economic development has been dominated by the Silicon Valley Paradigm. This paradigm stipulates that high-growth technology companies most likely emerge under the particular framework conditions that govern the business environment of Silicon Valley. These include, for example, the abundance of risk capital, a culture of risk taking, the availability of a deep pool of highly skilled talent and the presence of large communities of foreign-born graduates and entrepreneurs, in addition to strong universityâindustry links and other factors. Considering the rapid emergence in Silicon Valley of numerous high-growth, high-tech start-ups that have gone on to become globally dominant, it is easy to see why this region has come to dominate attention and perceptions about what is most important for start-up success. With a population of less than three million, Silicon Valley generates a GDP of around US$210 billion (or US$70,000 per capita), with 45 % of households claiming an income over US$100,000. On a per capita basis, Silicon Valley counts among the richest areas of the worldâin the same league as countries like Norway and Singapore.
The remarkable success of this region has made it a model to be copied by aspiring regions around the world, from the Silicon Plateau in Bangalore, India, to the Silicon Gulf in the Philippines, from Irelandâs Silicon Bog to Israelâs Silicon Wadi. Academically, a lot has been written about the Silicon Valley phenomenon. A quick search on Google Scholar for the two words âSilicon Valleyâ (in quotation marks) returns over 161,000 hits, excluding patent citations. As early as 1984, innovation guru Everett M. Rogers wrote (with co-author Judith K. Larsen) his seminal work Silicon Valley Fever, and in 1985, AnnaLee Saxenian, a scholar based in Silicon Valley, compared Silicon Valley with (Bostonâs) Route 128, exploring whether the two regions embodied a formula for start-up success or if they were merely the results of exceptional historical serendipities (Rogers and Larsen 1984; Saxenian 1985). In fact, Saxenian had already tried to answer this question in an earlier work titled âThe Genesis of Silicon Valleyâ which ascribed the regionsâ success to both historic serendipity and industrial organisation factors (Saxenian 1983), two important explanations I will touch upon subsequently in the next chapter.
Over the following three decades, the phenomenon of Silicon Valley fever went globalâwith its particular elements and structure achieving almost the status of a theory stipulating that if a region is able to assemble a number of core factors that recreate certain conditions found in Silicon Valley, technology businesses will thrive. And yet, despite the hundreds of Silicon Valley type experiments around the world and the thousands of pieces of literature devoted to the topic, as recently as 2015 and 2014, we are still asking how Europe can create its own Silicon Valley, how India can create its own Silicon Valley, and whether China can create its own Silicon Valley.
Meanwhile, a growing body of evidence has shown that successful technology businesses can emerge in places far removed from Silicon Valley or any initiatives inspired by it. From Australia to Zambia, successful technology start-ups are emerging at an international scale. In some places the trend has been so strong that books are being written about it. In Start-up Nation (2009), Dan Senor and Saul Singer details the successful stories of technology start-ups coming out of Israel; in Startup Asia (2011), Rebecca Fannin gives an in-depth analysis of a similar growth trend in China and India, and in Startup Rising (2013), Christopher M. Schroeder documents the same phenomenon in the Middle East. Companies like Sina and Baidu in China, in Mobi in India, Maktoob and Rubicon in Jordan, Supercell and Rovio in Finland, Spotify in Sweden, and Odigeo and 24Symbols in Spain, to name just a few, are all examples of technology-driven start-ups that have emerged in less likely placesâthousands of miles from Silicon Valley and without most of the conditions and the factors once believed necessary for a Silicon Valley environment to emerge.
It is against this background that I decided to examine the rise of successful technology start-ups outside Silicon Valley, and in fact, outside the USA or any other Silicon Valley-type regions. Unlike the other previously mentioned books, which focus on emerging trends in specific regions, the units of analysis in this book are individual tech start-ups which have emerged outside of and without the support offered by incubator hubs but which have gone on to achieve exceptional levels of success over many years. They are what I call âblack swanâ start-ups, or start-ups which are now established firms with well-established brands which defy conventional expectations and have surprised many by their emergence in the absence of artificial or natural Silicon Valley conditions.
Understanding how they began, evolved and overcame challenges helps us understand the conditions and factors that make success possible outside the supposedly âmodelâ conditions of Silicon Valley. Moreover, these conditions and factors hold the promise of being more universal than those pertaining to the unique experience of Silicon Valley. This is not a trivial aspiration; if we can understand successful results under the different and potentially difficult-to-change macroconditions that often characterise the world around us, we may be able to develop new modelsâand new prescriptionsâfor success under more universal conditions.
The book is written in an accessible business-like style but remains academic at heart. As I have done over the majority of my research career, I researched this book with the aim of applying a pragmatic understanding of theory in order to advance practice. Theories that work only with everything being equal or held constant have little use in the real world. The real world is neither equal nor constant. It is therefore my opinion that a useful theory in the social sciences is not necessarily one that demonstrates a consistent inherent logic under static conditions but one that is pragmatic enough to explain a dynamic reality.
Black Swans
A black swan is a characterisation that typically refers to an atypical occurrence or an anomalous observation. The specific characterisation itself is said to date back to Roman times when such a creature (as distinct from a white swan) was believed to exist only in myth: âa rare bird in the lands, very much like a black swan,â wrote Juvenal, a first-century poet and satirist (Puhvel 1984). The first actual documented sighting by a European of a black swan was made in January 1696 by the Dutch explorer Willem de Vlamingh, on the west coast of Australia. Upon sighting it he knew instantly that he had arrived in a new world, flourishing with life beyond the parameters of his previously known universe. The essential point of the black swan metaphor is that any well-established system of belief that we may hold about the nature of reality will rapidly unravel if something unexpected occurs to undermine the fundamental premise upon which that system rests.
This book looks at 11 black swansâhighly successful tech companies launched in such unlikely places as Amman, Jordan; Tallinn, Estonia; Espoo, Finland; Lahore, Pakistan; and Fuschl-Am-See, Austria, which prove Bas C. Van Fraassenâs point that âa son is not the same as a man, even if all sons are men, and every man is a sonâ (1980). The same can also be said about technology businesses in that a successful Silicon Valley technology business is not the same as a successful technology business, even if all successful Silicon Valley businesses are technology businesses. The 11 companies studied in this book are black swans because they were not supposed to exist and succeed where they have, just like the black swans of Australia. While some might argue that some of the locations studied in this book are now considered start-up hubs, such as Amsterdam, Berlin, Dubai or Helsinki, they were in fact all considered far from start-up friendly at the time when these 11 black swan firms were founded.
Thus, these 11 firms challenge our assumptions, force us to modify our theories, and urge us to adopt a more pragmatic framework of analysis. In this regard, the cases help us to construct a more cogent theory to explain why these firms succeeded against such apparent odds and why and how you need not be in Silicon Valley to succeed.
A big part of the answer, as this book will show, lies in the particularities of context. All businesses and all company founders in all locations had individual contexts. This does not mean that they did not share common challenges and pressures, because they did. But the various pressures arose from different forces and manifested themselves in different forms, and the ways the entrepreneurs responded were shaped by their local and personal realities. It is perhaps these particularities that often render the general prescriptions of a magic (Silicon Valley) formula irrelevant. If the formula worked, Zafar Khan, the founder of Sofizar Constellation, would not have left Silicon Valley to set up his technology business in Lahore, Pakistan; Janus Friis (a Dane) and Niklas Zennström (a Swede) would not have left Stockholm to set up their company in post-Soviet Tallinn in Estonia. And neither would Rabea Ataya have left Silicon Valley for Dubai, nor would have Alexander Ljung and Eric Wahlforss have left Stockholm, a Nordic start-up hub, for Berlin at a time the city government was bankrupt.
But not all the counter-intuitive examples in this book are about entrepreneurs trading one place for another; a majority of them are about founders who should, or could, have left but chose not to. As various researches have shown, entrepreneurs tend to prefer staying at home (Mueller and Morgan 1962; Reynolds and White 1997; Figueiredo et al. 2002). In Amman, Jordan, despite the many difficulties often facing founders of start-ups, Samih Toukan and Hussam Khoury preferred the advantages of Amman over other potentially superior locations. Likewise, at the height of big business in Helsinki when founders of small technology start-ups in Finland felt disadvantaged in every respect when it came to sharing a space with a global giant like Nokia, the founders of Rovio, the company behind the world-famous videogame Angry BirdsâNiklas Hed, Jarno VĂ€kevĂ€inen and Kim Dikertâchose to remain in freezing, expensive and highly taxed Helsinki than move to London or Silicon Valley. A similar situation is observed in the case of TomTom in the Netherlands, a country that is better known for its century-old multinationals than its start-ups, but where a group of three Dutch and one French entrepreneursâPeter-Frans Pauwels, Pieter Geelen, Harold Goddijn and Corinne Vigreuxâmanaged to beat the odds and create the first new global Dutch corporate brand in living memory.
Sometimes the black swan is a national story with a local context. StormGeo, the worldâs largest meteorological information systems company, unlike a majority of Norwegian start-ups which tend to gravitate towards the capital city of Oslo, made its home base the western rainy city of Bergen, a city nestled between seven mountains and better known for its isolation than technology ventures. StormGeoâs founder, Siri Kalvig, who had in fact left Oslo for Bergen several years previously when she was still a student, concluded it was the perfect niche location for her future endeavour, despite not being from the town herself. The personal preference of the entrepreneur more often than not appears to be a main driver of location choice, as recent research from Catalonia, Spain, has shown (Lafuente et al. 2010), but when we dig deeper, we find that personal preferences often reflect a perceived locational advantage in the minds of a founder. For example, to start a business at home or to move somewhere else appears less important than the established familiarity of an entrepreneur with a place (Dahl and Sorenson 2012). What emerges as critical from all the case studies in this book is what I call the convenience of familiarity with a place. Some places appear highly inconvenient for outsiders, but less so for those familiar with them. This creates a different understanding of the notion of comparative advantage as it manifests itself at the micro rather than the macrolevel. In other words, a place that has less little comparative advantage because of various shortcomings would seem to discourage a fledgling start-up from setting up shop there, but it may actually serve as a business shelter for those who know how to navigate the terrain. This is supported by studies that present evidence that place familiarity is positively correlated with start-up survival and performance rates (ibid.). The comparative advantage in this respect involves two different and opposing levels of dynamics. At the macrolevel, restricting the entry of new economic actors can slow the dynamism and the competitiveness of a place, yet at the level of the firm, it offers meaningful protection from outside competition.
Nevertheless, while location choice is central to this book, it is neither its real focus nor its main theme. Location choice, which is usually either opportunity or problem driven (Cyert...