I grew up in Michigan as a "car guy" with virtually no awareness of what what happening in Silicon Valley ...when everything was happening in Silicon Valley. Detroit was the place to be. And I went, only to find out that I didn't want to be there because it wasn't what it used to be. After accepting a generous package to voluntarily quit General Motors, I moved to Silicon Valley. Seeing both places up close and personal, I concluded that they had nothing in common - in fact, they were polar opposites. Imagine my surprise to find a research paper proposing that they were quite similar!
To compare the two areas in context, the study focused on the period when growth and spin-offs were rampant. For Silicon Valley they chose 1957 through 1986 and for Detroit they chose 1900 through 1924. So, for those of you who think of Detroit as GM, Ford and Chrysler (and GM as Chevy, Buick, Olds, Cadillac, GMC and Ponitiac; Ford as Ford, Mercury and Lincoln; and Chrysler as Chrysler, Dodge and Plymouth) as I did, that's not they way it looked back in 1924. But let's start in 1895.
As the semicoductor industry did not start in Silicon Valley, the automotive industry did not start in Detroit. The early companies were in New York, New England and the closet to Detroit was Cleveland. And these companies did not start out building cars with internal combustion engines - the technology wasn't there yet. Those companies were established horse-drawn carriage makers, sewing machine and bicycle manufacturers who branched out. The technologies were steam, electricity and eventually gasoline. The first significant gasoline-powered car was from the Olds Motor Works - founded by Ransom E. Olds in Lansing, MI, about 100 miles from Detroit. Olds used two main sub-contractors in the Detroit area: the Dodge Brothers, and Leland & Faulconer.
Meanwhile, a young Henry Ford was working for Edison and left to start his own company: the Henry Ford Company. But Henry Leland (subcontractor to Olds) was brought in to manage the company so Henry Ford quit - and Leland renamed it Cadillac. Henry Ford then started the Ford Motor Company that we know today with significant investment from the Dodge Brothers (subcontractor to Olds, and now the captive engine supplier to Ford). Eventually, the Dodge Brothers started their own company. So now we have Cadillac, Ford and Dodge as spin-offs of Olds.
Ransom E. Olds was pushed out of the Olds Motor Works and he started REO (presumably they made the Speedwagon); another spin-off. Two other Olds defectors, Benjamin Briscoe and Jonathan Maxwell teamed up to start the Maxwell-Briscoe Company in New York (with financing from Buick). It struggled, succeeded, was bought out, then spun out in a new location near Indianapolis and struggled some more. New management moved the company to Detroit where it did quite well. Much later, during another struggling period, Walter P. Chrysler was brought in and it eventually became the Chrysler Corporation. Chrysler had just left the Willys-Overland company (the original Jeep), but his early career was at Buick.
Henry Leland also founded the Lincoln Motor Company after selling Cadillac to William Durant. Durant was the head of Buick and on a buying spree that eventually became General Motors. That spree went too fast and Durant was pushed out and so he founded Chevrolet with Louis Chevrolet (a former racer employed by Durant at Buick). Years later, General Motors acquired Chevrolet and things began to look like what I remembered. Incidentally, both Mercury and Plymouth were never independent entities; they were creations of Ford and Chrysler, respectively, for marketing purposes and both are now defunct. Pontiac was somewhat similar for General Motors, and is also gone.
From 1895 to 1924, there were 112 new firms in the automotive industry in Detroit and 48% of them were spin-offs. As noted, many firms were acquired so the actual number of spin-offs was 142 which exceeds the estimate for semiconductor spin-offs (91). Olds and Buick each had seven spin-offs. Cadillac, Ford and Maxwell-Briscoe had four each.
I will assume you are familiar with the semiconductor genealogy; from vacuum tubes to Bell Labs and the transistor; from early transistor companies like Transitron; and Shockley and Fairchild and all the Fairchildren in Silicon Valley. So you recognize that the tube companies didn't make the jump to transistors. And the transistor companies didn't make the jump to integrated circuits - just like the carriage and bicycle companies didn't make the jump to automobiles; and the steamers and electric car companies didn't make the jump to gasoline-powered cars.
There is another parallel with the types of cars and with management style. Many of the early car companies made big luxury cars and failed to see the market for smaller, affordable cars and so people left to pursue those markets. I view this as similar to what many semiconductor spin-offs did, for example, leaving a digitally-focused company to make analog circuits. And a lot of the defections were basically disagreements with management or stockholders about how to run the company. Like Fairchild and Intersil disputes about stock options.
Both Fairchild and Olds were first to jump on the new technology. Both were full of very talented engineers yet had ineffective management. Their success was enough encouragement for people to venture out on their own. And in the beginning, neither area had venture capitalists. But while some talented people from Fairchild and Olds started companies, other talented people from Fairchild and Olds used their new-found wealth to help finance those start-ups. The study uses the term agglomeration to extend to all of the support companies necessary for the industry and the abundance of experienced labor. It is probably an effect, not a cause of the growth. Other studies point to the perfect storm of Stanford University, venture capitalists, the cold war and Silicon Valley's flat hierarchical structures as the reason for its growth. But Detroit lacked all these things yet seemed to spawn more spin-offs.
Of course, we have the benefit of hindsight to see how Detroit evolved. Forty years after 1924, Detroit was peaking in world domination only to get derailed by the oil crisis a decade later - of which it's arguably never really recovered. Forty years after 1986 is just around the corner for Silicon Valley. To some extent, the semiconductor industry is not the only game in Silicon Valley anymore. Regardless, it's still the epicenter of the semiconductor world. Will it get derailed in the next few decades? Are there lessons to be learned?
"Silicon Valley -- A Chip off the Old Detroit Bloc", Stephen Klepper, Carnegie Mellon University, January 2007