How to Establish and Deteriorate a Nation’s Center of Innovation

In 1874, Thomas Alva Edison sold the rights of his early invention Quadruplex telegraph

to Western Union for $10,000. Using this fund, he started to develop the idea of a new modern lab facility. After thorough two-year’s preparation, in 1876, he opened his industrial research lab in Menlo Park. It is considered the first industrial research and development lab. Menlo Park is a part of Raritan Township (Today Edison Township), Middlesex County, New Jersey. At the time, Edison was already famous and had the resource to build his lab anywhere. He selected New Jersey to set up laboratories and build companies and manufacture his inventions because New Jersey close to the biggest finance center and the industry centers in the world at the time.


Edison’s Menlo Park lab became the first institution with the sole purpose of producing constant technological innovation. He wanted the lab to have “a stock of almost every conceivable material” and his inventions have touched almost every aspect of our life. In just over a decade after its open, Edison’s Menlo Park laboratory had expanded to occupy two city blocks. At there, Edison invented both the phonograph and light bulb. Christie Street in Menlo Park was the first street in the world to use electric lights for illumination. Based on the Menlo Park lab, Edison have patented 1,093 inventions.


More importantly Edison invented the modern lab. In his lab, teams of people sharing ideas, working together, develop prototypes, and perfecting devices. He created the first industrial R&D lab and it was very efficient in innovations. In addition to the light bulb and the phonograph, he and his teams have invented the kinetoscope, the stock ticker, the telegraph, the Dictaphone, the radio, the tattoo gun, and the telephone. Based on his invention, he also started the Motion Picture Patents Company. Because Edison’s Menlo Park lab was so productive and successful, other corporations started to follow and build their own R&D labs in their organizations. At the time and after, New Jersey became the place to set up R&D facilities and the home of inventors.


Edison’s Menlo Park lab was a fast-running innovation engine that produced astonishing innovations with enormous efficiency. The inventions coming out of the lab was dramatically changing the people’s life and the industry around the world. His achievement attracted other inventors pouring in the New Jersey region. New Jersey was also benefited from its center location of the industry and finance development at the time. It would take a short communication to reach Wall Street for obtaining capital to finance the R&D. It is also very close to big factories to industry needs. A strong and brilliant person, Thomas Edison made New Jersey the nation’s center of innovation at the end of 19th Century.


At the same era, on the west coast, Stanford University was just founded on Palo Alto farm with 15 original professors and struggled financially. The Santa Clara Valley (AKA Silicon Valley) was a farm land of French Plum that would then be dried into prunes after harvest. It was known as the Prune Capital of the world. The only “technology facility” was a telegraph station in San Jose.


Before Edison’s time has passed, in 1925, under Edison’s influence, Western Electric Company and the American Telephone & Telegraph company (AT&T) formed separated R&D entity called the Bell Telephone Laboratories, Inc. Originally, Bell labs’ principal work was to plan, design, develop, and support the equipment that Western Electric built for AT&T, other Bell System operating companies and and the U.S. government. The equipment at the beginning included everything from telephones, telephone exchange switches, and other transmission equipment. Right after its open, in 1926, Bell Labs invented an early version of synchronous-sound motion picture system.


From then, Bell Labs along with a number of other laboratories inherited the tradition of Edison’s “invention factory” and developed into a huge R&D organization that even Edison himself would not be able to envision. Bell Labs started in New York City, and moved to Murray Hill, New Jersey in 1941. Then it spread out over many cities in New Jersey. At its peak, Bell Labs has 24,000 employees.


Over the years, Bell Labs has produced innovative technologies that touched every aspect of modern life. Its interests have rapidly expanded from telephone and transmission equipment to almost all areas in engineering, science and technology. It has achieved great success in those disciplines. For example, seven Nobel Prizes in Physics, one one Nobel Prize in Chemistry, and three Turing Awards have been awarded for work completed at Bell Laboratories. It also received 12 U.S. National Medals of Science and 10 U.S. National Medals of Technology & Innovation. Its achievement in the science and technology has been extended to entertainment industry as well. Bell Labs received two Grammy Awards and two Emmy Awards.


After Thomas Edison’s era, Bell Labs continued elevating New Jersey to the world’s center of innovation in the middle of 20th Century. It is not exaggerating to say that Bell Labs provide the building block of all digital products in contemporary life. Not only Bell Labs is the birthplace of the laser, the solar cell and fax machines, it is also the root of silicon technology. In 1947, a group of Bell Lab scientists led by William Shockley invented the transistor. The transistor is the fundamental building block of all modern digital devices.


William Shockley, who received Nobel Prize in Physics later for his invention the transistor, moved from New Jersey to Mountain View California in 1955 to open his own lab and take care of his ailing mother in Palo Alto. His lab Shockley Semiconductor Laboratory as a division of Beckman Instruments is the first to begin commercializing the semiconductor transistor technology. That is the birth of Silicon Valley.


One of the strengths of Bell Labs was the freedom to pursue long-term fundamental research. It was warranted by the Bell monopoly position in the network industry. When Bell Labs was growing stronger and stronger and the AT&T dominated the network industry, the federal government had attempted to break up the Bell System since the 1960s. An antitrust case against the Bell System was initiated in 1974. After 10 years of lawsuits and negotiation, as a result of the antitrust case, the Bell System was dissolved on January 1, 1984, and Bell Telephone Laboratories, Incorporated ceased to exist.


Even a new AT&T Bell Laboratories, Inc. and a Bell Communications Research were

created to continue the R&D of the original Bell Telephone Laboratories. But, breakups and reorganizations after started seems never-ending. In 1996, Bell Labs spun out of AT&T and became a part of Lucent Technologies. With the demise of the Bell monopoly and the constant breakups and reorganizations, the long-last stable research environment and the research freedom became difficult to preserve. After reaching its peak before the antitrust breakup, Bell Labs inevitably went downhill.


As Bell Labs dims, innovation gradually withdraw from New Jersey and New Jersey gave up its center positon of innovation. In 2016, the Garden State New Jersey ranks 10th among the 50 states for tech industry employment, according to tech association CompTIA. Its tech industry employment is less than one fifth of California’s and even behind Florida’s by 50%.


New Jersey has been the brightest star in innovation for a century. The historical New Jersey’s innovation roots goes way back to the colonial period from Samuel Morse and Alfred Vail’s invention of telegraph in the early 19th century. It established his leading position in the nation with Thomas Edison and his Menlo Park lab. Then the Bell labs scattered in the state pushed New Jersey to the highest level of innovation and the center of innovation of the world.


Even the rich and long history couldn’t prevent the fading of New Jersey’s innovation. Over the years, East Coast had become self-contained and isolated. Big companies such as Bell Labs demanded their employees remaining loyal to only them. In addition, due to the lobby of big companies, New Jersey has strict anti-competitive laws that make it difficult to leave your job and create a new company with what you learn at your job. Ironically, they led to monopolies and eventually breakups that disrupt the stable environment needed for long-term fundamental research.


The easy access to New York City and Wall Street’s capital was once a plus, but now serve as a double-edged sword, since as the financial capital is expanding, it magnetizes talented people into finance industry instead of technology R&D. In New Jersey, even with several world renowned academic labs, industry labs, and technology companies, tech industry has less influence and impact to the state economy than the finance industry. To the state, tech industry is just one of many sectors. The state’s policy making would not pivot to the tech industry as much.


A supporting government, rich innovation history, prosperous capital, and the most important — brilliant and visionary people are all necessary ingredients for making an innovation center. Getting them all in the same region is much more difficult than forming a NBA champion team. Nurturing an innovation center and keeping it flourished is even more difficult. Since the breakup of Bell Labs, New Jersey started to export its brightest people to other states, especially the San Francisco Bay Area in California.


The San Francisco Bay Area in California had been a major site of United States Navy research and technology since late 19th Century. US Navy has sufficient funds and eager to use new technology. Many local companies flourished with Navy funds by providing service and developing technologies to the Navy. For example, the Federal Telegraph Corporation (FTC) founded by a Stanford University graduate Cyril Elwell in Palo Alto created the world’s first global radio communication system, and signed a contract with the Navy in 1912. The Navy then established the Air Base Sunnyvale at Moffett Field as a Naval Air Station in 1933. More technology firms were started in the area around Moffett Field at Sunnyvale and Mountain View to serve the Navy.


In the 1940s and 1950s, Stanford’s dean of College of Engineering and Provost, Frederick Terman, encouraged faculty and graduates to start their own companies.  Later he proposed to lease vacant Stanford’s lands to high technology companies for building offices and build the Stanford Industrial Park (later Stanford Research Park). In 1954, Stanford started the Honors Cooperative Program to allow full-time employees of those high-tech companies to pursue graduate degrees as part-time students. Terman also found venture capital for technology start-ups, include Hewlett-Packard, which was founded by Stanford alumni David Packard and William Hewlett in a Palo Alto garage. Starting from then, many high-tech companies grew up around the Stanford campus and become Silicon Valley. Terman is often called “the father of Silicon Valley”.


As mentioned before, in 1956, William Shockley, the creator of the transistor, moved from New Jersey to Mountain View and started Shockley Semiconductor Laboratory. Shockley’s eight employees, including Gordon Moore and Robert Noyce, created Fairchild Semiconductor Company. Amazingly, none of them graduated from Stanford. Later, Gordon Moore and Robert Noyce went on and created Intel. Gordon Moore is the author of Moore’s law, while Robert Noyce gave Silicon Valley its name.


After President Eisenhower signed the National Aeronautics and Space Act (NASA), National Aeronautics and Space Administration (NASA) is established. It took over took over the Moffett Field from US Navy. Many of the original companies stayed, while new aerospace firms moved in such as Lockheed. The President Eisenhower saw the importance of using transistors in space projects. He turned to Fairchild Semiconductor and funded Fairchild’s semiconductor projects, since it is the only company in the world that was able to make transistors.


At the same time, solid state technology research and development were carried out at Stanford University in collaborating with Shockley Semiconductor and Fairchild Semiconductor and Xerox PARC. The Stanford Research Institute (now SRI International) were created in 1946. After a number of notable inventions, such as the first computer mouse, inkjet printing, optical disc recording, Liquid-crystal display (LCD) technology, they invented Advanced Research Projects Agency Network (ARPANET) and TCP/IP that later turned into Internet.


In the 1960’s and 1970’s, the Silicon Valley area became the brightest rising star in innovation. In April 1974, Intel released the Intel 8080, and the national center of innovation has moved from New Jersey to Silicon Valley. In July 1976, Apple I computer went on sale. In December 1980, Apple Computer successful launched $1.3 billion IPO. Then the availability of angel investors and venture capital in Silicon Valley exploded. Those funding sources provided the life lines for startups such as Google and Facebook in 1990s and 2000s. Now Silicon Valley accounts for one-third of all of the venture capital investment in the United States, which has helped it to become a leading hub and startup ecosystem for high-tech innovation and scientific development. Thousands of high technology companies are headquartered in Silicon Valley.


The generous and steady U.S. Department of Defense and NASA spending and Stanford University leadership and education were the key factors in the Silicon Valley’s early development. The regionalism thinking at Stanford University helped align Stanford’s interests with those of the area’s high-tech firms at the infancy state of Silicon Valley. Stanford could be considered as the heart of Silicon Valley, as it continuously pumps brilliant people, new technologies, and spinoffs into the valley. Almost all Stanford graduates want to stay at the Bay Area for both its comfortable weather and innovation atmosphere.


Universities usually last much longer than companies and much more stable. So long-term research could survive and flourish in academic labs. Universities usually look for community impact and global impacts instead of short-term profits. A large long-history University usually has a law school and its graduates usually fill up the important local official positions. If the university has a clear vision on local engagement that would benefit the local economy, it more likely would be support from the local government. So a university have large political influence than a company and at better position to nurture an innovation center. However, many universities in a limited region would not necessary benefit the development of the region the best since they would compete for limited resources with unconsolidated or even conflicted visions.


The local law and policy in California makes spinning-off companies and creating start-ups easy. The tax policy in California encourage California residents to stay in the state. The culture in the Bay Area encourage taking risk and making changes. People rarely stay with a company for more than five years and everyone is expected to start their own company.

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