The Bay Area Innovation System

Science and the Impact of Public Investment

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The San Francisco Bay Area, which includes Silicon Valley, has for decades served as the world’s flagship hub for technology, innovation, and entrepreneurship. This status has been earned through a collaborative relationship among the region’s research universities, venture capital firms, and technology and life sciences companies, which combined have produced an unparalleled track record of revolutionary change and technology commercialization. Parallel with technology, companies are developing and executing innovative business models. Positive and interconnected networks and feedback loops have sustained this flourishing environment.

This report examines the scientific roots of the Bay Area’s innovation system and the contribution of public investment to the research on which much of the region’s technological success has been built.

Project Production

This report was prepared for the Bay Area Science and Innovation Consortium (BASIC) by a team led by Dr. Sean Randolph, Senior Director at the Bay Area Council Economic Institute. BASIC is the science and technology affiliate of the Bay Area Council and the Bay Area Council Economic Institute.

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Chapter 1

The Evolving Innovation System and Its linkages

 

The Bay Area’s already considerable impact on the national and global economies is continuing to grow. Over the last six years, since BASIC’s first mapping of the region’s innovation ecosystem, we have seen the rapid acceleration of emerging technologies and their applications, including machine learning, personalized medicine, autonomous vehicles, cleantech, and virtual reality, to name only a few. These technologies are profoundly impacting the future of business and how we live. As Silicon Valley’s reach expands to the farthest corners of the globe, hundreds of millions more people will use and benefit from the technology and services that Bay Area businesses generate.

While the key components identified in BASIC’s last report—universities, federal labs, independent labs, joint research facilities, corporate labs, incubators, accelerators, and venture investment—continue to provide the system’s base, new players such as industrial innovatiion centers have been added. This “innovation cloud” has proven its resilience, repurposing itself again and again with dynamic, non-linear developments across the technology sector.

Interconnected networks and positive feedback loops sustain the Bay Area's innovation system.

Chapter 2

Funding Research and Development in the Bay Area

 

California leads the nation in R&D activity, accounting for 25 percent of total national R&D expenditures in 2015.

While industry is responsible for the largest share of R&D expenditures, most of that funding is spent on product-related R&D. Basic research (scientific research without an immediate commercial objective) provides a critical and necessary foundation for technology breakthroughs that underlie the region’s and the nation’s economic leadership and may ultimately be commercialized. The largest share of basic research expenditures comes from government sources, and almost half of basic research is performed by the higher education sector (49.1 percent in 2015).

California received $15.3 billion in federal support for science in 2015.

Chapter 3

Science and the Economy: Public Investment in Economic Leadership

 

One of the Bay Area’s most significant competitive and collaborative assets is its deep scientific base, which enables basic scientific inquiry but also technology breakthroughs that generate new world-class companies—and often create or transform entire industries. Because the working parts of the region’s innovation system are so closely interconnected, any weakening of one can impact other elements and the system as a whole. A key theme of this report is that consistent, sustained public investment in science provides a critical foundation for the region’s and the nation’s scientific and economic leadership.

  • Federal investment in science is essential to US economic competitiveness and leadership. Investment should be increased in both physical and life sciences and sustained in a consistent manner in order to more effectively pursue long-term goals.
  • The federal government should prioritize and fund AI research, encouraging multidisciplinary approaches, and should prioritize implementation of the National Quantum Initiative Act, which was passed in December 2018.
  • The federal government should also reform H1-B visa and green card processes to ensure that the state, the region and the nation have access to the world’s best technical talent. S.2355, the “I-Squared” bill offered by Senator Orrin Hatch, comprehensively addresses these issues. The federal government should also create an entrepreneur visa program to make it easier for entrepreneurs from other countries to start companies here.
  • At the state level, California should sustain and increase support for the University of California; continue and extend the Energy Commission’s EPIC program (which advances the commercialization of clean energy and low carbon technologies); continue to support the Strategic Growth Council’s Climate Change Research Program (which funds other climate-related and resiliency research); and establish an Innovation and Science Adviser in the Governor’s Office.
  • California must also accelerate 21st century technological skills development in high schools and community colleges and address the region’s and the state’s housing deficit, which increases the cost of living and makes it more difficult to attract and retain talent.