Study: Local Politics Key to E-Biz Bliss

Though California's Silicon Valley is famous for being the world's haven for e-business, local governments need to better help industry management and employees deal with the many challenges of life in the area, according to a report released Wednesday by an area non-profit organization.

Joint Venture: Silicon Valley Network, which unveiled the "Internet Cluster Analysis 2000" study before a panel in Palo Alto, California, said that 30 percent of local Internet businesses would consider relocating.

According to the report, the leading areas that e-commerce leaders are thinking about moving to are Austin, Texas, the Pacific Northwest and the Washington, D.C. area, which has recently developed its own impressive high-tech corridor.

Global management consulting firm A.T. Kearney prepared the report for Joint Venture, a non-profit group that brings private and public sector leaders from the San Francisco Bay Area together to discuss growth issues.

Government Support Wanted

For the first time, "proactive government" joined the list of factors that are essential to attracting high-tech companies to particular regions, such as Silicon Valley. The report also cited the need for pillar companies, strong local universities, and the prevalence of talent, capital and support services.

Among the negatives the report said e-commerce faces were high taxes, traffic problems and high residential rents. Many felt these issues can be exacerbated by government policies which, for example, encourage the building of commercial projects over housing.

"Silicon Valley's local governments need to remove the barriers that stand in the way of implementing change," said Ben Smith, vice president in A.T. Kearney's Silicon Valley office. "We're at a critical turning point, where we must move beyond the planning stage and actually begin implementing growth initiatives that will deliver the best environment for companies and residents alike."

Global Villages

Besides Silicon Valley, the report studied several cities attracting Internet businesses within the U.S., as well as Germany's "Silicon Saxony" region, Singapore's "Intelligent Island" and Israel's "Silicon Wadi."

While U.S. e-commerce is still attracting the bulk of high-tech venture capital investment, the report pointed out that other countries are making serious gains. For example, venture capital investments in European tech companies last year topped $7 billion and were close to $9 billion in Asia.

Additionally, many U.S. companies are opening foreign operations to take advantage of the growth in these regions. Today, 59 percent of top Internet companies have operations in Europe, 43 percent in Asia, 19 percent in Latin America and 7 percent in Africa.

"As the World Wide Web gets wider, Silicon Valley must adopt a global perspective," Joint Venture president and chief executive officer Ruben Barrales said. "Business, education, government and community leaders must work together to ensure that Silicon Valley continues to wield global influence without compromising the natural beauty and vibrant community of our region."