Anthony J. Pennings, PhD

WRITINGS ON DIGITAL STRATEGIES, ICT ECONOMICS, AND GLOBAL COMMUNICATIONS

Remembering New York’s Silicon Alley

Posted on | January 16, 2010 | No Comments

During the late 1990s, the nickname “Silicon Alley” began to circulate as a marker for the increased investments in “new media” activities in lower Manhattan. A pun on California’s high-tech constellation “Silicon Valley” that replaced the apricot orchards south of San Francisco, the New York City version was located throughout various downtown communities from the Flatiron District through the New York University campus and SoHo to TriBeCa and Wall Street. Even the ill-fated World Trade Center announced they were a new address on Silicon Alley in 1999. While Silicon Valley made its reputation primarily through the design and manufacture of microprocessors and related hardware; Silicon Alley’s upstart entrepreneurs initially sought to leverage New York’s long time comparative advantage in advertising and media content production. But as investment flowed into the notorious “dot.coms”, a wide variety of new media companies emerged and the name “Silicon Alley” was coined.

Michael Indergaard’s (2004) Silicon Alley: The Rise and Fall of a New Media District, documented the history of this phenomenon from a sociologist’s perspective, drawing on previous work he had done analyzing the decline of the industrial Midwest. Having recently arrived at the Manhattan campus of St. John’s University, Indergaard witnessed firsthand the rise of the digital industry in the area. He drew on his background in economic sociology which proposed that firms learn from cognitive networks and cultural conventions to identify market patterns and competitors.[1] He was also influenced by a growing body of work looking at the political economy of geography, examining the role of cities in the global economy and the function of clusters of similar businesses.

This type of spatially-oriented economic analysis accelerated in the early 1990s, gaining international credence with Michael Porter’s Competitive Advantage of Nations (1990) that highlighted the role of clusters of interrelated companies. Porter’s work traversed the macroeconomic focus on the national economy and the microeconomic analysis of the individual firm. He turned the focus onto the interstices of the political economy; on the complementary infrastructure and institutions as well as the competition between firms. Instead of looking just within the company, and its markets, attention began to include its competitors as well as an inter-related network of suppliers and supporting institutions such as universities, think tanks, trade associations, vocational training centers as well as related government agencies and public utilities.

Even its competitors were seen as part of a dynamic and interrelated fabric of related companies; sharing (sometimes stealing) ideas on market opportunities, production techniques, promising personnel, and access to capital. Clusters were purported to have a threefold effect:

  • They increase the productivity of the firms within the cluster through access to specialist inputs, labor, knowledge, and technology;
  • They promote innovation by making all firms more aware of new opportunities and enhance the capacity for rapid and flexible responses to those opportunities;
  • They promote new business formation in related sectors through the access to the necessary labor, skills, knowledge, technology, and capital.[2]

Richard Florida’s (2002) The Rise of the Creative Class combined his interest in regional development with an examination of how employment patterns were changing. Dissatisfied with standard occupational classifications and the debate about the post-industrial transition to a knowledge or service society, he posited the need for a new category, what he called the “Creative Class”. He argued that while service and other working jobs required carrying out a planned set of activities; the creative class had more autonomy and flexibility than the other two and was paid to be inventive. He argued that this distinction made his classification more accurate than prevailing terms like “knowledge workers, symbolic analysts or professional and technical workers”.[3] Florida then tied the creative class to the importance of creative places and with how people he considered working in creative occupations gravitated towards specific places.

    Creative people don’t just cluster where the jobs are. They cluster in places that are centers of creativity and also where they like to live. From classical Athens and Rome, to the Florence of the Medici and Elizabethan London, to Greenwich Village and the San Francisco Bay Area, creativity has always gravitated to specific locations. As the great urbanist Jane Jacobs pointed out long ago, successful places are multidimensional and diverse—they don’t just cater to a singly industry or a single demographic group; they are full of stimulation and creativity interplay.[4]

Not surprising, Florida identifies New York as one of the four global “mega-cities” along with London, Paris, and Tokyo in the competition for creative talent but hastens to mention the increasing competition from other global cities such as Chicago, Los Angeles, Milan, and Singapore as well as a number of second and third “tier” cities from Austin, Boston and Brussels to Washington DC, Wellington and Zurich. He stresses that congestion and rising inequalities resulting in such difficulties as overpriced housing markets threatens these center cities; and rising intolerance to immigration, a long-time bedrock of American economic success, cuts off a critical flow of creative talent to firms and universities.

Indegaard acknowledges Florida’s argument and makes the connection between creative talent and the enclaves that attract them to the particular problems of digital media applications and content production. This involved two strategies.

The first involved looking at the people and identities involved as well as the creative impulses and motivations that that made new media and Silicon Alley attractive. The hacker had been one prominent identity associated with the use of computer technologies and the recessionary times of the early 1990s led to a new grouping of what some began calling “cyberslackers”. These “techno-bohemians” were noted for their social circuits, and a culture of loft parties where they shared artistic and technical knowledge related to the new media[5]. The introduction of the World Wide Web and the Netscape browser in 1994 accelerated interest in the Internet as images and text could be shared and displayed easily. Artists began to experiment with the new medium and sought business ties to support their endeavors. The term “new media” was particularly attractive to many of the Silicon Alley immigrants as it differentiated them from “computer people”. Many also saw new media as challenging the traditional New York broadcast and publishing powers and having the potential to allow formerly marginalized voices to be heard. Many web pioneers became entrepreneurs as the web began to get media attention and entered the public consciousness. Soon, investment capital became readily available attracting even more web hopefuls looking to stake their claim to the riches of cyberspace. Many of the successful ones went on to become venture capitalists, guiding new companies in exchange for significant ownership stakes.

The second strategy required an inquiry into the role of culture and its relationship to digital content production and the quest of the industry to find that “killer application” that would transform cultural content in a readily commodified form. Tenants of Silicon Alley were cognizant of their relationship to the media and cultural industries of New York City and sought to capitalize on its heritage of publishing, broadcasting, fashion, and graphic arts. While ad services such as 24/7 and DoubleClick sought to capitalize on the Madison Avenue mystique. Music, art, theater, antiques, museums and tourist sites were also subject to the innovative recombinant processes of deconstruction and reconstruction within the digital context of cultural production. This production and consumption of digital culture also expanded into community and lifestyles websites such as iVillage (women) and Starmedia.com (Hispanic).

Spring 2010 marks the ten year anniversary of the collapse of the dot.com market. Share prices of Internet-related companies dropped dramatically. NASDAQ, the online stock exchange that specializes in high tech stocks declined over 3000 points from a high of just over 5,000 in March of 2000. Venture capital continued to prop up the NYC market through 2000 but firms came under increased scrutiny to become profitable. Furthermore, the newly unemployed were quickly absorbed by a wide range of companies and non-profits anxious to develop or expand their web presence. But as stock prices continued to fall and companies began to be delisted from NASDAQ, morale began to falter. Although temporarily buoyed by the AOL/Time Warner merger in January of 2001, the terrorist attack on the twin towers of the World Trade Center on September 11 later that year devastated the remnants of Silicon Alley and its dream of a collaborative hi-tech cluster.


[1] Description of economic sociology derived from Indergaard, M. (2004) Silicon Alley: The Rise and Fall of a New Media District. Routledge Press. p. 190.
[2] Porter’s threefold effect of clusters from Jinna Tay’s “Creative Cities”. In John Hartley (ed.) Creative Industries. New York: Blackwell Publishing. p. 224.
[3] Classification of “creative workers” from Richard Florida, The Rise of the Creative Class. (2002) Basic Books, p. 9.
[4] Quote on creative places from Richard Florida, Florida, R. (2002). The Rise of the Creative Class: And How it’s transforming work, leisure, community and everyday life. New York: Perseus Book Group. p. 7.
[5] Cyberslackers and new media identities from Indergaard, M. p. 6.

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AnthonyAnthony J. Pennings, PhD has been on the NYU faculty since 2001 teaching digital media, information systems management, and global political economy. He can be reached at ap70@nyu.edu

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    Professor and Associate Chair at State University of New York (SUNY) Korea. Recently taught at Hannam University in Daejeon, South Korea. Moved to Austin, Texas in August 2012 to join the Digital Media Management program at St. Edwards University. Spent the previous decade on the faculty at New York University teaching and researching information systems, media economics, and strategic communications.

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