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.

Shortly after arriving 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 a company’s 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 single industry or a single demographic group; they are full of stimulation and creativity interplay.^[4]

Not surprisingly, 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 several 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 threaten 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 connects creative talent and the enclaves that attract them to the particular problems of digital media applications and content production. This inquiry involved two strategies.

The first involved looking at the people and identities involved as well as the creative impulses and motivations 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 readily. Artists began experimenting 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 on 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 lifestyle websites such as iVillage (women) and Starmedia.com (Hispanic).

The dot.com market’s bubble burst in 2000 with the collapse of many Internet companies, leading to a downturn for Silicon Alley. Many startups folded, and funding dried up. The tech sector in New York saw a sharp decline as entrepreneurs and investors became more risk-averse, causing many to question the future of Silicon Alley. At the time, 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. However, 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.

By the late 2000s, the NYC media industry experienced a revival. This time, the sector diversified beyond traditional Internet and media companies. It became a hub for a broader range of technology industries, including fintech, e-commerce, ad tech, social media, and software development. Companies like Etsy, Foursquare, and Tumblr emerged during this period, signaling a new era for the tech scene in New York. Mayor Michael Bloomberg’s administration also championed the city’s tech sector, launching initiatives to attract technology talent and startups. The city invested in infrastructure, including the Cornell Tech campus on Roosevelt Island, aimed at nurturing future generations of tech entrepreneurs.

While Silicon Alley initially referred to the tech scene concentrated in Manhattan, particularly in the Flatiron District and SoHo, the term became less geographically specific as the tech industry spread to other boroughs. Brooklyn, particularly the neighborhoods of DUMBO and Williamsburg, became popular among startups and tech firms due to lower costs and access to creative talent. Queens and the Bronx also saw growth in their tech companies. By the early 2010s, New York City had become the second-largest tech environment in the United States, after Silicon Valley. Tech giants such as Google, Facebook, Amazon, and Twitter opened major offices in the city. The city also became a magnet for tech talent, with universities and coding boot camps catering to the growing demand for software engineers, data scientists, and other tech professionals.

Citation APA (7th Edition)

Pennings, A.J. (2010, Jan 16). Remembering New York’s “Silicon Alley.” apennings.com https://apennings.com/digital-geography/remembering-new-yorks-silicon-alley/

Notes

Citation APA (7th Edition)

Pennings, A.J. (2010, Jan 16) Remembering New York’s “Silicon Alley”. https://apennings.com/media-strategies/remembering-new-yorks-silicon-alley/

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Anthony J. Pennings, PhD is a professor at the Department of Technology and Society, State University of New York, Korea teaching broadband policy, engineering economics, and AI for sustainable development. From 2002-2012 he was on the faculty of New York University where he taught digital economics and information systems management. He also taught in the Digital MBA at St. Edwards University in Austin, Texas, where he lives when not in South Korea.

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Category: creative cities, creative industries, digital geography, media strategies
Tags: AOL/Time Warner > Competitive Advantage > DoubleClick > economic analysis > iVillage > knowledge workers > mega-cities > NASDAQ > political economy of geography > Silicon Alley > Starmedia.com > The Rise of the Creative Class > Wall Street > World Trade Center

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