Cold War Armory: Military Contracting in Silicon Valley

Abstract

Silicon Valley is frequently portrayed as a manifestation of postindustrial entrepreneurship, where ingenious inventor-businessmen and venture capitalists forged a dynamic, high-tech economy unencumbered by government's “heavy hand.” Closer examination reveals that government played a major role in launching and sustaining some of the region's core industries through military contracting. Focusing on leading firms in the microwave electronics, missile, satellite, and semiconductor industries, this article argues that demand for customized military technology encouraged contractors to embark on a course of flexible specialization, batch production, and continuous innovation. Thriving throughout much of the Cold War, major military contractors fell on hard times when defense markets started to shrink in the late 1980s, because specialized design and production capabilities were rarely applicable to civilian product lines. But Pentagon funding for research and development helped lay the technological groundwork for a new generation of startups, contributing to Silicon Valley's economic renaissance in the 1990s.