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2. Institutional models of the networksociety: Silicon Valley and FinlandPekka Himanen and Manuel CastellsThis chapter emphasizes the institutional and cultural diversity of networksocieties around the world. It focuses on a comparison of the two networksocieties that have for many years topped the global rankings in technologicaladvancement and economic competitiveness. What makes the comparisonespecially interesting is the fact that their dynamic performance has beenbased on very different social and institutional models. The model of theUnited States – which we call the “Silicon Valley model” as this region is itsmost dynamic area and, indeed, its symbol – is based on unfettered capitalism.There is widespread belief among leading political and business circlesthat an advanced information economy is only possible by replicating thesuccessful Silicon Valley model. Therefore, whether by competition ordesign, it is the Californian experience that has shaped public perception ofthe global rise of the network society.However, the Finnish model factually contradicts this belief. Finlandoccupies the leading position in the United Nations index of technologicaldevelopment, and it was ranked as the most competitive economy in theworld by the World Economic Forum in 2003. It is also a trendsetter in someof the key technologies, such as mobile telecommunications (in which Nokiahas roughly 40 percent of the world market) and open-source software (inwhich the Linux operating system runs the largest part of the World WideWeb). Yet the process of technological development and economic growth inFinland has been actively steered by the government. And Finland, in sharpcontrast with Silicon Valley, features a comprehensive welfare state, whichincludes free, public, and high-quality education, including student grants foruniversity; a mostly free, public, and high-quality health care system, whichis open to everyone regardless of employment status; universal unemploymentand pension protection; and a universal right to low-cost, public childcare run by child-care specialists with college-level education.At a time characterized by the tension between the rise of the globalnetwork society and social movements attempting to re-establish socialcontrol over market forces, a comparison of the Silicon Valley model and the49

50 Pekka Himanen and Manuel CastellsFinnish model has political relevance both for these countries and for theworld at large. Suddenly, the European tradition of government guidance andconcern for social protection is no longer necessarily sentenced to historicaloblivion. And, for the developing world, the transformation of Finland froma relatively poor country in 1950, mostly making a living from agricultureand forestry with 50 percent of its population employed in the primary sector,to a leading global economy fifty years later provides cause for reflection forcountries trying to “leapfrog” into the information age.As for the Silicon Valley model, the region around the San Francisco BayArea has been the seedbed of the information technology revolution since thelate 1950s. It has been at the forefront of the successive waves of entrepreneurialand technological innovation that have constituted the infrastructureof the information age: the microelectronics revolution of the 1960s and1970s, the development of personal computers and recombinant DNA in the1970s, the adoption and development of UNIX and open-source software(together with the Massachusetts Institute of Technology) in the 1980s, theexplosion of Internet applications and businesses in the 1990s, and, in theearly twenty-first century, nanotechnology, advanced genetic engineering,and the convergence between microelectronics, computing, and biologicaltechnologies.As so much of the innovation system and so many businesses in the “neweconomy” of the US are based on the replication and expansion of the experienceof the Silicon Valley innovation complex, we use the notion of “SiliconValley” as a proxy for the underlying model of innovation that has inducedeconomic productivity, organizational networking, and cultural change in theUnited States as a whole. Our observations will focus on the specificprocesses of Silicon Valley’s innovation model, although the aggregate dataon the performance of economic and technological processes will refer to theUnited States, as statistical sources for comparisons and rankings use countriesas the accounting unit.However, when we refer to the Silicon Valley or Finnish “model,” we donot in either case mean a normative model to be followed by other societies:a simple imitation would not, of course, be possible as societies have to transformthemselves on the basis of their own history, institutions, and culture.Our purpose here is purely analytical. The fact that the “Finnish model” hasperformed technologically and economically as well as the “Silicon Valleymodel,” albeit on a vastly smaller scale, means that there is not just one wayinherent in the dynamics of information technology for it to be the lever of asuccessful information economy. Thus, there is political choice and there arepolicy alternatives in the ways in which institutions shape the network society.Yet, in the context of this book, we will resist normative judgments andleave the debate on political decisions to people and governments.

2. Institutional models of the networksociety: Silicon Valley and FinlandPekka Himanen and Manuel CastellsThis chapter emphasizes the institutional and cultural diversity of networksocieties around the world. It focuses on a comparison of the two networksocieties that have for many years topped the global rankings in technologicaladvancement and economic competitiveness. What makes the comparisonespecially interesting is the fact that their dynamic performance has beenbased on very different social and institutional models. The model of theUnited States – which we call the “Silicon Valley model” as this region is itsmost dynamic area and, indeed, its symbol – is based on unfettered capitalism.There is widespread belief among leading political and business circlesthat an advanced information economy is only possible by replicating thesuccessful Silicon Valley model. Therefore, whether by competition ordesign, it is the Californian experience that has shaped public perception ofthe global rise of the network society.However, the Finnish model factually contradicts this belief. Finlandoccupies the leading position in the United Nations index of technologicaldevelopment, and it was ranked as the most competitive economy in theworld by the World Economic Forum in 2003. It is also a trendsetter in someof the key technologies, such as mobile telecommunications (in which Nokiahas roughly 40 percent of the world market) and open-source software (inwhich the Linux operating system runs the lar<strong>ge</strong>st part of the World WideWeb). Yet the process of technological development and economic growth inFinland has been actively steered by the government. And Finland, in sharpcontrast with Silicon Valley, features a comprehensive welfare state, whichincludes free, public, and high-quality education, including student grants foruniversity; a mostly free, public, and high-quality health care system, whichis open to everyone regardless of employment status; universal unemploymentand pension protection; and a universal right to low-cost, public childcare run by child-care specialists with colle<strong>ge</strong>-level education.At a time characterized by the tension between the rise of the globalnetwork society and social movements attempting to re-establish socialcontrol over market forces, a comparison of the Silicon Valley model and the49

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