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Framework Overview
Michael Porter, in his research on competition, has discussed a new theory related to corporate competition. This cluster theory discusses how a group of organizations, geographically located in proximity to each other, can all be interconnected as a cluster. In Silicon Valley, CA, including San Francisco, Mountain View, San Mateo, Cupertino, and other cities, there is a cluster of organizations all interconnected in the field of IT. It is important to note that the cluster is not necessarily a specific industry vertical. It is a group of interconnected organizations that all contribute to the competitive landscape. In the case of Silicon Valley, the cluster environment not only drives competition but also drives innovation. The companies are competitive towards each other but also collaborate on a certain level. The companies part of the Silicon Valley cluster belong to a number of industries including Internet corporations, hardware engineering, software engineering, legal support, and start ups. All of these companies contribute or benefit from the culture in some way. It does not necessarily have to be a two-way street of contribution and benefit however as a whole, the companies all serve a purpose to the cluster. For more information on clusters, please visit the HBS.

Factor / Input Conditions
A number of factors contribute to the strength of an individual culture. These factors range from the human capital or talent contribution, to the natural or physical environment, as well as the intangible factors including the network of professionals as well as the exchange of information. Many of these factors contribute to the strength of Silicon Valley. I think most notably, the human resources and capital resources have the largest contribution. The amount of capital investment that is available in Silicon Valley is very high. Not to say Chicago, New York, or LA doesn't have comparable availability, however the strategy for investing capital is very much different in SV. The thought process and risk analysis is very different than your standard financial analysis techniques. This capital element attracts a lot of young, energetic, and innovative entrepreneurs to the Silicon Valley Cluster.

The human resource element is a major input factor that is driven by other contributing input factors. The physical and natural layout of the area is attractive to young adults and seasoned veterans alike. The exchange of information, the amount of networking and mentoring available, as well, and most importantly, the established culture and atmosphere of innovation all drives the intake of top talent. All of these factors, although some more apparent than others and still others more front and center versus behind the scenes, all contribute to the success of Silicon Valley.

Related and Supporting Industries
Related and supporting industries can contribute to the cluster in two ways; locally-based suppliers and competitive related industries. The presence of companies and start-ups of all shapes and sizes are all related in some way. The most apparent relation is the dependence or contribution to the technical landscape. Also, while not all companies or start-ups directly compete with each other in terms of products or services, a strong competition still exists.

The culture in Silicon Valley is extremely competitive. Companies are competing to attract, acquire, and retain top talent. The talent pool is highly competitive in landing the top and most sought after positions in the area. And the innovation that exists in Silicon Valley drives competition in the use of various technologies and stimulates the implementation of groundbreaking technologies into the work stream of these organizations. Companies may not have competitive products or services, but competition is very much alive and well and this competition complemented by the drive of innovation contributes to the strength, attractiveness, and viability of Silicon Valley.

Demand Conditions
Another dimension of the framework is the demand conditions, which relates to a company's output of goods or services. The demand conditions of a customer will have to directly affect the output of any given organization, as companies that may have started with low-quality or simplified products/services will begin to develop/produce with higher quality and differentiation in order to increase demand across markets. With availability to a local market of sophisticated consumers, companies can obtain quick insight into their customers' wants and needs. One example would include local market testing, where each consumer testing the product would provide a higher level of constructive criticism and feedback. This allows for efficient change/evolution and the improvement of quality/diversity of products/services before they are introduced into the global market. The government also plays a part in demand conditions by streamlining regulations and modifying them to encourage innovation, which will also provide for improved quality and differentiation of outputs.

Context for Firm Strategy and Rivalry
Another contributing factor to the strength and sustainability of a cluster is Firm Strategy and Rivalry. Firm strategy refers to the strategy of cluster organizations in their long-term success that both contributes and benefits from the culture. This strategy allows for and encourages a steady stream of investment into the cluster as a whole. This can come in many forms, including financial investments. In Silicon Valley, we saw a shared strategy in regards to capital funding. The encouragement and steady flow of VC and investment funding contributed to the cluster. Intense firm rivalry among cluster organizations is another contributing factor. Most notably, in Silicon Valley, the intense rivalry for attracting and retaining top talent was a major notable factor. The rivalry among local firms in the cluster can come in many forms, not just talent competition. Another notable form of competition was the fight for innovation. This constant intense rivalry benefits both consumers and business within and outside a cluster; the market wins. Both firm rivalry and strategy are a major contributors to the sustainability and strength of the cluster and was witnessed first hand in the Silicon Valley IT cluster.