| Chapter 1: | From “The Valleyof Heart’s Delight” to “Silicon Valley” |
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Even HP, the “garage” leader founded in 1938, got its early start through federal monies. In a short span of 4 years, between 1941 and 1945, HP’s sales went from $37,000 to $750,000 and the number of employees rose from 9 to 100, thanks to the military contracts for its electronic measuring devices and receivers (Leslie, 2000; Saxenian, 1994).
Silicon Valley was, and continues to be, a national leader in the hi-tech segment of the defense industry, including guided missiles, electronic components, and measuring and controlling devices. Silicon Valley ranks among the most “defense-dependent communities” in the nation, as table 1 shows (Gray et al., 1999).
The sharp increases in defense spending during the Second World War decisively shaped the economy of Silicon Valley. Although the benefits for the fledgling hi-tech industry on the West Coast were minimal compared to the profits accrued by rivals on the East Coast, even small contracts made a big difference.
Table 1. Metropolitan-area recipients of defense contracts in the United States, 1989.
| Metro Area | National Rank | Prime Contracts per Worker Employed | Ratio to U.S. Average |
| San Jose | 1 | $4,590 | 4.33 |
| Washington, D.C. | 2 | $3,863 | 3.64 |
| St. Louis | 3 | $3,850 | 3.63 |
| Boston | 4 | $2,863 | 2.70 |
| Cincinnati | 5 | $2,778 | 2.62 |
| U.S. average | $1,060 | 1.00 |
Source. Gray et al. (1999).