News Ticker

Some call it the Silicon Valley of East Germany

By Larry Magid
San Jose Mercury News
September 1, 2008

ADLERSHOF, Germany — About 12 miles south of the center of Berlin, this district has a rich history of science, technology and innovation. But when the Berlin Wall came down in 1989, the future of Adlershof was very much in doubt.

Today, Adlershof is home to numerous research institutes and more than 250 companies, many of which were founded by scientists of the former East Germany’s Academy of Sciences. Some call the area “the Silicon Valley” of Germany.

Adlershof became a breeding ground for innovation through a combination of tenacity, political will and a hybrid work culture that blends free-wheeling capitalism with communist-style planned economic growth. Though different in many ways, this German center for science and technology and our own Silicon Valley share some striking similarities.

At the beginning of the 20th century, the area that now bills itself as the “City of Science, Technology and Media” was home to the German Experimental Institute for Aviation. Orville and Wilbur Wright built airplanes here, as did Fokker and Rumpler.

But after the defeat of the Nazis in World War II, the airport was closed, marking an end to the area’s contribution to aviation. Later, under Soviet control, the area enjoyed a revitalization, serving as headquarters of the East German television network and the East German Academy of Science. It was also home to the East German Ministry of State Security and its 12,000 soldiers.

The Academy of Science, which employed 5,600 people when Germany was reunified in 1989, was East Germany’s premier center for scientific research and known for numerous products and inventions. Those included ultra-short pulse lasers, time-resolved optical spectroscopy and space diagnosis devices. It even claims to be the birthplace of contraceptive pills.The demise of East Germany meant trouble for this region. The military base and its 12,000 soldiers went home and both the Academy of Sciences and the TV network underwent massive changes. About 1,400 academy employees, including 700 scientists, were allowed to continue their work under a different agency, but most were told to find other jobs or start their own businesses.

And that’s exactly what some of them did. Despite having been raised under the decidedly non-entrepreneurial East German regime with little or no training in business management, about 100 of the scientists formed private companies. Now, amid the area’s state-owned academic institute, about 250 private companies are developing a wide variety of products around photonics, lasers, control instruments, wireless telecommunications products, software development and other technologies.

The area reminds me a bit of our own Silicon Valley, where a university environment and former military presence served as a breeding ground for spinoff businesses. Even the architecture is similar, with plenty of low-rise buildings and a train track running through the center of the area connecting this technology-rich region to its cosmopolitan urban neighbor to the north. Unlike our Moffett Field, only a few remnants remain of what was once an important military and civilian airfield.

One big difference between Silicon Valley and Adlershof, though, is that Adlershof’s economy didn’t just happen — it was planned. Following reunification of Germany, federal and local governments formed a state-owned corporation to develop the area.

That effort included demolishing many of the old military and academic structures and converting the rest to house both the new institutes and the private businesses.

Peter Strunk, a historian who serves as a spokesman for the company that manages area facilities, said only one of the 250 new companies had gone out of business. Asked why there was such a low failure rate, he said the former East German scientists who started these companies tend to do an enormous amount of planning and take far fewer risks than their Western counterparts. Many of the companies operate from revenues rather than venture capital or loans, getting their money by offering research, development and consulting services to West Germany’s large technology companies.

Strunk also pointed out that the scientists and others who had worked in state-owned East German enterprises had a far more communal approach to their work and a strong tendency to collaborate.

The former East German scientists “concentrate on long-term planning,” he said. “They don’t invest in Porsches but put their money in their companies.”

And, like Hewlett-Packard of old, “When there is a recession and a crisis, they stick together and all reduce salaries rather than laying people off.”