Innovation is a driving force behind Silicon Valley's economy and a key source of regional competitive advantage. Innovation leads to the translation of ideas into novel products, processes and services that create and expand business opportunities. Innovative capacity hinges upon investment, the generation of new ideas, value-added across the economy and small business innovation funding. Patent registrations track the generation of new ideas and the ability to disseminate and commercialize these ideas. Additionally, tracking the areas of venture capital investment over time provides valuable insight into the region's longer-term direction of development.

Labor productivity, or value added per employee, in Silicon Valley has grown every year since 2008, reaching the highest value reported of $157,100 in 2012. Over the previous year, value added per employee in both the region and California increased 1.7 percent, while growing 0.9 percent across the nation. In the past decade, value added per employee grew at a faster rate in Silicon Valley (47%) compared to California (33%) and the United States (29%).

Silicon Valley represented 48 percent of the state's total patent registrations in 2011, a fall of 0.7 percentage points from the year prior. Despite declining as a percentage of California patents, Silicon Valley registered 1.5 percent more total patents in 2011, though California witnessed a three percent jump in patent registrations. Nationally, patent registrations grew just under one percent.

Regional patent registrations in 2011 numbered 13,520, nearly 200 more patents than 2010. Consistent with past years, Computers, Data Processing & Information Storage comprised the largest portion of patents in Silicon Valley, representing 39 percent of the region's total patents. Health experienced the largest gain of patent registrations over the last year, adding 220 registrations to reach a total of 1,130 patents. Measuring, Testing & Precision Instruments saw the biggest drop with 95 fewer patents, or ten percent less than in 2010.

After rebounding from the recession, venture capital (VC) investment in Silicon Valley decreased for the first time since 2009, down to $6.5 billion. This represented a 17 percent decline from 2011 levels, with a significant drop in VC investment in the third and fourth quarters of 2012. However, San Francisco investment increased 22 percent in 2012 to $3.4 billion. Taken together, these two regions accounted for 37 percent of the nation's total investment and 70 percent of California's investment. By industry, Software continues to attract the largest share of total investment (38%), and was one of only five industries to see an increase in investment between 2011 and 2012.

Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) awards are highly competitive federal grant programs. These grants are reserved for applicant teams led by for-profit companies with fewer than 500 employees. Silicon Valley's small businesses were awarded 184 grants in 2011 through the SBIR and STTR programs, 28 percent less than in 2010. While the number of awards decreased, Silicon Valley garnered nearly $91 million from these grants suggesting that higher number of smaller awards were issued. This marked a 30 percent improvement over 2010 award levels and a 67 percent increase from 1990.

• Value Added Per Employee
• Patent Registrations
• Patent Registrations by Technology Area
• Venture Capital Investment
• Venture Capital Investment by Industry
• Small Business Innovation and Technology Awards