San Diego, California is now one of the most innovative regions in the USA. In the past fifteen years it has transformed itself from an economy dominated by defence contracts, tourism and real estate into a major centre for academic research and high-tech industry This article examines the various means by which this transformation has been achieved and suggests that the experience of San Diego offers guiding principles for developing innovative capacity in regions elsewhere in the USA and in other countries. The paper concentrates on the three major ‘hooks’ that the authors identify as critical to successful, regional development: (a) the store of intellectual capital in the region; (b) the character and extent of catalytic business and financial networks; and (c) the breadth and depth of the advanced skills and knowledge of the human capital. With specific reference to San Diego's biotechnology and telecommunications clusters, the authors demonstrate how non-profit research institutions have created powerful research clusters in the region and how these clusters, in partnership with technology-focused networks of business and professional leadership, have provided those three essential ingredients. While certain elements of the San Diego story are attributable to the specific history and assets of the region, the key factors that have shaped its growth suggest principles of economic transformation that are applicable throughout the world.
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