Silicon Valley has Stanford and University of California, Berkeley. Boston has MIT and Harvard. Flagship research universities will carry a regional economy far into the 21st century. Clusters of expertise will make regions world class competitors for specific products semiconductors and computers in the Silicon Valley, financial services in New York City, medical devices in Minneapolis, wine in Bordeaux, France, leather goods in Italy, and watches in Switzerland. India produces more Ph.D.'s than any other country in the world, and despite its manifold problems, India has created a major software industry located in Bangalore, where the Indian Institute of Technology produces the software expertise that countries all over the world seek out.
Expertise means the best of the lot.
If resources are diluted and spread over multiple areas or multiple universities, you will end up with a collection of average departments and average universities, but average is not sufficient to ensure the economic success of the region. The regional version of this ruthless commitment to excellence requires considerable political will to say yes to some investments and no to others, and then to stay the course. In the 1950's Stanford recruited Nobel Laureate William Shockley, inventor of the transistor, to the faculty. Literally hundreds of graduate students flocked to Stanford to work for Professor Shockley and the other faculty who were attracted to work in his laboratory. Included among them were people like Bob Noyce, who went on to found Intel Semiconductor.