Does Silicon Valley Really Have 'It'?

Many observers have long claimed there is something special about Silicon Valley that promotes entrepreneurship. Are these claims true? Is Silicon Valley more entrepreneurial, and if so, is there a special "it" factor, or are the rates due to factors already known to produce entrepreneurs? A study released by the Office of Advocacy of the U.S. Small Business Administration answers these questions by showing that while high, Silicon Valley's entrepreneurship rates are not unique, although the factors that drive them may be.

"There appears to be something special about Silicon Valley," says Chad Moutray, chief economist for the U.S. Small Business Administration's Office of Advocacy. "Controlling for the factors we know contribute to entrepreneurship still doesn't explain what has happened in the Valley. While not the highest in the country, Silicon Valley's consistently high rates of entrepreneurship appear to bedriven by factors that have yet to be measured."

Entrepreneurship in Silicon Valley during the Boom and Bust, written by Robert Fairlie of the University of California Santa Cruz with funding from the Office of Advocacy, examines the reasons for the rates of entrepreneurship in the dot com boom and post-boom periods.

The study found that Silicon Valley's entrepreneurship rate, asmeasured by the Kauffman Index of Entrepreneurial Activity, was consistently higher than the national rate during the dot com boom of the late 1990s. However, several other metropolitan areas had higher rates of entrepreneurship during the same period.

The Silicon Valley rate rose in the post-boom period, suggesting thatthe tight labor market, high wages, and available stock options suppressed entrepreneurship. After controlling for factors such as education andnative/non-native birth, the Silicon Valley rate remained high, lending credence to the idea that Silicon Valley has a special, unmeasured factor that drives entrepreneurship.

The Office of Advocacy, the "small business watchdog" of the federal government, examines the role and status of small business in the economy and independently represents the views of small business to federal agencies, Congress, and the president. It is the source for small business statistics presented in user-friendly formats, and it funds research into small business issues.


Bookmark http://universeeverything.blogspot.com/ and drop back in sometime.