The Power of Ecosystems: Startups & Silicon Valley

Those of us working to support entrepreneurial ecosystems know that ecosystems matter greatly when it comes affecting startup performance and success.  Yet we don’t always have a good handle on the specific extent of these impacts or what specific policy interventions matter most.  An interesting new paper from Columbia University’s Jorge Guzman offers some help on these fronts. “Go West Young Firm” teases out what happens when startup firms move to Silicon Valley.  Past research shows that most firm moves don’t have a huge impact on the bottom line; a given firm performs similarly even when it moves to a new location.  Yet moving to Silicon Valley is different, with relocating firms seeing large scale benefits.  They are much more likely to exit via an initial public offering  or acquisition (up 277%), receive venture capital investments (up 218%), and receive a patent (up 60%).

This scale of impacts is not found when firms move to other hotspots such as Seattle, Boston, or New York.  Guzman suggests that the Silicon Valley’s unique ecosystems play a role here.  In particular, the region’s capacity to generate new ideas matters most.  In fact, per capital patenting levels seem to matter most, even more than the availability of venture capital, when its comes to explaining the region’s strong economic performance. 

This paper is part of an excellent research effort, the Startup Cartography Project, led by Guzman and MIT’s Scot Stern.  You can find related papers here.