From the SBA Office of Advocacy:
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 today 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.
Entrepreneurship in Silicon Valley during the Boom and Bust, written by Dr. 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, as measured 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 Statistical Areas had higher rates of entrepreneurship during the same period.
The Silicon Valley rate rose in the post-boom period, suggesting that the tight labor market, high wages, and available stock options suppressed entrepreneurship. After controlling for factors such as education and native/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.
My best guess is that there was a convergence of money and talent that happened at just the right time. Just like any success story, there may have been more than a little luck involved — in fact, luck may be the mysterious “it” factor in the Silicon Valley story.