Author(s)
Aaron K. Chatterji and Robert W. Fairlie
Source
NET Institute Working Paper #08-04, September 2008
Summary
This paper provides economic analysis of the “Roaring 90s” in Silicon Valley with a central focus on business creation.
Policy Relevance
This paper provides an in-depth economic perspective on Silicon Valley in the '90s which can be used to understand what factors are important for economic and entrepreneurial booms, and whether those factors can be controlled, replicated, and repeated by design.
Main Points
- This paper analyzes entrepreneurship in Silicon Valley by matching monthly current population surveys (CPS) from 1996 to 2005. The results indicate that high-tech entrepreneurship rates were lower in Silicon Valley than in the rest of the United States during the rapid economic expansion of the late 1990s and entrepreneurship rates were higher after the dotcom bust than in the late 1990s.
- Results suggest that in a strong economy the number of entrepreneurial opportunities can increase without commensurate increases in actual entrepreneurship. This is due to higher opportunity costs to entrepreneurship that dissuade some individuals from leaving salaried labor.
- There are lots of important factors that need to be taken into account if the Silicon boom experience is to be replicated. In particular, having a large concentration of immigrants and a highly-educated workforce are likely to lead to more entrepreneurial activity.
