Why do some locations — such as Silicon Valley — seem to have higher rates of entrepreneurship than others? Given the role start-ups often play in bringing forth new ideas, that's a question many people interested in economic development would like to know the answer to. And it's one two researchers from Harvard examine in a new working paper. Edward L. Glaeser and William R. Kerr of Harvard looked at manufacturing start-ups throughout the U.S. over a period of more than two decades — and tested a number of hypotheses about why some cities have more entrepreneurial activity than others.
Their findings? Well, for one thing, places with lots of small suppliers tend to have more manufacturing start-ups. The authors found strong support for a hypothesis put forward by a researcher named Chinitz in the 1960s, who argued that new businesses benefit from a network of small, independent suppliers willing to work with them.
Another finding from this new working paper is not very surprising but reinforces the importance of economic clusters: It turns out you're more likely to find start-ups in a given location if there are other industries around that hire the same type of workers the start-ups do. In fact, the results suggest "that people and their human capital are probably the crucial ingredient for most new entrepreneurs," conclude Glaeser and Kerr.