Nurturing entrepreneurial activity

When someone thinks of a highly innovative place in the world, it is very likely that the name "Silicon Valley" will be mentioned. Silicon Valley is by far the most famous region/cluster in the world when it comes to innovation, digital technologies, and entrepreneurship. It is after all the home of some of the world's most known companies such as Intel, Google, Apple, Hewlett-Packard, and Facebook. How then can we replicate it, and is it even possible to replicate it by design?

Innovation and technological progress are by far the most important drivers of long-term growth in productivity and output.

The New Climate Economy Report

To answer the former we have to think if there exist other Silicon-Valley-type clusters in the world and what are their common traits if any. Unsurprisingly, the answer is that yes, there are other clusters like Silicon Valley in other places, admittedly of lesser magnitude with regards to number of registered patents and investments, such as Austin-Texas, Research-Triangle-Park in North Carolina, Boston, Seattle, Tokyo, Bangalore, Beijing, Tel Aviv, Munich, Paris-Saclay and London's Tech-City. These innovation hot spots have all managed to cluster highly motivated entrepreneurs together and have created an entrepreneurial self-supported ecosystem that counts in their numbers not only scientists and tech geeks but also lawyers and accountants, logistic specialists, business consultants, investment funds, as well as university research departments (incubators) and government institutions. Now that said, many similarities end there. For the last 50 years or so, states have tried to replicate the Silicon Valley effect with limited success. Its occurrence is an ambiguous phenomenon of space and time, of geography and institutions, of the political environment of the 1970s and the demographics of the region.The result is that venture capital in Silicon Valley is estimated at 11.2 billion US dollars while second largest cluster in venture capital measurement is Boston (or Paris depending in USD/EUR exchange) with around 4 billion US dollars. So to answer the initial question, yes there are similar results in other regions to that of Silicon Valley but the difference are so massive that it is like comparing different kinds of pets, say a dog and a cat; both domesticated pets with four legs, mouth, ears, tail, fur and all, but that is where the similarities end. There is one Silicon Valley-.

Regardless, the positive externalities of clustering are worth the replication effort. Clustering brings people and ideas together. This creates exponential possibilities for innovation.

Overall scale and diversity may positively affect location decisions through, for example, local transport cost savings from improved local upstream and downstream linkages, thus affecting local industry growth.

Vernon Henderson

One can argue that the advances of communication technologies have rendered the importance of common space irrelevant, but I will argue that inhabiting the same workspace and interacting with other professionals on a daily basis even off work is still quite relevant. For example, one incubator in London has rented a building at the block where a top tech company has its headquarters and now they share the same patio ("smoking area"). It might sound irrelevant or insignificant, but one needs to think of the possibilities arising from the opportunity from a casual conversation with a top researcher or tech geek during lunch break or tea. Of course the externalities are far from just transfer of knowledge from casual opportunities. Clustering is a dynamic and continuous process. More and more companies will be attracted at a site where there exist entrepreneurial activity such as suppliers, services contractors, transport companies and logistics of every kind that bring overall production costs down. A paper on the role of entrepreneurship on Nigeria's growth concludes that economic growth generated by entrepreneurs is the core engine of a virtuous cycle that develops an economy. Successful entrepreneurs, through their breakthrough technologies and rapidly growing businesses, create new wealth that can generate even greater economic growth .

Reasonable people adjust themselves to the world. Unreasonable people attempt to adapt the world to themselves. All progress, therefore, depends on unreasonable people.

George Bernard Shaw