The role of the university in attracting high tech entrepreneurship: A Silicon Valley tale

Among the many sorting functions provided by institutions of higher education, there is a geographic dimension. During the years spent as students and residents of local communities, students develop specific networks and contacts, and perhaps their tastes change as well. After graduation, these students may be more likely to reside in the locality or region in which they have been educated. This paper presents evidence which suggests that the university is important in attracting human capital to the local area and in stimulating entrepreneurial talent in the region. We also measure the strength of the impact of the university on geographical location in one specific instance. For post-graduate professional business and engineering students at Berkeley, we compare the spatial distribution of residences before attending the university and again after graduation. The results are suggestive of the importance of academic institutions in the geographic pattern of agglomerations of footloose scientific firms, such as those in the Silicon Valley just south of San Francisco. The results also reinforce the self-interested reasons for government investment in high-quality educational institutions, as measured by the return on the augmented human capital stock in the region.