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High-Technology Entrepreneurship in Silicon Valley1

  • Fairlie, Rob

The economic expansion of the late 1990s created many opportunities for business creation inSilicon Valley, but the opportunity cost of starting a business was also high during this periodbecause of the exceptionally tight labor market. A new measure of entrepreneurship derivedfrom matching files from the Current Population Survey (CPS) is used to provide the first test ofthe hypothesis that business creation rates were high in Silicon Valley during the "Roaring 90s."Unlike previous measures of firm births based on large, nationally representative datasets, thenew measure captures business creation at the individual-owner level, includes both employerand non-employer business starts, and focuses on only hi-tech industries. Estimates indicate thathi-tech entrepreneurship rates were lower in Silicon Valley than the rest of the United Statesduring the period from January 1996 to February 2000. Examining the post-boom period, wefind that entrepreneurship rates in Silicon Valley increased from the late 1990s to the early2000s. Although Silicon Valley may be an entrepreneurial location overall, we provide the firstevidence that the extremely tight labor market of the late 1990s, especially in hi-tech industries,may have suppressed business creation during this period.

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Paper provided by Department of Economics, UC Santa Cruz in its series Santa Cruz Department of Economics, Working Paper Series with number qt655088zg.

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Date of creation: 02 Feb 2011
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Handle: RePEc:cdl:ucscec:qt655088zg
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  1. Steven J. Davis & John Haltiwanger & Ron S. Jarmin & C. J. Krizan & Javier Miranda & Alfred Nucci & Kristin Sandusky, 2007. "Measuring the Dynamics of Young and Small Businesses: Integrating the Employer and Nonemployer Universes," NBER Working Papers 13226, National Bureau of Economic Research, Inc.
  2. Bruce Fallick & Charles A. Fleischman & James B. Rebitzer, 2006. "Job-Hopping in Silicon Valley: Some Evidence Concerning the Microfoundations of a High-Technology Cluster," The Review of Economics and Statistics, MIT Press, vol. 88(3), pages 472-481, August.
  3. Earle, John S. & Sakova, Zuzana, 2000. "Business start-ups or disguised unemployment? Evidence on the character of self-employment from transition economies," Labour Economics, Elsevier, vol. 7(5), pages 575-601, September.
  4. Stuart, Toby & Sorenson, Olav, 2003. "The geography of opportunity: spatial heterogeneity in founding rates and the performance of biotechnology firms," Research Policy, Elsevier, vol. 32(2), pages 229-253, February.
  5. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  6. Robert W. Fairlie & Alicia M. Robb, 2008. "Race and Entrepreneurial Success: Black-, Asian-, and White-Owned Businesses in the United States," MIT Press Books, The MIT Press, edition 1, volume 1, number 026206281x, June.
  7. repec:cup:cbooks:9780521828130 is not listed on IDEAS
  8. Evans, David S & Jovanovic, Boyan, 1989. "An Estimated Model of Entrepreneurial Choice under Liquidity Constraints," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 808-27, August.
  9. Marianne P. Bitler & Alicia M. Robb & John D. Wolken, 2001. "Financial services used by small businesses: evidence from the 1998 survey of small business finances," Federal Reserve Bulletin, Board of Governors of the Federal Reserve System (U.S.), issue Apr, pages 183-205.
  10. Johansson, Edvard, 2000. " Self-Employment and Liquidity Constraints: Evidence from Finland," Scandinavian Journal of Economics, Wiley Blackwell, vol. 102(1), pages 123-34, March.
  11. Cassar, Gavin, 2006. "Entrepreneur opportunity costs and intended venture growth," Journal of Business Venturing, Elsevier, vol. 21(5), pages 610-632, September.
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