WhEre is silicon Valley?

Scott Stern and Jorge Guzman have developed a novel approach for measuring growth entrepreneurship which distinguishes entrepreneurial quantity – the rate of start-up activity – from entrepreneurial quality – the likelihood a start-up achieves a growth outcome. This approach estimates the probability of a growth outcome – achieving an IPO or a significant acquisition – as a function of characteristics observable near the time of initial business registration (e.g., the firm name or filing for a trademark/patent). This allows for the identification of clusters of high entrepreneurial quality, including a novel characterization of the region commonly referred to as “Silicon Valley.”

Nowcasting and placecasting Entrepreneurial quality and performance

Scott Stern and Jorge Guzman build on their methodology to estimate entrepreneurial quality by linking the probability of a growth outcome as a function of start-up characteristics observable at or near the time of initial business registration (Where is Silicon Valley?, Science, 2015).

Using business registration data, they develop an approach to characterize entrepreneurial quality at an arbitrary level of geographic granularity (placecasting) and in advance of observing the ultimate growth outcomes associated with any cohort of start-ups (nowcasting).  They implement this approach in Massachusetts from 1988-2014 to propose two new economic statistics for the measurement of entrepreneurship:  the Entrepreneurship Quality Index (EQI) and the Regional Entrepreneurship Cohort Potential Index (RECPI).   They then use these indices to offer a novel characterization of changes in entrepreneurial quality across space and time, and unique findings associated to that.

Here is a peek at the geographical application of this method (placecasting) in the MIT, Boston and Massachusetts ecosystems.