For years people have recognized that industries cluster geographically, and that the clustering can lead to superior firms. It’s one reason why many Minnesota startups have moved to the Silicon Valley.
Harvard Business Review’s Anne Marie Knott argues that innovation is primarily due to successful firms, and startups and companies clustering around them, that spawns innovation:
“California and Minnesota have created environments that are favorable to the spawning of entrepreneurial ventures around a successful large innovator. Meanwhile in other states, although companies that enforce non-compete rules may be able to keep some employees from leaving, the entrepreneurial ones will leave anyway, and when they do, they’ll have to leave the state as well.
So although many firms may believe the institutional frameworks of California and Minnesota are unfriendly to and expensive for business, these states’ friendliness to entrepreneurial employees make them better locations in the long term.”
Read the full article “What the Two Most Innovation-Friendly States Have in Common.” (Hat tip for the heads-up on the article goes to Rohn Jay Miller).
UPDATE: For a counter-view, take a look at “Experts are split on reason for state’s No. 2 innovation ranking” in the 12/6/14 issue of the Minneapolis StarTribune.