Entrepreneurial Attractiveness: Amazon, Google, and the Search for Innovative Hot Spots

Abstract

Recent economic literature suggests that entrepreneurship in technological fields can spur economic growth, making it a popular topic for city development officials. Yet, this increasingly popular phenomenon is met by many economic questions. One of those questions is which characteristics of metropolitan areas are attractive to entrepreneurs. To answer the question of attractiveness on both the small business and corporate levels, I compare across two case studies: Amazon’s search for a second headquarters and Google’s tech hub network. Using principal component analysis, I statistically deduce seven components of attractiveness from an original 34 variables. These components are then weighted using three methods—a case study, a survey, and an empirical method—to produce comparable indices of attractiveness. Generally, I find that sizeable population and healthy economy are the strongest components. However, the statistically insignificant components that can change an urban area’s ranking considerably are talent and geographic network effects. Ultimately, creating policy to maximize these aspects can change a city’s innovative trajectory.