There’s a certain mythology when it comes to startup companies, especially when it relates to new technologies developed by young business phenoms. For some, the image that first comes to mind for many is that of companies like Google sprouting out of entrepreneurial hot beds such as Silicon Valley. While there is some merit to this concept, it is not always the case.
According to a recent article from Columbia Ideas at Work, a blog for the Columbia Business School, the effects of running a business in an industry hub may be overstated. The story cites a study from Columbia professor Evan Rawley, Rui J.P. de Figueiredo Jr. of University of California at Berkeley and Philipp Meyer-Doyle of INSEAD business school. The team looked at the concept of agglomeration, the sharing of resources and employees between companies within a certain geographical region, and how it related to business.
After researching a number of hedge fund startups, the team found that agglomeration did have a noticeable effect. However, they also found that the benefits carried over when individuals left that hub to work elsewhere, an occurrence they have come to call inherited agglomeration effects.
“You would think that staying in the financial center would help, because you would remain close to the industry, to other people,” says Rawley. “But we found that in the context of hedge funds inherited agglomeration effects are derived not from social capital but from knowledge, which for portfolio managers includes trading strategies, and operational knowledge.”
While the team’s research focused on startups, it’s indicative of a trend in the commercial sector of companies putting less emphasis on where it operates and more on how well it is run. With the latest HR software solutions, businesses are finding new ways to succeed regardless of their location.