Startups, Unicorns, and the Local Inflow of Inventors

Abstract

We provide evidence that the arrival of technical human capital improves regional entrepreneurship, both by increasing firm entry and reducing failure. The results also indicate negative externalities upon low-tech and competing industries: the arrival of inventors in a county shifts the locus of venture capital investment away from low-tech startups to high-tech startups and moreover towards new ventures in the same sector as those inventors’ skills. Identification is provided by a shift-share instrument combining the spatial distribution of surnames in the 1940 U.S. Census with thousands of surname-specific shifts based on modern inventor mobility.