Evaluating the Role of the Four Factors of Production in Economic Concentration – An Analysis of Silicon Valley Technology Hub Economic Concentration
Silicon Valley is characterized as the United States’s computer and micro-electronics center. A myriad of factors have contributed to Silicon Valley’s emergence as an economic hub. One of the factors that have contributed to its rise as an economic epicenter for computers and software is that it plays the home base to various companies that are in the industry of manufacturing computers, software, workstations, hard disks, and other related services. As a result, other companies come in because of the availability of other services or products they may need to complement their primary offers. Another reason for the base’s emergence as an economic epicenter is the existing support by multinational corporations and the US government through the Department of Defense. These entities utilize products and services offered by computer and digital services companies, thus attracting more companies to leverage the existing ready market to enhance their products. The rampant entrepreneurship, circulation of firm-to-firm engineering technologies and labor, and visibility of major global multinationals and government agencies have contributed to Silicon’s emergence as an economic and technology hub.
The Influence of Competition and Pricing
Different competitive influences contribute to Silicon Valley’s emergence as an economic Hub. First, there is a high demand for talented employees and engineers in and around Silicon Valley due to the existence of multinational companies that demand these services. As a result, most talented engineers have moved from other parts of the US and globally to settle in Silicon Valley (Lee, 2000). To that end, companies looking forward to finding the best talent to work in their firms move to the Valley to access these talents. Another competition insight that favors Silicon’s emergence as a tech hub is California’s favorable intellectual property regulations, including trademarks, creator’s rights, and trade secrets. As a result, most new startups with inventions find it favorable, knowing that their IP rights are protected.
On pricing, Silicon Valley is located in a high-income and low-poverty area, which means housing prices are high. The area also registers low unemployment rates, making commodity prices shoot relative to other areas (Lee, 2000). Common citizens may not afford to live in the area, making it a perfect host for companies to whom rent is not an issue of concern. Besides, the availability of talent and California’s tough IP regulations reduce the prices of starting and maintaining a company, hence attracting most companies to the area.
The graph below shows how housing prices have spiked over time in Silicon Valley.
The Influence Supply Chain
The influence of the supply chain on the emergence of Silicon Valley as an economic hub cannot be overstated. Today, the Silicon Valley hosts multiple tech companies. Due to the high concentration of technology companies in Silicon Valley, most companies that supply these technology companies with products and services are motivated to set up shops, aware that there is a ready market for their products (Sawhney et al., 2002). As stated earlier, the region hosts many web development companies and IT experts who may need hosting services. Subsequently, hosting companies have moved to the area to leverage an existing market. Tech companies prefer to partner with a hosting company that is near, rather than using the services of a company that may be located miles away. To that end, more companies that deal with technology continue to move into the area to fulfill the supply chain needs of the existing tech companies.
Evaluating the Four Factors of Production
Among the four factors of production, entrepreneurship emerges as the most prominent factor of production that led to the emergence of Silicon Valley as an economic hub. Silicon Valley is characterized by risk-taking and innovative cultures, factors that are central to successful entrepreneurship. Startups and companies moving to set up shops in the area are looking forward to being successful, like Apple, Google, and Facebook, and this may involve using these companies’ models to enhance their success (Audretsch, 2021). Secondly, Silicon Valley is characterized by the existence of venture capital, which will likely fuel startups to succeed. The third most prominent factor in fueling the economic concentration in Silicon Valley is labor since most talents in the technology industry have moved to the area. The least vital contributor to the concentration island, yet still, the increased demand for real estate has driven the cost of living upward, and tech companies have taken advantage.
Anticipated Changes
According to Stumer (2014), Silicon Valley has emerged as one of the most gentrified areas in the US. Today, gentrification has driven out ordinary American citizens since they cannot afford real estate property and the overall cost of living. Soon, even companies will be discouraged from setting up shop in the area due to high real estate costs and the skyrocketing cost of living.
References
Audretsch, D. B. (2021). Have we oversold the Silicon Valley model of entrepreneurship? Small Business Economics, 56, 849-856.
Lee, C. M. (2000). The Silicon Valley Edge: A habitat for innovation and entrepreneurship. Stanford University Press.
Sawhney, M., Gulati, R., & Paoni, A. (2002). TechVenture: New rules on value and profit from Silicon Valley.John Wiley & Sons.
Stumer, C. R. (2014). Super Gentrification: The Influence of Silicon Valley in San Francisco. Paper for Geography, 457.
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Question 
Write a 700- to 1,050-word paper evaluating economists’ assessments of the role the 4 factors of production played in determining how the economic concentration you selected has evolved. Complete the following in your paper:
Evaluating the Role of the Four Factors of Production in Economic Concentration – An Analysis of Silicon Valley Technology Hub Economic Concentration
Analyze how the economic concentration in the area you chose was influenced by competition and pricing.
Analyze how the economic concentration in the area you chose influenced the supply chain.
Analyze which of the 4 factors of production were the most and least important in determining the economic concentration of the area you chose.
Predict changes you anticipate for the area of economic concentration you chose. Support your predictions.
Consider the resources provided and other academically appropriate sources. The use of charts and tables to illustrate data is highly encouraged.