"Right now, Silicon Valley is the mecca for traditional tech startup folks. That is gradually (this is key - NOT overnight) changing though."Actually, no.
You don't find Muslims making a journey to Detroit to worship Mohammed do you?
That's because Silicon Valley is actually a place not a concept. That being said there are other areas where other economic drivers are being augmented by technology drivers, NYC comes to mind.
However if you look at places that tried to "be" Silicon Valley (Rte 128 in Boston comes to mind) there are lots of failures scattered around.
Part of it is social, part of it is political, part of it is economics.
If you want to foster innovation remove barriers to innovation, outlaw non-competes, create a durable right for workers to keep what they make on their own time with their own gear.
What happens is people quit their jobs to build a competitor than can do it better/cheaper than where they worked. It weeds out non-innovators. It also frees up folks to quit and still work on stuff they know, they start creating networks that span companies and pretty soon lots of people know lots of people and creating a company gets easier, then all these companies being created and grown will help the intial capital suppliers do well, and their success will attract other sources of capital.
Strangely enough, if you could step out of the world trademarks treaty, and said "If you work in this zone you cannot be sued for software patent infringement nor may you file them." You might create a mini-boomlet right there :-)