Recent Research: Strategies for connecting communities to the innovation economy

The final part of this series explores the tactics and strategies associated with increasing exposure to innovation and broadening economic opportunity.

Last week, The Digest explored recent research examining the role that exposure to innovation plays in determining future inventiveness. The study’s authors, led by Stanford’s Raj Chetty, find that a child’s characteristics at birth – their neighborhood, socioeconomic class, race, and gender – are highly predictive of their propensity to file a patent later on in life. Based on their results, the authors recommend strategies that focus on increasing exposure to innovation and broadening intergenerational economic mobility. This article explores these types of policies in depth, as well as additional tactics that may help reconnect America’s communities with greater economic opportunity.

In an analysis released earlier this year, Ron Coan of the Council for Community and Economic Research (C2ER) finds that economic development strategies rarely take into account the particular needs of the "forgotten people," those individuals in both urban and rural areas who have been disproportionately impacted by globalization. Citing frustration with traditional economic development policies that ignore that population, Coan argues that a “forgotten people” focused strategy must offer “some realistic economic opportunity acceptable to them.” Fostering realistic economic opportunity lies at the heart of a reconnection agenda.

Research published this summer in the Economic Development Quarterly suggests that relatively few communities have developed comprehensive strategies to support social equity and economic opportunity. In Environment, Equity, and Economic Development Goals: Understanding Differences in Local Economic Development Strategies, authors Xue Zhang and Mildred Warner of Cornell, and George Homsy of SUNY-Binghamton analyze a survey of more than 5,000 communities in the United States. They find that while many communities concentrate on jobs and wages, just 26 percent of communities identified “social equity” as an economic development goal. Those communities, which tended to be larger, were less likely to rely on traditional business incentives and instead focused on community economic development tools. They were also more likely to engage in a formal economic development process and involve a wider array of participants in the strategy-making process.

There are examples of large regional economic development organizations prioritizing inclusion, though their efforts are relatively nascent. In Minneapolis-St. Paul, the organization GREATER MSP states, “inclusion is our growth strategy,” according to an article in the Pioneer Press.  That strategy includes programs devoted to improving the competitiveness of “center cities” like North Minneapolis and East St. Paul, as well as on attracting and retaining minority talent. An initiative by Brookings’ Metropolitan Policy Program seeks to advance inclusive growth efforts at more regional economic development organizations, including those in Indianapolis, San Diego, and Nashville. The above inclusion strategies account for racial inclusion, but ignore rural connectivity. Furthermore, few, if any, small regions have developed comprehensive strategies to promote social equity.

A major point of emphasis in Chetty’s Equality of Opportunity research is the importance of policies that provide under-utilized talent with greater exposure to innovation. They find that contact with inventors that look like you is critical in determining future inventiveness, especially among women and ethnic minorities. Mentorship, apprenticeship, and internship programs present examples of what “realistic economic opportunity” tactics might look like.

Apprenticeship and internship programs that support mentorship are pervasive throughout the country. The organization i.c. stars, for example, offers a two-year program that provides an opportunity for low-income adults to develop both technical and leadership skills through intensive technical and non-technical (e.g., community development, soft skills) mentorship programming. Along with industry partners, national nonprofit organizations like LaunchCode and  Per Scholas use similar approaches to create economic opportunity and address the skills gap, with mentors playing a major role. There are also many other apprenticeship programs in the U.S. focused on fields beyond IT.   

Connecting R&D assets to K-12 STEM programming can also increase exposure to innovation. The strategic placement of STEM-focused public or charter schools near R&D assets, like St. Louis’ Collegiate School of Medicine and Bioscience and the Science Leadership Academy in Philadelphia, offer two examples of this. Federal labs located in rural areas, such as the Crane Naval Surface Warfare Center and the Idaho National Lab, have developed numerous programs with K-12 schools in their regions for STEM-related outreach. A partnership between 4-H and Lockheed Martin focuses on career pathways in STEM by engaging young scientists through applied learning opportunities.

Furthermore, multiple entrepreneurial development programs with an inclusion focus have placed a specific emphasis on mentorship. In San Diego, the CONNECT ALL initiative provides outreach, education, and mentorship to underrepresented groups and diverse early-stage entrepreneurs. Jumpstart’s Focus Fund targets women and minority entrepreneurs throughout Ohio, providing them with capital, mentorship, and other assistance. Mentorship is also at the core of programs such as St. Louis’ Bioscience and Entrepreneurial Inclusion Initiative, the Propel accelerator in Memphis, Chicago’s Blue1647, and the Hillman Accelerator in Cincinnati. 

Programs targeting opportunity through mentorship and entrepreneurship are not limited to urban areas. Maryland TEDCO’s Rural Business Innovation Initiative connects mentors with businesses throughout the state’s rural regions. Working with teachers throughout a 20-county rural area, The Next Big Thing, an initiative of Murray State University's Kentucky Innovation Network, supports youth entrepreneurship through mentorship and targeted programming. In New York’s Adirondacks region, the Point Positive angel fund seeks to provide rural entrepreneurs with the connections and capital they need to grow their businesses.

The Scalable Innovation program offered by InnovationWorks is another tactic for the reconnection agenda. The program helps (mostly rural) manufacturers in the Pittsburgh region partner with (mostly urban) high-growth startup technology companies. Startups can learn valuable skills from manufacturers, such as product design, development, and prototyping. Meanwhile, working with startups can help manufacturers identify new revenue opportunities by helping them tap into Pittsburgh’s burgeoning tech economy.

Tactics recommended by C2ER’s Coan to support “realistic economic opportunity” include industry-led workforce development, an enhanced focus on the service sector, and the deregulation of local occupational licensing rules. In what he describes as “Back to the Future” economic development, the linking of work, remedial and vocational education, as well as basic and soft skills training, can empower individuals to address the problems that occur throughout their own communities, creating opportunity in the process. “For more advanced skill workers, local brownfields cleanup, subsidy for volunteer firemen, and labor on local sewer and water pipes, small flood control projects, and a variety of spruce up projects can restore aesthetic appeal to tired small towns and villages, as well as the toughest ghetto,” Coan writes.

These types of tactics would require considerable capital. To support a reconnection agenda, John Lettieri and Steve Glickman of the Economic Innovation Group posit that there needs to be more ways to channel investment from wealthy areas into those lacking opportunity. They cite Congress’ Investing in Opportunity Act, which would allow private investors to pool money into “Opportunity Funds” located in designated distressed communities with deferred capital gains, as one possible approach to incentivize these investments. There are also opportunities within the venture capital space to drive more investment in a broader subset of regions. The Revolution Group’s recent Rise of the Rest fund is one model for such an initiative. 

Paul Jargowsky and Christopher Wheeler of the 21^st Century Cities Initiative propose that local policymakers can do little to counter the national and international macroeconomic forces that have led to unprecedented levels of economic inequality. Despite this, they identify other tactics that contribute to a reconnection agenda. For example, state and local policy levers such as raising the local minimum wage, addressing educational disparities through school assignment may be able to affect how broad regional income inequality impacts neighborhood inequality.

Jargowsky and Wheeler also find that economic segregation increased fastest in places where suburban housing development outpaced center city housing. To combat this, they suggest that controlling the locations of new housing construction may be able to limit inequality’s impacts at the neighborhood level.  In a recently published book on housing dynamics in Northeast Ohio, Cleveland State’s Tom Bier supports regional tax growth sharing to accomplish similar goals. Brookings’ Reeves points to other tactics to address “dream hoarding,” such as changing local zoning laws, addressing the allocation of internships, and the college application process.

Finally, affordable and accessible broadband internet is often overlooked as a tactic for supporting economic opportunity in both urban and rural areas.  Ohio’s state legislature is exploring the use of $50 million from the Ohio Third Frontier Commission – funds intended for technology-based economic development – to support broadband connectivity in rural parts of the state. During the 2017 legislative cycle, 20 other states passed or introduced legislation to support rural broadband, according to a GovTech analysis. In rural areas in particular, eliminating net neutrality could hinder the technology-based economic growth, according to a recent commentary in The Hill.  Dozens of communities signed onto the U.S. Department of Housing and Urban Development (HUD) initiative from the Obama Administration, ConnectHome, which offered financial support and educational outreach for broadband services to families living in HUD-assisted housing. Anchored by community development organizations, Detroit’s Equitable Internet Initiative is installing high-speed internet in underserved neighborhoods and offering advanced digital literacy training programs. Internet access helps level the playing field in the knowledge economy, making intergenerational opportunity a realistic goal.

America’s future competitiveness, especially as it relates to innovation, is heavily tied to its ability to expand place-based economic opportunity. As the research described above makes clear, however, there is no one-size-fits-all approach to increasing exposure to innovation and broadening intergenerational economic mobility. Ultimately, this requires a new way of thinking, with new strategies and new tactics that can help deliver where previous approaches have fallen short. An emphasis on bottom-up strategy development, a focus on broader societal goals, and a willingness to change behaviors is critical to such an effort.