Study Looks at High-Tech Metro Areas

Technology-based economic growth can be extremely beneficial to metropolitan areas, but comes with risks, according to America's High Tech Economy: Growth, Development, and Risks for Metropolitan Areas. The report was prepared by the Milken Institute, a non-profit economic think tank founded by Michael Milken.

Among the report's findings are:

• A concentration of high-tech output does not guarantee continuing high-tech growth,

• Technology-based economic growth is causing greater income disparity, reducing job security and job tenure, and increasing the risk of unemployment for workers in their 50s,

• High-tech manufacturing industries are among the most volatile in the economy, and

• The high-tech sector has grown on average four times faster than the overall economy during the 1990s.

Using a series of applied econometric approaches, the Milken Institute examined the role of high technology industries in explaining the relative economic growth of metropolitan areas. They found that high-tech activity (measured by movements in the relative metro real high-tech output index and the 1990 location quotient in high-technology activity) can explain 65 percent of the growth differential between metros in the 1990s.

The authors also developed a composite, standardized measure of high-tech spatial concen-tration combining the location quotient with the metro area's share of the national high-tech output. The result was the identification of "Tech-Poles" —  metro areas that have some degree of relative technology gravitational pull or attraction.

The top ten Tech-Poles and their composite index scores were:

1. San Jose/Silicon Valley, CA (23.7)

2. Dallas, TX (7.06)

3. Los Angeles, CA (6.91)

4. Boston, MA (6.31)

5. Seattle, WA (5.19)

6. Washington, D.C. (5.08)

7. Albuquerque, NM (4.98)

8. Chicago, IL (3.75)

9. New York City, NY (3.67)

10. Atlanta, GA (3.46)

Smaller high-tech clusters were among the fastest growing. The top ten and their relative high-tech real output growth rate during the 1990s were:

1. Albuquerque, NM (4.37)

2. Pocatello, ID (3.08)

3. Boise, ID (2.93)

4. Cedar Rapids, IA (2.68)

5. Harrisburg, PA (2.58)

6. Columbus, GA (2.39)

7. Merced, CA (2.23)

8. Richland, WA (2.02)

9. Yuma, AZ (1.95)

10. Austin, TX (1.92)

Of particular interest and potential value to economic development policy makers are a dozen variables identified as influencing the development or regional high-tech industries. The variables are divided among three groups: public policy, compara-tive location benchmarking, and social infrastructure development.

Research centers and institutions were found to be "undisputably the most important factor in incubating high-tech industries."   The federal government was found to have "had an unintended impact on the formation of high-tech clusters around the county through its location of research centers and allocation of grants." Other positive factors included access to venture capital, presence of an educated workforce, and climate and quality of life factors.

Proximity to suppliers and regions offering initial low-costs, on the other hand, were found not to provide a sustainable comparative advantage in high-tech industries.

The report is available from the Milken Institute's website http://www.milken-inst.org