Let's say you're the mayor of Middlevale, a (fictional) medium-sized city in Texas. The coal-fired electric power plant outside town just closed, and the steel mill in the next county over has gone bankrupt. Now voters expect you to do something about rising unemployment and the shrinking tax base. You might look at America's booming metropolitan areas, such as Boston, Seattle or Silicon Valley, and say what we need here is an “innovation district” or a “technology cluster.”
Sounds great! But it's rarely the full answer.
You certainly wouldn't be the first public official to fall under technology's spell. After all, when high-growth companies flock to a specific location, jobs and higher incomes do tend to follow. Take the Kendall Square cluster, loosely defined as the area within a 10-minute walk of the subway station at the Massachusetts Institute of Technology. It's home to more than a dozen top biotech firms. Google, Microsoft, Amazon and Facebook all have research outposts here. And some 750 start-ups incubate at the Cambridge Innovation Center. It's all helped to give Cambridge the lowest unemployment rate in Massachusetts and a family income 59 percent above the national median.
Of course, the city is also home to high-paying institutions like Harvard University and M.I.T. But that, too, is part of the canonical definition of a cluster. Business scholars say it's hard to build a tech cluster without at least one research university to generate ideas and qualified employees.
And the ingredient list goes on. A base of older tech firms gives future start-up founders a place to train. Federal investment, which helped to put Silicon Valley's semiconductor industry on the map, is a huge boost. Finally, you need local venture capitalists willing to invest in high-risk enterprises.
Put it all together, and you get what I think of as the proximity effect—a self-sustaining churn of people, inspiration, investment, intellectual property and profit. It's no wonder that dozens of U.S. cities, both large (San Diego, St. Louis) and medium-sized (Columbus, Chattanooga), are investing in innovation districts. But there's a problem: it can take decades of planning to assemble all the components of a cluster, and you can't invest in just one element while ignoring the others.
Floridians paid a lot to learn that lesson. Between 2003 and 2008 then governors Jeb Bush and Charlie Crist arranged hundreds of millions of dollars in subsidies to bring biotech laboratories such as the Max Planck Florida Institute for Neuroscience to the Palm Beach County area. The private-sector spin-offs Bush and Crist had promised never emerged, and between 2007 and 2012 the state's spending spree had brought fewer than 1,000 new jobs to Florida. “We didn't have the infrastructure that was needed to develop the industry at a rapid pace,” the president of the Business Development Board of Palm Beach County told reporters.
Fortunately, cities don't need to follow the classic cluster model. There's new evidence that regions can develop fast-growing business scenes even if some of the traditional cluster ingredients are sparse or missing. The Detroit area, for example, is home to only a handful of venture firms. But it's developing a distinctive mix of start-ups focused on what Detroit does best: manufacturing, robotics and next-generation transportation technologies, with a dose of software. Ted Serbinski, managing director of Detroit's Techstars Mobility incubator, has called it “the intersection of steel and bits.”
In fact, quite a few of the metro areas that show the strongest start-up growth lately fall outside the traditional cluster definition. In the Ewing Marion Kauffman Foundation's 2017 rankings of start-up growth, the Columbus, Nashville and Atlanta metropolitan areas placed third, fourth and fifth, respectively. All have strong universities. But none has a major tech-industry legacy or a substantial venture-capital community.
As mayor of Middlevale, you're not going to build a research university from scratch or lure a flock of venture firms to town. But you can focus on the skills your citizens already have and look for ways to match those with the more digital, distributed, globalized economy of the 21st century. Admire the clusters—and then go your own way.