If Pittsburgh is to grow economically and compete with other regions in the U.S., it must create more technology-based start-up companies, according to two new reports — one from the Milken Institute and the other from Battelle Memorial Institute.
The reports present a clear picture of the Pittsburgh region′s competitive position and lay the foundation for a focused strategy to advance the Pittsburgh region to the top tier of technology regions, according to Donald Smith, chairman of the Board of Directors of Greater Oakland Keystone Innovation Zone (GO KIZ), which sponsored the reports, and director of the University Partnership of Pittsburgh.
The reports make a number of recommendations for the region, including what it might take to add significantly more new jobs to the region and build a stable base of experienced managers for start-up companies.
The Milken Institute′s report, "Pittsburgh Technology Strategy," cites the region′s low ranking on several Institute indexes, including the Tech Pole Index (39th out of 100 metro areas on a measure of high-tech industry concentration and growth) and Best Performing Cities Index (its highest position since the annual index started in 1999 is 96th out of the top 200 largest metros in the U.S.).
The study said Pittsburgh is not reaching its development potential for several reasons, among them:
- High corporate taxes
- Poor entrepreneurial environment
- Lack of productivity growth
- Lack of anchor firms
Ross DeVol, director of Regional Economics at the Milken Institute, and one of the report′s authors, said that to turn things around, Pittsburgh must, among other things, take better advantage of its knowledge-based assets.
"Pittsburgh has some academic research jewels in Carnegie Mellon University and the University of Pittsburgh, but these institutions have not been fully integrated and leveraged to spur technology-based economic development," DeVol said. "Greater focus on commercializing this research within the region at existing firms and starting new firms will be critical for future economic performance and creating high-paying jobs."
Co-author Perry Wong, a senior managing economist at the Institute, added that Pittsburgh′s strong base of knowledge assets have led to the creation of many small start-ups in recent years.
"The success story of rebuilding Pittsburgh′s economy, however, will depend on its effort to building a technology cluster where larger advanced high-tech companies in the region can command a strong gravitational pull on global talents as well as companies," he said.
The reports present an in-depth analysis of the Pittsburgh region′s economic future and its ability to compete in a technology-based economy. It also presents some gaps and opportunities for the region′s leadership to address.
While some findings confirm previously identified challenges in the region, there are a number of important new findings. The priority new findings follow.
Technology Sectors Drive Regional Economies
Technology-based development is the single greatest predictor of a region′s economic performance. An analysis by the Milken Institute reveals that 65 percent of regional economic success is directly related to the presence and growth of high-tech industry. Technology is critical for both mature, established companies and emerging industries.
Technology Start-Ups Are the Bellwether of a Strong Tech Economy
The key indicator of a vibrant technology economy is the rate of start-up company creation. While there are many other indicators that are important, this one measure takes on the central role as a target for regional progress. A robust start-up climate is both an indicator of success and a means for realizing regional job growth.
Pittsburgh′s Technology Performance Lags in Significant Ways
The Pittsburgh region trails peer and competitor regions in growing technology industries, with a technology concentration that is 18 percent below the national average and overall job growth that is half the national average. In addition, the reports confirm that the region has an insufficient base of large, potential anchor technology firms; sluggish private-sector job growth; a continued downturn in venture capital activity; and, most importantly, the creation of fewer new companies than other regions.
The Region Has the Assets Needed to Successfully Compete
University and health-system research and technology development are important areas of competitive advantage. Regional universities secure more than $1 billion annually in research funding. And the region′s strong base of academic research and its university-medical complex are not only sources of spinouts, but also attractive to leading-edge technology firms that seek to partner with and locate near top research institutions. Regional assets include:
- A sizeable base of corporate R & D centers and significant pool of scientific talent;
- The proven ability to attract leading global research entities and cutting-edge tech firms, including Google, Intel, RAND and Seagate; and
- UPMC, a major life sciences anchor that attracts international suppliers and partners to the region in addition to investing and developing local start-up companies.
Smith said the two reports clearly indicate that preserving the status quo is not an option.
"Unless we leverage our considerable asset base more effectively, other regions will continue to pull ahead of us, and our economic competitiveness will decline," Smith said. "Meeting this challenge will not be solved with a single initiative or the hard work of a few organizations. We must establish technology-based development as the top regional priority, and everyone in the region has a role to play in using our considerable assets toward this end."
View the Milken Institute report.
View the Battelle report.