Seemingly every American city, from Boston to New Orleans, wants to be "the next Silicon Valley." This isn’t anything new; it has happened before with industries like film, video games, and alternative energy. Basically, if an industry looks profitable, city (and state) officials will often try to work tirelessly to bring their own municipalities a piece of the financial pie.
But while tech is certainly the buzziest industry in the United States now, a recent study suggests that cities need not focus on becoming the “next Silicon Valley.” They simply need to try to become the next something.
A recent study suggests that cities need not focus on becoming the "next Silicon Valley." They simply need to try to become the next something.
Professor Scott Stern, who teaches entrepreneurship at MIT, led a study proving that business clusters—geographically and fundamentally adjacent industries—can help boost a city’s overall economy. Yes, that’s long been a popular belief; now, there’s empirical evidence to back it up. More than that, Stern’s work—which appears in the December issue of Research Policy—shows that a business cluster of almost any variety is good for a city’s economy.
“Very often, regions are given advice that they should become the next Silicon Valley, or be like some other region,” Stern says. “They’re told that ... they should try to put out very expensive incentives to attract a single plant. What our research suggests is that regions succeed by investing in and extending their comparative advantage.”
Stern and his researchers focused on the role of business clusters in fueling employment and innovation growth, specifically in the individual industries that form the regional cluster. (An economic cluster, according to this study, has around 15 types of individual industries. Think of car manufacturing in Detroit: There’s not just the automaker, but also the engineering firms and parts manufacturers, maybe even the metal manufacturers.) Using the U.S. Cluster Mapping Project, the team collected 15 years’ worth of data from 41 larger clusters—that’s 589 specific industries—across 177 U.S. regions.
The researchers found that nearly any type of business cluster spurs job creation and intellectual property development within that cluster’s constituents, as well as overall economic growth in a given region. Stern saw that a slight increase (technically speaking, a one-standard-deviation increase) above the average level of industry specialization within U.S. cities leads to a 1.3 percent annual job growth rate within that region, and a 1.2 percent patent growth.
“We're able to show that the stronger cluster environment is associated with a higher rate of entrepreneurship, more persistence for those entrepreneurs, and more growth for those entrepreneurial ventures,” Stern says. “[Policymakers] can prioritize those activities that leverage the things about our regions that are unique, distinctive, and meaningful. That leads to a smarter type of economic development than simply chasing the next big thing.”
So, Stern’s research suggests, let San Francisco have its start-ups, and New York City its Wall Street. Focus instead on propping up a different, unique industry—one that will create jobs and foster intellectual growth, even if it's at the expense of potential international headlines.