Tech Clusters Research Articles

The rise (and fall) of tech clusters

Tech clusters play a growing role in knowledge-based economies by accommodating high-tech firms and providing an environment that fosters location-dependent knowledge spillovers and promote R&D investments by firms. Yet, not much is known about the economic conditions under which such entities may form in equilibrium without government interventions. This paper develops a spatial equilibrium model with a competitive final sector and a monopolistically competitive intermediate sector, which allows us to determine necessary and sufficient conditions for a tech cluster to emerge as an equilibrium outcome. We show that strongly localized knowledge spillovers, skilled labor abundance, and low commuting costs are key drivers for a tech cluster to form. With continual improvements in infrastructure and communication technology that lowers distance decay in knowledge spillover or coordination costs, tech clusters will eventually be fragmented.

Innovation Spillovers Across U.S. Tech Clusters

Innovation Spillovers Across U.S. Tech Clusters

Platform Firms, Commercial Real Estate Cycles and San Francisco’s Growth as a Tech Cluster, 2008–2020

Between the Great Recession and the COVID-19 pandemic, the U.S. technology industry increasingly shifted toward cities. Local governments pursuing innovation-led growth encouraged this shift, as exemplified by San Francisco, the spatial and symbolic urban home of the global technology industry. The commercial real estate market is central to understanding the city’s growth as a tech cluster between 2008 and 2020. Platform technology firms substantially contributed to employment growth and demand for office real estate in San Francisco during this period of rapid tech industry expansion. The city also exemplifies how the pandemic-led transition to remote work has profoundly changed the relationship between platform firms and urban space. In this article, we use interviews and secondary sources to study tech-led office leasing and development activity in San Francisco. We identify neighborhood-level trajectories of path dependence, industrial conversion, failed revitalization, and frontier-making during the period of growth leading up to 2020. Digital platform companies exert significant economic and political influence over cities, but their control over urban space is also constrained by the historical, material, and economic realities of commercial real estate.

Exploring the microgeography and typology of U.S. high-tech clusters

Despite the principal role of high-tech clusters in local planning practice and research, their location and sectoral typology at the granular level have been rarely studied. This study explores the location of U.S. high-tech clusters at a micro-scale by employing firm-level data sets and spatial statistics and examines their sectoral typology using market concentration indices in 52 large U.S regions. The majority (80 %) of the 627 tech clusters we identify have multiple dominant tech industries or are specialized in professional services. Furthermore, while clusters form the major regional hubs for the high-tech economy, they are home to a very small share (7 %, on average) of regional population. U.S. regions also have widely diverse spatial patterns of high-tech clusters; although some regions have scattered clusters, the New York and Northern California high-tech booming regions have clusters concentrated in central business districts (CBDs). Last, U.S. high-tech clusters and the overall high-tech economy are strongly shaped by the location and performance of professional services, i.e., consulting, legal, computer, engineering, and architectural services.

Modeling clusters from the ground up: A web data approach

This paper proposes a new methodological framework to identify economic clusters over space and time. We employ a unique open source dataset of geolocated and archived business webpages and interrogate them using Natural Language Processing to build bottom-up classifications of economic activities. We validate our method on an iconic UK tech cluster – Shoreditch, East London. We benchmark our results against existing case studies and administrative data, replicating the main features of the cluster and providing fresh insights. As well as overcoming limitations in conventional industrial classification, our method addresses some of the spatial and temporal limitations of the clustering literature.

Winner takes all? Tech clusters, population centers, and the spatial transformation of U.S. invention

U.S. invention has become increasingly concentrated around major tech centers since the 1970s, with implications for how much cities across the country share in concomitant local benefits. Is invention becoming a winner-takes-all race? We explore the rising spatial concentration of patents and identify an underlying stability in their distribution. Software patents have exploded to account for about half of patents today, and these patents are highly concentrated in tech centers. Tech centers also account for a growing share of non-software patents, but the reallocation, by contrast, is entirely from the five largest population centers in 1980. Non-software patenting is stable for most cities, with anchor tenants like universities playing important roles, suggesting the growing concentration of invention may be nearing its end. Immigrant inventors and new businesses aided in the spatial transformation. One Sentence SummaryThe growing concentration of patenting in tech centers masks an important stability in non-software patenting for most U.S. cities.

The Effect of ­High-Tech Clusters on the Productivity of Top Inventors

The high-tech sector is concentrated in a small number of cities. The ten largest clusters in computer science, semiconductors, and biology account for 69 percent, 77 percent, and 59 percent of all US inventors, respectively. Using longitudinal data on 109,846 inventors, I find that geographical agglomeration results in significant productivity gains. When an inventor moves to a city with a large cluster of inventors in the same field, she experiences a sizable increase in the number and quality of patents produced. The presence of significant productivity externalities implies that the agglomeration of inventors generates large gains in the aggregate amount of innovation produced in the United States. (JEL D62, J24, L60, O31, 034, R32)

Gathering round Big Tech: how the market for acquisitions reinforces regional inequalities in the US

Are the agglomeration economies of technology hubs augmented by a localized market for start-ups – acquisitions, and IPOs? How does this affect the ability of places outside of those hubs to foster digital startups as a tool of local economic development? We study this with a particular focus on acquisitions by the seven largest American digital platforms – Amazon, Alphabet [Google], Apple, Microsoft, Facebook, Oracle and Adobe, which we call, collectively, Big Tech. We cover the years 2001-2020. We show that firms acquired by Big Tech are, disproportionately to the sectors in which they operate, concentrated in major tech clusters, and particularly in the Silicon Valley (San Francisco/San Jose). Foreign acquisitions by Big Tech also show a marked concentration in a few countries, and particular places in those countries. NASDAQ IPOs of firms in relevant sectors are similarly concentrated. Acquisition, or the less common alternative, IPO, is the second major phase of financing for a digital start up. The first phase is commonly associated with venture capital (VC), and location proximate to venture capital companies has often been seen as a motivation for locating in a tech cluster. We find, however, that neither VC funding, nor funding an investor located in the Silicon Valley, predicts either acquisition by Big Tech, or IPO. Funding by any of the VCs that helped launch the Big Tech firms, however, is strongly associated with Big Tech acquisition. This suggests an important role for social networks in both the first and second phases of financing, but not necessarily a geographical role in the first phase.We argue that the acquisition market – and its effects on both the major tech hubs and the left behind rest – depends crucially on the proprietary control of access to various digital network products. Regulation of these markets, particularly in the form of common carrier status and open standards, could achieve a considerable re-balancing.

Winner Takes All? Tech Clusters, Population Centers, and the Spatial Transformation of U.S. Invention

U.S. invention has become increasingly concentrated around major tech centers since the 1970s, with implications for how much cities across the country share in concomitant local benefits. Is invention becoming a winner-takes-all race? We explore the rising spatial concentration of patents and identify an underlying stability in their distribution. Software patents have exploded to account for about half of patents today, and these patents are highly concentrated in tech centers. Tech centers also account for a growing share of non-software patents, but the reallocation, by contrast, is entirely from the five largest population centers in 1980. Non-software patenting is stable for most cities, with anchor tenants like universities playing important roles, suggesting the growing concentration of invention may be nearing its end. Immigrant inventors and new businesses aided in the spatial transformation.

What to Make of Gentrification in Older Industrial Cities? Comparing St. Louis (USA) and Dortmund (Germany)

Few scholars have studied gentrification in older industrial cities across different national contexts. A review of the literature suggests that gentrification in older industrial cities will look different in systematic ways from gentrification in global, magnet cities that most research has focused on. The literature also suggests that the political and institutional differences in cities located in different national contexts can shape gentrification processes. Our research shows that Dortmund and St. Louis are both undergoing deep processes of economic restructuring with new knowledge workers moving in to neighborhoods adjacent to expanding tech clusters. The speed and magnitude of gentrification, however, is significantly less than reported in strong market cities. Unlike in hot market, global cities, many areas within Dortmund and St. Louis are experiencing little or no gentrification, and the neighborhoods that are experiencing gentrification-like processes vary significantly along important dimensions. Despite important differences in political institutions, the basic pattern of gentrification in St. Louis and Dortmund is similar. In these two older industrial cities, at least, gentrification is a complex and variegated phenomenon that requires more research to be fully understood.

Tech Clusters

Tech clusters like Silicon Valley play a central role for modern innovation, business competitiveness, and economic performance. This paper reviews what constitutes a tech cluster, how they function internally, and the degree to which policy makers can purposefully foster them. We describe the growing influence of advanced technologies for businesses outside of traditional tech fields, the strains and backlash that tech clusters are experiencing, and emerging research questions for theory and empirical work.

Immigrant entrepreneurship in America: Evidence from the survey of business owners 2007 & 2012

We study immigrant entrepreneurship in 2007 and 2012 using the Survey of Business Owners. First-generation immigrants create about 25% of new firms in America, but this share exceeds 40% in some states. Conditional on basic regression controls, immigrant-owned firms tend to create fewer jobs than native-owned firms, have comparable pay levels, offer fewer benefits, and engage more in international activities. Prominent tech clusters display quite pronounced shares of immigrant entrepreneurs. Our results suggest that most of the impact of immigrant high-tech entrepreneurship for tech centers happens through the quantity dimension: Silicon Valley and similar tech hubs attract many immigrant founders.

The Rise (and Fall) of Tech Clusters

Tech clusters play a growing role in knowledge-based economies by accommodating high-tech firms and providing an environment that fosters location-dependent knowledge spillovers and promote R&D investments by .rms. Yet, not much is known about the economic conditions under which such entities may form in equilibrium without government interventions. This paper develops a spatial equilibrium model with a competitive final sector and a monopolistically competitive intermediate sector, which allows us to determine necessary and sufficient conditions for a tech cluster to emerge as an equilibrium outcome. We show that strongly localized knowledge spillovers, skilled labor abundance, and low commuting costs are key drivers for a tech cluster to form. Not only is the productivity of the final sector higher when intermediate firms cluster, but a tech cluster hosts more intermediate firms and more R&D and production activities, and yields greater worker welfare, compared to what a dispersed pattern would generate. With continual improvements in infrastructure and communication technology that lowers coordination costs, tech clusters will eventually be fragmented.

Emergence of diverse and specialized knowledge in a metropolitan tech cluster

Specialized knowledge is increasingly central in modern information- and technology-oriented economies, yet we know surprisingly little about how this knowledge is organized. We trace the evolution of specialized knowledge at both the individual- and network-levels by analyzing email exchanges shared among members of a large tech professional community in New York City over seven years. We find a shift over time toward the emergence of an increasingly specialized ecology of knowledge and information. This division of knowledge is driven by the influx of new cohorts of participants with different knowledge and interests than those already there. Yet, even as individual contributors increasingly sort into specialized niches, the community as a whole remains robust in its ability to address topics of diverse concern. This study illustrates how new sources of data enable us to see with greater clarity the structures underpinning modern knowledge-based innovation clusters.

Design principles for establishing a multi-sided open innovationplatform: lessons learned from an action research study in the medical technologyindustry

Innovation in the medical technology (med tech) industry has a majorimpact on well-being in society. Open innovation has the potential to accelerate thedevelopment of new or improved healthcare solutions. Building on work system theory(WST), this paper explores how a multi-sided open innovation platform cansystematically be established in a German med tech industry cluster in situationswhere firms had no prior experience with this approach. We aim to uncover problemsthat may arise and identify opportunities for overcoming them. We performed anaction research study in which we implemented and evaluated a multi-sided web-basedopen innovation platform in four real-world innovation challenges. Analyzing thefour different challenges fostered a deeper understanding of the conceptual andorganizational aspects of establishing the multi-sided open innovation platform aspart of a larger work system. Reflecting on the findings, we developed five designprinciples that shall support the establishment of multi-sided open innovationplatforms in other contexts. Thus, this paper contributes to both theory andpractice.

A Comparative Study of High Tech Clusters and Corporate Innovation in UK and China: The Roles of Knowledge and Environmental Factors

High tech clusters become a common feature in the modern economy and do tend to be beneficial for startups as well as to a region as a wealth creator. High tech clusters attract corporate to the area and corporates within these tech clusters are more competitive, so their corporate growth is driven by strategies that are focused on promoting innovation. Innovation is essential for the corporate growth. Empirical studies found that there is a positive effective on high-tech clusters on innovation and yet many corporations are struggling or fail in their attempt to become successful innovators. It’s because due to a lack of focus on knowledge flow and the business environment. This study will discuss innovation as a critical success factor in corporate competition as well as corporate growth and will explore the mediating role of knowledge and the moderating roles of environmental factors. On the basis of matched survey data obtained from 120 manufacturing firms in high-tech clusters in the United Kingdom and China. Our analysis will show that even though high-tech clusters form a key element to innovations, their impacts on such innovations are fully mediated by knowledge. Our result shows that the impact of the environment is having many different aspects; In particular, the environment hostility and environmental uncertainty weakens the effect of high-tech clusters on knowledge fact, while environmental complexity strengthens it. The theoretical and practical implications of this study and its limitations are also discussed.

Evolutionary Venture Capital Policies: Insights from a Product Life Cycle Analysis of Israells Venture Capital Industry

The significance of VC as a component of the ‘Silicon Valley’ model of high tech has led many countries during the 80s and 90s to implement government policies aimed at stimulating this activity. This paper suggests that a major factor in the failure of many of these policies to create an early phase, high tech SU(Start Up) oriented VC industry was the simplistic attitude of policy makers who viewed VC as a ‘pool of capital’. The alternative ‘VC as an industry’ view adopted in this paper explicitely considers issues of VC organization, capabilities, strategy and institutions. An analysis of their impact on VC policy requires considering the context & timing of policy implementation; and the links between VC and VC policies on the one hand and high tech and high tech cluster policies on the other.The new approach focuses on the process of creation of the new industry (“VC Emergence”) and on targeted VC emergence policies which are significantly more complex than the VC-directed policies suggested in the literature. Moreover success necessitates adoption of a systems/evolutionary perspective to Innovation & Technology Policies in general and to VC-directed policies in particular. The successful emergence of a VC industry in Israel during the 90s was not a ‘pure’ market-led process, rather it was triggered by a targeted VC directed policy/program (Yozma), implemented during 1993-98. The incentives structure & timing of this program as well as other elements in its design stimulated entry both of high quality domestic managers/ entrepreneurs (many of them with prior high tech experience) and of reputable, capable and networked investors from abroad. Both groups provided significant added value to the emerging VC industry and hi-tech cluster. Moreover by successfully dealing with the ‘system failures’ associated with achieving critical mass, collective learning, and other processes associated with the emergence or transformation of high tech clusters — Yozma (the Israeli VC targeted policy program) facilitated an extremely rapid and efficient process of VC emergence based on co-evolutionary and other cumulative processes It also assured a pattern of investment which followed a strict definition of VC (dominance of early stage investments in pure high tech SU). Based on the Israeli case and on information on the U.S’s experience, the paper presents an Industry Life Cycle (ILC) model of VC industry evolution. The model contains five distinctive phases with VC emergence being preceded by two phases (background conditions & a pre-emergence) and being followed by the remaining two (crisis & restructuring; and consolidation). Our analysis suggests that a successful process of VC emergence does not by itself assure industry sustainability. Additional restructuring & reconfiguration processes would be required, frequently in response to a post emergence crisis caused by late emergence overshooting.Despite the enhanced complexity of VC policy, the experience from Yozma suggests that Targeted VC (directed) policies are possible and could be successful; and that their likelihood of success depends on a successful policy-high tech co-evolutionary process which in Israel started two decades before implementation. It also suggests that VC emergence policies in certain countries could contribute to high tech industry and to the emergence of new high tech clusters.

VC Policy: Yozma Program 15-Years Perspective

This paper deals with a policy instrument supporting the emergence of VC industries. It is based on the Israeli experience with the Yozma program, which triggered the creation of the VC industry. This program dealt with specific system failures of the entrepreneurship process the early stage equity gap and the lack of complementary assets and skills in entrepreneurial firms. VC emergence in Israel was a policy-enhanced process in the sense that a targeted government policy directed to this goal (Yozma Program, 1993-1998) triggered it. Accompanying the process of VC emergence was the transformation of Israel's high tech sector toward a startup-intensive ICT cluster. We suggest that the feasibility of building a dynamic and innovative cluster, which exploits the ICT revolution, may be depended on the emergence of a capable domestic VC industry. Therefore, understanding the specific characteristics of Yozma program and the process it triggered could generate significant policy implication related to the process of VC industries and high tech clusters development in other countries. Therefore, the paper present a full case study of Yozma program 15 years after its implementation.

Evolutionary Innovation and High Tech Policy: What Can We Learn from Israel's Targeting of Venture Capital?

The paper analyzes Israel’s Innovation and High Tech Policy from a Systems-Evolutionary (S/E) and Life Cycle Perspectives with a focusing on the targeting of the Venture Capital Industry during the 1990s. Other related research strongly suggested that the emergence of Venture Capital (VC) during that decade was a central vector in the re-configuration of Israel’s high tech industry into a Silicon Valley, start up intensive, model of high tech. The paper undertakes a qualitative assessment of the central VC-directed program-Yozma; and compares it both with a prior failed program (Inbal) and with VC policies of other countries. It concludes that in all likelihood, Government intervention was justified and its impact was high. Absence of a clear policy evaluation methodology in the literarure that follows S/E principles implies that the main thrust of the analysis lies in the framing of policies rather than in undertaking a quantitative analysis of economic impact. Israel’s success in its Venture Capital policies (with Venture Capital defined ‘strictly’ in the sense of early phase equity-based finance and support of high tech start ups) contrasts with the seemingly weak impact of policies adopted by other countries, including OECD countries. Moreoever, and in contrast to much of the relevant literature, it also raises the possibility that targeting high tech clusters is possible provided adequate background and, even more important, adequate pre-emergence conditions have been fulfilled. In Israel those conditions

Local country attributes and the emergence of high tech clusters

The aim of this study is to explore the effect of a country’s attributes on the decision of firms to be active globally. We first built a theoretical model, which shows that an initial difference in the business environment may dampen the desire of firms located in countries with a relatively weak business environment to seek a higher level of R&D. The decision not to pursue higher levels of R&D leads, in turn, to lower output and lower scope of activity of global firms in these countries. Moreover, firms with relatively high level of management skills will choose to migrate from a relatively weak country to one with a stronger business environment, creating a brain drain that will further impoverish the weak country.