Researchers from the Brookings Institution and the Information Technology and Innovation Fund, a tech-industry-backed think tank, arrived at their conclusion by looking at a fairly narrow slice of jobs—13 industries that involve the highest rate of research and development spending and STEM degrees per worker. That includes much of the software industry, as well as jobs in areas like pharmaceuticals and aerospace. The researchers found that, between 2005 and 2017, five metro areas—San Jose, San Francisco, Seattle, San Diego, and Boston— not only added lots of jobs, they were also becoming more dominant in those industries overall.
In part, that’s due to changes in what businesses need, says Enrico Moretti, an economist at UC Berkeley who wasn’t involved in the study. The enduring dominance of some tech hubs is somewhat counterintuitive. Technology was supposed to be a democratizing force—the internet and iPhone would make it possible to do innovative work from just about anywhere. But instead, high-tech industries became about proximity to your fellow high-tech workers. Businesses clustered around hubs of investment, in places where skilled workers could stick around after school, hop between jobs, and stay in touch with contacts. That plays out on an individual level too, Moretti says. In recent research tracking the patent activity of scientists as they moved in and out of places like the Bay Area, Moretti found that they were far more productive in those innovative hubs…
The researchers’ point is that it’s hard to build hubs of innovation from scratch—in places where the economy is really struggling, and where there’s little existing tech talent. Instead, you want to start with places that are already buzzing, and through a mix of investment—in things like R&D, education fellowships, and financing for small businesses—and tax incentives to encourage new business, nudge them to become innovation hubs. In other words, those places are already fertile ground for high-tech companies, but they need a little more fertilizer to get there. The researchers prefer federal investment to local subsidies that try to attract individual businesses—an often fruitless effort for smaller communities, as incidents like the downsized Foxconn factory in Wisconsin and Amazon’s HQ2 search demonstrate.
How exactly these centers of industry arise, thrive, and consolidate (and then maybe fade away or die?) is a good subject of academic study. Through a series of decisions, conditions, and good circumstances, agglomerations start. Inertia can carry them for a long time. As noted in the last paragraph, it can be difficult to introduce competition from other centers or create new centers once the main locations are well-established. Tech center do not just happen; they are the result of multiple social processes, interactions, and decisions.
Additionally, it is interesting to see that there is still a lot of value of actual physical locations near other businesses or organizations – even in a field that can render spatial and time distances less relevant. Being close to other people, being able to actually stop by or talk to them, still matters. All of this can add up to a location with a collection of similar organizations being more than the sum of its parts.