New evidence that you can't build a start-up city overnight.
The study, from Kauffman's Dane Stangler, compares the location of leading high-tech hubs, based on their start-up density, in 2010 and 1990, and finds that little has changed. The nation's leading tech hubs in 2010 are more or less the same as they were twenty years earlier. Drawing from a concept first introduced by the economist Paul David, who uses the example of the persistence of the established yet inconvenient QWERTY keyboard, the study argues that leading tech clusters are highly "path-dependent." The report references and builds upon the study from Engine's Ian Hathaway and the Kauffman Foundation on leading high-tech centers, which I wrote about here last month.
The table below, from the report, compares the nation's top 20 large metros in terms of high-tech start-up density in 1990 and 2010. San Jose leads in both periods. And although the order has shifted a bit, every single one of the top 10 metro areas in 2010 was among the top 20 in 1990. A bold name highlights metros that either fell off the chart after 1990 or jumped into the top 20 by 2010. Note how few new additions to the list there are.
Only five of the top 20 in 2010 — Portland, Wilmington, Phoenix, Kansas City and New Orleans — weren't among the most tech-dense cities twenty years ago. Even metros that have begun to climb the high tech ranks recently, like Kansas City and Portland, really "owe their emerging entrepreneurial ecosystems to many years of spinoffs and entrepreneurial spawning," the report notes.
The same pattern holds for smaller and medium-size tech hubs. The table below shows the top ten small and medium sized metros (with populations between 250,000 and 500,000) by high-tech start-up density. Boulder tops the list in both periods. Of the top ten in 2010, five were on the list in 1990. The report notes that there is likely to be more change in the ranks of small and medium size metros because such metros can rise or fall based on changes in a relatively small number of firms.
High tech is notoriously fast-paced. Companies like AOL, Myspace, and GeoCities can quickly rise and fall. Many of today's most innovative and powerful tech companies like Facebook, Twitter, or even Google did not exist in 1990. Mark Zuckerberg was still in high school in 2000.
But, the Kauffman Foundation's report concludes, "No place can transform itself overnight. Boulder has only entered the national consciousness as a start-up hub in the last decade, yet it has enjoyed an increasingly dynamic tech sector for much longer than that." Start-up communities are networks — glorious in all their messiness and chaos. However, they aren't simply organic phenomena, Boulder-based venture capitalist Brad Feld told me in an interview on this site last year. "You have to have leaders who are entrepreneurs. They have to have a long-term view," he explained. Developing a robust start-up hub is a generational event.
This new study provides a much needed corrective to faddish magic bullet policies and initiatives — from tax breaks and incentives for tech companies to incubators and local publicly supported venture capital funds — that aim to turn cities into tech hubs over night. Such efforts will do little without the the longer term gestation and underlying social structure of innovation required for high-tech success.
Place is the real constant in high-tech industry. It is place that brings together the institutions, capital, and talent required to build dynamic entrepreneurial firms and disruptive industries. More than two decades ago in our research on the leading tech complexes of the day, Silicon Valley and the Route 128 area outside Boston, Martin Kenney and I identified the role of what we termed the "social structure of innovation" — the research universities, established entrepreneurial businesses that operate as feeders, local venture capitalists, abundant talent, and support institutions that comprise the key locational assets required to spawn and sustain high-tech industry. Today, place has supplanted the industrial corporation as the key economic and social organizing unit of the post-industrial knowledge economy.