Research and Development labs are even more geographically clustered than venture capital or startups
It goes without saying that innovative new ideas and technologies are keys to today’s economy. But the knowledge economy is also concentrated, clustered and uneven—a huge factor in the deepening geographic and economic inequality that vexes our nation. Just the top ten metros account for 75 percent of startup venture capital funds; and the Bay Area alone makes up roughly 45 percent.
A new study published in the Journal of Urban Economics sheds additional light on the clustering and unevenness of America’s knowledge economy, looking specifically at the locations of R&D labs. R&D is the underlying foundation of the knowledge economy. There would be no Silicon Valley without the R&D that takes place at Stanford University; no Boston-Cambridge tech miracle without MIT; no Pittsburgh revival without Carnegie Mellon. In fact, it is hard to name a major tech hub around the world that does not have one or more great research university.
The R&D that is conducted by business is another key factor. Industrial labs help translate more theoretical university R&D into commercially-viable products and prototypes, while doing applied research of their own. Xerox’s famed Palo Alto Research Center, or PARC, paved the way for Apple’s advances in personal computing. Well before Microsoft was founded, Boeing’s R&D units made Seattle a player in the knowledge economy. Pittsburgh’s leading-edge corporate R&D centers, including brand new facilities for Google and Uber, have been essential to its revival alongside its great universities.
The study, which draws upon business directories to pinpoint the location of R&D labs, generates several important takeaways about the clustering of innovative activity and what it means for cities and for American society.
For one, R&D labs, like much of leading edge knowledge-based economic activity in America, are highly concentrated along the two coasts. About a third of all labs (1,035) are located in the Boston-New York-Washington, D.C. Corridor compared to less than a fifth of population and jobs; another quarter of labs (645) are located in California, compared to about 10 percent of population and employment.
R&D labs form tight geographic clusters across these two bi-coastal centers. The study finds that the clustering of R&D labs is greater than the clustering of manufacturing facilities and even more significantly concentrated than the locations of top scientific and technological talent. The location of labs does not just follow this talent, it is more concentrated than talent is.
The following maps help visualize the extent of this clustering in the Northeast and California. In the first map, the black dots indicate labs in a core cluster and the white dots show labs located farther away.
The next map shows how these tight micro-clusters join together to form core clusters, spanning five or ten miles.
The third pair of maps zero in on the overlap between smaller and larger clusters of R&D labs in the Bay Area and Boston-Cambridge. See how the small dots grow into larger areas or clusters.
In the Bay Area (above), the black dotted line demarcates a cluster with a ten-mile radius that covers virtually the entire region. Within this area there is a five-mile dominant core cluster, surrounded by gray curves, that corresponds almost exactly with Silicon Valley. Zooming in still closer, at the one-mile level, we see an even more pronounced cluster distinguished by black lines at the heart of Silicon Valley, stretching south from Stanford Research Park to San Jose. On the Boston map, we see a similar pattern of concentric clusters, with the densest clusters concentrated around Cambridge, Route 128, and major transportation hubs.
R&D labs also cluster by industry, according to the study. The Northeast has clusters of labs in chemicals and business services. California has clusters of labs in industrial and commercial machinery, electronics, and data processing.
Every phase of the knowledge economy, from the inception of a new idea, to the financing and growth of new companies, is likely to occur in just a handful of American metros, and just a handful of neighborhoods therein. This study of R&D labs provides another layer of evidence that the knowledge economy is clustered, concentrated and spiky, within as well as across cities and metros areas.
The gross “spatial inequality” evinced by the concentration of R&D labs helps us understand the increasingly pronounced role of place in American’s worsening economic divides. This study also points to the need for new initiatives that would spread the benefits of the knowledge economy to more people and places.
Creating incentives for R&D to take place in other parts of the country could help foster new creative ecosystems and knowledge hubs. R&D, in particular, is a smart area for policy makers and local boosters to focus on, since it is an essential precursor to high tech startups and venture capital investment. While the presence of world class universities and established companies provides certain places a major leg up, my previous research has demonstrated that a vibrant arts and entertainment scene, a tolerant culture, and an accessible, appealing built environment can go a long way toward attracting innovative people and firms. Would-be R&D hubs would be wise to develop some of these qualities of place.