The New Economy, High Tech Industries and the Role/Limits of State Economic Development Policy

The New Economy “The Information Economy” “The Digital Economy” “The Risk Society” “The Knowledge Economy” “The Network Economy”

What is New about the New Economy?

Trade Is An Increasing Share of The New Economy

The Economy Is Spawning New, Fast-Growing Companies

The New Economy is Constantly Churning

Fierce Business Competition

“Cooperation” In The New Economy

Consumer Choices Are Exploding

The New Economic Order: Speed Is Becoming The Standard

Computing Costs Are Plummeting

E-Commerce Takes Off

KEYS TO THE OLD AND NEW ECONOMIES OLD ECONOMY Stable National Hierarchical Mass Production Capital and Labor Mechanization Lower Costs Go-it-alone Business Culture A Skill or Degree Adversarial Relations NEW ECONOMY Dynamic Global Networked Flexible Production Innovation and Knowledge Digitization Innovation, Quality, Speed Alliances and Partnerships Lifelong Learning Collaboration

Implications of New Economy for ED Importance of Technology to all firms Innovation Entrepreneurship Boost Firm and Worker Learning Agglomeration or clusters of firms matter “Entrepreneurial” Strategies, aka growth from within strategies will drive development --Progressive Policy Institute

Factors that attract and sustain high-tech industries Traditional measures Tax structure Compensation costs Space costs Capital costs Business climate Specific to High-tech Proximity to research institutions Access to venture capital Educated workforce Network of suppliers Technology spillovers Quality of life -- Milken Institute

High Tech Economic Development What is “high-tech” industry? How important is to regional economic prosperity? Is high tech a silver bullet?

What is High-Tech? Varying definitions Workers Scientists, engineers, programmers Processes Manufacturing vs. Services? Products Computers vs. Shoes

3 Organizations Measuring the New Economy These three, plus others, have either developed measures of local economic performance in the new economy, or include new economy data points in their measures: Progressive Policy Institute Milken Institute Corporation for Enterprise Development

Miliken Institute’s Definition High Technology Industries Spend above average amount of revenue on R&D Employ above average # of technology using occupations (scientists, engineers, etc)

HT Manufacturing Industries Drugs Computer and Office equipment Communications equipment Electronic components Aircraft Guided missiles, Search equipment Medical supplies, lab instruments

HT Service Industries Telephone Communications Services Computer programming, data processing Motion picture production Engineering, Research, Development and Testing services

High-tech Industries (1987 SICs) 283 Drugs 357 Computer equipment 366 Communications equipment 367 Electronic components 372 Aircraft & parts 376 Guided missiles 381 Navigation equip 382 Laboratory apparatus 384 Medical instruments 481 Telephone services 737 Computer programming 781 Motion pictures 871 Engineering services 873 R & D services -- Milken Institute

New Economy Index More Expansive View Industrial and Occupational change Globalization Dynamism and Competition Information Technology Revolution

Missing? Significant technology users Finance (banking and securities) Insurance Publishing Processes are changing Back offices (Citibank in SD) E-publishing Data bases Important consumers of high technology

Knowledge Industries Producers Software Bio-tech Information technology hardware Source: PPI Users Telecommunications Banking Insurance Advertising Law Medicine Government Education

High-tech Occupations Producers Engineers Scientists Programmers Designers Users Managers Lawyers Bankers Sales reps Accountants Teachers -- PPI

High-tech Occupations (BLS Major Groups) Primary Computer & Mathematical Architecture & Engineering Life, Physical, Social Sciences Secondary Management Business & Financial Operations Legal Education, training, library Healthcare practitioners & technical

Who Collects This Stuff? Bureau of Economic Analysis Bureau of Labor Statistics Standard Industrial Classification (SIC), now (NAICS) I.e. Drugs SIC 283

Why States Focus on HT? Boosts long term growth of US economy Determines relative economic success of regions Source of Good Jobs

HT --Source of Growth

New Economy Index

HT Predicts Metro Growth

HT Wages 73% Higher

4 Limits to High Tech Strategies Produce small numbers of jobs Geographically concentrated Not immune to business cycles Public policy tangential to growth of industries?

Small # of Jobs 5.3% Avg

High Technology Employment U.S. Average is 5.3% (Miliken Institute) Only 18 states are above average (Where are the states?)

Overall State New Economy Scores (1999)

High-Tech Jobs are Geographically Concentrated

Not Immune to Business Cycles

Key Factors of Economic Growth Science & technology World-class education and skills Organizational innovation Robust competition Open global trade -- Progressive Policy Institute