4 ingredients for the perfect tech hub

How several U.S. cities built their urban innovation ecosystems
The high quality of life in Madison, Wisconsin, is one reason it's become an American 'tech hub'. (Rudy Balasko/Shutterstock.com)

Why would a Washington, D. C.-based think tank that focuses on foreign and security policy be interested in cities such as Boulder, Colorado or Austin, Texas? Why would its staff want to spend time in places like Madison, Wisconsin talking to residents about local issues, including city and state government policies, local culture and regional business practices?

The answer is that cities such as these are worth understanding because they and other “tech hubs” like California’s Bay Area (of which Silicon Valley is a part) are the cutting edge of America’s knowledge economy. The United States enjoys its position as the world’s economic, scientific, and military leader precisely because these places are key to the U. S. innovation ecosystem, the engine that churns out the nation’s scientific discoveries, breakthrough technologies, and commercially valuable products.

In 2016, the Atlantic Council conducted a study tour of these four city-regions around the United States — in order to understand both how they work and how they fit into the country’s larger tech-driven innovation system. Our recent report, Keeping America’s Innovative Edge, emerged out of this grassroots research.

We argue that America’s edge consists of a national system that is without peer in the world. This system is a nexus of lab-based scientific research, technological development, and commercial innovation. Governments at the federal, state and local levels have worked together with the private sector to build this machine, which is the most formidable of its kind that the world has ever seen. It has been fundamental to America’s global economic and military might since 1945, giving the United States a significant advantage over its main rivals, whether yesterday’s Soviet Union or today’s China.

Local leverage

While we place much weight upon the many roles played by the federal government — ranging from direct science funding to patent protection to immigration policy and much more — we also emphasize the critical functions that cities and regions play. Innovation happens on the ground in America’s world-class tech hubs, places that bring talented people together to turn laboratory research into commercially viable ideas and products. Because the U. S. has this network of innovative places, no other country in the world is as adept at both conducting high-quality scientific research and creating practical and usable technologies.

In venturing into the American heartland, our main purpose was to discover the “secret sauce” that is common to America’s tech hubs. Our findings indeed revealed some commonalities.

First, research institutions drive local tech ecosystems. Public universities, research hospitals, and federal research labs provide indispensable assets and services around which the rest of the local tech ecosystem thrives. Universities that make robust efforts to get their lab-based research into the commercial bloodstream, through the encouragement of faculty, staff, and student entrepreneurialism, have proven to be most valuable at enabling local tech hubs. Of the cities we visited, the strongest institutions at doing this were the University of Wisconsin-Madison and Stanford University.

[See: How Seattle became a world leader in global health and development]

A second finding should be obvious but deserves mention because it is often ignored when discussing the high-tech economy. Old-school, bricks-and-pavement city planning issues still matter — a lot, as it turns out. When we asked people in these tech hubs to list their place’s most important strengths and weaknesses, they universally pointed to liveability issues including traffic and commuting, housing costs, access to nature, and amenities such as parks. Even Silicon Valley executives placed quality-of-life concerns at the top of their lists, albeit as a weakness owing to the area’s high housing costs and nightmarish commutes.

[See: Why Vienna ranks high on almost every urban quality-of-life list]

A third commonality is that local tech hubs often originate with a core of people who were able to translate a place’s latent potential into a realized one. It is not enough to have a first-class research institution, a liveable city, and smart people. To become a tech hub, a spark is needed, one that is often provided by a small and dedicated group of people who labour for years, sometimes decades, to get a place off the ground.

These people or groups launch startups that become major tech companies, like Austin’s Michael Dell, founder of Dell Computer. They create intermediary institutions that help construct an ecosystem, as Madison’s Forrest Woolworth did when he founded Capital Entrepreneurs, a grassroots networking group by and for local innovators. Or they help embed an entrepreneurial spirit into a place’s DNA, as Boulder investor Brad Feld has done for decades, through unceasing effort.

[See: Tel Aviv library makes room for tech startups]

But a fourth finding is that no two places are exactly alike. Austin, Boulder, Madison, and the Bay Area are all tech hubs, but each took different pathways to reach that status. Each offers something unique: Boulder’s innovators are attracted to Colorado’s spectacular natural setting, Austin’s to the city’s vibrant culture, Madison’s to its high quality of life, and the Bay Area’s to the region’s status at the pinnacle of the global economy.

Invest wisely

We believe that the American future is a bright one if its leaders at federal, state, and local levels are smart enough to sustain this system and create the conditions wherein more cities and regions can evolve into entrepreneurial tech hubs. Indeed, if the U. S. is to stay ahead of its global rivals, reinvigorate its economy, and provide good jobs to millions more people around the country, then it will have to find ways to grow this system. Unfortunately, as our report also details, at the federal level at least, the U. S. appears more interested in shrinking it.

The U. S., like many other countries in the world, is threatened by more than a rich-versus-poor inequality. In our estimation, geographic inequality is just as problematic. The knowledge economy delivers great benefits to people who live in some places, including the hubs examined in our study, while it delivers very little to those who live in not-so-fortunate-places. Whether by the forces of history, chance, leadership, or design, the latter places and their residents are left on the outside looking in.

“Innovation happens on the ground in America’s world-class tech hubs, places that bring talented people together to turn laboratory research into commercially viable ideas and products.”

Absent stronger attempts to redress this severe geographic imbalance, we fear for the country’s future. The degeneration of American politics into an increasingly vicious us-versus-them contest is, we believe, in no small measure due to the country’s spatial imbalance and thus its dual-tracked economy.

That is the bad news. The good news is that this condition does not have to be permanent. Growing an innovation system — whether in the U. S. or elsewhere — depends upon the creation of a network of successful hubs, distinct places on the ground that not only attract innovative people but churn them out as well. Many places in the United States and elsewhere in the world have the potential to become thriving tech hubs.

Indeed, the U. S. can point to its own examples of places like Pittsburgh that have successfully transitioned from the industrial to the knowledge economy, or to places like Chattanooga that are now hard at work trying to do the same thing. As long as the federal government does not abandon the field, and as long as state and local leaders apply a few core lessons, invest wisely, and build on their own unique qualities, many more places can follow these examples.

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Peter Engelke

Peter Engelke is a resident senior fellow with the Atlantic Council’s Strategic Foresight Initiative, which aims to enhance analysis and policymaking through understanding future challenges and opportunities at global scale. 

Robert A. Manning

Robert A. Manning is a senior fellow with the Brent Scowcroft Center on International Security and its Strategic Foresight Initiative at the Atlantic Council.