• Chart of the Week
  • September 23, 2020

The next big thing

The Amazon headquarters near downtown Seattle, Washington.

Ansyvan

Several years ago, more than 200 US cities had bold dreams of becoming the next Silicon Valley by vying for Amazon’s attention

They dangled tax breaks, job training programs, office space, and other incentives in hopes that the e-commerce giant would locate a second headquarters in their town. Many of the offers were absurdly rich, but city officials said they were willing to pay a high price for a transformational company, one that would help them realize their dreams of becoming a great technology hub.

But high-tech hubs don’t get created overnight. In the Journal of Economic Perspectives, authors William Kerr and Frederic Robert-Nicoud take a deeper look at these technology clusters and some of the dynamics that lead to their development.

Figure 1 from their paper takes a look at where tech clusters are located and how the picture has changed over time. For the most part, it shows that the “rich are getting richer.”

 

 

 

Figure 1 from Kerr and Robert-Nicoud (2020)

 

The figure shows patenting activity in various cities during two five-year periods — the late 1970s, and then 2013-2018. For the most part, cities that were already pumping out a lot of patents (like San Francisco, New York, and Boston) in the ‘70s have continued to stay ahead of the pack decades later. Overall, patenting activity has picked up steam, as represented in the chart by cities located above the 45-degree dashed line. A few cities have been growing especially fast in recent years. Seattle, San Diego, and Austin, Texas, are much more successful than they were in the late 1970s. Unfortunately, not everyone has seen better times. Patent activity in Kalamazoo, MI, and Charleston, WV, has slowed down.

The figure illustrates the challenges facing cities that want a quick transformation. On the contrary, the nation’s major centers for high-tech innovation appear to have been on that path for a long time.