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

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

2. The New Economy • “The Information Economy” • “The Digital Economy” • “The Risk Society” • “The Knowledge Economy” • “The Network Economy”

3. What is New about the New Economy?

4. Trade Is An Increasing Share of The New Economy

5. The Economy Is Spawning New, Fast-Growing Companies

6. The New Economy is Constantly Churning

7. FierceBusinessCompetition

8. “Cooperation” In The New Economy

9. Consumer Choices Are Exploding

10. The New Economic Order: Speed Is Becoming The Standard

11. Computing Costs Are Plummeting

12. E-Commerce Takes Off

13. 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 KEYS TO THE OLD AND NEW ECONOMIES

14. 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

15. 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 Factors that attract and sustain high-tech industries

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

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

22. 3 Organizations Measuringthe 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

23. 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)

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

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

26. 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 High-tech Industries(1987 SICs)

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

28. 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

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

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

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

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

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

34. HT --Source of Growth

35. New Economy Index

36. HT Predicts Metro Growth

37. HT Wages 73% Higher

38. 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?

39. Small # of Jobs 5.3% Avg

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

41. Overall State New Economy Scores (1999)

42. High-Tech Jobs are Geographically Concentrated

43. Not Immune to Business Cycles

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