Innovation and the Tech Sector in D.C. , what factors matter?

Policy makers across the nation realize the importance of innovation and technology as drivers of economic growth and they increasingly set their economic development goals to encourage innovation and the development of the tech sector in their jurisdictions.  How does the District measure up in terms of innovation?   As a proxy for innovation we looked at statistics on patent issuance in major metropolitan areas in the nation.

Here are some key results:1

  • In 2013, the D.C. area ranked 16th among 374 metropolitan areas in the nation in number of patents issued, down one position in the ranking from 2012.
  • San Jose (Silicon Valley) by far outpaced all other areas with patents issued totaling approximately 13,000 in both 2012 and 2013.
  • Following San Jose there appears to be a tiered structure that has number two ranked San Francisco through number seven ranked Seattle in a second tier with over 4,000 patents.
  • A third tier of the top 25, which includes D.C.,  has the number of patents ranging from just over  1,000 for Denver to approximately 3,800 for Chicago.
  • The remaining metro areas all had fewer than 1,000 patents.

We then looked at the same statistics for the top 16 over a longer time frame, from 2003 to 2013, to see if any trends emerged.

 2

  • Measured in terms of growth, the District fared better, ranking 6th highest among major metro areas with a 72 percent change in the number issued.
  • All major cities showed strong growth over the ten year period. The lowest ranked, Detroit, still had growth of over 30 percent, underscoring how important innovation and technology are in today’s world.
  • Once again, the Bay Area around San Francisco and San Jose still ranked in the very top, even by this measure. It is no surprise that the economy is booming there and the dot-com era appears to be back.

What else can we glean from the data?

It is not apparent that the cost of doing business or taxes are the dominant drivers for where the innovation process occurs. It may affect where the products and services that embed these innovations are manufactured . The top three markets San Jose, San Francisco, and New York  have high tax burdens and high costs of doing business.  It seems that the eco-system surrounding these areas, including the presence of world class universities and research institutions in the tech areas, and the ability to attract the most talented individuals in their fields also play an important role in where tech firms and innovators choose to locate.

Economists are increasingly examining  how social and demographics factors also impact innovation. A recent and fascinating study,  “Religion and Innovation”  by Roland Bénabou, Davide Ticchi and Andrea Vindigni  examined cultural and religious factors that might explain attitudes towards risk taking and innovation. Another study  “Cities and The Creative Class” by Richard Florida found social diversity, tolerance and acceptance of new ideas to be positively correlated with innovation.

 What exactly is the data: Data on patent issuance is from the United States Patent Office . The study by Richard Florida can be accessed here.  “Religion and Innovation”  by Roland Bénabou, Davide Ticchi and Andrea Vindigni is a working paper. An abstract can be found here.

Bob Zuraski contributed to this post

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