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Characteristics of Successful Places: The changing dynamics of innovation and entrepreneurshipin economic development
Saint Louis Federal Reserve Bank/Heartland ForwardNorthwest Arkansas Regional Economic Briefing| Bentonville, AR| November 4, 2019
Presented by: Ross DeVolPresident and CEO, Heartland Forwardhttps://heartlandforward.org
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Presentation overview
• Innovation and long-term growth
• Technology and science assets
• Entrepreneurs and young, knowledge-intensive firms
• Most Dynamic Metropolitans
• Conclusions: innovation and entrepreneurs
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Long-term regional growth process
• Large regional differences in growth
• Few barriers to flow of economic activity
• Export-intensive activity is critical
• Manufacturing is an export sector
• Healthcare services or medical science can be an export
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Factors affecting disparity in regional growth
• Existing industrial structure• Cost of doing business:
• Tax rates, capital costs, wage rates, space costs, energy costs, health care costs, etc.
• Labor force skills, access to markets and capital• Research, development, innovation and entrepreneurial capacities• Universities/colleges committed to tech transfer and creating human capital• Quality of place issues
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Business increasingly driving innovation
0
100
200
300
400
500
1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Total R&D
Business
Federal Government
Higher Education
U.S. Research and Development SpendingBillions of 2009 Dollars
Source: National Science Foundation
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STSI Research and Development Inputs Index
Source: Milken Institute
14th
12th
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Entrepreneurs vital to a dynamic economy
10
11
12
13
14
15
16
17
18
1993 1996 1999 2002 2005 2008 2011 2014 2017Source: Census Bureau
Percent of U.S. Employment at Young Firms
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STSI Risk Capital and Entrepreneurial Infrastructure Index
Source: Milken Institute
14th
10th
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Human capital investment key to growth
10
15
20
25
30
35
40
1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010 2014
Percent of U.S. 25 and Older Population with a Bachelor's Degree or Higher
Source: Census Bureau
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STSI Human Capital Investment Index
Source: Milken Institute
14th
4th
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STEM workforce converts research to viable firms
0
1
2
3
4
5
0
2
4
6
8
1960 1970 1980 1990 2000 2015
Number of Jobs (Left Axis)
Share of all U.S. Jobs (Right Axis)
U.S. Science and Engineering JobsMillions Percent
Sources: National Science Foundation analysis of Census Bureau and Bureau of Labor Statistics
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STSI Tech and Science Workforce Index
Source: Milken Institute
14th
7th
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Advanced services’ success critical to job creation
4
5
6
7
8
2003 2005 2007 2009 2011 2013 2015 2017
Advanced Manufacturing
Advanced Services
U.S. Employment in Advanced Industries Millions of Workers
Sources: Brookings Institution analysis of Emsi data
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Advanced industries account for majority of U.S innovation
8.717.2
60.0
80.0 81.289.0
0
20
40
60
80
100
Employment GDP Exports Engineers Patents Private SectorR&D
Advanced Industries' Share of 2015 U.S. Macro Measures Percent
Source: Brookings Institution analysis of Moody's Analytics, Export Nation 2013, and Bureau of Labor Statistics data
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STSI Tech Concentration and Dynamism Index
Source: Milken Institute
14th
10th
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State Technology and Science Index
Source: Milken Institute
14th
8th
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Innovate to create high wage jobs
0
20000
40000
60000
80000ActualPredicted
Actual versus STSI-predicted Average Annual Pay US Dollars
Source: Walton Family Foundation analysis of Milken Institute and Bureau of Labor Statistics data
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US Metropolitans by share of employment at young firms
Source: Heartland Forward analysis of Census Bureau data
14th
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Model-predicted employment growth performs well
-20
-10
0
10
20
30
40
502010-2017 Percent Change in Employment
Actual Employment Growth
Model-Predicted Employment Growth
Metropolitan Areas, Ranked by Actual 2010-2017 Employment GrowthSource: Heartland Forward analysis of Burea of Labor Statistics and Census Bureau data
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Source: Milken Institute, Ross DeVol
Regionalentrepreneurial ecosystem and life cycle
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Most Dynamic Metropolitans Metrics
Measure Time Period SourceYoung Firm Employment Ratio 2016 Census BureauPer-Capita Personal Income 2016 Bureau of Economic AnalysisMedium-Term Job Growth 2013-2018 Bureau of Labor StatisticsShort-Term Job Growth 2017-2018 Bureau of Labor StatisticsShort-Term Job Momentum Dec. 2017-Dec. 2018 Bureau of Labor StatisticsMedium-Term Average Annual Pay Growth 2013-2017 Bureau of Labor StatisticsShort-Term Average Annual Pay Growth 2016-2017 Bureau of Labor StatisticsMedium-Term GDP Growth 2012-2017 Bureau of Economic AnalysisShort-Term GDP Growth 2016-2017 Bureau of Economic Analysis
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Most Dynamic Metropolitans
Source: Heartland Forward
14th
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NWA in Most Dynamic Metropolitans
Measure Ranking Z-ScoreYoung Firm Employment Ratio 191st -0.241Per-Capita Personal Income 9th 2.611Medium-Term Job Growth 13th 2.006Short-Term Job Growth 92nd 0.579Short-Term Job Momentum 108th 0.460Medium-Term Average Annual Pay Growth 103rd 0.443Short-Term Average Annual Pay Growth 18th 1.274Medium-Term GDP Growth 11th 1.970Short-Term GDP Growth 57th 0.766Overall Performance 17th 1.096
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Conclusion: innovation and entrepreneurs summary
• Entrepreneurial capabilities are essential to maintaining an innovation ecosystem
• They combine existing technology with new discoveries into the marketplace
• Serial entrepreneurs critical advantage in most dynamic ecosystems
• Research universities are one of the strongest assets America can use to compete in the age of innovation.
• University IP creates both middle- and high-skill industry jobs through innovation and commercialization.
• Early stage risk capital is essential to the process: banks don’t accept IP as collateral for loans
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