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  • Writer's picturePhiladelphia Business Journal

Pennsylvania's innovation economy suffers from 'lack of a drumbeat,' policy experts say

By Ryan Mulligan - Reporter

December 06, 2022, 03:03pm EST

The state house in Harrisburg from the Susquehanna River.
The state house in Harrisburg from the Susquehanna River. 📷: SeanPavonePhoto

A report on Pennsylvania's tech and innovation economy from the Brookings Institute characterizes the state's innovation environment as "anemic," "lackluster" and "adrift."

Mark Muro and Rob Maxim, two of the authors of the report, spoke on Tuesday at an event hosted by the Chamber of Commerce for Greater Philadelphia. They recommended policy changes, criticized a lack of a statewide innovation agenda and outlined current obstacles to growth in Pennsylvania's advanced industries.

Pennsylvania has the resources to be "a potential powerhouse" in technology and innovation, Muro said, but by many measures it underwhelms. Core innovation funding has dropped substantially over the past two decades, Pennsylvania's employment growth in advanced industries lags the national average and the state's share of new tech firms per one million residents falls well below the U.S. average.

"We heard ubiquitously around the state, the simple lack of a strong storyline around the state, the lack of a drumbeat, even cheerleading around the state from the chief executive has been a problem," Muro said. "There is the need to have a storyline when other states are competing with you."

Mark Muro was one of the researchers on the Brookings Institution report, which details the rise of "mid-tech" jobs in non-coastal areas.
Mark Muro was one of the researchers on the Brookings Institution report, which details the rise of "mid-tech" jobs in non-coastal areas. 📷: Courtesy Brookings Institution/Ralph Alswang

Pennsylvania had 4.9 new tech firms per one million people from 2016 to 2021 compared to the national average of 11.8, the report shows. Even in Philadelphia, that number was subpar at 7.2 startups per one million people.

The report also found that those new companies haven't been major employment catalysts. They create 3.43 jobs on average, trailing the U.S. mark of 4.74 jobs per startup.

The factors and effects of Pennsylvania's lagging innovation economy are wide-ranging and diverse. However, Maxim and Muro think that without a clear vision from state leadership, that may be unlikely to change.

"Federal money has supported regions and states that have a plan," Maxim said. "Regions [within the state] that have been successful have been doing so in spite of the state and we think it’s time for that dynamic to reverse."

To make change, there needs to be a restoration of the state's innovation budget. In 2003, the state allotted close to $140 million in core innovation funding in 2022 dollars. In fiscal year 2023, that has dropped to around $40 million.

Increased funding would mean putting more money into programs like Ben Franklin Technology Partners or the state-run Diverse Leaders Venture Program, which provides loans to venture funds that are investing in and controlled by diverse populations.

State funding can be hard to come by, but Muro and Maxim had some ideas for how the Keystone State can better support tech and startups. Muro said some states have used tax revenue from gaming or cannabis to help support economic development in tech. He also floated a personal income tax in innovation industries that can be reinvested in those fields.

"There is a need for a one-time shock now to get the state moving, but over time it will take sustained investment," Muro said.


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