Key details of Washington-D.C. report show Pennsylvania falling behind, will continue to fall if adjustments aren’t made.
By: Michael Yoder | Central Penn Business Journal August 29, 2019
In a state with a legacy of fostering illustrious inventors and trailblazers like Milton Hershey, Robert Fulton and Benjamin Franklin, some worry that Pennsylvania’s modern economy is falling behind in its development of new technologies and innovations.
A recent report released by the Brookings Institution, the Washington D.C.-based think-tank, points out that if government and business leaders in Pennsylvania don’t take a more proactive role in promoting and cultivating its innovation sector, the state has an even greater chance of falling behind its economic contenders and others that serve as standard bearers in emerging economies and industries.
Mark Muro and Robert Maxim of the Brookings Institution. (Photo: submitted)
In the report titled “Ideas for Pennsylvania’s Innovation Policy: Examining efforts by competitor states and national leaders,” authors Robert Maxim and Mark Muro have laid out a path for legislators and the business community to reinvigorate the economy through investment in startup companies and ways to see the technology sector dispersed in different communities.
“Historically, Pennsylvania’s been a leader in putting together really strong policies and programs to promote innovation, both in its major cities and throughout the state,” Maxim said. “And I think there’s been a sense in recent years of a drift away from that – kind of a breakdown in what was previously a bipartisan support for innovation.”
The 66-page report released Aug. 13 was developed over six months as the researchers interviewed key technology players from around Pennsylvania, wading through the analytics of hard data in the state’s economy and taking a look at success stories of innovative projects in other states.
Four key points permeate the report, including:
Creating an innovation strategy at a state level.
Strengthening business research and development.
Increasing state funding in the early stages of a startup business.
And helping to distribute technology companies throughout the state instead of having them concentrated in major metropolitan areas.
Muro said the researchers have been interested in Pennsylvania as a “national microcosm,” representing a state that has both urban and rural challenges in its economy.
“Innovation policy matters relatively more for places like the Lehigh Valley or Central Pennsylvania than it does for Pittsburgh or Philadelphia, even though we believe they also need further amplification from state policy,” Muro said. “Business as usual and continuing to go sideways is more harmful for places like Central Pennsylvania than the rest of the state’s big cities.”
The areas of innovation strength driving the economy in Pennsylvania remain in its two major cities, Muro said, highlighting things like significant research being conducted by Uber on automated vehicles in Pittsburgh and the advanced health and cyber research companies popping up in Philadelphia’s tech sector. He also highlighted Lehigh Valley and its partnership working with Lehigh University and Erie taking steps to form innovation districts within the city.
Maxim said they were surprised by the lack of independent technology startup companies in the State College and Centre County region (home of Penn State University) since it has become the third most important center for innovators in the state. Maxim said Penn State has served as a “bedrock” for research and development at a university level, but when it comes to converting that public research into private advanced industries, services and manufacturing, the job creation is not there.
“There’s a little bit of disconnect between the really strong, disproportionate university R&D in the region and some of the advanced industries that you may expect to spin out of it,” Maxim said.
Sectors of technology where Pennsylvania excels remain robust, Muro said, including strengths in artificial intelligence, robotics, advanced digital solutions and analytics research. The state has also enjoyed technological benefits of fracking, Muro said, with the proximity to cheap gas making local areas well positioned for plastics manufacturing.
Existing higher value, R&D-intensive manufacturing offers a “tremendous opportunity” for the state, Muro said. Those manufacturing areas include intersections of new digital processes, automation and artificial intelligence in what experts have been calling “Industry 4.0” to describe the future smart cities and the internet of things that interconnect technologies and information.
“There’s a strong presence and great potential in advanced manufacturing,” Muro said.
There needs to be a catalyst to grow technologies in all parts of the state instead of a majority of the innovation being centered in Philadelphia and Pittsburgh, Muro said.
State budgetary issues also contribute to the problem, Muro said. Gridlock in the assembly leads to economic problems in the private sector and a lack of a strong statewide consensus on how to move forward or grow an innovation economy.
“Pennsylvania has numerous, intriguing urban centers that with the right care and feeding and mix of bottom-up creativity and top-down support would be really promising,” Muro said. “And the state is probably leaving a lot on the table right now.”
Muro said one of the simplest remedies that can be accomplished almost immediately is formulating a state-level report that calls attention to the issue of technology, suggests the costs of inaction and the benefits of commitment. The report would provide basic information that can serve as a focal point for planning, Muro said, including a catalog of already existing technology and innovation businesses in the state.
Following other state leads
An example highlighted in the Brookings report of a state already taking stock in its tech sector is Massachusetts and its annual “Index of the Massachusetts Innovation Economy.” Administered by the Massachusetts Technology Collaborative, the index that has been compiled every year since 1997 and assesses the state’s innovation economy across six measurements – economic impact, research, technology development, business development, capital and talent. The metrics are then used by policymakers to guide future planning and to also see how the state is comparing to other regions.
The last time Pennsylvania compiled a similar report was in 2005 called “Pennsylvania TechFormation.” In it, then Gov. Ed Rendell wrote, “We will continually reevaluate the Commonwealth’s efforts to support technology-based economic development activities to determine if we are effectively utilizing scarce state resources. This will enable us to capture best practices and ensure that Pennsylvania continues to be a global leader in innovation.”
Maxim said it was a “deprioritization of the issue” that led to no additional reports done as successive administrations did not see its need and the 2009 recession making a major hit on budgetary initiatives.
While Pennsylvania has struggled with budgetary issues by cutting back on programs and investment, Maxim said other states increased money going toward innovation, seeing technology as a way to build a stronger economy.
Maxim said programs like the Maryland Industrial Partnerships and the Georgia Research Alliance Venture Fund provide millions of dollars in investment money through public and private partnerships. The investment money then helps keep research and development initiatives that have begun in their state universities with businesses that remain in the state.
Another successful public-private partnership Maxim indicated is the Indiana Biosciences Research Institute (IBRI), a nonprofit independent applied research center founded in 2013 by state government, the city of Indianapolis, major biosciences firms operating in the state and university health research centers. Maxim said the IBRI serves as a conveyance between industry-sponsored and publicly funded research and keeps money and researchers in Indiana.
Maxim said the most successful technology partnership models happen when a conglomerate of companies band together to make pitches at the state level.
“If there was a set of companies representing not only Philadelphia, but also Erie, Lancaster and Harrisburg and they were on the same page and could deliver a message to both the administration as well as the legislature that this is something we need to prioritize and here’s how it can help us improve the well-being of the citizens of Pennsylvania, then that message can be very effective and has been really effective in other states,” Maxim said.
In the past, Pennsylvania was an innovator in similar programs highlighted in the report, Maxim said, as other states would copy their programs. He said there’s nothing stopping stakeholders in Pennsylvania from taking lessons now from their competitors, saying, “You really don’t need to reinvent the wheel for a lot of this.”
A successful Pennsylvania program Maxim highlighted is the Ben Franklin Technology Partners, which has been helping to provide funding and expertise for early-stage and established companies since 1983. Maxim said Ben Franklin served as the go-to model for many other state innovation programs, but he said a lack of funding has hampered the program’s mission.
Steve Brawley, president and CEO of Ben Franklin Technology Partners of Central and Northern Pennsylvania, called the Brookings report a “powerful study” and noted the importance of regularly bench marking achievements to see where innovation stands in the state, where it’s going and where it could go.
Brawley agreed with the problem of declining funds coming from the state, saying investing in startups is truly an investment, not an expense. He said tech companies will build and drive the Pennsylvania economy into the future.
“The only way we’re going to stem the tide of losing some great talent in Pa. is that we need more jobs for everybody here at home,” Brawley said. “And the way to create those jobs is to invest in Pa. startups, which are homegrown and a bit different than trying to recruit a company in from outside the market.”
As for Muro, he said the report should not be taken as the final word on what Pennsylvania should do. But he said if some action isn’t taken, the state will continue to fall farther behind in innovation.
“Innovation is being good at figuring things out, sorting out the most efficient way to do it or to create a new product or service that people have to have,” Muro said. “This is going to take a serious commitment over years to get the state’s innovation mojo back in terms of innovation policy.
Michael Yoder covers real estate at the Central Penn Business Journal. Email him at myoder@cpbj.com.