The New Economy, High Tech
Industries and the Role/Limits of
State Economic Development
Policy
The New Economy
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“The Information Economy”
“The Digital Economy”
“The Risk Society”
“The Knowledge Economy”
“The Network Economy”
What is New about the New
Economy?
Trade Is An Increasing Share
of The New Economy
The Economy Is Spawning New,
Fast-Growing Companies
The New Economy is
Constantly Churning
Fierce Business
Competition
“Cooperation” In The
New Economy
Consumer Choices Are
Exploding
The New Economic Order: Speed
Is Becoming The Standard
Computing Costs Are
Plummeting
E-Commerce Takes Off
KEYS TO THE OLD AND NEW
ECONOMIES
OLD ECONOMY
• Stable
• National
• Hierarchical
• Mass Production
• Capital and Labor
• Mechanization
• Lower Costs
• Go-it-alone Business Culture
• A Skill or Degree
• Adversarial Relations
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NEW ECONOMY
Dynamic
Global
Networked
Flexible Production
Innovation and Knowledge
Digitization
Innovation, Quality, Speed
Alliances and Partnerships
Lifelong Learning
Collaboration
Implications of New Economy
for ED
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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
Factors that attract and sustain
high-tech industries
Traditional measures
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Tax structure
Compensation costs
Space costs
Capital costs
Business climate
Specific to High-tech
• Proximity to research
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institutions
Access to venture capital
Educated workforce
Network of suppliers
Technology spillovers
Quality of life
-- Milken Institute
High Tech Economic
Development
• What is “high-tech” industry?
• How important is to regional economic
prosperity?
• Is high tech a silver bullet?
What is High-Tech?
• Varying definitions
• Workers
• Scientists, engineers, programmers
• Processes
• Manufacturing vs. Services?
• Products
• Computers vs. Shoes
3 Organizations Measuring
the 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
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)
HT Manufacturing Industries
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Drugs
Computer and Office equipment
Communications equipment
Electronic components
Aircraft
Guided missiles,
Search equipment
Medical supplies, lab instruments
HT Service Industries
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Telephone Communications Services
Computer programming, data processing
Motion picture production
Engineering,
Research, Development and Testing
services
High-tech Industries
(1987 SICs)
• 283 Drugs
• 357 Computer equipment
• 366 Communications
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equipment
367 Electronic
components
372 Aircraft & parts
376 Guided missiles
381 Navigation equip
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382 Laboratory apparatus
384 Medical instruments
481 Telephone services
737 Computer
programming
• 781 Motion pictures
• 871 Engineering services
• 873 R & D services
-- Milken Institute
New Economy Index
• More Expansive View
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Industrial and Occupational change
Globalization
Dynamism and Competition
Information Technology Revolution
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
Knowledge Industries
Producers
• Software
• Bio-tech
• Information
technology hardware
Source: PPI
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Users
Telecommunications
Banking
Insurance
Advertising
Law
Medicine
Government
Education
High-tech Occupations
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Producers
Engineers
Scientists
Programmers
Designers
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Users
Managers
Lawyers
Bankers
Sales reps
Accountants
Teachers
-- PPI
High-tech Occupations
(BLS Major Groups)
Primary
• Computer &
Mathematical
• Architecture &
Engineering
• Life, Physical, Social
Sciences
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Secondary
Management
Business & Financial
Operations
Legal
Education, training, library
Healthcare practitioners &
technical
Who Collects This Stuff?
• Bureau of Economic Analysis
• Bureau of Labor Statistics
• Standard Industrial Classification (SIC),
now (NAICS)
• I.e. Drugs SIC 283
Why States Focus on HT?
• Boosts long term growth of US economy
• Determines relative economic success of
regions
• Source of Good Jobs
HT --Source of Growth
New Economy Index
HT Predicts Metro Growth
HT Wages 73% Higher
4 Limits to High Tech Strategies
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Produce small numbers of jobs
Geographically concentrated
Not immune to business cycles
Public policy tangential to growth of
industries?
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Small # of Jobs 5.3% Avg
% HT employment
12.00%
10.00%
8.00%
6.00%
4.00%
2.00%
0.00%
% HT employment
High Technology Employment
• U.S. Average is 5.3% (Miliken Institute)
• Only 18 states are above average
• (Where are the states?)
Overall State New Economy Scores (1999)
1st Quartile
2nd Quartile
3rd Quartile
4th Quartile
High-Tech Jobs are Geographically Concentrated
Not Immune to Business Cycles
Key Factors of Economic Growth
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Science & technology
World-class education and skills
Organizational innovation
Robust competition
Open global trade
-- Progressive Policy Institute