Sunday, June 04, 2006

Ideas + Entrepreneurship = Jobs

How can the Pittsburgh Region create more jobs? Economic development research suggests that two factors are essential: Innovation (creating new ideas), and entrepreneurship (turning ideas into new companies, or using them to renew existing companies). Without entrepreneurship, innovation won’t create many jobs. Without innovation, entrepreneurs can’t build major businesses. Regions need both to be successful.

It’s not a new concept for Pittsburgh. Companies like Alcoa, Heinz, PPG, U.S. Steel, and Westinghouse were all started here a century ago by entrepreneurs like Andrew Carnegie, John Ford, H. J. Heinz, Alfred Hunt, and George Westinghouse, using technologies invented or perfected here. Newer companies like FedEx Ground, Medrad, and Respironics did the same thing. In fact, most of the largest employers in the Pittsburgh Region today didn’t move here, they started here this way.

But do we have the right stuff to keep creating new companies and new jobs in the future?

The Pittsburgh Region may well have greater strength in innovation today than at any time in history:

  • Pittsburgh has more university research & development (R&D) than 32 of the 50 states and more than all but a dozen other regions. In 2003, Carnegie Mellon ranked second among all universities in the nation in expenditures on computer science R&D, and the University of Pittsburgh/UPMC ranked 13th in spending on life sciences research. Research spending at Pitt, UPMC, and Carnegie Mellon has grown faster than the national average, and now totals $900 million per year.

  • The Pittsburgh Region has more corporate R&D than most states, with over 150 corporate R&D facilities, including major R&D Centers for Alcoa, Bayer, Crucible, Heinz, Kennametal, Mine Safety Appliances, PPG, Seagate, U.S. Steel, and many others.

But if innovation alone were the key, the Pittsburgh Region would have the same reputation for economic growth as Austin, Boston, Seattle, and Silicon Valley.

What’s missing? Entrepreneurship. Compared to the other 40 largest regions in the country, the Pittsburgh Region:

  • created new businesses at the third lowest rate (relative to the size of the labor force) between 1990 and 2001;

  • had the third largest decrease in business creation during this period (whereas business creation grew in most other regions);

  • had the third smallest proportion of new firms which grew rapidly.

No other large region ranked lower on all three of these measures than Pittsburgh. No wonder Pittsburgh ranked 50th out of 50 in Entrepreneur Magazine’s 2005 list of Hot Cities for Entrepreneurs.

How can the region increase entrepreneurship? Treat entrepreneurs like important economic engines for the region, rather than people who can’t get a “real” job. Help them get the financing they need to grow, even it means taking a bit of a risk. Make it easier for them to find help – they should spend time growing their business, not trying to figure out which economic development agency is which.

What will it take to create a brighter future for the Pittsburgh Region?
Remain one of the best places in the world for new idea creation, by continuing to grow R&D.
Become one of the best places in the world for entrepreneurs.
Then watch the jobs grow.


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