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CIAO DATE: 06/04
High-Tech Cluster Bombs: Why Successful Technology Hubs Are the Exception, Not the Rule
On The Issues
April 2004
Scott Wallsten
Abstract
Although success stories do exist, most high-technology cluster-development projects do little to enhance regional economic growth. The taxpayer costs for a wide array of tax incentives offered by politicians to corporations and research institutes as inducements to move facilities into their districts are rarely recouped, and often only wealthy organizations and developers benefit from the projects.
The first economic-development fad of the twenty-first century has arrived—Silicon Valley is out, biotechnology is in. The dot-com bust made Internet-led growth less attractive, but dreams of building a vibrant high-tech "cluster" live on. Around the world, politicians wishing to replicate the biotech success stories seen in areas such as San Diego, California, are pouring taxpayer's money into new initiatives. They imagine that luring the right businesses and research organizations to their backyard will set in motion a virtuous circle, attracting highly educated people to the area who will start more companies, which, in turn, will attract more people who set up even more companies.
There is just one small problem. Despite the promise of thousands of new jobs, cluster-development schemes rarely work. Success stories are the exception, not the rule. San Diego is a real biotech hub, as are Boston's Route 128 and North Carolina's Research Triangle Park, where thousands of scientists and engineers busily work on leafy corporate campuses. Yet nobody really knows how to start a successful cluster from scratch. As a result, money spent trying to build one is usually wasted.
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