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After a decade of ‘erosion,’ here’s how to strengthen Pennsylvania’s innovation economy

The state is not living up to the potential it has to be a leader in innovation, Brookings researchers say. Inclusion tactics, restored funding, geological expansion of industries and buy-in from politicians can help.

Locust Walk on the University of Pennsylvania campus.

(Photo by J. Fusco for Visit Philadelphia)

With its healthcare, robotics, tech, transportation, manufacturing and life sciences industries, Pennsylvania is poised to be a powerhouse of innovation.

But it’s yet to live up to its full potential, researchers of a new Brookings Institute report found. And the state is representative of a lot of the US, as researchers and co-authors of the report, Mark Muro and Robert Maxim, told Technical.ly. The pair worked with fellow co-author Yang You to assess Pennsylvania’s current innovation landscape, identify its weak spots and suggest solutions to grow its strengths.

Brookings discussed this decline in a report three years ago. The authors have now dived deeper into the research — and offer some solutions. The report itself is more than 100 pages long, so we asked Muro and Maxim to summarize some top points: It boils down to university R&D not translating to high-growth jobs, lack of state investment, lack of diversity, and innovation struggling outside major metros.

What’s not working in Pennsylvania’s innovation economy?

One of the factors that makes Pennsylvania’s potential for innovation strong is its university-based research and development teams. The state ranks fourth in terms of higher ed R&D, which leads one of the most important support systems for innovation-based growth, Muro said. But it’s stuttering when it tries to transition those graduates to high-value jobs.

“There’s tremendous university activity, but a middling conversion of that into employment growth,” Muro said.

The researchers see advanced jobs in pharmaceutical and life sciences realms, but new firm creation and scale-up in advanced industries has lacked. Some of that is caused by a lack of investment at the state level in budget spending and resources that would promote new firm growth and company growth.

That lack of investment, the authors said, can be trailed back to budget cuts amid the Great Recession of the late aughts. For instance, gov-backed, early-stage investor Ben Franklin Technology Partners, which invests in technology companies and innovation across a statewide network, had lost about half its funding from 2008 to 2019. The report found Pennsylvania was spending nearly $100 million toward innovation funding in 2008, and about $40 million this year.

While Philadelphia, Pittsburgh and State College had stronger innovation economies, those jobs haven't traveled outside urban cores.

“It’s simply not been a high priority across the last two to three administrations,” Muro said. “At the same time, the state as seen an erosion of programs supporting growth of innovation ecosystems in bigger metros.”

While the authors found that Philadelphia, Pittsburgh and State College had stronger innovation economies, the third thing bringing the state down is that those jobs haven’t traveled outside urban cores. Only about 1% of university-based R&D happens outside these three areas, and subsequently, industry-related jobs are rare there, too. Just a quarter of the state’s advanced industry firms were formed outside of these major university hubs.

Regions outside the three major metro areas have seen an innovation-industry employment decline through the last decade. The trend in Pennsylvania mirrors much of the rest of the country, Brookings found.

And a fourth, major contributing factor to Pennsylvania’s stalled growth in innovation is that access to it via education and jobs is unequal to people of different races and genders. Women and Black, Latinx and Indigenous people are underrepresented among STEM degrees and jobs.

Black, Latinx and Indigenous people represent 19% of the state’s population, and less than 10% of STEM degrees. Just 5% of STEM Ph.D.s are of this population, and women — who represent more than half of the state’s population — hold 40% of STEM degrees and one third of STEM Ph.D.s. These statistics translate to firm ownership, as well.

Historically in Pennsylvania, trade jobs around transportation, energy and manufacturing haven’t been thought of as part of the innovation economy, Maxim said.

“When they think innovation, they think of the pure tech side,” Maxim said. “But manufacturing is now the tech industry, energy — the move to green energy — is now the tech industry in many ways.”

Where can Pennsylvania go from here?

A lot of it begins with reinstating the funding into innovation programs that have been cut over the last decade, Muro said. He also introduced the idea of focusing intensely on place-based innovation strategies. The authors identified 20 regions outside of the major metro areas, and suggests a competitive challenge grant to kick start innovation and entrepreneurship. They also suggest pouring money into established organizations, like Penn State LaunchBox and Innovation Network.

Expanding inclusion within the STEM sector will also bring more people into high-value careers. Establishing a state CDFI fund; and better leveraging public procurement to support entrepreneurship and business development among underrepresented groups are among their specific suggestions, as is providing workforce development funds.

And in order for all of these other tactics to work, Muro said, the next set of state leaders needs to whole-heartedly endorse and support the innovation economy.

“One of most important things is for the next governor to assert importance of this priority,” Muro said. “Signal over and over, with excitement being part of the story.”

Read the full report here -30-
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