• Lessons from two states: Louisiana Innovation is a state-agency catalyst; the Arizona Technology Council is a member-funded trade group. Both try to knit competing metros into one statewide ecosystem.
• Research shows that networked smaller cities can “borrow size” from bigger neighbors — or fall into an “agglomeration shadow” if the links are weak.
• Both states poured the same federal SSBCI dollars overwhelmingly into venture capital, but Louisiana chose a decentralized fund-of-funds, deliberately giving up control.
Are you more likely to wear a t-shirt boasting your state, or one with your city? This means something for coalition building.
Nationally, two-thirds of us are “proud” of our city or town, per YouGov last year, yet only around half say the same about their state. Like most things, though, there’s real variation across the country.
Minnesota, Michigan and Virginia topped the state pride list. Missouri residents were least proud, and surprisingly, Texans statewide pride has declined measurably over the last decade: Now more residents are proud of their city/town than the Lone Star state itself.
“There’s a lot more to collaborate about than there is to compete about.”
Steven Zylstra, Arizona Tech Council
Humans solve problems collectively. To coordinate, we tell stories of identity, threats and opportunity. To attract and retain brainy people to do good work (and dutifully pay taxes), state and local leaders must care a lot about how we feel about where we live, and visit. Last fall, the Nasdaq Entrepreneurial Center’s annual report argued regional ecosystems ought pay more attention to statewide coalitions.
If states risk devolving into an administrative grouping of rival metros, the question economic developers keep bumping into: who stitches them together, and how?
Josh Fleig is Louisiana’s chief innovation officer, running a two-year-old state initiative called Louisiana Innovation. Steven Zylstra is the longtime CEO of the Arizona Technology Council, a member-funded trade group of roughly 750 companies. One works for the governor. The other works for his dues-payers.
Both are trying to turn a handful of competing cities into a single innovation economy and have something to teach the rest of us.
Place-based leaders must sensibly start with the unique qualities of their jurisdictions, both Zylstra and Fleig agreed.
For slow-growth Louisiana, Fleig said he has a responsibility to develop statewide identity and strategy.
“Not one of our markets independently is big enough to turn the tide for Louisiana,” Fleig said. The Austin, Dallas and Houston metros next door each rival or exceed his entire state of 4.6 million people. “We have to think of Shreveport, Baton Rouge, Lafayette and New Orleans as one innovation hub, not four.”
There’s a name for what he’s describing. Urban economists call it “borrowed size” — the idea, traced to a 1973 William Alonso paper, that a smaller city wired into a larger network can access advantages it’s too small to generate alone. The catch, as described in more recent work by Evert Meijers and Martijn Burger, is that weak links produce the opposite: an “agglomeration shadow,” where the small city just gets overlooked. Whether Louisiana’s metros borrow size or sit in a shadow depends on exactly the connective tissue Fleig is trying to build.
Zylstra has run this play in two states. Before Arizona, he led the Pittsburgh Technology Council, and he’s a believer in the statewide model with local roots. He’s blunt that the tension never disappears. Smaller cities are “always a little bit envious” of the big metro, he said, and his fix is to staff and program locally — offices in both Phoenix and Tucson, events sprinkled to Flagstaff and Yuma.
Both Arizona and his long-ago home of Pennsylvania are states with big cities that have robust identities competing with statewide ones.
“There are all kinds of ecosystems — local, regional, statewide and multi-state,” Zylstra said. “There’s no one that’s more important than the other.” You need a statewide coalition to move a legislature; you need a hyper-local one to help a company pick a block. What he refuses is the zero-sum frame: “There’s a lot more to collaborate about than there is to compete about.”
Who leads — and who lets go
Fleig is adamant that government should catalyze, then step back.
“I philosophically believe this is a free-market thing, and we just need to catalyze areas that might not be working so well but ultimately get out of the way,” he said. It’s the “leaders and feeders” logic that entrepreneurship writers have pushed for a decade — founders lead, institutions feed.
Both states have used bits of money to incentive gap-filling and otherwise supported flourishing regional speciality and organizing to come together. For example, SXSW, Austin’s sprawling tech conference turned city-sized activation to hawk products and places, has become a proving ground: Leaders from Alabama, Pennsylvania, Tennessee and Michigan, among others, have all experimented with joint activations. All of them made t-shirt design decisions.
States have access to capital at a scale that no single municipality does. Louisiana and Arizona both dedicate a higher share of federal cash toward equity investments than the national average.
The State Small Business Credit Initiative, the $10 billion program Congress reauthorized in 2021 that’s part of a patchwork of federal funding for high-growth entrepreneurship, is left to states to design. Louisiana was allocated up to $113 million — and rather than run one big state fund, it became a limited partner in about a dozen local seed funds, each required to match with private dollars.
Fleig framed the decision as cultural, not financial. A single blue-chip manager “might return more,” he conceded. “But that’s a short-term solution. I’m managing for cultural change.”
His metaphor: “I need a lot of people rowing in the same direction, get more people at the party.” That instinct has academic backing too — economist Josh Lerner’s 2009 Kauffman Foundation-backed “Boulevard of Broken Dreams” is a book-length case for why centralized government venture funds tend to fail.
Arizona made the same equity bet with a twist that underscores the models’ difference: The state deployed roughly $87 million of its SSBCI money into venture programs through a purpose-built vehicle, the Arizona Venture Development Corporation — not through Zylstra’s council. The trade group convenes and advocates; the state agency writes the checks.
Louisiana has earmarked 81% of its allotments toward company equity investing, and Arizona has dedicated 78%, according to our analysis. The national average is closer to a third.
The long game vs. the photo op
Both men know the enemy is the calendar.
Economic development “is very much wired and geared to ribbon cutting for big projects,” Fleig said. “Those are immediate wins and they’re very real.”
But “grow your own” economic development necessitates an “ecosystem” strategy of many pro-entrepreneurship efforts, at both the grassroots and strategic level, Fleig said.
A lot of it fails, he said, but “the 10 or 20% that does has potential to change the future of our economy.”
Selling that patience is half the job. Innovation, Fleig told legislators, is not a sideshow but “the beginning of the economic flywheel, the supply chain for the jobs you want later.” The urgency is that federal money is “lumpy,” he said. Unable to depend on a chaotic federal funding landscape (from SSBCI to successive years of federal Tech Hubs and NSF Engines), the work is institutionalizing the strategy “beyond my time.”
The Nasdaq Entrepreneurial Center ARIE study, analyzed by Technical.ly, found the strongest startup regions shared “a durable statewide pro-entrepreneurship coalition, reinforced locally.” It also found almost no correlation between a metro’s venture-dollar rank and its actual performance — with capital-scarce New Orleans named as an outperformer. Coalition beats cash.
Fleig’s favorite model for the whole thing is a party. Mardi Gras, he said, is “the largest decentralized, unowned, non-corporate party in the world. No one can own it.”
That, more or less, is the ecosystem he’s trying to build — headless, statewide and impossible for any one metro to hoard.
