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Greater Boston has been resilient amidst the whirl of the Great Recession, and the region’s technological prowess has been part of its success, but will technology start-ups continue to be an economic engine in the future? Moreover, even if technological success endures as a mainstay of the Boston economy, will technology start-ups provide employment for ordinary workers without advanced degrees? Are there sensible steps that state and local government can take to further strengthen the region’s technology eco-system?
In a new policy brief produced by the Rappaport Institute for Greater Boston at Harvard Kennedy School (HKS), a research team led by Institute Director Edward Glaeser reviews the current state of technology entrepreneurship in greater Boston.
“The technology sector remains in remarkable flux,” the authors write. “In 1998, computers and related manufacturing represented about half of the technology-intensive employment. Twelve years later, that sector had declined by well over 50 percent and now represents only one-in-seven technology jobs in greater Boston. Moreover, the technology sector tends to locate away from the region’s poorer neighborhoods and tends to employ the disproportionately skilled. These facts limit the ability of the current technology cluster to employ less advantaged residents of the region.”
The researchers examine the current geography of small technology firms in the region and the prospects for future growth.
“As of 2010, the two traditional technology clusters around Kendall Square and Route 128 remain strongholds of this sector. These clusters are remarkably successful, but it is an open question whether their success can be reproduced in less privileged places. Kendall Square is anchored by M.I.T.; Route 128 clusters around well educated communities,” they write.
Glaeser and co-authors Steve Poftak and Kristina Tobio argue that the policy approach to entrepreneurship moving forward will have to be radically different from the traditional economic development policies of the past.
“Supporting technology entrepreneurs does not mean offering generous tax incentives to attract a single large employer,” they write. “It is hard to imagine that any government entity—state or local—will ever have the technological expertise to successfully play venture capitalist, funding nascent companies in such an environment of change and uncertainty.”
The authors conclude that while there is little evidence that tax breaks and public loans cause a significant boost in employment in the region, there are several tools available to policymakers to address the challenge.
“We…believe that it is appropriate to apply cost-benefit analysis to existing state and local regulations that impact entrepreneurship. An added proposal is to follow California’s lead and cease enforcing non-compete clauses,” they write. “Our most high-risk proposal is to consider an innovation district in a lower income neighborhood. Much of the data we have marshaled suggests that such an experiment has a reasonably high probability of failure. Technology firms prefer to employ highly educated workers and to locate in higher income zip codes. Yet technological innovation must serve both rich and poor, and an innovation district in a poorer community provides a possible way to achieve that dream.”
Edward Glaeser is the Fred and Eleanor Glimp Professor of Economics and faculty director of the Rappaport Institute for Greater Boston and the Taubman Center for State and Local Government. Steve Poftak is the executive director of the Rappaport Institute. Kristina Tobio is the assistant director of the Taubman Center.