Pennsylvania could be missing out on job and economic growth as it falls behind other states in fostering investments in innovation, while solid gains in the state’s metro centers — Philadelphia and Pittsburgh — have not spread to other regions, a new assessment finds.
The Keystone State lags in number of patents, new companies, jobs at young firms, and jobs in technologically advanced industries, according to a report from the Brookings Institution’s Metropolitan Policy Program.
The report, issued Tuesday, looked at spending by state and local governments, as well as businesses and universities, on research and development and other incentives.
“The state was a leader on this and has gone sideways,” said Mark Muro, one of the authors of the Brookings study.
That matters, the Brookings researchers say, because innovation produces a steady stream of new, highly competitive products and services for national and global markets, which in turn benefits the economy and creates high-quality jobs in sectors such as manufacturing, technology, or energy.
“The jobs that come out of the innovation economy are jobs that are pathways to the middle class,” said Matthew Bergheiser, president of the University City District, an innovation center in Philadelphia.
The authors say political disagreement over the state’s role in economic development and a struggle to bring stakeholders together have led to less state spending on innovation and have combined with several other factors to slow progress. According to the report:
Advanced industries in Pennsylvania account for 8.9% of employment and 15.3% of output, while across the United States they account for 9.6% of employment and 17.2% of output
Pennsylvania’s share of national venture capital funding has dropped from close to 4% in 2003 to less than 1% in 2018.
State and local government support for university research and development has declined.
Pennsylvania produces fewer patents per capita than the national average and is home to fewer new companies.
The state’s rankings by indices that measure major state innovation have largely flatlined over the last decade.
In contrast, Ohio increased a statewide technology-based economic development project from $58 million in 2014 to $110 million in 2019. Massachusetts has $623 million earmarked for a five-year life-sciences initiative. Oregon created a state Innovation Council and has seen its index scores rise. Rhode Island has a voucher program to help small businesses fund research and development.
In New Jersey, the state’s 2018 economic plan provides for expanding business incubators, creating connections with educational institutions, investing in clean energy, and modernizing the state’s R&D tax credit.
Pennsylvania has been nationally recognized for the Ben Franklin Technology Partners, a tech-based economic development program that provides firms with funding and assistance; it also has supported other programs like the Keystone Innovation Zone grant program and the Pennsylvania Angel Network for investors.
A spokesperson for the Department of Community and Economic Development said Gov. Tom Wolf has fought, despite “difficult budget years,” to keep funding for the Ben Franklin Technology Partners from being cut and for other new initiatives to “ensure a vibrant business climate” and help industry growth.
“Direct investment in research and development is one aspect. But investment in public schools, affordable higher education, and nimble workforce development initiatives that respond to the market are critical as well,” said Francisco Garcia, director of business development in innovation and technology at the city’s Department of Commerce. “Just advocating for state funding to foster innovation doesn’t take into account other challenges.”
The city could reach greater heights with more state support, the Brookings report said, adding that it has been outpaced by competitors such as Denver in some measures of innovation.
Political gridlock between the Republican legislature and Democratic governor could be partly to blame; in rural areas where innovation is already stagnant, it can be difficult for lawmakers to see how new initiatives would benefit them, Muro said.
“ ‘Innovation’ unfortunately has become a buzzword. …. Many folks don’t necessarily see the straight line between a robust state innovation policy and how it affects their day-to-day life,” said Robert Maxim, the other author of the report. “This really is a hugely important topic when it comes to creating new jobs, employment, and higher standards of living for people in all communities.”
Pennsylvania also exemplifies a national trend of growing disparity between “winner-take-most” cities and everywhere else, with smaller metropolitan and rural areas falling behind as big cities do well but work increasingly independently.
“Can a metropolitan area with some real assets become a real star nationally without some prioritization from the state?” Muro said. “That’s the big question, and maybe the hard question, to answer.”
While the state may have stagnated, the city invested more time and energy into the innovation economy over the last 15 years, Bergheiser said, pointing to endeavors like the Navy Yard, growing as a biotechnology hub; Pennovation Center, the University of Pennsylvania’s business incubator; and the entrepreneur community uCity Square.
“In Philadelphia, we’re really just scratching the surface of what’s possible,” Bergheiser said.