Does your city suffer from Silicon Valley envy? If you want to do something about it, experts from Stanford, Harvard, and MIT agree on one thing you should not do — try to become the next Silicon Valley.
Their research documents failed attempts by cities around the world to get there and points the way to a more productive approach for such cities. Two of the most compelling case studies suggest reasons for optimism despite imperfections.
To be sure, there is good reason for the rest of the world to envy Silicon Valley and Cambridge. They host a relatively large number of fast-growing startups — the Kauffman Foundation calls them Gazelles which create wealth much more efficiently than do lifestyle startups that support the founder and some employees.
Stanford and MIT have played an important part in creating businesses that employ millions of taxpayers and generate trillions of dollars’ worth of revenue. Stanford Assistant Professor Chuck Eesley reported that by 2014 MIT alumni had created 30,200 companies with $1.9 trillion in revenue, which employed 4.6 million people while Stanford had done even more — by 2011 Stanford alumni had created 39,900 companies with $2.7 trillion in revenue, and 5.4 million jobs.
If a city does not host Gazelles, however, all is not lost. Indeed Kauffman reported in 2014 that St. Louis, Missouri has enjoyed a “resurgence of entrepreneurial activity” thanks to “activity-based events, where entrepreneurs have the chance to use and practice their skills needed to grow their businesses.”
Harvard Business School Professor Josh Lerner, in his book Boulevard of Broken Dreams, highlights the most common errors that cities make in trying to create effective startup ecosystems. As Lerner explained in a July 6 interview, “I have been intrigued by the foolish things that states and cities have done and thought there ought to be a better way. Europe split billions into 27 equal pieces — it was spread so thin that it had no impact anywhere.”
Lerner’s prescription advocates overcoming local barriers to entrepreneurship. “I recommend a different approach. Government leaders should examine local impediments to entrepreneurship and develop a plan to address them; they should get the private sector involved as a reality check; and they should recognize that it will take decades, not three or four years to make progress,” he said.
How exactly should cities approach these challenges? Karen Gordon Mills, Senior Fellow at Harvard Business School, proposed a logical process. As she said in a July 5 interview, “First assemble a group of local leaders – people from government, business, research, academia, labor, philanthropy and other key groups and decide what specific outcome they want to achieve.”
She continued, “With that outcome in mind, the group should analyze local assets [using local industry-specific employment and other data from the Cluster Mapping Project] and try to figure out which ones are world-class. Next they should create a local competition backed by significant funding to encourage the emergence of startups that will build new businesses around these world-class assets. A non-political third-party should select the winner of the competition.”
Another approach from MIT focuses on cities outside the U.S. As MIT Sloan School professor, Michael Cusumano explained in a July 2 interview, “We created the Regional Entrepreneurship Acceleration Program (REAP) which admits eight regions annually to participate in a two-year learning engagement with MIT.”
REAP is based on a stakeholder and systems approach. As Sloan School professor Scott Stern explained in a July 13 interview, “REAP uses a series of mechanisms to translate, convene and educate teams of regional leaders through a full 5-stakeholder approach — including entrepreneurs, risk capital, government, big corporations, and universities. The teams address the existing system by setting a strategy to deploy new interventions to improve it.”
These experts cited a handful of cases that have achieved mixed results — here are two of them:
In the early 1980s, Pittsburgh’s economy was collapsing — but 30 years later its prosperity had returned.
The key to its turnaround was Red Whittaker, a robotics professor at Carnegie Mellon University who turned a robotics team that built a robot to assess the damage at Three Mile Island into a three-decade long cycle of investment and innovation that drove Pittsburgh’s resurgence.
According to Politico, In “1983, Pittsburgh’s unemployment rate reached 17.1% and the city was losing more than 4,000 people a month. The steel industry that had built modern Pittsburgh, funded its museums and mansions, its football team and its aspiring middle class, was cratering, never to return.”
Fortunately, at the same time, “the success of Carnegie Mellon’s Three Mile Island robotics team would set into motion a spectacular, three-decade cycle of innovation, investment and expansion,” wrote Politico.
By 2014, Pittsburgh was “growing in population for the first time since the 1950s thanks to its expanding robotic, artificial intelligence, health technology, advanced manufacturing and software industries,” according to Politico.
Many initiatives — environmental clean-up, public-sector incentives to attract businesses, billions of dollars in federal funding to turn abandoned brownfield sites into tech headquarters– contributed to Pittsburgh’s revival. But the most important was the revival of its “dormant human capital in its institutions, foundations, and great universities,” according to Politico.
To be sure, this population growth did not continue but there was still reason for optimism. By July 2017, Commercial Property Executive wrote that “Despite a slowly shrinking population, the city’s multifamily market remains steady, bolstered by increased hiring in recession-resistant sectors—such as education and health services.”
Mills gave another example — how a failed Chattanooga, Tenn.-based power company was able to use its rights of way to build a high speed fiber optic network that has helped revive the area.
According to a February 2104 New York Times report, “In 2009, a $111 million federal stimulus grant offered the opportunity to expedite construction of a long-planned fiber-optic network, said David Wade, chief operating officer for Electric Power Board of Chattanooga (EPB). Wade said it quickly became apparent that customers would be willing to pay — [55 businesses and 3,640 residences] for the one-gigabit connection offered over the network.”
By 2014 Chattanooga — known as “Gig City — had the first, fastest, and among the least expensive (less than $70 a month) — high-speed Internet services in the United States,” noted the Times.
This attracted some new businesses — but not enough to make up for the ones that closed. As the Times reported, “Gig created about 1,000 jobs in the last three years, the Department of Labor reported that Chattanooga still had a net loss of 3,000 jobs in that period, mostly in government, construction and finance.”
Mayor Andy Berke told the Times, “We don’t need to be the next Silicon Valley. That’s not who we’re going to be, and we shouldn’t try to be that. But we are making our own place in the innovation economy.”
Indeed by May 2017 that progress was showing up in Chattanooga’s 3.3% unemployment rate — well-below the Tennessee average, according to Times Free Press which quoted a July 19 Paychex report “that Tennessee led the nation in small business job growth during June 2017 with employment gains of 1.31%.”
Neither of these cities is going to become the next Silicon Valley — but with varying levels of success, they have demonstrated that with the right leadership and a shared vision, a city can build off its strengths and recover from the loss of key industries.
This post originally appeared on Forbes.