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Atlanta, GA | Posted: October 2, 2009
Summary Sentence:
Local Roots are as Important as Resources
Full Summary:
Why do Silicon Valley and Boston thrive as high tech industry hubs while other promising areas stagnate? Its a question long debated by reseachers, but new findings by Dan Breznitz in the Sam Nunn School of International Affairs identify localized business connections and funding as imperatives. In a case study focusing on Atlanta, Breznitz uncovers critical course corrections for that city and provides a roadmap for other regions looking to grow high tech industry.
Why do Silicon Valley and Boston thrive as high tech industry hubs while other promising areas stagnate? Its a question long debated by reseachers, but new findings by Dan Breznitz in the Sam Nunn School of International Affairs identify localized business connections and funding as imperatives. In a case study focusing on Atlanta, Breznitz uncovers critical course corrections for that city and a roadmap for other regions looking to grow high tech industry.
Breznitz, and co-author Mollie Taylor of the Enterprise Innovation Institute at Georgia Tech, set out to settle the debate over what induces sustained regional entrepreneurial growth in the high tech industry ""physical resources or business social structure. They focused their research on the Atlanta metropolitan area because it leads the U.S. in the physical factors necessary to attract and sustain technological-entrepreneurial clusters: top research universities, a large educated labor pool, a wealth of new technologies and entrepreneurs, a vibrant creative class, and generous venture capital financing. Atlanta has also been perceived as having the social business structure needed to induce growth. The study revealed otherwise.
Breznitz and Taylor found that Atlanta companies haven't meshed within the local economy. The result has been a decade of steady migration of companies to other states leaving the city with an "at best, stagnant" industry profile. 40% of Atlanta's high tech start-up companies leave for other states within three years. California, New York, New Jersey and Florida are common destinations for Georgia-born IT companies. That, combined with a persistent decline in large IT companies, accounts for the industry malaise.
"The metro area excels at incubating high tech businesses, but it lacks the cohesive business social structure needed to sustain them so many of the most promising young companies leave the city," says Breznitz. "Instead of building great high tech companies, Atlanta has become a feeder system for great high tech companies in other states."
Analysis of Atlanta's most promising new companies and the city's top 50 technology firms revealed little contact either between IT executives with those of Fortune 500 or with other technology companies. CEOs, attorneys, and managers in Atlanta IT companies don't sit on each other's boards and don't communicate. The problem isn't unique to the city's IT industry, but there are far fewer interlocks within the IT community than in other industries that are successful in the region.
"Companies there don't interlock with each other and the large companies that control industry in Georgia don't interlock with the high tech industry," says Breznitz, highlighting a complaint that he and Taylor heard consistently from the area's high tech workforce.
Atlanta provides a lesson for other cities aspiring to grow high tech industry. The study identifies the need for policies and institutions that stimulate information sharing, collective learning, access to resources, and business community buildings. It also identifies venture capital industry with true local focus (which Atlanta lacks) as crucial to embedding a company locally. In conclusion, business social variables are crucial for long-term entrepreneurial-technological economic growth.
Breznitz is interested in helping reshape Atlanta's high tech business landscape. He is helping reinvent the Advanced Technology Development Center (ATDC) at Georgia Tech's Enterprise Innovation Institute evolving its success as a business incubator to build more links between start-up.
