A policy agenda for revitalizing Pennsylvania’s economic dynamism | So Good News
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Fewer states have the assets needed for innovation-driven growth like Pennsylvania. Powerful research universities address today’s most pressing challenges in life sciences, artificial intelligence, robotics, transportation and energy. Breakout companies are making headlines and garnering major investments. At a time when creativity and inclusion are increasingly important, the diversity of talent in the state’s urban and rural areas contributes to the rich potential for community-based innovation.
Despite this, Pennsylvania has not been able to translate its assets into abundant, high-quality economic growth or large-scale employment in high-tech, high-paying advanced industries. With this in mind, Pennsylvania needs to unlock its innovation potential, which requires catalytic steps on the part of state government.
This report examines the state’s key innovation trends and challenges and offers a set of state-level policy recommendations to help the new governor energize the state’s innovation sector. Overall, the report draws several key conclusions:
Pennsylvania excels in university research and development but lags behind in creating high-value, high-paying jobs.
On the one hand, Pennsylvania has a rich history of innovation with strong research universities and several groundbreaking innovation programs. The state’s $4.8 billion higher education R&D enterprise ranked fourth largest in the nation in 2020. At the same time, the state has started developing a complex of nationally competitive innovative clusters in areas such as life sciences, computer and information services, and robotics. , chemicals and plastic and rubber products.
On the other hand, the state’s accumulation of economically important advanced industry jobs is lagging behind. From 2010 to 2019, Pennsylvania grew its advanced industry jobs by 10.9% overall, outpacing the national sector by 8 percentage points. Overall, Pennsylvania ranked sixth among the nine states for leading manufacturing job growth, trailing Indiana and Massachusetts at 9 percentage points and Michigan at 23 percent.
At the heart of Pennsylvania’s innovation drift are four issues holding the state back:
- The state government appeared to lack a clear commitment to innovation and allowed its key innovation programs to languish.. Most notably, Pennsylvania cut its investment in innovation programs by nearly two-thirds during the Great Recession and has not recovered in subsequent years.
- The state has lagged behind the transformation of high-quality research into growth firms and broader employment growth. The state’s above-average concentration of academic research in areas such as IT has so far failed to translate into above-average employment concentrations in related advanced industries. Another factor dampening innovation-related employment growth is thin startup creation and hiring.
- Meanwhile, innovation is struggling outside the state’s major cities. Only about 1% of Pennsylvania’s university-based R&D activity takes place outside the Philadelphia, Pittsburgh, and State College metro areas. Areas outside the three major innovation metro areas have seen the state’s share of advanced industry employment decline over the past decade.
- TAcross the state, access to the innovation economy is unequal by race and gender. STEM education, from K-12 to higher education, is highly unequal in Pennsylvania by race and gender. This contributes to employment and entrepreneurship, where women, blacks, and Latino or Hispanic Pennsylvanians are particularly underrepresented in advanced industry employment and overall firm ownership.
Despite these challenges, the Commonwealth needs to renew its commitment to innovation as a fundamental driver of high-quality, broad-based prosperity.
With world-class anchor institutions, promising urban ecosystems and diverse talent, Pennsylvania has great potential to invent, grow and participate in the next important technology platforms. However, if this potential is to be met, the state must recover its history of supportive policy innovation. To do so, this report presents a limited set of priority themes and recommendations that state government can use to catalyze Pennsylvania’s vast innovation potential and reinvigorate its entrepreneurial dynamism:
- Striving for innovation. Today, Pennsylvania’s key innovation programs are largely adrift without adequate funding or top-level advocates in government. Leaders of the next administration must act urgently to increase the importance of innovation. The following administration along these lines:
- Embrace the cause of innovation and represents a strong point of view.
- Center for Innovations in Economic Development activities.
- Reconstruction of the innovative budget.
Read more about how Pennsylvania can participate in innovation on page 65 of the report.
- Accelerating commercialization and growth in key innovative metro areas of the state. Pennsylvania lags behind in translating high-quality R&D into growth firms and advanced industry employment. At the same time, reduced public investment has spurred efforts to strengthen critical technology ecosystems that help companies grow, especially near research universities. Accordingly, the following administration in Harrisburg:
- Design and Support the Pennsylvania Innovation Hubs program as a large pilot grant to help regional innovation clusters.
- Aggressively using parallel federal cluster programs.
- Expand state matching funds for Small Business Innovation Research (SBIR)/Small Business Tech Transfer (STTR) awards.
Read how Pennsylvania can accelerate innovation in the state’s key innovation metro areas on page 68 of the report.
- Fostering innovation and entrepreneurship outside of major metro areas. Pennsylvania’s sharp regional divide cuts off hundreds of thousands of Pennsylvanians from opportunities in big-city innovation centers. To help the state’s smaller cities, towns and rural areas take advantage of the innovation economy, the administration will:
- Design and competitive trial grant funding Encourage innovation and entrepreneurship in 20 areas outside of Pennsylvania’s major metro areas.
- Creation of innovation voucher in advanced industries program.
- Continue Strengthening the Penn State LaunchBox and Innovation Network and wider involvement of universities in local areas.
Read how Pennsylvania can foster innovation in small communities on page 75 of the report.
- Request a connection. Without a dedicated effort to build a more inclusive innovation economy, Pennsylvania risks perpetuating the same disparities it has faced for years. With this in mind, the state should focus on increasing inclusion in its innovation economy on three themes:
- Develop a more inclusive entrepreneurial ecosystem both in innovation-intensive industries and in Main Street entrepreneurship.
- Expand access to advanced industry careers for historically underserved workers in those industries.
- Make STEM education fair K-12 through higher education.
Read more about how Pennsylvania is embracing its innovation economy on page 81 of the report.
To build a more competitive and inclusive economy for years to come, Pennsylvania must act now to reclaim its position as an innovation leader.
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