Poverty Traps and Sexy Cities

WE LIVE IN A COUNTRY that is rapidly growing apart. Thriving industries tend to cluster in some cities but not in others. These cities create good jobs and generate good salaries while others lag further and further behind. People can move from failing cities to prosperous ones, but as we have seen, this is not a panacea. The question therefore is how to help communities that are stuck with the wrong mix of jobs and skills. Can we help cities like Flint, Mobile, and Visalia create a self-sustaining local ecosystem that creates good jobs in the community?

This is a challenging question to answer, but one way is to look at how existing innovation clusters were created and see whether that process can be reproduced elsewhere. The history of the biotech industry is particularly enlightening. In the spring of 1973, Herbert Boyer and Stanley Cohen invented a recombinant DNA technique that changed the course of life science research forever. Almost immediately, dozens of private biotech labs appeared all over the United States—among other places, in Houston, Long Island, Cincinnati, Montgomery, Cambridge, Philadelphia, northern New Jersey, Miami, Palo Alto, Emeryville, Los Angeles, and La Jolla.

 Today the three locations with the largest concentration of private biotech firms are the Boston-Cambridge metropolitan area, the San Francisco Bay Area, and San Diego. Their share of industry jobs keeps increasing. Remarking on the Bay Area cluster, the biotech venture capitalist Dr. Charles Homcy, a partner of Third Rock Ventures, said, “Finding great science and great scientists and the next innovative platform to revolutionize medicine—there are few places to do that. This is one of them.” But in 1973 it was not so obvious where the industry was going to cluster. There was nothing to suggest that the cities now at the top of the chart were necessarily going to be the winners.

Of the three, San Diego, a quiet community that attracted mainly retired navy sailors, fishermen, and tourists, was the most unlikely location for a biotech cluster. Describing the early days of the industry, the Stanford sociologist Walter Powell reports that in the 1980s, “Torrey Pines Road in La Jolla, now the epicenter of ‘biotech beach’ in San Diego County, was more widely known for its golf courses and gorgeous beaches than for its laboratories.” Even Cambridge was not a slam dunk. Kendall Square in Cambridge is now full of space-age biotech labs, but even as late as 1985 it was “riddled with decaying textile factories.” The liberal academic establishment in Cambridge was at first hostile to the industry, mainly because of its opposition to genetic engineering. The biotech pioneer Biogen learned this the hard way. In reconstructing the history of the cluster, Powell noted that “public uproar over ‘Frankenstein factories’ led the founders of Biogen to incorporate initially in Switzerland to avoid the controversies in Cambridge, and co-founder and Nobel laureate Walter Gilbert had to take a leave of absence from Harvard University.”

 So why did biotech put down its roots in these three locations? The conventional wisdom is that all three had premier universities: Cambridge has Harvard and MIT, the Bay Area has Stanford, Berkeley, and the University of California at San Francisco, San Diego has the University of California at San Diego. On a superficial level, this answer makes sense: academic research is crucial to biotech firms, with their emphasis on basic science. Therefore, we might expect that proximity to academic institutions played a fundamental role in biotech firms’ location decisions.

But if we look a little deeper, we realize that this isn’t the whole story. It is a classic case of after-the-fact rationalization. In the United States, there are 1,764 four-year colleges and 662 universities. The average metropolitan area has five colleges and two universities. It would be difficult for a biotech cluster to sprout without being physically close to a university. Even if we were throwing high-tech clusters randomly on a map of the United States, they would probably land only steps from a university.

Is it a question of being close to a top university, or a top biology department in a top university? This is not the answer either. When biotech appeared in the 1970s, at least twenty excellent research universities with world-class biology departments or research hospitals existed in cities as diverse as New Haven, New York, Philadelphia, Baltimore, Atlanta, Chicago, Madison, Denver, Cleveland, Houston, Pasadena, Ann Arbor, and Los Angeles. These were all attractive locations, but they did not all develop major clusters.