Building Regional High-Tech Industry Clusters Requires Top Research Facilities Nearby, Milken Institute Study Finds.

Business Editors/High-Tech-Industry Writers

LOS ANGELES--(BUSINESS WIRE)--Aug. 10, 2000

To get ahead in the New Economy, cities must create innovative, knowledge-driven high-technology clusters in their communities. Without them, they risk being left behind.

But how do you create a technology cluster? What are the critical elements? A new report from the Milken Institute has some answers.

Number one on the list is cutting-edge research facilities and top educational institutions. Without them, chances of success are very low, Institute researchers have found.

"Research centers and institutions are undisputedly the most important factor in incubating high-tech industries," says the study, `Blueprint for a High-Tech Cluster: The Case of the Microsystems Industry in the Southwest.' "High-tech clusters such as Silicon Valley and Austin owe much of their prosperity to research centers and universities where top scientists can release their creative energy."

Just as important, however, is the ability to translate that research into viable commercial uses that will allow high-tech businesses, their supplier networks and the local economy to grow and thrive, the study found.

"A lot of regions have some outstanding scientists and researchers doing great work, but they either aren't allowed or aren't encouraged to turn their work into commercial applications," says Ross DeVol, Director of Regional and Demographic Studies for the Milken Institute, and the study's author. "The problem of technology transfer is one that many areas of the country are having, and solving it could be critical to how well these regions do in the future."

Other critical elements to building high-tech clusters are:

-- A trained and educated workforce.

-- Technology spillovers from nearby high-tech industries.

-- The availability of venture capital.

-- Quality-of-place factors, like a pleasant climate, low crime

rate, and good schools.

-- The cost of living, especially affordable housing.

-- Cost-of-doing-business factors, such as low land prices.

DeVol used a number of measurements to determine how well states do in these areas, including research funding, workforce education, the cost of doing business, venture capital investment, business starts, patents issues, and IPO proceeds, among others.

To illustrate how to build, grow and sustain high-tech clusters, DeVol chose the microsystems industry as his "blueprint" for this study because it is a relatively new technology that has not established itself in any part of the country. And he chose the Southwest because it has great, but unrealized potential as a high-tech cluster region.

The Southwest is very well positioned to take advantage of this new technology. But the report indicates other regions are also in good position to become the microsystems industry leader, including Michigan, Central New Jersey, Boston, Boca Raton, Fla., and Silicon Valley.

"The advantage," the report states, "will belong to those who are able to convert these competencies into commercially viable products and capture global markets."

About the Institute: The Milken Institute is a Santa Monica, Calif., 501(c)(3) not-for-profit, nonpartisan, non-ideological, independent economic think tank founded in 1991.

Note: A copy of this study is available on the Milken Institute web site. In addition, the Institute has compiled statistics for all 50 states on 13 key measurements for high-tech cluster development -- from venture capital investment to research & development dollars. To view both, go to www.milkeninstitute.org, under Publications/Policy Briefs/"Blueprint for a High-Tech Cluster."