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Route 128: Lessons from Boston's High-Tech Community.

In their lively and useful new book, Susan Rosegrant and David Lampe provide a fascinating biography of Route 128, the high-technology cluster named for Boston's beltway. Probing the roots as well as the life and times of this creative complex, they seek to place the "Massachusetts Miracle" of the 1980s in a broader context and to examine the evolutionary process that has made the Boston area a wellspring of innovation for more than a century. Defining the real miracle of Massachusetts as its exceptional ability to grow ideas, the authors explore the long, complicated process in which scientific breakthroughs are fostered and then applied in the marketplace. Their ultimate purpose is to draw lessons for regional and national policymakers who are trying to spark innovation-based growth and counter competitive challenges from abroad.

The authors' goal is ambitious. Thus, it is not surprising that the outcome is only partially successful. At times, the "lessons" are misleading; they are also incomplete.

Rosegrant, a former Business Week and Associated Press reporter and now a freelance writer specializing in high-technology business, and Lampe, a former reporter for Business Week and The Los Angeles Times and now assistant director of MIT's Industrial Liaison Program, start by stating one of their basic themes, that much of Massachusetts' extraordinary record of innovation stems from creative interactions among academia, the federal government, and industry--"the mind, the means and the muscle of innovation." The authors point to, but--despite Lampe's MIT affiliation--by no means overstate, the school's primary role in this history. As the authors make clear, MIT has forged unusual but crucially important ties with industry and the federal government from its earliest days. Recipient of a remarkably large share of federal research funds, MIT has launched more spinoff companies than any other institution.

The body of the book traces the development--from colonial times to the recent recession--of the educational, industrial, and political links that made Massachusetts synonymous with industrial innovation's ability to spur regional growth. A key event was the Morrill Land Grant Act of 1862, which first formalized an often tense, often fruitful collaboration among academia, government, and business. Newly founded MIT was among the first schools to benefit from the Morrill Act, and, with a curriculum that encouraged practical application, the Institute soon had a major impact on the state's evolution. From the 1880s, individuals trained at MIT carried new technology and the conviction that industrial research was important to such local firms as General Electric, Arthur D. Little, and Gillette.

The importance of defense

Moving on to World War II, the authors show how Massachusetts became this country's primary center for defense research. They explain how Vannevar Bush, an ex-dean of engineering at MIT, came to lead the nation's technological forces in the war, and how the MIT Radiation Lab and a small radio tube company (Raytheon) came to the defense of Britain by speeding the manufacture of magnetrons, the heart of radar systems. With such dramatic stories, the authors illustrate how World War II spurred a wide range of technologies, from radar to computers, and transformed the federal government into the principal sponsor of basic research in this country.

At war's end, the book continues, individuals who had been part of the war effort turned from government projects to entrepreneurial endeavors. In a section peppered with quotes from and anecdotes about all major (and some minor) players, the authors describe how companies such as Wang and Millipore sprang up and spread out along Route 128. Thereafter, the spectacular successes of companies such as Digital Equipment Corporation (DEC) and Itek provided role models that helped fuel an entrepreneurial explosion.

Spinoffs from MIT labs and companies such as DEC propelled much of the area's growth over the next three decades, the authors argue. And, after the lean years in which Project Apollo and Vietnam wound down, the explosion of high-tech firms in the late 1970s and early 1980s underscored the ability of new technology to bolster regional growth. In this section, the authors provide a who's who of the founders and describe how and why they started their companies, and why they stayed in Massachusetts.

The authors end their narrative by describing how, victim to changing technologies, global competition, economic setbacks, and greed, the "Miracle" ended in 1989. But, the book argues, the miracle most people saw was an illusion, focused on one industry--computers--and on short-term financial gains. Understanding the real miracle--an amazing record of invention in many areas--is urgent, the authors say, as concerns about declining U.S. hegemony spark widespread efforts to spur innovation.

From this history, the authors draw a set of unobjectionable lessons. They conclude that the region's research/educational facilities were key. Further, the Route 128 phenomenon was not planned but evolved from Boston's cultural, academic, and industrial traditions. MIT's founder was drawn by this mix, and the Institute, in turn, greatly affected the state's development. Because MIT faculty had done pioneering work in strategic technologies and individuals associated with MIT were in key places, MIT and Massachusetts companies were in a unique position to benefit from World War II and the Cold War. In addition, the entrepreneurial culture of both the region and MIT interacted to foster an extraordinary amount of spinoff activity. Centripetal forces keeping spinoffs in the Boston area included the need to tap new technology, the skilled labor pool, and the network of specialized suppliers. In marked contrast to the federal government, the state was largely irrelevant.

On the basis of these lessons, the authors endorse strengthening research and educational facilities at all levels and maintaining a broad agenda for basic research, because important advances come from unexpected quarters. But the authors also point out that the culture and economies of scale that produce a Route 128 are hard to duplicate. Asserting without much evidence that most regions with strong research universities have failed in their attempts to develop high-tech entrepreneurial communities, the authors suggest (and here I begin to part company with them) that the country should recognize that it has a national resource in Route 128, and industry and government should locate their research facilities there. They advise that high-tech is not a realistic niche for all, and, in a comment that might mollify policymakers elsewhere, point out that high-tech industry does not always lead to explosive job growth.

Finally, Rosegrant and Lampe advise against overmanaging the system. They warn against channeling resources into selected areas of technology and suggest that it is dangerous for the government to try to outguess the marketplace. They also recommend relying on the peer review process to allocate research funds instead of letting congressional politics intrude. (Clearly, in their view, politics never play a role in the peer review system.)

On the whole, the book is more successful in placing the Miracle in its historical context than in providing a full picture of its recent dynamics. For example, the authors seem to overstate the contribution of venture capital and the banks to startup activity. Similarly, they do not mention that Massachusetts' recent budget crisis reflected national, not just regional, trends. Puzzlingly, moreover, since the authors fault others for focusing on computers, that is exactly what they do in covering the 1975-89 period. Although the ups and downs of defense spending are shown to have been crucially important to the region through the mid-1970s, defense suddenly disappears in the Miracle years. Instead, the authors stress the computerization of society and a huge spurt in spinoff activity, primarily--judging from their anecdotes--in a single industry. In treating the Miracle's demise, the authors blame changing (computer) technologies, along with global competition, economic setbacks, and greed.

But, in fact, the Massachusetts Miracle had multiple causes. Most important, since 40 percent of the increase in Massachusetts manufacturing employment from 1977 to 1984 was in defense-related industries, the Carter-Reagan defense buildup clearly played a major role in the Miracle and deserves more attention than it gets. In addition, the real estate and banking crises were not simply the result of the high-tech sector's roller coaster ride. Rather, the real estate boom, which began after high-tech began to falter, reflected changes in federal tax policy and deregulation in the banking industry. Evidence of boom/bust real estate conditions occurred well beyond Route 128 and as far away as Australia and Japan.

The authors' failure to examine the high-tech context beyond Massachusetts may also be responsible for one of their most unrealistic suggestions. Although many of the areas hoping to replicate Route 128's achievements clearly will be disappointed, the idea that they should just sit back and accept their fate seems self-serving and unlikely. The book argues that the nation is facing a crisis, that it has lost its position of world economic leadership. But the same developments that have propelled foreign competitors--the spread of education, industrialization, and innovative abilities--are occurring in this country as well. As the authors repeatedly point out, academic prowess, industrial traditions, and political connections all contributed to Route 128's success. But other regions now have excellent universities, industrial economies, and increasingly, as the population shifts to the South and West, political connections. Politics undoubtedly contributed to the location of defense and space-related facilities in these areas, which, in turn, has fostered the development of high-tech infrastructure in Texas, Colorado, and elsewhere. Indeed, the authors cite Mitchell Kapor, founder of Lotus and ON Technology, as saying that "up-and-coming" areas such as Boulder, Denver, and Austin might now be alternatives to Boston, in contrast to the situation in 1981 when the choice was California or Massachusetts.

Route 128 would have benefited from a chapter on other high-tech communities. Then, instead of simply asserting that these centers do not have Boston's traditions, the authors could have explored how they got started and how and why they differ from Route 128.

The book is also threaded with inconsistencies. Some are minor. For instance, the high-tech community is described as self-sustaining one page before the Miracle begins to unravel. But one is major. Although Rosegrant and Lampe show how Route 128 entrepreneurs benefited from exploiting specific technologies (radar, computer) developed with public funds, they vote against industrial policy.

The authors' story, however, suggests a resolution to the difficult issue of how industrial policy could work in a U.S. context. The solution comes from recognizing that government is generally expected to provide services when the benefits to society exceed those that the private sector, providing the same services, could collect in the marketplace. National defense is the most obvious example of such a public good. The propriety of government spending on defense research has never been an issue in the United States. Other public goods that federal research could advance include the environment, renewable energy, and transportation and communications infrastructure.

In the end, one important question goes unasked. After most of the book suggests that Massachusetts has benefited from a de facto industrial policy based on defense-related research, the authors fail to address the implication of the current defense cuts for the country's technological future. If the government reduces defense-related research, what other area will attract a similar level of support? Or will the private sector take up the slack? A recent study by the National Science Board suggests that it will not. One of the most critical lessons from Route 128 is that these questions need to be asked. If the end of the Cold War permits major cuts in defense, should the government increase its support for research related to other public goods?

In sum, this book provides a fascinating and detailed history of the Route 128 high-tech community. Anyone interested in regional policy or innovation policy should read it. However, the lessons taught by this history are not always the ones cited by the authors.

Jane Sneddon Little is an economist at the Federal Reserve Bank of Boston.
COPYRIGHT 1992 National Academy of Sciences
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Copyright 1992 Gale, Cengage Learning. All rights reserved.

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Author:Little, Jane Sneddon
Publication:Issues in Science and Technology
Article Type:Book Review
Date:Dec 22, 1992
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