Patents and Regional Prosperity

by James A. Bacon

Graphic credit: Broookings Institution. Click for more legible image.

Here’s more evidence that economic growth in the innovation economy will gravitate toward existing centers of technology prowess: According to a Brookings Institution report, “Patenting Prosperity: Invention and Economic Performance in the United States and its Metropolitan Areas,” 63% of all U.S. patents are developed by people living in just 20 metro areas accounting for 34% of the U.S. population. Inventions, as embodied in patents, are a major driver of long-term regional performance.

Graphic credit: Brookings Institution.

The good news is that the nation has entered a new golden era in patent productivity, as measured by the number of inventions per one million population. The current level of more than 300 patents per million people is the highest since the great wave of innovation during the Industrial Revolution, and twice the level of only 20 years ago, as seen in the chart to the right.

The not-so-good news for readers of Bacon’s Rebellion is that Virginia isn’t close to achieving national leadership in the technology-innovation sweepstakes. The Old Dominion’s tech champion, the Washington metro region, ranks only 17th among the nation’s 100 largest metropolitan regions for the number of patents granted annually (2007-2011). On a per-million-residents basis, Washington generates about one-twentieth the number of patents as world leader San Jose (Silicon Valley), one sixth as many as Austin and San Francisco, and one-fourth that of Boston. Indeed, the patent rate is the lowest among the top 20 metro areas (by number of patents issued) in the country. Needless to say, Richmond and Hampton Roads don’t even make the list.

Rankings for regional innovation remain fairly stable over time, although there is some movement when viewed over decades. From 1980 to 2011, San Jose moved from ninth place to first. Austin and Raleigh moved up 41 and 55 notches, while Cleveland fell 10 slots and Philadelphia fell nine. Given the complex mix of corporate champions, world-class research centers, leading graduate university programs in science, venture capital networks and other supporting institutions it takes to succeed, breaking into the elite is a very difficult thing to do. As Austin and Raleigh proved, it can be done. But such instances are rare and they take decades to play out.

The Brookings report does not break out its key metrics for regions that generate fewer patents, so I cannot report the numbers for Richmond and Hampton Roads. But there is one ray of light. The report does publish a table of metropolitan regions (both large and small) that show the greatest “productivity growth” as measured by the largest increase in the number of patents per worker between 1980 and 2010. Charlottesville, Blacksburg and Winchester all made the Top 20.

What’s remarkable about Winchester, Charlottesville and Blacksburg is that they defied the odds against small metropolitan regions. As I blogged in “The New Geography of Jobs,” the economics of the knowledge economy favor large labor markets, which puts smaller metro regions at an inherent disadvantage. Their prominence in this ranking may reflect the law of small numbers: Because they started from a relatively small base of patents earned, it didn’t take a huge increase to show a high rate of growth. Even so, the fact that these three strong metros perform so well over the past three decades is a reason to be encouraged.

The implications for Richmond and Hampton Roads are sobering, however. Richmond has only one second-tier research university (Virginia Commonwealth University), while Hampton Roads has two third-tier research institutions (Old Dominion University and The College of William & Mary) and two federal labs (NASA Langley and Thomas Jefferson). Metro leaders of these two regions must ask themselves really tough questions: Can they ever hope to compete in the technology-innovation big leagues? Can they sustain the intense and long-term commitment it takes to rise in the ranks? Conversely, are they better off trying to find some other niche in the innovation economy? Are there non-tech-intensive sectors where they can achieve wealth-creating excellence?

I cannot speak for Hampton Roads, which I do not know intimately. But I think that Richmond has the potential to be a stand-out in the professional services sector, built upon a strong base of legal services, advertising and marketing, boutique finance and insurance and engineering/architecture. I can list among my personal acquaintances two attorneys who have launched non-law firm enterprises arising from expertise gleaned through their legal practices. While Silicon Valley creates the technology, someone has to apply it to real-world situations.

An economy based on professional services may never achieve the wealth-creation potential of Austin, Boston or Silicon Valley, but, really, how many regions anywhere in the world can realistically aspire to that level? The challenge of Richmond and Hampton Roads is to create a culture of innovation that will enable their regions to continually reinvent themselves as the world economy evolves.

3 Responses to Patents and Regional Prosperity

  1. I don’t get Winchester… can someone explain?

  2. Good for Charlottesville and Blacksburg, they can stand out as bright lights for Virginia’s smaller metropolitan areas.

    Winchester has to be some anomaly produced by the law of small numbers.

    Bad news for Richmond and Hampton Roads.

  3. FWIW there is some push back against simple output measures like patents. Easy to count, but index them with some other measures of R&D intensity and you may see a different outcome. And even if we take the Brookings report at face value the idea that these regions are walled gardens also seems a bit incomplete. Richmond and Hampton Roads are going to have to stand on their own to feet, but Virginia Tech and UVA are increasingly working on delivering R&D to companies around the sate (e.g. CCAM, NIA in Hampton, etc).

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