The Color of Innovation

Innovation District: Boston’s  “South City Action Plan”

The good city is innovative and fun; it is prosperous; it strives for justice and sustainability- and above all, it is alive. —— Paul S. Grogan

All politics is local. —— Tip O’Neill

 

If one were asked to single out the most difficult role to play on the political stage of Massachusetts, the mayor of Boston would be the default answer. It can be explained by two reasons: firstly, the Greater Boston area has long been among the world cities and Boston is no doubt the center of the area. Therefore, any moves made by the mayor would exert significant impacts on the region and its surroundings. Such a fact requires the mayor to possess sufficient foresight and superb leadership. Secondly, as the capital of Massachusetts, Boston is both an independent city with its own constituency and the key area for state governance. Indeed, the state government and the city hall are located within half a miles from each other at the heart of the city. It is therefore very natural that the two governments would frequently find itself at odds with the other on various issues, ranging from development goals, project selection, construction timetable and specific operational plans. As a result, the post of mayor requires strong communication and coordination skills. To borrow the words from Chinese officialdom, the situation of Boston mayor is comparable to that of “Peking officials.” However, the incumbent Mayor Thomas M. Menino has served in this position for nineteen years, finishing up his fifth term next year. In light of the general popularity and his overall performance record, Menino is believed to be the most accomplished and popular mayor in the history of Boston.

Menino was born into an ordinary Italian immigrant family at Hyde Park, Boston. He received his higher education at University of Massachusetts Boston. Prior to taking the mayorship in 1993, Menino had served for ten years on Boston’s city council. Up to the present, he has never left Boston, his beloved city where he grew up, went to school and then work, got married and had children.  Ever since he first took office,  Menino has demonstrated strong dedication and an undivided attention to build a better city. Making full use of his major in community planning and with the most ardent enthusiasm and attention to details, Menino devotes himself to neighborhood development. For nearly two decades, he has visited individual homes and streets to examine and resolve problems. From cleaning up the parks and fixing the streetlights, to selecting location for convenience stores and repairing the sewage system, nothing is too trivial for Menino. When new projects come up, he is delighted to supervise every aspect of the construction, be it site selection, planning, supporting infrastructure building or exterior design. His burly figure often appears at the street corners, restaurants, bars, shopping centers and the barbers’. A survey conducted by a local media in 2009 showed that about 59% of the citizens had private talks with the mayor. He is omniscient. It is hard to tell if such is his innate leadership style or deliberative policy strategy. In short, his tireless work ethic and attention to the basics that make for a thriving city won him the reputation of “urban mechanics” early in his career.  His most distinguished achievements include promoting the growth of medium-size and small businesses, supporting education innovation, revitalizing cooperation-based community culture and clamping down on crime, for which he has been recognized as a national leader on urban neighborhood governance.

At 69 years old, Menino has been constantly bothered by minor health problems. His eye surgery and leg operation were both topics of local media reporting. His extremely strong Boston accent earned him the nickname Mumbles. For all appearances, he stands as strikingly different from the young, upbeat and eloquent American politicians we often see on TV. But beware such should not trick you into believing that Menino is no man of charm and competence. On the contrary, he has shown extraordinary insight and courage for innovation during his entire mayoralty. At the inauguration speech of his unprecedented fifth term, Menino pledges a new era of “shared innovation,” jointly built by the administration and the people; he promises to create a continuum of educational opportunities for the city’s youth, from dusk to dawn and from birth through college; he aims to revitalize the undeveloped parts of the city and construct a sustainable and shared innovation economy; he advocates civil entrepreneurship as a proper means to initiate a wave of urban innovation; he is committed to a culture of “inclusiveness” to bring the city even closer together across varied backgrounds. The whole Boston gathered under his championship. With criticism of “hopelessly myopic” and “lacking in spirits” against Menino the workaholic swiftly disappearing, his new initiatives are all making steady progress, among which the South Boston Innovation District is unequivocally the most prominent. Indeed, Menino’s South Boston “action plan” kicked off a new round of urban construction and has made great contributions to the city’s reviving economy. Innovation District, shortened as ID, is a new “ID” for Boston proper.

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Located at the old south seaport of Boston, Innovation District is nestled between Boston’s transportation gateways: abutting historic Boston Harbor, adjacent to Logan International Airport, and at the nexus of two major interstate highways. The 1,000 acres of residential, commercial, and industrial space includes Fort Point, Pan Pier, Seaport, Liberty Wharf, Channel Center as well as parts of the Financial and Leather districts. Before Menino rechristened it as Boston’s Innovation District and vowed to help companies large and small, this part of the city had been home to Seaport World Trade Center, Boston Convention and Exhibition Center, and Marine Industrial Park. However, in the past decades, it remained a largely empty land with abandoned factories and gravels that attracted only artists to work or wander around.

Innovation District has clear and distinctive principles, goals and strategies. In Menino’s opinion, people in clusters innovate at a quicker rate, sharing technologies and knowledge easier and thereby increasing productivity. So he was determined to create a place, in midst of the economic recovery, for the best ideas to collide and the most promising entrepreneurs to meet and communicate. By assisting entrepreneurs to develop their business, more work opportunities will come along and the economy will grow. The ambition of Innovation District is not limited to another typical regional innovation economy cluster In Massachusetts like Kendall Square, Route 128 and Longwood Medical and Academic Area, but extends to building a vigorous and vibrant urban community with experiences and lessons borrowed from San Francisco and New York. To reach such an end, Innovation District defines its theme as “work, live and play,” that is, to build a multi-functional urban community that combines business and jobs, comfortable and convenient living, as well as leisure and fun. In addition to an abundance of collaborative venues, research and development space, Menino has spurred the investment of monies in transportation and municipal infrastructure. He has also made available a wide variety of housing choices as well as a large number of dinning and entertainment options. I cannot help but be reminded of a slogan on posters all over Changping when I started to work there: Let’s make Changping the first choice for investment and entrepreneurship, living and residing, tourism and leisure. Much encouraged, I understand how difficult it would be to turn these words into reality on the 300 thousand-acre land of Changping. To see such a seemingly unattainable goal being implemented in an orderly manner here at the Innovation District, I was simply overcome with emotion.

Being an opportune project, Innovation District has had a smooth first two years. Statistically, by February this year, over one hundred new companies had moved to the area, bringing more than three thousand new jobs. It is fair to say that Innovation District has managed to seize three opportunities. First of all, limited office space in Kendall Square drives rents up, and the soaring price forces many start-ups to look for more affordable place. Besides, as the second-time host of the BIO International Convention, Massachusetts consolidated its leadership in the world’s biomedical and pharmaceutical industry, attracting a number of multi-national corporations, European companies in particular, to relocate or open branches in the Greater Boston area.  Thirdly, against the backdrop of current global economic recession, Greater Boston is able to keep a relatively strong economic growth rate, highlighted by its featured innovation economy. With biomedical, clean energy and information technology, among others, being the primary industries, Innovation District has initiated a new economic path marked by multi-industry, diversified development as well as integration of industry, academia and research.  Some of the companies and institutions that have moved to Innovation District include: MassChallenge, Greentown Labs (Boston’s first clean tech incubator), Oasys Water (committed to developing breakthrough technologies to address the growing global water crisis), Space with a Soul (a non-profit accelerator), Babson Boston, Gezelle (sale of used electronics), Gemvara (customized jewelry making), Crimson Hexagon (social media monitoring analysis), NPR Digital (digital platform service), Buzzient (social media tools), Boston Society of Architects (a nonprofit membership organization committed to architecture, design and the built environment). In 2013, two well-known companies, Vertex Pharmaceuticals and Zipcar will make Innovation District their home. The new headquarter of Vertex, a $900 million development plan under construction, is presently the largest private sector construction project in the nation. So, to respond to one of the comments made on my blog- “could you predict the most promising industry along Route 128?” my answer would be: Massachusetts’ innovation economy has stopped relying on one or a few industries; rather, Route 128, Red line innovation corridor and Innovation District have all presented a mixed development of multiple industries and it is thus hard to predict which one of them would become the new star. These industries’ shared advantages lie in knowledge and technology. Innovation activities are concentrated on basic research, product development and lean production. The most distinguished characteristics of the enterprises can be summarized as small scale, big investment, and high return.

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The rise of Innovation District, viewed in a broader perspective, mirrors the revival of urban culture in Boston and America at large, thanks to the coordinated efforts of politicians, entrepreneurs and intellectuals. According to the studies of Edward Glaeser, professor of Urban Economics at Harvard University, downtown Boston showed signs of decline in the 1920s, hit bottom in the 1950s, and did not get back on its feet until the late 1980s. Glaeser’s observation could be verified by two facts. The first is the curious absence of any large-scale commercial building in Boston downtown amidst the building boom between 1950 and 1957 that created Route 128 as well as the industrial parks and commercial facilities along the line. The second is the disappointing result of the fundraising campaign led by the then mayor Kevin White and developer James Rouse in 1975 for renovating two cultural heritage sites—Quincy Market and Faneuil Hall. Their proposal met unanimous disapproval from the city’s banks, as no one saw it a promising project. But Boston was not the only city hit by a downturn in fortune during the early part of the twentieth century—Detroit, Pittsburgh, San Francisco and Cleveland followed suit. With the wholesale exodus of residents and jobs, the once glamorous downtown areas deteriorated into a nightmare of blight, decay and danger, filled with disease, poverty and crime. It was not until the 1980s that cities like Boston and San Francisco with unique human resources bounced back with the advent of information technology revolution, and recovered their former prosperity as new consumer cities.

While urban life invokes tribute and longing in Europe and Asia, it enjoys much less glorification in America. “Ambivalent” may best characterize its status in the American psyche. Paul Grogan attributes, and rightly so, the negative image to one of the nation’s founding fathers and America’s third president, Thomas Jefferson, who famously declared that “cities contain all that is pestilential to the morals and moods of mankind.” Jefferson’s curse had substantially lowered American people’s estimation of cities, and the prejudice was only confirmed and deepened with people’s redefinition and pursuit of the American Dream: it was not about living in the gay and debauchery cities of high-rise buildings, but rather about enjoyig detached houses with spacious lawns, private swimming pools and groups of children—an orderly and civilized life in the suburbs in close contact with nature. Besides, the federal government had been the unwitting accomplice during the decline of cities. Such combined policies as the construction of federal highways, mortgage-interest deduction for suburban housing, generous support for automobile industries and long term fuel subsidies have all driven people to settle in the suburbs and left downtown to the homeless. However, the battle to rescue downtown from decline has never ceased, at least in Boston. In the political arena, Francis Sargent, governor of Massachusetts (1969-1975), vetoed a plan for Boston’s Inner Belt highway, making a timely effort to prevent Boston from further decline. Since 1960s, successive mayors of Boston from John Hynes through John Collins to Kevin White and Thomas Menino have all made unflagging efforts for the city’s revival. Their long terms, ranging from eight to twenty years, also ensured the continuity and longevity of policies, and promoted Boston’s steady course to prosperity. Business leaders have also made laudable contributions. Teradyne, the manufacturer of automatic test equipment, had firmly based its offices in downtown Boston since its inception in 1960 until its recent move to North Reading. When I visited Boston Properties last month, I learned from Michael LaBelle, the vice president, that the company has been, for the past forty years of its growth, focusing on high quality and high end office buildings and commercial complexes in the metropolis and never engaged in suburban projects. The company itself is headquartered in its masterpiece architecture, the famous Copley Place in central Boston.

Did the rebirth of Boston promote the status and importance of cities in general? Perhaps not in the opinion of Menino. During an interview at the end of 2007, he chafed at media’s lack of attention to urban affairs, and registered his disappointment that the importance of urban governance and urban problems seemed to have eluded the minds of the two presidential candidates. He cautioned America’s hope should reside in well-developed cities, and that the key to urban governance should be education, economy, housing, and public safety. Above all, innovation should remain the source and core power for the urban revival. Scholars have also risen to the defense of cities. In his 2011 book Triumph of the City, Professor Glaeser offered policy suggestions to the federal government and envisioned the beautiful future of urban civilization, based on his studies of the developmental history of the world’s famous cities. The book’s subtitle presents a powerful argument for the city: how our greatest invention makes us richer, smarter, greener, healthier and happier. Glaeser believes that in the new information age of globalization, physical distance no longer poses obstacle to communication, yet still most innovative ideas are generated through frequent and direct interaction and communication between people. Therefore he is a firm supporter and advocate for building skyscrapers and nurturing urban industrial clustering. No evidence has been found to suggest that Glaeser’s book has inspired Menino’s launching of Innovation District, but Glaeser and Menino certainly have shared some common beliefs. The official website of the Innovation District proposes that “Distance equals death,” as in contrast to the “Death of distance” theory of the British economist Frances Cairncross. But a closer reading of Cairncross’s work leads me to realize that the two notions are not intrinsically contradictory but rather address different issues. On the one hand, the extensive use of information technology has greatly reduced the time and cost of interpersonal communications, and in this sense distance has disappeared. On the other hand, the increasingly advanced information technology also calls for face-to-face communication to stimulate new ideas, so it would be rather unwise to give up the physical convenience offered by cities. Glaeser provides academic endorsement for Innovation District, while Cairncross does not necessarily oppose to it.

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Boston World Partnership, which successfully held the “Innovation Express” event, was established with Menino’s endorsement yet operates independently. The main task of BWP is to publicize and promote Innovation District and the “New Urban Mechanics” program. ” “New Urban Mechanics” aims at tackling the basic issues in the city through mustering the passion and wisdom of the constituents. For Menino, civic entrepreneurship, richly embedded in citizens and all kinds of social organizations, needs to be mobilized to resolve even the tiniest problems. Once the various types of foundations, entrepreneurs, tech experts and community residents plunge into this massive innovation campaign, Boston’s lasting prosperity and success will be guaranteed and enhanced.

From being nicknamed as “urban mechanics” to promoting “New Urban Mechanics” in a variety of ways, Menino’s political career seems to have been filled with trivialities. A popular Chinese term “city management” came to my mind. Nonetheless, quite in contrast with the Chinese ways of “making drastic changes,” Menino enhances his favorite city through maintaining the traditional functions and providing basic services. It is through gradual small-scale improvements to address constituent concerns that Menino achieves innovation and makes the big difference. Such is perhaps Menino’s unique approach to city management and may very well be the right one. After years of watching Boston’s development and studying urban policy, Professor Howard Husock from Harvard University made the following remarks: “I think that Mayor Menino has been an important mayor for Boston — and for Democratic mayors across the country especially — because he signaled that a focus on core, traditional services was important. That we should not only think that new projects and changing the face of the city should be the sole focus of a mayor. The delivery of core services is a message that any mayor can take to heart.”

Actively advocating a shared experience for an innovative Boston and perseveringly pursuing inclusion and diversity, Menino has gained support and respect from the voters. Such is also reflected in his attitude toward the Chinese community. Throughout the history of Boston, Menino is the mayor who has paid most visits to Chinatown. His frequent interactions with the Chinese often invite generous coverage by local Chinese media. Recently, Menino vetoed a redistributing plan that would split Chinatown into two parts. The action won him unanimous praise from the Chinese community. On the afternoon of October 12, 2012, together with Harvard President Drew Faust, Menino attended the donation ceremony by the Chao family to Harvard Business School. Noting that people of Chinese descent now comprise Boston’s second largest immigrant group, Menino called the accomplishments of the Chaos as a prime example of a family that had lived the American dream. Humorously, Menino mentioned that the size of Harvard’s Boston campus exceeds that of its Cambridge campus and that the new building at HBS made possible by Chao’s funds will have to get his approval.  He also took the opportunity to express his genuine wish for more innovation resources into Boston. Following the news that Boston outpaced San Francisco’s Bay area and became the most innovative city in the world, the China Press published an article on October 20 to further introduce the great contributions made to Boston by scientists of Chinese decent. I sincerely hope that Boston will carry on such an honor and that more and more American Chinese will join the force. Together, we will inject more Chinese elements into Boston’s vitality.

 

 

References:

Boston’s Innovation District. City of Boston. Web. 26 Oct. 2012. <http://www.innovationdistrict.org/>.

“Case Study: The Boston Waterfront Innovation District.” SustainableCitiesCollective. N.p., 27 July 2011. Web. 18 Oct. 2012. <http://sustainablecitiescollective.com/ecpa-urban-planning/27649/case-study-boston-waterfront-innovation-district>.

City of Boston.“The Strategy.” Boston’s Innovation District. June 28, 2010. Accessed June 23, 2011 <http://www.innovationdistrict.org/about-2/the-strategy/>.

Farrel, Michael. “High-tech Firms Find Fertile Turf in South Boston.” Seaport Innovation District. N.p., 23 Jan. 2012. Web. 16 Oct. 2012. <http://seaportinnovationdistrict.com/2012/south-boston-waterfront-innovation-district/>.

Mayor’s Office. City of Boston. Web. 26 Oct. 2012.

<http://www.cityofboston.gov/mayor/>.

Hiestand, Emily, and Ande Zellman, eds. The Good City: Writers Explore 21st Century Boston. Boston: Beacon, 2004. Print.

Patton, Zach. “The Boss of Boston: Mayor Thomas Menino.” Governing the States and Localities. N.p., Jan. 2012. Web. Oct. 2012. <http://www.governing.com/topics/politics/gov-boss-of-boston-mayor-thomas-menino.html>.

Tsipis, Yanni and David Kruh. Building Route 128. Charleston, SC: Arcadia, c2003.

 

Boston’s Route 128: Past and Present

 Distinctive and Unconventional：A Singular Success

      Economic miracles may suddenly become visible, but such miracles are almost always produced by solid fundamentals and these solid fundamentals always have a long history.

—— Lester C. Thurow

     Paradoxically, regions offer an important source of competitive advantage even as production and markets become increasingly global.

—— Annalee Saxenian

     On September 13, the Federal Reserve Bank finally launched its latest monetary policy, ending prolonged hesitation and observation. The new policy, “Quantitative Easing” or shortened as “QE3”, was designed to boost American economy and create job growth. Though much anticipated, the policy still managed to stir new waves in a turbulent world: the global capital market cheering for an upcoming carnival; the two parties drumming up support or suppression amidst their white-hot presidential campaign; scholars flooding the media with all kinds of analyses, comments and predictions…

Amidst all the uproars, my attention and thoughts were drawn to two discussions that happened earlier in the Boston area. One took place over a month ago and the other was on the eve of the “QE3” policy announcement.

On the evening of September 12, a brightly lit and crowded open classroom in Northeastern University welcomed two titans in the field of economics: Lawrence Summers, a former Harvard University president, Treasury secretary under President Bill Clinton (1999 to 2001) and top economic adviser to Obama until 2010; N. Gregory Mankiw, chairman of the White House Council of Economic Advisers during George W. Bush’s presidency, currently counseling the Republican presidential candidate Romney.  Though both being Harvard professors in economics, they share little in common with respect to experience and position. Summers opened the discussion by stressing the active role government should continue to play to get economy back on its feet. He argued for more stimulus measures to repair schools, hire teachers and renovate airports. Mankiw, on the contrary, elaborated on the significance of tax policies on a long-term economic recovery. To the surprise of many, neither of them addressed the central bank or its policies. Instead, they concentrated on means available to the White House and the Congress. Government spending, taxes and deficits were the focus of their arguments.

Mankiw and Summers were able to reach one consensus though: neither increase in investment nor tax deduction alone would prove a fundamental strategy, for they are too costly and unsustainable. Any measures to fix the rooted flaws of a national economy must be consisted of multi-dimensional policies. Since Mankiw recognized Summers as a mentor while he was a graduate student in MIT and Dukakis, who was moderating the discussion, jokingly attributed his failure in the 1988 presidential campaign to hiring Summers as his adviser, a fierce battle of words, concluded in a relaxed and humorous atmosphere, leaving the expectant audience doubly gratified.

Another contention commenced via the Boston Globe. On August 7^th, in an article titled “Fed must do more, its Boston chief says”, Eric Rosengren, president of the Federal Reserve Bank of Boston, was reported to be making strong demands in an interview that Fed take immediate measures to fuel the stagnant economy despite the pressure of the election year. Since disagreements in the Fed are commonly resolved internally, media Interpreted Rosengren’s action to be “an unusual public plea”. As a “subordinate”, Rosengren would not normally express such a view to the public. A featured article “Economists: Fed action will have minor impact” soon followed the next day. Quoting views from Harvard professor in economics, Benjamin M. Friedman, the article states that monetary policies by themselves would hardly have any impacts and that the role Fed can play is fairly limited. “It is clear the US economy needs more stimulus,” but they should come from the Congress not from the Fed. Interestingly enough, the debate stopped abruptly in August and no follow-up report could be found. As some have speculated (in hindsight), Rosengren’s move was more a testing signal for Ben Bernanke, the Fed Chairman, than an urgent appeal out of his discontent with the central bank. Anyways, the short-lived controversy became a skirmish prior to the Fed’s formal introduction of its new policy.

These two discussions, unlikely to capture much public attention, provoked my thoughts on the extended process of issuing policies and regulations in America. First of all, the general public has to be consulted in advance; such may take form of open discussions launched by relevant departments or scholarly articles on media to stimulate deliberation and conversation. Policies then must go through a mix of legal procedures including debates and hearings. Once implemented, they are subject to supervision from all sides, and their effectiveness is to be assessed through a complicated review and evaluation process. As much as the Fed emphasizes its “independency”, it has to resort to discussions in academia and on media to show the impartiality and transparency of its policies- be it careful conceiving or mere coincidence, given the sensitive timing for the present occasion. Scholars, therefore, by putting forward direct opinions or beating around the bush, play a much larger role than acting as a go-between or simply justifying the policy-making.

In order to trace the development of Boston’s Route 128 and the growth of Massachusetts’ innovation economy, I have collected and studied almost all the papers and books relevant to the subjects over the past two years.  The most profound reflections on my part can be summarized as following: collective governance- by the government, business and academia- built upon self-governance and rule of law, promotes and sustains the prosperity and growth of a regional economy and society; different parties, communities and individuals with varied interests, styles and goals, through unremitting dispute, reconciliation and compromise, contribute to the advance of policies from being “democratic” to being “scientific” and “lawful”. Next, I shall introduce a number of scholars and their works to unfold the course of development of Boston’s Route 128 high-tech region.

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     Vivid descriptions of “Massachusetts Miracle” and “Route 128” largely set in the late 1980s, a period when news coverage, featured articles and scholarly writings were entangled with the 1988 presidential election. For this very reason, each work must be carefully examined as to its objectivity and reference value. Here is a case in point: then governor Dukakis and his economic adviser, Harvard Business School professor Rosabeth Moss Kanter co-authored Creating the Future: The Massachusetts Comback and its Promise for America, blending Massachusetts’ economic performance with case studies from HBS. This seemingly academic work has been dubbed “an awkward hybrid” to glorify Dukakis. In spite of Professor Kanter’s extraordinary academic attainments elsewhere, the book only received insipid responses after publication, and is not worth recommendation.

David Lampe’s painstaking efforts produced two book that deserve close reading. One is a collection of essays entitled The Massachusetts Miracle: High Technology and Economic Revitalization, edited by Lampe and published in 1988; the other is Route 128: Lessons from Boston’s High-Tech Community, co-authored by Lampe and Susan Rosegrant. While working on this book, Lampe was a columnist in Business Week and Rosegrant a free-lance writer. Both continued to work in media and at universities, yet neither became a big name. Nonetheless, the book’s professionalism and academic standing was in the least affected.

The Massachusetts Miracle: High Technology and Economic Revitalization is a specially complied book. It consists of a chronological series of twenty-one historical documents and essays, recording in details major events and dramatic changes in Massachusetts’ economy from 1971 to 1983. Quotations carefully drafted by the editor precede each piece of writing, introducing the author and the background of what follows. The book brings readers into close contact with a prolonged public policy debate on the economic issues of the state. Although it contains speeches and articles by Francis W. Sargent (the 64^th governor of Massachusetts) and Dukakis, among other politicians, the book as a whole gives bigger role to entrepreneurs and academia. Since as many as nine reports and articles were authored by James M. Howell, chief economist at Bank of Boston and his staff, Bank of Boston once hoped to delay the publishing till after the 1988 election in fear of a possible negative influence on Dukakis’ presidential campaign, whose role in the state economy did not stand out in the book.

Filled with optimism about the economy of Boston area and that of Massachusetts, the book builds on reliable sources and come to fair conclusions. The advice it offers to countries and regions eager to learn from and copy the Route 128 model is, in particular, candid and valuable. In a word, government, especially the state government, had minimal impact on the revival of Route 128; 128 phenomenon is easy to describe, difficult to explain and yet almost impossible to transplant or duplicate.

Allegedly, Lampe and Rosegrant had started the book Route 128: Lessons from Boston’s High-tech Community since 1985, when Massachusetts’ economy reached its peak. When it was published in 1992, however, the “Massachusetts Miracle” labeled by Dukakis, had collapsed, and both authors were confronted with numerous cases of society fighting with perseverance against the economic downturn. Previous editing experience and present sense of harsh reality enabled Lampe and Rosegrant to produce a book with historical perspective and uncommon wisdom. Through probing the roots of a cooperative relationship among the academia, industry and government in American history, they analyze the real driving force behind economic transition and development. In their eyes, a “miracle” represented by the single explosive growth of industry computers never existed; the true miracle lies in the area’s time-honored capacity for technological innovation. In order to reveal America’s competitive advantage, the book compares the academia, government and business, respectively, as the “mind, means and muscle ” of innovation, and further points out that the three players collaborate, conflict and compromise out of their interests, thereby advancing innovation in a highly productive manner.

From the 1862 Morrill Land Grant Act, which redefined and expanded the role of university, to Lowell becoming the cradle of American industrial revolution, to the immense R&D funding from the federal government in the latter part of World War II and throughout the Cold War, resulting in the emergence of the electronics industry, and the huge contributions made by a number of universities and research institutes led by MIT all the way along, the story of Route 128’s high-tech community is one “of idealism and entrepreneurship, of ivory tower intellectualism and practical Yankee ingenuity, and of individual dreams and cooperative efforts.”

Route 128: Lessons from Boston’s High-tech Community explains the partnership between the academia, industry and government, and examines the origin and essence of American innovation. The authors insist that nobody, be it government, organizations or individuals, should claim credit for the success of Route 128, nor should we regard its temporary crisis and stagnation as decline or irreversible downfall.  A firm belief in “innovation” leads them to trust a real “American miracle” would soon befall Route 128 and the Bay state. In this very sense, the monograph has immense appeal for professionals and laymen alike, as much then as it does now.

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      Regional Advantage: Culture and Competition in Silicon Valley and Route 128 is by far the most widely circulated and the most influential scholarly writing on the 128 phenomenon (and, for that matter, on Silicon Valley as well). Harvard University Press published the hardcover and paperback editions of the book in 1994 and 1996, respectively. It was an immediate success, met with enormous responses and winning “Honorable Mention, 1994 Professional /Scholarly Publishing Award of the Association of American Publishers, Business and Management Category”. In 1999, the writer authorized Commonwealth Publishing Co., Ltd to publish its Chinese version in Taiwan. In 2000, Shanghai Far East Publishers put the book’s simplified Chinese version into print. This book has thenceforth arguably formed Chinese-speaking people’s opinions (and bias), about Silicon Valley and Route 128.

Annalee Saxenian, author of this book, was born and raised in the Boston area, went on to obtain her master’s degree from University of California Berkley on the west coast and then her doctoral degree from Massachusetts Institute of Technology on the east coast. Although both her master’s and doctoral dissertations dealt with issues in Silicon Valley, Saxenian had begun to explore the differences between Silicon Valley and Route 128 during her years in MIT. Later she returned to MIT in 1990 and devoted one year to researching Route 128.

The thesis and selling point is clearly and conveniently summarized on the back cover (potentially an advertisement): “Why is it that business in Silicon Valley is again flourishing while within Route 128 clearly and in a straightforward way in Massachusetts it continues to decline?” The answer, as found by Saxenian was such: “Despite similar histories and technologies, Silicon Valley developed a decentralized but cooperative industrial system while Route 128 came to be dominated by independent, self-sufficient corporations.”  Through comparative study and extensive analysis of local data, Saxenian discovered through over 100 interviews that the Silicon Valley and Route 128 demonstrate very differently in the following ways. Silicon Valley encourages openness and decentralization; communication and exchanges among highly specialized firms are common; the culture on the west coast tolerates failure, and supports experimentation and risk-taking. Companies in Route 128 are vertically integrated, valuing loyalty and hierarchy; they are independent and self-contained; with a strong sense of intellectual property rights, risk-averse firms discourage inter-firm contacts and cooperation; they are much more conservative and less flexible in management style. Therefore, companies in Silicon Valley are positioned to find professional talent, technical services and venture capital from an unmatched regional base of vendors. Start-ups are burgeoning one after another and time-to-market for new products are considerably shorter. In contrast, large firms in Route 128 refuse to open up to the region and are declined to assist spin-offs. With stringent restrictions on talent flow and traditional sources of financing, starting up a new company is hard and innovation eventually slows down.  In short, the different organizational structure and cultural characteristics of Silicon Valley and Route 128 determine the unequal learning ability and ultimately the fate of the two regions. Saxenian illustrated the above distinctions and struck home her point, using Hewlett-Packard in Silicon Valley and Digital Equipment Corporation in Route 128 as case studies. The fates of HP and DEC appeared to have verified her statement: in 1998 DEC was acquired by Compaq, and in 2002, Compaq was merged into HP.

Praise and criticism of the book never subside, largely due to the dramatic situation in Boston area around its conception and publication: When Saxenian began to research and write the book, Route 128 was amid its worst moments: the “Massachusetts Miracle” was disillusioned, economy was hitting the bottom and pessimism and depression was shrouding the Greater Boston area. Shortly after the book was published, however, the state economy was seen to be reviving and a new round of growth had commenced, causing no small embarrassment for Saxenian. The book’s examination of Silicon Valley and Route 128 is, in general, profound and correct. One could hardly find fault with its prediction and promotion of Silicon Valley.  Yet to conclude that Route 128 needs a complete rebirth from the fact that Silicon Valley succeeded and did so on a totally different model, was indeed a bit too hasty. Regional development takes root in the culture and tradition of the region, and the birth and growth of innovation is a long and meandering road, paved with trials and tribulations, for which patience and foresight are required. If we fail to explain the resurgence of Route 128 in mid 1990s, how could we possibly resolve the myth of its decline in 1980s? A Boston native, as she calls herself, Saxenian seems to lack an in-depth understanding of its culture and history. The task was to befall Michael Best!

Two issues are worth reflection with regard to the research methodology employed by Saxenian. Firstly, it is inappropriate to rush into judgment that organizational structure and local culture are to blame for the poor economic performance of a certain region; secondly, it is unreasonable to use the organizational structure and culture characteristics of a region with strong economic performance as a benchmark to negate or disparage styles and features different from it.  A more just conclusion should acknowledge the relative advantages of each model, allowing each to maintain its distinction while encouraging both to learn from each other. In August 1995, Saxenian wrote a preface to the paperback edition that was to be published by Harvard University Press. It could have been a perfect opportunity to modify some of her views in the book, yet she stubbornly insisted that horizontal collaboration between highly specialized firms trumps vertical integration within large enterprises, and therefore, “it (Boston’ Route 128) is likely to take decades to overcome the management practices, culture and institutions that have hindered the region in the past.” A worldly renowned scholar, expert on regional economic development, Saxenian is now Dean of the School of Information in University of California, Berkley. She also chose to reside in northern California and focus on studying Silicon Valley. But criticism from her hometown continues to follow her, likely to become a lingering regret of her lifetime.

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       Michael Best, Professor Emeritus and External Director of Center for Industrial Competitiveness at University of Massachusetts, Lowell, is a low-key scholar with rigorous style. His thirty years of academic life, from 1982 on, produced three monographs and nearly twenty papers on economics. He is also a Fellow of the Judge Business School of Cambridge University, and serves about ten different positions in a range of political, business and academic organizations in both Europe and the States. His research focus includes industrial development strategies, business organization, technological change, cluster evolution, and regional innovation systems. Though not a prolific author, he has exerted profound influence in the field with each of his pulbications. Despite being frequently consulted by the national and local governments of many countries, Best seldom accepts media interviews. It was really not easy to find a picture of his on the Internet. Therefore, the only way to know Best is through his works. My regret soon turns to respect: perhaps such is what makes a true scholar!

Best’s academic efforts are manifested three-fold. Firstly, he plans to carefully sort out the main views of the key economics schools, laying theoretical cornerstone and right direction for his own research. He draws upon a long heritage in economic thoughts beginning with Adam Smith, and claims to have inherited the new growth theory (from Robert Solow to Paul Romer) that acknowledges science and technology as critical to economic development. He also sides himself with Schumpeter and Porter. The “productivity triad” he created is employed as an analysis framework to x-ray the economy and is said to be an amendment to Porter’s “diamond model”. The three domains that make up Best’s “productivity triad” are skill formation, business model and production system. Besides, Best strives to conduct research based on extensive and accurate data. On his initiative and in his charge, THREAD (short for “Techno-Historical Regional Economic Analysis Database”) was set up in the Center for Industrial Competitiveness. Many of Best’s papers and reports on the development of technology industry in Massachusetts utilized this database, for which reason the credibility of his findings was greatly enhanced. Thirdly, Best aims at nurturing an international comparative perspective for his research. He has travelled all over the world. His participation in industrial reconstruction and economic policy making brought him into close contact with the economies of many countries and regions, including Massachusetts, US, Northern Ireland, London, Malaysia, Slovenia, Cyprus, Jamaica, Honduras and Moldova. Extensive traveling and scientific research have bestowed his works with a genuine international perspective and global vision.

All those in pursuit of knowledge and truth hope their work to be recognized as objective, authentic and reliable. Best Is no exception, and he achieves so by respecting history with a critical eye, by collecting and screening regional economic data and by celebrating differences while seeking common grounds.  Painstaking efforts finally paid off with inner satisfaction and general praise. His 1990 book The New Competition: Institutions of Industrial Restructuring was highly recommended by book reviewers. Charles Perrow, among others, thinks highly of this book for four reasons: historical scope, comparative methodology, rigorous approach to theories as well as clear explanation of complex economic issues with simple language and models. A phenomenal sale of tens of thousand copies is a deserving reward for Best’s steadfast pursuit over the years.

Best’s examination of Massachusetts’ economy can mostly be found in a series of papers he wrote and his 2001 book The New Competitive Advantage: the Renewal of American Industry, published by Oxford University Press. From a “capability and innovation perspective,” Best addresses the resurgence of American economy, and that of industry in particular. The fifth chapter of the book entitled “The Resurgence of Route 128: the Triumph of Open Systems,” is a classical piece that explains the 128 phenomenon- its decline and rebirth- in a convincing manner.

——  A capacity to maintain the continuity of science and technology while actively adapting to the changing environment is the most prominent regional advantage of Massachusetts and the New England region as a whole. The New England area has traditional technology advantage, especially a leadership in precision machining and complex product systems worldwide. It was the first to convert from traditional industries such as garment, textile and leather to modern information industry and to contemporary plural industries in biomedicine, clean energy and so on. Adaptability and innovation have become the momentum for regional economic and societal development.

——  A new business model- systems integration-with its characteristic openness and flexibility played a decisive role in the resurgence of Route 128. Best inclines to interpret the years of economic downturn between 1985 and 1992 as a time of “creative destruction”, for following that period Massachusetts began to widely apply the principles of systems integration to business organization. A model as such that had proven powerful in Silicon Valley advanced new product development and spawned a large number of “disruptive” innovations. Route 128 started to exhibit equally durable vigor and vitality as Silicon Valley, if not more.

—— The 128 region gains a new competitive advantage through industry diversification and small-scale production. Massachusetts’ high-tech industry has evolved from a single computer industry to plural industries including biomedicine, precision machining, robotics and new energy. The region has never had a competitive advantage in mass production, and so automobiles and consumer electronics never took root here. The area favors high-end and exquisite personalized products targeted at a relatively small market. Presently, such products are labeled as “high-tech.” In Best’s opinion, this is exactly a new competitive advantage demonstrating “capability and innovation.”

Silicon Valley and Route 128 were used by Best as case studies to elaborate on “capability and innovation perspective”. It was his long-time efforts in creating new theories that rendered his interpretation of the 128 phenomenon convincing and impeccable. Only one point may be added here: In terms of America’s overall industrial development, Silicon Valley, Route 128, North Carolina Triangle Park or other distinctive industry clusters are all indispensable. Gentility on the east coast and cowboy culture on the west are no more than a regional division of labor with respect to basic research, product development and production scale. It is exactly thanks to such a variety of industries and qualities in different regions that American can still impress the world as a leading innovative nation and innovation economy.

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       Today, Route 128 remains the focus of attention for numerous researchers and policy-makers. Outside the United States, Asians, in particular, have expressed a keen interest in the region. For instance, Professor Man-Hyung Lee from Chungbuk National University in South Korea and Professor Eungyoon Lee from the University of Hong Kong co-authored the paper “Legacy and Reconstruction of Route 128 Governance.” “Boston Route 128 Revisited” by Jarunee Wonglimpiyarat, researcher from Thailand’s Ministry of Science and Technology, titled has considerable influence among the English readership. Articles and reports published in other local languages are simply voluminous. Trying “America 128” in Chinese on google, you will find the search engine generates 800,000 results.

We follow 128 and study it for good reasons. It is a treasure trove for anyone interested in the development of regional economy and innovation economy. My close reading of the works in this areas yields five points which may be shared with the readers:

—— The clustering of regional high-tech industries and their success do not result from any active planning or interference on the government’s part. Such holds true for Boston’s Route 128, Silicon Valley and North Carolina’s Research Triangle Park, to name a few. However, this does not mean that governments can be nothing but a passive onlooker. Instead, governments of various levels should refrain from any participation. They need to deliver sufficient infrastructure and convenient public services, and work closely with different sectors of society to provide incentives and environment for business development.

—— Underlying the success of regional economy have been the combined arduous efforts from all sides, especially the business community, over an extended period of time. Brilliant economic performance, oftentimes attributed to the present administration’s effective governance, is in fact a much more complex matter. First of all, businesses, especially those created and managed by entrepreneurial minds, are pivotal for the development of regional economy; the integration of entrepreneurship and advanced technologies is the soul for regional innovation economy. Secondly, for any industry to breed and break though, and for a certain region to form a virtuous and functional system, it takes decades or even centuries of hard work and persistence. “One generation sows and another reaps” is the governing law for the growth of a regional innovation economy.

—— The nurture and evolution of organizational system and cultural characteristics make up the power source for regional competitiveness and sustainable development. Knowledge economy and innovation economy are built upon information, technology and culture, as in marked contrast to the traditional economy, which relies heavily on land, capital and labor. On one hand, regional culture and tradition, together with the social and organizational system from which they derive, can positively foster economic development; on the other, high-tech, represented by information technologies, exert influences on regional culture and organizational system, leading to innovation and transformation. Yet, no changes in organizational structure or culture happen overnight. “What is essential is invisible to the eye,” and the ultimate secret is no secret- there is no shortcut to success.

—— For a country, pluralism and heterogeneity are the right directions for a knowledge-based economy. Comparing the histories of Boston’s Route 128 and Silicon Valley, I find it difficult to claim which is better, in terms of both experiences and lessons. Each possesses unique strengths and advantages that need to be maintained and developed, yet each exhibits certain desirable features, worthy of being acquired by the other. In view of the historical and present performances of both, I am inclined to view the two regions as a geographical division of labor within a holistic innovation economy. Route 128 region places more emphasis on basic research and industrial R&D, and thereby is the cradle of new industries, businesses and products. Silicon Valley, however, leans more toward innovation in the design and production process, and thus is the mecca of mass production and massive sales. As is shown clearly on the economic maps of such large nations as America and China, domestic division of labor and industry is realized through various industrial “districts,” “belts” and “corridors.” A “big” country makes “many” industries possible. No matter in the fields of economy, politics or culture, it is the breaking away with convention and tradition, or “maverick”, that enables multiple successes, all with strong capacity to resist risks.

—— Greater importance should be attached to researches on the cycle of innovation economy. Despite our genuine wish for perpetual growth and prosperity, the economy has a cyclical development of growth, stagnation, recession and recovery, which is beyond our will. Is there a special cycle for innovation economy? What are the implications of Route 128, with its course of sudden prosperity, rapid decline, recent resurgence and steady development? Can we find any correlation between the present global crisis and the high-tech led innovation economy? Several useful lessons could be drawn from the story of Route 128: there is no need to panic when the economic growth slows down or stalls, nor should any irrational actions be taken. Intervention may produce immediate effects, but the short-sighted measures may deal a lethal blow to the economy in the long run. Scholars on Route 128 are solidly united on one point: the 128 high-tech region is neither a product from governmental planning nor a result of administrative intervention.

Route 128 and Massachusetts at large have won plenty of applauses and cheers for their leadership in innovation economy. Such is not saying that the state boasts a perfectly healthy economic sector. In fact, it has long been besieged with worries, doubts and criticism, which include the following: firstly, Massachusetts, unlike California and other technology-leading states, is home to only a handful of big companies (among a total of 132 US companies on the Fortune Global 500 list, only 11 are headquartered in Massachusetts); secondly, Massachusetts fails to offer the best business climate, due to the high living costs driven up by expensive housing and commodity prices, not to mention its high taxes (it was once dubbed “Taxachusetts”); thirdly, the state has a long way to go to keep its locally educated talents from migrating elsewhere; fourthly, Massachusetts is not the “apple of the eye” for venture capitalists, and it is believed that such pillar enterprises as Raytheon could fall easy prey to the cut in defense R&D funding from the federal government; fifthly, vulnerability caused by sole dependence on the European and domestic markets demands expansion to the global market; and etc. A few of these problems have in part been addressed in scholarly works (e.g. the relatively small amount of big pillar companies), while many more have been placed on the agenda of collective governance. Recent prediction of a dozen local economics that the state’s economy had slipped into a “slow gear” did not arouse any panic or recrimination. People have chosen to take the fact with calmness and peace. Perhaps more stimulus measures are coming up or the market shall be let alone to recover. In any event, the innovation economy in Boston’s Route 128 area is growing with its characteristic perseverance, adding some bright hue onto the otherwise dim picture of America’s economic recovery.

On September 20, Eric Rosengren, president of the Federal Reserve Bank of Boston, was invited to give a talk to an audience from South Shore Chamber of Commerce. With a deck of slides full of charts and graphs, and against the backdrop of America’s current economic situation, Rosengren intended to provide sufficient justification for the latest policy announced by the Fed. He also firmly dismissed the alleged conspiracy between Bernanke and him one month ago. All major news, Fox News included, reported his talk and the ensuing arguments. The local Boston Globe regarded the open discussion- stirred up by the senior officials of the Fed both prior to and after the announcement- as rare. Yet, given all the legends surrounding the meandering Route 128, what on earth is not possible for the dash and daring Boston?

 

References

Best, Michael H. The New Competition: Institutions of Industrial Restructuring. Cambridge: Harvard UP, 1993. Print.

Best, Michael H. The New Competitive Advantage: The Renewal of American Industry. Oxford: Oxford UP, 2001. Print.

Dukakis, Michael S., and Rosabeth Moss. Kanter. Creating the Future: The Massachusetts Comeback and Its Promise for America. New York: Summit, 1988. Print.

Earls, Alan R. Route 128 and the Birth of the Age of High Tech. Charleston, SC: Arcadia Pub., 2002. Print.

Euchner, Charles C., ed. Governing Greater Boston: The Politics and Policy of Place. 2003 ed. Cambridge, MA: Press at the Rappaport Institute for Greater Boston, 2003. Print.

Morgan, Kevin. Rev. of Regional Advantage: Culture and Competition in Silicon Valley and Route 128. Research Policy 25.3 (1996): 484-85. EconPapers. Web. 11 Sept. 2012.

Lampe, David, ed. The Massachusetts Miracle: High Technology and Economic Revitalization. Cambridge, MA: MIT, 1988. Print.

“Massachusetts’ Clean Economy Sees Massive Growth, Now Hosts 71,000 Jobs In Cleantech.” Massachusetts’ Clean Economy Sees Massive Growth, Now Hosts 71,000 Jobs In Cleantech. N.p., 01 Sept. 2012. Web. 15 Sept. 2012. <http://thinkprogress.org/climate/2012/09/01/785051/massachusetts-clean-economy-sees-massive-growth-now-hosts-71000-jobs-in-cleantech/?mobile=nc>.

“Massachusetts Economy Faring Well in World of Economic Hazards, UMass Journal Reports.” Boston.com. The New York Times, 21 June 2012. Web. 15 Sept. 2012. <http://www.boston.com/businessupdates/2012/06/21/massachusetts-economy-faring-well-world-economic-hazards-umass-journal-reports/VAAqond7LUSNyDotK6V43M/story.html>.

Massachusetts Economic Outlook. Rep. JP.Morgan Chase, 29 Aug. 2012. Web. 10 Sept. 2012. <https://www.chase.com/online/commercial bank/document/Massachusetts.pdf>.

O’Connor, Thomas H. Building a New Boston: Politics and Urban Renewal, 1950-1970. Boston: Northeastern UP, 1993. Print.

Perrow, Charles. Rev. of The New Competition: Institutions of Industrial Restructuring. Administrative Science 37.1 (1992): 162-66. JSTOR. Web. 15 Sept. 2012.

Rosegrant, Susan, and David Lampe. Route 128: Lessons from Boston’s High-tech Community. New York: Basic Books, 1992. Print.

Saxenian, AnnaLee. Regional Advantage: Culture and Competition in Silicon Valley and Route 128. Cambridge, MA: Harvard UP, 1994. Print.

Tuerck, David G. Rev. of The Massachusetts Miracle: High Technology and Economic Revitalization. Snwll Business Economics 1.1 (1989): 81-83. JSTOR. Web. 13 Sept. 2012.

Tsipis, Yanni Kosta, and David Kruh. Building Route 128. Charleston, SC: Arcadia, 2003. Print.

Woolhouse, Megan. “Obama and Romney Economic Advisers Spar on Taxes, US Aid Harvard Economists Offer Rival Visions.” The Boston Globe. N.p., 14 Sept. 2012. Web. 15 Sept. 2012. <http://www.bostonglobe.com/business/2012/09/13/harvard-summers-and-mankiw-advisers-obama-and-romney-air-differences-economy/Qxu4IaNJeLqNuSSeYv9DdK/story.html>.

 

A Chinese version of the article can be found at Sina Financial and Economics Blog.

 

 

 

 

 

 

 

Innovation Economy and an Economic “Oasis”

        If America wants to be a healthy, smart, rich, globalized, high-tech powerhouse, we arguably have no better model than Massachusetts.

—— Mark Vanhoenacker

       After the outbreak of the financial crisis, it did not take long for many U.S. economists and business leaders to recognize that innovation economy would be the key to brake recession and make possible a resurgence.  Paul Krugman defined the “great recession” as “the third depression” in the world’s history, and clearly stated that nothing but a new technological revolution that transforms the lifestyle and modes of production for all humanity could lift us out of the recession and usher in a new wave of economic growth.  Economist Tyler Cowen from George Mason University expressed a very similar view in his book, the Great Stagnation. Failing to accurately predict the crisis and defuse it in a timely manner, economists from various schools have been under great pressure. Yet while continuing to quarrel over the causes of the recession and short-term measures against it, few questioned or challenged the above positions. In the business arena, Warren Buffett have stricken home his point repeatedly: the value of the American system lies in innovation which unleashes human potential; innovation will lead America out of the predicament.  Steve Jobs also showed his confidence and believed that “as long as we innovate, we will be fine”. Gary Shapiro, CEO of American Consumer Electronics Association launched the innovation movement, a coalition of 100,000 citizens, wishing for a revival of innovation economy to spur America’s Comeback.

Winning the 2008 presidential election by advocating “change”, Obama has launched a series of policies and measures to promote innovation and economic development. In September 2009, he released “A Strategy for American Innovation: Driving towards Sustainable Growth and Quality Jobs”. In his 2011 State of the Union Address, Obama proposed “Startup America Initiative”. In February 2011, he announced the “Wireless innovation and Infrastructure Initiative” and “Better Building Initiative”. The “Government Reform for Competitiveness and Innovation Initiative” was established in his Presidential Memorandum in March 2011. Very recently in March 2012, Obama advanced manufacturing initiatives to drive innovation, create job growth and ultimately improve America’s competitiveness in global trade. For the Democratic Party and the Republican Party who have plunged into an unprecedented political fight, innovation has been one of the two issues on which both can easily reach consensus (the other is said to be criticism on China’s human rights situation). These initiatives, rekindling Americans’ hope and refreshing their commitment to innovation, increased investments in basic scientific research and proved effective in supporting clean energy development. However, the two parties diverge again when it comes to the intention and impacts of such initiatives. Hardcore Republicans see Obama’s policies as a continuation of the Bush Administration, with no novelty in content or effectiveness in execution. Obama’s followers, on the contrary, firmly believe that America has finally made its way back on the right path. For them, it was due to the lack of foresight and the mistakes of the previous administration that the present polices are taking longer to show their effects.

Along with the increasingly raucous party brawls, America’s recovery has been full of twists and turns. The revolutionary breakthrough in science and technology, much longed for by everyone, seems unlikely to take place in the near future. The economy has not fared well in the past few months: high unemployment rate (risen to 8.3% in July 2012), slow growth rate (1.5% for the 2nd quarter of 2012), persistently low consumer confidence (latest reported to hit the bottom in July 2012) …… All of these not only fogged the prospects of the nation’s economic recovery, but also cast a heavy shadow on Obama’s efforts to seek reelection. Some have even begun to question if America’s competitive advantage, centering on innovation, is gradually lost. The 40th Republican National Convention, closed just this past Friday, not only made official the nominees for the 2012 Presidential election, but tirelessly hammered the Obama administration’s poor economic performance, especially when it comes to job creation and innovation.  Fortunately, there remain a few unyielding oases in the largely devastated desert, which somehow represent and indicate the future hope of a 21-century “innovation America”. Massachusetts is among the most convincing ones.

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       Although Massachusetts has to bear the same troubles and miseries brought by the recession, it was able to buck the trend and had a couple of good shows. In comparison to the nation’s flagging economic situation that has lasted for a while, Massachusetts’ performance, if not outshining all others, has certainly been eye-catching.

• Massachusetts was eleven months later than the nation to enter recession (recession in Massachusetts started in November 2008 vs. December 2007 for the nation); in March 2010, Massachusetts took the lead into recovery. Its economic growth rate is over twice the national average (growth rate 4% in Q2, 2012).
• Unemployment rate in Massachusetts has been far lower than the national average (June 2012: US 8.2%, MA 6%); it created the record of a consecutive 16-month job growth during the recession.
• In March 2012, Massachusetts regained the top spot on 11^th Annual State Competitiveness Report, issued by the Beacon Hill Institute at Suffolk University (it was the third in 2010).
• Massachusetts ranked the first on Kauffman Foundation’s 2010 State New Economy Index. Washington came in second with an obvious gap.
• Boston, Massachusetts’ capital city, successfully broke into Economist magazine’s Global City Competitiveness Index, ranking top 10.
• In October 2010, American Council for an Energy Efficiency Economy placed Massachusetts as the most “energy efficient” state, replacing California.
• According to Massachusetts Divison of Health Insurance Finance and Policy, the state’s insurance coverage ranks first in the nation: the uninsured rate has dropped to 1.8%, and the uninsured rate for children is as low as 0.2%.
• Massachusetts has the best schools in America. Education Week’s 2012 report ranks Massachusetts the second on the overall index; but on two of the index’s most important measures- a lifetime educational Chance for Success index and a K-12 Achievement index, the state leads the nation. According to 2011 Harvard survey, the reading skills of Massachusetts’ high schoolers is fifth worldwide, and math skills the ninth, ahead of both Japan and Germany.

 

Particularly noteworthily, Standard and Poor’s (S&P), in view of the state’s outstanding performance in fiscal control and budget balance for recent years, upgraded the credit rating for Massachusetts to AA+ from AA in September 2011. Previously, the state had gained ratings of Aa1 from Moody’s and AA+ from Fitch. Taken together, this set of ratings gave Massachusetts its highest credit standing in history, contrasting starkly to the fact that S& P downgraded the credit rating for America about a month earlier. Such hard-earned results truly made the government and state legislature leaders happy and excited for quite a while. Most importantly, it added new confidence and motivation to the future development of Massachusetts.

Aiming at promoting collaborative activities among government, industry, universities and research institutes as well as advancing the healthy development of a high-tech oriented knowledge economy, Massachusetts state legislature established a specific economic cooperation organization, Massachusetts Technology Collaborative (shortened as MTC). Ever since 1997, MTC has released Index of the Massachusetts Innovation Economy on a yearly basis.  Through a comparative analysis against other US technology leading states as well as other countries and regions with advanced science and technology, the Index makes an objective evaluation of the annual performance of Massachusetts’ innovation economy, clarifies the elements propelling or constraining innovation and economy, with the hope of providing some valid suggestions to policy makers, business managers and academic leaders. In 2004, MTC founded John Adams Innovation Institute, named after the second president of America, to lead the writing of the report. Beginning with a striking title, “Massachusetts USA leading the Innovation Revolution”, the preamble to the 2011 index fully recognized the state’s remarkable achievements in 2010 and further pointed out, “The Massachusetts Innovation Economy is one of the state’s key advantages in the global economy and an engine of prosperity for our citizens. It is also a source of resilience amidst national and global economic uncertainty.”

This preamble arouses one’s curiosity about the root causes and the historical origins of the economic prosperity and social progress witnessed in the Commonwealth.

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      When it comes to innovation in Massachusetts, almost all commentators would trace its history back to two or three hundreds years ago, or probably even four hundred years ago. Most of them would also be citing the many “best”, “No.1” and “leading place” that the state and the Greater Boston area have created in the history of America in order to reinforce Massachusetts’ position and image of an “innovator”. From the moment in the early seventeenth century when the pilgrims set foot on the continent of North America, settlers of the New England region, those in Massachusetts being the most representative ones, have begun their long journey of arduous pioneering. The dream and efforts of these early colonists to build a “City upon the Hill” reaped rich fruits on this not-so-fertile piece of land.

From the establishment of “Mayflower Compact” to that of the first state constitution, from the first shot in the Independence War to the United States Declaration of Independence (documents record five Massachusetts residents signed it), numerous founding fathers dedicated themselves to the Great American Experiment, drawing the blueprint and laying the rudiment for a future America. By founding Harvard University and opening the first public school in the nation (Boston Latin Grammar School), through building the first free public school (Dorchester Mather School) and opening the first public library (Boston Public Library), Massachusetts has been brave in educational innovation and reforms, finally growing into a world-renowned intellectual city. Inventions in Massachusetts are simply impossible to enumerate: the electric light, the telegraph, the telephone, the computer, the sewing machine, the typewriter, the microwave and the razor; the initial clinical applications of the smallpox vaccine, the anesthetic ether and the penicillin; the first email successfully sent out and the smooth launch of liquid fuel powered rocket- the list goes on and on. Hundreds of thousands inventions and creations as such revolutionized the lifestyle and mode of production of Americans and of people around the world. Besides, Massachusetts was home to the first lighthouse, the first railroad, the first motorcar, the first man-made canal and the first subway line. It also took the lead in introducing the park, the cemetery, the seaside bathing spot, the countryside golf club and other public facilities alike. It was in Massachusetts where the first Thanksgiving was celebrated and the first Christmas card was printed. People in Massachusetts also had the privilege to watch the first basketball and volleyball matches as well as the marathon in 1890s. The “American system of manufacturing”, featured by interchangable parts, later sweeping the world and preceding Ford’s assembly line, claims Massachusetts as its cradle, so does the modern industrial park and venture capital. In one word, invention and innovation are inseparable from the Massachusetts history and have become an engrained cultural gene, unique to the region.

American English has a special word to describe the innovative characteristic of residents in Massachusetts and in the New England region as a whole: Yankee Ingenuity. Merriam-Webster Dictionary defines it as “the self-reliance of early colonial settlers of New England, United States”. The phrase is further elaborated as an attitude of make-do with materials on hand: it is “inventive improvisation, adaptation and overcoming of dire straits when faced with a dearth of resources”. I find it not fairly hard to locate an accurate equivalent in Chinese to fully bear the wealth of implications. Indeed, “Yankee ingenuity” is in fact where the nowadays much-lauded  “entrepreneurship” and “innovativeness” derive from. In the Bay state, one sees everywhere the upholding of tradition by the “politically-oriented” Massachusetts people. They not only have “the Spirit of America” engraved on their license plates, but also composed a song with “the Spirit of America” as its title and sing it widely as the unofficial state song.

With a deep understanding of and a warm respect for the history and culture, incumbent Massachusetts governor, Deval L. Patrick, stated proudly so in his first inaugural address: “Massachusetts invented America. American ideals were first spoken here, first dreamed about here… In so many ways, our struggle, our sacrifice, our optimism shaped the institutions and advanced the ideals of the nation.”  “Massachusetts invented America”, how boldly declared! This declaration, causing statewide and lasting resonance in the Commonwealth, was spread and eulogized broadly.

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       It took a long process of gestation and development before the “innovative spirit”grew into an “innovation economy”. With indomitable entrepreneurship, early pilgrims survived the many hardships and promoted the prosperity of business. Massachusetts and throughout the New England region have been leading America’s industrialization ever since they became the birthplace of the nation’s First Industrial Revolution in the mid-nineteenth century. As early as 1920s and 1930s, Massachusetts had witnessed economic transformation and industrial restructuring, both of which quietly carried on during the Great Depression. Starting from the latter part of World War II, as traditional industries accelerated outward migration and the federal government increased R & D investments, high-tech industries began to burgeon and grow in the Bay state. In 1950s and onward, scientists and engineers from the Massachusetts Institute of Technology set out one after another to found high-tech enterprises in suburbs along Route 128, and a variety of resources that had long been stored up in the Greater Boston area swiftly integrated. A large number of entrepreneurial scientists and science-minded entrepreneurs embarked on the journey to open up the brand new field of “innovation economics” with innovative practices.

The thirty years from 1950s to 1980s steeled Massachusetts and got it well prepared for a powerful display of high-tech economy in mid 1980s. Overnight, Route 128 was known as “America’s Technology Highway”, and “Massachusetts Miracle” became a buzzword. However, such happy days did not last long. In late 1980s, Massachusetts once again sank into recession and stagnation. Compared to the shower of praises on Silicon Valley, Massachusetts and Route 128 were mourned by many. It was a moment when the Massachusetts people showed extraordinary courage and calmness. Self-collected, they adhered to a unique path of development and meanwhile, looked to other regions for successful experiences. A desperate counterattack was going on under a seemingly tranquil surface! From the birth of “Massachusetts Miracle” and its disillusionment, to the economy’s resurgence in late 1990s and finally to its prominent position nowadays, the ups and downs are worth a careful study.

Innovation economy has taken on new features in Massachusetts. Firstly, the industrial structure shows a tendency of diversification. Massachusetts’ high-tech industry, commonly viewed as being dominated by computer, information technology and the defense industry, actually includes other areas like financial services, bio-medicine, medical equipment, precision machinery, robotics industry, clean energy, architecture design and social media, all of which have achieved a leading place in the nation. Secondly, a multi-polar industrial layout has developed in Massachusetts. Route 128 remains the core location for high-tech industries, but has extended to Interstate 495. Areas along the subway Red Line and the Innovation District in South Boston have also attracted a considerable number of enterprises and research institutions. In addition to Boston and Cambridge, such satellite towns as Springfield, Worcester, Bedford and Woburn too formed industrial parks with distinctive functions. Thirdly, multilateral collaboration constitutes the impetus for econimic development. While solidifying its own edge, Massachusetts draws on development lessons from other emerging high-tech industrial clusters, Silicon Valley being only one of them, and has nurtured a positive cooperation mechanism made up by universities, research institutions, financial and consulting agencies, enterprises and the government. Cross-industry, cross-sectoral and interdisciplinary scientific and industrial development projects came up in an endless fashion, contributing to the regional economic prosperity. These new trends and features are all built upon innvation economy; in other words, the innovative practices carried out by the various economic elements on all level of economic activities are the fundamental driving force. Put differently, economic growth relies primarily on knowledge creation, technological innovation and entrepreneurship. Scott Kirsner, an active Massachusetts economist and columnist on innovation economics, articulates in his article “Innovation City”, “Boston is a city that attracts people who want to work in industries that have existed here since Massachusetts was a British colony; it is also the city for those who believe that the only industry worth working in is the one they’re about to create.”  Referring to Boston, these words are in fact a true portrayal of the entire Commonwealth of Massachusetts.

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      “Innovation economy” is a new term born from the unremitting exploration and successful practice of innovation in Massachusetts. The term makes most frequent appearances in innovation economy index reports and is largely promoted through the efforts of media and consulting agencies in the Greater Boston area. The academic discussion of “innovation”, however, needs to be traced to the classical definition in Joseph Schumpeter’s 1942 book Capitalism, Socialism and Democracy.  In Schumpeter’s opinion, “creative destruction”, as an intrinsic factor of capitalism, describes the phenomenon that commercial enterprises under capitalism destroy and eliminate old technologies and production systems through innovation competition (rather than price competition), break the original market equilibrium and establish a new production system and market order, gaining lucrative profits in the process. Such a concept opened the gate to innovation, from where a novel school of economics-innovation economics- emerged. Attending closely to knowledge, technology, entrepreneurship and the role innovation plays in economic growth, innovation economists, however, rarely use the term “innovation economy”. Similarly, the word “innovation”, in spite of being widely applied in the daily lives of ordinary Americans and broadly employed in the fields of politics, economy, culture and education, is in definition still mainly confined to the scope of technology and economic activities. When I was exploring a new regional development strategy for Changping in 2007 as mayor of the district, I looked extensively for the word “innovation economy” in the literature of innovation economics, but failed to find any. So I summarized my strategy as “ to vigorously develop laboratory economy and build an integrated regional innovation system of industry, academia and research”. As I did not have the access to documents in Massachusetts, I chose “laboratory economy” to carry my idea. Now thinking about it, “Innovation economy” would have been a more appropriate pick.

Guided by the “innovation prophet” Schumpeter, a series of glittering names such as Paul Romer, Elhanan Helpman, Brian Arthur, Robert Axtell, Eric Beinhocker, Richard R. Nelson, Richard Lipsey, Michael Porter and Christopher Freeman stand one after the other as signposts on the “innovation avenue”. The latest progress and breakthrough with innovation economics would have to be Michael Porter’s theory of national and regional competitive advantage. The aforementioned state competitiveness index issued by Suffolk University is exactly based on the measurement system put forward by Porter in discussing national and regional competitive advantage, i.e. eight groups of more than forty indicators altogether with a stress on per capita income and the capacity of sustainable economic growth. Schumpeter was a Harvard professor, so is Porter. From regional competitiveness to innovation economy index, the two reports echo each other, on both of which Massachusetts singles itself out. Can we conclude then, “innovation economy leading regional development” will be the next research subject for innovation economics?

No matter how the academic prospects of “Innovation economics” turn out to be, Massachusetts in THE place to feel the tremendous vitality brought about by “innovation” and “innovation economy”.  Thanks to my previous career experience, I have kept paying special attention to Governor Patrick’s political agenda and performance since I arrived here. His overall political agenda does revolve around “innovation economy” and his daily schedule is filled with innovation businesses: laying the foundation for innovation district, cutting the ribbon of school innovation laboratory, addressing at an annual student conference of history and innovation, proclaiming Massachusetts “innovation month”, writing an open letter to encourage student entrepreneurs and signing Social Innovation Compact with non-profit non-govrenmental agencies, to name only a few. Hardworking, pragmatic and full of pioneering spirits, the governor has won good wills and respect from his citizens. A vigorous advocate for the use of clean energy, an enthusiastic participator in the Race to Top program funded by the US Department of Education, a top leader in the social innovation program Pay for Success, Patrick has been faithfully practicing Obama’s innovation initiatives all along.

Deval Patrick, a Democrat, an African American, is rumored to have very close personal connections with Obama. Will this Democratic political star help Obama keep Mitt Romney, former governor of Massachusetts, away from the White House? How much would Massachusetts, as a preliminary manifestation of the power and significance of innovation economy, assist Obama with his final race in November? Let’s wait and see!

 

References:

Cowen, Tyler. The great stagnation: how America ate all the low-hanging fruit of modern history, got sick, and will (eventually) feel better. New York: Dutton, 2011.

Kao, John. Innovation Nation: how America is losing its innovation edge, why it matters, and what we can do to get it back. New York: Free Press, c2007.

Kirsner, Scott. “Innovation City”. The Good City. Ed. Emily Hiestand and Ande Zellman. Boston, Massachusetts: Beacon Press, c2004. 58-73.

“MIT’s 150 Ideas, Inventions and Innovations that Helped Shape Our World.” May 15, 2011. < http://www.boston.com/news/education/higher/specials/mit150/mitlist/ >

Porter, Michael E. The Competitive Advantage of Nations. New York: the Free Press, 1990.

Saxenian, Annalee. Regional Advantage: Culture and Competition in Silicon Valley and Route 128. Cambridge, MA: Harvard University Press, 1994

Schumpeter, Joseph A. Capitalism, Socialism and Democracy. New York and London: Harper & Brothers, 1942.

Vanhoenacker, Mark. “Don’t Mess with the Bay State” . May 14, 2012. <http://www.slate.com/articles/news_and_politics/politics/2012/05/massachusetts_is_the_best_state_in_the_union_.html >

 

A Chinese version of the article can be found at Sina Financial and Economics Blog.