Regional growth and resilience: evidence from urban IT centers

After being emblematic of the U.S. economic surge in the late 1990s, urban areas that specialize in information technology (IT) products struggled in the aftermath of the IT spending bust, with most experiencing deeper and longer periods of economic decline than the nation as a whole. Seven years later, most have recovered, but only a few have regained the prominence of earlier years. In this paper, we consider the rise, the fall, and the recovery of urban IT centers and distinguish between the factors leading to temporary gains and those contributing to a more lasting growth path. Specifically, we examine the initial characteristics of the most prominent IT centers, linking these characteristics to a discussion of economic research concerning the sources of growth in urban industrial centers. We then follow these centers through the IT bust and subsequent economic recovery. The results indicate that, although each of our IT centers was hit hard by the IT bust beginning in 2000, the full impact of the decline and the subsequent pace of recovery varied considerably with the size, density, and composition of the local IT sector. The overall experience of the IT sector and the factors that ultimately seemed to separate those urban areas that succeeded from those that struggled suggest that inputs to the process such as education, research networks, and flexibility matter more than picking the right industry.