Christopher M. Cirillo ECON 345 – Urban Economics Duke University April 26, 2013 - PowerPoint PPT Presentation

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Christopher M. Cirillo ECON 345 – Urban Economics Duke University April 26, 2013 PowerPoint Presentation
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Christopher M. Cirillo ECON 345 – Urban Economics Duke University April 26, 2013

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  1. Birth of an Idea: The Creation of Research Triangle Park and Its Sustained Economic Impact on the Research Triangle Area Christopher M. Cirillo ECON 345 – Urban Economics Duke University April 26, 2013

  2. Introduction • After World War II, the economy in the state of North Carolina had stagnated and was starting to decline • In response, key local and state leaders developed an idea for the establishment of a research and development driven park to stimulate the state’s economic growth • From the mid-to-late1950’s the park grew from an idea to a physical entity, Research Triangle Park • Today, Research Triangle Park is one of the world’s most successful science and technology-based parks • The growth of Research Triangle Park has directly impacted the economic growth of the Research Triangle area (Durham, Chapel Hill, Raleigh, and Cary) in an extremely positive manner

  3. Basis for Need: The 1950s Economy of North Carolina • For most of the twentieth century, the economy of North Carolina was driven by agriculture & three industries • Tobacco manufacturing • Furniture manufacturing • Textile manufacturing • By the 1950s, international & domestic competition resulted in a severe decline in the North Carolina economic base • In 1952, per capita income1was: • U.S. - $1,639 • South - $1,121 • NC - $1,049* • As a result, the state was not retaining its best and brightest university graduates *only two states, Arkansas and Mississippi had a lower per capita income in 1952 than NC2

  4. From Idea to Birth • In 1954, three individuals were responsible for initially proposing the idea of creating a research park to be located in North Carolina • Brandon Hodges, Treasurer of the State of North Carolina • Robert Hanes, President of Wachovia Bank and Trust • Romeo Guest, local Greensboro builder • The main idea was to leverage the science, research, and engineering expertise located at the three world-class universities located in close proximity to each other, so as to attract technology and development firms to the area: • Duke University, Durham • The University of North Carolina at Chapel Hill (UNC-CH) • North Carolina State University (NCSU), Raleigh

  5. From Idea to Birth (concluded) • After securing support in 1955 from Governor Luther Hodges, the first official entity associated with the park was established, the Research Triangle Development Council was established • Later this entity became the Research Triangle Committee under the leadership of UNC-CH sociology professor George Simpson • In 1958 a turning point occurred in the success of establishing the park when Archibald Davis proposed making the park a public, as opposed to private, entity • In just two short month’s at the end of 1958, the newly formed Research Triangle Foundation of North Carolina raised $1.425 million dollars to acquire the land for the park and construct the Research Triangle Institute2 Prof George Simpson shown third from left3

  6. Growth of the Park • The first major firm to locate in the Park was Chemstrand Corp. in May 1959 • Growth was slow over the next 6 years until the U.S. Department of Health, Education, and Welfare announced the construction of the $70 million National Environmental Health Sciences Center • Three months later, IBM announced that it would build a 600,000-square foot research facility spread over 400 acres2 Source: Hammer, Siler, George Associates 1999 study and HR&A analysis of RTF data <http://www.rtp.org/about-rtp/rtp-companies>

  7. Research Triangle Park Growth Number of Jobs, Number of Projected Jobs, and Number of Research & Development Firms Located in Research Triangle Park since 1960 through a 2016 projection. Source: Weddle, Rick L., “Research Triangle Park: Past Success and the Global Challenge”, Understanding Research, Science and Technology Parks: Global Best Practices. < http://www.nap.edu/openbook.php?record_id=12546&page=127>

  8. Research Triangle Park Today • One of the top research parks in U.S. • 7,000 acre campus located between the “tri-cities” of Durham, Chapel Hill & Raleigh • 170 companies • 39,000 full-time researchers • Creation of RTP was based on establishing “New-line” industries in North Carolina • Electronics • Communications • Chemicals • Engineering & Management Services • Business & Education Services • % New-line in Triangle area: • Pre-RTP • <15% • With RTP • By 1966 – 30% • By 2005 – 51% Source: cableinch.com <http://cableinch.com/NCHeartland.html>

  9. Research Triangle Park Today (concluded) • Key RTP Business Sectors • Agricultural Biotechnology • Biotechnology/Lifesciences • Clean and Green Technologies • Information Technology • Material Sciences and Engineering • Scientific Associations, Foundations, and Institutes • Financial and Insurance Activities Map of Research Triangle Park and list of associated companies by industry sector. Source: Research Triangle Foundation of North Carolina. <http://rtp.org/sites/default/files/Map%20info%40rtp%202012%20industry_final_0.pdf>

  10. University Partnership - TUCASI • Central to the creation of RTP was the importance of establishing a more permanent working relationship with the area’s three world-class universities • This relationship was cemented with the creation of the Triangle Universities Center for Advances Studies, Inc. (TUCASI) • Permanent capability to enable interaction between university & industry researchers and engineers • Established in 1975 on a 120-acre “park within the park” • Home to world-class organizations including: • Microelectronics Center of North Carolina • North Carolina Biotechnology Center (NCBC) • National Institute for Statistical Sciences (NISS) • Statistical and Applied Mathematical Sciences Institute (SAMSI) • Borroughs-Wellcome Fund • Sigma Xi Center The Research Triangle Park <http://www.rtp.org/tucasi>

  11. RTP’s Impact on the Area’s Economic Growth – Data Characterization • Economic impact on the Research Triangle area is measured and displayed relative to the area’s two Metropolitan Statistical Areas (MSAs) • Durham-Chapel Hill • Raleigh-Cary • Definition of MSAs established by the U.S. Office of Management and Budget (OMB) Population Data for the Durham-Chapel Hill, NC & Raleigh-Cary, NC MSAs. Source: U.S. Census Bureau’s Statistical Abstract of the United States: 2011 – Appendix II. <http://www.census.gov/prod/2011pubs/11statab/app2.pdf>

  12. RTP’s Impact on the Area’s Economic Growth – Population and Income Growth Population Growth Per Capita Personal Income growth (Dollars) Great Recession Period Raleigh-Cary MSA Raleigh-Cary MSA Population Per Capita Personal Income (Dollars) Durham-Chapel Hill MSA Durham-Chapel Hill MSA Year Year Both the Population growth (left chart) and the Per Capita Personal Income (Dollar) growth (right chart) since 1969 in the two area MSAs (Durham-Chapel Hill & Raleigh-Cary) correspond with the growth experienced by Research Triangle Park and the creation of 39,000 RTP high technology researcher jobs during the same timeframe. Source: U.S. Department of Commerce’s Bureau of Economic Analysis. <http://www.bea.gov/iTable/iTable.cfm?ReqID=70&step=1>

  13. RTP’s Impact on the Area’s Economic Growth – Gross Domestic Product Gross Domestic Product (GDP) in Millions of Dollars Raleigh-Cary MSA Gross Domestic Product (GDP) in Millions of Dollars Durham-Chapel Hill MSA Year Since 2001, the Gross Domestic Product (GDP) in millions of dollars in the two area MSAs (Durham-Chapel Hill & Raleigh-Cary) continued to grow in spite of the global Great Recession. Source: U.S. Department of Commerce’s Bureau of Economic Analysis. <http://www.bea.gov/iTable/iTable.cfm?ReqID=70&step=1>

  14. RTP’s Impact on the Area’s Economic Growth – Income Growth Per Capita Income Growth The Research Triangle area, North Carolina and Select Metropolitan Areas Percent Above/ Below the National Average A Comparison of change in Per Capita Personal Income as measured by percentage comparison to the National Average from 1970 through 2005 for the state of North Carolina and select cities. Source: Weddle, Rick L., “Research Triangle Park: Past Success and the Global Challenge”, Understanding Research, Science and Technology Parks: Global Best Practices. <http://www.nap.edu/openbook.php?record_id=12546&page=127>

  15. RTP’s Impact on the Area’s Economic Growth – Populated Area Growth Physical growth in Populated Area since 1950 in the two area MSAs (Durham-Chapel Hill & Raleigh-Cary) corresponds with the growth experienced by Research Triangle Park and the creation of 39,000 RTP high technology researcher jobs during the same period of time. Source: UNC-CH Department of Public Policy – Circling the Research Triangle. <http://publicpolicy.unc.edu/research/reasarch-triangle-park-database>

  16. RTP’s Impact on the Area’s Economic Growth – Global Economic Recovery • In 2010, the Brookings Institute developed the Global Metro Monitor to allow for a more visual understanding of the economic recovery of major MSAs from the Great Recession • Although the recession was given an official end date of June 2009, the U.S. has three million less jobs today than when the recession began toward the end of 20074 • Global Metro Monitor ranks each of the top 300 global metropolitan areas in terms of economic growth data, including real GDP and employment change

  17. RTP’s Impact on the Area’s Economic Growth – Global Economic Recovery – Durham-Chapel Hill MSA Global Metro Monitor 2012 Generated Economic Performance Ranking for the Durham-Chapel Hill, NC Metropolitan Statistical Area out of 300 metropolitan economies worldwide. Source: the Brookings Institution’s Metro Monitor. <http://www.brookings.edu/research/interactives/global-metro-monitor-3>

  18. RTP’s Impact on the Area’s Economic Growth – Global Economic Recovery – Raleigh-Cary MSA Global Metro Monitor 2012 Generated Economic Performance Ranking for the Durham-Chapel Hill, NC Metropolitan Statistical Area out of 300 metropolitan economies worldwide. Source: the Brookings Institution’s Metro Monitor. <http://www.brookings.edu/research/interactives/global-metro-monitor-3>

  19. RTP’s Impact on the Area’s Economic Growth – Global Economic Recovery Over the period 2011-2012 both MSAs (Durham-Chapel Hill & Raleigh-Cary) experienced positive GDP Per Capita change and Employment change giving them a favorable world-ranking relative to the 300 largest global MSAs Source: the Brookings Institution’s Global Metro Monitor. <http://www.brookings.edu/research/interactives/global-metro-monitor-3>

  20. Patent Trending • As argue by urban economist Edward Glaeser, the true importance of the existence of cities, the “dense agglomerations that dot the globe,” is that they have served as the “engines of innovation” since they were first formed • February 2013 report by the Metropolitan Policy Program at the Brookings Institute conducted a comprehensive, first of its kind analysis of patenting activity and trends on a national scale5 • Major findings include: • The rate of patenting in the United States is at a historically high level and has been increasing over the last several decades; • The issuing of patents tends to occur in a small number of metropolitan areas. 92% of all U.S. patents are issued in just 100 metropolitan areas, while 63% are developed by individuals living in only 20 metropolitan areas; • High quality patents are found to be long-term stimulators of economic growth; • Metropolitan areas with a significant rate of patenting most often contain research oriented universities with graduate programs in the sciences; • Patents produced under U.S. government funded research activities tend to be of very high quality.

  21. Patent Trending – Patents per Million Residents National Ranking If taken together (as could be argued) then the Research Triangle area would rank 5th nationally with 2,284 patents per million residents Both MSAs rank in the Top 20 nationally – Raleigh-Cary 12th and Durham-Chapel Hill 14th Over the period 2007-2011 both MSAs (Durham-Chapel Hill & Raleigh-Cary) ranked in the Top 20 nationally for Patents per Million Residents indicating a very high level of innovation & creativity which typically indicated a strong economic foundation & potential for economic growth5 <http://www.brookings.edu/~/media/research/files/reports/2013/02/patenting%20prosperity%20rothwell/patenting%20prosperity%20rothwell>

  22. RTP’s Impact on the Area’s Economic Growth – Summary • In addition to the 39,000 research related jobs created in RTP, studies show that >1,500 additional companies have come into the area because of RTP • Other direct economic benefits associated with RTP include: • Construction jobs • Real estate tax yields • Sales tax yields • Income tax yields • RTP and its associated universities are an incubator for creativity and innovation as measure by recent Patent trends analysis with both MSAs ranked in the Top 20 nationally for Patents per Million Residents • The creation of Research Triangle Park has directly benefited the economy of the two associated MSAs (Durham-Chapel Hill & Raleigh-Cary) • This economic impact did not occur at RTPs inception, but rather started to pay noticeable dividends in the early-to-mid-1980s • The growth in the areas population, per capita income, and Gross Domestic Product is a direct by-product of the establishment of RTP • RTPs and the area’s economic growth is most likely linked to the “new-line” nature of the industries that moved into the area beginning in 1959, with a surge in the early-to-mid-1980s

  23. RTP’s Impact on the Area’s Economic Growth – Summary (Based on Additional Research) • Professor Michael Luger is currently Director of the Manchester Business School at the University of Manchester. Prior to this appointment, he was Professor of Public Policy, Business and Planning at the University of North Carolina at Chapel Hill specializing in the study of the economic behavior of the Research Triangle area: • The failure to create RTP would most likely have resulted in the reduction of 2/3 of the 32,000 jobs in the park (circa 1988) (Luger, 97) 6 • Luger credits RTP with creating 12.1 percent of the total number of jobs in the region in 1988, with the total regional employment growth linked to the park to be about 52,000(Luger, 97) 6 • In 1988, Luger's research indicated that 21 of the research and development facilities in RTP would not have located in North Carolina if RTP had not been created. Also, “16 percent of the high tech companies in the region, not in the park, wouldn't have come here if RTP didn't exist”. 3 • In 1999, on top of the research jobs in RTP, Luger calculated that approximately “25,500 jobs have been generated by companies locating in the region, near RTP”. 3 • In a 2001 speech, Luger credits RTP during the period from 1959 to 1990, with directly and indirectly generating ¼ of all jobs in the region7

  24. Summary • From its humble beginnings in the mid-1950s to today, Research Triangle Park has become a world-class research park that has had an extremely positive impact on the economic growth and success of the area’s economy • Most of this success can be attributed to four primary factors: • Timing: the idea for the Park occurred during a period in which both private industry and state and local government saw the immense potential for significant investments in advanced research and development; • University Partnerships: the linkage with the three surrounding world-class universities allowed the RTP to build excellent working relationships with the school’s scientists and engineers and also employ the best and brightest graduates of these universities. The formal establishment of a permanent academic entity, the TUCASI, also helped to play a significant role in cementing this relationship; • Clustering: the critical mass of diversified businesses with their highly skilled scientists and engineers has enabled RTP to form a knowledge-based cluster that has demonstrated the ability to leverage these skills in innovative and creative ways to sustain long-term economic sustainability and growth; • Commitment: there has been a long-term commitment on the part of both state and regional leadership that has allowed RTP to flourish. • As argue by urban economist Edward Glaeser, the true importance of the existence of cities, the “dense agglomerations that dot the globe,” is that they have served as the “engines of innovation” since they were first formed

  25. Works Cited Cover Images: “The Research Triangle Park – Media Resources”. Research Triangle Foundation of North. 2011. Web. 13 April 2013. <Carolina http://www.rtp.org/about-rtp/media-resources> 1Weddle, Rick L., Elizabeth Rooks, and Tina Valdecanas, “Research Triangle Park: Evolution and Renaissance”. The Research Triangle Foundation of North Carolina. June 2006. Web. 26 March 2013. <http://www.rtp.org/sites/default/files/RTP_History_0.pdf> 2Link, Albert N., and John T. Scott. “The Growth of Research Triangle Park”. Department of Economics Dartmouth College. 2000. Web. 14 April 2013. <http://www.dartmouth.edu/~jtscott/Papers/00-22.pdf> 3 Rogoski, Richard R.. “State's future hinged on RTP success”. Triangle Business Journal. 18 January 1999. Web. 24 April 2013. <http://www.bizjournals.com/triangle/stories/1999/01/18/focus1.html?s=print> 4 Friedhoff, Alec, and Siddharth Kulkarni. “Metro Monitor – March 2013”. The Brookings Institution – Metropolitan Policy Program. 28 March 2013. Web. 14 April 2013. < http://www.brookings.edu/research/interactives/metromonitor#M39580-recovery-overall-nv> 5 Rothwell, Jonathan, Mark Muro, and José Lobo. “Patenting Prosperity: Invention and Economic Performance in the United States and its Metropolitan Areas”. Metropolitan Policy Program, the Brookings Institute. 1 February 2013. Web. 20 April 2013. <http://www.brookings.edu/~/media/research/files/reports/2013/02/patenting%20prosperity%20rothwell/patenting%20prosperity%20rothwell> 6 Luger, Michael I., and Harvey A. Goldstein. Technology in the Garden: Research Parks & Regional Economic Development. Chapel Hill: The University of North Carolina Press, 1991. Print. 7Luger, Michael. “Technology-led development”. Invited speech at National Economic Development Forum, Washington, DC, 31 May 31 2001.