Fostering Hi-Tech Economic Clusters in Miami-Dade County

Abstract

Hi-tech firms and labor are becoming increasingly important in the United States economy. Therefore, federal, state, and local government should understand the process by which hi-tech firms form and cluster together regionally. The term “cluster” entails a spatial and sectoral concentration of firms of a related industry. A cluster grows when new firms are added to it, typically through the birth and expansion of entrepreneurial startups. The term “hi-tech” refers to fourteen specific industries that have the highest share of high-skilled technical labor; the majority of these industries relate to information and communications technology (IT). The literature on hi-tech clustering has focused on both qualitative and quantitative studies of different regions. Generally, qualitative literature revolves around well-covered cases, such as Silicon Valley. Quantitative studies may focus on diverse regions, but may not offer causal explanations for cluster formation. Therefore, this study seeks to add to the body of evidence concerning how hi-tech economic clusters develop by exploring a new case, that of Miami-Dade County in South Florida. The evidence used to assess the county is primarily qualitative, relying on public and private sector documents, data, and research reports, as well as interviews with eighteen individuals involved in the county’s hi-tech industries. Individuals were chosen to represent different stakeholders, such as government officials, entrepreneurs, investors, legal professionals, executives, business incubator staff, and professors. After assessing this evidence, it is apparent that the seeming weakness of Miami-Dade’s IT industries (compared to Silicon Valley and the United States as a whole), and the relative strength of its life sciences industries, reflects the distribution of the county’s human, social, and financial capital, and the institutions and policies that affect this distribution. There are a number of conclusions to be drawn from this finding, for both understanding how economic clusters form, and the effectiveness of public policy on hitech development in Miami-Dade. The county’s history of cluster formation is largely consistent with the theoretical literature, which highlights the importance of “anchor” firms, venture capital, developed social networks among hi-tech industry and universities, and the importance of education. The literature has not resolved some issues, such as the importance of locally born entrepreneurs versus the importance of outsiders and immigrants, the importance of infrastructure and physical geography, and the exact causal mechanisms by which anchor firms form spin-offs. Evidence from Miami-Dade alone is not sufficient to resolve these debates. A number of policy implications can also be drawn. Foremost, each region likely has a different balance of human, social, and financial capital, and therefore, solutions for the county are not fully applicable to other regions of the United States. Federal policies concerning immigration and macroeconomic policy will affect the trajectory of the county’s hi-tech development. It is also apparent that federal support for STEM education is important. At the state level, tax policy, grants and state investment funds have not provided the venture capital that local startups need. Available evidence is insufficient to determine how effective state support for nonprofit research institutions is. Local policy has proven able to provide small amounts of capital for supportive projects, help with awareness campaigns, and support quality-of-life assets for which entrepreneurs value Miami-Dade. Finally, private sector actors’ importance cannot be understated; policy has only set the background against which these individuals build firms.