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Ross DeVol

Director of Regional Studies, The Milken Institute

Though he currently resides along the Southern California coast, author and researcher Ross DeVol knows more about the Southern high-tech economy than most area natives. The director of regional studies at the Milken Institute, DeVol co-wrote a thorough national report titled “America’s High-Tech Economy: Growth Development and Risks for Metropolitan Areas” that placed five Southern cities within the nation’s top 25 metropolitan areas for technological and economic performance.

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An expert in regional growth comparisons, DeVol studies the relative effects of economic, business, labor, and political change or stagnation across the United States. In this interview, he focuses on the Southeast region of the country, and explains why that area needs to concentrate its energies on creating a collaborative business environment, bolstering its institutions of higher education, and improving its public image.

Capital Concerns
Government has to play a role, especially in the early stages, in trying to develop a concentration of technology firms. Regions need to first import “anchor firms” like IBM or Intel that come from the outside. In order to do that, it does require a coordinated government effort. Providing the research infrastructure is an important component of that. I think the Raleigh-Durham area has done an outstanding job, and many other metros around the country are trying to emulate their organization by developing technology parks that help attract those anchors, and then start to grow technology firms within the area. It’s a successful formula.

As you develop a tech cluster, tax breaks aren’t as important in the quest to attract firms from outside. Having said that, if your tax rates get out of line, it can become a problem very quickly. But in the later stages, it’s more important for the government to monitor developments, engage in public private forums, and see that communication between the government and the private sector is occurring so that if problems are festering and entrepreneurs are encountering barriers, the government can step in and help.

An active, progressive importation policy in the later stages is not going to sustain the tech cluster. It has to be done indigenously or internally to the area. So the infrastructure needs of the existing high-tech firms must be met, and entrepreneurs must be able access capital. Today, a lot of smaller, tech startup firms are having difficulty getting access to broad-band telecom from their providers. That presents a problem because if you can’t guarantee your clients T1 speed access to their Web page, you’re in trouble.

Reputation Is Key
If you’re a tech company looking to start up a facility somewhere, the public perception of that area can become a quality of life issue if it’s felt that somehow it infringes on your ability to get access to needs. If there’s a perceived lack of culture, then that stereotype can be manifested that way. Though Atlanta and Raleigh-Durham have certainly overcome those perceptions, it is certainly still an issue in many parts of the South. Hovever, we’ve seen a lot of businesses relocate from the northeast, to the southeast, so I do think the overall region is beginning to overcome those stereotypes.

Hurricane Harassment
Certainly one positive quality of life component is the climate, although the hurricane headlines don’t help much. Regardless of where you live, you are close to a beach and you have access to recreational activities, such as mountain climbing and hiking. The cost of living, adjusted for wages, is also fairly good in the South.

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For firms looking to expand or move from another part of the country, the cost of doing the business is going to be one of the key components determining whether they move. If they’re just looking for the cream-of-the-crop technology, or research and development, they’ll go to places like Boston. If they are looking for low costs of doing business, the South may be attractive.

Silicon South
The collaborative, cooperative environment present in Silicon Valley is conducive to growing technology firms. That does not mean that every region should necessarily aspire to be the next Silicon Valley, because that environment is not necessarily reproducible. But they can emulate the network approach to developing and growing technology firms — the infrastructure support.

That will take a while in the South. They’re certainly trying. You don’t see too many of the high-tech service clusters in the Southeast, and the cutting-edge research and testing are still not present. Cities in the Southeast are beginning to become aware of how important those issues are, but it’s going to require a shift in social and cultural values to make those priorities a reality. What makes Silicon Valley so successful is its collaborative approach and openness. That is not something the South has inherited. They tend to have a hierarchical business structure.

Predictions
In another decade or so, the South will close the gap significantly with the Northeast in terms of technology production. The greatest high-tech growth is not occurring in the Northeast now. In fact, 38 of the 50 fastest growing high-tech metros in the 1990s were located in the South or West. And a lot of those are in the state of Texas.

The South will need to upgrade it’s educational facilities, especially at the high-end. To really exist at the leading edge of technology development, you have to have that core of top-notch researchers and scientists. The South has some of that, but it doesn’t have world-renowned research institutions. It needs to develop very high-end local talent — that will probably be the key factor in how much the southeast closes the gap with the northeast.

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