Research on Austin’s Entrepreneurial Ecosystem

PROJECT DESCRIPTION

Principal Investigator: Dr. Elsie Echeverri-Carroll

Around the world, policymakers are searching for unique economic development policies that can start a spiral of high-tech clusters. Austin is often selected and ranked highly as a successful high-tech city mainly due to the presence of large technology companies like IBM, 3M, Apple, Hewlett-Packard, Google, Facebook, AMD, Applied Materials, National Instruments and many others. The early build-up of computer and microelectronics manufacturing in the 1960s, strengthened by the successful location of the Microelectronic Computer Corporation (MCC) in Austin in 1983 and Sematech’s consortium of 13 semiconductor manufacturers in 1988, has been well documented by a group of senior researchers at the IC² Institute – Ray Smilor, David Gibson, and Fred Phillips – who worked closely with George Kozmetsky, founder of the Institute, to empirically document Austin’s early high-tech developments. These researchers highlight the central role of business, civic, and university collaboration in high-tech industrial development and the targeting of sectors that could leverage the comparative advantages of the region as the key ingredients that moved Austin into the top ranks of high-tech cities.

The 2015 Kauffman Index Report rated the Austin MSA as the number-one U.S. city for technology innovation startups. However, less is known about the policies, influencers, and institutions that have contributed to the development of Austin’s entrepreneurial ecosystem. The Austin MSA is a unique and compelling case to study about entrepreneurial pathways for a number of reasons. First, it experienced one of the most exceptional transformations in the U.S urban landscape, growing from a state capital/university town of under 400,000 in 1970 to a leading technology-based region with a population of two million today. In the 1970s there were a number of regions sharing Austin’s basic characteristics – major university/state capital city, a highly educated workforce, a good amenity/quality-of-life mix. What role did the entrepreneurial ecology of the region play in supporting and sustaining such remarkable growth and transformation? Second, the Austin region has been extraordinarily resilient through various phases of industrial change and restructuring. Most notable is how rapidly the region adjusted to major industrial restructuring in the 2001–2003 period (the dot-com bust). The region experienced negative job growth from 2001 to 2003, but by 2005 Austin’s employment and population growth were again far exceeding national averages as well as the growth of other tech-oriented regions. The region was successful in rapidly diversifying its economic base through robust new start-up activity and the repositioning of more mature firms.

In prior work, Echeverri-Carroll and Brennan establish that the birth and sustainability of Austin’s entrepreneurial ecosystem was due to strong corporate linkages between local corporate branches and parent firms in leading innovation centers, especially Silicon Valley. These links not only brought talent and knowledge of microelectronics and computing product markets to Austin but also put local civic and university leaders in contact with successful corporate managers in high-growth tech sectors. Not only were these companies courted to locate in Austin, but civic entrepreneurs worked aggressively to encourage investment expansion and links to the university.

Several questions need to be addressed. How did Austin develop a robust entrepreneurial economy over time? What institutions and policies have been important in the growth and sustainability of local, innovative startups? How did the 2000 dot.com bust change the Austin entrepreneurial scene? What role have the large corporations that located in Austin played in the birth and growth of Austin’s entrepreneurial ecosystem? How has the University of Texas at Austin contributed to the supply of startups in the city? The research and analysis substantiating Austin’s rich history as a technology entrepreneurial hot-spot has not been done, and the story of how innovative entrepreneurial firms have been created and grown in the city has not been told.

Recognizing potential gains from telling a more complete story, the Ewing Marion Kauffman Foundation is supporting the creation of a unique relational database that will contain longitudinal data on technology-intensive entrepreneurial ventures in Austin. Elsie Echeverri-Carroll from the IC² Institute is principal investigator on this project, and Michael Oden from Community and Regional Planning is co-principal investigator. The 18-month project (Fall 2015 – Spring 2017) involves developing a database that collects firm and founder information from at least 20 third-party databases (e.g., National Establishment Time Series (NETS), Crunchbase, and Linkedin), entrepreneurial firms’ websites, government primary data sources (e.g., Census of Population and American Community Survey), and local newspapers (e.g., Austin American Statesmen, Austin Business Journal). We validate data with interviews; information on events related to entrepreneurial firm growth, such as annual employment, patenting, university technology licensing, government grants, and other events, such as VC investments, mergers, and initial public offerings (IPOs); and biographical information on company founders such as founder’s name, education, work history, others firms founded, and social networks.

This project will study the industrial genesis of Austin’s entrepreneurial economy, proposing an alternative model based on the location of large firm branch plants that evolved over time into an entrepreneurial economy. Specifically we highlight the role of individuals who acted as influencers and the enduring institutions they built. This project will document the development of an entrepreneurial ecosystem that is more sustainable and more inclusive than the prevailing Silicon Valley model. Building on our prior work in Austin, this project will provide a comprehensive examination of the development of a successful entrepreneurial economy. Working with Maryann Feldman and Nichola Lowe at the University of North Carolina, we will organize the Austin data using the Triangle Genesis database structure, which will permit a comparison of similarities and differences between these two regional economies that have been able to generate enviable technology-based entrepreneurial economies.

We plan to meet several objectives. Our first objective is the expansion of an updatable data repository for studying and documenting dynamic processes of entrepreneurship, innovation, and employment growth in the Austin Metropolitan area since 1980. A second, related objective is the preservation of documents in a publicly accessible and digital archive, thereby giving practitioners and researchers additional documentation for data analysis and interpretation.

PRINCIPAL INVESTIGATOR

Elsie Echeverri-Carroll

CO-PRINCIPAL INVESTIGATOR

Michael Oden

AUSTIN PROJECT STUDENT TEAM

Jeremiah Spence, Post-Doctoral Fellow, College of Communication

Evan Johnston, Undergraduate Student, Economics and Computer Science

Tingting Cai, Master’s Student, School of Information

Hayden E. English, Master’s Student, LBJ School of Public Affairs

Yimeng Zhao, Master’s Student, School of Information

Bhavya Bhalla, Undergraduate Student, Business and Economics

Sanjani Prodduturu, Undergraduate Student, Chemical Engineering

Hubbard Uhlhorn, Undergraduate Student, Business and History

PUBLICATIONS

Echeverri-Carroll, Elsie, and Niles Hansen (1997). “The nature and significance of network interactions for business performance and exporting to Mexico: An analysis of high-technology firms in Texas.” Review of Regional Studies 27, 1: 85-99.

Echeverri-Carroll, Elsie, Lynn Hunnicutt, and Niles Hansen (1998). “Do asymmetric networks help or hinder small firms’ ability to export? The case of the high-technology industry in Texas. Regional Studies 32, 8: 721-733.

Echeverri-Carroll, Elsie (1999). “Knowledge flows in innovation networks: A comparative analysis of Japanese and American high-technology firms.” Journal of Knowledge Management 3, 4: 296-303.

Echeverri-Carroll, Elsie, and Alejandro Somuano (2001). “Do innovations lead to exports? A case study of high-technology firms in Texas.” Southwestern Journal of Economics 4: 192-216.

Echeverri-Carroll, E. L., and Brennan, W. (2009) “Are innovation networks bounded by proximity? In Paez A, Buliung, R. N., Le Gallo, J., Dall’erba, S. (eds.) Innovation, Networks, and Localities. Springer Verlag: Berlin; 28-49.

Echeverri-Carroll, E. L., and Ayala, S. (2004) “Economic growth and linkage with the Silicon Valley: The cases of Austin and Boston.” Texas Business Review, Bureau of Business Research, University of Texas at Austin. December.

Gibson, D., Rogers, E. (1994) R&D Collaboration on Trial: The Microelectronics and Computer Technology Corporation. Harvard Business School Press: Boston, MA.

Gibson, D., Butler J. .S (2013) “Sustaining the Technopolis: The Case of Austin, Texas.” World Technopolis Review (1): 64-80. World Technopolis Association. Open Access.

Kozmestky, G., and Smilor, R. W. (1983) Transforming Texas and the Nation: Productivity through Entrepreneurship and Risk Taking. Working Paper, IC² Institute. University of Texas at Austin.

Oden, M., Yilmaz, Y. (2006) From assembly to innovation: Learning from the birth and development of a high-tech region. In Technology and Development. UNESCO-WTA: Paris.

Smilor, R. W. (1982) Small Business and the Entrepreneurial Spirit. Proceedings of a conference sponsored by the RGK Foundation. Deloitte Haskins & Sells, IC² Institute, and College of Business Administration.

Smilor, R. W., and Kuhn, R. L. (1984) Corporate Creativity: Robust Companies and the Entrepreneurial Spirit. New York: Praeger Publishers.

Smilor, R. W., Kozmetsky, G., and Gibson, D. V. (1987) “The Austin San Antonio Corridor: The Dynamics of a Development Technopolis.” Working paper. IC² Institute.

Smilor, R., Gibson, D., Kozmetsky, G. (1988) Creating the technopolis: High-technology development in Austin, Texas. Journal of Business Venturing 4: 49-67.

Smilor, R. W., Kozmetsky, G., Gibson, D. V. (1988) Creating the Technopolis: Linking Technology Commercialization and Economic Development. Ballinger Publishing Company: Cambridge, Mass.

Smilor, R., Gibson, D., and Dietrich, G. B. (1990) “University spin-out companies: Technology start-ups from UT–Austin” Journal of Business Venturing 5:63-76.

Smilor, R. W., Wakelin, M. (1990) Smart infrastructure and economic development: The role of technology and global networks. In The Technopolis Phenomenon, Kozmetsky, G. (ed.). IC² Institute, University of Texas at Austin: Austin, TX.

Smilor, R., O’Donnell, N., Stein, G., and Welborn, R. S. (2007) “The research university and the development of high-technology centers in the United States.” Economic Development Quarterly 21:203-222.