Technology-Based Economic Development (TBED) in Pittsburgh, 1978-2005 Senior History & Policy Project Course: Fall 2005 Carnegie Mellon University December 14, 2005 Technology-Based Economic Development (TBED) in Pittsburgh, 1978-2005 History and Policy Project Course Fall 2005 Department of History Carnegie Mellon University Authors: Richard Bangs Stephanie Busi Paul Buyanovsky Margaret Cartaya Kyle Dominguez Christine Filiciotto Sean Friday Sara Lewis Nathaniel Maurer Erica Nurnberg Joseph Phillips Eugene Shiu Jimmy Song Emily Soong Eddie Szeto Joseph Trevithick Course Instructors: Professor Jay Aronson Alex Bennett, TA Mathew Hamilton, TA 2 Table of Contents Acknowledgements……………………………………………......…………………..4 Chapter 1: Introduction and Methodology…………………………………………….5 Chapter 2: A Brief History of Pittsburgh……………………………………………...9 Chapter 3: Economic Development in Theory and Practice…………………………32 Chapter 4: Components of Technology-Based Economic Development ……………………………………………………………..59 Chapter 5: Local Economic Development Organizations Promoting Growth…………………………………………………………………...107 Chapter 6: General Working Conditions & Racial Disparities in Pittsburgh………………………………………………………………...139 Chapter 7: General Statistics…………………………………………………………157 Chapter 8: Conclusions………………………………………………………………170 Appendix A…………………………………………………………………………..176 Appendix B……………………………………………………………….…………..182 Afterword…………………………………………………………………………….183 3 Acknowledgements The 2005 class of the History and Policy Project Course would like to acknowledge the following individuals for their contributions to our report: • Ralph Bangs, University Center for Social and Urban Research, University of Pittsburgh • Ryan Chin, Cover Artist • Kate Colligan, Archivist, University of Pittsburgh Library System • Sue Collins, Librarian, Hunt Library, Carnegie Mellon University • John P. Friel, President and Chief Executive Officer, MEDRAD, Inc. • Pamela Gaynor, Director of Communications for the Jewish Healthcare Foundation and the • Pittsburgh Regional Healthcare Initiative • Terri Glueck, Innovation Works, Pittsburgh • Leon Haley, Graduate School of Public and International Affairs, University of Pittsburgh • Susan Hansen, University of Pittsburgh • Chris Kasabach, BodyMedia, Pittsburgh • Mark Kryder, Director of Seagate Research, Pittsburgh • Timothy P. McNulty, Director of Economic Development for CyLab / Special Assistant to the Provost for Strategic Technology Initiatives at Carnegie Mellon University • Kit Needham, Senior Vice President, Allegheny Conference on Community Development • Jane Orie, State Senator in Pennsylvania, 40th District • David Palmer, Chief Operating Officer, Pittsburgh Life Sciences Greenhouse • William Peduto, Pittsburgh City Councilman • Doros Platika, Chief Executive Officer, Pittsburgh Life Sciences Greenhouse • Walter H. Plosila, Former Deputy Secretary of the Pennsylvania Department of Commerce and Director of the Pennsylvania Governor's Office of Policy and Planning • David Ruppersberger, President and Chief Executive Officer, Technology Collaborative • Donald F. Smith, Jr., Vice President of Economic Development, MPC Corporation / University Director of Economic Development at the University of Pittsburgh and Carnegie Mellon University • Richard Stafford, Heinz School, Carnegie Mellon University • Joel Tarr, Department of History, Carnegie Mellon University • Richard Thornburgh, Former Governor, Pennsylvania • Joe Trotter, Department of History, Carnegie Mellon University • Nancy Watson, Archivist, Thornburgh Papers at the Archives of Industrial Society, University of Pittsburgh • Stephanie Weir, Administrative Associate, University Partnership of Pittsburgh, University of Pittsburgh and Carnegie Mellon University 4 Chapter 1: Introduction and Methodology This project is the product of the Fall 2005 Senior History and Policy Project Course. The initial goal of the project was to look into the effects of biotechnology on the Pittsburgh economy, and was later expanded to look at the effects of technology- based economic development, or TBED, on the social, economic, and political fabric of the city. We sought to understand the efforts being taken to revive the city’s economy in the wake of the collapse of the steel industry in the 1980s. In this chapter, we will summarize the contents of the report and describe the methodology that we used. In Chapter 2, we will provide a brief overview of Pittsburgh’s rise and fall as an industrial city, paying particular attention to those factors that led to its initial success and those factors that led to its drastic demise. We will also examine early research and development efforts that laid the foundation for Pittsburgh’s recent venture into a technological economy, as well as the emergence of public private partnerships aimed at revitalizing the city. In Chapter 3, we examine how state-wide policies have helped or hurt the economic development of Pittsburgh since the 1980s. After briefly reviewing competing economic development theories and the role of government in economic development, we take a closer look at former Governor Dick Thornburgh’s efforts to revitalize Pennsylvania’s economy in the early 1980s. His administration’s policies have served as the starting point for all subsequent local efforts to bring Pittsburgh back to life. Especially important was Thornburgh’s creation of the Ben Franklin Partnership, which was later renamed Innovation Works after a financial scandal. This organization seeks to 5 encourage the growth of technology-based companies through grants and early-stage funding. In Chapter 4, we discuss the some of the basic factors that are necessary for Pittsburgh to develop a strong technology-based economy. These include: venture capital; support from the local foundation community during the period of economic transition; a supportive business environment (especially a fair tax structure); and a strong academic community and universities committed to technology transfer. At the end of the chapter, we will present profiles of a few companies in order to better understand how all of these factors play out in practice. In Chapter 5, we focus on the various organizations that have been created in Pittsburgh over the past 15 years that seek to provide guidance and funding for newly emerging technology companies. These organizations include the Pittsburgh Technology Council, Innovation Works, Pittsburgh Life Sciences Greenhouse, and the Pittsburgh Digital Greenhouse. In the course of researching the above topics, we decided it was necessary to take a brief look at socio-economic and neighborhood indicators of the health of the city. In Chapter 6, we address the issues of how TBED impacts regional job growth and the demographic changes that have taken place in the city over the past three decades. The report includes a significant amount of research on how such economic development impacts pre-existing ethnic and racial disparities. We examine how successful Pittsburgh is when it comes to retaining and attracting skilled workers in general and whether TBED provides additional jobs for people with a less well-developed set of skills. This involved an examination on what has been done to integrate residents of Pittsburgh into the new 6 tech-based economy, the average education of residents, and retention of university graduates. Along these lines, we also examined how all of this economic development was affecting the overall gentrification of Pittsburgh. Methodology The History and Policy Project Course used a number of different types of sources when researching the topic, both primary and secondary. Initially, we conducted extensive secondary source research, working through scholarly literature on regional economic development and the history of Pittsburgh. We then examined readily accessible primary sources, such as newspaper and magazine articles that chronicled the city’s ups and downs over the past three decades. We also read and analyzed numerous technical reports focusing on the health of Pittsburgh’s economy, as well as reports that provided blueprints for the city’s revitalization at various points during this time period. Once this preliminary research was complete, we examined various collections at University of Pittsburgh’s Archives of Industrial Society. Most notably, we made extensive use of the papers of former Pennsylvania Governor Dick Thornburgh (1979- 1986). In gauging the health of Pittsburgh’s economy, and the effectiveness of the various policies we describe, we also examined statistics provided by government agencies such as the U.S. Department of Labor, Bureau of Labor Statistics and the U.S. Census Bureau. Finally, and perhaps most importantly, we conducted interviews with local politicians, entrepreneurs, CEOs, university officials, academics, activists, economic development specialists, and many more. Before conducting these interviews, we 7 decided as a class what issues to focus on, and what questions to ask. We then tailored these questions to specific individuals, and went out in teams of two to conduct interviews. All tapes are currently in the possession of Professor Aronson, and many of the interviews have been fully transcribed. We hope to eventually place many of these tapes and transcripts into a local archive so that they can be used in the future. Note from the Project Course Students The students felt it was important to stress the scope of the project. The issues tackled on the following pages have been examined at state and local levels