Dissertation Exploring Sources of Innovation in the Knowledge-Based Economy The Case of Los Angeles Marlon Graf This document was submitted as a dissertation in May 2016 in partial fulfillment of the requirements of the doctoral degree in public policy analysis at the Pardee RAND Graduate School. The faculty committee that supervised and approved the dissertation consisted of Rafiq Dossani (Chair), Trey Miller, and Martin Kenney. PARDEE RAND GRADUATE SCHOOL For more information on this publication, visit http://www.rand.org/pubs/rgs_dissertations/RGSD376.html Published by the RAND Corporation, Santa Monica, Calif. © Copyright 2016 RAND Corporation R® is a registered trademark Limited Print and Electronic Distribution Rights This document and trademark(s) contained herein are protected by law. This representation of RAND intellectual property is provided for noncommercial use only. Unauthorized posting of this publication online is prohibited. Permission is given to duplicate this document for personal use only, as long as it is unaltered and complete. Permission is required from RAND to reproduce, or reuse in another form, any of its research documents for commercial use. For information on reprint and linking permissions, please visit www.rand.org/pubs/permissions.html. The RAND Corporation is a research organization that develops solutions to public policy challenges to help make communities throughout the world safer and more secure, healthier and more prosperous. RAND is nonprofit, nonpartisan, and committed to the public interest. RAND’s publications do not necessarily reflect the opinions of its research clients and sponsors. Support RAND Make a tax-deductible charitable contribution at www.rand.org/giving/contribute www.rand.org Exploring sources of innovation the knowledge-based economy: the case of Los Angeles Doctoral Candidate: Marlon Graf (Pardee RAND Graduate School) Dissertation Committee: Dr. Rafiq Dossani (Chair), Dr. Trey Miller and Dr. Martin Kenney Abstract My dissertation uses a mix of both quantitative and qualitative methods to help policy makers identify sources of innovation in the knowledge-based economy and to best leverage these sources for regional economic growth. Specifically, I am evaluating two case studies in Los Angeles: As part of my first case study, I develop a stakeholder map to inform USC’s efforts to build a Biotech Science Park in South-East Los Angeles. As part of this undertaking, I conducted interviews and focus groups with USC faculty members and researchers, community residents, local small and large business owners, policy makers and academic experts in order to both assess entrepreneurial needs and community capacities. I find that while the Los Angeles region appears to have all the necessary ingredients for a highly innovative and entrepreneurial ecosystem such as world class research institutions, funding mechanisms, business support entities and a very creative, diverse and highly-skilled workforce, the vast geographic spread and insular nature of its neighborhoods prevents these resources from being connected with one another. The medical and health sciences industries in particular are dispersed across the region and in need of a centralized location or hub such as the proposed Biotech Science Park around USC’s Health Sciences Campus. For my second case study, I carry-out an exploratory analysis of the Silicon Beach technology innovation movement in West Los Angeles. In order to do so, I constructed a geocoded venture capital database from Crunchbase.com, an open-source startup registry, and used correlational and time series analyses in order to detect predictors of firm success and patterns of locational iii decisions. When looking at the geographic spread of firms over time, a clear pattern emerges, suggesting that the Silicon Beach movement originated between Santa Monica and Venice Beach and has since spread to Marina Del Rey, Mar Vista and Playa Vista in the South as well as Westwood, Beverly Hills and Hollywood in the North-East. These particular paths of expansion can be explained by the rising rents on the Westside of Los Angeles, the agglomeration effects around the new campuses of large technology corporations in Playa Vista and the location of most LA-based investors along the Wilshire Corridor between Santa Monica and Downtown Los Angeles. In terms of predominant industries, I find strong associations between technology-related fields and traditional strongholds of the Los Angeles economy that are related to fashion, lifestyle and the Hollywood entertainment cluster. Following a thorough analysis of these two case studies, I conclude by recommending that policy makers in Los Angeles work to establish a framework to enhance connectivity and visibility of regional sources of innovation, including entrepreneurs, research institutions, business support entities and investors in order to nurture and cultivate a vibrant entrepreneurial network. Furthermore, I describe the requirement to better understand the emerging business environment and to tailor the regulatory framework to most effectively meet the needs of an increasingly startup and small firm-dominated high-tech economy. iv Table of Contents List of Tables ....................................................................................................................................... vii List of Figures ...................................................................................................................................... ix Acknowledgments .............................................................................................................................. xi Introduction ........................................................................................................................................... 1 Describing the transition from an industrial to a knowledge-based economy ........................... 1 Los Angeles in the context of the knowledge-based economy ................................................... 3 The University of Southern California as an emerging entrepreneurial university ............ 8 A Biotechnology Science Park for South-East Los Angeles? ..................................................... 8 The theory behind entrepreneurial universities ........................................................................... 11 Making sense of the relationship between university technology transfer and economic growth: knowledge-based clusters around entrepreneurial universities .................................. 18 Constructing a stakeholder map for the USC Biotech Corridor ................................................ 30 Research findings ............................................................................................................................. 34 Main takeaways and policy recommendations ............................................................................ 54 Limitations ......................................................................................................................................... 59 Silicon Beach as a new wave of the digital economy in Los Angeles ................................. 60 Telling the story about Silicon Beach and the rise of the Los Angeles tech movement ........ 60 Research questions and methodological approach .................................................................... 67 Exploring data sources for analysis and bounding the Los Angeles innovation movement . 69 Breaking-down the Los Angeles innovation movement ............................................................. 84 Adding a temporal dimension to the analysis of the Los Angeles innovation movement ..... 90 Examining underlying trends in cluster formation and locational patterns .............................. 96 Main takeaways and policy recommendations .......................................................................... 108 Limitations ....................................................................................................................................... 111 Outlining a future research agenda for Silicon Beach and Crunchbase Geo ....................... 112 Conclusion and Policy Recommendations ............................................................................... 114 Understanding the knowledge-based economy in Los Angeles: from entrepreneurial universities to Silicon Beach ......................................................................................................... 114 Concluding thoughts and policy recommendations .................................................................. 116 v Key References ................................................................................................................................. 118 Appendix ............................................................................................................................................ 127 USC Stakeholder Analysis - Focus Group Protocol ................................................................. 127 USC Stakeholder Analysis – Questionnaire for Faculty Entrepreneurs ................................ 130 USC Stakeholder Analysis – Policy Questionnaire ................................................................... 135 Crunchbase.com Database Overview ........................................................................................ 138 Distribution of firms by industry (scatter plots of latitude-longitude combinations) .............. 151 Stem and Leaf Plots to estimate