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‘Town by town, factory by factory, job by job’: how Pittsburgh became a research cluster

The seeds for Pittsburgh’s resurgence were planted long before the collapse of the steel industry in the city

I wrote the following piece for the recent Royal Society report on research clusters, republished here under a creative commons license. The full report has eight case studies. Individually, they tell the story of how the actions of leaders, businesses, universities and communities have affected the development of different places with different contexts and histories. Combined, patterns and trends begin to emerge. The story of Pittsburgh is one of a slow recovery fuelled by investments with long-term returns, and a slow accumulation of talent and expertise.

The Pittsburgh cluster is perhaps best described as several clusters with some areas of overlap. The Pittsburgh Innovation District lists these as life sciences and digital health, advanced manufacturing, and AI and robotics, whereas the Brookings Institution identifies manufacturing, technology, and health care as key clusters.1 These industries have grown by 8.4 percent, nearly double Pittsburgh’s private-sector growth rate, since the end of the recession in the early 2010s.2

Businesses in these clusters work closely with the university sector. The University of Pittsburgh is recognised as a leader in life sciences research, the University of Pittsburgh Medical Center (UPMC) is a top-ranked hospital system with 89,000 employees and 40 hospitals, and Carnegie Mellon University has specialist expertise in computer science and engineering.3 The metropolitan area outperforms the national average on academic activity, ranking ninth among the largest 100 cities for the amount of university research and development, and performs particularly strongly in fields such as robotics, gerontology, critical care, artificial intelligence, cell and tissue engineering, neurotrauma, and software.4

The Oakland district is the academic and healthcare centre of Pittsburgh, and is an example of two much-vaunted developments: an innovation district home to a dense, walkable hub of economic activity for research and entrepreneurship, and a shift from heavy industry to ‘eds and meds’, with the knowledge-rich ecosystem that accompanies universities, large hospitals and their spinoffs and spillovers.5 As the Brookings Institution has noted, few cities have such a naturally occurring innovation district as Pittsburgh: Oakland represents three percent of the city’s land area, ten percent of residents, 29 percent of jobs, and over a third of the state of Pennsylvania’s university research output.6 As such, challenges remain in ensuring inclusive growth in neighbouring districts (which have some of the highest rates of long-term unemployment and poverty in the city), connecting communities to new opportunities, and addressing regional inequalities.

Pittsburgh’s performance is often framed against the collapse of the steel industry in the city in the 1980s, when the unemployment rate in the city hit 18 percent. Prior to the collapse, manufacturing represented more than a quarter of all employment in Pittsburgh; today manufacturing accounts for under ten percent of employment. More people work in Pittsburgh’s health sector today than in the steel industry at its highest point.7 Although this transformation is remarkable, the seeds for Pittsburgh’s resurgence were planted long before the collapse of the steel industry in the city.

Development

By 1983, Pittsburgh – seen as the industrial powerhouse of the US – was in economic breakdown. The Pittsburgh Press newspaper described it as a tide of change: ‘town by town, factory by factory, job by job’.8 Three quarters of Pittsburgh’s steelmaking capacity and 130,000 manufacturing jobs were lost, and tens of thousands of residents moved away – with knock-on effects for the businesses and services which remained.9

In the following decades, the economy shifted from low- and moderate-value production to technology-driven services and high-value advanced manufacturing. This shift was led by a focus on innovation, driven by federally-funded research at Carnegie Mellon University and the University of Pittsburgh.10 But an overarching theme of Pittsburgh’s story is a slow recovery fuelled by investments with long-term returns, and a slow accumulation of talent and expertise. It is necessary to trace the roots of today’s research clusters to the height of the steel industry in Pittsburgh.11

Important (but some, at the time, seemingly modest) investments were made in three areas in the 1950s.12 The first was a partnership known as ‘Renaissance I’ between local government leaders and Pittsburgh’s business community (under the banner of the Allegheny Conference). The aim was to improve the quality of life in the city and address the region’s environmental and infrastructure issues. Real estate development was channelled through public authorities, deserted train sheds were converted to house and offices, cultural attractions were built, and transport and sanitation improved.

The second investment was a donation of $50 million from the local Mellon family to the University of Pittsburgh to build and run a new medical school. The creation of a world-class medical research institution set a foundation for the region’s biomedical research strengths today. The third set of investments follows from this: that of the philanthropic community who grew wealthy from Pittsburgh’s industry. Funding from philanthropic foundations has ensured the survival of much of the city’s cultural infrastructure from the Symphony Orchestra to community arts organisations – an essential ingredient in creating an environment for attracting and retaining skilled workers. More recently, foundations in the city have tended to view economic development through technological innovation as a core part of their social mission. Philanthropic investment has, for example, helped transfer robotic and automation technology from the lab to the city for real-world testing, and was central to starting programmes of work on machine learning, computational finance, and robotics at Carnegie Mellon University.13 The close relationship between philanthropy and universities has a long history in Pittsburgh, and is central to shaping the city’s development.

These investments bore fruit years after the collapse of Pittsburgh’s steel industry. They are not, however, responsible alone for the creation of Pittsburgh’s research clusters. Upon this foundation, the local universities and local government (and, in particular, their leaders) played a key role, supported by federal and state grants.

As unemployment soared, the heads of Carnegie Mellon University and the University of Pittsburgh – historically competitors – decided to coordinate efforts to diversify Pittsburgh’s economy and drive research and development in the city.14 In 1978 Carnegie Mellon University, led by Richard Cyert, established the Robotics Institute with corporate funding, and planted the seed for the city’s expertise in this area (the CMU Robotics Institute also became the first in the world to offer a PhD in robotics).15 Heaton et al describe the investments made by university and local leaders in new technologies in Pittsburgh – others included biotech and computing – as ‘sensing activities’. These are ‘long-gestation investments’ that are the first stage of a new innovation ecosystem (with no guarantee they will pay off), and which ‘assess internal and external signals about scientific and technological developments that hold promise for the future, then ensure that sufficient financial and faculty resources are available for exploring the most attractive possibilities’.16

In 1986, with University of Pittsburgh Chancellor Wesley Posvar’s guidance, all of the city’s hospitals, teaching hospitals and research facilities were brought together under one not-for-profit roof – known today as UPMC. And as Carnegie Mellon University sought out the best researchers to relocate in Pittsburgh, the University of Pittsburgh persuaded medical experts to join, including pioneers of organ transplantation – helping to establish the city as a world-leading centre in this area.17

The universities have continued to play an important role in shaping Pittsburgh’s research and innovation clusters. When Jared Cohon stepped down as Carnegie Mellon University president in 2013, he identified three key ways the institution helped Pittsburgh’s economic shift: by making it easier for professors to start new companies by changing the technology transfer policy, by collaborating with the University of Pittsburgh to support start-ups, and by building the Robert Mehrabian Collaborative Innovation Centre.18 This centre opened in 2005 and was funded by state, university and private money, allowing companies and researchers to work collaboratively.

State and federal governments have also played an important role. Both provided grants to research universities and seed funding to entrepreneurs in technology-related fields. As Holstein and Eschenfelder conclude, state-funded accelerator programmes:

reduced information asymmetry and externality problems that inhibit the birth of new enterprises. Their highly selective application process reduced cost to angel investors and venture capital firms of searching for early-stage startups with high commercial potential. The rigorous and short-term duration of these programs accelerated growth of some startups, but also accelerated failure of others enabling resources to move to higher valued uses. These programs also linked potential tech entrepreneurs to a network of mentors who provide the legal, accounting, marketing, and management skills that they lack. As a critical mass of successful tech ventures were established, new accelerator programs began to obtain funding from private sources and the inflow of capital from angel investors and venture capital firms from various parts of the country increased.19

Pittsburgh’s reinvention required the city’s leadership to ‘think like a system and act like an entrepreneur’ – taking stock of assets, cultivating talent, and maintaining a good place to live, whilst taking risks, seizing opportunities and being flexible.20 Tom Murphy, a state representative who later became mayor of Pittsburgh, is regarded as one such leader. Recognising and supporting the role of universities in a post-steel Pittsburgh, he introduced the Ben Franklin Technology Partnership in 1983, dedicated to advancing early-stage startup businesses and the commercialisation of technologies – since described as a state programme run like a venture capital firm.21

After becoming mayor in 1994, Murphy developed more than 25 miles of new trails alongside the river and urban green space, and cleaned up more than 1,000 acres of abandoned industrial land.22 In more recent years, the city has improved its food and art culture, helping to attract skilled workers.23 This, combined with a consistently low cost of living, has helped Pittsburgh’s economic transition.24 Above all, however, this transition has been driven by the long-standing alliance between universities, local leaders, businesses and the civic community – and the return on investments made long ago.

Outcomes

Michael J. Madison, a Professor at the University of Pittsburgh, describes the city’s revitalisation as being less about the ‘grit’ and character of Pittsburghers (a popular narrative to explain the transition) and more about having economic diversification thrust upon it.25 But by building on strong research and innovation assets – UPMC, the University of Pittsburgh, and Carnegie Mellon University – the city has managed to excel in knowledge production. Pittsburgh’s education and technology sectors account for 80 percent of the high-wage jobs in the city.26 Overall, the technology sector accounts for a third of annual payroll in the Pittsburgh region, helping to retain highly educated young people.27 And in 2016 the region’s university research and development spending per capita was nearly two and a half times the national average.28

There are still threads connecting modern Pittsburgh to the rich legacy of manufacturing in the city. The advanced manufacturing clusters in the region are highly specialised: automation and industrial machinery, and metals and metal processing each have more than two times the national employment concentration. New clusters have formed around these industries as technology companies seek access to top engineering and computer science talent.29

However, the acceleration of scientific and technical activity and global expertise headquartered in the city has not translated locally into broad-based growth outside the clusters, and in the neighbourhoods in which they are sited.30 As Madison puts it, ‘steel money was sucked out of one part of the Pittsburgh region; new money is largely being injected elsewhere’.31 The risk is that, without new jobs being created at all skill levels, spatial inequality in the region will increase. The Brookings Institution recommends in particular that the Oakland innovation district needs to be marketed and better connected to the regional economy, with better integration with nearby employment centres.32

Pittsburgh’s history and resurgence has been much studied and analysed. Professor Michael Porter, considered the father of cluster theory, draws several lessons from Pittsburgh for other cities.33 First – and as we have seen – cluster growth is a long-term process with assets taking decades to develop. Second, diversification across several clusters helps strengthen the regional economy and to protect it against economic shocks. Third, research and development investment is critical, but so too is effective commercialisation mechanisms – and Pittsburgh faces challenges in this area (see below). Finally, strong and unified leadership is required to push for a regional cluster development programme.

Looking forward

A 2017 benchmarking report examined the prospects of Pittsburgh’s life sciences cluster, and found great opportunities for developing new solutions and innovations at the intersection with other clusters – automation, robotics, and healthcare – and with other areas of expertise – biomedicine at the University of Pittsburgh and computer science at Carnegie Mellon University.34 The blurring and crossover of disciplinary boundaries extends to collaboration with the private sector. The report gives the example of UPMC partnering with IBM Watson to form Pensiamo, a Pittsburgh-based startup using cognitive analytics to improve supply chain performance in hospitals.35

Pittsburgh’s clusters face several challenges. Commercialisation is lagging, in particular in life science firms, which often take longer to develop. Although investment trends are improving, the region has less venture capital funding than other US innovation hubs.36 Connected to this is a low rate of high-growth startups. One contributing factor is the need for more corporate partners (a barrier to recruiting talent to startups is the lack of backup employment options if the local startup does not succeed – a truly effective cluster, by definition, offers choice).37 And finally, ongoing challenges remain over continuing to build links between the research being conducted in universities and the strengths of industry, and ensuring a pipeline of skills to meet future workforce needs: fundamental concerns that remain constant even for well-established clusters.38

(Photos from Unsplash: bridge, skyline, freeways)

  1. https://www.pittsburgh-id.com/innovation-clusters; Andes, S., Horowitz, M., Helwig, R. and Katz, B., (2017). Capturing the next economy: Pittsburgh’s rise as a global innovation city. Anne T. and Robert M. Bass Initiative on Innovation and Placemaking at Brookings.
  2. Andes, S., et al (2017). Capturing the next economy: Pittsburgh’s rise as a global innovation city. Brookings.
  3. Pittsburgh Region Life Sciences Benchmarking & Opportunities Analysis May 2017; https://www.upmc.com/about/facts.
  4. Andes, S., et al (2017). Capturing the next economy: Pittsburgh’s rise as a global innovation city. Brookings.
  5. Madison, M. (2011). Contrasts in innovation: Pittsburgh then and now. In M. Carpenter (Ed.), Innovation and entrepreneurship in evolving economies: The role of law. Pittsburgh, PA: Edward Elgar Publishers; Haynes, C. and Langley, V. (2014). Magnet Cities. KPMG.
  6. Andes, S., et al (2017). Capturing the next economy: Pittsburgh’s rise as a global innovation city. Brookings.
  7. Madison, M. (2011). Contrasts in innovation: Pittsburgh then and now. In M. Carpenter (Ed.), Innovation and entrepreneurship in evolving economies: The role of law. Pittsburgh, PA: Edward Elgar Publishers; Haynes, C. and Langley, V. (2014). Magnet Cities. KPMG.
  8. https://www.post-gazette.com/business/businessnews/2012/12/23/In-desperate-1983-there-was-nowhere-for-Pittsburgh-s-economy-to-go-but-up/stories/201212230258.
  9. Andes, S., et al (2017). Capturing the next economy: Pittsburgh’s rise as a global innovation city. Brookings; Madison, M. (2011). Contrasts in innovation: Pittsburgh then and now. In M. Carpenter (Ed.), Innovation and entrepreneurship in evolving economies: The role of law. Pittsburgh, PA: Edward Elgar Publishers.
  10. Gallagher, P. (2017). Pittsburgh myth, Paris reality, Science vol 356 issue 6343; Andes, S., et al (2017). Capturing the next economy: Pittsburgh’s rise as a global innovation city. Brookings.
  11. Bruce Katz and Jeremy Nowak conclude that ‘Pittsburgh’s emergence has been decades (if not a century) in the making’ (https://nextcity.org/daily/entry/how-the-once-struggling-pittsburgh-is-reinventing-itself-as-innovation-hub).
  12. Drawn from Michael Madison’s study of Pittsburgh’s resurgence which tells the story in greater detail: Madison, M. (2011). Contrasts in innovation: Pittsburgh then and now. In M. Carpenter (Ed.), Innovation and entrepreneurship in evolving economies: The role of law. Pittsburgh, PA: Edward Elgar Publishers.
  13. Andes, S., et al (2017). Capturing the next economy: Pittsburgh’s rise as a global innovation city. Brookings.
  14. Haynes, C. and Langley, V. (2014). Magnet Cities. KPMG.
  15. https://www.pittsburgh-id.com/robotics. As part of this process, faculties were closed and activity focused on science and technology. Funds released as a result of restructuring were used to lure world-class researchers working elsewhere in the US to the university (Haynes, C. and Langley, V. (2014). Magnet Cities. KPMG).
  16. Heaton, S., Siegel, D.S. and Teece, D.J. (2019). Universities and innovation ecosystems: a dynamic capabilities perspective. Industrial and Corporate Change, 28(4), p.930.
  17. Haynes, C. and Langley, V. (2014). Magnet Cities. KPMG.
  18. Heaton, S., Siegel, D.S. and Teece, D.J. (2019). Universities and innovation ecosystems: a dynamic capabilities perspective. Industrial and Corporate Change, 28(4).
  19. Holstein, A.D. and Eschenfelder, M.J. (2017). Economic Analysis Of Public Support For Tech Startups: A Case Study Of Pittsburgh. Journal of Business and Behavioral Sciences, 29(1), p.100. CMU’s Project Olympus incubator and the University of Pittsburgh’s Innovation Institute are two examples of sources of support to startups. Both also collaborate on successful centres such as the Pittsburgh Life Sciences Greenhouse (https://www.plsg.com/).
  20. The RSA’s Matthew Taylor quoted in https://nextcity.org/daily/entry/how-the-once-struggling-pittsburgh-is-reinventing-itself-as-innovation-hub.
  21. Haynes, C. and Langley, V. (2014). Magnet Cities. KPMG. An evaluation of the Ben Franklin Technology Partnership found returns on investment in terms of generated tax revenue of 3.6:1, with 140,000 new jobs created since 1989 (https://benfranklin.org/what-is-bftp/).
  22. https://www.economist.com/united-states/2011/10/22/smaller-is-more-beautiful.
  23. Andes, S., et al (2017). Capturing the next economy: Pittsburgh’s rise as a global innovation city. Brookings.
  24. Madison discusses the pros and cons of low property costs in detail. ‘Cheap real estate translates into low local tax revenue and then into poor public services. Unsurprisingly, property-rich communities get wealthier. Property-poor communities lose ground.’ Madison, M. (2011). Contrasts in innovation: Pittsburgh then and now. In M. Carpenter (Ed.), Innovation and entrepreneurship in evolving economies: The role of law. Pittsburgh, PA: Edward Elgar Publishers.
  25. Madison, M. (2011). Contrasts in innovation: Pittsburgh then and now. In M. Carpenter (Ed.), Innovation and entrepreneurship in evolving economies: The role of law. Pittsburgh, PA: Edward Elgar Publishers, p.25.
  26. Heaton, S., Siegel, D.S. and Teece, D.J. (2019). Universities and innovation ecosystems: a dynamic capabilities perspective. Industrial and Corporate Change, 28(4).
  27. Holstein, A.D. and Eschenfelder, M.J. (2017). Economic Analysis Of Public Support For Tech Startups: A Case Study Of Pittsburgh. Journal of Business and Behavioral Sciences, 29(1), p.100.
  28. Andes, S., et al (2017). Capturing the next economy: Pittsburgh’s rise as a global innovation city. Brookings.
  29. Andes, S., et al (2017). Capturing the next economy: Pittsburgh’s rise as a global innovation city. Brookings.
  30. https://nextcity.org/daily/entry/how-the-once-struggling-pittsburgh-is-reinventing-itself-as-innovation-hub.
  31. Madison, M. (2011). Contrasts in innovation: Pittsburgh then and now. In M. Carpenter (Ed.), Innovation and entrepreneurship in evolving economies: The role of law. Pittsburgh, PA: Edward Elgar Publishers, p.34.
  32. Andes, S., et al (2017). Capturing the next economy: Pittsburgh’s rise as a global innovation city. Brookings, pp.8-9.
  33. Porter, M. (2002). Pittsburgh: Clusters of Innovation Initiative. Council on Competitiveness.
  34. Fourth Economy in Collaboration with Warner Advisors (2017). Pittsburgh Region Life Sciences Benchmarking & Opportunities Analysis.
  35. https://www.pensiamoinc.com/.
  36. https://www.geekwire.com/2018/pittsburgh-forges-new-future-remaking-iconic-steel-town-modern-innovation-factory/; Fourth Economy in Collaboration with Warner Advisors (2017). Pittsburgh Region Life Sciences Benchmarking & Opportunities Analysis; Andes, S., et al (2017). Capturing the next economy: Pittsburgh’s rise as a global innovation city. Brookings.
  37. Fourth Economy in Collaboration with Warner Advisors (2017). Pittsburgh Region Life Sciences Benchmarking & Opportunities Analysis; Andes, S., et al (2017). Capturing the next economy: Pittsburgh’s rise as a global innovation city. Brookings.
  38. Andes, S., et al (2017). Capturing the next economy: Pittsburgh’s rise as a global innovation city. Brookings.

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