Saturday, December 15, 2007

IntoPittsburgh: Building Pittsburgh 2.0

Via Brewed Fresh Daily, I learned more about the value of proximity for entrepreneurial activity:

Entrepreneurs strategically locate based on what resources are within 500 meters. Through research, Aharonson and colleagues, Joel A.C. Baum at the Rotman School of Management, University of Toronto and Maryann P. Feldman from the Institute of Higher Education, University of Georgia, found that companies choose to locate within a half-kilometer radius of essential resources such as research and development activity, labor and capital. The researchers looked at the availability of resources at greater distances and found that after 10 km, the influence of access to the resources diminishes.

I've heard a number of times from a variety of sources that the immediate area surrounding Pitt and CMU is less than ideal for benefiting from "knowledge spillovers." I would bet that along with distance (the proximity variable), we should also consider density and geographic barriers. Being within 10 km of CMU-Pitt isn't valuable if you are physically disconnected from the centers of knowledge production. The diffusion of knowledge spillovers is likely quite uneven and subject to idiosyncrasies of the local landscape.

Given the terrain, public transportation, and infrastructure of Pittsburgh, I would guess that the value of proximity to knowledge resources diminishes well before you stray 10 km from the center of Oakland. My sense is that the innovation hubs are too scattered and isolated to capitalize on density (lacking critical mass). Also, Oakland might be beyond salvage. Lastly, Pittsburgh is aggressively trying to attract more activity to the CBD.

I think Lawrenceville is a promising creative center that would allow entrepreneurial activity to cluster in a way Oakland cannot. The goal is to improve the connectivity between the universities and this neighborhood. The new Children's Hospital is a harbinger of things to come. Of course, locals might have a better location in mind for the agglomeration of talent.

Two more ingredients are needed to help spark Pittsburgh's talent economy. The experience needed to cultivate a successful start-up is often lacking. Pittsburgh 2.0 can help in this regard, bringing the right people together in what could be characterized as a Flat World:

HYPE knows no borders. So it was probably inevitable that Bangalore would be branded another Silicon Valley, soon to be populated by armies of entrepreneurs and venture capitalists. Reality is more sobering, but something is afoot. More venture capital (VC) is flowing into the country—including some from American VC firms active in India—and a growing share of it is being invested in innovative early-stage firms.

Things are moving in the right direction, but this is hardly Silicon Valley. For one thing, the infrastructure for technology entrepreneurs is at “an early stage”, says Surendra Jain of the Indian arm of Sequoia Capital, a Silicon Valley VC firm. The “term sheets” listing the financing conditions are the same, he says, but the courts may not interpret them in the same way. Similarly, professional networks and the collective knowledge of how things are done are still developing. This is why Helion Ventures, a local VC firm, has made a speciality of advising entrepreneurs by, say, helping them find a chief financial officer.

But putting together proximity, density, connectivity, and experience is still not enough to approximate Silicon Valley. The magic dust is the entrepreneurial spirit. What is missing are immigrants, both domestic and international. I hypothesize that the drive to boomerang back to Pittsburgh is the kind of intrinsic motivation necessary to cultivate the kind of risk takers Pittsburgh desperately needs.

1 comment:

Guy Hogan said...

This isn't my field, I live in North Oakland and write short stories about Pittsburgh, but I suppose there is such a thing as "too much density." The University of Pittsburh/UPMC seems to be buying up a lot of real estate and it claims to be a non-profit. Like I said, this is not my field, but that can't be good for region.