Regional Clustering and Innovation Strengthens Exports

Strong manufacturing and patent producing metropolitan areas generate the highest shares of exports from their output, according to researchers at the Brookings Institute.

Brookings_Logo“Strong manufacturing and patent producing metropolitan areas generate the highest shares of exports from their output,” according to a recent Brookings report. Researchers at the Brookings Institute found that the top exporting U.S. metros also were significantly more innovative. In this study, innovation was defined by the rate of patent production. Metros with regional clusters also were more likely to export than those without strong regional clusters. The report recommends that U.S. metros should develop metropolitan export initiatives that focus on innovation to increase their export capabilities and modernize their economic development strategy from 20th century thinking to 21st century action on export oriented economic growth.

Metros with strong manufacturing bases tend to have a larger share of their Gross Metro Product (GMP) tied to export. The Midwestern metros were among the most export oriented of the top 100 metros. The Southern and Western metros followed and were similar in terms of exports as a share of GMP. Not a single Northeastern city made the top 20 metros when measuring exports by share of GMP.

Innovation, as measured by rate of patent production, was the second most important indicator of export success among U.S. metros in this study. The report indicates that innovation might be significant because “firms that are more innovative are more likely to export internationally and exporting activity reinforces innovation through competition.” The report also shows that many high exporting metros with “high innovation” have strong regional clusters based around technology development. According to research, innovation has a strong relationship with the growth in U.S. exports.

The report also discusses the importance of regional clusters to exporting. In numerous studies, export oriented industries produce more patents when clustered. An industry cluster fueled many of the top exporting metros. In many cases, cluster driven metros also had higher levels of exporting than similar cities from the same geographical region. These clusters ranged from the standard manufacturing clusters to several technology-based clusters.

Metropolitan specific characteristics (e.g., innovation and regional clusters) drive the differences between U.S. metros, according to the report. The report advises that U.S. metros should develop their own metropolitan export initiatives focused on innovation and development of regional clusters. These initiatives would focus on export promotion, innovation, freight, and data collection policies. The first step in this process would be the identification and strengthening of industry clusters. Second, U.S. metros should effectively leverage federal and state services and assets to implement the plan. Metros also should not duplicate any services provide by federal or state agencies.

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Source: SSTI
Photo: Brookings Institute