The Washington region has plenty of lawyers but not enough entrepreneurs. Plenty of office space, but not enough business-social networks. Plenty of airports, but not enough new high-tech companies.<\/p>\n
Despite an explosion of growth in the private sector and a strong infrastructure for new business development, the region’s economy is still hampered by a reliance on government contracts and a relatively risk-averse business culture, according to a new study by American University’s Kogod School of Business.<\/p>\n
The report compared the Washington area economy with that of Boston and Silicon Valley, two of the nation’s wealthiest high-tech corridors. It finds that this area still struggles to translate its commanding resources into an atmosphere where high-tech companies can compete in the global market.<\/p>\n
“The Washington area has had very good success in attracting and keeping good people,” said Shyam Chidamber, an associate professor of management at American University and the author of the report. “Where we lag is leveraging what we have.”<\/p>\n
The report, a broad analysis of existing data about the region’s high-tech economy, names at least three major barriers to a stronger entrepreneurial culture in Washington:<\/p>\n
Corporate reliance on government funding, which can stymie both innovation and communication between companies competing for the same contracts.<\/p>\n
The tendency of federal and federally funded researchers to keep their innovations secret, which limits the transfer of technology from the public to private sector.<\/p>\n
The absence of stable venture capital investment in the area, which has discouraged entrepreneurs from launching new companies.<\/p>\n
In short, the Washington area economy, for all its progress in attracting and nurturing cutting-edge technology companies in the past decade, is still too dependent on its traditional government ties.<\/p>\n
“We need to expand upon the existing profile in this region,” said Kathleen M. Delaney, a former high-tech executive and partner at Ropes & Gray LLP, a law firm with offices in the District, who reviewed the report.<\/p>\n
The report recommends that Maryland, Virginia and the District, which present a fractured economic landscape, should pool their research resources to speed up innovation; that companies tap into the region’s embassy system and foreign community to lure international investment; and that government and business leaders promote interaction among high-tech workers.<\/p>\n
The report gave the region high marks for business infrastructure, including a large number of attorneys, accountants and tax preparers and the widespread availability of Internet broadband access. It also pointed to the area’s transportation system as an asset for high-tech workers.<\/p>\n
The study found the region’s labor force is high-skilled and highly educated. Compared with both Boston and Silicon Valley, the report said, the Washington area has the highest percentage of people holding bachelor’s, graduate and professional degrees. Washington also ranks ahead in the percentage of workers holding managerial, technical and professional jobs.<\/p>\n
“The D.C. economy has lurched ahead,” said Sanju K. Bansal, chief operating officer of McLean software company Microstrategy Inc., which moved from Rhode Island to Virginia in 1994. “A decade ago, no one would have thought to do a comparison between D.C., Boston and Silicon Valley.”<\/p>\n
But major problems persist.<\/p>\n
The report finds that the Washington area economy does not actively foster entrepreneurship. One glaring example is the relatively weak business-social networking system. Washington has 45 of these organizations, compared with 55 in Boston and 150 in Silicon Valley.<\/p>\n
At the same time, the report suggests businesses that rely on government contracts are often loath to collaborate for fear of releasing proprietary business information.<\/p>\n
The report also indicates that the dramatic falloff in venture capital investment over the past three years — nationwide, VC commitments plunged from $100 billion in 2000 to $39 billion in 2001 — has keenly impacted the Washington region.<\/p>\n
The region started off with a smaller base of venture capital investment than either Boston or Silicon Valley in the 1990s, but attracted $900 million by the late quarters of 2000. That figure fell to $189.2 million in the fourth quarter of 2002 — “a bad omen for D.C.’s high-tech companies,” the report says.<\/p>\n
Perhaps more importantly, the report says the Washington area shows “abrupt changes” in investment amounts, indicating the region is “clearly less stable than Boston and Silicon Valley when it comes to holding VC money.”<\/p>\n
The Washington area fared better when it comes to direct investment from foreigners, a measure of global reach and future promise. Of the $300 billion foreign investors poured into the U.S. economy in 2000, California received more than $120 billion and Washington $40 billion, giving it an edge on Boston, with just $23 billion.<\/p>\n
But when it comes to turning investment into commercial companies’ products, Washington lags. The report found the region has produced fewer public companies and total patents issued than Silicon Valley or Boston, based on data for 2000 and 2001. Chidamber called the discrepancy “worrisome” because initial public offers and patents generate both employment and financial value to high-tech companies.<\/p>\n
Reported By TechNews.com, http:\/\/www.TechNews.com<\/p>\n
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