Could Dallas’ innovation economy compete with Silicon Valley?

Innovation is the engine of economic progress. It is easy to see this by looking back in time. Americans today live so well thanks to a series of inventions over the past 100 years or so, from electricity, automobiles, airplanes and air conditioning to televisions, computers, the Internet and smartphones.

The benefits of future innovations are not yet clear. We hear about the next big thing all the time, but we don’t really know what wonders it will bring into our lives. We don’t know what disruption they will cause, including job losses.

Worries about the drawbacks of progress won’t stop innovation, not in the vibrant US economy. On the contrary, innovation has accelerated for decades. The tech toolkit for entrepreneurs is expanding far beyond anything the world has ever seen. The advances of previous ages will still contribute to progress. Cutting-edge technologies are always emerging, opening up new perspectives for innovation.

Autonomous vehicles are already in use. Drones were developed to deliver races and serve as eyes in the sky. 3D printers turn computer-generated designs into physical objects. Voice recognition and artificial intelligence bring virtual reality and the Internet of Things into our daily lives. Genomics is leading to new treatments for cancer and other diseases. Nanotechnology opens up possibilities for new materials with breathtaking properties.

Tech hotspots fuel DFW’s innovation economy


We could go on. The inventory of realized and potential technologies could fill this magazine a thousand times and still be incomplete. This is the amount of knowledge available to savvy entrepreneurs today. Making profitable use of it will mean fortunes for emerging tycoons, as well as higher jobs and income for some workers.

Like almost every other metropolitan area, the Dallas-Fort Worth area wants to own more of the future that emerges from the innovation economy. North Texas is no rival to Silicon Valley, but the region has a lot to offer.

It starts from a recognition of the nature of the innovation economy. In the past, Texas could thrive on natural resources – land for cotton and cattle, oil underground. Today, and more so in the future, growth will depend on human ingenuity: our ability to use knowledge and technology to develop better ways to give consumers what they want.

Harvard economist Edward Glaeser, author of “Triumph of the City,” tells us that human creativity and cooperation flourish when people, ideas, cultures, and businesses come together in a relatively dense economic space. Simply put, their hustle and bustle make large and diverse metropolitan areas the best places for the innovation economy. With over 7.2 million inhabitants, DFW is the fourth largest metropolitan area in the country.

But size isn’t all it offers.

Entrepreneurs try, fail, pivot and move forward. They do better in markets that are more free, flexible and open to change. DFW ranks Houston second in the Index of Economic Freedom for Metropolitan Statistical Areas (MSA) calculated by Dean Stansel, our colleague from Southern Methodist University. Texas ranks among the top five states for economic freedom.

Over the past decades, DFW has proven its ability to innovate and evolve. Since the oil crisis of the 1980s, North Texas has diversified considerably, becoming less dependent on energy and related activities. When oil prices exploded in 2014, DFW had enough healthy sectors to continue to grow and create jobs.

At least 60% of DFW’s $ 512 billion economy is found in five innovation-intensive sectors: finance, manufacturing, professional and business services, education and healthcare, and ‘information. Innovation has also revived traditional sectors. For example, hydraulic fracturing (fracking) began in the Barnett Shale formation north and west of Fort Worth.

DFW’s favorable business climate and Texas low taxes attract innovative companies that enhance the diversity of the local economy. Since 2010, about 100 companies have come from other states, including Toyota North America from California and Topgolf from Illinois.

Like new businesses, new residents add diversity and bring new ideas and energy to the local economy. From 1992 to 2011, DFW ranked among the top five MSA in terms of net immigration, gaining a total of 1.1 million people. Families are drawn to the area’s relatively low cost of living (including taxes) and employment opportunities.
Innovation is global, so it’s more important than ever to be connected to the rest of the world. The 210 non-stop destinations at Dallas-Fort Worth International Airport include 56 foreign cities. Equally important, large companies based at DFW are going global. Texas Instruments, for example, makes almost 90% of its revenue overseas.

Human ingenuity plays a key role in the innovation economy and in DFW’s workforce. Duane Dankesreiter, senior vice president of the Dallas regional chamber for research and innovation, said DFW had 229,237 high-tech workers in the third quarter of 2017, the seventh among major US subways and a few thousand more as the San Jose area, the hub of Silicon Valley. DFW ranks eighth for the number of software developers.

DFW’s sophisticated workforce supports a large tech industry that includes long-standing pillars like TI, as well as newcomers like Bottle Rocket and Brainspace. Google, Cisco, Oracle and other big tech companies are already present in DFW. Microsoft’s local operations are the company’s second largest.

Big name names are just part of a booming DFW tech sector. Concentrations of innovative businesses line the Central Expressway from downtown Dallas to Plano. Other hot spots can be found along Interstate 35 north of Interstate 635 and in Las Colinas, near the DFW airport. DFW has 61 coworking spaces and 36 accelerators and incubators. Twenty companies operate Enterprise Innovation Centers at DFW. Cheap electricity and plentiful fiber transmission helped build a 231 megawatt data center inventory, just behind Northern Virginia’s 608 megawatts.

Glaeser’s point is that a density of creative minds creates sparks. They ignite in big and small ways. The entrepreneurs will come out of DFW’s technological environment. Tech companies launched elsewhere will find DFW a good place to grow their business. We got off to a good start.

DFW doesn’t need a big new strategy. He should keep doing what he did. The path to success in the innovation economy is to master the basics: having a free market and being flexible, entrepreneurial, urban, connected to the world and better educated.

W. Michael Cox is founding director of the William J. O’Neil Center for Global Markets and Freedom at Southern Methodist University. Richard Alm is writer in residence at the center.

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