The following analysis is presented in depth in the Atlas of Innovation Districts, in which readers can explore and compare data on 50 prominent US Innovation Districts.
Formerly a powerhouse of heavy industry, Pittsburgh’s economy went through several decades of hard times following the collapse of the steel industry. The economic renaissance of Pittsburgh over the last two decades illustrates how a city can reignite innovation by tapping into a bygone competitive advantage.
Historical Background
From the 1930s to the 1950s, Pittsburgh, Pennsylvania was an industrial powerhouse with strong specialization in steel production and heavy manufacturing. The steel industry in particular served as the anchor institution that drove the city’s economy and development decisions. Industrial materials and manufacturing companies developed in clusters throughout the Pittsburgh region, benefiting from an ample local supply of coal to fuel production processes. During the city’s heyday in the World War II era, Pittsburgh’s manufacturing capabilities were competitive at the frontier of innovation and provided made substantial contributions to the American war effort.
Pittsburgh's situation changed when World War II ended, leading to a decrease in demand for steel. During the period spanning from the 1960s through the 1980s, many of Pittsburgh’s factories closed and the city lost 40% of its population. By 1983, the city had a 17% unemployment rate and was one of the most economically depressed and environmentally degraded places in the United States.20 It seemed that all was lost.
The Problem: Underdeveloped Network of Talent
The decrease in demand for steel was the final blow to an economic ecosystem that had gradually become overly focused on production. In doing so, the city had neglected important functions related to research and technology transfer that were necessary inputs for long-term competitiveness. As demand for steel decreased, the Pittsburgh’s economic engine began to stall, and when large portions of the population moved out, the city suddenly found its network of talent depleted. This became a downward spiral; without its network of talent, Pittsburgh’s Innovation Intensity decreased until it could no longer feed the Innovation Performance and Innovation Impact phases of the innovation process. For Pittsburgh to survive, it needed to find a way to rebuild its Innovation Intensity.
Insights from Pittsburg
Despite its massive losses, Pittsburgh underwent a resurgence beginning around the turn of the century and is now once again on the path to prosperity. Today, the city is home to one of the world’s most important centers of innovation in robotics, advanced manufacturing, and artificial intelligence. In the past 15 years, it has received accolades from multiple publications as one of the United States’ most livable cities. What explains Pittsburgh’s economic renaissance?
Government officials were facing a challenge at the metropolitan level. The city identified robotics as a potential new area of specialty that would be complementary to their prior expertise in manufacturing and heavy industry. But to become innovators in robotics, they first needed to make significant investments in their Research & Academia talent network to reach the frontier of collective knowledge in robotics. Only then could they push forward into the Technology Transfer phase and ultimately reach Mass Production.
Analyzing Pittsburgh’s innovation economy at the metropolitan scale, the ecosystem can be understood through the phases of Research & Academia, Technology Transfer, and Mass Production. To rebuild competitive advantage, Pittsburgh needed to kickstart this process. The city's leading universities, Carnegie Mellon University and the University of Pittsburgh, made strategic investments with the establishment of a series of new research centers. Leaders throughout the innovation ecosystem correctly identified these institutions as engines for future innovation. These investments gradually rebuilt the local knowledge network, attracted new talent in relevant industries, and created spaces that promoted density and collaboration. Alongside these investments in Research and Academia, the city government made significant investments in the urban environment as well, eventually buying over 1,500 acres of abandoned steel mills for redevelopment as attractive mixed-use urban spaces.21 Over time, these investments produced virtuous cycles of redevelopment and concentration of knowledge. The city’s economic engine was reignited.
The story of Pittsburgh’s economic renaissance showcases three particular activities that support the Research and Academia phase of innovation - an essential foundation for healthy networks of talent.
Specialization of Knowledge-Base
First, a city must promote strategic concentration and specialization. This step allows a city to develop its/a comparative advantage. It is easier to create knowledge around a pre-existing industry than it is to start from scratch in a field that requires major foundational investments and many years to consolidate. Specialization also allows a city to focus its investments into an area of high impact rather than diffusing investments across many areas and lessening their effect. Pittsburgh made strategic investments to advance knowledge around robotics and advanced manufacturing at its universities. Carnegie Mellon University became a new anchor institution, helping to transition the talent left over from Pittsburgh’s past Industrial Cluster anchor into the city’s new specialization area: robotics and AI.
Acceleration of Knowledge Development
Next, a city must develop and diversify its areas of competitive advantage to the current cutting edge of knowledge. To do this it must boost knowledge. It can accomplish this by providing academic and professional training for workers as well as by attracting talent from elsewhere and providing incentives for new basic and applied research. In Pittsburgh’s case, this process involved creating new educational programs in metal technology, advanced manufacturing, robotics and AI, all centered around the city’s universities.
Diversification and Sophistication of The Collective Knowledge Base
Once the specialty industry has reached the edge of existing knowledge, it is ready to push past the frontier into innovation. In this phase, companies will begin to diversify their products into unique, sophisticated offerings. This process of diversification and sophistication will solidify the city’s reputation as an innovative environment and attract additional talent and investment within the area of specialization. Pittsburgh’s economic renaissance is the result of pursuing these three activities to maturity.
