Tech Hub Competition and Federal R&D Funding

Executive Summary

Funding for Research & Development (R&D) is crucial for sustaining a tech hub. Federal funding for R&D in particular plays a unique and important role; federal R&D funding is often focused on basic research which contributes to the foundation of scientific research which is the catalyst for innovation – the bedrock of tech hubs.

In this report we examine the competitiveness of Boston’s tech hub by comparing its performance to other leading hubs. When examining input metrics, established tech hubs, like Boston and the Bay Area, receive the lion’s share of the federal funding for R&D. However, Boston’s growth rate of federal funding lags behind emerging tech hubs, such as Seattle, that show consistent growth in their share of funding. In addition, Boston relies mainly on funding from the Department of Defense, while Seattle enjoys more diverse funding sources. Recent political developments indicate that the federal government is more inclined to increase its stagnating investment in R&D. However, there are also growing demands for geographical diversification of federal investments across the country – a development that might further increase Boston’s competition with emerging tech hubs over federal funding.

Boston and Massachusetts maintain their competitiveness, but are still in a close competition, when measuring output metrics such as utility patents and the number of individuals employed in tech occupations. In terms of the number of tech firms, Boston trails behind or is in a close competition with other tech hubs, such as the Bay Area, Austin, Seattle, New York, and the DMV area.

To sustain the Boston tech hub, we recommend that local and federal policymakers: (1) diversify
their federal funding, mainly through investments in Biotech; (2) attract more government facilities
to the area, such as government labs; (3) increase collaboration with emerging tech hubs, mainly in geographically dispersed areas; and (4) emphasize small businesses with innovative ideas. Adopting these recommendations would not only support Boston’s economy but also safeguard one of the country’s leading scientific and innovative ecosystems, maintaining American scientific leadership.

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