Regional economic competitiveness is driven by five key factors. These drivers are Traded Sectors, Talent, Innovation, Infrastructure and Governance. Regions grow – and create more Quality Jobs for local workers – when they put focused energy and investment in these five drivers.
B3K’s mission is to bring our region together to imagine, engineer and build our next era of success, where all people prosper and businesses thrive. As we work to grow our Opportunity Industries and add 100,000 additional Good and Promising Jobs in the Bakersfield-Kern region, we have to be mindful of the impact our innovative capacity (and use of that capacity) has on both the growth of traded sectors and quality of jobs created.
Defining Innovative Capacity
In the B3K Prosperity Market Assessment, we defined a region’s innovative capacity as its ability to create new value, uncover new products and services, start new businesses, adopt solutions to improve productivity and adapt to rapid technological change.
Specifically, there are four areas where innovation can be a catalyst for economic growth:
- Research and development
- Entrepreneurial dynamism
- Advanced industrial production
Regions with high innovative capacity and strong performance in these four areas consistently rank among the most competitive and diversified regional economies.
How do we measure innovation?
Measuring a region’s innovative capacity can be difficult. Compared to assessing other economic drivers like Talent (where educational attainment offers a clear and direct measure), measuring innovation requires more finesse.
In the B3K Market Assessment, we evaluated the four areas of innovation via six core indicators.
- Academic Expenditures on Research and Development: for most regions, a university is their most significant institution for research and development. This metric is a helpful indicator of the level and nature of a region’s innovative capacity
- Peer-Reviewed Scholarly Articles: Innovation strengths and areas of new opportunity can be identified by examining the content, volume, concentration, relative impact and convergence of scholarly articles published by institutions – academic and other – within a region
- Patent Generation: the number of patents generated in a region and their distinctiveness, i.e., “Knowledge Complexity Index”
- Small Business Innovation Research (SBIR) and Small Business Technology Transfer (SBTT) Awards: competitive awards that enable domestic small businesses to engage with federal research and development with the potential for commercialization. This metric is a proxy for a region’s effectiveness at leveraging federal research and innovation assets to spur commercial activities
- Jobs Quality-Quantity Index: a measure developed by the Kauffman Foundation that aggregates and equally weights the indicators of job contribution, earnings compensation and constancy of jobs to provide a comprehensive picture of job-related dynamics in young firms.
- Density of High-Growth Young Firms: the impact of entrepreneurship on regional economic competitiveness relies on a concentration of “high-growth” firms.
Rating Innovation in the Bakersfield-Kern Region
Our innovative capacity lags severely behind our peers.
Between 2009 and 2018, CSUB, our local university, had just $26 million in R&D expenditures. For an economy of our size, that number is very small. Fresno State spent $77 million over the same period, while CSU San Bernardino spent more than $100 million. In peer regions across the country, the University of Nebraska – Omaha spent $90 million, while the University of Oklahoma – Tulsa spent $22 million over just five years.
Of particular note, CSUB received very little funding from business or nonprofit groups for its R&D, both in absolute terms and compared to peers. This low level of support creates a major gap in applied problem-solving and other R&D activities that could (and would) lead to commercialization and regional economic benefits.
Published articles and patents generated tell a similar story. Altogether, regional institutions only published 2,300 articles over roughly two decades. This is an extremely low volume of scholarship for a region of our size, representing, on a per-capita basis, just about 12 percent of the U.S. metro average.
On the bright side, the scholarship produced in the Bakersfield-Kern region is highly concentrated in fields aligned with or adjacent to our Opportunity Industries. Petroleum engineering and aerospace engineering (directly related to our Energy and Carbon Management and Aerospace Opportunity Industries) account for 9.5 times as many of our region’s scholarly citations, compared to the national average.
We generate a below-average number of patents compared to our peer regions. However, despite the low volume of patents granted, the distinctiveness of patents generated in the Bakersfield-Kern region is slightly above the median. Further, because of the complexity of measuring military-associated patents and military intellectual property, it’s likely that the number of patents generated at Kern’s military installations and their Knowledge Complexity Index are understated.
Despite potentially understating the impact of our region’s military patent output and novelty, the reality is that technology developed on military installations in the Bakersfield-Kern region is not translating to commercial activity. Small Business Innovation Research (SBIR) awards and Small Business Technology Transfer (STTR) programs disproportionately concentrate in regions – like the Bakersfield-Kern region – with large federal R&D assets, i.e., national labs or military bases, that spin off both technology and talent to recipient businesses and are partners in support of the work.
For example, Huntsville, AL., Santa Maria-Santa Barbara, CA., Dayton, OH., and Santa Fe, NM., rank among the most intense SBIR/STTR regions, leveraging their proximity to NASA Marshall Space Flight Center, Vandenberg Air Force Base (AFB), Wright-Patterson AFB and Los Alamos National Lab, respectively. Neither Dayton nor Santa Fe feature a Tier 1 research university (similar to the Bakersfield-Kern region), demonstrating that the presence of such an institution is not a prerequisite for successful commercialization and scale.
Despite this, our region extraordinarily underperforms against our federal R&D counterparts, when comparable assets actually should put us far ahead of our economic peers.
Lastly, in measures of entrepreneurial dynamism, we also find ourselves trailing our peers. The Bakersfield-Kern region experienced a substantial decline in employment at young firms over the past ten years, equivalent to other inland California regions but much worse than our economic peers.
While we have a high number of new jobs created in young firms, the B3K Market Assessment found that our young firms rank low in compensation by a notable amount and rank at the bottom for the constancy of those jobs. When looking at the Kauffman Jobs Quality-Quantity index and its comprehensive picture of job-related dynamics at young firms, the Bakersfield-Kern region is the lowest among our peers. We also rank low in our density of high-growth young firms against multiple comparison groups.
Where do we go from here?
With the Bakersfield-Kern region performing poorly on almost every measure of innovative capacity, it would be easy to view our situation as bleak. However, hidden slightly beneath the surface are promising signs for improving innovation in our region.
CSUB is an important partner for B3K Prosperity. Its 2019-2024 Strategic Plan includes several strategies and sub-strategies to increase R&D activities taking place on campus, such as increasing faculty and staff pre- and post-award support for research and grants, appointing staff to identify funding opportunities, creating research clusters and building partnerships with other institutions that share common research agendas.
In East Kern, our Aerospace Implementation Team is working with leadership at regional military installations to create an innovation storefront, simplifying the process for businesses to find commercialization opportunities and accelerating the potential to launch new high-growth firms that leverage military R&D.
And, our Entrepreneurship and Business Services implementation teams are both targeting basic missing supports for young firms, moving beyond generic “small business services” to develop assets like incubators and accelerators, programs in commercialization and problem-solving assistance, and nurture digital and technology talent to help firms scaleup later in the business lifecycle.
There’s a lot of work to be done. If you’re interested in supporting B3K Prosperity’s efforts and growing our region’s innovative capacity, get involved by signing-up for one of our Implementation Teams.