Phoenix Makes a Play to Become An R&D Powerhouse

The Greater Phoenix Area, once an epicenter for the foreclosure crisis, now wants to become a hub for software, engineering, and research.

National Journal
May 27, 2015, 7:53 a.m.

In the years fol­low­ing the Great Re­ces­sion, politi­cians, busi­ness lead­ers, and eco­nom­ists throughout the Great­er Phoenix area did some soul-search­ing about the state of the loc­al eco­nomy. Phoenix had been hard hit by the burst­ing of the hous­ing bubble, shed­ding more than 300,000 jobs in hous­ing, real es­tate, and con­struc­tion be­gin­ning in 2008. What eco­nom­ic growth the re­gion did ex­per­i­ence over the last two dec­ades came from pop­u­la­tion growth in­stead of real eco­nom­ic activ­ity, ac­cord­ing to an ana­lys­is done by the Brook­ings In­sti­tu­tion’s Met­ro­pol­it­an Policy Pro­gram.

Loc­al of­fi­cials knew that they needed to find a new path for the re­gion­al eco­nomy: a long-term strategy to boost growth, wages, and pro­ductiv­ity for the re­gion’s roughly 4.3 mil­lion res­id­ents. That strategy, they de­cided, would come from trans­form­ing Phoenix in­to a loc­al hub for re­search and de­vel­op­ment by build­ing off the re­gion’s ex­ist­ing ad­vanced man­u­fac­tur­ing, aerospace, and de­fense in­dus­tries. The trans­form­a­tion is still in its nas­cent stage, ex­pec­ted to take hold over the next five to 10 years.

Na­tion­al Journ­al spoke with Kath­leen Lee, vice pres­id­ent of re­search and strategy for the Great­er Phoenix Eco­nom­ic Coun­cil, about the re­gion’s new plans, loc­ally nick­named “Ve­lo­city.” Ed­ited ex­cerpts of the con­ver­sa­tion fol­low.

Tell me what Phoenix was like after the Great Re­ces­sion.

The en­tire na­tion was in a deep re­ces­sion, and Phoenix was one of the places hit hard. We had some sig­ni­fic­ant down­turns in the hous­ing mar­ket. Our pop­u­la­tion growth slowed down be­cause there was no real mi­gra­tion hap­pen­ing na­tion­ally. Like oth­er places, we had a high un­em­ploy­ment rate at the time as well. We’re in a re­cov­ery mode right now—al­most 85 per­cent re­covered. The ef­forts around Ve­lo­city came out of that point in time, when the re­gion really star­ted look­ing at oth­er in­nov­at­ive strategies to sus­tain eco­nom­ic growth over the long haul.

So how did Phoenix of­fi­cials come up with the idea to turn the re­gion in­to a hub for re­search and de­vel­op­ment?

When the re­ces­sion hit, we star­ted to look at our eco­nomy. We looked at our top met­rics and dug deep­er in­to the as­pects of our eco­nomy in terms of our in­dus­tries, in­nov­a­tion, and en­tre­pren­eur­i­al ca­pa­cit­ies. We did an as­sess­ment and looked at where the po­ten­tial op­por­tun­it­ies were. Out of that work were the three strategies from our eco­nom­ic growth plan.

But why fo­cus spe­cific­ally on re­search and de­vel­op­ment? It seems like every city now wants to mas­ter this.

Cer­tainly, the glob­al eco­nomy is driv­en by know­ledge sec­tors. In any eco­nomy, if you really want to con­tin­ue to see eco­nom­ic growth and really see the cre­ation of good jobs, you need to fo­cus on pro­ductiv­ity and in­nov­a­tion. For sev­er­al dec­ades, be­cause we were such a high-growth area, I think a lot of people for­got that we have a really strong in­dus­tri­al base and elec­tron­ics and semi­con­duct­ors and oth­er re­lated in­dus­tries. That in­dustry base is already es­tab­lished here.

In or­der for us to really look at how our in­dus­tries will per­form over time around these new tech­no­logy areas, we need to have more re­search and de­vel­op­ment cap­ab­il­it­ies. Re­lated to that will be the know­ledge and skilled work­force that can sup­port that type of growth. That is why we landed on that.

I nev­er really knew that Phoenix already had an in­dus­tri­al base. What does that look like?

In our re­gion, we spe­cial­ize in aerospace and de­fense, semi­con­duct­ors and elec­tron­ics. These are in­dus­tries that were es­tab­lished in the 1950s. The his­tory of these sec­tors is that early com­pan­ies came here and set up op­er­a­tions around re­search and de­vel­op­ment; at the time, there was a lot of work around tech­no­lo­gies geared around de­fense. Those busi­nesses grew in­to large com­pan­ies like Hon­ey­well or In­tel.

Now, what we’re see­ing is that some of these com­pan­ies are look­ing at oth­er kinds of new tech­no­logy areas. So if you look at re­search and de­vel­op­ment in­vest­ments in our re­gion, you see that a sig­ni­fic­ant por­tion of our total re­search and de­vel­op­ment is in private in­dustry. In­tel, for ex­ample, made huge in­vest­ments here. We’re also see­ing a sig­ni­fic­ant amount of com­pan­ies that are soft­ware or in­form­a­tion tech­no­logy com­pan­ies that sup­port, not just con­sumer products, but also man­u­fac­tur­ing and oth­er kinds of in­dus­tries. We’re be­gin­ning to see that kind of in­form­a­tion tech­no­logy and pro­duc­tion get bet­ter in­teg­rated in­to the new type of busi­ness mod­el.

Do you con­sider this a makeover for the Phoenix area?

I wouldn’t say it is a makeover. I would say it’s an ac­cel­er­a­tion of what we already have and build­ing upon those cap­ab­il­it­ies. I think “makeover” im­plies that we’re try­ing to do something en­tirely dif­fer­ent. If you look at oth­er re­gions and places, if you try to do that and you’re not hold­ing on to what you already have, the like­li­hood of suc­ceed­ing will be very dif­fi­cult. We’re build­ing on what we already have and then ad­ja­cent in­dus­tries like soft­ware and in­form­a­tion tech­no­logy are ac­tu­ally grow­ing out of it.

What We're Following See More »
Trump Signs Border Deal
1 days ago

"President Trump signed a sweeping spending bill Friday afternoon, averting another partial government shutdown. The action came after Trump had declared a national emergency in a move designed to circumvent Congress and build additional barriers at the southern border, where he said the United States faces 'an invasion of our country.'"

Trump Declares National Emergency
1 days ago

"President Donald Trump on Friday declared a state of emergency on the southern border and immediately direct $8 billion to construct or repair as many as 234 miles of a border barrier. The move — which is sure to invite vigorous legal challenges from activists and government officials — comes after Trump failed to get the $5.7 billion he was seeking from lawmakers. Instead, Trump agreed to sign a deal that included just $1.375 for border security."

House Will Condemn Emergency Declaration
1 days ago

"House Democrats are gearing up to pass a joint resolution disapproving of President Trump’s emergency declaration to build his U.S.-Mexico border wall, a move that will force Senate Republicans to vote on a contentious issue that divides their party. House Judiciary Committee Chairman Jerrold Nadler (D-N.Y.) said Thursday evening in an interview with The Washington Post that the House would take up the resolution in the coming days or weeks. The measure is expected to easily clear the Democratic-led House, and because it would be privileged, Senate Majority Leader Mitch McConnell (R-Ky.) would be forced to put the resolution to a vote that he could lose."

Where Will the Emergency Money Come From?
1 days ago

"ABC News has learned the president plans to announce on Friday his intention to spend about $8 billion on the border wall with a mix of spending from Congressional appropriations approved Thursday night, executive action and an emergency declaration. A senior White House official familiar with the plan told ABC News that $1.375 billion would come from the spending bill Congress passed Thursday; $600 million would come from the Treasury Department's drug forfeiture fund; $2.5 billion would come from the Pentagon's drug interdiction program; and through an emergency declaration: $3.5 billion from the Pentagon's military construction budget."

House Passes Funding Deal
2 days ago

"The House passed a massive border and budget bill that would avert a shutdown and keep the government funded through the end of September. The Senate passed the measure earlier Thursday. The bill provides $1.375 billion for fences, far short of the $5.7 billion President Trump had demanded to fund steel walls. But the president says he will sign the legislation, and instead seek to fund his border wall by declaring a national emergency."


Welcome to National Journal!

You are currently accessing National Journal from IP access. Please login to access this feature. If you have any questions, please contact your Dedicated Advisor.