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New York City Is Bad At Building An Innovation Economy--Listen Up Mayor Bloomberg

Posted by: Bruce Nussbaum on September 28, 2009

A new study out by the Center for An Urban Future shows that New York City has great research centers but is terrible turning scientific advances into start-up businesses and economic growth.

I am not surprised. My own personal experiences in working with NYC officials to introduce an Exec Ed program run by Parsons School of Design and the Rotman School of Management to retrain ex-Wall Street bankers to be innovative entrepreneurs was a dismal failure. The Economic Development Corporation in charge of city economic strategy is full of lawyers and one-time business consultants from McKinsey who didn’t understand innovation. They weren’t aware of the conversation surrounding Design and Design Thinking or the experience of P&G and other corporations in transforming their business models and cultures. The EDC has two plans up and running—one, JumpStart, apprentices 50 ex-bankers in innovative NYC companies, hoping they will “catch” the entrepreneurship bug. There was no scale to it—no way for it to have an actual impact on the New York economy. Another was to build a new media lab in NYC—a place that has several state-of-the-art media labs, from R/GA to NYU. Yet another was to renovate a building to make a space for young people to start new companies. New York has that already—it’s called Brooklyn.

Read this report. The one point I take issue with is engineering.

The report laments the lack of a great engineering school in NYC and the need for a Stanford-quality engineering school. No. No. No. NYC has it's own strength in Design and Media. It needs to harness it's expertise in social media platforms, Design Thinking and Design to develop new delivery systems for its Health and Education industries. New York has the designers and social scientists to understand the cultures of learners, patients, doctors, drivers and build new businesses off that.

But try telling that to Mayor Bloomberg's Economic Development Corporation.

Read the report's PR release:

September 28, 2009 – A new report released today by the Center for an Urban Future, a Manhattan-based think tank, finds that while New York City is home to several of the world’s leading scientific research institutions, these universities and research centers have not yet become powerful catalysts for entrepreneurship and local economic development the way similar institutions have in a number of other regions. The study concludes that New York has long failed to harness the full potential of its pre-eminent academic research institutions to build a meaningful innovation economy; an enormous missed opportunity given that the city desperately needs to diversify its economy and cultivate new engines of job growth.

The 48-page report, titled “Building New York City’s Innovation Economy,” cites numerous reasons for the city’s failings in this area, including the high cost of real estate and the shortage of affordable lab space. However, the study argues that the institutions themselves have been a big part of the problem. It shows that the leaders of the city’s universities and nonprofit research centers have not been particularly supportive of efforts to spin off new tech ventures, have not dedicated enough resources to engineering programs and, in many cases, have been too preoccupied with licensing the technologies from university research to existing firms located elsewhere, rather than to start-ups that have the potential to create jobs locally.

The Center’s report is accompanied by the city’s first-ever Innovation Index, a package of 49 charts and graphs that show where New York stands compared to other cities and regions on a broad range of indicators measuring both existing science and technology assets and the city's level of success at commercializing these assets.

The two publications, which were funded by the Alfred P. Sloan Foundation, reveal that New York is nearly unparalleled as a global leader in scientific research. They show that the New York City metro area leads all other regions in overall research and development spending by colleges and universities, with $2.9 billion in total R&D expenditures in 2006. Seven colleges and universities in the five boroughs rank among the nation’s top 200 in money spent on R&D, while 11 of the city’s hospitals and research centers are in the top 200 for R&D spending by nonprofit research institutions.

Despite their unquestionable strengths, however, the Center finds that the city’s universities and nonprofit research centers have not sparked the creation of a large technology sector the way similar institutions have elsewhere.

· According to the report, New York City is home to just six companies on the Deloitte 2008 Technology Fast 500 list, an annual ranking of the 500 fast-growing technology, media, telecommunications and life sciences companies in North America. The city’s total was miniscule compared to other regions, such as the San Francisco Bay area (which had 88 firms on the list), Los Angeles (50 firms), Washington, DC (47) and Boston (41).

· New York City’s research institutions are particularly strong in the life sciences. However, the report shows that in the fourth quarter of 2008 and the first quarter of 2009, the city was home to just one biotech company receiving venture capital. In contrast, the rest of the New York City metro region had 13 biotech firms receiving VC funds in these quarters, while Silicon Valley had 41, the Boston area had 33 and San Diego had 17.

According to the report, the city’s leading universities and nonprofit research institutions generated 21 startups in 2007, compared to 59 for institutions in Boston. Not every New York institution fell short on this front: Columbia produced 12 start-ups, more than all but four universities in the nation, while NYU had six startups, their highest total ever. But Mount Sinai School of Medicine, the Albert Einstein College of Medicine at Yeshiva University and Memorial Sloan-Kettering Cancer Center—all among the nation’s leaders in attracting NIH research grants—produced a combined total of three startups in 2007. Rockefeller University, another nationally renowned research center, has produced just 14 startups in the last 15 years.

The report details a number of reasons why the city has long failed to get more economic bang from its scientific research institutions. These include:

· The city lacks a first-rate engineering program, a key problem since it is the mix of engineering and science that often provides a critical spark for commercializing technologies. In 2007, only one New York City institution was among the top 100 U.S. universities for R&D expenditures in engineering; Columbia, which was 50th out of 100.

· The leaders of the city’s top research institutions have not done enough to promote and support entrepreneurship among their faculty and students.

· Tech entrepreneurs in New York find comparatively few options for early stage financing. Of the top 55 most active venture capital firms in the country in 2007, only two were based in New York City. Silicon Valley was home to 27 and Boston to 11. In addition, a comparatively small share of the VC money that does get invested here goes into high-tech and biotech businesses. In the first two quarters of 2008, only two percent of all VC deals in the city went to firms in the biotech sector—compared to 33 percent of all VC deals in San Diego, 30 percent in the Boston region and 16 percent in the Philadelphia area.

· The city lacks a deeply ingrained high-tech “ecosystem” that allows for frequent, casual interactions between the web of people who form the core of any dynamic tech sector: scientists, engineers, entrepreneurs, VC and angel investors, tech transfer officers and patent lawyers.

· The scope of tech-based business creation in New York City remains limited by the comparatively small number of seasoned technology entrepreneurs who understand how to bring promising technologies to market.

While many if not most of New York’s academic research institutions still have much room to improve when it comes to turning scientific breakthroughs into start-up enterprises, the report notes that there is growing cause for optimism.

According to the report, the technology transfer offices of seven of the city’s leading institutions are asserting themselves to a degree not evident before: in recent months the various offices have organized several forums to bring scientists together with investors and entrepreneurship experts, and produced a brochure that promotes New York City’s collective science and tech assets. And in recent years, several of the city’s institutions have brought in new, entrepreneurial-minded presidents and tech transfer managers—from Polytechnic President Jerry Hultin to Alan Paau, who took over the tech transfer office at Cornell in 2007 after doing the same type of work in tech hotbed San Diego.

The report also points out that Mayor Bloomberg has taken a number of positive steps to support an innovation economy. In the past year, the Bloomberg administration has supported a digital media incubator at Polytechnic University in downtown Brooklyn and two other incubators for new ventures in lower Manhattan, and the creation of NYCSeed, a new entity that is providing capital to some early-stage technology firms in the city. It has also backed the creation of a major bioscience research park on the East Side of Manhattan.

The Center for an Urban Future is a Manhattan-based think tank dedicated to independent, fact-based research about critical issues affecting New York’s economic future. This is the most recent in a long line of studies the Center has published about how to grow and diversify the city’s economy. Previous reports by the Center have focused on the city’s health IT sector, video game development sector, the biotechnology industry, the air cargo sector, the creative economy and the role of immigrant entrepreneurs as a sparkplug for economic growth.

The full report is available at's%20Innovation%20Economy.pdf

Our Innovation Index can be viewed at:

If you have any questions, please contact me at 212-479-3347 or 917-376-2309.

Best regards,

Jonathan Bowles
Center for an Urban Future
120 Wall Street, 20th Floor
New York, NY 10005

Reader Comments

David Hochman

September 29, 2009 2:08 AM

As the author of the opinion piece that Jonathan footnoted on the engineering question, I respectfully disagree with your disagreement. Link here: . There is nothing in the "engineering" argument inconsistent with continued efforts to build intelligently the design and media sectors, and there would be many positive side effects in biomedicine. Anyway I think you're way too harsh on the recently launched City programs. My thoughts here: .

David Lombino

October 2, 2009 10:02 PM

In the interest of full-disclosure, I would like to bring it to the attention of your readers that the author of this post, Bruce Nussbaum, approached the New York City Economic Development Corporation on May 19th 2009, seeking millions of dollars of taxpayer money for a proposal to create a workforce training program in which his personal interest was unclear.

If your readers would like to see Mr. Nussbaum’s presentation, which was “highly conceptual” in nature, I would be happy to share. Notwithstanding the somewhat confusing presentation that we received, in the interest of being responsive to Mr. Nussbaum, we informed him that we would welcome his submitting an application to be judged on a competitive basis for a request for proposals from qualified institutions for a professional training program. He never submitted a proposal. We eventually selected SUNY’s Levin Institute to run a program that has been enormously successful.

The next time we heard from Mr. Nussbaum was in the vitriol-filled, error-ridden blog post published on your web site, where he failed to disclose his relationship to our organization. If we had given Mr. Nussbaum taxpayer monies, would we have avoided his scorn? If we receive and reject a future proposal from him, will he knock us again?

NYCEDC has made great strides over the last year in coming up with creative and bold programs to spur entrepreneurship and boost the City’s technology sector at a time when the City has had to cut back on expenditures. In fact, our efforts were singled out and applauded in the report on innovation by the Center for an Urban Future that was the subject of Mr. Nussbaum’s bitter rant. While we were sorry that Mr. Nussbaum was not happy with the outcome of his specific request to us, we are not at all sorry for our record of success over the past year.


David Lombino

Senior Vice President, New York City Economic Development Corporation

bruce nussbaum

October 17, 2009 4:02 AM

I'm just catching up to David Lombino's comment on my blog item after being "in the dark" for three weeks so forgive the silence. It is strange to hear a Public Relations person say that in my blog I didn't identify the Parsons/Rotman partnership when I visited the Economic Development Corporation when it is right there on top in the second paragraph. We were trying to bring to New York City the same kind of Design Thinking and culture change that corporations around the world have used to generate growth, open silos, become more entrepreneurial and creative and cut costs. P&G and dozens of other companies have used this kind of Exec Ed program. With NYC losing 40,000 jobs on Wall Street, it seemed a good idea to bring a fantastic partnership between two great schools to help. No money was discussed at the meeting.

Alas, the PR person reflects the fact that the EDC doesn't get it when it comes to building a scalable innovation program that can make a difference in NYC. EDC's lack of comprehension of a conversation underway for a decade in business culture on innovation and design is the issue. The failure of New York City to have an innovation agenda that competes with San Francisco, Chicago, San Diego, London, Stockholm, Copenhagen, Beijing, Seoul, Singapore is the issue.

New York has an unemployment rate that is higher than the national average and almost certain to rise further this coming summer when commercial construction slows to a halt and tens of thousands of people are laid off. Given the problems of the city, the EDC gets a "C" in generating innovative solutions to rebalancing New York's economy and getting growth started again.


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Want to stop talking about innovation and learn how to make it work for you? Bruce Nussbaum takes you deep into the latest thinking about innovation and design with daily scoops, provocative perspectives and case studies. Nussbaum is at the center of a global conversation on the growing discipline of innovation and the deepening field of design thinking. Read him to discover what social networking works—and what doesn’t. Discover where service innovation is going and how experience design is shaping up. Learn which schools are graduating the most creative talent and which consulting firms are the hottest. And get his take on what the smartest companies are doing in the U.S., Asia and Europe, far ahead of the pack.

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