Introduction High technology has become the latest “buzz word” for local economic development officials and communities across the United States. Local governments are increasing their investment to attract “innovation” industries to replicate the success of California’s Silicon Valley and North Carolina’s Research Triangle areas. These areas are considered hot spots for technological innovation at the national level. High Tech industries bring high-wage positions and can lead to economic diversification and economic resiliency. The emerging biotechnology clusters in Jupiter and Port. St. Lucie are two good examples of Florida’s efforts to become a new powerhouse in the innovation economy. Similar efforts have also sprung up in the Central Florida area. In 2005, Orange County outlined a vision of a “high tech/high value” corridor in east Orange County stretching from the University of Central Florida to the Orlando International Airport. Soon thereafter, both Osceola and Seminole Counties announced their own respective plans to develop similar areas to stimulate the creation of high technology parks and attract clean industries. While these are great efforts, few of the plans actually define what is considered a “high tech” industry. Moreover, there have been very few studies that profile the characteristics of the local high technology sector. This third article of the Economic Research initiative defines high technology industry and discusses Orange County’s high technology economy. What is “high tech”? Our search did not find an actual definition of high technology industries. The AeA (formerly known as the American Electronics Association) defines high technology industries as those that fall within three broad categories: high-tech manufacturing, communications services, and software and computer services. However, it does not include other cutting edge industries, such as biotechnology, engineering services, and research and testing industries. Another important research institute, the Milken Institute, also does not have a definition per se, but it lists nineteen high tech industry categories organized by NAICS code. These sectors are depicted in Exhibit 1. The Milken Institute recently published North America’s High Tech Economy: The Geography of Knowledge Based Industries, which ranked all of North America’s metropolitan regions according to their performance as clusters of technological activity using the aforementioned sectors. The Orlando-Kissimmee Metropolitan Statistical Area (MSA) was ranked 43 rd among the top fifty high tech areas, up from 46 th in 2003. The MSA had a total of 63,600 high tech jobs in 2007. The highest ranked industry was the Commercial and Service Industry Machinery (NAICS 3333), ranked number 7 in North America. Establishments within this industry specialize in manufacturing optical equipment. To determine the role of Orange County in the regional high tech economy, staff assessed the location quotients for all the high tech sectors studied by the Milken Institute. Exhibit 2 shows the ECONOMIC OUTLOOK SEPTEMBER 2009 The High Technology Sector in Orange County by Luis Nieves-Ruiz, AICP Issue 3
Transcript
Introduction High technology has become the latest “buzz word” for local economic development officials and communities across the United States. Local governments are increasing their investment to attract “innovation” industries to replicate the success of California’s Silicon Valley and North Carolina’s Research Triangle areas. These areas are considered hot spots for technological innovation at the national level. High Tech industries bring high-wage positions and can lead to economic diversification and economic resiliency. The emerging biotechnology clusters in Jupiter and Port. St. Lucie are two good examples of Florida’s efforts to become a new powerhouse in the innovation economy. Similar efforts have also sprung up in the Central Florida area. In 2005, Orange County outlined a vision of a “high tech/high value” corridor in east Orange County stretching from the University of Central Florida to the Orlando International Airport. Soon thereafter, both Osceola and Seminole Counties announced their own respective plans to develop similar areas to stimulate the creation of high technology parks and attract clean industries. While these are great efforts, few of the plans actually define what is considered a “high tech” industry. Moreover, there have been very few studies that profile the characteristics of the local high technology sector. This third article of the Economic Research initiative defines high technology industry and discusses Orange County’s high technology economy.
What is “high tech”? Our search did not find an actual definition of high technology industries. The AeA (formerly known as the American Electronics Association) defines high technology industries as those that fall within three broad categories: high-tech manufacturing, communications services, and software and computer services. However, it does not include other cutting edge industries, such as biotechnology, engineering services, and research and testing industries. Another important research institute, the Milken Institute, also does not have a definition per se, but it lists nineteen high tech industry categories organized by NAICS code. These sectors are depicted in Exhibit 1. The Milken Institute recently published North America’s High Tech Economy: The Geography of Knowledge Based Industries, which ranked all of North America’s metropolitan regions according to their performance as clusters of technological activity using the aforementioned sectors. The Orlando-Kissimmee Metropolitan Statistical Area (MSA) was ranked 43rd among the top fifty high tech areas, up from 46th in 2003. The MSA had a total of 63,600 high tech jobs in 2007. The highest ranked industry was the Commercial and Service Industry Machinery (NAICS 3333), ranked number 7 in North America. Establishments within this industry specialize in manufacturing optical equipment. To determine the role of Orange County in the regional high tech economy, staff assessed the location quotients for all the high tech sectors studied by the Milken Institute. Exhibit 2 shows the
ECONOMIC OUTLOOK SEPTEMBER 2009
The High Technology Sector in Orange County by Luis Nieves-Ruiz, AICP
Issue 3
high tech industries with the highest location quotients. To complement this information, staff also researched the number of establishments within these categories using the InfoUSA business database.
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Besides Commercial and Service Industry Machinery, other high tech industries with high location quotients were Data Processing, Hosting, and Related Services, which provides infrastructure for web hosting and streaming; Architectural, Engineering, and Related Services, which includes the planning and design of buildings and testing laboratories that are engaged in performing physical, chemical, and other analytical testing services; and, Telecommunications, which are primarily engaged in operating or providing access to facilities for the transmission of voice, data, text, sound, and video. Finally, Scientific Research and Development Services establishments conduct research and experimental development in the physical, engineering, and life sciences.
While NAICS codes are widely used to study local economies, they are less effective when used to study some high tech industries. These are industries that are hard to define, because they use a
ECONOMIC OUTLOOK SEPTEMBER 2009
NAICS Code
Industry Description
3524 Pharmaceutical and Medicine Manufacturing
3333 Commercial and Service Industry Machinery
3341 Computer and Peripheral Equipment Manufacturing
3342 Communications Equipment Manufacturing
3343 Audio and Video Equipment Manufacturing
3344 Semiconductor and Other Electronic Manufacturing
3345 Navigational, Measuring, Electromedical, and Control Instruments
3346 Manufacturing and Reproducing Magnetic and Optical Media
3364 Aerospace products and Parts
3391 Medical Equipment and Supplies
5112 Software Publishers
5121 Motion Picture and Video Industries
517 Telecommunications
518 Data Processing, Hosting, and Related Services
5191 Other information Services
5413 Architectural, Engineering, and Related Services
5415 Computer Systems Design and Related Services
5417 Scientific Research and Development Services
6215 Medical and Diagnostic Labs Source: Milken Institute
Exhibit 1: Milken Institute's High Technology Sectors Exhibit 1: Milken Institute's High Technology Sectors
Industry Orange County LQ
Establishments Number of Employees
3333 Commercial and Service Industry Machinery 5.02 9 2,920
518 Data Processing, Hosting, and Related Svcs. 1.49 99 2,133 5413 Architectural, Engineering, and Related Svcs. 1.45 606 11,647
517 Telecommunications 1.21 258 6,771
5417 Scientific Research and Development Svcs. 1.14 95 3,890 Sources: BLS Location Quotient Calculator, InfoUSA 2009
Exhibit 2: High Technology Sectors with Highest Location Quotients in Orange County Exhibit 2: High Technology Sectors with Highest Location Quotients in Orange County
variety of new technologies and encompass several fields. Thus, they would not be directly counted in a ranking system like Milken’s. The best example is the Modeling, Simulation, and Training Sector (MS&T), which is one of Orange County’s largest technology industries. There is no traditional NAICS classification for the MS&T sector because most of the companies within this industry perform tasks and create technologies that defy traditional industry codes. This makes it extremely difficult for researchers to quantify the impact that this industry has at the national and local level. However, these companies are technology-intensive and rely on state-of-the art information and interaction software. Therefore, they are an important high technology industry. What is Modeling, Simulation, and Training?
A simulation is typically the implementation of developed models that are used in a variety of applications, such as military and flight training, entertainment, test and evaluation, education, analysis, digital media, and product design (Hagen, Martin & Caswell, 2002). Orange County’s industry started in the 1960s, when the Navy transformed a former Air Force base into a training facility and started to use early versions of simulator technologies. The opening of UCF in 1968, then known as Florida Technological University, and the first moon landing helped to establish the area’s simulation industry. In 1980, UCF officials offered the Navy 40 acres next to the campus to establish what is now known as Central Florida Research Park. The rush in homeland security investment after the 9/11 attacks created a boost for the research park and its simulation companies. In 2002, a total of 102 MS&T companies created approximately 5,591 jobs in the Orlando MSA (Hagen, Martin & Caswell, 2002). Team Orlando, the Army’s office of simulation and training in Orlando, awarded $17.5 billion in contracts earlier this year, most of which went to simulation and training firms in Central Florida Research Park.
Using the InfoUSA establishment data (2009), staff found more than 130 MS&T companies in Orange County. Less than half of these companies are within the “high tech” sectors defined by the Milken Institute. Exhibit 3 shows the industry sectors that comprise the local MS&T sector. The majority of these companies (45) are within the Professional, Scientific, and Technical Services category. MS&T companies within this subsector are classified within diverse industries, such as engineering services, custom computer services, human resource consulting, process and logistics. A second group was
ECONOMIC OUTLOOK SEPTEMBER 2009
8%
8%
6%
14%19%
34%
11%
541 Prof., Scientific & Tech.Svcs
443 Electronic & Appliance Stores
999 Unclassified Establishments
Other Classifications
611 Educational Services
928 National Security
334 Comp. & Electronic Prod. Manuf.
Exhibit 3: Orange County’s MS&T Companies by NAICS CodeExhibit 3: Orange County’s MS&T Companies by NAICS Code
Sources: InfoUSA 2009 and Orlando Business Journal’s 2009 Book of Lists.
classified as Electronic and Appliance Stores. The rest of the companies belonged to an array of industries, including manufacturing, educational services, performing art related companies, and national security companies. Fourteen percent of the companies were unclassified. The lack of a specific NAICS code for MS&T companies made this search very time consuming. Therefore, staff decided to search for clusters or concentrations of these companies. Clustering makes it easier for high technology companies to share resources and new technologies.
As noted in Exhibit 4, there are four MS&T clusters in Orange County. These four clusters account for 85 percent of all companies and 44 percent of all the MS&T workers in Orange County. The first and largest cluster, the Alafaya-Rouse Road cluster, has 85 companies near UCF, including the Central Florida Research Park on the south west part and north of University Boulevard. All of these companies are associated with national security efforts. The Aloma-University corridor contains twelve companies and is probably an outgrowth of the previous cluster, as most of these companies are also associated with national security issues. There are also two smaller clusters. One is located within the City of Orlando, and it includes several Department of Defense offices that likely support the simulation companies. A smaller cluster is south of West Sand Lake Road. While it includes some national security companies, it also has two entertainment companies.
ECONOMIC OUTLOOK SEPTEMBER 2009
Exhibit 4: MS&T Clusters in Orange County Exhibit 4: MS&T Clusters in Orange County
Source: InfoUSA 2009, 2009 Book of Lists
Conclusions
Technological innovation is expected to become the future driver of economic development, as it brings higher-wage jobs and economic diversity to our community. Other jurisdictions across the United States will continue to compete fiercely to attract these jobs, but Orange County shows strength in a variety of high tech sectors, including Commercial industry and machinery, Data Processing and Hosting, and Telecommunications. Based on our analysis, the County also has a high number of establishments dedicated to Modeling and Simulation Training (MS&T). This field is very hard to define, as it encompasses engineering, training, education, and a variety of disciplines. This could very well affect the County’s position in economic rankings such as the Milken Institute’s high tech index. The recent arrival of the Burnham Institute would certainly increase our area’s high technology profile at the national level. A future issue in these series will discuss the role of biosciences and the health care industry in Orange County’s economy. References Burnett, R. Army deals in limbo. Orlando Sentinel. Originally published on July1, 2009. Retrieved August 7, 2009 from http://www.orlandosentinel.com/business/orl-bizfuture-combat fallout070109070109jul01,0,6513272.story Bureau of Labor Statistics, U.S. Department of Labor. 2007 Location Quotient Statistics for Orange County, Orlando MSA, and State of Florida. Retrievd on March 11, 2009 from http://data.bls.gov LOCATION_QUOTIENT/servlet/Lqc.ControllerServlet Corthright, J. and Mayer, H. High Tech Specialization: A Comparison of High Technology Centers. The Brookings Institution. January 2001. Retrieved June 2009 from http://www.brookings.edu/reports/2001/01labormarkets_joseph-cortright-and-heike-mayer.aspx.
Devol. R.C. Klowden K., Bedroussian A and Benjamin Y. North America’s High Tech Economy: The Geography of Knowledge-Based Industries. Milken Institute. Executive Office of the President, Office of Management and Budget. (2007). North American Industry Classification System United States 2007. Lanham: Bernan Hagen, G. Martin, B., Caswell, S. (2003). Impact of Florida’s Modeling, Simulation and Training Industry. Orlando: National Center for Simulation (NCS) infoUSA Database License Group. (May,2009). Orange County Business Leads Report .
Lohr, Steve. Unboxed-Governments Embracing a Role in Innovation? New York Times. Originally published on June 20, 2009. Retrieved on August 7, 2009 from http://www.nytimes.com/2009/06/21/technology/21unboxed.html?emc=eta1 Orlando Business Journal. 2009 Book of Lists. Volume 29, Issue 29. December 19, 2008 Stokes, M. Team Orlando Military boasts large presence in Research Park. East Orlando Sun. May 21-June 17, 2009. Originally published in the East Orlando Sun. Retrieved on August 7, 2009 from http://enewsbuilder.net/orcc/e_article001449453.cfm?x=bfD44hs,b10gGhlb
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