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Study Finds Tech Impact in Region Hurt by Sprawl

Survey: Southland firms found to trail those in other areas in ability to raise venture capital, make IPOs and generate patents.


Southern California's high-tech economy ranks second only to Silicon Valley in a new survey of the nation's leading technology centers, but there are still significant shortcomings because of the Southland's sheer size.

The region is home to more high-tech companies and workers than the Bay Area or any other part of the country. But when the Southland's huge population is taken into account, local tech firms severely lag when it comes to raising venture capital, making initial public stock offerings and generating patents.

The study, which will be released today by the regional technology alliance Larta, compares the combined Los Angeles, Orange, Ventura, Riverside and San Bernardino counties with the Bay Area, Massachusetts and Austin, Texas, in 35 categories ranging from exports to Internet access in school classrooms.

In general, Southern California scored high in such measures as the number of high-tech companies and workers, the number of universities and the number of graduate students studying science and engineering.

That means the region's economy has the necessary ingredients to convert new ideas into companies that can create jobs and wealth, said Ross DeVol, director of regional studies at the Milken Institute in Santa Monica, which was not involved with the study.

But the report concedes that many of those big numbers may simply be a consequence of the fact that Southern California is a very big place. When population is taken into account, Silicon Valley, Massachusetts and Austin frequently overtake the Southland.

"It says that given the resources we have here, we're perhaps not capitalizing on them as much as we could, or as much as some of the other leading centers are," DeVol said.

In several measures of new-company growth, Southern California trails other regions. Start-ups in Silicon Valley and Massachusetts raised more venture capital than Southland firms. The Bay Area and Massachusetts also generated more IPOs than Southern California.

On a per-capita basis, greater Los Angeles ranks fourth in research and development expenditures by universities. The Southland also ranked last in the number of patents issued and the number of pre-market notifications that companies make to the Food and Drug Administration before they can market a new medical device.

Taken together, these factors suggest that the Southland's technology economy is fueled more by old-line companies such as aerospace giant Boeing Co. and information technology services leader Computer Sciences Corp. than by firms in faster-growing fields such as software and networking, said AnnaLee Saxenian, an associate professor of city and regional planning at UC Berkeley.

The Larta study also highlighted a signature Southern California problem: sprawl. Because the region is so spread out, high-tech companies have developed in clusters that dot the region. Los Angeles' South Bay is strong in aerospace and defense, for instance, while Orange County specializes in biotechnology, Internet and software firms. The 101 Corridor along the Ventura Freeway in the San Fernando Valley and Ventura County is home to scores of companies building telecommunications equipment.

"Southern California's clusters don't have the degree of interaction that you see in most of the other leading clusters," DeVol said. "How does a biotech firm in Thousand Oaks interact on a daily basis with people in Pasadena? It's a concern for Southern California."

Saxenian said the study could have offered more insights if it had compared Southern California to other tech centers such as Seattle, Northern Virginia and North Carolina's Research Triangle Park. But on the whole, she said it is plausible that Southern California is the No. 2 technology region after Silicon Valley.

"There is a center of [high-tech] activity that has emerged, and it happens to be within a very big metro area that doesn't dominate the economy," said Saxenian, who has studied Silicon Valley and other regional high-tech economies. "But that doesn't take away from the fact that this economy is increasingly tech-oriented."

Los Angeles-based Larta, a private industry group with California state backing, funded the study. It plans to repeat the survey on an annual basis to measure Southern California's progress against its major high-tech rivals, said Larta Chief Executive Rohit Shukla.

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