Arizona State University often touts its annual U.S. World News rating as the number 1 university in the world for “innovation.” But what does that really mean? How does this concept fit into Arizona’s economic outlook?
Michael Porter, a Harvard professor who has dedicated his career to studying economic competitiveness, believes that “Innovation is more than just scientific discovery. Innovation stretches beyond science and technology, and includes all the activities involving the discerning of needs and the transformation of knowledge into commercial products, processes, and services. In advanced regions, prosperity rests heavily on the capacity for continuous innovation.”
U.S. World News describes its methodology for choosing the “most innovative universities” by analyzing a school’s investments in “curriculum, faculty, students, campus life, technology or facilities.”
Innovation as a touchstone
The university’s focus on innovation has taken root across the state, with Arizona Gov. Doug Ducey announcing in his first year in office that Arizona “has a culture of innovation.” Through economic reforms, expanded programs, and public-private partnerships, the state government has collaborated with local governments and the private sector to draw investment and enterprise to the state.
One strategy leveraged to accrue investment was the implementation of the Angel Tax Credit Program. This program certifies up to $2.5 million of tax credits annually from July 2017 through June 2021 for “qualified investments made in qualified small businesses.” This program reached its full funding potential in November 2020 when the Arizona Commerce Authority declared that all the funding for the program had been allocated.
Venture capital is a large resource to both the economy and workforce, boosting economic growth and laying the groundwork for career creation. Venture capital dollar amounts in Arizona over the past two years have set records. In 2018, $800 million went to Arizona startups over 133 deals. In 2019, $723 million in venture capital was invested in startups based in Arizona over 114 deals.
In 2018, Gov. Ducey signed House Bill 2434, which created a FinTech (Financial Technology) Regulatory Sandbox, the first of its kind in the United States. This allowed for companies to launch products on a temporary and limited scale to consumers in order to test their products, services, business models, and delivery mechanisms in the real market without having to face regulatory costs and burdens that would otherwise be imposed.
At the time, Arizona Attorney General Mark Brnovich said, “Arizona has always been a state for big ideas and this is just one more place where we are trailblazing in entrepreneurship and innovation.”
Then in 2019, Ducey signed House Bill 2673 into law, which established a Property Technology–PropTech– Sandbox. Similar to H.B. 2434, it provided opportunities for startups and existing companies, which are focused on real estate, a regulatory free space to test their products and services without incurring repercussions normally incurred in a real market.
All of these efforts combined with the location of the state and the high-tech and highly skilled pipeline talent have led to the influx of companies looking to make the Valley their new homebase.
According to the EMSI Talent Attraction Scorecard, Maricopa County is among the top counties in the United States for talent attraction, driven by a growth migration and regional competitiveness. In 2020, the skilled workforce in the county grew by 18 percent and the county as a whole ranked number 1 for regional competitiveness.
Regional competitiveness in the scorecard is defined as the job change that occurs due to factors within a region, as opposed to being the result of national border trends. Other counties which are typically compared to Maricopa such as Los Angeles County or Palm Beach were ranked 601st and 23rd respectively.
With the nickname of Silicon Desert, the state of Arizona has garnered a lot of attention from companies looking to capitalize on the economic benefits the state offers.
Chris Camacho, CEO of the Greater Phoenix Economic Council (GPEC), said that Arizona’s highly skilled workforce and competitive taxation (compared to neighboring states) has enabled this expansion: “These individuals and companies are seeking other alternatives from the high tax and regulatory environment that plagued them.”
Companies such as DoorDash, Opendoor, and Norton LifeLock have all moved into the state or made decisions that are expanding their influence in the region, specifically in Tempe. Twenty-two percent of the population of Tempe is made up of millenials and the city is home to Arizona State University. On top of this, 30 percent of the Phoenix metropolitan area holds a bachelor’s degree or higher.
There are lots of benefits to reap from coming to the Valley, including the workforce coming out of the large state universities. This means that companies can have a large staff for a lower price of leading tech locations in other states. Arizona’s tech market is expected to grow and prosper over the next few years as businesses look to make the move toward technological hubs to promote networking between skilled individuals and companies.