The information technology industry and telecommunications: An empirical analysis of cities in the Minneapolis-St. Paul and Phoenix metropolitan areas

THE1990s saw many cities clamoring to become the next silicon haven. When the digital economy encountered major setbacks in 2000, the bursting of the information technology bubble prompted localities to wonder if tying their economies to such an industry was a sound economic-development policy. All indicators thus far suggest that the information technology (IT) industry is still beneficial to the economy of a region. A recent government report explains that the IT industry not only accounted for nearly one-third of economic growth in the United States between 1995 and 2000, but with the industry’s rebound, it also contributed to over one-third of U.S. growth in 2003. In addition, IT industry jobs in both manufacturing and services still remain at a greater level today than during the two years before the decline. In general, these positive indicators suggest that the IT industry would be an attractive target for growing a local economy. Although much research examines the agglomeration of high-tech industry and its benefits to cities, few examine the IT industry. While high-tech firms are knowledgeand research and development-intensive, the IT industry classification used in this The firms in the industry we are discussing “produce, process, or transmit information, goods, and services as either intermediate demand (inputs to production to other industries) or as final products for consumption, investment, government purchases, or exports. . .. [T]hey also provide the necessary infrastructure (communications) for the Internet to operate” (U.S. Department of Commerce 1998).