Is metro Milwaukee prepared for the new knowledge-based economy?

By Joe Peterangelo

Our latest research finds that the four-county Milwaukee metropolitan area has made strides in increasing educational attainment levels and adding scientists, engineers, and technology workers to the regional talent pool. Yet, with regard to other indicators tied to innovation — including small business formation and venture capital funding — our region continues to struggle.

Cultivating Innovation identifies current strengths and weaknesses — and gauges progress made since the Great Recession — on a range of metrics associated with economic innovation and dynamism. We use 20 indicators that measure our region’s success in building a skilled workforce; developing new ideas and transferring them to market; creating new businesses and entrepreneurs; and attracting financial resources needed to help enterprises innovate and grow.

In addition to tracking metro Milwaukee’s progress over the last decade, the report compares the region’s performance with 10 peer metro areas. The Forum conducted a similar analysis in 2010.

This research is particularly relevant in light of the planned Foxconn plant, which could create a much greater need for skilled and technical workers and which supporters hope could improve the local entrepreneurship climate. Any increased business dynamism that may result from the Foxconn development, however, is not likely to happen on its own, but rather will require diligent and strategic efforts to shore up some of the weaknesses identified in our analysis. Furthermore, whether or not the Foxconn development happens and lives up to its potential, efforts should be undertaken to strengthen business creation activity and business survival in our region more generally.

Key findings from our analysis include the following:

The Milwaukee area’s talent pool is strengthening and appears to be competitive with our peers. Educational attainment is rising and the region’s workforce is competitive with our 10 comparison metro areas in its concentration of individuals employed in occupations associated with knowledge and innovation. Attention is needed, however, to ensure that those key talent pools continue to grow.

Our region is underperforming in its rates of business development and business survival. Between 2004 and 2014, fewer new businesses were created than those that closed in metro Milwaukee. While entrepreneurship activity appears to have slowed nationally over the long term, the problem appears to be particularly acute in our region. In addition, metro Milwaukee’s rate of business survival does not appear to make up for its sluggish pace of business creation.

Capital formation remains an area of concern for the region. One possible factor contributing to the region’s slow pace of business creation is a reduction in the flow of several major forms of public and private capital to area businesses. Federal grants and federally-guaranteed loans for business startups, expansions, and R&D activities have declined at a faster rate in metro Milwaukee than nationally, and Milwaukee underperforms almost all of our comparison metro areas in attracting venture capital investing.

We hope that this analysis — and our ongoing monitoring of these economic indicators over time — will provide insight to local policymakers, business leaders, and the broader community as to how our region is advancing and which economic development strategies we may wish to prioritize in the future.