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Tech Industry

Business growth wanes in Silicon Valley

The U.S. high-tech hub is losing ground to states in the Rocky Mountain and Midwest regions, according to a government ranking of business hot spots.

    It may be a scorching summer in California's Silicon Valley, but the nation's technology hub isn't so hot when it comes to small-business growth, according to new research.

    According to a study released Wednesday by the National Commission on Entrepreneurship (NCOE), the bulk of high-growth companies in the past decade were in Rocky Mountain and Midwest cities such as Provo, Utah, and Elkhart, Ind.

    The highest-ranking major metropolitan regions for business growth were Boston, Detroit and Houston. Phoenix, Salt Lake City and Dallas were the top cities with fewer than 3 million residents. Smaller regions such as Austin, Texas; Las Vegas; Baton Rouge, La.; Albuquerque, N.M.; Elkhart; Lafayette, La.; Provo; and St. George, Utah, rounded out the list.

    Although San Francisco was the No. 5 major metropolitan area for business growth, it was the only California city--large or small--to make the list of top spots. Much of the city's job growth was tied to the rise of dot-coms in the mid- to late 1990s, before the sector imploded in spring 2000 and legions of workers were laid off.

    Regional tech hubs such as Washington, D.C., Austin and Boston made the list, which ranked all 394 regional job markets tracked by the U.S. Census Bureau. But the vast majority of high-growth cities were in states such as Michigan, Indiana, Wisconsin, Utah and Louisiana--far from the headquarters of the nation's largest technology companies.

    That is because most high-growth entrepreneurial companies are not in the conventional technology industry, researchers determined. Rather, they are in sectors such as medicine, automobiles and manufacturing.

    Researchers also found that fewer than one in 20 American businesses can be defined as "high growth," achieving employment growth rates of at least 15 percent per year from 1992 to 1997. Only 4.7 percent of all businesses that existed in 1991 grew at least 15 percent per year or at least doubled their employment every year from 1992 until 1997.

    Because news organizations and stock market analysts often fixate on high-growth companies in the technology sector, the relative paucity of such organizations in the broader economy shocked researchers.

    "The New Economy is often depicted as a handful of companies in a few select cities creating significant but sometimes short-lived wealth," said Patrick Von Bargen, NCOE executive director. "Our report...shows that nearly every American city contains companies that are creating jobs at an extraordinary pace, and that span a diverse range of industry sectors."

    Another surprise: San Jose, Calif.--considered the epicenter of the nation's technology industry--received an NCOE "growth company index" rating of 178. That's not bad, but it's a far cry from the 200 rating that Provo received. In fact, the lowest score that any Utah region received was higher than any California region. Logan, Utah, received 195--the worst performer in the land-locked "Beehive State."

    The Washington-based NCOE says its report, "Mapping America's Entrepreneurial Landscape," is the first to measure employment growth in every labor market tracked by the U.S. Census Bureau. The complete rankings and color-coded map are available at the NCOE's Web site.