Performance of Urban Information Technology Centers: The Boom, the Bust, and the Future

Information technology (IT) producers were among the key drivers of the national economic expansion during the late 1990s and in 2000, helping to spur robust growth in output, productivity, and income. Between 1995 and 2000, IT-producing businesses accounted for nearly one-third of U.S. GDP growth and, by one estimate, nearly two-thirds of the surge in productivity growth, despite accounting for less than 9 percent of total output at the start of the period. At its peak, the IT sector was growing more than four times as quickly as the overall economy. This growth was driven largely by business investment in IT products, which increased rapidly throughout the period. While the national IT boom helped spur growth throughout the U.S. economy, certain urban areas were especially well-positioned to take advantage of the IT spending surge. These urban IT centers were at the forefront of expansion in the U.S. IT sector, posting extraordinary gains in employment and income. As in the past, Silicon Valley (the San Francisco Bay Area more generally) was among the nation’s leading IT centers. However, the 1990s also marked a time when several other urban IT centers, including Portland, Seattle, Washington, D.C., and Austin came of age. All of these centers were emblematic of the IT boom, posting substantial increases in IT output and serving as home bases to researchers and companies that played an integral role in bringing innovation to the marketplace. Just as the IT boom disproportionately benefited many regional centers of IT production, the IT bust left them struggling to regain economic stability. Battered by the Performance of Urban Information Technology Centers: The Boom, the Bust, and the Future*