Michael Murff and Dr. John Griffin, Political Science
Problem Statement
Escalating in the 1970s, the Intermountain West experienced a dramatic economic shift from mining and agriculture toward information technology (IT). Both Utah and Colorado took steps to attract computer and software firms in an effort to diversify and develop IT industries. At first glance Utah appears especially well prepared for technological innovation and a progressive IT market. Strong university computer science departments, two solid law schools, and a respectable business school provide ample intellectual capital for a robust Wasatch Front IT environment. But a closer look reveals that Utah firms lag behind their regional counterparts in overall growth rates, initial public offerings, patenting, and venture capital. (Griffin et al, 1999). Determining the causative factors and for such disturbing variance will serve to help Utah firms and entrepreneurs better understand effectual governance mechanisms and strategies.
Hypotheses
(1): One possible explanation for Utah-Colorado IT incongruity rests on the theory of path dependence, which asserts that an entity’s (in this case regional economies) outcome and possibilities are largely contingent upon its historical trajectory and origins. If Utah and Colorado IT markets are similar systems, then their economic prosperity should be just as similar. Hence, a historical comparison should bear out large differences in longitudinal trends. To test this theory I map labor statistics from both states over a 150 year span to create a criterion for industrial comparison. Since IT markets grow out conventional industry, disparity in historical Utah-Colorado labor statistics should foreshadow and suggest why Utah IT firms lag behind their Colorado counterparts.
(2) Another possible explanation turns on the traditions and culture present in Utah and Colorado. The predominant culture in Utah stemming from homogenous religious norms may constrain finance and investment as well as hamper interfirm networks. Although I will not pursue this angle, others have identified strong cultural currents that shape governance trends and firm performance in both states (Ibid).
Method
In order to assess the case for path dependency I trace the industrial foundations of Utah and Colorado. Using US Census data from the “Social and Economic Indicators” series, I create graphs that show a most-similar-system model. By using statistical data showing parallel historical trajectories of both states, I preclude the possibility for path dependency per se. For path dependency theory to hold in this case current performance indicators in each economy should equally correspond to their developmental trajectories. The parallel nature Utah-Colorado economic development lends credence to hypothesis (2).
By collecting employment data by industry for the period spanning 1850-1990, I show that Utah and Colorado historical trajectories share and overlap to the extent that they meet necessary and sufficient criteria to reject the case for path dependency growing out of labor market development. As my results show, other variables, whether antecedent or intervening, must account for inter-regional firm diversity; labor market data, however, provide an important step in the process of hypothesis testing.
Results
Even a cursory glance at the graphs above reveals marked similarity—parallel economies—not divergence as hypothesized. Utah and Colorado labor statistics show the ebb and flow of economic modernization. Specifically, the growth of the public service sector (yellow), decline of agriculture as a percentage of the labor force (lavender), and a strong increase in professional services (magenta) evidence healthy and necessary change for the emergence of robust IT markets. Clearly, labor statistics alone do not tell the important story of why Utah and Colorado IT markets manifest disparate fruits, but my study does show broadly the preconditions for IT markets and general trends of economic modernization. Further research, which I will write up in an honors thesis, will show specific variables involved in the elusive equation for regional IT prosperity. Finding out why Utah IT firms fare worse than like Colorado firms remains an open question worthy of intensive pursuit.
References
- Griffin, John, and John Torres and Paul Edwards. 1999. “The Silicon Desert: The Governance and Development of Information Technology Economies in Utah and Colorado.” Unpublished, presented at the 11th Annual Meeting on Socio-Economics at Madison, Wisconsin, July 11th, 1999.