MIT-related firms in the high-growth, high-tech industries (software, electronics, biotech) are particularly likely to locate in Massachusetts or in northern California. These two states account for 70% of all MIT-related electronics firms, 68% of software firms, and 63% of drug and medical firms (Chart 12). By contrast, they are host to only 44% of firms in all other industries.
MIT has a substantial presence in both of the premier technology regions of the U.S.--Silicon Valley and greater Boston. Map 3 shows MIT-related companies and their employment in the San Francisco Bay area. As the map makes clear, the bulk of this employment is in the Silicon Valley area around San Jose at the southern end of the Bay. All told, there are 467 MIT-related firms with head offices in California which employ 348,000 people worldwide and have $86 billion in sales. Of the 388 firms for which employment is known, 287 are in Northern California. They account for the greater part of the MIT presence in California--$66 billion in world-wide sales and world-wide employment of 287,000. Total Silicon Valley employment of MIT-related companies (including California branches of companies located elsewhere and excluding non-California employment of companies with headquarters in the valley) is just over 73,000--about half of total California employment of MIT-related companies. Of this, some 56,000 is in manufacturing and 46,000 in electronics. When these totals are measured against overall employment in the San Jose area, they amount to 25% of manufacturing employment in the area and 29% of electronics employment (Chart 12A) .
Well over half the sales and employment of MIT-related companies in California are in electronics and instruments, but there's a billion or more of sales in software and biotech as well. The largest MIT-related firms in the region include Hewlett-Packard, Intel, National Semi-Conductor, 3Com, Tandem Computer, Raychem, Cirrus Logic, Lam Research, Genentech, and Symantec.
There are 1,065 MIT-related companies with headquarters in Massachusetts. The world-wide sales of these companies--$53 billion--represent 7% of the sales of all Massachusetts companies . Two rough calculations suggest that MIT-related companies account for about 25% of the total sales of all Massachusetts manufacturing companies . In software, sales of MIT-related companies in the state--$4 billion--represent a third of the total.
Worldwide employment of these 1,065 companies is 353,000. This represents substantial growth from 1989 when we issued our first analysis of the economic impact of MIT-related companies. At that time we found 636 MIT-related companies in Massachusetts, with world-wide employment of 190,000.
A substantial share of the 353,000 jobs of companies with headquarters here are not actually in Massachusetts (Digital, Raytheon, Gillette, and other large MIT-related companies with headquarters here have employees across the U.S. and around the world.) There are 125,000 employees in Massachusetts of MIT-related companies. This figure includes the local employees of companies such as Hewlett Packard which have headquarters elsewhere but have branches or subsidiaries in Massachusetts. These 125,000 jobs represent about 5% of total state employment. Almost 80,000 of these jobs are in manufacturing and almost 60,000 of those are in electronics and instruments, as shown in Chart 12A. MIT-related companies account for over a third of manufacturing employment in the Boston area and over 60% of employment in electronics and instruments.
As discussed above, almost all this employment is in the state's economic base, which consists of the manufacturing, financial services, software, and other industries that sell mainly on national and world markets. Each job in the economic base supports a little more than one job in the state's domestic sector, so these MIT-related companies support indirect employment of an additional 125,000 employees. Counting direct and indirect employment, the companies account for roughly 10% of total state employment .
MIT-related companies are located throughout eastern Massachusetts, as shown in Map 4. Each dot on the map represents one company. The shading in the map shows the total number of MIT employees in each 3-digit zip code area (all companies with zips beginning 021, for example, are in one area).
Raw numbers tend to understate the impact of MIT-related companies on Massachusetts. In one industry after another, these companies represent cutting edge technologies in their fields. Examples include Raytheon in missile and guidance systems, Thermo Electron in instruments and environmental technology, Lotus Development in software, Analog Devices and Analogic in integrated circuits and electronic devices, Cabot Corporation and American Superconductor in advanced materials, and Molten Metal in environmental technology, Teradyne in testing equipment for electronic components, M/A Com in microwave technology, BBN in electronics and networking, Genzyme, Biogen, and Alpha-Beta in biotechnology, Bose in speaker systems, and PictureTel in video conferencing .
One of the reasons MIT is so important to the Massachusetts economy is that most of the MIT-related companies never would have been located in Massachusetts absent MIT. Only 8.7% of MIT undergraduates grew up in the state, but some 36% of all MIT-related companies are located in Massachusetts. Most of the MIT-related companies in Massachusetts were founded by people who came to the state to attend MIT, liked what they saw, settled down here, and eventually started their companies in Massachusetts. In the last 5 years, over 45% of the newly founded MIT-related companies in software, the internet, biotech, and electronics have been located in Massachusetts.
MIT attracts some of the brightest young people in the country (and the world); many of them like the Boston area and choose to stay here. As just one example, Alex d'Arbeloff came to MIT from his native Paris just after World War II and graduated in 1949. His first job was in New York, but he chose to come back to Boston 11 years later, where he and his partner Nick DeWolfe (also an MIT graduate) started an electronic testing equipment company in DeWolfe's home. When they outgrew the house, they chose to rent space in downtown Boston because they liked living on Beacon Hill and wanted to walk to work.
Today, Teradyne is a billion dollar company; it's still located in downtown Boston. Another MIT founder located his company north of Boston, so he could have easy access both to downtown and, on weekends, to the Maine coast and the New Hampshire mountains. These stories are worth retelling because they underscore the critical importance of the fact that scientifically oriented entrepreneurs like living in the Boston area. Absent the symphony, the parks, the ocean, the universities, the art museum, and the other cultural attractions that make Boston unique, the city would fail to hold these entrepreneurs and would grow more slowly.
Compared to Silicon Valley, Boston is actually the lower cost location for attracting top technical help. California taxes are more than comparable to those in Massachusetts, but there's far more vacant land for housing and industrial expansion in Massachusetts than in northern California.
The Boston area's appeal to MIT-related companies is reflected in the expansion plans of firms located here. Fully 57% of the surveyed firms located in Massachusetts are planning expansions--more than in any other region. The comparable figure for firms elsewhere in the East and the Midwest is only 40% (Chart 13).
What's more, firms in Massachusetts were more likely to locate their new addition in-state than firms anywhere else in the country (91% for Massachusetts firms, as opposed to 79% in California, 71% in the Northwest, and 86% in the Northeast).
One advantage of a Massachusetts location is the ease of ongoing access to MIT and other Boston area universities. When asked the importance of various location factors, Mass-achusetts survey firms ranked access to MIT and to other universities ahead of low business cost; in every other region of the country, business cost was more important than contact with universities, as shown in Chart 14. (As indicated earlier, the most important location factors are quality of life and access to skilled professionals; these have average scores well above those shown in Chart 14 for business cost and university access).
Just under half of the Massachusetts firms represented in the survey reported regular contact with MIT; the major purpose of these contacts was consulting with faculty members, continuing professional education, and company recruiting (Appendix Table 11). About 1 in 5 firms outside Massachusetts remains in touch with MIT. Half of the firms in the study reported that they maintain regular contact with MIT or some other university. There is relatively little variation in this percentage from one industry to the next. The companies of those who graduated more than 30 years ago are slightly less likely to maintain regular contacts than are the most recent graduates.
One example of ongoing contact with MIT comes from Analog Devices, a billion dollar manufacturer of precision electronic devices used for measurement and control. Analog Devices participates in the Center for Quality Manage-ment, which was originally developed by MIT and now consists of 50 companies and 11 universities which work together to develop course materials and form a mutual learning network to promote problem solving and customer satisfaction.
Return to Table of Contents
Proceed to Next Section href="http://web.mit.edu/newsoffice/www/newsoffstaff.html"