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The Innovation Roundtable

A Discussion of Growth in Northeast Ohio

Innovation may be a buzzword among the business community, but what does it mean for economic growth?

Late last year, the Federal Reserve Bank of Cleveland brought together leaders from the medical and technology sectors and educational and financial institutions to discuss both this question and up-and-coming drivers of the Northeast Ohio economy. The conversations centered on workforce development and education and on research, financing, and commercialization.

Workforce Development and Education

Roundtable participants said finding and retaining high-skilled employees was one of the major challenges for growth in the region. Within the biomedical and tech sectors, electrical, biomedical and software engineers as well as data scientists were the most difficult employees to find​. In addition, finding enough human resource organizational specialists has become a challenge for these sectors because of increased recruiting efforts and thus increased need for such specialists. In the newly developing additive manufacturing sector, contacts cited machinists, welders, and even hourly factory workers as hard to attract.

The reason participants think there is scarcity? A skills gap.

More than one roundtable participant suggested an increase in work-based learning, internships, and co-op opportunities to fill that gap, or at least help minimize it. Although educational institutions are eager to partner with firms to provide their students these hands-on opportunities, such opportunities are often costly and difficult to administer.

One source of optimism, though, is the growth in numbers of highly educated individuals in the region. The data argue that more than 33 percent of individuals aged 25 to 34 in Northeast Ohio have obtained a bachelor’s degree, compared to 27.3 percent for all individuals over 25, suggesting that the educational attainment rate has been increasing in recent years. Although Northeast Ohio has made progress in this arena, it still lags behind some nearby metro areas and the nation.

Percent with a Bachelor’s Degree or Higher

Ages: 25 + Ages: 25–34
Akron 29.9 34.9
Canton 21.3 28.7
Cleveland 29.5 35.2
Youngstown 20.4 26.5
Northeast Ohio MSAs* 27.3 33.1
Cincinnati 31.4 37.7
Pittsburgh 31.6 44.9
Columbus 34.7 41.2
Dayton 27.3 29.1
Nation** 33.5 37.2

*population weighted average of the Northeast Ohio MSAs
**population weighted average of the top 100 MSAs
Source: 2014 American Community Survey.

Some in Northeast Ohio are making efforts to form partnerships between educational institutions and industry to facilitate research, development, and commercialization of new technologies.

For instance, local universities have partnered with the Cleveland Clinic to provide joint graduate programs. Case Western Reserve University launched think[box] in 2012, a makerspace for students, faculty, alumni, and members of the community to learn about 3D printing, industrial design, woodworking, and a range of other skills. Think[box] has partnered with business innovation and product design firm Nottingham Spirk to help bring ideas from the space to fruition. It doesn’t stop with Case Western, however.

The Liquid Crystal Institute at Kent State University served as the birthplace of liquid crystal technologies and has sponsored-research programs, and Lorain County Community College has developed a Fab Lab open to students, faculty, nearby high schoolers, and members of the public. The college has partnered with several organizations dedicated to supporting and advancing the manufacturing industry, including Weld-Ed, MAGNET, and the National Association of Manufacturers. Programs like these help bring new skills to future graduates and also serve to retrain and familiarize existing workforces with new technologies and career paths.

There are efforts underway in Northeast Ohio to close the skills gap, it’s clear. But this gap wasn’t the only issue up for discussion at the Innovation Roundtable.

Company culture is an important factor for attracting and retaining talent, as well. Smaller firms and startups noted that it was easier to recruit Millennials who are attracted to the startup culture. There’s a caveat, though: Startups will often have to pay a wage premium over established firms for more experienced talent. Larger firms have also been thinking critically about their corporate cultures and have made investments to improve the work environment to attract the best talent. But some participants noted that it’s slow going.

Research, Financing, and Commercialization

Another real strength in the regional economy, according to roundtable participants, is research and development by large established firms. Manufacturing still plays a very important role in research and commercialization, and the industry has undergone a transformation to become more high-tech than ever. The evolution of 3D, or additive, printing and polymer science has facilitated partnerships between the traditional manufacturing sector and biomedical researchers. These partnerships have resulted in a vibrant and growing medical device industry. Public financing for research and development in the medical sector has been traditionally funded by federal and state sources, the National Institutes of Health and Ohio Third Frontier, respectively.

The growth in research centers in Northeast Ohio has led to strong patenting activity across the region, as is shown in data from the US Patent and Trademark Office. From 2009 through 2013, Northeast Ohio developed 6,382 patents and had a patenting rate of 0.34 per 1000 people, the second highest patenting area in the Fourth District after Cincinnati. Both Akron and Canton have patenting rates that exceed the national average.

Total Patents and Patents per 1,000 Citizens by Metro Area

Total Patents (2009–2013) MSA Rank* Patents per 1,000 Citizens
Akron 1728 55 0.49
Canton 783 87 0.39
Cleveland 3592 27 0.35
Youngstown 279 153 0.10
Northeast Ohio MSAs 6382   0.34
Cincinnati 4376 22 0.41
Pittsburgh 3693 26 0.31
Columbus 2282 48 0.24
Dayton 1001 78 0.25
Nation 553,414 N/A 0.35

*By total patents
Sources: US Patent and Trademark Office, author’s calculations.

Although the importance of manufacturing in innovation and patenting is still substantial, in the past 5 years healthcare and education institutions in the region have increased their patenting volume as they continue to invest in research and development.

Top Patenting Organizations in Northeast Ohio Metros, 2009–2013

Akron Canton Cleveland Youngstown
Goodyear Tire (166) Diebold* (302) Rockwell Automation (160) Delphi Technologies (63)
Bridgestone (164)* Goodyear Tire (45) Cleveland Clinic Foundation (148) Werner Co. (27)
Cisco Technology, Inc (73) Timken Company (31) Lincoln Global (131) R & L Marketing and Sales (9)
Individual Patents per Metro Area
146 121 432 80

Note: The number in parentheses is the total patents for this time period.
*Total of all patenting activity across multiple legal entities
Sources: US Patent and Trademark Office, author’s calculations.

Participants noted that technological change includes but is more than just new inventions. It can also come in the form of new and improved services and processes. These innovations might not be patented, but can manifest in the form of new businesses. The total business-creation rate in Northeast Ohio has trended downward since the 1990s. In 2013, new firms accounted for about 5.3 percent of total firms in Northeast Ohio, down from around 8.6 percent in 1995. But this decline is roughly equivalent to the decline seen in nearby metro areas.

Participants also reminded everyone that finding funding can be difficult, as well.

New Firms as a Percentage of Total Firms

A major challenge facing startups in the region is the availability of Series A funding by local venture capital and angel investors. Startup capital in the region tends to be tied to more traditional industries such as manufacturing, so many new businesses have had to seek their startup funding from entities outside the region.

Several initiatives promote startup creation through incubator and co-working spaces in Northeast Ohio such as JumpStart Inc., BioEnterprise, Youngstown Business Incubator, BlackRock, LaunchHouse, and StartMart.

On the public side, participants viewed Ohio Third Frontier, a $2.1 billion technology-based economic development initiative by the State of Ohio, as a positive source for growth funding in established firms and as seed-stage funding for new firms.

Overall, Innovation Roundtable participants were optimistic about future growth opportunities for Northeast Ohio.

Sum and substance: Participants at the Cleveland Fed’s second Innovation Roundtable believe there are many opportunities—and some challenges—for growth in Northeast Ohio.

Read more

High-growth enterprises comprise only a small portion of new business creation. Traditional new and small businesses will have different financing challenges. Read Protecting Small-Business Borrowers for more information.

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