Technology hubs change cities but is it worthwhile?

From Los Angeles to Beijing, tech hubs are prevalent and big tech companies often tend to hover up swathes of real estate near their competitors. But why do these companies cluster?

Big technology companies are often clustered in places called “tech hubs” and such places are becoming more and more common all over the world.

Sometimes these hubs are carefully crafted by city authorities but when that is not the case, companies just follow the suit of their rivals’ expansions and move closer to them seeking access to similar resources.

From Los Angeles to Beijing, tech hubs are prevalent and big tech companies often tend to hover up swathes of real estate near their competitors as they grow past the startup phase.

But why do these companies cluster?

Importance of Tech Hubs

Various researches like ‘The Effect of High-Tech Clusters on the Productivity of Top Inventors’ by the National Bureau of Economic Research show how tech hubs can multiply the productivity and innovation in companies thus allowing them to thrive.

"One of the most remarkable and consequential aspects of the economic geography of the US is the strong degree of geographical clustering of the high-tech sector," the paper concludes.

These hubs are believed to have become the engines driving growth in tech companies and ensuring that products and services with genuine impact continue to roll out to market.

From Silicon Valley to Shanghai’s Zhangjiang Hi-Tech Park, major international companies and start-ups favor these hubs for expansion to have access to some of the same resources as their competitors.

These hubs not only provide companies with easy access to state-of-art office facilities but also provide entrepreneurs and workers with networking opportunities that allow companies to communicate and collaborate with other like-minded individuals and entities which can boost research and development and commercialization.

Government and private institutions often roll out schemes, benefits, partnership opportunities for these hubs and companies that are out of these hubs often end up missing out on these benefits.

It is also beneficial for the workers who are provided with better chances of growth and better pay packages as companies compete to grab the top talent.

How does it change cities?

It all boils down to the availability of highly-skilled labor for tech companies. Tech hubs are often catalyzed with the help of universities and highly-skilled workers themselves end up moving near these hubs as the opportunities increase.

But there are implications, companies far away from these hubs often find it hard to find qualified workers in smaller cities as the large pool of highly-skilled labor prefer to cluster near tech hubs seeking better job and socializing opportunities.

The cities that host tech hubs, on the other hand, also face negative implications. Real estate prices and the cost of living in these cities can quickly escalate thus increasing the burden on native residents.

Average house prices in cities with big tech hubs are often more than double compared to the national average as in the case of New York City, Shanghai, and London. Increasing migration, both domestic and international, also leads to overcrowding in these cities taking commute times well above national averages.

The positive implications, however, makes the pain worthwhile in most cases. Tech hotspots attract foreign talent and investment thus motivating governments to also accelerate the development to keep up the pace.

Cities with tech hubs are expected to meet global standards in terms of connectivity, healthcare, and education among other things and the increased cost of living eventually translates to a better quality of life.

Bengaluru, which is often dubbed as India's Silicon Valley, topped a ranking of 131 world cities based on their ability to change, innovate, and adjust to constantly evolving circumstances. The city is home to India’s largest IT outsourcing firms such as Infosys and Wipro and also houses e-commerce giant Flipkart as well as new internet startups like ride-hailing app Ola.

Technology companies are focussed on making life easier and creating economic value for society. Cities that host these tech hubs are usually the first to test new breakthroughs when these companies roll-out their products and services.

(Disclaimer: The opinions expressed are the personal views of the author. The facts and opinions appearing in the article do not reflect the views of Devdiscourse and Devdiscourse does not claim any responsibility for the same.)