Tradeology, the ITA Blog

By Maureen Book, Research Analyst, SelectUSA 

High-Tech Industry Employment Concentration, High-Tech Employment/All Employment, by Metro Area, 2015 Source: U.S. Census Bureau, 2015 County Business Patterns, Accessed July 6, 2017, factfinder.census.gov

SelectUSA released its second industry-focused report: “High-Tech Industries: The Role of FDI in Driving Innovation and Growth” on Sept. 19. This report provides an in-depth look at high-tech clusters in the United States, and gives the first-ever analysis of the role of foreign direct investment (FDI) in high-tech industries. The report’s biggest takeaway is that FDI plays a significant role in these industries.

Where are high-tech clusters?

High-tech industries have a concentration of science, technology, engineering, and mathematics  and employ more than twice that of the national average. After analyzing the U.S. high-tech industry and considering participation of both foreign and domestic firms, SelectUSA explored the geography of high-tech companies in the United States by state, to identify large groups, or clusters, of employment.  The top employers of high-tech workers were California, Texas, and New York, while the District of Columbia, Virginia, and Washington boast the highest employment per capita of high-tech jobs.

High-Tech Clusters by Metro Area

Looking at metro areas with the highest concentration of high-tech employment, SelectUSA found that San Jose, Calif., tops the list with more than 34 percent of local employment in high-tech industries. They were followed closely by Elkhart, Ind., with nearly 33 percent, and Huntsville, Ala., with more than 31 percent. While the concentration in San Jose might not be surprising because it is the largest city in the Silicon Valley area, Elkhart and Huntsville both have industry concentrations nearby to make them important locations for high-tech companies. Elkhart’s economy is heavily concentrated in the transportation equipment manufacturing industry, and centers around recreational and commercial vehicle manufacturing. Huntsville is home to many aerospace and defense contractors, and military technology firms.

The Role of Foreign Direct Investment (FDI)  

The data cited is provided by the Bureau of Economic Analysis. 

FDI Impact in U.S. High-Tech Industries, by Majority Foreign-Owned U.S. Affiliates Source: Source: Department of Commerce, U.S. Bureau of Economic Analysis, Accessed Oct. 24, 2016, http://www.bea.gov/iTable/index_MNC.cfm Note: Data for some high-tech industries has not been included due to lack of available data.

Using our definition of high-tech industries and data published by the Bureau of Economic Analysis, SelectUSA looked at the role that FDI plays in high-tech industries. For those not familiar with the terminology, FDI generally captures a long-term relationship with the management of a foreign enterprise, which is usually linked with the real output of the country in which it operates.

Our data found that FDI stock in high-tech industries reached more than $1.6 trillion in 2016, and supported 2.1 million jobs in the United States. In fact, the high-tech component of FDI is quite robust; nearly 44 percent of all FDI in the United States is invested in high-tech industries.

Compensation, R&D, Exports, and Value-added Activities

Beyond employment, one must also acknowledge the significant impact that foreign firms in high-tech sectors play in other economic activities. For instance, U.S. affiliates of foreign-owned firms on average offer a higher compensation to U.S. workers than domestic . But FDI in high-tech industries offer a greater average compensation than other FDI companies in other industries. U.S. affiliates of foreign-owned firms also greatly contribute to the innovation sector of our economy, spending nearly $42 billion on research and development (R&D) in the high-tech sector. In 2015, they also contributed $154 billion towards U.S. goods exports and more than $373 billion towards value-added activities.

High-Tech Position in the United States, Historical-Cost Basis Source: Department of Commerce, U.S. Bureau of Economic Analysis, Accessed Aug. 17, 2017, http://www.bea.gov/iTable/index_MNC.cfm

Source Markets Supporting High-Tech

We also find that Germany, the United Kingdom, France, and Japan are among the largest source markets for R&D spending, exports, and value-added activities in high-tech industries. Beyond that, they are also several of the United States’ leading trading partners. Collaborating with them on FDI reinforces the trade relationship and strengthens our nation’s bilateral ties with these partners.

For more information:

Please visit selectusa.gov to view the full report, other industry reports, international and domestic FDI fact sheets, and SelectUSA’s data visualization tool, SelectUSA Stats.