October 18, 2021

Francis Fukuyama was the first speaker in the Center for the Study of Economy & Society’s fall lecture series, “The American State in a Multipolar World.” His lecture, introduced by Cornell President Martha E. Pollack, highlighted the key challenges facing global democracy: pandemic, climate change, and political polarization. Photography by Dave Burbank.

Wesley Stubenbord

“Celebrated public intellectual Francis Fukuyama ’74 will be the first speaker in the Center for the Study of Economy & Society’s new fall lecture series, “The American State in a Multipolar World.” The series will examine the issues and choices facing the U.S. in a multipolar global economy and shifting world system.”

Read more on the Cornell Chronicle

James Dean, Cornell Chronicle

“As its founding director 20 years ago, Victor Nee didn’t imagine the Center for the Study of Economy and Society (CSES) taking an interest in New York City’s tech economy. The city hardly had one to speak of – on par with Philadelphia’s, and a bit player compared to financial services, real estate or tourism.

Now, New York claims the nation’s second-largest tech economy after Silicon Valley, and the development of regional knowledge economies is one of several primary areas of research focus for the center’s Economic Sociology Lab, supported by graduate researchers and undergraduate assistants.”

Read more on the Cornell Chronicle

News

Congratulations to Sonja Opper, Victor Nee, and Stefan Brehm for their recent publication “Homophily in the career mobility of China’s political elite” in Social Science Research.

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Highlights

• The first paper to explore the role of homophily in political elite recruitment in China.
• The first paper to show that homophily constitutes a significant factor in promotion of leaders to the top echelon of China’s ruling elite.
• The study shows, homophily works independently of factional ties and economic performance.
• The effect of homophily is even more decisive in the sub-sample of turnover candidates.

Abstract

We argue that leadership promotion in China’s political elite relies on homophily for signals of trustworthiness and future cooperative behavior more than on economic performance. We first point to the limitation of the economic performance argument from within the framework of China’s specific M-form state structure, and then we proffer a sociological explanation for why higher-level elites in China rely on homophilous associations in recruiting middle-level elites to the top positions of state. Using a unique dataset covering China’s provincial leaders from 1979 to 2011, we develop a homophily index focusing on joint origin, joint education and joint work experience. We trace personal similarities in these respects between provincial leaders and members of China’s supreme decision-making body, the Politbureau’s Standing Committee. We then provide robust evidence confirming the persisting impact of homophilous associations on promotion patterns in post-reform China.

About Journal

Social Science Research publishes papers devoted to quantitative social science research and methodology. The journal features articles that illustrate the use of quantitative methods to empirically test social science theory. The journal emphasizes research concerned with issues or methods that cut across traditional disciplinary lines. Special attention is given to methods that have been used by only one particular social science discipline, but that may have application to a broader range of areas with an ultimate goal of testing social science theory.

Introduction

The high-tech digital economy has firmly established its position as a key driver of economic growth, one where small start-up tech firms are vital drivers of innovation and regional economic development. Open access to technological knowledge and an increasingly educated labor pool—with expertise in data engineering and communication technologies—have dramatically lowered the entry barriers to the high-tech digital economy. As a result, success-factors of tech start-ups have changed over time. Whereas the success of Silicon Valley was based on the technological edge of highly educated and closely connected engineers and computer scientists, new start-up entrepreneurs in this sector today emphasize the more important role of existing industry ties and the tailor-made application of their new technologies. As a consequence, high-tech development depends increasingly on close links with other industries, to develop and exploit novel and innovative applications. For example, EdTech and FinTech companies are currently at the forefront of this development.

The comparative advantage of metropolitan areas relies increasingly on entrepreneurs founding small-scale digital information and high-tech start-ups, providing essential services and tools for a rapidly changing knowledge based economic development. Not only do the IT and digital industries emerge as a new powerful sector, but also contribute to the development of new networks of innovation—which in turn help to revolutionize established industries. The proposed project, therefore, aims to explain the relationship between entrepreneurial activities and the emergence of high-tech clusters in the New York City metropolitan region.

Studying such phenomenon close to its emergence is of utmost importance, and leads to deeper understanding of the factors that produce successful entrepreneurship and growth in high-tech clusters. At the turn of the new century, relatively few tech start-ups were located in New York City (NYC). Silicon Valley, New England, LA/Orange County, San Diego and even upstate New York far outstripped the New York metropolitan area in tech start-ups. From 2007 to 2011, however, high tech start-ups in NYC grew by 32% during a severe economic recession when other regions experienced sharp declines in venture capital investments. The rate of founding of tech start-ups in NYC more than tripled over the last decade, making the metropolitan area the fastest growing knowledge-based economy in the United States.

The rapid growth of the high-tech economy in NYC cannot be explained by overall economic growth, especially given that the NYC financial industry was the epicenter of the most serious financial crisis since the Great Depression. Why did New York City, particularly Manhattan, experience such explosive growth in high tech start-ups at the outset of a major economic downturn?

Our Approach

Our interdisciplinary approach—including teams of sociologists and economists—focuses analytic attention on institutions in the making of a knowledge-based regional economy. In explaining the rise of regional centers of knowledge-based economic development, our approach explores the institutional drivers of successful entrepreneurial activity. We plan to conduct basic research on knowledge-based economic development near to the timing of emergence, with a focus on the social mechanisms and institutional processes enabling and promoting this new wave of entrepreneurship.

Preliminary research has shown significant evidence of cluster formation in the concentration of tech start-up firms in lower Manhattan.  This pattern of cluster formation is consistent with the view that dense networks of like-minded actors and norms of reciprocity are important causal factors in the emergence of trust and cooperation, which we hypothesize enables and guides the emergence of NYC’s tech start-up economy.

Broader Implications

The proposed study is novel because it aims to examine the dynamics of the emergence of spatially concentrated entrepreneurial activity and rapid growth in the founding of tech start-up firms in the New York City metropolitan area.

Project findings will be disseminated through progress reports, and will be provided to all individuals taking part in the study—including NYC entrepreneurs, incubators, accelerators, venture capitalists, angel investors, and local administrative agencies, etc. Additionally, we plan to submit academic publications to the leading peer-reviewed journals and to Harvard University Press.

Project Support

“We are pleased to support research spearheaded by Cornell’s CSES examining the technology sector in cities like New York. In New York City, the growing technology sector continues to diversify and strengthen the City’s economy, creating jobs across a spectrum of related industries and generating critical economic activity and opportunities at all levels throughout the five boroughs. This exciting body of work has the potential to inform policymakers, practitioners, and other stakeholders looking to encourage the growth of tech clusters in cities around the world by suggesting potential strategies and best practices. We look forward to our continued partnership with Professor Nee and CSES, and eagerly await the results of this promising research project.”

-NYC Economic Development Corporation

“NY Tech Meetup is pleased to support the research examining the growth of New York’s technology sector being conducted by Cornell’s CSES. We have been part of the New York technology ecosystem for the past decade, during which time we have witnessed tremendous growth in the tech community as a whole and in our own organization. We believe that research of this type is key to informing and influencing policy and future growth in a way that benefits all of New York’s citizens. We look forward to continuing to work with Cornell and Professor Nee on this project.”

-NY Tech Meetup

“We, at ERA, think the project being conducted by Cornell’s Center for the Study of Economy and Society would be helpful for NYC and we look forward to the research findings and how these findings can be leveraged to improve NY’s start-up ecosystem further by attracting capital, human and technical resources in to the city.”

-Entrepreneurs Roundtable Accelerator

“We are delighted to see CSES’s commitment to understanding the organic development of the technology industry in New York.  We believe this market is in an extraordinary period of creativity and collegiality.  We are fortunate to have been a part of this community from the beginning and proud to be associated with so many great entrepreneurs, innovators, co-investors management teams, and now academic researchers.”

-RRE Ventures

“We think this project has the potential to provide a lot of insight into the growth and success of the NY tech community. We are really excited to see the data and hear the conclusions the team at the Center for the Study of Economy and Society draws from it.”

-Gotham Ventures

“General Assembly’s history is deeply intertwined with other New York city startups, the city of New York and the growing needs of a knowledge-based economy. Our mission to build a community of individuals empowered to pursue the work they love has been fueled in part by the growth of the NYC tech ecosystem. This research has the potential to inform the future growth of NYC and other major economic centers. We’re delighted to participate and see the conclusions that the CSES team draws from their work.”

-General Assembly

Sonja Opper (Gad Rausing Professor of Economics and CSES Fellow) and Victor Nee (Frank and Rosa Rhodes Professor and CSES Director) were awarded a $1,075,000 grant from Sweden’s Marianne and Marcus Wallenberg Foundations for their three-year US, Swedish and Chinese comparative project, “The Making of Knowledge-Based Metropolitan Economies: IT-Start-ups in International Comparison”.

Victor Nee, the Frank and Rosa Rhodes Professor at Cornell University and Director of the Center for the Study of Economy and Society, has received one of the highest scholarly honors that the Academy of Management can bestow on a scholar: the 2013 George R. Terry Book Award. The Terry Book Award was given to Victor Nee and Sonja Opper for their ground breaking book Capitalism from Below: Markets and Institutional Change in China.

The George R. Terry Book Award is granted annually to the book judged to have made the most outstanding contribution to the advancement of management knowledge and published during the past two years (2012-2013). The Academy of Management is an international association with over 19,000 members. The award was presented at its recent annual meeting in Orlando, Florida.

Capitalism from Below: Markets and Institutional Change in China asks the big question: how does one account for the emergence of a thriving private enterprise economy in a communist state that until 35 years ago vigorously suppressed capitalism? Nee and Opper provide an insightful analysis of how private enterprise bubbled up from below to overcome impediments set up by the Chinese government and drive the engine of China’s economic miracle. Studying over 700 manufacturing firms in the Yangzi region, the book argues that through trial and error, entrepreneurs devised institutional innovations that enabled them to decouple from the established economic order to start up and grow small, private manufacturing firms. Barriers to entry motivated them to build their own networks of suppliers and distributors, and to develop competitive advantage in self-organized industrial clusters. Close-knit groups of like-minded people participated in the emergence of private enterprise by offering financing and establishing reliable business norms. This rapidly growing private enterprise economy diffused throughout the coastal regions of China and, passing through a series of tipping points, eroded the market share of state-owned firms. Only after this fledgling economy emerged as a dynamic engine of economic growth, wealth creation, and manufacturing jobs did the political elite legitimize it as a way to jump-start China’s market society. Today, this private enterprise economy is one of the greatest success stories in the history of capitalism.

Nee is the author or editor of five other books, including On Capitalism by Stanford University Press 2007, The Economic Sociology of Capitalism by Princeton University Press 2005, Remaking the American Mainstream: Assimilation and the New Immigration by Harvard University Press 2003, and The New Institutionalism in Sociology by Harvard University Press 1998.