Clustering/agglomeration economies and revival of Southern California's space sector

 

The book, The Rise of the Gunbelt: Military Remapping of Industrial America, describes how the Southwestern industrial economy was built on military spending.  

Southern California's industrial sector in part was built on the military-defense industry, and out of that grew businesses focused on "space" as opposed to aerospace.

As companies consolidated, manufacturing facilities closed and headquarters operations moved, leading to a severe decline in industrial employment.

The Los Angeles Times is reporting on a renewal of business development in the sector, "The space race is transforming Southern California’s economy — again," partly as a result of SpaceX having most of its engineering operations in Orange County.

Some 128 aerospace, artificial intelligence and companies in other fields have been founded by former SpaceX employees — with 96 started in the last five years still in operation, according to the alumnifounders.com website run by a San Francisco tech executive.

Nearly half, or 63, were founded in Southern California, including 20 in aerospace. No other region comes close, including Silicon Valley or the Pacific Northwest, where Jeff Bezos’ Blue Origin rocket company is based in Kent, Wash.

Some companies just come to the region to be close to same talent pool and aerospace manufacturing base that first attracted SpaceX. Rocket Lab, which launches small satellites, was founded in New Zealand but moved to the region in 2013 and opened new headquarters in Long Beach in 2020.

... A forthcoming report by the Los Angeles Economic Development Corp. shows the county’s aerospace and defense industries added 11,000 jobs between 2022 and 2024. While those 58,700 plus total jobs are well below the historic peak, they had an average wage of $141,110 — more than twice the county average.

“A lot of folks have kind of made the assumption that the aerospace and defense industry has left the entire region,” said Stephen Cheung, chief executive of the organization. “What they didn’t see is a lot of the manufacturing was still here, and over the last 10 years, you’ve been seeing this transition into space commercialization, and now that’s stimulating a whole new ecosystem.”

Clustering and agglomeration economies:

-- "How the closure of a Pfizer research center in Ann Arbor, Michigan led to the development of a more robust and independent biotech sector," 2021
-- "Federal government research hub development initiative," 2023
-- "Universities and ancillary economic development (versus the anti-research agenda of the Trump Administration)," 2025
-- "Next Phase of Clustering of Business away from the Midwest," 2022

The Trump Administration aims to destroy the US's competitive advantage in technology development and innovation.

-- "Trump is destroying 100 years of competitive advantage in 100 days," Washington Post
-- "Crippling America’s Innovation Economy" Project Syndicate
-- "Attacks on the U.S. Innovation Ecosystem Are an Attack on a Wellspring of American Prosperity," Center for American Progress
-- "Trump Is Killing American Innovation," Foreign Affairs

University-based innovation:

-- "UM research announces 3rd straight increase in inventions from university work," Crain's Detroit Business

The University of Michigan achieved another year of research commercialization records for fiscal year 2025, with 673 invention reports and 326 license and option agreements. The news comes as cuts to university research — both from the federal administration and state government — loom.

... UM also launched 31 startup companies in 2025, only the second time the university has done so since 2020.

-- "UC San Diego ranks top 10 in world for universities driving innovation," San Diego Union Tribune.

 -- Top Fifty Universities Powering Global Innovation, Clarivate

The paper includes: A comprehensive analysis and top 50 ranking of the universities leading in research-to-innovation impact. The key relationships between universities and leading innovators. Visualized pathways showing global knowledge flow patterns between university research and industrial inventions.