The Impact of Local Innovation on San Diego County

Dec 13, 2021

Editorial by Matt Kroe

In 2020, San Diego’s innovation economy directly generated more than $69 Billion in Sales, employed more than 164,000 workers, and provided over $23 Billion in payrolls.

The direct economic contribution of the innovation economy to San Diego’s entire economy is over $36 Billion, accounting for more than 14% of the total regional economy or gross domestic product (GDP). Including indirect and induced impacts, the San Diego innovation economy contributes to the generation of more than $66 Billion of impact, 26% of San Diego’s estimated total GDP.

Additionally, for every innovation job in San Diego County, another 2.78 jobs are supported or created through indirect or induced effects. Jobs are created by indirect effect as a result of the increase in business transactions from innovation companies, and jobs supported by induced effect are done so by the additional personal income afforded by jobs from both the indirect and direct effects of local innovation companies.

The graph to the below shows the annual Venture Capital investment in San Diego County companies from 2011 through 2020. As you can see, 2020 was the strongest funding year for San Diego startups ever recorded.

In the face of record breaking funding, a trend that began in 2017 continued in 2020: the number of new innovative startups being created was lower than the year previous, reaching another new low since Connect began tracking this data in 2005. In 2020, 229 new innovation startups were created in San Diego County.

Innovation Economy San Diego Connect New Companies

While these numbers appear disappointing amongst incredible data from the rest of the innovation economy, it is just one data point. The remainder of our metrics reveal the true strength and resilience of innovation.

Between 2005 and 2020, at least 5,465 new tech and life sciences companies have been created in San Diego County.

Software startups made up over 60% of San Diego County’s new innovation startup companies established in 2020 – at least 138 new software companies were created, a slight drop from the 140 created in 2019. Life Sciences startups – Pharmaceuticals, Biotechnology, & Medical Devices – established in 2020 totaled 61 – an increase from the 51 created in 2019 and the 60 created in 2018, but still lower than the 93 created in 2017.

In 2020, San Diego’s innovation economy included approximately 7,379 companies and provided over 164,000 jobs. San Diego’s innovation economy is composed of knowledge-based sectors* on the leading-edge of research, innovation, and the development of technologies. These sectors are defined by businesses** involved in the development and production of technical equipment, communications, and/or advanced technology services. The specific technology sectors encompass:

Research and development in physical sciences, life sciences and engineering
Biomedical Products (Medical Devices)
Biotechnology and Pharmaceuticals
Communications (Telecommunications)
Computers and Electronics
Defense and Transportation
Environmental Technology
Recreational Goods Manufacturing
Software

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In 2020, San Diego’s Innovation Economy Represented

At least – 7,379 companies, 164,000 employees, $23 Billion Payroll

*Innovation sectors were defined by the San Diego Association of Governments (SANDAG) “cluster” definitions in conjunction with Connect, and further refined in collaboration with the National University System Institute for Policy Research
**Public and Private academic and research institutions are not included in these figures

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The average innovation sector job in San Diego paid 2.2x more than the average job in San Diego in 2020.

Average Annual Salary:
Innovation Economy Job: $138,650
Rest of Economy Job: $62,753

Jobs in the Biotechnology and Pharmaceuticals industries were the highest paying innovation economy jobs in 2020, earning their workers an average salary of $164,020. This was followed closely by those working in Communications Equipment Manufacturing, who on average earned $161,230.

Jobs in Recreational Goods Manufacturing had, on average, the lowest salary of the industries that make up the San Diego innovation economy – $80,871. This was still about $18,000 more than the average wage for a job outside of the innovation economy.

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San Diego’s Innovation Economy provided at least:

164,000* high paying jobs in 2020

The average number of innovation economy jobs in 2020 dropped slightly from the high in the prior year, but remained very close to the decade high average of 164,145 in 2019.

*According to the Quarterly Census of Employment and Wages

While there was a noticeable drop in employment numbers from Q1 to Q2 2020, employment totals bounced back by Q4 2020 and even surpassed those seen in the first two quarters of 2019. This return to form shows the resilience of an innovation economy. At a time when San Diego had lost 5,300 jobs, on net, and unemployment had risen from 6.6% to 8% in December 2020 (San Diego’s Economic Pulse by the SD Regional EDC), the innovation economy was bouncing back, and supporting 2.78 jobs for every innovation job added.

A local innovation economy not only elevates the livelihoods of those directly employed by these companies, but also supports the communities in which these companies reside.

The data included here comes from: Connect, Dun and Bradstreet, Quarterly Census of Employment and Wages (QCEW), San Diego Regional Economic Development Corporation, and The San Diego Institute for Economic Research, who conducted analysis based upon the IMPLAN econometric model for San Diego.

We would also like to thank the County of San Diego Community Enhancement Fund for their generous support in the collection, analysis, and reporting of the data included here.