Recent announcements of institutional change and large public investments suggest a possible brighter economic future for Indianapolis. Success, though, requires new sophistication in regional coordination and strategic execution.
The trasformation of Central Indiana into a global amateur sports hub made Indianapolis a textbook case for regional economic strategy.1 Velocity, though, from a strategy born in the 1980s has withered. A metropolitan area that once made national headlines for gutsy public investment choices now lags most other regions in unified vision and economic performance.2,3
Shifts in higher education priorities, capital investments by companies that economically anchor the region, proactive engagement by the state, a redefined vision for downtown and new interest in cooperation across local entities serendipitously give the region new opportunity to transform the economic identity of Indianapolis. In September, 135 regional leaders from business, government, universities and the nonprofit community go to Massachusetts as part of the Indy Chamber Leadership Exchange to study how the ascendancy of Boston can inspire a relighting of Central Indiana’s economic fire.4 This article informs that study with a data- and fact-driven contrast of Boston and Indianapolis.
Convergence of new economic opportunity for Indianapolis
Changes in higher education currently drive a bolder vision of economic development for Indianapolis. Reinvigoration by Indiana University and Purdue University of their commitment to research and workforce development in Indianapolis headlines the region’s new potential. Retirement of the IUPUI model has sparked hundreds of millions of dollars in commitments to new research infrastructure,5,6 academic programs7,8 and campus facilities.9,10 A new engineering school at Marian University,11 a new TechPoint-supported education and workforce innovation accelerator at Butler University,12 a new $10 million philanthropic enhancement of experiential learning at the University of Indianapolis13,14 and a new Eli Lilly-funded biopharmaceuticals science and technology lab at Ivy Tech Indianapolis15 underscore important economic contributions by higher education beyond IU and Purdue. University presidents demonstrate an unprecedented sense of urgency in elevating the quality of talent and intellectual innovation their institutions bring to Indianapolis.16
Emergence of new research and development hubs within the region coincide with new appreciation by universities of the economic contribution that they make. The 16 Tech Innovation District continues to grow with the addition of an apartment community and two new buildings for offices and laboratories. A critical mass of more than 200 businesses, organizations and academic entities committed to commercial discovery won 16 Tech designation as a member of the Investor Catalyst Hub. That Hub is a Boston-based national network of researchers, entrepreneurs and investors committed to the advancement of health care.17 16 Tech is also host to a new Ivy Tech Community College pharmaceutical manufacturing training center targeted to meet growth in demand for technically trained workers. The new Elanco downtown corporate campus will see the addition of the OneHealth Innovation District and a partnership with Purdue to drive commercialization of new research in animal health and life sciences.18,19 Recently announced federal support for the Indiana Heartland BioWorks Hub with funds from the CHIPS and Science Act promises additional resources for work coordinated at 16 Tech and OneHealth.20 IU Health’s new $4.3 billion hospital opens in 2027 and will become the clinical home of the nation’s largest medical school.21 In 2023, the IU School of Medicine received $243 million in National Institutes of Health funding and ranked 13th nationally among public medical schools for total grants received.22 Construction of Eli Lilly’s new $9 billion manufacturing complex in Lebanon is also underway. This industry record-breaking investment in pharmaceutical production brings additional engineers, scientists and advanced technology to Central Indiana and leverages the region’s strength in life sciences and manufacturing.23
State initiatives strive to upskill the Indianapolis workforce and make it nimbler. The 2023 state budget tripled Workforce Ready Grant funding.24 Such grants pay the costs of academic certificates that qualify recipients for good jobs in industries that drive the state economy.25 High school students can take advantage of career scholarship accounts that pay for work-based learning experiences often hosted by employers.26 These accelerate the growth of apprenticeships that more quickly integrate academics with career skills development.27 These opportunities are strengthened by proposed new high school diploma requirements that make academic credit for work-based learning easier to earn.28 Beyond education and training, Regional Economic Acceleration and Development Initiative (READI) grants provide hundreds of millions of dollars to multi-county regions to improve quality of life in ways that attract and retain skilled talent.29 Additionally, the Indiana Economic Development Corporation works to recruit companies from innovative industries such as advanced manufacturing, agbioscience, defense, life sciences and logistics that offer high-paying jobs.30
There are $9 billion in capital projects underway that will bring new vibrancy to a downtown hit hard by post-pandemic reduction in commuter foot traffic and demand for office space.31 A $600 million conversion of Circle Center Mall into a pedestrian-friendly, open-air, mixed-use development is expected to transform downtown and reverse the fortunes of currently distressed properties.32,33 By mid-2023, the daily number of individuals in downtown each day was 79% of what was observed in 2019, but this beat 64% in Cincinnati, 61% in Chicago, 57% in Columbus and 54% in Louisville.34 Indianapolis leveraged itself as a preferred host for conventions and national events to drive a downtown rebound that beat its midwestern neighbors. NBA All-Star Weekend, the U.S. Olympic swimming trials, Taylor Swift, Gen Con and the National Eucharistic Conference are among 550 conventions, meetings and events that make 2024 a banner year for tourism in Indianapolis.35 Expected strong growth in visitors and events fuels a $750 million expansion of the Indiana Convention Center (which includes a new 37-story, 800-room hotel) and a $312 million redevelopment of a former CSX site adjacent to Gainbridge Fieldhouse (which includes a new entertainment venue and 170-room upscale hotel).36,37 Work to attract a Major League Soccer expansion franchise with a new soccer stadium at the current heliport site generates additional enthusiasm for a revived downtown.38
Municipal leaders from the Indianapolis region recently formed the Central Indiana Regional Development Authority (CIRDA) to institutionally coordinate regional economic development and apply for state, federal and philanthropic funds.39 Before CIRDA, there was no formal entity coordinating the economic development efforts of the approximately 100 city, town and county government jurisdictions that comprise the Indianapolis metropolitan area.40 CIRDA won $45 million in second round READI grants, $5 million more than first round READI grants won by sub-regional coalitions before CIRDA was formed.41 CIRDA also applied for a $500 million regional pollution grant from the U.S. Environmental Protection Agency. These two grants, plus collaboration on road funding legislation and water resources planning, represent a new level of inter-jurisdictional coordination through CIRDA that can strengthen a unified regional economic vision for Indianapolis.42
Comparative standing of Indianapolis
A study published for the September 2023 Indy Chamber Leadership Exchange delegation to Switzerland highlighted worrisomely slow growth in real per capita gross domestic product (GDP) and real labor productivity in the Indianapolis metropolitan area. Between 2007 and 2021, real per capita GDP (real GDP divided by population) grew 1% in Indianapolis while it grew 14% in the United States. Over the same period, real labor productivity (real GDP divided by employment) grew 3% in Indianapolis while it grew 18% nationwide. Total real GDP, though, grew 18% in the Indianapolis metropolitan area. Indianapolis employment growth of 14% impressively outpaced 6% national growth. Growth in productivity stalled, even though growth in the economy and labor force did not. Since productivity determines wages, higher real GDP without higher productivity means that expansion in low-wage jobs fuels the growth of the Indianapolis economy. Without commensurate growth in productivity, the Indianapolis region becomes less competitive with other metropolitan areas. Lack of comparative wage growth can force Indianapolis into a geographic poverty trap that is difficult to reverse.43
In December 2023, the U.S. Bureau of Economic Analysis published a comprehensive revision of real GDP estimates for counties and metropolitan areas going back to 2017 and offered previously unpublished estimates for 2022.44 If old, unrevised real GDP data and new, revised population data are applied, per capita GDP in the Indianapolis metropolitan area fell 4.8% between 2007 and 2017, but then increased 6.1% between 2017 and 2021.45,46,47 If the new, revised GDP data is applied, per capita GDP grew 7.1% between 2017 and 2021.48,49 Revisions in measurement reveal that Bureau of Economic Analysis data used for the September 2023 study understated real GDP growth in the Indianapolis metropolitan area through 2021. Addition of 2022 data reveals newfound comparative strength for Indianapolis. Between 2017 and 2022, real per capita GDP growth of 10% in the Indianapolis metropolitan area exceeded 9.2% nationwide. Similarly, real productivity growth of 7.9% in the Indianapolis metropolitan area exceeded 7% nationwide.50 Per capita GDP and real productivity growth that are now suddenly faster than the nation combined with previously outlined emergent economic opportunities suggest a window of opportunity for Indianapolis to reverse its sluggish economic fortunes. More so than in recent history, the data suggests that a well-designed and well-coordinated, sophisticated regional strategy can generate high economic returns for metropolitan Indianapolis.
Comparison of Nashville to Indianapolis illustrates the comparative power of regional vision and strategic execution. Inspired by the amateur sports strategy implemented by Indianapolis in the 1980s and 1990s, Nashville launched its “Music City” strategy in 2003. The business community embraced a brand promise of “authentic, unique, friendly and unpretentious” that visitors already assigned to Nashville. Bold investments in marketing, downtown projects and a new entrepreneurship center around the “Music City” brand changed outsider impressions of Nashville. In the national mind, Nashville became a place where creative people could thrive. This reputation sparked economic energy well beyond the music industry and prompted massive migration of new talent and business into the region. Between the Great Recession and the pandemic, employment in metropolitan Nashville grew at twice the rate of metropolitan Indianapolis. New business creation occurred at three times the rate. In 2001, per capita GDP in metropolitan Nashville was 82% of metropolitan Indianapolis. By 2021, it was 108%. A region with significantly fewer resources and less prosperity leveraged leadership, strategy and marketing to economically surpass Indianapolis in just 20 years.51
Like Nashville, Boston is a region that pulled ahead of Indianapolis because of an intentional economic strategy that played to 21st-century industry and workforce strengths. In the 1970s, an economic retreat of labor-intensive manufacturing from the Northeast and Midwest hit Indianapolis and Boston, but it hit Boston harder. The population of Boston shrank 12% during the 1970s, while it fell only 5% in Indianapolis.52 As Figure 1 illustrates, comparatively easier economic decline allowed per capita personal income in Indianapolis to rise from 87% of Boston in 1970 to a high of 97% in 1978. Recession in the early 1980s triggered a dramatic divergence that disfavored Indianapolis. The ratio of 97% in 1978 became 77% in 1988 and declined further over the long term to 73% in 2022. For Boston residents, an income close to that of Indianapolis residents in 1978 became an income that was 37% higher by 2022.53,54 Prosperity stagnated in Indianapolis while it advanced in Boston.
Comparison of employment changes by industry between 1990 and 2023 in Table 1 uncovers how the Boston economy accelerated past Indianapolis. Faster per capita personal income growth in Boston required a larger shift of the Boston workforce to higher paying industries. Manufacturing shrinkage equaled 30% of net employment growth in Boston. This freed a significant share of workers to reposition themselves for jobs in professional and business services, which paid a wage equal to 120% of the national average in 2023 versus 96% in manufacturing. Professional and business services accounted for almost half (48%) of Boston’s net employment growth. In contrast, manufacturing shrinkage was only 7% of net employment growth in Indianapolis. Professional and business services accounted for just over one-fourth (28%) of net expansion in the number of workers. Transportation and warehousing—an industry that pays 87% of the national average—accounted for 14% of net employment growth in Indianapolis versus only 3% in Boston. The number of government employees fell 3% in Boston while it increased 28% in Indianapolis. Even though total Indianapolis nonfarm employment grew more than twice as fast as Boston (61% versus 26%), newer jobs in Boston were of much higher quality. Between 1990 and 2023, the average weekly wage for workers in Boston grew 70% faster than for workers in Indianapolis.55,56
Recent economic growth illustrates how modern Boston has shifted more and more of its workforce from lower paying jobs that serve the periphery of the U.S. economy to higher paying jobs that drive the innovation of the U.S. economy. Between 2017 and 2022, real GDP growth of 16.2% in metropolitan Boston closely matched 15.2% in metropolitan Indianapolis. Boston’s population, though, only grew 0.2% while it grew 4.7% in Indianapolis. This means real per capita GDP grew 16.0% in Boston but only 10.5% in Indianapolis, implying a growth rate over 50% higher in Boston.57,58 This only occurs if labor productivity grew at a similarly rapid rate.
Labor productivity grows most quickly within a workforce that is highly educated and employed in high-value sectors of the economy. Among the 150 largest metropolitan areas, Boston ranks 7th in educational attainment while Indianapolis ranks 68th.59 The share of the population ages 25 and older with a bachelor’s degree is 27.3% in Boston versus 23.5% in Indianapolis. The share with a graduate or professional degree is 23.3% in Boston versus 13.2% in Indianapolis.60 A contrast in workforce transformation is most visible in life sciences, an industry cluster that is a primary driver of both regional economies. Between 2001 and 2022, the number of individuals employed in scientific research and development services—a sector important for life sciences—grew 182% in Boston while it only grew 23% in Indianapolis.61,62 Dramatic growth in high-quality talent was matched by equally vibrant business innovation. During the same period, growth of new scientific research and development services ventures in Boston occurred at nearly twice the rate of Indianapolis.63,64 Across all industries and economic sectors between 2017 and 2023, Boston attracted $99.2 billion in venture capital deals while Indianapolis attracted $1.8 billion.65
Human capital, geography and economic ascendancy in Boston
Boston surpassed Indianapolis by leveraging talent and strategically chosen city locations to retool and reengineer the regional economy. Between 1978—the year when incomes in Indianapolis and Boston were equivalent—and 2023, the population of metropolitan Boston grew 33% (from 3,261,000 to 4,344,000) compared to 225% for metropolitan Indianapolis (from 834,000 to 1,881,000).66,67 Unlike Nashville and other fast-growing regional economies, Boston did not increase per capita income by attracting large waves of new high-skilled talent from other regions. Boston, instead, reconstructed how native talent prepared itself for high-value employment. Boston has a strong history of economic reinvention. Life sciences is the most recent industry cluster upon which the region has built its prosperity.68 Maritime trading and fishing in the early 1800s, manufacturing in the late 1800s and information technology in the late 1900s preceded life sciences as industry clusters that dominated the regional economy. During each economic transition, the region developed and curated pools of high-skilled workers to meet the talent needs of emerging industries.69
The 1970s and 1980s retreat of manufacturing in Boston and the rest of New England was harsh. Massachusetts lost 80,000 manufacturing jobs between 1983 and 1986. The permanent disappearance of a legacy industrial base drove economic retrenchment instead of temporary decline driven by the business cycle.70 By 1986, though, unemployment was 3.6% and state government had a half billion-dollar surplus. The Boston economy was strong when compared to the nation. The city reinvigorated itself by doubling down on the retention of local university graduates, support of entrepreneurs and the development of an ecosystem that attracted federal research funding. Sustained growth in scientists and engineers fueled Boston’s economic revival.71 In 1977, Cambridge (a university-dominated city within the Boston metropolitan area) became the first city in the nation to formally regulate but allow genetic research. This seeded the launch of biotechnology pioneer Biogen in 1978. A startup of between 30 and 40 employees in 1980 became a company with 7,000 employees by 2017. Genetics was a game changer for medicine and translation of it to clinical practice required research embedded within universities. High economic potential forced quick fusion in Boston between pure science as understood by academia and commercialization as understood by business.72 This generated a virtual cycle of investment, venture creation, talent attraction and income generation that made Boston a new global life sciences hub.73
The role of government in Boston’s economic resurgence was unique. Development of the life sciences industry cluster occurred in a high-tax environment. Massachusetts, for example, imposed the 14th-highest tax burden on its residents in 2022 among all states (compared to 37th highest for Indiana).74 This contrasted with other parts of the country that emphasized low taxes as a driver of business and employment expansion. Boston’s success underscores the primacy of talent over taxes in decisions by companies on where to locate and invest. High comparative tax revenue enabled three public investments important to Boston’s economic ascendancy. The first important investment was public schools. Quality public schools attract and retain a region’s current generation of skilled talent and develop its next generation. Boston schools achieved top rank for academic achievement (compared to a rank of seventh for Indianapolis) in a comprehensive 2021 survey of the 50 largest metropolitan areas.75 The second important investment was public support of life science industry development. In 2008, the Commonwealth of Massachusetts committed the deployment of $1 billion in capital over 10 years through the Massachusetts Life Sciences Center (MLSC). A $623 million, five-year commitment was added to that in 2018. The MLSC funded projects within companies that advanced research, commercialization and workforce development within the life sciences.76 Through 2018, the MLSC assisted 115 companies that created 8,940 new jobs, attracted $2.1 billion in venture capital and earned 3,460 patents.77 The third important investment was the “Big Dig,” which rerouted the major downtown artery Interstate 93 through underground tunnels. Space was released for greenways and historical connectivity between neighborhoods was restored. Construction between 1991 and 2007 was a $14.8 billion endeavor in placemaking that increased quality of life.78 Just through 2006—a year before its official completion—the project reduced traffic travel time by 62% and attracted $7 billion in private investment that added 7,700 housing units and 43,000 jobs.79
Concentration of research, innovation and commercialization in specific areas of the city maximized the economic value produced by the interaction of talent, corporate assets and scientific discovery. Rapid growth of enterprises in computers and electronics in the 1970s and 1980s preceded Boston’s leadership in life sciences. These enterprises voluntarily clustered themselves along Route 128 to capture natural economic benefits from co-location and geographic proximity to research on university campuses.80
Dubbed “America’s Technology Highway,” the high concentration of technology companies along Route 128 preceded Silicon Valley. Silicon Valley surpassed Route 128, though, as a global driver of digital change because mature corporate environments along Route 128 could not generate the same innovative energy sparked by young entrepreneurial ventures in Silicon Valley.81
The rise of life sciences in Boston occurred in Kendall Square in Cambridge. Land that was originally cleared for a federally funded space center that never came found itself a parking lot in the 1970s. Biogen, Genzyme and other early biotech companies took advantage of the unused land to locate themselves close to university laboratories. More and more ventures seeded by commercialization of academic research located themselves in Kendall Square. Opened in 1999, the Cambridge Innovation Center accelerated business activity by providing affordable space where new companies could operate and entrepreneurs, scientists and investors could interact. By 2009, Kendall Square was known as “the most innovative square mile on earth.”82
Congestion around Kendall Square generated spillover of life sciences into the Boston Seaport area. A 2011 announcement by Vertex Pharmaceuticals to relocate its headquarters from Cambridge to the Seaport ignited geographic transformation that fulfilled a vision by Mayor Thomas Merino to make the South Boston waterfront Boston’s next innovation district.83,84 Before the 1990s, the Seaport was an underutilized industrial area where only 40% of wharf spaces were occupied. Public investment made the area attractive for economic renewal. The Big Dig increased access, a harbor cleanup improved environmental quality and construction of a new courthouse and convention center anchored new commercial activity.85 By 2023, more than 25 life sciences companies had a presence in the Seaport district.86 As one of the newer Seaport tenants, Eli Lilly opened a $700 million research facility in August 2024.87 A comparatively higher density of qualified talent and scientific innovation motivated Eli Lilly to place its new research center in Boston instead of Indianapolis.88
The previous two destinations for the Indy Chamber Leadership Exchange provided valuable insights for Central Indiana’s economic direction. Nashville demonstrated how a region with fewer resources than Indianapolis can economically surpass it with tightly coordinated leadership, marketing and public investment. Nashville’s success informed work to promote and brand the Indianapolis region, such as through the Indy Chamber’s “Life in Indy” campaign.89 Zurich sparked faster integration of academics with career development through apprenticeships for high school students. The trip motivated new legislation from the General Assembly that strengthened state support for workplace learning.90 It also energized new commitments from EmployIndy to scale the Indy Modern Apprenticeship Program beyond the 122 apprentices it supported in August 2024.91
Compared to Nashville and Zurich, the lessons from Boston are more fundamental. High-quality human capital must be a singular uncompromised focus. The guidance for Indianapolis is very precise. Success for the region begins with obsession over development, recruitment and retention of scientists and engineers. Between May 2019 and May 2023, the number of scientists and engineers in the metropolitan Indianapolis area fell 8% from 25,410 to 23,380.92,93 As Carnegie-classified R1 institutions (the highest classification for research-driven universities), IU and Purdue must quicken growth of their STEM (science, technology, engineering and mathematics) research and educational programs in Indianapolis to reverse this decline.94 Smaller regional institutions of higher education play an important role in filling niche regional STEM talent needs. Just as commercialization of university research fueled geographically concentrated business creation in Kendall Square, the Seaport district and along Route 128 in Boston, Indianapolis should leverage IU, Purdue and other regional research enterprises to make similar venture investments within 16 Tech and other emerging innovation districts, such as OneHealth at the new Elanco corporate headquarters, LEAP in Boone County and the Riverside Education Innovation District (REID) next to Marian University.95,96 A transformed Indianapolis core must dramatically increase quality of life for resident businesses and households and enhance geographic access to campuses and innovation districts that border downtown. Innovation within local school districts should develop and graduate students with disproportionately strong STEM knowledge and workplace skills.
The aspiration of Indianapolis in 2024 to mimic achievement of Boston by emulating its regional human capital strategy is as rational as aspiration of Nashville in 2001 to mimic achievement of Indianapolis by emulating its regional branding strategy. As previously shared, Nashville’s per capita GDP vaulted from 82% of Indianapolis in 2001 to 108% in 2021. Metropolitan areas evolve over time—they rise, mature and then position themselves for a new period of economic takeoff. Current data suggests a surprisingly small gap in regional innovation capacity between Indianapolis and Boston. StatsAmerica scores innovation intelligence in Boston only 1% higher than Indianapolis. Relative to economic size, Boston beats Indianapolis in terms of educational attainment and venture capital. Indianapolis matches Boston in terms of new business and patent creation. Indianapolis beats Boston in terms of external corporate investment, employment growth and poverty rate.97 Boston’s population is not younger despite the presence of more colleges and universities. In both Indianapolis and Boston, 28% of the population was between 25 and 44 years old in 2022. The share of population between 18 and 24 years old was only 1% higher in Boston (10% versus 9% in Indianapolis).98 Boston faces challenges with affordability and income inequality that Indianapolis does not. The median household income in Indianapolis funded 137% of what was needed to afford a single-family home in 2022, while a median household income in Boston only funded 88%.99 The ratio of the average income of the top 1% of income earners to that of the bottom 1% in 2013 was 30.6 in Boston, making Boston the 23rd most unequal metropolitan area in the nation (out of 916). This value was 18.5 in Indianapolis, making Indianapolis the 207th most unequal.100
Indianapolis finds itself enjoying a critical mass of new economic energy. Smart leadership, coordination and cooperation can harness this energy to position Indianapolis as the nation’s next great story of regional transformation. Focused growth in engineers and scientists, large-scale commercialization of research by universities, geographic concentration of new ventures within favored innovation districts, bold investments that increase downtown quality of life and high standards for public school performance are the insights Boston provides Indianapolis for ignition of economic takeoff. Indianapolis sets its own limits for success. A deeper, more sophisticated regional strategy for human capital is key for a breakout by Indianapolis from its current economic stagnation.
Notes