New York City’s economy is in the midst of
a rapid transformation. The high-tech industry is the
fastest growing sector in terms of economic output. Big
data, smart phones, social media, and artificial intelligence
have sparked a wave of innovation that is creating a number of
new startups and is re-inventing New York City’s traditional
industries. The city is home to some of the
nation's fastest growing tech sectors. Indeed, it has
surpassed Boston as the number two hub, only second to Silicon
Traditional NYC industries such as advertising, fashion, and
financial services are becoming increasingly tech
oriented. Advances in computer science, automation, and
technology in general will propel the city to new limits and
unexplored frontiers. Innovative NYC companies have
large teams of computer scientists and engineers constantly
developing new technologies. Federal and state research and
development tax credits are available to stimulate these
The R&D Tax Credit
Enacted in 1981, the federal Research and
Development (R&D) Tax Credit allows a credit of up to 13
percent of eligible spending for new and improved products and
processes. Qualified research must meet the following four
New or improved products,
processes, or software
Technological in nature
Elimination of uncertainty
Process of experimentation
Eligible costs include employee wages, cost of supplies, cost
of testing, contract research expenses, and costs associated
with developing a patent. On December 19, 2014, President
Obama signed the bill extending the R&D Tax Credit for the
2014 tax year.
The New York City Tech
The tech industry in NYC is booming.
HR&A Advisors, a leading real estate, economic
development, and energy-efficiency advisory firm based in New
York City recently conducted a study of the technological
economic opportunities for New York. The following are
some of the NYC tech ecosystem research findings:
There are 291,000 tech jobs in
the NYC ecosystem. This is an impressive 7% of the 4.27
million people working in NYC. The retail sector
employs 354,000 people or 8% of total workers, while
healthcare employs 665,000 people or 16% of total
The NYC tech ecosystem generates
approximately 541,000 total jobs, which is 12.6% of
total NYC employment.
From 2003 to 2013, the New York
City tech ecosystem added 45,000 jobs, growing faster
than both total New York City employment and total U.S.
employment. This represents an increase of 18%.
The NYC tech ecosystem generates
over $5.6 billion in annual tax revenues to the City.
That represents 12.3% of the City's 2013 tax revenue.
Workers in the tech ecosystem
earn 49 percent more than the average City-wide hourly
Jobs in the tech ecosystem that
do not require Bachelor's degrees pay 45 percent more in
hourly wages than jobs with the same educational
requirements in other industries.
findings lay out the growing importance of the tech industry
on NYC’s broader economy. Andrew Rasiej, Chairman of the
38,000 member NY Tech Meetup had this to say about the
"This groundbreaking study confirms once and for all that
technology can no longer simply be considered just 'a slice'
of the economic pie, but rather 'the pan' that is supporting
the dramatic and dynamic transformation of all of New York
City's core industries as they fight to compete in the
hyper-connected 21st century global
New York State has offered technology companies millions of
dollars in tax breaks in recent months, a practice that Albany
officials say encourages job creation.
Part of the reason why leaders are so eager to keep tech
companies in New York is because they realize the profound
effects that the tech industry will have on NYC’s core
industries. The finance industry for example is becoming
increasingly intermeddled with the technology industry.
Tech and Finance
Tech and finance are becoming increasingly
intertwined. Of the 4.27 million people working in New
York City, 21% work in professional services, information,
finance, and insurance sectors. 63% of the 291,000
workers in the NYC tech ecosystem work technology jobs in
these sectors. The tech ecosystem’s dominance of these
key sectors demonstrates the vital role technology plays in
supporting the business and operations of firms within these
traditionally strong sectors of the NYC economy.
MasterCard has recognized the intermeddling of the two
industries. That company is one of several big-name
financial services firms that are opting to set up tech
divisions in Manhattan separate from their headquarters.
Some of these service firms are even beginning to view
themselves as technology companies.
Kim Slate, head of MasterCard’s emerging payments technology
group, had this to say about the importance of technology in
the modern finance industry:
“We’re seeing this huge digital shift. In the next five
years you will see more change in payments [than in] the
previous 50. We need to think differently, design
products differently [and] design products faster than
Tumblr, the social networking and microblogging platform,
has its headquarters on East 21 Street. The 2007
start-up sold for $1.1 billion to Yahoo! in May 2013.
Tumblr has an audience of over 420 million and registered
blogs of over 206 million.
Etsy, the 2005, Brooklyn start-up, has a mission to reinvent
commerce in ways that build a more fulfilling
experience. The vintage, handmade online marketplace
connects people from around the world, to make, sell, and
buy unique goods. A recent survey of Etsy sellers
across the nation suggests that nearly half are independent
workers, and nearly 90% are female. Over the last year
alone, Etsy has facilitated over $1.35 billion in sales.
ZocDoc, headquartered in Greenwich Village, is a platform
for finding and booking appointments with doctors. The 2007
start-up has innovated the way doctors and patients interact
and improved the healthcare experience by eliminating market
inefficiencies. “We’re one of the companies that can
help fix the health care system,” said Dr. Kharraz, a
physician and ZocDoc’s COO. “We’re making doctors more
efficient and helping patients find the hidden supply of
healthcare.” That hidden supply, he explained, is the 10-20%
of appointments that are made and then cancelled within one
to two days of the appointment date.
New York City is the place to be for ad
tech companies. Google, the internet advertising giant
has over 3,000 employees in the former Port Authority building
on Eighth Avenue. Smaller businesses are grabbing at the
expanding market as well. John Elton, a partner at venture
firm Greycroft Partners, which has bankrolled more than 100
startups, nearly 30% of them in New York, had this to say
about technology working its way through NYC’s key industries,
"It's a great place to build companies that are going to
disrupt some of those industries."
Ad tech firms are reaping profits from a broad range of NYC
clientele. They generate the majority of their revenues
selling ad space and campaigns to marketers from all
industries including the traditional NYC economic anchors such
as finance, fashion, and real estate.
However, even these traditionally low-tech industries are
being forced to innovate. Financial service companies,
for example, have encountered a new climate demanding active
responses to market changes following the Great Recession.
This has prompted a push towards modernization of systems and
adoption of more agile principles of business.
Charles Schwab, for example, recently released Schwab
Intelligent Portfolios which provides a fully automated
investment advisory service for a fraction of the price and
includes traditional investment services. Small
investors with as little as $5,000 will now be able to open
IRA’s and revocable living trust accounts and gain as much in
returns as a human advisor.
IBM’s Agilysis Stratton Warren (SWS) software is another
innovative example. Named after superstar investor
Warren Buffet, it uses search engine technology to
generate responses to detailed questions such as “What
happens to the share prices of energy companies when oil
trades above $100 a barrel, political unrest has recently
occurred in the middle east, and inflation runs rampant in
Russia?” Search engine technology allows the
computer to sort through a storage of big data in order to
answer questions. Similar search engine technology is
infiltrating other industries as well.
Some commentators refer to the expansion of search
technologies in all industries as Googlization. NYC is
currently experiencing this phenomenon as it shifts from a
primarily financial industry based economy to a more balanced,
technology driven economy.
New York City’s tech industry is a fast
growing sector. Big data, smart phones, social media,
and artificial intelligence have sparked a wave of innovation
that is creating a number of new start ups and re-inventing
New York City’s traditional industries. Federal and
state R&D tax credits are available to support and
stimulate companies performing innovation in the New York City