5 Lessons for Unleashing Economic Potential through Innovation
Updated: Jun 26
This article was published in the MIT Technology Review Spanish-language publication on July 29th, 2019. You can access the Spanish version through this link. To explore the interactive Atlas and read the full report, visit the Atlas page of our website.
Despite the growing number of Innovation Districts over the last two decades, the mechanics of well-functioning innovation ecosystems remain poorly understood. By analyzing the innovation phenomenon and its key hotspots throughout the United States, a team of researchers has identified 5 lessons for boosting innovation.
Around the world, the last 20 years have seen remarkable growth in the number of Innovation Districts: areas where inventive organizations and individuals are intentionally clustered together to kickstart virtuous cycles of innovation. Innovation Districts are valuable for the novel products and services they generate, but their values goes beyond these obvious outputs; Innovation Districts are also powerful economic drivers for the surrounding communities, producing an average of 9 times more job opportunities than non-innovation districts. This produces an exponential benefit to the broader region as the advantages of concentrating talent and knowledge-intensive activities in Innovation Districts cascade through the supply chain to related industries and businesses.
It is important to understand that high-functioning Innovation Districts do not develop by accident. They result from intentional, holistic planning and design work, integrated with good organizational design and public policy.
Despite the obvious value created by these districts, innovation ecosystems are still poorly understood. This is because the regional economic systems in which Innovation Districts operate are too complex for analysis with traditional methods. This unmanageable level complexity has forced planners and leaders to rely on qualitative and instinctual judgments to supplement rough analysis.
Furthermore, siloed thinking has limited our scope of understanding. Various organizations have perspectives on innovation at different scales - for example, government organizations may look at the macroeconomics of a metropolitan while businesses may focus on their operations within a district. There is also role-based siloing. Urban planners, small business owners, policy makers, researchers, and developers each understand a different piece of the system. There is no scientific, comprehensive view of the whole.
All that is about to change. We stand at the brink of a new science of cities, made possible by emerging technologies like complex system modeling, machine learning, and applications of network theory. A team of researchers at Aretian, an urban analytics and design startup based at Harvard University, has conducted a deep study of innovation ecosystems in an attempt to discover the recipe for a high-functioning Innovation District.
Here are the 5 lessons they discovered for unleashing economic potential through ecosystems of innovation:
Strategic Investment in the early phases of an Innovation District’s development will have amplified effects in later phases. The effects of these early interventions, particularly related to Research and Technology Transfer, will be amplified as innovations move downstream. This lays the groundwork for virtuous cycles and industry diversification and sophistication.
The location, context, and urban design features of an Innovation District shape its potential for fruitful human interaction and knowledge-intensive specialization. The highest-performing Innovation Districts achieve focus through specialization. The history and geography of a region will determine which areas of competitive advantage are most appropriate for specialization. Furthermore, the leading institutions within a district have a strong influence on the kind of work produced there - be they industrial manufacturers, academic institutions, government agencies, or others. Location and urban design characteristics (topology, morphology, entropy, desirability, accessibility) also have a dramatic impact on the ability for high performing teams to collaborate in the context of innovation districts, and eventually to contribute to make the whole community thrive.
Organizational support structures can make or break an Innovation District. Strong organizational support structures can propel good ideas forward, while a lack of organizational structure can obstruct them. In particular, systems that enforce meritocratic principles are crucial for allowing good ideas to flourish while pushing bad ideas out of development. Innovation ecosystems with formal programs to guide entrepreneurs, foster collaboration, and facilitate technology transfer tend to have the best performance across a variety of metrics.
Networks of talented people are powerful drivers of an Innovation District’s effectiveness. Innovation is a social activity. Contributions from talented people working on the frontier between disciplines shape the effectiveness of an Innovation District at every phase of its development. It is crucial to attract, retain, and develop knowledge workers within the regional community to maximize the benefits of their collaboration. This can be achieved through urban design interventions, infrastructure investments, strengthening the richness of cultural amenities, and professional development programming.
Innovation districts generate and amplify positive effects that benefit surrounding areas. The presence of an Innovation District creates jobs and wealth beyond the district. Compared to non-innovation neighborhoods, Innovation Districts produce on average a 9 times higher density of job opportunities, 15 times higher concentration of knowledge-intensive jobs, and 20 times more wealth or economic activity per resident. These trends create an ongoing economic stimulus for the surrounding communities, as the advantages of concentrating talent and knowledge-intensive activities in Innovation Districts cascade through the regional economy.
The research effort that produced these lessons points to many exciting opportunities for future work. As a proof of concept, the research demonstrates how emerging technologies are poised to open a new frontier in the scientific study of cities and economic development. Further analysis will reveal more insights on how we might approach urgent societal challenges like social inequality, adaptation to climate risk, and sustainable economic development.
These lessons provide valuable insights for many stakeholder groups. Prominent among these are policy makers, who will benefit from a new generation of decision support tools on key questions related to sustainable, equitable economic development. For real estate developers and investors, these insights allow for new ways of thinking about how a neighborhood will fit into the context of a larger system over time, reducing investment risk and increasing the quality of development projects. Ultimately though, this research is an invitation for all stakeholders to think bigger: to consider the system in its full complexity, accessible for the first time through data science.
Further scientific study of innovative environments will lead to a more robust understanding of innovation ecosystems that transcends location and economic context. As a first step toward this goal, the researchers have published the Atlas of Innovation Districts, which provides standard metrics and context for the top 50 Innovation Districts in the United States.
Innovation is not an inscrutable, mysterious process beyond our understanding. The truth is quite the opposite: the ability to promote or obstruct innovation is within our power to understand and control. The complexity of successful innovation environments may be daunting at first, but a rigorous, data-driven approach can reveal powerful insights. With careful design, coordination, and management, innovation is within reach for communities around the world - and as a result, so is distributed economic prosperity.