Innovation Districts: Are they part of your city’s Post-Pandemic Prosperity Playbook?

• With remote and hybrid work becoming the new norm, cities need new approaches to building economies that are innovative, resilient & sustainable.
• I argue that Innovation Districts (and their supportive ecosystems) can be foundational to this post-pandemic prosperity playbook in urban & metropolitan environments.
• The reason: in the knowledge economy, “innovation” is the business function that is most dependant on physical proximity. Activities such as team collaboration, using specialized testing equipment or facilities, or even working directly with a first-user customer to demonstrate the effectiveness of a prototype — are all accelerated by proximity.

Image from @Barcelona_cat of Barcelona’s 22@ Districte de la innovació — the project that is thought to have started the global innovation district movement. The project is discussed further below.

Moving from Remote Work to Hybrid Work

“The future of urban life lies in mixed-use, accessible places all throughout a city. And to get to that future, commercial space needs to be re-imagined...” So says this June 2022 article in Fast Company; which goes on to present some of the considerations that city builders must make as a response to the fact that only 41% of us have returned to the office.

Neighbourhoods will become more amenity-rich as the “15-minute city” model becomes more and more common. This means less commuting and more time with family — as we apply our knowledge & creativity, and even satisify our need for collaboration through a screen in our home office.

This sounds good at face value — but what will it mean for our city economies?

Put another way, should we be satisfied with “attracting remote workers” as an economic development strategy? Most economic development professionals like myself would suggest that we shouldn’t be. There are many reasons for this, but here are two big ones:

1. The importance of knowing where our city’s wealth comes from

Every city economy is made up of many different types of businesses and employers, but they ultimately fall into two categories: secondary & tertiary producers (businesses or organizations that are serving a local customer; like construction or most mainstreet businesses) and primary producers (businesses that are serving external markets; like technology or advanced manufacturing companies).

For any economy to produce good, high-paying jobs over the long-term, it needs an abundant mix of primary producers. For more on why, see my previous post on how our city economies actually work. So what happens with remote work is that our cities and neighbourhoods adapt to serving people working out of their home offices — thus the 15-minute, amenity-rich hood with nice local businesses and green space and walkability. This is great at face value, but there’s no doubt that this model will lead to less innovation, less job creation and less collaboration — but if we take deliberate action, this model can be the best of both worlds: bringing us high quality of life AND future-oriented jobs.

2. The risks of declining productivity.

Building from the above, research has shown time and time again that geographic proximity of businesses leads to increased innovation and competitiveness. Alfred Marshall (1890) was perhaps the first to point out these agglomeration effects. But others such as Jacobs (1969), Porter (1990) and Florida (2002) expanded on this. The general conclusions: a) proximity leads to knowledge spill-over that increases rates of innovation and creates other positive externalities like specialized research, highly trained personnel, and many others; and b) these externalities rapidly diminish with distance.

This means remote working may be detrimental to a company’s ability to innovate and gain the positive externalities that only proximity presents. And as this year’s winner of the Balsillie Prize for best public policy book, Dr. Dan Breznitz says, countries like Canada must fix their “horrific” approach to innovation that is hurting future generations.

Maximizing the Potential of the New “Hybrid Office” Environment

I believe Innovation Districts can serve as a strategic and deliberate response to all of the above because:

• They can anchor and nurture amenity-rich neighbourhoods by bringing back the people — and inspiring them through aesthetics, new connections and exposure to art in all forms.
• They can create the type of vibrant, collaborative working environments that make “hybrid” work more productive and satisfying for employees and employers alike.
• By being “sector agnostic” they can facilitate cross-pollination that leads to new ideas, partnerships/collaborations and increased rates of entrepreneurship.
• They can attract innovative companies and investors that desire and align to these positive externalities.
• For younger workers, they offer the chance to learn through osmosis. Something that only the in-person experience can offer.

And I’m not alone in this belief. The Global Institute on Innovation Districts is pulling together a global network of these districts starting in 2022 to explore their strengths in a post-pandemic city economy.

Let’s dig deeper.

Innovation Districts Defined

The term Innovation District was popularized in North America by Bruce Katz and colleagues starting in 2013 (see this video intro) but the initial inspiration for innovation districts can be traced to the 22@ district of Barcelona, Spain. In 2000, the City began to transform 115 city blocks with a focus on media, information communications technology, medical technology, energy, and design.

This deliberate focus and set of policies ultimately attracted 9 universities into the district along with 10 specialized R&D centres and 4,500 companies (over 1.2 per day!) which led to substantial economic spinoff, and garnered attention from urbanists and economic developers from all over the world.

Since then, many different types and structures of Innovation Districts emerged. This report by The Business of Cities, commissioned by the Catapult Network, the UK’s central facilitator of 9 technology and innovation centres, sought out to describe various types of Innovation Districts and Hubs:

1. Innovation Hub buildings within a central business district or fringe area.
2. Innovation sites vacated by large employer(s).
3. Innovation Districts in inner-city heritage-rich and post-industrial areas.
4. Innovation Parks in suburban areas undergoing intensification efforts.
5. Innovation Corridors spanning road or rail links or commutershed transport links.
6. Innovation Campuses oriented around Universities.
7. Innovation Triangles that connect three concentrations of innovation activity.
8. Innovation Zones in large out-of-town settings.
9. Innovation Landscapes built around a set of natural assets

As you’ve probably gleaned by now, this means there doesn’t seem to be a commonly agreed upon defintion.

A 2019 report, funded by Kauffman Foundation, defined them to be “spatially delineated urban areas in which firms connect with each other and with anchor institutions to foster innovation and entrepreneurship, with active support from policies and programs, effective infrastructure, attractive amenities, and conducively structured economic and social spaces”.

This same report analyzes four different models selected for their variation along several dimensions such as location, size, ownership/initiation model, etc. Here’s a snap-shot that shows their differences:

From the 2019 report “Innovation Districts — As a Strategy for Urban Economic Development” funded by the Kauffman Foundation

Is an Innovation District just a new term for Industry Cluster?

Clusters — popularized by Harvard’s Dr. Michael Porter starting in 1990 — are slightly different than Innovation Districts, but still rely on agglomeration and its effects.

Cluster theory describes that companies (often competitors) within similar sectors locating near each other creates positive externalities that they wouldn’t get if they were disbursed across multiple cities. So things like the creation of specialized programs at nearby post-secondary institutions that only these similar companies demand. A good example might be the Aircraft Structural Test & Evaluation Center (ASTEC) at the National Institute of Aviation Research in Wichita, Kansas. It’s there because of a long-established cluster of aerospace companies like Cessna, Beechcraft, Airbus, Bombardier Learjet, and over 450 of their world-class suppliers.

Perhaps the biggest differentiator between Innovation Districts and Clusters is the emphasis on the urban form itself. For clusters, the “positive externalities” are things like programs or suppliers or the benefits of knowledge-transfer between and among firms within the cluster; whereas Innovation Districts will deliver more physical amenities. For example, they might bring restaurants, cafes, bars, artist studios, event space, tech incubators & accelerators, and even diverse housing types deliberately into proximity so that participating firms benefit from and contribute to the vibracy. These mix together with other key ingredients to make the place come to life.

Ingredients of Innovation Districts

Tim Moonen and colleagues at The Business of Cities came up with a set of success criteria for all the types of innovation districts that were outlined above. Here’s a sampling of the common ingredients in play (though they change depending on the type):

• Proximity and porosity
• Shared work spaces
• Mix of floorplates
• Access to grow-on space
• Access to capital
• Mentorship community
• Co-located sectors and mixed uses
• Proximity to first-users and customers
• High-calibre, specialized shared equipment
• Privacy, security and IP protection
• Nearby housing affordability
• Walkability and micro-mobility
• …read the rest of the ingredients here.

Innovation Districts as Economic Development Strategy

The economic development toolkit typically links back to one or more of these four approaches:

1. Business Retention and Expansion
2. Nurturing Entrepreneurs & Startups
3. Investment and Company Attraction
4. Workforce Development

You can explore how these fit into holistic economic development through a previous post, but basically any economic development strategy involves some combination of the above, either as an approach or an outcome (i.e. attracting talent to keep our existing employers competitive, or attracting tourists that support our mainstreet and hospitality businesses, etc.).

So how are Innovation Districts different?

In the post-pandemic economy we will need to think differently. Attracting and growing talent, investment and employment in and to our cities will not follow the same formula as before. In a knowledge economy, the talented people who drive change, innovation and success have altered their values and lifestyles. Cities must adapt to this in order to thrive. Innovation Districts can serve as part of this adaption.

Conclusion

So as the Fast Company article above demands that “cities encourage and support this shift by doubling down on a place-based approach that invests in civic infrastructure, parks, and cultural amenities…”, I suggest that this place-based approach contains a deliberate effort to not only acknowledge where our future wealth will come from, but create strategies to grow, expand and attract the investment, amenities, research assets and even customers that will make that future a vibrant reality.