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Introduction

Innovation in the city and innovative cities

Jane Marceau
Innovation and Technology Policy Analyst and Visiting Professor, City Futures Research Centre, Faculty of the Built Environment, University of New South Wales, Sydney NSW

Abstract

Cities matter. By 2006, more than half of the total OECD population lived in urban areas. Major cities in OECD countries generate almost one third of their nation's production while in some countries more than half national output is produced by one city and some Canadian cities generate half or more of their provinces' value added (OECD 2006: 13). Cities are a nation's innovation hubs, producing almost all patents and other measures of new products and processes in business.

Cities also matter increasingly because they are also hotspots of consumption and hence waste generation; already responsible for 75% of global energy consumption and 80% of greenhouse gas emissions. Moreover, while cities in most rich developed countries are the motors of economic growth and the development and maintenance of the population's living standards, cities are also generators of major social problems, social inequalities and economic disadvantage.

Cities are complex entities and play multiple and complex economic and social roles. Governments are only now coming to grips with issues about how to best deal with the problems while also encouraging the generators of their wealth. Doing so makes enormous new demands on governance mechanisms and the skills of politicians and administrators as well as the imaginations and willingness of city populations to finance and accommodate change.

Keywords

innovative cities, contemporary development, knowledge economy, living standards

Article Text

Over recent decades, as several papers in this volume make clear, economic literature on contemporary development has focused increasingly on innovation as the key to the long term competitiveness of modern western nations and drawn attention to the role of technological change as an endogenous factor in growth and the shift of techno-economic paradigm which causes nations and their component firms to move to new products, processes and organisational forms in all areas of production - resources, manufacturing and services. The emerging international economy among western countries has become known as the ‘knowledge economy', increasingly reliant on the generation and use of knowledge, formal and informal, as a major factor of production. Institutional and knowledge-generating arrangements brought together in national systems of innovation underpin this shift (see eg Edquist 1997), even though much of the shift to the new economy has been linked to shifts in international production systems, known collectively as globalisation.

Attention has been drawn to the bases of the innovation necessary for competitiveness. The outstanding factor is usually agreed to be knowledge. While all production has always involved often quite important inputs of knowledge, there now seems to be agreement that modern economic systems are based on formal knowledge to a much higher degree than older ones. This knowledge can be scientific or linked more closely to information about customer needs, overseas markets or new organisational possibilities, often themselves made possible by radical new technologies and their application as platforms for a wide variety of industrial and service sector uses. Both formal and informal knowledge are carried by people as they work and move around different spatial arenas. So knowledge, its generation and diffusion, visible as innovations, have come to the heart of policies for modern economic development.

Innovations are made by people operating in organisations and firms but it has become clear that much of the impetus for innovation comes from the socio-economic and technical systems in which any firm or organisation operates and innovates. These systems are composed of institutions, both in the sense of organisations and the regulatory ‘rules of the game', legal arrangements, especially for intellectual property and labour markets, education and training provision, financial and other support organisations and governance via formal governments and the more informal partnerships that provide input to the formal regulation and political systems. It is at the level of systems of innovation that national arrangements are the most evidently important. It is usually national governments that mandate financial and other regulation, organise education systems, make labour and intellectual property laws, provide welfare and other social inclusion or income redistribution policies, govern the tax system and make critical trade and other treaties that form a national system of innovation (NIS).

More recently, over perhaps the last decade and a half, observers have come to realise that nations may not always be the relevant territorial unit of analysis when examining the motors of economic growth. On the one hand, this view has resulted from the obvious international and globalising waves that have shifted the world's territorial production and consumption patterns and multiplied international connections, making transnational regions important in some areas. Innovation systems can be much larger than national systems and in some contexts it may make good sense to speak of an area with similar rules such as the EU or close trade links such as the Asia Pacific zone as a region. On the other hand, closer investigation has also shown the divergences within national boundaries as to how territorial units grow richer or poorer and more or less diverse.

It has thus become increasingly clear that sub-national levels of territorial unit are also important and have their own organisational and institutional arrangements. One level of these has been described collectively as ‘regional systems of innovation' (RIS) (see eg Cooke 2007 for a summary of recent theorising). The term ‘region' of course may cover areas hugely diverse in size, whether of territory and/or of population, and may even cross international borders as in several zones in Europe, such as Oresund which covers areas of both Denmark and Sweden. Regional systems seem often conceived of as smaller versions of national systems, subject on the one hand to national rules of the game but also with regional variations in terms of population, research and training systems or facilities, production structures and specialisations and such matters as income levels, which may determine consumption levels, and languages or cultural practices. Regions may also be conflated with Provinces or States in federal systems of government as these levels of government determine many of the specific rules and practices relating to innovation, such as education and research systems, transport and other access arrangements and financial or regulatory support for innovative activities. It is often these levels of government that have the closest interest in the mechanisms and location of specific kinds of economic activity.

In developed countries, however, regions are usually dominated by one or more major cities and it is cities that are the real heart of most regional innovation systems. Cities, moreover, it is increasingly clear, have their own, more local, systems of innovation, composed of the same elements as higher order systems but geographically much more concentrated even though they necessarily have many of their economic relationships (firms' clients and suppliers) with areas beyond the immediate city borders. Cities, especially large cities, are where it all happens in terms of economic development and innovation, knowledge generation and diffusion, the availability of skilled personnel, important transport nodes and the housing of both people and firms. It is where much local planning takes place, especially in terms of investment in new or replacement elements of the built environment, special incubator zones or science parks and many of the other supply-side elements that are generally agreed to be important to innovation by companies and public institutions. It is in cities that the firms who generate economic activity and the public authorities that organise governance are most likely to interact on a regular basis and where information related to all aspects of innovation more freely occurs. It is in cities that, for example, innovative partnerships between government, business and communities may be easiest to arrange since the organisations concerned are smaller than at national levels and in principle at least more permeable than higher levels of government, leading to faster problem-solving and greater room for policy experimentation.

Cities house innovative firms and innovative people. But not all cities are innovative power houses and not all are innovative in the same way or to a similar degree across national geographical areas. Some cities at some times are ‘in decline' while others are growing in both population and economic terms so fast that infrastructure provision and other innovation-related organisations and services may not be able to keep up. In between are cities where innovation is accepted as a desirable goal but where for various reasons it is not leading the city's development. In yet other cases, the public authority side of the city may be miles ahead of business development while in others innovation is pushed by companies powering ahead.

Cities also come in a vast range of sizes and compositions and are located in very different national and international contexts and circumstances. It is very often difficult to see the boundaries of a city since they have nothing that really resembles a frontier. Work on cities as local innovation systems has mostly focused on larger metropolitan areas which are often called city-regions as their economic footprint extends well beyond the main built up area. It seems most useful to define a city in policy terms at least as the area of the economic footprint. Thus, in Australia, Sydney, the country's largest city, is often referred to by policymakers as the Greater Sydney Region or the Sydney Basin and may be stretched as far as Newcastle to the north and Wollongong to the south if it is to match the functional economy.

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