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Innovative Companies Move Back to the City

Everyone knows that Google’s headquarters are in suburban Mountain View, California. What’s less known is where the tech giant is expanding—into cities like Pittsburgh and Cambridge, where Google can be close to major research universities like Carnegie Mellon and MIT, and nearby innovative, R&D-intensive firms.

The revival of big-city population growth has been well reported: Millennials are revaluing urban amenities at the same time that baby boomers and empty nesters are leaving their suburban homes and downsizing in the city. As a result, urban population growth has outpaced suburban growth every year for the past three years.

Absent from much of the conversation, however, is the concurrent shift of some of our most innovative and inventive companies from isolated suburban campuses into dense, urban cores.

Clearly, companies are moving to be near talent. Central cities are not just gaining new residents; they are increasingly home to our most skilled and educated workers. According to economist Joseph Cortright, the number of 25 to 34 year olds with college degrees living near the central business districts in the nation’s largest metropolitan areas increased by 26 percent between 2000 and 2009—double the growth rate in the rest of the metropolitan area.

But companies and firms are also moving into cities to be closer to other companies, universities, and research labs. Our increasingly open economy requires firms to work together to bring new products and services to market. Proximity is everything for this process to happen efficiently and seamlessly.

The result is the growth of Innovation Districts—geographic areas that cluster together advanced research institutions and R&D-intensive companies with start-up firms and business accelerators. These districts are compact and transit-connected, while offering mixed-use development. They also concentrate three core asset types—economic, physical, and networking—that, together, supercharge the innovation economy.

Re-imagined urban area for Boston Innovation District. Reconnected to the city with the “Big Dig” and Boston Harbor Cleanup projects, Boston’s once-isolated seaport is transforming into a hub of innovation and entrepreneurship. Image used with permission of the Brookings Institution.

Economic Assets
First are economic assets. In many districts, these start with major anchor institutions—research universities, medical centers, or national labs—that can attract large-scale federal research funding, provide a platform for commercialization, and concentrate skilled workers and students. Think of the Massachusetts Institute of Technology, which anchors Cambridge’s Kendall Square district with $824 million in annual research spending and has cultivated an ecosystem of spin-off companies around the campus.

Paired with these platforms are innovation cultivators—companies or organizations that support the growth of firms and ideas. These include incubators, accelerators, technology transfer offices, and shared working spaces. Innovation cultivators allow inventors to focus on perfecting their science rather than considering substantial capital expenditures or assuming large early risks. The Cambridge Innovation Center, for example, which bills itself as the “largest start-up community anywhere,” offers co-working space in Kendall Square and its resident firms have attracted billions of dollars of seed funding and later-stage investment.

Physical Assets
Second, innovation districts cluster physical assets that provide connectivity and build community. Physical assets include transit lines and infrastructure. The explosive growth of the Boston Innovation District would not have been possible without the Silver Line Bus Rapid Transit system that now connects the once-isolated Seaport to downtown Boston and to Cambridge’s Kendall Square. They also include IT infrastructure.  Chattanooga’s municipal gigabyte broadband Internet network is a key asset for a potential innovation district in the city’s downtown.

Networking Assets
Finally, networking assets are critical to generating and commercializing new ideas. These assets are essentially the relationships between individuals, firms, and institutions that accelerate the advancement of ideas. They are critical because an economy based on “open innovation” relies on trust and collaboration both within and across companies and industries. Networking assets are bolstered by places such as Boston’s District Hall, a newly constructed hub for the city’s Innovation District, which hosts network-building events like workshops, training sessions, and hack-a-thons.

The Path Forward
If done right, the development of Innovation Districts offers great opportunity for our cities. Practitioners in leading Innovation Districts offer five pieces of advice:

1.  Collaborate to compete. Build a network of leaders from key institutions, firms, and sectors who regularly cooperate on the design, delivery, marketing, and governance of the district.

2.  Set a clear vision for growth by providing actionable guidance for how an innovation district should grow and develop in the short-, medium-, and long-term along distinct economic, physical, and social dimensions.

3. Pursue talent and technology, given that skilled workers and sophisticated infrastructure are the twin drivers of innovation.

4. Promote inclusive growth by using the Innovation District as a platform to regenerate adjoining distressed neighborhoods as well as creating education and employment opportunities for low-income residents of the city.

5. Enhance access to capital to support basic science and applied research, the commercialization of innovation, entrepreneurial start-ups, mixed-use development, education and training facilities, and place-based infrastructure, including energy grid tech, broadband, and transportation.

Innovation Districts offer strong potential for growth. They are a natural response to the disruptive dynamics of our era and a clear path forward for cities and metropolitan areas. The result could be a big step toward building a stronger, more sustainable, more inclusive economy.

Bruce Katz is Brookings vice president and co-director of the Brookings Metropolitan Policy Program and the co-author of “The Metropolitan Revolution.” Julie Wagner is a non-resident senior fellow at the Brookings Metropolitan Policy Program. Follow them on Twitter at @bruce_katz and @wagnerjk

Innovative Companies Move Back to the City was originally published on Ideas Lab

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