Innovation and the city.

INTRODUCTION

The literature on the increasingly globalised nature of innovation is enormous, particularly that dealing with multinational corporations and global trade. However, less work has been done on the spatial aspects of innovation, which is an important dimension of the globalisation process. This is because innovation activities, personnel and expenditure tend to be geographically concentrated or clustered. It is also because certain geographical areas tend to be associated with significant levels of innovation activity and success, such as Silicon Valley for semiconductors, London for hedge funds, or Paris for fashion.

Cities provide an ideal environment for innovation as they offer proximity, density and variety. However, some cities are more innovative than others, and policymakers have long been concerned with finding out why. Unpacking this problem requires considerable effort. Cities are complex systems and they exist in the context of diverse regions, nations and international relationships. Moreover, cities themselves rarely innovate--they are hosts for innovation by people, firms and organisations. This means that cities often support innovation indirectly and that some of the most important things they do are not thought of as innovation policy at all. This article presents an initial consideration and analysis of which particular urban features, processes or assets may be important in enabling, sustaining and promoting innovation.

The paper draws on a 12-month research project carried out in 2007 focusing on cities in the UK and Germany. The paper uses the term 'city' to mean the spatial area that comprises a functional urban economy. In the UK, the title 'city' has no statistical or technical definition--it is a title conferred on a settlement by a royal charter. This paper therefore focuses on the 'economic city'--functional urban economies of scale--and uses statistics from the largest 56 functional urban economies in England. When we refer to 'cities' in this paper, we mean a large urban area, based on a functional urban economy.

INNOVATION IN UK CITIES

In England, several measures of innovation suggest that the highest rates of 'visible innovation' are found in and around cities. Analysis of European Patent Office data for 1999 to 2001 shows that 67 per cent of EPO patent applications came from the 56 largest cities in England, and that 43 per cent of these applications came from just 10 cities (DCLG-SOCD).

Patent applications are only one measure of innovation; they are poor at capturing process innovations and are biased towards manufacturing industries (NESTA, 2006) and science-based fields. However, the strong urban focus of innovation holds true when broader types of innovation are included, such as those recorded by the Community Innovation Survey (CIS) which provides data for a range of types of innovation, including organisational, service and process innovations as well as product innovation, and data on the employment of scientists and researchers. The Fourth European Community Innovation Survey (CIS) provides an estimate of the proportion of all firms which are 'innovation active', actively innovating by developing or improving new products and processes, implementing new organisational forms or adopting and adapting existing ideas and innovations for their own use. The CIS reveals that a number of England's cities have high rates of innovation-active firms, compared to the English average (Department for Communities and Local Government, 2006). A more recent analysis of this data by Simmie et al. (2008) shows that the cities with the highest rates of innovation-active firms tend to be small yet internally and externally well networked cities. It may therefore not be size that is essential to city innovation.

Cities generally seem to offer the specialised, knowledge-based labour markets that help to enable and drive innovation. Employment data for England, for example, show that in 2005, 81 per cent of knowledge-intensive business services employment was located in cities. Additionally, 90 per cent of England's knowledge workers (an aggregate including firms in engineering-based manufacturing, manufacturing, knowledge-intensive services and creative industries) worked in cities in 2005.

Innovation is uneven between UK cities

Not all cities are equally innovative, however. Large variations in the rates of innovation between cities can be seen when using the measure of patent applications. Cambridge, for example, registered 81 patent applications per 10,000 adults between 1999 and 2001, whereas Blackpool registered just two. Table 1 presents the top five highest and lowest innovation performers when patents per 10,000 inhabitants are the measure. A similar picture emerges from other indicators of innovation activity. Tables 2 and 3 show which English cities are the most and least innovative in terms of developing new products and processes--illustrating widely differing performance between cities.

There is a clear correlation between innovation and economic performance in cities. In the UK, cities such as Cambridge, Oxford and Reading have high-performing economies and their strong innovation profiles are one of the features that help to explain that performance.

Cities have very different economic structures, physical assets, governance, labour markets, and other strengths and weaknesses. Some cities, such Blackpool in the north west of the UK, a traditional holiday resort, do not have the types of economic activities or labour markets which tend to provide the basis for innovation. Industrial structure may explain these differences--but what other factors are at work in explaining the differences in innovation performance between cities?

This paper presents an initial consideration of this question and uses evidence from both five case studies researched in 2007 and existing studies and sources of data to answer it.

INNOVATION IN CITIES: FIVE CASE STUDIES

Overview of the case study cities and sectors

During 2007, a research project was completed which examined existing literature and secondary evidence about which city characteristics and processes contribute to shaping and driving innovation.

Within each city, a sectoral economic specialism was examined. The cities and sectors were:

* Dundee (Life sciences)

* London (Fashion)

* Coventry (Auto-engineering and design)

* Reading (ICT)

* Dortmund (Life sciences and micro-technology)

The case studies were designed for breadth: the aim was to explore as wide a range of cities and innovative sectors as possible. A brief overview of each city is provided in the remainder of this section. Section 4 draws out the key findings from the case study evidence and on that basis suggest that there are five main components of an urban innovation system: firms, markets, assets, institutions, and networks. It is how these are working that determines the degree of innovation in the surrounding urban area.

Dundee and life sciences

With a population of 146,000 in 2006, Dundee is Scotland's fourth largest city, behind Glasgow, Edinburgh and Aberdeen. Dundee's life sciences sector has grown around the University of Dundee's leading international life sciences research. It has developed from a centre of purely scientific and research expertise into an industry with 350 businesses with between 2,700 and 2,900 employees in total. Between 1993 and 2003, 22 of the research team leaders at the University of Dundee's School of Life Sciences were in the top one per cent of most quoted scientists in their field and in the areas of biology, biochemistry and genetics the Dundee was either the first or the second most cited university in Europe, ahead of Cambridge, Oxford and University College, London.

A significant reason for the emergence of Dundee as a world leader in the life sciences field has been the leadership of one person, Professor Sir Phillip Cohen, who played a pivotal role in orchestrating large-scale investments in the university's facilities by bringing and holding together complex alliances of public and private sector actors. The result has been the creation of a series of state-of-the-art research centres, including the 13m [pounds sterling] Wellcome Trust Biocentre completed in 1997 and the 21m [pounds sterling] James Black Centre opened in 2005. Cohen has also been instrumental in nurturing and attracting world-class scientific talent, and in securing public and private sector financing for research.

Research-based businesses have developed and grown alongside the university, which feeds the cluster's development through patents, spinouts and licences. Firms can choose to locate elsewhere after being spun out but there are important economic reasons why they stay. In particular, many firms need access to the expensive facilities housed at the university and they all benefit from the steady stream of expert researchers that Dundee University produces.

London's designer fashion industry

London is the capital city of the UK and is located in the south east of England, with a population of 8.7 million in 2005. London has a highly successful range of creative industries--including publishing, music, theatre, film, television and designer fashion industry.

Directly employing 4,400 in Fashion Design in 2005 (Greater London Authority Economics, 2007), London has one of the most thriving, dynamic fashion industries in the world. Innovation in London's designer fashion sector draws heavily on London's scale, diversity of demand and cultural dynamism, as well as the complex system of informal networks that are enabled by the co-location of businesses and workers.

In London, the fashion scene has a distinct character shaped over decades. There are clear links between fashion, art, design and music; and more broadly, between fashion and different aspects of pop culture in general. Sub-cultures feed each other with creative ideas and innovations. Designers need to be in London to be part of this, and remain at the leading edge of cultural trends. Strong local networks are important for enabling designers to hook into London's various cultural scenes and they also act as a crucial source of knowledge, ideas and business opportunities.

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