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Weekly UpdatesOver the 1990s, Oulu's fame as a technology centre rose and the city appeared frequently in the media. Oulu's fame as a world class R&D competence centre also attracted foreign companies. In 2000, Ericsson opened a large R&D unit in Oulu, concentrating on data security on the mobile Internet. The city grew rapidly during the 1990s and managed to attract more professionals, mainly from the northern part of Finland. One of Oulu's current challenges is to reduce its dependency on ICT and R&D and, in cooperation with the region, wants to diversify its economy and focus on the environmental sector, biotechnology, content production and media. This strategy is elaborated in a Growth Agreement backed by all the important actors in the region.
Coordination between several levels of policy development has been a key success factor. Also, the presence of a key private sector player was key for Oulu. Knowledge infrastructure was a precondition but in itself was not enough. In this respect, Oulu provides a lesson for other cities trying to change their development patterns for the better.
EMERGING NATIONAL POLICY FRAMEWORKS
Governing the urban knowledge economy is not a matter for local urban actors alone. Regional and national policies, especially innovation policy, R&D policy, and university policy have a deep impact at the city level. We discussed this already under the heading of 'vertical policy integration' but some aspects need some more attention.
A key policy field in his respect is science and education policy. This policy field is essentially intended to be spatially neutral but in practice the effects on different city types vary considerably and deserve further consideration. One common recent international policy trend is to focus research funding on excellent research teams. In the UK, this disproportionately benefits existing elite university centres such as Oxford and Cambridge at the expense of other universities if the quantum of research funding is not increased. This may be counterproductive at the urban development level. In Germany, the national government has selected some 'excellent universities', again mainly based on research performance, and rewards them with additional funding. Two of the three 'elite' universities are in Munich, arguably Germany's most successful knowledge city.
Many policymakers in Europe believe that promoting and rewarding excellent academic research will have significant economic impacts. Inspiring examples from the US are MIT and Stanford, that both propelled their regional knowledge economy in the last decades. Elite universities attract the best brains (and may stop the brain drain of top European academics to the US), produce top-level knowledge that is highly valuable to R&D departments of firms, and 'churn out' high tech start-up companies. In Europe, Cambridge and Oxford are cities where academic excellence has been a key driver of knowledge-based economic development. The same is true for Leuven in Belgium.
But it is questionable whether putting all bets on elite universities is a wise strategy. In this connection, the Lambert Review (2003, commissioned by the UK government) which analysed the UK university system and its relation to regional economic development recommended NOT spending all research money on just a few academically top centres. Less prestigious universities, Lambert (2003) said, can play an important economic role in their regions, notably as partners for local business in new product development or applied research and upgrading the local knowledge base by conducting contract research and supporting incremental innovation processes in local firms. Reducing the funding for these universities so as to give more to elite universities may thus have negative impacts on the regional economies in which they are situated and contribute to the ongoing centralisation of knowledge based industries in a few leading academic centres.
Similarly, the policy trend to urging universities to co-operate more with businesses may backfire, especially if it reduces their untied funding levels. Although this policy shift was ostensibly spatially neutral, it most benefits cities with a strong and diversified economy and big firms. In these cities, co-operation between companies and universities/research institutes is easier and more fruitful because they work at a similar level of technological sophistication but others may not have this kind of balance and different policies may be more appropriate. Based on a number of case cities, van den Berg et al. (2005) conclude that cities with both a strong knowledge base and a strong economic base have the best perspectives for fruitful university-business interaction. In contrast, it may be hard for others who will subsequently find themselves going backwards in the R&D stakes or operating not with local firms but with firms at similar levels of technology outside the immediate urban environment.
KEY POLICY CHALLENGES
Cities face many challenges in improving their urban assets and in simultaneously striving for other goals which may at times be conflicting. Matching policies for goals related to improving their economic vitality may clash with limiting social exclusion, improving quality of life and accessibility to urban amenities for all. To generate sustainable economic growth, cities need to be attractive places at many levels and the increasing mobility of human resources and companies will punish cities that fail to invest sufficiently in their attractiveness. Some of the challenges are common and cities may learn from each other.
Cities are challenged to better exploit their current assets and focus first on their strong points to promote economic development, promoting clusters in which they have a relative advantage. In the global economy, places can benefit enormously if they become concentrations of specialised knowledge, embedded in people, firms, and institutions as this will enable them to attract similar activities from elsewhere, further strengthening their local clusters. Almost all cities need to increase knowledge spillovers, mainly between universities and the business sector but also between different players to encourage the recombinations of knowledge that underpin innovation.
In every urban area, governance can be improved. Cities may need to take the initiative in improving co-operation with central, state or local governments and help create more appropriate roles for each and a shift in the types of city governance structures; they may design, and above all implement, a metropolitan vision that can promote policy integration and channel investments.
Given the intensifying competition between cities for mobile assets such as skilled personnel and other resources, urban marketing and branding (preferably at the metropolitan level) become more important in promoting the strong points of specific metropolitan areas. Integrated city marketing can be an important instrument, not only to promote and develop the region with all the stakeholders but also as a platform where the stakeholders meet and negotiate common goals.
Challenges for thriving metropolitan areas
Diversified and internationally oriented metropolitan areas are the main beneficiaries of globalisation and the transition towards a knowledge-based economy. The key challenge for them is to manage growth and make sure that growth does not harm the assets that were behind the city's success. Success creates its own problems. Core aspects of growth management are how to deal with gentrification, crowding out processes and increased pressure on hinterlands. Steeply rising costs of living, especially housing, may drive vital categories of workers--nurses, policemen, teachers--out of the city, with resulting negative repercussions on quality of life, and artists and creative industries may also flee. Equally importantly, the quantity and quality of basic research and education, one of the foundations of innovation in many respects, may be hollowed out when wages in public research are falling relative to wages in the booming private sector. Failure to invest further in promoting accessibility to the city for all may also have negative repercussions on the very aspects of city life which have underpinned success.
Challenges for cities with a disadvantageous economic structure
Cities with an outdated economic structure (an industrial legacy or specialised in other declining sectors) face particular difficulties. In brief, the key challenges for these cities are clearly to improve the quality of life, to renew the economic base and to attract/retain knowledge workers. For these cities more than for the others, investments in quality of life are needed for future competitiveness. This can be done through intelligent housing policy, investments in culture and events, reduction of pollution, investments in the quality of urban public space, provision of recreation facilities and so on.
Another key challenge for these cities is fighting their negative image; in addition to real quality of life improvements, integrative city marketing strategies are essential.
These cities should resist the temptation to support declining local industries; this may not always be easy, especially when there are powerful defensive institutions or interest groups. To overcome their problems, these cities are often tempted to invest massively in new physical infrastructure, such as port areas, science parks and stadiums, but this may be to waste resources. Softer policies based on indigenous strengths often yield much higher returns. To broaden their economic base, these cities may do better by facilitating innovative activity that prefers low-cost urban locations, such as artists or certain segments of the creative industries. Investing in good infrastructure for these may well pay off.
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