Academic journal article Innovation: Organization & Management

Innovation and the City

Academic journal article Innovation: Organization & Management

Innovation and the City

Article excerpt


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.


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. …

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