Thursday, January 14 2016
By Catherine Searle Renault, principal and owner of Innovation Policyworks, LLC
When the grandfather of university research parks, the Research Triangle Park (RTP) near Raleigh, NC, is making major changes, you know something is afoot. After nearly 50 years, RTP is changing its approach, modifying its suburban campus’ auto-accessible layout to include a centralized “downtown.” Adding a new 400 acre new development will make RTP more like a city: stores, restaurants, condos and apartments "for a variety of incomes"—and of course, tech companies.
The motivation for this change is the rise of innovation districts across the country that are offering a new vision where anchor institutions like universities, large and small companies and the resources of the broader ecosystem co-exist to produce economic vitality and growth. And, these innovation districts are largely thriving in large metropolitan areas, challenging the suburban office park model.
What’s driving innovation districts? Millennials and Baby Boomers. The demographic shift, driven by aging Baby Boomers and Millennials, is causing population growth in metro areas after decades of flight to the suburbs. Both older workers and the youngest workers want to live, work and play in the same place, have lower car ownership levels and value an environmentally-friendly, low carbon footprint lifestyle.
While the 2015 census estimates seem to suggest that this pattern is slowing, there is no denying that large metro areas in the U.S. are still gaining population as smaller, rural areas are losing. The salient fact is that the metro areas are not gaining simply because they are cities, but because of what they can offer: population densities that mean both larger and more diverse workforces and employment opportunities, cultural and entertainment options, and more transit options that environmentally-conscious young people translate into a perceived lower carbon footprint.
Places where researchers, entrepreneurs and large companies employees rub shoulders on a day-to-day basis seem to have built-in opportunities for knowledge spillovers, an essential ingredient for economic growth. While older university research parks sought to create this type of interaction by isolating researchers together in campus-like settings, the new innovation districts feature more “happy collisions” where creativity intersects with diversity, yielding innovation. Places where creativity flourishes because there is a lot of new knowledge and where diversity of thought allows the transfer of ideas from one field to another will experience more innovation, than the older, isolated models of research parks where the collisions happen within the four walls of the individual laboratories. Compare the impressive results of a Bell Labs in suburban New Jersey, or the Xerox Palo Alto Research Center that yielded the essential elements of today’s computing experience, with the open innovation that is happening today in Kendall Square in Cambridge, or in Manhattan or Chicago.
The critical difference is the diversity of the broader innovation district, versus the uniformity prevalent in earlier research settings. Richard Florida, whose work on the Creative Economy first raised the idea of what the “creative class” can bring to a place, has looked systematically at what attributes are coincident with the attraction of venture capital. While you can easily see that there are some attributes that are naturally correlated, his observations strongly suggest the benefits of diversity to entrepreneurship and creativity. For instance, he finds that venture capital is highly correlated to higher education levels, foreign-born residents, the percentage of gay and lesbian residents, and levels of innovation as measured by patents and the location of high-technology industries.”1
Steven Johnson also gives us some insights into the role of diversity. He notes that, “Innovative environments are better at helping their inhabitants explore the adjacent possible, because they expose a wide a diverse sample of spare parts – mechanical or conceptual – and they encourage novel ways of recombining those parts. Environments that block or limit those new combinations – by punishing experimentation, by obscuring certain branches of possibility…will on average, generate and circulate few innovations than environments that encourage exploration.”2
Johnson is saying that good ideas often come from areas of inquiry that are next to a known area, for instance, borrowing from shipbuilding to build a better airplane. And, he points out that if an organization or community lacks tolerance for borrowing or for new ideas, then it will be less successful.
Another element is the notion of information spillover – in dense environments, information spills over from one person to another – essentially people learn from one another more in regions where there is more density.3 More recent research suggests that the spillover effect is strongest within the first one-quarter of a mile, giving even more credence to the importance of geographical proximity.4
All of the innovation districts, then, focus on creating dense urban places where people literally rub shoulders, creating “happy accidents” where knowledge is transferred, either formally through partnering and joint venturing, or informally, in an open innovation-style sharing of tacit knowledge. And, it’s the attitude towards this sharing that is important, whether it’s the paranoid, “someone is listening” attitudes common in the Boston area during the 1980s that ultimately resulted in the demise of the minicomputer businesses there, or the highly networked environment that propelled Silicon Valley during the same time period.5
Some innovation districts, such as Kendall Square in Cambridge, MA and University City in Philadelphia, are urban versions of university research parks. Both feature one or more universities, plenty of large, innovative companies, as well as a rich entrepreneurial ecosystem, replete with venture capitalists, patent attorneys and other service providers necessary to growing innovative companies.
One big challenge for older, more rural or suburban university research parks is lack of mass transit or other “green” methods of transportation that link the parks back to their campuses and/or to the broader community. The lack of transit is a particular problem for getting younger workers to commit to jobs in these parks, and even the buses run by Google and others between their suburban locations and San Francisco are met with resistance by Millennial employees.
One area of disagreement among researchers is the role of universities and medical centers in innovation districts, the so-called Meds and Eds. Richard Florida, for one, flatly says that venture capital is negatively correlated with “Meds and Eds,” and suggests this is because commercialization of technology is not their primary purpose.
On the other hand, most of the examples of innovation districts cited by Brookings involve significant investment by major universities and university teaching hospitals. Indeed, Meds and Eds seem like great anchors for these districts, because they tend to be very stable, and don’t change location. It’s important, however, that these institutions be dedicated to supporting entrepreneurs both from the community and from their own ranks, and excellent at transferring their technology to the nimble, smaller companies that can successfully commercialize it. Simply building a new development near a university or teaching hospital and calling it a research park or an innovation district misses the point of the importance of the culture, workforce and synergy, not just the real estate. And, these sort of development run the risk of being innovative “in name only.”
Another caution is the risk of gentrification. Where these new districts are being superimposed on existing, lower-income neighborhoods, there is some effort being made to provide job opportunities. Where the partners are “meds and eds,” this is reasonably successful because there are a significant number of jobs in these institutions that do not require a four-year degree. Workforce programs such as the one in University City, Philadelphia can help. There, the West Philadelphia Skills Initiative works in partnership with major employers to identify “real jobs with real vacancies” and then preparing unemployed West Philadelphians to excel in these jobs, putting them to work in their own community.6
However, caution should be exercised when considering an innovation district as an economic development strategy. Large tracts of land occupied by “meds and eds” may well bring urban vitality and redevelopment, but as nonprofits, likely contribute little to the tax base. Districts where “meds and eds” are tenants, versus owners, however, will contribute more to the property tax base.
Dr. Renault has twenty-four years of experience in state technology-based economic development and evaluation. She was the Director of the Maine Office of Innovation and Science Advisor to Governor John Baldacci. Her previous state role was as Managing Director of Virginia’s Center for Innovative Technology where she was responsible for entrepreneurship and access to capital policy as well as statewide technology transfer initiatives. She also spent ten years in the private sector including with AT&T and Data General.
Dr. Renault is originally from Boston and received her undergraduate degree from Harvard, her MBA from the University of Virginia and her Ph.D. from the University of North Carolina at Chapel Hill.
Dr. Renault is currently Chair of the Board of Directors for the Maine Center for Entrepreneurial Development and of the Board of Managers for Sea Change Group, LLC.
2 Johnson, Steven. 2010. Where Good Ideas Come From: The Natural History of Innovation. New York, NY: Riverhead Books.
3 Jaffe, Adam B., Trajenberg, Manuel, Henderson, Rebecca. 1993. “Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations.” Quarterly Journal of Economics. 108: 577-98.
4 Carlino, Gerald, Chatterjee, Satyajit and Hunt, Robert. 2006. “Urban Density and the Rate of Invention. “ Working Paper 06-14. Federal Reserve Bank of Philadelphia.
5 Saxienian, AnnaLee. 1996. Regional Advantage. Cambridge, MA.: The Harvard University Press.
6 See more at: http://www.universitycity.org/wpsi#sthash.sgSj5p5Q.dpuf