The Metropolitan Revolution – The New Geography of Innovation

by Matija Derk on June 11, 2015

GlobalisationCities are growing and growing at a rapid rate. In 2014 there were 3.9 billion people living in cities in comparison to 746 million in 1950. According to the United Nations, the world’s urban population will grow to over 6 billion by 2045. Most of this growth is expected in less developed regions of the world.

Growth of the urban population is definitely one of humanity’s great challenges and a danger for the future growth and stability on a global scale. It is already clear that focus should shift towards sustainable urbanization, however it’s hard to make a judgment on how serious this issue has been taken to this day on all levels of governance – especially when we talk about local authorities where capacity is the weakest and resource often very scarce. Given the estimated urban population growth rates we may start addressing this problem when it’s too late.

At the same time this unprecedented growth of urban population is also hiding huge potential.

Negative demographic trends in developed countries are already causing shortages of workforce, especially skilled workforce. A European Commission “e-Skills in Europe” report from February 2014 estimates that ‘the excess demand or shortage (calculated as the number of open posts) amounts to 509,000 in 2015 and 913,000 in 2020.

We see huge employment potential for new jobs in just the ICT sector, but if we take into consideration negative demographic trends in Europe it’s more likely the EU will not be able to meet this demand from the internal labour market. In short, they will have to import skilled labour from other parts of the world – most likely less developed countries, since developing countries have rather weak labour markets, usually not aligned with the needs of the economy. If there are no jobs where will these people work? In the EU, perhaps? On top of that jobs in the EU, for instance are much better paid.

So if a developing country decides to invest in ICT education, as there is a high chance they will invest a lot of money, they cannot afford to produce a workforce for someone else. That is if they don’t start doing exactly what developed countries are doing now – focus on smart specialization. Smart specialization is a foundation for attracting business, talents and researchers. With adequate policies it can lead to not only better links to the labour market, but also the creation of new opportunities, jobs and greater exchanges of students.

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Countries are not attracting people, companies and cities are. Companies offer jobs, while cities offer adequate transport infrastructure, housing, attractive public spaces, different support organization and quality basic services.

It seems we are shifting towards a different kind of competition – for talents. The biggest potential of any country, or a city lies with its people. But talent has to be nurtured and developed.

Currently it seems that a greater amount of talent is coming from developed cities that are actively working on the creation of a favourable environment that will attract and keep talent in the city. Cities should strive to offer everything young professional needs in order to have an adequate quality of life. This means much more than just good housing, jobs and a good transport system.

The number of businesses, social, cultural, family and entertainment contents and services are essential. It seems money is not the only key driver for young talented people to make a decision where they will live. The surrounding environment, the ease of living and working, security and proximity to other people that think alike are at least as equally important to attract and retain talent to the city.

Detroits populationThe City of Detroit, once a leading industrial and car manufacturing city is famous these days for its recent bankruptcy and perhaps even more famous as it lost 25% of its citizens in the first decade of the 21st century. More than 70,000 buildings are abandoned and the prospects to recover are slim. Globalization did its part.

Competition pushed industry to relocate to other areas leading to loss of jobs and, as it seems, the city government had no response to changes happening in the world. But now there is a plan. It is called an Innovation District.

Currently they are intensively working on urban redevelopment that shows a lot of promise to bring Detroit back on its feet. Detroit’s Innovation District is foreseen as a vibrant hub for people to live, work and collaborate. A designated Innovation District will harness their collective power to accelerate job growth, commercialize new technologies and enhance the quality of life for Detroit’s people and businesses.

The City of Eindhoven in collaboration with Philips invested in the area titled ‘Brainport’. Quite an interesting and very indicative name for a city district whose main purpose is to attract word class talents in areas of lighting technologies in order to promote a targeted research and business development agenda. In 2011 Brainport in Eindhoven Region was voted ‘Intelligent Community of the Year 2011’ by the Intelligent Community Forum. There are more examples world-wide, for instance Barcelona, Berlin, London, Medellin, Montreal, Seoul, Boston, Seattle, Boston, Brooklyn and Chicago.

imageBruce Katz and Julie Wagner from Brookings Institute explored the concept of Innovation Districts in their publication titled ‘A New Geography of Innovation in America’. "Innovation districts" should be seen as tools that city governments utilise partnerships with higher education institutions, businesses, government and civil society to fuel job growth based on integrated development and the redevelopment in targeted locations.

Innovation districts are based on the premise that collaboration and productivity result from proximity, and therefore job creation and innovation can be fostered through the intentional clustering of businesses, institutions, ideas and people. At the end of this article you can find a short video that explains the importance of proximity and clustering of different stakeholders in dense areas.

Considering increased urbanization cities are exactly the places where this density is naturally achieved, proximity is not the only factor for success. To attract and retain talent, cities have to capture what matters most for people – great research, innovation and business infrastructure coupled with comfortable and secure public spaces with a variety of social and cultural events. Seems quite complicated and difficult, however most cities are already doing this. It is more about setting the right vision of development in a global context to differentiate from other competing cities. And of course, adequate management structures are essential.

The real question is not about whether cities will move towards sustainable urbanization, but will they be able to build adequate institutional and human capacity to engage in planning and management of urban areas in time and with right focus. For instance, it is clear that cities will have to start building and redeveloping city areas. This usually means big projects in housing, water and waste management projects to increase public health and the availability of basic services, public urban transportation to improve competitiveness.

Today the tendency is still to look at these projects as separate initiatives dealing with only one, in best cases few, aspects of broader problems within urban areas. This simply means there are no adequate synergies and complementarities between projects, leading to very limited effects from investments. Though one could argue the most important is to ensure getting best value from invested money, it seems that in this case it is even more important to get the best possible effect from investments. This does not contradict value for money principle but puts a view on value in a bit of a different context.

In the end it is about choices. Cities can choose to tackle their issues on a number of different ways. Most will likely continue developing in ‘a good old way where we feel comfortable’. If they choose the way of Innovation Districts chances for success in achieving socio-economic sustainability will rapidly grow.

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The current situation is serious and requires thorough rethinking of vision for each city with a broader and global outlook. This then is a natural position to design optimal institutional setup, design processes to engage with stakeholders, build management and implementation capacities. Furthermore, urban–rural linkages should be explored more as there is a potential to achieve more sustainable cities. Urban–rural linkages might lead to a form of ‘node’ type development of urban areas which extends in rural space around the city. In other words rural areas could be seen as an extension of the suburbs as an extension of the city centre.

The EC Statement on the 25th Governing Council of UN Habitat says that ‘we are of the view that well-managed urban-rural partnerships can ensure a high degree of self-sustainability of metropolitan areas, limit urban sprawl and prevent rural depopulation.’ It might be worthwhile to examine whether Smart Specialization principles could be integrated as one of the pillars of ‘well-managed urban-rural partnerships’.

The Metropolitan Revolution – The New Geography of Innovation

About Matija Derk :

Matija Derk is a Senior Advisor with Bearing since 2015 and has a background as Assistant Minister of Regional Development in Croatia, Matija was responsible for preparation of all strategic documents necessary for the use of EU funds in the financial period 2007-2013, as well as in the period 2014-2020. This included preparation of National Strategic Reference Framework and 4 Operational Programmes (Transport, Environment, Human Resources Development and Regional Competitiveness) and the overall Croatia – EU Partnership Agreement.

Previous to his National Government experience, as a Director of Regional Development Agency Međimurje, Matija led dozens of EU-funded projects, such as preparation of the County Development Strategy and the County Rural Development Strategy in collaboration with UN FAO, integrated project for urban regeneration of an unused ex-military area, a World Bank supported project of Technological Innovation Centre in Međimurje and an EU supported project for establishment of the Regional Energy Agency. He was also the President of the Governing Board of Business Innovation Agency of Croatia (BICRO) and a Member of Governing Board of National Agency for Regional Development (ARR).

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