Boosting Tech Innovation Ecosystems in Cities

20 February 2020 | Victor Mulas, Michael Minges, Hallie Applebaum, Kathy Qian, Nga Phuong Nguyen, and Mary Alexander Sherman (2015) conducted an informative discussion paper with ideas and policy suggestion about building innovation ecosystem in cities that sounds doable and feasible.

Cities are emerging as hubs of technolog­ical innovation. This is characterized by an ongoing shift from technology parks in suburban areas to entrepreneurial activity within cities.

Technology innovation ecosystems need to be understood as a community or combination of communities, where the social dimension is critical.

Therefore, focus of policy to support ecosystems should (i) pay attention to the development of networking assets that kickstart communities, build networks (for example, meetups, mentors) and provide platforms for community building (for example, collaboration spaces), and (ii) is the community (defined by its social dimension) and not a geographic area (for example, a district or technology park) within the city.

The emergence and sustainability of urban technology ecosystems can be supported with policy actions, and that those policy actions can obtain results in the short term (that is, one to three years).

City Innovation Ecosystem Framework

People are the basic element for innovation to happen. Innovation results from the interactions and the work of people. A survey of tech entrepreneurs in the United States highlighted the talent pool of employees as being the most important business-related resource that cities offered (Endeavour Insight 2013). The “creative class” has been cited as an important factor for generating economic output in cities (Florida 2002). People also form part of the innovation support network by serving as mentors and guides and are a testing ground for innovative products and services. This category maps the characteristics of people that increase the potential for innovation, including their diversity, in terms of background and education, their level of education, and the education and training capacity of the city, including provision of technology-related training.

If in the 1990s an entrepreneur needed $2 million and months of work to develop a minimum viable prototype, today an entrepreneur would typically need less than $50,000 and six weeks of work (Center for an Urban Future 2012) and, in some cases, these costs can be as low as $3,000 (Mytton 2009).

Entrepreneurs “want to live where the action is” – that is, in places where other young people, social activities, peers, and entrepreneurs are located (Florida 2013).

Economic Assets include the elements that: (i) interact with people to increase the number of ideas resulting in innovation and, (ii) allow for implementing these ideas into practical innovation. This category maps elements such as the variety of industries, business and sectors; the size, amount, and diversity of companies and businesses; the universities and research and development facilities; the maturity and size of the technology and creative industries; and the availability and size of innovation-oriented investment firms, particularly for providing seed financing.

Infrastructure facilitates interactions among people and economic assets. This category maps the infrastructure in the city that: (i) provides basic living conditions, (ii) facilitates access to people and knowledge, or (iii) facilitates random collisions.

Enabling Environment refers to public policies and the government commitment to promote innovation. This category identifies: (i) the enabling environment provided by the government for innovation to occur, and (ii) the degree of commitment, promotion and facilitation by the government for development of the innovation ecosystem. This category maps policies such as doing business, property and IP protection, business associations, as well as specific policies to promote the innovation ecosystem, such as open data, challenges, innovation promotion, and so on.

Networking assets increase the number of collisions in the ecosystem, multiplying the effect provided by agglomeration. Innovation ecosystems will produce higher results in terms of, for instance, (i) increased number of startups, (ii) increased value of startup exits, (iii) increased employment in tech innovation related activities, if the number of random collisions increases. This category maps the main networking assets, including meetups, tech community events, bootcamps and skill training programs, collaboration spaces, accelerators, incubators, angel investors, venture capital, and networks of mentors.

Social dimension, or the interpersonal connections and communities, are critical for the growth and sustainability of the ecosystem. Networking assets (defined as community building events, skill training events, collaboration spaces, and networking of mentors) are central to this social dimension. These are factors make tech innovation and entrepreneurship ecosystems grow faster and larger in some cities.

Networking assets (such as accelerators and incubators, networks of mentors) are central to the ecosystem’s social dimension, being nodes of connection for startups and other stakeholders. Networking assets are the connectors which: (i) sustain the social network of the ecosystem, and (ii) have the potential to boost the ecosystem’s growth by increasing the collisions that result from social connections. By being central to the ecosystem and these connections, networking assets would play a critical role in the growth and success of urban technology innovation ecosystems. Either the social dimension of startups determines their success (in terms of capital raising) or success determines the of startups centrality for the ecosystem (in its social dimension).

* Victor Mulas, Michael Minges, Hallie Applebaum, Kathy Qian, Nga Phuong Nguyen, and Mary Alexander Sherman (2015). Boosting tech innovation ecosystems in cities : a framework for growth and sustainability of urban tech innovation ecosystems. Discussion Paper. Washington, D.C.: World Bank Group

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