One size for innovation policy doesn’t fit all

Innovation hotspot: Nesta’s report identifies cities as centres for innovation.

When it comes to innovation in IT, cities and regions around the world have one role model: Silicon Valley, California. Siliconia, a website that follows this phenomenon cites almost 80 regions that have appropriated the term.

Similarly, the Bay area of San Francisco, home of biotechnology, is seen as the place to emulate in developing a life sciences sector.

The problem with every region having the same role model is that it does not take account of local circumstances. And the similarity of approach this engenders ends up pitting one region against another, says Nesta, the UK’s National Endowment for Science, Technology and the Arts, in a recent paper on Innovation in UK Cities.

The redundancy of this approach is highlighted by the fact that the eight regional development agencies in England, and their counterparts in Scotland, Wales and Northern Ireland all include biotechnology or life sciences as a priority for development.

“The UK’s cities form spikes of innovation in an otherwise flat world,” says Nesta. “Our cities need innovation strategies tailored to their unique strengths and weaknesses, but competition between them must not overshadow UK-wide priorities.”

The world may be becoming flatter as the forces of globalisation and information and communications technologies bring about “the death of distance” allowing any place with an Internet connection can participate in a knowledge-based global economy.

But when you look at where innovation is occurring, it is not becoming geographically dispersed but is continuing to cluster in specific geographic regions. Furthermore, says Nesta, this tendency for innovation to coalesce is becoming more pronounced, not less.

In the UK, for example, since the Big Bang of the 1980s deregulated its markets, the City of London has grown enormously and consolidated its position as the world’s leading financial centre. Similarly, the M4 corridor around Reading has emerged as a hub for the IT industry and Aberdeen as a hub for the energy industry.

The fact is that developing and exploiting ideas requires far more than access to the kind of knowledge that can be codified in copyright and patents, and transmitted easily over the internet.

The key ingredient argues Nesta, is tacit, or sticky knowledge, held in the heads of individuals that can only be transmitted by personal interaction.

Innovation is a contact sport

Cities, because of their high population density enable these connections to be made (both intentionally and unintentionally) through personal networks and places to gather. This ease of interaction and the high likelihood of chance interactions create the conditions for innovation.

The availability of high quality jobs is the single most important factor in attracting well-educated people to a given place. Highly-skilled people, however, are attracted not just by one job, but a labour market that can offer them choice and the prospect of a sustained career.

But this is a rare commodity: the question is how can less-favoured cities and regions break into this virtuous circle?

Part of the answer, says Nesta, is to develop a more sophisticated approach to innovation policy.

Traditionally innovation strategies have been based upon a linear view of innovation, where research and development in university or business laboratories generates a stream of inventions that are then commercialised.

This has the attraction of being amenable to clear and well-tested policy interventions: build a technology park or a bio incubator; support university-industry technology transfer; pump prime local venture funds.

The problem is that rather than happening in straight lines, innovation requires an ecosystem in which to thrive – a far more challenging proposition when it comes to policy.

Stimulating an ecosystem in which innovation will thrive requires precise, yet subtle, interventions across diverse policy areas, including education and skills, business support and infrastructure, as well as technology transfer and more traditional interventions.

Another strand of innovation policy requires that it promotes intelligent competition. Currently, local innovation strategies tend to duplicate and overlap. This similarity of approaches inevitably leads to competition.

It is not clear exactly how many biotechnology clusters the UK, or indeed Europe, really needs, or can sustain.

It is not just that this duplication is a waste of resources, competing efforts may also be preventing the formation of critical mass at any one location.

To avoid this, local ambitions must be placed in a regional, national and European context. In developing innovation strategies, cities should establish their own strengths and understand what others are doing.

Involve the whole innovation community

Innovation strategies can no longer be developed in a closed room by a small group, says Nesta. They need to include active participation from a coalition including local universities, trade bodies, firms (of all sizes), social enterprises, and community organisations. Such a partnership needs to be more than nominal – responsibilities and rewards for successful execution of the strategy should be shared across stakeholders.

Putting its money where its mouth is, Nesta is working to support cities as hubs of innovation. Over the next 12 months its policy and research unit will establish research partnerships to investigate relevant areas including path dependence and the role of leadership in stimulating regional innovation.