Innovation is the crucial element to our competitiveness and prosperity. Countries and cities that generate new ideas and new ways of doing things are most likely to thrive in a global economy where knowledge is at a premium. This is why policymakers around the world are continuously rolling out new strategies in which they embrace “innovation” and declare their allegiance to it.
But despite all the goodwill there is not a uniform idea about how one fosters innovation. There will be the American examples of the Silicon Valley and Boston, where garage geniuses and seed capital helped create Yahoo, Google, Facebook, and other high-growth gazelles; or the European examples of Helsinki, Stockholm and Munich where old large industrial companies with a strong steer from government teamed up with local engineering schools and successfully revitalised and regenerated existing industries. Britain has hardly been short of models, with centres of innovation such as Cambridge, Oxford and London, which all proved to be difficult to replicate elsewhere.
To make things more complicated only a minority of places in the world stand behind a majority of innovations. By the count of the Organisation for Economic Co-operation and Development, 38 per cent of total OECD gross domestic product was generated by only 10 per cent of regions and 57 per cent of all patents were recorded by just 10 per cent of regions. Where does this leave the rest?
Cities, regions and countries can innovate and prosper in a variety of ways, not least by learning from and absorbing innovations from elsewhere. So, the fact that great university cities of Boston, Oxford or Cambridge are constantly developing new ideas of their own does not mean that every city can do the same.
The city state of Dubai provides a good example in this respect. The city was recently ranked 14th in the Insead global innovation index, run by a French business school, coming above many European countries including Austria, Belgium, and Italy, but also ahead of Brazil, China, India, and Russia (the Brics). Yet, unlike most of these countries, Dubai is not particularly known for its scientific achievements or for its technological prowess. It does not function as a seat for any major world class university or as an important source for internationally filed patents. How did Dubai do it?
According to the Insead index, the city state derives much of its innovative capacity from its capacity to access and attract knowledge from elsewhere, which it has achieved through a mixture of financial incentives, investor-friendly legislation, active “brain gain” policies and advanced infrastructure.
In the 1980s (when oil prices were very low) the Dubai rulers embarked on a rapid policy of global economic integration based on the principle of “build it and they will come”. Their plans began with the building of the Jebel Ali free zone, making Dubai one of the biggest trading hubs in the world. The success of that was followed by the construction of several similar free trading zones such as the Dubai internet city and the Dubai media city. Unlike the Jebel Ali free zone, the Dubai media city and the Dubai internet city zones were created to trade in ideas, not goods. These free “trading” zones (medical and educational cities were added later) were built for people, ideas and money to come and mix. Today, Dubai has quickly risen into the league of leading world cities. It is no surprise that a recent study by the London Chamber of Commerce identified Dubai as London’s main potential competitor in the next decade.
But London remains in a stronger position than Dubai. Not only can it learn from the rest of the world, but it is also a strong source for indigenous creative ideas and innovation. In that sense, London is different from Cambridge, just as New York is different from Boston: London and New York process knowledge, whereas the science centres surrounding the ancient seats of learning in Boston and Cambridge (England) help create it. Yet it is proximity to London and New York that gives these cities access to the wider world. In this respect, London helps Cambridge to innovate, while Cambridge helps London to compete with other world cities.
There are many routes to innovation-driven prosperity. Sometimes strong research universities matter most; in other cases, it may be ease and strength of access to overseas networks through an international airport or a global company. With Cambridge and Oxford, it is the product of a strong science and technology base, while for New York or London it is having the right overall mix of talent and infrastructure.
Policymakers and innovation leaders around the world should recognise that there are many different routes for innovation-driven economic prosperity. The way forward often depends on which route one is taking and where they are on that route in relation to competitors. As things are now, most economic and innovation strategies produced for cities and countries are aimed at producing closed circuits of local networks confined largely to administrative and political boundaries. Instead, what are needed are policies aimed at fostering economic integration with the rest of the world, creating and drawing on complementary capacities between cities, regions and nations. This will make for more winners and fewer market failures.
The writer is research director, regional and international innovation, at the UK’s National Endowment for Science, Technology and the Arts (Nesta). He is the lead author of Innovation by Absorption: How UK Nations and Regions Innovate, a Nesta research report to be published this autumn