Innovation Hot Spots – Countries vs. Cities

By: Tim Jones

We increasingly see the world and much of its innovation through the lens of cities not countries, but there is little clarity around where the true innovation hotspots of today, let alone tomorrow, are to be found. While there is general agreement around which are the most innovative countries, the lack of consensus around the criteria used to identify an innovative city has produced multiple views and varied answers. If we want to understand more about the approaches that are the most effective in leading locations, we must decide on the best way to assess which cities are the most innovative.

After trip to the UAE to discuss innovation, cities and the future, the question of when Dubai will be recognised as a leading global city was frequently raised. In a very good panel discussion at the Emirates Literature Festival, Parag Khanna from the Lee Kuan Yew School of Public Policy, Singapore, suggested that, by taking a view of global connectedness, Dubai is already in the top 10. However in other, more innovation-focused dialogues with both government and business leaders, most agreed that, by traditional metrics, Dubai and the wider UAE were yet to appear on any top rankings of the world’s innovation hotspots. Some felt that this is not a true reflection of what is actually going on across the UAE that is working hard to drive bolder innovation, and so challenged the traditional technology and GDP output metrics. If there is an alternative view, then how should we be tracking innovation prowess and impact of one location against another?

For me, many of these discussions highlight the on-going debates of not only how we should measure the best locations for innovation around the world but also the question of whether we should be analysing cities rather than countries? Just as with tracking the most innovative companies, many agree that innovation prowess is good and helps to drive economic growth as well as improve social cohesiveness and environmental impacts, but few seem to be aligned on how best to coherently judge one location against another. What are the issues here, what are the opportunities and what are some of the implications?

The Country Perspective

First off we should acknowledge that most historical views have been focused on countries. Governments and international organisations have frequently taken a nation vs. nation comparison perspective on the most effective innovation location. Many still do.

For example:

• The Global Innovation Index sees Switzerland, Sweden and the UK to be the most innovative. Jointly published by INSEAD, Cornell University and the WIPO, this uses a combined index covering 7 elements – 5 of which are ‘inputs’ (institutions, human capital and research, infrastructure, market and business sophistication) while 2 are ’outputs’ (knowledge and technology outputs alongside creative outputs).
• The WEF by contrast, considers Switzerland, Israel and Finland to be the leading three innovation countries. Its assessment takes into account aspects like the quality of scientific research at universities, company spending on R&D, collaboration between universities and industry, patents as well as the number of engineers and scientists in each country.
• Another view – Bloomberg’s multi-factor analysis – sees that South Korea, Japan and Germany are top. Its areas of focus includes R&D intensity, manufacturing value-added per capita, the share of high-tech public companies, postsecondary education, the percentage of professionals engaged in R&D and again patents.
• In its Science, Technology and Innovation Outlook, the OECD perspective is perhaps the most comprehensive and provides detailed analysis of a number of national data sets on R&D investment, university research, STEM skills, patents, public sector innovation and government strategies as well as service innovation, green innovation, innovation for an ageing society and tax incentives. The OECD analysis not only looks at the rolled up data for countries, but also seeks to separate out leading investment and patent activity against different technology clusters such as the IoT, AI, nano-materials, biotech and even micro-satellites.

Although they each come up with different answers, all in all these four analyses, and others, provide a rich, deep annual review of country-by-country activity – but are they still relevant? Does innovation really happen at a national level anymore or is it more accurate to consider a local perspective?

Cities Not Countries

Many now believe that it is cities that matter more than countries. Cities are where innovation happens, where most ideas form and from where economic growth largely stems. They are where most of us choose to be, to work and to interact with others. They are also where significant problems can first emerge and where challenges can be magnified. As a steadily rising global population approaches 70% urbanization, not only are many mayors taking the lead over presidents and prime ministers on issues such as pollution, obesity and climate change, but they are also directly encouraging innovation in potential solutions such as electric vehicles, sugar taxes and green energy. Many of us are rapidly moving to a new world which ironically is surprisingly familiar to the classical historian who studies the time when cities such as Venice, Istanbul, Shanghai, London and Hamburg led the way.

Today, once more, it is cities not countries that are driving innovation forward and so it is through the city lens that we should be measuring and tracking not only who is most effective and efficient at innovation, but also what approaches are working best, where and why.

Innovative Cities

So where in the world is leading on innovation? Is it still Silicon Valley? Is it Singapore, Moscow or Tel Aviv or London, Boston or even Dubai? There is lots of hype and misinformation around so how best do we cut through the noise and really identify where innovation is having greatest impact? For cities, the current views on which are the most innovative are variable, looking at myriad of indicators. Here are just a few:

• The OECD thinks it is about patents per capita. Given how rich its analysis of country innovation is, this seems a very simplistic view. It is also a distorted perspective as it is highly influenced by company HQ locations that are often the address used for patent activity from around the world. So in the most recent rankings Eindhoven (Philips’ HQ) comes top of its analysis, followed by Stuttgart (Mercedes and Bosch HQ locations). The whole question of patents is also being challenged by the likes of Tesla and SpaceX that are both clearly delivering significant innovation in Palo Alto and LA but are not leaving an IP footprint.
• CityLab thinks it is more about the number, performance, reach and funding of start-ups with US locations of Silicon Valley, New York, Los Angeles and Boston taking 4 of its top 5 positions. Tel Aviv comes fifth and London sixth.
• MIT’s Technology Review’s World Innovation Clusters analysis focuses on several factors including venture capital, good weather, strong IP protection, culture and positive immigration laws. This highlights Boston, Bangalore and Beijing in its top 8 alongside Russia’s Skolkovo Innovation City.
• In the UK, Nesta, Accenture and the Future Cities Catapult produced a report that evaluated 40 city governments and crunched 1,400 data points to determine that New York City, London and Helsinki are the most innovative.
• The Urban Land Institute rated Medellin in Colombia the world’s most innovative city in a 2013 survey. This was largely due its turnaround from being the capital of ‘narco-terror’ to become a thriving, liveable city with a host of political and public / private partnerships all driving progress.
• In the media, Reuters are reporting in which cities we find the most innovative universities and research institutions, while CNN has a US-centric view that considers that it is all about the tech sector with New York, Boston and Portland top of their list.
• While varied consultancies, large and small, such as McKinsey, PWC and 2thinknow have broader views of what makes cities innovative and provide the most opportunity. The latter is another multi-factor assessment that puts London, San Francisco and Vienna at the top.
• Lastly, seeking to acknowledge innovation success in Africa and India, some are championing other views that better consider government-funded innovation, mobile services and social outcomes such as decreases in inequality. Several even see that traditional models do not really recognise the innovations that are emerging in the global south.

So, we clearly have not only many different answers to the question of which city is the most innovative, but also a host of different views of how it should be measured. Although everyone’s view is valid, no one seems to have actually come up with a solid and consistent way of looking at this. Just as with the questions of which companies are the most innovative, it is only through diligent, enduring assessments that we can build up a clear view of which factors really count. However, while we have seen sustained examinations of what makes one company more innovative than another, maybe, for cities, it is just too complicated? One must hope not as many cities and a plethora of policy makers, investors and commentators are all very interested in both highlighting and understanding where is best. They clearly need better answers. Is there, therefore, an improved, most holistic, way of most reliably identifying the world’s most innovative cities?

The Toronto View

To kick-start a new ball rolling on potentially developing a more insightful view, last Sunday we ran an innovation lab with a group of PhD researchers at the ISPIM Innovation Forum in Toronto. In a wide-ranging discussion, different groups had varied but, in the end, quite complementary views. Pivotal here was context: understanding why city-focused innovation is being measured and by whom is evidently going to drive different approaches. If this question is about civic-led change or city branding, social impacts or even reflecting on historical achievements then clearly the narratives and hence the core dynamics in identifying the world’s most innovative cities will shift. However, while this nuance may change from location to location, when thinking about a holistic global approach it was argued by most that a fundamental means of tracking levels of collaboration has to be in the mix. Whether looking at a new high-tech smart city, a growing second tier city or a global mega-city, partnerships between business, government, academia, entrepreneurs and society were seen as a core issue.

Other potentially significant elements suggested as in need of being included in any complete view included other enablers such as capital, infrastructure and digital connectivity; visible benefits encompassing the economic, social, cultural and environmental; and long-term sustainability measures – especially concerning the attractiveness of a city for global talent and the avoidance of future brain drains. Notably there was strong rejection of some of the traditional ‘Northern Hemisphere’ technology output driven type views – especially commonly used metrics such as patents and the raw number of start-ups. Interest was instead stronger on understanding more about the ‘black box’ process within the city that drives improved innovation – very similar in thinking to the Innovation Leaders analysis of company activity.

Unsurprisingly in a room full of PhD researchers the role of education was also stressed. Whether this is examining the levels of creativity being encouraged in early stage schooling or the interaction between and within leading research universities, the role of home-grown, high-quality innovative education centres within any city was also a priority focus.

Foremost in yesterday’s discussion however was the idea of communities. Somehow tracking how groups of disparate people and expertise connect and collaborate, the culture that supports this and diversity across the community was seen a paramount. Cities that actively encourage migration, provide access to citizenship for a diverse talent pool and enable new connections across ecosystems were all seen as the ones that lead in the innovation arena. Lastly, as a closing local thought, and as highlighted way back in 2002 in the Competing on Creativity report, it was suggested that maybe what is seen as having been at the core of Toronto’s recent innovation success could be a future focus for all cities globally  – talent, tolerance and technology?

Moving Forward

These perspectives certainly provide some focus and raise some interesting additional questions to explore. Moving forward perhaps more of us can build on this and other views and collaborate more widely on refining and testing an improved way of answering the question of how best to assess which cities are the most innovative? If you would like to join in, let us know and we can do this together. Most immediately you may have comments on some of the points above, if so please do share. Looking further ahead, if you would like to be part of a global collaboration to address the challenge, again do let us know and we can make sure you are in the mix going forward.

As the dominance of cities continue to grow, potentially at the expense of national interests, it is important that we seek to gain a clear and shared, globally relevant view. While many view see that the likes of San Francisco, Boston, London and Tel Aviv are some of the leading innovation hotspots today, some ask if they will continue to be so in the future. If we are going to identify the emerging centres of future innovation early, we need to collectively know what to look for. Maybe, as new locations begin to play a vital role as hubs for talent, ideas, and capital, the leaders will change. As the shift of power turns away from the traditional western cultures perhaps innovation will turn too. Maybe the new ideas will come from cities like Bangalore, Nairobi or even Dubai?