Older cities in the US and Europe are seeing a resurgence in their inner-city areas as educated young workers flock to authentic urban environments. But it is not just hip new bars and restaurants that are drawing talent to cities – it is also the mix of forces that creates innovative environments, spawning opportunity and new ideas.

In his recent book, The Metropolitan Revolution, Bruce Katz, vice-president of the Brookings Institution and director of its Metropolitan Policy Programme, has termed these areas ‘innovation districts’. Here, leading-edge anchor institutions and cutting-edge firms cluster and connect with supporting and spin-off companies, business incubators, mixed-use housing, office and retail space, and 21st-century amenities and transport.

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In the US, the phenomenon is widespread, concentrated in inner-city areas. Boston is the first city to claim the moniker, with the Boston Innovation District, mayor Thomas M Menino’s incentive to transform 400 hectares of south Boston’s waterfront into an urban environment that fosters innovation, collaboration and entrepreneurship.

Viva Las Vegas

In Las Vegas, Tony Hsieh, founder of online shoe retailer Zappos, moved his company into the old city hall and is investing $350m of his own funds creating an environment where entrepreneurs flourish. One of the main functions of Mr Hsieh’s 'downtown project' is the creation of ground-level activity and gathering places such as cafes, small businesses and public spaces – the kind of amenities that catalyse connections between workers and industries. 

Urban-based innovation districts are not limited to the US. Mobile game developer Wooga and music sharing platform SoundCloud have both grown out of Berlin’s Silicon Allee, a dense, highly networked tech district centred around Rosenthaler Platz in the central Mitte district.

Entrepreneurs are attracted to the affordable housing prices, cultural vibe and excellent nightlife, but they take business seriously. In 2013, Germany attracted €273m in venture capital, overtaking the UK as the lead recipient in Europe.

A new model for innovation

In past decades, suburban office parks housing major tech firms and research labs were designed to encourage secrecy. Few were zoned for residential use and a car-commuting culture did not encourage brainstorming over beers. The physical environment of suburban office parks of the past century cannot support the cross-pollination of ideas that is vital to today’s model of open innovation.

Several factors are driving a change in preference. Across the globe, populations are rapidly urbanising. The millennial generation is displaying a preference for quality places to both live and work. Areas that provide around-the-clock amenities will attract the kind of workforce sought out by innovative companies.

Dense environments also breed innovation. Employment density creates intellectual spillovers that have been shown to increase employment and patent rates. To capitalise on this density, an infrastructure that encourages random connections – at bars, coffee shops and shared working spaces – is necessary.

Furthermore, co-location improves the effectiveness of systems of innovation and commercialisation. When researchers are connected to capital, technology created in labs or universities can be brought to the market sooner. In these environments, small entrepreneurial firms intermingle with larger firms with the ability to scale and grow their ventures. In turn, large firms gain the advantage of access to cutting-edge ideas.

Starting from scratch

Outside the US, recently developed technology parks are attempting to create environments for open innovation from scratch. These developments tend to be spearheaded by national governments, so they have the advantage of access to land and capital. But because they are built outside major cities, they can be removed from anchor institutions, convenient transportation and the buzz of city life.

In Singapore, One-north is a 200-hectare business park that was launched in 2001. The development is connected to Singapore’s MRT rail network and has ties to academic institutions, including Insead Asia, the National University of Singapore, Singapore Polytechnic and the Institute of Technical Education.

Fusionopolis, the core urban area of the One-north development, is a research and development complex housing labs, high-tech companies, government agencies, shops and apartments, all developed by JTC Corporation, the government agency responsible for developing and managing industrial estates.

While Fusionopolis houses larger, more established firms, the Singapore government is seeding a start-up community nearby. Since 2011, the National University of Singapore has sponsored a successful incubator in a former industrial building on the One-north site, spawning 250 companies. This year, the government has announced a 1.2-hectare expansion of the existing incubator, doubling the number of tenants and including cafes, co-working spaces and sports facilities under the brand Launchpad@one-north.

With the anchor institutions of both universities and large firms, combined with entrepreneurial companies and retail and residential amenities, Fusionopolis fulfils all the requirements of a world-class innovation district. Yet, some question whether the business park’s location outside of the main city of Singapore can provide the same advantages as an inner-city location.

Just business

Located 50 kilometres south of Kuala Lumpur, the Malaysian city of Cyberjaya was founded in 1997 as a hub for IT. Through incentives packages, the city has attracted investment from foreign companies seeking IT workers, including computer services provider IBM, IT consultancy Wipro and international lender HSBC. It has also seen the development of several institutions of higher learning.

But, due to Cyberjaya’s lack of residential housing and amenities, it functions more as a traditional business park than a thriving inner-city innovation district, with most of the city’s workforce vacating after the workday. Planned residential expansion may help to turn the tide, especially if combined with amenities and opportunities for the city’s young student population.

Innovation districts in existing cities have the advantage of an established urban environment with a mix of uses and density that creates opportunities for workers to engage with peers outside work, brainstorming solutions and ideas. New tech cities such as Fusionopolis and Cyberjaya have the advantage of available land and political will to build state-of-the-art research space and offices. But to create a truly innovative culture, they will need to focus on creating amenities to attract workers and connections that sustain start-ups. 

Where density of research, small and large firms, and residential and retail projects locate, educated young workers and innovative companies will follow. And where successful businesses and cutting-edge technology meet, investment will flow.

Emily J Brown is an associate at the International Economic Development Council in Washington, DC.