Innovation Cities in a New Economy

Innovation often comes from chaos and crisis.  In this month’s The Atlantic magazine, Richard Florida, author of The Rise of the Creative Class and director of the Martin Prosperity Institute at the University of Toronto’s Rotman School of Management, wrote an interesting prediction of how the recession will change the landscape of American cities.  He argues that the financial crisis will create “great mega-regions that already power the economy, and the smaller, talent-attracting innovation centers inside them.”  He includes Austin in the short list of mega-regions which also includes Boulder, Research Triangle and Silicon Valley.  He sees the innovation that is happening in these areas as key to the next iteration of the economy.  He argues that a reshaped America will be focused on these “mega-regions” and be “a landscape that can accommodate and accelerate invention, innovation, and creation—the activities in which the U.S. still holds a big competitive advantage.”  It seems, at least to Richard, that Austin is key to this new economy.

Along the same lines, McKinsey recently did a study of the world geography of innovation, how cities compare in terms of innovation.  The results, in a pretty interesting interactive map, place Austin in the “Silent Lake” category (in the middle between “Dynamic Oceans” and “Shrinking Pools”), which means we have “slow-growing innovation ecosystems backed by a narrow range of very large established companies that operate in a handful of sectors. These clusters are frequently the source of a steady stream of “evolutionary” innovations and step-wise improvements.”

Taken together, then, it appears that there is a bright future for Austin.  What neither the article nor the study take into consideration, though, is social innovation.  I would love to see a similar analysis of hotbeds of social innovation, areas where sectors are converging and new ideas, products, services which include a social element are emerging.  That would be fascinating and would probably mirror the mega-regions Richard describes.  Because I believe that at the end of this restructuring we are undergoing, we will have an economy where social and financial returns are fundamentally integrated. And those cities that understand and leverage this change will be far more successful.

Tags: Austin, Boulder, Economy, innovation, McKinsey, Research Triangle, Richard Florida, Silicon Valley, social innovation