Cities Chase Elusive 'Innovation Economy'

Urban areas like Silicon Valley, Austin, Seattle, and Boston have built their contemporary economies on innovation: new ideas that turn into companies that change the world in ways large and small. These companies are the General Motors and IBM's of the 21st century. They are, by and large, creatures of cities. 

How, then, do cities build innovation economies? 

Enrico Moretti, professor of economics at the University of California-Berkeley, has taken the amorphous idea of innovation and defined it, mapped it, and analyzed its impact on urban economies and workforces. He has found, among other conclusions, that rising tides lift all boats: though generous salaries at innovative firms may raise the cost of living in areas like Palo Alto, they also correspond with rising salaries of people who do not work in innovation. They also correspond with a widening gap between cities that have innovation economies and those that don't.

Urban landscapes are conductive to innovation, but no particular city has an inherent advantage. The growth of innovation depends as much on happenstance as on policy -- but that doesn't mean that cities can't try to create fertile ground. 

"All (innovative industries) have two things in common. The first is they tend to employ workers with a high level of human capital, which I measure in terms of education. These are sectors where the number of workers with a college degree is very high. The second is, they make a product or service that is unique: it’s innovative in the sense that it cannot be easily reproduced and easily outsourced."

"It is absolutely true that you see innovation hubs in places that are urban and dense as well as in places that are sprawling and suburban. What you see in both places is a tendency towards urbanism and densification. A lot of the Silicon Valley companies that have offices in the suburban part of the Bay Area have opened offices in San Francisco in great part because their workers prefer living in San Francisco."