The Context for Urban Innovation Strategies: Opportunities, Challenges, Paradoxes and Puzzles

1. The Context for Urban Innovation Strategies: Opportunities, Challenges, Paradoxes and Puzzles Philip McCann University of Sheffield

2. The Context for Urban Innovation Strategies: Opportunities, Challenges, Paradoxes and Puzzles • Innovation features: newness; improvement; overcoming of uncertainty • Edward Glaeser, 2011, Triumph of the City • Cities as hubs of innovation → knowledge spillovers and/or transparency and competition • Cities as testbeds for new technologies – traffic, mobility solutions, health services, public service provision Cities also provide opportunities for governance experimentation → radical local government: “Political Petri Dishes”, The Economist, 22.09.2012 • Urban innovation strategies for city productivity and wellbeing → corporate and science advocates • Innovation challenge-led strategies are much more difficult in difficult urban contexts

3. The Context for Urban Innovation Strategies: Opportunities, Challenges, Paradoxes and Puzzles

4. The Context for Urban Innovation Strategies: Opportunities, Challenges, Paradoxes and Puzzles

5. The Context for Urban Innovation Strategies: Opportunities, Challenges, Paradoxes and Puzzles

10. The Context for Urban Innovation Strategies: Opportunities, Challenges, Paradoxes and Puzzles • Textbook assumptions of how cities (and their regional contexts) work • Assumptions: Cities display a productivity premium and drive economic growth; → Recent evidence: While this is true for many cities it is also true that many cities display no (or even a negative) productivity premium; many cities are not (productivity or population) growth drivers; in some countries productivity-scale relationships are zero or close to zero • EU experience is very different to US - Triumph of the City • In Europe urban advantages relating to employment and productivity post-crisis are oriented towards EU13 economies while EU15 face severe urban disadvantages

11. The Context for Urban Innovation Strategies: Opportunities, Challenges, Paradoxes and Puzzles • Assumption: Largercities are more productiveandresilient→EU cities display both resilience and vulnerability: they exacerbate national post-crisis trends with growing countries driven by growing cities and declining countries weighed down by declining cities • Effects of the real estate-related debt on the real economy are more pronounced in cities; real estate shock effects are dominated by cities → induced effects in the real economy • Assumption: Productivity growth drives wagegrowth→ Recent evidence: the link is rapidly weakening due to job polarisation, especially in cities

12. The Context for Urban Innovation Strategies: Opportunities, Challenges, Paradoxes and Puzzles • Assumption: Regional re-allocationscan drive productivity→ Recent evidence: increasing divergence in many countries; falling US interregionalmigration; static UK interregionalmigration (2 of the 3 most geographically mobile societies); increasingspatialdispersion of yields on investments • Assumption: Innovationandentrepreneurshipdiffusion is criticalforgrowth→ Recent evidence: falling US rates of entrepreneurship; innovationdiffusionprocessesstalled/broken in manycountries UK/US; costs of innovationsincreasing?

13. The Context for Urban Innovation Strategies: Opportunities, Challenges, Paradoxes and Puzzles • Assumption: Bid-rent curves (productivity spikes) are downward-sloping → Recent evidence: upward sloping bid rent curves in European manycities; flat bid-rent curves in manydeveloping country mega-cities • Assumption: Transport infrastructure drives productivitygrowth→ Recent evidence: no specificobservable link whichcanbegeneralised: onlygeneralbroad statements are possiblebased on comparisonsbetweenregionswithand without goodinfrastructure

14. The Context for Urban Innovation Strategies: Opportunities, Challenges, Paradoxes and Puzzles • Assumption: Urban economicmodelsbased on land priceand/or populationgrowth→ Recent evidence: betweenonequarterandonethird of European cities are facingpopulationdecline; a majority of JapaneseandKoreancities are declining • Little or no knowledgeregardinghowto ‘manage decline’ → random vacancies/insolvenciesincreasemarginalcosts of infrastructureandnetwork-based service provisionandinhibit/prohibitnecessary land useconsolidationandcoordination • Assumption: Henry George Theorem→ Recent evidence: human capitalrewards in cities are 50% economicrentsratherthan returns toknowledgeinvestments (Collier andVenables 2018)

15. The Context for Urban Innovation Strategies: Opportunities, Challenges, Paradoxes and Puzzles • Essential need for urban innovation strategies to address societal challenges which are specific and relevant to the urban context • Need to also consider innovation opportunities and challenges related to the urban context • Need to identify opportunities for experimentation, testing, and trialling in the urban context • Need for urban governance systems which allow for innovation strategies → including allowing for failures • Need to identify intended ex ante outcomes, ongoing monitoring and ex post evaluation for strategic success