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Cities Promote 'Innovation Districts' for Economic Development

Instead of isolated corporate campuses like Silicon Valley, some places are trying to promote "innovation districts" to bring industry back. Can it work?

A girl on her phone in the Mission District in San Francisco.
A girl on her phone in the Mission District in San Francisco.
As city governments look to attract more business, they are coming up with novel ways to entice new firms. One method people affiliated with municipal governments, universities and companies use to spur economic growth is to promote neighborhoods that foster development in business and technology -- “innovation districts,” as a Brookings report by Bruce Katz and Julie Wagner terms the idea.

Katz and Wagner said that isolated corporate campuses like those found in Silicon Valley, traditionally the places where technology is developed, are being replaced by more integrated innovation districts. The three characteristics of these districts are firms or organizations that support economic development, physical and geographic assets such as buildings and open spaces that give rise to greater connections and firms that encourage ideas to foster.

Chattanooga, Tenn., Mayor Andy Berke, who was present at Brookings’ unveiling of the report on June 9, emphasized his city's transformation from the dirtiest city in the country in 1969 to the city with the fastest broadband Internet in the country in 2010, when the municipally-owned utilities company in Chattanooga began offering connection speeds of one gigabyte per second through a fiber-optic cable network.

“We have this horrible legacy of the 1970s’ decline, and then what you see now is we have a vibrant downtown,” Berke said. “There’s tons of people there.”

Chattanooga’s downtown reflects the attention it has received from outside companies, including $2 billion in new investment. It recently attracted Volkswagen’s North American manufacturing plant, and the city's fiber optics system has enticed entrepreneurs and investors to the mid-sized Southern city, although its unemployment rate has hovered above both Tennessee’s and the national average since April 2012.

Katz and Wagner advocate for a model that builds on existing communities (and recruits local talent) rather than replaces them. They assert that the districts could provide employment and educational opportunities for residents of nearby low- and middle-income neighborhoods. The University of Pennsylvania operates a K-8 school close to its campus, and Drexel University is planning a similar endeavor focusing on science, technology, engineering and math (STEM) education.

Katz said that the shifting geography of innovation was “a really disruptive trend” that cities should harness to foster better and more accessible jobs. He said innovation districts can allow cities and firms to work better together by integrating housing, recreation and workplaces within a small physical place, as opposed to isolated corporate parks accessible by car.

The report highlighted several other districts in American cities that exemplified these innovations, including Seattle's South Lake Union neighborhood, North Carolina’s Research Triangle Park and St. Louis’s Cortex Innovation Community. These cities come in three models, according to Katz and Wagner : the “anchor-plus” model, where districts coexist with nearby universities research institutions, the “re-imagined urban areas” model, where former industrial and urban districts are targeted for development, and the “urbanized science park” model, where suburbs and exurbs are built up with new amenities.

Tech sector involvement in city development is complicated. In Boston’s Innovation District, part of the area's success is likely connected to the fact that 10 percent of jobs are in education and nonprofits and 20 percent of jobs are in creative fields such as advertising. The development efforts are typically driven by private companies and investments, although local governments have contributed funding and designated land for the districts. Starting with a 1998 neighborhood revitalization plan, Seattle, for example, created the South Lake Union district when it bought a five-acre plot of plot of land from the U.S. Navy and provided $31 million to redesign the property

The report highlights potential benefits of innovation districts, including economic growth, the reduction of inequality and poverty and improved environmental sustainability due to reduced need for cars. The authors note that the potential for innovation districts to develop across the United States is significant since most American cities and suburbs have the elements one of the three innovation models.

Because innovation districts are a new phenomenon in the United States, their long-term effect on the economy has yet to be determined. Higher real estate prices in the districts are already giving rise to concerns of affordability in Boston and other cities. Still, if Katz and Wagner’s predictions hold true, innovation districts could be more common in cities working seriously to try to bring back jobs.

Daniel Luzer is GOVERNING's news editor.
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