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Innovation ecosystem

PSE talks to researcher Lizzie Crowley of The Work Foundation about her new report investigating why some cities are doing better than others, how innovation can be nurtured, and over-centralisation in growth policy.

What makes a city home to innovation and innovative business, and how much impact can policy-makers have on spurring it on?

In her report published at the end of 2011, ‘Streets ahead: what makes a city innovative?’, The Work Foundation’s Lizzie Crowley notes that an area’s innovation potential is not just a simple scale from high to low, but that different cities can nurture different types of innovation. Her report uses a typology of cities, labelling them high performing innovators (eg Cambridge, Southampton), service sector innovators (Aberdeen, Milton Keynes), technological innovators (Derby, Coventry), innovation potential (Gloucester, Sheffield), or low innovation cities (Blackpool, Middlesbrough).

Freedom

At the report’s heart is a call for more freedom for cities to be able to develop their own innovation and growth potential, and for the Government to realise that different areas need different solutions if they are to emulate the success achieved in recent years by London and the towns and cities surrounding it that have managed to sustain growth, including Milton Keynes, Reading, Crawley and Guildford.

Crowley notes that with the demise of the regional development agencies (RDAs), virtually all innovation policy is now delivered from the centre, as those budgets were not passed down to the local enterprise partnerships.

She told PSE: “Although a lot of the activities to do with innovation-style policies were always led nationally, through the Technology Strategy Board and BIS itself, the RDAs did have a budget as well to spend money and be able to tailor that type of initiative, setting up, for example, sector networks and things like that.

“But when the RDAs disappeared, the budgets didn’t go to LEPs: they just disappeared with them.

“Overall, it’s a much more top-down, nationally led initiative, rather than something devised to fit the individual needs of particular areas.”

The widening gap

One of the less positive conclusions of the report, echoed in other recent research by the Centre for Cities think tank, is that already well-performing cities are now doing even better, but those that were struggling continue to do so.

Although the report does contain advice to policy makers, civic leaders and local government, some might ask just how much impact they can hope to have over the apparently intractable problems relating to lack of growth and innovation in some areas, particularly deindustrialised areas and seaside towns.

Crowley said: “Local government and regional government has a particular role to play in removing some of the barriers facing firms looking to grow and expand, and a lot of that is around the wider conditions.

“They’ve got that place-shaping role, but more specifically around innovation policy, networks are an incredibly important mechanism for spreading innovative practice.

“The majority of innovation is actually through innovation by adoption; adopting ideas you see other firms doing, and so generating more value from a single idea. The report emphasises the importance of networks, and you really do need a neutral organisation to be able to broker some of those relationships between businesses.

“That can be a university, for instance, but it could also be a role for a LEP or local government, as a kind of neutral, outside organisation able to bring different and often competing businesses together, facilitate relationships, and spread good practice across sectors.”

Show them the money

The report calls on the Government to give more power to LEPs by establishing an innovation fund, which cities could use to co-ordinate inward investment, innovation and business support.

There is currently too much of a focus just on businesses themselves, and not enough on the wider conditions in an area, she said – but acknowledged that the Government’s recent promise to hand more powers to England’s core cities could help promote the growth agenda.

Crowley explained: “There is a recognition of the role of clusters of firms in policy, but not so much of a recognition of the role that sub-regional government through LEPs can play in supporting quite a bit of this agenda.

“There are possibilities through the core cities. One of the suggestions was, for example, reducing business rates for a particular sector. So if you wanted to encourage more of a high-tech cluster and you already have a strength in that, but maybe some of your businesses are being squeezed out by the increasing gentrification of the area, for instance, you might decide to try to support that sector by lowering business rates, therefore retaining them and growing the cluster.

“It’s quite positive that the Government seems keen for these cities to be setting their own agenda. Obviously their proposals on what they would like to have control over have to be realistic, but the idea that places are different, and all have different strengths and weaknesses, and different challenges to address, is important. We’re really keen on calling on them to step up to the mark and identify what they need, and what they would do with additional power and resources if they got it.”

Procurement

She urged different parts of the public sector to procure and commission services in a whole systems or total place type way, to generate savings but also to build innovation partnerships with the private sector.

She said: “A lot of local government organisations are now putting procedures in place in their procurement policies to implement innovation – especially better public-private partnerships, working together on delivering services more effectively, and using procurement as a lever to kickstart some of that thinking.

“That’s been quite embryonic in a lot of previous government initiatives, and current ones, but it’s certainly not something that’s happening across the board at all local authorities or every public sector body.”

Crowley’s focus is very much on the importance of networks and idea adoption. When launching the report, she said: “We know that high-performing, competitive cities, such as London and cities in the south east like Guildford and Cambridge, are more successful because their economies have established strong networks between the public and private sector – what we call an ‘innovation ecosystem’. In these cities, businesses and public institutions such as universities regularly work together to collectively drive growth and job creation. This helps them attract world-class businesses and nurture home-grown entrepreneurs.

“We need a place-based innovation policy which recognises that not all cities are the same. Economies such as Bristol are rooted in the knowledge-intensive services of software and design, so they need a very a different set of policy responses compared to cities like Preston and Derby, which have a strong high-tech manufacturing base.

“The Chancellor seems to think that many cities outside London are still stuck in the 1980s, and can only be turned around with outdated policies like Enterprise Zones. What this one-size-fits-all policy ignores is that our most successful cities, such as Milton Keynes, have economies driven by strong business services. Many cities outside London have a huge amount of economic potential, but they need the freedom to build on their own strengths, and to develop a unique appeal to businesses.”

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