Innovative Urban Environment. Role of the City in Innovative Economic Development

Innovative Urban Environment Role of the City in Innovative Economic Development 26 May 2011

Cynthia Bouthot Russia Innovation Collaborative cbouthot@russiainnovation.com

Innovation Clusters: What’s Needed • The development of a city and region is based on its regional advantages, specialization around those advantages and close integration with market demands • Cities and regions develop and progress more rapidly when they have robust knowledge based sectors that are supported by academia, business and government • It’s critical to identify unique sector strengths based on true underlying capability, and to develop robust propositions that can be communicated to international companies

• Cities and regions must get very specific in terms of what they are good at and then have supporting grants and programs that align with those specific strengths.

• A strategy of innovation development should include a comprehensive description of all stakeholders in the innovation ecosystem, including: government; business, the research base; universities and other key professional and networking groups.

• Local innovation centers must be linked to the international marketplace; they must have a view of how to bring innovation to the people of the region; and an

Why Pursue an Innovation Cluster Strategy?

• Address the current and projected workforce shortages • Plan for and develop the infrastructure needed to move the state economy forward • Develop and strengthen rural communities and regions of the state • Provide for strong companies and a strong workforce

• Create more efficient and effective government

Clusters and Competitiveness • Clusters Increase Productivity – Efficient access to specialized inputs, services, employees, information, institutions, and “public goods” (e.g. training programs) – Ease of coordination and transactions across firms – Rapid diffusion of best practices – Ongoing, visible performance comparisons and strong incentives to improve vs. local rivals

• Clusters Stimulate and Enable Innovations – Enhanced ability to perceive innovation opportunities – Presence of multiple entities involved in specialized knowledge creation – Ease of experimentation given locally available resources

• Clusters Facilitate Commercialization and New Business Formation – Opportunities for new companies and new lines of established business are more apparent – Commercializing new products and starting new companies is easier because of available skills, suppliers, financing, etc.

Source: Professor Michael E. Porter: Harvard Business School Texas Economic Summit San Antonio, TexasNovember 14, 2006

Important Considerations in Developing an Innovation Cluster Strategy

• Clusters must be industry-driven • Both government and industry leadership is required • A cluster strategy must avoid picking winners and losers • The strategy must address both state and regional economies.

Enhancing Competitiveness: Improving the Business Environment Context for Firm Strategy and Rivalry 

Factor (Input) Conditions 

Presence of high quality, business inputs –Human resources –Capital resources –Physical infrastructure –Scientific and technological infrastructure –Administrative systems (e.g., permitting and approvals) –Wide availability of information –Natural resources

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Source: Professor Michael E. Porter: Harvard Business School

Local rules, regulations, and norms that encourage investment and Demand productivity Conditions Open and vigorous local competition  Sophisticated and demanding local customer(s)  Local needs that anticipate Related and those elsewhere

Supporting Industries

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Access to capable, locally based suppliers and firms in related fields Presence of clusters instead of isolated industries

Successful innovation economic development is the process of enhancing the business environment to support and encourage increasingly sophisticated ways of competing

Clusters and Public Policy: what can Cities and Regional Governments Impact?

Business Attraction

Education and Workforce Training

Export Promotion

Clusters Market Information and Disclosure

Science and Technology Infrastructure (e.g., centers, university departments, technology transfer) Setting standards

Specialized Physical Environmental Stewardship Infrastructure Natural Resource Protection

Clusters provide a framework for organizing the implementation of public policy and public investments towards economic development Source: Professor Michael E. Porter: Harvard Business School Texas Economic Summit San Antonio, TexasNovember 14, 2006

In 1980, Boston was a declining city in a middle-income metropolitan area in a cold state…There was little reason at that date to suspect that Boston would be any more successful than Rochester or Pittsburgh or St. Louis over the next few decades…Twenty years later,

Boston looks like the future not the past….

Why?

Choosing to Compete: Massachusetts’ Cluster Strategy Process with Michael Porter • Understood which companies exist in which geographic areas: In Massachusetts there were 7 regions • Met with companies to understand what’s holding them back • Forged collaborations to address key issues: – HR resources – resources to provide skilled workers (universities + community colleges) – Enough funding to support; what capital needs do the companies have (buildings, working capital) – Infrastructure to support • Transportation (workers) • Transportation (distribution channels)

• Reshaped the way the state looked at its economy - more targeted focus on individual regional needs • Allowed state to leverage resources in a more targeted way

Developing Innovation Clusters Requires Identification of Narrow Technologies

Source: Massachusetts Alliance for Economic Development Playing to Win: MA Place in the Competitive Landscape June 22,2007 William Guenther President, Mass Insight Corporation

Boston/Cambridge Seeds for a Life Science Innovation Cluster

• Strong academic institutions with world-class research – MIT and Harvard.

• Strong applied research through Harvard hospital system.

• Local network of teaching hospitals.

• Physical spaces for development in Longwood Medical Area (Harvard) and Kendall Square (MIT).

• All key facilities within 3 miles of each other.

• Mixture of large and small companies – Biogen Idec & Genzyme grew up alongside Wyeth and Novartis.

Today Boston/Cambridge is the Number 1 Biotech Cluster in the World • More than 100 biotech companies in Kendall Square alone, including HQs of Genzyme, Biogen Idec & Millennium.

• R&D facilities for Amgen, Merck, Pfizer, Wyeth, Schering-Plough & Novartis.

• Massachusetts has the second largest concentration of medical device companies in U.S. (over 300 companies).

• Top 25 publically traded life sciences companies in Massachusetts doubled their annual sales revenues between 2002 & 2006.

• One in six working people employed in this sector.

• biotech now employs around 30,000 workers in Massachusetts, growing at around 10% a year for a decade.

• Biotech accounts for 18% of the state’s venture-capital investment, 27% of its R&D spending, one sixth of its public companies, 10% of its market capitalization and produces 8% of the world’s pipeline of new medication

Role of the City and State: Local Legislation and Incentives • City of Cambridge passed first municipal biosafety ordinance in U.S. in 1977 – Established clear legislative framework for R&D by universities.

• City of Cambridge passed Cambridge Biosafety Ordinance in1981 – Extended regulation to cover public and private R&D. • Followed by opening of Biogen and location of Genetics Institute in Cambridge.

• Massachusetts Life Sciences Center created by state government in 2006. Invests in workforce development and investments at critical stage of project. Hub of industry.

• Massachusetts established $1 billion Life Sciences Initiative in 2007 to provide incentives, tax credits and investment for all critical phases of project development.

Includes 9 different incentives associated with life science R&D cycle.

Cluster Development: Biotech in Massachusetts Supports many Sub Sectors

Source: Professor Michael E. Porter: Harvard Business School Texas Economic Summit San Antonio, TexasNovember 14, 2006

Governments can Facilitate the Development of Biotech but Networks are Much More Important • Most biotech firms originate in universities – which governments control through funding and regulation • Policies can stimulate the commercialization of science and surround universities with infrastructures designed to hasten commercial development (e.g. technology parks) However, there are many more world-class universities than there are wellperforming clusters…..

• Governments are a facilitator and should not pick ‘winners’…government is about power not about efficiency and will tend to pick things favored by powerful interest groups, not the best technology.

• Successful high-regions develop social structures promoting innovation…..Social ties and labor market mobility – Innovation: knowledge is diffused through job-hopping – Career management –High inter-firm mobility (implicitly facilitated through social networks) can dramatically reduce the career risk of leaving a stable job to work in a start-up

Institutions for Collaboration: Innovative Clusters Require Networks

Source: Professor Michael E. Porter: Harvard Business School Texas Economic Summit San Antonio, TexasNovember 14, 2006

The Process of Economic Development linked to Innovation Clusters Shifting Roles and Responsibilities

Old Model

New Model

• Government drives economic development through policy decisions and incentives

• Innovation economic development is a collaborative process involving government at multiple levels, companies, teaching and research institutions, and institutions for collaboration

• Competitiveness must become a bottom-up process in which many individuals, companies, clusters, and institutions take responsibility • Every region and cluster can take steps to enhance competitiveness Source: Professor Michael E. Porter: Harvard Business School Texas Economic Summit San Antonio, TexasNovember 14, 2006

Lessons Learned from Boston • The key three elements are: education, finance, and technology • Cities need to focus on doing the basics well: infrastructure, taxation, management of resources, education and schooling and affordable housing • Invest in People and reinvest in traditional institutional basis • Change is inevitable but human capital helps cities rebound: continually attract and retain talented people • Industrial diversity is good to help take advantage of new opportunities and insulate against risk • Act quickly when you see growth area • Support universities which innovate, commercialize and create economic benefit for the region • Embrace Localism but not too much • Policy areas must be considered strategically

Collapse or Renaissance? Can a Traditional Industrial City Achieve Successful Transition?

• London, Birmingham, Liverpool and Pittsburgh are all examples of success transitions created by strong leadership • Pittsburgh had to change - when a community defines itself by a single industry it can be hard to move on and make the difficult decisions to transform an economy…for Pittsburgh, this transition in mindset took 10 years • It was only in the late 1980s and early ‘90s, when the mills were dismantled, that people came to fully understand that they had to invest in a new, more diverse economy • Through private and public sector cooperation and collaboration the region’s economy was diversified to include innovation and technology ventures and quality of life assets — building on the foundation of what the region has historically done well, including manufacturing.

Transforming an Industrial City to anPittsburgh Innovation- Economy Manchester

• The University of Pittsburgh Medical Center is an $8 billion global health enterprise, integrating 20 hospitals, more than 400 outpatient sites, a major insurance division, and an international and commercial unit

Pittsburgh, PA From Steel to High Tech and Life Science: the birthplace of the polio vaccine and the multiple organ transplant

• The McGowan Institute for Regenerative Medicine serves as a single base of operations for leading scientists and clinical faculty to develop tissue engineering, cellular therapies, biosurgery and artificial and bio-hybrid organ devices. • Centers like the Pittsburgh Life Sciences Greenhouse, Innovation Works, The Technology Collaborative and the Pittsburgh Technology Council help entrepreneurs bring innovations to the marketplace

Transforming Another Industrial City to an Innovation Pittsburgh Economy - Manchester Manchester UK •

The largest Cancer Research Centre in Europe The Christie NHS Foundation Trust

Named in AD 79 for Roman fort and settlement Mamucium

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The largest Cardiovascular and Renal Clinical Research Networks in the UK

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The largest European Centre dedicated to the Ageing and Health (Newcastle)

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MIMIT – Manchester Integrating Medicine and Innovative Technologies

From Textile Manufacturing and cotton production (Cottonopolis and Warehouse Cit) to the first industrialized city to professional services, life science industries, creative, cultural and media, manufacturing and communications.

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Manchester Academic Health Science Centre (MAHSC) - partnership between six NHS organizations and the University of Manchester

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University of Manchester Incubator Company: A growing portfolio of incubators, covering both the Bioscience and IT/Hi-Tech sectors

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NHS Technology Adoption Centre – Marg Parton as CEO

International Linkages are Key Pittsburgh - Manchester Innovation Centers Should be Linked Internationally

Manchester UK

Pittsburgh, PA

The UK has fostered an environment where Partnerships drive R&D The UK Science Super Clusters Initiative

Impact

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Creation of Thematic Capability Clusters

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Harness UK capabilities in specific areas by bringing together clinical and academic centres of excellence

Optimised environment for joint working with the best academic/clinical research

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Faster access to markets with promising lead technologies

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Streamlined processes and protocols (avoid multiple contracts, IP negotiations)

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Provide single point of contact between academic researchers & industry

Supports strong collaboration for early development of new technologies

In September 2005, Gordon Brown designated six Science Cities: Birmingham Bristol Manchester Newcastle Nottingham York

UK ‘Science City’ is a government designation that recognizes a powerful local combination of research excellence and business strength.

6 UK Science Cities • In September 2005, Gordon Brown designated six Science Cities to lead the development of deeper links between business and the science base and ensure that science, technology and innovation succeed in becoming the engine of economic growth: – – – – – –

Birmingham Bristol Manchester Newcastle Nottingham York

• UK ‘Science City’ is a government designation that recognizes a powerful local combination of research excellence and business strength.

UK Science Cities – Lessons Learned • National governments should take the lead in overarching innovation policy, especially regulation and fiscal policy • Local and regional government should play a major role in broader issues related to innovation, including housing, transport, planning and skills • Innovation should not be treated as a specialist policy area and instead it should be an integrated part of a wider economic growth strategy • Universities should not be expected to lead economic growth • Regions cannot develop clusters based simply on aspiration, it must be based on realistic capacities (e.g. biotech)

UK Science Cities – Lessons Learned • Regions should not try to replicate successful strategies from other innovation regions, instead they should design strategies from existing strengths and weaknesses • Governments must understand time horizons: 15 -20 years not 2 – 5 years!

• Innovative regions must connect internationally – build specialized niches using global innovation networks • Regions must avoid the fragmentation of business support initiatives and organizations • Regions should focus on areas where they have the greatest marginal impact on rates of innovation and economic growth

Thank You

Birmingham • Science and Technology: The collaborative development of pure and applied research • Business: The effective application and commercialization of Science and Technology • Market demand: The development of demonstrator projects to develop and showcase new technology-based market opportunities • Infrastructure: Physical and virtual infrastructure to underpin a successful Science City Skills • Attitudes: The development of the people / skills base and engagement with science

Birmingham – Science City Examples • Intelligent Zero-Emissions Vehicle Demonstrator – Collaborative project between Universities of Birmingham and Coventry, Microcab, Tempus, Computers, BT and RDM – Project has contributed to the UK’s first hydrogen filling station on the Birmingham campus, and has attracted companies such as Nissan to run trials

• Centre for Ocular Allergy – Collaboration project between universities of Aston and Worcester – Sustained release of drugs from contact lenses

Bristol • Science City Bristol supports and develops the area’s science and innovation assets to deliver sustainable economic and social benefit by: – Bringing business, academia and government together – Creating a more connected scientific community – Promoting the area’s scientific achievements to help attract even more world-leading scientific enterprise and research – Creating a culture for all which understands and celebrates science and technology

• Bristol’s definition of science is a broad one which includes technology, social sciences, engineering and creative technologies, as well as the more traditional physical, chemical and biological sciences. Science City Bristol is also a strong believer in the links between science, art and culture

Bristol – Science City Examples •

Venturefest SouthWest – a series of events to bring together money and ideas

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Attracting investors and providing ongoing support Meeting unmet needs (non-graduate/non-university staff/companies not based in incubator units nor science parks

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BioBlitz – a 30 hour race against the clock where scientists , naturalists, students, members of the public, schools and community groups worked together to find and identify wildlife in the Aston Court Estate Creating a flagship project for international year of biodiversity SETsquared is a collaboration between the universities of Bath, Bristol, Southampton and Surrey which partners in enterprise activities and collectively supports the growth and success of new business opportunities through spin-outs, licensing and incubation.

The Partnership also works with industry through research collaboration and consultancy.

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Manchester • Innovation Partnerships Exploratory, cross-sector collaborations between academic and industry specialists, trade associations and support agencies, in key areas such as healthcare, the built environment and digital media.

• Real World Science Helping to unlock the public benefits of science and technology, enabling more people to take part in informed debate and decision-making.

• The Innovation Ecosystem A pioneering conceptual approach to city-level innovation policy, taking account of the many inter-dependent factors that make up the complex ‘total environment’ for innovation. This new approach has since informed local strategy and the national UK agenda. In Manchester we’re nurturing a total environment that takes account of:– – – – – –

talent attraction investment finance physical infrastructure policy support networks and partnerships creative and cultural buzz

Manchester – Science City Examples •

MIMIT (Manchester Integrating Medicine and Innovative Technology) – The first and only international affiliate of Boston’s CIMIT (Centre for Integration of Medicine and Innovative Technology – MIMIT technologies are now attracting an impressive range of leveraged resources including • • • •

Proof of concept funding Investment deals form business angels and Venture Capital Intellectual property licenses 1.3 million pounds Science Bridges award from RCUK to support further UK/US collaboration

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The University of Pittsburgh Medical Center is an $8 billion global health enterprise, integrating 20 hospitals, more than 400 outpatient sites, a major insurance division, and an international and commercial unit

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The McGowan Institute for Regenerative Medicine serves as a single base of operations for leading scientists and clinical faculty to develop tissue engineering, cellular therapies, biosurgery and artificial and biohybrid organ devices.

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Centers like the Pittsburgh Life Sciences Greenhouse, Innovation Works, The Technology Collaborative and the Pittsburgh Technology Council help entrepreneurs bring innovations to the marketplace

Newcastle • Supporting business and entrepreneurs – helps science based businesses to innovate and grow with support from a dedicated team

• Innovation Machine – A business model which helps entrepreneurs develop insight-led business ideas – starting with unmet need

• Education, Community and Skills – Helping young people , teachers and parents to get involved and benefit from science and focused on STEM

• Science Locations – Supporting investors to find the perfect location to grow their business in specific areas: • Ageing and Health • Sustainability • Stem Cells and Regenerative Medicine

• ‘Be Part of Science City’ Outreach – Access to a toolkit, developed to help ambassadors promote NSC across the world, including and using the NSC logo

Nottingham • The aims of Nottingham Science City are to: – Nurture Nottingham’s role as an international leader in scientific discovery and teaching excellence – Stimulate community pride and interest in our scientific heritage – Convert science into thriving businesses in Nottingham

• Focused on three areas: – Creative – Green-tech – Med-tech

• Future Lab – proposed new state of the art medipark next to Queen’s medical center

York • Bringing world-class research together with industry • Facilitating growth and innovation in biorenewables & new environmental technologies • Managing specialist sector networks: Bioscience York, Creative York and IT & Digital York • Delivering tailored business mentoring • Securing major capital investment in support of a leading knowledge economy • Connecting the wider community with the benefits of living and working in a leading city of science.

Innovation Nation…

The UKGovernment, Government’s Business, Research Base….etc Innovation Nation: • Role of Government: –

Move from ‘supply-side’ to demand pull of innovation and how can government use procurement and regulation to drive innovation

• Business Innovation: – – – –

TSB will bring forward 5 new Innovation Platforms over 3 yrs Businesses receive innovation vouchers to work with Knowledge-based institutions finance for innovation businesses at all stages of growth Double number of KTP’s, increasing their flexibility, applicability to a range of educational institutions

• Supporting the Research Base –

IP and Universities

• International Innovation – – –

DIUS international strategy focused on higher education, skills, research+innovation TSB marketing plan to help deliver a step change in the ability of UK business to compete for grants in EU Framework Programme 7 The Technology Strategy Board view on opportunities which may arise from the adoption of EU regulations to stimulate business innovation

• Innovative People –

Skills academies, University Enterprise networks, STEMcompete

• Innovation in Public Service • Innovative Places

UK Innovation Policy – Key Features • Sustained Investment – Investment in science and innovation has increased from £1.9 billion in 1997 to £3.9 billion in 2010/11 – UK established the 10 year funding framework for science and innovation in 2004; to increase % of R&D to GDP – Significant investment in innovation (over £1 billion in current spending review period)

• Independence and Excellence – Funding for scientific research and innovation is allocated by independent expert bodies, research councils and the technology strategy board with regional priorities identified and supported by RDA – Technology and economic / business assessment of R&D projects – Measurement infrastructure focused on priority areas

UK Innovation Policy – Key Features • Support for Knowledge Transfer – Creation of higher education innovation fund (150 million pounds by 2010/2011) supporting technology transfer offices and other KT activities – Support for seven focused innovation products (including collaborative R&D, KTN’s and KTP’s)

• Fiscal Incentives – R&D tax credit – £3 billion of support for36,000 claims by March 2007 (over 30,000 claims worth over £1 billion under SME schemes and over 5000 claims worth about £2 billion under the large company scheme) – Publicly funded Venture Capital programs have committed £400 million since 2000. Government has also launched UKIIF with £150 million investment in May 2009

The UK’s link between Government, Universities, and Business • Driven by Government, each of the Research Councils has published a vision or strategic plan which sets out the overarching research aspirations and priorities over a 5 year plus period.

• These strategies are developed through consultation with academia, Govt, public sector, industry, charities and all contain the following priorities: – invest in high-quality research (about 2/3 of budget goes there) – attract and train first rate people – translational research or technology transfer or knowledge transfer

• Industry, Government, Universities and Research Institutions have been working closely together across all sectors.

See: www.rcuk.ac.uk/aboutrcs/operation/strategies.htm

The UK’s link between Government, Universities, and Business • Historically, the primary role of universities was academic research – translational research and working with the industry would largely depend on the individual academic • Over the past 10 years, Government provided a framework to promote business/university collaboration and technology transfer, intellectual property, skills, innovation in science, and the targeted promotion of certain areas of technology or science (e.g. healthcare and life sciences), for example: – – – – – – –

Life Sciences Blueprint, July 2009 Sainsbury Review of Science and Innovation October 2007 Gower’s Review of Intellectual Property, December 2006 Leitch Review of Skills, Spring 2006 UK Stem Cell Initiative Report, November 2005 Nanoscience and Nanotechnologies, July 2004 Lambert Review of Business University Collaboration, Dec. 2003