Two economists argue urban environments help foster the borrowing of ideas even better than they harvest original ones.
We all know that cities are great engines of innovation. One reason that's the case, as Emily Badger recently pointed out, is that cities grow "superlinearly": interpersonal connections grow at an greater rate than sheer population, and with that super proximity comes a super exchange of ideas. The secrets of industry, as economist Alfred Marshall once wrote, are truly "in the air."
But innovation is a blanket term that can encompass very different things. Scholars who study the subject typically limit it to the urban proliferation of patents. For sure, the creation of original concepts and products is a sign of innovation. At the same time, it could also reflect a new way of doing business — applied from some other sector, perhaps, or even adapted from a competitor for some other purpose.
So we know cities innovate, but we don't necessarily know what that innovation means.
Well, we have a slightly better idea now thanks to the recent work of economists Neil Lee of Lancaster University Management School and Andres Rodriguez-Pose of the London School of Economics. Lee and Rodriguez-Pose used a sweeping 2010 business survey to study the innovation patterns of roughly 1,600 small and medium enterprises across the United Kingdom. The survey divided innovation into two types (products and processes) and two sources (entirely "original" ideas or merely those newly "learned" to the firm).
The main results of the survey fit well with what's already known about urban innovation. U.K. firms located in the city were indeed more likely than those in rural areas to report both new products (52 to 46 percent, respectively) and new processes (43 to 34 percent). From there, Lee and Rodriguez-Pose dug deeper to try to understand how exactly this urban advantage emerged.
When it came to new business products, cities seemed to derive their innovation from some combination of original and learned ideas — not really one or the other. So the city environment, ripe with chance exchanges and interactions, might only explain a sliver of new product development. Some complex combination of other forces (e.g. creative inspiration or specific demands or more approaches to problem-solving) is also involved.
When it came to new business processes, however, the urban advantage seemed to rely almost entirely on ideas learned from neighboring firms (as opposed to original ideas). Here the city itself would appear to play its greatest role in innovation. Greater proximity to other firms, and perhaps also greater employee movement from company to company, no doubt increases the flow of outside information and leads to new ways of working.
As Lee and Rodriguez-Pose conclude, in an upcoming issue of Urban Studies, there's probably "a greater degree of nuance with respect to the ways in which cities support innovation" than often perceived:
Underlying the innovation advantage of cities are two separate processes. One may allow new approaches to problem-solving and the development of entirely new products. Yet alongside this, a second allows urban firms to learn, or rather mimic, other firms and gain an innovation advantage from this.
There are any number of reasons why cities might be better suited to perpetuate learned ideas than to harvest original ones. For starters, truly original innovations are quite rare. They're also quickly patented, which makes them tough to emulate. Beyond that, customers might not flock to a company seen as creating only copycat products, whereas they probably couldn't care less how the firm actually operates.
So there may well be secrets of industry wafting through the city air, but they don't stay secret for long.