Two women at a bar with a bottle between them.
Women at a bar in Manhattan's East Village. A new study finds that a greater number of bars and restaurants corresponds with higher levels of innovation. Carlo Allegri/Reuters

A new study finds evidence that Jane Jacobs was right about the dynamic and innovative qualities spurred by living in dense, urban neighborhoods.

Long ago, Jane Jacobs showed us how dense, diverse urban neighborhoods filled with short blocks and old buildings were catalysts of innovation and creativity. But when economists and urbanists measure innovation they typically look at big geographic areas like metros. Yet, what Jacobs was talking and writing about was the micro-geographic texture of much smaller neighborhoods like her own Greenwich Village.

A new study, forthcoming in the Review of Economics and Statistics, takes a close look at the effect of small urban neighborhoods—and in particular on key characteristics of their physical layout—on innovation. The study, by Maria P. Roche, a doctoral student at the Georgia Institute of Technology’s Scheller College of Business, examines the effect of certain neighborhood characteristics on innovation. The study compares the rate of innovation (based on patents granted between 2011 and 2013) to two key neighborhood characteristics that capture older more compact, neighborhoods built before the mass onset of the automobile: street density (based on the total miles of streets shared by cars and pedestrians) and percentage of housing stock built before 1940.

The study includes a range of control variables to capture the role of amenities like bars and restaurants; the role of a particular type of human capital or talent measured as concentration of college grads and inventors; the presence of key knowledge institutions like universities and colleges; and physical characteristics such as land area and bodies of water. To get at this micro-geography of innovation, the study looks at Census block groups and tracks the connection between neighborhood form and innovation in more than 120,000 block groups or across the country

The study finds that neighborhood form—in particular the density and layout of its streets—has a considerable effect on innovation. It finds that a ten percent increase in street density or connectivity is associated with a 0.05 to 1 percent increase in innovation. This is in line with previous studies which find that a ten percent increase in employment density results in a two percent increase in per capita patenting over a ten-year period and that a ten percent increase in highway connectivity leads to a nearly two percent increase in patenting across metro areas over a five-year period.

Neighborhoods with higher street density not only have more patented innovations, but more citations of the patents they generate. This suggests that neighborhoods with denser streets help facilitate greater knowledge exchange and higher levels of interaction over the ideas they generate, as Roche told me via email. The report reads: “Studies comparing citation data with surveys of inventors have detected a strong correlation between patent citations and knowledge flows.”

The study also finds population, employment, and amenities like bars and restaurants to be positively associated with neighborhood level innovation. Roche sees these as factors that work together with the layout of streets and neighborhood form to spur interaction between people—the exchange of knowledge and ideas that ultimately generate new innovations.

For too long, we’ve seen innovation as something that takes place in corporate R&D (research and development) centers, university laboratories, and suburban office parks. But as Jane Jacobs long ago said, new innovations are more likely to come from the density and diversity of urban neighborhoods.

These Jacobs-identified factors have tended to elude economists and urbanists, who have lacked the kinds of detailed neighborhood-level data and analysis needed to track and identify them. Until now, most studies of the geography of innovation have tracked innovations or startup companies broadly across cities and metro areas. Roche’s study uses detailed data to help us better understand how factors of urban form interact with density to shape geographic micro-clusters of innovation at the neighborhood level. Not only does innovation turn on the presence of universities or concentration of talent or human capital, but on physical characteristics like street layout and form of the neighborhood.

As Roche puts it, her findings provide real empirical “support for the idea that the actual physical capacity to connect people and ideas may, in fact, be one reason why cities, and some neighborhoods are more conducive for innovation than others.” The forms and structure of our cities and neighborhoods are not add-ons or afterthoughts. They are key features of the innovative fabric that powers our economy as a whole.

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