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Are Innovation Districts Right for Cities?

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Joshua Drucker
July 5, 2019

Drucker and his colleagues are authors of the report Innovation Districts as a Strategy for Urban Economic Development: A Comparison of Four Cases from which the material in this essay is drawn.

Innovation districts are a new strategy for urban economic development. They are zones designed to attract and support innovative companies and workers. How? By clustering startup firms and entrepreneurs along with programming and services such as incubators, mentoring and networking events. Many are planned as, “Live-work-play,” spaces, with a dense mix of land uses, convenient public transportation and cultural amenities.

Cities in the United States and worldwide are establishing innovation districts to advance various economic development goals, including job creation, revenue generation, neighborhood revitalization and economic modernization. As the trend spreads, cities may designate innovation districts to keep pace with competitors or may be persuaded by promotion from the Brookings Institution or the Global Institute on Innovation Districts.

The Cortex Innovation Community is one of the first innovation districts in the United States. It was founded in 2002 as a tax-exempt organization in an area of obsolete warehouses and aging manufacturing facilities in St. Louis with the mission of building an innovation cluster.

More than 250 companies and 4,000 employees in bioscience and other technology-intensive industries now work in the 190-acre district adjacent to St. Louis University and the medical campus of Washington University. Because Cortex is an independent non-profit entity, the City of St. Louis was able to entrust it with zoning, eminent domain, tax abatement and tax-increment financing authority. Substantial initial funding from by four anchoring research institutions—the two neighboring universities, the University of Missouri-St. Louis and BJC HealthCare—kickstarted development.

In fact, relatively little is known about how innovation districts perform over time. Are they likely to produce the impacts policymakers envision? How should they be structured and implemented to achieve their goals? These are some of the questions I, along with my colleagues Henry Renski and Carla Maria Kayanan,  investigated in research sponsored by the Ewing M. Kauffman Foundation. We examined the origins, settings, designs, implementation and outcomes to date of four United States innovation districts in Boston, Detroit, St. Louis and San Diego.

Few places possess the combination of institutional and legacy resources, human capital, committed leadership and motivation for action that characterized the St. Louis effort from the early 2000s to today. Yet other cities have been following suit with innovation district strategies that aim to build on their own assets and advantages.

Curiously, one of the magic ingredients to St. Louis’s success was the fear the area’s leaders felt for its future, including economic desperation rooted in corporate decline, fleeing capital and talent and previous failed economic development attempts. As it’s been said, “The threat of the hangman’s noose has a powerful way of focusing one’s attention.”

Significantly, the founders and supporters of Cortex didn’t let the risk dissuade them. They gambled that the eventual economic and fiscal returns would be worth short-term foregone revenue and long-term forfeiture of public control.

Another counterintuitive ingredient was the weak land market in St. Louis. It placed relatively few constraints on Cortex’s land acquisition and steady development pace, unlike innovation districts in Boston, San Diego and elsewhere that are pressured by competing land uses in stronger real estate markets.

Cortex delivers or sponsors many entrepreneurial and business supports (termed innovation centers), including incubators and accelerators, co-working spaces, networking events, management training and mentorship programs and multiple programs linking companies and entrepreneurs with researchers and students. The innovation district houses a mix of startup and established firms, offsite workplaces for mature companies and non-profit organizations.

Cortex focused from its start on fostering entrepreneurship, engagement among actors and realizing advantages from spatial proximity. With these features firmly in place, Cortex was able to fill in other innovation district features later, such as a mix of activities and appealing amenities.

Active, responsible, and dedicated leadership has been key throughout. Elite and respected individuals and institutions backed the project at its inception, and an experienced professional economic developer guided the organization through its transition to a fully-fledged innovation district. Issues arising with Cortex’s continued expansion, such as how to maintain cohesion across more varied industrial activities and potential gentrification and displacement, have no ready resolutions as of yet. These challenges will demand continued effective leadership.

Cortex has been, in many ways, the most effective of the four innovation districts we studied. It has achieved remarkable success in clustering innovative activities and jobs, developing and supporting entrepreneurship, and generating excitement— “buzz”—about the regional economy. Cities can and are looking at Cortex for approaches that may be adapted effectively for their own settings. Although not perfect, Cortex illustrates a real future for the idea of innovation districts.

Author: Joshua Drucker, University of Illinois at Chicago, Faculty Advisory Panel Member, Government Finance Research Center

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