Building innovation ecosystems: Accelerating tech hub growth
Across the United States, from urban to rural areas, public- and private-sector leaders are coming together to build innovation hubs. Relative upstarts such as the Indianapolis 16 Tech Innovation District and Tulsa Innovation Labs are positioning themselves as new centers of innovation, drawing inspiration from established ones such as Silicon Valley and Boston. Currently, the opportunity to launch new hubs is especially ripe given there is nearly $2 trillion in new federal funding designed to boost US innovation, competitiveness, and national security over the next decade.
Innovation hubs are geographic areas that bring together R&D institutions (such as tech-enabled corporations, universities, and medical facilities), as well as venture capital, incubators, and start-ups. They fall into three categories: smaller districts, midsize tech hubs, and larger cross-regional ecosystems, with the latter being by far the most complex but potentially impactful (see sidebar “Ecosystems, hubs, and districts: A short primer”).
Think tanks and businesses have published papers defining the value proposition of innovation hubs and offering ways for companies to participate in the hubs that already exist. While these papers generally address the what and the why, this article builds on those perspectives to explore how public- and private-sector leaders could launch and scale an innovation ecosystem anchored in existing regional assets or accelerate efforts that are already underway.
Below, we outline the potential benefits of innovation hubs and offer six essential steps that leaders can consider for building and nurturing an ecosystem that promotes vibrancy, attracts top talent, and creates new and significant opportunities for economic and social development. The playbook we’ve created is based on our experience designing and developing best-in-class ecosystems and on our data analysis of more than 100 innovation districts and tech hubs. It addresses key elements of building an innovation hub including prioritizing sectors, attracting talent and investment capital, mapping strengths and opportunities, and identifying ways to support the effort.
Creating an innovation ecosystem is a significant undertaking, and success often pivots on how well those who lead it build relationships with new and established companies and institutions, fill gaps in the business landscape through investment, and address the specific needs of workers and residents.
Why innovation hubs matter
Spanning high-value, research-oriented sectors from aerospace to life sciences to software, innovation hubs generate attention and investment for a reason. Annual productivity growth for US innovation industries has averaged 2.7 percent since 1980—nearly double the rate of all other sectors. These industries also claim 60 percent of US exports, boast 80 percent of US engineers and patents, and attract workers with above-average earnings—generating even more jobs for the communities where they are located. Innovation hubs have higher commercial-rent growth rates than adjacent business districts: 5.3 percent from 2010 to 2020, compared with 4.8 percent, respectively. They outperform other regions and business districts economically, financially, and socially. In the most successful examples, the unifying, mission-driven spaces they create open new avenues for healthier, more diverse, and more connected communities.
There are compelling reasons to focus on innovation hubs now. In 2021 and 2022, the federal government passed a suite of legislation that aims to bolster the resilience of the US supply chain, promote the development of high-tech innovation clusters, and extend services and infrastructure to rural communities. Leaders can help finance and jump-start the development of an innovation ecosystem by taking advantage of competitive grants to regional innovation ecosystems and of legislation such as the CHIPS & Science Act, which creates incentives for domestic semiconductor manufacturing and authorizes funding for programs such as the National Science Foundation’s Regional Innovation Engines.
Six essentials: The innovation ecosystem playbook
Innovation hubs typically fall into one of three categories—districts, tech hubs, and ecosystems—that vary according to scale, levels of collaboration, and reach. Ecosystems are the newest of these, and definitions are evolving (see sidebar “Categorizing innovation districts, tech hubs, and ecosystems”). Broadly speaking, in addition to prioritizing technology-centered R&D, investment, and growth, these ecosystems usually feature assets such as robust mobility options (including public transit), as well as a strong technological infrastructure and accessible spaces to play, connect, and live. All this promotes inclusive and equitable economic growth, innovation, and productivity (see sidebar “Research Triangle Park”).
Public- and private-sector leaders could consider following a six-step approach to create and expand a thriving innovation ecosystem (Exhibit 1). A community-building program in a district will look quite different from one at an ecosystem, for example—but the playbook’s essentials remain the same across the spectrum of innovation hubs.