3. Innovation

This infographic was created for ICF by StudioLocale (www.studiolocale.com) using data from the Intelligent Community in Numbers report. For more information, click here.


The broadband economy is an innovation-driven economy. Economist Robert Solow won the Nobel Prize in 1987 for proving that 80% of all economic growth comes from the development and use of technology. The spread of global and local connectivity has had a fundamental impact on the necessity for innovation, its speed and its economic value. Why?

  • The first requirement for innovation is knowledge: of what customers want, of what other innovators are doing, and of what level of opportunity the market offers. Broadband has become the knowledge pipeline of the planet, making it possible for innovators to learn more faster than ever before.
  • Another critical requirement for innovation is access to talent. Broadband has allowed both multinational companies and small business to efficiently tap the world's best and brightest.
  • Innovation also requires access to markets. Broadband has made it far cheaper and easier to run a network of remote facilities or sales offices, to enforce standards of operation, branding and all the other factors in a successful marketing effort. And for innovators whose product can be marketed or delivered digitally, broadband opens the door to a global market.

Innovation-400.pngInnovation is essential to the interconnected economy of the 21st Century. Intelligent Communities pursue innovation through a relationship between business, government and such institutions as universities and hospitals. The Innovation Triangle or “Triple Helix” helps keep the economic benefits of innovation local, and creates an innovation ecosystem that engages the entire community in positive change. Investments in innovative technology by government contribute to that culture and improve service to citizens while reducing operating costs.

Building Innovation Capacity

Creating, attracting and retaining knowledge workers are the most important steps a community can take to raise its innovation rate. Unlike traditional business as most of us conceive it, an innovative business is all about people.

In addition to building a knowledge workforce, Intelligent Communities focus on building the local capacity to innovate rather than achieving a few "big wins" in the business attraction game. Sustainable economic growth is no longer built on attracting the manufacturing facilities, R&D labs or distribution hubs of the world's biggest companies. Why? Because the world's biggest companies are not net creators of jobs. They have been shrinking in terms of total employment for decade.

Where do you look instead for local income growth? To new companies. In the 20 years between 1980 and 2000, all of the net growth in American employment came from firms younger than five years old. The US offers one of the world's friendliest economies for start-ups, but the same trend is visible throughout the industrialized world, according to the Organization for Economic Cooperation and Development.

Most small companies are not fast-growing. But a percentage of small businesses are what MIT researcher David Birch termed "gazelles" – nimble, aggressive start-ups with big ambitions hungry for the resources needed to achieve them. Successful "gazelles" throughout the industrialized nations create the income growth on which the rest of the local economy feeds. To empower them, communities should work to:

  • Reduce the bureaucratic load. If your nation, state or province makes it difficult to start a business – as so many of them do – find out what your community can do to make it easier. Provide potential entrepreneurs with advice, help them with paperwork, even represent them before the various licensing and regulatory agencies. Convince local universities and technical schools to help entrepreneurs license technology on straightforward terms and develop progressive intellectual property policies. A community that makes it easier and faster to start and grow a business than its neighbors will enjoy a serious competitive advantage.
  • Create a pipeline for talent. Improving the educational assets of a community is a big job, which can take years or even decades to bear fruit. But it takes far less time and effort to create a more effective "pipeline" through which local business can find the talent it needs. The work starts with talking to the significant employers in your community to learn what skills they need. From that point, communities conduct multi-faceted efforts to attract and channel talent to their employers.
  • Expand access to funding. While slow-growing "income replacement" companies can fund themselves from cash flow, fast-growing "gazelles" need investment capital to realize their ambitious dreams.

The Role of E-Government

Governments may not directly create the business innovation that powers economic growth. But local government can play a powerful supportive role. In addition to the steps described above, Intelligent Communities also invest in e-government programs that simultaneously reduce their costs while delivering services on the anywhere-anytime basis that digitally savvy citizens expect.

E-government has an impact at the local level that is both subtle and complex. Leading by example, e-government raises the public's "digital awareness" and helps to create a more innovative culture that attracts leading-edge individuals and businesses. Money spent locally on IT products, services and support increases local demand for them. Effective e-government also signals to businesses and citizens that the community is a good destination for the "digiterati." In short, properly executed, e-government can do more than save money and improve service delivery. It can also become a robust economic development tool.

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