CNBC25: Rebels, Icons and Leaders

Look beyond Silicon Valley for lasting innovation

Susan Christopherson, Special to

When teaching at UCLA in the 1980s, I asked my class what they wanted to do when they graduated. "I want to be an entertainment lawyer." "I want to be a set designer." "I want to be a producer." These weren't the kind of answers one would typically expect to hear from 18-year-olds, but these were Los Angeles kids. They had a sense of who succeeded in local industry, and they knew people (sometimes their fathers) in those jobs.

What this told me was that new ideas and creativity aren't just the property of individual entrepreneurs. The creative industries that constantly produce new ideas depend on knowledge that develops in particular places and that may be handed down from one generation to another. It also shows me that innovation and place are connected. The people who live in some cities develop a particular genius for making things and for continuous innovation that we need to celebrate and foster.

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Strangely, we seem to have lost this understanding about cities and creativity. We live in an era when innovation doesn't mean making things or making things better. It is about making deals—finance first, invention second. So the new geography of innovation is centered on places prominent during the financial bubble: San Francisco, Boston, New York. In these cities, dealmakers connect with the venture capital that allows them to demonstrate proof of concept and with the financiers who can find buyers for their "app" or bioscience intellectual property in global markets.

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Richard Florida's Martin Prosperity Institute recently released a report on these "start-up cities" that illustrates how narrow our ideas about innovation have become, and how few cities and industries are considered players. If you aren't in the computer or biosciences, which show the highest rates of return for venture capital, your new ideas and inventions rapidly fall outside the frame of what counts as innovation.

There is another model. It's not sexy. Nor is it built around quick returns and get-rich-quick schemes. It's the kind of innovation that transforms industries through learning, experimentation and application: product and process innovation. So, while the Nobel Prize-winning invention of graphene came from two brilliant British scientists, it is being adapted, tested and commercialized for industrial use in the Chinese electronics industry in cities such as Wuxi and Shenzen. These cities have the know-how to use the new material to transform products and processes. They have something more than entrepreneurs. They have industries.

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For another example of the difference between innovation in financial deals and in products and processes, we can look at a U.S. city that is missing from the institute's map of start-up cities: Houston. It is adding jobs and growing at an exceptional rate because of an industrial innovation in how to extract oil and gas.

Whether you are for or against hydraulic fracturing, there is no doubt that it is a disruptive technology that is transforming the U.S. economy. This technology did not spring full-blown from the mind of one entrepreneur. It developed after years of testing and information-sharing among engineers and rig crews and geologists. It was rooted in the business of oil and gas extraction and in the place—Houston —where people think about how to improve and profit from resource extraction every day.

When hydraulic fracturing became economically viable, it spawned a production boom that has affected many parts of the world. Yet the place that benefits the most is Houston. Companies employing scientists, engineers and consultants of all kinds are expanding there, the headquarters of the industry, even as fracking technologies are deployed globally.

While start-ups are increasing in the financial innovation cities, only a fraction will turn into viable businesses. By contrast, Houston is expanding its significant industrial and export base in a global industry. Both Boston and Houston are about innovation, but while one gets all the attention, the other is increasing employment, benefiting from the incremental transformation of a global industry.

Many U.S. cities are like Houston, though at a smaller scale. Michigan's reviving auto-industry cities show signs of transforming their supply chains. The center of the U.S. optics and laser-imaging, Rochester, N.Y., has lost jobs but retains critical expertise in an emerging industry with a growing global market. Though these cities have entrepreneurs, their inventions are primarily about transformation. They depend on shared knowledge and experience with processes, materials and products.

Cities don't drive these industries. Rather, they grow up around them to exploit their ability to create products and improve productivity by quickly transferring new ways of doing things from one company to another. In our enthusiasm to celebrate the financial entrepreneur with one salable idea, we may be neglecting the kind of innovation that cities do best. The most innovation-friendly cities create the ecosystem of talent and technical knowledge that fosters new ideas, and then they help those ideas grow into connected businesses that employ people—that is, into industries. They are not only about new ideas but about know-how.

Susan Christopherson is a Professor in the City and Regional Planning Department at Cornell University. Her research interests are diverse, but focus on industry location and regional economic development. She is Editor in Chief of the Regional Studies Association book series Regions and Cities, published with Routledge.