November 2008

Innovation Considered Critical for Regional Economy

By Lisa Tehrani

As the economy falters, local economists are increasingly turning to a new model of economic development – one that focuses on innovation – as the way forward.  Earlier this fall a group of government officials, high-tech industry leaders, and economic and financial industry representatives gathered at the University of California, San Francisco’s (UCSF) Mission Bay campus to participate in the New Model for Driving 21st Century Economic Development conference.

Doug Henton, President of Mountain View-based Collaborative Economics, explained that economists consider the 21st Century economy to be idea-based, rather than anchored in manufacturing.  From this perspective the Bay Area is competing with the rest of the world based on its ideas and ability to innovate. Success is measured by the quality of the work force and speed by which new concepts get to the market.

According to the new economic development model, “Clusters of communities acting as regions are large enough to achieve a critical mass of companies, institutions, infrastructure, and talent, yet small enough to allow for the close interactions among people, firms, and organizations required to innovate and ultimately compete in the global economy.” A natural cluster already exists in the Bay Area, with Silicon Valley at the center, but more needs to be done to secure it, according to Henton.

Henton thinks the region needs a “habitat for innovation,” meaning that innovative regions need to have a support system that includes other necessary sectors.  Livable communities are critical to innovation; Henton applauded the Mission Bay Redevelopment Area as a good example. “Housing, transportation and land use policies all play an important role,” he said.  Henton also points to Mountain View as a model, “It is not an accident that Google is located in Mountain View,” he stated.  “If you want to have an innovative economy you need to have a community that understands the value of innovation.”

David Johnson, Business Development Program Director for the City of Menlo Park, was impressed with the conference.  “I was really blown away by it because it is thinking into the future and what direction we need to go,” he said.  Menlo Park will monitor its economic development with new metrics, such as by tracking patents and the amount of venture capital issued to local companies.  As with Southeast San Francisco, Johnson noted that Menlo Park has significant amounts of industrial space that’s no longer viable, prompting land owners to upgrade their buildings for high-tech tenants.

Converting old, industrial space for high-tech occupants has been a hot topic in Southeast San Francisco.  With a spate of new life science related development in Mission Bay, and proposed innovation and life science zoning districts in the Central Waterfront, it appears that the San Francisco Planning Department has bought into the new economic development model.   

With the Bay Area coming in fourth place as a leader in the global economy – after London, Tokyo and New  York – conference leaders focused on how the region can maintain its competitive edge.  According to Sean Randolph, President and Chief Executive Officer of the Bay Area Council Economic Institute, “We need to do this in a more collaborative way.”  He explained that the rest of the world is investing in infrastructure and implementing focused technologies, leaving no room for complacency in the United States.  

“You have to constantly innovate in order to survive,” agreed Dr. Regis Kelly, Director of the California Institute for Quantitative Biosciences.  Kelly reflected on how the Bay Area has a significant number of innovative companies, particularly in the life science arena, and supported in part by substantial public sector funding. He noted that Mission Bay has land available for more life science companies, and that there’s an interest in clustering together academics and industry in the area.  For example, Pfizer is locating its Biotherapeutics and Bioinnovation Center adjacent to UCSF’s Mission Bay campus.

Kelly stressed the concept of developing “regional innovation brokers,” people who can bring together inventors, financiers, production and marketing experts to create new partnerships.   He noted that the Bay Area isn’t the only area working on this model:  Boston and San Diego, as well as cities in Europe, China, Singapore and Korea are also emerging as leaders in innovation.  According to Kelly oppressive immigration laws hinder the United States’ ability to excel in innovation. “The competition is real and if we do not move quickly then we are in real trouble,” he said.

Henton believes that innovation will be the key to enabling the economy to pull-out of the financial crisis. During the last decade considerable investment was made in housing and commercial building, but that activity has almost completely stopped.  Over the next several years there’s likely to be significant investment in more productive areas and high paying jobs. “We need to diversity and grow the economy with jobs that export dollars. I am hoping to come out of the crisis much stronger,” he explained.

 

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