Competitive Communities are growing an innovation economy with creative ideas and risk taking. In a previous entry, Building Innovation Communities – Are You Counting Your Entrepreneurs? , we presented information about characteristics of communities with cultures of innovation that are attracting clusters of entrepreneurs. Growing better is more important than growing bigger. Innovation cultures require a system with incentives for growing companies. Investments in quality place to attract brainpower do more to create the environment for innovation than do investments in large incentive packages to compete in recruiting big companies.

CEOs for Cities and Progressive Policy Institute published a study in Fall 2000 that supports our competitive communities model, Urban Economic Prospects in the Knowledge Economy. Download the index or the document.

The following excerpts from the study set the stage for new opportunities and offer suggestions for Competitive Communities developing strategies for the new economy:

“In the old economy, a good business climate meant government-imposed or government-influenced low costs (e.g., taxes, and unemployment insurance). In the new knowledge economy, costs, while still important, are much less important than other factors. To succeed in the New Economy, places need to foster a culture of innovation. “

“Business cultures are embedded in larger civic cultures. These civic cultures vary significantly between different parts of the country. People talk about the open and friendly Midwesterners; the entrepreneurial Yankees; the "open-to-anything" Californians. Cultures that do best in the new economy have the following characteristics: people feel they are in it together; risk-taking is accepted and even encouraged; people are encouraged to cross institutional borders; and business, government, and labor trust one another.”

“There are new economic realities, many driven by technology, that are shaping the economic potential of cities and their surrounding regions. These include:

Trend 1: The high-tech industry is growing quickly relative to other parts of the economy and it is driving overall metro growth rates;
Trend 2: The high-tech industry tends to cluster in metropolitan regions;
Trend 3: Attracting and retaining talent is a critical factor to a region’s success;
Trend 4: Within metropolitan regions, high-tech development remains, for the most part, a suburban phenomenon;
Trend 5: High-tech products and services are transforming the rest of the economy, putting a greater share of the metropolitan and urban economy “in play.”

What to Do: New Economy Success Factors and Policies

Know Your Region
High-tech is not one industry, it is many, and each has different requirements and location patterns. Develop an in-depth and ongoing understanding of the regional economy, including how the major economic sectors work and what the region’s economic strengths and weaknesses are.

Stop Trying to Get Bigger; Try to Get More Prosperous
In the old economy, the goal of economic development was almost always to “get big.” In the new economy, the goal should be to “get prosperous,” meaning to create higher wages and better jobs, improve the quality of life, reduce poverty, and expand opportunities for all of the region’s citizens.

Stop Trying to Get Cheaper; Try to Get Better
In the old economy, “getting cheap” meant tax holidays, big subsidies, and other giveaways to companies that only cared about reducing costs. In the new economy, the key to success is to “get better.” Getting better means:

-Develop a vibrant technology infrastructure. Support and enhance high quality research universities and institutions; invest in fast and low cost telecommunications infrastructure; and expand access to the Internet.
-Create a skilled workforce. Make all schools high quality schools; increase training in technology skills; create industry-led workforce development alliances; reform local Workforce Investment Boards.
-Create a great quality of life. Reduce crime, increase transportation mobility, boost “New Economy culture” (European-like urban amenities combined with Western U.S.-like outdoor recreation activities), and ensure adequate physical infrastructure.
-Foster a culture of innovation. Identify cultural strengths and weaknesses; recognize and celebrate innovation, both public and private; support the formation of high-tech business councils to encourage networking and learning.
-Reinvent and digitize government. Government in the New Economy can’t govern alone—it needs to form strategic visioning and managing partnerships with the other key players. Be entrepreneurial and innovative and rely on information technology to create a fast and responsive government.”