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Federal Reserve Bank of Kansas City
Economic Review
Do only big cities innovate? : technological maturity and the location of innovation
Michael J. Orlando
Michael Verba
Abstract

Innovation enhances economic performance. High rates of innovation are associated with high rates of productivity growth, and faster productivity growth leads to higher real wages and improvements in standards of living. Consequently, many local policymakers are eager to encourage higher rates of innovation in their areas. Theoretical and empirical studies of the geography of innovation find that relatively populous regions are the most conducive to innovative activity. Large and densely populated places offer more developed markets for the specialized inputs used in innovation. Populous places also offer innovators greater opportunities to learn from one another. On the surface, these findings seem to offer little hope to smaller, more sparsely populated regions—places that would like to compete for innovative activity and the benefits of a knowledge economy. Are large populations a prerequisite for innovation? Orlando and Verba explore this common perception and find it is not always true. More populous regions dominate in relatively new technological fields, where innovations are more original. But less populous regions can compete in relatively mature technological fields, where innovations are more incremental. This finding should be of interest to research and development professionals—and to policymakers who are seeking ways to enhance regional innovative activity.


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Michael J. Orlando & Michael Verba, "Do only big cities innovate? : technological maturity and the location of innovation" , Federal Reserve Bank of Kansas City, Economic Review, issue Q II, pages 31-57, 2005.
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Keywords: Cities and towns
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