Archive for the 'innovation' Category

A modern industrial strategy

February 3, 2017

A What Works Centre post I thought would be good here. Written with Henry Overman.

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Much has already been written on the UK Government’s Industrial Strategy Green Paper. This post isn’t intended to provide an overall assessment or spell out our individual views on the approach being set out (they differ, depending on which of us you ask). But there are areas where the proposed strategy will shape the work that we’ll do at the Centre and where we also hope that our work will influence the implementation of the eventual strategy.

[Full disclosure – the Centre is cited in the document as one of the institutions the Government hopes will help improve local economic growth.]

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The first area relates to what we do and don’t know about policy effectiveness, particularly when it comes to some of the Strategy’s 10 pillars – which are a mix of tech (science, research and innovation) cross-cutting (skills, infrastructure, supporting business growth, procurement, trade and inward investment) and sector (new sector deals, clean energy). Academics would call this a ‘matrix’ approach.

Take, for example, policy to support business to start and grow. We know that there are market failures here – entrepreneurs often make avoidable mistakes, which better information could help fix; many young firms need better access to early stage finance (the Green Paper talks about ‘patient capital’).

The crucial question is: what’s the right policy mix to help address these challenges? Our evidence reviews on business support and on access to finance suggest that around half of schemes have measurable impact against policy objectives but around half don’t. Our reviews and associated toolkits start to identify the elements that might go in to the design of a more effective set of interventions. And we’ll soon be publishing more toolkits on incubators, accelerators and science parks. All this material provides guidance on how we might improve support to businesses but major challenges remain – both in terms of gaps in our understanding and embedding the evidence in policy development.

We are in a similar position when it comes to policy to develop skills. We know quite a lot – see, for example our evidence reviews on employment support and apprenticeships and our toolkit on training (soon to be supplemented by a toolkit on apprenticeships). Changes to policy design can improve effectiveness but, once again, there are gaps in our knowledge and challenges in implementation.

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Things are more complicated when it comes to investing in science and promoting innovation. We can say something about the specific policy tools – e.g. from our evidence reviews we know that both R&D grants and tax credits drive up innovative activity. But it’s not so clear whether increased innovation at the firm level feeds in to improved local economic performance and there are lots of unanswered questions about the appropriate policy mix. That ambiguity is one of the reasons why people advocate such different approaches to strategy.

In the interests of openness – we should note that one of the things our review did find was that grants and loans programmes that target particular production sectors appear to do slightly worse in terms of increasing R&D expenditure and innovation, compared to those that are ‘sector neutral’. So, while it makes sense for government to recognise that different sectors might need different policy responses (e.g. in terms of the institutional structure that supports those sectors) this might increase the challenge of effective policy implementation in some of the other policy areas.

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Questions of infrastructure are similarly challenging. The evidence that we do have on the link from transport to local economic growth raises some questions about the effectiveness of these policies for turning around areas that are struggling. But at the same time, we know that such investments can help drive growth in areas where travel times and congestion are a big issue (and not all of those areas are in London and the South East). Getting the right balance will be crucial.

As with innovation expenditure, people are willing to advocate for very different approaches – particularly when it comes to the overall pattern of expenditure. We’ll continue to make the case that focussing on the overall pattern of expenditure isn’t helpful when it comes to shaping effective policies. What we need is a better understanding of the economic impact of different schemes and improved ways of feeding this information back in to decisions about scheme prioritisation. This will be where our work will focus in the coming years.

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We could make similar points about the other pillars, but in the interest of space, let’s turn instead to a final cross cutting issue – whatever happens we think that to be successful, industrial policy will need to be inherently experimental. How we deliver and develop the policy will matter a lot.

Industrial strategy is always going to involve unknowns. Most fundamentally, because it involves funding basic science (or commercialising new ideas) – not all of which are going to work out, so wouldn’t be delivered by the market. In other cases, investments will trigger spillovers between parts of the economy that are hard to see upfront.

Finally, unknowns crop up because – for a lot of the things Governments want to do as part of industrial strategy – we still have a long way to go in understanding what is an effective policy mix. In addition to the policy areas covered above, at least three of the Pillars – strategic procurement, innovative place strategies, and institutions – are subject to big knowledge gaps in terms of what works. As a result, how we implement future industrial strategy will be crucial.

As you might expect, we will be arguing for an experimental approach. We need to test lots of different ideas, figure out what works, scale up the things that do and drop those that don’t. Many of those calling for a more interventionist policy – such as Harvard’s Dani Rodrik – have consistently emphasised this point. Many people have argued that the Green Paper’s approach isn’t such a fundamental break with the past. But a greater focus on flexibility, on experimentation, and on testing and improving, would help differentiate this from the past and increase the chances of success where so many other strategies have failed.

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Originally posted here on 27 January.

‘After Florida’ wins a prize

December 21, 2016

I’m delighted (and honestly, surprised) to have won the 2016 Jim Lewis Prize for my paper on the economics of diversity – After Florida – which is out in European Urban and Regional Studies. The prize is awarded for the most innovative paper published in EURS the previous year.

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You can read the whole paper here. To give you a flavour, the abstract is below.

In recent years, most European countries have experienced substantial demographic changes and rising cultural diversity. Understanding the social and economic impacts of these shifts is a major challenge for policymakers. Richard Florida’s ideas have provided a popular – and pervasive – framework for doing so. This paper assesses Florida’s legacy and sets out a ‘post-Florida’ framework for ‘technology, talent and tolerance’ research. The paper first traces the development of Florida’s ideas. ‘Florida 1.0’, encapsulated by the Three Ts framework, has performed badly in practice. There are problems in bringing causality to the fundamental relationships, and in consistently replicating the results in other countries. ‘Florida 2.0’, though suggests that Creative Class metrics have value as alternative measures of human capital. This creates space for a post-Florida agenda based on economic microfoundations.

I argue that the growing body of ‘economics of diversity’ research meets these conditions, and review theory and empirics. Urban ‘diversity shocks’ shift the size and composition of populations and workforces, with impacts operating via labour markets, and through wider production and consumption networks. While short-term labour market effects are small, over time low-value industrial sectors may become migrant-dependent. Diversity may help raise productivity and wages through innovation, entrepreneurship, market access and trade channels. Bigger, more diverse cities help generate hybridised goods and services, but may also raise local costs through crowding. All of this presents new challenges for policymakers, who need to manage diversity’s net effects, and address both economic costs and benefits.

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The paper has its origins in the intro chapter to my PHD thesis. If you fancy wading deeper in, that’s here.

Physicists explain things to me

August 19, 2016

1 6sljSYxo4QWBg3PAIHIUEQ

I’ve written a long post on cities, superlinear scaling and universal laws over at Medium.

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I’ve been gradually building a presence there: it’s a platform that works particularly well for long-form pieces like this. Go take a look!

 

Jane Jacobs: City Limits

May 18, 2016

(c) 1971 Laurence Hyde / NFB

City Limits is a lovely 1971 film about Jane Jacobs. You can watch the whole thing here; it’s about 30 mins long. Directed by Laurence Hyde for the Canadian National Film Board, the documentary features Jacobs talking through her ideas, interspersed with some terrific footage of Toronto, New York, London and other cities around the world. I’m indebted to Martin Dittus for digging it out of the NFB archives.

(c) 1971 Laurence Hyde / NFB

The 30-minute film is worth watching for many reasons. For starters, Jacobs herself appears in much of it – sat in a park, shopping in a market, buying a newspaper, and at one point clambering into a helicopter to survey Toronto from above.

(c) 1971 Laurence Hyde / NFB

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At the same time, the film is a great summary of Jacobs’ big ideas about how urban neighbourhoods – and cities – work, when they succeed and when they fail. Jacobs is a superb writer, but she never spells it out for you. The film does, and in the author’s own words:

A city is an organism, and a very complex  one, and an ever changing one.  I would like us to see cities as ecologies – because that’s what they are. As surely as the ecologies of the natural world. The ecology of a city is of the same order of complexity as the ecology of a woodland. And this is what proper city planning ought to be directed to.  

This is the essence of a crucial chapter buried in the back of The Death and Life of Great American Cities: ‘The Kind of Problem a City Is’ (page 558 in my edition). It’s the research design for the book: it’s also Jacobs’ whole way of doing urbanism.

jacobs34 jacobs21 jacobs16(c) 1971 Laurence Hyde / NFB

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Watching the film reminds me how prescient Jacobs was. There’s a surprising sequence on cultural diversity, which Jacobs presents both as an amenity, and as a channel of innovation:

Foreign districts introduce extra dimensions into a city. They often introduce new kinds of food, new customs, new music, even new kinds of clothing. And they’re a lot of fun for people who aren’t familiar with those customs, foods and so on. … that’s the way things spread in cities. And from cities to other places.

(c) 1971 Laurence Hyde / NFB

This innovation argument is the big idea from The Economy of Cities. ‘Jacobian externalities’ are knowledge spillovers across sectors: these are self-reinforcing, and help cities become resilient to economic shocks. What I hadn’t previously spotted was that Jacobs sees *cultural* and *economic* diversity as so closely intertwined.

(c) 1971 Laurence Hyde / NFB

Jacobs also makes some subtle points about mobility and technology. She came to prominence in New York opposing Robert Moses’ megaschemes for urban motorways and ‘sum clearance’:  not surprisingly, then, much of the film is concerned with congestion and pollution. But Jacobs has a much more profound argument:

People worry that there’s too much progress – in fact it’s just the opposite. … Automobiles don’t represent     progress any more – they’re pretty old …

There’s no solution in saying people should live close to their work and shouldn’t travel. People change their  jobs, goods have to move. So the problem is mobility – but the automobile isn’t providing much of an answer.

In other words: the car-based city is old thinking. The future is mass transit, bikes, and mobility as a service, enabled by technology. Scroll forward to 2016, and that future is taking shape all around us.

In 1971, however, this meant ‘Dial-a-Bus’ [link7] – a prehistoric Uber Pool, summoned to your house by landline and whisking you and fellow commuters to the local train station.

(c) 1971 Laurence Hyde / NFB

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Jacobs was a thinker and an activist, not a consultant. It’s not as easy as it looks to derive practical guidance from her work – not least because she is the original full-field urbanist, drawing together history, built form, economics, social structure and culture into her analysis. Watching the film is a salutary reminder of this; it also emphasises how much Jacobs’ work draws on close observation of specific places she knows well.

Death and Life … tends to be distilled into four urban design tropes: high density, short city blocks, mixed use, old buildings. Result: every 1990s block of flats with space for a shop at the bottom (but VAT rules that incentivise developers to knock down old buildings). That’s clearly not enough to make a street or neighbourhood ‘work’, if it has no relation to the demographics and socio-economic life around it. The film is a neat reminder that we shouldn’t reduce Jacobs to design code box-ticking. But it also highlights just how tricky it is to roll her ideas into generalised practice. ‘What should a city be like?’ asked Reason in 2001. Jacobs’ answer: ‘it should be like itself’.

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(c) 1971 Laurence Hyde / NFB

The film also highlights how much Jacobs’ thinking about urbanism is a product of its time. All around her cities were losing people to the suburbs, and losing old urban grain to modernist, car-centric city form. Many neighbourhoods were emptying out. In London and New York today, all of that has flipped around: populations are growing, high-value activity is back, and we have an urgent crisis of housing and cheap space.

Ed Glaeser famously has a go at Jacobs in The Triumph of the City, arguing that preserving old buildings simply chokes off the supply of bigger, newer ones, and the subsequent gentrification pushes out the artists and mixed communities she sought to preserve. I’m not sure that’s completely fair: she was dealing with a different era’s problems. But it also seems that she had fairly little to say about today’s urban crises. That is the message from of this 2003 Brick interview, conducted three years before Jacobs’ death. She’s asked whether today’s cities are in better shape. She replies:

In some ways there’re worse and in some ways better. The things that are worse I don’t think are so much focused or anchored in cities as they are in our North American culture as a whole … I think that things are getting better for cities in that there’s not the great ruthless wiping away of their most interesting areas that took place in the past … however, I think the urban sprawl outside of cities has gotten much worse.

In the Reason interview she goes a little further, citing Portland, Seattle and San Francisco as ‘attractive places … where good things are being done.’ The interviewer asks about gentrification and rising prices. She bats away the question.

By this point her  writing had also moved on to other issues:  the nature of work, economic ecosystems. Clearly, she wasn’t much interested in going back to the street.

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It’s early morning, and the city is beginning to dance. The camera follows Jacobs as she crosses a busy street. A man walking beside her notices the camera and gazes in increasing curiousity at our heroine, trying to place her. Unable to do so, he wanders away. Lost in thought, she disappears into the crowd.

jacobs9 jacobs8 jacobs10 (c) 1971 Laurence Hyde / NFB

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Here’s the link to the film again.

 

Big data and local growth policy

March 11, 2016

Twitter.

I’ve written a couple of posts for the What Works Centre on how to use new data sources, and data science techniques, in designing and evaluating local growth programmes.

In parts of the interweb ‘Big Data’ is now such a cliché that dedicated Twitter bots will dice up offending content – see above. But in local economic development, and urban policy more broadly, researchers and policymakers are only beginning to exploit these resources.

The first post lays out the terrain, concepts and resources. The second post is more focused on evaluation, research design and delivery.

Happy reading!

 

What I did in New Zealand

August 4, 2015

Matiu / Somes Island. (c) 2015 Max Nathan

Am back from New Zealand and just about over the jetlag. Thanks again to Motu and the Caddanz team for hosting me. I’m already plotting a return trip …

Here’s my talk from the Pathways conference. This is on the economics of migration and diversity, and brings together various projects from the past few years.

Here are slides and audio from my public policy talk at Motu. This looks at the What Works agenda in the UK, particularly the work of the What Works Centre for Local Economic Growth, and some of the opportunities and challenges these institutions face.

New essay on London’s digital industries

June 27, 2015

I’ve written a piece for the new issue of London Essays, the beautifully-designed journal published by Centre for London.

Having covered soft power, the latest issue looks at technology. It launches on 1 July, but you can read my article early here: I take a look at London’s digital industries and their contribution to the city’s economic future, crunch some new numbers and try not to make too many jokes about artisanal products.

Hope you enjoy reading it!

Writing it has been good preparation for the LSE lecture I’m chairing on 7 July, where Gerard Grech, CEO of Tech City UK will be setting out his thoughts on London’s digital future, and the prospects for the tech sector across the country. If you can make it, please come say hello.

 

 

Future chat

May 20, 2015

(c) 2015 Max Nathan

I’ve been busy working on a bunch of projects recently, but will be escaping the office to do a couple of talks over the summer. Each very different …

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On 7 July I’m chairing an LSE lecture by Gerard Grech, CEO of Tech City UK. We’ll be talking about the extraordinary growth of London’s digital economy, and where these sectors could take us next.

I’ve just completed a long piece on London’s digital evolutions for the Centre for London think tank’s new London Essays imprint, so I’m looking forward to this one. Emma and I met Gerard recently and were impressed by his openness. It should be a great session. Details are here.

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On 23 July I’m in New Zealand at the ‘Pathways, Circuits and Crossroads’ conference on the economics of immigration and diversity, which is organised by the University of Waikato, Massey University and Motu. I’m very grateful to Jacques Poot and Dave Maré for inviting me over. They’re just beginning a major programme of work on immigration and diversity in NZ, and I’m hoping we can kick off some interesting collaborations when I’m in town. More details of that event when I have them.

If you’re around for either of these, come and say hello!

New big data paper

November 27, 2014

(c) 2014 NIESR / GI

Anna Rosso and I have just published the next phase of our big data project. Kindly funded by NESTA, this builds on the work we did with Google last year. As before we’re working with Growth Intelligence, who’ve developed the very nice multi-layer dataset we use. We’ll be publishing a further paper sometime in the New Year.

You can download the full NIESR working paper here or a summary here. A version of the paper will also be coming out in Research Policy shortly.

The abstract is below. Or take a look at this writeup in the FT.

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Governments around the world want to develop their ICT and digital industries. Policymakers thus need a clear sense of the size and characteristics of digital businesses, but this is hard to do with conventional datasets and industry codes. This paper uses innovative ‘big data’ resources to perform an alternative analysis at company level, focusing on ICT-producing firms in the UK (which the UK government refers to as the ‘information economy’). Exploiting a combination of public, observed and modelled variables, we develop a novel ‘sector-product’ approach and use text mining to provide further detail on the activities of key sector-product cells. On our preferred estimates, we find that counts of information economy firms are 42% larger than SIC-based estimates, with at least 70,000 more companies. We also find ICT employment shares over double the conventional estimates, although this result is more speculative. Our findings are robust to various scope, selection and sample construction challenges. We use our experiences to reflect on the broader pros and cons of frontier data use.

Can ‘Tech North’ take off?

October 27, 2014

Rory Cellan-Jones has a nice article on the BBC website on the prospects for the Government’s ‘Tech North’ initiative, building extensively from my work with Emma Vandore on Tech City in London. Here’s some further thoughts.

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Tech North was launched by Nick Clegg last week: it’s one of the products of the DPM’s recent Northern Futures initiative. The idea is to promote tech clusters in Liverpool, Manchester, Sheffield, Leeds and Newcastle: Clegg has put £2m/year on the table to support local firms, and to attract FDI to the area.

Politically this is a no brainer. It meshes with the government’s ‘rebalancing’ rhetoric. And it fits the new mission of TechCity UK, which has expanded its remit from just East London to cover the whole country. TCUK is publishing work next month looking at digital clusters, which will put some new numbers behind the policy.

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So will it work? Rory is fairly sceptical in his piece. I’m still unclear what the programme will actually do: so here are five issues policymakers should be thinking about.

1/ Real geographies – Tech North connects five big cities with over 150 miles between them. In the real world, urban tech is in very tight microclusters: neighbourhood scale scenes which allow for lots of face to face contact. In Liverpool, for example, a lot of the action is in Ropewalks or the Baltic Triangle.

In London, Ministers originally hoped to ‘connect’ the Shoreditch cluster to the Olympic Park a few miles away. That hasn’t proved possible, not least because Old Street firms didn’t want to move there and saw no connection between the two.

So the chances of creating a single super hub across the Pennines are slim at best. There are worrying echoes of the Thames Gateway here: a planning concept, not a real place. On the other hand, as we found in London, the area branding might prove a helpful way to raise the profile of these local scenes.

2/ Who’s in and who’s out? The DPM seems to have focused his attention on the five Northern core cities. Fair enough, in that these are the economic powerhouses of their wider regions. But the real geography of tech activity is a little different. But cities like York and Sunderland also have quite a lot of tech firms. So why aren’t they included?

3/ FDI versus growing our own – firms cluster because co-location makes sense: they can tap into new ideas and pools of skilled workers and can share useful inputs (like fast broadband or VC investors). On the other hand, clusters have tensions built in. As more firms enter, pressures on space build up, so rents rise. And competition rises, for staff and for market share.

Given all this, it’s risky to base cluster development policies on foreign investment. If FDI simply brings in big multinationals, these might displace smaller, younger UK businesses. I doubt that’s what Government or cities want. Agencies like UKTI typically try and maximise the count and size of foreign investments. A different approach is needed here, which is to focus on the type of foreign inputs.

4/ Infrastructure – FDI programmes should try and enrich the rest of the ecosystem, especially specialist services tech firms need: finance, lawyers, accountants and workspaces. This stuff is only just starting to appear in London at scale, and is likely to be a priority for other UK cities. Certainly, the UK’s VC scene is pretty weak outside the capital.

Equally, fast internet (and fast connection to it) is a basic need. For me, this is now a public utility, so it’s disappointing that the Superconnected Cities scheme has retreated from rolling out faster systems to everyone, to simply providing vouchers to SMEs. The CORE programme in York, Peterborough and Derby is an interesting exception (thanks to Tom Forth for the link).

5/ Policy architecture (and whether it really matters) – cluster policy advocates like Michael Porter assume that cluster development has to be local, since clusters are local phenomena. But this doesn’t follow.

First, Tech North has little cash on the table: its five-city budget is about the same as the original budget for Shoreditch. Second, a lot of the relevant policy levers are held at national level: tax breaks for investors, crowdfunding regulation, immigration and skills. That still leaves some local levers: branding, networking, planning and any local investment pots. But it’s limited stuff.

Arguably some of these national levers should be devolved: that’s started to happen through City Deals and Local Growth Deals. But we’re at the very start of this process, and though the post-Scotland moment may yet shake things up further, what Ministers are handing over in powers they’re currently taking away in cuts.

But perhaps that’s too pessimistic. As Emma and I found in the East London research, the Old St scene grew quietly for years without policymakers really noticing. That could well be the likely trajectory for the many clusters under the Tech North umbrella.

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