Innovation Networks and Economic Growth

Here at Fourth Economy, we’re always looking for opportunities to identify and build upon local assets. This often takes the form of bringing together various stakeholders to advance specific technologies and sectors. We’re currently working on building more robust sectors around both energy and water here in the greater Pittsburgh region and beyond. Even though this work is challenging, a dense network of universities, technology intermediaries, economic development partners, and private sector businesses aids our work. But what happens when you leave the “big city” and those players are spread further across a region?

Bruce Katz and Mark Muro from Brookings provided an excellent overview and resource on regional innovation clusters, which we reviewed in an earlier post. The concept of clusters has been influencing economic development for many years but there has not been much exploration about different kinds of clusters in different regions. We tend to think mostly of the prototypical Silicon Valley or Boston cluster, which exist at a scale and density of actors and relationships that few regions can match. Heike Mayer has been doing excellent work on innovation clusters in the second tier regions. She has done research on Portland, Boise and Kansas City to name a few. Now another researcher, Scott Dempwolf, is addressing some of these same questions from a different perspective – he is applying the tools of social network analysis.

According to Dempwolf, “Regions lacking the institutions and density found in large agglomeration regions get less guidance from the economic development profession and face very different challenges than larger, denser regions. Manufacturing-based economies in smaller regions have experienced particular difficulty transitioning to a global economy and clearly need alternative strategies.” Dempwolf’s research found innovation networks, if applied correctly, could be a driving force for economic development and the creation of new manufacturing jobs.

In his forthcoming thesis, Scott Dempwolf, PhD Candidate at the University of Maryland, asks the question, “Are innovation networks drivers of economic development in regions that lack the institutions and density present in agglomeration regions?” In his research, he defines networks as being comprised of Actors (inventors, firms, intermediaries, funders, location-based orgs) and Relationships (patents, technology, funding source, location, labor markets). The network analysis approach allows us to see regional innovation clusters in entirely new ways.  Like traditional cluster analysis we can still identify the industry linkages within regions.  But we are also able to see important connections with distant actors that play important roles in the cluster.  We can also go beyond the industry level to identify innovative firms within the clusters and use network methods to identify critical relationships that economic developers should focus on as part of a comprehensive strategy.

Dempwolf lays out an operational strategy to facilitate innovation networks in these regions:

• Use the network model to identify weak ties and structural holes;
• Identify key technologies and organize events around them;
• Use the events to connect firms, universities, inventors, etc. Target specific ties that you want to create or strengthen; and
• Help arrange investments (SBIR applications, Angel/VC networks, lenders and state/federal programs).

The UMD – Morgan State Center for Economic Development was recently designated as a University Center by the U.S. Economic Development Administration. There, they will take Dempwolf’s research to the next level, by providing communities across Maryland with innovation mapping services. Through modeling, they will help communities see how and where innovation networks exist and give them tools to help support and build those networks.

If you have had success creating innovation networks in areas without a dense agglomeration of Actors and Relationships, we’d love to hear your story.