Innovation in Real Places
Strategies for Prosperity in an Unforgiving World
by Dan Breznitz
Innovation in Real Places (2021) posits that the Silicon Valley blueprint for growth isn't the universal solution for every city or region. Instead of trying to replicate the tech hub dream, communities should pinpoint their unique position in the global production chain and cultivate innovation rooted in their inherent strengths.
About the author
Dan Breznitz, a distinguished professor at the University of Toronto, delves deep into innovation policy. His literary contributions, such as Innovation and the State, The Run of the Red Queen, and The Third Globalization, have garnered significant acclaim.
Redefining Growth Through Innovation
Every leader, from heads of nations to local town chiefs, seems to be enamored with the term "innovation." It's hailed as the magic potion for economic rejuvenation in our contemporary era. But what's the real recipe for innovation? Can history offer insights into the type of innovation that communities should chase for tangible benefits?
In this summary, we'll navigate a pragmatic, unconventional solution for communities. We'll sidestep the common illusion of mirroring "the next Silicon Valley" and instead spotlight opportunities that align with a community's genuine strengths.
You'll discover that communities can consistently nurture specialized innovation, leading to job creation and an enhanced quality of life.
Debunking the Silicon Valley Mirage
Innovation might not be what you've been led to believe.
For generations, a narrative has been peddled to cities and regions: to innovate is to emulate Silicon Valley. And with that emulation comes prosperity.
Yet, the reality is starkly different. Historical evidence suggests that this strategy often ends in disappointment.
Take Atlanta, Georgia, for instance. In its quest to become a startup haven during the 1980s and 1990s, it housed trailblazing companies in nascent tech domains like modems, software, and cybersecurity. Some, like Scientific Atlanta, MSA, and Internet Security Systems, even dominated their market segments.
But this dominance was fleeting. MSA's acquisition price barely surpassed its annual revenue. Both Scientific Atlanta and Internet Security Systems were bought by companies outside the state. Shockingly, 40% of Atlanta-based startups that secured venture capital between 1999 and 2007 relocated within three years of their initial funding.
While Atlanta's initial success in fostering startups was commendable, it didn't translate to enduring local prosperity. The absence of robust community bonds and the impatience of investors meant that the city became a transient startup springboard, with companies briefly flourishing before relocating.
This Atlanta narrative underscores the pitfalls of myopically pursuing startups. When regions single-mindedly chase VC-backed tech with dreams of becoming the next Silicon Valley, the outcomes are often skewed and volatile. Even if a startup ecosystem emerges, the rewards seldom benefit the local community. The windfall is often limited to a select group of tech professionals, while the local populace grapples with escalating living costs and widening inequality. Instead of a transformative metamorphosis, communities witness subdued growth and a bifurcated economy.
Breznitz identifies three foundational myths underpinning this flawed innovation and growth model.
The first myth equates innovation solely with groundbreaking gadgets and startups, overlooking the myriad everyday innovations that propel progress. True innovation is about enhancing products and services, not just about revolutionary discoveries.
The second myth glorifies venture capital as the catalyst for growth, championing startups with visionary goals. This perspective neglects the inherent nature of VCs, which prioritize rapid returns for their investors over a community's sustainable development. VCs often propel companies towards aggressive growth trajectories, pushing for an IPO or acquisition. Moreover, the local retention of economic gains isn't a priority for VCs, leading to heightened inequality and a focus on short-term gains.
The final myth is the belief that emulating Silicon Valley guarantees prosperity. This model of growth typically benefits a narrow demographic, creating a chasm between the privileged tech elite and the rest. Regions attempting to mimic Silicon Valley often become mere talent pipelines for larger cities, hemorrhaging both talent and profits over time.
It's high time communities abandon these one-size-fits-all strategies. A revolutionary reimagining of innovation and growth is overdue.