Can small cities like Amsterdam beat massive cities in innovation? Really? ??
The answer like all matters of economics and society is ‘it depends’. All things being equal there are ‘network effects’ of innovation, but also size downsides. Enjoy some actual quantitative results.
Welcome back from northern summer vacation for those in North America, Europe, and north of the equator!
Due to a majority of Gazette readers being in the northern hemisphere, and taking summer vacation, we have elected not to publish widely any new analysis during this period (July-August) for free subscribers.
Hopefully you all enjoyed your trips to Thailand, south of France, New Zealand ski slopes, and all the other places where the well-traveled among you visit.
Note a quick update will follow this early next week - for anyone who has download troubles recently for results.
What you missed while on holidays…
Well, we updated our index for Small and Medium cities on the same basis as the standard 2022-2023 index.
This gives you new insights based on city population.
And is based on one of the most common queries — the impact of population on the results. Thus, if you classify cities by population bands you will find the following enlightening and useful.
Cities & growing pains
There are two bands, small cities and medium cities.
The mega cities (4.4 million plus) is the difference, but we have not published those.
2ThinkNow Insight - Around that 4.4M point is when our research identifies a strategic shift in the needs and management of a city to a London or Paris model (for example).
4.4. million plus means ‘growing pains’.
Note we are one of the first rankings to sub-categorise this way.
Innovation Cities™ Index: Small 200 Cities
Small is beautiful.
Two hundred global cities under 1 million population, ranked on same basis as global five hundred. (Yes, in some cases the ‘metro’ size of below exceeds 1 million. These are based on our carefully researched urban populations.)
What this gives you: really good insight in which smaller cities are doing better than their population would naturally allow them to do.
A sub-million population city has an entirely different ‘vibe’ to a 4 million person city.
The top 10% of the full 200 ‘small’ cities are:
1. Amsterdam
2. Tel Aviv
3. Basel
4. Frankfurt
5. Düsseldorf
6. Québec (City)
7. Rotterdam
8. Gothenburg
9. Geneva
10. Tallinn
11. Edinburgh
12. Hamilton
13. Albany
14. Malmö
15. Nuremberg
16. The Hague
17. Ventura
18. Salzburg (City)
19. Florence
20. Essen
Full list:
https://innovation-cities.com/?p=27964
You can see on this list many small cities that have ranked well on other lists. Also, a few, like Ventura or Albany which rarely appear anywhere.
Tallinn is a world leader in digital services and eGovernment, so that’s hardly a surprise. Geneva has many of Switzerland’s innovation advantages – in a small package. We often get told that Swiss cities should be higher, and sorting for population, this is indeed the case, naturally.
Common feedback of our ranking is why doesn’t Tel Aviv rank higher!?
You can see that the city ranks 2nd globally in its population band for Tel Aviv proper.
(It’s important to note we did not consider distribution when ranking the indices)
Each of these cities is competing against much larger cities. Making the results that much more of stand-out.
So, in relative term, the above top-20 especially, are out-performing peer cities.
Well done to their respective governments, stakeholders and businesses.
Innovation Cities™ Index: Medium 200 Cities
For cities greater than 1 million and less than 4.4 million (wording corrected for consistency 16.09). Generally, considered as mid-sized cities.
1. San Francisco - San Jose
2. Berlin
3. Stockholm
4. Dubai
5. Munich
6. Vienna
7. Seattle
8. Montréal
9. Milan
10. Vancouver
11. Copenhagen
12. Miami
13. Philadelphia
14. Oslo
15. Osaka-Kobe
16. Dublin
17. San Diego
18. Brisbane
19. Helsinki
20. Hamburg
What is interesting is that Silicon Valley (#1) continues to dominate this list. The population definition we at 2ThinkNow use places them inside this list.
And Berlin’s role as challenger is well entrenched. Berlin has an awesome infrastructure and tech sector for start-ups, among other strengths.
Dubai is #4 – which the innovation-leading Emirates will be pleased with. A true playground for the architectural and business innovator. More remarkable because of the slow and constant ascent of Dubai over time (like Lee Kuan Yew-era Singapore, but for different reasons).
Brisbane at #18 is quietly going places given it’s small size and relatively unknown status. Also, number one out of 500 in green spaces. Ahead of the much larger Tokyo.
Yes, I chose to move near Brisbane some time ago. A true vote of confidence in Queensland’s long-term future.
Full medium list:
https://innovation-cities.com/?p=27963
Some random insights from preceding
These numbers were prepared by our analysts as standing out. Some additional explanatory analysis has been done. Ask for more details, or to put 2ThinkNow on retainer to answer your queries.
Other insights by nation or regions are available to retainer clients.
1. I.T. and R&D strategy can work
Wroclaw is a leading Polish R&D and I.T. center resulting in an increase in 62 Places for innovation eco-system among the Small 200.
Note we are not measuring R&D /I.T. Science parks directly. Rather we are measuring broad innovation conditions.
Having spent 15 years analyzing these ‘schemes’ - I would argue if the strategy is right the overall innovation conditions should improve.
However - too many incubator/science park hubs mistake activity for innovation. I have read hundreds of the brochures. Yet they under-perform.
The ‘build it and they will come’ does not work. It must be a fully-rounded strategy to work.
However, this rise of a location predominately known for the traditional R&D / I.T. strategy shows this can still work. Notably, as a ‘hint’ to the cities success - Wroclaw has embraced numerous cultural strategies, which provides hints to their success.
We have further insights on how to get your R&D/incubator strategy to work, available to retainer clients.
2. Italy has largely because digital matters
Italian cities are on the rise with an average increase of 25 places. While an old country, Italian cities have quietly been improving their tech and digital skills.
This success has gone largely unnoticed by many.
2ThinkNow Insight - Notably, Italy is rejecting some tech such as ‘lab-printed meat’ and tech which impacts their agriculture and tourism strengths. This example shows it is possible to mix old and new, and retain local values. In fact greater success will come from retaining local values, while adopting new tech like A.I. and its successors.
Italy’s success can be seen in the presence of many innovative Italian companies at post-Covid trade fairs, and exporting their wares globally. Of course, Italian cities also have many ‘old country’ benefits such as history, tourism and food production industries, as well as support for smart cities.
Longer term, cities like Lisbon and Barcelona in the main indices, have had success with this strategic profile.
3. Tennessee cities rise
In USA, the often over-looked state of Tennessee is on the rise, with both Chattanooga (+34) and Knoxville (+40) gaining significant places. This would be more to do with the business and commercial environment of TN, as well as its culture, than other factors.
It’s important to note we do not attribute this directly to the university sector or STEM (technical subject) initiatives.
Culture eats strategy for breakfast - anecdotally, Peter Drucker (bit of a controversy about this ‘quote’, but the point remains - culture dominates).
2ThinkNow Insight - Accordingly we would argue that creating the climate for the culture of innovation is what matters. NOT strategy. Which is why so many strategic plans fail. Culture wins out.
There are also some cases where our model would assert non first-tier U.S. cities remain better bets than large cities. Despite the network effects of size.
4. California bureaucracy kills small cities
However, on that note, small Californian cities tend to be on the decline with an average decrease of 13 places. Some plausible explanations as to why:
We would state that this is based on the Californian ‘thought disease’ of centralisation. Economic professors long ago disproved the efficacy of central planning. You can easily verify this by comparing centrally planned versus free market economies. Despite this, modern technology is giving the illusion that ‘control’ can work. But it doesn’t, can’t and won’t.
The total and complete rebuttal of Soviet-style planning stands unchanged.
A.I. will not change that. Unfortunately full central planning always fails, and even with Artificial Intelligence, will continue to fail. It will just take further failure to convince those doing the planning.
On a related note - Californian cities suffer too much bureaucracy. Bureaucracy at a state level can be absorbed by large cities, but small cities will always struggle with bureaucracy. Unnecessary so-called ‘red tape’ kills innovation. (That is not to say zero regulation is ideal either).
But… if overtly bureaucratic centrally-planned homeless and mental health policies worked in reality - then California would have succeeded in ending these problems. Instead California is under-performing other U.S. states constantly in adequately managing these problems.
California legislates state-wide laws that then damage the competitiveness of its smaller cities.
Despite more labor laws, and more legislation, homelessness and mental health rates remain much worse in California than elsewhere.
The current California state policies are in our view killing the California goose that laid the golden economic eggs. The state otherwise has always been an amazing innovation center - and could be again even more dominant.
San Francisco - San Jose is #1 on the medium cities list for a reason.
It’s the job of the California legislature to ‘get out of the way’ and slash legislation.
5. Larger cities are ‘back’
In the U.S. and U.K. big cities return to form. As a whole, small USA and UK cities have declined across the board, all things being equal. About 5 to 7 places in the Small 200 on average - the outliers noted above not withstanding.
So, the U.S./U.K. returns to form … and big is better. Or is it?
Given inflation, and the U.S. Federal Reserve’s muddled reply, the answer is ‘no, not really’. And when combined with the sort of central planning / meddling of the Biden administration it begins to look like the economy is sending mixed signals.
An artificial boom is possible, indeed likely, but like the Big Short, it is not based on fundamentals. It’s ‘Ice Cream, Ice Cream, So Good’ thinking.
What is 98% certain is this is the last boom before a crash. When that crash is cannot be said, could be tomorrow or six years, but at current the next crash is the real one. There would be no stopping this crash as what we consider fundamentals are basically exhausted, and money-printing does not fix it.
For all long term booms, it must be based on productivity.
2ThinkNow Insight - Which is where Artificial Intelligence comes in. Like the P.C. and the smartphone. Eventually, A.I. is a corporate game changer for productivity.
So A.I. has huge potential as a force-multiplier on productivity. Which favours large cities as talent pools for A.I. to draw from. And nothing gets economists more excited than productivity growth.
So here we are, again in a ‘it depends’ scenario.
And, once again - it comes back to cities.
And individual cities can succeed - despite the economic winds that blow.
6. Centralisation 2 - small cities in Canada
Small Canadian cities have risen significantly on average. Big winners in Canada are Hamilton and Halifax in relative terms.
This is possibly again a condemnation of central planning – as practiced in Ottawa and Toronto. Yes, the ‘big’ or ‘government’ city has the main power and innovation conditions in total. But when thinking per capita they barely move the needle.
One explanation is that the seemingly ‘nanny state’ of the Trudeau government is severely damaging grass roots innovation in our view. A more ‘night watchman’ approach (less intervention) would probably help Canada’s capitals right now.
You could (generously) argue redistribution may (may!) be helping regional Canada.
You could also argue that Trudeau government are focused on the major cities in Ontario, and Ottawa the capital, and that Federal policies are damaging innovation conditions in the larger cities of Canada - a more sensible interpretation according to our model (and basic classical economics).
Cities like Quebec City, also do very well on a population-adjusted basis.
Small Canadian cities are up, on average, around twenty places in the Small 200 against peers.
Want to answer your own city questions?
In the end there are many more insights at your fingertips. Let us know your research questions, and we can work up answers from the data. There are so many insights buried in our data that remain untapped - we rely on you to help us find the questions you need answered.
More insights (of course) available on demand to retainer clients.
Keep innovating™!
CH
Image: Thanks to Max van den Oetelaar on https://unsplash.com/photos/-e4vLFZV9QM
Minor Corrections: Note grammar has been corrected on 16th/18th Sept 2023, AEST. Earlier versions will contain typos and grammar errors that may modify meaning slightly. Minor clarifications added for readability. Notably this has not (generally) changed the meaning substantively. Note we also mostly use Australian English (closest to British English) - this differs from U.S. English e.g. favours/favors.
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