Cities, Innovation, and the Growth of the Digital Economy

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A Look at the Future of Cities in the Internet Age (PDF)

The digital economy, or the internet sector, is a critical component of urban economies. This sector is not often thought of in the same way as more traditional industries — if formally measured, it would be among the 20 largest — but today it looms over many ‘powerhouse’ sectors like retail, construction, and the auto industry.

Cities and metropolitan regions are where the digital economy is thriving. The key to broadening this growth is to uplift success from the ground up by further diffusing innovation into national policy.

City leaders are employing technology to create smarter cities, imbue innovation more broadly through public-private partnerships and deepen entrepreneurial ecosystems with small business creation and start-up activity.

The internet sector contributes approximately $1 trillion, or six percent of GDP, to the U.S. economy — equating to around three million jobs and over 231,000 businesses. Collectively, cities are shaping the next chapter in the story of America, and the internet sector is a major reason.

That’s why the National League of Cities teamed together with the Internet Association to release our new report, A Look at the Future of Cities in the Internet Age.

The report highlights on-the-ground lessons from a series of four city case studies in Columbus, Ohio, Kansas City, Missouri, Phoenix, and Pittsburgh in order to explore innovation leadership. These cities were deliberately chosen because each enjoys a higher-than-average internet sector presence — as measured by employment and establishments — but are not the largest coastal cities traditionally associated with technology employment, where high concentrations of internet firms exist.

Within these four cities, community-specific lessons can be drawn for wider replication — including how smart city programs have been implemented, what these cities are doing in the realm of technology and transportation, how they are infusing inclusion into economic development, what effects a culture of experimentation can have on communities, and how partnerships are key to scaling innovation.

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By further delving into the stories of each of these cities, we seek to illuminate the creativity and cross-sectoral nature of these initiatives. As an example, in Kansas City, the report highlights not only the success in building STEM employment (with fully five percent of the workforce in the internet economy) but also explores the broader value of partnerships and experimentation — with stakeholders applying the success of technology incubators to a host of other industries.

Kansas City’s Arts Incubator has been established in the city’s downtown Crossroads district — capitalizing on the city’s long arts tradition — offering an innovative program for the city’s many aspiring artists to hone both their artistic and business skills. As incentive, the city offers personal work and studio space, common spaces, and programs aligned with a full suite of digital platforms to sell works, publicize exhibitions, and more. By applying the principles of collaboration, continuing education, and streamlined processes, Kansas City fosters innovation across sectors.

Stories like these are highlighted throughout the report across all four case study cities, and they are further seen in various ways all throughout the country. A Look at the Future of Cities in the Internet Age seeks to offer key takeaways for city leaders and other stakeholders:

  • Capitalize on cultural and historical assets
  • Emphasize economic inclusion
  • Experiment with new programs
  • Build well-rounded labor markets and diverse economies

Furthermore, the following areas are of particular application for city leaders to help further build their digital economies:

  • Transportation systems are critical infrastructure and can rapidly benefit from new technologies.
  • Open data systems provide win-win opportunities to cities and community members. Businesses can utilize the data to improve products, services, and efficiency while governments can gain important insights on services and community need.
  • Rapid pilot projects in procurement systems allow for faster development of innovative city services while minimizing the risk from larger scale implementations.
  • Partnerships are key to achieving policy goals. Governments can often draw on the technical expertise of the private sector while business can utilize the vision and policy expertise of local leaders to find better solutions.

A Look at the Future of Cities in the Internet Age is available to download now from the Internet Association.

About the author: Brooks Rainwater is the senior executive director of the Center for City Solutions and Applied Research at the National League of Cities. Follow Brooks on Twitter @BrooksRainwater.