Monday, June 18, 2012

Flat World Of Innovation

Geography matters more than ever. The world is flat. These two sensational claims aren't mutually exclusive. At the top of the urban hierarchy, between global cities, the world is flat. The forces of agglomeration are annihilating distance. As economic globalization diffuses, CBDs further down the urban hierarchy join Flat World. Fast Company with the emerging geography:

New York, yeah. Silicon Valley, of course. But Greenville? Cleveland? Baltimore? These cities are famous for many things. Their lively tech scenes aren’t one of them. Yet as we’ve revealed in a series of articles over the past few months, some of the most innovative businesses and ideas are springing up in the least likely places. The reasons for the shift are complex and differ from one city to the next, but in many cases, they boil down to this: The Internet has lifted the cost and geographic barriers of starting a business. That, combined with the proliferation of local incubators and other support networks, has freed entrepreneurs all over the country to innovate, and take risks, without losing their shirt. Barriers remain: Talent still hugs the coasts and funding can be woefully hard to snag, even for the most dogged entrepreneurs. But the momentum persists. Who knows? Maybe the next Facebook will emerge from Phoenix, Arizona, or Grand Rapids, Michigan.

Barriers are lowering. Barriers remain. The two drags on the Flat World of innovation are talent migration and venture capital flows. As distance increases, so does the perception of risk. We go where we know. We invest in whom we know. Diaspora networks are one great exception to these rules. Talent and money flow all around the world, geography be damned.

Transnationals are the agents of diffusion for globalization. Talent leaves, ideas and foreign direct investment are sent home. Two places are linked. Proximity doesn't matter. I've observed the same phenomenon in play for Rust Belt cities, namely Pittsburgh, Cleveland, and Youngstown. Ironically, brain drain is fueling the Rust Belt resurgence. Talent connectivity with New York, Silicon Valley, and Chicago is informing the innovation boom Fast Company notes going on in Cleveland:

“When you think of startups, you tend to think of what the popular press covers, Facebook and really young firms,” Dearborn says. But focusing on sexy young things can miss an enormous swath of potential innovators with experience under their belts. JumpStart’s average applicant is in his mid-40s and out of traditional industry--not necessarily your hip-innovator profile, but definitely undervalued.

Many of these older entrepreneurs bring ideas that were the results of recreational tinkering, either at the lab or the factory: useful innovations their bosses deemed either too small-potatoes or too off-industry to pursue, Dearborn says. Others walk in the door with their early-retirement package in hand, looking to fund phase two of their careers. “Older workers bring not just experience with them, they bring a whole network of people” to realize the idea, Dearborn says.

Emphasis added. When return migrants come back to Cleveland from New York, "they bring a whole network of people" from the biggest hub of globalization. The two barriers to the Flat World of innovation are overcome with talent churn.

Like international brain circulation, Rust Belt return migration is transforming the economic geography of the United States. The rise of Rust Belt Chic is indicative of this trend. Now the appeal of the urban frontier attracts more than just wayward natives. Talent magnets (e.g. Portland) are yielding the stage to talent producers (e.g. Cleveland).

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