The geography of innovation: local hotspots, global networks

What aspect of the geography of innovation does the 2019 report focus on?

Where the 2011 World Intellectual Property Report focuses on the broad geographical shifts that characterize global innovation, the 2019 report explores why economic activity tends to center around urban agglomerations or cities and how this gives rise to the global innovation networks that generate so much of the world’s innovation.

Why is it that so much innovation takes place around cities?

Economists have typically explained the distribution of economic activity across space by focusing on economies of scale and scope, transport costs and savings. Cities are where companies find skilled workers. People move to cities because they value the amenities metropolitan life offers and the well-paying jobs they find there. Cities are also the most fertile places for ideas to flourish, as innovators work in close proximity.

But in the innovation-driven economic models of the 21^st century, other forces are also at work. Technology, especially digital technology, has increasingly facilitated knowledge flows over ever-longer distances – there is a long history of scientific collaboration among researchers from different universities and countries. Multinational corporations (MNCs) have also sought to optimize their innovative impact by developing global value chains that disperse their research and development (R&D) activities to different places. These factors, especially, urban agglomeration and dispersion of research and R&D, have given rise to global innovation networks. The 2019 World Intellectual Property Report tracks the evolution of these networks and their make-up.

What data sources did you use?

From this viewpoint, the report is the most ambitious we have undertaken to date. We used two primary data sources. First, patent data covering the period 1970 to 2017 from 168 patent offices. The rich bibliographic data found in patent documents are a useful window into technological invention across space and time. The data included around 9 million patent families (groups of patents relating to the same underlying invention) listing over 22 million inventors. We geo-coded the addresses of all the inventors cited in these documents at the rooftop, postal code or sub-city levels. Second, we analyzed scientific publications from the website, Web of Science, for the period 1998 to 2017. These data comprise 24 million scientific articles that list more than 62 million authors. Again, we geo-coded all available addresses at the postal code or sub-city levels.  

What are the report’s key findings?

First, we see that innovation is increasingly local. We determined this by developing an algorithm to identify areas with the greatest concentration of inventors and authors, which we divided into two categories, namely, – innovation hotspots and specialized innovation clusters.

We identified 174 hotspots (areas with the greatest density of inventors and authors) worldwide. Silicon Valley, for example, is one of the most prominent global innovation hotspots. We also identified 313 specialized niche clusters where innovation density is high (but lower than in an innovation hotspot) in one or more fields of patenting or scientific publishing. The area covering Neuchâtel, Biel, Bern and Fribourg in Switzerland is such a specialized niche cluster. 

Where are these hotspots and niche clusters located?

They are heavily concentrated in North America, Western Europe and East Asia. Aside from China, and to a lesser extent, Brazil and India, there are far fewer hotspots in middle-income economies. While there are no innovation hotspots in Africa, there are a number of specialized niche clusters.

All hotspots and most niche clusters are in highly populated metropolitan areas, although not all metropolitan areas attract innovation hotspots or niche clusters, as we see when we overlay our findings with satellite data on night light. In the United States, for example, we see many hotspots in dense urban areas along the east and west coasts. Many inland urban areas, however, do not show the same innovation density.

Infographics

Infographic: The top ten collaborative hotspots of the world account for 33 percent of all international co-inventions.

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Infographic: The impact of plant biotech innovation reaches far beyond the lab. Innovation produced in a metropolitan hotspot can benefit 75 times its land mass.

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How important are these hotspots and clusters?

They are very important. They account for 85 percent of all patents and 81 percent of all scientific activity. In other words, more than four-fifths of the world’s innovation takes place in these areas. Global innovation hotspots, in particular, also play an outsized role in the global innovation landscape. Thirty of the top metropolitan hotspots – most of them are in China, Germany, Japan, the Republic of Korea and the United States – account for 69 percent of all patents and 49 percent of all scientific activity.

How is the nature of innovation changing?

Innovation is becoming more collaborative. From our data, we observe how many innovators and authors contribute to an invention and a scientific article, respectively. The role of single inventors or single scientific authors has diminished over time. Teams, and teams of growing size, are becoming increasingly important. This trend is particularly striking in scientific research, where more than one-fifth of scientific publications have six or more authors. There are many explanations for this but growing technological complexity is an important one. It takes more and more researchers with more specialized knowledge to solve increasingly difficult problems.

International collaboration is also on the rise. Comparing the period 1999-2002 with 2011-2015, we see more international co-inventorship and scientific collaboration. Global innovation hotspots are playing an outsized role in driving this. For example, Silicon Valley, New York, Frankfurt, Tokyo, Boston, Shanghai, London, Beijing, Bengaluru and Paris account for 22 percent of international co-inventions. When we look at the top 10 percent of co-invention ties among global innovation hotpots and specialized niche clusters, both domestically and internationally, we find that the innovation network in the United States is far more dense than in other countries.

What role do multinational corporations play in the global innovation landscape?

Our findings reveal that multinational corporations (MNCs) lie at the center of global innovation networks. MNCs have spread their global R&D activities across their global value chains as evidenced by our analysis of patent documents, which reveals a rise in what we call international patent sourcing – where a patent applicant in one jurisdiction lists inventors from other countries. In the 1970s and 1980s, international patent sourcing took place predominantly between companies and inventors from high-income economies, but since then MNCs have progressively relied on inventors from middle-income countries and especially from China and India. Interestingly, we also see MNCs from middle-income economies – think Embraer in Brazil and Infosys in India – increasingly relying on the ingenuity of inventors from the United States, Western Europe and China.

The report also includes case studies. What do they reveal?

The report features case studies of two industries that are currently undergoing profound change. The first explores the impact that the emergence of autonomous vehicles is having on the automotive sector, in terms of its make-up and the geographical orientation of R&D. Our report reveals that the technological shift towards autonomous vehicles is prompting IT companies to challenge established car manufacturers and their suppliers. However, despite great technological dynamism in this area, full driving automation – where a vehicle can essentially drive anywhere without driver assistance – is still considered to be likely to take many years, if not decades.

The second case study focuses on agricultural biotechnology (ag-biotech), a field where historically scientific breakthroughs have shaped the direction of applied innovation. We explore the potential of CRISPR, the new tool that has cut the cost of gene editing and promises to unleash new genetic improvements in crops and livestock. The case study highlights the prominent role that universities and public research organizations play in the ag-biotech landscape as primary sources of innovation, especially in developing economies. Collaboration is also key in this sector. Many innovations originate in the science sector but need large-scale private investment for commercialization.

Our findings also reveal a concentration of R&D investment in the seed, chemical and fertilizer industries, due in part to the high cost of R&D and the commercialization of transgenic plants. Because of the need to adapt innovations in this area to local conditions, ag-biotech clusters are relatively more widespread compared to many other technology fields. Our analysis shows that innovation-dense agricultural clusters exist on every continent. However, high-income jurisdictions plus China still account for more than 55 percent of all articles on crop biotech and more than 80 percent of all patents.

What do the report’s findings imply for policymakers?

Our data reveal a global innovation landscape that is highly interlinked. While technology is playing a key role in connecting the world’s innovation hotspots, it is important to recognize that these links have also relied on a policy environment that has favored openness and international collaboration. However, amid growing skepticism about globalization, such an open environment is not a given. We argue, therefore, that it is more important than ever to maintain openness in the pursuit of innovation. Evidence suggests that it is becoming increasingly more difficult to push the global technology frontier. It takes more and more R&D effort to achieve the same level of technological progress as in the past and that applies to many fields, including health, information and transport technologies.

Openness promotes greater diversity and specialization in innovation and helps form the increasingly large teams required to solve ever-more complex technological challenges. Such collaboration relies crucially on proactive cooperation among governments on policies, such as intellectual property and standardization. It also expands to the joint funding of large-scale scientific research that exceed national budgets and which require technical knowledge available in different countries. There are prominent examples of such arrangements working well, such as CERN (the European Organization for Nuclear Research) or the International Space Station.

Another important element in making openness work is the need to address growing regional divergences in income within countries. Take the case of Israel, whose vibrant innovation economy has earned it the nickname “Startup Nation”. A closer look at innovative activity in that country reveals that the Tel Aviv Metropolitan Region stands out as the clear champion. It accounts for 77 percent of all startups and 60 percent of high-tech jobs; wages are around 35 percent higher than in peripheral regions. Interestingly, Israel has recently developed policies to address income disparities in peripheral areas. This prominent example highlights the fact that while the world’s most vibrant innovation hotspots are embedded in innovation networks, there is a need for policies that promote innovation-driven growth for the benefit of economies as a whole.