Home > Key Factors Of City Success How capital, institutions, and psycho-cultural behavior promote economic growth

Key Factors Of City Success How capital, institutions, and psycho-cultural behavior promote economic growth

Here is an article that tries to solve a key mystery that keeps city leaders awake at night: why do cities succeed?

It’s an easy observation that some cities are better able to foster venture and innovation than others. Wouldn’t it be nice if we knew how to predict – and how to change – the success of a given city? What are the factors that determine this variation in the outcomes that can make or break a city’s future? While there are many factors involved – availability of investment and resources, the skills of the workforce, the availability of entrepreneurs and innovators, the collaborative ecosystems, and more – there is little of the needed understanding of how these factors are related or connected.

This article – which is based on a review, critique and synthesis of a wide range of empirical and conceptual literature – aims to develop a systemic model that can connect both the structural and behavioral determinants of the innovation and growth capability of firms within cities. From the structural perspective, cities are portrayed as urban growth systems where capital availability and the quality of institutions play a key role in promoting firm level innovation and growth. However, this capital and associated institutions may lack effectiveness unless a city contains significant numbers of individuals, especially entrepreneurs, with the behavioral, cultural and personality traits that allow them to act as agents of innovation. Therefore, behavioral systems – encompassing the culture and psychology of cities – can be considered to underpin the functioning of city growth systems and subsequent innovation and growth.

The article describes a range of behavioral, institutional and capital factors that shape the ability of firms within cities to innovate. Institutions and capital form the city growth systems within which ventures operate and evolve, while the behavioral systems of cities will help shape the type and nature of entrepreneurs, as well as the ventures they establish and the forms of innovation they engage in. The author concludes that there is a need to consider innovation institutions in the form of the incentives and constraints to creating and embracing new technology, as well as conventions in relation to the financing of innovation and norms regarding the ‘restriction’ or ‘freedom’ of ideas. Although such conventions are likely to stem from national and supra-national level institutions, more localized formal and informal institutions also play a role.


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About the Author:

Robert Huggins – Professor and Director of Research, School of Geography and Planning, Cardiff University.