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Universities

The myth of the devastating blow: the healthy growth of the Stockholm-Uppsala life science industry

I wrote the following piece for the recent Royal Society report on research clusters, republished here under a creative commons license. The full report has eight case studies (see my previous posts on Pittsburgh and Israel). Individually, they tell the story of how the actions of leaders, businesses, universities and communities have affected the development of different places with different contexts and histories. Combined, patterns and trends begin to emerge. The story of Uppsala in Sweden is one of a long history of industry and academia working closely together.

The life science industry in the Stockholm-Uppsala region began to attract international headlines in the early 2000s. A special section in Nature lauded the ‘world class scientific and business environment’.1 The Economist described Uppsala alongside Cambridge in the UK as one of the most biotech-dense cities in the world.2

The region is Sweden’s largest life science cluster, home to just over half of the country’s life science industry (over 20,000 employees), five universities and 650 life science companies.3 Over the past decade, 15 to 20 new life science companies were formed in the region each year.4 Stockholm-Uppsala usually ranks in top ten European biopharma clusters, and the sector was recognised as a national priority with the establishment of an Office for Life Sciences in 2019.5

Despite the concentration of academic and industry activity, opinions differ on whether the cluster should be defined as an ‘Uppsala cluster’ or as part of the wider Stockholm-Uppsala region. We will refer to the Uppsala cluster, whilst recognising that activity spans different spatial dimensions: from informal networking and labour market dynamics at a regional level, to business and academic relationships that span the globe.6 Uppsala itself is just 70km from Stockholm and activities often bridge the two. With an international reputation as ‘the city of methods’ due to a traditional focus on the production of biotech research tools, Uppsala has a long history of industry and academia working closely together.7

The cluster builds on Sweden’s solid foundation for life sciences research. The country has a good environment for conducting clinical trials, and has invested in electronic patient records and similar databases. Intellectual property rules allow researchers to retain patent rights in their work – seen by some as encouraging entrepreneurship, but by others as blocking technology transfer. And the country ranks fifth in Europe for the number of products in its clinical development pipeline.8 Upon this foundation, but with roots stretching back to the 1920s and periods of growth and uncertainty, the Uppsala cluster emerged.

Development

The Uppsala life sciences cluster has much in common with the development of other notable clusters: a strong university research base, a proliferation of innovative firms, and key individuals who mobilise and attract funding and garner wider interest in their work. It also has a popular origin story of a cluster born out of adversity – when in reality the life sciences activity in the region today is the product of decades of work (Pittsburgh has a similar narrative).

However, the literature on Uppsala has a pronounced focus on three elements in particular: institutional changes and restructuring over time, the impact of the media, and the role of cluster initiative bodies. The story of Sweden’s largest life sciences cluster will be told through these areas of focus.

The roots of the cluster can be traced to biotech research conducted at Uppsala University during the 1920s and 1930s. However, larger-scale industrial activity was sparked by the Swedish pharmaceutical company Pharmacia relocating from Stockholm to Uppsala in the 1950s. A major reason for the move was a history of collaboration between Pharmacia and a research unit at Uppsala University built on the contribution of two Swedish Nobel Laureates in chemistry: Theodor Svedberg and Arne Tiselius.9

In 1995 Pharmacia, then one of the largest pharmaceutical companies in Europe, merged with the US company Upjohn, leading to protracted restructuring and relocating – including the move of some R&D and marketing activities to the US.10 Product and research focus shifted to match those of the new owners. The company adopted an American business culture: ‘competence originated at the top of the company and filtered down through the organisation’ – at odds with the Scandinavian culture of delegated decision-making.11 Around 200 research and managerial positions were moved out of Uppsala; the move was initially seen as striking a huge blow to the region.12

The merger was the culmination of a series of spin-offs, reorganisations and sales, significantly changing the life science landscape of the region. As Pharmacia withdrew, a new narrative began to emerge. Former Pharmacia researchers and managers, it was perceived, were freed from their corporate shackles and channelled their energy into new enterprises; the vacuum left by company’s withdrawal led to a frenzy of entrepreneurial start-ups and innovative ideas.13 Soon after, there was an influx of new capital to the cluster, further boosting the growth of life science research and enterprise in the region.

The reality is slightly more complex. As subsequent research has found, the capital was not sourced locally, but from foreign investors and venture capital firms in the greater Stockholm region attracted by the technologies developed at Pharmacia.14 And, in a detailed deconstruction of the popular narrative, Alexandra Waluszewski has shown how the emergence of the Uppsala cluster is not simply the result of (or the aftermath of) a single critical event, but the interaction of ‘stable and healthy’ industrial and academic units over at least 70 years.15 She concludes that:

a closer look at the ‘‘new’’ life science/biotech companies’ population in the Uppsala region reveals that most of them have a long history. The majority have their resource roots in projects initiated long before the restructuring of Pharmacia. Many of them have existed for decades, sometimes as visible companies, sometimes hidden as projects within different parts of the universities or companies. The small company Medical Products Octagon is an illustrative example. The company was established in 1971 but existed as a project in the early 1960s. As one of the initiators, Professor Uno Erikson, explains: ‘‘We were many researchers with our daily work at the University hospital, within such disciplines as anaesthesia, physiology, radiology, cardiology, etc., and continually experienced technological problems connected to available equipment and material. It was this displeasure, and particularly all the negative effects we saw on the patients, that triggered us to use our medical knowledge for the development of new technological solutions. However, for decades we were forced to handle this work—development of new solutions, patents and licenses—in secrecy. For a professor at Uppsala University running a business was regarded as very suspect’’.16

As such, several key organisations including Uppsala University and its research hospital, the University of Agriculture, the biotech instrument producer GE Healthcare, and Phadia (blood test systems) have acted as ‘anchor’ institutions, and have had an important role in the formation of many new companies.17 This includes through spin-outs, knowledge generation and dissemination, and access to research labs, but also customer and supplier connections, sharing of prototyping expertise and production facilities, and business support and advice. Growth has also been stimulated by governmental agencies located in Uppsala, including the National Veterinary Institute and the Medical Products Agency.18

However, this does not diminish the importance of Pharmacia in shaping Uppsala’s life sciences cluster. Both GE Healthcare and Phadia have their roots in Pharmacia’s restructuring (and interactions with Uppsala University’s Department of Biochemistry); Pharmacia itself is now part of Pfizer and retains a presence in the region. Indeed, seven of the ten largest companies have some form of Pharmacia heritage.19 A second legacy is the significant local knowledge pool in several biotech areas; the development of specialised methods, instruments, and research tools is considered the traditional core of the cluster and underpins Uppsala’s reputation as a ‘city of methods’, whilst differentiating it from national competitors.20

The role of the media is a second, and related, theme in discussions of Uppsala’s cluster development. Initial media coverage portrayed the 1995 Pharmacia merger as a crisis and a devastating blow for the region, asking questions of the trustworthiness and strategy of company directors. By 1998 stories reflected a narrative of a community united and collaborating to shape the future: that Pharmacia relocating was ‘the best thing that could have happened to Uppsala’, and ‘laid-off researchers in Uppsala have turned local developments around’.21

Regardless of whether this ‘catalytic event’ narrative reflected the reality, it had an impact. The expanding biotech sector in Uppsala became a hot topic. It affected how government actors engaged in regional development and infrastructure planning in Uppsala. It influenced how customers, suppliers, venture capitalists and potential employees viewed the cluster.22 As such, the media helped to construct a ‘perceived regional advantage’, providing the necessary channels to ‘promote investment opportunities and attract new capital’.23 Several bodies, including STUNS (the Foundation for Collaboration between the Universities in Uppsala, Business and the Public Sector) and the Chambers of Commerce, have been linked to commissioning media articles on the region’s biotech resurgence during this period.24

A third factor is the part played by cluster initiatives: collaborations between public and private sector bodies, including government agencies, universities and companies, to improve the competitiveness of clusters. Uppsala BIO was created in 2003 by local representatives from government, industry, and academia.25 Cluster initiatives raise the awareness of the work within a cluster, provide platforms for dialogue and decision-making (especially around the business environment), and perform the important intermediary activities of brokerage, facilitation and promotion.26 A study of Swedish cluster initiatives found successful bodies struck a balance between being relevant for members and being open to new perspectives; Uppsala BIO offers training and networking for Uppsala’s life science industry, but also ‘open house’ networking and knowledge-exchange activities.27 Promotion and marketing has been an important thread in Uppsala’s life sciences cluster development, and Uppsala BIO is part of this continued effort. But this cluster initiative also reinforces the foundation upon which the cluster has grown: a long history of universities and industry working together.

Outcomes

There have been notable outcomes throughout the history of the Uppsala cluster. Swedish academics have found that the cluster played an important role in national economic restructuring from the 1970s, and was the engine of national life science growth.28 Specifically, academic and industry collaboration led to the discovery of Sephadex, a gel filtration medium, in 1959, and immunoglobulin E, used to diagnose and treat allergies, in 1967. And this collaboration more generally led to the growth of Pharmacia as one of Europe’s largest pharmaceutical companies, an important actor in the economic growth of the region, and a convenor of talented researchers and managers. As such, Pharmacia has been described as ‘the third University’ in Uppsala (together with Uppsala University and the Swedish Agricultural University).29

The result today is a mature ecosystem. There are several markers of this. First, the growth of specialised services firms in and around the cluster, including in business development, patenting and legal advice, recruitment and marketing.30 Specialised consultancy firms also help to fill gaps within biotechnology start-ups.31 A second marker is the growth of informal contact between industry and academia, built over time on the foundations of formal relationships. The result of this physical and social proximity is the rapid circulation and spillover of knowledge and ideas within the cluster, well-developed social networks, and easy access to global contacts and channels. Individuals can easily switch firms and move from industry to academia and vice versa, transferring knowledge and further strengthening relationships.32

Despite strong collaboration and professional mobility within the cluster, there are differences between public and private sector organisations, and – as one might expect – differing views on the priorities and strengths of the cluster. Their interactions differ too, perhaps to the overall benefit of the cluster. Public sector organisations tend to interact more with biotech companies at a national level than their private sector counterparts, whereas private sector companies interact more often with biotech companies at an international level. Both, however, rank the cluster’s work in developing methods and tools for discovery as the greatest strength, followed by diagnostic work.33

Looking forward

The Uppsala cluster is closely intertwined with inward investment efforts from Invest Stockholm and other bodies, in targeted areas such as applying artificial intelligence and machine learning to life sciences, and health tech.34 This builds on Stockholm-Uppsala Life Science (SULS), a joint effort between Uppsala BIO and Stockholm city to actively market the region’s life science outside of Sweden which began in 2007.35

Previous analyses have found that the venture capital sector in Uppsala is heavily underdeveloped in terms of the number of local actors.36 However, this is perhaps symptomatic of the country as a whole, rather than an issue of local provision: an earlier study found that 84 percent of venture capital invested in Swedish drug discovery firms was in the Stockholm-Uppsala region.37

Finally, and despite high quality R&D, Sweden faces challenges that may affect the cluster. These include the level of patenting, and small companies facing a choice between licensing products to ‘big pharma’ or being acquired. This has led to fears of stunted company growth, inhibiting the development of a thriving, home-grown sector.38

(Photos from Unsplash: archway, train, buildings)

  1. Nature October 2001, p.6 in Waluszewski, A., 2004. A competing or co-operating cluster or seven decades of combinatory resources? What’s behind a prospering biotech valley?. Scandinavian Journal of Management, 20(1-2), pp.125-150.
  2. The Economist, 2003 in Waxell, A., 2016. Writing up the region: anchor firm dismantling and the construction of a perceived regional advantage in Swedish news media. European Planning Studies, 24(4), pp.742-761.
  3. https://ssci.se/en/news/facts-about-stockholm-uppsala-life-science-cluster; https://www.uppsalabio.com/facts-figures/stockholm-uppsala-region/.
  4. https://www.investstockholm.com/investment_opportunities/lifescience/.
  5. https://www.biospace.com/article/ranking-the-top-10-biotech-clusters-in-europe/; https://www.lifesciencesweden.se/article/view/646365/meet_the_governmental_life_science_office.
  6. Waxell, A. and Malmberg, A., 2007. What is global and what is local in knowledge-generating interaction? The case of the biotech cluster in Uppsala, Sweden. Entrepreneurship and Regional Development, 19(2), pp.137-159.
  7. Teigland, R. and Lindqvist, G., 2007. Seeing eye-to-eye: how do public and private sector views of a biotech cluster and its cluster initiative differ?. European Planning Studies, 15(6), pp.767-786.
  8. https://sciencebusiness.net/report/leading-life-sciences-clusters-europe.
  9. Waxell, A. and Malmberg, A., 2007. What is global and what is local in knowledge-generating interaction? The case of the biotech cluster in Uppsala, Sweden. Entrepreneurship and Regional Development, 19(2), pp.137-159. Many more recent initiatives have their roots in notable research units built around key individuals. For example, ‘the technology on which Pyrosequencing [a company formed in 1997] is built is derived from research carried out under the leadership of Professor Mathias Uhlén at KTH, and in its early stage was related to a group of researchers within Amersham Biosciences [which became GE Healthcare following a takeover in 2003]’. Waluszewski, A., 2004. A competing or co-operating cluster or seven decades of combinatory resources? What’s behind a prospering biotech valley?. Scandinavian Journal of Management, 20(1-2), p.139.
  10. Waxell, A., 2016. Writing up the region: anchor firm dismantling and the construction of a perceived regional advantage in Swedish news media. European Planning Studies, 24(4), pp.742-761.
  11. Waluszewski, A., 2004. A competing or co-operating cluster or seven decades of combinatory resources? What’s behind a prospering biotech valley?. Scandinavian Journal of Management, 20(1-2), pp.125-150.
  12. Waxell, A. and Malmberg, A., 2007. What is global and what is local in knowledge-generating interaction? The case of the biotech cluster in Uppsala, Sweden. Entrepreneurship and Regional Development, 19(2), pp.137-159.
  13. Waluszewski, A., 2004. A competing or co-operating cluster or seven decades of combinatory resources? What’s behind a prospering biotech valley?. Scandinavian Journal of Management, 20(1-2), pp.125-150.
  14. Eliasson and Eliasson (2006), in 5 (or 9). The flow of venture capital increased from 1995 due to new legal arrangements for investors managing governmental funds: Waluszewski, A., 2004. A competing or co-operating cluster or seven decades of combinatory resources? What’s behind a prospering biotech valley?. Scandinavian Journal of Management, 20(1-2), pp.125-150.
  15. Waluszewski, A., 2004. A competing or co-operating cluster or seven decades of combinatory resources? What’s behind a prospering biotech valley?. Scandinavian Journal of Management, 20(1-2), p.138.
  16. Waluszewski, A., 2004. A competing or co-operating cluster or seven decades of combinatory resources? What’s behind a prospering biotech valley?. Scandinavian Journal of Management, 20(1-2), p.136.
  17. Waxell, A., 2009. Guilty by association: a cross-industrial approach to sourcing complementary knowledge in the Uppsala biotechnology cluster. European Planning Studies, 17(11), pp.1605-1624. Waluszewski describes these organisations as ‘nodes’ that combine and recombine resources. The cluster is therefore one ‘where almost all of the emerging companies in one way or another have some kind of kinship with the above mentioned established units’. Waluszewski, A., 2004. A competing or co-operating cluster or seven decades of combinatory resources? What’s behind a prospering biotech valley?. Scandinavian Journal of Management, 20(1-2), p.137.
  18. Waxell, A. and Malmberg, A., 2007. What is global and what is local in knowledge-generating interaction? The case of the biotech cluster in Uppsala, Sweden. Entrepreneurship and Regional Development, 19(2), pp.137-159.
  19. https://uppsalabio.com/wp-content/uploads/2017/05/14993_stockholm-uppsala_life_science_facts_and_figures_2014.pdf.
  20. Waxell, A. and Malmberg, A., 2007. What is global and what is local in knowledge-generating interaction? The case of the biotech cluster in Uppsala, Sweden. Entrepreneurship and Regional Development, 19(2), pp.137-159.
  21. Waxell, A., 2016. Writing up the region: anchor firm dismantling and the construction of a perceived regional advantage in Swedish news media. European Planning Studies, 24(4), pp.742-761. Note the close similarities with the narratives surrounding Pittsburgh in chapter X.
  22. Waluszewski, A., 2004. A competing or co-operating cluster or seven decades of combinatory resources? What’s behind a prospering biotech valley?. Scandinavian Journal of Management, 20(1-2), pp.125-150. Waluszewski notes similarities in this respect to Silicon Valley, quoting Kenney (2000): ‘Industrial developments in the Santa Clara Valley became known to the general public only when the region was named’.
  23. Waxell, A., 2016. Writing up the region: anchor firm dismantling and the construction of a perceived regional advantage in Swedish news media. European Planning Studies, 24(4), p. 756.
  24. Waluszewski, A., 2004. A competing or co-operating cluster or seven decades of combinatory resources? What’s behind a prospering biotech valley?. Scandinavian Journal of Management, 20(1-2), pp.125-150; Waxell, A., 2016. Writing up the region: anchor firm dismantling and the construction of a perceived regional advantage in Swedish news media. European Planning Studies, 24(4), pp.742-761. Furthermore, the city was first presented to the public as a ‘Region of Biotechnology’ at Biotech Forum, a life science expo held in October 2000. STUNS remains active in the region: https://www.stuns.se/en/in-english/.
  25. Teigland, R., Hallencreutz, D. and Lundequist, P., 2005. Uppsala BIO-the Life Science Initiative: Experiences of and Reflections on Starting a Regional Competitiveness Initiative. Uppsala universitet; https://www.uppsalabio.com/about-uppsalabio/. The aforementioned STUNS foundation is a key player in sustaining Uppsala BIO: Laur, I., Klofsten, M. and Bienkowska, D., 2012. Catching regional development dreams: A study of cluster initiatives as intermediaries. European Planning Studies, 20(11), pp.1909-1921.
  26. Laur, I., Klofsten, M. and Bienkowska, D., 2012. Catching regional development dreams: A study of cluster initiatives as intermediaries. European Planning Studies, 20(11), pp.1909-1921.
  27. Laur, I., Klofsten, M. and Bienkowska, D., 2012. Catching regional development dreams: A study of cluster initiatives as intermediaries. European Planning Studies, 20(11), pp.1909-1921.
  28. Moodysson, J., Coenen, L. and Asheim, B., 2009. Clusters in time and space: Understanding the growth and transformation of life science in Scania (Vol. 2008, p. 4). CIRCLE Electronic Working Papers.
  29. Waxell, A. and Malmberg, A., 2007. What is global and what is local in knowledge-generating interaction? The case of the biotech cluster in Uppsala, Sweden. Entrepreneurship and Regional Development, 19(2), pp.137-159.
  30. Teigland, R. and Lindqvist, G., 2007. Seeing eye-to-eye: how do public and private sector views of a biotech cluster and its cluster initiative differ?. European Planning Studies, 15(6), pp.767-786.
  31. Waxell, A., 2009. Guilty by association: a cross-industrial approach to sourcing complementary knowledge in the Uppsala biotechnology cluster. European Planning Studies, 17(11), pp.1605-1624.
  32. Waxell, A. and Malmberg, A., 2007. What is global and what is local in knowledge-generating interaction? The case of the biotech cluster in Uppsala, Sweden. Entrepreneurship and Regional Development, 19(2), pp.137-159; Waxell, A., 2009. Guilty by association: a cross-industrial approach to sourcing complementary knowledge in the Uppsala biotechnology cluster. European Planning Studies, 17(11), pp.1605-1624.
  33. Teigland, R. and Lindqvist, G., 2007. Seeing eye-to-eye: how do public and private sector views of a biotech cluster and its cluster initiative differ?. European Planning Studies, 15(6), pp.767-786.
  34. https://www.investstockholm.com/globalassets/invest/reports/stockholm-ai-report.pdf; https://uppsalabio.com/wp-content/uploads/2017/05/health_tech_2017.pdf.
  35. https://www.uppsalabio.com/about-uppsalabio/history/.
  36. Waxell, A., 2009. Guilty by association: a cross-industrial approach to sourcing complementary knowledge in the Uppsala biotechnology cluster. European Planning Studies, 17(11), pp.1605-1624.
  37. Over the period 1997-2004. Valentin, F., Jensen, R.L. and Dahlgren, H., 2008. How venture capital shapes emerging bio-clusters—a cross-country comparison. European Planning Studies, 16(3), pp.441-463.
  38. https://sciencebusiness.net/report/leading-life-sciences-clusters-europe.
Categories
Universities

Tracing the roots of Israel’s technology cluster to agriculture and beyond

The following post is taken from my contribution to the recent Royal Society report on research clusters, republished here under a creative commons license. The full report has eight case studies (see my previous piece on Pittsburgh). Individually, they tell the story of how the actions of leaders, businesses, universities and communities have affected the development of different places with different contexts and histories. Combined, patterns and trends begin to emerge. The story of Israel’s technology sector is closely intertwined with the complex history of Israel itself.

Israel, owing to its prolific track record of establishing innovative information and communications technology (ICT) companies, has earned itself the moniker of ‘start-up nation’. A 2011 book, taking this moniker as its title, described how Israel (with a population of just under nine million) had more companies on the Nasdaq stock exchange than South Korea, Japan, Singapore, India and all of Europe combined, and the highest density of start-ups per person in the world.1

Others describe Israel’s technology cluster as ‘Silicon Wadi’, after the concentration of high-tech firms along the coastal plain. Activity is concentrated in metropolitan Tel Aviv – including the affluent suburbs of Herzeliya, Ramat Gan and Ra’anana – and Haifa in the north (home to Matam Technology Park, Israel’s first and largest high-tech business park), together with the second city of Jerusalem. Including some secondary areas, such as the corridor south from Tel Aviv to Be’er Sheva and the Western Galilee, the cluster covers an area no larger than 6,000 square kilometres – half that of the extended Silicon Valley in the US.2

Around 1,400 start-ups are created every year in Israel and some 800 shut down.3 In total, there is roughly one start up per 1,400 people. In comparison, France has 0.112 startups for every 1,400 people, Germany has 0.056, and the UK has 0.21.4 This growth is not just a recent phenomenon. According to the IVC Research Center, 10,866 high-tech companies were established in the period 2010 to 2019, with 98 listed on the Nasdaq, and 369 accelerators and 24 incubators established. Since 2010, capital raising by Israeli tech companies has risen by 400 percent and the number of deals by 64 percent.5

Amid this explosion of numbers, questions have been asked whether Israel needs to transform from start-up nation to scale-up nation, or if too many young enterprises are being bought out by international companies.6 Others suggest the start-up scene has already matured: Israel’s cluster of high-technology industries emerged in the late 1990s. Since then many companies have grown substantially, and the country hosts large research and development (R&D) sites for many multinational technology companies.

These developments, and the orientation of the Israeli economy, are reflected in statistics for both exports and research and development. ICT services form over 45 percent of Israel’s service exports, compared to 7 percent for the UK, and 9.5 percent for high-income countries as a whole.7 Israel’s research and development expenditure, at 4.58 percent of GDP, towers above the UK (1.67 percent), and the high-income country average (2.57 percent).8 And Israel has 8,250 R&D researchers per million people, compared to 4,377 in the UK and 4,196 in high-income countries.9

The story of Israel’s technology sector is – more so than many other clusters – also a tale of the country’s national development. The emergence of the Israeli ICT cluster is the result of several complex and interrelated factors including culture, geopolitics, state intervention and broader government policies. Some of these factors, as we will see, can be double-edged swords, and few are easy to replicate (despite the Israeli model being cited as inspiration in other countries).10

Development

The emergence of Israel’s technology cluster can best be explained through direct factors – historical decisions shaped through geopolitical circumstances and government interventions – and contributory or enabling factors that include broader government policies, cultural influences and the military.

In an article on ‘Clusters as Innovation Engines’ published in the European Management Review, the authors claim that some of the world’s most powerful innovation clusters, including Tel Aviv, are relatively young and their origins cannot be traced to historical reasons as implied by cluster theory.11 This isn’t quite accurate: whilst the emergence of an Israeli technology cluster took place in a concentrated period of a few decades, the roots of this cluster can be traced to Israel’s founding in 1948.

Two constraints since then have encouraged innovation. First, Israel is resource-poor. According to Shimon Peres, former Israeli President and Prime Minister, ‘high-tech in Israel began with agriculture… technology was 95 percent of the secret of Israel’s prodigious agricultural productivity’.12 Today, the legacy of agricultural kibbutz (collective community) movements is felt in a proclivity for shared working and teamwork, and the converting of municipal facilities such as city libraries into incubator start-up spaces.13 And Israel’s national emphasis on agriculture and agricultural technology helped the transition into what is today a healthy biotechnology and life sciences cluster.14

A second constraint is the geopolitics of the region. Even when Israel has not been at war with its neighbours, the relationship has been uneasy and borders closed to people and goods. This has meant a focus on innovative solutions and high-tech development as a form of protection, and a need to think globally and develop exports for more distant markets; software and services are easier to sell half way around the world than heavy machinery. Israel was then well-positioned to benefit from the global shift towards knowledge- and innovation-based economies.15

The Israel Defence Forces, given a central national role as a direct result of these geopolitical constraints, was a driving force of Israel’s emergence as a technology cluster. Military innovation accelerated following the French embargo imposed on Israel after the 1967 Middle East war, requiring Israel to develop its own military technology.16 Many commercial technologies have emerged from highly-specialised Israeli military R&D, from fibre-optics and voice compression to networking software and devices; Israeli military intelligence had a computer training unit as early at 1960 helping establish world-leading expertise that was later commercialised.17 As important as the technology itself, however, was flow of people with the skills and leadership ability to manage technology companies, and deep experience of working on cutting-edge innovations.18

Israeli high-tech firms began to form in the 1960s, albeit at a slow pace.19 ECI Telecom was founded in 1961, and Tadiran and Elron Electronics in 1962; Elron is seen as the ‘Fairchild of Israel’ after the legendary Silicon Valley firm. Yet the cluster truly emerged in the mid-1990s, as the rate of successful companies grew from 1-2 per year to 10-20. de Fontenay and Carmel attribute this to the emergence of ‘specialised cluster intermediary services’ such as venture capital and legal services, services which also had professional networks in the United States, the major market for Israeli companies. Strong interpersonal networks and direct experience then allowed new firms to grow more quickly.20

Broader developments helped the cluster’s growth. Global telecommunications and internet booms in the 1990s increased demand and led to several high-profile acquisitions of Israeli companies.21 Shifts in the computer industry from hardware to software products greatly benefited Israel, particularly owing to the demand from businesses for security tools – several of which had been well-tested within Israeli military communications networks.22 Finally, the 1993 Oslo accords with the Palestinians encourages large companies such as Cisco, Motorola, IBM, Microsoft and Hewlett-Packard to invest heavily in R&D centres in Israel, helping to build international networks, expand employment opportunities and develop skills.23

Government interventions have directly stimulated the Israeli technology cluster, with the state nurturing the development of a venture capital industry. Several initiatives stand out. Yozma (Hebrew for ‘initiative’) began in 1993 with 100 million USD and established 10 venture capital funds with the aim of attracting foreign direct investment into Israel. Investors were offered matched funding at the rate of two dollars from the government for every dollar committed by a foreign investor. Equally generous was the option of buying out the government’s stake in the fund after five years. The fund has grown to manage billions of dollars of capital today.24

Other important initiatives include the Office of the Chief Scientist (now Israel Innovation Authority) R&D Development Fund, which gives new R&D facilities access to interest-free loans to match private investment, and the Israel-US Binational Industrial Research and Development Foundation (BIRD) fund, financed by both governments. BIRD ‘played matchmaker’ between an Israeli company with innovative technology and a US company who could distribute and market the product. Although the financial incentives were helpful, the largest impact was to teach young Israeli companies how to do business in the US.25 The state has also reduced bureaucracy, simplified tax regulations, and established incubators.26

Finally, two further factors have enabled cluster growth. The first is the influence of the unique Israeli military culture, pervasive in Israeli businesses because of compulsive military service (for at least two years from the age of 18). The Israel Defence Forces have an unusually flat hierarchy, leading to informal communication with superiors (and the willingness to challenge authority), great flexibility, the development of strong leadership skills, and experience of shouldering considerable responsibility at a young age: all skills that translate into strong entrepreneurship and teamwork in business.27 The strong networks formed in the military – often with people from different backgrounds – are then maintained through reserve duty for many years following military service.28 Alumni who met whilst working in the elite military units (particularly in intelligence) have spawned many high-tech companies, and graduates from these units are often the recruitment targets of major US technology companies.29

The second contributory factor was a large stock of human capital. Levels of education and technical skills are high, supported by world-class universities such as the Israel Institute of Technology (called the Technion) and the Weizmann Institute of Science. But the Israeli government’s open immigration policy towards Jews has also provided a significant inflow of talent. When the US tightened immigration in the 1990s, Israel saw a dramatic increase in immigration of often highly-educated Jewish immigrants from former Soviet Union nations – in ten years the population grew by 800,000, or one fifth; the number of engineers in Tel Aviv doubled. Given the traditional strengths of Soviet Union countries in theoretical sciences, Israel became ‘a superpower in mathematics’, as well as gaining knowledge of proprietary technologies and different methodologies.30 These enabling factors helped provide fuel for the Israeli technology cluster, and in turn for the growth of the nation.

Outcomes

By the late 1990s, the Israeli technology cluster was internationally connected and strongly entrepreneurial, based on deep stocks of human capital and local knowledge. The source of this innovation was commercialisation of military technology and university R&D, supported by flows of skilled workers and a government interventions to promote investment and generate capital.31 Although the acquisitions of several Israeli companies and the opening of large R&D plants put the country on the global innovation radar, it was the result of decades of government-led economic development rooted in efforts to secure national security and high-tech growth.

There are several key outcomes of these developments. First, Israel’s technology cluster overcame its geographic isolation to work effectively with distant – primarily US – markets by building on world-leading expertise and targeting business customers who require less face-to-face support.32 Professional ties with other clusters, such as Silicon Valley, are strong and aided by the diaspora concentrated in New York and Los Angeles. Concerns over brain drain, as young Israelis look to study and work abroad, are countered by new networks formed and the return of expatriates – often many years later – to set up regional offices or to champion investment and R&D centres in Israel.33

Second, a mature venture capital industry has emerged in Israel. More than 430 professional investors (including venture capital firms, private equity firms and incubators) have a permanent presence in Israel; just under a quarter of these are non-Israeli. Nearly 1,500 investors, representing more than 30 countries, invested in Israeli companies during 2018.34

Third, the Israeli culture – a somewhat intangible factor that draws on the collectivist origins of Israeli society and the nature of the military – has offered a competitive advantage. In addition to the factors explored in the section above, it has been suggested that collectivism and military service translates into loyalty, strong teamwork and lower turnover in the workplace compared to competitor nations. This might mean, for example, faster development times and greater retained knowledge when designing new computer chips – which often have long development cycles.35 However, despite these considerable advantages, the Israeli technology cluster faces several challenges that spring from each of these three outcomes.

Looking forward

One might imagine that the spectre of instability and violence, which served as the impetus for Israel’s focus on national growth and security, might also undo confidence in the ability of Israelis to innovate, and undermine investment in Israeli companies. Senor and Singer argue in Start-Up Nation that the determination of Israeli entrepreneurs to continue innovating in the face of war makes the country more enticing for investors.36 An analysis of the effect of Palestinian terrorist attacks during the second Intifada (2000-2005) found that despite being profoundly affected by terrorism, Israeli society was not demoralised by it because the public possessed a high level of social resilience – fostered in part by the cohesiveness of Israeli-Jewish society.37 Although violence continues to be a risk factor, more prosaic factors are perhaps of more concern.

First, the cultural attributes that lend themselves to entrepreneurialism may be a double-edged sword. The Israeli high-tech community has been accused of inattention to detail, indifference to quality, an unscalable management culture, and poor customer service. In particular, the management culture may be hindering the growth of companies, with few growing larger than 1,000 employees.38 Others fear that the ‘national characteristic of brusqueness is better suited to the creative process, not the nurturing of long-term projects’.39

Second, there is concern that start-up founders are too focused on buy-outs (and big pay offs) from overseas companies or public listings, instead of growing large businesses.40 Connected to this are perennial fears of brain drain and an exodus of talent to the US.41 These fears are heightened by a shortage of skilled software engineers, with five jobs for every applicant in the sector. Efforts to bridge the gap include alternative training programs such as tech boot camps, and boosting recruitment of women and Arab and ultra-Orthodox Jewish minorities, who are all under-represented in the sector.42

(Photos from Unsplash: street, square, skyline)

  1. Senor, D. and Singer, S., 2011. Start-up nation: The story of Israel’s economic miracle. Random House Digital.
  2. de Fontenay, C. and Carmel, E. (2001) ‘Israel’s Silicon Wadi: The Forces behind cluster formation’, Stanford Institute for Economic Policy Research, Discussion Paper 00-40.
  3. https://www.timesofisrael.com/startup-nation-has-grown-into-tech-nation-intel-israel-rd-chief-says/.
  4. https://www.forbes.com/sites/startupnationcentral/2018/05/14/israeli-techs-identity-crisis-startup-nation-or-scale-up-nation/#46c07ad6ef48.
  5. https://www.ivc-online.com/Portals/0/RC/Magazine%20&%20YB/IVC_ANNUAL_ISRAELI_TECH_REVIEW_FEB_2020/mobile/index.html#p=4.
  6. https://www.ft.com/content/e4b5a70a-c903-11e5-a8ef-ea66e967dd44; https://blogs.timesofisrael.com/israel-turns-71-is-the-start-up-nation-ready-to-be-a-scale-up-nation/.
  7. 2017 figures; World Bank data: https://data.worldbank.org/indicator/BX.GSR.CCIS.ZS?locations=IL-GB.
  8. 2017 figures; World Bank data: https://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS?locations=IL-GB-XD.
  9. Israel figure 2012, UK figure 2017, high income country average figure 2016; World Bank data: https://data.worldbank.org/indicator/SP.POP.SCIE.RD.P6?locations=IL-GB-XD.
  10. From Ireland to Lithuania: https://www.irishtimes.com/news/what-ireland-has-to-learn-from-israel-s-high-tech-companies-1.683699; https://www.haaretz.com/israel-news/business/1.5109951.
  11. Ferras‐Hernandez, X. and Nylund, P.A., 2019. Clusters as innovation engines: The accelerating strengths of proximity. European Management Review, 16(1), pp.37-53.
  12. Senor, D. and Singer, S., 2011. Start-up nation: The story of Israel’s economic miracle. Random House Digital, p.xii.
  13. Haynes, C. and Langley, V. (2014). Magnet Cities. KPMG.
  14. De Fontenay, C. and Carmel, E. (2001) ‘Israel’s Silicon Wadi: The Forces behind cluster formation’, Stanford Institute for Economic Policy Research, Discussion Paper 00-40.
  15. Gilbert, B.A., Li, Y., Velez-Calle, A. and Crews, M., 2019. A theoretical model of values and behaviors that shape technology region emergence in developing contexts. Small Business Economics, pp.1-13; Senor, D. and Singer, S., 2011. Start-up nation: The story of Israel’s economic miracle. Random House Digital.
  16. A few years later, the the US replaced France as the main supplier of arms. The US has since given billions of dollars in aid and military assistance and as such is a key part of the Israel’s technology story (Devi, S. ‘Business as usual’, Financial Times Magazine, April 13 2007). This stimulation of demand from military and technology projects is also a common characteristic shared with the US (Ferras‐Hernandez, X. and Nylund, P.A., 2019. Clusters as innovation engines: The accelerating strengths of proximity. European Management Review, 16(1), pp.37-53).
  17. Devi, S. ‘Business as usual’, Financial Times Magazine, April 13 2007; de Fontenay, C. and Carmel, E. (2001) ‘Israel’s Silicon Wadi: The Forces behind cluster formation’, Stanford Institute for Economic Policy Research, Discussion Paper 00-40.
  18. de Fontenay and Carmel note that, paradoxically, the military protects less of its intellectual property than do commercial firms, thus encouraging greater rates of commercial innovation. de Fontenay, C. and Carmel, E. (2001) ‘Israel’s Silicon Wadi: The Forces behind cluster formation’, Stanford Institute for Economic Policy Research, Discussion Paper 00-40.
  19. de Fontenay and Carmel provide a detailed account, summarised here. de Fontenay, C. and Carmel, E. (2001) ‘Israel’s Silicon Wadi: The Forces behind cluster formation’, Stanford Institute for Economic Policy Research, Discussion Paper 00-40.
  20. de Fontenay, C. and Carmel, E. (2001) ‘Israel’s Silicon Wadi: The Forces behind cluster formation’, Stanford Institute for Economic Policy Research, Discussion Paper 00-40, pp.25-26.
  21. In particular communications tools (again a legacy of military-developed technology). Detailed in Haynes, C. and Langley, V. (2014). Magnet Cities. KPMG. The burst of the dot com bubble in 2000 did, however, lead many companies to make mass redundancies.
  22. de Fontenay, C. and Carmel, E. (2001) ‘Israel’s Silicon Wadi: The Forces behind cluster formation’, Stanford Institute for Economic Policy Research, Discussion Paper 00-40.
  23. Devi, S. ‘Business as usual’, Financial Times Magazine, April 13 2007.
  24. Haynes, C. and Langley, V. (2014). Magnet Cities. KPMG; Senor, D. and Singer, S., 2011. Start-up nation: The story of Israel’s economic miracle. Random House Digital.
  25. Senor, D. and Singer, S., 2011. Start-up nation: The story of Israel’s economic miracle. Random House Digital, p.200.
  26. de Fontenay, C. and Carmel, E. (2001) ‘Israel’s Silicon Wadi: The Forces behind cluster formation’, Stanford Institute for Economic Policy Research, Discussion Paper 00-40.
  27. Explored in great detail in Senor, D. and Singer, S., 2011. Start-up nation: The story of Israel’s economic miracle, Random House Digital. See also de Fontenay, C. and Carmel, E. (2001) ‘Israel’s Silicon Wadi: The Forces behind cluster formation’, Stanford Institute for Economic Policy Research, Discussion Paper 00-40.
  28. They also contribute to a broader national network: ”You are never more than a couple of telephone calls away from anybody else in Israel, and we all like to help each other out if we can”, says one entrepreneur and investor in a Financial Times profile (Devi, S. ‘Business as usual’, Financial Times Magazine, April 13 2007). The size of Israel’s population also makes this a more feasible proposition than in larger countries.
  29. Haynes, C. and Langley, V. (2014). Magnet Cities. KPMG. Senor and Singer describe the IDF’s elite units as Israel’s equivalent of Yale, Harvard and Princeton. Senor, D. and Singer, S., 2011. Start-up nation: The story of Israel’s economic miracle. Random House Digital, p.84.
  30. de Fontenay, C. and Carmel, E. (2001) ‘Israel’s Silicon Wadi: The Forces behind cluster formation’, Stanford Institute for Economic Policy Research, Discussion Paper 00-40.
  31. Roper, S. and Grimes, S., 2005. Wireless valley, silicon wadi and digital island––Helsinki, Tel Aviv and Dublin and the ICT global production network. Geoforum, 36(3), pp.297-313.
  32. In common with other nations such as Taiwan and India, where local demand was deemed insufficient (de Fontenay, C. and Carmel, E. (2001) ‘Israel’s Silicon Wadi: The Forces behind cluster formation’, Stanford Institute for Economic Policy Research, Discussion Paper 00-40). In this sense, Israel also shares characteristics of other innovation-rich economies such as Ireland and Finland, which are relatively small and have fewer natural resources, and thus have focused on knowledge-intensive industries requiring firms to target export markets (Roper, S. and Grimes, S., 2005. Wireless valley, silicon wadi and digital island––Helsinki, Tel Aviv and Dublin and the ICT global production network. Geoforum, 36(3), pp.297-313).
  33. As was the case for Intel and Microsoft. de Fontenay, C. and Carmel, E. (2001) ‘Israel’s Silicon Wadi: The Forces behind cluster formation’, Stanford Institute for Economic Policy Research, Discussion Paper 00-40.
  34. The State of the Israeli Ecosystem in 2018, Start Up Nation Central: Finders Insights Series. (http://mlp.startupnationcentral.org/rs/663-SRH-472/images/Start-Up%20Nation%20Central%20Annual%20Report%202019.pdf).
  35. de Fontenay, C. and Carmel, E. (2001) ‘Israel’s Silicon Wadi: The Forces behind cluster formation’, Stanford Institute for Economic Policy Research, Discussion Paper 00-40.
  36. They also show that investment in Israeli hi-tech continued to increase in the face of rising violence in the early 2000s. Senor, D. and Singer, S., 2011. Start-up nation: The story of Israel’s economic miracle. Random House Digital, p.182.
  37. Waxman, D., 2011. Living with terror, not living in terror: The impact of chronic terrorism on Israeli society. Perspectives on Terrorism, 5(5/6), pp.4-26.
  38. de Fontenay, C. and Carmel, E. (2001) ‘Israel’s Silicon Wadi: The Forces behind cluster formation’, Stanford Institute for Economic Policy Research, Discussion Paper 00-40. Note this is dated. To quote from their interviews: ‘“That’s why Israel will never put a man on the moon” [said one]… meaning that a research organisation the size of NASA could never function properly given Israeli organisational culture’.
  39. Devi, S. ‘Business as usual’, Financial Times Magazine, April 13 2007.
  40. Haynes, C. and Langley, V. (2014). Magnet Cities. KPMG; Devi, S. ‘Business as usual’, Financial Times Magazine, April 13 2007.
  41. See, for example, https://www.newsweek.com/2018/05/18/israel-brain-drain-technology-startup-nation-religion-palestinians-economy-919477.html.
  42. https://www.ft.com/content/e4b5a70a-c903-11e5-a8ef-ea66e967dd44; https://blog.startupnationcentral.org/general/israel-high-tech-human-capital-shortage/.
Categories
Universities

Innovators Without Borders

This post originally appeared on the Yorkshire Universities website.

Nesta recently launched a report exploring how cities and regions collaborate internationally on innovation. If done effectively, international collaborations offer the opportunity to hit multiple policy priorities: levelling up regions, boosting investment in R&D towards 2.4 percent of GDP, and strengthening overseas relationships post-Brexit.

Cities and regions have a long history of forging overseas relationships directly with international partners. So-called ‘municipal internationalism’ thrived in the nineteenth century, culminating in the formation of the International Union of Local Authorities in 1913. Today, ambitious city regions across Europe have overseas offices (often in Brussels) and a complex web of relationships around the world. As Shane Ewen and Michael Hebbert put it, ‘the spirit of the Hanseatic League is alive and well in Europe’s town halls’.

There has been renewed interest in the topic in recent years. ‘Decentralised Development Cooperation’ is promoted by the likes of the OECD as means to help cities and regions achieve the UN Sustainable Development Goals. City diplomacy is an established academic field. I even published some musings of my own on the topic back in 2016.

The Nesta report is, however, valuable for considering how international collaborations can boost policy innovation (for leaders and governments), systems innovation (to address longer-term systemic issues of institutional capacity) and partnerships innovation (between government and business, universities, and other institutions) at the local level. The latter, in particular, is significant. Michele Acuto has observed that the average distance between a city hall and the closest major university is just under four kilometres in four of the major city networks. Strong, strategic partnerships at local level can only help strengthen international ones.

One effect of COVID-19 will be a greater role for universities and other civic bodies in regional collaborations. According to the report, ‘these are repeatedly viewed as critical and under-tapped intermediaries in peer-to-peer collaboration, because they have additional and more durable capacity as well as the ability to pedagogically transmit key principles, codify lessons and develop processes for distributed on-the-ground implementation’. Initiatives such as the EUniverCities network, in which medium-sized cities and their universities work together, offer a glimpse at what this may look like as a formalised structure.

For Yorkshire, the relationships that exist in the region between universities and LEPs, Combined Authorities, metro mayors, and local authorities provide a solid base to build upon. Both local government and the region’s universities have a wide set of relationships with counterparts around the world. The extent of city twinning in the region (which exploded in popularity after world war two) provide an insight into the range of partners: Hull is twinned with several cities, including Rotterdam in the Netherlands and Niigata, Japan. York and Bradford both have twins in France and Germany. Sheffield’s twins include Chengdu in China, Kawasaki, Japan and Pittsburgh, United States. Leeds is twinned with several cities including Hangzhou in China, Dortmund, Germany, and Durban, South Africa.

The multiple policy priorities of levelling up, boosting investment in R&D, and strengthening overseas relationships – ambitious even before COVID-19 struck – mean we need to bring universities into the centre of efforts to collaborate internationally on innovation. This would provide a timely boost to the concept of ‘Global Britain’.

(Photo of Brussels from Unsplash)

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Universities

Research and innovation clusters – new Royal Society policy briefing

The Royal Society launched a policy briefing on research and innovation clusters today – I provided support for the analysis and wrote the case studies for Israel, Pittsburgh, and Uppsala.

The report is online here, and there’s a blog by Professor Richard Jones on Wonkhe introducing the report: can research clusters help level up the country? Research Professional also has coverage (paywalled article).

(Photo of Pittsburgh from Unsplash)

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Universities

Reshaping UK regions post-COVID: research and industrial capacity

Yesterday Nesta published a report arguing that some parts of the UK have missed out on £4 billion of public research and development (R&D) funding each year, plus a further £8 billion of private sector investment. Some of these regions never fully recovered from the 2008 Great Recession, and COVID-19 threatens to deepen these divisions.

The Government’s target – set before the pandemic – called for the UK to increase investment in R&D to 2.4% of GDP by 2027, and by 3% in the future. The importance of this target is now greater than before. To meet it means empowering those regions with the lowest R&D intensity and recognising and supporting the vital role of universities and other partners in these regions.

Proposals in the report include devolving a substantial portion (25%) of the promised uplift in the R&D budget to nations, cities and regions, delivered through ‘Innovation Deals’.

The report also recognises how historic policy decisions have led to path dependency for regions, entrenching a set of ‘winners’ and ‘losers’. (This factor is missing in some – otherwise reasonable – recent reports which instead advocate building on existing centres of excellence). As the Nesta authors put it:

The current situation is the result of a combination of deliberate policy decisions and a natural dynamic in which these small preferences combined with initial advantages are reinforced with time.

Industrial capacity

Decisions made by previous generations of policymakers and politicians also play an outsized role in the UK’s industrial policy.

This excellent piece on efficiency and redundancy in the UK, and how we need more of the latter at the expense of the former to ensure resilience, is taken forwards nicely by Andy Westwood in this discussion of building industrial capacity in the UK. Building in redundant capacity is seen as a signature trait of a ‘resilient’ city or region. Andy sets out the case for starting with ‘national self sufficiency’ in health and manufacturing but then rapidly broadening out to other sectors, with a focus on impact at the local level. Movement towards autarky is a balancing act needing careful trade-offs, but there is a strong case for securing – or at least diversifying – supply chains in key industries and sectors.

The pandemic has drastically curtailed trade and investment; a return to previous patterns of international cooperation (which differ across UK regions) following COVID-19, and when trade picks up, is unlikely. More emphasis will be given to secure and resilient supply chains within the UK and near neighbours. This means strengthening industrial capacity and domestic manufacturing in the UK, and ensuring the provision of critical goods and services across the country – with clear implications for spatially-aware policymaking and an opportunity for rebuilding local economies.

These discussions neatly fit with a few themes I have touched on in recent posts – on how discussions over the smart city have morphed into ones about self-sufficient cities, on the risks of poor policymaking for resilience, and why popular narratives around ‘resilient communities’ are dangerous. See also this piece by Yorkshire Universities on The Coronavirus Pandemic: Universities and the Economic Recovery of Place.

(Image credit)

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Universities

When a local economy collapses, we can’t just rely on the grit of communities

This post originally appeared on the Yorkshire Universities website.

I’m a little late in reading Janesville: An American Story, Amy Goldstein’s tale of an industrial Wisconsin town in the depths of the Great Recession. The book received wide praise when published in 2017, telling the story of a community trying to pick itself up in the years following the closure of a major General Motors assembly plant. But the story has particular resonance now, as we stand on the cusp of another wave of economic upheaval. Here are three reflections.

A tale of two towns

Five years after the General Motors plant closed, the shock of vanished jobs has faded. But ‘the ways that time and economic misfortune can rend even a resilient community – a community determined not to lie down and give up – are plain to see’. Goldstein describes the emergence of two Janesvilles: one of business owners that emerged relatively unscathed, and another large group of struggling families. For this group, part of a ‘broad tumbling downhill’, the future is uncertain, incomes have halved, mortgages outstrip house values, food stamps have replaced eating out, and health insurance stops.

Inequality is at the heart of recent work by Yorkshire Universities on health and wealth, including a forthcoming report with NHS Confederation and the Yorkshire & Humber Academic Health Science Network (AHSN). Just before the pandemic struck, Sir Michael Marmot published a report showing widening regional disparities in life expectancy, including falling life expectancy for the poorest. In Yorkshire and the Humber, healthy life expectancy at birth is lower than the national average – with stark variations within the region too. Absence from work because of sickness is greater than the national average. Mortality rates are uniformly higher.

The danger is that the long-term economic impact of coronavirus exacerbates these inequalities. A briefing paper from the Institute for Fiscal Studies makes uncomfortable reading, referencing a study that showed a 1% fall in employment leads to a 2% increase in the prevalence of chronic illness:

To put this in context, if employment were to fall by the same amount as it fell in the 12 months after the 2008 crisis, around 900,000 more people of working age would be predicted to suffer from a chronic health condition. Only about half this effect will be immediate: the full effect will not be felt for two years. The shock to employment from the coronavirus pandemic is likely to be much larger than this and so we may expect a larger rise in poor health.

The poorest in society are hit hardest by recessions, driving wider inequalities in health and wealth, and splitting towns and cities into two.

The challenges of retraining

‘It isn’t simple to take someone with a high school degree and a factory job and help lead them into new work’, reflects Bob Borremans. Bob is a community leader and head of Janesville’s job centre, and faces an uphill battle despite enthusiastic trainees and injections of federal cash.

Retraining and re-skilling are obvious responses to job losses and economic restructuring. But promised jobs at the end of retraining do not always materialise, and the path to graduation is tough. In Janesville, many former factory workers turned to courses at Blackhawk Technical College funded by federal grant programmes. Despite the laudable work of the college, the average pay of those who graduate is a shadow of their pre-recession wages.

The UK’s What Works Centre for Local Economic Growth concludes that employment training programmes for adults can have a positive, although modest, impact on earnings and employment. The key to success is designing appropriate programmes. A review of the evidence by the Centre found shorter programmes (below six months) are more effective for less formal training activity, and that longer programmes generate employment gains when the content is skill-intensive. On the job training programmes tend to outperform classroom-based ones. Further and higher education providers should bear this in mind in the months and years to come.

Phoenixes vs. Planting Seeds

Janesville is proud of its ‘can-do spirit’, a trait that can be traced back generation to generation, to the industrious and hard-working communities that first attracted the likes of General Motors to the town. The problem is that a can-do spirit is, by itself, rarely enough to save a town struck by economic upheaval.

In another project, I have been exploring how world-leading research clusters have emerged in certain places – from advanced manufacturing in Pittsburgh, to life sciences in the Stockholm-Uppsala region, to the high-tech industry in Israel. Many of these have a popular ‘origin story’, often spun by an enthusiastic local press. The story usually goes something like this. The town has a proud past rooted in a particular industry. Economic calamity strikes due to wider structural forces. The proud industry is obliterated. There’s mass unemployment, and, temporarily, hope is lost. But the community is resilient and bounces back through sheer determination and hard work, attracting a new industry and forging a new, bright future – a high-tech phoenix rising from industrial ashes.

The reality is often messier, and the roots of any revival go back much further than the economic calamity. Take Pittsburgh. The steel industry in the city collapsed in the 1980s and the unemployment rate hit 18 percent. The city’s revitalisation is often explained by the grit and character of Pittsburghers, whereas the seeds of revival were planted decades before when the steel industry was at its height. Philanthropic investment led to specialist expertise being developed at the University of Pittsburgh and Carnegie Mellon University, including a new medical school, forming the foundation of Pittsburgh’s research and innovation clusters today.

There is a similar story in Sweden. When Pharmacia, then one of the largest pharmaceutical companies in Europe, merged with the US company Upjohn in 1995, around 200 research and managerial positions were moved out of Uppsala; the move was initially seen as striking a huge blow to the region. The popular narrative is that the vacuum left by the company’s withdrawal led to a frenzy of entrepreneurial start-ups and innovative ideas. But the emergence of the Uppsala cluster is the result of industrial and academic collaboration over at least 70 years.

The message here is not that people and communities are not important. Specialisation builds on rich legacies, and new clusters form around old industries. Some people – especially the highly-skilled – will thrive; employment in automation and industrial machinery in Pittsburgh is more than twice the national average. But people need to be empowered by structures and institutions that support them. Some places are fortunate to have seeds planted long ago, such as a strong university. Despite the challenges such institutions will be facing themselves, they will need to step up. For places those without, relying on grit will not be enough.

(Photo by Science in HD on Unsplash)

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Universities

Lessons from the demise of 100 Resilient Cities

100 Resilient Cities closed its doors at the start of August. Although principally aimed at local governments and city administrations, the organisation’s focus on solving locally-identified challenges made it, in my opinion, highly relevant for universities.

The three African cities in my doctoral research – Accra, Addis Ababa and Kigali – are all resilient cities. Several posts on this site focus on resilience (examples here and here). And I have interviewed the Chief Resilience Officers in Toronto and Milan for several research projects that have stressed the role of universities in tackling urban problems.

There’s good coverage on CityLab and The Conversation on what the closure of 100 Resilient Cities means and some of the reasons for it being shuttered. Over on LinkedIn, Elliott Cappell, the former Chief Resilience Officer for the City of Toronto, posted an excellent analysis of the ascent and demise of 100 Resilient Cities, asking what can we learn. Elliott kindly gave permission for me to republish his post here – it’s well worth a read for considering what we can learn for similar future initiatives. Over to Elliott…

As of August 1st, 2019, 100 Resilient Cities is winding down.

Yes, you read that correctly: the $160m, Rockefeller-backed, global organization with offices from Mexico City to Singapore, and Chief Resilience Officers in 80 cities, has shuttered its windows.  This is a truly acute shock for anyone working on urban development, climate change, or international development.

I remember the first day I walked into 100RC’s offices in Manhattan, because that was the day I met Otis Rolley (who was then an executive of 100RC).  If you have met Otis, you will also recall your first time. Otis is so charismatic, so honest, and so intelligent that it defies description. It is hard not to like Otis.

On that April day in 2017, Otis cited scripture to describe the ascent of 100RC and its network of CROs: “As iron sharpens iron, so one person sharpens another”.  The passage, in this context, meant that 100RC was growing, drawing in the best people, the greatest cities, and the brightest ideas – and so drawing in even better people, more partners, and better ideas.  Otis was right, too.

Yet, just 28 months later, 100RC is finished. Wow.

How did this happen?  If you are working in cities or climate change or development, it is worth trying to understand how 100RC went from ascent to demise in just two years.  From my perspective, there are three lessons:

In public policy, simple ideas become complex very quickly.

In public policy, simple ideas become complex very quickly.  100RC started with a great idea: making cities around the world resilient to shocks, like Hurricane Katrina. They made it a bit more complex, by introducing the concept of ‘stresses’ that make those shocks worse, like poor land use planning or institutional racism.  Tackling ‘shocks and stresses’ was a huge, audacious idea, literally with the potential to change the world.

But then 100RC made it much more complex.  They promised resilience wouldn’t just be focused on the pending doom of climate change, but would actually solve ‘any challenges cities faced’.  They would create a ‘marketplace for resilience’, and ‘innovative finance for resilience’.  100RC’s approach was documented in a ‘guidance manual’ of hundreds of pages, in which ‘meetings’ became ‘bootcamps’; ‘consultants’ became ‘strategy partners’; and ‘discovery areas’ would feed into cities’ ‘opportunity assessments’.  Even the press releases are complex enough that it is really hard to understand what 100RC is doing or why.

Cities are complex systems, so it’s hard to simplify and still create meaningful change.  But the 100RC strategy should have been simpler; because simple becomes complex, and in this case, complex became unachievable.

If you get the local political economy wrong, your project will fail.

100RC’s second challenge was to apply their model, which was based on American cities’ governance, to cities around the world.  But cities are governed differently around the world. For example, as CRO in Toronto, I reported to the City Manager, who is like the CEO of the city, whereas our Mayor is like the Chairperson of the Board.  But in New York, the CRO reports to the Mayor, who is CEO and Chairperson both.

In international development, we refer to these subtle but very important differences as ‘the local political economy’.  If you get the local political economy wrong, your project will fail.

From my perspective on the ground, 100RC was not able to internalize the differences between New York and Toronto – which are only an hour away by plane.  Those differences created massive barriers to implementing 100RC’s model in our context. Now multiply that problem by 100 cities across dozens of countries, and you have a second reason 100RC is shut today: local political economy matters.

The third reason is money. 100RC spent lots and lots of money.  Annually, 100RC flew dozens of tech entrepreneurs and venture capitalists to Italy, where they were served meals literally topped with edible gold leaves (or gold leafs, in Toronto’s political economy).  They held a ‘resilience track’ at the Consumer Electronic Show in Las Vegas (Vegas was not a 100RC city). They held ‘learning labs’ around the world on a range of topics such as a ‘city currency’, and they spent lots doing so.

What do Las Vegas, a city currency, or consumer electronics have to do with protecting cities from climate change?  Didn’t we start this whole thing because of Hurricane Katrina and Superstorm Sandy? Where was climate change in all this spending?  One can draw a connection from venture capital to city resilience (100RC tried), but it certainly isn’t straightforward.

If you’re working on public policy or using public resources, you need to keep tightly accountable to linking your budget with your outcomes.  It isn’t easy to explain why using philanthropic funds for ‘living labs’ and ‘platform partners’ (100RC parlance for site visits and for short term consulting advice) leads to improved resilience.  So the third lesson here is that monitoring and evaluation is crucial: tracking to clear metrics help us demonstrate that money is leading to change.

100RC was successful and continues to be relevant, as climate change causes problems faster than cities are coming up with solutions.

100RC was not a failure.  In a short time there has been a substantial change in how cities act and think, and it’s very impressive how much was achieved.  With most people living in cities and the climate causing problems faster than we come up with solutions, 100RC is actually still relevant.  That 100RC was successful and is relevant makes today feel like a brutal, bruising failure.

I hope many other people in our industry share their thoughts on how we got here.  100RC was a very important organization, and it is important that we, as urban development, climate change, and international development professionals, own and understand this as a collective failure.  If, by the grace of the Rockefeller Foundation, we get another shot at helping cities combat climate change, we need to identify and learn the lessons from 100RC’s demise.

Elliott

Read the original post on LinkedIn here.

Update February 2020: here’s what has happened since.

(Image credit)

Categories
Universities

Tracking strategic internationalisation over time

Giorgio Marinoni and Hans de Wit ask in a recent edition of International Higher Education whether ‘the internationalisation of higher education has become a strategic process at higher education institutions (HEIs) around the world’.

They correctly note that having a strategy does not mean having a strategic approach. Drawing on a survey of 907 universities from 126 countries, they conclude that ‘the presence of an institution-wide policy/strategy for internationalisation, as well as the presence of a dedicated office or team to oversee its implementation, are becoming the norm at HEIs around the world’. Both the presence of a strategy and of dedicated teams have grown significantly over the past 15 years, according to previous survey data.

However, the development of monitoring frameworks has ‘stagnated’, and the authors find a risk of a gulf opening up between those institutions who choose to (and can afford to be) strategic about internationalisation, and those who are less engaged.

These discussions build on two related strands of work I’ve been involved with in the past: universities working with cities on internationalisation (with a central conclusion being a need for ‘strategic internationalisation’), and the ineffectiveness of many university engagement strategies. On the latter, and with a UK-focus, this post on the HEPI blog is worth a read: ‘almost 63% of university strategies have end dates in 2019, 2020 or 2021 and hence will need to be re-written and re-launched over the next few years’.

(Image credit: Unsplash)

Categories
Universities

Entrepreneurship in UK education: the local dimension

The National Centre for Entrepreneurship in Education (NCEE) launched the Inspiring Entrepreneurship in Education report last week at the House of Lords, capturing the views of 62 Heads of Enterprise from UK universities (I provided the analysis).

The report was covered by Times Higher Education (paywall article), who led with the finding that university support for enterprise in local schools and communities has significantly decreased in the past six years. The full report here (PDF) covers a wide range of activity and indicators, perhaps best summed up by this visual heat map from the annex. The first column is 2018 activity and the second column 2012 data, and greener is better:

The article ends by summing up the report conclusions focusing on local activity:

The report also recommends that universities consider how existing activity and the work of students in particular could engage with schools and communities, and that staff promote the work of local entrepreneurs, in preference to tales of high-profile examples such as Mark Zuckerberg and Richard Branson, to make entrepreneurship seem more accessible to students.

The final recommendation in particular was also echoed by Professor Alison Wolf, Baroness of Dulwich, who also spoke at the event.

Categories
Guest post Universities

No ordinary think tank

Guest post by Jonathan Schifferes, Associate Director – Public Services and Communities at the RSA

At the dawn of a new parliament – one which will be gripped by negotiating Britain’s international relations while also negotiating new alliances in the House of Commons – the UK gained another think tank last week.

Some political insiders explain that this kind of parliament is likely to sideline the philosophers and reformers with a policy vision for government. Instead the deal-makers, the tactical masters, and the charismatic will be in demand.

In this context, what contribution can a think tank realistically make in the coming year? At the RSA we have been working over the last two years to support the development of a new kind of think tank: one that is focused on the issues of a specific place, within an ‘anchor institution’ that itself shapes the place it is in.

Despite over a decade of devolution and localism in UK politics, there are remarkably few1 civil society organisations that have been established with a place as their focus. We hear frequent complaints of policy silos and politics centred on Westminster, yet most think tanks organise themselves around a policy issue and locate themselves in Westminster.

To generate a richer debate on the social and economic development of the UK’s towns and cities, we need to bridge the gap between the sidelined political philosophy and the daily grind of machine politics. For several years, the RSA has recognised that universities have enormous potential to drive social and economic outcomes in the places they exist – echoing calls for a new breed of ‘civic university’.

RSA Chief Executive Matthew Taylor gave the keynote speech last week, launching Nottingham Civic Exchange, based at Nottingham Trent University (NTU). In partnership with the university leadership, the RSA has helped shape this civic think tank – bringing together many of our Fellows across the region and pooling our research capabilities. NTU views Nottingham Civic Exchange as a key part of delivering its overall strategy.

Going to the heart of what will matter in the lives of one million people across Nottingham and Nottinghamshire, the first programme of Nottingham Civic Exchange is called ‘Out of the Ordinary’. Today, NCE publishes an analysis of ‘ordinary working families’ in the city-region. Rather than simply using economic analysis to fuel Westminster soundbites, and packaging up a new demographic for electoral fodder, this study uncovers important data on Ordinary Working Families in a specific place.

Six million people define themselves as ‘just about managing’

While the struggles of the ‘squeezed middle’, ‘alarm clock Britain’ and households on low and moderate incomes have been discussed for years, what is most remarkable is that nationwide, an estimated six million people define themselves as ‘just about managing’, despite being in households with income above the national median.

In Nottingham, jobs in the caring and leisure industries are more common sources of employment compared to the UK average, and the prevailing low pay of these sectors – where women hold the majority of roles – challenges household finances. The RSA’s Inclusive Growth Commission made the case for place-based industrial strategies, which will be even more crucial as the economic adjustment of leaving the EU approaches, and devolution seems likely to stall. NTU has a particular accountability to families who are ‘just about managing’ – 21% of their 2015 full time undergraduate intake is estimated to come from this background.

Through the summer, the RSA’s ongoing work with NCE will bring a further focus on economic insecurity. We think addressing economic security is a neglected policy goal, which will help bring in to focus the following:

  • The breakdown of traditional class markers. University education has expanded for the recent generation, occupational roles in the workplace are undergoing accelerating change, and home ownership is declining among adults in their 30s establishing families. The financial security previously afforded by a university degree and a white-collar job is eroding, and partly as a consequence owner-occupation is less easily accessible as a form of insurance to protect against unstable or falling incomes. As post-election analysis has suggested, ‘age is the new class’ when it comes to predicting how people align to support political parties.
  • The importance of households as a unit of analysis. Most labour market statistics, for example, look at workers as individuals. Most workers live in households and financial decisions are made in that context: 43% of people have a joint account with their partner. Families and their homes transmit wealth through the economy at a scale which dwarfs the government’s own system of tax-funded pensions. Differences in the experience of insecurity between generations remain relatively under-explored.
  • The importance of looking across the life-course rather than using snapshot data pictures. Looking at longitudinal data across Europe, the lower middle class has the highest rates of transitory poverty; moving in and out of poverty defines their economic status.
  • The economic, fiscal, social and health impacts of subjective (‘felt’) insecurity are just as, if not more potent than, the effects of objective insecurity and material deprivation. This doesn’t mean that addressing material deprivation and poverty should be neglected as policy goals. But it does mean recognising that progressing in the modern workplace brings anxieties and volatility, not necessarily the secure affluence that many crave.
  • Longer-term, a defining characteristic of our era is declining confidence that the future will be better than the past. A survey in 2015 found 25% of UK respondents thought their children would be better off than them; 68% thought they would be worse off.

Nottingham housing

My hypothesis is that in a rich country like the UK, being secure in your economic status matters alongside your absolute affluence. And overall economic inequality matters in part because it exacerbates the experience and perception of insecurity for all in society: greater inequality means there is more to gain and more to lose from a change in their position on the income spectrum.

Beyond the day-to-day parliamentary dealmaking, the election aftermath may prove be one in which austerity plans are dialled down, labour market considerations dominate Brexit talks and vote-winning policies for ‘ordinary working families’ are reconsidered. At the very least, facing a broad range of possible futures makes it a good time to be a nimble think tank.

We need more people to be more involved in policymaking

The next phase of work for Nottingham Civic Exchange will look in more detail at the lives of Ordinary Working Families through research, policy development and working with local communities to identify important issues and come up with recommendations for making changes which have real life impact. They will also link students and staff at the university with wider communities through scholarships, internships, and research projects. In line with the RSA’s wider programme on revitalising economic democracy, we need more people to be more involved in policymaking – in this parliament and beyond – if government and society is to successfully address growing economic insecurity for growing numbers of people. Through partnering with a university committed to improving the city and region it calls home, Nottingham Civic Exchange will tighten the links between policy, action and legitimacy in addressing economic insecurity.

Jonathan is Associate Director – Public Services and Communities at the RSA (Royal Society for the encouragement of Arts, Manufactures and Commerce). Read his posts on the RSA website here, or follow him on Twitter here.

This post originally appeared on the RSA blog.

Photos of Nottingham: top jess_k_kent1 on Flickr, middle Mr Thinktank on Flickr.


  1. We are aware of: Newcastle City Futures, Centre for London, Southern Policy Centre, Manchester New Economy. Let us know in the comments of others that we have missed.