Creating hotspots for the knowledge economy

Introduction

The increasingly knowledge-intensive economy is changing demands for contemporary workplace environments. All over Europe, we see a variety of initiatives for the (re)development of business and science parks, landscapes for working, and technological valleys and campuses. Though these initiatives vary in their objective, diversity, or brand, many of them bear at least one important thing in common. They presume added value from designing specifically for the knowledge economy by co-location. Such “hotspots,” nowadays the holy grail of area development, are believed to spur innovation. However, despite strong convictions, empirical data has proven their success to be a wash.

Taking this into perspective, we intend to discuss the design and organizational aspects of successful knowledge locales and what therefore must be incorporated to optimize innovation. Based on a literature study and fieldwork in a number of cities, we propose aspects or strategies for “knowledge management” at knowledge locations. The examples used to illustrate the strategies are based on field observations and expert interviews in a number of knowledge hotspots across Europe. Here we highlight Arabianranta in Helsinki, Finland, and the High Tech Campus in Eindhoven, some of the best examples of comprehensive knowledge-management schemes.

The intention of area development

Before addressing specific strategies, it is important to take notice of the fact that knowledge hotspots are developed for different reasons and with different intentions in mind. What’s the main idea or key purpose of the concept? Who takes the initiative? Which party is leading? In what way is the original goal preserved? Typically, public sector bodies drive the foundation of knowledge hotspots. Some hotspots are inspired by political goals like making the knowledge economy more visible; others have more specific ambitions. An example of such is that of a university-affiliated hotspot seeking to develop university intelligence into marketable goods. However, some are more business-driven, with the ultimate goal to increase innovation and profitability for a company. Whereas a public sector or university hotspot may have difficulty in maintaining focus and clear vision, a business-driven development avoids such hazards. The number of actors involved is reduced, decision-making clarified, and politics streamlined; even more so when one dominant, locally and politically well-connected, private actor takes the lead.

Strategies of knowledge management

The added value of a knowledge hotspot ultimately lies in the positive effects of co-location of related companies and knowledge institutes. However, achieving these benefits requires knowledge management. We here identify five strategic aspects that encompass successful knowledge management programs: optimizing cognitive distance, managing “co-opetition,” facilitating spillovers, and the active as well as passive promotion of knowledge diffusion.

Optimizing the cognitive distance

A first strategy is to ensure an optimal “cognitive distance” between tenants at the hotspot. Optimal cognitive distance means that the cognitive “gap” between people and companies at the hotspot is big enough to create new ideas but small enough to retain the capacity of collaboration. Several studies suggest that optimal cognitive distance between partners increases the chance of fruitful cooperation, ultimately resulting in innovation. Assuming that an optimal cognitive distance between park tenants is conducive to effective and fruitful knowledge exchange, the next question is how to manage this factor.

An option is to apply an active tenant admission policy based on a carefully detailed concept for the hotspot. Rather than targeting a large, diffuse group (“high tech firms”), the management may focus on a specific sector or a “community of practice.” Branding may help to identify and aim for specific “target groups” for the park, in order to generate a certain critical mass. It can be translated into admission criteria for tenants to avoid the risk of losing focus and creating fragmentation.

ARABIANRANTA, HELSINKI

Arabianranta is a redeveloped industrial area in northwest Helsinki. In the mid-1990s, it was reconfigured into a multi-functional district: housing, leisure, educational facilities and offices, all governed by an “art & design” theme that has led to the project’s international acclaim and commercial success. Historically, Arabianranta is the birthplace of one of Europe’s largest porcelain industries, called Arabia. The Arabia brand was renowned for the quality and design of its products, but its bankruptcy in the second half of the 20th century led to the closure of the factories and left the district in a state of polluted rubbish dump. In the early 1990s, the government set out to find a renewal strategy and settled on the goal of revitalizing its heritage of quality design. In addition, the world-class Helsinki School of Art and Design had set up a temporary annex in a disused building, and a small number of design agencies were beginning to set up there.

Since 1995, redevelopment and management have been taken over by a specialized company called ADC – Art and Design City, Helsinki – made up of the City of Helsinki, the School of Art and Design, as well as leading design agencies and higher education establishments in the surrounding area. These players work together to develop and implement the district’s management and planning strategies.Over time, art in public spaces has been the focus of significant investment, and the design quality of the buildings has been incredibly high.Each building is equipped with state-of-the-art broadband infrastructure, transforming the district into a particularly attractive “playground” for innovative companies to develop and test their new products and services.

Arabianranta has thus become the district of choice in terms of “user-led” innovation, a process in which resident communities participate in the innovation momentum. ADC acts as instigator and network manager for new projects.Arabianranta aspires to become one of the Baltic region’s leading centers for art and design thanks to the “Quadruple Helix” method: strategic partnerships between companies, public bodies, research institutions and citizens.Today, the district boasts five higher education establishments, a large number of renowned design agencies – most of them foreign – a mix of upscale residential areas and social housing, and high-quality infrastructure.It has attracted some 10,000 inhabitants, including 5,000 students and 300 creative businesses employing 4,000 people.

Companies indicate that they like the area for its creative ambiance; moreover, they highly value the presence of the Design Academy. The area has gained a strong reputation as the “place to be” for design firms. According to some entrepreneurs, being located in Arabianranta helps to sell products to business clients, and also, makes it easier to find qualified staff. Many firms are located there to stay current with the latest design trends. For them, “buzz” is even more important than the other benefits like the facilitation of networking and commercial cooperation.

Having admission criteria is more difficult to implement in long-established or very large hotspots. To replicate the strategy in very large and more diffuse knowledge hotspots, zoning or cluster policies co-locating similar types of businesses could create “sub-climates” for enhancing local cultural identity.

Managing co-opetition

A second strategy for knowledge management is a clearly defined “co-opetition” programme. Co-opetition refers to the idea that companies may cooperate and join forces in the first stages of research and development (the exploration stage), and become competitors in later stages of commercialization and mass rollout (the exploitation stage). The move from the first to the second stage can be a sensitive one and may cause problems if no proper arrangements are taken. Active management at the hotspot can help to address this relational risk. For example, the management can protect intellectual property by providing pro-active patenting. Another tactic is to avoid mixing pre-competitive and post-competitive activities in one hotspot, preventing the issue entirely. The hotspot management may, for example, decide to concentrate on the exploration phase, investing more in research and (a bit of) development activity.

A case in point is the Eindhoven High Tech Campus, a privately run knowledge park at the edge of Eindhoven. The major tenant and governing actor, the Philips Research division of Royal Philips Electronics, organises the park via company divisions and organizations that are mainly concerned with basic research. Only the affiliated Philips Applied Technologies is active in the “exploitation” or production phase, transitioning ideas into goods.

Facilitate spinoffs and spinouts

A third strategy for enhancing innovation is to facilitate the creation of spin-off and spinout firms from a mother company or university at the hotspot. Evidence suggests that if “mother and child” are located at the same spot, knowledge synergies can be expected. At research and development hotspots, like a science park, it is becoming typical to have incubation facilities, where spinout firms can prosper. At “smart” knowledge hotspots, conditions for the spin-off companies are optimized beyond the “usual” support activities of providing cheap rent and basic facilities. Such hotspots incorporate venture capitalism, internal subsides and financing, and access to a network of logistical expertise that academic start-ups typically lack such as intelligence on marketing, logistics, and management.

The management of company spinouts, however, may necessitate different strategies than for university spinoffs. Company spinouts are strongly tied to development within an existing value chain. They may emerge for different reasons: the mother firm may stop a business line which has spun out and run it as a separate entity; researchers in the mother firm may discover new products or develop ideas that don’t fit within the company’s portfolio/profile but have commercial potential, so a new firm is created; or, individual employees may join forces and create a new business. In the latter case especially, competition issues with the mother firm may arise (though not necessarily). University spin-offs are less problematic in this respect.

In Eindhoven’s High Tech Campus, the campus organization attends to company spinouts and external start-ups in several ways, including maintaining a fund for new technological entrepreneurs named Technostar. Apart from financial means, the management of Technostar helps start-ups with company development, networking, and coaching. In a physical sense the start-ups are accommodated through a “technology and business accelerator,” a multi-tenant building with reduced rents and dedicated spaces.

Promoting unplanned knowledge exchange

A complementary tool is the passive promotion of knowledge dissemination.Knowledge exchange can be promoted through the urban design of a neighborhood and the intelligent positioning of certain functions within it.For example, providing communal facilities (such as clean rooms or expensive equipment) increases encounters between people and companies, and encourages cooperation and exchange.The provision of collective facilities and open space on campus forms a “stage” for the dissemination of knowledge and for interaction between residents and organizations.

The High Tech Campus in Eindhoven has a very specific layout, with precise rules to encourage interaction and the dissemination of knowledge. The architects chose to centralize the public facilities and distribute the various functional zones concentrically around them.At the heart of the campus are the communal spaces (restaurants, stores and meeting rooms) grouped together in a building called “The Strip”, next to which are common facilities such as “MiPlaza”, “The Holst Centre” and the “Centre for Molecular Medicine”; these buildings include clean rooms, laboratories and other specialized spaces.Further out, silo parking lots are dotted between mixed-use buildings.Finally, sports facilities and a nursery school are located on the periphery. The maximum distance between the central facilities and the rest of the campus is around eight minutes on foot.

Development strategies have been reinforced by strict, campus-specific regulations. The inner area is inaccessible to cars, and the large landscaped green spaces are of high quality.Employees and visitors are thus encouraged to walk to their destinations within the campus, once again encouraging meetings in a welcoming environment.Meeting rooms in private buildings can accommodate no more than eight people, in favor of larger rooms on “The Strip”.Nor can private buildings feature canteens or cafés, as these too are offered in communal areas.Even the sports facilities, also for collective use, give priority to team sports at the expense of individual training.

Conclusions, recommendations and precautions

Knowledge cluster promoters and local governments generally have very specific expectations regarding the innovation potential of new districts. Nonetheless, most companies have privileged relationships with external partners rather than with their cluster neighbors. Few studies with conclusive results have been able to say whether the success of companies located in clusters was due to a correlation of factors already present in the neighborhood, or whether it came from co-location. So there’s no reason to believe that knowledge clusters can be stimulated by local interaction alone. What’s more, the interactions that take place in such places may often not be directly linked to knowledge and innovation, but they can nonetheless be fruitful for businesses by giving them access to commercial information (such as market trends) and strategic advice (how to obtain financing).

Another important point is to realize that innovation work is done very differently in different fields. Creative professions rely heavily on an effective network of “good people” and customer relationships based on innovation, as well as atmospheres that stimulate creativity.Freelance work and high staff turnover are very common, and reputation is an essential asset.On the other hand, in scientific fields (such as biotechnology), innovation processes are highly systematized and based on formal knowledge and scientific methods.Know-what” and “know-how” are more relevant, leading companies to be highly selective in their choice of partners.Technical cooperation often takes the form of international partnerships. And even within specific fields, modes of innovation can differ – industrial design is very different from a film shoot, and the discovery of a new molecule involves other processes and “proximities” than the development of human tissue.

Finally, don’t expect a simple bar to be a promoter of innovation. As Hubert points out, in the case of NTIC [New Information and Communication Technologies] employees in Cambridge, “in bars, people are often too drunk to say anything technically coherent.”

Given the restrictions listed above, what tools are available to the promoters and designers of knowledge hubs?

• Select tenants. Make sure that the tenants in the cluster are more or less complementary. The “cognitive distance” between tenants should be neither too great (i.e. they belong to completely different fields) nor too small (if they are too similar, they won’t see the point of collaborating). Tenant selection can be achieved by establishing admission criteria for new arrivals.
• Offer collective professional facilities (clean rooms, laboratories, prototyping services, financing organizations, business support services, etc.). These measures provide tenants with high-end facilities, enabling them to concentrate on their core business: innovation. Many knowledge institutions are very satisfied with turnkey solutions and all-in-one prices that include access to so much excellent equipment and infrastructure, especially as they can lead to unplanned meetings between tenant companies.
• Ensure a relevant program of activities. Organizing keynote speeches by leading industrial figures, demonstrations of new technologies, etc., can create a unifying momentum and bring different people together around a common interest. Similarly, the organization of events such as sports tournaments or cultural events helps to create social links and, potentially, professional cooperation.
• Promoting interaction through urban and landscape design. The hub can be designed to encourage chance encounters in public spaces. Amenities such as parks, but also low-traffic, pedestrian promenades and/or bicycle paths are all favorable elements.
• Create centralized facilities and amenities. Centralizing bars, restaurants and meeting rooms not only increases the chances of encounters, but also gives the area a center and an identity. In a highly regulated cluster, tenants are sometimes not even allowed to have their own facilities and amenities, as on the Eindhoven campus.
• Offer specialized services for start-ups. Young companies are highly endowed with ideas and innovative strengths, so you need to make sure they feel at home in the cluster by offering them, among other things, more attractive rents and support services. You can also put them in touch with larger companies on the site, potential new customers, or help them expand their network.