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Analyzing Local Economies
Presentation to:
The Aspen InstituteROUNDTABLE ON COMMUNITY
CHANGEThe Funders’ Exchange on Community Change,Poverty Reduction and Prosperity Promotion
Robert WeissbourdRW Ventures, LLC • January 15, 2008
Agenda
Background: The DNT Project
The Nature of Neighborhood Change
Implications 1.0: Dynamic, Specialized Neighborhoods
Implications 2.0: Specialized Tools - From Diagnostics to Investment
I
Implications 3.0: Innovation Capacity
II
III
IV
V
About Living Cities
“A partnership of financial institutions, national foundations and federal government agencies that invest capital, time and organizational leadership to advance America’s urban
neighborhoods.”
I Background: The DNT Project
AXA Community Investment Program Bank of America The Annie E. Casey Foundation J.P. Morgan Chase & Company Deutsche Bank Fannie Mae Foundation Ford Foundation Bill & Melinda Gates Foundation
Robert Wood Johnson Foundation John S. and James L. Knight Foundation John D. and Catherine T. MacArthur Foundation The McKnight Foundation MetLife, Inc. Prudential Financial The Rockefeller Foundation United States Department of Housing &Urban Development
LIVING CITIES PARTNERS:
Partners and Advisors
The Urban Institute
I Background: The DNT Project
Participating Cities: Chicago, Cleveland, Dallas and Seattle
We Know Where We Want to Go...
Common Goal:
I Background: The DNT Project
The Challenge: Scarce Resources, Many Options
Community-Based OrganizationsCommunity-Based Organizations: select : select interventions, identify assets and attract interventions, identify assets and attract investment investment
GovernmentsGovernments: tailor policy and interventions: tailor policy and interventions BusinessesBusinesses: identify untapped: identify untapped
neighborhood marketsneighborhood markets FoundationsFoundations: target interventions,: target interventions,
evaluate impactsevaluate impacts
I Background: The DNT Project
Information Resources
I Background: The DNT Project
Information Resources
Increasingly available, but more progress to be made
I Background: The DNT Project
Information Resources
Gap between practitioners and academics: need “Clinical Economics”(Sachs)
Increasingly available, but more progress to be made
I Background: The DNT Project
Information Resources
Few decision systems for neighborhood practitioners,investors and service providers
Gap between practitioners and academics: need “Clinical Economics”(Sachs)
Increasingly available, but more progress to be made
I Background: The DNT Project
Comprehensive Neighborhood Taxonomy
BusinessBusiness PeoplePeopleReal EstateReal EstateAmenitiesAmenitiesSocial EnvironmentSocial Environment
Improvement or Improvement or deterioration deterioration within typewithin type
Gradual vs. Gradual vs. Tipping pointTipping point
From one type to From one type to anotheranother
Port of entryPort of entry BohemianBohemian RetirementRetirement Urban Urban commercializedcommercialized
EmploymentEmployment EducationEducation CrimeCrime Housing Housing stockstock
Investment Investment activityactivity
I Background: The DNT Project
PHYSICAL:Distance from CBD, vacancies, rehab activity, …
Drivers Model and Data
TRANSPORTATION:Transit options, distance to jobs, …
CONSUMPTION:Retail, services, entertainment, …
PUBLIC SERVICES:Quality of schools, police and fire, …
SOCIAL INTERACTIONS:Demographics, crime rates, social capital…
I Background: The DNT Project
Agenda
The Nature of Neighborhood ChangeII
Agenda
The Nature of Neighborhood ChangeII
a. Measuring Change: the RSI
b. Overall Patterns
c. Specialized Patterns
d. Degree and Pace of Change
e. Drivers of Change
Theoretical Framework
Use Demand for Housing as Proxy for Use Demand for Housing as Proxy for Neighborhood HealthNeighborhood Health
Look at Quality Adjusted Housing Values to Look at Quality Adjusted Housing Values to Capture Neighborhood AmenitiesCapture Neighborhood Amenities
Look at Change in Quantity of Housing to Account Look at Change in Quantity of Housing to Account forforSupply EffectsSupply Effects
Amenities
Structure Rent
Housing Price
IIa Measuring Change: the RSI
Final Product: The DNT RSIRSI Estimation Coverage Using Case/Shiller Method
Time Period: 2000 - 2006 RSI Estimation Coverage Using DNT RSI Method
Time Period: 2000 - 2006
IIa Measuring Change: the RSI
Looking at Particular Tracts: High Appreciation in Logan Square
IIa Measuring Change: the RSI
Contour Model of 2004-06 Prices around Mt. Prospect Property
Spatial Distribution of Housing Values – Mount Prospect
1450 S. Busse
Sales Transactions
Tract Boundaries
IIa Measuring Change: the RSI
Chicago Neighborhood Change, 1990-2006
2006
IIb Overall Patterns
Initial Conditions and Appreciation
APPRECIATION59.7
-1.0
MEDIAN HOUSING PRICES 1990Up to $38,000
$38,001 - $63,750
$63,751 - $107,500
Over $107,500
IIb Overall Patterns
Change in Price: Poor Neighborhoods Present the Most Opportunities for Investment
IIb Overall Patterns
Partly Due to Lack of Information,These Areas Are Also the Most Volatile
TEMPORAL VOLATILITY OF INDEX0.14 - 0.93
0.94 - 1.33
1.34 - 2.54
2.55 and above
APPRECIATION59.7
-1.0
IIb Overall Patterns
IIc Specialized Patterns
Patterns of Interest: Tipping?
Chicago, North Side
IIc Specialized Patterns
Patterns of Interest: Neighborhood Turnaround
Dallas, Southeast Side
IIc Specialized Patterns
Patterns of Interest: Neighborhood Decline
Cleveland, East Side
IIc Specialized Patterns
Neighborhood Change Is a Slow Process
Neighborhood Mobility by Time Interval
5 Years 10 Years 15 YearsNo Change 1 Quintile2 or More Quintiles
58%
33%
8%
64%
30%6%
71%
25%4%
IId Degree and Pace of Change
Yet Substantial Change Occursin Select Neighborhoods
Median Sales Price Transition MatrixCleveland, 1990-2004
Final QuintileInitial Quintile 1 2 3 4 5
1 76.9% 15.4% 7.7% 0.0% 0.0%2 5.1% 51.3% 25.6% 15.4% 2.6%3 2.6% 26.3% 26.3% 39.5% 5.3%4 7.7% 2.6% 28.2% 23.1% 38.5%5 7.7% 5.1% 10.3% 23.1% 53.8%
IId Degree and Pace of Change
Neighborhoods and Regions
IIe Drivers of Change
Neighborhoods and Regions
Across Cities, 35% of NeighborhoodChange is Accounted for by Regional Shifts
R Squared from Regression Models of Tract RSI on Region
IIe Drivers of Change
Cleveland Chicago Dallas Seattle
Neighborhoods and Regions
Across Cities, 35% of NeighborhoodChange is Accounted for by Regional Shifts
R Squared from Regression Models of Tract RSI on Region
IIe Drivers of Change
Cleveland Chicago Dallas Seattle
81%57%
28%7%
The Big Picture: Urban Neighborhoods Are Coming Back
Chicago Cleveland Dallas Seattle
0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%
Average Tract Appreciation Rate (1990-2004)
Suburbs
City
IIe Drivers of Change
The Big Picture:Neighborhood Change = Changing Neighbors?
Ratio of HMDA Borrower Income (2000-2005) to Census Income (2000)
IIe Drivers of Change
The Big Picture:Drivers of Neighborhood Change
Mobility is the key mechanism of change Movers are attracted to areas with undervalued
housing but sound economic fundamentals (employment, income, education, young adults)
Being connected is important: proximity to job centers, access to transit, lower commuting times are positive
Cultural and Recreational Amenities (art galleries, bars and restaurants) help, but are not the main event
“The Goldilocks Theory” …
IIe Drivers of Change
The Big Picture:Drivers of Neighborhood Change
Race is still a factor: even controlling for income, influx of minorities in a neighborhood leads to lower appreciation
Neighborhood Spillovers are important: what happens in your neighborhood reflects what happens in the neighborhoods around you
Context matters: substantial variation by type and stage; current conditions have large affects on degrees and patterns of change
IIe Drivers of Change
The “Little” Picture: Few Silver Bullets
IIe Drivers of Change
Neighborhood Convergence
IIe Drivers of Change
Beta Convergence in Cook County, 1990 - 2005
Neighborhood Convergence
IIe Drivers of Change
Beta Convergence in Cook County, 1990 - 2005
Characteristics of Poorer Neighborhoods that Tend to Converge
Strong evidence suggests convergence is more likely:
Closer to the Central Business District In neighborhoods with more turnover With more Social Capital
– Civic, Social, Fraternal, Political, Religious, Businessand other Membership Associations
I Background: The DNT Project
Characteristics of Poorer Neighborhoods that Tend to Converge
Moderate evidence favors: Educational levels Supermarkets Transit nearby Income diversity Art Galleries nearby Eating establishments nearby
I Background: The DNT Project
How Drivers Interact Also Varies by Place
Far from CBD and with High Income Diversity
IIe Drivers of Change
Summary Implications
Neighborhoods are highly specialized Neighborhood change is a function of people and
money moving in and out This in turn varies based on neighborhood type and
stage of development – different people and investors choose different neighborhoods in the context of larger markets and systems
As a result, what matters varies by place. For any given neighborhood, the goal could be continuity or change in type, and implementation entails understanding who you want to stay or move in, and what factors matterto them
IIe Drivers of Change
Summary Implications
Two major implications:
1. We need a framework for understanding neighborhoods as dynamic, specialized, and nested in larger systems
2. We need much better tools for customizedanalysis of local economies
IIe Drivers of Change
Agenda
Background: The DNT Project
The Nature of Neighborhood Change
Implications 1.0: Dynamic, Specialized Neighborhoods
Implications 2.0: Specialized Tools - From Diagnostics to Investment
I
Implications 3.0: Innovation Capacity
II
IV
V
III
Neighborhoods are Complex
Dynamic, Specialized NeighborhoodsIII
Neighborhoods are Complex
Dynamic, Specialized NeighborhoodsIII
Neighborhoods are Dynamic
Dynamic, Specialized NeighborhoodsIII
Neighborhoods are Nested in Larger Systems Which Drive the Flows of People and Capital
Dynamic, Specialized NeighborhoodsIII
Neighborhoods are Nested in Larger Systems which drive the Flow of Capital and People
Dynamic, Specialized NeighborhoodsIII
Functioning Neighborhoods Connect Residents and Assets to Larger Systems
Poverty Productivity
Connectedness
Isolation
Dynamic, Specialized NeighborhoodsIII
Functioning Neighborhoods Connect Residents and Assets to Larger Systems
Employment networksEntrepreneurial opportunities
Business, real estate investment
Expanded products and services
Productive, healthycommunities
Undervalued, underutilized assets
Poverty Productivity
Connectedness
Isolation
Dynamic, Specialized NeighborhoodsIII
Economic Systems: Identifying Key Levels andLevers of Market Activity
Level: Market Operations
Dynamic, Specialized NeighborhoodsIII
PRODUCTION CONSUMPTIONEXCHANGE
Economic Systems: Identifying Key Levels andLevers of Market Activity
Level: Market Operations
Dynamic, Specialized NeighborhoodsIII
PRODUCTION CONSUMPTIONEXCHANGE
Transaction costs
Finding costs
Measurement costs
LEVERS
TasteIncome
LEVERS
Productivity
CostsLEVERS
Economic Systems: Identifying Key Levels andLevers of Market Activity
Dynamic, Specialized NeighborhoodsIII
PRODUCTION CONSUMPTION
EXCHANGEMarket Operations
Economic Systems: Identifying Key Levels andLevers of Market Activity
Level: Market Environment
Dynamic, Specialized NeighborhoodsIII
INSTITUTIONALCONTEXT
Enabling LawsPrescriptive Regulation
Entry Barriers
OTHER EXOGENOUS INFLUENCES
Infrastructure Factors/resources
TechnologyTastes
PRODUCTION CONSUMPTION
EXCHANGEMarket Operations
Applying the FrameworkSTEP 1A: What type of neighborhood do you
want to be?
Dynamic, Specialized NeighborhoodsIII
Applying the FrameworkSTEP 1A: What type of neighborhood do you
want to be?
Starter Home Community
Dynamic, Specialized NeighborhoodsIII
Applying the FrameworkSTEP 1A: What type of neighborhood do you
want to be?STEP 1B: What drivers will get you there?
Starter Home Community
Dynamic, Specialized NeighborhoodsIII
Applying the FrameworkSTEP 1A: What type of neighborhood do you
want to be?STEP 1B: What drivers will get you there?
Starter Home Community
• Specific Retail Amenities• Child Care• Schools• Safety• Affordability
Dynamic, Specialized NeighborhoodsIII
Applying the FrameworkSTEP 1A: What type of neighborhood do you
want to be?STEP 1B: What drivers will get you there?
Starter Home Community
• Specific Retail Amenities• Child Care• Schools• Safety• Affordability
Dynamic, Specialized NeighborhoodsIII
Applying the FrameworkSTEP 4: Specify Interventions
Starter Home Community
Dynamic, Specialized NeighborhoodsIII
Commercial Land Assembly (production –
costs)Specialized Market Data(exchange – finding costs)
ECONOMIC SYSTEM
Retail Markets
Agenda
Background: The DNT Project
The Nature of Neighborhood Change
Implications 1.0: Dynamic, Specialized Neighborhoods
Implications 2.0: Specialized Tools - From Diagnostics to Investment
I
Implications 3.0: Innovation Capacity
II
IV
V
III
Developing New Tools for the FieldQuestion/Goal ToolAnticipate and Manage Neighborhood Change Pattern Search Engine
Enabling Investment in Inner City Real Estate Markets RSI REIT
Track Affordability and Neighborhood Housing Mix Housing Diversity Metric
Anticipate and Manage Gentrification Early Warning System
Planning Community Development Interventions Neighborhood Change Simulation
What neighborhoods are similar along multiple dimensions of interest?
Similarity Index/ Custom Typology
What drivers differentiate neighborhoods with respect to a specific outcome of interest? CART
How will a specific intervention affect its surrounding area? Impact Estimator
What locations will maximize the impact of an intervention? Spatial Multiplier
Does the impact of an intervention vary in different places?
Geographically Weighted Regression
Specialized Tools - From Diagnostics to InvestmentIV
Developing New Tools for the FieldQuestion/Goal ToolAnticipate and Manage Neighborhood Change Pattern Search Engine
Enabling Investment in Inner City Real Estate Markets RSI REIT
Track Affordability and Neighborhood Housing Mix Housing Diversity Metric
Anticipate and Manage Gentrification Early Warning System
Planning Community Development Interventions Neighborhood Change Simulation
What neighborhoods are similar along multiple dimensions of interest?
Similarity Index/ Custom Typology
What drivers differentiate neighborhoods with respect to a specific outcome of interest? CART
How will a specific intervention affect its surrounding area? Impact Estimator
What locations will maximize the impact of an intervention? Spatial Multiplier
Does the impact of an intervention vary in different places?
Geographically Weighted Regression
Specialized Tools - From Diagnostics to InvestmentIV
Pattern Search
What It Does: For identified patterns of change, finds other
neighborhoods that have been through or are going through the same pattern
Applications: Enables identifying comparable neighborhoods
with respect to particular patterns of change in order to identify key factors and effects
Enables anticipating and managing particular patterns of change
Specialized Tools - From Diagnostics to InvestmentIV
Pattern Search Example: Gentrification in Chicago Goal: Anticipating Neighborhood Change How it Works: Define a Pattern and Find Matching
Cases Example: Possible Gentrification Pattern Defined
Based on a Neighborhood in Chicago
Specialized Tools - From Diagnostics to InvestmentIV
Zooming In: Wicker Park Area
Specialized Tools - From Diagnostics to InvestmentIV
Zooming In: Wicker Park Area
Specialized Tools - From Diagnostics to InvestmentIV
Pattern “Spreading” to Nearby Tracts
Specialized Tools - From Diagnostics to InvestmentIV
Specialized Tools - From Diagnostics to InvestmentIV
Possible Application: Anticipating and Managing Gentrification
Different Appreciation Patterns Found in the DNT RSI
Specialized Tools - From Diagnostics to InvestmentIV
Possible Application: Anticipating and Managing Gentrification
Different Appreciation Patterns Found in the DNT RSI
Specialized Tools - From Diagnostics to InvestmentIV
Possible Application: Anticipating and Managing Gentrification
Different Appreciation Patterns Found in the DNT RSI
Specialized Tools - From Diagnostics to InvestmentIV
Possible Application: Anticipating and Managing Gentrification
Different Appreciation Patterns Found in the DNT RSI
Housing Diversity Metric
What It Does: Tracks the affordability and mix of the
housing stock (distribution, not just median) Applications: Enables tracking the range of housing
available in the neighborhood Better indicator of possible displacement
than median prices alone
Specialized Tools - From Diagnostics to InvestmentIV
Specialized Tools - From Diagnostics to InvestmentIV
Example: Tracking the Price Mix
Strong Overall Appreciation, Strong Overall Appreciation, Range of Housing Options Is NarrowingRange of Housing Options Is Narrowing
Specialized Tools - From Diagnostics to InvestmentIV
Example: Tracking the Price Mix
Strong Overall Appreciation, Strong Overall Appreciation, Range of Housing Options Is NarrowingRange of Housing Options Is Narrowing
Strong Overall Appreciation, butStrong Overall Appreciation, butRange of Housing Options Is Still WideRange of Housing Options Is Still Wide
Specialized Tools - From Diagnostics to InvestmentIV
Percentage of Affordable Homes, 1990-2006
19901990
Specialized Tools - From Diagnostics to InvestmentIV
20062006
Percentage of Affordable Homes, 1990-2006
Classification and Regression Tree (CART)
What It Does: Identify similar neighborhoods with respect
to an outcome of interest and its driversApplications: Identify leverage points to affect the desired
outcome Meaningful comparison of trends and best
practices across neighborhoods
Specialized Tools - From Diagnostics to InvestmentIV
Specialized Tools - From Diagnostics to InvestmentIV
Sample CART: Foreclosures
40 Variables Tested
Specialized Tools - From Diagnostics to InvestmentIV
Sample CART: Foreclosures
40 Variables TestedOutcome: Number of Foreclosures (2004)
Drivers:% Subprime Loans in Previous Years
Mean Loan Applicant Income
% FHA Loans% Black Borrowers
Specialized Tools - From Diagnostics to InvestmentIV
CART Output: Chicago Segments
Cluster 8: Defining Traits and Risk Factors
Segment Profile: Isolated, underserved, predominantly African
American communities. High rates of unemployment and subprime lending activity.
Primary Risk Factor: Percentage of subprime
loans (primary driver offoreclosures) is at itshighest and still onthe rise
Specialized Tools - From Diagnostics to InvestmentIV
Impact Estimator
What It Does: Estimate impact of an intervention on
surrounding housing values (or on other outcome, e.g. crime)
Possible Applications: Evaluate the impact of a development policy Choose among alternative interventions
based on estimated benefits to the surrounding community
Advocate for a specific interventionSpecialized Tools - From Diagnostics to InvestmentIV
Specialized Tools - From Diagnostics to InvestmentIV
Example: What is the effect over time and space of LIHTC housing?
PRELIMINARY – FOR ILLUSTRATION PURPOSES ONLY
Specialized Tools - From Diagnostics to InvestmentIV
Specialized Tools - From Diagnostics to InvestmentIV
PRELIMINARY – FOR ILLUSTRATION PURPOSES ONLY
Specialized Tools - From Diagnostics to InvestmentIV
Impact of LIHTC on Surrounding Properties
Estimated Distance Decay Function – LIHTC ProjectsEstimated Distance Decay Function – LIHTC Projects
Distance from Intervention – Chicago Blocks (1 block = 1/8 mile = 660 ft) Distance from Intervention – Chicago Blocks (1 block = 1/8 mile = 660 ft)
DN
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Specialized Tools - From Diagnostics to InvestmentIV Specialized Tools - From Diagnostics to InvestmentIV
Applying the Estimator to a Specific Project: New Shopping Center in Chicago
New Shopping CenterNew Shopping Center
Geographically Weighted Regression
What It Does: Estimates how drivers of neighborhood
change vary by neighborhoodPossible Applications: Analyze impact of policies and interventions Tailor strategies to specific neighborhood
types Define geographic scope of intervention
Specialized Tools - From Diagnostics to InvestmentIV Specialized Tools - From Diagnostics to InvestmentIV
Specialized Tools - From Diagnostics to InvestmentIV Specialized Tools - From Diagnostics to InvestmentIV
Example: Impact of Supermarkets
PRELIMINARY – FOR ILLUSTRATION PURPOSES ONLY
Effect of 1990 supermarkets on 1990-2000 appreciation
Agenda
Background: The DNT Project
The Nature of Neighborhood Change
Implications 1.0: Dynamic, Specialized Neighborhoods
Implications 2.0: Specialized Tools - From Diagnostics to Investment
I
Implications 3.0: Innovation Capacity
II
IV
V
III
Innovation in Economic DevelopmentWhat is Innovation?What is Innovation? “The specific instrument of entrepreneurship... The act that endows resources
with a new capacity to create wealth.” (Drucker) “The process whereby ideas for new or improved products processes or
services are developed and commercialized in the marketplace.”
Innovation is not just thinking something; it’s doing something. In the Innovation is not just thinking something; it’s doing something. In the field of economic development, that means it entails making a real field of economic development, that means it entails making a real difference in the world.difference in the world.
The field suffers from an “Innovation Gap”:The field suffers from an “Innovation Gap”:
Outstanding academics, researchers and think-tanks who develop critical new ideas, but whose job is not to convert them to practical, applied products.
Accomplished practitioners with deep expertise in particular subjects or places, but rarely with time, capacity or resources to undertake new product development and deployment.
Lack sophisticated processes, systems or collaborative institutional framework for large-scale R&D, product development and scaling.
Context and OpportunityInnovation has always been the only long term driver of growth. This is just as true for economic development as
it is for the private sector. Innovation drives growth largely through product development: new technologies, goods, services and methodologies which change individual, organizational or systems efficiency, productivity and performance. The knowledge economy enables, accelerates and places a premium on innovation and product development, particularly through knowledge networks and synergies, as information technologies have made knowledge content a greater part of value added, enhanced networks for exchange of knowledge content, accelerated change and rewarded flexible adaptation.
This is a fertile time for product development in the economic development field. Market-based approaches to economic development create major new avenues for developing products to enhance particular
markets to include and invest in underutilized assets. A more holistic approach to development heightens the need for new ways to identify and leverage the linkages across subject
areas and geographies. Organizations are looking for opportunities for cross-subject learning and collaboration, and see the need for new institutions to consolidate our knowledge base and develop the next generation of products.
Increased focus on entrepreneurship, urban efficiencies, linkages of neighborhoods and regions, individual driven systems, “bottom of the pyramid” business strategies and social venturing all create opportunities, as does the emergence of “disruptive technologies” (e.g. smart documents, smart cards, web 2.0 platforms).
As the field becomes more business-like, opportunities for adapting private sector internal business systems products to development organizations expand, including established systems for innovation.
Product development for the economic development field is happening ... The Center for Financial Services Innovation: assisting the financial services industry to identify, develop, and implement new
products that deliver asset-building opportunities to the underbanked market and are profitable for both company and customer. The Urban Markets Initiative: improving the availability of information and seeding information products to enable expanded
market activity in urban communities. The Dynamic Neighborhood Taxonomy Project: developing new tools that community based organizations, local government
agencies, businesses and foundations can use to better target their investments and interventions to different types of neighborhoods.
… but the field lacks the institutions and incentives for large scale product development.The timing is right for a new institution that would build on these trends, more deliberately and
systematically foster product development, create new tools to enhance the effectiveness of economic development organizations, and bring products to scale.
Building on Solid FoundationsThe private sector invests hundreds of billions of dollars in research and development. A
vast body of work describes the mechanisms of product development and innovation. Private sector R&D consortia prove the value and enhanced productivity flowing from
collaborative knowledge networks focused on applied research and product development. These consortia provide important models for how collaboration is structured, how research and product development proceeds, and how innovations generated through collaboration are adopted and deployed in the marketplace.
What makes these models successful? They have established comprehensive systems and resources for moving
through the stages of product development from opportunity identification to scaling.
They bring a broad cross-section of the right people from multiple organizations (users, experts, designers, etc.) to the table. The collaborative sharing of knowledge and resources leads to cross-fertilization of ideas and fosters innovation. The broad participation also facilitates the dissemination of cutting edge analysis and products.
The recognition and trust that the consortia gain enable them to define protocols and standards for entire industries.
Examples of private sector R&D consortia include the Semiconductor Manufacturing Technology, the International Electronics Manufacturing Initiative, and the Financial Services Technology Consortium. The type of collaborative research and development process carried out by these consortia has generated major innovations that shape our everyday life, from the Universal Product Code (UPC) to the transistor.
Why Isn’t This Happening Already?Despite the vast current opportunities, product development does not happen as
naturally or readily in the economic development field, perhaps due to structural challenges characterizing the field and its organizations.
Different incentive structures: in the private sector, financial returns motivate entrepreneurs to continually develop new products and ideas and test them in the marketplace. Non-profit organizations are naturally more risk-averse and have more complex, less predictable incentives to innovate.
Lack of direct user feedback: the marketplace provides rapid feedback on the value of new products and services through consumer response. Assessing the value of economic development interventions is more difficult and less rigorous. Poorly designed subsidies sometimes prevent market feedback or reduce incentives to innovate.
Less capacity: organizations generally have fewer, shorter term financial resources; more narrowly focused skills, with less product development expertise; challenges attracting talented entrepreneurs, technologists and product developers.
Fragmentation: smaller organizations, focused on narrower issues or places. Lack of well developed networks, systems for product development, and
organized markets.
The Innovation Network for Economic Development
The Innovation Network for Economic Development (INED) would be a new large-scale, collaborative institution devoted to fostering innovation and productivity in the economic development field.
Building on models already tested in the private sector, INED would identify and undertake high potential applied research and product development, through a user-driven process engaging practitioners, researchers, businesses, technologists, policy makers, foundations and other stakeholders.
INED would constitute a knowledge network, able to identify needs and opportunities across sectors, and to develop, test and scale practical development products, filling the existing gap between academic research and economic development practice.
The network would also enable cross-fertilization, consolidation and certification of tools, and development of operating platforms, standards and business technologies for the economic development field.
Discussion
General Comments and Questions? What are You Trying to Better Understand
About Neighborhoods? What Impacts are You Trying to Achieve
and Measure? What Tools and Applications Would Be
Most Useful? Partners: Corollary Research, Tool
Development and Testing, Other?
Innovation CapacityIV
Analyzing Local Economies
Presentation to:
The Aspen InstituteROUNDTABLE ON COMMUNITY
CHANGEThe Funders’ Exchange on Community Change,Poverty Reduction and Prosperity Promotion
Robert WeissbourdRW Ventures, LLC • January 15, 2008
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