Why an innovation district might not be the best solution
Innovation districts have become a popular urban economic development strategy, aiming to cluster high-tech companies, research institutions and entrepreneurs in dense, walkable environments. In some cases, they are a powerful tool - particularly when there is a critical need to bring university researchers closer to businesses, or when a city lacks existing industry clusters. However, they are not always the best solution. In many cases, a broader sectoral approach - one that strengthens innovation ecosystems across an entire city - can deliver greater impact.
Innovation districts in context
Innovation districts work best when they enhance, rather than attempt to substitute for, a city’s existing innovation ecosystem. The most successful examples — such as Kendall Square in Cambridge, Massachusetts - are deeply embedded within broader networks of research, investment and commercialisation. Kendall Square, while an important hub, thrives in part because it is a key node within Greater Boston’s extensive life sciences ecosystem, which spans across the city and into surrounding suburbs.
Looking along Main Street in Kendall Square. Credit: Chris Rycroft, CC BY 2.0, via Wikimedia Commons
In Melbourne, the Melbourne Innovation District (MID) in City North was conceived as a precinct to bring together universities, startups and industry. While an important node, it exists within a broader innovation landscape that includes multiple life sciences hubs across the city - including the Monash Technology Precinct in Clayton, which houses leading research institutions and advanced manufacturing facilities. It also has a strong relationship with the adjacent central city area, home to a dense agglomeration of startups, venture capital firms and professional services - all critical components of an innovation ecosystem.
A sectoral approach
Rather than relying on a single district to drive innovation, a sectoral approach can foster collaboration across an entire city or region. Melbourne is pursuing this strategy in health technologies through the BioMelbourne Network, which connects industry, research and investment across the city. By building a cohesive ecosystem rather than concentrating activity in one location, Melbourne is positioning itself as a global leader in life sciences - leveraging expertise from research to commercialisation to advanced manufacturing.
This approach recognises that companies do not operate in isolation within a single district. Instead, they engage with a city’s entire ecosystem, working with universities, accessing capital and collaborating with peers across multiple locations. Cities that focus on strengthening sector-wide networks can create deeper, more resilient innovation economies than those that rely on a single geographic hub.
The role of property developers and governance challenges
Property developers often play a crucial role in bringing innovation districts to life, providing the physical infrastructure needed for collaboration. MIND (Milano Innovation District), led by developer, Lendlease, is an example of a development that seeks to blend real estate investment with an innovation ecosystem. While newly developed infrastructure is fantastic, it’s important that the success of an innovation district such as this is assesssed by its ability to contribute to a thriving ecosystem.
Effective governance structures are crucial in determining the success of innovation districts. These structures must balance strategic institutional leadership with broad stakeholder engagement to ensure alignment and foster ongoing collaboration. Key institutions often provide the necessary stability and vision, but genuine buy-in from a wide range of stakeholders - including startups, industry groups and government - is critical for sustainable growth.
Innovation districts must also remain flexible and adaptable, responding to the dynamic needs of the broader ecosystem. This requires continuous coordination between different sectors, ensuring that all players are aligned in their goals and working together to foster innovation. Without strong governance, districts may struggle to achieve cohesion or fail to integrate effectively with broader economic activity, limiting their potential.
Making the right choice: District or sectoral strategy?
The decision to pursue an innovation district should be based on a city’s existing strengths and economic structure. In some cases, an innovation district can accelerate new activity by bringing together fragmented parts of the innovation ecosystem, particularly where physical proximity fosters collaboration. In others, a sectoral approach - knitting together research, startups and investment across a city - may be a more effective strategy. Cities that focus on strengthening their entire innovation ecosystem, rather than relying on a single geographic hub, are more likely to sustain long-term economic growth.
For economic developer practitioners and policymakers, the key takeaway is that innovation districts can be powerful tools, but they are not a one-size-fits-all solution. A city’s innovation strategy should be built around its strengths - whether that means creating a new district or reinforcing a dynamic, citywide ecosystem.
If you’re looking to develop your city’s innovation ecosystem, let’s talk. Contact Andrew Wear (andrew.wear@econovation.com.au) for a discussion on how Econovation might be able to help.