Getting the governance of innovation districts right

Cities are now the drivers of economic activity. This is due to the density and diversity of economic activity concentrated in cities, and the interactions associated with this.

Inner cities are pre-eminent in their appeal to knowledge workers, due to the accessibility, amenity and diversity that they offer.

Firms enjoy a variety of benefits when they locate in cities and/or when they co-locate with similar and complementary organisations. These are widely considered to be the benefits of agglomeration economies, including industry clustering.

Governments across all Australian jurisdictions undoubtedly wish to drive their economic development by leveraging the dynamics of agglomeration economies. Innovation districts have increasingly been adopted across the world as a development approach to promote this activity and its associated benefits. Government efforts, particularly at the state, regional and local levels, often aim to transform precincts into the ‘cores’ of broader innovation districts that exploit regional strengths and generate quality jobs and investment opportunities along the way.

Key success factors

While science and technology parks once characterised government precinct-based development efforts, this form of development has generally underperformed in Australia because they have not overcome some of the barriers to innovation, i.e. ensuring people are open to and can collaborate with others when moving concepts from ‘ideas’ to commercial ‘realities’. University precincts have also suffered from similar shortcomings, with the focus on institutional property management overshadowing the creation of synergies between researchers and private enterprises.

SGS’s work across Australia over the last few years has profiled many international case study successes, and has highlighted that innovation districts have the characteristics listed in Figure 1 below.

Figure 1: Key characteristics of innovation precincts

Source: SGS Economics and Planning

While these characteristics of success are easy to list off, optimising investment to best deliver these outcomes requires significant and ongoing effort, supported by an appropriate governance model.

Innovation precinct governance functions

Delivering an innovation district involves not only the physical development of the site, but also the ongoing (and long-term) operation of the precinct, delivery of infrastructure and activating the public domain. The unique aspects of an innovation district are the curation functions. These are operational functions which are typical in a major mixed-use urban precinct, as well as the functions which are unique to a successful and sustainable innovation district.

From our extensive work in this area, we have identified the following necessary functions for innovation districts.

Table 1: Governance functions of innovation precincts

Source: SGS Economics and Planning

Stakeholders are generally well placed to ensure that precinct development and operating functions are appropriately scoped and delivered, i.e. through traditional approaches to property development (public or private developer) and precinct operations (local government or specialised authorities). However, when it comes to the innovation precinct functions, stakeholders have tended to struggle, possibly due to the ongoing, specialist and non-physical nature of these functions, which tend to fall through the gaps.

Innovation precinct governance lessons

To ensure that the innovation precinct functions are appropriately addressed throughout the development process, it is important that the responsible agencies:

  1. Recognise the elements of innovation districts that render them ‘special’ or different from run-of-the-mill urban development precincts, and enshrine these in the precinct’s long-term vision.
  2. Identify the ‘precinct functions’ that underpin these special elements, and ensure that control of these functions is retained by the precinct stakeholders; allowing more routine functions be undertaken by traditional parties.
  3. Establish a precinct entity to ‘control’ these underpinning functions and make them this entity’s performance mandate.
  4. Ensure that the long-term stakeholders that constitute the precinct entity are also supported by a ‘skills-based’ board to ensure that necessary skills are heeded along the way.
  5. Provide certainty of funding for the entity’s operations, while making it accountable to precinct stakeholders (i.e. establish and monitor clear KPIs, and ensure precinct beneficiaries contribute equitably to operational funding, while balancing affordability and public benefit considerations).
  6. Commence transitioning to this entity as the precinct’s primary governance body as early as possible, i.e. well before the precinct’s physical development is complete.

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