Innovation and Business-Establishment Density

by James A. Bacon

In previous posts, I have postulated that some human settlement patterns do more than others to promote creativity and innovation. Following the lead of such thinkers as urbanist Jane Adams, architect Leon Krier and economic geographer Richard Florida, I have suggested that certain urban forms — cul de sac subdivisions, massive skyscrapers — dampen physical mobility and access, thus, the ability of businesses to interact with one another. The ideal urban form would reduce the travel and time cost for people to leave their offices, meet, confer, grab coffee or lunch, meet after hours and have serendipitous encounters. The underlying assumption is that creativity and innovation arise from such interactions.

Drawing upon the work of  Jose Lobo with Arizona State University, Florida has mapped the “establishment density” — the number of business establishments per square mile — of the nation’s metropolitan statistical areas. (Read his blog post here.)

Not surprisingly, New York has the highest number of business establishments per square mile (79) among the country’s 20 largest MSAs, with San Francisco coming in third (47.9) and Boston fourth (34.9). Counter-intuitively — think of all those freeways — Los Angeles has the second highest density (68.7).

In Virginia, the Washington and Hampton Roads MSAs are of medium business density, while Richmond is below average.

This is all well and good, but is business-establishment density truly correlated with creativity and innovation? While I believe there is a link, I would hypothesize that it is a weak one, and I would readily concede that the case is far from proven. Someone should run a regression analysis to see if there is a correlation between business-establishment density and various proxies for business innovation.

Here’s the problem: Metropolitan-wide averages don’t mean much. To what extent are business establishments clustered within an MSA? For example, the Washington MSA is a large one, but IT/systems integration companies in the region are packed into a geographic sliver, the Tysons-Dulles corridor. If you measured the business-establishment density of that particular industry, it would be pretty darn high. To take another example, the advertising/marketing industry in Richmond is heavily concentrated within a couple of square miles in Shockoe Slip and Shockoe Bottom.

Here’s another critical issue: What is the quality of micro-level transportation connections within a region? How easy is it to walk, drive or take mass transit from one location to another? While the Dulles corridor may be compact geographically, how easy is it to travel from Point A to Point B within the corridor? Does anyone ever walk anywhere? Are the roads perennially congested? Will the construction of the Silver Line make a material improvement to interactivity within the corridor?

This is a fascinating line of inquiry, and an important one. There are only a handful of things that state/local governments can do to foster a culture of creativity and innovation. Fostering optimal human settlements (or creating the conditions where market forces achieve the optimal level) may be a neglected tool. The idea is worth pursuing.

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  1. DJRippert Avatar

    “For example, the Washington MSA is a large one, but IT/systems integration companies in the region are packed into a geographic sliver, the Tysons-Dulles corridor.”.

    Circa: 2005

    Today, the Rossyln – Ballston corridor has exploded with various high tech companies. Elsewhere in Arlington, companies like SureScripts ply their trade near National Airport. Meanwhile, ChinaTown in DC is a hot bed of IT and tech innovation anchored by high flying Living Social.

    The 261 tech start-ups in the DC area that received just under $1B in venture capital (making DC the 5th VC city) wouldn’t all fit in the Tyson’s to Dulles corridor.

    1. I stand corrected on the geographic distribution of tech companies within the Washington, MSA. My larger point remains: They are still concentrate in geographic pockets. And my larger question remains: What is the physical connectivity within those pockets?

      1. DJRippert Avatar

        Metro. You know, that boondoggle that you hate. It runs from F Street over to Virginia, up Wilson Blvd, through the Roysslyn – Ballston corridor (both Rosslyn and Ballston are the names of Metro stops) and (soon) out to Reston and Dulles Airport.

        Jim, your “bubble up” theory doesn’t work for areas of high tech entrepreneurism. All 10 of the top VC funding cities are liberal, Democratic, big government enclaves. Even potentially conservative areas like Denver have the greatest density of tech startups in “the People’s Republic of Boulder”.

        See Jim – when you let communities do their own thing some of them will create high tax, high service places where the creative class likes to live. But when a state government homogenizes everything back to “the Richmond ideal” you don’t get geographic innovation and you don’t get the creative class. If DC were a city in the middle of Virginia there would be no start-up community to talk about.

  2. DJRippert Avatar

    Perhaps you can add these 145 DC-based start-ups to your list of interesting companies.

    Now, I know that a meat pie store or kayak rental shop in Richmond will get a full and glowing review from you. However, you might want to poke around a little at these 145 companies and see if there’s anything that piques your interest.

    1. When the Northern Virginia Technology Council sponsors Bacon’s Rebellion to write about NoVa’s high-tech industry, I’ll very happily expand my coverage to the state’s most dynamic region. Have any ideas of who might be interested?

      1. DJRippert Avatar

        Maybe. We belong to MassTech since we are happily headquartered in Cambridge, MA – where the governor of the state announces Big Data start-up plans (do you think McDonnell could even define Big Data?).

        The NVTC might pay to play. Lord knows, they should – with either serious cutbacks of the fiscal cliff just around the corner.

        I’ll send you some names.

        So, people in Richmond pay you to write all those glowing articles about the city? I didn’t know that. However, I feel better now that I do know it. You know what they say? You can’t pay the rent with objectivity.

        1. Bon Secours Virginia Health System has sponsored my coverage of building healthy communities. There are four main themes — locally grown food/food deserts; walkable and bikable communities; clear water/clean air; and (a new theme) the James River. My focus is largely, though not exclusively, the Richmond region.

          Bon Secours is a great sponsor. They pretty much turn me loose to do my thing. Within those broad parameters, I write what I want. Same as with the Piedmont Environmental Council.

          I wrote about the sponsorship back in July.

  3. …still trying to figure out how the right wing GOP fits into DJ’s world…


    and a question to JB – Is Richard Florida a public transit guy? Would he be a supporter of METRO?

    1. DJRippert Avatar

      The GOP, more than the Democrats, believe in personal responsibility / accountability. So do I. For example, paying out social security benefits far in excess of what the system can sustain is inappropriate. The people receiving the benefits are getting back far more than they paid in and they are getting far more than future recipients will get. The system should be re-balanced every few years and benefits reduced if need be. Right now, that need exists and the Democrats wouldn’t even consider such a thing. Nobody promised the vast majority of social security recipients that they would be able to comfortably retire on social security.

      Who sponsors bills to forgive student debt? Democrats.

      I came out of college in 1981. The unemployment rate in 1982 was 9.7% – higher than any year of this so-called Great Recession. Should my student debt have been forgiven?

      Libtards have a bad habit of wanting to give away other people’s money to buy votes.

      Conservatives (and the GOP, in general) can’t differentiate between handouts and building for the future. Jim Bacon often falls into this trap. I have no problem paying more taxes for things that will make America economically superior. And yes, I mean superior – better, ahead of – everybody else. Roads, trains, schools, research – all fine by me.

      As for Paul Ryan …. here is an excerpt from his “Path to Prosperity” …

      “The tax code is patently unfair: many of the deductions and preferences in the system — which serve to narrow the tax base — were lobbied for and are mainly used by a relatively small group of mostly higher-income individuals.”

      “These tax preferences amount to $1 trillion a year.”

      “…these tax preferences are disproportionately used by upper-income individuals. …There’s nothing fair about that.”.

      Hey LarryG – I have a newsflash for you — He’s right!

      1. DJ – Social Security HAS been re-balanced several times including once by Ronald Reagan but the GOP does not want to re-balance it, they want to destroy it so that’s why it’s not getting re-balanced.

        re: taxes for good things – Mr Ryan is opposed to that except for DOD.

        re: Mr. Ryan and the Tax Code. – DJ – you better check that out, the vast majority of the so-called tax ‘loopholes’ affect the middle class – tax-free employer health care, child tax credits, home mortgage, charitable deductions, education credits

        Do you realize this DJ.

        Don’t believe Ryan without checking what he is actually saying guy.

        He’s been caught lying now on a fairly regular basis.

        I predict that Ryan is pretty much done because he apparently thinks he can continue to lie and no one will notice.

  4. I suspect he is a public transit guy, mainly because he’s a proponent of walkable, bikable communities. But I don’t know for sure.

  5. re: Ryan SUPPORTED , vote FOR the sequestration, right?

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