Innovation Zones: How the Federal Government Can Create Thriving, Place-Based Innovation Ecosystems

The following policy proposal is based on a workshop conducted in September 2020 with: Mason Ailstock (HR&A), Scott Andes (Carnegie Mellon University), Deborah Crawford (University of Tennessee), Bob Geolas (HR&A), Will Germain (Ventas), Bruce Katz (New Localism), Julie Wagner (Global Institute on Innovation Districts), and Kate Wittels (HR&A Advisors).

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Following a challenging election season, the Biden-Harris transition team is now drawing up plans for their policy agenda. Their task is hardly enviable. As we enter 2021, the United States faces four epochal crises: a public health emergency, an economic downturn, climate change, and a reckoning with systemic racism. Addressing these challenges will require a new approach to investing in our communities that stimulates more diverse economic growth, promotes social equity, and taps into knowledge creation that solves, rather than compounds, our twin health and environmental crises.
Federal investment in innovation districts provides a significant opportunity to address these challenges. The antithesis of monocultural research parks, innovation districts combine academic institutions, corporate R&D, startups, and entrepreneurial support organizations in mixed-use neighborhoods that promote creativity and collaboration, often in service of urgent societal challenges. Decades of research now demonstrates that the innovation economy thrives best in porous, multisectoral settings. By leveraging geographic proximity in its allocation of research funds, the federal government can thus dramatically amplify the impact of its R&D dollars. Similarly, by linking educational and workforce programs in low- and moderate-income neighborhoods to nearby innovation districts, the federal government can create a more sustainable economic engine for communities that are currently disconnected from the knowledge economy. Finally, by embracing its role in supporting regional innovation ecosystems, the federal government can reshape the country’s economic geography on a more equitable basis, creating new opportunities for job growth and investment in the nation’s heartland.
To support the growth of innovation districts, federal policymakers must focus on three interlocking policy domains. First, investments in district development will provide the dense physical environments necessary for innovation economies to thrive. Second, investments in talent development will cultivate the expertise needed to drive cutting-edge research and diversify the talent pipeline of local workers and students. Third, investments in research and development will supercharge local and national competitiveness by channeling federal R&D spending to specific innovation geographies.
Building on recent Senate proposals, including the Endless Frontier Act and the Innovation Centers Acceleration Act, there are a number of important actions that the federal government should take.

District Development
The federal government should support the growth of innovation districts in communities throughout the nation by:


  • Creating a federal Innovation Zone (IZ) program that funds programmatic and physical investments in districts with emergent innovation ecosystems that, barring federal support, would be unable to capitalize on these latent knowledge economy assets.
  • Seeking competitive proposals from local consortia bridging private industry, higher education, and local government.
  • Awarding funds to innovation districts that are distributed throughout the country, with an emphasis on supporting places that have yet to emerge as innovation hubs.


Talent Development
The federal government should support the upskilling and reskilling of the nation’s workforce by:


  • Supporting the education and recruitment of diverse research and entrepreneurial talent in high-tech fields relevant to specific IZs.
  • Requiring co-location of educational and vocational facilities within IZs to facilitate job placement and access to the innovation ecosystem across the skills spectrum and enhance connections to adjacent low- and moderate-income neighborhoods.
  • Funding the training of a diverse and resilient labor force with STEM skills through targeted partnerships with community colleges, four-year colleges, workforce investment boards, and the K-12 system.


Research & Development
The federal government should enhance domestic R&D activity by:


  • Targeting R&D funding to universities and businesses within specific IZs and incentivizing partnerships between companies, educational institutions, federal research entities, and state and local governments.
  • Encouraging commercialization within university settings by amending grantmaking criteria to incentivize applied research and restructuring Technology Transfer Offices into loss-leading, third-party entities operated independently from university administrations.
  • Providing seed funding for the creation of IZ-specific venture capital funds that can increase access to financing for new companies.


With a new presidential administration preparing to take office – and the country facing a cascading set of crises – now is the time for the federal government to invest in the growth of innovation districts, particularly in regions that have yet to benefit from the new economy. With a thoughtful and intentional re-alignment of federal policies supporting innovation and economic development, place-based investments in infrastructure, talent, and R&D can leverage the power of proximity to supercharge American innovation and in so doing lay a foundation for a new and more inclusive era of prosperity.