New Empirical Evidence: How One Innovation District Is Advancing the Regional Economy
Success in modern innovation-based economic development requires performance across a range of dynamic variables, such as R&D, education, workforce development, entrepreneurial know-how, capital availability, and face-to-face social networking. While there is no single formula for success, innovation districts are certainly at the forefront in generating dynamic, attractive, and spatially compact locations that appeal to innovative industries and the skilled talent they require. These districts are collaborative environments that facilitate R&D and innovation and promote the development, transfer, and commercialization of technology by providing a bounded and branded location in which companies, entrepreneurs, and research institutions and their highly skilled talent base operate in close proximity.
The Cortex Innovation Community in St. Louis, within the heartland of the United States, is one of the pioneers in innovation district development. Entering its 17th year of operation, Cortex has transformed 200 acres (81 hectares) of what was formerly blighted inner-city industrial land into a successful hub for entrepreneurship, R&D commercialization, and creativity. TEConomy Partners was recently tasked with evaluating the achievements of Cortex over the past 16 years and producing a detailed economic impact analysis of the district. Specializing in innovation-based economic strategy development and economic analytics, TEConomy was brought in because of our experience in the independent analysis of innovation drivers, scientific and technology competencies, and the development of entrepreneurial ecosystems—together with a strong résumé in impact analysis and retrospective reviews of major initiatives. (For example, TEConomy’s team performed the impact study for the Human Genome Project.)
“Our work demonstrates how the Cortex Innovation Community … is generating $2.1 billion in annual regional output.”
Our work, outlined in a detailed report, demonstrates how the Cortex Innovation Community developed into a dynamic regional growth hub, with 5,780 employees working in the district, 369 companies, and operations generating $2.1 billion in annual regional output. Cortex is also expanding the regional tax base, generating $69.6 million in total Cortex-related state and local tax revenues for 2018 and $185.4 million in federal taxes. Over the 30 year anticipated life of the Cortex “Super TIF,” more than $775 million in TIF revenues are projected to be generated for local taxing entities. The value created in the district and its spill-over effects in adjacent neighborhoods have led to the zip code in which Cortex is primarily located achieving the highest growth rate in property values (49.4%) of all the St. Louis regional zips examined over the 2004‒2018 period. This is an incredible turnaround for a formerly blighted inner-city industrial zone.
Once Cortex achieved a critical mass of innovative and entrepreneurial business activity, the area started to attract operations of major national companies, such as Microsoft and Boeing, which wanted to be close to a skilled scientific and technological workforce. The district has effectively evolved from an environment where significant incentives were required to stimulate any private investment, into a premiere in-demand location able to charge market rents and attract new projects.
Success at Cortex was not instantaneous. Early development between 2002 and 2009 proceeded at a moderate pace, and 35 operations called Cortex home by 2009. Seeking to propel the development to a higher level of performance, the Cortex Board modified operational management in 2010, recruiting an experienced CEO supported by a staff of 10 professionals. Notably, the Cortex Board and the CEO saw a strategic need for the organization to pivot from focusing solely on bioscience (although that is still a key focus of Cortex today and will remain so into the future) to embrace a broader vision of Cortex as a hub for other advanced technology and for associated support services and institutions. This early recognition of the emerging trend of “convergence” (the tendency for innovation to occur at the intersection of multiple, traditionally separate disciplines and industries) played a key role. Opening Cortex to companies in bioscience and other technology spaces (information technology, data analytics, advanced manufacturing, logistics, material sciences, and other sectors) made it possible to realize novel combinations of technologies and capabilities. The decision to embrace other sectors was especially prescient in terms of attracting companies in digital technologies, software development, and advanced analytics, which today are proving to be central to the ongoing “digitalization of everything” being experienced across nearly all areas of commercial growth, including biosciences. Since 2010, Cortex has experienced significantly enhanced development momentum—and the results speak for themselves. Today, 10 years on, Cortex accommodates more than 10 times the number of companies that were in the district at the end of its first eight years of operation.
One of the key lessons of Cortex is the impact momentum that builds once a comprehensive ecosystem for innovation-based economic development is structured. Cortex paid very close attention to convening multiple stakeholders, developers, entrepreneurial support organizations, and providers of capital into an effective matrix of support (Figure 1). The combined and coordinated work of these organizations across a complete set of innovation development factors is a key element of the success of Cortex.
The comprehensive ecosystem that has developed at Cortex provides new and fast-growing business enterprises with access to:
- Co-working, incubator, and accelerator space
- Lab space and specialized prototyping, pilot, and scale-up equipment
- Formal training programs in entrepreneurship and business venture management
- Skilled business advisors, mentors, and providers of professional services
- Training and support for accessing capital from pre-seed through to advanced VC financing rounds
- Expertise in IP protection, technology transfer, and intellectual property licensing
- 22 core scientific research facilities at area universities and research institutions
- Frequent facilitated social gatherings, events, and “collision” opportunities.
Perhaps most important of all, Cortex provides a location where informal and formal “collisions” among innovators, entrepreneurs, and service providers are encouraged and supported. The net results from this ecosystem are a wide-ranging series of economic and functional benefits (Figure 2).
The success at Cortex has led to international recognition of the district as a prime example of the power and promise of innovation districts, and Cortex is regularly visited by groups seeking to learn from its development history. TEConomy Partners’ report captures this history and provides a rigorous review of the characteristics of Cortex that have led to its large-scale economic impacts.