Think of the cities which are traditionally associated with technology and entrepreneurship and you’ll probably list the likes of San Francisco, Stockholm and Seoul.
But now a new batch of cities with little or no history of specialized tech-oriented entrepreneurship are using technology to deliver better services for their citizens and make a name for themselves in the global innovation economy.
Cities such as Santiago in Chile and Nairobi in Kenya are enjoying the benefits of booming start-up activity and strong inflows of international technology companies.
Although there is no magical formula for success, there are some common characteristics. Jeremy Kelly, Director of Research at JLL, says: “By incentivizing talent, improving their real estate offer, reducing barriers to entry, incubating new business and transforming the quality of infrastructure and public space, these lower and middle income cities are driving major changes to develop new products and services that give them a competitive edge and help them move up the global value chain.”
An emerging African hot spot
Nairobi has only recently started to build a reputation as the ‘Silicon Savannah’ but it’s one that is growing fast as it turns to tech solutions to address its development challenges.
Its tech projects are helping to build collaborative data sharing, analysis and visualisation, and to improve the circulation of goods and people around a congested metropolis. Banking and market information apps are transforming the knowledge and decision-making of small-scale commercial actors, with significant economic effects.
Incubators also play an important role in Nairobi. iHub was one of the pioneers, and serves as a forum, melting pot and convenience point for digital-savvy entrepreneurs and investors. In five years, it has spawned 16,000 members, 150 tech start-ups, and over 1,300 jobs, as well as inspiring a raft of similar institutions. As a result of its burgeoning tech scene, Nairobi has become a preferred African base for tech giants such as Google, Intel and IBM while three of its universities – financially supported by global tech firms – are nurturing determined graduates.
Lucy Githinji, head of JLL’s recently opened Nairobi office, says “The tech industry is reshaping Nairobi, with more than half the population using locally designed products for everything from making mobile payments, banking services to booking taxis. The technology sector is now the fastest growing part of the economy, boosting demand for commercial real estate. Testimony to Nairobi’s dynamism, it scores among the top 20 cities globally in JLL’s latest City Momentum Index.”
Santiago stands out among South American cities
Many miles away, the Chilean capital of Santiago is another city making a splash. Its innovation and start-up credentials are already visible in international indices, making it one of the few middle-income cities to rank among Startup Genome’s top 20 global locations. It scores particularly highly for the entrepreneurial mind-set of its residents, which stems from consistent investment in the workforce.
Marcelo Carrere, Head of JLL’s office in Chile says: “The rapidly growing tech industry is a significant factor behind Santiago’s very strong economic performance. It’s also helping to solve infrastructural issues, for example with apps that improve mobile phone coverage or enhanced training software for students.”
Research shows that the city’s rate of job creation and income growth is among the top quarter of cities worldwide over the past 15 years. It has become one of the top three locations in Latin America for corporate investment, and was voted one of the 25 most attractive emerging investment destinations worldwide.
However, this impressive set of statistics has required a lot of work behind the scenes, says Carrere. City and national authorities have mobilized significant resources to support the local innovation economy. Start-Up Chile is a major initiative instigated by Chile’s economic development agency in 2010, which acts as a platform for international funding and an early stage incubator for small businesses.”
Carrere says: “Having launched over 800 companies, the initiative is credited with accelerating a shift towards pro-innovation attitudes. At a city-level, the regional innovation strategy has been firmly integrated into the metropolitan area’s most recent masterplan. Many private initiatives also support the innovation economy, led by networking agencies such as the Club de Innovacion and BeST Innovation.”
While Santiago and Nairobi are home to very different start-up communities with different needs to service, their growth is still dependent on keeping on top of the challenges that come with the opportunities.
“Despite their differences, it is clear that it will be key for leaders in both cities to make broader improvements to their city platforms and closely monitor sector needs, if they are to maximise the promise of tech innovation,” Kelly concludes.
This article first appeared online at JLL’s Real Views. To find out more, please see The Business of Cities 2015.