Kathy Gibson at the Ericsson Business Innovation Forum in Stockholm – While digitalisation helps to drive urbanisation and innovation in cities, cities themselves are important innovation hubs.
This is the word from Maria Rankka, CEO of the Swedish Chamber of Commerce, who points to Stockholm as an example of a city that has both developed and leveraged digitalisation to become a world-leading urban area.
Stockholm is Europe’s fast-growing capital and is also the leading city for business in the Nordics, which is the 12th largest economy in the world.
Rankka believes that cities are responsible for massive global changes, with digitalisation, urbanisation and globalisation working hand in hand.
“These forces have reshaped Stockholm, and they are reshaping the global economy,” she says. “Connected cities like Stockholm outperform their countries.”
The implication of digitalisation is not that geography is less important or relevant, Rankka says. “On the contrary. Human meetings and real life interaction are still crucial to innovation.
“Digitalisation and communication lets us have more context, resulting in more meetings and physical interaction. And that’s why digitalisation is complementary to urbanisation, because cities are hubs of collaboration, competition and connectivity.”
She points out that 600 urban centres around the world account for 80% of global GDP. “Dense urban environments drive innovation cities that double in size will see a more-than-double increase in indicators like income and patents per capita – in fact increases are on average 115%. Cities promote social interaction, which leads to increases in productivity and innovation. When we meet like this, things happen.”
The majority of the global population already lives in cities, and will soon reach 70%.
“Take China for example,” says Rankka. “It was a poor rural economy just three decades ago. Today it has 170 cities with more than 1-muillion inhabitants. By the end of the decade, 60% of the Chinese population will live in cities.
“There is a strong correlation between urban density and prosperity. Last year, according to the IMF, two-thirds of new economic growth was from emerging economies – with 90% from urban regions.
“Urban proximity is key to economic success,” she says. “One of the surest ways to raise income is to move labour, business and ideas to metropolitan areas. Global growth is not so much on shifting skills, but more to do with urban proximity. Workers earn more if they live in city regions than if they are stuck in declining regions.”
In fact, the difference in average income between successful and declining US cities is bigger than it is between US and Peru.
Stockholm’s success in the technological age, Rankka adds, is because it is able to combine the key factors of density of skilled labour with density of innovative employers.
“The single most common profession in Stockholm is IT developer, with 36 000 programmers in the city. At the same time, Stockholm is home to one of Europe’s strongest IT cluster.”
But the city is also strong in industries like life sciences, automation, clean tech, infrastructure and creative industries in general.
Stockholm is also home to a number of dynamic start-ups, most of them located in the city centre, “literally within Bluetooth distance from one another,” Rankka says. “This shows that density matters.”
The city also boasts the head offices of 11 global companies, including Ericsson, Atlas-Copco and Electrolux.
For a relative small city, with a population of just 2,2-million people, this number of head offices is remarkable, Rankka says. It’s possible because the city has a well-developed infrastructure.
“This is a global city that thrives on the back of urbanisation. It is not necessarily a big city or a mega-city – nor does it need to aspire to be a mega-city. Second- or third-tier cities are equally able to become globally important. Yes, size matters, but not the only thing that defines global competitiveness.”
What defines a global city is the way it combines labour and business, and connectivity, Rankka adds.
“Cities are human eco-systems. When humans cluster together one plus equals three of four. Cities are groups of people with internal and external connections. They are connections not just agglomeration of people. They are here new connections can be developed. This is why digitalisation speeds urbanisation. Also why hyper connected cities like Stockholm will play a role in digitalisation.”