The winner takes it all: forward-looking cities and urban innovation

This paper offers a new perspective on urban innovation and enters the debate on the contribution of non-material growth-enhancing factors to the socio-economic performance of cities. Because of the often widespread availability of “hard” production factors, most cities increasingly compete for attracting non-material production factors whose role, in light of the more widespread diffusion of physical production factors, may ultimately determine their long-run economic success. Against this background, our paper focuses on a relatively neglected non-material factor, viz. urban risk attitude. In fact, cities offer the competitive and challenging environment where individual characteristics of actors may enjoy their highest returns; risk-loving and innovative individuals may sort in large urban agglomerations. The paper tests whether cities attracting such individuals and, thus, enjoying a more positive and open attitude towards risk, tend to innovate more. The empirical analysis of the paper is based on the most recent (2008/2009) wave of the European Values Study. Micro- data on about 80,000 individuals located in different EU urban areas are used to calculate city-specific attitudes towards risk that go beyond individual characteristics. This city-level risk attitude variable is then used within a knowledge production function approach, as an explanatory variable for urban innovation (patent applications to the European Patent Office) along with more traditional knowledge determinants (human capital and R&D expenditures). Our empirical results show that cities with a more open and positive attitude towards risk ceteris paribus also tend to be more innovative. In addition, we find that, unlike traditional knowledge production factors, this factor faces no decreasing returns. While further research might be beneficial in order to more precisely pinpoint the extent of such effects, our findings appear to be robust and suggest a positive role for the urban attitude towards risky endeavours in explaining urban innovation.