The transformative power of innovation districts: A deep dive into their economic impact and potential

Innovation districts have emerged as a powerful force in the modern economy, fostering collaboration between businesses, research institutions and communities. These districts are defined as geographic areas where anchor university institutions and companies—from startups to large corporations—cluster, connect with each other and leverage programs such as business incubators and accelerators. They are places where “creative collisions” occur. These districts are designed to be physically compact and transit-accessible, and offer a mix of housing, office and retail spaces—a true live, work, learn and play environment. The value they create for their communities is multifaceted, including economic growth, job creation and enhanced social cohesion.

David J. Adams is a Senior Advisor at Boston Consulting Group and Managing Partner of Adams Advisors, LLC, specializing in workforce, higher education and economic development. He previously served as Indiana’s Workforce Development Commissioner and led the creation and development of the Cincinnati Innovation District, which became the model for the state of Ohio. An accomplished entrepreneur, Adams has helped grow numerous businesses. He holds degrees in Industrial Engineering, has received multiple awards for his contributions to economic development and innovation, and is a frequent speaker and Forbes contributor.

DAVID J. ADAMS

The Brookings Institution has been instrumental in documenting and analyzing the rise of innovation districts. In their groundbreaking research, Brookings identified the core components necessary for a successful innovation district: the clustering of innovative sectors and research strengths, the convergence of disparate sectors and disciplines, and the supercharging effect of a diversity of institutions, companies and startups.¹ These components, along with strong connectivity and proximity; a mix of long-, intermediate- and short-term strategies and a focus on programming and social interactions, create the vibrant ecosystems that drive innovation districts.

As cities around the world seek to revitalize urban areas and spur economic development, the concept of innovation districts has gained significant traction. These districts are not just about clustering businesses and research institutions; they represent a fundamental shift in the way cities approach economic development, placing a premium on density, connectivity and collaboration.

Value created by innovation districts

The impact of innovation districts extends far beyond their physical boundaries. Economically, they drive job creation, attract talent and investment, and stimulate local businesses. Socially, they foster a sense of community and collaboration, bringing together diverse groups of people to work on cutting-edge technologies and ideas.

Economic benefits

Innovation districts are powerful engines of economic growth. They attract investment from both the public and private sector, are major attractors and retainers of talent, and are driving the development of new innovations, businesses and industries. The clustering of companies, from startups to large corporations, creates a dynamic ecosystem where ideas can be quickly developed and brought to market. This leads to job creation, not only within the district but also in surrounding areas. For instance, Silicon Valley is renowned for its tech industry, which has created millions of jobs and attracted billions of dollars in investment. It is renowned as the epicenter of global technology. It is also the oldest innovation district in the United States.

University City in Philadelphia has become a hub for medical research and innovation, drawing major pharmaceutical companies, startups and academic researchers. This has led to significant advancements in health care and life sciences, creating high-paying jobs and boosting the local economy. The MaRS Discovery District in Toronto has catalyzed significant advancements in the health and technology sectors, attracting companies like Johnson & Johnson and Autodesk. TechSquare and ScienceSquare in Atlanta have fostered a vibrant startup ecosystem, supported by Georgia Tech’s strong engineering and computer science programs. The Cincinnati Innovation District, which this author architected, is anchored by numerous Fortune 500 companies and boasts a robust startup ecosystem.

Community and social impacts

Innovation districts also have profound social impacts. They foster a sense of community and collaboration, bringing together diverse groups of people into a live, work, learn and play environment. This sense of community is reinforced by the physical design of these districts, which often include public spaces, cultural amenities and housing.

Innovation districts can also drive social inclusion and equity. By creating job opportunities in diverse sectors, they help bridge economic divides and provide pathways to prosperity for underrepresented groups. For instance, Kendall Square in Cambridge, Massachusetts stands as a premier example of a successful innovation district that has made concerted efforts to include local communities in its growth story. Programs focused on education, workforce development and entrepreneurship are critical to ensuring that the benefits of innovation districts are broadly shared.

Anchor actors in innovation districts

The success of innovation districts hinges on the active participation and collaboration of several key actors:

Universities as anchor institutions

Universities are often the cornerstone of innovation districts. They provide a steady stream of talent, foster research and development, and often act as anchor institutions that attract businesses and startups. Their role is crucial in driving innovation and fostering a collaborative environment. For example, the Massachusetts Institute of Technology (MIT) in Kendall Square has been instrumental in the district's growth, fostering partnerships between academia and industry that have led to significant technological advancements. Universities also contribute to the cultural and intellectual vibrancy of innovation districts, hosting events, lectures and public discussions that engage the broader community. 

In addition to MIT, other universities, such as Stanford in Silicon Valley, the University of Pennsylvania and Drexel University in University City, the University of Toronto near the MaRS Discovery District and the University of Cincinnati in the Cincinnati Innovation District, play similar roles. These institutions not only drive research and development, but also provide vital support services such as business incubators, accelerators and funding for startups. They are major economic engines providing access to student and faculty talent, research and educational resources.

Companies ranging from startups to large corporations

Innovation districts benefit from the presence of both startups and established corporations. Startups bring agility and fresh ideas, while large corporations provide stability, funding and extensive resources. The mix of different-sized companies creates a dynamic ecosystem where ideas can be rapidly developed and scaled. They are physical places where “creative collisions” can occur amongst the participants.

For instance, in Silicon Valley, the presence of tech giants like Google, Apple and Facebook alongside numerous startups creates fertile ground for innovation. Similarly, in the MaRS Discovery District, large companies such as Johnson & Johnson work alongside emerging biotech firms to develop new health care solutions. This collaboration between companies of different sizes fosters a culture of innovation and accelerates the development of new products and services.

Community involvement and support

The community plays a vital role in the success of innovation districts. Community support and engagement are essential for creating a vibrant, inclusive environment that attracts talent and fosters innovation. Local residents, civic organizations and government entities all contribute to the district's development and sustainability.

In the Cincinnati Innovation District, community involvement has been a key factor in its success. By engaging local residents in the district’s activities and ensuring that they benefit from the economic growth, the district has built strong community support. This includes initiatives such as local hiring programs, community events and educational opportunities that connect residents with the district’s innovation ecosystem.

A case study: Kendall Square

Kendall Square in Cambridge offers a compelling case study of the transformative power of innovation districts. Kendall Square dubs itself “the most innovative square mile on the planet.” The square itself was named after the owner of the 1880s Kendall Boiler and Tank Company, Edward Kendall. 

Historically a hub for manufacturing, the area has evolved into a vibrant ecosystem of innovation, largely due to the presence of MIT. Over the years, Kendall Square has attracted numerous biotech and pharmaceutical companies, research institutions, and startups. This clustering has led to a thriving economy, with the district now boasting one of the highest concentrations of life sciences companies in the world. It has become a magnet for talent and the companies that seek that talent.

History of Kendall Square

Kendall Square wasn’t always a hub for innovation; its transformation began in the 1960s when MIT started to expand its campus and attract research and development activities. Prior to that time, it was an area in economic decline, mainly used for industrial purposes and full of parking lots and empty space. The establishment of the Cambridge Redevelopment Authority helped facilitate this transformation by promoting mixed-use development and improving infrastructure. Over the next few decades, the area evolved from an industrial zone into a hub for technology and innovation.

Key partnerships and stakeholders

The success of Kendall Square can be attributed to strategic partnerships between various stakeholders, including MIT, the City of Cambridge, private companies and nonprofit organizations. MIT played a pivotal role by fostering a culture of innovation and collaboration, while the City of Cambridge provided the necessary infrastructure and regulatory support. Private companies brought investment and resources to the district.

Kendall Square has evolved over time. With MIT as a core anchor, Biogen joined in 1982. It provided Biogen access to researchers at MIT and local talent. As its reputation grew, so did the number of life science corporations that joined the cluster. This included Novartis, Pfizer, Moderna, Amgen and Eli Lilly. It also became a place that attracted world-class talent.

However, Kendall Square is not limited to life sciences. It has also attracted technology cluster giants including Apple, Google, Microsoft and IBM. It is a powerhouse of innovation from startups to Fortune 500 companies—proximity and location matter.

Economic impact over time

The economic impact of Kendall Square is profound. Before its transformation, the area was economically stagnant. Today, it is a powerhouse of innovation, contributing significantly to the local and state economy. The district’s success can be attributed to several factors, including strategic partnerships, investment in infrastructure and a focus on attracting and retaining top talent. Programs like the MIT Innovation Initiative have been crucial in fostering an entrepreneurial environment where ideas can be developed and brought to market.

Kendall Square has become a catalyst for other areas in the Boston region. Its development and success have served as a model by demonstrating the potential for transforming urban spaces into thriving innovation districts. One example is Eli Lilly’s recent announcement of their Lilly Seaport Innovation Center in Boston’s Seaport district. The research and development center will house 500 scientists and researchers, connecting Lilly’s expertise with early-stage biotech companies.²

Mechanisms for talent attraction

One of the key mechanisms for talent attraction and retention in Kendall Square is the presence of MIT, which draws top talent from around the world. Additionally, the district offers a high quality of life, with access to cultural amenities, public spaces and a vibrant community. MIT and the companies in Kendall Square also actively recruit globally, creating a strong talent pipeline.

The district’s collaborative environment also plays a crucial role in talent attraction. The close proximity of companies, research institutions and universities fosters a culture of collaboration and knowledge-sharing, which is highly attractive to top talent. Additionally, the presence of venture capital firms and business incubators provides the necessary support for startups and entrepreneurs, further enhancing the district’s appeal. It’s all about talent.

Economic data and impact

The district’s robust infrastructure, including state-of-the-art research facilities and collaborative workspaces, supports more than 29,000 individuals working in innovation-related employment that has also generated nearly 147,000 additional jobs.³ Stated another way, for every one direct innovation job, another five indirect jobs were created. The average income of innovation-related employment exceeds $195,000 per year, reflecting the high-value work being conducted in the district.⁴ The presence of major companies such as Biogen, Moderna and Pfizer has attracted significant investment flowing into the district for research and development activities.

In terms of specifics, Kendall Square is home to public companies with a market value of approximately $170 billion.⁵ The area is recognized as the top life science cluster in the U.S. and second in venture capital investments only to California.⁶ Between 2017 Q3 and 2023 Q2, the value of venture deals was $99.2 billion.⁷ As of 2023, Kendall Square had approximately 56 million square feet of laboratory and R&D space with a planned expansion of another 13.4 million square feet over the next two years.⁸

Social and community impact

Kendall Square has also made significant strides in community engagement and social responsibility. The district hosts numerous public events, such as science festivals, tech meetups and community fairs, which foster a sense of belonging and inclusivity. These events not only promote innovation, but also ensure that the benefits of the district’s economic success are shared with the broader community.

The district’s commitment to sustainability and green development is also noteworthy. Kendall Square’s buildings adhere to stringent environmental standards, with many achieving LEED (Leadership in Energy and Environmental Design) certification. This focus on sustainability has reduced the district’s carbon footprint and promoted a healthier living environment for residents and workers alike.

Investment

Kendall Square has seen a remarkable transformation fueled by billions of dollars in investment, making it a global hub for innovation, particularly in biotechnology, pharmaceuticals and technology. These investments were made in commercial, residential and mixed-use spaces, R&D centers, transportation and utilities infrastructure, and technology to support the district. They were fueled by both the public and private sector. These commitments include local and state government and corporate investments. It’s a collective and collaborative effort.

The investment is ongoing. The Kendall Square Initiative was launched in 2016 with a planned investment of $1.2B to develop new research, commercial, residential and retail spaces.⁹ This initiative is part of the broader MIT Innovation Initiative, which began in 2013 with the goal of fostering innovation and entrepreneurship across the MIT community.

Indiana’s OneHealth Innovation District:  A catalyst for economic growth

Building on the success of established innovation districts, Indiana Governor Eric Holcomb recently announced the OneHealth Innovation District.¹⁰ The OneHealth Innovation District has the potential to become a major driver of economic growth in Indianapolis, the state of Indiana and the broader midwestern region. The two initial anchors that will catalyze this effort are Elanco Animal Health and Purdue University.

Elanco CEO Jeff Simmons and Purdue University President Mung Chiang signed a memorandum of understanding with the Indiana Economic Development Corporation (IEDC) to create a globally recognized innovation district dedicated to improving the health of animals, plants, people and the planet.¹¹ This district aims to leverage the state's existing strengths in these areas to create and attract new businesses and create high-paying jobs. The announcement of Indiana’s OneHealth Innovation District marks a significant milestone in the state’s economic development strategy.

Location, location, location

The OneHealth Innovation District will be located at the former GM stamping plant just across the White River in downtown Indianapolis. The GM stamping plant was built in the 1930s and officially closed its doors in 2001. The IEDC acquired the land and designated it an “innovation development district.” 

The location itself is strategically situated and adjacent to numerous resources, including Purdue University in Indianapolis, IU Indianapolis, IU Health, 16Tech Community Corporation, Eli Lilly, Indiana Biosciences Research Institute, BioCrossroads, AgriNovus and many others. It will not only be a place where innovation occurs, but it will also leverage the many organizations and locations nearby.

Overview of the OneHealth Innovation District

Elanco Animal Health is developing its corporate headquarters at the site and it is expected to be completed in the second quarter of 2025.¹² The site will include state-of-the-art research facilities, business incubators, and office, meeting and event space. Elanco has also announced that it will acquire another 12 acres for further expansion.¹³ In addition, Elanco is planning to commit funds to catalyze venture investments in early-stage ideas and entrepreneurs.

For Purdue University, this builds on the extension of Purdue University in Indianapolis. This location provides the opportunity to expand the substantial and meaningful work that Purdue researchers conduct and provide opportunities for students in the heart of Indianapolis.¹⁴

The overall site will also include mixed-use development, providing a true “live, work, learn and play” environment for individuals and organizations, creating a dynamic ecosystem of innovation.

Potential economic impact on Indianapolis, Indiana and the region

In a recent report, Dr. Phil Powell and Riley Zipper highlight that even though Indianapolis has low unemployment, the city lags in the growth of high-wage jobs when compared to cities like Nashville, Denver, Charlotte and Columbus.¹⁵

This also presents a significant opportunity. The potential economic impact of the OneHealth Innovation District as a core driver to change could be substantial. If Indiana's OneHealth Innovation District achieves similar success to Kendall Square, it would significantly boost the city and state's economy and create thousands of jobs in the process.

By attracting companies and fostering collaboration between universities, research institutions and industry, the district can spur innovation, improve economic outcomes for individuals, become a talent attraction and retention mechanism, and contribute to the state's economic growth by focusing and building on one of its core strengths.

The OneHealth Innovation District has the opportunity to create thousands of high-paying jobs and attract billions of dollars in investment. This will have a ripple effect on the local economy, boosting demand for housing, retail and services. The district will also enhance the state’s reputation as a hub for innovation, attracting talent and investment from across the country and around the world.

Economic opportunity

Rewinding the clock, Indianapolis and Boston were nearly equivalent in per capita income in 1978 (see Figure 1). By 2022, however, per capita income in Boston was more than one-third higher that of Indianapolis. In 1978, Indianapolis per capita income was 97% that of Boston, but by 2022, it had fallen to 73%.¹⁶

From a demographic standpoint, the Boston metro is significantly larger than the Indianapolis metro (4.9 million people and 2.1 million people, respectively), but the college age and young adult population percentages are nearly identical.¹⁷ What is different is the share of the population 25 years and older who hold at least a bachelor’s degree (51% in Boston and 37% in Indianapolis) and those holding a graduate or professional degree (23% in Boston and 13% in Indianapolis).¹⁸

The Brookings Institute has highlighted that the key economic driver in today’s economy is people. Their research highlights that the economic value of knowledge and capabilities in the workforce is four times more valuable than physical capital and ten times more valuable than urban land.¹⁹ This is also playing out economically. Between 2017 and 2022, Boston per capita GDP grew 59% faster and real labor productivity grew 154% faster than Indianapolis.^20,21,22

The catalyst created by Kendall Square has also resulted in significant venture investment. The value of venture deals between 2017 and 2023 was $99.2 billion in Boston compared to $1.8 billion in Indianapolis.²³

The economic opportunity and results created in Boston with Kendall Square can be created in Indianapolis, too. Kendall Square, and the myriad of other well-developed innovation districts, can serve as blueprints to accelerate this effort. The OneHealth Innovation District can be a major catalyst in realizing this opportunity.

Community and regional benefits

The development of the OneHealth Innovation District will have significant social and community benefits. By promoting health innovation and research, the district will provide opportunities to improve public health outcomes for residents of Indianapolis and the surrounding areas. Community engagement initiatives will ensure that residents have access to new job opportunities and educational programs, fostering a sense of ownership and involvement in the district’s success.

Conclusion

Innovation districts represent a significant opportunity for cities and regions to drive economic growth, foster innovation and improve the quality of life for their residents. The examples of Kendall Square, Silicon Valley and others demonstrate the transformative potential of these districts. Many of these successes occurred serendipitously with little forward vision or planning. They are also very “congested” in terms of activity and access to resources. The OneHealth Innovation District can be forward-thinking, act with intentionality and move at the speed of business. These are competitive differentiators in a highly competitive global market. It will take time, but the opportunity exists to create something in years where others have taken decades.

For Indiana, the development of the OneHealth Innovation District presents a unique opportunity to build on existing strengths and create a vibrant ecosystem of innovation. By leveraging the power of collaboration and focusing on key sectors, such as the health of animals, people, plants and the planet, Indiana can position itself as a leader in the next wave of economic development.

The success of innovation districts depends on the active participation and collaboration of universities, companies and the community. By fostering a culture of innovation and creating a supportive environment for businesses and startups, cities can harness the potential of innovation districts to drive economic growth and social progress. The future of innovation districts is bright, and with the right strategies and investments, they can become powerful engines of prosperity and inclusivity.

With strategic planning and robust support from all stakeholders, Indiana’s OneHealth Innovation District could serve as a model for others, demonstrating how targeted investment in innovation and collaboration can drive sustained economic growth and community development. Just imagine the economic opportunity and impact the OneHealth Innovation District will have on Indianapolis, the state and the region as it becomes a global beacon for innovation.   

This article focuses on innovation districts and their economic impact. It does not cover the significant economic impact the Heartland BioWorks, of which the OneHealth Innovation District is a strategic anchor, will have on Indianapolis and Indiana. The Heartland BioWorks, based in Indianapolis, is one of only 12 Tech Hubs designated by the U.S. Economic Development Administration with a focus on areas critical to strengthening U.S economic competitiveness and national security.²⁴

With the broader innovation ecosystem that includes Purdue University, Indiana University, IU Health, 16Tech Community Corporation, Eli Lilly, Indiana Biosciences Research Institute, BioCrossroads and AgriNovus to name just a few, the economic opportunities and benefits are substantially greater.

Notes

1. Katz, B. & Wagner, J. 2014. “The rise of innovation districts: A new geography of innovation in America.” Metropolitan Policy Program at Brookings. May 2014. https://www.brookings.edu/wp-content/uploads/2016/07/innovationdistricts1.pdf.
2. Eli Lilly and Company. 2024. “Lilly opens state-of-the-art research and development center in Boston Seaport.” News release. August 13. https://investor.lilly.com/news-releases/news-release-details/lilly-opens-state-art-research-and-development-center-boston.
3. Aretian Urban Analytics and Design. 2019. The Atlas of Innovation Districts. https://www.aretian.com/atlas.
4. Cambridge Redevelopment Authority. 2024. “KSURP and Kendall Square Area Development (2022).” April 5. https://storymaps.arcgis.com/stories/3f65f885f6a84344a36edaa92e7dd7fc.
5. Spalding, R. 2018. “How a rundown square near Boston birthed a biotech boom and real estate empire.” Bloomberg. October 5. https://www.bloomberg.com/news/features/2018-10-05/how-a-rundown-square-near-boston-birthed-a-biotech-boom-and-real-estate-empire.
6. CBRE. 2020. “Leading life science clusters: The bio-boom intensifies.” U.S. Life Sciences CBRE Research. https://f.tlcollect.com/fr2/420/21555/2020_CBRE_Life_Science.pdf.
7. PitchBook. 2023. “Global VC ecosystem rankings.” PitchBook Data, Inc. October 10. https://files.pitchbook.com/website/files/pdf/Q4_2023_PitchBook_Analyst_Note_Global_VC_Ecosystem_Rankings.pdf.
8. CBRE. 2020. “Leading life science clusters: The bio-boom intensifies.” U.S. Life Sciences CBRE Research. https://f.tlcollect.com/fr2/420/21555/2020_CBRE_Life_Science.pdf.
9. Logan, T. 2015. “A new Kendall Square envisioned in $1.2b MIT plan.” The Boston Globe. July 28. https://www.bostonglobe.com/business/2015/07/28/mit-unveiling-billion-plan-for-kendall-square/fd4DRGIeKkYDkvwVn6cFRM/story.html.
10. Indiana Economic Development Corporation. 2024. “Gov. Holcomb announces new Purdue-Elanco Research Facility in newly-created OneHealth Innovation District.” Press Release. May 23. https://iedc.in.gov/events/news/details/2024/05/23/gov.-holcomb-announces-new-purdue-elanco-research-facility-in-newly-created-onehealth-innovation-district.
11. Ibid.
12. Ibid.
13. Ibid.
14. Purdue University. 2024. “Purdue and Elanco Animal Health announce One Health Innovation District in Indianapolis.” Purdue University News. May 23. https://www.purdue.edu/newsroom/releases/2024/Q2/purdue-and-elanco-animal-health-announce-one-health-innovation-district-in-indianapolis.html.
15. Powell, P.T. & Zipper, R. 2023. “Making the Indianapolis workforce more competitive.” Indiana Business Review 98(3). https://www.ibrc.indiana.edu/ibr/2023/special/article2.html.
16. Federal Reserve Bank of St. Louis. 2023. “Per capita personal income in Boston-Cambridge-Newton, MA-NH (MSA)”. Federal Reserve Economic Database. https://fred.stlouisfed.org/series/BOST625PCPI.
17. Indiana Business Research Center. 2024. “Side-by-side comparison: Boston-Cambridge-Newton, MA-NH (Metro), Indianapolis-Carmel-Anderson, IN (Metro).” StatsAmerica. https://www.statsamerica.org/anywhere/comparison.aspx.
18. Ibid.
19. Parilla, J. 2019. “Talent is America’s most precious resource—it’s time economic development organizations focus more on developing it.” Brookings Institution. December 11. https://www.brookings.edu/articles/talent-is-americas-most-precious-resource-its-time-economic-development-organizations-focus-more-on-developing-it/.
20. U.S. Bureau of Economic Analysis. 2024. “CAGDP1 County and MSA gross domestic product (GDP) summary.” Regional data: GDP and personal income. https://apps.bea.gov/itable/?ReqID=70&step=1&_gl=1*1dx8jhq*_ga*MTIwNzg5MzMwOC4xNzE5NTE2Nzg1*_ga_J4698JNNFT*MTcyMjc5NjU3OS4zLjEuMTcyMjc5Njk2MC42MC4wLjA
21. U.S. Bureau of Economic Analysis. 2024. “CAINC1 County and MSA personal income summary: personal income, population, per capita personal income.” Regional data: GDP and personal income. https://apps.bea.gov/itable/?ReqID=70&step=1&_gl=1*1dx8jhq*_ga*MTIwNzg5MzMwOC4xNzE5NTE2Nzg1*_ga_J4698JNNFT*MTcyMjc5NjU3OS4zLjEuMTcyMjc5Njk2MC42MC4wLjA
22. U.S. Bureau of Economic Analysis. 2024. “CAINC4 Personal income and employment by major component.” Regional data: GDP and personal income. https://apps.bea.gov/itable/?ReqID=70&step=1&_gl=1*1dx8jhq*_ga*MTIwNzg5MzMwOC4xNzE5NTE2Nzg1*_ga_J4698JNNFT*MTcyMjc5NjU3OS4zLjEuMTcyMjc5Njk2MC42MC4wLjA.
23. Gootee, T. 2023. “Indianapolis tops global 15 VC ecosystem by growth.” TechPoint. December 5. https://techpoint.org/indianapolis-tops-global-15-vc-ecosystem-by-growth/.
24. U.S. Economic Development Administration. 2024. “Biden-Harris administration announces next funding round of $504 million for 12 tech hubs across America.” Press Release. July 2. https://www.eda.gov/news/press-release/2024/07/02/biden-harris-administration-announces-next-funding-round-504-million.