Casebook illustration of agglomeration economies: Kendall Square and biotech

"Agglomeration economies" is a fundamental concept from urban economics. The Geography of Transportation webpage at Hofstra University defines them thusly:

Agglomeration economies are a powerful force that help explain the advantages of the "clustering effect" of many activities ranging from retailing to transport terminals. There are three major categories of agglomeration economies:

Urbanization economies. Benefits derived from the agglomeration of population, namely common infrastructures (e.g. utilities or public transit), the availability and diversity of labor and market size;

Industrialization economies. Benefits derived from the agglomeration of industrial activities, such as being their respective suppliers or customers. This favors the emergence of industrial clusters;

Localization economies. Benefits derived from the agglomeration of a set of activities near a specific facility, let it be a transport terminal (logistics parks), a seat of government (lobbying, consulting, law) or a large university (technology parks).:

The job market and the world economy is much more competitive and operates much faster, making agglomeration or "clustering" valuable again when in the post-war period through the first decade of the 21st century, automobile-centric land use and transportation development paradigms allowed automobility to trump the clustering value of place/location.

The Boston Globe has a nice article about Kendall Square in Cambridge, which is perhaps the leading center for biotech in the US, although San Diego and San Francisco would argue over who is #1 ("The suburbs are cheaper, but they don’t have what Kendall Square has for biotechs: serendipity").

(Also see "Alexandria Real Estate’s empire grows in Kendall Square: The area’s life sciences boom puts the developer on top," BG.)

From the article:

There’s no denser collection of biotech startups, big pharma companies, and venture capital firms anywhere else in the United States, and perhaps on the planet. They’re clustered on either edge of the Massachusetts Institute of Technology campus, and along Main Street heading into Cambridge’s Central Square. And they’re all paying the highest rents in New England: almost $100 per square foot for lab space and $92 per square foot for offices, according to the real estate brokerage CBRE. Both numbers are records.

What makes it worth paying such high rents, when you can be in the suburbs for half the price, or even in other parts of Cambridge for 60 or 70 percent of the cost of Kendall Square? I posed that question to the denizens of the neighborhood — as well as to some who have decamped for more affordable neighborhoods.

Everyone started by talking about a dynamic that’s tough to put a price tag on: serendipitous interactions with people at other companies. “There are countless interactions between biotech entrepreneurs, pharma leaders, and investors that happen virtually every day,” says John Maraganore, chief executive of the publicly traded biotech Alnylam Pharmaceuticals. “I walk to MIT, the Broad Institute, the Whitehead, all the time. I also walk to my partners over at Sanofi and Novartis, and also to potential partners all around the square.”

Clusters can be relative.  I used to believe that only the leading clusters had advantages, that secondary locations had no chance.

Now I don't believe that. There is a place for secondary or peripheral locations. They won't be Cambridge, but they can still be significant centers with opportunities for growth, especially locally.

But you really have to work it:

-- "Naturally occurring innovation districts | Technology districts and the tech sector," 2014
-- "Better leveraging higher education institutions in cities and counties: Greensboro; Spokane; Mesa; Phoenix; Montgomery County, Maryland; Washington, DC," 2016

(Reprinted.)
Learning from Europe: Knowledge locations in cities.  In 2013, I wrote about Helsinki, "Helsinki as an example of creative industries driving urban revitalization programs," for the Europe in Baltimore project conducted by the Washington Chapter of the European Union National Institutes of Culture.

Design is a key element of Helsinki's identity and economy.  And while writing the article, I learned a lot which has influenced my thinking ever since, about cultural planning, cultural production, systematic planning of new districts, specifically Arabianranta, where the Aalto University is now located, assigning cultural planners to districts, libraries, and more.

An article on Arabianranta,

"Developing creative quarters in cities: policy lessons from 'Art and design city' Arabianranta, Helsinki," Van Tuijl, Carvalho, and Van Haaren, Urban Research & Practice 6(2):211-218 · June 2013

introduced me to a new line of thinking about "creative quarters," which we might call Arts Districts 2.0.

The research was part of a larger project which resulted in the book Creating Knowledge Locations in Cities: Innovation and Integration Challenges.  (This is a pdf of the book.)

Note that Brookings Institution has a similar program, Innovation Districts, but I like the writings from Europe better.