Innovation and the interface between local community and global economy

Locational factors are providing a new driver for innovation in both private and public sector management of market oriented economies (Porter and Stern, 2001; Florida, 2003). This is creating an interesting point of convergence in managerial practice. One side of this sees business seeking to draw together threads of knowledge and networks of relationships available in particular localities to increase competitive advantage and return on investment to shareholders. The other side sees government responding to customers and citizens, who are demanding processes and outcomes more tailored to their particular local needs. In both cases the enterprises and organisations which are able to tap into local knowledge and networks will be advantaged. The innovation equation facing contemporary manager may be expressed as I(nnovation) = T(raditional)K(knowledge) + N(etwork)K(knowledge) / L(ocality)K(knowledge). The key point in this formulation is the role of locality in determining the extent to which a given organisation is able to access the knowledge and networks which drive successful innovation. Understanding the significance of locality then becomes a key activity determining organisation outcomes. In the public sector this is being called 'place management'. In the private sector it may be identified as 'good old local know-how'. In both cases the conceptual keys to understanding the new sources of innovation are to be found in the complex web of social capital ideas currently fashionable across many academic disciplines. While the boundaries between private and public sector management have always been fuzzy, in this article, we are using the contemporary identification of locality as a new driver of innovation to direct attention to newly significant areas of interaction and convergence between the two.