(Yicai Global) April 6 -- Which is China’s most innovative city? Is it Beijing where nine out of ten people are entrepreneurs? Or Shenzhen where a big number of large high-tech enterprises such as Tencent and Huawei are located?
Cities exist for innovation.
This was the concept and approach of Yicai Media Group’s The Rising Lab anatomization and analysis of China’s cities from the following perspectives – innovation and entrepreneurial ability, how much hot money is flowing out of a city, how many unicorns can they boast, the housing rental index and their ability to educate and attract talent.
The Rising Lab previously looked at China’s new emerging cities – areas recognized to be on the cusp of entering the first tier of Beijing, Shanghai, Guangzhou, and Shenzhen.
The city has not been the most conducive environment for human life since its inception, yet people are still willing to choose this crowded and tense way of life, sacrificing comfort for its convenience, diversity, efficiency and inclusiveness.
The city is always the social environment most likely to give birth to innovation.
In his book, The Rise of the Creative Class, Richard Florida, a professor at the University of Toronto, wrote, "Creativity cannot be stored, contested and traded like a mine. It must always be enriched, renewed and maintained, otherwise, it will slip away.”
At present, the rankings of the innovation ability of Chinese cities, broadly a measure of their cultural or technological creativity, can be assessed by the most intuitive digital indicators – the number of patents, copyrights, number of high-tech enterprises and startup companies, for example.
These work to a degree, however, they may not represent all the innovation and can sometimes even be misleading.
City managers and companies can think of ways to increase the number of patents but these may not make any improvements to the world at large. There are a lot of creative ideas that cannot be patented every day. This is what the numbers cannot truly reflect but are within the bounds of the definition of innovation we subscribe to.
So, when The Rising Lab tried to use data to analyze the technical and entrepreneurial ability of China’s cities, they dropped those metrics and returned to the origin of innovation – patents, writings and all innovations that cannot be measured which are ultimately created by human beings. They may be scientists, engineers, designers, artists, or young people and seniors who do not know how to define themselves.
On the question of how much innovation a city has, The Rising Lab is more concerned about how the city becomes the soil bed of innovation and growth. We believe that any subtlety in the city has the possibility of innovation and what is important is how to attract creative seeds. This is also the original intention of releasing China’s City Innovation Ability Rankings 2017.
China’s City Innovation Ability Rankings 2017 makes a comprehensive measurement of China’s cities from the four perspectives of hot money, unicorns, house rental and partner indices. The data sources used include data partners 36kr.com, Zhaopin.com and Risk.com, a Chinese corporate credit information platform, as well as official population data and high-tech enterprises.
Considering that innovation capacity needs to be based on a certain economic and commercial vitality, only 19 top cities on the 2016 China’s City Business Charm Rankings and new emerging cities were selected as the candidates for the China’s City Innovation Ability Rankings 2017.
The resulting rankings of China’s city innovation ability are: Beijing, Shenzhen, Shanghai, Guangzhou, Hangzhou, Tianjin, Chengdu, Wuhan, Suzhou, Chongqing, Nanjing, Xi'an, Changsha, Qingdao, Ningbo, Wuxi, Xiamen, Dalian, and Shenyang.
The following is a detailed interpretation of the measurement metrics and the calculation methods.
Hot Money Index
In the commercial community, innovation generally comes from social organizations or companies, and funding will relieve entrepreneurial firms’ burdens and enable them to focus on their own development. Therefore, a city with more investments in innovation will have more possibilities for creativity.
Nevertheless, funding as a measure is not everything, for sometimes it is not sensitive enough. There have been massive companies dissolved soon after they obtained their startup funds, which brought no substantial change to the world. Therefore, the effectiveness of investments really matters for a city’s basis for innovation. The handsome number of enterprises obtaining Round C and subsequent rounds of financings in relevant cities indicates a longer vitality for enterprises in these cities.
Besides, we also referred to the bio-diversity to calculate the diversity of entrepreneurial projects in each city, and attempted to analyze the number of enterprise incubators, which are becoming new concentrated areas for innovation, to present the entrepreneurial support in a city.
High-tech enterprises represent the technological innovation capacity of a city. Herein, many companies’ businesses may be not understandable to ordinary people, and they may be ignored when it comes to innovation. However, these hidden champions behind the scenes act as a vital driver of innovation.
In the unicorn index, we not only analyzed the number of high-tech enterprises in each city and their patent numbers, but also figured out the five cities with the most intensive enterprise clusters of each sector in accordance with the sectors in which these high-tech enterprises deal.
For the Suzhou survey, The Rising Lab noted that technicians specializing in the nanometer sector would give priority to jobs in Shenzhen or Suzhou due to the intensive nanometer industrial clusters and the leading industrial positions of these two cities. It was our original intention to calculate the high-tech enterprise cluster index to discover the relevance between these two cities and the nanometer industry.
For high-tech enterprises, due to their special requirements on technological basis, talent supplies or aspects like detailed R & D and production environments, their preference for cities will not necessarily follow the mainstream. All these factors form the precious unicorn sectors in cities.
House Rental Index
For organizations like companies, innovation cost means the input of research and development funds and technologies. For cities, it means the cost of retaining creative talents, of which the majority comes from housing.
We employed the house rental index in each city to present their innovation costs. In calculating this item, we first picked the 10 areas of each city with the most intensive company clusters. Then, we described a circle centering on each area center with the average commuting distance as the radius and then worked out the average rental of these areas with enterprise clusters, rather than simply including the average rental price.
Of course, house rental is no indication that cheaper is better. After all, high housing rental driven by more jobs is not bad for the innovation development of a city. Hence, we also included the benefits of high rentals, whereby the cities ranked the top on the house rental index not only feature economical rentals but also massive enterprise clusters.
The phenomenon that the housing price will rise along with the coming of major companies is called gentrification by urban planning scholars. For cities ranked the top in this index, it is crucial to take full account of the current period. When their local housing prices are still moderate, they should promote their attraction for innovators as much as possible.
The partner index focuses on the topic how many partners a person can expect to find while creating a new product, service or firm in the city concerned.
Zhaopin.com offers a crucial dimension, the competition index. This index refers to the ratio of the number of curriculum vitae sent via this platform to the number of job vacancies. A higher ratio indicates fiercer competition. Nevertheless, for this data, the total volume is of the same significance with the ratio, so it is necessary to multiply the corresponding recruitment scale coefficient to work out the competition index of a city.
Surely, the talent supply is also of the same importance as talent reserves. Here we employed the number of college and university students to describe the talent reserves. Moreover, the proportion of the urban migrant population, those permanent residents without local household registration, is used to measure the talent supply, which also indicates a city’s capacity for attracting talent. This basic population data represents the new possibilities of a city.