America's smaller cities are embracing the knowledge economy and leading innovation

There's a push and pull competition taking place between large coastal urban areas and small- to medium-sized cities in the United States.

The push side is well documented — high costs of living and housing unaffordability, coupled with quality-of-life issues such as long commute times and emergent remote work patterns, are impelling residents away from large, developed metros like New York and San Francisco. Many of those leaving are knowledge-based workers who originally flocked to bigger cities after their higher-ed years and are now choosing to return to their home regions a decade or two later, often with families in tow. The COVID-19 pandemic and remote working accelerated this dynamic.

The pull side is part opportunity and part appeal. Small and medium-sized urban centers across the United States have become more attractive in recent years. Housing is affordable. Many offer incentives and good jobs, which have spread out through the knowledge economy and resurgent manufacturing, and increasingly host innovative new businesses and industries working in the green economy. Bike trails, urban parks and revitalized neighbourhoods that foster arts, culture and entrepreneurship draw in people looking for a good quality of life.

Some cities — Eugene, Charlotte and Portland, Maine, for example — are reputable knowledge centers, with strong universities and established institutions that underpin business and job creation. They also share that essential originality and genuine quality of place many people seek: historic downtowns, local traditions in the arts or in food and drink and an appreciative and engaged citizenry.

Another draw of these smaller cities are the growing innovation sectors and districts many of them now host. Metros like Detroit have emerged as targets for investors with creative enterprises and redevelopment in mind. Major undertakings like Ford’s mobility district around Michigan Central Station or Bedrock’s reinvention of the former Hudson’s department store have attracted over 250 businesses to the Motor City and added tens of thousands of new jobs. Detroit was recently named the number one emerging startup ecosystem globally.

Some of these key developments capture value in what was previously abandoned. In Atlanta’s Beltline, the stranded assets of rail lines are turned into parks. Cleveland’s Whiskey Island, once a busy industrial area, is converted to an idyllic lakefront. These reinvented areas tell a place’s history and generate growth through imaginative, sustainable developments that foster the creation of a green economy.

In other cities, a mix of grassroots and federally supported initiatives are accelerating innovation. Incubators like Urban-X, now operating in 17 metro areas, along with funded innovation districts and public-private benefit corporations, are supporting enterprises and the deployment of new technologies. In the pursuit of clean energy, the Inflation Reduction Act is fueling latent growth potential in places like Tucson and Burlington, Vermont.

Smaller-scale cities are increasingly the testbeds for new civic tech and advanced urban systems, in part because they deploy prototypes quickly and effectively, which may be more difficult to achieve in many big cities. Meanwhile, new innovation districts — the result of public-private collaborations between cities and local institutional partners — are being developed in smaller downtowns, such as Durham and Wilmington, in North Carolina.

While their futures are bright, many smaller cities still face hurdles to continued growth. Stranded assets present opportunities for reinvention, but they require strategic local leadership and deep investment — something that is increasingly difficult to access as borrowing has become more expensive, and remains concentrated in major metropolitan areas.

Successful urban centers leverage public-private collaborations to catalyze innovation and the green economy and to take advantage of new federal funding. Others are positioning their existing manufacturing workforces as assets for new infrastructure investments. Some city leaders are pushing for identity-defining public realm infrastructure projects that embody their post-industrial vision.

These initiatives require local and state support, national foundation funding and a commitment to community engagement and visioning. Communities that have carefully assessed the underlying requirements for adaptive reuse are seeing success. Many have also worked to fund remediation of brownfield sights and other past contaminations.

When it comes to attracting knowledge-based fields with potent investor appeal, like biotech and clean energy, some small cities will struggle. But they can make up for it with revived manufacturing, creative industries and a strong local culture — think Pittsburgh, for example, where decades of local reinvention has countered the loss of heavy industry. There and in Norfolk, Tucson, and Burlington, cultivating a green economy has paid off, not just in climate adaptation but also in drawing start-ups and tech-focused investors. Examples include building offshore wind components in New York’s Hudson Valley, or producing hydrogen in cities like Cleveland and Columbus as part of a Midwestern coalition. These former manufacturing centers offer both infrastructures and workforces equipped to implement these carbon-slashing technologies.

While coastal cities still dominate when it comes to attracting educated knowledge workers, the revitalization of small and mid-sized cities — accelerated by the pandemic — is positioning them as the innovative leaders of the future. The perils of climate change and the nationwide effort to mitigate and adapt to it will push this trend even further in the coming decades. The cities that invest in their institutions, stranded assets and workforce will undoubtedly fare the best.