The prevailing wisdom is that innovation thrives best in cities where the agglomeration effect ensures an ample supply of talent and finance to generate and develop new ideas, and then a robust market to sell those ideas to.  This fundamental scale advantage suggests that small towns and rural areas will always be at a disadvantage.

A recent study from McGill University suggests this need not be a fait accompli however, and indeed, sometimes rural areas offer distinct advantages over more populous regions.

The authors examine seven successful high-tech firms that reside in five small towns in the east of Switzerland. Each of the firms is a global leader in their niche, and the researchers set out to explore how they were able both to thrive and innovate, despite operating in largely homogeneous communities.  The researchers are particularly keen to explore whether factors such as company size, stakeholder network or external partnerships help to provide the degree of thought diversity that their local communities fail to provide.

Rural innovation

“We hypothesize that diversity has various dimensions, some of which are not related to urban density,” the authors say. “In our analysis, we identify different types of diversity mentioned by interviewees in order to provide corroborative evidence supporting the claims made recently by some economic geographers, as well as the observations on the nature of rural social networks (which were unconnected to economic or innovation concerns).”

The three dimensions mentioned above to increase the exposure to diversity by each firm each manifested themselves in unique ways:

• Internal workforce – The first strategy firms deployed was to try and create a diverse workforce. Given the relative homogeneity of the local community, this typically required firms to spread their recruitment net widely and try and attract talent from the major metropolitan areas within Switzerland or from overseas.
• Open cultures – A second clear strategy observed in the firms was to adopt an open culture whereby employees were encouraged to interact across organizational silos. The authors believe that in many ways this kind of culture reflects the small town vibe of their host communities.
• External networks – A third core strategy then was to develop broad external networks that allow them to access diverse sources of knowledge. These typically come from clients, universities and conferences, with firms all too well aware of the importance of non-local knowledge to their business.

The authors argue that these three methods of tapping into diverse sources of knowledge allow firms to remain innovative, even if their host communities lack the knowledge diversity present in much larger cities. Whilst none of the factors are necessarily specific to rural communities, they argue that they do allow innovation to occur nonetheless, regardless of one’s location.

“Our analysis shows that firms are able to foster diversity and that the paucity of actors in small towns can in fact lead to types of diversity (cross?hierarchical and multiplexed) which are more difficult to foster in urban areas or in regions where workers rarely cross paths outside of the workplace,” they conclude.

The very process of innovation involves challenging prevailing orthodoxies, and this study provides a timely reminder that innovation need not be confined to large urban areas.