Innovation, human capital, and creativity

Innovation has long been understood as a fundamental factor in economic growth. Economists, geographers, and other social scientists have examined the effects of innovation on economic growth, the factors associated with the production of innovations, and the geographic distribution of innovations. Jane Jacobs notes that the capacity to innovate is a product of a local environment or milieu that attracts talented people and is open and creative. Following Jacobs, this paper argues that innovation is a joint product of human capital and creativity. The capacity to innovate is seen to be a function of a region’s ability to attract human capital and to provide low barriers to entry for talented and creative people of all backgrounds. Multivariate models are used to test the joint effects of research and development expenditure, human capital, creativity/diversity, and industry mix on regional innovation. New measures of creativity (the bohemian index) and diversity (the gay index) are introduced. The findings suggest that innovation at the regional level is positively and significantly associated with both human capital and creativity.