August 4, 2005--Highly populated cities aren't the only areas that foster innovation, according to a study by the Federal Reserve Bank of Kansas City.

Using data from sources including the National Bureau of Economic Research and the U.S. Patent and Trademark Office, the study found that less populated areas had a disproportionately large number of patents in mature technology fields. Mature technology consists of industries, such as planting, firearms, and mining, which are relatively older and whose innovations are more predictable.

In contrast, the study also showed that large cities with heavier populations had disproportionately higher numbers of patents in emerging industries. Michael J. Orlando, senior economist at the Federal Reserve Bank of Kansas City and co-author of the study, said that more populated areas foster innovation in new technology fields because of their unpredictability. "In emerging industries, you don't know who to sell to or what your input requirements are," he said, adding that innovations in emerging fields rely on the vast number of suppliers, consumers and knowledge readily available in heavier populated areas.

Orlando also noted that it was not just agricultural businesses that innovated in less populated areas, but that the disproportionately high patent numbers in these places continued throughout all mature technology fields. "Everyone would like to run their businesses in cheaper places," he said. "But the emerging technology fields can't get away with it yet."

Published on: Aug 4, 2005