Behind the Buzz: How Innovation Ecosystems Deliver Value—and How to Measure It

Dr John H Howard
May 22
9 min read

Updated: May 25

John H Howard*, 22 May 2025

The idea of innovation ecosystems has become central to contemporary policy, city planning, and university strategy, for good reason. When well designed, these ecosystems generate genuine economic, industrial, and public value that far exceeds the sum of their parts. Yet the key challenge remains: How can we clearly demonstrate their value, and what evidence truly convinces both policymakers and the public?

This Innovation Insight seeks to provide answers. It explores how innovation ecosystems—dynamic networks of universities, businesses, intermediaries, and government—create the conditions for productivity growth, capability-building, and enduring competitiveness. Rather than simply assembling assets, successful ecosystems mobilise talent, capital, and ideas across organisational boundaries, enabling knowledge to flow and new opportunities to emerge.

Drawing on robust international research and practical case studies, the paper argues that innovation ecosystems should be recognised as vital productivity infrastructure, not just vehicles for start-up creation or research commercialisation. Their real power lies in nurturing collaboration, accelerating diffusion, and building resilience across sectors and regions.

With policy and investment decisions under increasing scrutiny, this analysis sets out a clear and actionable framework for measuring ecosystem performance—ensuring that future strategies are grounded in real impact, not rhetoric, and deliver lasting public benefit.terms.

From Concept to Consequence: What Do Innovation Ecosystems Really Do?

Innovation ecosystems are not merely clusters or innovation precincts. They are adaptive socio-technical systems involving universities, firms, entrepreneurs, intermediaries, government agencies, capital providers, and communities. These actors interact through knowledge flows, joint ventures, worker mobility, and institutional relationships.

Research and comparisons of ecosystems are increasingly showing that innovation ecosystems produce better results than adding up what each part contributes. This happens not just because the actors are in the same place but also because of the strong and meaningful connections they have with each other across different organisations, industries, and fields.

This is not due to the mere co-location of actors but rather to the density and quality of their interactions across organisational boundaries, sectors, and disciplines. These interactions foster what Metcalfe (1995) terms a “distributed innovation process,” wherein knowledge creation and diffusion are not linear but shaped by relational dynamics, institutional trust, and co-evolution.

For example, research by Autio et al. (2018) demonstrates that ecosystems characterised by high levels of actor interdependence and institutional alignment outperform loosely coordinated networks at sustaining innovation over time. Similarly, the OECD’s analysis of knowledge triangle policies (2013) finds that ecosystems with deliberate coordination across education, research, and innovation functions exhibit greater adaptive capacity and higher rates of knowledge diffusion into markets.

Interaction, alignment, and institutional coordination—not mere proximity or funding—drive the productivity and innovation benefits of ecosystems. The evidence base supports the view that ecosystems are valuable not because they concentrate assets, but because they mobilise and orchestrate them.

In short, ecosystem value lies not simply in the presence of universities, firms, and government actors, but in their ability to interact productively, share risk, build collective intelligence, and co-invest in shared futures.

Productivity as the Central Policy Rationale

In the current policy milieu, the decisive question is whether innovation ecosystems demonstrably contribute to productivity growth, the principal channel through which innovation drives prosperity, competitiveness, and fiscal sustainability. Without such assurance, governments will hesitate to prioritise ecosystem development in constrained budgetary environments.

Well-designed ecosystems contribute to productivity growth through multiple mechanisms:

Reducing Innovation Friction: Ecosystems reduce time-to-market by streamlining experimentation, regulatory navigation, and technology diffusion.
Boosting Firm Capability: By giving firms—especially SMEs—access to high-quality knowledge, talent, and collaborative R&D, ecosystems improve managerial and operational efficiency (Bloom et al., 2019).
Accelerating Spillovers: Proximity and dense interconnections enable tacit knowledge spillovers, often with stronger productivity effects than R&D inputs alone (Audretsch & Feldman, 2004).
Fostering Technological Convergence: Ecosystems enable cross-sectoral breakthroughs, such as robotics in agriculture or genomics in manufacturing, that underpin future productivity frontiers.
Supporting Workforce Adaptation: Integrated ecosystems can embed training, reskilling, and informal learning, which increases labour productivity.
Aligning Capital and Coordination: Ecosystems can consolidate fragmented public and private investments into coordinated capability-building platforms, enhancing long-run economic efficiency.

This framing demands that innovation ecosystems be recognised as strategic productivity infrastructures, not just enablers of entrepreneurial activity or R&D commercialisation.

However, we must also acknowledge the spatial and market realities. In Sydney, for example, many firms—both emerging and established—have demonstrated a preference to locate outside the formal Tech Central zone. Instead, organic agglomerations are emerging in areas such as Surry Hills, Pyrmont, Walsh Bay, Barangaroo, North Ryde, Liverpool, and other dispersed industrial and retail districts.

These locations may offer lower land and rental costs, better logistics, or embedded industry connections. This suggests that ecosystem value may reside less in branded precincts and more in distributed networks of capability and interaction across a city or a larger region.

Innovation policy must adapt accordingly, supporting not just flagship developments but the often-overlooked connective tissue of ecosystem health—workforce pipelines, shared testing infrastructure, peer networks, trusted intermediaries, and place-based coordination platforms.

The Value Innovation Ecosystems Create

Economic Value: Innovation ecosystems deliver firm creation, job growth, investment attraction, and export expansion. More importantly, they provide the adaptive capacity to maintain competitiveness in fast-changing environments. Eindhoven’s transition from a single-firm dependency (Philips) to a globally recognised deep-tech ecosystem illustrates how ecosystems can renew economic capacity after industrial declines (Trippl et al., 2015).

Industrial Value: Ecosystems support the scaling and upgrading of industry capabilities through knowledge spillovers, workforce mobility, and shared R&D. Germany’s Fraunhofer model demonstrates how embedded applied research institutions can diffuse advanced technologies into SMEs, increasing sector-wide productivity (Eickelpasch & Fritsch, 2005). Similarly, Canada’s MaRS district facilitates sector-wide platform building in health, cleantech, and enterprise technology.

These dynamics underpin the creation of industrial commons—shared talent pools, research platforms, and institutional capabilities that drive competitiveness over the long term (Pisano & Shih, 2009).

Public and Societal Value: Ecosystems also generate public goods—green technologies, inclusive education models, digital public health tools, and culturally enriching activities. Barcelona’s 22@ and Montreal’s Quartier de l’Innovation illustrate how civic ecosystems can enhance urban quality of life while fuelling innovation. In Australia, this dimension is less developed. Strategies often over-emphasise commercialisation metrics while undervaluing civic engagement, inclusive innovation, and social outcomes.

Core Attributes of a Well-Functioning Innovation Ecosystem

If innovation ecosystems are to be taken seriously in policy and budget processes, their advocates must go beyond rhetoric and clearly demonstrate the presence and effectiveness of specific attributes. A categorisation of attributions, rationale, and evidence, indicators, and metrics might be constructed as follows.

Table 1: Attributes of a Well-functioning Innovation Ecosystem

Attribute	Rationale, Explanation	Evidence, Indicators, Metrics
1. Frequent and Diverse Knowledge Exchange	Actors share insights, data, and experiences across organisational, disciplinary, and sectoral boundaries—enabling new ideas to emerge and spread.	Evidence includes co-publications, co-patents, or cross-sector projects.
2. Low Friction for Collaboration and Experimentation	The ecosystem lowers barriers—legal, financial, cultural—to partnerships and pilot projects.	Demonstrated by the speed and frequency of collaborative ventures, cross-licensing agreements, or sandboxes for regulatory testing.
3. Shared Infrastructure and Intermediary Platforms	Physical and institutional resources (labs, testbeds, accelerators, data platforms) are accessible and actively used by multiple actors.	Evidence includes utilisation rates, case examples, and cross-institutional service agreements
4. Talent Mobility and Circulation	People move between research, business, government, and intermediaries, transferring know-how and building relational capital.	Trackable through secondments, alumni networks, job placement flows, and joint appointments.
5. Supportive Intermediaries and Brokers	Entities such as accelerators, translational institutes, or innovation hubs actively connect supply and demand, de-risk innovation, and build trust.	Effectiveness is shown through user satisfaction, funding leverage, or deal conversion rates.
6. Institutional Trust and Strategic Alignment:	Organisations trust each other enough to share risks, data, and decision-making. Strategic goals align across institutions.	Measurable through joint strategies, partnership longevity, or stakeholder surveys.
7. Dynamic Capability Building	Actors and institutions enhance their capacity to innovate, scale, and adapt over time.	Evidence of capability lifts, such as improved innovation maturity, digital adoption rates, or upskilling programs.
8. Relational Density and Informal Networks	Informal ties complement formal partnerships, enabling rapid problem-solving and knowledge flow.	Tracked through social network analysis, collaboration patterns, or stakeholder mapping exercises
9. Coordinated Governance and Feedback Loops	Governance bodies coordinate action, resolve tensions, and adapt strategy based on feedback and performance.	Indicators include adaptive policy frameworks, meeting transparency, or changes made in response to evaluations.
10. Inclusive Participation and Social Embeddedness	Broad participation across firm sizes, demographics, and communities strengthens legitimacy and diffusion.	Demonstrated through diversity metrics, engagement with underserved groups, and community partnerships
11. Mission-Driven or Purpose-Led Activities .	In mature ecosystems, actors align around societal challenges or strategic missions (e.g., decarbonisation, food security).	Demonstrable via mission statements, challenge-led funding, and cross-sector alliances tackling public problems
12. Spatial and Sectoral Coherence	The ecosystem displays coherence either through spatial proximity (precincts, campuses) or sectoral specialisation (e.g., healthtech, clean energy).	Measurable through value chain mapping, locational clustering, or sectoral intensity.
13. International Connectivity	Well-functioning ecosystems tap into global knowledge and capital flows.	Demonstrated through international research collaboration, foreign direct investment, export data, or participation in global innovation networks.
14. Anchored Public and Private Investment	Sustained co-investment from public, private, and philanthropic sources shows confidence and commitment.	Evidence includes capital commitments, matched funding, and long-term investment strategies.
15. Observable Economic and Innovation Outcomes	Visible economic outputs: new firms, exports, IP, productivity gains. R&D absorption, capability upgrading, supply chain anchoring Public Value: Emissions reductions, health and education access, cultural participation.	Tracked through standard metrics and case examples

These attributes should be used to develop ecosystem health diagnostics, baseline assessments, longitudinal performance tracking, and benchmarking frameworks.

Conclusion: Towards Strategic Productivity Ecosystems

The policy case for innovation ecosystems rests on their capacity to enhance long-term productivity, industrial renewal, and civic well-being, not simply to create startups or generate patents. Their true value lies in what they make possible: upgraded capabilities, resilient industries, adaptive cities, and public value.

For this value to be visible and sustained, governments must invest in strategic patience, systems-based measurement, and distributed, place-aware governance models. Innovation ecosystems should be viewed not as discretionary investments for economic boom times, but as essential infrastructure for national resilience and productivity renewal.

References

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*Dr John H. Howard is an expert policy analyst, economist, and innovation strategist with over three decades of experience advising governments, universities, and industry. As Founder of the Acton Institute for Policy Research and Innovation and a Visiting Professor at UTS, he brings an integrative perspective to complex policy challenges. His work bridges academic insight and practical application, offering clear analyses grounded in deep professional and personal experience.

John can be contacted at john@actoninstitute.au