Shanghai has set the goal of expanding its position as a global city in its latest 2040 Master Plan. Beyond industries such as finance, trade and shipping, Shanghai desires to become an international hub of technology, innovation and culture. One way of achieving this objective is to encourage “mass innovation and entrepreneurship,” increasing the city’s ability to attract and retain global talent. Shanghai Mayor intends on pursuing a knowledge-based economic development agenda that furthers this vision. In service of the Mayor’s broader vison, the city should prioritize the creation of innovation clusters in Shanghai.

The idea of an innovation cluster has three distinct historical antecedents. First, and most important, talent clusters have often evolved organically and led to remarkable innovations. Ancient examples include the military and commercial success in 5th century BC Athens that enabled the friendship of Socrates and Plato which generated the core ideas that came to define western philosophy. Second, innovation clusters are a natural evolution of special zones in the west and China which offer different types of regulatory or tax relief. Often these clusters developed through deliberate government directed planning, such as China’s special economic zones, designed to promote innovation and entrepreneurship. The third model for developing innovation clusters is through private initiatives, such as the Stanford Industrial Park in Northern California in the United States, that provided the foundation of what became known as Silicon Valley.

These many examples show that dense clusters have enabled the flows of ideas which generate great innovations. The critical question is whether cities can create the conditions for such innovations to appear on demand. The track record of public interventions is imperfect, but with smart planning and limited interventions, the chances of success can certainly be enhanced. We believe there are three fundamental features that help ensure an innovation cluster will flourish.

Speeding the knowledge flow

We put knowledge first because the spread of ideas is the crucial ingredient in any innovation cluster. To speed the knowledge flow, targeted learning programs can be designed in the cluster and for the cluster. One of the programs should show foreigners that the innovation district exists and explain its purpose. Other programs should focus on Chinese learners, to introduce well-trained Chinese talent to the process of becoming an entrepreneur in the cluster, and to build more basic skills for younger Chinese with modest training.

Another way to facilitate the flow of knowledge is the leasing of a social space, which can be programmed for social events. At the heart of Boston’s Innovation District is “District Hall,” a social space featuring co-working availability and accommodating a vast number of events where people can come and interact. Such social spaces provide opportunities for intellectual conversations from loosely structured networking parties to highly structured events like TED Talks.

To succeed, the innovation cluster needs both strong internal knowledge flows and strong connections to the outside world. It should also have an outreach strategy for connecting to the larger world of technology in China and the outside world. Boston’s Innovation District for example, relied on Mass Challenge, which was essentially a contest among budding entrepreneurs. A particular need is to ensure links with the global venture capital community that will help fund successful innovations.

Boosting productivity

The thicket of regulations can be daunting for entrepreneurs in any country. So, we propose creating a one-stop permitting entity that can provide targeted services to entrepreneurs within the innovation district and can guide them through the permitting process. This permitting should involve everything from complex rules regulating technology firms that are the ultimate source of the district’s success, to simpler but still difficult rules that restrict the formation of ordinary service firms enhancing quality of life.

The permitting center will be government run, ultimately beholden to higher public authorities. Ideally, that governance should be balanced by a private entity that would also focus on improving the productivity of the cluster. That entity should be funded by levies on property owners and also provide oversight for the education programs and for quality of life investments. A model to consider for this entity is the Business Improvement District (BID), adopted by many US cities. BIDs are empowered to impose charges on local property owners, and those charges are then spent on basic services, including security, trash removal and other investments that improve quality of work and life in the district. Another BID benefit is its collective representation for the businesses in the district. The BID can negotiate directly with the government on how to improve the efficiency of public entities, including the permitting entity.

Enhancing quality of life

A strong innovation cluster must consider the entire work-life experience of the people who will work and live there and should appeal to both Chinese and expatriates.

The starting point for this is mixed-use development, since the district will only have the capacity to improve work and life if it contains both residences and workplaces. The residents that the innovation district needs to attract are young, smart, ambitious and often prioritize time over other benefits. The best way to save time for this group is to give them access to abundant housing close to their work-sharing space. This housing need not be luxurious, but it does need to be affordable. Micro-units are one way to reduce costs for a younger hard-working population. In addition to being convenient and practical, the innovation cluster also needs attractive retail. Because micro-units serve only minimal needs, other nearby facilities, like restaurants and entertainment are especially important. The absence of large interior living space increases the need for shared exterior space that can generate the sort of intellectual exchange through social interactions.

Speedy transportation also plays a central role in attracting and maintaining global talent. Designated bus lanes and congestion pricing make particular sense within the innovation cluster. One model could ban private cars within the cluster. Individuals would park their cars outside the cluster then use buses and ride-sharing to travel within the cluster. Another option is high congestion fees for driving within the district that discourages automobile use. Bicycle-sharing should also be encouraged within the innovation district. Finally, connecting the district to areas outside will require easy access to metro stops and shuttle buses operating in fast moving designated lanes.