One of the most persistent myths in America today is that urban areas are innovative and rural areas are not. While it is overwhelmingly clear that innovation and creativity tend to cluster in a small number of cities and metropolitan areas, it’s a big mistake to think that they somehow skip over rural America.
A series of studies from Tim Wojan and his colleagues at the U.S. Department of Agriculture’s Economic Research Service documents the drivers of rural innovation. Their findings draw on a variety of data sets, including a large-scale survey that compares innovation in urban and rural areas called the Rural Establishment Innovation Survey (REIS). This is based on some 11,000 business establishments with at least five paid employees in tradable industries—that is, sectors that produce goods and services that are or could be traded internationally—in rural (or non-metro) and urban (metro) areas.
The survey divides businesses into three main groups. Roughly 30 percent of firms are substantive innovators, launching new products and services, making data-driven decisions, and creating intellectual property worth protecting; another 33 percent are nominal innovators who engage in more incremental improvement of their products and processes; and 38 percent show little or no evidence of innovation, so are considered to be non-innovators.
The first table below charts this breakdown for rural and urban areas. Establishments in urban areas are more innovative, but not by much. Roughly 20 percent of rural firms are substantive innovators, compared to 30 percent of firms in urban areas.
In fact, the urban-rural divide in innovation may be more a product of the relative size of firms than of geography. The next chart shows this: Rural areas actually have a slightly overall higher rate of substantive innovation for large firms (those with 100 employees or more), while urban areas win out in their rate of substantive innovation by small and medium-size firms.
Rural areas also have a slight advantage over their metro counterparts in the rate of substantive innovation by the most innovative firms (those that are patent-intensive). That’s because innovation in rural areas tends to be a product of patent-intensive manufacturing in industries like chemicals, electronics, and automotive or medical equipment, while urban areas have higher rates of innovation in services…..(Readmore)