Iraq has been rekindled. Whether it will merely be singed or immolated entirely remains to be seen, but the fire is burning again.

Most Americans stopped caring about Iraq long ago. That’s an inescapable reality but also an unfortunate mistake. Iraq is not just a painful and divisive memory or a cudgel to take up against one’s political rival, it is a very real interest. Today, Iraq has surpassed Iran to claim the spot as the second largest oil exporter in OPEC, behind only Saudi Arabia. Iraq’s steadily climbing oil production has been critical to reducing oil prices, and its collapse into renewed civil war would endanger our fragile economic recovery.

Moreover, just as spillover from the Syrian civil war is helping to re-ignite the Iraqi civil war, so renewed chaos and strife in Iraq could once again threaten other important oil producers like Kuwait, Iran and even Saudi Arabia. As it has in the past, Iraq is again becoming a hub for al-Qa’ida’s regional presence.

Just as unfortunately, the problems of Iraq will not be easily healed. They are not the product of ancient hatreds, a canard that resurfaces with the outbreak of each such civil war. Instead they are principally the products of our own mistakes. We caused the Iraqi civil war, we healed it briefly, and then we left it to fester all over again. It is not that Iraqis had no say in the matter, no free will. Only that they were acting within circumstances that we created and those circumstances have driven their actions.

Thus, understanding where the Iraqis may end up requires understanding how we brought them to where they are. And here again, America’s determination to turn its back on the experience of Iraq is a dangerous hindrance. The problems sucking Iraq back into the vortex of civil war are merely the latest manifestation of the powerful forces that the United States unleashed as a result of our botched occupation from 2003 to 2006. Minor adjustments and small fixes are highly unlikely to be able to cope with them. Averting a relapse of the civil war may require a combination of moves akin to those that the United States and Iraqis engineered between 2007 and 2009, and that is exceptionally unlikely.

This essay traces the course of Iraq’s fortunes from the American invasion in 2003 through the civil war of 2005-2008 and the endangered effort at reconstruction that followed. Only by seeing the full course of Iraq’s narrative arc during this period is it possible to understand both Iraq’s present, and its likely future—as well as what would probably be needed to produce a better outcome than those that currently seem most plausible.

It is not a hopeful story, but it is an important one. It is the critical piece to understanding the possibilities for Iraq as we fret over its renewed downward course. And it is a warning about what would likely be required to address the analogous Syrian civil war raging next door, as well as the dangers of allowing that war to rage unchecked.

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In 2015 the international community agreed on a set of ambitious sustainable development goals (SDGs) for the global society, to be achieved by 2030. One of the lessons that the implementation of the Millennium Development Goals (MDG s) has highlighted is the importance of a systematic approach to identify and sequence development interventions—policies, programs, and projects—to achieve such goals at a meaningful scale. The Chinese approach to development, which consists of identifying a problem and long-term goal, testing alternative solutions, and then implementing those that are promising in a sustained manner, learning and adapting as one proceeds—Deng Xiaoping’s “crossing the river by feeling the stones”—is an approach that holds promise for successful achievement of the SDGs.

Having observed the Chinese way, then World Bank Group President James Wolfensohn in 2004, together with the Chinese government, convened a major international conference in Shanghai on scaling up successful development interventions, and in 2005 the World Bank Group (WBG ) published the results of the conference, including an assessment of the Chinese approach. (Moreno-Dodson 2005). Some ten years later, the WBG once again is addressing the question of how to support scaling up of successful development interventions, at a time when the challenge and opportunity of scaling up have become a widely recognized issue for many development institutions and experts.

Since traditional private and public service providers frequently do not reach the poorest people in developing countries, social enterprises can play an important role in providing key services to those at the “base of the pyramid.”

In parallel with the recognition that scaling up matters, the development community is now also focusing on social enterprises (SEs), a new set of actors falling between the traditionally recognized public and private sectors. We adopt here the World Bank’s definition of “social enterprises” as a social-mission-led organization that provides sustainable services to Base of the Pyramid (BoP) populations. This is broadly in line with other existing definitions for the sector and reflects the World Bank’s primary interest in social enterprises as a mechanism for supporting service delivery for the poor. Although social enterprises can adopt various organizational forms—business, nongovernmental organizations (NGOs), and community-based organizations are all forms commonly adopted by social enterprises—they differ from private providers principally by combining three features: operating with a social purpose, adhering to business principles, and aiming for financial sustainability. Since traditional private and public service providers frequently do not reach the poorest people in developing countries, social enterprises can play an important role in providing key services to those at the “base of the pyramid.” (Figure 1)

Figure 1. Role of SE sector in public service provision

Social enterprises often start at the initiative of a visionary entrepreneur who sees a significant social need, whether in education, health, sanitation, or microfinance, and who responds by developing an innovative way to address the perceived need, usually by setting up an NGO, or a for-profit enterprise. Social enterprises and their innovations generally start small. When successful, they face an important challenge: how to expand their operations and innovations to meet the social need at a larger scale. 

Development partner organizations—donors, for short—have recognized the contribution that social enterprises can make to find and implement innovative ways to meet the social service needs of people at the base of the pyramid, and they have started to explore how they can support social enterprises in responding to these needs at a meaningful scale. 

The purpose of this paper is to present a menu of approaches for addressing the challenge of scaling up social enterprise innovations, based on a review of the literature on scaling up and on social enterprises. The paper does not aim to offer specific recommendations for entrepreneurs or blueprints and guidelines for the development agencies. The range of settings, problems, and solutions is too wide to permit that. Rather, the paper provides an overview of ways to think about and approach the scaling up of social enterprise innovations. Where possible, the paper also refers to specific tools that can be helpful in implementing the proposed approaches. 

Note that we talk about scaling up social enterprise innovations, not about social enterprises. This is because it is the innovations and how they are scaled up that matter. An innovation may be scaled up by the social enterprise where it originated, by handoff to a public agency for implementation at a larger scale, or by other private enterprises, small or large. 

This paper is structured in three parts: Part I presents a general approach to scaling up development interventions. This helps establish basic definitions and concepts. Part II considers approaches for the scaling up of social enterprise innovations. Part III provides a summary of the main conclusions and lessons from experience. A postscript draws out implications for external aid donors. Examples from actual practice are used to exemplify the approaches and are summarized in Annex boxes.

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At a news conference in Seoul today, the United States and the Republic of Korea jointly announced the decision to deploy a Terminal High Altitude Area Defense (THAAD) missile defense system on the Korean Peninsula, with operational deployment planned by the end of 2017. Though many details are still pending, the decision is not a surprise, and the purposes of the deployment are wholly transparent.

As elaborated in the official announcement, the THAAD deployments are intended to defend the infrastructure and citizens of South Korea, and to protect core military capabilities underpinning the U.S.-Korea alliance. It is not a panacea for South Korea’s potential vulnerabilities to North Korean missile attack, but it will appreciably buttress Seoul’s still-limited air and missile defense capabilities, and explicitly link them to the far greater assets of the United States. 

Seoul did not undertake this commitment lightly. In recent years, South Korean strategic analysts have hotly debated the missile defense issue, but the political-military leadership has proceeded very deliberately. It was only in the aftermath of North Korea’s fourth nuclear test in early January and a long-range rocket test that soon followed that President Park Geun-hye’s administration agreed to initiate consultations on the “earliest possible” deployment of a THAAD missile battery. The North’s accelerated missile testing program, evident since April, reinforced the need for a meaningful response to Pyongyang’s actions.

Neither China nor Russia seems mollified by today’s announcement. Beijing and Moscow both perceive a malign U.S. strategic design, purportedly intended to detect and intercept Chinese and Russian strategic missiles, thereby invalidating their respective deterrence capabilities. But these worst-case estimates attribute technical reach and refinement to the Raytheon radar system likely to accompany the THAAD deployment that substantially exceeds even the manufacturer’s claims. 

China and Russia also contend that the THAAD deployment will further complicate the larger goal of denuclearization and threat reduction on the Korean Peninsula. But this places the cart before the horse. Pyongyang’s determination to expand and diversify its nuclear and missile programs has triggered the THAAD decision. Without the North’s accelerated military efforts, it is very doubtful that sentiment in Seoul would favor deployment of THAAD. Beijing and Moscow assuredly know how to connect the dots, but they seem unwilling to do so. 

At a time of increased Chinese wariness about U.S. military strategy along China’s periphery, it is not a surprise that Beijing has paid little heed to American and South Korean assurances.

Beijing also calculates that warning South Korea of unspecified consequences will convince Seoul to forego the THAAD decision. But this underestimates the South’s determination to proceed with missile defense, which will tie Seoul even more integrally to longer-term cooperation with the United States. This decision is unwelcome in China, but it is wholly within Seoul’s sovereign right to defend its vital interests by all appropriate means; China routinely does the same.

In meetings with Chinese counterparts, senior Korean officials have repeatedly stated that the THAAD deployment serves one irreducible purpose: the protection of South Korean vital national security interests. Seoul is keenly aware of Chinese strategic equities, and will remain very mindful of Beijing’s concerns as it moves ahead with this program. 

At the same time, Seoul and Washington have repeatedly conveyed their willingness to impart to officials in Beijing the limited purpose of the THAAD deployment. It will be directed entirely towards the North’s threats against the South; it will be exclusively bilateral in design; and it will not be targeted against the capabilities of any other party. 

At a time of increased Chinese wariness about U.S. military strategy along China’s periphery, it is not a surprise that Beijing has paid little heed to American and South Korean assurances, at least publicly. But officials and analysts in China must quietly grasp the reasons for the THAAD decision. The North’s nuclear and missile programs worry China deeply, as well. 

The need for a quiet, private conversation about the risks to stability on the peninsula has never been greater. The United States and South Korea are surely ready for this conversation. Whether China is ready remains to be seen.

In “Water Crimes: a Global Crisis on the Rise,” a lecture given on February 20, 2015 at Brookings Mountain West Lecture Series, Vanda Felbab-Brown explains that urbanization, population growth, environmental degradation, water pollution, climate change, and increased living standards are some of the main reasons for intense competition for water. As surface water depletes, there is increased pressure for ground water usage, which is more difficult to regulate for use, abuse, and theft. Water theft and smuggling are perpetrated by both the wealthy and those who are chronically deprived of water, says Felbab-Brown, as she provides examples from California, southern Europe, Nigeria, Kenya, the Middle East, and South Asia. In many parts of world, elaborate smuggling of water with complex network chains and water mafias has emerged. Smuggling modes vary and among others include the development of illegal pipelines, illegal truck deliveries as well as the cooptation of water regulators complicit in licensing fraud and broader government acquiescence to illegal water delivery. Illegally sourced and smuggled water is used for personal consumption, agriculture, industry, and sometimes for other other illegal activities, such as the production of illegal narcotics.

For many reasons, the illegal use and delivery of water is difficult to address, says Felbab-Brown. Large-scale agriculture and industry often exercise great influence over regulators and law enforcement. In slum areas, mostly unconnected to legal pipelines, the suppression of illegal water distribution can sever access to water and hence threaten the physical survival of the most marginalized and poor. Across the world, citizens tend to be vehemently opposed to increased water pricing. Yet without effective regulation, appropriate pricing, and suppression of water crimes, the sustainability, long-term viability, and inclusive and equitable use of water cannot easily be achieved.

Among the ways to improve water policy and suppress water smuggling, Felbab-Brown notes: (1) Recognizing the extent of water misuse, abuse, and crimes; (2) developing better inventories and water-level monitoring capacity, better regulation, including pricing, greater transparency, and a broadly-based external oversight of water authorities; (3) increasing stakeholder-participation of water regulation, including farmers, businesses, and the poor who are traditionally excluded; and (4) selectively licensing some currently illegal water distributors to areas without legal water distribution systems while cracking down on the most usury, unreliable, and abusive ones. Looking ahead, coping with scarcity will require not just more innovation, but particularly better conservation.

Brexit has little direct effect on the Chinese economy though it does increase the risk of financial volatility. In the long run it is hard to see it as anything but a plus for China as the West continues to decline and China continues to rise.

In the immediate aftermath of the Brexit vote, stock markets all over the world tanked. The interesting exception was China: The Shanghai market fell 1 percent on Friday and then more than recovered it on Monday. In the short run, Brexit is a modest negative as Europe’s gross domestic product (GDP) and trade are likely to grow less rapidly, and the EU is China’s largest trading partner. But the Chinese economy is simply not that export-oriented anymore. In the aftermath of the global financial crisis, the contribution of net exports to China’s GDP growth has averaged around zero. China initially made up for lost external demand with a massive stimulus program aimed at investment. This has now led to excessive capacity in real estate, manufacturing, and infrastructure. As a result, investment growth is slowing (see figure below). But China’s GDP growth has held up well because consumption is now the main source of demand. It consistently delivers more than 4 percentage points of GDP growth and its contribution has been on an upward trend.

China has developed a virtuous circle in which wages are rising at a healthy rate (more than 10 percent over the past year), consumption is growing, consumption is mostly services so the service sectors expand, and they are more labor-intensive than industry so sufficient jobs are created to keep the labor market tight. There are plenty of things that could go wrong, but maintaining consumption is the big challenge for China, not the external sector.

Another feature of China’s new growth pattern is that there is a steady outflow of capital as investment opportunities at home diminish. The U.K. had been one of the favored destinations for China’s outward investment, seen as a welcoming location that could be used as a jumping off point for the rest of Europe. Chinese firms will now need to rethink that strategy but this should not be too difficult an adjustment. The United States has been the destination for the largest share of China’s overseas investment and it is likely that that trend will strengthen in the wake of Brexit.

Brexit does complicate China’s currency policy. The dollar and the yen have strengthened while the pound and euro decline. In past global crises, China has been a source of stability but the yuan fixing on Monday suggests that the central bank does not want to follow the dollar up if it is going to keep rising. Ideally they would like relative stability against a basket. There continues to be a risk that this policy will excite accelerating capital outflows so in that sense financial risks have increased somewhat. But probably the central bank will be able to manage the capital outflows so that the trade-weighted exchange rate is stable.

A U.K. no longer in the European Union will presumably be anxious to strengthen its ties with China so it may well be willing to make compromises on market-economy status and investment deals that a unified Europe would not have made.

Finally, from a larger geostrategic perspective, it would seem that China is the big winner from Brexit. Europe is likely to be a less influential player on the world stage and will be absorbed with internal issues of negotiating the British exit, controlling immigration, and keeping the periphery inside the eurozone. The United States is also likely to be distracted by these European challenges. This gives China more scope to pursue its reclamation activities in the South China Sea and to play divide and conquer with European states on various issues. For example, China would like to be recognized as a market economy, which is both symbolic and a practical matter for adjudicating anti-dumping cases. It is also negotiating investment treaties with both the United States and the EU, though so far China’s offers have not been very attractive in the sense that they exempt many important sectors from open investment. A U.K. no longer in the European Union will presumably be anxious to strengthen its ties with China so it may well be willing to make compromises on market-economy status and investment deals that a unified Europe would not have made. Brexit itself may not be that important but it may prove to be a good signal of the decline of Europe and the rise of China.

In his new book, “The Rise and Fall of American Growth: The U.S. Standard of Living Since the Civil War,” Northwestern University economist Bob Gordon argues that the century between 1870 and 1970 was exceptionally good for U.S. households (particularly 1920 to 1950) but that the years since 1970 have been disappointing and the future looks disappointing too.

His postscript includes a few thoughts that deserve immediate attention in today’s economic policy debates: Whatever the causes of the distressing slowdown in the growth of productivity (the amount of stuff produced for each hour of work) and the increase in inequality, what policies might both increase productivity and decrease inequality? 

Many years ago, economist Art Okun argued that we had to choose between policies that increased efficiency and those that increased equity. Perhaps. But  if there are policies that could achieve both, it’s time to try them. 

Mr. Gordon lists several at the end of his book, some conventional and others less so. They include: 

1. Make the earned-income tax credit (a bonus paid by the government to low-wage workers) more comprehensive and generous, a complement to raising the minimum wage. The earned-income tax credit, most economists agree, encourages work. 

2. Reduce the share of Americans who are in prison, which is costly, disproportionately hurts the poor, and has long-lasting negative effects on former prisoners and their families. Also, legalize drug use to save money on enforcement, raise tax revenue, and eliminate the negative consequence a criminal record has on employment.

3. Shift financing of K-12 schooling from local property taxes to statewide revenue sources to reduce inequality and improve outcomes. Shift college financing from loans to income-contingent repayment administered through the income tax system, which is what Australia does.

4. Roll back regulations that hurt the economy and the less affluent, including copyright and patent laws (which have gone too far), occupational licensing (which is a barrier to entry and employment), and zoning and land-use regulations (which boost housing costs). 

5. Reform immigration laws to encourage high-skilled workers, including those trained at U.S. graduate schools. 

Mr. Gordon notes (Page 314) “the extraordinary investment” by state and local governments in education and infrastructure between 1870 and 1940 and cites the substantial boost to productivity created by the interstate highway system. He doesn’t put increased public infrastructure investment on his list, though it belongs there. 

Every presidential candidate should be asked what policies he or she would offer to increase the pace of U.S. productivity growth and to narrow the widening gap between winners and losers in the economy. Bob Gordon’s list is a good place to start.

Editor's note: this post first appeared in the Wall Street Journal Washington Wire blog.

 Bruce Katz's keynote presentation to the Mid-America Region Council discussed what metropolitan areas need to succeed in a competitive world, with specific information about how Greater Kansas City compares to other regions and areas for improvement.

The urban center hosts and participates in a variety of public forums. To view a complete list of these events, please visit the urban center's Speeches and Events page which provides copies of major speeches, powerpoint presentations, event transcripts, and event summaries.

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In 2015 the international community agreed on a set of ambitious sustainable development goals (SDGs) for the global society, to be achieved by 2030. One of the lessons that the implementation of the Millennium Development Goals (MDG s) has highlighted is the importance of a systematic approach to identify and sequence development interventions—policies, programs, and projects—to achieve such goals at a meaningful scale. The Chinese approach to development, which consists of identifying a problem and long-term goal, testing alternative solutions, and then implementing those that are promising in a sustained manner, learning and adapting as one proceeds—Deng Xiaoping’s “crossing the river by feeling the stones”—is an approach that holds promise for successful achievement of the SDGs.

Having observed the Chinese way, then World Bank Group President James Wolfensohn in 2004, together with the Chinese government, convened a major international conference in Shanghai on scaling up successful development interventions, and in 2005 the World Bank Group (WBG ) published the results of the conference, including an assessment of the Chinese approach. (Moreno-Dodson 2005). Some ten years later, the WBG once again is addressing the question of how to support scaling up of successful development interventions, at a time when the challenge and opportunity of scaling up have become a widely recognized issue for many development institutions and experts.

Since traditional private and public service providers frequently do not reach the poorest people in developing countries, social enterprises can play an important role in providing key services to those at the “base of the pyramid.”

In parallel with the recognition that scaling up matters, the development community is now also focusing on social enterprises (SEs), a new set of actors falling between the traditionally recognized public and private sectors. We adopt here the World Bank’s definition of “social enterprises” as a social-mission-led organization that provides sustainable services to Base of the Pyramid (BoP) populations. This is broadly in line with other existing definitions for the sector and reflects the World Bank’s primary interest in social enterprises as a mechanism for supporting service delivery for the poor. Although social enterprises can adopt various organizational forms—business, nongovernmental organizations (NGOs), and community-based organizations are all forms commonly adopted by social enterprises—they differ from private providers principally by combining three features: operating with a social purpose, adhering to business principles, and aiming for financial sustainability. Since traditional private and public service providers frequently do not reach the poorest people in developing countries, social enterprises can play an important role in providing key services to those at the “base of the pyramid.” (Figure 1)

Figure 1. Role of SE sector in public service provision

Social enterprises often start at the initiative of a visionary entrepreneur who sees a significant social need, whether in education, health, sanitation, or microfinance, and who responds by developing an innovative way to address the perceived need, usually by setting up an NGO, or a for-profit enterprise. Social enterprises and their innovations generally start small. When successful, they face an important challenge: how to expand their operations and innovations to meet the social need at a larger scale. 

Development partner organizations—donors, for short—have recognized the contribution that social enterprises can make to find and implement innovative ways to meet the social service needs of people at the base of the pyramid, and they have started to explore how they can support social enterprises in responding to these needs at a meaningful scale. 

The purpose of this paper is to present a menu of approaches for addressing the challenge of scaling up social enterprise innovations, based on a review of the literature on scaling up and on social enterprises. The paper does not aim to offer specific recommendations for entrepreneurs or blueprints and guidelines for the development agencies. The range of settings, problems, and solutions is too wide to permit that. Rather, the paper provides an overview of ways to think about and approach the scaling up of social enterprise innovations. Where possible, the paper also refers to specific tools that can be helpful in implementing the proposed approaches. 

Note that we talk about scaling up social enterprise innovations, not about social enterprises. This is because it is the innovations and how they are scaled up that matter. An innovation may be scaled up by the social enterprise where it originated, by handoff to a public agency for implementation at a larger scale, or by other private enterprises, small or large. 

This paper is structured in three parts: Part I presents a general approach to scaling up development interventions. This helps establish basic definitions and concepts. Part II considers approaches for the scaling up of social enterprise innovations. Part III provides a summary of the main conclusions and lessons from experience. A postscript draws out implications for external aid donors. Examples from actual practice are used to exemplify the approaches and are summarized in Annex boxes.

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• Download the full paper (PDF)

Year after year, federal spending on poverty programs has been going up, but we still see more and more people who have no margin to guard against unexpected expenses or job loss. At the same time, for different reasons, Americans who are not impoverished have seen their wealth decline sharply. Expert Ron Haskins, co-director of the Center on Children and Families, says the problems are growing deeper, despite increased federal spending on programs to assist the poor. Haskins says everyone must sacrifice, but also says, that people in general, who finish high school, get a job, and get married and delay having children until age 21 are better off.

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• Solutions to Poverty's Rise in America

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Unprecedented armed conflicts and natural disasters are now driving a global displacement crisis. According to the United Nations High Commission for Refugees, more than 60 million people are displaced worldwide, and half of them are children. These displaced children are hindered from developing cognitive and social-emotional skills—such as perseverance, emotional regulation, and conflict resolution—which are essential for school readiness and serve as the foundation for a more peaceful and stable future. However, through the development and testing of innovative educational strategies, we can build effective practices for improving young children’s learning and developmental outcomes in crisis contexts.

On June 8, the Center for Universal Education at Brookings and Sesame Workshop co-hosted a panel discussion to explore innovative strategies to meet the needs of young children in humanitarian crises. 

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• Supporting early childhood development in humanitarian crises

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• Transcript (.pdf)

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View the report

The geography of innovation is shifting and a new model for innovative growth is emerging. In contrast to suburban corridors of isolated corporate campuses, innovation districts combine research institutions, innovative firms and business incubators with the benefits of urban living. These districts have the unique potential to spur productive, sustainable, and inclusive economic development.  

On June 9, the Metropolitan Policy Program at Brookings released “The Rise of Innovation Districts,” a new report analyzing this trend. The authors of the paper, Brookings Vice President Bruce Katz and Nonresident Senior Fellow Julie Wagner, were joined by leaders from emerging innovation districts across the country to discuss this shift and provide guidance to U.S. metro areas on ways to harness its potential.

Join the conversation on Twitter using #InnovationDistricts

Presentation by Bruce Katz

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Bruce Katz, Vice President and Director, Metropolitan Policy Program

Lydia DePillis, John A. Fry, Nicole Fichera, Kofi Bonner, Julie Wagner

The Honorable Andy Berke, Mayor, City of Chattanooga, TN and Bruce Katz

Video

• What Are Innovation Districts?
• Innovation Districts Aligned With Disruptive Dynamics of Our Era
• Cities are For People
• Boston's District Hall a Living Room for Innovation Economy
• Innovation Happens Anywhere and Everywhere
• Are Innovation Districts Another Form of Gentrification?
• Philadelphia Behind but Competing in Innovation Districts
• Chattanooga Has Fastest, Cheapest Internet in Western Hemisphere
• We Live In an Innovation Century
• The Rise of Innovation Districts - Opening Remarks
• The Rise of Innovation Districts - Presentation by Bruce Katz
• The Rise of Innovation Districts - Panel Discussion
• The Rise of Innovation Districts - Moderated Dialogue

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• The Rise of Innovation Districts: A New Geography of Innovation in America

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• Uncorrected Transcript (.pdf)

Event Materials

• 20140609_innovation_districts_transcript

The geography of innovation is shifting. For proof, start with Google, which over the past 10 years has taken the core R&D and innovation-oriented activities it once housed only in Silicon Valley and extended them into cities. The company’s presence in London’s Tech City, New York City’s Chelsea district, and Pittsburgh’s Bakery Square reflects management’s calculation that being in cities increases the company’s access to growing tech-oriented ecosystems, advanced research institutions, deep pools of talent, and distinct regional specializations.

In its decision to go urban, Google has been joined by not only other tech firms such as Twitter, Microsoft, and Spotify, but also companies like Comcast, Amazon, Pfizer, Quicken Loans, and countless numbers of small start-ups and entrepreneurs. (Our recent research for the Brookings Institution, “The Rise of Innovation Districts: A New Geography of Innovation in America,” provides the larger context for these corporate choices.)

For the past 50 years, the landscape of innovation has been dominated by regions like Silicon Valley—suburban corridors of spatially isolated corporate campuses, accessible only by car, with little emphasis on the quality of life or on integrating work, housing, and recreation. After visiting dozens of U.S. and European cities, interviewing hundreds of practitioners and experts on the ground, and scouring scholarly analyses of investor and firm behavior, we are convinced that a complementary new urban model is now emerging, in the form of what we and others are calling “innovation districts.”

These districts, by our definition, are “geographic areas where leading-edge anchor institutions and companies cluster and connect with start-ups, business incubators, and accelerators. Compact, transit-accessible, and technically-wired, innovation districts foster open collaboration, grow talent, and offer mixed-used housing, office, and retail.”

Globally, Barcelona, Berlin, Copenhagen, London, Medellin, Montreal, Seoul, Stockholm, and Toronto all contain emerging innovation districts. In the United States, the most iconic districts can be found in the downtowns and midtowns of Atlanta, Cambridge, Detroit, Philadelphia, Pittsburgh, and St. Louis. In each, advanced research universities, medical complexes, and clusters of tech and creative firms are sparking business expansion as well as residential and commercial growth.

Other innovation districts are developing in Boston, Brooklyn, Chicago, Portland, San Francisco, and Seattle. Former industrial and warehouse areas are undergoing a renaissance, powered by their enviable location along transit lines, proximity to downtowns and waterfronts, and recent additions of advanced institutions. (Note, for example, Carnegie Mellon University’s decision to place its Integrative Media Program at the Brooklyn Navy Yard.)

Perhaps the greatest validation of this shift is the fact that traditional exurban science parks like Research Triangle Park in Raleigh-Durham are now responding with efforts to meet the new demand for more vibrant and collaborative work and living environments.

Innovation districts are already attracting an eclectic mix of firms in the app economy and high tech sector as well as in high-value, research-oriented sectors such as life and material sciences, clean energy, and data computing. They are also home to companies in highly creative fields like architecture, design, theater production, advertising, and marketing. We even see a return to cities of small-scale and customized manufacturing, made possible by 3D printing, robotics, and other advanced techniques.

Much of this activity reflects a fundamental rethinking by corporate management about how and where innovation happens. In turn, it is making the case that discrete urban geographies can be instrumental in strengthening the competitive advantages of specific firms and clusters.

Rather than being the outgrowth of heavy-handed government programs, innovation districts are instead emerging from broader trends and market forces. For example, an economy increasingly oriented toward innovation (particularly through open collaborations) naturally rewards urban density. Companies, researchers, and entrepreneurs working in close proximity are able to share ideas rather than invent in isolation. No one company can master all the knowledge it needs, so they rely on a network of industry collaborators. A recent New York Times article on the growth of Pfizer, Novartis, and other major pharmaceutical companies in Cambridge, makes the point explicitly:

Pharmaceutical companies traditionally preferred suburban enclaves where they could protect their intellectual property in more secluded settings and meet their employees’ needs. But in recent years, as the costs of drug development have soared and R&D pipelines slowed, pharmaceutical companies have looked elsewhere for innovation. Much of that novelty is now coming from biotechnology firms and major research universities like MIT and Harvard, just two subway stops away.

If the benefits of urban density were already being experienced, they take on heightened importance in what Michael Mandel has called the “age of convergence” —when companies must simultaneously push forward with technology and content. Other analysis by the Center for an Urban Future in New York City finds many tech players focusing less on building new technologies and more on “applying technology to traditional industries like advertising, media, fashion, finance, and health care.” These shifts reinforce the importance of proximate location as companies strive to be physically close to the individuals and companies they partner with.

The rise of a convergence and collaborative economy also raises questions of how commercial buildings—offices, research labs, business incubators, and innovation institutes—should be designed. Thus, the creative solutions being tried in vanguard innovation districts will yield broad lessons. With their many variations on incubator space, collaborative venues, social networking, product competitions, technical support, and mentoring, they are beginning to sort out the best physical and social platforms for entrepreneurial growth.

Finally, large-scale demographic migrations are putting new value on cities and demanding more and better choices in where workers live, work and play. The City Observatory recently found, for example, that the number of young college graduates living within three miles of city centers (i.e., where innovation districts tend to be located) has surged, up 37 percent since 2000. This is happening not just in talent magnets like Denver, Portland, OR, and San Diego, but also in older industrial cities like Buffalo, Cleveland, and Pittsburgh.

The confluence of these disruptive economic, social, and demographic dynamics has changed corporate calculus. As companies design forward-looking strategies, they should be asking whether and how a greater commitment to urban locales could help them squeeze out even more success.

This commentary was originally published by Harvard Business Review.

In the year since we released “The Rise of Innovation Districts: A New Geography of Innovation in America,” Brookings has visited or interacted with dozens of leaders in burgeoning innovation districts in the United States and Europe. In so doing, we’ve sharpened our knowledge of what’s happening on the ground and gained some important insights into how cities and metros are embracing this new paradigm of economy-shaping, place-making, and network-building.

Innovation districts capture the remarkable spatial pattern underway in the innovation economy—the heightened clustering of anchor institutions, companies, and start-ups in small geographic areas of central cities across the United States, Europe, and other global-trading regions.

The rise of innovation districts has been situated against the familiar backdrop of suburban corporate campuses and science parks. Accessible only by car, these spatially isolated corridors place little emphasis on the quality of life or on integrating work, housing, and recreation.

By contrast, in our report we found the rise of urban innovation hubs to be the organic result of profound economic and demographic forces that are altering how we live and work. The growing application of “open innovation”—where companies work with other firms, inventors, and researchers to generate new ideas and bring them to market—has revalued proximity, density, and other attributes of cities. At the same time, the growing preference of young talented workers to congregate in vibrant neighborhoods that offer choices in housing, transportation, and amenities has made urban and urbanizing areas increasingly attractive.

We also found that innovation districts uniformly contain a mix of economic, physical, and networking assets. Economic assets are the firms, institutions, and organizations that drive, cultivate, or support an innovation-rich environment. Physical assets are the public and privately owned spaces—buildings, open spaces, streets, and other infrastructure—designed and organized to stimulate new and higher levels of connectivity, collaboration, and innovation. Lastly, networking assets are the relationships between actors—such as between individuals, firms, and institutions—that have the potential to generate, sharpen, and/or accelerate the advancement of ideas. These assets, taken together, create an innovation ecosystem—the synergistic relationship between people, firms, and place that facilitates idea generation and advances commercialization.

One year later, innovation districts continue to rise. What have we learned about how they are evolving?

A simple Google search will reveal the extent to which the language of “innovation districts” (or “innovation quarters,“ “innovation neighborhoods,” or “innovation corridors”) has rapidly permeated the field of urban and metropolitan economic development and place-making.

In some places, this labeling is being accurately used by globally recognized research institutions (e.g., Carnegie Mellon in Pittsburgh, Drexel University in Philadelphia) that are both experiencing extraordinary growth near their campuses as well as designing intentional efforts to build on their distinctive assets. In communities as diverse as Philadelphia, Pittsburgh, and St. Louis in the United States and Manchester and Sheffield in England, local leaders are conducting deep empirical analysis to understand their competitive advantages and existing weaknesses within their innovation ecosystem. They are exploring what it means to encourage greater collaboration and cooperation across their institutions, firms, and entrepreneurs. And they are exploring ways to better create “place” so as to increase overall vitality, facilitate innovation, and spur the growth of new businesses and jobs.

In other places, the nomenclature reflects an aspiration—and is spurring more deliberate efforts by local stakeholders to grow distinctive innovation ecosystems. In cities like Albuquerque, N.M., Chattanooga, Tenn., Chicago, Ill., Durham, N.C., and San Diego, Calif., local leaders are using the innovation district paradigm as a platform to measure their current conditions, develop strategies for addressing gaps and challenges, and build coalitions of stakeholders that can together help realize a unified vision for innovative growth. Some of these budding districts represent typologies not outlined in our report but that are ripe for future research, including “start-up” enclaves in or near downtowns of cities that lack a major anchor as well as “public markets” that blend locally produced food products and crafts with maker spaces, digital design, and other innovations in the creative arts.

There is one unfortunate trend in the rising use of the "innovation district" lexicon. In a number of cities, local stakeholders have applied the label to a project or area that lacks the minimum threshold of innovation-oriented firms, start-ups, institutions, or clusters needed to create an innovation ecosystem. This appears to result either from the chase to jump on the latest economic development bandwagon, the desire to drive up demand and real estate prices, or sometimes a true lack of understanding of what an innovation district actually is. The motivation for real estate developers to adopt the moniker seems clear: to achieve a price premium for their commercial, residential, and retail rents. Yet these sites are typically a collection of service-sector activities with little focus on the innovation economy. The lesson: labeling something innovative does not make it so.

From all these observations, it is clear that the field needs a routinized way to measure the starting assets of innovation districts—both to separate true districts from “in name only” ones as well as to give individual communities a platform for developing targeted strategies going forward. This means both running the numbers—conducting a quantitative audit—and undertaking a more qualitative assessment of strengths and weaknesses. Irrespective of their phase of development, innovation districts must evaluate the extent to which they have a critical mass of economic, physical, and networking assets to collectively generate the vitality that these districts demand. They need to evaluate the competitive advantages they have in certain economic sectors and learn how to cultivate them. And they need to ensure that they have the connectivity, diversity, and quality of place necessary to create a unique and vibrant environment in which innovation can thrive.

To facilitate this process, we are working in close collaboration with Mass Economics and the Project for Public Spaces to develop an audit template and tool. Over the next year, we intend to sharpen this tool in a subset of innovation districts across the country and then encourage others to employ it in their own established or burgeoning districts.

Second, the core economic assets of innovation districts are not fixed; in fact, many innovation districts are being created or enhanced by the relocation of major anchor facilities as institutions strive to achieve the highest return on investment.

The conventional notion of an “anchor” institution is that it is solidly weighted in a particular place. Yet over the past decade a substantial number of innovative companies and advanced educational and research institutions have moved key facilities and units as a means of generating greater innovation output. Examples of new locations include the University of California-San Francisco’s biotechnology campus in Mission Bay (2003); the University of Washington’s medical research hub in Seattle’s South Lake Union (2005); Brown University’s medical school in downtown Providence, R.I. (2011); Duke’s Clinical Research Institute in downtown Durham (2013); Carnegie Mellon University’s Integrative Media Program in the Brooklyn Navy Yard (2013); and, most famously, the new Cornell Tech campus on Roosevelt Island in New York City (2015).

These “first mover” relocations show how corporate and university leaders are departing from the tradition of building new facilities within their existing footprint and are willing to seek out new areas (and even new cities) to retain, or achieve, competitive advantage in their respective clusters and fields. As Cornell Professor Ronald Ehrenberg said about his school’s isolated Ithaca, N.Y. campus, “It is very, very difficult for us to do the kind of development through tech transfer that a place like Stanford or Berkeley can do in San Francisco or Harvard or MIT can do in Boston.” Our strong sense in talking with leaders around the country is that we are still at the early stage of corporate and university relocations given the extent to which urban areas have been revalued. The physical relocation of key innovation assets has now become a critical competitiveness strategy for companies, universities, and even states.

In some cases, the “unanchoring of anchors” is also compelling local leaders to rethink the traditional borders and boundaries of the innovation economy. In Philadelphia, for example, University City has always been recognized as a settled innovation hub, given the co-location of such anchor institutions as Drexel University, the University of Pennsylvania, the University City Science Center, and others. The recent decision of Comcast to consolidate its corporate presence in the downtown area and build its major new Innovation and Technology Center less than 10 blocks from 30th Street Station and the Drexel Campus is convincing some leaders to “stretch” Philadelphia’s University City district to incorporate this new corporate giant.

While our paper dissected various types of physical assets to help practitioners understand their individual roles and value, the more important message to convey now is the imperative to combine and activate physical assets in ways that create vibrant “places.” The Project for Public Spaces aptly describes place as “…environments in which people have invested meaning over time. A place has its own history—a unique cultural and social identity that is defined by the way it is used and the people who use it.”¹

Our review of innovation districts, including those cited in our paper, reveals that many have not yet maximized the potential for creating lively communities in which their residents and workers feel invested, reducing the potential innovation output of these communities. When designed and programmed well, a district’s public spaces—whether within buildings or outside of them—facilitate open innovation by offering numerous opportunities to meet, network, and brainstorm. Strong places entice residents and workers to remain in the area off hours, extending the opportunities for collaboration. Strong places create a culturally and educationally enriched environment that strengthens human interaction, knowledge, and motivation.

While some university-led districts have made some improvements over the years, districts anchored by medical campuses have significant work ahead. These spaces were designed as isolated fortresses that valued parking over walking (ironic given their health mission), with little or no attention paid to amenities, cultural activities, retail, or housing. Significantly, some medical campuses are often located in close proximity to downtowns, as part of universities, or near organic entrepreneurial communities (e.g., the proximity of Oklahoma City’s Health District to Automobile Alley). This raises the potential for smart (and related) place-making activities in a nearby area and reinforces the need to rethink traditional geographies and artificial boundaries when considering interventions.

The past year has seen substantial growth in multicity intermediaries along with scores of locally grown accelerators and incubators. It appears more than ever that intermediaries are increasingly the catalyst to growing innovation and entrepreneurial energy within local districts and across start-ups, small and medium-sized enterprises, and, even to some extent, large companies and research institutions. They are designed to think and act horizontally, encouraging people and firms to interact and work together in ways and at a scale previously unseen.

A growing and increasingly important role for intermediaries is helping innovation districts evolve from the traditional “research and development” model to a “search and development” one, where crucial answers to their innovation questions and technological challenges are discovered by finding and collaborating with other firms. Some districts immediately recognized this potential and have gone to great lengths to grow, lure, and fund the development of multiple intermediaries across their districts.

The Cortex Innovation Community in St. Louis has, in a short period, clustered new buildings owned and/or supported by a number of well-respected intermediaries. These development and programmatic moves are effectively creating a new focal point for Cortex innovation activities. The new Cambridge Innovation Center, which offers space for start-ups combined with access to venture capital firms, professional services, and a plug-and-play physical environment, is already at 85 percent occupancy. A newly constructed Tech Shop—a do-it-yourself “maker space” equipped with industrial tools, machinery, and technology to support entrepreneurs—is under construction nearby. The near complete renovation of the Center for Emerging Technologies, which provides training, specialized facilities, and technical support, adds yet another layer of support for entrepreneurs and start-ups. Adding more to this mix is a soon-to-be-constructed space for tech-commercial activities combined with new housing, which will exponentially increase the number of people in a very small radius.²

As one can imagine, this clustering was deeply intentional and viewed as a way to stimulate new relationships, new networks, and the cross-fertilization of ideas; Cortex refers to this deliberate process as “innovation engineering.” We anticipate more innovation districts to follow suit, pursuing, if not cultivating, such intermediaries in their own innovation ecosystems.

Finally, the rise of innovation districts takes place in a national and urban political environment that demands inclusive growth and equitable outcomes.

The past year has seen the elevation of income inequality and social mobility as issues of national and urban significance. With the federal government mired in partisan gridlock, cities have become the vanguard of efforts to raise the minimum wage, expand affordable housing, and extend pre-K education, among other initiatives. These efforts come at a time when the civil unrest in Baltimore and Ferguson has refocused national attention on neighborhoods of high poverty.

Because of their location in the cores of central cities, many established and emerging innovation districts are located several blocks away from distressed communities. This proximity creates an enormous opportunity to show the positive impact that innovative growth can have on inclusive outcomes. Innovation districts create employment opportunities that can be filled by local residents and procurement and construction opportunities that can be fulfilled by local vendors and contractors. The districts generate tax revenues that can be used to fund neighborhood services and neighborhood regeneration. And they offer the potential to link the ample expertise and talent in anchor educational institutions with the needs of neighborhood schools and children.

Recognizing these benefits, local leaders are demonstrating a genuine commitment to growing more inclusive districts. In our work, we’ve seen several early models that could be built on and replicated. In the Barcelona 22@ district, for example, leaders are trying to quantify the growth in service jobs accessible to local and regional residents while, at the same time, connecting those residents to training that increases their skills in more innovation-oriented sectors. Last year, Drexel University opened a new “urban extension center” that offers career-building workshops, legal clinics, and other services to residents of the adjacent Mantua Promise Zone. The Evergreen Cooperative in Cleveland’s University Circle district has been working for several years to leverage local purchasing power to create business ownership and employment opportunities for low-income residents. And in Baltimore, the University of Maryland partnered with surrounding neighborhood organizations, residents, and institutions to develop a detailed new plan for building what the Baltimore Southwest Partnership envisions as a “diverse, cohesive community of choice built on mutual respect and shared responsibility.”

These examples represent concrete initiatives to ensure that nearby neighborhoods and their residents connect to and benefit from new growth opportunities in innovation districts and beyond. Scaling such efforts will be critical in the years to come, as the success of these districts will be defined in large part by their broader city and regional impacts.

As Brookings works this year to help unleash more innovation districts across the U.S. and Europe, we will continue to hone our observations and knowledge about trends, challenges, and strategies. We will compile and publish what we have learned for anchor leaders, policymakers, scholars, and practitioners, focusing on many of the issues—accelerating commercialization to improving inclusion—noted above. We will do this work in close collaboration with proven organizations like Mass Economics and Project for Public Spaces. We look forward to contributing to this rapidly changing space via empirical and on-the-ground research, strategy and policy development, convenings, and network building. Stay tuned.

Read The Rise of Innovation Districts: A New Geography of Innovation in America

Alert voters everywhere realize the economy is neither as strong as claimed by the party in power nor the disaster described by the opposition. The election season will bring many passionate but dubious claims about economic trends. People running for office know that voters rank the economy near the top of their concerns. Of course, perceptions of the economy differ from one voter to the next. A few of us are soaring, more are treading water, and too many are struggling just to stay afloat.

Since reaching a low point in 2009, total U.S. output—as measured by real GDP—has climbed 15 percent, or about 2.1 percent a year. The recovery has been long-lived and steady, a tribute to the stewardship of the Administration and Federal Reserve. The economic rebound has also been disappointingly slow in view of the depth of the recession. GOP office seekers will mention this fact a number of times before November.

Compared with the worst months of the Great Recession, the unemployment rate has dropped by half. It now stands at a respectable 4.9 percent, almost 3 points lower than the rate when President Obama took office and far below the rate in fall 2009 when it reached 10 percent. Payroll employment has increased for 77 consecutive months. Since hitting a low in January 2010, the number of workers on employer payrolls has surged 14.6 million, or about 190,000 a month. While the job gains are encouraging, they have not been fast enough to bring the employment-to-population ratio back to its pre-recession level. June’s job numbers showed that slightly less than 80 percent of adults between 25 and 54 were employed. That’s almost 2 percentage points below the employment-to-population rate on the eve of the Great Recession.

One of the most disappointing numbers from the recovery has been the growth rate of wages. In the first 5 years of the recovery, hourly wages edged up just 2 percent a year. After factoring in the effect of consumer price inflation, this translates into a gain of exactly 0 percent. The pace of wage gain has recently improved. Workers saw their real hourly pay climb 1.7 percent a year in the two years ending in June.

The economic bottom line for most of us is the rate of improvement in our family income after accounting for changes in consumer prices. No matter how household income is measured, income gains have been slower since 2007 than they were in earlier decades. The main reason is that incomes produced in the market—in the form of wages, self-employment income, interest, dividends, rental income, and realized capital gains—fell sharply in the Great Recession and have recovered very slowly since then. That a steep recession would cause a big drop in income is hardly a surprise. Employment, company profits, interest rates, and rents plunged in 2008 and 2009, pushing down the incomes Americans earn in the market. The bigger surprise has been the slow recovery of market income once the recession was behind us.

Some critics of the recovery argue that the income gains in the recovery have been highly skewed, with a disproportionate share obtained by Americans at the top of the income ladder. Economist Emmanuel Saez tabulates U.S. income tax statistics to track market income gains at the top of the distribution. His latest estimates show that between 2009 and 2015 income recipients in the top 1 percent enjoyed real income gains of 24 percent. Among Americans in the bottom nine-tenths of the income distribution, average market incomes climbed only 4 percent.

However, Saez’s estimates also show that top income recipients experienced much bigger income losses in the Great Recession. Between 2007 and 2009 they saw their inflation-adjusted incomes drop 36 percent (see Chart 1). In comparison, the average market income of Americans in the bottom nine-tenths of the distribution fell just 12 percent. These numbers mean that top income recipients have not yet recovered the income losses they suffered in the Great Recession. In 2015 their average market income was still 13 percent below its pre-recession level. For families in the bottom nine-tenths of the distribution, market income was “only” 8 percent below its level in 2007.

Only about half of households rely solely on market income to support themselves. The other half receives income from government transfers. What is more, this fraction tends to increase in bad times. Many retirees rely mainly on Social Security to pay their bills; they depend on Medicare or Medicaid to pay for health care. Low-income Americans often have little income from the market, and they may rely heavily on public assistance, food stamps, or government-provided health insurance. When joblessness soars the percentage of families receiving government benefits rises, largely because of increases in the number of workers who collect unemployment insurance.

Government benefits, which are not counted in Saez’s calculations, replace part of the market income losses families experience in a weak economy. As a result, the net income losses of most families are much smaller than their market income losses. The Congressional Budget Office (CBO) recently published statistics on market income and before-tax and after-tax income that shed light on the size and distribution of household income losses in the Great Recession and ensuing recovery. The tabulations show that, except for households at the top of the distribution, net income losses were far smaller than the losses indicated in Saez’s income tax data.

For example, among households in the middle fifth of the before-tax income distribution, average market income fell more than 10 percent in the Great Recession (see Chart 2). If we include government transfers in the income definition, average income fell 4.4 percent. If we account for the federal taxes families pay, average net income fell just 1 percent. In contrast, among households in the top 1 percent of the distribution, average market income fell 36 percent, average income including government transfers fell 36 percent, and average income net of federal taxes fell 37 percent. Government transfers provided little if any protection to top-income households.

The CBO income statistics end in 2013, so they do not tell us how net income gains have been distributed in the last couple of years. Nonetheless, based on Saez’s income tax tabulations it is very unlikely top income recipients have recovered the net income losses they experienced in the Great Recession. All the available statistics show household income gains since 2007 have been negligible or small, and this is true across the income distribution.

It is popular to say slow income gains in the middle and at the bottom of the distribution are due to outsize income gains among families at the top. While this story is at least partly true for the three decades ending in 2007, it does not fit the facts for the years since 2007. CBO’s latest net income tabulations show that inequality was almost 5 percent lower in 2013 than it was in 2007. The Great Recession hurt the incomes of Americans up and down the income distribution, but the biggest proportional income losses were at the very top. To be sure, income gains in the recovery after 2009 have been concentrated among top income recipients. Even so, their income losses over the recession and recovery have been proportionately bigger than the losses suffered by middle- and low-income families.

Editor's note: This piece originally appeared in Real Clear Markets.

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From “American Crossroads” to “Americans for a Better Tomorrow, Tomorrow,” so-called "super PACs" have emerged as the dominant new force in campaign finance. Created in the aftermath of two landmark court decisions and regulatory action and inaction by the Federal Election Commission (FEC), these independent spending-only political action committees are collecting unlimited contributions from individuals, corporations and unions to advocate for or against political candidates. The legal requirements they face—disclosure of donors and non-coordination with the candidates and campaigns they are supporting—have proven embarrassingly porous. Increasingly, super PACs are being formed to boost a single candidate and are often organized and funded by that candidate’s close friends, relatives and former staff members. Their presence is most visible in presidential elections but they are quickly moving to Senate and House elections.

On March 1, on the heels of the FEC’s February filing deadline, the Governance Studies program at Brookings hosted a discussion exploring the role of super PACs in the broader campaign finance landscape this election season. Anthony Corrado, professor of government at Colby College and a leading authority on campaign finance, and Trevor Potter, nonresident senior fellow at the Brookings Institution, a former chairman of the FEC and lawyer to Comedy Central’s Stephen Colbert, presented. 

After the panel discussion, the speakers took audience questions. Participants joined the discussion on Twitter by using the hashtag #BISuperPAC.

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• Full Video: The Rise of Super PACs
• Why Corporations Spend on Elections
• GOP Likely to Benefit Most from Super PACs

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• Campaign Finance in the 2012 Elections: The Rise of Super PACs

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• Uncorrected Transcript (.pdf)

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• 20120301_super_pacs

In 2015 the international community agreed on a set of ambitious sustainable development goals (SDGs) for the global society, to be achieved by 2030. One of the lessons that the implementation of the Millennium Development Goals (MDG s) has highlighted is the importance of a systematic approach to identify and sequence development interventions—policies, programs, and projects—to achieve such goals at a meaningful scale. The Chinese approach to development, which consists of identifying a problem and long-term goal, testing alternative solutions, and then implementing those that are promising in a sustained manner, learning and adapting as one proceeds—Deng Xiaoping’s “crossing the river by feeling the stones”—is an approach that holds promise for successful achievement of the SDGs.

Having observed the Chinese way, then World Bank Group President James Wolfensohn in 2004, together with the Chinese government, convened a major international conference in Shanghai on scaling up successful development interventions, and in 2005 the World Bank Group (WBG ) published the results of the conference, including an assessment of the Chinese approach. (Moreno-Dodson 2005). Some ten years later, the WBG once again is addressing the question of how to support scaling up of successful development interventions, at a time when the challenge and opportunity of scaling up have become a widely recognized issue for many development institutions and experts.

Since traditional private and public service providers frequently do not reach the poorest people in developing countries, social enterprises can play an important role in providing key services to those at the “base of the pyramid.”

In parallel with the recognition that scaling up matters, the development community is now also focusing on social enterprises (SEs), a new set of actors falling between the traditionally recognized public and private sectors. We adopt here the World Bank’s definition of “social enterprises” as a social-mission-led organization that provides sustainable services to Base of the Pyramid (BoP) populations. This is broadly in line with other existing definitions for the sector and reflects the World Bank’s primary interest in social enterprises as a mechanism for supporting service delivery for the poor. Although social enterprises can adopt various organizational forms—business, nongovernmental organizations (NGOs), and community-based organizations are all forms commonly adopted by social enterprises—they differ from private providers principally by combining three features: operating with a social purpose, adhering to business principles, and aiming for financial sustainability. Since traditional private and public service providers frequently do not reach the poorest people in developing countries, social enterprises can play an important role in providing key services to those at the “base of the pyramid.” (Figure 1)

Figure 1. Role of SE sector in public service provision

Social enterprises often start at the initiative of a visionary entrepreneur who sees a significant social need, whether in education, health, sanitation, or microfinance, and who responds by developing an innovative way to address the perceived need, usually by setting up an NGO, or a for-profit enterprise. Social enterprises and their innovations generally start small. When successful, they face an important challenge: how to expand their operations and innovations to meet the social need at a larger scale. 

Development partner organizations—donors, for short—have recognized the contribution that social enterprises can make to find and implement innovative ways to meet the social service needs of people at the base of the pyramid, and they have started to explore how they can support social enterprises in responding to these needs at a meaningful scale. 

The purpose of this paper is to present a menu of approaches for addressing the challenge of scaling up social enterprise innovations, based on a review of the literature on scaling up and on social enterprises. The paper does not aim to offer specific recommendations for entrepreneurs or blueprints and guidelines for the development agencies. The range of settings, problems, and solutions is too wide to permit that. Rather, the paper provides an overview of ways to think about and approach the scaling up of social enterprise innovations. Where possible, the paper also refers to specific tools that can be helpful in implementing the proposed approaches. 

Note that we talk about scaling up social enterprise innovations, not about social enterprises. This is because it is the innovations and how they are scaled up that matter. An innovation may be scaled up by the social enterprise where it originated, by handoff to a public agency for implementation at a larger scale, or by other private enterprises, small or large. 

This paper is structured in three parts: Part I presents a general approach to scaling up development interventions. This helps establish basic definitions and concepts. Part II considers approaches for the scaling up of social enterprise innovations. Part III provides a summary of the main conclusions and lessons from experience. A postscript draws out implications for external aid donors. Examples from actual practice are used to exemplify the approaches and are summarized in Annex boxes.

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