Inside fDi: too many tech hubs, not enough spokes

If every city is a 'tech hub', then no place really is. There can be no hub without spokes, so if every city considers itself a hub of technology, then where are the spokes? 

The trouble is, no one wants to be a spoke. But despite the eagerness of every city with a smattering of start-ups and shared-office spaces to declare itself a tech hub, a few superstars have had a stranglehold on the title for years. Could this situation change?

Certainly there is a dramatic dispersion of innovative activity under way and new tech cities are challenging the status quo. Our Tech Start-up Attraction Index identifies those that are punching above their weight, with Lithuania’s capital Vilnius leading the way based on the amount of greenfield FDI it has attracted from start-ups on a per capital basis. Vilnius’s success shows what is possible. 

However, the gap between the tech winners and the contenders still has room to narrow. The concentration of venture capital is what keeps the established tech leaders out front. Large financial capitals find it easier to develop tech ecosystems because they can tap deeper pools of funding. This, combined with a wealth of talent and human capital, has solidified London’s position as the leading tech city of Europe – though it is doing its level best to threaten these key competencies and more with Brexit. 

Venture capital remains far too concentrated in too few places, but human capital is proving more mobile and sooner or later the money will be smart enough to follow it. Young, talented tech workers are tiring of the sky-high property prices in major cities and looking for higher qualities of life. This tallies with a trend towards increasing investment in Tier 2 cities, creating a virtuous circle of higher skills, better jobs and more investment in these cities. Tech is among the sectors with the most room for mobility and thus is the key driver of this shift. 

However, this trend is still most distinct in Europe, whereas in much of the developing world the opposite thing is happening, with large-scale urbanisation creating ever-sprawling mega-cities and most tech activity taking place in these locations. It may be a while before the tech hubs or even spokes truly take hold in these markets. But that is not to say they won’t.

The tech FDI landscape is changing and even if there remain many more spokes than hubs, new locations are at least giving the established hubs a run for their money. 

Courtney Fingar is editor-in-chief of fDi Magazine. Email: courtney.fingar@ft.com