November 20, 2001

Cities Online: Urban Development and the Internet

The Internet, Cities, and Social Capital

Introduction

The Internet is helping to change the “rules of the game” in various institutions within cities.  In most cases, the Internet’s effect is primarily catalytic.  By prompting people to come together to plan how to use the Internet, the Internet’s presence stimulates social networks and lays the groundwork for building new social capital.  The development of Internet content has been less prevalent in the cities studied, but there are identifiable examples of it. 

In this concluding section, I summarize the Internet’s impact on catalyzing new social networks and how those changes have affected the Internet itself through the creation of Internet content that serves the community.  I then look across the five cities rating their relative strengths and assessing “best practice” for how cities can use the Internet beneficially.  I conclude with recommendations on how cities can sustain the emerging positive impacts of the Internet. 

The Catalytic Effect of the Internet

Activists of different stripes—from advocates for low-income communities to promoters of economic growth—have in their respective spheres come together to find ways to use the Internet constructively.  This has represented a boost to social networking in the cities studied, which in turn lays the groundwork for Internet-driven increases in social capital.  Taking a look across the five cities studied, here is how the Internet’s effect has unfolded.

i. Social Networking Strategies Among Economic Developers

The economic development community offers a good example of how social networking is a pre-eminent strategy in the New Economy.  In many places, economic development programs have traditionally connoted “smokestack shopping” whereby city and community leaders have dangled financial incentives to lure a factory to their region.  This strategy has not disappeared in the high-tech era; cities still vie for semiconductor and computer manufacturing facilities and campus-like research parks.  However, the increasing focus on entrepreneurship as a driver of economic growth has altered traditional economic development strategies.  To a great extent, they have been replaced by strategies that try to promote social networks.13

Portland presents a good example of the type of strategy that is being employed to stimulate the demand for business ideas and find the capital to fund them.  The Oregon Entrepreneurs Forum has grown in membership from 100 in 1997 to about 1,200 people today.  The main service the Forum offers its members is networking opportunities.  As the forum has grown, financiers in Portland have established the Portland Angel Network to direct start-up funding to promising new companies.  Although the network is not oriented solely to dot-com start-ups, Internet ideas receive a great deal of attention. 

The other cities studied have similar initiatives, in different stages of development.  Nashville’s Chamber of Commerce has the Nashville Technology Council, although its offshoot, the Technology Funding Alliance, is dormant.  Cleveland’s high-tech happy hours and the Seed Capital Initiative sponsored by the Northeast Ohio Software Association try to stimulate social networks for entrepreneurs in that region.  Washington’s Digital Capital Alliance serves a similar purpose.  In each of these cities, new entrepreneurial and angel finance networks rely on physical interaction.  Although the business plans of most of the companies interested in such forums rely on cyberspace, the process of getting them off the ground is unavoidably tied to face-to-face contact. 

ii. Social Networking in Neighborhoods

The same pattern of social networking is manifest in efforts to use the Internet at the community level.  In Cleveland, Bill Callahan, the director of the West Side CDC, characterizes the Internet’s impact on his organization in this way: “It wouldn’t make sense to have this place without the Internet, and it wouldn’t make sense to have the Internet in this neighborhood without this place.”14 In other words, his CDC needs to have Internet access to make it a place where people want to go, but merely providing Internet access to people in a disembodied fashion would not work.  People need a place to learn about the Internet, and they benefit from having an environment where they can find out who else in the neighborhood is on the Internet.  In Callahan’s CDC and others, the Internet has changed the pattern of foot traffic; people who probably otherwise would not visit a CDC are being drawn to it because of the Internet.  With the Digital Vision coalition and the money from the city for computer boot camps, Cleveland is in a position to expand the Internet’s role in social networking.

In a number of other community organizations profiled in this report, the catalytic effect of the Internet in changing foot traffic has drawn people to community organizations.  The Neighborhood Pride Team revitalized itself by providing Internet and computer training to residents of a southeast Portland community.  The Austin Learning Academy, due largely to the Internet, has changed from an after-school program for kids to a family learning center where the Internet is the centerpiece.  And by partnering with existing community organizations in the District of Columbia, Byte Back’s Internet training programs have added new dimensions to the missions of these nonprofits.  In these examples and others (e.g. the Austin Free-Net and D.C.’s See Forever project), the presence of the Internet has served as a catalyst to social networking. 

Content Development: Social Capital’s Effect on the Internet

In several cities, there are indications that people have begun to begun to develop Internet content to help their communities or organizations operate more effectively.  Some of this builds on existing stocks of social capital, while some is a direct outgrowth of Internet initiatives that first stimulated new networks of people.  These people in turn have been instrumental in creating new content.

i.        Neighborhood and Community Content

The listserv activity surrounding the Southwest Community Plan in Portland shows how the Internet used an existing stock of social capital in the neighborhood to create Internet content to shape an outcome important to the community, and the cooperative process in developing a response to the Metro government’s proposal may have helped build additional social capital in that community.  The Neighborhood Pride Team, on the other hand, became a focal point for people interested in the Internet who subsequently created their own online content.  The Trillium Artisans, who now market their wares on the Web, are an example of content creation, as are the people who have been through the NPT and then posted Web pages to market home-based businesses. 

In Cleveland, theT2K.org portal for affordable housing providers is an example of Web content designed to improve service for providers and clients of public housing.  In the design phase, the Portland Area Housing Clearinghouse serves a similar purpose.  Also in the design phase is Nashville’s Designing a Community Online project; this project will provide access to the Internet for underserved populations and also create community content.  Farther upstream is Austin’s Grants for Technology Opportunities program that will fund Internet content development among nonprofits.  Although the development of Internet content by communities is not widespread, projects such as Portland’s NPT indicate that it can have a substantial impact on people’s lives when does occur.

ii.       Content in the Business Sector

The ease of starting dot-com businesses is an indicator that sufficient social capital exists in a community beyond financial capital.  This social capital is embodied in people—more specifically, in the ease with which information flows about where and how to find support for a business idea.  In Portland, the region rates well, but not spectacularly, when it comes to the availability of venture capital.  For that reason, Portlanders have actively employed the social networking strategy to match entrepreneurs with financiers.  To make up for a shortage of financial capital, people in Portland are trying to leverage other sources of community capital.  Similar coalitions in other cities, some fairly active (Cleveland and D.C.) and others not (Nashville), try to do the same thing. 

The goal of these efforts is, of course, to create New Economy businesses.  With the dot-com shakeout, it is hard to find evidence that these regional networks of entrepreneurs and financiers are paying off.  But in some places, such as Cleveland, an important goal of such networks is to change the business culture of the region so that entrepreneurialism is encouraged, so that ultimately business plans involving electronic content receive warmer receptions.  This is a long-term strategy and only time will tell whether it bears fruit.

One common long-term strategy evident in several cities is creating places for New Economy start-ups to flourish.  Washington’s NoMa initiative is perhaps the most ambitious of these, as it will try to create a place where the arts and mixed-use business-residential development revitalize a section of the downtown and attract high-tech businesses.  NoMa will be combined with tax incentives to lure start-ups to the District.  In Austin, the city is offering incentives to new and existing high-tech start-ups to develop its “digital downtown.”  Portland’s creative services initiative also will try to combine a rich urban environment with creative people to spur multimedia start-ups.  Where D.C. is offering incentives to developers to push NoMa, Portland is retrofitting a building to provide space for multimedia companies. 

Best Practices, Best Cities

Even with many common themes evident in the five cities, it is clear that different cities move at different paces in different areas of Internet impact.  Nashville, for instance, is behind Austin, one of America’s most wired cities, in most ways.  But Cleveland, not often associated with the growth of the Internet, is perhaps surprisingly advanced when it comes to programs to bring Internet to low-income neighborhoods.  What are the best ways cities are using to exploit the Internet?

i.        Portland

Of the five cities studied, Portland has a combination of technological sophistication, economic vitality, commitment to regional planning, community engagement, and an existing infrastructure of community nonprofits that makes it the city most likely to effectively exploit the Internet for economic and social purposes.  The use of the Internet in the community in Portland cuts across several different environments.  The Southwest Community Development Plan shows how the Internet has been used in a grassroots fashion in a middle-class neighborhood.  There are also efforts in low-income neighborhoods—as witnessed by the Neighborhood Pride Team—to integrate the Internet into the day-to-day lives of residents.  Finally, Metro government’s Bureau of Housing and Community Development shows great promise in using the Internet to improve the lives of low-income people in Portland.  The Enterprise Foundation, which is working to wire nonprofits in the area, should have the same effect.

In economic development, the Oregon Entrepreneurs Forum and the Portland Angel Network are strong evidence of new vitality in making Portland a place where business ideas—New Economy and otherwise—can find support.  The city’s support for the creative services initiative is a notable public financial commitment to Internet-driven commerce.  The initiative is also tied to Portland’s long-time commitment to urban planning, and business and government have worked cooperatively in encouraging business development downtown. There is reason to be optimistic about the initiative’s prospects for success—assuming sufficient demand for creative services in the local and national economies. 

ii.     Austin

Austin has a strong track record of community activism in providing Internet access to low-income areas, a great deal of technical literacy, wealth and economic vitality, and an emerging dialog about social equity that encompasses information equity.  Austin’s Free-Net, Community Technology Initiative, and Grants for Technology Opportunities Program are examples of the city government’s strong commitment to encouraging community-wide access to the Internet.  These programs have come about as a result of pressure from community technology activists, and the existence of initiatives such as the Austin Learning Academy suggests that the grassroots nature of Internet equity concerns in Austin is quite strong.

The city government’s “digital downtown” program also signals the city’s desire to encourage dot-com development in an urban setting.  Of course, this commitment can only bear fruit if the market for high-tech and multimedia products is strong.  The fact that Vignette and Intel have had to put their plans for downtown headquarters on hold demonstrates how fragile such initiatives can be. 

The Austin Idea Network is the best example of the promise and fragility of the Internet’s impact on Austin.  The Idea Network was formed primarily by dot-com entrepreneurs who wanted to find ways to help out the less fortunate in Austin.  As the dot-com economy has soured, the Idea Network has had a difficult time implementing its ideas, in part because some of its leaders’ businesses have gone under.  Moreover, the Idea Network, even though it aimed at low-income residents on Austin’s east side, did a poor job initially in reaching out to leaders in that community for input.  The network’s slow start is thus only partly attributable to the dot-com downturn.

Another reason for the slow start is the relative dearth of community-based organizations in Austin.  Unlike Portland or Cleveland, Austin does not have a well-developed network of CDCs in housing.  Because of this, it is difficult for a new or outside group like the Idea Network to find a ready list of organizations to turn to when starting new initiatives.  Thus the financial resources that the Idea Network brings to community Internet projects in Austin are not matched by a strong social infrastructure that would grease the path for such projects.  For that reason, even with all the assets Austin has with respect to the Internet, the city ranks just behind Portland.

iii.   Cleveland

Cleveland rates well among the five cities because of its focus on business-to-business ecommerce as its New Economy priority and its innovative coalition building to encourage Internet access in the low-income community.  On the economic front, Cleveland’s abundant bandwidth and encouraging attitude toward telehotels suggests that the infrastructure for ecommerce in northeast Ohio should be more than adequate.  Cleveland’s decision to focus on business-to-business ecommerce for large manufacturing operations looks prescient in light of the downturn in retail and brand-oriented dot-coms.  The B2B ecommerce strategy is clearly long-term in nature and will require a shift in business culture in Cleveland.  However, with the Northeast Ohio Software Association and the Lorain County Community College business incubator, social networking has taken on greater prominence in economic development circles in Cleveland. 

Community activists in Cleveland have been remarkably persistent and successful in moving community technology issues onto the city’s policy agenda.  The Digital Vision coalition is a striking example of the Internet’s catalytic affect in bringing members of the community together in a new way for a common goal.  More important, the coalition was successful in lobbying the city to set aside $3 million in cable franchise fees to bring the Internet to neighborhoods via CDCs.  In fact, CDCs in Cleveland have been a focal point for community Internet projects.  The Cleveland Housing Network has used the Internet to improve its operating efficiency and is working toward providing Internet access in affordable housing units.  The existing network of CDCs in Cleveland is a stock of social capital that Digital Vision has been able to exploit, and by obtaining resources for Internet “boot camps”, the coalition seems to be creating new social capital in Cleveland.

iv.    Washington, D.C.

Washington is a latecomer with promise. It is playing catch-up against its thriving high-tech competitors in suburban Maryland and Virginia; in response, the District is beginning to aggressively market itself as a hip, lower-cost alternative to its congested suburbs.  The main vehicles for its marketing campaign are the New Economy Transformation Act and development in the NoMa downtown technology district.  One challenge for these initiatives is the fading fortunes of dot-com companies, which are making office space in the suburbs suddenly cheaper. NoMa is also a long-term project, making its payoff difficult to predict.  Nonetheless, NoMa and other initiatives by the District have brought energy to high-tech development in Washington.  The existence of the Digital Capital Alliance shows that the business community shares the enthusiasm.

Community Internet projects in Washington amount to a diffuse set of innovative and ambitious projects that might benefit from greater coordination.  These projects enjoy support from the private sector or from federal grants; thus far, the city government has not played much of a role.  Still, the scope of the projects profiled here is impressive. Byte Back, the SeeForever Foundation, and Edgewood Terrace have each made significant inroads into their communities and exposed a large number of people to the Internet. This adds up to a stimulus to social capital in several places in the District and is a useful model for other D.C. initiatives, whether they are supported by public or private funds. 

v.       Nashville

Nashville ranks fifth among the cities studied primarily because it lags far behind the others in projects that provide Internet access to low-income citizens.  The TOP-funded “Designing a Community Online” project indicates some promise on this front, as does the mayor’s commitment to the use of information technology in city government and outreach to neighborhoods.  But these initiatives are in the nascent stages, and the clamor in Nashville for community Internet projects is modest in comparison to that in the other cities. 

From the economic development perspective, Nashville has embraced social networking by providing forums where entrepreneurs can exchange ideas about business opportunities.  The Chamber of Commerce has been a driving force behind these, although its more ambitious effort to channel start-up financing to entrepreneurs stalled with the dot-com economy.  Although Nashville had a number of dot-com start-ups—many oriented to music or health care—none achieved the financial success that might have provided capital for subsequent entrepreneurs.  It is unclear how robust the networking approach will be in Nashville in the face of the dot-com shakeout. 

Still, Nashville is trying to make itself more attractive for entrepreneurs.  The development of a hip downtown district near the Gulch is designed to attract young entrepreneurs.  Perhaps more important, the development signals a long-term commitment by city and business leaders to make Nashville more attractive to New Economy entrepreneurs.  Thus, while Nashville does not rate well on community-oriented Internet programs, the business community is well in line with other cities in trying to create an attractive business climate for Internet firms.

Social Capital and The City: Sustaining the Internet Effect

Even with signs that the Internet is having a positive impact on social capital, sustaining this impact will be no easy task.  “Digital downtowns” that are part of smart-growth initiatives wax and wane with the health of the technology economy.  Community programs typically struggle for resources, and a key source for support from the public sector, the Technology Opportunities Program, is under constant budget pressure in Washington.  Nonetheless, lessons from the five cities point to ways in which early efforts to capitalize on the Internet can be sustained.

Encourage bottom-up initiatives: Almost invariably, the Internet projects in the five cities started because interested people in the community took the initiative.  This underscores the reality that successful programs tend to be pulled by demand rather than pushed by technology.  In particular, the social networking approach employed in community technology programs has reached out to determine community needs and respond to them; cities have not imposed community-computing programs on communities from the top down.  Portland’s Neighborhood Pride Team is a good example of this, and there are similar examples in Austin, Cleveland, and Washington, D.C.

Encourage catalysts:15 The Internet as a catalyst to building social capital is a prominent theme in this report, so a recommendation to encourage community catalysts is hardly a surprise.  The bottom-up nature of most of the Internet initiatives has come about because individuals in the community have served as catalysts.  Just because these people have taken the initiative does not mean that they and their initiatives do not need nurturing.  Financial support is the most obvious, and probably most useful, form of encouragement, but publicity is another.  The media could do a community service by focusing on how community groups are using the Internet for social purposes.  This might help these programs obtain the resources—financial, volunteer, and technical—they need.

Encourage public funding: The coffers of local governments have played an important role in several cities.  Cleveland and Austin have programs that channel public funds to community technology projects, although it is important to underline that the programs came about only after community technology activists had been running programs in the cities for some time.  But as demand in the community for services expands, local government help is needed to meet it.  Additionally, federal funding, in the form of U.S. Commerce Department TOP grants, often is crucial to getting projects off the ground.  There is still considerable demand for community computing programs and great need to wire local governments for better service delivery.  With high demand likely for some time into the future, cutting the TOP, as has been rumored, does not appear wise.

Encourage “bridging”: In several cities, coalitions have been formed in an attempt to foster “bridging”–that is, bringing advocates of low-income people into contact with the technology sector for community development.  Cleveland’s Digital Vision and Austin’s Idea Network are two examples.  Such initiatives hold promise, but their existence should not be seen as ends in themselves.  These coalitions are partnerships among people and groups with differing outlooks and goals.  Business leaders may see community-computing programs as a way to increase the supply of skilled workers—something that they need quickly.  Community activists may see the partnerships as long-term strategies to improve people’s lives and foster civic engagement among forgotten members of the community.  Recognizing these differences early is key to making bridging efforts work.

Encourage experimentation: Across the five cities, we have seen several different models for using the Internet for community purposes.  In Washington, D.C., the nonprofit Byte Back partners with existing social service agencies to provide Internet access.  In Austin, the Free-Net, which receives some public support, also partners with community groups, but the city also funds job-training programs that focus on computer skills.  On the economic front, Portland is funding the retrofitting of a building for creative services, while Washington is nurturing an entire downtown district for similar purposes.  There is no single solution to exploiting the Internet’s potential and community leaders and policymakers should be aware of this.  A willingness to tolerate multiple approaches should also be accompanied by a willingness to tolerate fits and starts in programs, and even failure.  The lessons learned in the process can be as valuable as successful models that are often showcased as successes.

The Internet brings new possibilities to cities and communities, from improved delivery of government services, to greater civic engagement, to new economic opportunities for regions.  But cities also bring new possibilities to the Internet, as community leaders can bring content to the Internet that furthers a wide variety of community objectives.  The reciprocal relationship between the Internet and places is how the “rules of the game” for institutions are shaped.  There are early signs that the Internet can play a positive role in revitalizing city institutions.  Patience, persistence, and resources will be needed over time to sustain and build upon these early successes.

  1. See the National Commission on Entrepreneurships’ Building Companies, Building Communities, July 2000, for a discussion on inward-looking strategies at the local and regional levels to spur entrepreneurship.
  2. Interview with Bill Callahan, director of West Side Community Development Corporation, Cleveland, Ohio, September 28, 2000.
  3. This idea builds on a recommendation in the Kettering Foundation’s report “Meaningful Chaos: How People Form Relationships with Public Concerns” available on the Web at: http://fly.web.net/ccic/volsect/PE4A-meaningful_chaos.htm