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The phrase “corporate innovation” is a strange amalgam. It suggests a big, established entity spawning something new. (To pessimists, it’s an oxymoron.) Often, companies struggle to make it happen at their headquarters campus: “Let’s take a group of employees, lock them in a room with a ping-pong table, and get some innovation!”

But a growing number of companies are realizing the limits of that approach. They’re looking at the world’s innovation hotspots—places like Silicon Valley, Tel Aviv, and Beijing—and sending scouts to understand what’s happening there that might tie in to their businesses. They’re investing in, or acquiring, startups that have discovered something new and are building momentum. They’re opening innovation labs, technology development centers, or partnering outposts, seeking to tap into local talent and collaborate with other players in a given ecosystem.

For our list of the top cities for corporate innovation around the world, we examined an array of factors that create a constructive context for big companies that want to engage in ecosystems outside of their home turf. We took into account factors like:

  • the presence of startups and venture capital funding
  • top-notch universities cranking out new ideas, as well as smart and driven young people
  • trade shows and conferences that bring people together to exchange ideas
  • corporate headquarters of large companies with a global reach that spend heavily on research and development
  • presence of other non-indigenous companies (think Google or J&J) with innovation centers
  • shared co-working spaces, incubators, and accelerator programs that help new ideas take shape, and
  • the overall economic competitiveness of the country, along with governmental support for entrepreneurship, venture capital, and innovation infrastructure.

We also sought input from more than a dozen investors, entrepreneurs, and executives who have worked and traveled widely—people who seek out deals in Shanghai or have run accelerator programs in Shenzhen, or who can compare the relative merits of the business environment in Jakarta versus Kuala Lumpur.

One important note about this list: In 2017, we put together a list of the top cities in North America for corporate innovation. This time around, we focused on all the other continents. 

Want to make the case for another city? Take issue with our rankings? Share your thoughts on social media using the hashtag #ILtopcities, and we’ll dive into the debate!

You can also join us in person in June 2019 as we visit one of the leading cities on this list for our London Field Study

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Westerners may not be familiar with the ojek, or motorcycle taxi. (Driver in front, rider on the back.) But Indonesia’s first unicorn startup, Go-Jek, is a startup that app-enabled that popular and zippy form of transport. Like its California cousin Uber, Go-Jek also offers food delivery, but it has diversified into lots of other businesses—from mobile payments to ticket sales to massage on demand. As of February, the company’s valuation was pegged at nearly $10 billion. And Jakarta is home to other fast-growing startups like Traveloka, an online travel booking platform, and Tokopedia, an online marketplace and provider of financial services. The latter raised $1.1 billion in fresh capital at the end of 2018.

Indonesia, already the world’s fourth most populous country, is a market that’s destined to grow—and it’s home to a massive population of digital natives who grew up in the post-1998 democratization era. “There’s some real magic happening,” says Hari Nair, a fellow at Harvard’s Advanced Leadership Institute and a former Kimberly-Clark innovation executive in Asia. “If I were to put my money down on an innovation center, I’d put it on Jakarta.”

The government also is working to support the local startup scene. The administration of President Joko Widodo has launched an entrepreneurship program that aims to spawn 1,000 startups by 2020.

Among the multinational companies with a strong presence in Jakarta are UnileverGoogle,and ExxonMobil. The nonprofit Endeavor has provided support for dozens of Indonesian entrepreneurs, including Bukalapak, which offers e-commerce services to small businesses, and Mapan, a community-based lending platform acquired by Go-Jek in 2017.

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What modern city has made a higher-profile play for the future than Dubai, with its artificial islands, underwater hotel rooms, the world’s tallest building, and one of the world’s best-rated airlines, Emirates, flying into a major international hub? Dubai is also set to host Expo 2020, which will bring 190 countries to town and run for 173 days.

Dubai has a “dazzling veneer of innovation,” says venture capitalist Michael Greeley, who adds that he has “concerns about how deep does it actually run?” Greeley says Dubai is “clearly a gateway to unexploited regions of the world such as the Middle East and Africa, with an unclear path forward.”

Imran Sayeed, a senior lecturer at MIT’s Sloan School of Management and former Chief Technology Officer for NTT Data, the global IT services firm, says that while the city is “an incredible tourism center” with lots of state support for innovation, “that doesn’t necessarily mean that it has translated into startups.” (Sayeed grew up in Dubai.) But it is certainly a dominant business hub in the Middle East. Michael Davies of the management consulting firm Endeavor Partners says that Dubai benefits from being “extremely receptive to people coming in—you can arrange meetings there that would be impossible to do in Saudi Arabia, and you can have women at the meetings.” That’s helpful not just for the corporate executives from around the world, but also for “traders and entrepreneurial people,” Davies says. Davies is also a guest lecturer at the London Business School.

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Shenzhen is home to the consumer drone-maker DJI, as well as Tencent Holdings, which owns the social network WeChat (China’s biggest). Huawei Technologies and ZTE Corporation, two makers of networking technology that are both mired in US federal investigations concerning cybersecurity threats, are also based in the booming manufacturing center. Hundreds of thousands of workers staff the biggest Foxconn electronics assembly facility in the world at Shenzhen’s Longhua Science & Technology Park. But Shenzhen is transforming itself from a factory town “into an innovation powerhouse,” says Cyril Ebersweiler, the founder of Shenzhen-based startup accelerator HAX, which focuses on consumer electronics; it operates a 50,000-square foot prototyping facility in the city. Pascal Marmier, Head of Engagement for Americas & Asia at Swiss Re, says it has potential to be “the future hot spot in Asia,” adding that Shenzhen’s “link to Hong Kong will be key to bringing the region to the next international level.” Marmier spent four years working for the Swiss consulate in China.

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With a population of just 177,000, Basel is the smallest city on this list, nestled in the north of Switzerland near the borders of Germany and France. But it’s a major center of scientific innovation, home to Novartis, Lonza Group, and Roche, as well as divisions of other pharma companies, like Bayer’s consumer health group and Actelion, part of Johnson & Johnson that focuses on rare diseases. (Roche and Novartis together spent nearly $20 billion on research and development last year; they’re the only Swiss companies in the top 20 spots on that list, along with Intel, Apple, and Facebook.) A Swiss economic development agency, BaselArea.swiss, counts 600 life sciences companies in the Basel region, in addition to the presence of hospitals, universities, and research centers like the Friedrich Miescher Institute for Biomedical Research, which explores scientific fields like neurobiology and epigenetics. The Switzerland Innovation Park, managed by BaselArea.swiss, provides office and lab space to fledgling companies.

Fun fact: Basel is where LSD was invented, in 1938, by pharma researcher Albert Hofmann, who also went on the first LSD trip—accidentally.

Venture capitalist Michael Greeley calls Basel “the ultimate company town dominated by a few very large multi-national pharma companies.” Having Novartis and Roche located just across the Rhine River from one another “is like having the Yankees and the Red Sox in the same city,” Greeley adds. That said, the independent startup scene is still nascent, and there’s a “very limited venture capital community” in Basel, Greeley says.

Still, Switzerland as a country shows up in the top spot of the Global Innovation Index. Pascal Marmier, the Swiss Re executive who previously worked in the Swiss consulate, notes that there is “strong government support at every level, even for small firms.”

Basel is also home to a number of other non-pharma businesses, like Viking Cruises, Swiss International Airlines, UBS (co-headquartered here and in Zurich), and Coop Group, a Fortune Global 500 retailer that operates 2,295 supermarkets, department stores, pharmacies, and garden centers.

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Some reviewers argue that Samsung, headquartered here, makes the world’s best smartphone. It’s also moving fast into virtual reality and three-dimensional image capture with the Gear VR headset and Gear 360 video camera. Hyundai Motor Company will soon start producing a new line of electric and plug-in hybrid vehicles, the Ioniq. And at the Consumer Electronics Show this past January, LG Electronics was hyping a new artificial intelligence offering, ThinQ, which will learn your preferences over time. (LG also announced a roll-up TV screen and a $1,400 home clothes-pressing system, the Styler.)

South Korea’s sprawling family-owned conglomerates, or chaebols, have traditionally dominated the business scene here. But Seoul has become more hospitable to startups recently, says Cyril Ebersweiler of HAX.

“The startup activity is one of the highest in Asia, and some will get their footing—if they are not strangled by the chaebol,” Ebersweiler says. The poster child: Coupang, an e-commerce startup that notched roughly $5 billion in revenues last year.

Hugh Mason of the Singapore-based incubator Joyful Frog Digital Innovation, agrees with Ebersweiler: “Both the quality and quantity of Korean startups is increasing rapidly, [and] the level of international awareness is rising fast in a nation that has often looked inwards.” Mason adds that “there are still cultural reasons why, as in Japan, young South Koreans may feel pressured to join large corporations, but the knowledge that there are other options is spreading fast.”

The government is pitching in: In September 2018, it began doling out money from a $9 billion investment fund with a focus on drone technology, AI, and fintech.

South Korea is also known for its top universities, with 29 of them on the most recent Times Higher Education World University Rankings. Some of the most well-known are based in Seoul: Seoul National UniversityYonsei University and Korea University

Seoul might be higher on our list—but for its insularity. “It is hard to do anything in Korea if you’re not Korean, and that can keep other corporates out,” says Davies of the management consulting firm Endeavor Partners. 

 

Top Global Cities Form

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A hub for the automotive and advanced manufacturing industries, Germany ranks as the world’s most innovative economy, according to the World Economic Forum’s 2018 report. But many of the biggest players are based in cities like Munich and Stuttgart. That created a vacuum in Berlin that startups are filling. Grocery-delivery service HelloFresh is here, as are the audio hosting service SoundCloud; language learning app Babbel; and ResearchGate, a social network for scientific researchers.

Tech giants like Facebook, Google, SAP, Amazon, and Apple all have outposts in the city, and in 2018, the industrial equipment maker Siemens AG, headquartered in Munich, announced a major $681 million project to build Siemensstadt—a 170-acre science and technology hub on a site where Siemens’ predecessor company once operated factories in the late 19th century. The Spielfield Digital Hub, located in a former postal distribution center, brings together corporates and startups to help the corporates run more experiments in the digital realm.

“Over the last couple of years, Berlin has become one of the main hubs for tech and digital health innovation in Europe,” says Annika Pierson, Chief Operating Officer of the government-supported German Accelerator, which helps startups enter the US and Asian markets. “A key component of this ecosystem are local incubators and company builders like Flying Health and international accelerator programs such as German Accelerator and Techstars that help companies in building the right business strategies, and provide access to very experienced mentors as a resource. Several companies, including Ada Health and N26, have built their success stories in Berlin and attracted major funding from international investors.”

Media giant Axel Springer, the biggest publisher of newspapers and magazines in Europe, has a corporate venture capital arm called Digital Ventures, which has put money into Airbnb, Uber, and the augmented reality startup Magic Leap. It also operates two accelerator programs, APX and Axel Springer Plug & Play.

Among the top universities here are Humboldt University of Berlin, which has links to the winners of 55 Nobel Prizes. Berlin also attracts professionals of various stripes every year through its trade shows, among them the IFA Consumer Electronics Show, the Berlin Air Show, and E-Commerce Berlin Expo.

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By some counts, Tokyo is the city with more corporate headquarters than any other: about 600.

Brand names like Canon, Mitsubishi, and Honda are among the 37 Tokyo-based companies that show up on Fortune’s Global 500 list. (You may think about fuel-efficient sedans when you hear Honda, but the company is also building robotic lawnmowers and business jets these days.) Tokyo is also home to the tech giant SoftBank. In addition to selling mobile devices, electric power, high-speed internet, and consumer robots, the company is also a major investor in  startups around the world with its $100 billion (yes, billion) Vision Fund. Among the US companies SoftBank has backed: Uber, WeWork, DoorDash, and Wag, an app for dog walkers. (Plus, other startups in Singapore, India, China, and Kenya.)

Government-supported startup programs in the city include J-Startup and Edge-Next. In March 2018, a weekly “Venture Café” gathering for entrepreneurs began taking place every Thursday—and within a year, it had attracted about 10,000 guests, according to Yasuhiro Yamakawa, its executive director and a professor of entrepreneurship at Babson College.

The marketplace app Mercari, similar to Craigslist, went public last year on the Tokyo Stock Exchange, selling $1.2 billion in shares. Other startups like Preferred Networks, which counts Toyota as its biggest investor, could soon follow suit. Preferred is focused on applying deep learning technology to the manufacturing industry; among its early customers is Fanuc, the world’s biggest producer of industrial robots.

Japan is also one of Asia’s education hubs, with 103 universities listed on the World University Rankings 2019. Among those in Tokyo are the University of Tokyo, whose alums have become astronauts and prime ministers; the Tokyo Institute of Technology, Japan’s largest science-and-technology school , with about 10,000 students; and Waseda University, the alma mater of many business leaders at companies like Sony and Toshiba.

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While the typical tourist might visit Amsterdam to enjoy some of its mood-modifying substances—Heineken beer, perhaps, or space cakes—the city is also home to global-scale companies. Heineken is the world’s second-largest brewer, after Anheuser-Busch InBev, and banking biggie ING Group has been moving fast in blockchain, artificial intelligence, chatbots, and APIs for external developers. ING’s new headquarters campus, slated to open in 2019, will be “an innovation hub for start-ups, scale-ups, and entrepreneurs,” according to a company announcement. Philips, with $18 billion in annual revenue, is now focusing entirely on healthcare, and has sold off businesses in lighting, television, and appliances, which CEO Frans van Houten sees as quickly becoming commoditized. Philips’ research group employs about 1,200 people—and works on everything from next-generation cardiac ultrasound technology to electric shavers that can cut as close as a blade.

A less familiar name is Here, a mapping software firm owned by a group of automakers that now employs about 6,500. It is working on next-generation mapping technology that will help autonomous vehicles navigate.

The Startupbootcamp accelerator program has been active in Amsterdam since 2012, and five years later, the Fashion for Good Accelerator launched; with support from corporate partners like Galeries Lafayette, Target, and Stella McCartney, it seeks to foster more sustainability and responsible sourcing in the apparel business. And there are venture capital investors like Peak Capital, which invests in software and data-driven startups, and life sciences-focused M Ventures, part of the German pharma company Merck KGaA.

“What I see as most interesting in the Amsterdam/Rotterdam region right now is the focus on impact—energy transition, climate change, etc.,” says Melissa Ablett, general manager of CIC Rotterdam, a shared workspace in that city. “Innovation teams, corporates, down to almost every startup are figuring out how they fit in to the UN Sustainable Development Goals, and the Dutch are positioning themselves as the entrepreneurial leads, testers, and early adopters of anything fitting in these themes. There is a huge sense of shared responsibility around the world’s problems here.”

The Global Innovation Index puts the Netherlands at No. 2 on its list, just behind Switzerland.

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Some see Bangalore as the Silicon Valley of India; others as Outsourcing City, a place that draws software and customer service work because of a well-educated and English-speaking populace. But Bangalore is carving out its own identity in the 21st century, with help from newly-minted unicorn startups like OYO, a hotel chain; Swiggy, a food delivery business; and Byju’s, an online learning platform.

Then, of course, there’s Flipkart, the e-commerce giant acquired last year by Walmart in a $16 billion deal. While Flipkart hasn’t yet turned a profit, it has spawned a whole new generation of entrepreneurs. An estimated 177 startups trace their roots back to Flipkart, according to the venture capital tracking firm Tracxn.

And Bangalore’s two IT services giants, Wipro and Infosys, have also helped fertilize the startup fields here: More than 1,500 other companies were founded by veterans of those two firms, according to Tracxn.

Global companies like AccentureIBMQualcommand Royal Dutch Shell have flocked to Bangalore to open innovation or R&D labs. And real-estate company JLL in 2018 named Bangalore as the world’s No. 1 “most dynamic city” for its growth as an urban economy in an emerging market.

Recent grads from the Indian Institutes of Technology or the Indian Institute of Management used to prefer to work for multinational employers like Cisco, Microsoft, or Infosys, says Sayeed at MIT. “They put together these amazing campuses, and they became the go-to choice for the best graduates.” But more recently, Sayeed says, “the startups are now the preferred choice, because people have seen the success of Flipkart and others. And their parents are fine with them going to work for a startup, because they’ve seen the role models.”

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From construction to apparel to podcasts, Stockholm is home base for an impressive range of industry leaders like Skanska, H&M, and Spotify, the streaming music service that went public in 2018 and in 2019 has been snapping up podcasting networks like Gimlet Media and Parcast. Also here are Ericsson, investing big in 5G wireless network technology and services to support the Internet of Things, and Electrolux, the world’s second-biggest appliance maker (after Whirlpool).

Sweden clocked in at No. 3 on the Global Innovation Index for 2018, the ranking put out annually by Cornell University, INSEAD, and the World Intellectual Property Organization.

The Swedish capital attracts about 15 percent of all the foreign direct investment that goes into European tech companies, according to the Wharton School of Business-affiliated site Knowledge@Wharton. And over a 14-year period, from 2000 to 2014, acquisitions of tech companies totaled almost $25 billion. That sum includes Microsoft’s acquisitions of Skype and Mojang, the maker of the game Minecraft—but not the acquisitions of King.com, creator of Candy Crush, or iZettle, a digital payments company acquired last year by PayPal. And the VC and incubation firm Wellstreet is slated to launch the Nordic region’s largest innovation hub, The Factory, in a Stockholm suburb this year. It will accommodate up to 100 startups.

With a population of less than one million, Stockholm produces more unicorn startups per capita than any place on earth, according to Knowledge@Wharton—aside from Silicon Valley.

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Thirty years ago, Shanghai’s Pudong district was a sparse cluster of factories and warehouses—nothing fancy. Now, the neighborhood has sprouted a forest of futuristic skyscrapers, emblematic of the growth spurt that has turned China into a major economic force.

Shanghai is the city many global firms have chosen for their Asian R&D or corporate VC presence—among them General Electric, DuPont, Michelin, Johnson & Johnson, and L’Oreal.

Apart from hosting brand-name companies, Shanghai is also one of China’s hubs for startups, attracting nearly $24 billion in venture funding between 2015 and 2017, according to PitchBook data. Foreign entrepreneurs like to get a foothold in Shanghai because of the city’s copious startup resources, especially in the fintech sector, says Pascal Marmier of Swiss Re.

In March, Yum China Holdings, a spin-off from the American fast food company Yum! Brands, opened the doors to a new 27,000-square-foot innovation center in Shanghai, complete with a test kitchen.  Yum China develops several hundred new products each year, including menu items like Okinawa sea-salt ice cream for KFC and durian pizza for Pizza Hut. (Yum?)

Shanghai’s universities supply a stream of talent to companies here. Among them are the highly selective Fudan University, Shanghai Jiao Tong University, and Tongji University. Accelerators and incubators based here include Chinaccelerator, XNode, and BCG Digital Ventures.

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The island city-state of Singapore was a former British colonial backwater with few real resources when it broke apart from neighboring Malaysia more than 50 years ago. Now, it is the world’s No. 4 financial center, with skyscrapers dotting its skyline alongside food stalls that have earned Michelin stars.

Singapore is also a magnet for VC investment. At $4.7 billion, the city-state attracted the most VC investment in Southeast Asia between 2015 and 2017, according to PitchBook data. Fast-growing startups include Grab, a transportation startup that received a $1.46 billion boost from the SoftBank Vision Fund in March.

The Singaporean government has also been pouring investments into the innovation space. The state-owned company JTC Corporation currently operates the sprawling research hubs Biopolis, which specializes in biomedical research, and Fusionopolis, which centers on physical sciences and engineering. One of the tenants at Fusionopolis is Sandcrawler Studios, part of Lucasfilm’s Industrial Light & Magic special effects business.

“What is amazing about Singapore is [that] it runs like a corporation,” says Hari Nair, a former Kimberly-Clark executive. “It sets a business plan and a strategy and just executes. Good or bad, it’s an amazing place to be. If they’ve committed to it, if it’s on a piece of paper, everybody rallies behind it, and it’s going to happen.” The newest component of Singapore’s business plan: $700 million of research investment in artificial intelligence, cybersecurity, cell therapy, urban farming, and lab-grown meat.

Among the global firms based here are commodity company Trafigura Group, agribusiness giant Wilmar International, and the contract manufacturer Flex—all of which are in the Fortune Global 500. In March 2019, the British appliance-maker Dyson announced that it would relocate its corporate HQ to Singapore to “reflect the increasing importance of Asia” to its growth, according to a company press release. Dyson is also building a new electric vehicle here, slated to hit the market in 2021.

Then, there’s Block 71, which the Straits Times calls “the heart of Singapore’s startup ecosystem.” The former factory is jammed with more than 100 startups and investment firms, and it hosts several workshops and networking events every week. Block 71 “is an ecosystem builder and global connector which catalyzes and aggregates the startup community,” says James Andrade, Chief Learning and Innovation Officer at the Singapore-based industrial real estate investment trust Ascendas-Singbridge

The Global Innovation Index, co-published by Cornell University, INSEAD, and the World Intellectual Property Organization, had Singapore at No. 5 in its most recent ranking—tied with the US.

But now that just about every Fortune 500 company has an office in Singapore, “it’s time to switch tactics,” explains Hugh Mason, CEO of Joyful Frog Digital Innovation, which helps craft new businesses with participation from corporates and entrepreneurs. “Instead of making Singapore a key part of someone else’s value chain, which worked very well to build prosperity through the first decades of nation-building, the emphasis now is on helping corporates to innovate [and] to generate new value chains that are anchored here in Singapore for [the Asia Pacific region’s] massively expanding markets.” One key, Mason says, will be “leveraging the trust and integrity that many project onto Singapore’s island of stability in a region of economic and political upheaval.”

 
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Israel may be a tiny sliver of real estate, but it punches way above its weight when it comes to R&D investment and entrepreneurial mojo. The US and China have the most companies traded on the tech-centric Nasdaq index—but in third place is Israel. According to the World Bank, no country invests more of its GDP (4.25 percent) on R&D. And residents like Jimmy Massatschi, Managing Partner of the tech scouting firm Innovantage Partners, boast that the country has a higher density of startups per mile than even Silicon Valley.

Global corporations are taking note: More than 350 multinationals across every industry have taken up residence in the country, from Nielsen and BNY Mellon to McGraw Hill and Alibaba. The nonprofit StartupNation Central, which spun out of the best-selling book of the same name, has played a role in educating and assisting those companies as they look to plug in to the Israeli entrepreneurial ecosystem, and the group regularly hosts corporate leaders from around the world.

The center of it all is Tel Aviv, where the Technion and Tel Aviv University crank out entrepreneurs, techies, and scientists, and several dozen venture capital firms hunt for their next deal. Newly-arrived investors include Pitango, aMoon, and OrbiMed, which invests in healthcare startups. But plenty of other well-known US venture firms have also staked a claim in Israel, from GE Ventures and Autodesk Investments to HP Tech Ventures and Verizon Ventures.

Website-hosting company Wix.com, big-data management company Attunity, and wireless backhaul solutions provider Ceragon Networks are a few of the fast-growing tech companies based in Tel Aviv. Their neighbors include innovation and R&D labs set up by more established brands like VisaSamsung, and Google. Israel Ganot, the former head of the MassChallenge Israel startup accelerator, says there’s action in “diverse fields of innovation, including cybersecurity, automotive, digital health, ag-tech, foodtech, water and energy, and fintech.”

The mobility space appears to be particularly active in Israel, especially on the heels of two high-profile and multi-billion-dollar exits, Mobileye (acquired by Intel) and Waze (now part of Google). “There’s generally a big trend in automotive,” says Massatschi. “Daimler/Mercedescame two years ago, Volkswagen came nine months ago, and BMW will come in the summer [of 2019]. Continental did an acquisition of Argus Cyber Security in 2017, and that gives them a presence in Tel Aviv.”

Massatschi says that the trend now is less about big companies setting up large R&D centers in Tel Aviv, “but it’s more having an innovation or scouting team, or a few desks here—smaller teams of one to five people, maybe up to 25 people. They’re scouting for investments and partly [for] R&D purposes.”

In 2016, the Tel Aviv Stock Exchange and Taglit-Birthright Israel launched a visitor’s center to offer a glimpse of new technologies being developed in the country, the Center for Israeli Innovation. More than 80 companies use it as a showcase for their products, and nearly 4,000 groups have come through on tours since it opened.

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Investors’ waning confidence in the UK market (thanks, Brexit!) may have cost London its No. 1 status as the world’s largest financial center, but a chunk of the world’s foreign exchange trading still flows through the city—a whopping $5.1 trillion a day. London is home to financial services firms like Lloyd’s, HSBC Holdings, and Barclays. All three are banking big on innovation: HSBC has a corporate investment arm, and both Lloyd’s and Barclays run startup accelerator programs.

Supporting it all is Innovate Finance, the UK’s four-year-old fintech trade body, which has funding from the City of London and roughly 50 banks and insurance providers.

Beyond fintech, there are artificial intelligence startups like DeepMind (acquired by Google for $500 million), and Blue Prism, ranked as one of the world’s smartest companies by MIT Technology ReviewBrewDog sells a line of craft beers; Improbable makes tools for videogame developers; and Darktrace is building an “enterprise immune system” to keep companies secure. Shared office spaces like Campus London, Makerversity, TechHub, Rainmaking Loft, and Rocketspace house hundreds of up-and-coming companies.

“London is still a leading city when it comes to funding, supporting, and championing innovation—from the policy makers, regulators, investors, startups, and now the corporate sector—everyone wants to capitalize on London’s unparalleled environment,” says Claire Cockerton, a serial entrepreneur and founder of Plexal, a 68,000-square-foot “mini-city” designed to spur innovation. “Innovation budgets are becoming bigger and bigger, and there is a growing realization that innovation belongs in the corporate DNA, not as a side project led by one millennial hire.”

Some of the world’s top academic institutions lie just outside the city, in Oxford and Cambridge. But closer to the City of London is Imperial College, among the best schools anywhere for engineering, science, math, and technology, according to the QS Top Universities Ranking. In 2016, Imperial opened a new incubator at its White City campus that quickly filled up with 20 early-stage science and tech startups like CustoMem, which captures pollutants in industrial wastewater, and Polymateria, creating additives for plastic products that enable them to biodegrade.

Not to be left out of the picture are some of the biggest and best-known brands in the UK. The venerable British Broadcasting Corporation has a labs group, founded in 2012, that works on projects at the intersection of journalism, technology, and data. Retailer Tesco is exploring “convenience, immediacy, and personalisation,” in the words of lab head Jo Hickson. John Lewis & Partners, which operates supermarkets and department stores, invites startups from around the world to participate in its Jlabs innovation programs and works with the most promising ones on pilot tests. And power company Rolls-Royce—the one that makes jet engines and nuclear reactors, not luxury cars—is developing micro-grid technology to take better advantage of renewable power sources, as well as electrically-powered aircraft engines.

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Beijing is booming.

On the last day of February, the Beijing Municipal Commission of Development and Reform rattled off a list of 300 major construction projects in the city, including 100 related to “high-end technological industries.” The total investment in those 300 projects? $35 billion. And that doesn’t include the new Beijing Daxing International Airport on the fringes of the city, slated to open in September. The price tag for Beijing’s second major international airport, designed by architect Zaha Hadid and ADP Ingénierie of France, is expected to hit about $14 billion.

China, with its population of 1.4 billion, is already the world’s second-largest economy.  Investors have been vying to tap into the country since China kicked off its market reforms four decades ago.

“Beijing is like Washington, DC and San Francisco wrapped up into one,” says Hari Nair, the former Kimberly-Clark innovation executive. “You’ve got the government. And all the startups, and obviously all the multinationals have a pretty significant presence in Beijing.”

And with China’s socialist regime playing such a strong role in the economy, “being close to the government is still a good idea in 2019,” says Cyril Ebersweiler, the founder of Shenzhen-based startup accelerator HAX.

More than 50 Beijing-based companies landed on the Fortune Global 500 list. State-owned energy giants like State GridSinopec Group, and China National Petroleum ranked second, third, and fourth on the list, respectively.

And MIT Technology Review in 2017 included two Beijing-based companies on its 50 Smartest Companies list: facial-recognition service Face++ at No. 11 and Internet search and AI company Baidu Inc. at No. 50.

JD.com, headquartered here, is the largest retailer in China by revenue: about $55 billion in 2017. It operates both brick-and-mortar stores and highly-automated warehouses that take advantage of robotic arms and mechanical exoskeletons that help workers lift heavy items, as well as artificial intelligence. And JD.com is also testing drone delivery for some products, both in China and Indonesia.

Beijing pulled in about 14 percent of the world’s total venture capital investment between 2015 and 2017, according to venture capital research firm PitchBook. Startup accelerators like Plug & Play (with locations in Beijing and several other Chinese cities) help broker connections between those startups and corporates like BNP Paribas, Bosch, Nestlé, and Procter & Gamble.

Schools like Tsinghua University and Peking University crank out thousands of computer science, engineering, and life sciences grads. Research labs run by Microsoft and Google help turn those grads into industry experts.

While some foreign companies still prefer to put down roots in Shanghai, says Pascal Marmier of Swiss Re, Beijing is “the most active innovation environment in China, by far.” 

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Don't forget to check out the rest of our Sping 2019 magazine, featuring case studies from Coca-Cola, Cisco, the Air Force, P&G, and more. Check it out »

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