An understanding of how the built urban environment affects innovation will contribute significantly to the current high tech economic development policies across the country. With the employment competition in the globalized economy, city and county governments have identify knowledge based economic activities, including innovation, as a new source to create high pay jobs. They pursue high-tech economic development policies by creating special high tech centers and parks, providing tax breaks to high tech companies, and increasing funding to research activities. If urban environment can be shown to have impacts on innovative activities, city planners could devise land use policies to improve innovation and thus create new jobs. Urban sprawl, characterized with leap frog development and low population density, is a common phenomenon in American urban landscape and has attracted a fair amount of attention from planning scholars. Urban sprawl leads to longer commute distances and automobile dependence, which likely creates impediment to face-to-face interaction important to the innovation process.

To answer that question, the current paper examines the mechanism of urban environment that may influence innovative activities, based on what has been discussed in the literature regarding urban sprawl, social cohesion, and knowledge localization. The empirical analysis uses the US patent data by application years from 1990 through 2002 (Hall, Jaffe, and Trajtenberg 2001, Hall 2003), the county compactness data (Ewing et al. 2003), and the Social Capital Benchmark Survey data (Roper Center 2005).

Among important findings, urban form has some impacts on innovation activities. However, more compact counties are associated with lower innovation after controlling for other factors. Social trust is positively associated with innovation meanwhile faith ties are negatively associated with innovation. The results regarding urban form and innovation may not be conclusive because of certain limitations in the way urban form has been captured. The study sets up a solid framework for future studies before we advocate using the land use planning tool as part of innovation policies.