Digital urban development is often associated with more efficient administrative processes, intelligent traffic management or improved public participation. However, the economic dimension of smart city strategies has received less attention to date. Yet it is becoming increasingly clear that digital urban projects extend far beyond their immediate areas of application and can contribute indirectly to the competitiveness of regions.
Economic effects often arise indirectly
Current research indicates that the economic effects of smart city measures are often not directly measurable. Rather, they arise through changes in location factors such as cooperation, innovative capacity, attractiveness and connectivity. Indirect regional economic effects include, for example, greater visibility of the location, the formation of new networks or improved framework conditions for businesses and skilled workers.
The authors of the study emphasise that many of these effects cannot be captured solely through traditional performance indicators. Rather, they often involve qualitative and delayed developments that manifest themselves, for example, in new forms of cooperation, changed working methods or a more positive external perception.
Digital infrastructure is becoming a location factor
The development of digital infrastructure plays a central role. Urban data platforms, smart mobility solutions or digital administrative services can improve local authorities’ decision-making and management capabilities and open up new potential for data-driven value creation. The study classifies these developments as business-oriented location factors and sees them as an important contribution to the future viability of cities and regions.
At the same time, new opportunities for cross-sectoral cooperation are emerging. Digital participation platforms and collaborative planning processes foster networking between public administration, business, academia and civil society. Such structures can accelerate innovation processes and strengthen regional adaptability to economic and technological changes.
Smart Cities as Innovation Ecosystems
The study shows that smart city projects frequently act as catalysts for regional innovation systems. In the model municipalities analysed, new platforms for start-ups, interdisciplinary innovation centres, data-driven participation formats and programmes to promote digital skills and STEM education have emerged.
It is clear that economic effects do not result exclusively from technological applications themselves. Rather, they take effect through a combination of digital tools, physical meeting spaces and new forms of collaboration. These interactions promote knowledge exchange, strengthen regional networks and support the development of innovation-oriented environments.
Securing a skilled workforce and enhancing regional attractiveness come into focus
Another finding of the study concerns the long-term retention of skilled workers. Smart city initiatives can help to promote digital skills at an early stage and forge closer links between education, research and business stakeholders. This creates new opportunities to develop skilled labour potential and enhance the attractiveness of regions as places to work and live.
At the same time, image effects are gaining in importance. Local authorities that visibly implement digital innovations can strengthen their reputation as modern, forward-looking and liveable locations. The study points out that smart city projects are increasingly seen as an expression of a local authority’s capacity for modernisation and can thus indirectly influence investment decisions, business relocations and the recruitment of qualified skilled workers.
Economic impacts are not always immediately measurable
The authors expressly point out that indirect regional economic effects are often only quantifiable to a limited extent. They frequently manifest as observable developments or plausible causal relationships without being clearly attributable to individual measures. Nevertheless, they play an important role in political decision-making and in the long-term sustainability of digital urban projects.
It is precisely here that a key insight for local government practice lies: the value of digital urban development is not measured solely by short-term efficiency gains or business performance indicators. Increasingly relevant are its contributions to innovation capacity, network building, securing a skilled workforce and the strategic positioning of cities and regions.
