A not-so-quiet revolution around medical innovation is taking place in the Philadelphia area. The Penn Center for Innovation at the University of Pennsylvania, the Bossone Research Center at Drexel University and the Jefferson Innovation Center are all helping startup medical companies get to market.

As a whole, such initiatives are commonly called innovation districts or innovation neighborhoods. What exactly are these? A recent study by the Brookings Institution classifies these as geographic areas where leading-edge anchor institutions like Penn, Drexel and Thomas Jefferson, along with private companies, cluster and connect with startups, business incubators and business accelerators. These districts share common traits. They are dense, compact and transit accessible. Many districts own large physical plant assets that have been rewired for digital technology. Such districts also offer mixed-use housing, office and retail space.

So why are innovation districts popping up in Penn’s hometown and in other cities like Baltimore, Cleveland, St. Louis and Houston? Why so rapidly?

Possible reasons for the rise in these districts are the changing demographics and the demand for technology talent. Startup activity and venture investment have begun to shift to urban centers—to be close to each other, often within a quarter-mile of each other, served by mass transit and where people can easily walk from one place to another. Researchers have found that interdisciplinary teams, working in the same building in academic medical centers, for example, often make a difference by creating conditions for scientific breakthroughs. As well, the more open and collaborative nature of the “knowledge economy” is fostering this.

Second, 20 percent of U.S. jobs are in the science, technology, engineering and math (STEM) fields. These naturally include medical devices and pharmaceuticals—all natural fits for Penn, Drexel and Jefferson, based on their affiliation and proximity to leading U.S. medical institutions.  The Philadelphia area in particular has specific expertise in health, computing and informatics due to its teaching institutions and major medical centers.

Third, federal legislation has helped with the passage of the Bayh-Dole Act of 1980, which enabled university and research centers to own the byproducts and technology developed with federally funded research. That helped spark an entrepreneurial mindset.

Fourth, large insurers such as Independence Blue Cross Blue Shield are investing in startups that may help the insurers in becoming more efficient.  This is partially a result of the medical loss-ratio requirement, whereby large insurers are required by law to spend a specific amount on direct patient care and the activities associated with it.

Lastly, research and development in large medical companies has been farmed out essentially to startups.

Interestingly, these innovation initiatives are revitalizing the areas in and around Penn and Drexel. I had an opportunity to witness some of this transformation in a medical device meeting in which I participated in December, hosted by Ben Franklin Technology Partners.  In attendance were accelerator and incubator representatives from Penn and Drexel discussing what they are doing with startups and how to provide the necessary infrastructure for early-stage businesses, as well as a significant number of startup company representatives. The energy, thirst for knowledge and interaction at this meeting was frankly contagious and very exciting to see.