Innovation and tech hubs shape the knowledge economy

Talent is more important than ever in this technological age but increasingly hard to attract and retain. Skilled workers tend to cluster around major tech companies and research universities, making it hard for firms located elsewhere to keep up with digital transformation. Technology is not the only driver. Whether reshoring semiconductor production or expanding footprints in new midsize cities, companies often struggle to find a sufficiently skilled workforce, including engineers and technicians.

Executives recognize the urgency: Half of the CEOs (50% of the 415) surveyed in 2026 by the Oliver Wyman Forum and the New York Stock Exchange see talent attraction, retention, and workforce development as a key opportunity for their business over the next three years.

Locating in cities where talent is more readily available will be key to this strategy, but it’s not sufficient by itself. Businesses must also provide ongoing training or risk losing promising employees, and where talent isn’t available, outsourcing to a growing number of BPO hubs.

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Cities with vibrant ecosystems can help build deep talent pools

Companies can meet this talent goal by finding cities that have the universities, amenities, and career opportunities that employees — especially Gen Zers and millennials — want and by providing them with the ongoing training they need.

Locating in cities with strong STEM universities, vibrant VC scenes, and a mixture of world-class multinationals and emerging startups helps to attract talent. Our data shows that leading cities, such as London, Boston, or Seoul, have a unique combination of all these attributes at a world-class level. But companies can look beyond such leaders to a growing number of cities with a share of these attributes. Helsinki, Manchester, and Wuhan, for example, are important talent hubs in their own right.

These cities also function as training ecosystems at a time when training is more valued than ever. According to Oliver Wyman’s 300,000 Voices report, a third of employees said access to training would most improve their work experience, but only about a third of workers are confident they are getting the skills they need. Companies can provide this training. But employees also can learn by attending university courses, collaborating with startups, engaging with adjacent industries, or switching firms.

In cities with vibrant talent ecosystems, workers benefit from reduced career risks through proximity to multiple opportunities, even as AI threatens to disrupt jobs. For firms, these environments bolster their ability to design and implement effective training initiatives, fostering a deeper, more adaptable labor pool. With skills becoming obsolete in less than five years, building and leveraging strong talent ecosystems is more critical than ever for both employees and companies seeking sustainable growth.

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The global talent war is heating up

Companies also can focus on cities that provide business- and worker-friendly financial incentives, and so are magnets for talent. Dubai and Riyadh, for example, attract some of the world’s best talent with low or zero personal tax rates, compared with around 17% in Hong Kong and Singapore and up to 43% in Europe.

European cities are especially concerned about losing talent to cities across the Middle East and Asia, attracted by opportunities to earn and build savings. In the United States, state income tax differences are one of the drivers of migration between states and their cities.

Visa policies are another key differentiator. Many workers want to move but cannot obtain the necessary visa or passport. The US government has raised fees on new H-1B visas, risking reducing inflow of high-skilled foreign workers, with cities officials having little flexibility to respond. By contrast, Dubai and Abu Dhabi have introduced the five-year UAE Golden Visa (long-term residence permits) and are among the world’s fastest in terms of work visa processing times. Hong Kong has similarly introduced a Top Talent Pass Scheme (TTPS) for graduates from top global universities.

Livability and affordability also drive talent flows. European cities have significant strengths in this regard, such as Munich’s proximity to mountain retreats, Paris’ art galleries, and Tallinn’s striking mix of medieval and modern architecture, which are more important for some than relative tax rates. American cities like Cleveland and Huntsville are attracting talent from larger competitors by providing lower housing costs, with rents up to half the price of larger cities, while Denver and Seattle offer outdoor activities.

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AI and aging populations globally make outsourcing key for city success

If talent is not available locally, companies need to outsource business to other locations. India’s Hyderabad and Pune and the Philippines cities of Cebu and Bacolod, for example, have grown significantly as BPO hubs, but competition for talent is also fierce and business leaders may need to look in non-traditional locations. Identifying new outsourcing hubs based on metrics such as graduates, connectivity, or digital infrastructure are key.

Change is already underway. Cairo and Tunis, for example, are engineering talent hubs for European automotive players. Our data shows nearly 50 midsize cities that have clusters of universities, such as Amman, Islamabad, and Lima, but lag on commercial metrics. That suggests opportunities to grow as BPO or R&D hubs by investing in data infrastructure, introducing foreign investment incentives, and seeking anchor investors.

Demographics will drive growth in these hubs as aging populations in Asia and Europe impact the economy, shrink workforces, and increase spending on healthcare and pensions. The median age in Hyderabad, Cebu, and Cairo is just 26 years, compared with mid-40s in Osaka, Essen, and Valencia. For firms unable to find either sufficient talent or the right type of capabilities in the latter cities, opportunities to outsource are significant. Relatively younger African cities also have an opportunity — Cape Town and Durban are leading the charge, with Lagos, Nairobi, and Kigali also on the radar.