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Towards a successful development of smart cities — An exploratory research on factors influencing the financial feasibility


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Version: 1.0

Last Updated: 8-2018


The development of smart cities is a complex process. There is no commonly agreed on
definition, but the positive effects on the urban environment are clear: implementing smart
city technology can increase the quality of life, improve the local economy and attribute to
the sustainability of an area. This is especially of interest due to the ongoing urbanisation
process and the climate change the world is facing. However, at this moment the concept
“smart city” is mainly developed in living labs, supported by subsidies. This study aims to point
out the factors which are important when making the smart city concept financially feasible.
In the developing of smart cities, there certain factors that can drive the development, these
area: community, policy and technology. The community includes the demographic
composition of the area. This includes among other things: residents, businesses, urban
density and the current quality of life. The policy-driver describes whether a government
supports the implementation of smart city technology or not. To understand the technologydriver,
a case study is conducted to Strijp-S, the former factory site of Philips in Eindhoven. In
this area, a backbone is constructed that facilitates connectivity. Connectivity offers the
opportunity to implement the Internet of Things in an area. The Internet of Things enables the
offering of smart city services.
A System Dynamics approach is used to bring all the found factors together into a model that
shows how these factors influence the financial feasibility of the smart city concept and how
the outcome-factors are influenced by the implementation of the smart city enablers. It
appeared that the policy-driver mainly influences the transformation time of an area and so
the speed with which the transformation to a smart city becomes profitable. Secondly, the
community and technology drivers include variables that describe whether an area can be
part of a profitable transformations. An area should be a high-density urban area with
relatively high-income residents, an attractive physical environment and a significant amount
of businesses in the catering and retail sector. In this study, this type of area is classified as
“city-centre areas”.

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