I just got back from Tallinn, Estonia, which definitely deserves to be the European Capital of Innovation (Amsterdam is the current Capital).* Watch this:
These contests are great for promoting "benchmark competition" (a type of Tiebout sorting), which helps current citizens get better services and would-be migrants decide where to go.
* Three French cities are in the running. It seems they plan to "innovate" without speaking English. I worry about that.