Regional Clusters in a Global Industry ICT Clusters
Regional Clusters in a Global Industry: ICT Clusters in Canada David A. Wolfe Matthew Lucas Anita Sands Program on Globalization and Regional Innovation Systems Centre for International Studies University of Toronto Presentation to the ONRIS/MRI/MEDT Fall Workshop Queen’s Park, Toronto November 4, 2005 Innovation Systems Research Network
Key Issues • Two stages of cluster development – Cluster evolution – Cluster growth • Key Factors – – Talent Knowledge base Anchor organizations Partnerships and linkages • Policy implications – The role of senior levels of government Innovation Systems Research Network
ISRN’s Cluster Life Cycle Innovation Systems Research Network
ISRN’s ICT Case Studies • Ottawa Telecom and Photonics • Waterloo ICT and Software • Calgary Wireless • Vancouver Wireless • Quebec Photonics • New Brunswick ICT • Cape Breton ICT Innovation Systems Research Network
Path Dependence and Cluster Formation • Initial conditions and trigger events – – – Entrepreneurial intervention Role of lead or anchor firm Spin-offs and technological spillovers Key role of public sector institutions Institutional and cultural dynamics • Random acts of entrepreneurialism not fully explained by local circumstance: – “Chance, however, often has local antecedents, making its role less than it first appears” (Porter) – Cluster emergence inextricably intertwined with local institutions Innovation Systems Research Network
Cases in Cluster Formation • Local antecedents – – – Ottawa ICT – federal labs Waterloo ICT – founding of university Calgary Wireless – public infrastructure Quebec Photonics – public research institutions NB ICT – lead anchor firms Cape Breton – industrial restructuring • Chance occurrences and trigger events – – – Ottawa ICT – US consent decree – Bell Northern Research Waterloo ICT – Waterloo Maple and early spin-offs Calgary Wireless – Nov. Atel Quebec Photonics – Exfo and ABB Bomem – early spinoffs NB ICT – provincial government and NBTel Cape Breton – government directed Innovation Systems Research Network
Talent and Cluster Formation • Development of ‘thick’ labour market supports cluster formation – Ottawa and Waterloo blessed with strong research infrastructure that fed growth of talent base – Quebec – specialized research infrastructure that focused on niche markets – Calgary and Vancouver – critical role of lead anchor firms contributed to concentration of talent in the local economy – NB – lower skilled labour force, but exploited cost advantage to attract firms – Cape Breton – government driven, limited education base – limited success • Inflow of firms attracted to talent base – But also stimulates growth of the talent base • Challenge of finding management talent to support cluster growth Innovation Systems Research Network
The Knowledge Base for Cluster Formation • Analytic knowledge base draws upon research infrastructure of the regional economy – interaction between research institutes and entrepreneurial drive of emergent firms • Combinations of complementary knowledge – Alberta Telephones and Nova Corp • As cluster grow – firms expand source of the knowledge base – RIM partners – Nortel global research activities • Differentiate between R&D – “Big D, little R” • For regions with both weak public research infrastructure and private R&D activity – Challenge of expanding knowledge base is considerably greater Innovation Systems Research Network
Corporate IT Environments The RIM Partner Model Network & Systems Management ERP/SCM Messaging & Collaboration Document Management CRM Content Providers Business Intelligence Platforms Corporate Innovation Access Systems Research Network
The Role of Anchor Organizations • Anchor organizations pivotal in the emergence of six out of seven case studies – Divided between large private firms • Ottawa, Vancouver • Internal capital and market linkages – crucial assets – Public utilities • Calgary, New Brunswick – Public research institutions • Waterloo, Quebec • Provided stable employment and helped build thick labour market – Source of spin-off firms and new firm formation Innovation Systems Research Network
Partnerships and Linkages • Crucial role of public research facilities in partnering with private industry • Public leadership can also drive cluster development – Case of NB ICT • Relatively weak local linkages – Lack of intensive local firm interaction – Inapplicability of the Porterian model – Relatively small size of Canadian market and export orientation of firms • Problems of international branding Innovation Systems Research Network
Emerging Role of Civic Associations • Networking Institutions for Collaboration – – – Promote cluster awareness Engage in dialogue of cluster’s competitive position Monitor and communicate market and technology trends Develop training and management programs Develop mentoring programs for new firms/business people – Participate with government in recruitment efforts – Expand cluster to include all constituents – Link common assets across clusters • Emergence of local civic associations is critical step in the formation of cluster identity – – OCRI – Ottawa Communitech – Waterloo Calgary Technologies Inc – Calgary WINBC - Vancouver Innovation Systems Research Network
Drivers of Cluster Initiative Success • Setting – – Strong business environment Trust in government Strong regional government Cluster strength • Objectives – Broad range of objectives – Objectives selected based on cluster’s specific needs – No significant effect of special objectives • Process – – – CI Facilitator with cluster insight CI has office and significant budget CI has clear strategy and measurable goals No negative effect of government financing Negative effect of limiting participation • Source: TCI Greenbook, 2003 Innovation Systems Research Network
The Role of Finance: the Missing Dimension • Few ICT clusters conform to SV model • Key sources of finance – Large anchor firms incubate new spin-offs – Firms startup as service firms – obtain initial finance from local firms or angel investors – Successful entrepreneurs become angel investors or VC’s – Cluster growth attracts foreign VC’s – Expansion of LSVCC’s created new pools of funds • Critical gap at medium stag – Lack of deep capital markets poses critical challenge for growth of firms – Newbridge, MD and others Innovation Systems Research Network
Policy Implications • Linkages between elements of the system – Especially research infrastructure and clusters – Not just a ‘supply-push’ phenomenon • Importance of demand side of innovation system – Absorptive capacity – at both firm and regional level – Knowledge is not a ‘free good’ • Growing role of networks and clusters – Talent as a key attractor – ‘Competing on Creativity’ – Combination of educational resources and quality of life factors • Importance of social factors and institution building • Gaps in capital markets at key stages of cluster evolution • Critical role of strategic planning and regional foresight at the local and community level – Coordinate federal agencies at local level Innovation Systems Research Network
Magic Bullets ? • Business led – sustain leadership – Identify champions • Clustering is a process not a goal • Promote networking and interaction – Build common vision • Focus on achievable steps – Revise, refocus • Align institutions and resources – Across three levels of government – Clusters focus federal/provincial initiatives – Clusters lead workforce development – Educational institutions target critical areas Innovation Systems Research Network
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