Regional Clusters in a Global Industry: ICT Clusters in Canada

1
Regional Clusters in a Global IndustryICT
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
• Queens Park, Toronto
• November 4, 2005

2
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

3
ISRNs Cluster Life Cycle
4
ISRNs ICT Case Studies

• Ottawa Telecom and Photonics
• Waterloo ICT and Software
• Calgary Wireless
• Vancouver Wireless
• Quebec Photonics
• New Brunswick ICT
• Cape Breton ICT

5
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

6
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 NovAtel
• Quebec Photonics Exfo and ABB Bomem early
  spinoffs
• NB ICT provincial government and NBTel
• Cape Breton government directed

7
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

8
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 RD Big D, little R
• For regions with both weak public research
  infrastructure and private RD activity
• Challenge of expanding knowledge base is
  considerably greater

9
The RIM Partner Model
Network Systems Management
ERP/SCM
Messaging Collaboration
Document Management
Corporate IT Environments
CRM
Content Providers
Business Intelligence
Platforms
Corporate Access
10
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

11
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

12
Emerging Role of Civic Associations

• Networking Institutions for Collaboration
• Promote cluster awareness
• Engage in dialogue of clusters 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

13
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 clusters 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

14
The Role of Financethe 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 VCs
• Cluster growth attracts foreign VCs
• Expansion of LSVCCs 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

15
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

16
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