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From Industrial Policy to Innovation Strategies: The Global and the Local


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Title: From Industrial Policy to Innovation Strategies: The Global and the Local

From Industrial Policy to Innovation Strategies
The Global and the Local
  • David A. Wolfe
  • Program on Globalization and Regional Innovation
  • Munk Centre for International Studies
  • University of Toronto
  • Presentation to the Industry Canada/ICP Workshop
  • Industrial Policy and International Trade
  • Ottawa, Ontario, March 13, 2009

What is Industrial Policy?
  • Definition
  • Any government program that directly affects the
    economic activity of an industry, company or
  • Policies designed to change economic structures,
    behaviour and/or performance
  • Types of industrial policy
  • Innovative designed to promote growth and
    development by fostering the promotion of new
    product and process technologies
  • Defensive attempt to protect firms, sectors or
    regions against undesired economic changes
  • Adaptive attempt to ease the adjustment process
    by reallocating capital and human resources away
    from declining economic activities

The End of Industrial Policy ?
  • Failure of Industrial Policy, 1970s to 1980s
  • Adaptive and defensive more than innovative
  • Industry and Labour Adjustment Board
  • Canadian Industrial Renewal Board
  • Individual bailouts Chrysler, Maislin,
  • Tier I and Tier II Consultations
  • Great expectations few results
  • Megaprojects strategy
  • Sidelined in Cabinet
  • Macdonald Commission Report
  • In a small open economy, industrial policy and
    trade policy are synonymous FTA, CUFTA

Provincial Industrial Policy
  • Provincial Initiatives 1980s and 1990s
  • Ontario Premiers Council Reports late 1980s
  • Competing in the Global Economy
  • Industrial Policy Framework 1992
  • Emphasis on sectors Sector Partnership Fund
  • Quebec early 1990s
  • Industrial Atlas of Quebec
  • Influence of Porter
  • provincial economy as twelve industrial clusters
  • Parallel initiatives in BC, Sask, Nova Scotia
  • Lack of integration with federal strategy

Industrial Policy Redux
  • Federal Programs Innovative Adaptive
  • DIPP, TPC and Program for Strategic Industrial
  • Industrial and Regional Benefits Policy
  • Regional Development Agencies
  • Subsidy and loan programs
  • Science and Research Policy
  • SRED
  • NCEs, CRCs,

Industrial Policy from an Innovation Systems
  • Innovation is a social process
  • Networks and relationships facilitate the
    translation of new ideas, ie. research into
    commercial products
  • Innovation is place-based
  • Occurs in an institutional, political and social
  • Spatial proximity facilitates sharing of
    knowledge and capacity for localized learning,
    but global pipelines remain important
  • Localized learning is facilitated by common set
    of regional institutions
  • Innovation policy becomes the cornerstone of
    industrial policy
  • Focuses on system failures rather than market
  • Recognizes the internationalization of technology
  • Learning process are central to innovation and
    policy design
  • Knowledge capabilities are person embodied

Schumpeterian Dynamics in a Small Open Economy
  • Inventive activities of firms in
    knowledge-intensive industries remain
    concentrated in home country (Macher Mowery
  • Growth of global production networks
  • Vertical specialization firms specialize in a
    limited set of activities
  • Design, systems integration and RD located in
    home base
  • Small open economies face structural disadvantage
    from the perspective of Schumpeterian competition
    (Harris 1985)
  • Smaller indigenous firms perform lower levels of
    RD and face greater barriers to entry in
    Schumpeterian industries
  • Less than optimal industrial structure for
    Schumpeterian competition especially in where
    scale economies represent entry barrier
  • Industries in which product differentiation is
    the most important structural feature of the
    innovation process offer greatest for success for
    smaller firms from a small open economy to
    establish export market bases
  • Provides justification for targeted support for
    firms in these industries

Spatial (nested) Scales
  • National
  • Corporate organization and governance
  • Legal/regulatory framework
  • Fiscal (taxation) and macroeconomic environment
  • Framework of industrial relations and labour
  • Financial system
  • Government policy
  • State/Provincial
  • Regional industrial structure
  • Research infrastructure higher education sector
  • Specialized training institutions
  • Government policy/support
  • Industrial attraction and retention
  • Local /Cluster
  • Civic governance
  • Physical /communications infrastructure
  • K-12 education system

Unique Capabilities of Local Innovation Systems
  • Regional Innovation Systems produce unique local
    capabilities, which become a key source of
    competencies for local firms in a variety of
  • Localised capabilities include
  • The regions specific institutional endowment
  • Local knowledge infrastructure
  • Specialized knowledge and skills available in the
  • These capabilities develop and evolve slowly over
  • A regions institutional endowment shapes
  • Distinctive rules, practices, routines, habits,
    traditions, customs and conventions
  • Entrepreneurial spirit, moral beliefs, political
    traditions and decision-making practices
  • Regional culture

Clustering as a Source of Competitiveness
  • Competition and cooperation are complementary
  • The old dichotomies no longer apply (Best 2001)
  • Cluster members are both suppliers and buyers
  • Beneficial outcomes of cluster collaboration
  • Creates linkages among firms
  • Facilitates specialization
  • Role of lead anchor firms
  • Focus on core competence
  • Builds critical mass
  • Improved branding and marketing
  • Enhanced resources for the cluster
  • Specialized financing, education, policy supports
  • Attracts customers, new investment, skilled
  • Growth of a thick labour market

Average Regional Income by Employment in Clusters
Strategic Management ofLocal Innovation Systems
  • Regional response to globalization is emergence
    of strategic management policy
  • Not for firms, but for regions
  • This strategic management of regions has
    harnessed the propensity for knowledge and
    innovative activity to concentrate geographically
    as a locomotive of regional economic development
    (Audretsch, 2002)
  • Collaborative institutions - formal and informal
    organizations that
  • Facilitate exchange of information and technology
  • Foster cooperation and coordination
  • Enhance civic capital and improve competitiveness
  • Creating relationships and establishing trust
  • Forming collective institutions
  • Identifying common strengths and developing
    common agenda
  • Formulate innovation-based strategic plans
  • Strategic planning exercises draw upon civic
    capital created by these institutions
  • local social knowledge management exercises

Strategic Planning at the Community Level
  • Innovation-based strategic planning
  • Promotes innovative ideas in all aspects of
    regional economy
  • Integrate across all levels of governance
  • Promotes strategic alignment of policy across
    spatial scales
  • Strategic assessment of local/regional assets
  • Workforce skills
  • Knowledge assets and RD
  • Creative elements
  • Infrastructure
  • Quality of place
  • Entrepreneurial networks and clusters
  • Key Role of Community Leadership
  • Civic entrepreneurs
  • bring civic interests together to collaborate
  • Create broad buy-in across all sectors of

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
  • National policies impact at the local level
  • Best example is IRAP which builds innovative
    capacity at local level
  • Need to coordinate role of federal agencies at
    local level
  • Growing role of networks and clusters
  • Disaggregation of companies and industries as
    objects ofpolicy into supply chains and
    knowledge networks.
  • Continuing role of lead anchor firms in grounding
  • CATAs motherships
  • Gaps in capital markets at key stages of cluster
  • Critical role of strategic planning and regional
    foresight at the local and community level