Regional Clusters in a Global Industry: ICT Clusters in Canada

1. 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 Regional Clusters in a Global Industry:ICT Clusters in Canada

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. ISRN’s Cluster Life Cycle

4. 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

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 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

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 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

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 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

14. 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

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