Innovation Systems Research Network Embedded Clusters in a Global Context: Findings from the ISRN Research Initiative David A. Wolfe, Ph.D. Program on Globalization and Regional Innovation Systems Centre for International Studies University of Toronto Presented to the 8 th Annual Meeting of the Innovation Systems Research Network Kingbridge Centre, King City, May 4, 2006

Innovation Systems Research Network Objectives Encourage the creation of linkages and the exchange of ideas and information among the academic community, private sector firms and associations and government policy makers; Develop agendas for research on the relationship among innovation, the new knowledge-based economy, and regional economic clusters; Foster a multidisciplinary approach to research that includes a variety of disciplines such as business, economics, urban planning, public administration and science and technology management; Encourage the development of graduate students with the interests and skills necessary to contribute to future research in this area and/or to practice as managers of science-based innovation; and Improve innovation systems, thereby influencing public policy and corporate strategy.

Innovation Systems Research Network Design Features Nodal Structure Five subnetworks Multidisciplinary membership Structure mirrors regions being studied –Research methodologies tailored to regions being studied Research dissemination –Regional workshops –National meetings –Web sites and electronic newsletters –Annual publication Links with extensive network of government partners –Policy advice tailored to the regions

Innovation Systems Research Network MCRI Project on Industrial Clusters Core Research Questions To what extent — and in what ways — do local, extra–firm relationships and interaction enable firms to become more innovative and successful? What is the relative importance of local, national and global relationships and knowledge flows in spurring the development of regional clusters over time?

Innovation Systems Research Network Cluster Case Studies Size and composition of the cluster History of the cluster’s evolution, including key events (intentional and accidental) Relationships between firms Relationships between firms, research infrastructure, other institutions/organizations Geographical structure of these relationships Role of finance capital (especially angel investors and venture capitalists) Role of local social capital and civic entrepreneurs

Innovation Systems Research Network MCRI Case Studies ( ) Biotech/Biomed: Montreal, Toronto, Vancouver, Ottawa, Saskatoon, Halifax ICT/Photonics/Wireless/e-Commerce: Vancouver, Calgary, Waterloo, Ottawa (Telecom and Photonics), Quebec City, New Brunswick, Cape Breton) Mechanical Engineering: Aerospace (Montreal); Steel (S. Ontario), Auto Parts (Windsor, Waterloo) Multimedia: Montreal, Toronto, Vancouver Food and Wine: Specialty Foods (Toronto); Wine (Niagara, Okanogan) Resource Industries: Wood Products (BC); Mining Supply/Services (Sudbury)

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 ISRN’s Cluster Life Cycle Cluster Activity Time LatentDevelopingEstablishedTransformational Shrinking margins Instability Reinvention or/ Government intervention New companies Expanding markets Movement of HQP among firms Private to IPO International standards Experts Private R&D investment Incubators Innovation assistance Angel & VC investment Champions Linkages HQP Infrastructure Gov’t R&D funding Champions Linkages

Innovation Systems Research Network Clusters and Industrial Structure Emerging contribution to cluster literature –excessive tendency to generalize from one industrial sector across all others i.e. Silicon Valley and ICT sector Tendency to apply one analytic model across wide variety of different geographic settings Clusters are industrially specific Key characteristics determined by –Age of cluster –Maturity of underlying technology –Supply chain linkages and/or disaggregation –Production model –Links to local labour markets

Innovation Systems Research Network ISRN CLUSTER TYPOLOGY Knowledge Dimensions Industrial Structure and Cluster Linkages Lead Anchor Firm Global Supply Chain Local Value Chain Synthetic Ontario SteelMontreal aerospace Waterloo auto parts Sudbury Mining S&S Windsor auto parts/ Machine tool & die Analytic NB-IT Ottawa photonics/telecom Calgary/Vancouver wireless Saskatoon biotech Waterloo ICT Mtl, Tor, Van, Hal Biotech/life science Cape Breton IT Mtl, Tor, Van media Quebec photonics Ottawa biotech Hybrid Ontario, BC wine BC wood products Ontario food

Innovation Systems Research Network The Local and the Global Key elements of the literature maintain the importance of the local supply network and demand conditions for cluster development ISRN findings contradict this –Both key suppliers and customers are often non-local –Cluster firms are well integrated into global supply chains and knowledge networks This is more true for ICT, bio-life sciences and mechanical engineering In multimedia, food and wine clusters, local demand conditions and supply base are more critical Clusters are anchored to their locality by agglomeration economies, –especially the labour market

Innovation Systems Research Network Research Infrastructure In contrast to most celebrated international case studies –Research institutions play supporting, not causal role Clusters are not spun-off from research institutions Waterloo and Ottawa ICT are clearest exceptions Research (especially PSE) institutions are excellent ‘market readers’ –Expand research and teaching activities to meet needs and demands of local clusters –Contribute to development of a thick labour market

Innovation Systems Research Network Role of Talent and Local Labour Market Depth and breadth of labour market – key ingredient for cluster development Depends on strength of educational institutions –Underlying quality of place Key question is what factors influence the growth of strong local labour market –How do you retain talent in the local labour market

Innovation Systems Research Network Local Dynamics Local knowledge circulation –Intra-cluster knowledge flows –Linkages between research infrastructure and cluster firms –Learning at three levels Within firm Within cluster At level of broader community Strong social networks at community level –New institutions of civic governance –Value of inclusive civic engagement

Innovation Systems Research Network Policy Implications Importance of social factors and institution building Linkages between elements of the system –Especially research infrastructure and clusters –Institutional alignment Importance of demand side of innovation system –Absorptive capacity –Knowledge is not a ‘free good’ National policies impact at the local level Growing role of networks and clusters –Talent as a key attractor –Combination of educational resources and quality of life factors

Innovation Systems Research Network Policy Implications II Broad mix of policies –Support for upgrading innovative capacity of firms –Infrastructure to promote rapid diffusion of technologies –Support growth of SME’s through networking and interaction –Role of financial system –Stimulate both supply of and demand for new knowledge Critical role of strategic planning and regional foresight and the local and community level –Coordinate federal agencies at local level