1. Policies for Cluster Creation: Lessons from the ISRN Research Initiative
David A. Wolfe, Ph.D.
Program on Globalization and Regional Innovation Systems
Centre for International Studies
University of Toronto
Presentation to the Breakfast on the Hill Seminar Series
Centre Block, Parliament Hill
February 17, 2005

2. Context Innovation Systems Research Network (ISRN)
Established in 1998 to support interaction among researchers and their partners
To promote the diffusion of findings to public and private sector partners
Instrumental role of Statistics Canada Workshop March 1997
Strong network of international collaborators
Research Advisory Committee

3. 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.

4. 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

5. Research Dissemination
Web Site:
Subnetworks
Bibliography
Annual Volume – Queen’s School of Policy Studies
Electronic Newsletters
Rin – Le Bulletin Innov
Thecis Newsletter
ONRIS – OREDI Newsletter
“For anyone interested in cultivating the widest possible understanding of the tech-based economic development, one of the best possible web sites is Ontario’s OREDI Newsletter. Every issue of the newsletter is packed with links to quality articles, academic research papers, reports, proceedings and events. The content selection is a good balance between Canadian, US and other international perspectives on this field.” SSTI Bulletin, Feb. 22, 2002

6. The Innovation Systems Approach
network of institutions that interact to initiate, import and diffuse new technologies
government policy
corporate R&D
education and training system
structure of industry
patterns of interaction between firms as collective learning process in acquisition and use of new knowledge
internal organization of firms
network of interfirm relationships
role of public sector
degree of R&D intensity
nature of R&D organization

7. National System of Innovation

8. From the National to the Regional
Focus shifts from the national to the regional level:
Recognition that spatial proximity facilitates the sharing of tacit knowledge and capacity for localized learning;
Firms clustered in a region share a common regional culture that facilitates learning;
Localized learning is facilitated by a common set of regional institutions
Regional Innovation System:
“The set of economic, political and institutional relationships occurring in a given geographic area which generates a collective learning process leading to the rapid diffusion of knowledge and best practice” (Nauwelaers and Reid)

9. Spatial (nested) Scales
National
Corporate organization and governance
Legal/regulatory framework
Fiscal (taxation) and macroeconomic environment
Framework of industrial relations and labour training
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

10. Sources of Competitive Advantage in Regional Economies
‘Untraded interdependencies’ - technological spillovers
knowledge and practices transferred between firms
not always codified or explicit - ie. tacit dimension
transferred through networks
technological competence bundled in ensembles of related capabilities
Networking - based on trust
shared intelligence of group of firms
grounded in a regional economy
Social capital - shared norms and trust
facilitates cooperation among firms and sectors
shared institutional frameworks
region’s ‘institutional architecture’

11. ISRN: 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?

12. 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’

13. ISRN: Work in Progress (2001-2005)
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)

14. Emerging Findings: 5L’s
Location
Dynamic, innovative concentrations of firms rely equally on strong local and global linkages
Research infrastructure and/or local labour pool are critical
(Saskatoon Biotech, Ottawa Telecom and Wireless, Montreal Aerospace, NB e-commerce)

15. Emerging Findings Learning Old and new industries
In-house and inter-firm
Local and non-local
Local memory, experience key – esp. amongst VC, angels, managers,
Specialized professionals

16. Emerging Findings Labour The single most important input
Many places can produce ‘talent’
But their ability to retain and attract talent depends on:
Thickness, opportunities, depth of local labour market
Quality of place: creativity, diversity, tolerance

17. Emerging Findings Leadership: @ 2 scales Firm: Community:
Managerial talent, entrepreneurial ability differentiates one firm from another (e.g. Montreal Aerospace, S Ont Steel)
Established large firms with global reach act as visible, symbolic role models to encourage new entrants
Community:
‘Civic entrepreneurs’ play a key role in creating the conditions conducive to cluster formation and growth
+ Waterloo, Ottawa, Montreal
– Toronto?

18. Emerging Findings Legislation/Labs: Public sector role
Institutions, regulations shape ‘rules of the game’
e.g. IP rights, barriers to entry/exit, time horizons, labour market stability/mobility, immigration
May be set by nation, province or individual organization
Role of local universities/research institutions is not consistent across all cases
some clusters are clearly university-led
in other cases, universities are followers, not leaders, but are still important…
Policy inadvertence – unintended consequences

19. 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

20. 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

21. Strategic Planning at the Community Level
Innovation-based strategic planning
Promotes innovative ideas in all aspects of regional economy
Facilitate relationship-building
Strategic assessment of local/regional assets
Workforce skills
Knowledge assets and R&D
Creative elements
Physical and Communications Infrastructure
Quality of place
Collaborative institutions
Entrepreneurial networks and clusters
Key Role of Civic Leadership
Brings civic interests together to collaborate
Creates broad buy-in across all sectors of community