1. Innovation Systems Research Network Life Science Innovation Systems: Lessons from the ISRN Meric S. Gertler Uyen Quach Tara Vinodrai Program on Globalization and Regional Innovation Systems Munk Centre for International Studies University of Toronto Joint ONRIS / MRI / MEDT Fall Workshop Toronto, Ontario November 4, 2005

2. Innovation Systems Research Network Key Questions What drives the emergence and formation of clusters? –What are the catalysts to cluster development? –What role is played by different levels of government, civic associations, and lead / anchor firms? How important is the local knowledge base to cluster dynamics? –Role of private and public actors in generating knowledge –Role of universities in producing knowledge vs. talent Are there different paths leading to successful cluster development (e.g. specialization vs. diversity)? –What are the advantages / disadvantages of these different paths?

3. Innovation Systems Research Network Definitions Biotechnology –OECD (2002): “The application of science and technology to living organisms as well as parts, products and models thereof, to alter living or non-living materials for the production of knowledge, goods and services.” –Statistics Canada and Industry Canada use similar definition Life Sciences –Broad definition that includes biotechnology, medical and assistive technologies, pharmaceuticals, contract research, bioinformatics, etc.

4. Innovation Systems Research Network ISRN Case Study Overview VancouverSaskatoonTorontoOttawaMontréalHalifax Core Biotech - Firms481455108010 - Employment1,7013692,6617363,238558 Life Sciences - Firms80-140~40~400100-140>270~60 - Employment8,8351,01535,5854,63524,9251,720 SpecializationHuman health (diverse) AgricultureHuman health ‘megacentre’ (diverse) Non- therapeutics; ICT-related Human health ‘megacentre’ (pharma) Human health and marine CharacteristicsRapidly growing Ag-biotech centre Scale & diversity EmergentDrug discovery/ pharma Small ‘collection’ of firms Source: PriceWaterhouseCoopers 2003; BioNova 2004; OEOBC/OLSC 2004; Philips et al. 2004; Graytek 2005; Industry Canada 2005; Spencer and Vinodrai 2005;

5. Innovation Systems Research Network Industrial Composition VancouverSaskatoonTorontoOttawaMontréalHalifax Pharmaceutical and medicine mfg XX Medical equipment and supply mfg XXX Medical and diagnostic laboratories XXX Pharmaceutical, etc. distribution / wholesale XXXXX Nav., measuring, medical & control instruments mfg XXXXX Grantmaking and giving services XXXXX Note: ‘X” indicates a location quotient >= 1 in specific industry

6. Innovation Systems Research Network Key Questions What drives the emergence and formation of clusters? –What are the catalysts to cluster development? –What role is played by different levels of government, civic associations, and lead / anchor firms? How important is the local knowledge base to cluster dynamics? –Role of private and public actors in generating knowledge –Role of universities in producing knowledge vs. talent Are there different paths leading to successful cluster development (e.g. specialization vs. diversity)? –What are the advantages / disadvantages of these different paths?

7. Innovation Systems Research Network Different Catalysts and Enabling Factors Role of lead / anchor firm sparked latent entrepreneurialism / provided credibility and inspiration for the region –Vancouver: QLT Inc. (1981) working closely with UBC’s University- Industry Liason Office (UBC-UILO) and resulting in spin-offs –Montreal: BioChem Pharma (1986) and a broad base of large pharmaceutical companies –Halifax: Biotech Working Group (1993); Ottawa: MDS-Nordion (1991); Toronto: Allelix (pioneering Canadian biotech company) Role of federal government through location of national laboratories –Saskatoon: NRC Plant Biotechnology Institute (NRC-PBI) –Montreal: NRC Biotechnology Research Institute (NRC-BRI)

8. Innovation Systems Research Network Different Catalysts and Enabling Factors Role of specific events and background conditions that shape local / regional context –Ottawa: ICT bust in late 1990s raised profile of life sciences, attracting political / financial support, transfer of talent / entrepreneurs –Toronto: origins of diverse life sciences cluster found in the breadth of its older economic activities –Vancouver: weak industrial infrastructure to support product development, modest pool of local venture capital, and absence of a local pharmaceutical base has influenced many firms to become ‘IP vendors’ Role of industrial associations and civic leadership has been generally limited but growing in importance –Ottawa Life Science Council –Toronto: TRRA becoming focal point Role of provincial government through a variety of initiatives –Montreal benefits from large public venture capital pool and tax incentive structures

9. Innovation Systems Research Network Key Questions What drives the emergence and formation of clusters? –What are the catalysts to cluster development? –What role is played by different levels of government, civic institutions, and lead / anchor firms? How important is the local knowledge base to cluster dynamics? –Role of private and public actors in generating knowledge –Producing knowledge vs. talent: role of universities? Are there different paths leading to successful cluster development (e.g. specialization vs. diversity)? –What are the advantages / disadvantages of these different paths?

10. Innovation Systems Research Network Local Knowledge Base Role of key public research institute varies by cluster –Vancouver: Firm creation assisted by UBC-UILO –Toronto: U of T and research-intensive hospitals produce knowledge and talent; recent opening of MaRS –Montréal: NRC-BRI co-evolved with private sector –Saskatoon: R&D coordination led by NRC-PBI –Ottawa: Public research actors passive, though becoming more active recently

11. Innovation Systems Research Network Global Knowledge Flows BUT need to acknowledge interdependent relationship between local and global knowledge flows Saskatoon case an extreme example of this: –Foreign proprietary sources of knowledge (know-what and why) –Local knowledge base develops tacit dimensions of know-how and know-who to complement non-local knowledge flows –“…the generation and transmission of the non-codified knowledge in the regional system is the key factor holding things together. People develop skills and working relationships, which together convert bits of information into operable knowledge” (Phillips et al. 2004)

12. Innovation Systems Research Network Sources of Skilled Labour / Talent Importance of local supply of skilled labour/talent –Key sources: local research institutes, universities, other firms –Circulation of talent prompted by downsizing; allows for cross-over between sectors (e.g. pharmaceutical companies in Toronto, ICT bust in Ottawa) Consistent problems recruiting experienced managers –Halifax: Hire retired CEOs that settled in the area –Saskatoon: Recruit expatriates –Toronto: Multiple sources and responses (local and non-local) Statistical evidence shows that innovative biotechnology firms devote more resources, pursue diverse strategies, and tap into global networks for recruiting staff

13. Innovation Systems Research Network Key Questions What drives the emergence and formation of clusters? –What are the catalysts / triggers to cluster development? –What role is played by different levels of government, civic institutions, and lead / anchor firms? How important is the local knowledge base to cluster dynamics? –Role of private and public actors in generating knowledge –Role of universities in producing knowledge vs. talent Are there different paths leading to successful cluster development (e.g. specialization vs. diversity)? –What are the advantages / disadvantages of these different paths?

14. Innovation Systems Research Network Paths to Cluster Development Two general paths to cluster development: specialization vs. diverse economic base Specialized: Montreal, Vancouver, Saskatoon –High potential return –Risk / vulnerability: Vancouver very dependent on QLT Inc. (generates 87% of cluster’s revenue); Montreal’s success tied to the fortunes of a few companies (e.g. BioChem, now NeuroChem); Saskatoon vulnerable to backlash vs GMOs, Monsanto Diverse: Toronto, Ottawa, Halifax –Resilience and larger employment potential; diverse mix of occupations –Lower ‘coherence’, low local visibility / profile (e.g. Toronto) –Opportunities for convergence and combination of diverse knowledge bases (e.g. Ottawa) –Challenge for developing critical mass (Halifax)

15. Innovation Systems Research Network Lessons Learned Cluster emergence / formation –Importance of path dependency and historical, region-specific context in explaining cluster formation –Does not offer easily generalizable explanations for cluster formation; no ‘one-size-fits-all’ model Local and global flows of knowledge and talent –Cases confirm mutually beneficial, reinforcing nature of local and non-local sources Cluster development –Specialization route is often a high risk, high return proposition –Diversification allows for combination of knowledge bases but challenges related to developing coherent profile, visibility, and internal ‘self-organization’

16. Innovation Systems Research Network Thank you meric.gertler@utoronto.ca Joint ONRIS / MRI / MEDT Fall Workshop Toronto, Ontario November 4, 2005