1. In Search of a Canadian Space Cluster Innovation Systems Research Network Sixth Annual Meeting May 13-14, 2004 David Arthurs Tijs Creutzberg Christine Havey Innovation Systems Research Network Sixth Annual Meeting May 13-14, 2004 David Arthurs Tijs Creutzberg Christine Havey

2. Outline  The Canadian Space Sector  The Six L’s Location Location Labour Labour Legislation Legislation Labs Labs Learning Learning Leadership Leadership  Conclusions  Implications for Cluster Theory

3. Space Sector Characteristics  CSA statistics: 200 organizations (122 in this study) 200 organizations (122 in this study) Revenues - $1.8B Revenues - $1.8B Workforce 5,789 – 59% Ontario, 21% Quebec, 9% BC Workforce 5,789 – 59% Ontario, 21% Quebec, 9% BC The top 30 firms account for 98% of the revenues The top 30 firms account for 98% of the revenues 40% exported 40% exported 63% Telecom, 13% EO 63% Telecom, 13% EO  Many firms no longer are active in space.  Several firms do no consider themselves a part of the space industry.  Apart from earth observation, firms are usually less than 25% space.

4. ToolsComponents & Services IntegrationOperationApplication SpaceSystems Telecom Navigation EarthObservation SpaceScience Robotics 3 2 1 5 2 19 11 3 6 2 6 10 7 1 2 1 2 2 34 3 32 9 24 6 46 5 122413184713 Space Sector Structure Value Chain Sub-Sectors

5. City # Firms Anchor Organization City # Firms Anchor Organization Toronto/Waterloo28XSaskatoon4X Ottawa/Kingston23X St. John’s 4 Montreal21XKelowna2 Vancouver/Victoria12XEdmonton2 Halifax8Winnipeg3X Quebec City 7XMoncton2 Calgary6Total122 CSA Geoid CCRS CRC CresTech

6. Location “We don’t work for the region. People are here because they want to live here.”  Location decisions are based on history and lifestyle preferences. They are not business decisions.  Distance is not difficult to overcome. “Really the only infrastructure that is important is communications – especially the high speed Internet” “Really the only infrastructure that is important is communications – especially the high speed Internet”  Proximity is somewhat an issue for customers: “Where we think it helps to be close, we put people there” “Where we think it helps to be close, we put people there”  Proximity is not an issue for competitors, suppliers, research.  There is no accounting for taste in location.

7. Labour “The most important factor is probably the supply of qualified people”  Technical personnel are more likely to be sourced locally. Management is more likely to be sourced nationally and internationally.  Turnover is very low.

8. Legislation “CSA placed itself in a geographically unlucky place”  Regional Benefits Policy. Cannot use ‘best of class’ suppliers Cannot use ‘best of class’ suppliers Playing field is not level Playing field is not level Regional distribution disperses a critical mass Regional distribution disperses a critical mass  Regional Agencies.  Political location of the Canadian Space Agency. Firms are not locating close-by. Firms are not locating close-by.

9. Labs “The knowledge exchange, however, goes from us to them”  Effective research is a dialogue, not technology transfer.  Innovation is global, not local. “Innovation has become distance insensitive” “Innovation has become distance insensitive”

10. Learning “Space is a strange market for adopting new technologies. There is a heavy reliance on heritage products because of risk aversion.”  Most learning results from interactions with customers.  High degree of interaction with distant laboratories.  Low levels of collaboration.  Low labour mobility reduces inter-firm transfers of knowledge.  Significant training within the firm.

11. Leadership “We have a giant and lots of pimples. MDA’s historical approach to clustering is to stamp on pimples”  Anchor organizations are not acting as cluster leaders.  “We tend to complement on another more than compete, but we are not successful at coming together”  “Yes we do consider ourselves a part of a network or related firms, but not with firms in the region”

12. Conclusions  Is there a Canadian Space Cluster?  Has public policy worked against the emergence of a cluster?  Has the lack of a cluster hurt the industry?  Emphatically NO – No spatial agglomeration Poor functional inter-linkage  There is a national innovation system  Probably YES  That is the question

13. Implications for Cluster Theory “This is a fad; it only makes sense in Ontario”  The space sector provides a counter-example for cluster theory.  Firms rationalize their decisions.  Cluster theorists find what they are looking for. Correlation versus Causation.