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
Innovation Systems Research Network
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
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
Research Dissemination
•Web Site: www.utoronto.ca/isrn
–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 techbased 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
Innovation Systems Research Network
The Innovation Systems Approach
• network of institutions that interact to initiate,
import and diffuse new technologies
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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
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internal organization of firms
network of interfirm relationships
role of public sector
degree of R&D intensity
nature of R&D organization
Innovation Systems Research Network
National System of Innovation
Macroeconomic and
regulatory context
Communication
infrastructures
Education and
training system
Global
innovation networks
Firms’
capabilities
& networks
Other
research
bodies
Science
system
Supporting
institutions
Clusters of industries
Regional
innovatoin systems
Knowledge generation, diffusion & use
National innovation system
Corporate governance
and finance
Product and factor
market conditions
National innovation capacity
COUNTRY PERFORMANCE
Growth, job creation, competitiveness
Innovation Systems Research Network
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)
Innovation Systems Research Network
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
Innovation Systems Research Network
Sources of Competitive Advantage
in Regional Economies
• ‘Untraded interdependencies’ - technological
spillovers
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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
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Social capital - shared norms and trust
– facilitates cooperation among firms and sectors
– shared institutional frameworks
• region’s ‘institutional architecture’
Innovation Systems Research Network
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?
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
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)
Innovation Systems Research Network
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 ecommerce)
Innovation Systems Research Network
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
Innovation Systems Research Network
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
Innovation Systems Research Network
Emerging Findings
• Leadership: @ 2 scales
• Firm:
• 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?
Innovation Systems Research Network
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
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
Innovation Systems Research Network
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
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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
Innovation Systems Research Network