27 May 2018

When it comes to cluster policy and development, the Toronto region faces a multi-faceted challenge. First, cluster theory and policies do not have a long history in North America. Historically, the focus has been on sector or economic development, which are often separated from innovation. Therefore, there is little understanding of the benefits of clustering, much less how to develop a cluster from the bottom up.

 

Moreover, the economic strength of Toronto comes not only from the City of Toronto, but also its surrounding jurisdictions. The Toronto region has a labour force of 4.7 million across a multitude of municipalities and regions, each with their own thoughts on economic development, in addition to the policies enacted by the provincial and federal governments. Over the past few years, there has been a re-focus on clusters as a driver of innovation and economic development, leading to increased competitiveness, but top-down cluster policy remains subject to shifting political tides and economic conditions.

 

Finally, the Toronto region lacks the geographical density that many of the past TCI Global Conference hosts benefit from. For example, the Toronto region is 3.7 times larger in size than Bogota, Colombia, the location of TCI 2017, with a population density that is nearly four times less. While geographical density is not the most important factor when it comes to cluster development, it does make creating unexpected connections from clustering more difficult.

 

For the Toronto region, the key to cluster success must be from collaboration to compete globally. But collaboration must occur between governments across the region and various levels and with industry, universities, research organizations, and cluster organizations.

 

The most sweeping cluster policy in recent years is the Innovation Superclusters Initiative (ISI), which was introduced by the Canadian federal government early in 2017. The ISI was developed as a competition that requires supercluster finalists to match the $950 million in public investment over five years. There were a number of strict rules, including the creation of a non-profit corporation (e.g., a cluster organization) with a board and CEO, and the inclusion of a multiplicity of cluster actors including universities, large anchor firms, and a smattering of small-to-medium enterprises (SMEs). The projects that the $950 million would fund must be new and not projects that were in the pipeline. In most cases, the provincial and local governments were involved, helping to shape policy and invest in the supercluster initiatives. The projects themselves must focus on innovation and be developed in collaboration with other cluster actors.

 

Of the 50 applications received, which represented over 1,000 businesses, nine were shortlisted in October 2017 and a final five were chosen in February 2018. Not surprisingly and in true Canadian form, there was an equitable division of the finalists across the country: western Canada (British Columbia) is now home to the Digital Technology Superclusters, the Prairies (central Canada) has the Protein Supercluster, the Advanced Manufacturing Supercluster is in Ontario (where the Toronto region is located), the AI Supercluster is in Québec, and eastern Canada (New Brunswick) has the Oceans Supercluster. While a number of the existing clusters in the Toronto region are part of the Advanced Manufacturing supercluster—including automotive, aerospace, wood, emerging technology, etc.—many are not.

 

The Institute for Competitiveness & Prosperity has always recommended that governments use their convening power to bring actors together and to invest heavily in innovation. The ISI certainly executes upon these recommendations. There have been many stories of collaboration and ‘co-opetition’ between traditional competitors. On the other hand, many argue that this is a government handout to large companies and that the intellectual property (IP) benefits will find their way to firms that are not headquartered in Canada. Additionally, this top-down initiative spurs forced collaboration that may only last for as long as the money flows. Perhaps the most significant risk is the lack of knowledge on the part of the supercluster organizations to act as (super)cluster managers and coordinate hundreds of projects worth millions of dollars, half of which are public funds.

 

 

As we head into TCI 2018, it is clear that the Toronto region is ready for a global clusters conference: There is alignment across all three levels of government under the superclusters initiative, an appetite to learn about clusters and their importance, as well as the recognition that at least for the Toronto region, cluster actors, particularly government, must “act locally, but think regionally.” It is our hope at the Institute that by bringing TCI 2018 to the Toronto region we can forge ahead together, by not only working within the region but by also building the bridges and making those unexpected connections with our international counterparts to bring the shared prosperity that we all desire.

 

Dorinda So, Research Director at Institute for Competitiveness & Prosperity.