To generate recommendations and big ideas to improve Canada’s innovation performance, we needed to conduct field research on the Canadian innovation landscape. Early in the process we made the decision to focus on industry clusters, which the European Commission defines as follows:1 Read More>>
In more general terms, clusters can be defined as a group of firms, related economic actors, and institutions that are located near each other and have reached a sufficient scale to develop specialised expertise, services, resources, suppliers and skills. A common element of most cluster definitions is the aspect of a concentration of one or more sectors within a given region as well as the emphasis on networking and cooperation between companies and institutions.
Clusters are defined by relationships, not memberships, and their spatial boundaries are variable and not necessarily corresponding with political borders. Cluster geography may be defined by the distance and time that people are willing to travel for employment and that employees and owners of companies consider reasonable for meeting and networking. Geography is therefore not a stable concept but influenced by factors such as travel conditions, cultural identity, and personal preferences. New forms of transport and communication, such as the Internet, are also changing the spatial dimensions of a cluster.
There is no universally agreed-upon method on how to identify or calculate the number of industry clusters that exists in a country, but we can estimate the number with some level of confidence. Using data from the 2011 National Household Survey and a Dun & Bradstreet 2011 universal business establishment database, Canada’s Cluster Atlas2 identifies 230 distinct clusters in Canada. These clusters of resource, manufacturing and service industries are spread out across the country. Clusters can be found in big cities such as Toronto’s finance cluster, which employed 307,963 people in 2011 in 12,495 different companies; in mid-sized cities, from Moncton’s logistic cluster of 53 businesses that employed 5,061 people to Brandon’s agricultural cluster, which was made up of 19 companies and employed 3,433 people.
But why focus on clusters instead of firms in general? First, there are some benefits to firms by being in a cluster.3 Firms in clusters benefit from knowledge spillovers between firms and institutions within the cluster thanks to proximity. They create economies of scale and scope; for example, having a large number of tech companies in an area creates the conditions that allows law firms to specialize in legal issues specific to that industry. They create a “social glue” that links different actors in the cluster together, which creates trust and cooperation leading to the creation of new firms, products, and processes.
There is a growing body of empirical evidence that suggests that clusters create the conditions for innovation. Research by the European Commission (2008) found that innovative companies in clusters were twice as likely to apply for a patent than the general population of innovative companies. They also found that the cluster companies were twice as likely to contract out research to other firms and universities, and over 50 percent more likely to conduct market research for introducing new products or services. In a study of over 4000 Swedish firms, (Wennberg & Lindqvist, 2010) found that, con- trolling for other factors, firms in clusters create more jobs, pay higher wages and remit higher levels of taxes to the government than those not within a cluster.
To gather more data and inside knowledge on Canadian industry clusters, Canada 2020 assembled eight roundtables across the country that brought both private - and public - sector leaders together to discuss the bottlenecks to innovation in a specific, geographically centred industry cluster. The eight clusters we chose, from Vancouver’s cleantech and renewables cluster to Halifax’s culture and digital creative sector, were not meant to necessarily represent Canada’s most important clusters. Rather, we felt it was important to have a cross-section of industries and geographies to act as case studies so we could identify common bottlenecks to innovation that could be addressed through smart public policy. We specifically wanted to avoid falling into the common innovation research trap of over focusing on science and technology. Recall the Oslo Manual definition of innovation from Chapter 2:
“An innovation is the implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method in business practices, workplace organization or external relations.”
This definition of innovation applies just as much to the agri-food industry as it does to the life sciences, so only through an examination of a cross section of industries can we truly understand the bottle- necks to innovation.
1 (European Commission, 2008) The Concept of Clusters and Cluster Polices and Their Role for Competitiveness and Innovation
2 (Spencer, Gregory M, 2014) Cluster Atlas of Canada, Toronto, Local IDEAs
3 These are discussed in detail in The Concept of Clusters and Cluster Polices and Their Role for Competitiveness and Innovation (European Commission, 2008)