Towards competitive clusters in the Maritimes

1. Towards competitive clusters in the Maritimes Jorge Niosi Canada Research Chair on the management of technology Université du Québec à Montréal Niosi

2. This presentation • The Atlantic and Canadian clusters • How to build competitive clusters: attracting and creating human capital Knowledge production:University research, public and non-profit laboratories Attracting or nurturing private users of knowledge: innovative firms and spin-offs Knowledge localization: technology parks Regional advisory bodies: City committee for STI Picking sectors and locations • How to do it? Niosi

3. Canadian and provincial STI policy • Canada has developed an array of STI policies nurturing the development of many new industries (aerospace, ICT, biotechnology, and others): tax credits for R&D, R&D subsidies for SMEs, university research councils, Technology Partnerships... • But, in spite of these policies being national, those new industries agglomerate in a few large metropolitan areas. • These Canadian regions are privileged by immigration, population and provincial policy Niosi

4. The present situation in Canada • Canada is one of the most cost-effective countries to conduct R&D, coast to coast • Yet, most innovation is concentrated in the nine largest metropolitan areas: the 9 largest CMAs represent 50% of the country’s population, but 77% of industrial R&D expenditures, and 72% of scientist and engineers working in industrial R&D • Two methods are used to measure innovation: industrial R&D and patents • Both indicators point towards the dominance of Toronto, Montreal, Ottawa and Vancouver. Niosi

5. The present situation in Canada • Also, regions are not converging: increasing differences in income and productivity, as well as population and R&D efforts are evident. • Between 1988 and 1999, Ontario’s productivity increased by 1.2%, by 0.4% in Quebec, 0.3% in Western Canada, and 0.2% in Atlantic Canada (according to Statistics Canada, 2006) • The four provinces of Atlantic Canada had in 2001 several thousand dollars in income below the Canadian average. Niosi

6. Population in Canadian CMAs Niosi

7. Industrial R&D in 2002 R&D activity in Canada is geographically concentrated Niosi

8. BERD is concentrating outside the Maritimes Niosi

9. Industrial R&D in 2002 R&D activity in Canada is also industrially concentrated Niosi

10. Large CMAs host many sectors: Toronto Niosi

11. …and Montreal Niosi

12. Smaller CMAs host few sectors: Quebec Niosi

13. …and Calgary Niosi

14. Patents are granted to the largest CMAs Niosi

15. Population in Atlantic CMAs Niosi

16. US patents invented in Halifax (2002-4) Niosi

17. Private patent holders of Halifax • Immunovaccine Technologies, a Dalhousie University spin-off (1) • Neocon International: plastic prods. (1) • Darmos Toys (4) • Algoplus Consulting: aviation safety software (1) • Blue Sky Entertainment (1) • Ocean Nutrition: neutraceuticals (1) Niosi

18. What to do: Increase skills and knowledge production • Investing in university research to create local spin-off firms • And attracting public, private and non profit laboratories • Also luring human capital from abroad and ROC • Putting mechanisms in place to incorporate new human capital in the labour pool. Niosi

19. Increasing human capital supply and demand Niosi

20. Higher education R&D expenditures by province Niosi

21. Attracting industrial R&D • Four factors are key in the decision to locate corporate R&D: • Output market potential • Intellectual property protection • Quality of R&D personnel (Route 128, Silicon Valley, N. Carolina Research Triangle…) • University collaboration with industry (new science, expertise of academic faculty, ease of collaboration) (Thursby and Thursby, 2006) Niosi

22. The role of anchor tenants • In all high-tech industries, some organizations play the role of “anchor tenants” or attractors. • In biotechnology and nanotechnology, universities play that role: they conduct key research and create the labour pool, and spin-off new companies • In ICT andaerospace, large companies play that role I.e.: Canadair (now Bombardier) in Montreal aerospace, Nortel in Ottawa telecom cluster, and IBM Canada in Toronto’s software agglomeration. They contribute to the labour pool and spin-off companies. Niosi

23. BERD by province Niosi

24. Picking locations • Larger cities are the places where the action is, in Canada, the US and the European Union. • Also, the vast majority of landed immigrants go to the larger cities (Toronto, Montreal and Vancouver). • A new set of incentives is required to attract more skilled immigrants to the larger Atlantic metropolitan areas (I.e. faster recognition of academic degrees, faster entry in the labour market, acquisition of complementary skills). Niosi

25. Picking locations • The best bets for the Atlantic Provinces are its CMAs (population as of 2006): Halifax (Nova Scotia) (372,000) (Canada’s 13th) St John (Newfoundland) (181,000)(Canada’s 20th) Moncton (New Brunswick )(126,000)(Canada’s 27th) • Rationale: larger cities create more externalities than small ones, thus usually attract more immigrants and knowledge circulate faster than in small cities • Rationale: universities are located in CMAs, spin-offs from universities, and attracted R&D labs, will locate in them because skilled people tend to settle in CMAs Niosi

26. Virtuous circles of growth in larger CMAs Niosi

27. Vicious circles of stagnation in skilled labour Niosi

28. Policy opportunity • Increase the production of college and university graduates in the Atlantic provinces through grants, scholarships, increased academic personnel, more research. • Increase the attraction of skilled immigrants (faster recognition of degrees, faster admission by professional organizations, better upgrading programs in local universities). • Then attract anchor tenants Niosi

29. Conclusion • Human capital is unanimously considered the main factor behind economic development • Thanks to the oil boom, Atlantic Canada has the means required to attract skilled labour and high technology industry and enter into a virtuous circle of sustained growth. • The main policy opportunity is in the area of the creation and attraction of human capital, a precondition to lure R&D-intensive firms. Niosi

30. Conclusion • For this purpose, two main and one minor set of policy measures appear adequate: - Increase the production of university research and graduates in science and technology intensive areas. Nurture spin-offs and lure venture capital - Increase the attraction of skilled immigrants from rest of Canada and abroad by facilitating their insertion in the labour market - Pick sectors: R&D in oil, gas and related activities; high-tech services (I.e. software). But be alert to other sectors growing spontaneously Niosi

31. Bibliography • Niosi, J. (2000): Canada’s national system of innovation, Montreal & Kingston, McGill-Queen’s University Press. • Niosi, J. (2005): Canada’s regional systems of innovation, Montreal & Kingston, McGill-Queen’s University Press. • Niosi, J. and M. Bourassa (2007): Canada’s inventive cities, a presentation to the Annual Statistical Conference of Statistics Canada, Ottawa, May. • Thursby, J. and M. Thursby (2006): Here or there? A survey of factors in multinational R&D location. Report to the Government-Industry-University Research Roundtable, Washington, National Academies Press. Niosi