David A. Wolfe

21st Century cities: The geography of innovation

By Dr David Wolfe

The key to Canada's future prosperity lies in solving two critical but interrelated challenges — the ability to create high growth, knowledge-based firms and the ability to sustain our cities as dynamic centres for innovation and creativity. The former challenge has been analyzed thoroughly in the recent report from the Council of Canadian Academies and the failings of our current policy environment have been highlighted by Doug Barber, Terry Matthews and other successful technology entrepreneurs in recent policy papers and conference speeches.

Less well recognized is that overcoming the first challenge is critically intertwined with the second. Despite the intensifying pressures for globalization, the successful creation, production and marketing of new products and processes remains a place-based phenomenon. In analyzing the factors that contributed to the success of the Lancashire textile industry at the end of the 19th Century, Alfred Marshall famously wrote that "The secrets of industry are in the air". The 21st Century Canadian equivalent is the story oft related by leaders in Waterloo's high-tech community of the federal industry minister who inquired, "What do you put in the water here?"

In reality, the secret to successful innovation lies neither in the air nor the water, but on the ground in specific cities and regions across the country. According to the results of the 2006 census, nearly 25 million people, or 80% of Canada's population live in urban areas — two thirds in 27 large Census Metropolitan Areas. The vast majority of population growth between 2001 and 2006 took place in cities.

The city-region is a critical scale for innovation and creativity because spatial proximity between economic actors and the institutions they share enables the circulation of knowledge. At the same time, city-regions act as crucial hubs for tapping into global knowledge flows and disseminating that knowledge and learning to their regional hinterlands.

Formulating a strategic response to the challenges facing individual city-regions must start from an understanding of the underlying structure of the urban economy, the relevant skills and knowledge assets of the city, and its existing institutional supports. As the global economy becomes more tightly integrated and new locations emerge as dynamic sites of innovation, the economic success of existing city-regions, especially in older industrial areas, rests on how they respond to these changes.

The ability of existing industries to transform themselves and shift into new areas of innovation depends, in part, on how complementary the existing areas of technical specialization are within the same urban region. This involves the synergies between existing technological capabilities, among the skill set of the labour force and between the existing social and institutional dynamics within the urban economy. Without the presence of these synergies, the potential for the successful transfer of ideas across existing knowledge bases and the ability to recombine existing skill sets into new sources of economic activity will be severely limited.

The state of civic governance, particularly the presence of strong civic leadership, the ability to forge cohesive development coalitions and the capacity for undertaking, and revisiting, focused strategic plans, will all influence how these pathways to future economic growth and development are shaped.

This process will play out differently in different cities across the country. The need to recognize the incredible diversity of Canada's urban system of cities and city-regions is critical — as members of the Innovation Systems Research Network have argued, ‘one size does not fit all'. Canada's larger cities are more likely to assume the role of ‘Schumpeterian hubs', as their research-intensive knowledge infrastructures create the conditions where existing resources are recombined to generate new innovations, new products and entire new industries, although the pattern will vary across the individual cities.

Similarly, their high degree of concentration in knowledge-intensive business services and the creative and cultural industries, including fashion, design and advertising, provides a solid grounding for the emergence of the creative and cultural economy. Canada's medium-sized and smaller cities face a different set of challenges in that they must shift their economic base out of declining economic sectors into those in which their relative degree of specialization and local research infrastructure affords them a strong basis for economic growth.

Examples abound of city-regions across the country that have launched recent efforts to alter their growth trajectory through collective efforts to improve their endowment of institutional and cultural factors, in other words through a process of civic engagement and strategic planning. They differ in terms of the relative mix of industries on which their success is based, the underlying infrastructure of research and other institutions that support the local firms and the social or civic culture that creates cohesion in the region or locality. But they share a capacity for learning from past experience and charting a new direction for the future.

To succeed in these efforts, Canadian city-regions must be able to draw upon the fiscal resources of the senior levels of government and put them to work in aid of the strategies that they develop. However, these processes will not succeed in assisting city-regions to implement new growth strategies if the policies and resources of the federal and provincial governments are not better aligned with the goals of city-regions.

The underlying reality is that city-regions across the country are already undergoing a shift to more research-intensive and knowledge-based activities. While some of these developments are linked to upgraded manufacturing activities, others are tied more closely to an expanding range of economic activity in the cultural, creative and design sectors of the economy. The key question is whether all three levels of government will be able to align their support for innovation and economic development more closely with these trends.

David A. Wolfe is national coordinator of the Innovation Systems Research Network. He was the CIBC scholar-in-residence at the Conference Board of Canada in 2008-2009. These comments are based on his monograph 21st Century Cities in Canada: The Geography of Innovation which can be downloaded from: http://www.conferenceboard.ca/documents.aspx?DID=3311