David Crane

Scandanavian clusters worth examining

By David Crane

Canada’s innovation strategy aims to generate a successful economy through strong regional clusters of competitive industries that provide good jobs and support a high quality of life. As set out by Industry minister Allan Rock, it proposes the creation of 10 clusters across Canada. And prime minister-in-waiting, Paul Martin, is expected to give cluster-building high priority (R$, August 8/03).

Yet the challenge of building successful clusters should not be underestimated. A cluster is not just a list of companies. There is a high level of interaction and collaboration. If Canada is to reap the benefits of clusters, we need a better understanding of what makes successful clusters tick.

On a recent visit to Sweden and Denmark, I had an opportunity to visit two thriving clusters — Telematics Valley in Gothenburg, Sweden, and Medicon Valley which links the southern tip of Sweden with Denmark’s Copenhagen region. There is much that can be learned from these two clusters.

Perhaps the most important lessons are the importance of identifying the real areas of expertise and opportunity, the need for genuine collaboration between competing organizations, the critical role of private sector leadership, and the major benefit that derives from an established receptor capacity for new ideas generated in the cluster region.

Telematics Valley is closely linked to Sweden’s motor vehicle and information technology and communications industries. Its goal is to build the competitiveness of the cluster as an international centre for the development and use of ICT in vehicles and in intelligent traffic managements systems.

Volvo Cars (now owned by Ford Motor Co.), Volvo Global Trucks (part of the Swedish Volvo AB group) and Saab (now owned by General Motors Corp.) are all within a 100-km radius of Gothenburg. Delphi, the biggest US auto parts company, has located a telematics subsidiary, Mecel, here. Ericcson has a major wireless research centre here. Much of the R&D is taking place in the new Lindholmen Science Park, which has incubation capacity for new firms.

There are several interesting features. First, Telematics Valley is industry-led. Its board of directors consists of executives from Mecel, Volvo Cars, Saab, Volvo Global Trucks, and Ericcson. It has more than 60 corporate members, some established companies and other small and midsize firms, and a staff of three. The organization has developed a telematics test bed for researchers and companies and serves as an organizer of conferences, seminars and mentoring.

Second, there is a high level of collaboration, such as Wireless Car, a joint venture between Volvo Cars, Ericcson and Teleca, a leading Scandinavian telco. Another is the cooperation between Gothenburg University and Chalmers University of Technology in jointly creating an IT university at Lindholmen Science Park.

Third, the major motor vehicle corporations in the region provide an important receptor capacity for new ideas that emerge, as well as serving as a source of management for new companies and as potential investors or joint venture partners for smaller firms.

Medicon Valley provides another interesting example of cluster organization, this one linking the life sciences sector. Medicon Valley is part of the Oresund Region, with a population of about 3.5 million in southern Sweden and the Copenhagen region. It grew out of a broader initiative, the Oresund Science Region, which spun out four cluster organizations for IT, food and packaging, environmental technologies and life sciences.

Like Telematics Valley, Medicon Valley has its own organization, with about 270 members — businesses, venture capital firms, universities and hospitals — with a board consisting of key figures from universities, pharmaceutical and biotech companies, public hospitals and local governments. It has a staff of 10. Based on a Boston Consulting Group study, Medicon Valley determined that its areas of life science expertise were in diabetes, neuroscience, immunology and inflammation, and cancer.

As with Telematics Valley, Medicon Valley benefits from private sector leadership. Its board includes senior executives from AstraZeneca R&D, Novo Nordisk and H. Lundbeck. Moreover, its base of international companies is also major investors in R&D. Private sector R&D runs at about US$870 million a year and academic research at about $100 million. There are some 115 biotech companies in Medicon Valley, along with manufacturers of compounds, diagnostics and medical supplies. With 26 area hospitals, there is an effective market to test new medical products and a strong capacity for clinical trials.

Medicon Valley is noteworthy for the way it helps solve industry problems. For example, it was instrumental in putting together funding for a unique post-doctoral programme combining biological sciences and IT to attract top researchers from around the world. When local industry found itself short of people skilled in bioinformatics, it set up a programme to retrain unemployed biologists and chemists. It is also active in promoting venture capital — there are about 50 VCs with offices in the region now.

Another example of strategic collaboration is the close interaction between some 14 universities in the region. An organization, Oresund University, was created to promote cooperation, including a strategy setting out areas of specialization for individual universities and improving ways that students and faculty can move among institutions. It is also a region rich with research institutes, such as the Biomedical Centre at Lund University, and there appears to be easy collaboration between researchers and companies.

If Canada is to develop successful clusters, it will only do so if corporate leadership is prepared to play a real leadership role. Investing in university research can only pay off in a major way if there is a close interaction with industry. This is a major challenge for Canada. Real collaboration is another challenge. What’s striking in the Swedish/ Danish examples is a level of trust and cooperation between institutions or between the private and public sectors that is not as well developed in Canada. Moreover, Canada faces another challenge — how to grow companies to the scale and scope they need for sustained growth. Without larger firms we will not have the receptor capacity we need to encourage and commercialize research.

While a cluster-based strategy can work for Canada, we have much to learn and do if we are to succeed.

David Crane is a commentator on innovation issues whose column appears in The Toronto Star and a number of other papers. He can be reached at crane@interlog.com.