David Wolfe

Coordination, alignment key to cluster growth

By David Wolfe

Over the past 30 years, Canada's approach to innovation policy has suffered from a number of chronic shortcomings. We have been obsessed with the crafting of new strategies at the expense of persevering in the implementation of existing ones. We've failed to distinguish between S&T and innovation strategies. And perhaps most seriously for a highly regionalized and federalized country, we have failed to integrate national strategies with provincial and regional initiatives.

This has occurred despite the growing body of research pointing to the importance of strategies to enhance the linkages between institutional components of the innovation system at both national and regional levels (R$, January 21/08).

Members of the Innovation Systems Research Network — a national network of academic researchers, government and not-for-profit partners — have been engaged in the study of these questions for the past 10 years, including a comprehensive study of industrial clusters across the country. Supported by the Social Sciences and Humanities Research Council, the results of this effort shed valuable light on how the appropriate design of strategies at the local and regional levels can contribute to a more effective national innovation strategy.

Cluster strategies represent a valuable mechanism for integrating a range of different policy instruments that cut across a number of different fields. Their goal is to use existing policy instruments in a more focused and coordinated way and facilitate a greater degree of alignment among federal and provincial policies that impact on the innovative capabilities of firms at the local and regional level.

Many policies that are most effective at seeding cluster growth are rarely designed with the explicit goal of cluster creation in mind; rather they are intended to achieve some other goal or objective. Public policies that build a strong knowledge base in the regional economy, and contribute to the creation of a well educated workforce rank among the most effective in establishing the local antecedents that support the emergence of clusters. While a strong research infrastructure and thick labour market are distinctly local phenomena, they are not the exclusive preserve of local, or even provincial policies. Federal policies contribute to the development of these factor endowments as well. It requires a greater degree of coordination between the senior levels of government with responsibility for research and education policy and local and regional development agencies with cluster responsibilities to ensure the cluster benefits are realized.

Cluster analysis can help regional and local governments to be more strategic, systematic and effective in their expenditure of limited public resources. It can allow governments to target prospective investments in a way that strengthens clusters in both mature and emerging industries. Effective cluster strategies include a number of essential elements: actions for identifying key clusters, mapping systematic relationships within them and benchmarking performance against competitors; working with cluster associations to respond to industry needs and improve inter–firm collaboration; reorganizing the delivery of information and services to strengthen and promote the relationships identified by cluster analysis; establishing one-stop points of entry for cluster members, and creating cluster teams to focus on solutions that cut across departmental and agency boundaries. And finally, use clusters as the focus for upgrading labour skills and qualifications to create the thick labour markets that strengthen the competitive base of firms in the cluster and attract new ones to it.

Policies to support cluster development should include three distinct types: to involve key actors in the process of cluster development; to facilitate the development of collective services to support cluster firms; and, to engender more effective use of localized R&D infrastructure, as well as specialized local training programs and institutes. Many policy measures target increased interaction and dialogue among cluster–based firms and supporting public sector actors as a principal goal.

Across the ISRN case studies, the emergence of cluster-specific support organizations provided a crucial institutional means for the delivery of programs and services to cluster members, as well as for the implementation of cluster strategies and policies. The case studies suggest that the most successful clusters have profited from the development of strong social networks at the community level and the emergence of dedicated, community–based organizations.

Once established, local cluster and more broadly based civic associations can provide a convenient institutional basis to deliver programs and help overcome coordination problems in the delivery of national and regional programs of benefit to local clusters. These entities link leaders in the individual clusters to a broader cross–section of community leaders involved in local economic development. They are supported by new institutions of civic governance that identify problems impeding the growth of the cluster and help mobilize community support.

A final challenge for cluster policy is the need for policy continuity and policy alignment. The cluster approach provides an effective means for integrating existing S&T policies across a range of government departments and different levels of government. It can also help to integrate the diverse range of institutional actors that contribute to the innovation process from a systems perspective. Cluster strategies can succeed by tapping into existing government programs and budgetary envelopes to gain access to the needed resources, or by co-opting a new federal, provincial, or even, private sector initiatives and aligning their objectives to meet the goals of the cluster strategy.

Because electoral and policy lifecycles are shorter than cluster lifecycles, volatility or lack of continuity in the policy environment can destabilize the process of cluster development. This is compounded by the fascination of new governments with crafting new policy documents.

We have wasted far too much time in these efforts. What is needed now is a concentrated effort to leverage the existing array of federal and provincial policies to deliver the maximum benefit to existing and emerging clusters in the diverse regions across the country. Cluster policy represents one area where perseverance has the potential to reap great rewards.

This is the second of two articles for RE$EARCH MONEY. David Wolfe is co-director, Program on Globalization and Regional Innovation Systems Centre for International Studies, University of Toronto.