foreword by anne golden - memorial university€¦ · foreword by anne golden. 21st century cities...

David A. WolfeForeword by Anne Golden

21st Century Cities in Canada: The Geography of Innovation

The 2009 CIBC SCholAr-In-reSIDenCe leCTure

by David A. WolfeForeword by Anne Golden

The Conference Board of Canada • Ottawa, Ontario • 2009

©2009 The Conference Board of Canada*All rights reserved.ISBn-13: 978-0-88763-946-3ISBn-10: 0-88763-946-1Agreement no. 40063028*Incorporated as AerIC Inc.

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Library and Archives Canada Cataloguing in Publication

Wolfe, David 21st century cities in Canada : the geography of innovation : 2009CIBC scholar-in-residence lecture / David A. Wolfe.

ISBn 978-0-88763-946-3

1. Cities and towns. 2. Sociology, Urban. 3. Urban economics. I. Conference Board of Canada II. Title.III. Title: Twenty-first century cities in Canada.

hT155.W65 2009 307.1’16 C2009-906162-7

Printed and bound in Canada by Gilmore Printing Services Inc.

Cover design, page design, and layout by Scott Grimes, The Conference Board of Canada.Cover illustration and design by Robyn Bragg, The Conference Board of Canada.

CIBC logo is a trademark of Canadian Imperial Bank of Commerce.

This book is dedicated to David Pecaut, Chair of the Toronto City Summit Alliance, who embodies the true spirit and qualities of a civic entrepreneur and serves as an inspiration to all who care as passionately as he does about the future of Canada’s cities.

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Author’s ACknowLedgements

A number of people have contributed immeasurably to this book. The book would not exist without Anne Golden’s generous invitation to serve as the CIBC Scholar-in-Residence at The Conference Board of Canada, and I am indebted to Anne and to Michael Bloom for their helpful comments and suggestions. Over the past decade, I have been privileged to work with a talented group of colleagues in the Innovation Systems Research Network. The ideas and research presented in this book reflect the results of our collective research. Research sup-port for the network has been provided by the Social Sciences and Humanities Research Council, Infrastructure Canada, the National Research Council, the Ontario Ministry of Research and Innovation, the Toronto Region Research Alliance, and the University of Toronto. Some of the key ideas presented in the book took shape in the course of my collaboration with Meric Gertler, Allison Bramwell, and Jen Nelles. Their support is deeply appreciated. The charts and tables were gen-erated by Greg Spencer, and the maps were prepared by Zack Taylor. Trevor Barnes, Neil Bradford, Allison Bramwell, Meric Gertler, Jill Grant, Adam Holbrook, Tom Hutton, Jen Nelles, Enid Slack, and Zack Taylor took time to read and comment on all or parts of the manuscript, which helped to sharpen the focus considerably. Responsibility for any remaining errors or omissions is mine alone.

I am grateful to Lisa, Michael, and Rachel for their love and support throughout the project.

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ACknowLedgements

The Conference Board of Canada is deeply grateful to CIBC for its farsighted investment in the Scholar-in-Residence Program, which made this volume possible and is supporting a decade of cutting-edge research into topics of vital importance to Canada’s future.

We thank our media partner, The Toronto Star, for publicizing the May 2009 lecture that resulted in this volume and for giving Canadians an advance look at the arguments presented here.

At the Conference Board, Anne Golden and Michael Bloom organized the 2008–09 Scholar-in-Residence Program, and Laura Paquet edited this volume.

And, of course, we thank David A. Wolfe, as well as David Pecaut, Carl Zehr, Judith Wolfson, and John Honderich, for their extraordinary contributions to Canadian public debate.

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About the ConferenCe boArd of CAnAdA

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the Author

David A. Wolfe, Professor, Political Science, University of Toronto, and Co-Director, Program on Globalization and Regional Innovation Systems, Munk Centre for International Studies.

David A. Wolfe is a professor of political science at the University of Toronto Mississauga and a co-director of the Program on Globalization and Regional Innovation Systems (PROGRIS) at the Munk Centre for International Studies. PROGRIS is the national secretariat for the Innovation Systems Research Network (ISRN). Dr. Wolfe serves as National Coordinator of the ISRN and is currently Principal Investigator on the ISRN project entitled “Social Dynamics of Economic Performance: Innovation and Creativity in City-Regions.”

He holds a B.A. and an M.A. in Political Science from Carleton University and a Ph.D. from the University of Toronto. From October 1990 to August 1993, he served as Executive Coordinator for Economic and Labour Policy in the Cabinet Office of the Government of Ontario. Upon his return to the University of Toronto, he served as a research associate in the Canadian Institute for Advanced Research’s Program on Law and the Determinants of Social Ordering, a post he held from 1993 until 1997. He is editor or co-editor of seven books and numerous scholarly articles and public policy reports. In 2003, he co-authored the report Community Participation and Multilevel Governance in Economic Development Policy for the Government of Ontario’s Panel on the Role of Government.

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the CommentAtors

Anne golden, President and CEO, The Conference Board of CanadaAnne Golden has been President and Chief Executive Officer of The Conference Board of Canada since October 2001. Previous to that, Dr. Golden served as President of The United Way of Greater Toronto for 14 years. She has gained national recognition for her role in the public policy arena through chairing two influential task forces: one in 1996 for the provincial government on the future of the Toronto area, and another in 1998 for the City of Toronto and the federal govern-ment on homelessness. Dr. Golden is also a member of the Board of Directors of the Toronto Region Research Alliance.

In 2003, Dr. Golden’s commitment to social justice was recognized in her appointment by the Governor General as a Member of the Order of Canada. Author of numerous publications on public policy issues, Dr. Golden has received several honorary doctorates. Her many civic awards include the Urban Leadership Award for City Engagement from the Canadian Urban Institute, and the Women’s Executive Network’s Canada’s Most Powerful Women: Top 100 Award.

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Judith wolfson, Vice-President, University Relations, University of TorontoJudith Wolfson is a former President and Chief Executive Officer of Interac Association/Acxsys Corporation, the national electronic finan-cial services network serving Canada’s financial institutions and related industries. She spent 10 years with the Government of Ontario in sev-eral senior positions, serving under three premiers: David Peterson, Bob Rae, and Mike Harris. As Assistant Deputy Minister in the Ministry of Industry, Trade and Technology, she was involved in Canada’s free trade negotiations. She also served as Deputy Minister, Intergovernmental Affairs; Deputy Minister, Economic Development, Trade and Tourism; and Deputy Minister, Consumer and Commercial Relations. In 2003, Ms. Wolfson received the Queen’s Jubilee Medal for leadership and service to the community in recognition of her contributions to a wide range of major community organizations.

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Carl Zehr, Mayor, City of KitchenerCarl Zehr is Mayor of the City of Kitchener. He was first elected to the position in November 1997 and was re-elected in 2000, 2003, and 2006. Mr. Zehr also served as a councillor for the City of Kitchener from 1985 to 1994, and as a councillor for the Regional Municipality of Waterloo for four terms (1988–94 and 1997–present).

During his previous and current terms of elected office, he has served on a lengthy and varied list of municipal and regional council commit-tees, and has actively supported and served many community organiza-tions. His roles include, or have included, treasurer of the SEED Loan Fund, chair of the Independent Living Centre, past president of the Rotary Club of Kitchener, and member of the Mennonite Foundation of Canada Finance Committee. He has also served the Toronto Region Research Alliance and the Kitchener-Waterloo Skating Club.

Mr. Zehr was a partner in the CGA firm of Mercer, Hildebrand & Zehr from 1981 to 2002. Previously, Mr. Zehr held corporate and staff pos-itions with Hybrid Turkeys Limited and associated companies, the University of Waterloo, and Kitchener-Waterloo Hospital.

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david k. Pecaut, Senior Partner and Director, The Boston Consulting Group; and Chair, Toronto City Alliance SummitDavid K. Pecaut is the voluntary Chair of the Toronto City Summit Alliance (TCSA), a diverse coalition of civic leaders whose mis-sion is to accelerate social and economic development in the Toronto region. Through the TCSA, he has helped to mobilize the Toronto Region Immigrant Employment Council, the Toronto Region Research Alliance, the Strong Neighbourhoods Task Force, the Task Force on Modernizing Income Security for Working-Age Adults, Luminato (the Toronto Festival of Arts and Creativity), and Greening Greater Toronto.

Mr. Pecaut has taken his passion for the community and Canada to the national level. His accomplishments include founding and co-chairing the Canadian E-Business Opportunities Roundtable; co-founding Career Edge, the national youth internship program; serving on the Prime Minister’s External Advisory Committee on Cities and Communities; co-chairing the Leaders’ Roundtable on Commercialization, a blue-ribbon panel set up by The Conference Board of Canada; and serving on the boards of Canada Basketball, the United Way of Greater Toronto, and Pathways to Education.

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Table of Contents

foreword 1by Dr. Anne Golden

ChAPter 1—Introduction 9

Social Dynamics of Innovation and Creativity 15

Civic Engagement and Strategic Governance 19

Outline of the Monograph 21

ChAPter 2—Innovation and Creativity in City-regions 25

Introduction 27

Industrial Evolution and the Life Cycle of City-Regions 30

Diversity and the Emergence of an International Hierarchy of Cities 40

Urban Agglomeration and the Concentration of Talent and Creativity 44

From the “Creative Class” to the “Creative Economy”: Cities as “Schumpeterian Hubs” 46

Specialization Versus Diversity: Some Final Observations 50

ChAPter 3—Innovation, talent, and Creativity in Canadian Cities 53

Introduction 55

Cities in the Canadian Urban System 57

Competition Between Toronto and Montréal for Dominance of the Urban System 61

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Innovation and Growth in Canadian Cities: Specialization, Diversity, and Relative Size 64

The Role of Large Cities in the Innovation Economy 73

Innovation Patterns in Canada’s Medium-Sized and Small Cities 80

The Role of Talent and Creativity in Canadian Cities 86

Creative Industries and Creative Occupations in Canadian Cities 90

Immigration, Creativity, and Inclusion in Canadian Cities 102

Final Thoughts 105

ChAPter 4—from government to governance 107

the role of Civic Capital in urban economic development 107

Introduction 109

Changing Patterns of Governance 114

Urban Governance in a Multi-Level Setting 117

Governance and Social Learning 121

Civic Capital and Urban Governance 123

Strategic Planning in the Urban Economy 130

From Government to Governance: Final Observations 134

ChAPter 5—urban governance and strategic Planning in Canadian Cities 135

Introduction 137

Urban Governance and Civic Engagement in Canada’s Largest Cities 138

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Civic Engagement and Multi-Level Governance in the Greater Vancouver Region 140

The Toronto Region: Strong Cities, Weak Region 146

Civic Engagement, Multi-Level Governance, and Strategic Planning in the Montréal Region 153

Regional Governance in Ottawa 157

Prospects and Challenges for Urban Governance in Mid-Sized Cities 163

Civic Engagement and Strategic Management in Waterloo and London 163

Civic Engagement and Creative Planning in Halifax, Nova Scotia 171

Civic Engagement and Strategic Planning in Canadian Cities: Key Findings 174

ChAPter 6—Challenges and Choices for Canadian Cities 177

Introduction 179

Industrial Structure and Economic Growth in City-Regions 180

Urban Economic Transformation Through Civic Engagement 185

Conclusion 190

from the Lecture: Anne golden’s sIrP Lecture Comments (presented on behalf of Judith Wolfson) 191

from the Lecture: Carl Zehr’s sIrP Lecture Comments 197

from the Lecture: david Pecaut’s sIrP Lecture Comments 203

from the Lecture: Panel discussion and Q & A 213

Forewordby Dr. Anne Golden

C.M., President and Chief Executive OfficerThe Conference Board of Canada

3Foreword

I am privileged to introduce the work of Professor David Wolfe, The Conference Board of Canada’s 2009 CIBC Scholar-in-Residence. Since the early 1990s, economists have predicted that the world

is moving to a global economy—one that is based on the exchange of information. Economists have also advised that industries built around the production and distribution of knowledge will become key drivers of our economy. But they warn that Canada is not competitive in these emerging areas the way it has been in the natural resources sector. This year’s devastating recession has driven these points home.

At The Conference Board of Canada, we are particularly concerned that the vital contribution our cities make to national prosperity has not been fully acknowledged. Nor has the role they are destined to play in the new global knowledge economy been fully understood. Professor Wolfe’s research helps to clarify this role.

There are still many questions to resolve about which elements are most important in determining the economic performance of a city region. Should reliance be placed on urban specialization—as Harvard profes-sor Michael Porter claims? Do knowledge spillovers among clusters of geographically concentrated groups of firms in similar or related indus-tries make the most important contribution to growth? Or should we trust in diversity—as the late urban expert Jane Jacobs believed? Does the exchange of knowledge and complementary ideas across a variety of firms generate the greatest return for those firms that are able to recognize and capitalize on the newly forming knowledge bases?

Professor Wolfe argues that we have reached a stage where we are ready to transcend this debate. He has found empirical evidence to support assertions that both specialized and diversified industrial structures stimulate economic growth. Dr. Wolfe is leading a five-year national study of urban industrial clusters, involving an extensive research network of people across the country. In 21st Century Cities in Canada: The Geography of Innovation, Professor Wolfe summar-izes the key insights and findings from that study. He found that while concentration and diversity can still be crucial, additional factors must also be taken into account when considering the economic perform-ance of cities. For each city, we need to consider its relative size, active

4 21st Century Cities in Canada

economic sectors, fit in the evolving global hierarchy of urban centres, state of the evolution of its industrial structure toward higher-end busi-nesses, and services associated with the new knowledge economy.

Size does matter, Professor Wolfe found. Canada’s largest cities are adapting to the new global economy while smaller cities struggle with new challenges. However, it is encouraging to be able to report that Professor Wolfe’s findings also offer hope to smaller cities. When they grow into medium-sized cities, they too can become centres of innova-tion. Similar and related industries, and chains of suppliers, develop within these medium-sized cities and form clusters of common interest. And when this pattern is reinforced by support from government at all levels and from progressive educational institutions, the city can move forward as a centre of innovation and creativity.

Professor Wolfe’s monograph complements and builds upon earlier work undertaken by the Conference Board. For several years now, the Conference Board has explored the links among cities, productivity growth, and innovation. In our 2006 report Canada’s Hub Cities: A Driving Force of the National Economy, we used what economists call “convergence theory” to examine GDP—measuring per capita growth in nine of Canada’s largest cities in relation to their hinterlands. We found that these nine hub cities serve as the economic drivers of their respective provinces, or in the case of Halifax, for the entire Atlantic region. In fact, we show that when hub cities grow and prosper, the surrounding communities grow at an even faster pace than the hub cities themselves. We incorporated these findings into Volume III of our Canada Project Report, Mission Possible, which highlighted the importance of Canada’s cities to our nation’s future prosperity. We emphasized that cities today are the crucibles of innovation and produc-tion centres of knowledge-intensive goods and services. And we placed cities at the centre of the innovation dynamic, where brain-power is concentrated and where the sharing of ideas is most intense due to proximity.

Since 2007, the Conference Board has benchmarked the attract-iveness of Canada’s 27 census metropolitan areas (CMAs) to answer the question, “Do our cities have what it takes to attract increasingly

5Foreword

mobile skilled workers?” And in our City Magnets report, we showed that the places with the highest rankings are also the places with high in-migration.

In Professor Wolfe’s monograph, a central theme is the link between a city’s ability to innovate—making effective use of local universi-ties and social networks—and its approach to governance. Shifting to knowledge-based economies from traditional industrial platforms is difficult enough, but the current economic recession and restructuring is accelerating the transformation. This is especially true in the manu-facturing industries that have been a mainstay of cities in the Ontario–Quebec industrial corridor.

Professor Wolfe is adamant that most cities do have the potential to mobilize resources in pursuit of new, local-development strategies. However, he stresses, their success depends on two factors. The first is whether the city can adopt “strategic cooperation”—a flexible, innova-tive approach to local economic development that provides better align-ment and coordination of available programs and policy instruments across all three levels of government. The second factor is whether the city can obtain a broader range of civic associations and actors—under what the Conference Board and others are calling the “big tent”—and involve them directly as active participants in the design and implemen-tation of this strategic cooperation process. When the author says that “governance matters,” he means that the administrative and political structures governing the urban region must both be open to, and accept, a new level of civic engagement.

For many readers, the most compelling chapter in Professor Wolfe’s monograph involves the case studies that document how these new models of urban governance and civic engagement are taking hold in Canada’s cities. The stories of efforts in Vancouver, Montréal, Toronto—as well as a number of mid-sized cities, such as London, Hamilton, Halifax, and Waterloo—are fascinating, even inspiring. In each case, the approaches are quite different.

The account of the progress of the Toronto City Summit Alliance (TCSA), with which I was personally involved, underscores a view that I have long held. Much depends on the leadership of civic


entrepreneurs. Professor Wolfe’s dedication of this monograph to Canada’s most extraordinary civic entrepreneur, David Pecaut, the acknowledged dynamo of the TCSA, is therefore most appropriate.

The depth and scope of the evidence that Professor Wolfe has analyzed and summarized for us in this year’s publication confirms the thesis that cities have become the primary sites for innovation. His find-ings reinforce what some of us have argued for some time—that our cities are different, they play different roles in what geographers call the “urban system,” and that recognition of this significant variation is essential.

Professor Wolfe spent considerable time in Waterloo. That’s because he found a highly developed tradition of strategic cooperation and inclu-sion of non-governmental organizations and individuals in this mid-sized Ontario city. He believes Waterloo has been particularly astute in identifying existing federal and provincial resources and programs that the city could tap into, draw down to the community level, and use to its advantage.

Other cities need more than merely aspiration to replicate the Waterloo experience. Professor Wolfe shows that each individual city has to follow a trajectory that grows out of its own history and circum-stances. But other cities can certainly adopt the entrepreneurial spirit of Waterloo. In a sense, Waterloo becomes the poster child for the kind of “big tent” mixture of government and governance that Professor Wolfe believes we must develop to create successful 21st century cites.

Professor Wolfe’s monograph reminds me of the lecture of our first Scholar-in-Residence, Janice Gross Stein. Professor Stein set out her vision of “networked federalism” to deal with the multiplying flows of information that are an inherent part of globalization. She called for non-siloed, horizontal decision making that brings all orders of govern-ment, as well as non-governmental organizations and individuals, into “shared policy space.”

David Wolfe agrees that in a world of increasing policy complexity, jurisdictional overlap, and constrained government resources, we need to make room for all the key players. We need to find new ways of working together to devise strategies that will secure Canada’s future prosperity.

7Foreword

He concludes by warning us not to be lulled into a false sense of secur-ity by global demand for our commodities. But in the end, the author’s message is empowering and optimistic. Canada’s innovation agenda is an urban agenda, both by necessity and by default. We can meet the challenges of the 21st century and beyond—if we can find ways to be truly inclusive and collaborative, and to align policies and programs of all levels of government in support of the right strategies. Not an easy task in Canada’s federal system . . . but not beyond our reach.

Introduction

1

11Chapter 1

The economic shock of the past year has dramatized the changing nature of Canada’s economy and the challenges that lie ahead. The industries and resources that have powered

Canada’s growth for the past six decades are in flux, and the contours of the next economy are still taking shape. The requests for govern-ment assistance from a growing number of economic sectors under-score the pressure these sectors face, but they also highlight the need for strategic thinking about the future role of government support for economic development.

The impossibility of satisfying all of these demands simulta-neously suggests that governments need to align their policies more effectively across competing jurisdictions and that they have to ensure current and future investments in economic development have the max-imum impact on the economic transition underway. Such an approach requires that policy development and implementation be sensitive to regional variations and that they consider the perspectives of the array of local actors who are concerned about the economic prospects of the communities where they live and work. A coordinated approach to economic development at the regional and local levels requires an inte-grated perspective on policy planning at the governance level, cutting across existing programs and levels of government, to achieve a greater degree of policy alignment.

The impact of the current recession and the economic consequences that flow from it are increasing the pressure on government to deploy its resources more strategically to achieve maximum impact and facili-tate the structural transformation needed. The task of responding to these challenges in order to promote a more innovative and competi-tive economy that is also cognizant of the growing trend toward social polarization demands a coordinated response across all three levels of government in this country. However, our track record in this area is not particularly impressive. One response is to adopt a scattershot approach and liberally spread public resources across the country. An alternative response is to align policy strategically to ensure that it is tailored to, and suitable for, the specific capabilities and needs of individual city-regions across the country. Governments need to do the latter.


Another consequence of the transition underway is that the import-ance of cities, where a significant proportion of economic activity in Canada occurs, is bound to grow.1 As the processes of globalization gathered steam from the mid-1970s onwards, manufacturing activity has moved offshore driven by the search for lower cost production sites, making the connection between cities and their economic base of activity appear more tenuous. The containerization revolution of the 1970s was a critical innovation that facilitated this development, while the diffusion of new information and communications technologies in the following decade accelerated the trend with respect to service activities. By the turn of the millennium, confident predictions were being made about the elimination of space as an economic factor, or the “death of distance.”2

Despite this trend, there is growing evidence to suggest that many aspects of the contemporary global economy are making cities more important as sites of economic activity and innovation. Paradoxically, as certain aspects of the economy become more globalized in their scale of operation, the local scale of activity assumes an even greater significance. In Richard Florida’s apt phrase, “the world is spiky,”3 not flat, and becoming more so all the time.

With each layer that is added—population density, economic activity, and innovation—the map becomes increasingly concentrated. . . . The world gets spikier and spikier the farther you climb up the ladder of eco-nomic development, from producing basic goods to undertaking significant new innovations.4

1 Natalie Brender, Marni Cappe, and Anne Golden, Mission Possible: Successful Canadian Cities, The Canada Project final report (Ottawa: The Conference Board of Canada, 2007).

2 Frances Cairncross, The Death of Distance: How the Communications Revolution Is Changing Our Lives (Boston: Harvard Business School Press, 2001).

3 Richard Florida, “The World Is Spiky,” The Atlantic Monthly (October 2005), p. 48.

4 Ibid., Who’s Your City? How the Creative Economy Is Making Where You Live the Most Important Decision of Your Life (Toronto: Random House Canada, 2008), p. 30.

13Chapter 1

But as Florida recognizes, the converse side of these global spikes are the valleys, where population, economic activity, and innovation are far less densely concentrated. The spiky nature of economic activity means that some regions, which already have a greater concentration of economic activity, will do well, while others may fall behind. The spikes are increasing in Canada’s urban economy as the rate of growth of the largest cities rapidly outpaces that of the medium-sized and smaller ones. However, our strong commitment to regional equaliza-tion and social equity means that policy solutions cannot be fashioned to ensure prosperity in the spiky regions alone, but must take account of the valleys as well. The challenge is to ensure that the policy supports in place can be customized sufficiently to accommodate the different needs and realities of the diverse regions of the country. In other words, we must acknowledge that, in Canada, one size does not fit all.

Most Canadians live in city-regions. In its simplest terms, a city-region is a continuous network of urban communities, whose “bound-aries move outward—or halt—only as city economic energy dictates.”5 More precisely, it can be defined as “the presence of a core city linked by functional ties to a hinterland. The nature of those ties . . . generally includes a combination of economic, housing market, travel-to-work, marketing, or retail catchment factors.”6 According to the 2006 Census, nearly 25 million people—or four-fifths of Canada’s population—live in urban areas and two-thirds reside in the 27 census metropolitan areas (the large statistical areas that correspond most closely to the concept of a city-region).7 Most population growth in Canada between 2001 and 2006 took place in city-regions. According to the Conference Board, Canada’s 10 major city-regions accounted for 51 per cent of gross domestic product (GDP) and 51 per cent of employment in 2005. Over

5 Jane Jacobs, Cities and the Wealth of Nations: Principles of Economic Life (New York: Random House, 1984), p. 45.

6 Andrés Rodríguez-Pose, “The Rise of the ‘City-Region’ Concept and Its Development Policy Implications,” European Planning Studies 16, 8 (September 2008), p. 1027.

7 Statistics Canada defines a census metropolitan area as an urban core with a population of at least 100,000 and adjacent urban or rural areas that have a high level of economic and social integration with the core.


the previous decade, 65 per cent of the net new jobs created in the country were located in the major city-regions and the level of output grew by 3.6 per cent annually in those cities, compared with only 2.9 per cent in the rest of the country.8 Clearly, Canada is a highly urban society and becoming more so with each passing decade. Its city-regions are not just the dominant sites of economic activity; they are also the leading edges of innovation that will generate the new ideas, new products, and new industries that will drive the economy in the future.

However, city-regions are more than just locations where people live and work. Cities are also social and political spaces that shape our social, cultural, and political institutions. Any analysis of the factors contributing to the current development of Canadian cities must include this broader set of influences, in addition to the economic ones. We need a better understanding of how the interplay between the economic dimensions of urban centres and their social and political character affects their overall pattern of development. The political decisions that are taken about local strategies—to promote economic growth, expand the talent base of the local economy, and reduce social inequality—have important consequences for their economic performance.

Despite their underlying significance, recognizing the role of city-regions is not a particular strength of Canadian politics. Nor are city-regions well represented in the architecture of the federal system, where the local “voice” is often absent from the table. As Janice Stein perceptively argued in her 2006 CIBC Scholar-in-Residence lecture:

It is in cities that the intermingling of federal and prov-incial jurisdictions stands out most clearly, and it is here that they are tested most sharply. It is impossible to imagine that these overlapping jurisdictions could be disentangled from our city-regions, which are at the core of our future economic success.9

8 Brender, Cappe, and Golden, p. 5.

9 Janice Gross Stein, “Canada by Mondrian: Networked Federalism in an Era of Globalization.” In Roger Gibbons, Antonia Maioni, and Janice Gross Stein, Canada by Picasso: The Faces of Federalism (Ottawa: The Conference Board of Canada, 2006), p. 35.

15Chapter 1

At the same time, municipal boundaries rarely correspond to the real economic geography of Canada’s city-regions. This jurisdictional fragmentation compounds the pre-existing problem of the subordin-ate status of Canadian cities in the federal system. The result, as the Conference Board argued in Mission Possible, is that, “[t]he difficulty of coordinating local and regional—and even provincial and federal—activities and policies is one of the most critical challenges facing all our major cities.”10

The accelerating trend toward globalization and the emergence of a more knowledge-based and creative economy pose a set of challenges and opportunities for city-regions. Formulation of a suitable response must begin with a better understanding of the current factors driving innovation and growth in city-regions. This monograph addresses this question by exploring three specific dimensions of the way in which innovation and creativity contribute to the economic dynamism of city-regions: the nature of the innovation process in city-regions; the grow-ing importance of talent attraction and retention to urban economic development; and more inclusive processes for civic engagement and policy development at the urban level. The following sections lay out some of the relevant dimensions that will be explored.

soCIAL dynAmICs of InnovAtIon And CreAtIvIty

Innovation is increasingly recognized as a social process; it depends on interaction and social learning among economic agents. A substan-tial proportion of that innovation occurs via interaction between tech-nology users and technology producers, or with supporting institutions. The city-region is a critical scale for innovation and creativity because spatial proximity between economic actors and the institutions that support their activities enables the easy circulation of knowledge. As Brian Kahin has eloquently argued:



Conventional thinking is that location matters less now, but this thinking again confuses information with knowledge. In a flat world where information flows easily and freely, virtual tools and virtual organiza-tions are accessible to everyone. Advantage lies in the ability to generate and manage knowledge in all its recalcitrant complexity. The richness of [collocation] provides a competitive edge against the world by offer-ing the nuance and rich interaction that physical pres-ence makes possible. Where smart, ambitious, creative people get to know and trust each other, innovation is “in the air.”11

The relationships that transform ubiquitous pieces of information into commercially valuable forms of knowledge are underpinned by the presence of local infrastructure for knowledge generation in city-regions: specialized educational and research institutions, unique sup-port services for industry, and institutions that build and strengthen networks among firms and other actors to expedite the circulation of knowledge. At the same time, city-regions act as crucial hubs for tap-ping into global knowledge flows and disseminating that knowledge and learning to their regional hinterlands.

Some city-regions benefit from specialization in activities in the same and related industries, which generates positive effects related to the concentration of suppliers, a dense labour market, and the spill-over of ideas among related firms.12 Some observers also point to the benefits of a diverse mix of economic activities. The urban economics literature, following Jane Jacobs, suggests that ideas that are common-place in one sector of the economy may be novel in another. Thus, the opportunity for knowledge spillovers across economic sectors enhances

11 Brian Kahin, “Beyond the Box: Innovation Policy in an Innovation-Driven Economy,” Science Progress [online]. (July 2009). www.scienceprogress.org/2009/07/beyond-the-box, p. 11.

12 Michael E. Porter, “Clusters and the New Economics of Competition,” Harvard Business Review 77, 6 (November–December 1998), pp. 77–90.

17Chapter 1

the potential for innovation and the generation of new economic ideas among local firms.13 However, a number of questions remain. There is little agreement on the relative advantages of specialization versus diversity, nor have discussions of these factors been linked to an under-standing of the roles different cities play in a country’s urban system. While the advantages of the largest city-regions as centres of innova-tive activity appear to be well established, there is less consensus on the prospects for mid-sized and smaller urban regions in the evolving urban system. While the continuing importance of global linkages to local economic activity is recognized, there is still little understanding of how these distant connections complement the local dynamics of knowledge circulation in city-regions.14

The analysis presented in this monograph explores the relationship between specialization and diversity in city-regions; the difference size makes to the nature of economic activity in different cities across the country, as well as to their economic performance; and, finally, the way the global embeddedness of the Canadian economy and its city-regions affects the knowledge flows that contribute to innovation and economic growth.

While scientific research and engineering capabilities have long been seen as the keys to innovation and economic growth, there is also recognition that additional skills associated with the cultural and cre-ative occupations are important for economic success. This insight sug-gests that cities with local concentrations of highly skilled and creative workers have a potential advantage in attracting and retaining globally mobile investment, as well as in generating indigenous growth in the local economy. It is the social characteristics of particular places that make them attractive to talented workers who are of primary import-ance in sustaining local economic growth and prosperity. Such talent is attracted to cities that can provide a wide range of employment oppor-tunity, a critical mass of cultural activity and social diversity, and a

13 Jane Jacobs, The Economy of Cities (New York: Random House, 1969).

14 James Simmie and P. Wood, “Innovation and Competitive Cities in the Global Economy: Intro-duction to the Special Issue,” European Planning Studies 10, 2 (March 2002), pp. 149–151.


welcoming attitude for newcomers. There is also increasing evidence to indicate that the scientific and engineering occupations, tradition-ally seen as essential for the growth of an innovative economy, are also attracted to cities with strong concentrations of creative industries and occupations.

A related attribute of city-regions that makes them centres of dyna-mism and growth is their role as centres for the production of a range of cultural products, including products as diverse as books and magazines, television shows, films and videos, live and recorded music, new media, advertising, design, live theatre, and museums. The common attributes of these products are their high degree of creative content and the distinct-ive pattern of innovation required to make them. Innovation in the cre-ative and cultural industries is driven by the generation of content or the creation of products, embodying a high degree of design, which are then brought to market through a particular medium—be it books, television, film, music, art, or digital media. Developing, attracting, and retaining the talent capable of creating this content is critical to the vitality of these industries. A common feature of most of these industries is the project-based nature of their production process, which relies on the presence of a large, diverse talent pool that can be assembled quickly and easily into project teams to create individual productions. As Allen Scott and others have argued, cities have long been the pre-eminent sites for the creation of such cultural products.15

The migration of skilled labour has been an important factor in shaping the character and geography of Canadian cities. However, it has had a highly differentiated impact on specific places, according to city size and relative location. Immigration has contributed to the dyna-mism of the largest metropolitan areas, especially Toronto, Vancouver, Montréal, Calgary, and Ottawa, by providing a key source of human capital and talent. Immigration flows have enriched the cultural econ-omies of these city-regions by endowing them with distinctive forms of cultural capital. However, the benefits of immigration have not

15 Allen J. Scott, The Cultural Economy of Cities: Essays on the Geography of Image-Producing Industries (London, and Thousand Oaks, Calif.: SAGE Publications, 2000).

19Chapter 1

been equitably distributed across all city-regions in the country. Mid-sized and smaller cities, especially those more distant from large urban regions, have limited prospects of benefiting from these flows of immi-gration. Many are trying to cope with the loss of their own talent to other parts of the country, as well as their inability to attract and retain educated migrants from other countries.

While there is growing acceptance that the pursuit of a talent-based strategy is essential for tapping into the full knowledge resources of the labour force and the creative potential of cities, some question the degree of social inclusion in this approach. A key challenge for urban policy is to create the broader conditions to foster access to the educa-tion, skills, and labour market opportunities that all groups in society need to realize their full creative potential. Several questions follow from this idea. For instance, how effectively are concerns regarding social inclusion being incorporated into the talent-based development strategies adopted by Canadian cities? An equally pressing concern is how this approach applies to mid-sized and smaller cities. While many larger urban regions exhibit a strong quality of place that can attract and retain talented labour, will smaller urban regions with less distinct-ive characters be relegated to the status of also-rans?

CIvIC engAgement And strAtegIC governAnCe

The need to forge better linkages among relevant institutions and associated actors is a critical factor in urban economic development policy. The Conference Board describes the shift from a top-down, gov-ernment-knows-best approach to a more inclusive, multi-sectoral style of local governance as “the big tent.”16 Yet, recognizing the importance of collaboration and coordination to effective policy development is only part of the challenge; one must also understand the conditions that con-tribute to their emergence and development. Among those conditions is



the emergence of strong, dynamic civic leaders with the ability to forge broad and inclusive local development coalitions. A development coali-tion is a place-based coalition of a diverse cross-section of social and economic groups committed to the economic development of a specific city-region.17 Effective policy coordination also requires a conception of policy learning that focuses on the capacity of community-based organ-izations and local governments to devise strategies to promote urban economic growth in a knowledge-based and innovation-intensive era.18

The recognition that policy outcomes depend on the interaction among a wide range of social and economic actors—including sub-national governments, business, and not-for-profit organizations—has led to a growing focus on the role of governance as opposed to govern-ment. Central to the concept is the development of styles of governing in which the boundaries between public and private actors, and even across different levels of government, are blurred. Despite the inherent challenge in moving to a more participatory and inclusive “big-tent” approach to urban governance, there is evidence that such initiatives are underway in a growing number of cities and city-regions across the country. A number of them are engaging in strategic planning processes to identify and mobilize their knowledge assets and chart a new direc-tion for their local economy. The monograph draws on case studies from across the country to investigate the specific conditions that facili-tate or inhibit the emergence of effective collaborative leadership and the broadly based civic engagement that integrates community stake-holders into a more strategic approach to urban economic development. This approach can succeed only if the prevailing structures of urban governance provide the necessary support to allow strategic planning exercises to be effective.

17 Michael Keating, “Governing Cities and Regions: Territorial Restructuring in a Global Age.” In Allen J. Scott, ed., Global City-Regions: Trends, Theory, Policy (Oxford and New York: Oxford University Press, 2001), p. 379.

18 Neil Bradford, Cities and Communities That Work: Innovative Practices, Enabling Policies (Ottawa: Canadian Policy Research Networks, 2003), p. 11.

21Chapter 1

Despite the number of initiatives underway across the country, there is concern about whether cities can mobilize sufficient policy and fiscal resources to alter their economic futures. However, even though such civic resources are necessary if a city-region is to develop an alternative urban development strategy, they are not enough. The reality remains that the preponderance of fiscal resources fall within the purview of the two senior levels of government, not Canada’s urban governments. The key challenge remains to effectively coordinate public expendi-tures across all three levels of government in support of these goals and objectives. That will require a more effective degree of policy alignment across Canada’s multiple levels of governance. The mobilization of a broad range of community-based actors can help align the expenditure of public resources in the city-region in support of the strategic vision that has been developed. This bottom-up, demand-pull perspective on urban economic development can be thought of as the equivalent of a “market signal” that tells senior levels of government where and how to establish priorities and allocate funds.

outLIne of the monogrAPh

The economic future of Canada’s city-regions will be profoundly affected by their performance on each of the dimensions discussed above: the social nature of the innovation process in city-regions and how it varies across cities of different sizes; the social foundations of talent attraction and retention, and the extent to which these tasks are carried out in a socially inclusive manner; and the degree of civic engagement and the extent to which the relevant social and economic actors gather under a “big tent” to formulate strategies for managing their economic future.

The monograph investigates each of these themes in greater depth by drawing on a broad selection of case studies on the role of innova-tion and creativity in the economic performance of 16 cities and city-regions across the country, undertaken by members of the Innovation


Systems Research Network over the past five years.19 The goal is to develop a better understanding of the factors that influence the pattern of urban economic development, particularly with respect to the role of innovation across a range of large, medium-sized, and small Canadian cities, and the role of talent and creativity, both cultural and scientific, in fostering urban economic growth. The monograph explores the implications of the shift from government to governance for the way policy is formulated and implemented.

The second chapter surveys the findings and insights of recent research from North America, Europe, and Asia on the role of innova-tion and creativity in city-regions. It argues that the underlying social dynamics of city-regions exert a strong influence on their innovative performance and economic outcomes. While national institutions play an important role in setting and delimiting the context for urban eco-nomic development, the social and economic qualities of city-regions, the relative degree of specialization and diversity in their industrial structure, and the ways in which they are linked to the global economy are critical to their overall economic performance. There is growing evidence that the activities associated with the cultural and creative industries, as well as industries that rely on design, are growing in sig-nificance in the emerging cognitive-cultural economy. However, this pattern is playing out differently across cities of different sizes, with critical implications for their economic future.

The third chapter examines the relative standing of large, medium-sized, and small cities in the Canadian urban system. It draws on a range of case studies of different-sized cities to analyze how their rela-tive degree of specialization or diversity affects their prospects for economic growth. Particularly important is the changing role of the creative and cultural industries in city-regions of different sizes, and the way in which talent attraction and retention are influencing the

19 More details on the project can be found online at www.utoronto.ca/isrn/city-region_initiative/index.html. Detailed conference presentations and conference papers on the results of the individual case studies can also be found online at www.utoronto.ca/isrn/publications/NatMeeting/index.html.

23Chapter 1

economic performance of these cities. The chapter also draws on data for all of Canada’s census metropolitan areas and census agglomera-tions to examine changes in their economic performance along some of the key dimensions of innovation and creativity.

The fourth chapter explores the broader literature and research on changing patterns of governance in urban regions. It examines the role of civic leadership in building local civic capital and forging cohesive development coalitions that can pursue strategic approaches to urban economic development.

The fifth chapter draws on the Canadian case study literature to analyze the recent experience of cities of differing sizes in increasing civic engagement and adopting a more strategic approach to fostering innovation and urban economic development. It also examines the case studies for evidence that the three levels of government are begin-ning to work across their respective jurisdictions to align their policies more effectively.

The monograph concludes with a summary of the key themes that emerge from the analysis and their implications for the changing role of urban regions in Canada’s economic future. It explores the degree to which the intersection of past trajectories of development and the strategic choices made by city-regions affects their capacity to respond to periods of rapid economic change. As noted above, a more strategic approach to urban economic development requires not just a new cat-egory of policy, but also a new style of policy development. Not all cities will be equally successful in making this transition; the adoption of such an approach is influenced by the legacy of their past pattern of economic development, as well as their social and political capacity to forge new ways of working with the senior levels of government and aligning their initiatives with federal and provincial policies.

Innovation and Creativity in City-regions

2

27Chapter 2

IntroduCtIon

As the world economy becomes more globalized, cities and regions need to create distinct advantages for their local econ-omies. The introduction of new ideas in knowledge-intensive

production and service activities is the basis for economic perform-ance and growth in the industrial countries. The interactive nature of the innovation process means that city-regions are the critical space in which social learning takes place. The dense concentration of economic actors in cities offers multiple opportunities for contact, interaction, and the exchange of ideas among highly skilled people. That makes cities more, not less, important as sites for innovation and creativity in knowledge-intensive goods and services. The foundation for economic success in a globalized world involves not just the capacity for innova-tion and creativity, but also the broader qualities of urban places that support that innovation and creativity. The decisions made by individual cities that strengthen or undermine these qualities are likely to have a major impact on their future well-being.

Despite the growing recognition of the importance of city-regions as the loci of knowledge creation and innovation, a number of questions remain. First, there is considerable debate about how the economic struc-ture and particular characteristics of urban economies affect innovation and knowledge circulation within cities. Some analysts maintain that the most important dynamics are those generated by the advantages that accrue to firms located in dense clusters of similar and related firms—in other words, dynamics generated by a greater degree of specialization within city-regions. Conversely, others emphasize the potential for innovation that arises when new forms of knowledge circulate among a wide range of sectors within a city—in other words, from the dynamics associated with greater diversity in the economic structure of a city-region. In this latter view, ideas that are commonplace or widely accepted within one particular sector of the economy may have novel value in another. The possibility of this cross-fertilization arising from an economic structure with greater variety enhances the potential for the generation of new ideas and innovation within the local economy.


The question of whether industrial specialization or diversity has the greater potential for innovation and growth within city-regions has critical implications for their ability to adapt in a knowledge-based and globalizing economy.

A second question concerns the relative advantages or disadvantages associated with city size or urban agglomeration. There is widespread agreement that the largest city-regions enjoy certain advantages as centres of innovation and creativity, but they are also subject to greater costs that result from rising land prices and the congestion associated with larger size. The advantages derived from large, diversified economies, strong research institutions, and a deeper talent pool may be offset by negative consequences of urban agglomeration that weaken the social fabric of these city-regions. There is an observed correlation between the overall size of a city and the economic well-being of its inhabitants. In other words, people in larger cities tend to enjoy higher average incomes, but only up to a certain point. Statistical analysis undertaken by the Organisation for Economic Co-operation and Development (OECD) indicates that the relationship between urban size and income levels changes once the population of a city-region grows beyond 6 million people. At this point, the negative effects associated with greater con-gestion, higher commuting costs, increased logistics costs, higher rents, environmental degradation, and rising social inequality outweigh the positive effects associated with urban concentration.1 Bigger does not necessarily mean better in all cases, and “the growth capacity of metro-regions should not be over-estimated as metro-regions are not always synonymous with success.”2 The underlying criterion for success in the emerging knowledge-based economy is whether city-regions, regardless of their size, are able to build the local institutions to generate the kind of activities that nurture innovation in a knowledge-intensive economy. Which economic activities are sufficiently valuable to offset the effects of these “diseconomies” of scale in large city-regions? While there

1 Organisation for Economic Co-operation and Development (OECD), Territorial Reviews: Com-petitive Cities in the Global Economy (Paris: OECD, 2006), p. 51.

2 Ibid., p.15.

29Chapter 2

is only one city-region in Canada approaching this scale, the Greater Toronto Area, few would deny that some of the negative effects associated with this increased size have already begun to make an unwelcome appearance.

At the same time, there is less agreement on the prospects for mid-sized and small cities. Small and medium-sized cities often operate from a more specialized industrial base concentrated in a few economic sectors. That offers some advantages, but the future of these cities is closely tied to the specific industries in which they are specialized. The industrial structure of such cities increases the risk that they will be locked into declining sectors or obsolete technologies that may be sup-planted by newer ones. One consequence is that the economic fate of these cities may depend less on their degree of specialization than on the specific sectors in which they are specialized. At the same time, the speed or flexibility with which their economies can shift from declining sectors to emerging ones may have a disproportionate effect on their economic future. The ability of city-regions to adapt to and absorb rapid changes in technology, and the competitiveness of their industrial mix, are critical to their economic future.

Finally, the social changes associated with these economic trends will also have an important effect on the future state of our cities. Quality of place is an important factor underlying the social dynamics and economic performance of city-regions. Urban areas that foster positive attitudes toward tolerance and social diversity are more likely to succeed in attracting and retaining highly skilled and creative workers.3 Yet there is also evidence that while some people in large urban centres benefit from highly skilled jobs in knowledge-intensive industries, a significant number remain trapped in low-wage, contingent jobs, leading to increased social polarization. There is good reason to believe that the growing bifurcation

3 Richard Florida, Charlotta Mellander, and Kevin Stolarick, “Inside the Black Box of Regional Development—Human Capital, the Creative Class and Tolerance,” Journal of Economic Geography 8, 5 (2008), pp. 615–649.


of employment opportunities in urban centres is less than coincidental, as the low-wage workers are concentrated in the range of services occu-pations necessary to support a large-scale urban system.

This chapter draws on recent empirical research and conceptual analysis to explore these issues. It sets out a framework for understanding the implications of city size, the relative degree of specialization and diversity in cities, the contribution of a talented and creative workforce, and the dangers of increasing social polarization for the economic performance of city-regions. The framework developed in this chapter is used in Chapter 3 to analyze how these trends are currently playing out across a range of Canadian cities.

IndustrIAL evoLutIon And the LIfe CyCLe of CIty-regIons

One of the defining features of contemporary economies is the central role of knowledge and learning in creating economic value and deter-mining competitive success. The literature on this point is abundant and compelling: Innovation is a socially organized process that depends on interactive, social learning among individuals and firms.4 The critical issue is how the socially embedded nature of the innovation process affects economic growth and development in an urban setting. A number of theories have been advanced to explain the relative pace of industrial growth and decline in city-regions. Traditional explanations of the factors that affect the economic performance of city-regions have been framed in terms of the origins and growth of urban centres; the relationship between the concentration of firms in an urban economy and the growth of local labour markets; the relative degree of specialization or diversity that characterizes the economic structure of individual cities; and the relative importance of lifestyle amenities and the quality of place

4 Bengt-Åke Lundvall, “Introduction.” In Bengt-Åke Lundvall, ed., National Systems of Innovation: Towards a Theory of Innovation and Interactive Learning (London: Pinter Publishers, 1992), pp. 1–19.

31Chapter 2

in increasing the attractiveness of particular cities.5 Recent research suggests that these issues need to be considered within the context of a broader set of changes that influence the economic performance of city-regions. The additional factors include the relative size of the individual city, the city’s point of insertion into an evolving global hierarchy of urban centres, and the evolution of the city’s industrial structure toward the growth of higher-level business services associated with a more knowledge-intensive economy. The following discussion surveys the influence that this range of factors exerts over the economic performance of city-regions.

There is a close relationship between the locational choices of firms and those of individuals, particularly people with the higher level of educational qualifications and occupational skills that are in increasing demand. Conventional theories of urban economic growth emphasize the historical decisions made by firms regarding where to locate. These decisions were often influenced by physical factors, such as the practical necessity of locating near conventional modes of transportation such as rivers, coastal harbours, or railway lines, or the advantage of operating near rich endowments of natural resources. As transportation systems improved in the post-war period, especially with the introduction of intercity highway networks in the 1950s and 1960s and the deregulation of airline travel in the 1970s, the relative weight of these historical factors in determining urban location was reduced. Some researchers point to the greater impact that the mobility of highly skilled and educated workers attracted to locations with high levels of climatic or lifestyle amenities has on urban growth.6 At the heart of this debate is a question about how the locational choices of individuals intersect with and reinforce those made by firms to contribute to the growth and dynamism of modern cities: Do people choose to locate where they find the greatest

5 David A. Wolfe and Allison Bramwell, “Innovation, Creativity and Governance: Social Dynamics of Economic Performance in City-Regions.” Innovation: Management, Policy & Practice, 10, 2–3, (October–December 2008), p. 172.

6 Edward L. Glaeser and Joshua D. Gottlieb, “Urban Resurgence and the Consumer City,” Urban Studies 43, 8 (July 2006), pp. 1275–1299.


number of job opportunities, or do businesses locate in city-regions with the largest potential labour market? The debate has serious implications for the type of policy levers that governments at all levels may deploy most effectively to stimulate urban economic growth.

A related issue concerns the advantages that firms derive from col-locating in cities with firms in similar or different industries, and which type of structure contributes most to industrial innovation and economic growth. One perspective emphasizes the benefits for urban economic growth of specialization in similar or closely related industries, while the alternative focuses on the advantages that flow from a diverse and variegated urban environment. The first approach argues that the advan-tages created by a dense network of suppliers, a deep pool of skilled labour, and the knowledge spillovers that occur among geographically concentrated groups of firms in related industries make the most sig-nificant contribution to growth. These advantages are associated with a greater degree of specialization in an urban economy. The advantages are derived from factors that lie outside the boundaries of the individual firm, but are embedded in the industrial sector found in a particular city.

This perspective draws on a tradition dating back to the late 19th cen-tury, which suggests that once a region or city establishes itself in a par-ticular set of production activities, its chances for continued growth tend to be high. Paul Krugman, building on a tradition that dates from the work of Alfred Marshall in the early 20th century, suggests that three types of benefits are created for firms located in the same city-region that specialize in similar technologies or production techniques. The first is the deep pool of specialized labour created by the concentration of firms within similar industries, which makes it easier to hire people with the specialized skills the firms require and attracts more workers to the city-region because of the resulting employment opportunities. The second benefit is the fact that a local concentration of firms in the same industry can support a larger number of specialized providers of inter-mediate inputs or services, thus enabling firms to concentrate on their areas of competence through the specialized division of labour in the local economy. Finally, knowledge is transferred more easily among firms located close to each other in a city-region than it is over longer

33Chapter 2

distances. The transfer of knowledge between firms in the same industrial sector in the same city-region occurs through the mobility of specialized labour among them, through the tendency of serial entrepreneurs to establish a succession of firms in the same city, and through the “learning- by-observing” effects of densely concentrated industries.7 Overall, firms benefit from the process of industrial clustering, which increases sectoral specialization in particular regions over time.8

The contrasting perspective, frequently associated with the work of Jane Jacobs, suggests that new and innovative ideas often come from different industrial sectors. Therefore, city-regions that are endowed with a diverse range of different industries, rather than those that are specialized in a smaller number of industrial sectors, have the conditions that are most conducive to innovation and growth. Innovative ideas are derived by applying knowledge that may be considered standard in one sector to help solve problems or develop new products in another sector of the local economy. From this perspective, larger city-regions, with a broader cross-section of diverse industries, have a greater potential for generating innovative new ideas and, as a result, enjoy faster rates of growth and higher levels of innovation than do smaller ones. Jacobs also suggested that competition among alternative sets of ideas embodied in a diverse set of economic actors is more conducive to generating new knowledge than the local monopoly over ideas that exists in a more specialized urban economy.9

These competing views on the sources of urban economic growth have stimulated a considerable amount of academic research that has generated support for both sides of the argument, providing additional fuel for the ongoing debate.10 The results of some initial studies found greater support for Jane Jacobs’ hypothesis. An early study by

7 Paul Krugman, Geography and Trade (Cambridge, Massachusetts: MIT Press, 1991).

8 Gregory Spencer et al., “Do Clusters Make a Difference? Defining and Assessing Their Economic Performance,” Regional Studies (forthcoming 2010).

9 Jane Jacobs, The Economy of Cities (New York: Random House, 1969).

10 Catherine Beaudry and Andrea Schiffauerova, “Who’s Right, Marshall or Jacobs? The Localization Versus Urbanization Debate,” Research Policy 38, 2 (2009), pp. 318–337.


Ed Glaeser and his collaborators measured employment growth in a cross-section of manufacturing industries using data from 170 American cities between 1956 and 1987. The researchers found that, at the industry level for individual cities, “specialization hurts, competition helps, and city diversity helps employment growth.”11 Feldman and Audretsch sub-sequently examined innovation patterns in knowledge-based industries in the U.S. and found that the presence of complementary industries that draw upon a common base of scientific knowledge provided a stimulus for innovation. Furthermore, cities that have a greater degree of com-petition for new ideas are more supportive of innovative activity than cities with a greater degree of concentration, which is consistent with Jacobs’ suggestion. The degree of innovative activity tended to be lower in cities that were primarily specialized in a particular industry, whereas a stronger presence of complementary industries that drew on a common base of scientific knowledge generated a higher level of innovative activity.12

Conversely, a study by Vernon Henderson demonstrated that single- plant firms in a city benefited from their collocation with a greater number of firms in their own industry, but there was limited evidence to suggest that these firms benefited from the presence of other firms in a diverse range of local industries other than their own. The study thus found little evidence that firms benefit from the type of industrial diversity suggested by Jane Jacobs. Henderson concluded that industrial specialization in particular cities helps the firms involved realize greater economies of scale, and benefit from lower rents and congestion costs. However, the study also revealed an important finding related to urban size: the economies of many smaller metropolitan areas tended to exhibit a greater degree of specialization in more standardized manufacturing activities—such as the production of textiles, food processing, autos,

11 Edward L. Glaeser, Hedi D. Kallal, Jose A. Scheinkman, and Andrei Shleifer, “Growth in Cities,” Journal of Political Economy 100, 6 (December 1992), p. 1150.

12 Maryann P. Feldman and David B. Audretsch, “Innovation in Cities: Science-Based Diversity, Specialization and Localized Competition,” European Economic Review 43, 2 (February 1999), pp. 409–429.

35Chapter 2

steel and wood products—where the economic benefits associated with specialization can be realized. Conversely, the economies of larger cities tended to be more specialized in knowledge-intensive services, such as finance, real estate, insurance, and newer industries, such as electronic components and instruments.13

The extensive research in the field provides some evidence to sup-port both perspectives: that the presence of specialized and diversified urban economies contributes to the overall performance of city-regions, but the two factors may act in different ways in different-sized cities. A recent survey of the literature suggests a possible explanation for the apparently contradictory results. The outcomes reported by different studies may be the result of the specific industries selected for examination. Those industries with a base in more traditional, standardized methods of production tend to demonstrate the benefits resulting from a greater degree of specialization than do sectors based in high technology. The results are also affected by the range of indicators selected as evidence of economic performance. Different indicators, such as the level of employment growth, the degree of productivity increase, and the amount of innovation, can have a different effect on the results of the study. Most significant, however, is the suggestion that part of the confusion may arise from the omission of time as a factor in determining whether the economic benefits associated with special-ization or diversity exert a more important influence on the economic performance of firms in city-regions. In effect, “. . . the role of externalities varies according to the maturity of the industry. Jacobs externalities predominate in the early stages of the industry life cycle, whereas Marshall externalities enter at a later point, and in the end, specialization will, in fact, hinder economic growth.”14

This conclusion is consistent with other recent contributions, which suggest that the introduction of an industry life cycle perspective, as well as a better appreciation of the relationship between city size and diversity

13 J. Vernon Henderson, “Marshall’s Scale Economies,” Journal of Urban Economics 53, 1 (January 2003), pp. 1–28.

14 Beaudry and Schiffauerova, p. 334.


or specialization, may provide a better understanding of the relative contribution made by industrial specialization and diversification to urban economic growth. The economic benefits associated with a more diversified local economy play different roles in the innovation process at various stages in the maturity of the industry, while differences in population also affect cities’ ability to create and diffuse new knowledge. In an attempt to reconcile the contradictory findings described above, Gilles Duranton and Diego Puga have suggested that firms often develop new products in the diversified, creative environment found in larger urban centres, but as the technology and industry mature, there is a strong incentive for them to relocate to more specialized cities in the mass production phase of the industry’s life cycle in order to exploit urban cost advantages. Larger city-regions tend to be more diversified and knowledge-intensive than medium-sized and small cities. Where large cities tend to have multiple specializations, medium-sized cities have significantly fewer.15 Related findings reveal that levels of innovative activity are also strongly linked to city size, with R&D, patenting, and major product innovations much more concentrated in large urban areas.16

This insight is reinforced by an argument that links industrial activity, economic fortunes, and city size. Large cities with a diversified indus-trial base are more insulated from the impacts of economic change, while smaller ones with a narrower industrial base are more subject to a life cycle of growth and decline.17 While a greater degree of specializa-tion does stimulate the growth of some medium-sized cities, the outlook for those cities is linked to the economic prospects of the specific sectors in which they are specialized. Once the sectors lose their competitive edge, the cities may lack the knowledge assets or the quality of place

15 Gilles Duranton and Diego Puga, “Diversity and Specialization in Cities: Why, Where and When Does It Matter?,” Urban Studies 37, 3 (2000), pp. 533–555.

16 David B. Audretsch, “The Innovative Advantage of U.S. Cities,” European Planning Studies 10, 2 (March 2002), p. 170.

17 Elise S. Brezis and Paul Krugman, “Technology and the Life Cycle of Cities,” Journal of Economic Growth 2, 4 (December 1997), pp. 369–383.

37Chapter 2

to compete or diversify their local economy into newer and expanding industries. They are often confronted with the challenge of regenerating their local basis for economic development without the institutional capacity that can furnish a fresh supply of ideas and new sources of growth. This suggests that ultimately the source of innovation and economic growth for a city-region does not rest simply on the degree of specialization or diversification in its industrial structure, but more importantly on the resilience of the city-region in mobilizing its eco-nomic assets in the pursuit of a new basis for growth.

This insight suggests that variations in the ability of cities to create and diffuse new knowledge appear to be important for the cities’ long-term growth prospects, as well as their ability to adjust to changing economic conditions and recover from a decline in the economic fortunes of the industrial sectors in which they were specialized. Cities with a greater specialization in the kinds of knowledge-intensive service activities associated with the growing information economy tend to have stronger economies than places without any specialization. That is not particu-larly surprising, given that the globally focused information sector is the fastest growing part of the U.S. economy and is concentrated in its largest metropolitan areas.18 The growing significance of the information sector to the economic performance of individual cities is reinforced by work on the geography of the Internet economy. The spatial clustering of the Internet-related production of goods and services is not distributed on the basis of population patterns, but according to the geographic concentration of the information economy.19 Large concentrations of the advanced producer services documented by Matthew Drennan—finance, media, entertainment, health, technology, and related industries—constitute the control centres of the information

18 Matthew P. Drennan, The Information Economy and American Cities (Baltimore: The Johns Hopkins University Press, 2002), p. 6.

19 Matthew A. Zook, The Geography of the Internet Industry: Venture Capital, Dot-Coms, and Local Knowledge (Malden, Mass.: Blackwell Publishing, 2005).


economy. The growing impact of telecommunications and computer networks reinforce these concentrations of high value-added producer services in a few large metropolitan centres.20

The growing centrality of knowledge-intensive activity to urban competitiveness suggests that the growth potential of cities increas-ingly depends on their ability to utilize their local knowledge assets to develop greater specialization in growing knowledge-intensive areas of economic activity. That introduces a distinctly Schumpeterian dimen-sion into the analysis of urban economics that underlines the impact of the capacity to innovate. New economy sectors are sustained by the con-tinuous pace of innovation and learning needed to keep abreast of the rapidly moving knowledge frontier in their industries. However, this need for continuous innovation extends well beyond the manufacturing sector of the economy. Analyses of the modern economy that are con-strained by conventional 20th century definitions of industrial sectors are being overtaken by the growing integration of manufacturing and service activities: firms must be able to integrate their manufacturing capabilities with more knowledge-intensive activities to maintain their competitive edge.21 In an innovative economy where the knowledge frontier is moving rapidly, dynamic cities are those able to draw on their local knowledge assets and research infrastructure to reinvent them-selves by moving from one field of specialization to another. In this transition, existing industries may provide the essential building blocks for the emergence of a new innovative industry, because the skills and talents that have accumulated over time in the city may furnish critical inputs needed by the emerging industry, as has been the case with

20 Manuel Castells, The Internet Galaxy: Reflections on the Internet, Business, and Society (oxford and New York: Oxford University Press, 2001), pp. 222–231.

21 James Simmie and Peter Wood, “Innovation and Competitive Cities in the Global Economy, European Planning Studies 10, 2 (March 2002), pp. 149–151.

39Chapter 2

the digital media industry.22 The successful development of these new industries and clusters, many of which involve information-intensive activities, is a path-dependent process, which builds on the distinctive knowledge and industrial bases of individual cities. As a result, the ability of individual city-regions to marshal their local knowledge assets and develop local concentrations of expertise in emerging technology areas may be a good indicator of their prospects for resurgence and growth. As two experts put it, “[T]he important question may not be specialization versus diversity but whether a city has specialized in the right thing at the right time.”23

The capacity of individual cities to effect this transition to newer and more information-intensive forms of industrial activity does not just depend on the functioning of autonomous market-based processes; it is also affected by the cities’ institutional and political structures. The emergence of new technologies and industrial sectors is often associated with a corresponding set of changes in the industrial geography of par-ticular cities and regions. It is not surprising that the new information technologies or biotechnologies tend to be associated with names such as Silicon Valley, San Diego, Austin (Texas), or Research Triangle Park—places that scarcely registered on the industrial map of the U.S. prior to 1970. However, the ready association of these industries with upstart metropolitan areas often resulted from the ability of local business, and civic and political leaders to take advantage of the opportunities created by the emergence of new technologies.

At the same time, this transition poses significant economic challenges for the older, established metropolitan areas in the U.S., Europe, and Canada that dominated the previous industrial era. These cities were once the pinnacles of economic growth and prosperity to which other urban regions aspired: “[T]he Silicon Valleys of the Second Industrial

22 Shauna G. Brail and Meric S. Gertler, “The Digital Regional Economy: Emergence and Evolution of Toronto’s Multimedia Cluster.” In Hans-Joachim Braczyk, Gerhard Fuchs, and Hans-Georg Wolf, eds., Multimedia and Regional Economic Restructuring (London and New York: Routledge, 1999).

23 Michael Storper and Michael Manville, “Behaviour, Preferences and Cities: Urban Theory and Urban Resurgence,” Urban Studies 43, 8 (July 2006), p. 1250.


Revolution had names like Akron, Detroit, Pittsburgh, and Rochester.”24 While some older industrial cities in the U.S. have experienced recent economic growth and resurgence due to their ability to shift to knowledge- intensive activities, others have not. Cities and regions that remain locked into traditional specializations in mature manufacturing and are unable to capitalize on their existing knowledge assets or mobilize their local endowments of human capital face greater challenges in effecting this transition. However, as noted at the outset, this capacity is very much determined by the structure and the operation of their local civic and political institutions—a subject that will be examined in greater depth in Chapter 4.

dIversIty And the emergenCe of An InternAtIonAL hIerArChy of CItIes

The relation between the size of a city-region and its economic pros-pects is not determined solely by its relative standing within the national economy, but also depends on its place within an emerging hierarchy of global or world cities. In the early 1970s, Canadian economist Stephen Hymer suggested that the growing predominance of multi-national corporations in the global economy was likely to have a corresponding effect on the stratification of cities around the world, creating a new global division of labour between geographic areas corresponding to the vertical one within the firm. It would result in a concentration of those occupations with responsibility for corporate decision making within a few of the world’s major cities—such as New York, London, Paris, Frankfurt, and Tokyo—supported, in turn, by a lar-ger number of regional hubs. He maintained that the structure of income

24 Sean Safford, Searching for Silicon Valley in the Rustbelt: The Evolution of Knowledge Net-works in Akron and Rochester, working paper (Cambridge, Mass.: MIT Industrial Performance Centre, 2004), p. 16.

41Chapter 2

and consumption in those major cities would match the distribution of status and authority, with the citizens of these global capitals enjoying the best jobs and the highest rates of remuneration.25

In the decades since then, this provocative insight has been expanded upon in the growing literature on the stature and importance of “world cities” or “global cities.” In a seminal paper, John Friedman formulated a hypothesis about the emerging character of world cities as the basing points for global capital in the spatial organization of production activities and markets. He suggested that the resulting linkages made it possible to order world cities into a spatial hierarchy.26 According to Saskia Sassen, the fundamental dynamic at work “is that the more globalized the econ-omy becomes, the higher the agglomeration of central functions in a relatively few sites . . . the global cities.”27 The position of these cities in the global hierarchy is determined not only by the role they play in coordinating the processes of production and distribution of goods around the world, but also by their role in providing the increasingly spe-cialized services that large, complex firms require to manage a spatially distributed network of offices, factories, and distribution centres. Increasingly, these global cities have also become the key sites for innovation in the financial services industry and the development of new financial instruments, which have been two of the most notable features of the global economy since the 1980s. Rather than being distributed at random around the world, as some enthusiastic supporters of the digital revolution maintained,28 these high-end financial and information

25 Stephen Hymer, “The Multinational Corporation and the Law of Uneven Development.” In Jagdish N. Bhagwati, ed., Economics and World Order From the 1970s to the 1990s (london: Collier-Macmillan, 1972).

26 John Friedman, “The World City Hypothesis,” Development and Change 17, 1 (January 1986), pp. 69–83.

27 Saskia Sassen, The Global City: New York, London, Tokyo (Princeton, N.J.: Princeton University Press, 2001), p. 5.

28 Frances Cairncross, The Death of Distance: How the Communications Revolution Is Changing Our Lives (Boston: Harvard Business School Press, 2001).


services have in fact become ever more concentrated in the central business districts of a few leading cities that are specialized in the pro-duction of producer and financial services.

Below this narrow tier of truly global cities is a wider range of urban centres with a concentration of diverse knowledge-intensive production and service activities that act as the economic hubs of their respective national economies and serve as the principal nodes linking those econ-omies into the global economy.29 James Simmie argues that knowledge-intensive innovation is concentrated in a minority of the largest urban regions for several reasons. While innovative urban regions draw on their own knowledge assets, the ability to capture both local and global knowledge flows—“local capacity and international connections”—is increasingly necessary to reduce the uncertainty inherent in the innovation process. The ability of innovative firms to capture market share outside their own region is linked to their capacity to generate new products and services that draw on external sources of knowledge to a greater extent than less innovative companies do. The most successful cities are those that “are able to combine both rich local knowledge spillovers and inter-national best practice in the design and specifications of innovation.”30

International gateway cities—such as Paris, London, Tokyo, New York, and Los Angeles—located at the peak of the urban hierarchy achieve a higher level of economic performance because of their access to large pools of highly specialized and technical workers and the wide range of innovative firms located in the cities. They play a central role as knowledge hubs—both for their countries and for the wider world—due to their ability to attract exceptional talent, and to capitalize on global and local sources of knowledge, much of which flows through their local companies.

29 James Simmie, “Innovation and Urban Regions as National and International Nodes for the Transfer and Sharing of Knowledge,” Regional Studies 37, 6 & 7 (August 2003), pp. 607–620.

30 Ibid., “Knowledge Spillovers and Reasons for the Concentration of Innovative SMEs,” Urban Studies 39, 5 & 6 (May 2002), pp. 885–886.

43Chapter 2

However, these leading cities are not the only sources of innovation. Regional hubs, such as Montréal, Toronto, Boston, and Milan, are also highly competitive and play an important role in the global hierarchy. So do national and regional hub cities that share certain critical features. They contain high proportions of elite business and political leaders with the authority to make local investment decisions, which gives these urban areas a greater degree of autonomy. With their large populations, these cities also enjoy the benefits of economic agglomeration due to the con-centration of a wide range of knowledgeable collaborators from different disciplines who can contribute to the innovation process.31

Specialized knowledge transfers occur to a disproportionate extent among the minority of cities at the top of the emerging international hierarchy. Knowledge transfers between places such as Silicon Valley, Route 128 in Massachusetts, Berlin, Stockholm, Greater Southeast London, Baden-Württemberg, and Île de France occur “because they are often repositories of leading-edge knowledge in the activities in which they are specialized.”32 Medium-sized cities that are specialized in a narrower range of industrial activities can serve as hubs for their regional economies, but they have more limited access to global know-ledge flows and trade. The most dynamic medium-sized cities, which make the most effective use of local institutional research supports (universities) and social networks, are able to specialize successfully in knowledge-intensive industrial activities.33

31 Simmie, “Knowledge Spillovers and Reasons for the Concentration of Innovative SMEs.”

32 Ibid., “Innovation and Urban Regions as National and International Nodes for the Transfer and Sharing of Knowledge,” p. 617.

33 Safford.


urbAn AggLomerAtIon And the ConCentrAtIon of tALent And CreAtIvIty

Another view of the underlying determinants of urban dynamism and economic growth focuses on the crucial role of talent and creativity. The critical link between innovation, personalized knowledge exchanges, and economic growth makes the most important locational asset a dense labour market of highly educated and creative workers—what Cooke calls “regional talent pools of global significance”—with the potential to attract and embed globally mobile investment, and generate innovative growth.34 This view suggests that the local attributes that attract talented workers are of paramount importance in determining local economic prosperity. Such talent is attracted to and retained by cities, but not just any cities; those that offer rich employment opportunities, a high quality of life, a critical mass of cultural and entertainment activity, and social diversity are said to exert the strongest pull.35

A different line of argument maintains that the causal link between concentrations of creative and talented workers and regional economic growth may in fact be reversed. The preference of firms for locating in regions with large, diversified economies may be the primary factor in attracting and retaining large concentrations of creative workers, thus stimulating urban growth and innovation. “Though person-embodied tal-ent remains a critical input into innovation, it needs to be considered in the context of the other factors discussed above, such as city size, industry specialization, local institutional infrastructure, and knowledge flows.”36

Recent theories about the connection between the skill levels of creative workers and the economic performance of cities, such as Richard Florida’s idea of the “creative class,” identify the presence of knowledge-intensive industries in the city by measuring occupational categories rather than the industrial composition of the local economy.

34 Philip Cooke, “Regional Innovation, Entrepreneurship and Talent Systems,” International Journal of Entrepreneurship and Innovation Management 7, 2/3/4/5 (2007), pp. 117–139.

35 Glaeser and Gottlieb.

36 Wolfe and Bramwell, p. 177.

45Chapter 2

The creative class—people whose jobs add economic value through their creativity—includes knowledge workers, symbolic analysts, and professional and technical workers. The key driver of innovation in the creative economy is not restricted to scientific and engineering occu-pations, but includes a wide range of idea-generating and knowledge-intensive occupations. However, the definition of the “creative class” suggests that certain occupations are more important for innovation and regional development than others.

Florida defines the creative core of this new class as including those whose work involves “producing new forms or designs that are readily transferable and widely useful—such as designing a product that can be widely made, sold and used; coming up with a theorem or strategy that can be applied in many cases; or composing music that can be performed again and again.”37 Recent research has also found positive correlations between economic dynamism and agglomerations of artists, other non-science occupations, and entrepreneurs. There are relatively high correlations between artistic and entertainment occupations and regional labour productivity.38 These findings suggest that urban labour markets that contain a high concentration of artistic and creative occu-pations have an effect on urban economic growth similar to the effects that Jane Jacobs ascribed to the presence of a diversified industrial base. The positive contribution of human capital to urban growth rests on the concentration of a diverse labour pool rich in the creative occupations described above.

In addition, the more concentrated the talent, the more innovative the output. One of the key advantages of cities in a globalized economy is that they reduce the cost of knowledge transfer, and act as centres of idea creation and diffusion where talent clusters. There is also a strong correl-ation between population density in general, and the density of creative

37 Richard Florida, The Rise of the Creative Class: And How It’s Transforming Work, Leisure, Com-munity and Everyday Life (New York: Basic Books, 2002), p. 69.

38 Timothy R. Wojan, Dayton M. Lambert, and David A. McGranahan, “Emoting With Their Feet: Bohemian Attraction to Creative Milieu,” Journal of Economic Geography 7, 6 (2007), pp. 711–736. Also Ann Markusen and Greg Schrock, “The Artistic Dividend: Urban Artistic Specialisation and Economic Development Implications,” Urban Studies 43, 10 (September 2006), pp. 1661–1686.


workers in particular, and metropolitan patenting activity, suggesting that the population density of cities is a critical factor for knowledge spillovers and innovation.39 Consistent with the findings that the largest cities attract the strongest flows of knowledge, the effect of creative density on innovation in the U.S. is found to be the greatest in cities with a population of over 1 million. The relationship appears significant only at that level, suggesting that the innovative advantages accruing to large cities arise from the high concentration of technologically intensive manufacturing sectors, as well as a disproportionate share of the highly educated population.40 A related finding is that human capital levels are becoming more unequally distributed across urban centres, giving cities with greater concentrations of human capital a distinct advantage. Glaeser and Gottlieb suggest that the resurgence of cities such as London, New York, Boston, and Chicago in recent decades is partly attributable to the increase in the importance of knowledge to economic activity, so that “the biggest, densest cities appear to have a comparative advantage in facilitating the flow of knowledge,” partly due to rising consumer preferences for the sophisticated urban amenities, such as entertainment, found in these cities.41

from the “Creative Class” to the “Creative economy”: Cities as “schumpeterian hubs”

Critiques of those studies that find a positive correlation between urban concentrations of talent and human capital in urban centres and the prospects for economic growth suggest that the high concentrations of human capital may be the result of other positive externalities found in these cities. The basis of the criticism is that the skills-led explanations of economic growth espoused by Glaeser, Florida, and others may confuse the nature of the relationship between the locational decisions of

39 Gerald A. Carlino, Satyajit Chatterjee, and Robert M. Hunt, “Urban Density and the Rate of Inven-tion,” Journal of Urban Economics 61, 3 (May 2007), pp. 389–417.

40 Brian Knudsen, Richard Florida, Kevin Stolarick, and Gary Gates, “Density and Creativity in U.S. Regions,” Annals of the Association of American Geographers 98, 2 (June 2008), p. 472.

41 Glaeser and Gottlieb, p. 1275.

47Chapter 2

individual workers—creative or otherwise—and those of firms. These critiques argue that the primary determinant of economic growth in cities is not the locational preferences of highly skilled and creative workers, but of the concentration of firms that generate a dense labour market in the first place. Pointing to the fact that economic resurgence has occurred not just in Sunbelt cities, but also in “old, cold, dense city-regions” such as Boston, Chicago, and New York, Storper and Manville argue that recent population growth in cities—both older, northern ones and new, southern ones—is linked to shifts in regional economic geography and industrial activity. Workers are drawn to urban centres where employment opportunities are the greatest, not just to those with lifestyle amenities such as shopping and entertainment, which are ubiquitous and readily available in most cities of a certain size:

Jacobs, Florida, and Glaeser are all on to something in claiming that skills and amenities go together, but they may have got their causality reversed. It is the fact that these skilled workers are congregated in certain places that leads to the presence of amenities and, in some cases, makes the places tolerant and bohemian as well.42

The argument that workers are attracted by employment oppor-tunities more than by consumer, lifestyle, and social amenities sug-gests that explanations of urban economic growth need to be more nuanced. While many industrial activities still occur in identifiable sectors staffed by industry-specific occupations, many of the know-ledge-intensive activities associated with new and emerging sectors of the economy are less easily categorized. Changing patterns of urban development are similarly ambiguous. Allen Scott describes shifts in the nature of economic activity in terms of an emerging “cognitive-cultural economy” where leading-edge economic growth and innov-ation are driven by “technology-intensive manufacturing, diverse

42 Storper and Manville, p. 1254.


services, ‘fashion-oriented neo-artisanal production,’ and cultural products industries.”43 The shift to this new form of production is facilitated by the steady adoption of digital technologies for creat-ing more customized goods through a less routinized organization of the production process. In this view, the location choices of the cre-ative class and related concentrations of human capital result from the broader economic transformation to a knowledge-based economy that is underway. The larger forces at work are the outcome of historically conditioned trajectories of urban economic growth, where the supply of, and demand for, labour evolve in a mutually reinforcing fashion. The decline and resurgence of urban centres occur through the mutual attraction of capital and labour in an interdependent spiral, but labour is not the primary factor; local economic growth is anchored primarily by the preferences of firms.

The interaction between the location decisions of firms and those of highly skilled workers is strongly influenced, though not completely determined, by city size. The “cognitive-cultural economy” is most evi-dent in large metropolitan areas or “flagship hubs,” such as New York, London, Paris, Amsterdam, and Tokyo, where production activities are densely concentrated in firms with global market reach. However, smaller cities, such as Nashville and Austin in the U.S., or Halifax in Canada, have also developed large concentrations of artistic talent and cultural activity. New information technologies permit the simultaneous dispersion and concentration of economic activity, allowing producers in various urban centres to benefit from the local knowledge flows in a specific location, as well as to access global knowledge flows and markets. Virtuous cycles of growth result as the number of producers increases and local growth accelerates, leading to a deepening of localized returns and the intensification of economic benefits. The emphasis on growth driven by the virtuous interaction of skilled labour and firm preferences characterizes large metropolitan cities as environments where value chains underlying production, and the associated networks

43 Allen J. Scott, “Capitalism and Urbanization in a New Key? The Cognitive-Cultural Dimension,” Social Forces 85, 4 (June 2007), p. 1466.

49Chapter 2

of economic actors, can adapt rapidly because of their efficiency at coordinating and managing the processes that are the basis of innovation and growth. In this sense, cities are acting like giant “Schumpeterian hubs” of innovative activity, or “switchboards which permit the constant creation and reshaping of the chains linking producers, consumers, and different kinds of indirect players of the economy.”44 Signs of this developmental dynamic are evident in large metropolitan areas, both in rapidly growing “cognitive-cultural sectors” and in the formation of “intra-urban industrial districts devoted to specialized facets of cognitive- cultural production,” such as high-tech and software in the San Francisco Bay area, movies in Hollywood, business and financial services in New York and London, and fashion in Paris and Milan.45 These emerging areas of cognitive-cultural production tend to be located in, or close to, the central business district and often take advantage of low-cost space available in abandoned industrial warehouses or factories. The conversion of existing physical spaces associated with the older industrial economy to new uses for the emerging cognitive-cultural economy illustrates the critical way in which the spatial landscape of the inner city is recon-figured in dynamic urban regions.46

Despite the appeal of a talent-based approach to urban economic growth and development, the uneven distribution of creative occupations and highly skilled labour and the resulting increase in social disparities in some of the most successful city-regions suggests there are inherent limits to this approach to urban growth strategies. The rise of creative cities in North America and Europe is a product of their role as places with the ability to generate a high level of technological innovations and economically useful knowledge. However, as noted above, this pattern of urban development has also coincided with a number of negative

44 The Rationale for a Resurgence in the Major Cities of Advanced Economies [opening plenary address]. Presented by Pierre Veltz at Leverhulme International Symposium 2004 on the Resur-gent City. London: London School of Economics, April 19–21, 2004.

45 Scott, p. 1470.

46 Thomas A. Hutton, The New Economy of the Inner City: Restructuring, Regeneration and Dis-location in the Twenty-First-Century Metropolis (London and New York: Routledge, 2008), p. 11.


economic and social side effects. “The emerging new economy in major cities has been associated with a deepening divide between a privileged upper stratum of professional, managerial, scientific, technical and other highly qualified workers on the one side, and a mass of low-wage workers . . . on the other side.”47 In fact, cultural and creative occupa-tions often provide some of the most poorly paid jobs in large cities. If local and regional governments are to pursue a talent-based strategy for economic development, they must address the issue of social disparities to ensure that the resulting strategy draws upon a wide cross-section of skills and occupations in the labour force. A serious concern is whether it is possible to pursue a socially inclusive eco-nomic development strategy at the local level while many of the key policy levers that influence levels of education, occupational skills, and the capacity for innovation remain in the hands of the senior levels of government. A critical challenge for city-regions in Canada is to ensure that the policy levers with the greatest effect on our urban economies are aligned across all three levels of government and that there is an appropriate recognition of the interconnection between urban economic development and social inclusion.

sPeCIALIZAtIon versus dIversIty: some fInAL observAtIons

This chapter has surveyed the conflicting evidence on the virtues of economic specialization and diversity for urban economic growth; the emergence of a global hierarchy of cities around the world with ever more differentiated economic roles; the relative importance of greater concentrations of highly skilled and creative workers as attractors for firms and industries; and the relationship between creative occupations

47 Michael Storper and Allen J. Scott, “Rethinking Human Capital, Creativity and Urban Growth,” Journal of Economic Geography 9, 2 (March 2009), p. 164.

51Chapter 2

and creative industries as drivers of urban economic growth. While there is no consensus in the varied and contradictory theories and empirical studies surveyed above, some interesting patterns do emerge.

First, cities of different sizes play different roles in the broader urban system of both their own national economy and the broader global economy, with respect to specialization and diversification. Larger cities with a more diverse range of industries and more extensive research infrastructure are frequently, though not exclusively, the loca-tions where new ideas leading to new products and industries are developed. As the technologies and their associated production processes evolve, firms often relocate to medium-sized cities with traditional cost advantages. The evidence confirms this pattern has been particularly true in the case of the traditional manufacturing industries that dominated the urban economy of North America and Europe through the post-war period of growth. There is less clear evidence to conclude it will neces-sarily hold true for the newer industries that have emerged over the past two decades and are still developing.

Second, the spread of a globalized economy has also led to the con-centration of higher-order financial and business services in larger cities around the world, but a clear division has emerged between those cities that operate on a truly global scale and those that act as national and regional hubs for their hinterland economies. At the same time, there is growing strength in a wide range of industries related to the design of fashion and cultural products, many of which involve digital content. The tendency for these industries to collocate with the existing concen-trations of financial and business services has led some observers to describe this development in terms of the emergence of a new cognitive- cultural economy. While creative and talented workers locate in greater concentrations in cities with strength in financial and creative industries, the exact nature of the causal link between the two remains debated.

Third, what is clear is the growing importance of knowledge-based activities, design, and the cultural industries to future economic growth, especially in North American cities. While the evidence suggests that large cities have certain advantages in this respect, the successful development of new dynamic regions in the U.S. and elsewhere, with


respect to both the production of new technologies and cultural activities, suggests that is not a foregone conclusion. However, this tendency does pose serious challenges for small and medium-sized cities that have developed historically as more specialized manufacturing centres.

As we shall see in the next chapter, the Canadian urban system is characterized by a relatively small number of large cities (none of which have attained truly global city status) and a much larger number of medium-sized and small cities. The analysis presented in this chapter suggests that they will face increasing challenges in coping with the transition to the emerging knowledge-intensive and innovative economy.

Innovation, Talent, and Creativity in Canadian Cities

3

55Chapter 3

IntroduCtIon

Over the course of the past century, Canada has become an increasingly urban society. As part of this transition, cities have become the primary site for innovation within the Canadian

economy. However, in a country as diverse as Canada, not every city is the same, nor do they play similar roles in the Canadian urban system. One of the key challenges we face is to overcome the particularly Canadian inclination to treat all parts of the country the same and, instead, recog-nize the substantial variation in the roles played by different cities across the diverse regions of the country.

In a series of case studies of large, medium-sized, and small cities across Canada, researchers from the Innovation Systems Research Network (ISRN) have examined the considerable variation in the indus-trial structures of their economies, the different paths they have fol-lowed in their evolution toward a more knowledge-based economy, and the way in which the dynamics of the urban economy are shaped by the structure of the region in which a city is located.1 This variation has important implications for the innovative capabilities of Canadian cities and their potential to evolve into more knowledge-intensive centres of production—described as “Schumpeterian hubs” in the emerging cognitive-cultural economy. Even more significantly, it has profound implications for the way in which policy should be formu-lated if we are to adopt the more strategic approach to urban economic development discussed in the next chapter.

Most industrialized economies face the challenge of adapting to more knowledge-based forms of production over the coming years—a challenge that has been intensified by the impact of the current global recession. Canada faces a particular hurdle in this respect. On the one hand, the industrial sector must innovate to remain competitive, just as its counterparts in other OECD countries must. On the other hand, traditional manufacturing accounts for a decreasing portion of

1 Full details of the ISRN’s research program, as well as papers and presentations from the annual meetings of the research network, can be found online at www.utoronto.ca/isrn.


Canadian economic output, and two recent reports suggest Canada is falling behind in terms of its innovative capabilities. Our continuing dependence on resource-based sectors of the economy, along with a lack of private investment in research and development in some of the core manufacturing sectors, are part of the reason why Canada’s per-formance has consistently lagged on most measures of innovation.2 The impact of the current recession on many of our traditional manu-facturing industries, as well as the virtual disappearance of some of our major technology leaders in the more knowledge-intensive sectors of the economy, underline the urgency of this economic issue.

The challenge of simultaneously recovering from the recession and competing in a more knowledge-based economy accentuates the need to understand how the innovation process operates across our diverse regional and urban economies. Attempts to develop appropriate policies to support the innovation capabilities of firms and industries at the national level in Canada have foundered frequently on this problem of diversity. While broad statistical analyses can identify some of the common features of the innovation process across a range of industries, a more detailed examination of the dynamics of the innovation process within individual city-regions is essential for this understanding.

As we saw in Chapter 2, the prospects for urban economic growth are closely tied to the issue of the relative degree of specialization and diversity in the industrial structure of Canadian cities, and how it con-tributes to or constrains their capacity for innovation. Underlying this issue is the debate that has preoccupied urban scholars: whether it is economically more effective to be specialized in a few things within a regional or urban economy, or to be highly diversified. Jane Jacobs maintained that a diversity of industrial sectors, especially in larger cities, creates the opportunity for spillovers and cross-fertilization of

2 Council of Canadian Academies, Innovation and Business Strategy: Why Canada Falls Short, Report of the Expert Panel on Business Innovation in Canada [online]. (Ottawa: Council of Canadian Academies, 2009). www.scienceadvice.ca/innovation.html; Science Technology and Innovation Council, State of the Nation 2008: Canada’s Science, Technology and Innovation System [online]. (Ottawa: Science, Technology and Innovation Council, 2009). www.stic-csti.ca/eic/site/stic-csti.nsf/eng/h_00011.html.

57Chapter 3

ideas, which in turn stimulates the generation of innovations that feed the growth of new economic sectors, and contributes to the growth of cities and higher standards of living.

The ISRN case studies have examined the nature of the innovation pro-cess across a range of Canadian cities. In particular, they have investigated the pattern of knowledge flows that generate the new ideas that sustain the process. The results suggest that in most established industrial sectors, especially those found within small and medium-sized cities, knowledge flows occur largely within the contours of the existing industrial sector or cluster, or along the supply chain that provides key inputs to a particular firm or industry. Key ideas can come from local research institutions, such as post-secondary institutions, public and private research laboratories, and research consortia. More often than not, hiring students from local post-secondary institutions or drawing employees from a common labour market is the most effective way to circulate ideas among a group of firms within a city-region. At the same time, the globalization of the economy means that relatively few industrial sectors or clusters are self-sufficient in terms of their sources of ideas. However, the local circulation of know-ledge that does occur tends to happen within a particular sector or cluster.

This pattern differs significantly from that found in larger cities, especially the three largest Canadian ones, where a concentration of creative and cultural industries co-exists alongside more knowledge-based and research-intensive ones, in a manner similar to that sug-gested by Jacobs. These cities provide some evidence of the emerging cognitive-cultural economy, but serious questions remain about whether the policy supports in place are adequate to ensure continued success and vibrancy, as other cities around the globe undergo a similar eco-nomic transition.

CItIes In the CAnAdIAn urbAn system

Cities do not exist in isolation but as part of the regional economy in which they are located, as well as in relation to other cities in the national economy. The economic standing of an individual city and its


long-term prospects are influenced by its relative position within the urban system, which is defined by its spatial relationship with other cities. The factors affecting the prospects for a particular city are not confined to its local, or even regional, context but include a broad set of factors within the context of the urban system as a whole. The urban system is the organizational dynamic that underlies the economic and human geography of the country. Different-sized cities play different roles in Canada’s urban system. A clear understanding of those dif-ferences is necessary to formulate effective economic development policies targeted at the level of cities. Each city in the urban system “represents a unique combination of population size, demographic structure, economic specialization and rate of growth that together define the opportunities open to each resident.”3

Canada’s urban system is distinguished by its relatively large number of small cities, and only a few large ones, and by the substantial differ-ences between those larger cities. Large cities within the urban system are clearly differentiated from the medium-sized and small ones by their more diversified economic base. The 10 largest cities—Halifax, Montréal, Ottawa–Gatineau, Toronto, Winnipeg, Regina, Saskatoon, Calgary, Edmonton, and Vancouver—generate a disproportionate share of the national wealth and dominate the regional hinterlands in their respective parts of the country. In 2005, these cities accounted for 51 per cent of gross domestic product (GDP) and 51 per cent of employment in Canada. Between 1995 and 2005, 65 per cent of the 3.1 million net new jobs created in Canada were located in these cities.4

Although the 10 cities vary considerably in size, each (with the exception of Ottawa–Gatineau) is deemed to be a hub city that acts as the primary economic driver of its respective provincial or regional economy. The share of provincial output accounted for by these hub cities has been increasing over time, and they currently account for

3 Larry S. Bourne and Jim Simmons, “New Fault Lines? Recent Trends in the Canadian Urban System and Their Implications for Planning and Public Policy,” Canadian Journal of Urban Research 12, 1 (June 2003), p. 24.


59Chapter 3

at least 45 per cent of their respective provincial economies. (When there is more than one hub city in a province, the two cities combined account for at least 45 per cent).5 The Conference Board of Canada argues that these hub cities face major challenges—while they are expected to drive economic growth, they lack the investment and polit-ical autono my to fully develop this capacity.

Using a slightly different yardstick, a recent report, Large Cities Under Stress, included two additional cities, which have populations between 700,000 and a million, as large cities—Québec City and Hamilton. The report argues that these cities are clearly differentiated from smaller ones by several critical factors: “They are powerful magnets for the young and highly educated, . . . they are the dominant gateways for new immigrants, the command and information centres for the econ-omy, and the focal points of global connections.”6 Despite the privileged status of these cities within the Canadian urban system, none is substan-tial enough to have attained a significant position in the global urban hierarchy, with only one city—Toronto—in the 10-member “beta” group of world cities (no Canadian city is ranked in the topmost “alpha” group) and the 12-member “well-rounded global cities” category.7

The increasing role of the largest cities in the Canadian urban sys-tem, and the challenges it poses for the country as a whole, is high-lighted in a recent analysis of trends in the urban system over the past four decades. Pierre Filion notes that the traditional distinction between the core industrial cities and the more distant cities, referred to as the “heartland-hinterland” distinction, is on the wane. Over this period, it has been displaced by a growing differentiation between Canada’s largest cities and its medium-sized and small ones. As this disparity

5 Mario Lefebvre and Natalie Brender, Canada’s Hub Cities: A Driving Force of the National Econ-omy, The Canada Project (Ottawa: The Conference Board of Canada, 2006), p. 4.

6 Enid Slack, Larry Bourne, and Heath Priston, Large Cities Under Stress: Challenges and Oppor-tunities, report prepared for the External Advisory Committee on Cities and Communities (Toronto: Authors, March 3, 2006), p. 1.

7 Brender, Cappe, and Golden.


continues to grow, he postulates, the urban system will become more bifurcated, with a growing concentration of population and economic opportunities in the largest cities at the expense of the rest:

The Canadian urban system of tomorrow will be polarized, confronted at once with steep urban growth and decline. . . . [t]he future will advantage Toronto, Montréal, Vancouver, Ottawa–Gatineau, Calgary and Edmonton. Urban areas within the orbit of these regions will also enjoy rapid growth.8

These cities will also benefit from their attractiveness as centres for the continuing flows of immigration that will be the primary source of population growth in the future. Their increasing size and economic influence will afford them greater weight in our political system as well, to the disadvantage of small and medium-sized cities. The smaller and medium-sized cities that are more dependent on relatively few areas of industrial concentration may be more vulnerable to external economic shocks, which can adversely affect their economic status. This suggests that a major policy challenge for the urban system as a whole will be to ensure a balanced distribution of economic growth and economic opportunities across the country.

A defining feature of the urban system is the extent to which the urban corridor stretching from Windsor to Québec City, and containing Canada’s two largest urban areas, dominates the country as a whole. It contains a significant share of the manufacturing economy, as well as over 60 per cent of the total urban population.9 The relative concentra-tion of manufacturing industries within this narrow corridor cuts two ways—witness the impact of the current recession on the automotive

8 Pierre Filion, “Growth and Decline in the Canadian Urban System: The Impact of Emerging Eco-nomic, Policy and Demographic Trends,” GeoJournal [online]. (March 4, 2009). www.springer.com/geography/human+geography/journal/10708.

9 Larry D. McCann and Jim Simmons, “The Core-Periphery Structure of Canada’s Urban System.” In Trudi Bunting and Pierre Filion, eds., Canadian Cities in Transition: Local Through Global Perspectives (Don Mills, Ont., and New York: Oxford University Press, 2006), pp. 76–96.

61Chapter 3

clusters concentrated in the key cities from Oshawa to Windsor in Southern Ontario. The Metropolitan Outlook, recently released by The Conference Board of Canada, shows that some of Canada’s small and medium-sized cities with the heaviest concentration in manufacturing and automotive production are being punished the most by the current economic recession. Oshawa’s economy, which is heavily dependent on auto production, is forecast to decline by 2.5 per cent in 2009. Kitchener–Waterloo, with a more diversified economy, is forecast to decline by 2.6 per cent. St. Catharines–Niagara is expected to suffer a decline of 2.7 per cent due to a fall in both manufacturing output and tourist activ-ity. London is facing a decline of 2.8 per cent, unprecedented in its recent history. Given the expectation that Canada’s automotive industry will be radically reshaped by the current restructuring, the pressure on these manufacturing-dependent urban centres to shift their local economy to more knowledge-intensive forms of production will be all the greater.10

Competition between toronto and montréal for dominance of the urban system

If we examine the relative position of individual cities within the urban system more closely, we observe significant differences in their trajectory of economic development, as well as their relationship to their regional hinterland. The early development of Canada’s urban system can be traced to the commercial conflict between two compet-ing metropolitan centres—Montréal and Toronto—for control over the trade of the St. Lawrence River waterway and its continental hinter-land. Throughout this period, both cities competed for access to the hinterland and sought to attract a larger share of new immigrants and inward investment. Until the end of the Second World War, Montréal was the dominant urban economy in Canada, reflecting its initial loca-tional advantages as the chief eastern port at a key juncture of the St. Lawrence–Great Lakes waterway, its growth as a railroad hub from the mid-19th century onwards, its proximity to leading American urban

10 Alan Arcand et al., Metropolitan Outlook 2: Economic Insights Into 27 Canadian Metropolitan Economies (Ottawa: The Conference Board of Canada, 2009).


centres (especially Boston and New York), and its control over the national capital markets. Prior to the 1960s, Montréal was the primary transportation and communications centre of the country and home to the largest companies in these sectors.

Toronto emerged to challenge Montréal’s dominant position within the urban system after the Second World War, aided by the post-war economic boom that saw Canada’s trading patterns shift from an east–west to a north–south basis. In the early post-war period, Toronto’s growth was stimulated by the transition from a wartime to peacetime footing and the influx of foreign branch plants into Southern Ontario, many of which located their Canadian head offices in the Toronto region. Additional growth came from the emergence of aerospace, auto, and telecommunications industries. This trend was reinforced by the signing of the Canada–U.S. Auto Pact in 1965, which stimulated the growth of the automobile assembly and parts industry in Southern Ontario over the next three decades. Economic geographer Michael Ray argues that the growing predominance of American subsidiaries in Southern Ontario in the post-war period can be explained by the “economic shadow” concept, which is based on the relative distance between the U.S. city in which the corporate head office is situated and the Canadian location of its subsidiary. Using data from the 1960s, he demonstrated that Toronto provided the optimal market location for American subsidiaries and that only 8 of 210 metropolitan areas in the U.S., with head offices controlling Canadian subsidiaries, had more subsidiaries in Montréal than in Toronto.11

Toronto’s lead over Montréal as the dominant city within the urban system was secured in the 1970s, when the conflict over Quebec’s place in the Canadian federation accelerated the exodus of many lead-ing financial institutions from the province. According to Polèse and Shearmur, the loss of financial and other higher-order business services to Toronto accentuated the relative importance to the Montréal econ-omy of industrial manufacturing, as well as more research-intensive

11 D. Michael Ray, “The Location of United States Manufacturing Subsidiaries in Canada,” Economic Geography 47, 3 (July 1971), pp. 389–400.

63Chapter 3

sectors such as pharmaceuticals and aerospace that benefited from high levels of research spending and supportive government policies. Toronto, in contrast, has increasingly become the Canadian city-region most specialized in financial and other sources of management infor-mation. It serves as the leading node integrating Canada into national and international networks.12

While Montréal and Toronto are the two largest cities in Canada’s urban system, they are not the only important ones. Other hub cities within the urban system play key roles as providers of high-order or specialized services within their region; as the locations of regional or even national head offices for key companies; as centres for the financial services, cultural-creative, or media industries; or as critical nodes in the regional transportation network. Nowhere is that more evident than in Vancouver, Canada’s third major city. Vancouver dif-fers significantly from the other two—and, indeed, from most other industrial cities in North America—due to its economic origins as the regional metropole within the staples economy of British Columbia, based on the extraction and processing of fishing, forestry, and mining resources. Within this regional economy, Vancouver served as a centre for the control and distribution of the staple goods produced by these industries. The influx of major U.S. multinational corporations into the B.C. economy further consolidated Vancouver’s role as the con-trol centre for the provincial resource economy. From the mid-1970s onwards, as the leading staples industries in B.C. experienced strong declines, Vancouver’s economy became decoupled from its resource hinterland and the city began evolving into a modern centre of the cognitive-cultural economy that bears a stronger affinity to other West Coast cities in North America than to the more traditional manufactur-ing centres in the Québec City–Windsor corridor.13

12 Mario Polèse and Richard Shearmur, “Culture, Language, and the Location of High-Order Service Functions: The Case of Montréal and Toronto,” Economic Geography 80, 4 (October 2004), pp. 329–350.

13 Trevor Barnes and Tom Hutton, “Situating the New Economy: Contingencies of Regeneration and Dislocation in Vancouver’s Inner City,” Urban Studies 46, 5&6 (May 2009), pp. 1252–1255.


As the cases of Montréal and Toronto demonstrate, a city’s relative position within the urban system can shift over time due to changes in the underlying importance of its regional hinterland, the advent of new industries based on technological change, or shifts in transportation economics resulting from new modes of transportation.14 Despite its rela-tively smaller size and the loss of key financial activities to cities in Central Canada, Halifax retains a key position within the urban system due to its historic, and current, role as the leading commercial centre of Atlantic Canada. Conversely, although Winnipeg served as the major gateway into Western Canada from the late 19th until well into the 20th century, its position was gradually usurped by Calgary and Vancouver over the latter half of the century, due to the rise of the energy industry and the revolution in air transportation that linked Vancouver more easily into the national economy. Hamilton is roughly the same size as Winnipeg, but it has never occupied the same place in the urban system due to its location within the penumbra of the Greater Toronto Area and its com-petition from other manufacturing centres in Southern Ontario, such as Kitchener–Waterloo.

InnovAtIon And growth In CAnAdIAn CItIes: sPeCIALIZAtIon, dIversIty, And reLAtIve sIZe

Analyses of the sources of urban growth and productivity in Canada over the past decade lend support to the broad findings of the previous chapter. Canadian cities are differentiated by their relative standing within the urban system, as well as by the industrial structure on which the local economy is based. Studies by Statistics Canada show that industrial diversity varies significantly in different-sized cities across the country, with larger cities enjoying a more diverse economic base. Conversely, cities with the smallest populations tend to have more specialized economies. However, the relationship between population

14 Slack, Bourne, and Priston, p. 14.

65Chapter 3

size and industrial diversity is not a simple linear one. As smaller cities grow, their economies diversify rapidly, beginning to level off as the population reaches a half million people. There are two reasons for this trend: first, the growth of a city may be driven by the emergence of new industries within the local economy, which partly accounts for the city’s more diverse economic base; and, second, the local market of an urban economy increases as the population grows, which creates demand for the products of a more diverse range of local industries. However, it should be noted that some cities, such as Kitchener–Waterloo, are highly diversified despite their relatively small size.15 The relationship between the size of a city and the diversity of its local economy can be clearly seen in Chart 1.

Canada’s larger cities are also more likely to be home to the more creative and innovative industries. Recent research found that creative industries, as well as those that depend on scientific research, are con-centrated more heavily in larger cities across the country. There is a high correlation between the presence of a diverse local economy and a concentration of creative industries.16 The implication of this finding is that the kind of knowledge needed for creative activities—know-ledge based on a high degree of subjectivity, interpretation, and human experience—is more likely to be generated in an urban environment that is culturally rich and economically diverse. A large, diverse urban economy is more suited to stimulating and supporting those industries associated with the emerging cognitive-cultural economy. This finding has important implications for the development of policy aimed at sup-porting the development of urban economies.

An alternative way of looking at the relative degree of specializa-tion in Canadian cities is through the examination of industrial clusters. Researchers from the ISRN have identified 255 individual clusters spread

15 Desmond Beckstead and Mark Brown, From Labrador City to Toronto: The Industrial Diversity of Canadian Cities, 1992–2002, analytical paper, Cat. No. 11-624-MIE, No. 003 (Ottawa: Statistics Canada, 2003).

16 Gregory Spencer, The Creative Advantage of Diverse City-Regions: Local Context and Social Networks, Ph.D. thesis (Toronto: University of Toronto, 2009).


across 19 different cluster types in 140 cities and city-regions defined as urban areas by the Census of Canada.17 These clusters exhibit a dis-tinct regional pattern reflecting the industrial geography of Canada. (See Table 1.) As expected, the majority of manufacturing clusters are located along the urban corridor stretching from Windsor to Québec City. (See Exhibit 1.)

A significant proportion of the resource-based clusters are found in Alberta (oil and gas), Quebec (forestry), and British Columbia (for-estry). We see consistent patterns in the distribution of clusters across the Canadian urban system. Toronto, Montréal, and Vancouver have the largest

17 The methodology used to identify these clusters and more detailed analysis of their economic impact can be found in Greg Spencer, Tara Vinodrai, Meric S. Gertler, and David A. Wolfe, “Do Clusters Make a Difference? Defining and Assessing Their Economic Performance,” Regional Studies (forthcoming 2010).

Chart 1Industrial Diversity

Source: ISRN Indicators Database.

0

20

40

60

80

100

120

140

160

0 1 2 3 4 5 6

KitchenerHamilton

Edmonton

Calgary

Ottawa

VancouverToronto

Montréal

Indu

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Population 2006 (millions)

67Chapter 3

table 1Clusters, by Cities

(cont’d on next page)

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St. John's • • • • • 5

Halifax • • • • • • 6

Moncton • • 2

Saint John 0

Québec City • • • 3

Trois-Rivières 0

Montréal • • • • • • • • • • 10

Ottawa–Gatineau • • • • 4

Kingston • 1

6821st Century Cities in Canada

table 1 (cont’d)Clusters, by Cities


Agric

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Toronto • • • • • • • • • • • • 12

Hamilton • • • • • • 6

Kitchener–Waterloo • • • • • • • 7

London • • • • 4

Winnipeg • • 2

Saskatoon • • • 3

Calgary • • • • • • • 7

Edmonton • • • • 4

Vancouver • • • • • • • • • • • 11

69Chapter 3

exhibit 1Cluster Map

Source: ISRN Cluster Database, 2006.


number of clusters. Resource-based clusters are predominantly located in smaller cities, whereas manufacturing clusters are present in city-regions of every size. With the exception of higher education, which is relatively evenly distributed, service-based clusters are situated overwhelmingly in large urban centres. The results suggest that although clusters exist in a variety of urban settings, those that are research or knowledge intensive (such as biomedical; creative, cultural, and new media; finance; and infor-mation and communications technology [ICT] services) tend to develop in large urban settings consistent with the findings on diversity.

The research examined how the presence of clusters in an urban economy affected the economic performance of the region. An analysis of 43 cities and city-regions in Canada revealed a strong positive rela-tionship between the proportion of total employment in clusters and the average employment income in the city. (See charts 2 and 3.)

Chart 2The Relation Between Average Income and Clustering in Canadian Cities


Montréal

R2 = 0.4468

Chatham–Kent

Cape Breton

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Ottawa–Hull Windsor

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Local employment in clusters as a percentage of total local employment, 2001 (per cent)

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71Chapter 3

This finding reinforces the argument that relatively few of Canada’s cities have achieved the size and scale to derive the full benefits that flow from a diversified urban economy. Yet a broader cross-section of cities is sufficiently specialized in a few key industrial clusters to reap the benefits that clustering bestows on an urban economy.

Further confirmation of the economic benefits that flow from the clustering of manufacturing activities is provided by a Statistics Canada study that examined the effects of specialization on plant productivity and urban economic growth. Using a variety of measures, it explored

Chart 3Cluster Concentration by City


30

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Percentage employment in clusters, 2006 (per cent)

Calgary

Edmonton

Kingston

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Bubble size = population

Number = # of clusters

SaskatoonQuébec City

Winnipeg

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the degree to which collocating with firms in the same industry contrib-uted to higher levels of productivity for firms in that industry. The study found that the productivity of manufacturing plants was higher in cities with a strong supply of the specialized upstream sectors that provided critical inputs for the firms in the industry. Productivity was also higher in plants located in cities that contained a deep pool of labour that the firms in the industry could draw on. Finally, plant productivity benefited strongly from the knowledge spillovers within a local cluster, to the extent that locating within a 10-kilometre radius of establishments in the same industry had a positive effect on overall performance.18

The way in which different-sized cities contribute to innovation and growth across a range of industry sectors can also be seen in a related set of studies using data from the Canadian Survey of Innovation in Manufacturing. Researchers focused on the degree of uncertainty in the firms’ competitive environment as a strong influence on where they choose to locate. Firms faced with a higher degree of uncertainty in terms of their competitive environment tend to locate in a larger city where the presence of a diverse array of supporting industries can help to counteract or offset that instability. Conversely, firms primarily inter-ested in offsetting their need for highly specialized labour skills bene-fit from locating in an urban environment with a strong complement of firms in similar and related industries. Establishments confronted with a greater degree of uncertainty in their competitive environment, as well as those that consider innovation an essential part of their com-petitive strategy, are more likely to locate in larger cities. In contrast, establishments preoccupied with ensuring they have adequate access to a strong base of necessary skills in the local labour market are likely to locate in specialized urban environments, but not necessarily in the largest cities.19

18 John R. Baldwin, Desmond Beckstead, Mark Brown, and David L. Rigby, Urban Economics and Productivity, Economic Analysis Research Paper Series, Cat. No. 11-F0027-MIE, No. 045 (Ottawa: Statistics Canada, 2007), p. 28.

19 William Strange, Walid Hejazi, and Jianmin Tang, “The Uncertain City: Competitive Instability, Skills, Innovation and the Strategy of Agglomeration,” Journal of Urban Economics 59, 3 (May 2006), pp. 331–351.

73Chapter 3

These findings are consistent with Pierre Therrien’s conclusion that the concentration of research and knowledge capabilities in larger urban centres supports the conditions that contribute to radical innovations (major technological breakthroughs or the introduction of radically different products to the market), whereas smaller centres provide an environment that supports incremental or process innovations, the kind more likely to occur in already established industries.20 This evidence from Statistics Canada’s Survey of Innovation confirms the view that larger cities, which are home to a diverse economic base as well as a strong research infrastructure, provide the best environment for developing the new ideas that form the basis of new products and emer-ging industries. In contrast, small and medium-sized cities are more likely to support the growth of firms and industries that draw on an established knowledge base and depend on the supply of external inputs likely to be provided in a cluster of similar and interrelated firms.

the role of Large Cities in the Innovation economyWhile the general expectation is that the largest cities in Canada

should display similar evidence of more diversified economies, the industrial structures of Vancouver, Toronto, and Montréal are actually quite different, and they seem to be moving along different pathways toward the development of a cognitive-cultural economy. Montréal and Toronto remain similar in terms of the underlying structure of their respective economies, with the exception of the higher-end finan-cial and producer services. Data from the 2006 Census show that the two largest cities are evenly balanced in terms of the proportion of their local economies based in manufacturing, which accounts for 13.5 per cent of the labour force in both cities. Vancouver has a con-siderably smaller proportion of its labour force employed in manufac-turing (8.5 per cent). Furthermore, the location quotient (a measure of employment concentration) for manufacturing in Vancouver is only 0.71, well below the quotient of 1.13 for Toronto and 1.14 for

20 Pierre Therrien, “City and Innovation: Different Size, Different Strategy,” European Planning Studies 13, 6 (September 2005), p. 863.


Montréal.21 Toronto has a significant lead over both Montréal and Vancouver in higher-order services, with 7 per cent of the labour force employed in the finance and insurance sector (and a location quotient of 1.72), compared with 4.8 per cent of the labour force in Vancouver and 4.6 per cent in Montréal. Calgary and Ottawa, the two other cities with a population of over 1 million, are much more specialized than the three leading ones, with 6.5 per cent of Calgary’s labour force employed in mining and oil and gas extraction (a location quotient of 4.6) and 21.2 per cent of Ottawa’s labour force employed in public administration (a location quotient of 3.7).

Vancouver’s urban economy began to transition out of its traditional role as the regional metropole for the British Columbia resource econ-omy in the 1970s. A major consequence of this decoupling was the decline in the amount of resource processing within the city, as well as a reduction in the number of corporate head offices. Vancouver’s decline as a regional metropole was compounded by the migration to Calgary of the local venture exchange, which had traditionally special-ized in the financing of speculative mining companies. Conversely, there was a dramatic increase during the 1980s in Vancouver’s role as a destination for overseas investment and the migration of entrepreneurs from Taiwan and Hong Kong, which accelerated the city’s integration into the broader economy of the Pacific Rim. The redevelopment of Vancouver’s central business district as an area strong in new digital media and related cultural industries has been reinforced by a number of emerging areas of strength in the broader metropolitan economy in fuel cells, biomedical research, and wireless technologies. Despite the different development trajectory it has followed, Vancouver’s econ-omy reflects certain trends also observed in Toronto and Montréal. As Barnes and Hutton have noted, “Within the Canadian urban system,

21 The location quotient is a measure used to determine the size of a particular industry in a given city or region. It is calculated by comparing the local share (most often of employment) of a particular industry against the national share of the same industry. The simplest way to interpret it is that a location quotient of 2.0 means that the industry is twice as predominant locally as it is nationally. Conversely, a location quotient of 0.5 means it is half as predominant locally as it is nationally.

75Chapter 3

there are significant commonalities in terms of inner-city development both with Toronto and Montréal, with regard to the larger processes of industrial innovation, creative firm formation and the social reconstruc-tion of the inner city.”22

The Toronto urban economy has experienced four major eras of growth over the course of the post-war period. The first, from the end of the Second World War to the mid-1960s, was characterized by the rapid influx of foreign subsidiaries into Southern Ontario and the expansion of the aerospace, auto, and telecommunication sectors, as well as by substantial government spending on educational, physical, and social infrastructure. The second era, from the signing of the Auto Pact in 1965 to the Free Trade Agreement with the U.S. in 1988, was marked by an extension and deepening of those sectors that had taken hold in the earlier period, augmented by the flight of financial and business services from Montréal to Toronto. The third era witnessed a dramatic restructuring of the branch plant economy in Southern Ontario generally, and the Toronto region more specifically, follow-ing the introduction of both the Canada–U.S. and North American free trade agreements. The impact of this restructuring compounded the effects of the technological changes that occurred from the mid-1980s onward, leading to a dramatic loss of traditional manufactur-ing and clerical jobs, and increasing income polarization in the city. The most striking indicator of the extent of the change is the decline in the percentage of employment in manufacturing in the Toronto region, from 24 per cent in the 1981 Census to just 13.5 per cent in the 2006 Census. While some sectors, such as autos, aerospace, and telecommunications, continued to expand in the late 1990s and early 2000s, the third era of post-war growth also saw the rapid expansion

22 Barnes and hutton. Also Living on the Edge: Globalization of Emerging Technology Clusters in Vancouver [paper]. Presented by J. Adam Holbrook and Brian Wixted at 6th Asialics International Conference on Linkages in Innovation Systems: Global and Local Perspectives. Hong Kong: July 6–7, 2009. Also John N.H. Britton, Diane-Gabrielle Tremblay, and Richard Smith, “Contrasts in Clustering: The Example of Canadian New Media,” European Planning Studies 17, 2 (February 2009), pp. 211–234.


of the creative and cultural industries, including film, television, live theatre, music, fashion, design, and publishing, along with the con-tinued expansion of financial services.23

The period since the late 1990s has been labelled the Fourth Era in Toronto’s post-war economic growth.24 Demarcated by the amalgama-tion of the municipal government into a unified structure in 1998 and the growing integration of the urban core within the broader regional economy, it marks the emergence of Toronto as a leading cognitive-cultural economy. The GDP of the Toronto census metropolitan area (CMA) was $262 billion in 2005, accounting for over 20 per cent of the total Canadian economy. Between the 2001 and 2006 Census, Toronto’s total population grew by more than 9 per cent; between 1996 and 2006, employment increased by 27 per cent and average employment income increased by almost 6 per cent. In regard to financial and higher-order business services, Toronto has a significant lead over other Canadian cities, with 28.2 per cent of its labour force in this sector, compared with 22.6 per cent in Montréal. Other dynamic sectors include information and communications technology (including new media), biomedical and biotechnology, fashion and design, aerospace and automotive, tour-ism, and the cultural-creative industries. Particularly noteworthy is the dense concentration of both ICT and financial services in the regional economy. Toronto clearly benefits from the presence of a highly diversi-fied regional economy that is contributing to its development as a “Schumpeterian hub” of innovation and creativity. While the current recession will slow the overall pace of its growth, the decline of key manufacturing industries is accelerating the transition to higher-order business and financial services and the creative and design industries.

23 Boston Consulting Group, The Fourth Era: The Economic Challenges Facing the GTA, study prepared for the GTA Task Force (Toronto: Queen’s Printer for Ontario, 1995). Also Meric S. Gertler, A Region in Transition: The Changing Structure of Toronto’s Regional Economy, Portrait of a Region Series (Toronto: Neptis Foundation, 2000).

24 Ibid.

77Chapter 3

Montréal’s economy remains more heavily weighted toward the manufacturing sector, relative to business and financial services, than either Vancouver or Toronto’s economies. During the late 1980s and early 1990s, Montréal underwent a major restructuring of its trad-itional manufacturing industries and those industries related to its role as a rail transportation hub, which pushed the unemployment rate up to 6 percentage points above the Canadian average by the mid-1990s. The economic restructuring of this period laid the basis for a subsequent expansion after 1997, when the region emerged as a major centre for knowledge-intensive industries, such as aerospace, biopharmaceuticals, and ICT, which are among its primary exports.25

The economic development strategy adopted by the Communauté métropolitaine de Montréal (CMM) emphasizes the strategic import-ance of the manufacturing and knowledge-intensive sectors and clus-ters in which the region has demonstrated a strong export capability, as well as several associated with the creative-cultural industries. The strategy focuses on four groups of clusters within the regional econ-omy; three of these fall primarily within the manufacturing sector, while the remaining group includes a range of activities more often associated with the creative sector of the economy, including film, culture, tourism, and services. Overall, the patterns of innovation and knowledge flows supported by the strategy tend to follow existing linkages and relations within existing sectors and clusters, rather than promoting cross-sectoral and cross-cluster lines of convergence that are frequently associated with the benefits of a large and diversified urban economy. Despite the strengths of Montréal’s economy, a con-cern has been raised that the strong sectoral orientation of the strategy is focused on reinforcing existing strengths and patterns of knowledge

25 Communauté métropolitaine de Montréal (CMM), Charting Our International Future: A Competi-tive Montréal Region, economic development plan (Montréal: CMM, 2005).


flows, rather than promoting the cross-sectoral knowledge flows that are generally recognized as one of the benefits of a large and diversi-fied urban economy.26

Of the other large cities in Canada, Calgary and Ottawa are distin-guished by their higher degree of specialization in a smaller number of industrial sectors—Calgary in oil and gas and Ottawa in telecommuni-cations and software, as well as public administration. Calgary is one of the most distinctive cities in the country. Since the discovery of oil at Leduc in 1947, followed by the construction of the Interprovincial and Trans-Canada pipelines in the 1950s to bring the oil and gas to Central Canada, Calgary has emerged as the centre of the oil and gas industry and one of the most dynamic and fastest-growing city-regions in the country. It is home to 87 per cent of Canada’s oil and gas producers. Despite the fact there is no actual oil and gas production within the boundaries of the city, mining and oil and gas extraction account for 6.5 per cent of the labour force of the Calgary CMA, with a location quotient of 4.6, which is substantially greater than the location quotient for any other industrial sector in the city. In the words of one inter-viewee in the ISRN case study, “. . . in Calgary, you can’t do anything if it’s not linked to oil and gas.”27

Closely tied to oil and gas is a set of related industries whose prospects depend on those of oil and gas, particularly the construc-tion industry, and business, financial, and ICT services. Knowledge is embodied in the people working in the sector, and innovation within Calgary’s leading sectors is primarily based on local knowledge sources. Knowledge flows occur through the movement of person-nel within specific sectors, but they also occur through the networks of firms assembled to meet the needs of individual clients, as well as through the broader social networks within the city. In spite of the high

26 Innovation and Clustering in Montréal: Between a Product-Oriented and a Competence-Oriented Approach [paper]. Presented by Diane-Gabrielle Tremblay and Juan-Luis Klein at 11th Annual Conference of the Innovation Systems Research Network. Halifax, N.S.: April 29–May 1, 2009.

27 Firms and Their Problems: Systemic Innovation in Calgary [paper]. Presented by Cooper H. Langford, Ben Li, and Cami Ryan at 11th Annual Conference of the Innovation Systems Research Network. Halifax, N.S.: April 29–May 1, 2009.

79Chapter 3

degree of specialization in Calgary, innovative ideas developed in one sector of the local economy, such as imaging technology developed in geophysical services, can be adopted and applied in other sectors, such as medical devices.

Economic sectors that have grown up in close proximity to the dominant oil and gas industry, and that have developed specialized knowledge and technological capabilities in that role, can apply their knowledge to other opportunities in new markets in different industries, such as software, global information systems, and wireless communica-tions. New knowledge platforms that have emerged out of the primary resource-based economy are being applied in a cross-sectoral fashion to new commercial products and economic opportunities in a manner that suggests the possibility of moving beyond the confines of the specializa-tion versus diversity model of innovation in urban city-regions.28

Despite their different economies and relative location in different parts of the country, there are striking similarities between the regional economies of Ottawa–Gatineau and Calgary. Due to Ottawa’s role as the national capital, public administration accounts for over 21 per cent of the city’s labour force with a location quotient of 3.7. The city also has a large ICT sector, and nearly 10 per cent of its labour force is employed in professional, scientific, and technical services, also referred to as knowledge-intensive business services (KIBS). The KIBS sector has grown in response to the federal government’s demand for these higher-order services.

The origins of the high-tech sector—which is concentrated in the software, telecommunications, microelectronics, and photonics sub-sectors—lie in the original decision by Northern Electric (later Nortel) to establish a research facility in Ottawa, after a judicial decision in the U.S. in the mid-1950s cut off its access to patents from the Western Electric Co. Its purchase of a tract of land on the outskirts of Ottawa as the home of Bell-Northern Research (BNR), largely because of the concentration of the federal government’s telecommunications

28 Ibid.


laboratories in the nation’s capital, resulted in thousands of industrial engineers, researchers, and managers moving into the region. Many of the leading entrepreneurs in the Ottawa telecommunications and photonics cluster began their careers as researchers for BNR. Both technical and entrepreneurial talent left Nortel over the years to form new firms in the region.29

An analysis of the innovation process in both the high-tech and KIBS sectors in Ottawa reveals that most innovative firms draw on cooperative relations with other partners for their knowledge sources, but the pattern of these relations varies across the two sectors. For firms in high-tech manufacturing, the most important interactions are with other firms along the value chain, principally customers and suppliers. In contrast, KIBS firms rely more on their customers, their competi-tors, and public research institutions for their knowledge base and new ideas. They tend to focus on nearby clients more than high-tech manufacturing firms do. Given the diverse economic sectors served by KIBS firms, this suggests that knowledge flows across a diverse range of industries tend to be more important for service firms than for trad-itional manufacturing ones, even in the ICT industry.30 This finding is consistent with the broader view of the different patterns of innovation that prevail in these sectors of the economy.

Innovation Patterns in Canada’s medium-sized and small CitiesCanada’s medium-sized cities share some characteristics with

Calgary and Ottawa–Gatineau, although they have a greater degree of concentration in a smaller number of sectors. Innovation processes tend to draw on knowledge flows that occur largely within the confines of existing industrial sectors. However, many of the traditional manufac-turing industries are increasingly organized into global supply chains

29 Matthew Lucas, Anita Sands, and David A. Wolfe, “Regional Clusters in a Global Industry: ICT Clusters in Canada,” European Planning Studies 17, 2 (February 2009), pp. 189–209.

30 David Doloreux and Henrik Mattson, “To What Extent Do Sectors ‘Socialize’ Innovation Differ-ently? Mapping Cooperative Linkages in Knowledge-Intensive Industries in the Ottawa Region,” Industry & Innovation 15, 4 (August 2008), pp. 351–370.

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that tap into larger knowledge networks around the world. Pressures on firms to innovate and sustain their competitive advantage in global markets are shifting the structure of advanced manufacturing industries toward a pattern typical of nimbler high-technology clusters. Industries that have historically been organized through vertical supply chains between lead firms and a limited number of suppliers, and that have relied on internal R&D activities to support innovation, are adopting a clustered pattern of industrial organization, characterized by regional concentrations of networked suppliers, inter-firm learning, and a decen-tralized and flattened production chain.31 The challenge for small and medium-sized cities hoping to retain their attractiveness as locations for firms in these industries is to strengthen the local research infra-structure and skill profile that will embed their local firms into global supply chains. The restructuring of the steel industry in Hamilton and the biotechnology industry in Saskatoon provide instructive lessons in how this process is playing out in specific Canadian cities.

Saskatoon stands out as one of the more successful mid-sized cities in Canada, due to the large concentration of federal and prov-incial research facilities and the critical role of Innovation Place, the research and industrial park. The presence of the National Research Council’s (NRC) Plant Biotechnology Institute has served as a mag-net for a critical mass of multinational and local companies that form the nucleus of a dynamic cluster around the production of canola. The central role of the NRC Institute has inserted Saskatoon into the global networks of knowledge flows that are crucial to the innovation process in this industry. Many firms indicate that the dense labour market in the local economy provides them with a ready supply of high-quality talent. A large proportion of the collaboration that occurs in the city appears to be done on an informal basis through personal contacts and brief consultations. Given the relatively high degree of specialization in the local economy in biotechnology, mining, and software, there

31 Peter Warrian and Celine Mulhern, “From Metal Bashing to Materials Science and Services: Advanced Manufacturing and Mining Clusters in Transition,” European Planning Studies 17, 2 (February 2009), pp. 281–301.


is little evidence of cross-sectoral knowledge flows among innovat-ing firms. Careers tend to progress along pathways within the same sector, rather than cutting across different sectors within the city. Overall, it appears that the creative spark that drives innovation locally occurs within the specialized solitudes of existing industrial sectors, in a manner characteristic of medium-sized cities with a limited degree of specialization. The ability of local firms to capitalize on the unique characteristics of Saskatoon’s dynamic research infrastructure provides the basis for tapping into the broader global knowledge flows that characterize its specialized industries.32

Hamilton offers some similarities but also notable contrasts to the Saskatoon case. Although it is one of Canada’s 10 largest cities, with a population greater than 700,000, it is not considered to be a hub city because of its proximity to the Greater Toronto Area. Hamilton’s cur-rent economic situation is compounded by the ongoing restructuring of the Canadian steel industry, which has long been the mainstay of the local economy. Innovation in the steel industry has historically been a sectoral phenomenon, largely occurring within communities of practice constituted by professional engineering organizations, such as the National Open Hearth Conference, and the technical commit-tees of the American Iron and Steel Institute and the International Iron and Steel Institute. The takeover of Canada’s leading steel companies by major multinationals has resulted in their integration into global supply chains and knowledge networks. Hamilton’s leading steel com-pany, Arcelor Mittal Hamilton (formerly Dofasco), is currently valued for its contribution to the knowledge base and technological capabilities of the parent company. Innovation strategies are focused on deepening the research connections with McMaster University and the newly developed McMaster University Innovation Park (which will soon be home to the

32 Innovation and Knowledge Flows in the Saskatoon City Region [paper]. Presented by Peter W.B. Phillips and Michael Kunz at 11th Annual Conference of the Innovation Systems Research Network. Halifax, N.S.: April 29–May 1, 2009.

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federal government’s CANMET metallurgical laboratories), as well as on attracting one of Arcelor Mittal’s global research centres to locate in Hamilton.

The other key side of Hamilton’s innovative economy is the net-work of emerging biomedical and health sciences firms based around the McMaster health sciences complex. Firms in this network tend to be oriented toward medical devices and the delivery of innovative med-ical services, often building on aspects of the unique teaching model at McMaster’s medical school. Interviews for the ISRN case study revealed an unexpected linkage between the industrial manufacturing sector and the emerging health sciences one. Steel company execu-tives have traditionally played key leadership roles in the governance structures of the health sciences complex, and the well-endowed health benefit plans of local unions have provided the financial basis for new, innovative firms in health services. That is a surprising twist on the conventional innovation model, where cross-sectoral linkages within the consumer or demand side of the local economy have stimulated the development of innovative ideas generated on the supply side.33

The Kitchener–Waterloo–Cambridge (Waterloo) region is located an hour west of Toronto. It has benefited from its unique blend of trad-itional manufacturing (with roots dating back to the mid-19th century) and information technology firms with international reach (a sizable concentration that dates from the 1970s). The Waterloo region has been home to major national and international corporations for more than a century, from Dominion Electrohome Ltd. to present-day success Research In Motion—manufacturer of the iconic BlackBerry and now Canada’s largest information technology firm. Although the region is only about half the size of Ottawa, its more diversified industrial base—as well as the success of some of its leading industrial firms, such as Electrohome (now part of Christie Digital), in making the transition from older industrial technologies to newer digital ones—has been a

33 Biotech in Lunch Buckets: The Curious Knowledge Networks of Steeltown [paper]. Presented by Peter Warrian at 11th Annual Conference of the Innovation Systems Research Network. Halifax, N.S.: April 29–May 1, 2009.


continuing source of economic resilience. A hallmark of the innova-tion process in the region has been the application of digital technology to advanced manufacturing processes, evidence of a relatively uncom-mon, but critical, dimension of knowledge transfer across two of the core areas of specialization within the regional economy.

The emergence and dynamism of the high-tech sector in the Waterloo region owes its success to critical decisions made by indus-trial leaders in the local economy in the years following the Second World War, which led to the creation of the University of Waterloo. The high-technology cluster in the Waterloo region grew out of its strong industrial base in advanced manufacturing, combined with the early focus of the new university on engineering, math, and computer science. Two of the early firms in the cluster, WATCOM and Dantec Electronic, were spun off from the university in 1974. A subsequent generation of firms followed in the 1980s, including Dalsa (1980), Virtek Vision (1986), and Open Text (1989). Although the university remains central to the continuing development of the regional econ-omy, its primary contribution is no longer through the process of new firm formation, as relatively fewer firms have been spun off directly from the university since the late 1980s; other mechanisms for know-ledge transfer now play a more significant role.34

Most of the firms in the Waterloo high-tech cluster are engaged in research focused more on product development than exploratory research. While the region is best known for the radical innovation associated with Research In Motion, the emphasis in many of the other medium-sized and small firms is on solutions-focused, incremental innovations rather than research-intensive, first-generation products. Product and process improvements involve development activities such as modifying existing software platforms, creating product updates and new releases, applying the core technology to different applica-tions within the same factory, or making software web accessible. A

34 Allison Bramwell, Jen Nelles, and David A. Wolfe, “Knowledge, Innovation and Institutions: Global and Local Dimensions of the ICT Cluster in Waterloo, Canada,” Regional Studies 42, 1 (February 2008), pp. 1–16.

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critical type of knowledge transfer within the region seems to occur through dense peer-to-peer networks of highly qualified workers, who have developed extensive relationships during their university educa-tion and subsequent work careers. Thus, while the Waterloo region has developed strong specializations in particular sectors, such as informa-tion technology and advanced manufacturing, its innovative strength lies in the ability of local firms to transfer knowledge effectively across sectors and to find innovative ways—based on dense interpersonal net-works—to develop technology products.35

Smaller cities in the Canadian landscape present a different picture of the innovation process, but share some features with the mid-sized ones discussed above. A representative example is Trois-Rivières, Quebec. The pattern of interaction observed among firms in the local economy and their propensity for collaboration are a function of the tra-jectory along which the firms have developed, as well as the sector in which they are located. The economy in Trois-Rivières has historically been based on metal fabrication, along with forestry, wood products, and energy generation, based on hydroelectricity from Shawinigan. These sectors are still the mainstays of the regional economy, but new ones are emerging in areas such as hydrogen and bioprocesses. A rela-tively small services sector in areas such as professional, scientific and technical services, and business services has experienced signifi-cant growth in recent years. Innovations within the traditional sectors are focused on incremental product and process improvements, while radical innovations are rare and little basic research is performed in the region. Firms tend to have relationships with local research organ-izations, including universities, colleges, and public research organiza-tions, for the purposes of innovation and technology transfer. The vast majority of highly qualified personnel is drawn from the local univer-sity (Université du Québec à Trois-Rivières) and the local CEGEP, and the most important sources of knowledge tend to be locally and

35 Harald Bathelt, Dieter F. Kogler, and Andrew K. Munro, Social Foundations of Regional Innova-tion and the Role of University Spin-Offs: The Case of Canada’s Technology Triangle (Toronto: University of Toronto, June 2008).


sectorally based. A different pattern of interaction characterizes the two emerging sectors in industrial biotech and hydrogen and hydroelectri-city. In these cases, the networks and relationships for firms in these sectors tend to be extra-regional. They draw most of their knowledge and technical know-how from partners in Montréal, the rest of Quebec, and the rest of Canada, as well as in the U.S. and Europe. While there is little evidence of cross-sectoral knowledge flows in small industrial cities such as Trois-Rivières, the emerging and integrative sectors are effectively linked into external knowledge networks.36

the roLe of tALent And CreAtIvIty In CAnAdIAn CItIes

There is growing recognition that a critical set of skills, associated with knowledge-based and cultural and creative occupations, con-tributes significantly to the economic vibrancy of city-regions. Local concentrations of highly skilled and creative workers can attract and embed globally mobile investment, as well as stimulate innovative growth in the local economy. From this perspective, the social char-acteristics of particular places—those which make them attractive to talented workers—are of primary importance in sustaining local eco-nomic growth and prosperity. Such talent is attracted to and retained by cities that offer a richness of employment opportunity, a high quality of life, a critical mass of cultural activity and social diversity—in other words, cities with low barriers to entry for newcomers. The success of city-regions in attracting and retaining creative talent depends on their quality of place and community characteristics that promote strong neighbourhoods and social cohesion.

36 Local ou International? Diversité des Patterns de Résautage des Entreprises de la Région de Trois-Rivières [paper]. Presented by Michel Trépanier, Rosemarie Dallaire, and Pierre-Marc Gosselin at 10th Annual Conference of the Innovation Systems Research Network. Montréal, Que.: May 1–2, 2008.

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However, questions remain about which factors contribute most to the concentration of creative workers in the first place. Is it the pres-ence of a high quality of life and an abundance of lifestyle amenities in a particular city that draw larger numbers of talented and creative work-ers to the urban scene? Or is it the presence of a high degree of employ-ment opportunities and a dense labour market in creative and cultural industries that provide talented and creative workers with strong job opportunities? Either way, recent research provides evidence of a critical linkage between the location of cultural and creative industries and employment opportunities in talented and creative occupations, as well as those in more scientific and professional occupations. However, the role played by creative and cultural industries in the growth of Canadian cities varies considerably, and it is important to understand the different ways in which talent attraction and retention contribute to cities’ economic performance.

Several indices are used to measure talent. An early study of the rank-ing of Canadian cities on talent, creativity, and diversity indices found strong correlations between the ranking of individual cities on these three measures and their relative standing with respect to the concentra-tion of employment in technology-intensive industries. The talent index is defined as the proportion of the population 18 years of age or over with a bachelor’s degree or higher. The bohemian or creativity index relates to employment in creative and artistic occupations; the mosaic or diversity index is calculated as the proportion of the total popula-tion that is foreign born; and the tech-pole index compares a region’s share of national employment in high-technology industries with the region’s overall share of national employment.37 The study found that the same correlations between diversity and creativity, and the loca-tion of knowledge-intensive industries, hold as true for Canada’s urban centres as for those in the U.S. Overall, Ottawa–Gatineau and Halifax

37 Meric S. Gertler, Richard Florida, Gary Gates, and Tara Vinodrai, Competing on Creativity: Placing Ontario’s Cities in North American Context. Report prepared for the Ontario Ministry of Enterprise, Opportunity and Innovation and the Institute for Competitiveness and Prosperity (Toronto: Authors, 2002), pp. 3–4. These definitions are based on the original definitions in Florida, The Rise of the Creative Class, Appendix.


were ranked highest on the talent index, in terms of the percentage of the population over 18 with a university degree, followed closely by most of the other major cities, including Toronto, Calgary, Victoria, Vancouver, Québec City, Saskatoon, and London. The largest cities in the country ranked at the top in terms of creativity on the bohemian or creativity index, but Victoria and Halifax were also included in this group. Toronto and Vancouver topped all other Canadian cities in terms of their degree of diversity, by a considerable margin. And, finally, the five largest cities—Montréal, Toronto, Ottawa, Vancouver, and Calgary—outpaced the other Canadian cities in terms of their relative concentrations of technology-intensive employment. When the various indices were compared, both the talent and the bohemian indices were found to correlate strongly with the tech-pole index, but the bohemian index displayed the strongest overall correlation, which “provides evi-dence of the strong relationship between creativity and employment in knowledge-intensive economic activity.”38

When the leading Canadian cities were compared with leading ones in the U.S., the findings were remarkably similar. If anything, the key relationships were even stronger for Canadian cities than for U.S. ones. The bohemian or creativity index was most strongly associated with the level of a city’s employment in technology-intensive industries and consistently provided the best explanation of a city’s technological trajectory. The talent index was the next most reliable indicator, while the mosaic or diversity index was the weakest of the three. Also inter-esting was the fact that all three indicators performed much better for the largest cities, with populations over 1 million, than for the medium-sized and small cities. This finding reinforces the linkage between city size and some of the key indicators of talent and creativity that pro-vide strong support for the development of more technology-intensive industries and employment. The study concluded that many Canadian cities with a diverse population and concentration of talent contain the critical factors needed to thrive as creative communities.39

38 Gertler, Florida, Gates, and Vinodrai, p. 14.

39 Gertler, Florida, Gates, and Vinodrai.

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A more recent study by Florida and his colleagues explored the relationship among the indices sketched out above and analyzed their effects on the technological intensity of employment in Canadian cities, as well as their effects on income levels in the same cities. Two of the indices, the talent index and the bohemian index, are strongly correlated with regional and urban economic development in Canada. However, the results also show that a higher concentration of techno-logically intensive industries in a city has a positive effect on income levels, especially in those cities with a strong concentration of the creative class, when combined with openness to bohemian and gay people.40 This finding suggests that there is a significant relationship between the two key components of the creative class—the scientific and professional occupations that are employed more directly in innov-ation-related industries and the artistic and creative workers who are employed in cultural and creative industries. The importance of this relationship between the technological and artistic sides of the creative process is strongly supported by research from Statistics Canada, which concludes that scientists and engineers have the greatest impact on urban economic growth when their presence is combined with a large and diverse pool of skilled workers, and that “cities with large con-centrations of degree holders in non-science, non-culture occupations experience more robust science and engineering growth than others.” In other words, cities benefit when they are home to people in occupations that draw on both the left side and the right side of the brain.41

This research suggests that discussions of the contribution of talent and creativity to urban economic development need to be tempered by a better understanding of the different kinds of creative occupations

40 Richard Florida, Charlotta Mellander, and Kevin Stolarick, Talent, Technology and Tolerance in Canadian Regional Development, Working Paper 2009-WPONT-010 (Toronto: Martin Prosperity Institute, University of Toronto, 2009).

41 Desmond Beckstead, W. Mark Brown, and Guy Gellatly, Cities and Growth: The Left Brain of North American Cities: Scientists and Engineers and Urban Growth, occasional paper, Cat. No. 11-622-MIE, No. 017 (Ottawa: Statistics Canada, 2008). Also Ann Markusen et al., “Defining the Creative Economy: Industry and Occupational Approaches,” Economic Development Quarterly 22,1 (2008), pp. 24–45.


that contribute to the talent base of cities. It is also important to rec-ognize the critical distinction—introduced by both Florida and his col-laborators, and by the researchers at Statistics Canada—between the creative workforce employed in occupations closely associated with cultural and design-based industries (such as artists, designers, musi-cians, theatre performers, and film and television producers) and the creative part of the workforce employed as scientists, professionals, and managers in research- and technology-oriented occupations. The key question is whether significant concentrations of both types of creative occupations are more likely to be found in large cities with a certain type of industrial structure, or whether these occupations also have a significant presence in small and medium-sized cities.

Creative Industries and Creative occupations in Canadian CitiesIn order to shed light on the contribution of talent and creativ-

ity to innovation and growth in Canadian cities, it is helpful to sort out whether creative occupations or creative industries have the most important effect. Recent discussions suggest the two tend to develop together in a cumulative and mutually supportive spiral. In other words, creative industries, like many others, follow a historically conditioned pattern of development, and it is important to understand how the prior development of the cities in which the creative and cultural industries are rooted laid the groundwork for their development. Why do creative industries develop in specific locations at specific times, and how does the urban geography of those locations shape the way in which the industries develop? The concentration of creative and cultural indus-tries in Canada’s largest cities—particularly Vancouver, Montréal, and Toronto—did not emerge out of the blue, but they are grounded in a range of similar and related industries in those three cities.

Recent work by both Statistics Canada and members of the ISRN underlines the extent to which the cultural industries in Canada are concentrated in Canada’s largest cities. The three largest urban centres —Toronto, Montréal, and Vancouver—accounted for 64 per cent of all cultural workers in the country in the 2001 Census, even though these

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three cities made up only 52 per cent of the total national labour force.42 ISRN researchers examined the role of creative and cultural clusters in Ontario using the broader definition of industrial clusters discussed earlier in this chapter. Ontario’s creative, cultural, and new media industries employed 224,195 people in 2001. This workforce is primar-ily an urban one, with 11 cities in the province accounting for 87 per cent of the workforce. Furthermore, the workforce is overwhelmingly concentrated in Toronto, which accounted for almost 60 per cent of creative and cultural workers in the province, as compared to only 42 per cent of the overall provincial workforce.43

There are strong synergies among the industries associated with the creative and cultural economy that share a focus on the import-ance of design. These include more well-established industries such as architecture, industrial design, fashion and clothing, jewellery, adver-tising, and even consulting, as well as some of the industries related to the new economy, such as software design, computer graphics and imaging, digital media, the production of video games, and a range of support services associated with the rise of digital technologies and the Internet. The notion of design conveys a strong sense of creativ-ity but also “carries with it a manifestly industrial application both in its contemporary and more historical applications.”44 Equally import-ant is the linkage embodied in these industries between consumption, innovation, and the design of new creative products, whether they are commercial or artistic. While these industries are not tied directly to traditional cultural industries (such as book and magazine publish-ing, film and television production, and music and sound recording),

42 David Coish, Census Metropolitan Areas as Cultural Clusters, Cat. No. 89–613-MIE, No. 004 (Ottawa: Statistics Canada, 2004).

43 Tara Vinodrai and Meric S. Gertler, Measuring the Creative Economy: The Structure and Eco-nomic Performance of Ontario’s Creative, Cultural and New Media Clusters, report prepared for the Ontario Ministry of Culture (Toronto: PROGRIS, University of Toronto, 2007).

44 Tom Hutton, The Geography of Design in the City (Vancouver: University of British Columbia, n.d.).


they share certain key sensibilities and are attractive to similar kinds of personalities—namely, individuals who comprise the greater propor-tion of the creative class.

The tendency of this range of design, creative, and cultural indus-tries to exhibit distinctive spatial tendencies, similar to the more trad-itional technology- and science-based clusters, is a defining feature of the urban core in Canada’s larger cities. Proximity to market leaders, access to a common pool of talent, and linkages to local customers and suppliers have all been identified as reasons for collocation. There are, however, some important differences between traditional technology-based industries and those in the creative and cultural sectors. Foremost is the nature of the innovation process itself; innovation in the creative and cultural industries is primarily fuelled by the process of design in the form of fashion, architecture, or industrial products, as well as through the creation of content that is then brought to market through a particular medium, such as publishing, sound recording, film, tele-vision, or digital media. While process innovations may also be an important source of value for these industries, the process of creating original content for each of the different media is central to the creation of value in these clusters. Developing, attracting, and retaining creative talent is thus critical, as are the social and institutional aspects of the clusters that support the development of this talent pool.

The urban geography of the creative and cultural industries displays distinctive characteristics. These industries tend to locate in similar parts of Canada’s largest cities, particularly inner-city areas near the central business district that were once home to traditional manufactur-ing industries. As these industries have been restructured through the adoption of new labour-saving technologies and the relocation of their lower-cost and more labour-intensive aspects of production to offshore sites, they have opened up new urban spaces for development by indus-tries associated with the cultural and creative economy, which share a strong emphasis on design. Artists often play a key role in the redis-covery and development of these older underutilized and undervalued neighbourhoods within a city. The movement of artists into these

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parts of the city is often followed by other creative activities that take advantage of the low cost and easily adapted space of these neglected factories and warehouses.45

These districts can be found in different parts of Canada’s three lar-gest cities. Creative, cultural, and design-intensive industries are drawn to these neighbourhoods by a number of related factors, including the availability of highly skilled labour, especially artists and workers with the skills required by the specific industries; the combined attraction of highly adaptable space and relatively low rents in reconfigured indus-trial buildings; and the proximity of these districts to some of the lead-ing cultural institutions and attractions of the inner city, as well as the vibrant nightlife of the downtown core.

Vancouver’s urban core—including neighbourhoods such as Yaletown, Victory Square, Gastown, and the cultural district—has gradually been redeveloped as an area devoted to the emerging econ-omy of cultural production, with an emphasis on software development, computer graphics and design, and related digital media activities.46 Toronto’s creative and cultural industries represent a significant pro-portion of the urban economy, employing 133,000 people in advertis-ing, architecture, film and television production, performing arts, sound recording, specialized design, software, and new media. Much of this employment is concentrated either in the downtown core or in adjacent districts stretching from lower Spadina Avenue along King Street West to Liberty Village.47 Montréal retains a strong role as a leading centre for fashion and design industries, located in neighbourhoods such as Mile End. It is also prominent in a wider range of cultural industries, due to its central position as the home of French-language productions, and its recent development as a key centre for digital media.

45 Meric S. Gertler, Creative Cities: What Are They For, How Do They Work, and How Do We Build Them? Background Paper F/48 (Ottawa: Canadian Policy Research Networks, 2004); Hutton, The New Economy of the Inner City.

46 Barnes and hutton.

47 Meric S. Gertler, Lori Tesolin, and Sarah Weinstock, Toronto Case Study (Toronto: London–Toronto Strategies for a Creative City, July 2006).


The location of these industries in the central core of Canada’s lar-gest cities has also been influenced by the past tendency of new immi-grants to congregate close to these central areas (although in more recent years, many immigrants have settled in the suburban ring around the metropolitan cities). Immigration flows to Canada’s largest cities undoubtedly enrich their cultural economies by endowing them with distinctive forms of cultural capital. In Toronto and Vancouver, the influence of immigrant talent, creativity, and dynamism is strongly felt in key sectors such as literature, publishing, music, filmmaking, gas-tronomy, and specialty food. The presence of these immigrant com-munities has produced a more multicultural and diverse urban identity in Canada’s cities, which people employed in creative occupations and industries report as a vital source of inspiration for their work. In short, “immigration enhances the diversity and distinctiveness of these places, further strengthening their long-run economic prospects.”48 That is not to suggest that immigration has been without its problems in this country, an issue discussed in more detail below.

Detailed case studies of the fashion industries in Toronto and Montréal note some similar features. Interviews with fashion and graphic designers in Montréal’s Mile End neighbourhood illustrate how important it is for people in these occupations to be located in a culturally rich and open environment that contributes to a sense of experimentation. The Mile End neighbourhood consists of a rich mix of successive waves of new immigrants into the Montréal economy. Housed in a former industrial neighbourhood that went through a period of significant decline in the 1980s as Montréal lost many of its former industries, Mile End has been reborn through an influx of students, artists, writers, and musicians who provide the creative focus that has attracted designers’ workshops, fashion boutiques, and design galleries to the area.

48 See Meric S. Gertler, “Urban Economy and Society in Canada: Flows of People, Capital and Ideas,” Isuma: Canadian Journal of Policy Research 2, 3 (Autumn 2001), pp. 119–130.

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The Montréal case highlights the importance of the same factors that have contributed to the vitality of inner-city districts in Vancouver and Toronto: a compact and tightly constrained district, with easily adapt-able space in heritage buildings, located close to attractive cultural and creative venues. The aesthetic of the older architecture in these neighbourhoods provides a creative stimulus for designers and other artists. The character of these inner-city neighbourhoods also reinfor-ces the tendency of people working in the fashion or design industries to commingle with musicians and other bohemians.49 A related point was made in a recent study undertaken for Culture Montréal, which found that the artistic and cultural environment in Montréal generally attracts technical workers who enjoy the nightlife and the energetic atmosphere the city offers. This synergy among cultural, artistic, and technical occupations is manifested in numerous examples of technic-ally oriented companies drawing on the independent design firms and individual workers in Montréal’s cultural and artistic industries.50 A key implication of this research is that in addition to strategies focused on attracting cultural and creative types to the city, urban development policy should pay greater attention to preserving the diverse physical settings that provide a nurturing environment for these types of creative industries.51

Similar results are observed in the case study of the fashion indus-try in downtown Toronto. While not one of the largest fashion sectors in North America, Toronto has a substantial number of designers and apparel manufacturers that employ more than 50,000 people in total. Toronto does not appear to act as a significant draw for the inward

49 Bringing the Material Back In: The Role of Space in Creative Production [paper]. Presented by Norma Rantisi and Deborah Leslie at 10th Annual Conference of the Innovation Systems Research Network. Montréal, Que.: May 1–2, 2008.

50 Kevin Stolarick and Richard Florida, “Creativity, Connections and Innovation: A Study of Link-ages in the Montréal Region,” Environment and Planning A 38, 10 (2006), p. 1808.

51 The importance of providing adequate physical space for artistic and creative endeavours was a central part of the recommendations in the recent report of the Strategies for Creative Cities Task Force, Imagine a Toronto: Strategies for a Creative City (Toronto: Strategies for Creative Cities Task Force, 2006).


migration of fashion designers from other countries, yet it does have a large number of foreign-born workers in the sector, most of whom came to Canada for personal reasons. Also, a significant number of Canadian-born designers who were attracted to Toronto primarily to pursue an education in design ended up staying because of the employ-ment opportunities the city afforded.

One of the key attractions for creative workers in the fashion and design industry is the presence of a wide range of related cultural indus-tries, such as film, theatre, dance, art, architecture, and music. These related industries generate a wide range of synergies that contribute to the overall attractiveness of Toronto as a city for design work. Fashion designers in Toronto reported how important it was to be located in a city with a large, live-theatre sector—as well as dance and film produc-tion—where they could realize their passion for design by creating the more elaborate costumes needed by performers in these productions.52 That closely parallels the responses from other interviews with editors, publishers, and writers in the magazine publishing sector, who noted it was essential for them to be located in a large city with a vibrant dance, literary, or fashion scene, depending on whether they worked for a dance, literary, or fashion magazine. The cross-sectoral fertilization that Jane Jacobs viewed as central to the process of innovation and urban growth clearly seems to flourish in the cultural and creative sectors, con-centrated in our larger cities.

Few other cities in the country demonstrate the same concentra-tion of cultural, creative, and design industries as Vancouver, Toronto, and Montréal. Calgary differs significantly from the other large urban centres in Canada because of its high degree of specialization in a smaller number of sectors. Employment growth—although it has slowed recently—has been nearly double the national average over the past 10 years and has proved to be a magnet for in-migration from other Canadian cities. However, the rapid employment growth in the city is

52 Evaluating the Role of “Quality of Place” for Fashion Designers in Toronto [paper]. Presented by Deborah Leslie and Shauna Brail at 11th Annual Conference of the Innovation Systems Research Network. Halifax, N.S.: April 29–May 1, 2009.

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associated predominantly with the boom in the oil and gas industry, and the resulting labour shortages are concentrated in a specific range of both highly skilled and less skilled occupations associated with the industry. In contrast to a variety of other factors—such as the physical attractiveness of the urban setting, the presence of lifestyle amenities, or the density of social networks and the patterns of interaction within them—the clearest driver of employment growth and in-migration to Calgary’s booming economy is the strength of the labour market and a consistent demand for highly skilled talent.53

Cities on the margins of the country experience greater challenges in attracting and retaining creative talent and in sustaining their creative industries. The prospects for these cities must be viewed in the context of their position within Canada’s urban system. Cities such as Halifax and St. John’s exist on the periphery of not only the Canadian, but also the North American, economy, yet they serve as regional metro-poles for their respective hinterlands. Halifax has certain advantages that strengthen its position as an attractive site for creative workers. It is strategically located as the regional metropolis for much of Atlantic Canada, not just Nova Scotia. As a consequence, it is large enough to attract a critical mass of creative workers, while at the same time being small enough to maintain easy accessibility to valued lifestyle amen-ities, such as the ocean and other natural attractions. The smaller size of the city and its slower pace facilitate a sense of community that many find attractive. While most workers in the creative and high-technology sectors of Halifax appreciate the amenities associated with its natural beauty and medium size, their decisions about moving to or staying in the city are primarily influenced by the employment prospects within their sector. Interviews in Halifax with highly skilled workers revealed that it is an important centre for innovation and the site of diverse sectors of the cognitive-cultural economy, ranging from biomedical research to the vibrant music scene for which the city is well known.

53 Building the Pool of Creative Talent: The Case of Calgary [paper]. Presented by Cooper H. Lang-ford, Ben Li, and Cami Ryan at 10th Annual Conference of the Innovation Systems Research Network. Montréal, Que.: May 1–2, 2008.


As in the case of Hamilton, there were some unanticipated but noteworthy linkages across diverse sectors. Researchers are attracted to the city because of the quality of its universities and the research opportunities they afford. The universities benefit from the quality and number of students, many of whom come to Halifax from other parts of the country. Students, in turn, are attracted both by the quality of universities and by the city’s dynamic music scene and lively night-life, both of which thrive because the steady influx of students con-stantly replenishes the audiences for the numerous bands in the city. “Halifax illustrates the artistic dividend which Markusen and Schrock argue that artists can generate for places; in this case the music industry helps drive the research engine so vital to innovation in the region.”54 The strong synergies between the city’s scientifically based research sector and the creative-cultural sector provide a fascinating con-firmation of the important linkage between the right side and the left side of the brain that was noted by researchers at Statistics Canada. Interestingly, Halifax has weathered the current recession better than most other cities in the country; it had the best full-time job growth over the past 12 months and home prices held steady. Its steady sup-ply of university graduates has also proven to be a powerful magnet in attracting recent investments by insurance and hedge fund firms from the U.S., Research In Motion from Waterloo, and defence companies such as Lockheed and General Dynamics.55

In the case of St. John’s, there is some evidence of small but dynamic creative industries, especially in creative fields such as music. However, despite the presence of a dense network of creative people, there is uncertainty about the precarious nature of employ-ment within the local economy. St. John’s exhibits some of the charac-teristics of other large cities in Canada because of the functional role

54 Smart City/Cool City: Attracting and Retaining Talented and Creative Workers in Halifax [paper]. Presented by Jill L. Grant and Karin Kronstal at 11th Annual Conference of the Innovation Systems Research Network. Halifax, N.S.: April 29–May 1, 2009, pp. 14–15. Also Markusen and Schrock.

55 Sinclair Stewart and Tavia Grant, “Canada’s Safe Harbour,” The Globe and Mail, June 15, 2009.

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it plays within the urban system of Newfoundland. At the same time, its small size and relative isolation from other cities in the national and international urban system restrict its ability to attract and retain talent. There is thus a dual character to St. John’s as a city-region—as a metropolis on the margin that also serves as a launching pad for cre-ative and educated workers before they further pursue their careers in other locations outside the province. In contrast to other large cities in the country, such as Vancouver, which has evolved beyond its origin as an urban metropole for the staple-producing hinterland to a more diversified economy with a solid grounding in the emerging cognitive-cultural economy, St. John’s is still an urban metropole; however, its staple is now principally oil and gas, rather than fish. The urban econ-omy is undergoing a major expansion as the city faces the challenge of attracting and retaining the highly educated workers required to main-tain the rapid rate of growth in the oil and gas industry. In contrast to the period prior to 2001, when its population declined, St. John’s subsequently experienced a population increase of almost 5 per cent between 2001 and 2006. The depopulation of the more peripheral parts of the province is reinforcing the central position of St. John’s within the provincial economy. This example supports the view that it is the specific nature of the production activities and work opportunities in an individual city that determines its overall attractiveness to highly edu-cated and creative workers, rather than the quality of the lifestyle amen-ities found in the city.56

In the central corridor of the country stretching from Windsor to Québec City, medium-sized and small cities face substantial challenges in attracting the creative talent found in larger cities. They do not enjoy the advantages of being a regional metropole like Halifax or St. John’s. These cities, which are characterized by their unexceptional nature, face an entirely different set of problems. They may have an indus-trial profile in one or two sectors or clusters, but they have not been

56 Josh Lepawsky, Crystal Phan, and Robert Greenwood, “Metropolis on the Margins: Talent Attraction and Retention to the St. John’s City-Region, Newfoundland,” (St. John’s, Nfld., forthcoming).


successful in creating a distinctive local brand associated with their urban economy. Their in-between size is neither large enough to create the distinctive buzz found in major cities, nor small enough to benefit from the natural beauty found in more compact cities.

London, Ontario, is a classic example of such a city. Recent policy reports aimed at formulating an economic development strategy for the city have documented a number of issues it faces. They include an inability to attract talented newcomers, especially immigrant profes-sionals, and the failure to retain the young knowledge workers who move to the city to attend its university but who leave shortly after graduation. In contrast to the creative city hypothesis, highly skilled workers are drawn to London primarily for specific employment oppor-tunities or for family reasons. Even when younger, talented workers move to the city, they recognize that the lack of head offices in the city potentially limits their opportunities for career mobility and promotion to senior management positions. One exception is the medical science sector, where the high-quality research networks at the University of Western Ontario were identified as a potential source of leading-edge discoveries, with the potential for being spun off into new enterprises.57

Research conducted for the ISRN case study confirms some ele-ments of this view of the city, yet paints a slightly different picture. A number of highly innovative and globally recognized firms are able to attract the talent they need to sustain their growth. However, it is the prestige of the firm and the prospect of employment that draws talent to the city, not the attractiveness or “buzz” of the region. The most notable difficulty innovative firms faced was recruiting candidates for certain senior management roles, but this problem has been noted across a range of Canadian cities. However, many senior managers in the firms that were surveyed had been involved in founding or growing the firm, and therefore had the requisite niche skills to run the company. Beyond the realm of innovative firms, most of which were launched

57 Innovation and Creativity in the Ordinary City? Talent Matters in London, Ontario [paper]. Presented by Neil Bradford at 11th Annual Conference of the Innovation Systems Research Network. Halifax, N.S.: April 29–May 1, 2009.

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in London, the city faces a broader image problem. Its urban land-scape lacks the physical attributes associated with an attractive quality of place. Interviewees commented on the lack of the kind of inspired urban design and the older, reconfigured industrial buildings that are essential features of the rediscovered creative hubs in Canada’s larger cities. While civic leaders have made progress in revitalizing the down-town core and in welcoming immigrants and students to the city, the perception persists of London as a city that faces major challenges in creating an urban environment attractive to talented and highly skilled workers.58

Kingston, Ontario, faces a similar but even more challenging problem. Kingston and a number of other cities have a high ranking on the talent index but a relatively low ranking on the other indices asso-ciated with creative cities. As a result, they are perceived as uncom-petitive in the creative city sweepstakes. Looking at these cities only through the lens of creativity potentially sets them up for failure and implies there is little that can be done to make them more attractive or competitive in these terms. That compounds the problem these cities already face, given their relative position within the urban system. In the specific case of Kingston, its geographic proximity to three of the larger cities in the country—Montréal, Ottawa, and Toronto—means that it faces a constant challenge in retaining both individual talent and firms who are tempted by the advantages of relocating to a larger urban setting. It has been suggested that these cities need to be evalu-ated along a different range of indicators that may provide a more use-ful sense of their relative attractiveness—indicators that focus on their quality of life, liveability, and affordability. Given the empirical trends noted by the OECD regarding the decreasing returns associated with cities that grow beyond a certain size and the ensuing limits to sustain-ability, and given Kingston’s proximity to the largest urban agglomeration

58 Ibid.


in the country, it has been suggested that its competitive advantage may lie in stressing the relative attractiveness of Canada’s smaller cities as alternative locations.59

London and Kingston share an inability to capitalize on the presence of strong post-secondary institutions, in sharp contrast to Halifax and the Waterloo region. The latter has successfully rebranded its entire regional economy based on the reputation of its leading university. The University of Waterloo has been highly successful in growing its own talent base, due to its internationally recognized research and teaching strengths and to its unique cooperative education program. It runs the largest co-op program in the world, involving more than 11,000 students (60 per cent of the student body) and 3,000 employers each year. Not only are gradu-ates well trained within the university; they also gain practical experi-ence through their co-op placements, both in local firms and in firms all over North America. Many of the larger Waterloo firms, as well as global ones, have deep and enduring links with the co-op program and rehire students they first encountered through the co-op program. Although local firms often compete with leading global firms for talent, they view that as a strength of the regional economy, not a weakness. The inter-national competition to hire the best graduates of the university is viewed as a validation of the depth and quality of the local talent pool.60

Immigration, Creativity, and Inclusion in Canadian CitiesAs noted in Chapter 2, the pursuit of a talent-based strategy inclu-

sive of all elements of Canadian society is essential for tapping into the full knowledge resources of the labour force and realizing its cre-ative potential. A more inclusive labour force strategy has the poten-tial to draw upon a larger pool of labour market participants for the creative processes essential for innovation. Such a strategy explicitly

59 N. Lewis and Betsy Donald, “A New Rubric for ‘Creative City’ Potential in Canada’s Smaller Cities,” Urban Studies (forthcoming).

60 Allison Bramwell and David A. Wolfe, “Universities and Regional Economic Development: The Entrepreneurial University of Waterloo,” Research Policy 37, 8 (September 2008), pp. 1175–1187.

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recognized that those groups that have traditionally faced greater bar-riers to employment opportunities represent an important part of the creative labour force in the future economy.

Attractive as this argument may be, the evidence that such strat-egies are actually being pursued remains mixed. A number of studies have identified the increasing trend toward greater income polarization and the growing pockets of poverty in specific parts of Canada’s large metropolitan centres.61 There is also evidence that Canada’s immi-grant communities, generally viewed as a valuable component of our creative and cultural mosaic, face greater barriers to integration within the labour market than do other groups in Canadian society. That raises the issue of whether the talent requirements of the emerging cognitive-cultural economy are leading to economic outcomes in Canada that dis-proportionately benefit a select group of highly talented professionals to the social detriment of other members of Canadian society.

The inter-regional and international migration of skilled labour has been one of the most important flows reshaping the character and geog-raphy of Canadian cities in recent years. For the largest metropolitan areas, especially Toronto, Vancouver, Montréal, Calgary, and Ottawa, international immigration has brought incredible dynamism and vitality by providing a key source of human capital and talent.62 The impact of immigration on particular places, however, has varied according to city size and relative location. In recent years, over 70 per cent of all immi-grants have chosen to settle in the three largest cities in the country. This choice is influenced by the availability of employment opportun-ities and a rich multicultural environment in those cities. Over time, it is expected that the gap between the large cities and the remainder will increase in terms of the locational choices of Canada’s new immigrants,

61 Meric S. Gertler, “Urban Economy and Society in Canada: Flows of People, Capital and Ideas,” Isuma: Canadian Journal of Policy Research 2, 3 (Autumn 2001), pp. 119–130. Also United Way of Greater Toronto, Losing Ground: The Persistent Growth of Family Poverty in Canada’s Largest City, research report (Toronto: United Way of Greater Toronto, 2007).

62 The Conference Board of Canada, City Magnets: Benchmarking the Attractiveness of Canadian CMAs (Ottawa: The Conference Board of Canada, 2007).


as the existing advantages will become self-reinforcing.63 Mid-size and small cities face significantly weaker prospects of sharing in the bene-fits of inter-regional and international migration. Many of these cities are already contending with the loss of their homegrown talent to other Canadian cities, such as Calgary, Toronto, or St. John’s. This internal migration makes the challenge of attracting and retaining well-educated immigrants from other countries all the greater. For Canada’s small and medium-sized cities, the prospects of successfully pursuing a talent-based strategy to focus on promoting local innovation, creativity, and economic dynamism seem more remote.

Despite the positive effects of immigration on Canadian cities, the process of integrating new immigrants into society is not inexpensive and takes time, especially when English is a new language. One indica-tor of the scope of the challenge is that recent immigrants are consist-ently among the most economically disadvantaged groups in Canadian urban society. A recent study by TD Economics found that the eco-nomic status of new immigrants to Canada has been deteriorating over the past 25 years, as the gap between their earnings on entering the labour market and those of workers born in Canada has widened. As a result of this trend, immigrant families face a much greater risk of fall-ing into poverty than non-immigrant families do.64 A major challenge facing Canada’s metropolitan regions—especially the larger centres—is to build on their enviable legacy of diversity and tolerance while generating new institutions to deal more effectively with emerging obstacles to social inclusion.

However, new Canadians are not the only ones experiencing pov-erty, exclusion, and social polarization. Urban labour markets feature an expanding service sector, whose relative weight in the national economy is increasing as a result of the current recession. Employment opportunities in that sector are ever more divided between well-paid, creative, and rewarding careers in research, finance, and consulting in

63 Filion.

64 TD Bank Financial Group, Literacy Matters: Helping Newcomers Unlock Their Potential (Toronto: TD Bank Financial Group, 2009).

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knowledge-intensive public sector and industrial activities, and poorly paid, contingent, insecure, and unsatisfying jobs in retail sales, cleaning, data entry, and personal support care. Canada is not alone in dealing with this challenge, as the recent OECD report on competitive city-regions made clear.65 Failure to deal effectively with this issue will ultimately undermine our overall effort to transform our leading cities into dynamic and innovative hubs in the cognitive-cultural economy.

fInAL thoughts

This chapter suggests that the conventional way of framing the debate about urban economic growth in terms of whether specializa-tion or diversity is more beneficial to cities is being transcended. The evidence from the case studies reported on suggests that the most dynamic and innovative cities are starting to move beyond the narrower limitations of specialization or diversity. They are being reconstituted as “Schumpeterian hubs” of innovation and creativity—centres where existing resources are recombined to create innovations, new products, and entire new industries. Part of this transformation involves the grow-ing integration of a number of leading sectors, in areas such as high-end business services, the cultural industries, fashion, design, and advertis-ing, into the cognitive-cultural economy. But it is important to recognize that this is happening in the context of the integration of these centres into the global economy, where local innovation capabilities are becom-ing part of broader, global knowledge networks. There are relatively few centres in the world that are completely self-sufficient in the production of any good or any product. The potential of knowledge-intensive eco-nomic activities to create wealth does not automatically translate into similar growth of employment opportunities. Wealth and employment, and poverty and under- or unemployment, are spatially concentrated in cities where the negative externalities of poverty, social polarization,

65 OECD, Territorial Reviews: Competitive Cities in the Global Economy (Paris: OECD, 2006).


and poor social cohesion are becoming more evident. Community-wide efforts to address these problems from both an economic efficiency and a social justice perspective require a more focused and coordinated approach to the management of urban economies.

The key issue for cities and regions is the extent to which their industries are moving beyond the narrow confines of traditional areas of industrial specialization toward more advanced knowledge plat-forms. To succeed, innovative firms must be grounded in a strong local economy capable of utilizing its local knowledge assets and research infrastructure, but they must also be linked effectively into the global economy. Coordinated approaches need to be devised at the level of the city-region to improve the capabilities of firms in the local economy, as local governments simply lack the resources and funding to imple-ment these strategies on their own. The resources needed to support such strategies reside at the federal and provincial level. Local develop-ment initiatives must be able to tap into existing federal and provin-cial resources and put them to work in the local economy. Successful and effective policy has to be the responsibility of more than just one level of government—local, provincial, or federal. Those cities and regions that are implementing a more coordinated approach to eco-nomic development have a strong, engaged civic community, capable of reaching a consensus around its future economic trajectory. Chapter 4 turns to a consideration of this process.

From Government to Governance

The role oF CIvIC CAPITAl In URBAN ECONOMIC DEVELOPMENT

4

109Chapter 4

IntroduCtIon

As the global economy struggles to recover from the shock of the past year, the industrial landscape of Canada’s major cities is being dramatically reconfigured. Some of the most success-

ful companies that have anchored key sectors of the economy in core city-regions—such as Nortel in Ottawa, Stelco in Hamilton, General Motors in Oshawa, and Chrysler in Windsor—have shrunk substantially or virtually disappeared. This decline has had devastating implications for the cities in which they have long been the anchor companies. Larger city-regions are better insulated from such changes because of the more diversified economic base on which they rest. Even some of the mid-sized cities with a more specialized economic base and a strong concentration in manufacturing have begun to recognize the need to shift their economies to more knowledge-based strategies that cut across existing sectors and to reposition themselves for future growth.

In most instances, however, the success of these strategies depends on the ability to draw on existing federal and provincial programs to support new or expanded research facilities and other institutions. The cascading requests for government assistance from a growing number of sectors, and the current constraints on federal and provincial funding, high-light the need for more strategic thinking about the role of government support for economic development, in general, and at the urban level, in particular. The impossibility of meeting all these demands accentuates the need for governments to align new and existing policies more effectively across competing jurisdictions and to ensure that future investments make the maximum contribution to urban economic development. Such an approach requires that policy development and implementation take into account the perspectives of a broad array of local actors with significant interests in, and concerns about, the eco-nomic prospects of the communities where they live and work.1 It involves a shift in focus from government to governance, often referred

1 Maryann Feldman and Roger Martin, “Constructing Jurisdictional Advantage,” Research Policy 34, 8 (October 2005), pp. 1235–1249.


to as “governing beyond government.” The key distinction between gov-ernment and governance turns on the recognition that policy outcomes are not merely the product of actions taken by formal governmental authorities but also depend on the interaction of a broad array of civic interests. Central to the concept of governance is the development of styles of governing in which the boundaries between public and private actors, and even between different levels of government, become blurred. A broader and more inclusive approach to economic development strategy in city-regions requires a reorientation from government to governance that cuts across existing programs and levels of government to achieve a more effective degree of “policy alignment.”

The critical issue is how the conditions that affect the trajectory of growth for an urban economy can be influenced most effectively. Future development in city-regions will be driven by the knowledge-intensive innovation, and creative and design-based activities, associated with the cognitive-cultural dimension of the economy. The preceding chapter demonstrated that the fruits of knowledge-intensive economic activity are distributed unequally among cities of different sizes, industrial specialization, and labour markets, as well as among individuals within those cities. Efforts to improve the economic performance of city-regions, therefore, need to take into consideration the underlying institutions in those city-regions that can support their industrial trans-formation. Relatively few Canadian cities enjoy the same diversified economic base as Vancouver, Montréal, or Toronto, but each has its own institutional assets and capacity to develop its local economy. There is growing interest in the ability of cities to alter their economic fortunes, but if they are to do so, civic leaders need to develop a concrete understanding of the existing assets and deficiencies of their cities. They need to develop strategies that build on the strengths, and work to strengthen the linkages among networks and institutions within their communities.

A key to the success of these efforts is to build connections between civic actors and the associations in their communities. Communities that are able to do so effectively can establish the basis on which to design and implement new economic development strategies.

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Communities and cities, like companies, need to innovate and adapt to remain competitive. They must engage in strategic planning exer-cises that identify and cultivate their assets; undertake collaborative processes to plan and implement change; and encourage a civic mind-set that fosters growth. Strategic planning processes place particular emphasis on the role of social learning, since learning dynamics are fundamental to the ability of urban economies to achieve and sustain knowledge-based dynamism over the long run.2 Moreover, strategic planning exercises are, at their most fundamental level, socially organ-ized learning processes involving learning by individuals, by firms, and by community-based organizations.3

This chapter explores the influence of three interrelated dimensions of local governance and policy development on the strategic response by cities and communities to the economic challenges they face.4 The first dimension involves governance arrangements at the city-region level—both the existing administrative structures that govern the city-region and the relative openness of those governmental structures to the influence and participation of a broad range of social actors and civic associations. The complexity of economic development challenges requires the active involvement of a broad cross-section of community actors to devise effective policy solutions.

The second dimension concerns the nature of the relations among various interests and associations active at the local level. In most cities, influence has traditionally been exercised to a great extent by a local

2 The strategic planning approach to urban economic development, also referred to as innovation-based strategic planning, was elaborated in a series of reports for the U.S. Economic Development Administration in the late 1990s and early 2000s. See J. Montana et al., Strategic Planning in the Technology-Driven World: A Guidebook for Innovation-Led Development (Washington, DC.: Collaborative Economics and the Economic Development Administration, U.S. Department of Commerce, 2001).

3 Meric S. Gertler and David A. Wolfe, “Local Social Knowledge Management: Community Actors, Institutions and Multilevel Governance in Regional Foresight Exercises,” Futures 36, 1 (February 2004), pp. 45–65.

4 Governing the Local Economy? Challenge and Change in London, Ontario [paper]. Presented by neil Bradford at 10th Annual Conference of the Innovation Systems Research Network. Montréal, Que.: May 1–2, 2008, p. 7.


development coalition representing those organizations and actors in the community with the strongest interest in promoting the city’s economic development. In recent decades, the role and influence of these coali-tions have been contested by a wider range of social and community interests, which are concerned about the way the benefits of economic growth are shared among the population of the city at large, and about the degree of inclusion or exclusion that prevails in local decision-making processes. In cities where the contours of the development coalition are successfully expanded, the conditions are laid for the creation of a net-worked set of collaborative organizations that can contribute to the city’s economic development strategy. That, in turn, leads to the presence of higher levels of “civic capital” in the local community, which become an invaluable asset in the pursuit of the development strategy.

The third dimension involves the policy framework adopted to guide urban economic development. The traditional approach to urban eco-nomic development, which dates to the post-war era from the 1950s to the 1970s, focused on strategies to attract individual firms to a city-region, frequently by providing low-cost land and services, and by giving the targeted firms increasingly generous direct subsidies or tax reductions.5 While this practice has been recognized as a relatively high-cost approach to economic development that can degenerate into a zero-sum game for the communities involved, it is still employed to a surprising extent across North America. The second approach emerged in the 1980s, when a growing number of states and provinces reacted to the industrial restructuring of that decade by focusing their develop-ment efforts on building the educational and technological infrastructure to support the growth of more technologically intensive firms and to attract new investments on the basis of local research capabilities. In the late 1980s, however, a growing number of regional and local governments began to perceive the limits of this approach. Although the approach

5 In Canada, the use of tax subsidies to attract investment to a municipality was restricted by some of the provinces, thus limiting the extent to which this device was used. However, many still relied on the provision of low-cost serviced land or lower overall property taxes as a key aspect of their economic development strategy.

113Chapter 4

recognized the shift from an industrial economy to a knowledge- based one, it relied on the same public sector organizational dynamics employed in the past to meet policy needs. As the focus of economic development policy changed from chasing smokestacks to building research infrastructure and stimulating innovation, state and provincial governments created a mix of new policies administered by discrete branches of individual line departments—often with little coordination or integration across programs, and with minimal involvement from the urban level of government or the local community the policies targeted.6

In response to the perceived weakness of the earlier approaches, a growing number of city-regions have seen the need to adopt this strategic approach to urban economic development. Clarke and Gaile, who employ a slightly different typology of urban development strategies, suggest that a potential fourth wave will build on the strategic planning approach. Of necessity, it will emphasize the role of human capital in urban economic development and the need for improved information infrastructure to link urban economies more effectively into the global one.7 In a world of increasing policy complexity and constrained government resources, this approach will also require new forms of governance to engage a broader spectrum of economic, social, and cultural actors in the policy process and realize a greater degree of policy alignment. Despite the benefits of including this broader range of actors under the “big tent,” most urban jurisdictions rely principally on the role of formal, institutionalized structures of local government to devise and implement economic development policy. Where outside civic interests are involved, they often are narrowly based on traditional development coalitions.8

6 Doug Ross and Robert E. Friedman, “The Emerging Third Wave: New Economic Development Strategies in the 1990s,” Entrepreneurial Economy Review 9, (1990), pp. 3–10.

7 The alternative typology of three waves of urban economic development strategies and a potential fourth wave is outlined in Susan E. Clarke and Gary L. Gaile, The Work of Cities (Minneapolis, Minn.: University of Minnesota Press, 1998), pp. 9, 80–83.



In recent years, new economic development partnerships between business and local government, such the Greater Halifax Partnership and The Ottawa Partnership, have begun to emerge in a number of Canadian cities. There are also new organizations, such as the Toronto City Summit Alliance, which aim to represent a broad cross-section of the local community. The experience with these new forms of partnership and governance organizations provides instructive examples of an alternative approach to economic development policy that shares responsibility for development with a more inclusive range of actors outside the administrative structures of urban governments: it may even share formal administrative authority for development with them. Despite the appearance of these inspiring “green shoots” of civic innovation, there remains considerable scope for more bottom-up, negotiated approaches to local governance. This chapter draws on a broad conceptual literature on alternative modes of governance and civic engagement, and investigates the prospects for adoption of a strategic approach to local economic development.

ChAngIng PAtterns of governAnCe

The role of city-regions as drivers of economic growth and prosperity, as well as the primary sites where the social dynamics of innovation play out on the ground, underlines the significance of those conditions that facilitate the transmission of knowledge among both leading-edge and more traditional economic sectors in city-regions. The creation of better linkages among relevant institutions and associated actors, and the fostering of collaboration among a range of community-based actors, are integral to the effective coordination of policy and its imple-mentation at the local level. However, recognizing the importance of linkages and collaboration to effective policy coordination is only part of the challenge; better coordination also requires an understanding of the conditions that support its emergence and development. Such an under-standing requires that urban administrative structures be appropriate for the city-regions they have jurisdiction over and that responsibility

115Chapter 4

for relevant aspects of policy be shared with a range of local organ-izations capable of providing specialized knowledge and helping to deliver programs or services.

The growing focus on the role of governance, as opposed to govern-ment activities, encompasses recognition that policy outcomes are not purely the product of what formal governments do. Governance requires the development of styles of governing in which the bound-aries between public and private actors, and even across different levels of government, become blurred. Governance focuses on the mecha-nisms of governing that do not rely just on the authoritative distribu-tion of resources derived from traditional governmental structures.9 For Peters and Pierre, the underlying novelty of this approach is its emphasis on the processes of governing, rather than the exercise of formal authority through institutional structures. It recognizes “the process through which public and private actions and resources are coordinated and given a common meaning and direction.”10

This concept of governance builds on the insight that there is often a substantial gap between the formulation of policy and its implementa-tion. Policy outcomes are not merely the product of legislative or admin-istrative actions taken by national, provincial, or local governments. Senior levels of government may legislate in any one of a number of areas within their jurisdictional authority, but the implementation of that policy occurs on the ground in a specific geographic locality, where the policy’s effectiveness will be determined. The extent to which it achieves the desired outcome depends on the interaction among gov-ernmental authorities (operating a variety of arm’s-length governmental agencies), private sector firms, and a wide range of industry and other voluntary associations. For instance, the impact of federal and provincial research policies is a product of the responses to the initiatives by private

9 Gerry Stoker, “Governance as Theory: Five Propositions,” International Social Science Journal 50, 155 (1998), p. 17.

10 Guy Peters and Jon Pierre, “Multi-Level Governance and Democracy: A Faustian Bargain?” In Ian Bache and Matthew Flinders, eds., Multi-Level Governance (Oxford, U.K., and New York: Oxford University, 2004), p. 78.


firms, public and private laboratories, post-secondary educational institu-tions, and intermediary associations. What ends up being implemented may even differ radically from what the policy makers originally had in mind. Consequently, the pattern of governance cannot be reduced to the actions of any one actor but results from the combined interaction of a wide range of public and sector organizations.11 More effective policy alignment can be achieved if this complex set of governance relations is recognized at the outset and the perceptions of the relevant groups of actors are taken into account in both the formulation and the imple-mentation of that policy.

A key challenge for governments operating in this mode of governance is to establish the conditions under which a broad cross-section of actors can engage in a consultative and interactive fashion with government authorities across different levels of jurisdiction. Where this works, it may involve the delegation of certain tasks from formal government agencies to accredited business associations or community-based organizations. The latter frequently possess specialized knowledge of important issues and credibility with their members, which can be of invaluable assistance to public sector agencies in improving policy design and implementation. The dispersal of power to a broader range of civic actors creates the opportunity for more meaningful dialogue to take place at the city-region level of governance. That is important, because dialogue or discussion is central to the process by which parties come to reinterpret themselves and their relationship to other relevant actors within the urban economy, and formulate alternative visions of how the economy can develop. The involvement of these multiple actors gives them a greater sense of ownership of the strategies adopted and places greater responsibility for the outcome onto those organizations that will be directly affected.

The adoption of this approach does not imply an abandonment of a central role of the formal or institutional level of government but, rather, a rethinking of that role. In this approach, the various levels of

11 Rhodes, p. 657.

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government work with civic associations and social actors, rather than operating in a traditional command-and-control fashion. Government agencies continue to establish the basic rules governing the operation of the economy, but greater emphasis is placed on the devolution of responsibility to a wide range of associative partners by consulting with them and giving them a voice.12

urban governance in a multi-Level settingUrban governance applies these principles on a local scale. As one

definition puts it, urban governance “refers to the process through which local authorities, in concert with private interests, seek to enhance collective goals.”13 Included in this concept are the mechanisms by which civic associations and social actors participate in decision-making processes in city-regions, and the way in which public and private interests are coordinated. It also involves the formulation of strategies to promote the future development of the urban economy.

There is growing recognition that effective governance mechanisms are a critical factor in supporting high-performing cities. The OECD has devoted considerable attention to studying the relationship between effective governance at the local level and higher economic performance. A recent report notes that:

The analysis of governance issues in relation to [the] drivers of growth suggests that improving local gov-ernance is conducive to economic and employment development and prosperity. . . . Several new forms of governance have emerged over the past years. The main thrust of these developments has been to stimulate co-operation between public, private and civil society

12 David A. Wolfe and Tijs Creutzberg, “Community Participation and Multilevel Governance in Eco-nomic Development Policy.” Panel on the Role of Government. Toronto: Office of the Premier, December 2003.

13 Jon Pierre, “Models of Urban Governance: The Institutional Dimension of Urban Politics,” Urban Affairs Review 34, 3 (1999), p. 374.


actors; to bolster a strategic approach to economic and employment development at local and regional levels; and to take a co-ordinated approach to implementation.14

A related, but unresolved, issue concerns the appropriate scale of urban governance and the relationship between formal administrative structures and the economic boundaries of a city-region. As noted in the Introduction, the natural boundaries of a regional economy are often broader than the jurisdictional boundaries of the various municipalities that comprise the region.15 The Conference Board has noted there is considerable consensus that the administrative structures of city-regions must be sufficiently broad to address region-wide issues that often extend beyond the boundaries of a particular city, including fiscal issues, the coordination of regional transportation needs, land-use plan-ning, the adoption of comprehensive economic development strategies, and provisions for dealing with social disparities. Many municipal policy issues—ranging from providing basic services to ensuring affordable housing and maintaining environmental sustainability—spill over into neighbouring jurisdictions. The existing geographic boundaries of most cities are rarely broad enough to address these issues, particularly those requiring the adoption of economic development strategies.16 However, past efforts to establish administrative structures at the appropriate scale have met with mixed success, as we shall see in the next chapter.

In some instances, the development of more effective governance mechanisms involving a broad range of community-based and non-governmental actors can compensate for the absence of formal govern-mental structures at the appropriate scale. A recent study suggests that

14 Sylvain Giguère, “The Drivers of Growth: Why Governance Matters.” In OECD, Local Economic and Employment Development, Local Governance and the Drivers of Growth (Paris: OECD, 2005), p. 34.

15 OECD, Territorial Reviews: Competitive Cities in the Global Economy (Paris: OECD, 2006).


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emerging forms of inter-municipal cooperation in Europe and Canada provide an effective means of overcoming the existing fragmentation of municipal jurisdictions. To the degree that inter-municipal cooperation is one of several forms of regional coordination, it offers some insights into the factors that contribute to more effective governance. The study offers a framework that analyzes the diversity of approaches to inter-municipal cooperation. It suggests that a combination of regional, structural, institutional, and strategic factors can help explain the emer-gence of cooperation among local governments in the realm of regional economic development. Notably, it emphasizes the contribution of strong regional identities embodied in civic networks and the role of these networks in promoting political cooperation across existing municipal boundaries within a city-region. Regardless of their structural, strategic, or institutional constraints, regions with higher degrees of civic engagement and more interconnected civic networks have greater suc-cess in achieving high degrees of inter-municipal political cooperation.17

A related concept, multi-level governance, speaks to the relationships among governments across different geographic scales and levels of jurisdiction. The concept is derived from the analysis of the complex relationships among the various levels of government within the European Union. Whereas the governance literature focuses on the integration of a broader array of non-governmental actors into governing processes, multi-level governance emphasizes the need for greater cooperation across different levels of government that share overlapping or competing spheres of jurisdictional author-ity across a related set of policy areas. This idea stems from the passage of the Single European Act of 1992, which created a third tier of policy making, the European Union. It introduced the prin-ciple of subsidiarity—the idea that the level of government closest to the population should provide the service in question—and pro-foundly altered the relative powers of both national and regional

17 Cooperation and Capacity: Exploring the Sources and Limits of City-Region Governance Partner-ships [paper]. Presented by Jennifer Nelles at Annual Meeting of the American Political Science Association. Toronto: September 3–6, 2009.


governments in Europe. The core idea of multi-level governance is that the national level no longer monopolizes policy making and must engage in a collaborative decision-making process with other levels of government and relevant actors. In so doing, it inevitably cedes control over some aspects of the policy-making process; decision-making competencies are shared among a range of governmental actors, with no one level exercising a monopoly over another.18

In North America, where federalism is the norm, the notion of multi-level governance underscores the fact that the areas of federal and provincial jurisdiction have long since ceased to be the “water-tight compartments” described in classical theories of federalism. Understanding the interdependent nature of governmental roles and responsibilities, as well as those of social actors outside the formal pol-itical process, is increasingly important to achieving successful policy outcomes. Similarly, the sharing of effective decision making among several levels of government promotes a process of interactive learning—not just within public agencies, but also among firms, industry and community associations, as well as other institutions—which is essen-tial to economic success on an urban scale. However, as Sellers reminds us, interactive learning does not occur in a vacuum. The context for urban governance is strongly influenced by the formal institutional structures of government at the national and sub-national levels, as well as by the prevailing pattern of politics in different countries. Thus, the pattern of urban governance varies across national infrastructures, and the patterns of governance that emerge at the local level need to be analyzed in this context.19 Governance, as it now exists, describes the multi-faceted aspects of social and economic coordination across various formal levels of government, as well as with a range of non-governmental

18 Lisbet Hooghe and Gary Marks, Multi-Level Governance and European Integration (Lanham, Md.: Rowman and Littlefield Publishers, 2001), p. 4.

19 Jeffrey M. Sellers, “The Nation-State and Urban Governance: Toward Multilevel Analysis,” Urban Affairs Review 37, 5 (May 2002), pp. 611–641.

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actors, to achieve a desired set of goals. The governance of city-regions, in particular, must be viewed as part of a larger issue of coordination across multiple geographic scales and jurisdictional levels.20

In summary, a growing literature on the importance of urban gov-ernance identifies several key elements. First, the increasing complexity of a range of policy issues has shifted the focus from government to governance. Developing policy in horizontal, coordinated networks that involve both public actors and civic associations is seen as a more effective way to achieve solutions than using traditional, bureaucratic, and hierarchical approaches. Second, urban governance assumes greater relevance as the effects of proximity on an innovative and learning economy are better understood. City-regions are seen not only as the primary engines of national economic competitiveness and prosperity, but also as the places where public problems are experienced most acutely and, therefore, where innovative governance mechanisms are most needed. The growing appreciation of the value of flexible, asso-ciative forms of governance at the urban level has helped encourage experimentation with different locally based partnerships across a wide range of city-regions in Europe and North America.

governance and social LearningA key to this evolving pattern of governing relationships is the

importance of learning. As Bengt-Åke Lundvall and Björn Johnson point out, the knowledge frontier is moving so rapidly in the current knowledge-based economy that access to, or control over, knowledge assets affords merely a fleeting competitive advantage. The speed of change means that the economic value of knowledge tends to diminish the more widely that knowledge is disseminated. In tandem with this tendency, the tacit forms of knowledge that cannot easily be codified and transmitted electronically increase in value. Hence, it is the ability to acquire knowledge, especially in its tacit form—in other words, the

20 Allen J. Scott, John Agnew, Edward W. Soja, and Michael Storper, “Global City-Regions.” In Allen J. Scott, ed., Global City-Regions: Trends, Theory, Policy (Oxford, U.K., and New York: Oxford University Press, 2001), p. 22.


capacity to learn—that is critical to developing and maintaining innova-tive capacities.21 Learning refers here to the building of new competen-cies and the acquisition of new skills, not just acquiring information. In this sense, “learning and innovation are best understood as the outcome of interaction . . . interactive learning is a socially embedded process.”22 Learning dynamics are central to the innovation process, since these dynamics are essential to the ability of regional and urban economies to sustain their knowledge-based dynamism over the long run.

In recognition of this change, organizations are becoming more adaptive by tapping into the knowledge and capabilities of their mem-bers. The challenge for both the public sector and private organizations is to manage knowledge and intelligence in social ways, through “social learning,” rather than accessing them on an individual basis. “Learning” in this sense is defined as the capacity to improve current performance as a result of experience by redefining the organization’s objectives, and modifying behaviour and structures as a result of new circumstances.23 The idea of social learning assumes that innovation and economic development are interactive processes that rely on establishing supportive social relationships among a range of actors, and communicating insights and knowledge for successful outcomes. Regional economic development processes concern, at their most basic level, socially organized learning processes involving learning by indi-viduals, by firms, and by institutions.

The prerequisite for improving governance mechanisms at the local and regional scale, then, is to establish effective systems for socially organized learning. A number of processes are central to this. In his

21 Bengt-Åke Lundvall and Björn Johnson, “The Learning Economy,” Journal of Industry Studies 1.2 (December 1994), pp. 23–42.

22 Bengt-Åke Lundvall, National Innovation System: Analytical Focusing Device and Policy Learn-ing Tool, Working Paper R2007:004 (Ostersund, Swe.: Swedish Institute for Growth Policy Studies, 2007), p. 10.

23 Gilles Paquet, “States, Communities and Markets: The Distributed Governance Scenario.” In Thomas J. Courchene, ed., The Evolving Nation-State in a Global Information Era: Policy Challenges (Kingston, Ont.: John Deutsch Institute for the Study of Economic Policy, Queen’s University, 1997), pp. 25–46.

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study of successful cities and communities, Neil Bradford identifies three dynamics that contribute to successful instances of social learning. The first is a civic learning process that results in recognition among local public and private organizations of the importance of equity, diversity, and interdependence, and the need to accommodate these realities in their collaborations. Equally important is the second dynamic, administrative learning, whereby administrators learn new skills for building relationships, seeking consensus, assessing risk, and measuring performance. Such skills help foster a government that is effectively engaged in ensuring balanced representation of social inter-ests, addressing systemic differences in the capacity to participate, con-vening and organizing meetings, establishing protocols for monitoring progress, and maintaining the focus and commitment of social partners. Finally, civic and administrative learning culminate in the third dynamic, policy learning. At this stage, experience gained through working with the various actors involved in the process helps to refocus the policy agenda and policy goals.24

CIvIC CAPItAL And urbAn governAnCe

Research on urban economic development has long been concerned with the factors that contribute to the success of some regions and the failure of others. Among the relevant factors noted has been the character of relationships among actors in a city-region and the actors’ capacity to collaborate in the pursuit of common goals. Empirical studies of urban governance have begun to generate several useful typologies of the variation in governance dynamics across different cities. Perhaps most importantly, they have focused attention on questions of the way the values and objectives of governance participants shape political choices about governance structures. Social actors’ ability to cooper-ate is a critical element that contributes to, or undermines, an urban

24 Neil Bradford, Cities and Communities That Work, p. 11.


economy’s capacity for social learning. A key question concerns the best way to foster more effective cooperation within a wide array of urban settings.

The concept of social capital has been used to explain why some urban regions are more successful in overcoming the obstacles to establishing cooperation than others. It also suggests why some regions continue to be “sticky” in attracting strong concentrations of firms in related activities. The process of globalization has transformed what were previously local advantages into factors of production that firms can easily transfer to a variety of locations around the globe. Firms faced with this increase in factor mobility search for local advantages on which to base their competitive edge. Such advantages must have a high potential value and be difficult to imitate or replicate. Social capital is one such factor. It is defined as the “social relations among agents, resting upon social institutions that allow for cooperation and communication.”25 It refers to various features of the social organiza-tion of a region, such as the presence of shared norms and values, that facilitate coordination and cooperation among individuals, firms, and sectors for their mutual advantage. As Kevin Morgan has perceptively commented, “it has a value, but it has no price.” Social capital is not equally available in all communities; it cannot be purchased or trans-ferred; and it is difficult to imitate or replicate.

An important distinction is made between the business realm and the civic realm of social capital. Business relationships include technological learning within the firm, and inter-firm trade and knowledge exchanges. Trust, as a component of social capital, is based on the understanding that business partners are competent and can be relied on to perform as expected. Brown and Duguid note that people are remarkably well informed about what other firms are doing in Silicon Valley—who’s good at a particular task, who’s not, who can be relied on, and who can’t. Social capital can help reduce market costs for firms located in densely related networks with high levels of trust by supporting stable and reciprocal

25 Mark Lorenzen, “Social Capital and Localised Learning: Proximity and Place in Technological and Institutional Dynamics,” Urban Studies 44, 4 (April 2007), p. 807.

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relationships among them.26 Civic relationships, on the other hand, include those that exist between people in a community who interact with each other through their involvement with schools, various cul-tural and leisure activities, and civic associations. The civic dimension of social capital is particularly sensitive to geographic distance because many of the activities that strengthen civic relationships are based on the specific catchment area of a civic association or membership in a cultural organization. These relations frequently entail face-to-face meetings that are limited by distance.27

Building on this distinction between the business and the civic dimen-sions of social capital, the concept of civic capital is used to analyze the contribution that more cooperative forms of behaviour make to the success of urban economies. Civic capital focuses on the critical role that dense networks of civic associations play within successful com-munities. It offers a useful lens to examine the mechanisms that facilitate effective coordination at the urban level and to elaborate an approach to effective urban governance. Civic capital is defined as a set of rela-tionships that emerge from interpersonal networks tied to a specific region and that contribute to the development of a sense of community based on a shared identity and on shared goals and expectations. It encompasses the many conditions that support civic engagement among a wide range of individual actors or associations and that con-tribute to the emergence of collaborative forms of governance.28

Civic capital is generated when key actors are able to formulate a common vision of a city-region’s future and make decisions about that future in a collaborative and inclusive manner. Civic capital is rooted in

26 John Seeley Brown and Paul Duguid, “Mysteries of the Region: Knowledge Dynamics in Silicon Valley.” In Chong-Moon Lee, William F. Miller, Marguerite Gong Hancock, and Henry S. Rowen, eds., The Silicon Valley Edge (Stanford, Calif.: Stanford University Press, 2000), p. 36. Also Peter Maskell, “Social Capital, Innovation and Competitiveness.” In Stephen Baron, John Field, and Tom Schuller, eds., Social Capital (Oxford, U.K.: Oxford University Press, 2000), pp. 111–123.

27 lorenzen.

28 David A. Wolfe and Jen Nelles, “The Role of Civic Capital and Civic Associations in Cluster Policies.” In Charlie Karlsson, ed., Handbook of Research on Innovation and Cluster Policies (Cheltenham, U.K.: Edward Elgar Publishers, 2008), pp. 374–392.


a dense network of civic associations within the city-region that supports the community’s efforts to intensify the strength of the connections among them. Finally, civic capital also focuses on the need to nurture new community leaders and provide resources and support for them.29

Civic leaders, or civic entrepreneurs, are critical in articulating a shared vision or orientation for their community, and in intensifying and formalizing collaborative networks within and between commun-ities. Civic entrepreneurs build bridges between localized networks and different communities of actors. They are also effective at broadening the social base of local development coalitions to involve a wider range of actors in strategic planning exercises to formulate new approaches to urban economic development. Recent experience suggests that in order to formulate strategies to improve their prospects for economic development, city-regions require the presence of strong, responsive relationships between the economy and community that give both firms and the community a sustained advantage.30 These relationships are mediated by civic entrepreneurs and by collaborative organizations that bring the respective economic, social, and civic interests together to cooperate on strategies for the community.

The degree of mutual understanding and trust available to build civic capital is facilitated by processes that strengthen the interaction among actors so that understanding and trust become a more institutionalized feature of the local economy. The value of building better understanding and trust is reflected in the role of “talk” in creating the institutions of the learning economy. “Talk refers to communicative interaction, designed not simply to transmit information and relay preferences, but to achieve mutual understanding. In the case of prospective learning, information from other experiences where learning has worked . . .

29 William R. Potapchuk and Jarle P. Crocker Jr., “Exploring the Elements of Civic Capital,” National Civic Review 88, 3 (Fall 1999), p. 176.

30 Douglas Henton, John Melville, and Kimberly Walesh, Grassroots Leaders for a New Economy: How Civic Entrepreneurs Are Building Prosperous Communities (San Francisco: Jossey-Bass Publishers, 1997).

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can be valuable as a stimulus.”31 Talk must be supported by a range of incentives that encourage the parties to maintain their involvement with these institutions. Small, repeated experimental interactions can be effective in getting the parties to work together in a limited fashion and facilitate institutionalized learning. The creation of appropriate forums to support this kind of interaction at the civic level can improve access to critical pieces of knowledge vital to building civic capital and creating the conditions needed to launch successful strategic planning exercises. Knowledge of other civic actors’ strategies and positioning on key issues can reduce uncertainties and foster greater buy-in to a common vision.

The concept of civic capital provides insight into the processes and dynamics that contribute to more successful urban governance. City-regions with higher degrees of civic capital, where the social actors and civic associations have formed an effective basis for cooperation, contain networks of collaborative institutions that contribute to more effective governance. Collaborative institutions, which include local chambers of commerce, industrial associations, and social organizations, embody values and attitudes intrinsic to the city-region and help build civic capital. Based on their experience with launching community-based economic development initiatives, Doug Henton and his colleagues argue that what we have termed civic capital is critical for the success of urban economic development initiatives. Civic capital can be created, they say, by establishing collaborative relationships between various elements of the business and civic communities. “[T]hese alliances, net-works and other relationship-building mechanisms create connections and linkages vital to economic development in a technology-driven world. . . . Relationships matter.”32

31 Michael Storper, “Institutions of the Knowledge-Based Economy.” In Meric S. Gertler and David A. Wolfe, eds., Innovation and Social Learning: Institutional Adaptation in an Era of Technological Change (Houndsmill, U.K.: Palgrave Macmillan, 2002), p. 140.

32 Montana et al., p. 10.


Successful urban economies benefit from the presence of colla-borative institutions, which help communicate the respective needs of different community actors to each other, establish local and regional priorities for economic development, and build effective bridges across different segments of the economic community that might not otherwise be linked. “Collaboration is most effective when it draws new people together, not just the ‘usual suspects.’”33 Collaborative institutions can also provide the critical building blocks for local development coalitions. Above all, they contribute to the articula-tion of a shared vision for the economic community and the local economy and build a consensus among key civic actors and associa-tions around that vision. In doing so, they build civic capital by cre-ating relationships and developing collective institutions that benefit the community, identifying common strengths or mutual needs, and contributing to the development of a common economic agenda. Henton maintains that a good measure of Silicon Valley’s ability to ride the five major technology waves that have shaped its economy since the end of the Second World War has been due to a corresponding set of changes in its style of governance over the same period:

As the Silicon Valley economy was going through transition, so were its governance institutions in a rough parallel to the economic changes. Silicon Valley has shifted from essentially a laissez-faire limited government, market-driven region, first into a more business-driven model, and then into new models of collaboration and networks.34

The question of which social actors and civic associations participate in the process of urban governance is critical to understanding the development strategies they pursue and how those strategies are devised.

33 Potapchuk and Crocker Jr., p. 179.

34 Douglas Henton, “Lessons From Silicon Valley: Governance in a Global City-Region.” In Allen J. Scott, ed., Global City-Regions: Trends, Theory, Policy (Oxford, U.K., and New York: Oxford University Press, 2001), p. 396.

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More inclusive theories of civic capital presume a willingness on the part of social actors and civic associations to reach beyond the narrowly defined interests of their respective constituencies to forge broadly based development coalitions and agree on common strategies for promoting urban economic growth. Yet the danger with this assumption is a tendency to overlook prevailing differences in power resources among the actors and to assume they will overcome those differences for the sake of pursuing an agreed-upon agenda.

. . . substantive power differentials between social actors are often an obstacle to developing a common strategic vision, and the varying capacity of different groups to participate—and to represent the views of their con-stituencies—must be recognized and addressed.35

As Sean Safford has pointed out, what separates communities with strong reservoirs of social and civic capital from those that lack them is not the presence of these networks and leaders, but the social context in which they operate. Different kinds of social networks affect the ability of key leaders to form coalitions within their communities and formulate clear strategies in response to current crises and emerging opportunities. In his comparison of the economic growth trajectories in two “rustbelt” cities—Youngstown, Ohio, and Allentown, Pennsylvania—Safford attributes the relative failure of the first and success of the second to the quality of social networks in each place. “Differences in the under-lying structure of inter-organizational relationships in the two cities shaped the strategic choices and possibilities for mobilization among key organizational actors” and “these differences were the source of the regions’ economic divergence.”36 In this sense, it is not the amount of social or civic capital within a community that matters, but the way in

35 Neil Bradford, Why Cities Matter: Policy Research Perspectives for Canada, CPRN Discussion Paper No. F/23 (Ottawa: Canadian Policy Research Networks, 2002), p. 51.

36 Sean Safford, Why the Garden Club Couldn’t Save Youngstown: Civic Infrastructure and Mobil-ization in Economic Crises, Working Paper (Cambridge, Mass.: MIT Industrial Performance Center, 2004), p. 3.


which the distribution of power and the network of relationships among key actors affects their ability to deploy the civic capital available to them in the pursuit of economic development strategies. The for-mulation of new approaches for the development of urban economies must be analyzed in the context of these networks of relationships among key actors in the city.

strAtegIC PLAnnIng In the urbAn eConomy

Strong reservoirs of civic capital at the local level and better gov-ernance mechanisms are valuable, but far from sufficient, advantages that can help Canada’s cities respond to the cascading shocks buffeting the global economy. Adopting city-regions as the focus for economic development initiatives has a number of consequences for the design and implementation of those strategies. Emphasizing the importance of a territorial rather than a sectoral approach highlights the need for policy coordination across a range of policy domains and jurisdic-tional boundaries. That, in turn, draws attention to the existing nature of governance arrangements and the benefits of bottom-up, more participatory approaches. This approach has recently gained more widespread acceptance in encouraging experimentation with locally driven collaborative mechanisms based on partnerships in a growing number of OECD countries. Empirical research on the best practices and variations in governance arrangements arising from these experi-ments is beginning to emerge.37

However, a number of obstacles lie in the path of the successful implementation of these participatory development strategies. One of the limitations city-regions face when using a governance-based approach is the lack of financial resources to fully support the desired initiatives. This problem can be compounded by the absence of a formal tier of government institutions corresponding to the actual economic

37 OECD, Local Economic and Employment Development, Local Governance and the Drivers of Growth (Paris: OECD, 2005).

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territory of the city-region. Smaller and less dynamic city-regions may also face a greater challenge in accessing provincial and national government resources, or even gaining a significant place on these governments’ policy agendas. An additional danger lies in zero-sum, competitive approaches, associated with traditional development strat-egies that use financial incentives and subsidies to attract investment away from more established centres. Engaging in these kinds of bidding wars can reduce the economic benefit to the larger city-region or the nation as a whole.38

Rather than concentrating on the zero-sum competition for inward investment, the most successful places focus on searching for and gen-erating new economic knowledge that drives innovation and export success.39 As Feldman and Martin note, most jurisdictions pursue a strategy defined by the collective decisions that actors within the juris-diction make over time, whether these decisions are coordinated or not and whether they are articulated or not. Successful jurisdictional strategies are those that contribute to high and rising wages for local workers over time. City-regions offer a relevant scale for consideration because of the benefits of industrial agglomeration that accrue to them. Jurisdictions can benefit from creating an economic base with unique and valuable assets that provides a differentiated advantage for their city-region. However, Feldman and Martin emphasize that “constructing jurisdictional advantage takes the will of all the actors—a consensus vision and vision of uniqueness.”40

Following this line of thinking, one approach to constructing juris-dictional advantage at the level of the city-region takes the form of strategic planning. At the core of this approach is the cultivation within the urban economy of local assets that cannot be transferred across

38 Andrés Rodríguez-Pose, “The Rise of the ‘City-Region’ Concept and Its Development Policy Implications,” European Planning Studies 16, 8 (September 2008), pp. 1037–1039.


40 Feldman and Martin, p. 1245.


geographic space cheaply and easily. In his analysis of the factors that contribute to innovation at the urban level, David Audretsch argues that innovation does not depend on a narrow conception of economic factors alone but must also include a consideration of the broader set of organ-izational and institutional factors discussed above. He maintains that the greater the competition for new ideas within a city, the more conducive the urban environment is to innovative activity. Effective strategic plan-ning exercises are concerned with identifying a city-region’s unique jurisdictional assets that can support the development of its economy.41 They can include its knowledge economy assets, such as workforce skills, knowledge and research development institutions, creativity, advanced telecommunications infrastructure, quality of place, and financial capital; the strength of its collaborative institutions and organ-izations, such as regional development organizations, professional networks, research consortia, and entrepreneurial support networks; and the civic culture, including the values, attitudes, and regional mindset that govern its approach to urban economic development.

The successful adoption of a strategic planning approach requires a new style of policy development at the urban level that involves the kind of socially organized learning processes discussed above. Successful city-regions are able to draw on the presence of networks of key actors and associations to launch exercises that identify and cultivate their assets; undertake collaborative planning processes to implement change; and encourage a regional mindset that fosters growth. These exercises can succeed only if the prevailing structures of urban gov-ernance provide the support they need to be effective. Variations in the capacity of individual city-regions to engage in these processes are linked as much to the “collaboration between agents and their ability to mobilize assets” as to the city-region’s ability to create and diffuse new knowledge.42

41 Audretsch, “The Innovative Advantage of U.S. Cities,” pp. 172–173.

42 Simmie and Wood, “Innovation and Competitive Cities,” p. 149.

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An essential criterion for success is the ability to engage key members of the local community in planning for future economic development. The presence of a committed, creative, and collaborative leadership is the most essential factor in the success of a strategic planning process. However, the evidence from numerous case studies suggests that the sources of that leadership may vary. In some cities, it comes from political institutions or industry associations. In others, it originates with an inspirational figure in a university setting or anchor firm who attracts like-minded individuals in other firms or industry associations. These kinds of leaders mobilize those in the community with an interest in altering its economic trajectory and forge a development coalition.43

The process of developing a strategic plan and formulating related initiatives is an important stepping stone to building a development coalition with a shared sense of how to achieve the projected economic future of the city-region. To create buy-in for the strategy at the com-munity level, the initiatives must respond to real needs identified by the members of the development coalition. Finally, the entire process must be an iterative one. No strategic plan is carved in stone. Economic conditions change, and the challenges and opportunities facing a city-region are constantly evolving. To remain realistic, both the strategic plan and the initiatives that comprise the action plan must be revisited. The process of revisiting the strategy is also an effective device for renewing civic engagement in the overall planning exercise. Even the most successful city-regions, including Silicon Valley, have adopted regular strategic planning processes to help them face the challenge of the continual need to refocus and renew. They have also used these pro-cesses as an effective means of re-engaging strong civic leaders with the regional economy.44

43 Henton, Melville, and Walesh, pp. 31–35.

44 Doug Henton, Kim Walesh, and Liz Brown, Next Silicon Valley: Riding the Waves of Innova-tion [online]. (San Jose, Calif.: Next Silicon Valley Leadership Group of Joint Venture, 2001). www.jointventure.org/PDF/nsvpaper.pdf.


from government to governAnCe: fInAL observAtIons

The preceding analysis outlines the conditions needed for, and the elements of, an emerging paradigm for economic development policy in city-regions that is based on the underlying principles of participatory and multi-level governance. Achieving more effective policy alignment in the pursuit of an economic development strategy requires a greater degree of coordination across various levels of government, at both the jurisdictional and spatial levels, as well as among their respect-ive economic development agencies. It also requires a more engaged involvement on the part of a broader range of societal actors, through the mobilization of civic capital and the recruitment of active “civic entrepreneurship” that contributes to social learning. In a globalizing, knowledge-based economy confronted with increasingly complex policy problems, the search for effective solutions must draw on all relevant actors, not just those employed in formal governmental bureaucracies. Nor does any one level of government have a monopoly on the policy instruments and approaches necessary to create an effective economic development strategy on an urban scale. The coordinated approach to economic development policy requires a more integrated approach to policy planning at the governance level.

The framework set out at the beginning of the chapter identifies three key elements that improve or constrain the ability of individual cities and regions to formulate a strategic management approach to urban eco-nomic development. Within that broad framework, there is great variation across countries, and even within an individual country, in the way this approach is implemented. The next chapter examines the extent to which the elements are present in a cross-section of Canadian cities, and the extent to which these cities have been successful in responding to the current economic challenge and mapping alternative approaches to their economic future. Both the broader conceptual approach outlined in this chapter and the cases presented in the next one provide some insights into how new governance models are evolving at the urban level to chart strategic responses to the current economic restructuring.

Urban Governance and Strategic Planning in

Canadian Cities

5

137Chapter 5

IntroduCtIon

The current recession is accelerating the shift away from the traditional manufacturing industries that have anchored the economy of cities in the industrial corridor of Central

Canada toward knowledge-intensive business services and sectors associated with the creative and cultural economy. While recent upward trends in commodity prices have raised some hopes that smaller cities in the hinterland of the country might ride a renewed “staples” boom to growth and prosperity, the evidence suggests that the effects of this boom will be limited to a few large cities, such as Calgary and Edmonton, and a limited number of “metropolises on the margin,” such as St. John’s. Overall, the path of development in Canada’s urban system points to increased growth in the largest cities combined with greater challenges in adapting to the evolving global economy for our small and medium-sized cities.

The strategic planning approach outlined in the previous chapter suggests that city-regions have some capacity to influence their trajec-tory of economic development. In fact, given the balanced distribution of knowledge assets and research infrastructure across the country, there are relatively few cities that do not have the potential to mobilize those resources in the pursuit of a local development strategy. A key challenge in implementing this approach is the adoption of governance mechanisms to ensure a better coordination of relevant civic interests, and more effective alignment across available programs and policy instruments at all three levels of government. No one level of govern-ment has a monopoly on the policy instruments necessary for an effect-ive economic development strategy. Although the federal and provincial governments control the majority of the policy levers that can influence urban economic development, the full benefit of those policies cannot be realized without coordination at the city-region level. A prerequisite for the success of this approach is the development of new governance mechanisms that enhance the level of civic capital in cities and com-munities. Economic development policies work most effectively when


an inclusive group of social actors and civic associations are brought under the “big tent” and involved directly as active participants in the design and implementation of a strategic planning process.

However, as the analysis in Chapter 4 suggested, the implementa-tion of this approach depends on the state of three critical factors at the urban level:

� the appropriateness of governmental structures at the city-region level to the natural boundaries of the regional economy, and the openness of those structures to participation by a broad range of social actors and civic associations;

� the extent to which the contours of the local development coalition have been expanded to include a variety of actors and associations, laying the foundation for a networked set of collaborative organiza-tions that can contribute to the city-region’s economic development strategy; and

� the degree to which city-regions have adopted a strategic planning approach to urban economic development.

This chapter surveys the levels of civic engagement in a sample of cities across the country and these cities’ success or failure in adopting a more strategic approach to local economic development. While there is no clear blueprint for how such an approach should be implemented, the case studies provide a number of interesting examples of the ways in which Canadian cities are beginning to use a new mode of governance and fashion innovative approaches to local economic development. At the same time, the case studies also contain warnings of the numerous obstacles that lie in the way of successfully implementing this approach.

urbAn governAnCe And CIvIC engAgement In CAnAdA’s LArgest CItIes

A major challenge confronting many city-regions in Canada is the discrepancy between the economic boundaries of the regional economy and the formal administrative boundaries of the individual municipalities

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within it. To recap, the common feature of city-regions, as defined in Chapter 1, is the presence of a core city linked by a number of “flows” to a wider hinterland. The flows can include regular flows of people, infor-mation, or goods, including daily commuting patterns or the circulation of a local newspaper. In Canada, the definition of a census metropolitan area (CMA) used by Statistics Canada provides the closest empirical measure of city-regions across the country, although some city-regions encompass a larger area than the CMA. In most Canadian cases, the effective eco-nomic region dramatically outgrew the existing boundaries of its munici-pal government over the course of the post-war period. As a consequence, each of the three largest cities—Vancouver, Montréal, and Toronto—as well as some medium-sized ones such as Halifax, underwent a restructur-ing of their regional governments in the 1990s. In some instances, as in the cases of Toronto and Montréal, the restructuring involved a wholesale reorganization of the municipal government; in others, such as Vancouver, the changes were more incremental than transformative. In each case, the new structures replaced previous arrangements that were put in place over a period from the mid-1950s to the early 1970s.1 However, it is clear that there is no consensus on the most suitable structure to match the administrative capabilities of municipal governance with the needs of the economic region. The new administrative arrangements involve varying degrees of coordination and jurisdiction on the part of the regional admin-istrative units. The result is that relatively few city-regions in Canada, such as Calgary and Halifax, are now governed by a single authority that cor-responds to the economic contours of the CMA, while most others are hobbled by the presence of multiple, often recalcitrant, local jurisdictions.2

1 Richard Gilbert and Don Stevenson, “Governance and Economic Development: The Regions of Toronto, Vancouver and Montréal.” In OECD, Cities for Citizens: Improving Metropolitan Govern-ance (Paris: OECD, 2001), pp. 199–241.

2 There is a substantial literature on the question of the appropriate governmental structures for city-regions, but this question lies well outside the bounds of the current study. See Andrew Sancton, The Limits of Boundaries: Why City-Regions Cannot Be Self-Governing (Montréal and Kingston: McGill-Queen’s University Press, 2008); and Enid Slack, Managing the Coordination of Service Delivery in Metropolitan Cities: The Role of Metropolitan Governance, Policy Research Working Paper 4317 (Washington, DC.: The World Bank, 2007).


The presence of a formal tier of government that corresponds to the natural economic boundaries of the city-region clearly facilitates efforts to coordinate economic development across the regional econ-omy. However, it is far from a sufficient factor. The development of more effective economic strategies requires the presence of a strong civic leadership capable of building bridges across disparate groups of business and social interests at the urban level, as well as forging local development coalitions that bring the relevant players in the com-munity to the table to engage in the kind of strategic planning process outlined in the previous chapter. The following case studies provide numerous examples of the way these issues are currently playing out across the country—often with decidedly mixed results. Some of the most successful cases described below, such as Waterloo, diverge from the model in key respects. The limitations of this approach should not necessarily be taken as indications of its failure; rather, the case studies in themselves provide some valuable lessons about the challenges that need to be addressed in implementing the approach. In the end, there is no single blueprint for how that can be done. In other words, “one size does not fit all.” However, the approach can be tailored to the par-ticular circumstances of individual city-regions. The case studies should be viewed as part of a socially organized learning process for undertaking this kind of strategic planning.

Civic engagement and multi-Level governance in the greater vancouver region

In the case of Vancouver, the city proper represents just 27 per cent of the population of the total CMA. (See Exhibit 2.) Since 1967, Vancouver has had a second tier of government, formerly known as the Greater Vancouver Regional District (GVRD) but now called Metro Vancouver, which takes in most of the economic region. Its creation was part of a more general process that affected the entire province and was intended to establish joint service or planning arrangements for previously existing municipalities. Over the course of the ensuing years, the responsibil-ities of the GVRD expanded to include regional planning, public hous-ing, water, sewage and drainage, parks and pollution control, collective

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bargaining, and solid waste management. Metro Vancouver now includes 22 municipalities, one electoral area, and a treaty First Nation. It involves four nominally separate entities that share offices, staff, and similar board memberships. In addition to the GVRD, Metro Vancouver includes the Vancouver Water District, the Vancouver Sewage and Drainage District, and the Vancouver Housing Corporation.3

Urban politics in Vancouver are characterized by a local civic culture that blends a high degree of social activism with a fiscally conservative policy approach. The practice of civic politics in Vancouver displays three distinct characteristics: it is diverse, democratic, and open to the involvement of a wide range of socially differentiated groups. The city has a systematic process for open consultations managed at the local, city-wide, and regional levels of government. This practice results in continuous negotiations on a range of policy and program areas. In large measure, it is the source of Vancouver’s unique blend of civic politics and policy. The municipality of Vancouver alone has 22 agen-cies that afford citizens the means to provide some degree of input into decisions made at the municipal level. The city has also adopted a sys-tematic process for reviewing the role of its various advisory bodies, as well as the nature of public involvement with those bodies.

One particular organization is the Vancouver Economic Development Commission, which was created in 1996. The Commission comprises 15 representatives of the business community, plus a variety of ex officio members from city council and Tourism Vancouver, and representa-tives of the federal and provincial industry and economic development departments. Its role is to plan for sustainable development within the municipality, promote marketing initiatives in key sectors, and bench-mark Vancouver against a number of competitor cities around the world. Its task is complicated somewhat by the lack of a clear, coherent voice for the business community in Vancouver. There are also a number of organizations representing various segments of the business

3 Alan F.J. Artibise, Ken Cameron, and Julie H. Selig, “Metropolitan Organization in Greater Van-couver: ‘Do It Yourself’ Regional Government.” In Donald Phares, ed., Metropolitan Governance Without Metropolitan Government (Aldershot, U.K.: Ashgate Publishing, 2004), pp. 195–211.


community, including the Vancouver Board of Trade, the Business Council of B.C., the Urban Development Institute Pacific Region, the Real Estate Board of Greater Vancouver, and the Greater Vancouver Chamber of Commerce. Each of these groups assertively protects its own “turf,” with the result that there is no cohesive development coali-tion in the Vancouver city-region. As noted in Chapter 3, with the decline of the forestry and resource industries, the Vancouver economy has been based on tight clusters of small and medium-sized firms in

exhibit 2The Vancouver CMA, 2006

Source: CMA and municipal boundaries and shorelines from Geography Division, Statistics Canada, 2006 Boundary Files, Catalogue no. 92-160-XWE/F.

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the high-technology and cultural and creative sectors. These clusters draw their strength in part from major investments by the senior levels of government in the region’s research infrastructure, such as its dynamic biomedical complex and fuel cells cluster. There is a feeling among members of the city’s business community that the GVRD does not provide a sufficient level of leadership for economic development, and that the absence of a regional economic development strategy has limited the region’s success in attracting major corporations and new investments. There has been some inward investment by major firms within Vancouver through corporate buyouts, particularly in the area of digital gaming. Corporate investment by foreign firms has largely flowed to the suburbs: Microsoft in Richmond, Electronic Arts in Burnaby, Hollywood studios operating out of North Vancouver. In addition to the active role of the business community, Vancouver has a strong district labour council with several large unions involved in the political process. One observer has summarized Vancouver’s structure this way:

. . . like many North American cities, the power system in Vancouver seems to be split into two large and mixed networks of citizen and business organizations: a rather social democratic group, which may be more inclusive and represents progressive segments of society, particu-larly citizens and unions, and an entrepreneurial and neoliberal group, which emphasizes business organiza-tions but also believes in the social and economic bene-fits of public goods. . . . although competition between the complex networks of groups may be contentious at times, competition for influence is also viewed as funda-mentally positive, hence strengthening the perceptions of strong popular control over the destiny of the city.4

4 Emmanuel Brunet-Jailly, “Vancouver: The Sustainable City,” Journal of Urban Affairs 30, 4 (October 2008), p. 381.


Despite the absence of a cohesive development coalition in Vancouver, the city-region has been the beneficiary of major invest-ments by the provincial and federal governments, beyond the research infrastructure investments mentioned above. Throughout the post-war period, the province consistently invested in major infrastructure pro-jects. Since the mid-1980s, both the province and the federal govern-ment have supported Vancouver’s economic development through joint investments aimed at improving the regional transportation infrastruc-ture and helping finance Expo ’86 and the 2010 Winter Olympics.

The participation of the federal government in Vancouver’s staging of the 2010 Winter Olympics over the past few years signifies the role of multi-level governance in the Vancouver region. The Vancouver Olympic Committee includes representatives of all three levels of gov-ernment, plus the private sector and the Canadian Olympic Committee, and is the institutional embodiment of multi-level governance for this event. The committee is responsible for the overall direction of plan-ning and implementation for the Olympic Games, including construc-tion of the venues needed for the games themselves and much-needed improvements to the transportation infrastructure. Major investments include the new $2-billion Canada rapid transit line and the Olympic village, which represents the final rehabilitation of Granville Island and the Expo lands. The successive investments by the federal government over the last 25 years have made a major contribution to the regional economy, particularly in the realm of transportation infrastructure.5

Another initiative that illustrates the benefits of multi-level gov-ernance, although on a much smaller scale, is the series of Urban Development Agreements between Western Economic Diversification (the federal government’s economic development agency for the Prairie provinces and B.C.), three provincial governments, and the muni-cipalities of Winnipeg, Edmonton, and Vancouver.6 The Vancouver Agreement (VA) emerged through the initiative of a community-based

5 Tom Hutton, Multilevel Governance and Urban Development: A Vancouver Case Study (vancouver: University of British Columbia, 2009).

6 OECD, OECD Territorial Reviews: Canada (Paris: OECD, 2002).

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coalition focused on crime prevention and drug treatment in the Downtown Eastside neighbourhood. The coalition was composed of a cross-section of partners from business organizations, commun-ity agencies, the police, the school board, and local universities. It successfully applied for a $5-million grant from the federal national crime prevention centres to undertake an action research project on the Downtown Eastside. Subsequently, two agencies of the federal government, Western Economic Diversification and Health Canada, became involved in formulating an intergovernmental agreement that could lead to policy action. The VA, reached in March 2000, commit-ted the three levels of government to working with the community to implement a coordinated strategy for the promotion of sustainable community development. The agreement had three priority concerns: improving community health and safety; supporting economic and social development in the neighbourhood; and contributing to capacity building in the local community.

In 2003, the provincial and federal governments each made a $10-million contribution to the project. In total, 12 federal departments were involved in the agreement, along with 19 provincial ministries and agencies, 13 municipal organizations, and an estimated 300 community organizations. The decision to provide direct federal and provincial fund-ing was tied to Vancouver’s bid for the 2010 Olympic Games. Linking the revitalization of the Downtown Eastside to the 2010 Olympics was viewed as a commitment to addressing concerns that the Olympic event would increase disparities in the city by diverting funding from needed social initiatives. According to Bradford, “the VA projects involve note-worthy collaborations not just among the three governments, but also between government and the community sector, and in some cases government and . . . business.”7 However, recent assessments are less sanguine, suggesting that there have been significant disagreements between business interests and those social organizations concerned

7 Rescaling for Regeneration? Canada’s Urban Development Agreements [paper]. Presented by neil Bradford for Annual Meeting of the Canadian Political Science Association. Vancouver, BC.: June 4–6, 2008, p. 18.


with issues of housing affordability and provision. An investigation by The Globe and Mail concluded that in spite of a total of $1.4 billion in public and private spending in the area since the VA was signed, most observers, including some of the original sponsors of the agreement, believe that it has failed to achieve its objectives.8 Despite this mixed evaluation, the VA remains significant in two respects: it linked major infrastructural investments for economic development to a broad range of concerns about social disparities in the city; and it involved the form of multi-level governance that will become increasingly relevant as city-regions try to alter their trajectories of economic development.

the toronto region: strong Cities, weak regionRegional government in the Greater Toronto Area (GTA) stands in

sharp contrast to that in Vancouver. In 1998, the Ontario government rejected the recommendation of the Task Force on the Greater Toronto Area to establish a regional level of government that would correspond more appropriately to the economic boundaries of the GTA. Instead, the government created the current City of Toronto, which covers only a small portion of the rapidly growing regional economy that comprises not only the CMA, but a much greater area as well. The City of Toronto itself accounts for roughly 50 per cent of the population in the CMA, but there are 23 other municipal governments in the CMA, with no overarching administrative unit responsible for the region as a whole. (See Exhibit 3.)

Several key agencies established at the time of amalgamation to deal with region-wide issues have met with mixed success. The Greater Toronto Service Board, established at the time of amalgamation, failed to fulfill its initial mandate, while the Greater Toronto Marketing Alliance (GTMA) has had some achievements but is perceived to lack clout in pursuing its mandate to promote the economic development of the entire region.9 The GTMA was designed to promote the GTA inter-nationally, to help establish international partnerships, and to act as a

8 Robert Matas, “The Money Pit,” The Globe and Mail, February 13, 2009.

9 The following discussion draws on Nelles, Cooperation and Capacity.

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regional portal for site selection information and advice on provincial and Canadian regulations. As a public-private partnership, the alliance is managed by a board of directors composed of an equal number of public and private sector members. However, there are significant indications that buy-in from the members is largely symbolic and not determined

exhibit 3The Toronto city-region and associated CMAs, 2006

The Greater Toronto Area (GTA) comprises the City of Toronto and the Regional Municipalities of Halton, Peel, York, and Durham.Source: CMA and municipal boundaries and shorelines from Geography Division, Statistics Canada, 2006 Boundary Files, Catalogue no. 92-160-XWE/F.


by functional considerations. For instance, some key municipalities in the region, including the cities of Toronto and Mississauga, have opted to mount their own foreign trade missions without the participation of the GTMA. The City of Toronto has also created a new agency, Invest Toronto, whose role overlaps substantially with the GTMA’s mandate. While local actors have criticized the effectiveness of the GTMA as an organization, it is telling that local municipalities have opted to pursue individual goals rather than striving to improve regional governance. A recent regional economic forum formulated a 12-point action plan to stimulate economic recovery in the GTA, but it was greeted by a certain amount of skepticism as to whether it would lead to concrete results.10

In 2007, the landscape of regional transportation coordination changed with the establishment of the Greater Toronto Transportation Authority (GTTA), now known as Metrolinx. This regional transpor-tation agency has also faced major challenges in fulfilling its man-date, set out in provincial legislation, to provide leadership in the coordination, financing, planning, and development of a multi-modal transportation network that conforms to the provincial plan for the development of the economic region. Metrolinx was envisioned as a coordinating body for inter-regional transit issues, but it is also respon-sible for operating the region’s GO Transit commuter rail and bus system. It is significant that the formalization of regional coordination was imposed by provincial dictate; it is doubtful that such a regional partnership would have emerged without provincial intervention. Its governing structure was originally designed to give effective decision-making power to the representatives of local municipalities; however, after a series of public disagreements between local mayors and the board, the provincial government replaced the local politicians with private sector experts. Overall, the economy of the GTA remains ham-pered by the lack of region-wide administrative structures to coordin-ate economic development strategies.

10 Greater Toronto Region Economic Summit, Choosing Our Future: An Action Plan for Eco-nomic Recovery [online]. (Toronto: Greater Toronto Region Economic Summit, 2009). www.gtreconomicsummit.com/pdf/GTR_Summit_20090709_web.pdf.

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Since the 1990s, Toronto has been recognized as the most econom-ically influential city-region in the country. It is Canada’s financial and business services centre, with 28.2 per cent of its labour force work-ing in this sector, and it is home to the head offices of many leading Canadian companies. Although its sheer size affords it significant eco-nomic advantages and is the source of much of its current economic dynamism, it lacks some of the key institutional supports needed for the effective coordination of economic development strategies. Before 2009, the presence of the federal government was much less notice-able in the GTA than in other parts of the country. That was due in part to the absence of a federal regional development agency, which made it difficult to implement multi-level governance approaches in the Toronto city-region. With the recent establishment of the Economic Development Agency for Southern Ontario (FedDev Ontario), this deficiency has been remedied, but it is too early to determine what role it will play at the level of the city-region. The sheer geographic scale of the region and the physical barriers created by commuting times alone make it difficult to bring key actors and civic associations together on a region-wide basis. Until relatively recently, both the City of Toronto and the broader city-region lacked strong, integrated civic leadership that could forge a unified local development coalition. The business, social, and environmental communities are relatively well-organized and there is a wide array of organizations representing their respective interests at the municipal, rather than the city-region, level, but prior to the early 2000s, there were few instances of the social and civic leader-ship uniting around an agreed-upon set of goals.

Some of the shortcomings in the Toronto region associated with the lack of committed civic leadership have been overcome with the formation of the Toronto City Summit Alliance. The original City Summit was a one-day event organized in June 2002 on the initiative of the mayor of Toronto and with strong participation from a number of community organizations, including the United Way and the Canadian Urban Institute. At the conclusion of the summit, a group of 40 local leaders from the private, labour, voluntary, and public sectors decided to create the Toronto City Summit Alliance (TCSA). The TCSA set up


a number of working groups to analyze the economic and social chal-lenges confronting the greater Toronto region and devise a strategy for addressing those challenges.

The plan, released in April 2003, set out a wide-ranging agenda for change in a number of areas, including physical infrastructure, tour-ism, research infrastructure, education and training, immigration, and social services. While the name of the alliance suggests its mandate was restricted to the city, many of the initiatives identified in the plan were targeted at the city-region level. The release of the report was followed up with a second summit held in June 2003 and the commit-ment to proceed on a number of key initiatives, including the creation of the Toronto Region Research Alliance (TTRA) and the Toronto Region Immigrant Employment Council (TRIEC).11 However, some of these initiatives, such as the TRRA, continue to struggle with the inherent challenge of overcoming the competition for both public and private research investments among different parts of the region. What is unique about the Toronto City Summit Alliance is that the leader-ship has come almost entirely from the private and voluntary sector—including true “civic entrepreneurs,” such as David Pecaut—and its agenda has included a wide range of economic (TRRA), social (TRIEC and the Strong Neighbourhoods Task Force), and cultural (Luminato) initiatives, undertaken using many of the elements of the strategic plan-ning approach.

Both the City of Toronto and the broader city-region are home to a dense network of educational and research institutions, with particu-lar strength in medical and biomedical research, as well as a number of traditional engineering fields and computer science. The potential contribution of the research infrastructure has been enhanced by fed-eral and provincial investments in new initiatives such as the MaRS Discovery District and the Ontario Commercialization Network, as well as through existing research programs, such as the Centres of Excellence and the Canada Foundation for Innovation.

11 Toronto City Summit Alliance, Enough Talk: An Action Plan for the Toronto Region (Toronto: Toronto City Summit Alliance, 2003).

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The City of Toronto has undertaken several initiatives over the past decade aimed at formulating a strategic planning approach to its eco-nomic development. However, both economic planning exercises under-taken by the city have displayed more of the form of strategic planning than the actual substance. In the first instance, an initial study was undertaken by a U.S. consulting firm in partnership with local consult-ants and under the direction of the city’s economic development and planning offices.12 Although the study fed directly into the formation of the Toronto Economic Development Strategy, with a strong focus on cluster development, its implementation was hampered by a lack of sus-tained funding, as well as an uneven degree of community engagement. In part, that reflected the absence of a cohesive leadership committed to the economic success of the city-region, and the absence of “civic entre-preneurs” in the local community to assume leadership of the strategic planning process. However, the strategy development process did lead to several subsequent undertakings focused on the promotion of specific strategies to support the growth of key sectors in Toronto’s economy. One initiative was the launch of the Toronto Financial Services Alliance, under the leadership of the city’s economic development office. That involved the participation of 40 key organizations, including the major financial institutions, representatives of all three levels of government, and local post-secondary education institutions.

There have been several subsequent attempts to develop strategic plans for the City of Toronto. In June 2006, the mayor established the Economic Competitiveness Advisory Committee, composed of senior executives from business and academia, elected officials, and a limited number of representatives of labour and the broader social and environ-mental sector of the city. Its mandate was to foster an atmosphere of partnership to promote the economic future of Toronto. The committee

12 ICF Consulting, with the assistance of GHK International, Metropole Consultants, and WEFA Canada, Toronto Competes: An Assessment of Toronto’s Global Competitiveness, City of Toronto Economic Competitiveness Study (Toronto: Economic Development Office, 2000).


worked closely with public officials in the municipal administration to devise the next iteration of Toronto’s economic development strategy, which was released in January 2008 as the Agenda for Prosperity.13

The agenda laid out a vision for Toronto as a global business city that is a hub for environmental innovation, a centre for global education and training, and a location for new and distinctive cultural products that draw on creativity and diversity, as well as technological excel-lence. The report presents a number of areas for priority attention but contains little that departs dramatically from the previous economic development focus of the city. The most significant initiatives that emerged from it were the creation of two new municipal development agencies—Build Toronto and Invest Toronto—but both seem structured more along the lines of traditional approaches to economic develop-ment, rather than the strategic planning approach. Most notable is the relative absence of any overlap between the members of the Economic Competitiveness Advisory Committee and the members of any of the numerous initiatives launched by the Toronto City Summit Alliance. That signifies a lack of coordination among the city’s civic constitu-encies and the absence of a unified development coalition in Toronto, even on a city-wide basis, let alone a regional one.

In sum, while civic governance in the City of Toronto has made significant progress over the past decade through the leadership of the Toronto City Summit Alliance, its impact has been limited by a lack of coordination with elected municipal governments in the city, as well as by an ongoing degree of intra-regional competition. There is no shortage of entrepreneurial civic leadership or organizational pres-ence in the city, but the lack of coordination with the city’s strategic planning efforts signifies an inability to forge a cohesive development coalition at the city level. This weakness is even more apparent with respect to questions of broader governance at the city-region level. Thus, the Toronto city-region remains characterized by the lack of an integrated approach to economic development at the city-region scale.

13 Toronto Mayor’s Economic Competitiveness Advisory Committee, Agenda for Prosperity [online]. (Toronto: City of Toronto, 2008). www.toronto.ca/prosperity.

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The adoption of a strategic planning approach in the Toronto city-region is hampered by the puzzling contradiction of relatively strong civic capital at the local or city level that has not translated into a unified development coalition. This limitation is compounded by the weak links at the level of the city-region, the absence of administrative structures that correspond to the economic boundaries of the region, and the uncertainty surrounding a still-untested federal agency for regional economic development.

Civic engagement, multi-Level governance, and strategic Planning in the montréal region

Montréal is distinctive from the other large cities in the coun-try along each of three dimensions of interest to this discussion. The Montréal region is governed by one of the most complex sets of administrative structures of any city-region in the country. Overall administrative responsibility for the city-region rests with the Communauté métropolitaine de Montréal (CMM). It is divided into five administrative regions that include all of the cities in Montréal plus part of the regions surrounding it in the Lanaudière to the north and Montérégie on the south shore of the river. The City of Montréal includes just over 40 per cent of the region’s total population, but it is just one of 16 cities that comprise the Communauté métropolitaine de Montréal. The city itself is divided into a series of boroughs, each of which has its own Community Economic Development Corporation (CDEC) that allows for the involvement of local actors in issues of local economic and social development. (See Exhibit 4.)

The overall degree of political coordination within the city-region is enhanced by the fact that the mayor of Montréal also serves as the chair of the CMM, a tradition that predates the current administrative arrangement. Relationships between the province and the federal agen-cies in the region are closely interlinked, based on what is referred to as the Quebec model of state intervention and economic development. Although not always in full agreement on every issue, the relevant


agencies at the senior levels of government are usually at the table for most economic development initiatives. As a follow-up to amalgama-tion, the Province of Quebec and the City of Montréal signed a five-year

exhibit 4The Montréal Metropolitan Community and CMA, 2006

The Kahnawake First Nation is not part of the Montréal Metropolitan Community. Demerged municipalities are not shown for Montréal and Longueuil. Sources: CMA and municipal boundaries and shorelines from Geography Division, Statistics Canada, 2006 Boundary Files, Catalogue no. 92-160-XWE/F. Montréal Metropolitan Community boundary is adapted from Communauté métropolitaine de Montréal, “Territoire de la Communauté métropolitaine de Montréal : limites (en vigeur le 1er janvier 2006),” (Feb. 2009).www.cmm.qc.ca/fileadmin/user_upload/carte/territoire.pdf.

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agreement to invest a combined total of $2.5 billion in upgrading infra-structure and supporting cultural, social, and community development to improve the overall competitiveness of the city.14

Montréal has one of the highest levels of civic engagement of any Canadian city, and there is a significant degree of coordination among the key economic, social, and cultural organizations in the city. It has an active and engaged set of civic associations operating from the neighbourhood level to the regional level. This wide network of social actors and civic associations plays its role in the governance of the Montréal region within the context of a complex set of institutional compromises that have been referred to as the Quebec model. The key elements of this model are the ongoing relationships between the public sector trade unions and a range of actors in the social economy, and the partnership between these actors and the government in the provision of public services. The model assumes a distinctive form in Montréal because of the unique structure of organizations at the neigh-bourhood level, which forms the basis for the bottom-up coalition of civic actors.15

At the city level, the key civic actors include the Board of Trade of Metropolitan Montréal, Culture Montréal, Montréal International, and the Chantier sur l’economie sociale. The unique features of the govern-ance structure in Montréal are the incredible diversity and involvement of the cultural community in both the networks of civic associations and the city’s key development coalition. The cultural community is represented on a city-wide basis by Culture Montréal. The leadership of this organization views the arts and cultural community as essen-tial to retaining Montréal’s position as a leading metropolis on both a national and a continental scale. One of the most effective features of the governance structure in Montréal is the key role played by the leaders of these organizations, several of whom would easily qualify as


15 Juan-Luis Klein and Diane-Gabrielle Tremblay, “Social Actors and Their Role in Metropolitan Governance in Montréal: Towards an Inclusive Coalition?,” GeoJournal [online]. (March 11, 2009). www.springer.com/geography/human+geography/journal/10708.


civic entrepreneurs. There is a solid consensus among the major social actors and civic associations on the need for an inclusive form of gov-ernance that integrates all actors into decision-making processes on a region-wide, as well as a city and neighbourhood, level. There is also recognition of the lack of synergy between the existing administrative structures that govern the region and the existing networks of civic associations that create numerous opportunities for active participation. However, the leaders of the associations agree on the virtue of forging strong networks and connections among themselves to compensate, in part, for the challenge of governing such a complex region. The social networks in the city are governed by a relatively high degree of con-sensus that does not preclude conflict but sees the value in overcoming conflict by negotiating effective compromises.16

Another respect in which Montréal differs from the other large city-regions is with respect to formulating a more cohesive economic development strategy built around a common vision of strategic sectors and clusters for the entire regional economy. There is also substantial involvement by the provincial Ministry of Economic Development, Innovation and Trade, as well as the federal government’s regional development agency for the province, Canada Economic Development, which incorporates a significant degree of multi-level governance. Building on the respective roles and responsibilities of the public and private sector partners identified in its economic development plan, the CMM has created one of the most formal processes in the country for selecting and supporting cluster strategies in the key sectors identified.

As noted in Chapter 3, the economic development strategy adopted by the CMM emphasizes the strategic importance of the manufactur-ing and knowledge-intensive sectors and clusters where the region has demonstrated a strong export capability, as well as several associated with the creative-cultural industries. The CMM’s economic develop-ment plan sets out four key strategies: making Montréal a “learning region”; creating a competitiveness strategy focused on developing

16 Ibid.

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industrial clusters and enhancing the dynamics of innovation; making Montréal an attractive region by modernizing municipal infrastruc-ture, consolidating urban and inter-city transportation systems, and improving the quality of life in the region; and, finally, promoting the region on global markets and attracting foreign direct investment to the region.17

The strategy divides the regional economy into four groups of clusters—competitive clusters, visibility clusters, manufacturing clus-ters, and emerging technology clusters. Three out of the four fall pri-marily within the manufacturing sector, while the visibility clusters include a range of activities more often associated with the creative sector of the economy, such as film, culture, tourism, and services. The economic development plan identifies the key partners in its strategy, including the CMM itself, local economic development organizations down to the level of the CDECs, Montréal International, the Board of Trade of Metropolitan Montréal, and the federal and provincial economic development agencies.18 In this respect, Montréal has pro-gressed farther toward the adoption of a strategic planning approach than either of the other two major cities. The strategy is open to the criticism that it focuses too narrowly on the existing sectoral and clus-ter areas of strength, at the possible expense of providing support for new and emerging areas of the economy. Nonetheless, it is well thought out and effectively coordinated, with significant levels of buy-in from all three levels of government in the Montréal region, as well as key civic associations and private sector partners.

regional governance in ottawaOttawa–Gatineau is the fourth largest city-region in Canada, with

a combined population of 1.1 million located in two cities across the Ottawa River from each other. Ottawa, which contains about

17 CMM, Charting Our International Future.

18 Clusterize This! Challenges and Policy Lessons [presentation]. Presented by Yves Charette at 10th Annual Conference of the Innovation Systems Research Network. Montréal, Que.: May 1–2, 2008.


three-quarters of the CMA’s total population, is home to one of the leading high-technology clusters in Canada. The city, which had a staples-based economy in pulp and paper dating back to the 19th cen-tury, missed out on the expansion of industrial manufacturing that char-acterized post-war economic growth in much of the rest of Ontario. However, it has more than made up for it through the dramatic expan-sion of the size and influence of the federal government, and the emergence and rapid growth of its high-technology cluster, based on the western edge of the city-region in Kanata and once anchored by Northern Telecom. The economic shock of the dot-com meltdown after 2000 dealt the regional economy a blow from which it has never fully recovered, as dramatized by the auction of some of Nortel’s key assets in a New York law office to a group of leading international firms in the summer of 2009.

The ability to enhance civic capital at the regional level and foster better governance mechanisms has been critical in helping Ottawa respond to the cascading shocks currently buffeting the global economy. The rise of the high-technology sector in Ottawa’s econ-omy has clearly been influenced by the location of a disproportion-ate number of federal government research facilities in the region. Despite its endowment of an exceptional research infrastructure that includes two strong research universities, as well as one of the mostly highly regarded civic associations in the country, the city’s ability to weather the current shock to its concentration of high-technology firms will test its capacity for civic engagement and the strategic coordination of the regional economy.

Since the 1980s, Ottawa has been characterized by a higher degree of civic governance than exists in most other urban centres in the country. The relative success in building this form of governance has been noted by other cities, such as Waterloo, and there have been some efforts to reproduce elements of the model. The distinguishing feature of the Ottawa case is the strength of its local “institutions of collaboration” and the unusual degree to which they are integrated with the formal institutional structure of the regional municipality. The Ottawa Centre for Research and Innovation (OCRI) is a not-for-profit

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organization originally set up in 1983 by partners from industry, the regional municipality, the local post-secondary institutions, and fed-eral laboratories. Since its founding, it has served as the organizational focus for Ottawa’s high-tech community. OCRI has had a charismatic series of leaders, several of whom have played the role of local civic entrepreneurs. OCRI’s role expanded significantly in 2001 when it merged with the Ottawa Economic Development Corporation, effect-ively assuming major responsibility for economic development in the city-region. As the overarching civic association concerned with regional economic development, OCRI serves as the basis for the local development coalition in Ottawa, although other organizations have been established to lead local planning exercises.

OCRI currently has 625 members and a budget of approximately $8 million, of which 20 per cent is funded by the City of Ottawa, with the remainder coming from a variety of sources, including municipal, federal, and provincial governments; membership fees; professional development programs; and private sector contributions. OCRI delivers a wide range of services to the local economy and sponsors a host of networking events through its partnership with the City of Ottawa. It is also involved in a dense network of partnerships with many of the locally based federal and provincial research and technology organiza-tions, including national research laboratories and provincially funded research networks, aimed at strengthening the region’s innovation capabilities. Virtually all accounts of the rise and growth of the Ottawa high-tech sector agree on the fundamental role that OCRI has played in the process since its inception.19

Since the late 1990s, Ottawa has been at the forefront of efforts to adopt a strategic planning approach to regional economic develop-ment that also incorporates key elements of multi-level governance. It launched an innovative strategic planning exercise in the late 1990s

19 Jocelyn Ghent Mallet, “Silicon Valley North: The Formation of the Ottawa Innovation Cluster.” In Larisa V. Shavinina, ed., Silicon Valley North: A High-Tech Cluster of Innovation and Entre-preneurship (Amsterdam: Elsevier, 2004), pp. 21–31. Also Alan O’Sullivan, “How Technology-Intensive Clusters Are Organized in the Ottawa Region.” In Shavinina, Silicon Valley North, pp. 143–166.


in partnership with the Province of Ontario under the leadership of The Ottawa Partnership (TOP). OCRI was closely involved with the resulting Economic Generators Initiative led by TOP, a group of public and private leaders committed to advancing the local economy. The mandate of TOP was “to provide leadership and advice at a strategic level, on action required to improve and grow Ottawa’s economy.”20 Its membership included the chairs of the region’s business and economic development agencies, and representatives of its municipal council, the higher education sector, and the business community at large.

The TOP leadership undertook a detailed study of the region’s “economic generators” and used the study to prepare a strategic plan for the further development of the key engines driving the local econ-omy. Three hundred individuals participated in the work of the vari-ous groups that formed around the visioning exercise and formulated 33 specific goals to promote seven key clusters identified as growth generators for the regional economy. The economic generators initia-tive identified a series of flagship projects that were designed to cut across the individual clusters and generate positive effects for the regional economy as a whole. Unfortunately, the report was released just as the high-tech sector entered the post-2000 downturn. An update of the report, Innovation Ottawa, was released in January 2003. It set out a strategy for strengthening the links between the region’s research infrastructure—especially its post-secondary education sector and national laboratories—and the local sources of enterprise within existing and emerging clusters, but it failed to generate the same degree of momentum as the first report from TOP.21

That was attributable, in part, to the lack of a comparable degree of civic input into the second report and the lingering effects of the dot-com bust of 2001–02 on the regional economy. The overspecialization

20 ICF Consulting, with the assistance of WEFA Canada and FoTenn Consultants, Choosing a Future: A New Economic Vision for Ottawa (Ottawa: The Ottawa Economic Generators Initiative, 2000), p. i.

21 ICF Consulting, Innovation Ottawa: A Strategy for Sustaining Economic Generators (San Francisco: ICF Consulting, 2003), p. 3.

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of the Ottawa region’s high-technology cluster in telecom-based tech-nologies was revealed as a major weakness in its industrial structure during the dot-com bust. A related aspect of this highly concentrated industrial structure is that Ottawa has one of the highest levels of post-secondary education among the members of its labour force. However, the skills of these workers are highly specialized in the particular field in which they are employed and are not easily transferable to other industrial sectors. In response to the massive restructuring of the lead-ing telecom and photonics firms in the region, attention was focused on the challenge of launching a series of training and labour adjust-ment measures to help find new employment for high-tech workers who had lost their jobs with the region’s leading firms. The initia-tives included O-Vitesse, a joint undertaking of the National Research Council’s Regional Innovation Centre and the region’s two universi-ties to provide skill upgrading for underemployed or unemployed, often foreign, professionals22; the Ottawa Talent Initiative, organized by unemployed high-tech workers with federal and provincial gov-ernment representatives and community organizations; TalentWorks, launched under the auspices of TOP in 2003 and managed by OCRI, a community-based initiative to build Ottawa’s talent pool by providing integrated support to targeted sectors23; and a more recent initiative intended to build linkages among employers, immigrant-serving agen-cies, and other stakeholders to expand employment opportunities for skilled immigrants in Ottawa.24

22 Arvind Chatbar, “An Innovative Model for Skill Development in Silicon Valley North: O-Vitesse.” In Larisa V. Shavinina, ed., Silicon Valley North: A High-Tech Cluster of Innovation and Entrepre-neurship (Amsterdam: Elsevier, 2004), pp. 293–310.

23 Gilles Paquet, Jeffrey Roy, and Chris Wilson, “Ottawa’s TalentWorks—Regional Learning and Collaborative Governance for a Knowledge Age.” In Larisa V. Shavinina, ed., Silicon Valley North: A High-Tech Cluster of Innovation and Entrepreneurship (Amsterdam: Elsevier, 2004), pp. 311–329.

24 Economic Development, Institutions, and Urban Governance in the Region of Ottawa, Canada [paper]. Presented by Caroline Andrew and David Doloreux at 10th Annual Conference of the Innovation Systems Research Network. Montréal, Que.: May 1–2, 2008.


While the number and diversity of these post-2002 training initiatives reflects the breadth of Ottawa’s civic governance mechanisms, most have failed to deliver on their original intent. No one body has emerged as the central focus for training initiatives in the city-region, with the result that there is an excessive fragmentation of the respective networks and a lack of clear champions. The decision to house TalentWorks within OCRI has also been seen as limiting its focus to the high-tech sector. Ottawa–Gatineau continues to rank high on its level of civic engagement, but it has been unable to extend the boundaries of the local development coali-tion to include social and other voluntary organizations concerned with issues of labour force development and social inclusion.25

Despite this weakness, OCRI continues to be the cornerstone of the regional economy and has sustained the intense level of collaborative activities that has been its hallmark since the 1980s. Employment in the Ottawa high-tech sector has remained around 80,000 since the dot-com meltdown, and the shedding of labour by leading ICT firms resulted in a more significant decline in earnings for high-tech workers there than in any other ICT-intensive region in the country.26 It also led to the formation of a large number of small start-ups over the past decade, but it is too early to tell whether any of them will enjoy the rapid rate of growth experienced by an earlier generation of firms. Overall, the Ottawa case provides a striking illustration of the difficulties encoun-tered by a region in overcoming the legacy of an excessive reliance on a relatively small number of industrial sectors, despite the strong sup-port of its governance institutions. While it has many of the prerequi-sites needed to alter the development trajectory of its local economy, to date it has not succeeded in fully deploying these assets to overcome the legacy of its past pattern of economic development.

25 Allison Bramwell, “Networks Are Not Enough: Workforce Development and Urban Governance in Ontario,” Ph.D. dissertation (Toronto: University of Toronto, 2009).

26 Marc Frenette, “Life After High-Tech,” Perspectives (July 2007), pp. 5–13. Statistics Canada Cat. No. 75-001-XIE.

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ProsPeCts And ChALLenges for urbAn governAnCe In mId-sIZed CItIes

As we saw in Chapter 3, Canada’s mid-sized cities are differenti-ated from the largest ones by their relatively greater degree of special-ization in a smaller number of industries, often in the manufacturing sector of the economy. That has allowed them to reap the benefits of the economic advantages derived from collocating with similar firms in related industry segments, the presence of thick labour markets in their areas of specialization, and the benefits derived through know-ledge transfers from local research institutions and through labour mobility between firms. However, it also has exposed them to the chal-lenges of competitive restructuring, especially in the automotive and related industries in the Central Canada industrial corridor. Mid-sized cities, such as Halifax, which serve as a regional metropolis in more distant parts of the country, share certain features of the large cities in terms of their concentration of higher-end financial and producer services, and some have been included in the category of hub cities by The Conference Board of Canada.27 In either case, what is most revealing about these cities is the extent to which they perceive their existing economic base as vulnerable and have launched various efforts to reorient their local economies in terms of the emerging cognitive-cultural economy.

Civic engagement and strategic management in waterloo and London

Waterloo and London are two of the traditional manufacturing centres in the heart of the industrial corridor that has long been a hall-mark of the Canadian urban system. The manufacturing heartland in Ontario enjoyed a privileged economic position during most of the post-war period but has experienced increasing economic volatility since the early 1980s due to restructuring. This restructuring can be linked to

27 Mario Lefebvre and Natalie Brender, Canada’s Hub Cities: A Driving Force of the National Econ-omy, The Canada Project (Ottawa: The Conference Board of Canada, 2006).


broader processes of globalization, but it was accentuated after 1989 by Ontario’s deeper integration into the North American economy fol-lowing the signing of the Free Trade Agreement (FTA) with the U.S. and the deal’s successor, the North American Free Trade Agreement (NAFTA).28 Both cities were buffeted by the economic aftershocks of the dot-com bust in 2001–02 and the global financial crisis of 2008–09. In each case, their ability to manage the economic restructur-ing of the 1980s and 1990s and to weather the economic storms of the current decade has been affected by the breadth and inclusiveness of their local development coalitions and their success in building civic capital through effective governance mechanisms.

Despite the absence of a formal administrative structure with juris-diction over the broader Kitchener–Waterloo region, Waterloo is marked by both relatively strong regional governance and dense civic capital, which has grown and intensified over time. From the founding of the University of Waterloo to the establishment of Canada’s Technology Triangle Inc. (CTT), Communitech, and the recent formation of the Prosperity Council of Waterloo Region, the private sector has played an instrumental role in the economic development of the region.

CTT is the regional marketing association for the region and widely regarded as one of its keystone organizations. Communitech was estab-lished in 1997, though its roots stretch back to the early 1990s to an informal group of 12 CEOs, whose goal was to facilitate the exchange of ideas and improve networking relations between high-technology companies. That led to partnerships with technology companies, ser-vice firms, academic institutions, business support organizations, and government, and a role as one of the most visible “spokes organiza-tions” for regional economic development in the Waterloo region. The association provides a number of services to the technology commun-ity in Waterloo region that are widely subscribed to. Among the more effective of these services are its Peer2Peer networking events that

28 David A. Wolfe and Meric S. Gertler, “Globalization and Economic Restructing in Ontario: From Industrial Heartland to Learning Region,” European Planning Studies 9, 5 (July 2001) pp. 575–592.

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allow firm managers, such as CEOs, CIOs, and CTOs, as well as tech-nical professionals to share information and discuss best practices for their firms. Communitech also plays a broader role in the Waterloo community, through its involvement with many local initiatives.

The high visibility of the regional economy is also linked to the success of some of the leading local firms that anchor the information technology cluster, such as RIM and Open Text, and the leadership role played by the senior executives of those firms. Especially noteworthy has been the level of charitable donations by the co-executives at RIM to fund local research institutions, such as the Perimeter Institute, the Centre for International Governance and Innovation, and the Institute for Quantum Computing at the University of Waterloo, all of which have attracted considerable attention from other members of the local business community.29

The Prosperity Council of Waterloo Region is a relatively new venture in regional governance. It is a private sector led, but broadly inclusive, association geared toward regional foresight and policy exercises. It was initiated as a joint undertaking of the Greater Kitchener–Waterloo Chamber of Commerce, the Cambridge Chamber of Commerce, CTT Inc., and Communitech. Together, they represent more than 3,000 businesses in the Waterloo region. The council’s goals are to build a collaborative regional vision; brand and market the region as a successful area for business, arts, and lifestyle; enhance regional health institutions; strengthen local post-secondary institutions; and create and fund a regional arts and culture development and promo-tion body. A meeting of the council in the fall of 2008 established several strategic research priorities, which will underpin the region’s arts and cultural agenda. This activity is indicative of the willingness of the private sector to support regional cultural initiatives, as well as a public willingness to let civic groups drive the cultural agenda at the regional level. This willingness is symptomatic of the high degree



of inclusiveness that exists within the region’s development coalition and its ability to forge a consensus around the key economic develop-ment issues.

A key feature of Waterloo’s resilience has been the ability of local firms to recognize emerging technology trends and to mobilize key segments of the local business community, civic associations, and the regional research infrastructure in support of new iniatives to capitalize on those trends. Somewhat surprising in this context is the absence of a broad-based strategic planning exercise in the region. Despite this lack, local municipalities and civic associations have supported a number of important measures to expand the region’s post-secondary institutions in the area of digital media. The most recent initiative involves link-ing a new branch of the University of Waterloo in Stratford, Ontario—the Stratford Institute, which has a strong focus on the creation of content for digital media—to the parallel creation of a Digital Media Convergence Centre in downtown Kitchener. The combined initia-tive recently succeeded in attracting federal funding for a new Centre of Excellence, the Corridor for Advancing Canadian Digital Media (CACDM). The undertaking enjoyed strong initial support from the CEOs of key local firms, such as Open Text and Christie Digital. The drive to secure a wide range of private sector support, which was a pre-requisite for federal funding, was led by Communitech. The federal funding of $12 million is being matched by private sector contributions.

The Centre of Excellence aims to create Canada’s largest con-centration of digital media R&D and commercialization expertise, and to develop internationally competitive and sustainable capacity in digital innovation. It will provide common space for the corporate and academic communities to converge and develop new expertise in digital media and mobile technology. What is most innovative about the initiative is the inspiration to marry the well-established capabil-ities of the Waterloo region in digital technologies with the cultural and creative capabilities that the City of Stratford had long been recognized for. It represents a significant effort to shift the regional economy onto the path of becoming a preeminent site in the emerging cognitive-cultural economy.

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These recent initiatives to reposition the region to recover from the current restructuring of its industrial base are an important indication that civic capital in Waterloo is relatively strong, and its mobilization is a key factor in the region’s resilience. The region is characterized by a high degree of civic engagement and well-developed organizational linkages, which have coalesced behind a relatively wide local develop-ment coalition. Those collaborative networks are being deployed effectively to reposition the local knowledge infrastructure in support of future economic growth through initiatives such as the CACDM that draw on available federal and provincial funding to expand the region’s knowledge infrastructure and innovative capabilities.

It is also important to recognize that the Waterloo region deviates in some key respects from the model laid out in Chapter 4. In the absence of overarching strategic planning exercises of the type found in some other cities, the civic leadership in the region has focused its efforts on a more targeted set of initiatives to support and reposition its knowledge infrastructure. Similarly, the political fragmentation of the region into a number of smaller municipalities has been offset by the high level of civic capital outside of the public sector that links the different municipalities into the broader regional economy. Most of the key leaders, groups, and initiatives that have been influential in promoting the regional agenda have emerged from the private and higher education sectors. However, unlike their counterparts in Toronto, they readily acknowledge the high degree of networking and interaction that exists across the public and pri-vate sectors in support of the region’s economic future.

London, Ontario—just a short hour’s drive down the highway from the Waterloo region—faces a different set of challenges. London is a mid-sized city with a population about the same as that of the Kitchener–Waterloo region. Although it has traditional strength in financial services and strong post-secondary educational institutions, it was hard hit by the economic restructuring of the 1980s and 1990s. Despite the presence of a leading research university with a dynamic medical sciences complex, London’s governance structures and development strategy were dominated until recently by a traditional approach that relied on the plentiful supply of serviced industrial land


along the 401 transportation corridor and a readily available labour force to attract conventional manufacturing plants, primarily in the automotive assembly and parts sector. In recent years, this approach has been criticized by different interests within the local business com-munity, which stress the need for an indigenous economic develop-ment strategy, based on leveraging the region’s internal knowledge assets and its potential to grow the cognitive-cultural dimension of the local economy by embracing a “creative city” strategy.

In the process, three distinct development coalitions have emerged in London around these contrasting visions for the city’s future. They differ in their understanding of the key drivers of the city’s growth and in the extent to which they view both the social and the cultural dimensions of the economy as integral to that growth. In this sense, the London case stands in contrast to the Montréal and Waterloo cases described above, where social actors are more effectively integrated into the development coalition and the expansion of the cognitive-cultural dimension of the economy is perceived as essential to the city’s future growth and development. The three groups in London and their respective visions for the city’s future have been described as a classic “growth machine” in the spirit of traditional development strategies, with a continued emphasis on the provision of low-cost land and the potential for urban sprawl to attract more industries to the region; a “knowledge mobilization” coalition, more in the spirit of the research-oriented development strategies, which believes that London can emu-late the success of the Waterloo region by building on its strength in the medical sciences and its existing research infrastructure—such as the Stiller Centre, the Regional Innovation Network, and the London TechAlliance—to grow an indigenous high-technology cluster; and, finally, a “social sustainability” coalition that favours the integration of concerns about the social sustainability of the regional economy more directly into its economic development strategies.30

30 Governing the Local Economy? Challenge and Change in London, Ontario [paper]. Presented by Neil Bradford at 10th Annual Conference of the Innovation Systems Research Network. Montréal, Que.: May 1–2, 2008.

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Each of these coalitions is grounded in an existing set of local insti-tutions and civic organizations, but they are considerably less well inte-grated than the coalitions in some of the other cases examined above. The institutional base for the coalition focused on traditional growth-oriented strategies is the London Economic Development Corporation (LEDC). It was established in 1998 following the convening of a group of 40 business leaders by the London Chamber of Commerce to develop a new economic strategy for the city. The mandate of the LEDC is to strengthen the city’s business environment. Structured as a public-private partnership, it shares its economic development role with the city. The city provides funding for the corporation and has approval over its annual budget. The LEDC has assumed primary responsibility for investment attraction and internal business growth and retention, similar to the role assumed by OCRI in Ottawa after its merger with the city’s economic development corporation. LEDC has strong political support in certain parts of the city council, as well as in major segments of the local business community. Working closely with the city, it continues to pursue the strategy of promoting London as the centre for an automotive cluster in Southwestern Ontario.

The second coalition has its institutional basis in the smaller but significant set of interests involved with the high-tech sector. The key organizational bases for this coalition are the Stiller Centre for Biotechnology Commercialization, the University of Western Ontario Research Park and its technology transfer agency now known as WORLDiscoveries,TM and the TechAlliance. The coalition has also received a certain amount of support from the provincial Ministry of Research and Innovation in the form of funding from the Regional Innovation Network program, aimed at transforming the Stiller Centre and the TechAlliance into a viable commercialization hub for the region’s knowledge-based clusters. The key obstacle standing in the way of this coalition’s vision is London’s underperformance on most indicators relating to innovation and the high-technology sector, as well as persisting skill shortages in key sectors of the local economy.


The third group is more a potential than an actual coalition. Its major limitation rests in the fact that social organizations in London have historically been weakly organized and relatively fragmented. They have been unable to coalesce around a socially sustainable development agenda for the city.

None of the development coalitions is hegemonic, leaving London as a city whose development trajectory remains contested across a number of issues. Unlike other cities, such as Toronto or Waterloo, there is no institutional setting or governance mechanism through which these dif-ferent coalitions can work together to agree on their common interests and build a consensus around the city’s economic future.31

The lack of a cohesive development coalition with a unified vision for the city is reflected in a number of competing strategic planning exercises undertaken in the last several years. The first was a Creative City Task Force established in 2004 with the goal of strengthening the connections among the arts community, culture, and economic development in the city. After a civic engagement process lasting nearly a year, the task force delivered a report to the city with 87 rec-ommendations aimed at ensuring that the city recognizes the integral role of its creative industries in the broader economy. As the Creative City Task Force completed its work, another initiative—London’s Next Economy—was launched by a leading London technology entrepre-neur, aimed at altering the city’s development trajectory. The under-lying vision of this initiative was to transform the London region into a centre for high-technology growth and development on a par with leading Canadian and U.S. cities. The London’s Next Economy report reflects the interests and the vision of the knowledge mobilization coalition described above. While neither of these reports has received sufficient support to qualify them as strategic planning exercises for the city as a whole, they illustrate the extent to which leading elements in the city are attempting to reconceptualize its development strategies and chart a new direction for the city’s future economic growth.32

31 Ibid.

32 Ibid.

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Civic engagement and Creative Planning in halifax, nova scotiaHalifax occupies a unique position within the economy of Atlantic

Canada. Although only a medium-sized city within the Canadian urban system, its central position as the commercial and economic hub for the Atlantic provinces affords it a greater degree of significance than it would have based on its size alone. Halifax serves as an important administra-tive centre for the federal and provincial governments. It is also a leading centre for post-secondary education, with five local universities, draw-ing students from across the country. The city has a complex of research hospitals engaged in biomedical research and is home to major cultural facilities for the region.

In the late 1990s, Halifax benefited from a major reorganization of the administrative structure that governs the economic region, which was part of a province-wide scheme of municipal reorganization. In an effort to improve the administrative efficiency of the Halifax area’s regional government, the Province of Nova Scotia amalgamated four existing municipalities centred on Halifax Harbour into the Halifax Regional Municipality in 1996. With a population of 373,000, it repre-sents almost 40 per cent of the total provincial population.

An important innovation on the governance front was the creation of the Greater Halifax Partnership (GHP), which represents the busi-ness constituency in the city’s central business district. Another notable addition to the institutions of governance was the Halifax Regional Development Agency, which is based in the social community and has a mandate to develop inclusive strategies for more vulnerable residents in the inner and outlying areas of the city.

Halifax, along with the other municipalities in the region, had histor-ically pursued an economic development strategy that concentrated on building industrial parks, and offering serviced land for incoming manu-facturers or big-box retailers. It corresponded closely to the traditional approach followed by many municipalities in the post-war period. The intense competition this strategy generated among neighbouring muni-cipalities opened it to questioning, and a consensus developed in the mid-1990s that the approach was unsustainable. This shift coincided with the creation of the Halifax Regional Municipality and resulted in


the adoption of new approaches to local economic development. The first manifestation of the change occurred in 1996 with the creation of the GHP. Its mandate is to leverage the region’s technological assets in pursuit of new employment opportunities; to brand Halifax as a smart city; and to actively pursue development opportunities in the creative and knowledge-based sectors of the economy. The GHP is a joint public-private venture that is funded 60 per cent by local businesses. Its governance structure involves a cross-section of leaders from the local business community, universities, and all three levels of government, and it is focused on four key sectors of the economy: energy, biotech-nology, information technology, and transportation. The merger of the GHP and the Halifax Regional Development Agency in 2007 enhanced the ability of the regional municipality to adopt a strategic planning approach to urban economic development.33

Over the course of the current decade, the Halifax Regional Municipality has attempted to shift the regional economy onto a development trajectory that deliberately incorporates key aspects of the creative city discourse. At the request of the municipality, the Halifax Chamber of Commerce convened an economic summit in 2004 to formulate recommendations about future directions for the region’s economic growth. Its report focused on the importance of strategic initiatives to enhance the city-region’s quality of place, thereby improv-ing its attractiveness to creative talent. That approach was reflected in the economic development strategy the city-region adopted in 2005, Strategies for Success, which explicitly incorporated notions of part-nership and talent attraction as key elements. The city-region adopted two other plans in 2006: one, based on smart growth planning prin-ciples, led to an implementation strategy to enhance the attractiveness and growth potential of the urban core; the other, a cultural plan for the region, explicitly highlighted the importance of culture as a source

33 Neil Bradford, Cities and Regions That Work: Profiles of Innovation (Ottawa: Canadian Policy Research Networks, 2003), pp. 38–42. Also Jill Grant, Robyn Holme, and Aaron Pettman, “Global Theory and Local Practice in Planning in Halifax: The Seaport Redevelopment,” Planning, Practice & Research 23, 4 (November 2008), pp. 517–532.

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of economic growth for the region. In 2007, a consulting report done for the GHP focused on strategies the region could adopt to attract and retain talented young people. That led to the establishment of Fusion Halifax, an organization devoted to helping young professionals meet and interact. The organization has subsequently become an outspoken advocate for the regional municipality’s new urban design plan for the downtown, which was approved in June 2009. These initiatives illus-trate the growing influence of ideas about creative cities and smart growth on the economic development strategies promoted by the local development coalition in Halifax.34

The influence of these concepts is also reflected in the Seaport Redevelopment Plan formulated by the regional municipality to trans-form underutilized portions of the Halifax Port into a cultural district. The plan was patterned after other redevelopment projects, such as Harbourfront Centre in Toronto and Granville Island in Vancouver. The thinking in the plan reflected key ideas about the role of the cre-ative class in economic growth, presented in a study of Halifax’s rank-ing as a creative city in Canada. A recent analysis of the strategic planning process associated with the seaport redevelopment project found that the concept of the creative city had gained widespread influence among a diverse set of groups within the regional economy, including local development agencies, cultural associations, and key government representatives. However, despite the broadening of the base of local civic governance mechanisms that has occurred in the region, many social and cultural interests remain relatively excluded from the local development coalition and feel their concerns are not fully reflected in the development agenda. Notable in the seaport redevelopment planning process was the relative exclusion of socially disadvantaged groups.

Planning for the seaport redevelopment project involved important compromises among key local interests, including those that wished to maintain the seaport area as a historic working port and those that

34 Jill Grant, Halifax Regional Municipality: Summary Overview and Integrative Paper [working paper]. Prepared for the Innovation Systems Research Network (Halifax, N.S., 2009).


stressed the need to provide studio space for local artists as part of the redevelopment. The planning process reflected the network of inter-related social and professional associations operating both within the local Halifax environment and across the national professional design field. In the end, the process ensured that the redevelopment was under-taken with widespread support within the region, especially from the local cultural community. As such, it represents an instructive example of the effective formation of a relatively broad-based development coalition that was able to adopt and use some of the key concepts and ideas associated with the strategic planning approach to launch a sig-nificant local redevelopment initiative with high public visibility and a substantial level of buy-in from the community.35

CIvIC engAgement And strAtegIC PLAnnIng In CAnAdIAn CItIes: key fIndIngs

Cities across the country face numerous challenges in responding to the rapidly changing global economic environment. Traditional approaches to local economic development are subject to increasing limitations, leading cities to experiment with alternative approaches as they have emerged. Yet, as we saw in Chapter 4, city-regions are sub-ject to numerous constraints in the pursuit of their economic develop-ment goals, not least of which are the lack of jurisdictional authority over many of the key policy levers and the fiscal resources to imple-ment those policies. The irony of this limitation rests on the fact that innovative and dynamic firms are locally based. To succeed, they have to be grounded in a strong, dynamic urban economy capable of tapping into local knowledge assets. Local strategies need to be devised and implemented to improve the capabilities of local firms in the regional economy. A number of obstacles stand in the way of developing these strategies: the lack of symmetry between the existing administrative

35 Grant, Holme, and Pettman.

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structures for city-regions and the effective boundaries of the regional economy; the absence of a cohesive development coalition in the city-region capable of cutting across social and economic divisions; and the failure to adopt a strategic planning approach based on an inclusive and participatory approach to decision making.

The case studies analyzed above indicate that social actors and civic associations in a significant number of Canadian cities recognize the need to forge an alternative approach to urban economic development. While not all of these attempts have met with a full degree of success, they suggest that an important change in how we think about the rela-tionships between innovation, creativity, and urban economic dyna-mism is underway. It would be convenient to rank the relative degree of success or failure achieved in the individual cases described above. However, such an exercise would belie the principal insights that the case studies afford: namely, that there is no single blueprint for increas-ing civic engagement and adopting a strategic approach to local eco-nomic development. Even the cases that appear most successful on the surface, such as Montréal or Waterloo, differ in significant ways from the basic approach outlined in Chapter 4. Some city-regions that were viewed as models for civic engagement a decade ago, such as Ottawa–Gatineau, have encountered adverse economic conditions that even the most strategic of planning exercises have struggled to surmount. Halifax succeeded in a strategic infrastructure redevelopment initiative but has not been able to translate this success into a broad and inclusive development coalition. Vancouver and Toronto have made some major economic gains in the past decade without key elements of the model. Although London has failed to forge a unified development coalition, the competition among rival visions of the city’s economic future is evidence of a considerable degree of civic engagement among different segments of the local community. The main conclusion arising from the cases is that each city-region is unique and none offers a simple model that can be easily replicated in other communities.

Most important, however, is the fact that none of these efforts can succeed without support from the senior levels of government. That support must take several forms. As we have seen, some provincial


governments have been instrumental in beginning to redraw the admin-istrative boundaries of regional jurisdictions to more accurately reflect the underlying realities of the regional economy. In some instances, they have even provided significant fiscal resources to support the new regional level of government. There have also been instructive examples of the three levels of government working together in the true spirit of multi-level governance. In other instances, innovative city-regions have been creative in tapping into existing federal and provincial programs to access the fiscal resources needed to support the growth of new sectors associated with the cognitive-cultural econ-omy. Those cities and regions that are implementing these strategies most effectively also have a strong, engaged civic community, which is increasingly a prerequisite for a dynamic and innovative economy.

Challenges and Choices for Canadian Cities

6

179Chapter 6

IntroduCtIon

The current economic recession and restructuring are accelerating the shift toward a more knowledge-based or cognitive-cultural economy. This shift poses a set of challenges and creates new

opportunities for city-regions in Canada, but those challenges and opportunities are distributed unevenly across the country. Canada’s largest city-regions have demonstrated more resilience in adapting to this shift because of their diverse economic base, while many of the medium-sized cities in the industrial heartland of the country have borne the brunt of the restructuring more directly. City-regions whose economy is tied more closely to the resource base have experienced a different set of problems but are clearly banking on a return to pros-perity as the demand for their exports picks up. The greatest danger is that a resumption of global demand for our commodity exports will lull us into a false sense of security about our economic future. If Canada fails to build the collective skills and innovative capabilities that a more innovative economy requires, we will consign ourselves and future generations to a steadily falling standard of living, as has recently been argued by a number of observers. As the previous chapters have documented, city-regions are critical sites for innovation and creativity, because the spatial proximity between economic actors in related and diverse economic sectors facilitates the transfer of knowledge among key economic actors that underpins innovation. Cities must, of necessity, be at the centre of any policy response to influence the future direction of Canada’s economic development: an innovation agenda is, by default, an urban agenda.

However, regions and cities cannot just alter their trajectory of eco-nomic development by fiat or an act of political will. Their pattern of development is strongly influenced by the industrial structure of their existing economy, as well as by the broader set of institutions that have supported those sectors. Those sectors in which the urban economy has historically been specialized will constrain its future ability to create opportunities for new sectors to emerge. The basis on which those sectors can emerge will be influenced, in turn, by the capacity of firms and


institutions within the city-region to develop and exploit both new sources of knowledge and their existing knowledge infrastructure, as well as the talents and skills of the urban workforce. The more inclusive the basis on which they do so, the broader the potential set of skills and ideas that firms in the city can draw on. However, in the end, the past will strongly affect the range of possibilities that lie open in the future.

IndustrIAL struCture And eConomIC growth In CIty-regIons

To formulate a strategic response to the challenges it faces, an individual city-region must start by understanding the underlying structure of the urban economy, and the relevant skills and knowledge assets that the city can build on. The case studies of innovation and creativity presented in this monograph are intended to contribute to that understanding. Urban economies change in path-dependent ways that are shaped and constrained by past decisions. The concept of path dependence is used to explain why certain technologies prevail in the competitive setting of the marketplace, although they may not always be technologically superior. The evolutionary approach argues that economic systems change over time, but in ways that are shaped and constrained by past decisions, random events, and accidents of history. As a result of past choices and events, certain possibilities are easier to pursue in the present than others. When applied to urban economies, the evolutionary approach suggests that their trajectory of development is rooted in a series of economic, social, and political factors that influence their development over time.

The challenge is to reconcile the significance of random or chance events in endowing a region with its specific industrial structure and institutional capabilities, and the role of political leadership in fashioning subsequent changes in its institutional structures and development strat-egies. The presence or absence of key institutional assets in the local environment may affect a city-region’s innovative capacity and its ability to respond to external shocks—in other words, its resilience. As cities

181Chapter 6

are buffeted by external shocks, ranging from macroeconomic factors to technological and environmental changes, their response is shaped by a combination of the existing structure of their economies; by the under-lying institutional makeup of the urban region, particularly the capacity to develop and exploit new forms of knowledge; and, critically, by the strategic choices made by civic leaders in response to those shocks.

The key insight derived from the evolutionary approach is the under-standing of how random events and the locational decisions of a small number of firms can initiate new developmental paths or growth trajector-ies for specific city-regions. Much work has been devoted to explaining the emergence and growth of dynamic regions based on new technolo-gies, as well as to outlining the challenge that older, industrial regions face in breaking free of their locked-in paths of development to capitalize on new technological and industrial trajectories. However, considerably less attention has been focused on the interplay between city size, the relative degree of specialization or diversity in an urban economy, and path-dependent sequences of development. The debate about special-ization versus diversity sheds some light on this question. As we saw in chapters 2 and 3, agglomeration economies play out differently at various stages in the development of an industry, while differences in city size affect the way in which knowledge is created and diffused. Firms often develop new products in the diversified, creative environ-ment found in larger urban centres, but as the technology and industry life cycles mature, there is a strong incentive to relocate the firm to a city more specialized in the mass production phase of the industry, in order to exploit urban cost advantages. While larger cities are more diversified and knowledge intensive, with a wider array of industrial sectors, medium-sized and small cities tend to have a narrower range of specializations.

Equally relevant is the state of the city-region’s industrial structure and institutional underpinnings. The pattern of economic development in regional economies involves the process by which new paths are created and existing institutional ensembles begin to break down and are reconfigured. Central to this question is how adaptable these institutional ensembles are to changes in the principal industries and


technologies at the core of the city-region’s industrial structure. New path ways for urban economic growth can emerge through the indigenous creation of new products or processes; through the development of new areas of competence or specialization in the context of a diverse urban economy; through the progression along a value chain to higher value-added activities for existing industries; and through the relocation of existing firms and industries into an existing urban economy. However, these emerging pathways are strongly influenced by the existing mix of knowledge assets and labour force skills within the local economy. The key issue is how firms, industries, and institutions in a particular city-region recombine their existing knowledge base and localized capabilities to generate new, commercially valuable sources of knowledge. “New paths do not emerge in a vacuum, but always in the contexts of existing structures and paths of technology, industry and institutional arrangements.”1

This monograph has examined this issue by exploring three dimen-sions of the way in which innovation and creativity contribute to the eco-nomic dynamism of city-regions: the nature of the innovation process in city-regions; the growing importance of talent attraction and retention to urban economic development; and the contribution of more inclusive processes of civic engagement and strategic planning at the urban level. It has shown how the intersection between the path-dependent trajectories of urban development, the prevailing governance structures in city-regions, and the strategic choices made by developmental coalitions to chart a new economic path affect city-regions’ capacity to respond to the process of rapid economic and technological change. Among the important factors are the ability of regional and local governments to build on specialized regional assets, including public and private research infrastructure, as well as unique concentrations of occupational and labour market skills; the presence or absence of civic capital at the regional and local level; and the ability of regional networks to work within and across associational boundaries to support the formulation and refinement of strategic management approaches in response to external

1 Ron Martin and James Simmie, “Path Dependence and Local Innovation Systems in City-Regions,” Innovation: Management, Policy & Practice 10, 2–3 (2008), pp. 188–189.

183Chapter 6

shocks. Efforts to sustain the economic performance of regions through periods of disruptive change need to first consider the institutional capacity of those regions to manage their transition. The successful adoption of a strategic approach at the regional and urban level requires not just a new category of policy approach, but also a new style of policy development.

As the global economy becomes more tightly integrated and new locations emerge as dynamic sites of innovation in their own right, 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 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 factor includes the synergies between existing technological capabilities, among the skill sets of the labour force, and among the existing social and institutional dynamics of the urban economy. Without these synergies, the poten-tial 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 govern-ance—particularly the presence of strong civic leadership—the ability to forge cohesive development coalitions, and the capacity to undertake and revise focused strategic plans will all influence how these pathways to future economic growth are shaped.

This process will play out differently in different cities across the country. As we have seen throughout the monograph, 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 can be recombined to generate innovations, new products, and new industries, although the pattern will vary across the individual cities. Similarly, their high degree of concentration in knowledge-intensive business services and in the creative and cultural industries—including fashion, design, and advertising—provides a solid grounding for the emergence of the cognitive-cultural economy.


Vancouver is increasingly positioned as a gateway to the broader economy of the Pacific Rim and has much in common with other city-regions along the west coast of North America. The industrial base of the city-region will likely continue its transition away from its trad-itional role as a metropole for the staples industries toward an econ-omy strong in digital media and related cultural industries, as well as a number of emerging research-intensive areas, such as fuel cells, bio-medical research, and wireless technologies.

The recent global recession has accentuated the vulnerability of Southern Ontario’s industrial base in automotive manufacturing, while underlining Toronto’s strength and stability as a global financial centre and a dense network of creative and cultural industries. Business and civic leaders, including the Toronto Financial Services Alliance, are working on strategies to build on and enhance the city-region’s competi-tive advantages.2 The recent Greater Toronto Region Economic Summit signifies the beginnings of a broader awareness of the importance of the regional economy.

Montréal continues to benefit from its current strengths in advanced manufacturing industries, as well as a wide range of sectors associated with the creative and cultural economy.

All three cities will benefit from their selection as the primary location for immigration, and their increasing concentration of highly educated and creative talent. As a result, the disparities between Canada’s largest cities and its medium-sized and smaller ones will continue to grow.

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 special-ization and local research infrastructure afford them a strong basis for future economic growth. Some of the most innovative of these cities are moving beyond their traditional areas of specializations to develop new areas of competence at the intersection of a number of related sources of local strength. Yet their respective trajectories of development will differ

2 Philip Preville, “The Good News About the Bad Times,” Toronto Life, February 2009.

185Chapter 6

significantly. The development of new knowledge-intensive services in Calgary from prior areas of expertise in the oil and gas industry is a good example of that, while the Waterloo region’s latest initiative to meld its strength in digital media with the artistic and theatrical strengths of the Stratford Institute is another such example. Halifax is building on its role as a regional metropole for Atlantic Canada, as well as the depth of its research-intensive institutions and its growing cultural dimension. None of these cases provides a ready blueprint for other city-regions in the country, however. The challenge for individual city-regions is to determine the best way to use their existing strengths to move into these new knowledge areas.

urbAn eConomIC trAnsformAtIon through CIvIC engAgement

While some of Canada’s larger city-regions enjoy inherent strengths that are helping them weather the current recession and reposition their economies for future growth, their success in so doing will depend on how well they mobilize their existing assets in aid of a strategic plan to sustain their development. Applying a socially organized learning approach to questions of urban and regional development requires a more integrated understanding of policy at the governance level—a level that involves civic actors in decision-making processes and integrates policy across existing programs, as well as levels of government. The ability to create effective linkages among relevant institutions and actors at the city-region level to forge a cohesive development coalition is a key factor in the development of effective policy and a prerequisite for regional resilience. However, recognizing the importance of collabora-tion and coordination is only part of the challenge: better coordination also requires an understanding of the conditions that contribute to its emergence and development.

Much depends on the ability of cities and regions to develop the organizational capacity to formulate and implement new development strategies. The critical task is to determine the most effective means to


alter the conditions that influence the growth trajectory of a regional or local economy. Successful regions are those able to engage in strategic planning exercises and undertake collaborative processes to plan and implement change. These circumstances place new demands on civic leaders at the urban level and their ability to forge cohesive develop-mental coalitions. The extent to which they include a wide range of social and cultural concerns, especially those related to the critical issue of labour force training and adjustment, will expand the basis of support for the coalition. The emphasis on the role of local leaders in building civic capital and creating collaborative institutions underlines the importance of local action in overcoming the problems of lock-in and charting new developmental pathways for urban regions. However, even the most dynamic regions with the highest levels of civic capital must work within the constraints of their existing mix of industries and technological capabilities.

As we saw in Chapter 5, examples abound of city-regions across the country that have undertaken efforts to change their path of economic development by improving their institutional assets—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 economy is based, the research infrastructure that provides the source of new ideas and highly qualified labour to local firms, and the degree of civic capital that provides support for collective initiatives in the city-region, but they all demonstrate a strong capacity for social learning. However, the way in which this process occurs in different city-regions across the country varies according to the dynamism of the local civic leadership in place, the relative cohesiveness of the local development coalition, and the focus and coherence of the strategic plans that have been developed. There is no single blueprint for how this process should be carried out in individual city-regions. In other words, “one size does not fit all.”

And not all strategic planning exercises are guaranteed to succeed. Ottawa, which has been marked by a high level of civic engagement for the past two decades, has undertaken two strategic planning exercises during the current decade that failed to achieve many of their objectives.

187Chapter 6

While the city-region retains great strength in terms of its extensive research infrastructure, the high levels of skill and talent in its work-force, and the continuing dense networks of civic governance, its abil-ity to return to its pre-2000 growth trajectory will depend on how well it mobilizes these assets in pursuit of that goal. The Waterloo region is characterized by equally high levels of civic governance, but it has carried out its strategic planning efforts in a more targeted and focused way. It has been singularly effective in deepening and extending its already impressive strengths by drawing on federal and provincial pro-grams to get support for new research institutes, a new research park, and the latest Centre of Excellence to deepen and extend its research strengths. While its more traditional manufacturing sectors have been weakened by the current recession, its information technology firms have coped in better fashion and the new initiatives hold out promise as the basis for future growth.

In the end, however, cities in Canada simply lack the fiscal resources to effect the needed transition on their own, no matter how deep their reserves of civic capital, how dynamic their civic leadership, or how well organized and inclusive their developmental coalitions.3 To succeed in these efforts, Canadian city-regions must be able to draw on the fiscal resources of the senior levels of government and put them to work in aid of the strategies they develop. As we saw in Chapter 4, the inter-dependent nature of governmental roles and responsibilities, as well as those of social actors outside the formal political process, are increas-ingly important to achieving successful policy outcomes. Similarly, the sharing of effective decision making among several levels of govern-ment promotes a process of interactive learning—not just within public agencies, but also among firms, industry, community associations, and other institutions—that is essential to economic success at the urban level. However, these processes will not help city-regions develop and

3 Brender, Cappe, and Golden.


implement new growth strategies if the policies of the federal and prov-incial governments are not aligned more effectively with the strategies and goals of city-regions across the country.

The failure of senior levels of government and city-regions to align their respective approaches to innovation and economic development can best be described as a series of missed opportunities. The first arises from the failure to align federal and provincial investments in research initiatives, such as Centres of Excellence, with the local economic development strategies of the city-regions in which these initiatives are located. While decisions about the location of these programs are rightly made on the basis of academic and research excellence, many of the investments in Canada are allocated according to the strategic plans formulated by universities and other research institutions. The failure to align the strategic plans of the research institutions with the broader economic development goals and plans of their city-regions is a clear illustration of a missed opportunity. A second missed opportunity arises from the lack of integration of investments in science and industrial parks with sectoral initiatives at the city-region level, such as cluster programs, which can help ensure that the firms based in these parks are linked to sectoral initiatives underway in the city-region. The third missed opportunity arises from the lack of coordination between programs supporting regional economic development and programs promoting science and technology within the ambit of the national system of innovation.4 A coordinated approach to urban economic development requires a more integrated approach to policy planning at the govern-ance level that crosses existing program boundaries, as well as levels of government, and leads to a more effective degree of policy alignment.

Effective policy alignment is necessary for the success of urban economic development strategies. Strategies at the city-region level cannot rely on the adoption of new spending programs by senior levels of government in the context of the current budgetary situation at both the federal and provincial level. Most initiatives developed through

4 OECD, Competitive Regional Clusters: National Policy Approaches, OECD Reviews of Regional Innovation (Paris: OECD, 2007), p. 122.

189Chapter 6

strategic planning exercises at the city-region level can succeed only by tapping into existing government programs and budgetary envelopes to gain access to the needed resources, and by aligning their objectives at the local level with the stated objectives of existing federal and prov-incial programs. There is no simple or comprehensive recipe for doing so, but the results of the case studies provide concrete examples of how this can be achieved. As we saw in Chapter 5, there are a number of examples of successful efforts across the country—the Urban Development Agreements in Western Canada, including the Vancouver Agreement; the substantial level of financial support provided to the Communauté métropolitaine de Montréal as part of its reorganization in the early 2000s; the success of the business-led strategy in the Waterloo region in drawing on existing federal programs to provide the core funding for the new Corridor for Advancing Canadian Digital Media; and the support of senior levels of government for the seaport redevelopment project in Halifax.

As noteworthy as these recent initiatives are, they do not represent a broad enough or deep enough pattern of change to indicate that Canadian cities are viewed as central actors in the country’s innovation strategies. Nor do they signify that policy development is strategically aligned across all three levels of government to ensure that Canada meets the challenges that lie ahead. Recent developments in federal and provincial policy have paid far greater attention to the economy’s existing strengths in resource and commodity industries or have focused the government’s fiscal efforts on shoring up existing areas of manu-facturing strength, such as the automotive industry. While these efforts are undeniably needed, the harsh reality is that these manufacturing industries are unlikely to play the same role in the economy as they did before the recession, and the commodities-based, staples-producing industries are likely to face increasing economic challenges as environ-mental limits on their future development are recognized and constraints enforced on their future growth. 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 them are closely linked to upgraded manufacturing activities, others are more


closely tied to an expanding range of economic activities in the cultural, creative, and design sectors of the economy. The key question is how to ensure that government support for innovation and economic development is aligned more closely with these emerging trends.

ConCLusIon

This monograph has explored the way in which innovation and creativity are affecting the economic development of Canada’s cities. The challenge of shifting our urban economies to a more innova-tive growth path has been accentuated by the major external economic shocks since 2000. The degree of resilience exhibited by individual city-regions in responding to these shocks is a product of their under-lying industrial structures, which have been shaped by a path-dependent process of economic development, as well as by the strategic responses framed by key civic leaders working through local civic institutions. No city-regions are completely captive to the past trajectories of eco-nomic development, but neither do they get to wipe the slate clean and launch an entirely new strategy for future development. The most effective strategies for growth rely on acquired levels of civic capital and the cohesiveness of local development coalitions to chart new paths forward, but they do not always do so in an equally effective manner. Among the factors that determine their success are the ability to build on specialized regional assets, including public and private research infrastructure, as well as unique concentrations of occupational and labour market skills; the presence or absence of civic capital at the regional and local levels; and the ability of local firms and entrepre-neurs to adjust their business strategies in response to changing eco-nomic circumstances. Path dependence may play a role in determining the outcomes, but that role is always contingent, not pre-determined. It is framed by the choices made by local civic actors, and the extent to which local institutions and associations rally around those choices to support or constrain the achievement of their goals.

From the lectureANNE GOLDEN’S SIRP LECTURE COMMENTS

These remarks were delivered at the Scholar-in-Residence lecture on May 19, 2009, in response to a presentation by David A. Wolfe

of his research for this monograph.

193From the lecture: Anne Golden’s SIrP lecture Comments

Note: Anne Golden presented on behalf of panelist Judith Wolfson, who was unable to attend the lecture. Ms. Wolfson is the University of Toronto’s Vice-President of University Relations. She joined the university in July 2006 after eight years as President and CEO of Interac Association/Acxsys Corporation. She previously served as a lawyer, social worker, and deputy minister for the provincial government.

David’s work really resonates with me because it aligns so much with what I learned about 15 years ago when I was doing the study on the GTA; that is, that the whole dynamic

of innovation depends on proximity—the buzz factor. One of the most important articles I read then was called “Reinventing New York.” Remember, at that particular time, there were a lot of people predicting that because of technology, distance wouldn’t matter. That article tried to set the record straight. So I find the notion that innovation must be grounded locally compelling.

My second point is that this innovation dynamic is quite compli-cated and it’s different in every locale. I remember meeting with a political leader, and spending some time explaining that one-size-fits-all urban policies were not effective. It was a two-hour discussion, and at the end of it, he thanked me profusely for coming. Then he said, “But Anne, you must remember that we cannot do for Toronto what we can’t do for Wawa.”

Third, innovation depends upon local capacity—in terms of authority, in terms of money, and in terms of leadership. And what David stressed is, it’s not just political leadership: it’s leadership from all sectors— many actors. This is very empowering. That’s because the lesson is that if we can get our act together in the various cities, we don’t have to sit back and let events happen to us. Clearly, we are in the middle of a global recession and that’s something we couldn’t have stopped here in Toronto.

But we’re not without power to create our own future, and the engagement of all of us matters. It’s something I have always believed, and I learned early on that you cannot bequeath a sense of community from one generation to another. Nor can you bequeath a vibrant econ-omy from one generation to another. So I think there are lots of very exciting messages in David’s work.


In Judith’s comments—and unfortunately she is unable to make it in person tonight—there are some very interesting counterpoints. Judith makes the point that, while she agrees with David on many of the fun-damentals, not all innovation is geography-based.

Judith points out that the key factors that enable global innova-tion models to thrive are those based on platforms with a significant technology base, and with common connectors and knowledge that allow for innovation across the sector. Judith provides three powerful examples that I would like to cite.

You may not know that Judith was the former CEO of Interac, fol-lowing her previous career in the provincial government. Interac is a good example for our sponsor, CIBC, I would think. And it’s a great example for the rest of us. As Judith says, “I doubt there are many people in this audience who don’t feel grateful at least weekly that we have the Interac system in place.”

But this innovation—now a product and service that is ubiquitous in this country, serving every region—was put together by a consortium of Canada’s financial institutions. They had to cooperate to build the infrastructure and to develop the common platform technology. Judith makes the point that this could not have occurred using simply a city-regional model.

The second example she gives is in the health field—the Structural Genomics Project that brings together scientists from the University of Toronto, Oxford University, and the Karolinska Institute in Sweden. The catalyst for this powerful cluster is the high-performance compu-ting platform in these three institutions—again, a hugely expensive infrastructure.

The Structural Genomics Project does not need to be located in one region or in one centre, and it takes advantage of a global talent pool. The project is headquartered in Toronto, it has facilities in Oxford, and it has facilities in Sweden. As well, it has funding from public sector partners and from private sector partners across three jurisdictions, with multiple teams of researchers working in an open source model.

195From the lecture: Anne Golden’s SIrP lecture Comments

So this is a network that spans the world, and the benefits in advan-cing biopharmaceutical medicine accrue, of course, to industry and to all jurisdictions. So Judith’s point, again, is it couldn’t be built within just a single region.

The final example she gives of a global cluster with a platform technology is the Citizen Lab, headquartered at the U of T’s Munk Centre. The platform technology was developed by a cluster network of researchers from Oxford, Cambridge, Harvard, and the U of T.

It’s a cluster linked by technology, Judith would stress, not geographically-based. So I think she’s given three very interesting examples of the fact that a lot of what’s going to happen to drive innova-tion today must, by definition, be global. In her view, “perhaps the most common theme in all these examples is that certain sectors have both development and ongoing costs that are too high for any one region to invest the resources necessary to create the innovation. Furthermore, the type of innovation and the model for innovation would be at the local, regional, or national level, depending on the sectors.” So it will vary by sector, it will vary by all the different players. “The bottom line is the need to put the right people in the right place with the right resources to answer the big questions.”

I think what Judith is saying is that we’ve had a yin and she wants to present the yang. Her argument is important because it says innovation is not all about local activity. I think David—who has acknowledged the importance of integration—would agree that these global projects need to have cities somewhere and ultimately need to be headquartered somewhere; and I would say, why not here?

From the lectureCARL ZEHR’S SIRP LECTURE COMMENTS

These comments were delivered at the Scholar-in-Residence lecture on May 19, 2009, in response to a presentation by David A. Wolfe


199From the Lecture: Carl Zehr’s SIRP Lecture Comments

In terms of the history of the region of Waterloo [Kitchener–Waterloo, Cambridge, and four rural townships] the characteristics are about 200 years old, and they haven’t changed all that much.

David’s named a few of them. One thing that he didn’t mention was a work ethic that is instilled in people who live in the region, and it’s even in the immigrants who come here who may not have had the same kind of work ethic from their home country.

David mentioned entrepreneurial spirit, innovation, and the adaption to change. I want to add a couple of items in terms of the caring side of the community, and they speak to the quality of life that exists in our community.

In terms of characteristics, there is a generous spirit, and I don’t mean just the giving of money—large sums of money. In some cases—the founders of Research In Motion Ltd. had been very generous—not just locally, but abroad. And it is those individuals, who give signifi-cantly to the community, who want to become and continue to be a part of those organizations to which they are actually contributing. That feeds on itself and they become generators of a new organization.

All of these things clearly are not transferable as a package from one community to another. Hopefully, some people just pick up—just as we’ve picked up—on things from other communities. One of the other points, in terms of quality of life, is that in the City of Kitchener, we have 11 community centres that are very deliberately placed in those communities with a specific need—whether it is recreational, social, or even perhaps political—where we encourage neighborhoods to band together. We provide the facilities so that they can organize their own neighborhood.

As well, within the region of Waterloo, we’ve been one of the leaders in affordable housing, and I think that is part of that support system: the caring part that is carried on directly through the local government. But that has come through support agencies—and we support those agencies, themselves agents of change.


I speak of a multicultural centre. A little-known statistic is that our community ranks either fourth or fifth in this country in terms of immi-gration intake if you take the metro areas of Toronto, Montréal, and Vancouver out of the mix.

So it is significant, and we encourage that diversity. Actually, a new organization called the Waterloo Region Immigrant Employment Network is specifically targeting the professionals who are coming in from outside, so that they can become more integrated into the com-munity. With the growing change in the economy—I’m going to speak about employment in just a moment—we also created something called the Manufacturing Innovation Network, or MIN. This came out of a spinoff of the Centre for International Governance and Innovation. IGLOO is the technology company—a network of manufacturers.

In terms of doing something I would call “daring to be different,” the City of Kitchener undertook an employment land study in 2003. We quickly recognized the change coming in the economy, and we started to do something about it. We created the Economic Development Investment Fund, which was $110 million over and above our regular operating and capital fund. The money was to be raised over a period of ten years. The Economic Development Investment Fund became a very controversial item in the next election. What we said was that we wanted to create an education and knowledge creation cluster that addressed the coming economic change.

David Wolfe has already mentioned a couple of the things that came out of the Fund. For example, the City of Kitchener made contributions of cash and land to Wilfrid Laurier University. We also picked up the School of Social Work—lock, stock, and barrel—for the Waterloo campus, relocating it to an old high school that had been vacant for some 15 years. We dreamed that we would get the School of Pharmacy, and we did.

We dreamed, as well, that before 10 or 15 years were up, there might be a medical school attached to this. It is now under construction as we speak. And there is a second cohort of students in the community, in

201From the Lecture: Carl Zehr’s SIRP Lecture Comments

partnership with McMaster University. There are many other private institutions and education institutions in the community, as well in the core of our cities.

Our intention is for our health sciences campus to become an inte-grated and interdisciplinary training school as much as possible. Some very ground-breaking changes are being made there.

That $30 million the City of Kitchener gave to the health sciences campus has been leveraged to over $130 million—primarily from the private sector—in development that is occurring around the area. Also, we are getting spinoffs from the School of Pharmacy. One of the scientists who is teaching there, has opened up the North American office of the HPR pain research clinic. Not very pleasant, but it’s business.

Reference is also made to the Digital Media Convergence Centre that is in partnership with the University of Waterloo and the City of Stanford. The Centre was given $5.35 million: a total of $10.7 million has been given to both of those communities. Since change is so fast-paced, cities really need to be nimble to take advantage of the oppor-tunities that come along.

I was telling someone just before this meeting started that, for the first time (in history, I believe), there was a group of mayors—about 10 or 12 of us—invited back to 24 Sussex to actually sit around and chat. We literally sat around the dining room table, gathered the chairs ourselves, and had this informal meeting with the prime minister. This took place just before the Paul Martin government failed; it was right after the Speech from the Throne. That get-together, I believe, was very significant. We need to have more of that as we go forward in the rela-tionships with governments.

Professor Wolfe also spoke of the governance issue. While the region of Waterloo is combined with the multiple municipalities I previously mentioned, we are a reasonably successful—perhaps in spite of ourselves, or in spite of the fact that governance tends to be truly regional—city region. I think it’s critical that we not make comparisons within a CMA [census metropolitan area] that could be


self-destructive and counter-productive, while there is a great deal of collaboration and “co-opetition.” John Jung, who is the President of Canada’s Technology Triangle in our area, uses that term—co- opetition—quite a bit.

So in the region of Waterloo, we are so integrated that we work, we play, we live across these artificial municipal boundaries, yet we have seven local governments—and that is perhaps an argument for another day.

I’d like to close with Mahatma Gandhi’s “Seven Blunders of the World”:

Wealth without work, pleasure without conscience, knowledge without character, commerce without mo rality, science without humanity, worship without sacrifice, and politics without principle.

I think that we have the ability and the will to ensure that our 21st century cities do not make any of those same blunders.

From the lectureDAVID PECAUT’S SIRP LECTURE COMMENTS

These comments were delivered at the Scholar-in-Residence lecture on May 19, 2009, in response to a presentation by David A. Wolfe


205From the lecture: David Pecaut’s SIrP lecture Comments

There are four messages from the lecture that really stand out for me. The first is that David’s research clearly indicates that local knowledge and specialization matter. And in a global-

izing world, it’s easy to lose sight of the fact that in this region—the Greater Golden Horseshoe—we have an extraordinary collection of hundreds, if not thousands, of very specific sets of local knowledge and specialization that are really the ground source for innovation of our economic success.

David thankfully drew attention to what I would say is the other big lesson we’ve seen in the last 20 years—which is that diversity matters. And diversity in our economic situation in the Toronto region is actually one of our greatest strengths.

Nortel was one of the five largest employers in the Toronto region 12 years ago, and now Nortel, as a company, has been totally decimated and has lost most of its employees in this region. Any other city in North America—maybe with the exception of New York or Chicago—that had a Nortel, and saw Nortel implode the way it did over the past decade, would have suffered significantly from an economic point of view, and certainly from an innovation point of view. I’d argue that as much as Nortel’s demise has been extremely painful for the Nortel people and many of their suppliers, I think the average person in Toronto hasn’t really even seen it as a personal economic effect.

And that’s testimony to the incredible diversity of the region; not only do we have a large automotive manufacturing sector—although it’s under a lot of stress now—we have one of the largest financial ser-vice sectors in the world, with 20,000 or 30,000 jobs in Toronto alone. We also have a huge food processing centre. Not many people realize that the region within 100 kilometers of Toronto, as an agricultural region, has greater output than all of the Maritimes and Newfoundland put together. On top of that, we have one of the three largest food pro-cessing centres in North America.

We have the science and technology sectors we’ve been talking about, plus business services, which is one of our greatest export sec-tors and one which I get to be a part of in the consulting industry from time to time. So diversity is important. David’s third lesson, I think,


is that the region is the economic unit of analysis here. As the other speakers have said, we do ourselves a huge disservice when we start to talk about municipal boundaries as if those are logical economic units. They are important for the provision of services and infrastructure—but the economic unit is the whole region.

Corporations don’t think in terms of municipal boundaries; they are locating across the region. Even Research In Motion—as important as it is to Kitchener–Waterloo—now has a huge employment centre in Mississauga with thousands of people there now and more being added for the future.

So we are a single economic unit that presents some real challenges for how we actually harness this growth and direct it. Then finally, and perhaps most subtly, we can factor Schumpeterian economics into this, which I think is very important. Schumpeter—for those of you who have read economics and those of you who haven’t—has many claims to fame. But one of my favorites is what he called “creative destruc-tion,” which is the power of capitalism to destroy existing industries and redeploy those resources very aggressively to new growth areas where demand is being generated. We’re seeing incredible creative destruction going on in our economy right now.

What we’re having trouble focusing on is the amazing creative resilience that’s coming out of all corners of the economy. It’s going to lead to the next new wave of growth and things like green and environ-mental industries and many other areas. But David, you gave a wonder-ful nugget example of Electrohome and Christie Digital.

Nokia is a company I had a chance to visit in the mid-1980s when Nokia was one of the main manufacturers of television sets in the world. I remember sitting with Nokia executives who told me “we have to get out of television.” It’s a dead end, they said, the Koreans are making them very cheap now; the Chinese will be making them soon; we can’t innovate in television enough; we’re going to move into something new—mobile phones.

I remember one of my colleagues said to me, “fat chance the Finns are going to make mobile phones.” But, in fact they re-purposed the entire industrial enterprise and were completely out of the colour


television business by the mid-1990s. So it is possible to take enormous creativity and energy and re-purpose it into new businesses. It doesn’t happen very often in the same company; it more often happens when people leave that company and start new companies—even within the same region.

So I think David provided incredible insights. I guess what I’d chal-lenge us to think about then is: What do we take from that in terms of what we might do differently next Monday morning in our jobs—whether we work for economic agencies of the government, or univer-sities or colleges, or in the private sector? I’d like to focus on a few things that jumped out for me.

First, David, I think you’ve given an incredibly important sup-porting argument for why we need to focus investment—public invest-ment, but private as well—on anchor centres of excellence—places where we can really go deep and have global leadership. I think it’s been very exciting to see those emerge in the last couple of decades. And we’ve seen how quickly that properly applied resources can lead to a position of global leadership.

Carl, if I look down the road to Kitchener–Waterloo, Mike Lazaridis said ten years ago—maybe even seven years ago—“I want to create one of the great physics institutes in the world and I also think we should develop the science for the next generation of computing after Moore’s Law runs out.” In both areas, Quantum Computing and the Perimeter Institute, we have gone from a standing start to arguably having one of the five most advanced centres in the world in both fields, which I think is just absolutely incredible.

Some of these opportunities aren’t in obvious areas. In Toronto right now, we have arguably the greatest concentration of pension fund leadership in the world. Between Teachers and OMERS [Ontario Municipal Employees Retirement System] and the CPP [Canada Pension Plan], you have three outstanding public pension funds that have governance models that other countries are copying. The U of T’s Rotman School of Management has a pension management develop-ment centre. We could set the aspiration of being one of the better, maybe the leading, centres of excellence in pension fund management,


and that would be quite realistic to build on what we have today. It goes on and on in the number of places we can do that. So, I would argue strongly, we need to think about doubling down and re-investing in many of these sectors.

Second, we need to partner with our strongest firms. The companies who are already here, and have capacity, are going to be the ones most likely to build out and create innovation and growth. Now we’re doing that pretty well in some of the slow-growth areas, like automotive assembly where we’re putting lots of money against General Motors and Chrysler. And I think many of us feel uncomfortable about how much in the way of resources had to be dedicated there, although I think many people accept that it’s necessary in the short run. But that should cause us to re-commit to looking at some of our industrial champions. Look at the financial services sector: our five major banks, headquartered in Toronto, are in the top 20 in the world right now—not so much because they grew, but because the others shrunk. But the fact is we have an incredible set of businesses there, as we do in the life insurance sector as well.

Not many people know that Xerox has the most productive R&D centre in the world and it’s right down here on the QEW [Freeway]. IBM has over 2,500 software engineers in Markham and one of the top centres in the world. We should be asking these firms, what they need in order to expand and what we can do to attract more of their corpora-tion’s resources to build out new and complimentary businesses.

The third area is when we go out to recruit new firms. Let’s be strategic about it. Gone are the days when we could go out and tell a 40,000-foot story about the great quality of life, lots of graduates, and the wonderful climate. I am just kidding; climate isn’t a big plus for us in most parts of the world.

We’ve got to be more targeted, and we’re already seeing that when the jurisdictions work together. Again, I look to Kitchener–Waterloo over the last nine months where Agfa, one of the top medical imaging companies in the world, had suggested that they might actually close their Kitchener–Waterloo research facility in a global consolida-tion move.


The Toronto Region Research Alliance, working with the prov-ince, mobilized to say, Wait a minute, Agfa, you are making a huge mistake. Look at all the technologies we have in the universities in the Toronto region that are exactly what you need to draw on for gradu-ates, for employees, and for basic research. And in the space of six months, Agfa flipped its decision and is now closing other facilities. Employment in Kitchener–Waterloo will go into the several hundreds right in the heart of the recession as Agfa expands its facility. So it can be done, but it’s focusing on those companies that can leverage our research skills.

Fourth, I think we’ve ignored, to a large degree, the systemic qual-ities David was pointing to; and one area where we clearly have under-leveraged potential is procurement. We have large companies who are major buyers of goods and services. How do we make them more effective buyers of emerging products and services?

Last week, we saw the Toronto Region Research Alliance, working with the City Summit and the Centres of Excellence in Ontario, host a green marketplace. There were 20 Ontario companies who presented their latest and greatest green energy-efficient technologies—$50 bil-lion of procurement power in the room. It was a huge success—very small, very focused, but it actually leveraged the procurement power of governments and the private sector.

Last, a couple of areas that I think maybe you didn’t touch on as much, but that fit your argument well, David. One is immigration. We are a country of immigrants in terms of our make-up: 44 per cent of the GTA’s population is foreign-born, but we have not leveraged that as strategically as we could. And I think the next generation of lever-age has two parts to it. The first is that we should be using it as a competitive weapon. The United States is becoming more and more anti-immigrant.

The [U.S.] H1B skilled immigrant visas run out in April. It’s called the “April Fool’s Day Surprise” because Microsoft and major banks go in and apply for all these H1B visas and they’re all gone by April. We should be targeting those companies to say basically, we will give you the opportunity to bring your foreign workers here. Vancouver


has done something like this, and Microsoft has now opened a major research laboratory in Vancouver, expressly to get access to global talent they can’t get into the U.S.

It applies to financial services. I visited Goldman Sachs Canada in Toronto last week, and the CEO told me that they are becoming a “hotel” for Goldman in New York, who can’t get their skilled people in. So Goldman Canada basically flies people up from New York to meet with their Goldman employees from around the world who they can’t get into the U.S. on visas to work on projects.

We should turn that into a kind of red carpet service and say to com-panies, Come here, we’ll help bring your skilled people here. We have an open environment; we can do that very effectively. Then the second part of that is we’ve got to bring our diverse populations more into the leadership of the city region. We don’t see the diversity in the leader-ship of our corporations or non-profits or government boards anywhere near the degree that they’re represented in the population.

So DiverseCity—an initiative of the City Summit Alliance and Maytree—and other initiatives that can bring that leadership in and create a sense that the Toronto region—the Greater Golden Horseshoe—is the most open region in the world for visible minorities and immi-grants, would be fantastic. But finally, I’d like to conclude by “hitting the nail on the head” on two things implied by David.

The first is aspiration. I think we suffer from a deficit of aspiration in this country, but particularly in this region. Now what do I mean by that? I mean that what David has just laid out is a vision that says, go out in the world and invest behind your greatest strengths.

We have the opportunity to attract more resources and we will find that economic innovation flourishes. We know what the formula is. So where is that level of aspiration, where is the leadership standing up in the country saying, Toronto should be the world centre for pension fund management excellence or systemic risk? Right now, Canadian banks are being seen the world over. The front page of the Wall Street Journal said that Canadian banks have survived with no government assistance—the only G8 country that that’s happened in.


We have a better regulatory regime. Ireland just announced they are copying the Canadian regime, and we’re going to see other countries do it as well. Why don’t we build on that right now? Why don’t we say that our mission for the G8 next year is to have the centre for systemic risk monitoring for the world in Toronto. Let’s put it here, let’s put our resources behind it; we have great depth at U of T and Waterloo for that. The list goes on and on, and it also applies to our cultural sectors.

What is the Toronto International Film Festival’s new project on Queen Street other than an aspiration to be the centre of the world for anybody who cares and appreciates film? The Luminato Festival of Arts and Creativity, other great arts festivals, great cultural festivals—these are all part of that aspiration we need to have.

And then the last part—and David, I think this was the most pro-found thing you’ve pointed us toward—is that leadership in regions like this will come from civil society convening to tackle this together. I think we’ve seen that in the Toronto region—Carl, you’ve seen it in Kitchener–Waterloo—that when the business leadership, the non-profit leadership, and government leadership sit down together to articulate visions, put together fact-based comments, and come to specific action plans, enormous things can be accomplished.

What I think we have to do in Canada, and in the region, is start to see that process itself as our single greatest secret success formula. That is our Coke formula, our McDonald’s Big Mac formula. Our main basis of competitive advantage is that we are better at working across civil society to tackle problems, but also tackle opportunities. We should take the successes out there—whether they be the Quantum Computing Institutes of the world or the Toronto International Film Festival—and say what made us great, and then ask how we replicate that in all these other areas of opportunity.

From the lecturePANEL DISCUSSION AND Q & A

At the CIBC Scholar-in-Residence Lecture held at The Fairmont Royal York hotel in Toronto on May 19, 2009, some 500 people gathered to hear moderator John Honderich, David Wolfe, and three panelists debate

the role of cities and innovation. The following pages present excerpts from the Q&A session with the audience.

215From the Lecture: Panel Discussion and Q & A

bernie wolfe: I was wondering if we could address how we speed up the processes

of what you are talking about. It seems to me that we are really a fairly slow city in getting things done. We tend to talk a lot and sometimes do very little. In that context, if you were to re-write things as a political sci-entist, how you would change the jurisdictional areas in terms of powers? Politically, that doesn’t sound like it’s very feasible, but what are some marginal steps that could be taken?

david wolfe: It’s a big question, Bernie. In fairness, we had an opportunity 12 years

ago to change the jurisdictional boundaries in a significant way for the region. And, for better or for worse, we chose to change them in one way and not the other way that would have encompassed the kind of larger economic unit that actually exists, as David suggested. But I think the example from Kitchener–Waterloo, Cambridge, and Guelph is also instructive because they were another key region in Ontario that didn’t amalgamate at the same time either.

Everyone—business leaders, political leaders, civic leaders—will say that the lack of agglutination, the lack of integration, is a problem. At the end of the day, they will also then go on and say, “. . . but we can’t let that get in the way of doing the things we need to do in this region.” Toronto has the same dilemma, only magnified about ten times in terms of scale. We need to start building institutions at the civic level that reach out and stretch across the region and incorporate the larger economic region as it actually exists. I used the term “civic capital” when I was talking and I said an essential component of that is a shared sense of identity within a regional community and in a regional economy.

If we can begin to build some organizations and some institutions that stretch across the jurisdictional boundaries that actually exist—that are drawn on paper but don’t define where the economy begins or ends—then we can begin to create the shared sense of identity that eventually leads to us acting more like a regional economy in the way that David was suggesting we need to—and I firmly agree with him on this.


But I don’t think we can—if we go back to starting to redraw boundaries, we will lose an incredible number of opportunities that we have before us now. We need to be more pragmatic. A lot of the organizations that have come out of the City Summit Alliance are good examples of that: we need to give them more credit. I am a firm backer and supporter of the Toronto Region Research Alliance—it was a great initiative.

It’s done a number of good things for the region, but I think it could do a lot more. If it had more support from all levels of govern-ment, it could be even more successful. But it’s by building those kinds of regional institutions that we can effectively create a common regional identity and a sense of raising our aspirations in the way that David suggested.

Carl Zehr:Well, it depends on the day. David has just commented that we do

have an attitude; that at least some of us don’t like the current multi-plicity of municipalities. However, I keep saying to people in my com-munity that we have what it is, what we have right now. I have to present the Kitchener position as mayor of the City of Kitchener, but I also sit on the regional council. In terms of economic development, where we have individual economic development offices in each of your cities through Canada’s Technology Triangle, there is that collaboration. When we are speaking to the outside world, we are essentially speaking as one voice.

So there is that collaboration and I’ve used that word a number of times. Collaboration is more than just a word—it happens, and I think it goes all the way back to some of the characteristics I spoke of. There has to be a political will and willingness in the civic population to par-ticipate and be collaborative.

david wolfe:There is one other difference between this region—the Toronto

region—and other parts of the province. We have an overwhelming ten-dency to put our own institutions first and the region second—whether


it would be a municipal government, whether it would be a univer-sity, whether it would be an individual firm, or whether it would be an industrial sector organization.

Things won’t start to change seriously until we think of what is good for the region as a whole—how our institution and organiza-tion fit into that and what is the strongest and most supportive role we can play for the region as a whole. That’s what’s really missing in the Toronto region and that’s what differentiates us from a lot of the other successful regions I have studied in Canada and around North America.

david Pecaut:I don’t think it’s been without some progress because I remember,

Anne, when you were doing your study back in the ‘90s: the whole idea of 401 and 905—representing the City of Toronto and the regions respectively, was like a massive divide. So I think people are seeing things more regionally. I agree with David—I don’t think we want to try to redraw the map—but I do think governments need to deal with things and encourage regional institutions and regional buildings. But I am not sure that’s always the case. I also think that, from municipal-ities, there is this sense that somehow it’s more of a zero sum game than it is. To me, if somebody locates in Markham or Mississauga—or even in Kitchener–Waterloo—that’s hugely advantageous for the City of Toronto in every way. So I think people need to take a larger per-spective. But I think to achieve meaningful progress, these innovations need to take place in regional institutions. So I agree with David that the Toronto Region Research Alliance—which obviously I have been very involved in—should be beefing up those things. When we tackled immigration, we set it up as a regional Immigrant Employment Council for the whole GTA, and that’s worked quite well. So I think those kinds of mechanisms can be effective.

Leadership across our major institutions has to buy in. But, unfortu-nately, it’s very easy to slip back to that old game of: well, it’s a zero sum game and if money goes to Waterloo, it won’t come to Toronto, or it won’t go to Hamilton, or whatever. When in reality, when you look at most of those games as a region, we lose out to the rest of Canada.


A small example that John would remember. There are 34 National Research Council facilities [NRC facilities] in Canada. The federal government spends about $800 million a year on the NRC, but how many facilities are in the Greater Golden Horseshoe? Zero. And to get one of those facilities in this environment, we would need a coopera-tive approach.

So I think there are many examples where the regional approach would seem to be successful and there are examples where we haven’t had it—where you can see that we have lost out.

Anne golden:Well, obviously, I didn’t agree with the structural political solution as

it is now. The key point is that you need to have a policy capacity that matches the economic reality. That’s where the challenge comes in, and the political issues are real for the politicians. Their constituency does not cross boundaries. So, when you get into serious decisions around how to integrate land use and transportation planning, that is fundamental.

Our transportation infrastructure is so poor: Toronto has one-twelfth of the subways of Madrid, for instance—a city actually smaller than our CMA. We are seriously under-infrastructured. Yet, as I always say, because I am short, I see the glass half-full. I do feel that we have made progress. As a member of the Toronto City Summit Alliance, and the Toronto Research Region Alliance, I can see the creation of these organizations as positive steps, and I believe it when David says that we have an opportunity now that we really must build on.

I think it takes constant effort. One of the most important learning experiences for me was going to see the U.K. cities to understand their core city strategies. The U.K. has cities that have had to remake them-selves—Leeds, Manchester, and Glasgow—and they are doing so by sheer dint of collaborative effort.

David Crombie once said, “We make haste slowly in Toronto.” I agree, but it happens by huge effort and it’s ongoing and must engage all the players. I believe the message of collaboration among all the actors will be empowering for us. Change happens when the climate


of opinion changes. The whole concept of the tipping point is about when the climate of opinion changes. I think if we continue to make this effort, that climate of opinion will change.

mohammed dinani:In the last 40 years in the City of Toronto, we’ve actually seen the

population that’s in the middle-income category decrease by 50 per cent, and that group has slipped into the lower-income category. They haven’t moved up. How do we make prosperity more equitable so that every-one’s boat rises, which is unlike what’s happened over the last 40 years?

david Pecaut:I do think economic progress and social progress have to go hand-in-

hand. You can’t have a winning economy and have a losing society, or the winning economy will lose eventually. So I think it’s very important. Three things come to mind. The first is that we have to invest in educa-tion because education is a ticket to this knowledge economy, and many people don’t have at least a high school education. But having more and more college or universities, as David was saying, is critical.

But even with that, I do believe that there are going to be jobs that are necessary in society that are not going to necessarily justify high wages. We have to have income redistributive mechanisms to try to support those people that are going to have those kinds of jobs.

So I think it’s very important that we think about the working poor and ensure that we have income security supports that lift them out of poverty. But I think there has been progress in that area. Just look at regional successes: that task force on modernizing income security—which many of you were involved in—and certainly was a Toronto-led effort that led to the working income tax benefit federally and the child benefit in Ontario. When we started that project, people in Ottawa said, “Why would a city-based group tackle income security? That’s not your kind of thing.” We said, “Because Toronto won’t be successful if this doesn’t get fixed.” So I think that’s the second thing.


And then the third issue is: Do we need neighborhood strategies? As many of you in the audience know, poverty is getting regionalized in Toronto and other regions. So even if we are able to tackle the income security issues at a broader level, I think we’ve got to focus on neigh-borhood strategies as well.

david wolfe:To that I would add, minimum wage policies. We know that min-

imum wage is one of the fastest and easiest ways to put a floor under-neath low-income earners. We know that it also has positive side effects for other income security policies: the more you raise minimum wage, the less emphasis you have to put on income security.

Any time we have made a major innovation in the area of labour force training, we haven’t stayed with it long enough to let it gain traction. Employers in Canada tend to systematically under-invest in training. The community colleges, for years, played a major role in pro-viding supplementary training with federal dollars. Those dollars were almost totally eliminated in the 1990s, forcing the colleges to scramble for other sources of funds. There is an awful lot that we could be doing better in the area of training that would help increase people’s job pros-pects and improve their income possibilities.

Audience member:In April 2011, baby boomers will start retiring in droves, and we’ll

be relying on immigrants. It’s a brain drain from their country to our country. I’m finding that there is the issue of under-employment even there. I’m wondering, what mechanisms are there to implement this geography of innovation from Mr. Wolfe?

david wolfe:I think we need better systems for credentialing people with train-

ing and skills from other countries who come to Canada. Again, it’s another issue that we have studied long and hard in this country. I have looked at some of these issues a lot in the past. One of the great under-appreciated assets in our province, in our country, is our very strong


network of community colleges. I am a little biased because I come from the university, but I also tend to think that there are a lot of things that community colleges can probably do better. But assisting with skills upgrading and credentialing is one of the things that community colleges have tried to do effectively and haven’t always been given the tools to do properly. It’s one of the areas that could make a substantial difference.

Anne golden: This is an area in which the Conference Board has done work through

our studies on brain drain, brain gain, and billions of dollars that we stand to gain in terms of wealth potential if we improve credentialing. I believe we are starting to make improvements in this area, finally, after about 40 years. And, we are starting to improve the immigration system with the two tracks, etc. It’s very slow, but we are making progress.

21st Century Cities in Canada: The Geography of Innovation summarizes

the key insights and findings of a multi-year national study on urban industrial

clusters, led by internationally renowned urban expert David Wolfe, Professor

of Political Science at the university of Toronto. Professor Wolfe’s monograph

delineates the innovation dynamic, based on in-depth analysis of the experiences

of 15 Canadian cities. 21st Century Cities in Canada explores the ways in which

the economic shock of the past year has dramatized the changing nature of

Canada's economy, and it looks at the challenges that lie ahead. The monograph

also sheds new light on the role of cities as the dominant sites of economic

activity—the places where leading-edge innovation generates new ideas, new

products, and new industries.

The AuThorDavid A. Wolfe, 2009 CIBC Scholar-in-residence

THE COMMENTATORSAnne Golden, President and CEO, The Conference Board of Canada

David K. Pecaut, Senior Partner and Director, The Boston Consulting Group; and Chair, Toronto City Alliance Summit

Judith Wolfson, Vice-President, University Relations, University of Toronto

Carl Zehr, Mayor, City of Kitchener

About the CIbC scholar-in-residence Program

The CIBC Scholar-in-Residence Program is bringing renowned scholars to The Conference Board of Canada over a 10-year period to examine issues of national importance for improving Canada’s economic and social prosperity.

www.conferenceboard.ca

Canada $ 19.95

ISBn 0-88763-946-1

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