In Search of a Canadian Space Cluster

1. In Search of a Canadian Space Cluster Innovation Systems Research Network Sixth Annual Meeting May 13-14, 2004 David Arthurs Tijs Creutzberg Christine Havey

2. Outline • The Canadian Space Sector • The Six L’s • Location • Labour • Legislation • Labs • Learning • Leadership • Conclusions • Implications for Cluster Theory

3. Space Sector Characteristics • CSA statistics: • 200 organizations (122 in this study) • Revenues - $1.8B • Workforce 5,789 – 59% Ontario, 21% Quebec, 9% BC • The top 30 firms account for 98% of the revenues • 40% exported • 63% Telecom, 13% EO • Many firms no longer are active in space. • Several firms do no consider themselves a part of the space industry. • Apart from earth observation, firms are usually less than 25% space.

4. Tools Components & Services Integration Operation Application Space Systems 3 19 10 32 Telecom 2 11 7 2 2 24 Navigation 1 3 2 6 Earth Observation 5 6 1 34 46 Space Science 2 3 5 Robotics 2 6 1 9 13 47 18 3 41 122 Space Sector Structure Value Chain Sub-Sectors

5. Geoid CCRS CRC CSA CresTech

6. Location “We don’t work for the region. People are here because they want to live here.” • Location decisions are based on history and lifestyle preferences. They are not business decisions. • Distance is not difficult to overcome. • “Really the only infrastructure that is important is communications – especially the high speed Internet” • Proximity is somewhat an issue for customers: • “Where we think it helps to be close, we put people there” • Proximity is not an issue for competitors, suppliers, research. • There is no accounting for taste in location.

7. Labour “The most important factor is probably the supply of qualified people” • Technical personnel are more likely to be sourced locally. Management is more likely to be sourced nationally and internationally. • Turnover is very low.

8. Legislation “CSA placed itself in a geographically unlucky place” • Regional Benefits Policy. • Cannot use ‘best of class’ suppliers • Playing field is not level • Regional distribution disperses a critical mass • Regional Agencies. • Political location of the Canadian Space Agency. • Firms are not locating close-by.

9. Labs “The knowledge exchange, however, goes from us to them” • Effective research is a dialogue, not technology transfer. • Innovation is global, not local. • “Innovation has become distance insensitive”

10. Learning “Space is a strange market for adopting new technologies. There is a heavy reliance on heritage products because of risk aversion.” • Most learning results from interactions with customers. • High degree of interaction with distant laboratories. • Low levels of collaboration. • Low labour mobility reduces inter-firm transfers of knowledge. • Significant training within the firm.

11. Leadership “We have a giant and lots of pimples. MDA’s historical approach to clustering is to stamp on pimples” • Anchor organizations are not acting as cluster leaders. • “We tend to complement on another more than compete, but we are not successful at coming together” • “Yes we do consider ourselves a part of a network or related firms, but not with firms in the region”

12. Is there a Canadian Space Cluster? Has public policy worked against the emergence of a cluster? Has the lack of a cluster hurt the industry? Emphatically NO – No spatial agglomeration Poor functional inter-linkage There is a national innovation system Probably YES That is the question Conclusions

13. Implications for Cluster Theory “This is a fad; it only makes sense in Ontario” • The space sector provides a counter-example for cluster theory. • Firms rationalize their decisions. • Cluster theorists find what they are looking for. Correlation versus Causation.