Knowledge, Innovation and Regional Culture in Waterloo’s ICT Cluster

1. Knowledge, Innovation and Regional Culture in Waterloo’s ICT Cluster Allison Bramwell, Jen Nelles and David A Wolfe May 13, 2004

2. The Waterloo Region ICT Cluster • “Canada’s Technology Triangle” includes the municipalities of Kitchener, Waterloo and Cambridge • 958 high tech companies (PWC, 2001a) • Embedded in a diverse regional economy

3. Global Orientation • “Our recruiting is all local, our supply base is all over the world, even service providers now…our engineering service providers and prototyping providers are all over the place too. I mean, you can e-mail stuff out and get UPS back in so you kind of go where it’s quick and economical. People is local (sic), manufacturing is local, but pretty much everything else is non-local.” • “We sell exactly half of our product internationally versus the other half to North America in general. Our partners can just as easily be in Europe as in the States, so the distinction never comes up – it means less than nothing.”

4. The Puzzle: The Global/Local Dimension • Does not fit Porter - Firms in the Waterloo Region do not do business together • Supplier, Customer and Competitor relationships are predominantly Global • BUT evidence suggests that there is still a great deal of inter-firm and firm-institution interaction • How do we characterize the cluster since it doesn’t fit Porter’s model?

5. The Constellation of Variables • Locational Decisions of Firms • Local Educational and Research Institutions • Distinctive Regional Culture Supported by Civic Associations

6. The Literature • Global/Local Knowledge Flows and Mechanisms for Learning (Malmberg & Maskell, 2002; Feldman, 2000; Hendry et al., 2000) • Institutions and Innovation (Wolfe, 2002; Wolfe & Gertler, 2004; Henton, Melville & Walesh, 1997)

7. Role of Public Research Institutions • Tech Transfer and Commercialization “The truth is that [U]Waterloo has done the most tech transfer by a factor of 5 or 6 of any other university but most of that was done in the 70s and 80s, it’s not current experience. So there’s a little bit of nostalgia playing out there” • R&D Linkages: “Little R, big D” “At best, you know, it’s a research project, at best you’re going to get some idea feasibility and you may be getting some prototype out of it and that’s really where my expectations stop” • TALENT – Co-op program and software engineering “It all has to do with proximity to the university and that fact that a lot on our staff at this point, probably 400 of our 2,000 staff went to Waterloo, 100 or more went to Conestoga…once it starts it seems to keep on going but the thing that started it off was some people decided to stay here”

8. Culture • Culture is an important variable in regional economic development (Gertler, 2004) BUT “Socio-cultural factors often remain as a residual that could potentially explain basic differences in innovativeness and competitiveness between localities and regions” (Pilon & de Bresson, 2003) SO How do we characterize the distinctive culture of the Waterloo Region?

9. Waterloo’s Entrepreneurial Culture • German Roots • Entrepreneurial Involvement in Institutional Development • Informal Networks: High Tech Hockey • Associational Activity: Communitech • Local Community Leadership

10. Conclusions Empirical findings: The success of the Waterloo Region ICT cluster rest on the interaction between the locational decisions of firms, local educational and research institutions and civic associations, and a distinctive regional culture Theoretical Implications: • Tacit knowledge flows aspect of co-location vs. strategic interaction • The interdependence of variables • The role of extra-firm institutional supports