News from the IPL
The Benefits of an Apathetic Anchor: Why Waterloo Adjusted Faster than Ottawa
Darius Ornston & Lorena Camargo
Why do some communities bounce back from anchor firm collapse more quickly than others? This paper compares Ottawa and Waterloo, two high-technology ecosystems dominated by large, flagship firms, Nortel and Research in Motion (RIM). The Waterloo region adapted rapidly to RIM’s decline, buoyed by the proliferation of local, high-technology startups. By contrast, Nortel’s failure was deeply disruptive. Although Ottawa’s high-technology ecosystem rebounded, recovery was painful, protracted and, in some ways, incomplete. After eliminating several alternative explanations, we conclude that there is a trade-off in the way communities embed anchor firms. In Ottawa, Nortel was deeply embedded through market-based and associational channels. These ties maximized knowledge spillovers and entrepreneurial recycling as it grew, but simultaneously increased the region’s vulnerability to disruptive shocks. By contrast, RIM was an apathetic anchor. It donated generously to community causes, but was otherwise less engaged within its local, high-technology ecosystem. This distance limited positive spillovers as RIM expanded in the aughts. By creating space for independent enterprises and entrepreneurial programming, however, its apathy enabled the region to capitalize on the opportunities presented by the firm’s decline.
The Maker-Manufacturing Nexus as a Place-Connecting Strategy: Implications for Regions Left Behind
Nichola Lowe & Tara Vinodrai, Economic Geography
The maker movement has been heralded as a place-based strategy to invigorate urban manufacturing—offering the millennial generation access to affordable, high-quality technologies and inclusive marketing platforms through which to design new products and get them into the hands of design-savvy consumers. Yet it also offers significant place-crossing opportunities that have been overlooked, namely, the potential for the production needs of urban-based makers to be a resource for shoring up manufacturing communities beyond the metropolis at growing risk of being left behind. The paper demonstrate this possibility through an in-depth case study of the Carolina Textile District (CTD), a novel value chain experiment that helps incumbent textile manufacturers in more remote legacy industrial regions connect with and lend support to a new generation of urban-based textile designers and entrepreneurs. It argues the CTD is an innovative distributive platform that transforms the shared vulnerability of urban makers and rural manufacturers into productive and opportunity-rich relationships, fortified by the millennial-maker ethos of forging high-road supply chains in support of social equity and environmental sustainability. As the maker movement gains traction within planning and policy circles, the CTD offers lessons for how to intensify and de-risk interdependencies between nonmetro and urban regions; between old and new manufacturing clusters; and, ultimately, between blue-collar communities and urban-oriented millennial youth. Conceptually, the case speaks to the need for economic geographers to be more attentive to place-connecting industrial strategies in their growing call for spatial equity.
Editor's Pick
Scale, market power and competition in a digital world: Is bigger better?
Michael McMahon, Sara Calligaris, Eleanor Doyle & Stephen Kinsella, OECD
This report assesses the impact of digitalization on competition by examining the evolution of mark-ups and multi-factor productivity (MFP) across firms of different sizes. It finds that size is positively related to mark-ups and that this relationship has strengthened over time. This trend has been accompanied by an increase in the relative productivity advantage of larger firms and both changes are more pronounced in digital-intensive sectors, suggesting that digitalization may be an underlying driver. Policy makers may need to consider appropriate responses if digital technologies affect larger and smaller firms in a heterogeneous manner.
Cities, Clusters & Regions
Regional income disparities, monopoly and finance
Maryann Feldman, Frederick Guy, Simona Iammarino, Cambridge Journal of Regions, Economy and Society
The overall rise in inequality in the USA since 1980 has been matched by a rise in inequality between places; local and regional development policies aimed at reversing this polarization have seen limited success. The article proposes an explanation for the spatial polarization of prosperity and the failure of the policies to remedy it. Our explanation is based on the interaction of monopoly power, agglomeration economies in technology clusters and the power of financial sector actors over non-financial firms—all phenomena characteristic of the post-1980 economy. It reviews evidence for each of these elements and propose some causal relationships between them, as an outline of an ongoing research programme.
Statistics
Measuring cloud services use by businesses
Daniel Ker, OECD
Cloud computing infrastructures underpin an ever-increasing range of business tools, yet measures of cloud service adoption based on business ICT usage surveys give only a partial view of their diffusion. They do not reveal the intensity or volume of use by businesses, or the amount spent on cloud services. This paper assesses the extent to which insights on the use of commercial cloud services (i.e. services purchased from external providers) can be gleaned from economic and business statistics – in particular, from supply-use tables and the underlying business surveys. The paper examines the defining features of cloud services and their treatment in various statistical product classifications, before deriving estimates on the use of specific “cloud-containing product classes” across businesses. A key finding is that efforts are needed to improve the availability of data that can be used to gain robust insights on business use of cloud services.
Statistics Canada
Canadian businesses intend to spend $19.1 billion on in-house industrial research and development in 2020, a 2.5% increase from the preliminary estimates for 2019. However these intentions are based on data collected before the onset of COVID-19. In 2018, Canadian businesses spent $19.5 billion on in-house industrial research and development (R&D) to develop or improve products or services. This spending marks a marginal increase from the $19.0 billion spent in 2017.
Innovation Policy
Industrial Policies: Common Not Rare
Richard Lipsey & Kenneth Carlaw
This paper reviews some of the myriad, often complex, ways in which the private and public sectors interact in the invention and innovation of the new technologies that are a major driver of economic growth. Several terms have been used to describe the public sector’s activities in these matters: technology enhancement policy, innovation policy, industrial policy, and national systems of innovation. The authors use the term Industrial Policies to cover all the public sector’s activities that, either directly or indirectly, encourage technological advance. They first outline some important concepts and definitions: two views of the place of the public sector in technological advance; the definition of technology and the facilitating structure; the main public sector organizations that encourage technological advance; the four evolutionary trajectories of a new technology: invention, efficiency, applications and diffusion; the growing importance of science in technological advance; and an overview of a successful industrial policy. In Section II they study 13 important technologies developed over the last century and a half, showing the extent that the public sector has provided finance for the various trajectories of these technologies. In Section III they consider nine public policies designed to encourage technological advance in general. Then in section IV, they discuss over 20 cases in which the government has attempted to pick and encourage specific winners, some of which were successes while others were failures. After each of the case studies in the three main sections, they offer at least one tentative lesson concerning the conditions that favour success and/or that tend to lead to failure. Section V offers a few concluding remarks ending with the statement that “The cases considered here reveal that those who would dismiss industrial policy with statements such as ‘Governments cannot pick winners’ are relying on an empty slogan to avoid detailed consideration of the actual complicated, multifaceted relationship between the private and public sectors in encouraging the inventions and innovations that are the root of economic growth.
Who Is Winning the AI Race: China, the EU, or the United States? — 2021 Update
Daniel Castro, Center For Data Innovation
The nations that lead in the development and use of artificial intelligence (AI) will shape the future of the technology and significantly improve their economic competitiveness, while those that fall behind risk losing competitiveness in key industries. This report examines the progress China, the European Union, and the United States have made in AI relative to each other in recent years and provides an update on a report released on their comparative rankings from 2019. It finds that the United States still holds a substantial overall lead, but that China has continued to reduce the gap in some important areas. In addition, the EU continues to fall behind. Absent significant policy changes in both the EU and United States—particularly the EU changing its regulatory system to be more innovation-friendly, and the United States developing and funding a more proactive national AI strategy—it is likely that the EU will remain behind both the United States and China, and that China will eventually close the gap with the United States.
6 developments that will define AI governance in 2021
Alex Engler, Brookings Institute
This report outlines six developments to watch regarding artificial intelligence in the year ahead. Specifically, the report summarizes the following trends: 1) AI Regulations by the Federal Government; 2) Using AI in the Civilian Federal Government; 3) Formation of the White House National AI Initiative Office; 4) An Expansion of AI Research Funding and Capacity; 5) The European Union’s Imminent AI Legislation; and 6) The European Union’s Digital Services Act.
Policy Digest
A U.S. Grand Strategy for the Global Digital Economy
Robert Atkinson, ITIF
The report asserts that “for America to remain the global leader in IT, the U.S. government must formulate a grand strategy grounded in a new doctrine of ‘digital realpolitik.'” The first priority should be “advancing U.S. interests by spreading the U.S. digital innovation policy system and constraining digital adversaries, especially China” as well as “working with allies when possible—and pressuring them when necessary.”
The author summarizes the following ‘key takeaways’ from the Grand Strategy for the Global Digital Economy:
- U.S. IT and digital policy needs to be guided by a grand, overall strategy, focused first and foremost on maintaining U.S. global tech leadership.
- The United States faces a risk where much of the world, including the EU, could align against U.S. IT and digital interests, leading to a many-against-one environment, with detrimental consequences.
- In efforts to reestablish closer relations with the EU, the United States should not “give away the store” by allowing the EU to go forward with its increasingly aggressive technology mercantilism.
- The United States must enlist like-minded nations in a variety of ways to support U.S. interests—and it should not be reluctant to exert pressure to encourage these nations to come along.
- The overarching goal of U.S. strategy should be to limit China’s global dominance and manipulation of markets in the IT and digital space.
The report lists 11 key principles that should guide U.S. IT and digital policy internationally:
- Principle 1: Unabashedly support IT and digital innovation, rejecting the techlash narrative and policies.
- Principle 2: Embrace IT and digital “national developmentalism” (smart, active policies to support IT innovation and adoption) and bring more nations into that orbit.
- Principle 3: Work to limit China’s IT and digital progress, especially when it based on innovation mercantilism.
- Principle 4: Actively fight foreign IT and digital protectionism.
- Principle 5: Advance IT and digital free trade, especially with like-minded nations.
- Principle 6: Resist authoritarian influences in the IT and digital economy but remain focused on key U.S. interests.
- Principle 7: Defend the private sector’s core role in IT and digital governance.
- Principle 8: Defend the principle that big is not bad, and often is superior.
- Principle 9: Defend light-touch regulation.
- Principle 10: Defend the mostly open Internet.
- Principle 11: Support and advance a robust domestic IT and digital policy that ensures U.S. global leadership.
News
State of Ohio commits $265 million for new innovation district
Ellen Marrison, SSTI
Ohio’s governor and other state leaders this week announced the creation of a new Cleveland Innovation District, with the state of Ohio, through the Ohio Development Services Agency (DSA), JobsOhio and the Cleveland Clinic committing a combined $565 million to the new district. The new district will bring together Northeast Ohio’s leading healthcare providers and education institutions with the goal of creating a pathogen center with global reach. DSA is committing to $155 million, $100 million will be in the form of a loan, the terms of which are still being finalized, and an estimated $55 million in Job Creation Tax Credits (JCTC) over a 15-year period.
Links to recent IPL webinars
Canada’s future skills strategy: Workforce development for inclusive innovation
This is a recording of the January 19th 2021 webinar discussing the Future Skills Council report, released in November 2020, which recommends equitable and competitive labour market strategies in response to disruptive technological, economic, social and environmental events. It aims to provide a roadmap to a stronger, more resilient future for Canada. In this webinar, panelists discuss the report’s key action areas and pathways to successful implementation. Speakers: Rachel Wernick, Denise Amyot, Dan Munro, & David Ticoll.
Inclusive Innovation: COVID and After
This is a recording of the December 10th 2020 webinar discussing the importance of inclusive innovation; policies needed to bring it about; opportunities and prospects for doing so in the era of COVID-19; and new initiatives for measuring and tracking progress – including GDP 2.0 and the Innovation Policy Lab’s Inclusive Innovation Monitor. Speakers: Dan Breznitz, Susan Helper, Daniel Munro, & Anjum Sultana
Urban Leadership & Innovation During Times of Crisis
This is a recording of the Dec 3rd 2020 webinar discussing how urban leaders are the frontlines of crisis response, from the COVID-19 the pandemic and its associated economic, social and fiscal challenges to the growing protests over racial and economic justice and the looming reality of climate change. This session highlights the way urban leaders can best respond to build more inclusive, just and resilient cities and generate the policy innovations that can shape enduring change. Speakers: Richard Florida, Anita McGahan, Shauna Brail, & Supriya Dwivedi
Canada’s Innovation Imperative
This is a recording of the November 9, 2020 event. Innovation contributes to regional and national prosperity and is a well-established economic concept. To succeed in building capacity and strength in this technical realm, government policies must be deliberate, systematic and rooted in expertise. Data shows that Canada missed the shift from the tangible to intangible economy. Moving forward, how can we make sure Canada builds competitive advantage through policy that leverages innovation for tomorrow’s economy? Speakers: Jim Balsillie, Dan Breznitz, Meagan Simpson (moderator).
This is a recording of the November 12, 2020 event. Bank of Canada Senior Deputy Governor Carolyn A. Wilkins outlines how the COVID-19 crisis has damaged economic potential and discusses what will be needed to thrive in the post-pandemic world. Speakers: Carolyn Wilkins, Michael Sabia, Shauna Brail (moderator).
Policymaking Under Uncertainty
This is a recording of the Oct. 14th, 2020 event focused on Policymaking Under Uncertainty. Policymaking is a challenging endeavour under the best of times, as politicians and bureaucrats seek to juggle the need for rapid and innovative interventions on the one hand with democratic accountability on the other. Speakers: Uri Gabai, Darius Ornston, Sylvia Schwaag Serger, and Dan Breznitz
This is a recording of the Jul 16th, 2020 event focused on exploring the short and long term impacts of the COVID-19 pandemic on innovation and entrepreneurial ecosystems. Panelists included Catherine Beaudry, Ben Spigel, Tara Vinodrai, and David Wolfe.
Will COVID-19 Bring Us Together or Blow Us Apart? The Global Security Implications of the Pandemic
This is a recording of the July 7th, 2020 event focused on the national and international security implications of the COVID-19 pandemic. Janice Stein discusses the historical security lessons of previous pandemics and depressions, Jon Lindsay considers emerging military and strategic dangers exacerbated by COVID-19, and Ron Deibert discusses the cybersecurity and surveillance threats associated with the unprecedented relocation of life online.
This is a recording of the June 11, 2020 event focused on how will COVID-19 shape the future of our cities. Join experts Anita McGahan, Shauna Brail (School of Cities), and Nathalie des Rosiers (Massey College), Richard Florida (School of Cities Professor) as they discuss cities after COVID with Marcia Young, host of CBC’s World Report.
This is a recording of the June 11, 2020 event focused on the impact of COVID-19 on higher education. Speakers: Shiri Breznitz, Heike Mayer, Donald Siegel and Elvira Uyarra.
The Future of (Decent?) Work After COVID-19
This is a recording of the May 26, 2020 Munk School / Innovation Policy Lab / CIFAR event focused on the future of work after COVID-19. Speakers: Dan Breznitz, Zabeen Hirji and Peter Warrian.
This is a recording of the May 11th 2020 event focused on “what will the world look like in the wake of COVID-19?” Speakers: Shauna Brail, Anita McGahan, Tara Vinodrai and Shiri Breznitz.
COVID-19 and the World’s Grand Challenges
This is a recording of the May 8th 2020 event focused on “what impact will COVID-19 have on the achievement of the Sustainable Development Goals (SDGs)?” Speakers: Anita McGahan, Joseph Wong and Karlee Silver.
How is COVID-19 affecting global supply chains?
This is a recording of the April 29th 2020 event focused on “how is COVID-19 affecting supply chains in Canada and around the globe?” Speakers: Dan Breznitz, Shauna Brail and Steven Denney.
Events
International conference on AI in Work, Innovation, Productivity and Skills
1-5 February 2021
The 2021 OECD International Conference on Artificial Intelligence in Work, Innovation, Productivity and Skills (AI-WIPS) brings together technical and policy experts to discuss the fast-evolving changes in AI capabilities and uptake and to assess their implications for labour markets and societies.
Regional Innovation Policies Conference
Aalborg, Denmark, 25-26 March 2021 CANCELLED
Due to the COVID-19 outbreak the conference scheduled for March 25 and 26, 2021 in Aalborg, Denmark has been cancelled. The next RIP Conference is scheduled for Prague in August, 2021. The conference will focus on regions in transformation – as well as transformations in regional innovation policy and new developments in methods for defining and analyzing regions. Submission deadline: 30th November 2020.
May 10-13, 2021 | May 10 – Pre-conference Summer School
Virtual conference
The Partnership for the Organization of Innovation (4POINT0) is organizing the first ‘‘Policies, Processes and Practices for Performance of Innovation Ecosystems” (P4IE) international conference on 10-13 May 2020. Organized around eight highly relevant tracks, the conference offers participants the opportunity to discuss the impact of various technologies, practices, processes and policies, on innovation ecosystems, and the best means by which to design collaborative environments. The goal of the conference is to explore ways to strengthen Canada’s innovation through innovation ecosystems.
Subscriptions & Comments
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This newsletter is prepared by Travis Southin.
Project manager is David A. Wolfe