Innovative economy vital to take cities into the future

Posted on May 19, 2009 in Debates, Governance Debates – Opinion – Innovative economy vital to take cities into the future: Firms that come out on top after the recession will be locally based but globally integrated
May 19, 2009.   David A. Wolfe

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 since World War II are in flux and the contours of the next economy are still taking shape.

Most observers agree that the way forward for Canada lies in achieving a more effective innovation economy, but there is considerably less understanding of the role that cities play in an innovation economy. The reality is that cities are ever more important as sites of production, distribution and innovation around the globe.

Despite Canada’s vast geographic space, we live in an increasingly urban society. Our cities are not only the primary sites for economic activity, but constitute the leading location for new innovations that will create the new products and new industries to drive our economy in the future. The density and concentration of economic actors in cities offers multiple opportunities for interaction and the exchange of knowledge that are the touchstones of an innovation economy.

In my work as The Conference Board of Canada’s CIBC Scholar in Residence, I have been studying the nature of innovation and creativity in a broad cross-section of Canadian cities. A key research question is whether cities benefit more from strong concentrations of firms in clusters of related industries, as Michael Porter argues, or whether a diverse range of industries provides a greater stimulus to innovation and growth, as Jane Jacobs maintained.

Historically, large cities tended to be the ones with a more diverse economic base and a more innovative economy, while medium and smaller sized cities were more specialized in relatively fewer industrial sectors. However, the current recession is casting much of this accepted wisdom into question.

Many of the established industries that we have counted on for Ontario’s economic prosperity, like the automotive industry in the GTA, are facing unprecedented competitive pressures. There is little doubt that when the firms that comprise this industry emerge from the current recession, they will look vastly different than they do now. And so will the cities in which they are based.

There is growing evidence that the innovative urban economies of the future will be those that succeed in moving to a broader base of new knowledge platforms in diverse fields like digital media, nanotechnology and bioinformatics. The firms and industries that are most successful in these new fields will be locally based – closely tied to the research institutions and support organizations in their communities – but also integrated with global supply chains and international research networks.

The key challenge for those concerned with the economic well-being of our cities is to ensure that they have their share of the necessary assets to succeed in this innovation economy. The key question for policy-makers at all three levels of government is how to overcome the jurisdictional fragmentation of responsibilities for the policies and programs that can provide the resources that our cities need to succeed.

We need a new mode of policy-making in urban regions, one that is strategic, mobilizes the talents and capabilities of a broad array of economic and social actors, and taps into the existing mix of federal and provincial programs.

The Toronto region is well positioned to succeed in this new economy, with its dynamic range of industries and firms, the underappreciated depth of its public and private research institutions, and the multiple talents and skills of its diverse population. But at the same time, it is hindered by our inability to bring together the critical players distributed across an ever expanding geographic area. Witness the unwillingness to fund the Greater Toronto Marketing Alliance at a level sufficient to fulfill its original mandate to attract investment on behalf of the entire region.

Recent developments, most notably the creation of the Toronto City Summit Alliance and the multiple initiatives it has spawned, are taking us in the right direction. The Toronto Region Economic Summit, held just this month, marked the first event since the Golden Task Force report in the mid-1990s that focused on Toronto’s future as an economic city region.

However, the future challenge for Toronto is to ground these promising steps in a sustained process of policy development that leverages the research, human capital and business know-how of the region. Cities that do this most successfully have been strongly motivated by an impending sense of crisis or opportunity.

The current economic malaise in the Toronto region offers such an opportunity. Will Toronto’s civic actors – including local politicians and public officials, university and college presidents, business executives and community leaders – come together to chart a new course for the region’s economic future? We need to understand that our future prosperity is not assured. We have all of the ingredients for success, but we must learn to cooperate as a region to compete in the global economy.

David A. Wolfe is the Conference Board of Canada’s 2009 CIBC Scholar-in-Residence. He will deliver the 2009 lecture, The Geography of Innovation: 21st Century Cities tonight at The Fairmont Royal York Hotel. For more information:

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