Why Ontario – and Canada – need a Cluster Map

Why Ontario – and Canada – need a Cluster Map

In the 2016 federal Budget, the government announced its intent to develop a Canadian Cluster Mapping portal. This project will be done in partnership with the provinces and research institutions. The Institute applauds this initiative as clusters can drive economic growth.

What are clusters?

Clusters are geographically proximate groups of interconnected companies, suppliers, service providers, and associated institutions in a particular field. There are many natural examples, such as Silicon Valley in San Francisco and Wall Street in New York City.

Why are clusters important?

Clusters are important to economic growth because the close proximity of companies, suppliers, and workers in a region can spur knowledge spillovers and decrease transaction costs. A naturally competitive environment is also developed and, in order for firms to successfully compete, they must differentiate themselves from others. In most cases, this means companies need to be more innovative, either by creating more valuable products or services to increase revenue and profit, or cutting costs to become more efficient.

When many firms within a cluster become more innovative and productive, this has positive and significant impacts on the cluster and region. Ultimately, this generates prosperity. Supporting cluster development can help close the prosperity gap between Ontario and its North American peers. As of 2015, the prosperity gap stood at $12,500 in GDP per capita.

Why is the Institute interested in clusters?

The Institute's analysis on clusters is based on Harvard Business School Professor Michael E. Porter’s classifications of clusters, which are the same definitions used in the federal government’s Portal project. The Institute houses Canadian cluster data on its website, and this new project will provide more detailed and frequent information.

What is this project about?

The Canadian Cluster Mapping Portal is part of a larger North American project to use Porter’s cluster definitions to be able to compare regional cluster information across and within Canada, the US, and Mexico. The US Cluster Mapping Portal is already available in a user-friendly format, providing over 50 million open data records on industry clusters and regional business environments. A Canadian counterpart is the next step.

How will this Portal help with cluster development?

Cluster data and comparator information is helpful to both businesses and government. For companies, the Portal will give them an idea of where their industry’s cluster resides. When starting or relocating a firm, it is best to reside in a region that already has a strong cluster to take advantage of the close proximity of suppliers, talented labour pool, and knowledge spillovers. Data can also support strategic business decisions, as in the case of General Electric (GE) relocating to Boston. GE desires to become a top software and data analytics firm, instead of just a manufacturing corporation, and moving to Boston will enable its success.

For governments, the Portal assists in strategic regional development. Instead of investing haphazardly or equitably across industries, the Portal helps with evidence-based decision- making. The Portal will be integral to identify which strong clusters to support and grow through foundational investments in elements such as R&D, infrastructure, and taxation.

The Institute looks forward to partnering with the federal government on this initiative. 

Photo Credit: shoo_arts, Getty Images

Category: Businesses, Clusters, Economic Progress, Industrial Policy, Income, Infrastructure, Innovation, Productivity, Public Policy, Taxation