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Cambridge Journal of Regions, Economy and Society 2010, 3, 139–152

doi:10.1093/cjres/rsp032
Advance Access publication 15 January 2010

The strategic management of core cities: Path


dependence and economic adjustment in resilient
regions

David A.Wolfe

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Program on Globalization and Regional Innovation Systems, Munk Centre for International
Studies, 1 Devonshire Place, Toronto, Ontario M5S 3K7, david.wolfe@utoronto.ca.

Received on June 1, 2009; accepted on December 14, 2009

The evolutionary approach to economics hypothesizes that economies change in path-


dependent ways, shaped and constrained by past decisions, chance events and accidents of
history. These constraints make certain strategies easier to pursue and others less so. Re-
silient regions engage in collaborative processes to plan and implement change, within the
constraints endowed by their existing regional assets, including public and private research
infrastructure, and the infrastructure of regional institutions. This paper explores the way
these processes have played out in a two core cities in the province of Ontario, Ottawa and
Waterloo, over the past decade in response to two major external shocks.

Keywords: path dependence, strategic management, civic capital, regional resilience, Ontario, Canada
JEL Classifications: O18, R58

Introduction institutional makeup of the region, particularly the


The evolutionary approach to economics suggests capacity to develop and exploit new forms of
that economies change in path-dependent ways, knowledge, and critically, by the strategic choices
shaped and constrained by past decisions, chance made in response to those shocks.
events and accidents of history. The trajectory of The way in which path-dependent trajectories of
specific regions and cities is rooted in a series of development intersect with the strategic choices
economic, social and cultural factors that shape made by core cities in regions influences their ca-
their development over time. The presence, or ab- pacity to deal with external shocks. The economic
sence, of key institutional endowments may affect performance of regions through periods of disrup-
both their innovative capacity and their ability to tive change depends on the institutional capacity of
respond to external shocks, in other words, their those regions to manage the transition. The concept
resilience. As regions and their core cities are buf- of resilience has recently been introduced to analyse
feted by external shocks, ranging from macroeco- the ability of regions to respond to these changes
nomic to technological to environmental changes, and to compare how this varies across regions. Re-
their response is constrained by a combination of the gional resilience refers to ‘the ability to transform
existing structure of their economies as determined regional outcomes in the face of a challenge’
by past trajectories of development, the underlying (Chapple and Lester, 2007, 2). Core cities in

Ó The Author 2010. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.
For permissions, please email: journals.permissions@oxfordjournals.org
Wolfe

resilient regions must be able to identify regional rium approach focuses on the ability of a regional
assets through collaborative processes to plan and economy to maintain its pre-existing pattern of de-
implement effective change. velopment in the face of an exogenous shock or
However, regions and cities cannot alter their return to a previous level of output and rate of
trajectory of development by fiat or an act of polit- growth after being affected by such a shock. The
ical will. Their pattern of development is strongly path-dependence approach starts from the assump-
influenced by the industrial structure of their exist- tion of multiple potential points of equilibrium and
ing economy, as well as by the broader set of insti- analyses how a particular economy gets locked into
tutions that support those sectors. Those sectors in a specific pattern of growth through a cumulative

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which the urban economy has historically special- series of decisions over time. This perspective is
ized will constrain its future ability to grow or cre- also concerned with how new paths are launched
ate opportunities for new sectors to emerge. The and regions alter their trajectory of development.
basis on which those sectors emerge will be influ- The systems and long-term approaches focus on
enced in turn by the capacity of regional firms and how the persistence of a set of relationships among
institutions to develop and exploit new sources of a number of variables is conditioned by an under-
knowledge and the existing knowledge infrastruc- lying structure of relevant institutions (Chapple and
ture, as well as the talents and skills of the work- Lester, 2007; Hill et al., 2008).
force. In the end, the past will strongly condition the This paper uses the path dependence approach to
range of possibilities that lie open in the future. develop an understanding of the concept of regional
Among the important factors influencing the resilience. Within evolutionary economics, the con-
outcome are: the ability of regional and local gov- cept of path dependence is used to explain why
ernments to build on specialized regional assets, certain technologies prevail in the competitive set-
including public and private research infrastructure, ting of the marketplace, although they may not al-
as well as unique concentrations of occupational ways be technologically superior. The evolutionary
and labour market skills; the presence or absence approach suggests that technologies emerge and
of ‘civic capital’ at the regional and local level, and become predominant through a series of past deci-
the ability of regional networks to work within and sions, random events and accidents of history. As
across associational boundaries to support the for- a result of these decisions, certain possibilities are
mulation and refinement of strategic management easier to pursue in the present and others less so.
policies in response to external shocks. This paper When applied to regional and urban phenomena, it
explores the way these processes have played out in suggests that the developmental path of a specific
two core cities, Ottawa and Waterloo, in the prov- city or region is rooted in a series of economic,
ince of Ontario over the past decade in response to social and cultural factors in their past. The chal-
major external shocks—the post-2001 meltdown in lenge is to reconcile the significance of random or
the telecom sector and the macroeconomic shock of chance events in endowing a region with its indus-
2008. Lessons will be drawn from this experience trial structure and institutional capabilities, while
for the factors that can contribute to regional resil- allowing for the role of political leadership in fash-
ience elsewhere. ioning subsequent changes in its broader institu-
tional structures and development strategies.
Paul David defines a path-dependent sequence of
Path dependence and regional economic change as one in which important influ-
resilience ences upon the eventual outcome can be exerted by
The concept of regional resilience is associated with temporally remote events, including those domi-
a number of approaches in the social science liter- nated by chance elements, rather than systematic
ature, identified as equilibrium, path dependence, forces. In such circumstances, ‘historical accidents’
systems and long-term perspectives. An equilib- can neither be ignored nor neatly quarantined. In

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Strategic Management of Core Cities

a dynamic process, positive feedbacks are gener- and their core cities. During the early phase of tech-
ated by strong technical complementarities on the nology development, many cities have the potential
supply side of markets, and/or the interdependence to emerge as the location where a technology and its
of customer preferences on the demand side. He corresponding industry take root. Once a city or
insists that this does not mean that economic region establishes itself in a particular set of pro-
outcomes are predetermined; rather he quotes from duction activities, its opportunities for continued
Douglas North to demonstrate that ‘contingent growth are reinforced by the impact of increasing
probabilistic events have a place throughout the returns to the technological and institutional advan-
dynamic process’ (David, 1997, 17). North argues tages it enjoys. While this may be partly attributable

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that ‘‘At every step of the way, there were to the success of a ‘lead’ anchor firm in the region,
choices—political and economic—that provided such as Nortel in Ottawa or Research In Motion in
real alternatives. Path dependence is a way to nar- Waterloo, the process is reinforced by other factors
row conceptually the choice set and link decision at work, including local collaborative institutions
making through time. It is not a story of inevita- and political alliances that support the emerging
bility in which the past neatly predicts the future’’ industrial structure of the city or region. By the
(North, 1990, 98–99) (emphasis added by David). same token, ailing places may face greater chal-
The related concept of increasing returns ex- lenges in improving their fortunes when their prin-
plains how positive feedback can amplify the cipal industries and technologies begin to decline.
effects of small economic shifts in many areas of Once a path-dependent trajectory of decline sets in,
economic activity. Once a set of chance events the critical factor that determines a region’s resil-
pushes the technological trajectory of a new prod- ience is the capacity of local firms to shift to a new
uct or process onto a certain path, the prevailing or emerging set of production activities and the
technology may become locked-in due to the fact extent to which its institutional structures support
that it was the first to gain wider acceptance in the that shift.
marketplace, that many supplying businesses, dis- Economic geographers have elaborated on these
tribution networks, supporting technologies and insights to extend the analysis of path-dependent
users, plus a large community of users and devel- trajectories in regional development. Brian Arthur
opers, all converged on its design. In effect, the analyses the way in which agglomeration external-
overall appeal and market dominance of the tech- ities contribute to the concentration of firms in spe-
nology increases as this process unfolds (Arthur, cific regions. His interest in the question grew out
1988, 591). The key insights arising from this liter- of his fascination with Jane Jacob’s ‘‘haunting
ature are summarized by Martin and Sunley as tech- accounts of places and regions that had got ‘passed
nological ‘lock-in’, dynamic increasing returns, and by’ historically in favour of other places and
institutional hysteresis. They warn that the key lim- regions that had got ahead merely, it seemed, be-
itation associated with this approach is that it ‘‘tells cause they had got ahead’’ (Arthur, 1994, xviii). He
us little about how new paths come into being’’ set out to explain how one location pattern among
(2006, 407). The literature is more illuminating on many possibilities might emerge. His model allows
the question of how a new form of economic de- for a simple notion of historical accident by assum-
velopment, structure or technology generates self- ing that firms make locational decisions on an
reinforcing processes once selected, rather than individual and random basis. In an unbounded ag-
how they get selected in the first place. glomeration case, the random decision process
eventually locks into a situation where one location
Path dependence and regional development enjoys a monopoly advantage, ‘‘(t)he process is
The concepts of path dependence, increasing path-dependent . in that a slightly different
returns and lock-in have obvious applications to order-of-choice history early on could sway the out-
understanding the historical paths taken by regions come to a different location becoming dominant.

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Wolfe

An attractive location will likely be favoured by nomic structures and institutional supports as
many firms early in the choice order, and there- a key issue (Martin and Sunley, 2006, 413). The
fore it has a larger probability of predominating’’ path-dependent nature of development in regional
(Arthur, 1994, 58–59). economies, involves not just the process by which
Michael Storper highlights the contribution of these interdependent subsystems co-evolve but also
regionally based externalities to the process of in- the process by which new paths are created and
creasing returns. He notes that the technological existing institutional ensembles begin to break
complementarities identified by evolutionary econ- down and decay. Central to the question of regional
omists and the resulting positive feedbacks or resilience is how adaptable these institutional

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technological spillovers have a strong regional di- ensembles are to changes in the principal industries
mension. Knowledge spillovers in technological and technologies at the core of the region’s eco-
development mean that technological competence nomic structure. In particular, the key issue
is frequently bundled in ensembles of related capa- concerns the ability of firms, industries and institu-
bilities—firms that master it are tightly integrated tions in a specific city or region to adapt their exist-
into networks with other firms through formal ing knowledge base and localised capabilities to the
exchanges and ‘untraded interdependencies’, which generation and exploitation of new commercially
can confer advantages on certain regions that insu- valuable sources of knowledge. ‘‘New paths do
late them, at least temporarily, from market-based not emerge in a vacuum, but always in the contexts
competition. These include labour markets, public of existing structures and paths of technology, in-
institutions and locally or nationally derived rules dustry and institutional arrangements’’ (Martin and
of action, customs, understandings or values Simmie, 2008, 186). Resilient regions are those
(Storper, 1997, 18–22). Maskell and Malmberg ex- in which existing clusters of firms are able to
tend this point by arguing that the competitive suc- transition out of declining industries, while simul-
cess of firms depends on distinctive, localised taneously exploiting the local knowledge infra-
capabilities. These capabilities arise from local structure to cultivate new, potential growth fields.
assets that are unique to the region, based on its
infrastructure and built environment, its endow-
ment of natural resources, the regionally specific
Social learning and the governance of
institutions and the available set of knowledge
regional economies
and skills. A region’s institutional architecture Despite the constraints imposed by path-dependent
accumulates incrementally over time, becoming sequences of regional economic development,
part of its non-replicable asset base. examples abound of localities and regions that have
altered their developmental trajectory by improving
. it is the region’s distinct institutional endow- their endowment of institutional and cultural fac-
ment that embeds knowledge and allows for tors. They may differ in terms of their industrial
knowledge creation which . constitutes its structure, the relative mix of industries on which
capabilities and enhances or abates the com- their success is based and the social or civic culture
petitiveness of firms in the region. The path– that creates cohesion in the region or locality, but
dependent nature of such localised capabilities they share in common a capability for reflexivity or
makes them difficult to imitate and they thereby social learning. Increasingly, the challenge for both
establish the basis of sustainable competitive public and private organizations is to structure
advantage (Maskell and Malmberg, 1999, 181). knowledge and intelligence in social ways, through
social learning, rather than on an individual basis
This point is picked up by Martin and Sunley (Paquet, 1999; Wolfe and Gertler, 2002). Learning
who view the extent and nature of this interlocked is the capacity to improve present performance as
relation between underlying technologies, eco- a result of experience through a redefinition of the

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Strategic Management of Core Cities

organization’s objectives and the modification of collaborate with these actors under a more distrib-
behaviour and structures as a result of new circum- uted pattern of authority. This may involve the del-
stances (Paquet, 1997, 31). It is fundamentally a so- egation of certain tasks from government agencies
cial cognitive process that depends upon the to accredited business associations or community
interaction of geographically proximal actors to organizations; it may even involve instances in
develop new processes of adaptation. which these civic associations take the lead on im-
This form of learning assumes that neither the portant local initiatives. The sharing of power with
public sector nor private enterprises are the source a broad range of actors creates the opportunity for
of all wisdom; rather, the process of institutional more meaningful dialogue to take place at the re-

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adaptation demands an interactive form of learning gional and local levels, which is central to the pro-
in which the means for communicating insights and cess by which parties come to reinterpret
knowledge to all relevant actors in a regional econ- themselves and their relationships within the local
omy is crucial for the outcomes. Whether the adapt- economy (Morgan and Nauwelaers, 1999, 12–13).
ability of a city or region constitutes a dynamic
force for change or an ‘institutional drag’ depends Civic capital and regional governance
on the ability to replace inefficient norms and Research on urban and regional development has
practices with ones that facilitate the process of long been concerned with the factors that foster
economic change and social adaptation (Paquet, more effective cooperation among civic actors at
1999). The ability to create effective linkages the regional and local level. The concept of social
among relevant institutions and actors at the local capital has been used to explain why some regions
and regional level is a key factor in the development are more successful in overcoming obstacles to
of effective policy and a prerequisite for regional establishing cooperation than others. Social capital
resilience. Yet, recognizing the importance of col- is defined as the ‘‘social relations among agents,
laboration and coordination for reflexive policy de- resting upon social institutions that allow for coop-
velopment is only part of the challenge; better eration and communication’’ (Lorenzen, 2007,
coordination requires an understanding of the con- 801). Lorenzen distinguishes between the business
ditions that contribute to its emergence and devel- realm and the civic realm of social relations. Busi-
opment. Policy outcomes depend on the interaction ness relations include technological learning within
among a wide range of social and economic actors, the firm and inter-firm trade and knowledge
including sub-national and local governments, the exchanges. Civic relations include those that exist
private sector, voluntary, business and not-for- between people in a community who interact with
profit organizations. This approach emphasizes each other through their involvement with schools,
the processes of governing, rather than the exercise various cultural and leisure activities and other civic
of formal authority through organizational and ad- associations. The civic dimension of social capital
ministrative structures. Governance ultimately is particularly sensitive to geographic distance be-
refers to self-organizing, inter-organizational net- cause many of the activities that enhance the
works (Rhodes, 1996, 660). Central to the concept strength of civic relations are based on the specific
is the development of styles of governing in which catchment area of a civic association or member-
the boundaries between public and private actors ship in a cultural organization. These relations fre-
and even across different levels of government quently entail face-to-face meetings that are
become blurred. constrained by distance (Lorenzen, 2007).
For the public sector to operate in this mode of Building on this distinction between the business
governance, it must both establish the conditions and the civic dimensions of social capital, the con-
under which key actors at the community level cept of civic capital is used to analyse the contribu-
can engage in a consultative and interactive fashion tion that more cooperative forms of behaviour make
with government authorities, as well as learn to to the success of local and regional economies

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Wolfe

(Wolfe and Nelles, 2008). Civic capital focuses on contribute to the articulation of a shared vision for
the role that dense networks of civic associations the economic community and the local economy
play within successful communities. It is defined as and build a consensus among key civic actors and
a set of relations that emerges from interpersonal associations around that vision (Porter et al., 2001,
networks tied to a specific region or locality and 75). The emphasis on the role of local leaders in
contributes to the development of a common sense building civic capital and creating collaborative
of community based on a shared identity, set of institutions underlines the importance of political
goals and expectations (Nelles, 2009). agency in charting new developmental pathways
The basis of civic capital is its urban orientation for resilient regions; but even dynamic regions with

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and the quality of the networks that exist among the highest levels of civic capital are constrained by
civic actors within the community. Civic capital is their existing mix of industries and technological
generated within a city or region when key actors capabilities. No region gets to wipe the slate clean
formulate a common vision of their future and make and start afresh.
decisions about that future in a collaborative man-
ner. The concept of civic capital also pays close
attention to the role played by civic leaders in fos- Strategic management of regional
tering regional networks. Civic leaders, or civic
economies
entrepreneurs, are critical in articulating a regional The economic future of regions confronted with the
vision and intensifying and formalizing collabora- emergence of new technologies or the declining
tive networks within and between communities. competitiveness of their industrial structure de-
However, the source of that leadership may vary. pends on the ability to mobilize their knowledge
In some regions, it comes from political institutions assets and chart a new path forward. The response
or industry associations. In others, it originates with adopted by many regions to the trend towards
an inspirational figure in a university setting or an- knowledge-intensive production has been an in-
chor firm that attracts or spins off like-minded indi- creased emphasis on ‘strategic management policy’
viduals in other firms or industry associations. at the regional and urban level. This approach
These leaders understand the importance of collab- involves ‘‘the development and enhancement of
oration and through their leadership bring various factors of production that cannot be transferred
groups of actors together to negotiate and agree on across geographic space at low cost’’ (Audretsch,
regional goals. In doing so, they build civic capital 2002, 174). Rather than concentrating on the zero-
by creating the fora and the initiatives for different sum competition for inward investment, successful
segments of the local community to collaborate in places focus on generating new economic knowl-
pursuing agreed upon goals (Henton et al., 1997, edge that drives innovation and export success. As
31). Feldman and Martin note, most jurisdictions pursue
In regions characterized by higher degrees of a strategy that is defined by the collective decisions
civic capital, the presence of an interlocked network that actors within that jurisdiction make over time,
of collaborative institutions results in more effec- whether in coordination or not and whether articu-
tive governance. Collaborative institutions embody lated or not. Successful jurisdictional strategies are
values and attitudes that are intrinsic to the region those that contribute to high and rising wages for
and help build civic capital. Successful regional their workers over time. Jurisdictions can benefit
economies benefit from the presence of collabora- from creating an economic base with unique and
tive institutions, which communicate the respective valuable assets that provides a differentiated advan-
needs of different community actors to each other, tage over other jurisdictions, but ‘‘constructing
establish local and regional priorities for economic jurisdictional advantage takes the will of all the
development and build effective bridges across dif- actors—a consensus vision and vision of unique-
ferent segments of the economic community. They ness’’ (2005, 1245).

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Strategic Management of Core Cities

Variations in the ability of cities and regions to mote innovative ideas in all aspects of regional eco-
mobilize knowledge resources and develop new in- nomic activity, facilitate relationship building and
novative capacities are linked to ‘‘collaboration be- create buy-in and are ongoing, iterative and non-
tween agents and their ability to mobilize assets’’ linear. Successful strategies are reflexive in that
and ‘‘the successful institutional arrangements they use their past experience to create a more
[that] often grow out of local agencies and endow- effective process—in other words, they involve
ments’’ (Simmie and Wood, 2002, 149). a degree of social learning. An essential criterion
The theoretical foundation for this argument rests for success is finding the appropriate mechanisms
on the approach to governance that emphasizes the to engage key members of the community in a sus-

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benefits of collaboration across different levels of tained effort to advance its opportunities. Drawing
government and between public and private actors on their experience with community-based eco-
at the local scale, as the most effective way for nomic development initiatives, Henton and his col-
achieving better policy alignment and sustaining leagues argue that what we have termed ‘civic’
urban economic growth. capital is critical for the success of the most dy-
A key question is how to generate the right con- namic strategic management exercises. Civic
ditions for devising strategic management policy at capital can be created, and the basis for doing so
the regional and local level. Much depends on the is the establishment of collaborative networks be-
ability of cities and regions to develop the organi- tween various elements of the business and civic
zational capacity for formulating and implementing communities.
new development strategies. Successful regions
must be able to engage in strategic planning exer- The presence of collaborative institutions and
cises that identify and cultivate their assets, under- organizations . greatly facilitates this environ-
take collaborative processes to plan and implement ment. These alliances, networks and other
change and encourage a regional mindset that fos- relationship–building mechanisms create con-
ters growth. The successful adoption of a strategic nections and linkages vital to economic
management policy at the urban level requires not development in a technology–driven world.
just new types of policy but a new style of policy Relationships matter (Montana et al., 2001, 10).
development, deploying what Gertler and Wolfe
label ‘local social knowledge management’ exer- A number of additional obstacles lie in the path
cises (2004a). Such exercises are concerned with of the successful implementation of bottom-up gov-
identifying a city or region’s unique jurisdictional ernance development strategies. One of the limita-
assets that can support the development of its urban tions faced by a governance-based approach is the
economy. These can include knowledge economy lack of financial resources to fully support the de-
assets (such as workforce skills, knowledge and re- sired initiatives. This problem can be compounded
search development, creativity, advanced telecom- by the absence of a formal tier of government insti-
munications infrastructure, quality of place and tutions corresponding to the actual economic terri-
financial capital), collaborative institutions and tory encompassed by the city region. Smaller and
organizations (such as regional development organ- less dynamic urban regions may also face a greater
izations, professional networks, research consortia challenge in accessing regional and national gov-
and entrepreneurial support networks) and the ernment resources or even gaining a significant
regional mindset (values and attitudes). place on their respective policy agendas. An addi-
Regional economic development processes are tional danger lies in zero-sum, competitive devel-
fundamentally socially organized learning pro- opment strategies through the use of financial
cesses involving learning by individuals, by firms incentives and subsidies to attract investment away
and by institutions. Successful strategic planning from more established centres. Engaging in these
exercises are demand and opportunity-driven, pro- kinds of bidding wars can reduce the economic

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Wolfe

benefit to the larger region or nation as a whole Both Ottawa and Waterloo benefited from the
(Rodrı́guez-Pose, 2008, 1037–39). Resilient regions transition to a more knowledge-intensive economy
are better able to overcome these obstacles in formu- as the relative size and international reach of their
lating strategies that support the co-evolution of their technology clusters expanded from the early 1980s
industries and institutions along new development onwards. Both were blessed with a strongly
paths. endowed research infrastructure, national and pri-
vate research laboratories in the case of Ottawa and
strong post-secondary educational institutions in
Lessons from Ottawa and Waterloo, Waterloo. However, both cities have been impacted
Ontario

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by the economic aftershocks of the technology bub-
Ottawa and Waterloo are sites of two of the leading ble in 2001–2002 and the global financial crisis of
high-technology clusters in Ontario, Canada’s larg- 2008–2009. In each case, their ability to weather
est province and the centre of its greatest concen- the economic storms of the current decade has
tration of economic activity (Lucas, Sands and benefited from a combination of strong entrepre-
Wolfe, 2009). Ontario enjoyed a privileged eco- neurial business leadership and building civic cap-
nomic position during the post-war period, but has ital through effective governance mechanisms.
experienced increasing economic volatility since the Each city was affected differently by the current
recession of the early 1980s. This restructuring was crisis, due to the collapse of Nortel in Ottawa and
accentuated in the 1990s by Ontario’s deeper inte- the implosion of the automotive manufacturing
gration into the North American economy through base, which still comprises a significant part of
the North American Free Trade Agreement. Faced the Waterloo economy (Holmes and Rutherford
with major declines in the number of firms in mature, (2008). Their resilience in face of the current crisis
labour-intensive industries, the province came under is conditioned by a combination of the legacy of
considerable pressure to reposition its economy and their industrial structure and the strategies
to promote more knowledge-intensive activities in being forged to support the further growth of
industries such as information and communication knowledge-intensive industries.
technologies (Gertler and Wolfe, 2004b; Pike
et al., 2006, 206–12). This strategy faced new chal- Associative regional governance in Ottawa
lenges in the early 2000s in the wake of the telecom The origin of the high-tech cluster in Ottawa pro-
bust. The ability to enhance civic capital at the re- vides the classic illustration of a path-dependent
gional level and foster better governance mecha- sequence of development. The decision by Northern
nisms are critical elements in helping Ontario’s Electric (now Nortel) to establish a research facility
core cities respond to the cascading shocks that have in Ottawa in the late 1950s was made after a judicial
buffeted the provincial economy. The following case decision in the US cut off its ready access to patents
studies draw upon an extensive series of interviews from the Western Electric Co. It purchased a tract of
conducted in both cities over the past decade as part land on the outskirts of Ottawa as the home of Bell
of a large collaborative research project on innova- Northern Research, because of the location of the
tion and creativity in Canadian cities. The interviews National Research Council laboratories and the
followed a common semi-structured guide with Department of Defence’s Communications Research
questions focused on the inter-relationships between Centre in the nation’s capital, resulting in thousands
key public and private actors in the city involved in of industrial engineers, researchers and managers
economic development activities. The research moving into the region (Wolfe and Gertler, 2006).
sought to assess the quality of civic capital present Many of the leading entrepreneurs in the Ottawa
in the local community and the degree to which telecommunications and photonics clusters began
a strategic management approach had been adopted their careers as researchers for BNR. Both technical
in pursuit of local economic objectives.1 and entrepreneurial talent left Nortel over the years

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Strategic Management of Core Cities

to form new firms in the region. One of the key the Province of Ontario’s Office of Urban Eco-
events in the region’s early history was the bank- nomic Development. OCRI was closely involved
ruptcy of the semiconductor firm, Microsystems In- with the resulting Economic Generators Initiative
ternational Ltd. (MIL) in 1975, which released led a group of public and private leaders committed
a significant number of skilled workers into the re- to advancing the local economy. The mandate of
gional economy, many of whom went on to found the initiative was ‘‘to provide leadership and advice
new firms. More than 20 local start-ups emerged at a strategic level, on action required to improve
from the collapse of MIL, including some of the and grow Ottawa’s economy’’ (ICF Consulting,
region’s leading firms, such as Mitel, Mosaid and 2000, i). Membership included the chairs of the

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Calian (Harrison et al., 2004). region’s business and economic development
Since the 1980s, Ottawa has been characterized agencies, and representatives of its municipal
by a high degree of civic capital. The relative suc- council, the higher education sector and the busi-
cess in building this form of governance has been ness community at large. The leadership under-
noted by other cities, such as Waterloo, and there took a detailed study of the region’s ‘economic
have been some notable efforts to reproduce ele- generators’ and used the study to prepare a strate-
ments of the model. The distinguishing feature of gic plan for the development of the key engines
the Ottawa case is the strength of its local ‘institu- driving the local economy. Three hundred individ-
tions of collaboration’ and the degree to which they uals participated in the work of the various groups
are integrated with the formal structures of regional that formed the visioning exercise and formulated
municipal government. The linchpin of these insti- 33 specific goals to promote seven key clusters
tutions is OCRI, the Ottawa Centre for Research identified as growth generators for the regional
and Innovation, a not-for-profit organization economy.
founded in 1983 as a collaborative effort among The exercise produced a set of flagship initiatives
partners from industry, the regional municipality, designed to work across the individual clusters to
local post-secondary institutions and federal labo- benefit the regional economy as a whole. Unfortu-
ratories. OCRI currently has 625 members and nately, the report was released just as the high-tech
a budget of approximately $8 million, with 20% sector entered the post-2000 downturn. Despite the
funded by the City of Ottawa and the remainder recession, OCRI and the municipal council forged
coming from a variety of sources including: munic- ahead with some of the proposed initiatives. Among
ipal, federal and provincial government; member- those that came to fruition were measures to
ship fees; professional development programs, and strengthen the region’s biotechnology and photonics
private sector contributions. OCRI delivers a wide clusters with the formation of the Ottawa Biotech-
range of economic development services to the lo- nology Incubation Centre and the Photonics Fabri-
cal economy and is involved in a dense network of cation Centre, constructed through a partnership
partnerships with many of the locally based federal between the National Research Council and Carleton
and provincial research and technology-based University. The telecom bust of 2001–2002 under-
organizations, including national research laborato- mined much of the momentum generated through
ries and provincially funded research networks, the strategic planning exercise. An update of the first
aimed at strengthening the region’s innovation report was released in January 2003, setting out
capabilities. Virtually all accounts of the rise and a strategy for strengthening the links between the
growth of the Ottawa high-tech sector agree on the region’s research infrastructure—especially its
fundamental role that OCRI has played in the pro- post-secondary education sector and national labora-
cess since its inception (Chamberlin and de la tories—and the local sources of enterprise within
Mothe, 2003; Mallet, 2004; O’Sullivan, 2004). existing and emerging clusters, but did not have
Ottawa launched an innovative strategic manage- the same positive impact as the first one (ICF
ment exercise in the late 1990s in partnership with Consulting, 2003, 3).

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The twin crises of the past decade have revealed experienced by an earlier generation of firms. The
Ottawa’s over-dependence on telecom-based tech- collapse of Nortel in 2009 and the ensuing sale of
nologies as a major weakness in its industrial struc- all its key divisions signal the loss of the lead an-
ture. In response to the restructuring of the leading chor firm in the regional economy. Overall, the
telecom and photonics firms in the region, attention Ottawa case provides a striking illustration of the
shifted to the need for a series of training and labour difficulties encountered by a region in overcoming
adjustment measures to relocate high-tech workers the legacy of an excessive reliance on a relatively
who had lost their jobs with the region’s leading small number of industrial sectors, despite the
telecom and photonics firms. Initiatives included: strong support of its civic governance institutions.

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O-Vitesse, a joint undertaking of the National Re- It confirms that the degree of resilience exhibited
search Council’s Regional Innovation Centre and by a regional economy is a product of both the
the region’s two universities to provide skill path-dependent nature of its industrial develop-
upgrading for under-employed or unemployed, ment, as well as the capacity to forge regionally
often foreign, professionals (Chatbar, 2004); the based institutions of civic governance.
Ottawa Talent Initiative, organized by unemployed
high tech workers with federal and provincial gov- Promoting civic capital in Waterloo region
ernment representatives and community organiza- The technology sector in Kitchener–Waterloo–
tions, as well as a more recent one to build linkages Cambridge (Waterloo), located an hour west of
between employers, immigrants agencies and other Toronto, is one of the most dynamic sources of
stakeholders and expand employment opportunities high-tech activity in Canada. Although its present
for skilled immigrants in Ottawa (Andrew and contours can be traced back to the formation of the
Doloreux, 2008), and TalentWorks, launched under first software and computing firms in the 1970s, the
the auspices of TOP and managed by OCRI, as region has long been an important setting for
a community-based initiative to build Ottawa’s tal- manufacturing in Southern Ontario. Kitchener–
ent pool by providing integrated support to targeted Waterloo has been home to major national and in-
sectors (Paquet et al., 2004). While the extent and ternational corporations for more than a century,
diversity of these post-2002 initiatives reflects a cer- from Dominion Electrohome Ltd. to present day
tain degree of civic capital, the lack of integration success, Research in Motion—manufacturer of the
between the economic and labour market initia- iconic ‘Blackberry’. Although the region is only
tives, as well as the failure to follow through on about half the size of Ottawa, its more diverse in-
the 2003 report reveals an inability to deliver on dustrial base, as well as the historical capacity of
the original intent of the strategic management some of its leading firms to transition from older
exercises due to a fragmentation of the respective technologies to new ones, has been a continuing
networks and lack of clear civic champions. source of regional resilience. Much of the success
OCRI continues to be a cornerstone of the re- of the region has been attributed to its highly en-
gional economy and has sustained the intense level gaged civic associations and the proliferation of
of collaborative activities that have been its hall- mechanisms for strategic management and regional
mark. However, current employment in the high- governance.
tech sector languishes well below its peak in 2000 The emergence of the high technology cluster in
and labour shedding by leading ICT firms has the Waterloo region owes its success to critical
resulted in a more significant decline in earnings decisions taken by industrial leaders in the years
for high-tech workers than any other ICT-intensive following World War II. Leading members of the
region in the country (Frenette, 2007). It has led to local community in Kitchener–Waterloo played
the formation of a large number of small start-ups a prominent role in recognizing the need for more
over the past decade, but it is too early to tell technical education in the regional economy. They
whether any will enjoy the rapid rate of growth proposed a unique solution in the form of The

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Strategic Management of Core Cities

Waterloo Plan, which called for the formation of an regarded as one of the keystone organizations of
engineering-focused university with a new ap- the region and its mandate has expanded to include
proach to post-secondary education to be offered land use, infrastructure development and the inte-
on a cooperative basis with industry. In sharing gration of immigrants into the local community.
the burden of technical training with industry, the Communitech was established in 1997 with the
university would be able to provide a greater depth goal of facilitating the exchange of ideas and im-
of education—both theoretical and practical—and proving relations between high technology compa-
build a closer relationship with industry in order to nies. The group was formed as the CEOs of several
anticipate employment needs, secure additional local technology firms discovered that they were

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funding and ensure that classroom education facing similar challenges stemming from the weak
remained on the cutting edge. This proposal became state of the regional ICT infrastructure. The associ-
the basis for the University of Waterloo’s highly ation currently supports the tech community with
successful cooperative education program, widely a number of services such as Peer2Peer networking
regarded as the largest and the best university co-op events developed to provide a forum to discuss best
program in North America and a significant asset to practices for industry leaders (CEOs, CIOs and
the region (Nelles et al., 2005). CTOs), management and technical professionals.
The high technology sector in Waterloo grew out In addition to providing these direct services tar-
of its strong industrial base in advanced geted at its members, Communitech also plays
manufacturing, combined with the early focus of a larger role in supporting non-members in the tech
the new university in engineering, math and com- community as well as in local economic gover-
puter science. Waterloo’s first ICT firms emerged in nance (Bramwell et al., 2008). Although CTT and
the 1970s when two of the early firms, WATCOM Communitech were established by different com-
and Dantec Electronic, were spun-off from the Uni- munities of local actors to serve different purposes,
versity. A subsequent generation of firms followed they have developed increasingly close ties over the
in the 1980s, including Dalsa (1980), Virtek Vision years and a better capacity for coordination.
(1986) and Open Text (1989). Much of the spin-off The Prosperity Council, formed in 2003, is a rel-
success is attributed to the university’s intellectual atively new venture in regional governance. The
property (IP) policy, which allows ownership of IP Prosperity Council comprises representatives of
to rest with the creator. Although the University the above two organizations plus the local Cham-
remains central to the continuing development of bers of Commerce. Together they represent more
the regional economy, its primary contribution is no than 3000 businesses in Waterloo region. Its goals
longer through the process of new firm formation, are to build a collaborative regional vision; brand
as relatively fewer firms have spun out directly and market the region as a successful area for busi-
since the late 1980s (Wolfe and Bramwell, 2008). ness, arts and lifestyle; enhance regional health
As is the case in Ottawa, Waterloo is marked by institutions; strengthen local post-secondary institu-
both relatively strong regional governance and tions, and create and fund a regional arts and culture
dense civic capital, which has grown and intensified development and promotion body. The Prosperity
over time. From the founding of the University of Council has been active recently in organizing to
Waterloo to the establishment of Canada’s Tech- promote the regional arts and cultural agenda. This
nology Triangle Inc. (CTT), Communitech and activity is indicative of the willingness of the pri-
the recent initiation of the Prosperity Forum, the vate sector to support regional cultural initiatives, as
private sector has played an instrumental role in well as a public willingness to see civic groups
local economic development. CTT was founded drive the cultural agenda at the regional level.
in 1987 as the regional marketing association of While the post-2000 downturn in the ICT sector
the three local municipalities, but evolved into had a negative impact on Waterloo, it has fared
a public private partnership in 1999. It is widely better than the high-tech cluster in Ottawa due to

149
Wolfe

the more diversified industrial base of the regional private and higher education sectors, but all ac-
economy. A key feature of Waterloo’s resilience knowledge the high degree of networking and in-
has been the ability of local firms to recognize teraction that exists across both public and private
emerging technology trends and to mobilize key sectors in support of the region’s economic future.
segments of the local business community, civic
associations and the regional research infrastructure
in support of new initiatives to capitalize on those Conclusion
trends. The current recession has severely impacted This paper has outlined the way in which two of the
the more traditional manufacturing base in the core cities in Ontario have responded to the major

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region. In response, the local municipalities have sup- external economic shocks experienced since 2000.
ported a number of measures to expand the post- The degree of resilience exhibited by each is a prod-
secondary institutions in the area of digital media. uct of their underlying industrial structures shaped
The most recent measure involves linking a new by a path-dependent process of economic develop-
branch of the University of Waterloo in Stratford, ment, as well as the strategic responses framed by
Ontario, with a strong focus on the creation of con- key civic leaders working through their respective
tent for digital media with the parallel creation of institutions for regional governance. Each region is
a Digital Media Convergence Centre in downtown a product of the particularly way in which their in-
Kitchener and the attraction of federal funding for dustries and institutions have co-evolved over time.
a new Centre of Excellence, the Corridor for None are completely captive to the past trajectories
Advancing Canadian Digital Media. The Centre re- of economic development, but neither are they
cently attracted a major investment from the pro- completely free of that legacy. New pathways for
vincial government as well. The vision of the urban economic development can emerge through
Centre of Excellence is to combine arts and cultural the indigenous creation of new products or pro-
content with digital media to develop innovative cesses, through the expansion of new areas of com-
ways to present and manipulate data and visualize petence or specialization in the urban economy,
processes. It enjoyed initial support from the CEO’s through the progression along a value chain to
of key local firms, such as Open Text and Christie higher value added activities for existing industries
Digital. The drive to secure a broad base of private and through the re-location of existing firms and
sector support that was a prerequisite for govern- industries into an existing urban economy. How-
ment funding was led by Communitech. ever, these emerging pathways are strongly influ-
These initiatives to reposition the region’s eco- enced by the existing mix of knowledge assets and
nomic base are an important indication of the extent labour force skills within the local economy. The
to which civic capital in Waterloo is a key factor in key challenge is how firms, industries and institu-
the region’s resilience. The region is characterized tions in a particular region recombine their existing
by a high degree of associative activity, civic en- knowledge base and localized capabilities to gener-
gagement, personnel overlap and well-developed ate new commercially valuable sources of knowl-
organizational linkages. Over time, the scope and edge.
number of initiatives has increased and the range of The most effective strategies for regional resil-
participation expanded to include a wider range of ience rely on acquired levels of civic capital and the
actors. Despite the political fragmentation of the existing endowment of regional institutions to chart
region into a number of smaller municipalities, new paths forward, but they do not always do it in
civic capital is highly developed outside of the pub- equally effective manner. Among the factors that
lic sector and serves to bridge the existing munici- determine their effectiveness are the ability to build
pal jurisdictions. Most of the key leaders, groups on specialized regional assets, including public and
and initiatives that have been influential in promot- private research infrastructure, as well as unique
ing the regional agenda have emerged from the concentrations of occupational and labour market

150
Strategic Management of Core Cities

skills; the presence or absence of ‘civic capital’ at Chamberlin, T. and de la Mothe, J. (2003) Northern light:
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Endnotes
dictional advantage. Research Policy, 34 October:
1 1235–1249.
More details on the design of the research projects and
conference papers and presentations resulting from the Frenette, M. (2007) Life after high tech, Statistics
case studies can be found online at: www.utoronto.ca/ Canada Catalogue no. 75–001-XIE. Perspectives,
July: 5–13.
isrn.
Gertler, M. S. and Wolfe, D. A. (2004a) Local social
knowledge management: community actors, institu-
Acknowledgements tions and multilevel governance in regional foresight
exercises. Futures, 36 February: 45–65.
Funding Support: Research funding for this paper has
Gertler, M. S. and Wolfe, D. A. (2004b) Ontario’s
been provided by the Social Sciences and Humanities regional innovation system: the evolution of
Research Council of Canada under its Major Collabora- knowledge-based institutional assets. In P. Cooke,
tive Research Initiative Grant No. 412-2005-1001. H.-J. Braczyk, and M. Heidenreich (eds.). Regional
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