I think I blogged on this exact topic a few months ago but I felt in light of the high Canadian dollar it would be worth bringing the topic back.
Michael Porter’s cluster theory – Cliff Notes Version
Industry clusters have a greater propensity to grow so governments should support and nurture these clusters. An industry cluster is loosely defined as a critical mass of companies and related economic activity in a specific sector of activity (for example: car manufacturers, auto parts suppliers, auto industry trainers, auto industry R&D, industry consultants and support professionals, etc. all located within a local geographic market). A non-cluster would be onesy and twosy auto parts manufacturers located in an ‘isolated’ market. They have, in Porter’s view, little chance of success in the long term.
Richard Florida’s creativity theory – Cliff Notes Version
Florida believes that ‘creative’ communities achieve above average economic growth over time. His theory is that creative ‘types’ – artists, artisans, musicians, etc. end up weaving a culture of innovative thinking into local industry. In addition, this wedge of artistic creativity makes the community more liveable and attractive to people moving in.
David Campbell’s clusters, creatives, chickens, eggs – Cliff Notes Version
These are two examples of the chicken and egg theory of economic development. You need a cluster to grow a cluster. If clusters feed on themselves and grow, how did the original cluster come about to begin with? Same with creative communities. Do successful communities attract creative people (because there is surplus money around to fund the arts, etc.) and then those creative types end up benefitting the community or is it the other way around?
In other words, who is at the top of the hill starting the snowball rolling? Who is pushing those first logs to get the logs rolling? Or who is putting the slop in the barrel to get the pork barrelling started?
Ooops. Wrong metaphor. Scratch that last one.
You see, in my opinion, 15 years ago we could sell cheap and available labour for call centres and a $0.65 cent dollar. Now we have almost no available people and a $1.01 dollar.
The value proposition has fundamentally changed and I don’t see the economic development infrastructure changing with it.
Now we need to scrap ‘price’ as the centre of the value proposition ((i.e cheap labour) and move to ‘quality’ as the centre of the value proposition.
Take Toronto for example. It positions itself as ‘cheaper’ than Geneva, New York and London but doesn’t even try to compete with Winnipeg, Moncton or Halifax on cost. It competes on quality. Toronto has one of the most developed financial services infastructure environments in North America. I read that over 50% of the region’s lawyers have financial industry experience. Couple that with dozens of industry trainers, research centres, head offices, back offices, IT firms specializing in financial services products, etc. – and you have a true cluster.
I firmly believe that – maybe at a different scale – New Brunswick has to start doing this. If Moncton wants to attract financial services firms, it should design a financial services district downtown and attract the, I don’t know bear with me here, Gilles Ouellette or Frank McKenna Centre of Excellence in Financial Planning Research. U de M should have an advanced financial sector training faculty. Our immigration policy to should be geared towards attracting Indian finance professionals. The NB government should skew its tax policy to a favourable environment for financial services. The city of Moncton’s brand should have a financial angle such as “Cheque us out”. The Province should have a whole team of specialists working to attract major players here. BNB should encourage startups focusing on this sector.
Then you aren’t just competing on ‘cheap labour’, you are competing on quality.
PS – the example above is not to be taken literally. “Cheque us out” is a joke. But you get the point.