TOOC Module 5

Week 5 Creating Innovation Eco-Systems

This module’s objective is:

  • to examine ways in which governments and local/regional business organizations support and sustain entrepreneurship related to the “new economy” in the North

The evolution of the “new economy” has demonstrated the importance of local and regional conditions for success.  Countries do not succeed in the world of innovation. Instead, local environments succeed. The State of California, to use a well-known example, does not succeed as a whole. Instead, Silicon Valley is a world-leading centre of innovation and, although little known, San Diego is doing extremely well. This is the story for Oulu, Finland, Waterloo, Ontario, and many other local innovation economies.

So, a new question emerges:  What can governments and local organizations do to promote and sustain entrepreneurship associated with the innovation economy?  We have discussed this a little before.  Initiatives include:

  • investments in educational institutions, particularly in research and education
  • creation of commercialization offices, patent-protection services and other supports
  • investments in infrastructure to overcome local or regional diseconomies
  • coordination of local efforts to promote entrepreneurship
  • creation of regional pools of investment and risk capital to support start-up businesses
  • investments in professional development and personal growth for emerging business people
  • networking opportunities, typically within a community or a region, to promote collaboration and collective effort

There are northern communities that have succeeded — and even more government and business programs designed to promote new economy development. We will review several of these below.

But, lest you get too discouraged, you should check out six Scandinavian examples that show real potential.

  • Oulu, Finland, which was a core centre for Nokia (the once powerful Finnish wireless company), is a new economy powerhouse.  It is particularly exciting to watch the former Nokia executives and research personnel fight to keep the innovation economy alive in the area.
  • Rouvaneimi, Finland, is a northern logging town that has reinvented itself.  The local university has helped, but the establishment of the city as Santa’s “official” residence was a master-stroke.  Hundreds of thousands visitors come each year to spend a few moments with Santa, fuelling an economic revival that is rare in the North.
  • Lulea, Sweden, is a little known city in northern Sweden that is coming of age, working around a top flight technical university and a strong business community that has attracted some of the world’s leading digital companies to set up server farms in the area.  (Server farms, which power the Internet, require a great deal of power and lots of cooling.  Northern Sweden has power; the climate provides a lot of the cooling.)
  • Skellefteå, Sweden, is a classic example of a non-university community facing a failing old economy that opted to fight for its future.  By working together, the area businesses attracted several top new economy companies to the area, creating a vibrant and successful regional centre.
  • Umea, Sweden, has capitalized on a fine university and a city-wide commitment to innovation to produce a promising S&T economic base.  Their collective work on energy and environmental services has the potential to provide long-term opportunity.
  • Bodo, Norway, is an interesting community, small in international terms but with an aggresive international business development program.  This is a little city of substantial potential, based on enthusiasm for the new economy and a realization of the importance of collective effort.
  • Tromso, Norway is the self-styled “capital” of the Arctic and one of the most creative cities in the world. It has converted a captivating physical location (good for tourism), a young but impressive university, and the best Arctic S&T in the Circumpolar World.  They are doing some great things, particularly relating to Arctic oceanography and off-shore drilling, but the innovation effort is spreading.

But, with these achievements in mind, understand that the challenges are formidable.  Here are some of the greatest barriers:

  • questions about the viability of small and remote northern communities
  • the educational and socio-economic challenges facing Indigenous communities
  • threats to the viability of Indigenous harvesting activities, e.g. fishing, hunting, gathering
  • the transiency (movement out of the region, either on a seasonal or permanent basis) of the non-Aboriginal population and, increasingly, of emerging companies, which often either move south or sell their intellectual property (patents, licenses, highly qualified personnel and the life) to southern companies
  • political caution and limited funding which make it difficult to invest in northern infrastructure and business development
  • limited vision of business leaders, many of who are focused on the profitable and reliable natural resource sector and rarely turn their eyes toward the uncertainties of the economic and commercial future of the North
  • a lack of regional self-confidence, among business leaders, scientists, and government officials, who have difficult believing that they can compete globally with the new and exciting companies that are driving the “new economy” forward

The Innovation Process

Innovation is an intensive process. The scientific and technological work is expensive. It costs a lot of money to convert a concept into a practical, market-ready item likely to be of interest to consumers, service providers or other businesses. It requires a unique combination of entrepreneurial drive, creativity, good luck and technological ability to create something of interest in the global innovation economy.

Governments, eager to assist with economic development but not willing to take a lead role in the enterprise, have offered a wide variety of subsidies, tax breaks, grants, loans and other supports to emerging businesses.  (To be clear, most governments provide a lot more financial assistance to large, established, southern and urban companies, and a great deal of support to resource companies as well.) Agencies charged with supporting innovation companies typically wrestle with competing priorities:

  • Focus the money and attention on communities or regions or what is called “place-based economic development:”
  • Focus the money and attention on individuals who have the potential to launch successful businesses.

The research shows that programs that focus on individuals are more successful than those that emphasis place-specific initiatives, although governments, for political reasons, tend to favour the site-based approaches.

The next few webpage links connect to major Canadian economic development programs for the Canadian North. As you go through the websites, look for evidence of the place-based versus individual priorities.  Look, too, for an emphasis, if there is one, on innovation activities, as opposed to resource, tourism or other traditional economic sectors. Do these government programs provide strong and consistent support for the innovation economy?

Northern Incubators and Business Development Centers

Commercialization efforts are crucial for the development of the innovation economy. National and regional governments have made a variety of efforts to transform scientific discoveries into commercially viable products.

Incubators are a key part of this initiative. Generally, incubators provide small offices and shared facilities, typically at little or no cost, for start-up companies. The idea is that new stage companies get advice, professional services and other support as they develop the firm, improve prototypes, develop marketing plans, seek capital, and prepare rollout strategies.

The following report provides brief descriptions of incubators throughout the Circumpolar World. The number of centres is substantial, but read carefully for evidence of institutional and innovation success.

Business Incubators