Local-Global Partnerships for High-Tech Development: Integrating Top-Down and Bottom-Up Models

ECONOMICParker / LOCAL-GLOBAL DEVELOPMENT PARTNERSHIPS QUARTERLY / May 2001 Local-Global Partnerships for High-Tech Development: Integrating Top-Down and Bottom-Up Models

Paul Parker Paul Parker is director of the University of Waterloo Local Economic Development Program at the University of Waterloo. He has degrees Advocates of high-tech development use conflicting top-down and bottom-up models from Mount Allison to respond to the challenge of the increasing knowledge intensity of the global econ- University, the Australian omy. The trend for policies in the United States, Canada, and Australia is to shift the National University, and the emphasis from federal government and external resources to increased state and local London School of Economics. responsibility. The competing top-down and bottom-up approaches are reviewed and He has worked in Australia, then illustrated with case studies. Canada’s Technology Triangle and Australia’s Japan, and the United Multi-Function Polis were both initiated in 1987 and then transformed in 1997. The Kingdom and is currently an evaluation of these case studies identifies weaknesses in the original models and calls associate professor in for the integration of the two development approaches into a model of local-global geography at the University partnership for high-tech development based on the building of local capacity through of Waterloo. His research partnerships with local and external actors. interests include local economic development, Japanese trade and/or The increasing knowledge intensity of the economy has led many governments to promote eco- investment, energy efficiency, nomic development based on high-tech industries. The process of technology creation and transfer sustainability indicators, and is often assumed to be globally uniform, yet advocates of high-tech development use conflicting environmental policy. conceptual frameworks that depict contradictory roles for key members of suggested partnerships. One of the key differences is the role of central government in top-down versus bottom-up approaches. In the 1990s, the emphasis shifted from federal government direction of technology programs to the increased role for state government and private industry. The final report of the State-Federal Technology Partnership Task Force (1995) symbolizes this rise in the role of states in federal science and technology policy and the associated partnerships. However, the caution artic- ulated by Feller (1997) and the fragility of state programs caused by financial cutbacks and program termination in some states (Eisinger, 1995) require that a broader review of the proposed approach be undertaken. The policy trends experienced in the United States are often followed in other federal countries, such as Canada and Australia. Economic development objectives and trends in the devolution of powers are similar in each country yet offer differences in detail that make a comparison of the lessons gained in one jurisdiction helpful to decision makers in another. The promotion of high-tech industry is a common strategy for communities seeking to improve their position in the global economy, and an extensive literature has evolved (Beck, 1992; Britton,

AUTHOR’S NOTE: The author would like to thank the many individuals who assisted with this research by participating in interviews or providing information. The Social Sciences and Humanities Research Council of Canada provided financial assistance. Institutional support was provided by the University of Adelaide and the University of Waterloo. An earlier version of this article was presented at the Regional Science Associa- tion International’s Fifth Congress in Tokyo. The referees provided constructive comments that strengthened the article. Any errors or omissions remain the responsibility of the author.

1996; Castells & Hall, 1994; Glasmeier, 1987; Malecki, 1991; Markusen, Hall, & Glasmeier, 1986; Massey, Quintas, & Weild, 1992; Preer, 1992; Smilor, Kozmetsky, & Gibson, 1988). The globalization of the economy is perceived as both a threat and an opportunity for local development. Increased international competition is perceived as a threat as companies shift their production facilities to low-cost regions and cause a “hollowing out” of industrial economies as part of the new international division of labor (Bluestone & Harrison, 1982; Dicken, 1992). On the other hand, improved access to international markets means greater potential sales for high-value goods and services produced locally. The rapid exchange of information, using advanced telecommuni- cation technologies, has increased the rate of technology creation and diffusion. Both products and processes have become more information-intensive. The challenge facing many governments is how to implement a high-tech growth strategy to produce high-value, knowledge-intensive goods and services. High-tech industries are generally concentrated in the metropolitan centers at the top of national and international urban systems where information networks are the most dense and where financial, human, and infrastructure resources are the greatest (Castells & Hall, 1994). The high wages and rapid growth potential associated with high-tech firms make them desired by virtually all governments. As a result, lower order cities and peripheral regions in industrialized countries and developing countries alike want to increase their relative position in these industries. Advocates such as Partridge (1993) argue that even rural states can achieve employment growth in high-tech industries by the right mix of government expenditure and taxation policies. The rapid growth of information exchange on the Internet implies that old location factors may be overcome. In addi- tion, the exponential growth in the value of high-tech stocks can turn a local entrepreneur into an “instant” billionaire in university towns such as Waterloo, Canada (Crowley, 2000). The creation of new technology and the promotion of high-technology firms are thus topics of great interest as states and cities attempt to redirect their economies to specialize in this sector. Economic development strategies are often divided into two competing approaches. The first approach is based on a top-down model, in which central government initiates a strategy to attract external public and private investment to stimulate growth in a designated region. An international example of this approach is the Multi-Function Polis (MFP), proposed by the Japanese Minister for International Trade and Industry to his Australian counterpart, in which a new Pacific city for the exchange of technology and culture in the 21st century was to be established in Australia. How- ever, the top-down approach has been widely criticized, and the bottom-up approach has been promoted as an alternative (Filion, 1998). The bottom-up approach emphasizes entrepreneurship and building local capacity through the enhanced use of local capital resources (human, natural, built, and institutional). Partnerships and network formation among firms and other local actors are promoted to raise the ability of small and medium-sized firms to engage in large projects and to achieve agglomeration benefits. The inclusion of local actors from university, industry, and government is considered to be important in the creation of a sustained innovative milieu (Aydalot & Keeble, 1988; Maillat & Lecoq, 1992). An example of this approach in the high-tech sector is Canada’s Technology Triangle (CTT), where the four cities of Cambridge, Guelph, Kitchener, and Waterloo formed a joint marketing arrange- ment, computer firms formed industry-based networks, university-based research was commercialized in spin-off companies, and new initiatives were undertaken to access venture capture (Will, 1998). In general, top-down initiatives attempt to promote high-tech development by the attraction of firms to the community, whereas bottom-up initiatives concentrate on building local capacity through entrepreneurship and network formation. The two case studies, CTT and MFP, were both initiated in 1987 and underwent formal transitions 10 years later. The CTT added new institutions to facilitate collaborative development, whereas the MFP had its funding cut. Both regions identified information technologies, environmental management, and education as three key industries for promotion. The evaluation of these case studies identifies weaknesses in the original models and calls for the integration of the two development approaches into a model of local-global partnership for high-tech development based on the building of local capacity through partnerships with local and external actors. Parker / LOCAL-GLOBAL PARTNERSHIPS 151

HIGH-TECH DEVELOPMENT

To evaluate high-tech development, a definition is required, and an industry needs to be selected for examination. Many reviews of high-tech industry (Malecki, 1991; Markusen et al., 1986) highlight the lack of consistency in definitions that are based on data availability rather than consistency with a model of technical intensity. Two indicators form the basis of most attempts to define high-tech industries: the research and development (R&D) intensity, or R&D as a percentage of sales, and technical workers (scientists, engineers, and often technicians) as a percentage of the workforce. The Organization for Economic Cooperation and Development (OECD) criterion of R&D expenditure exceeding 3% of sales resulted in the identification of six high-tech industries: aerospace, office machines and computers, electronics and components, drugs, instruments, and electric machinery. Partridge (1993) used a labor-based definition similar to that of Markusen et al. (1986). This approach remains problematic because once an industry is defined as high tech, all firms are considered high tech regardless of whether they are pursuing advanced research or rou- tine production. Another limitation is the emphasis on manufacturing, although it is recognized that many service activities such as software development are clearly high tech in terms of the knowledge intensity of their product (R&D costs often exceed 10% of sales) and the associated skill level of the workforce (Information Technology Research Centre [ITRC], 1996). At the local level, definitions have been based on knowledge of firm operations. For example, the CTT directory of science and technology companies was based on four criteria: ongoing R&D activity, high percentage of knowledge workers, export orientation, and/or providing products or services that have a high value-added science or technology component, including companies that employ state-of-the-art processes, systems, or knowledge (CTT, 1994). Despite inconsistencies in the vari- ous definitions employed, the information technology industry is universally included in studies of high-tech industries and was selected as the industry for examination in the case studies. The information technology industry will be examined in each case study to determine whether development processes associated with either or both of the development models can be found. The primary unit of analysis is the information technology firm. Given the pursuit of development in the information technology industry over the decade 1987 to 1997, the types of firms present in the late 1990s can be identified and linked to either top-down or bottom-up processes. The processes of external attraction or high-tech development through entrepreneurship and the transfer of technology from universities to commercial enterprises will be examined in each region. If the expected types of firms are found in the respective regions (external firms are attracted to the MFP through a top-down approach, and locally grown firms emerge from the bottom-up approach in the CTT), the models and policies advocated in each region could be argued to be successful. However, if the pattern is not clearly aligned with the respective models, causality cannot be concluded, and a new model or explanation should be proposed. These case studies are exploratory in nature. They link policies to the attraction or evolution of firms; however, local development is recognized to be the product of many socioeconomic forces operating at both the local and global scale, which are beyond those considered here. The study thus serves as an initial investigation to highlight the need for a hybrid model that integrates local and global factors to create a more effective model for the pursuit of high-tech development.

The Top-Down Model

Many national governments have sought to stimulate the development of high-tech centers or technopoles (Malecki, 1991; Savoie, 1992). Castells and Hall (1994) reviewed many of these initiatives, including the MFP in Australia. In each case, the national government has a defined vision or set of policy objectives and implements a program to establish the technopole. In some cases, greenfield sites are chosen, and in others existing urban centers are selected for the expansion of an adjacent site or particular industries. In general, a few urban centers at the top of the urban hierarchy maintain a dominant role in the creation and dissemination of new technologies. The concen- tration of knowledge, communication, and information networks along with specialized financial, technical, and business services in these centers create a comparative advantage for further 152 ECONOMIC DEVELOPMENT QUARTERLY / May 2001

technological developments. Castells and Hall (1994) and others thus recognize the agglomeration benefits of new firms entering high-tech industries where clusters of similar firms are already located. The result is typically the reinforcement of the technopole role of metropolitan centers (London, Paris, Tokyo, etc.). A more interesting test of the top-down approach is the extent to which smaller centers can also become technopoles and stimulate economic development based on high-tech industries. The general top-down The general top-down model is based on the active role of external actors: central governments, model is based on the private banks, and transnational firms. Jobs, wealth, and a larger local tax base are created by the active role of external injection of funds from outside the region. The key inputs are external investment in response to actors: central improved infrastructure and fiscal incentives provided by federal or state governments. The devel- governments, private opment process is depicted as largely independent of the local region. Instead, the process is based banks, and transnational on key policy decisions by central governments, as well as the satisfaction of location factors set by external firms and loan criteria set by banks with external head offices. firms. Jobs, wealth, and a In Canada, the federal government attempted to stimulate regional development through a larger local tax base are series of federal departments and programs beginning in the 1960s (Savoie, 1992). By the 1980s, created by the injection these top-down efforts were considered by many to have failed, and the emphasis in industrial pol- of funds from outside the icy shifted to sectors. Two region-based initiatives remained (Atlantic Canada Opportunities region. Agency and Western Diversification Program) but operated with reduced budgets. In Australia, attempts in the 1970s to stimulate new growth centers under the Whitlam Labor government received much less funding ($140 million) over a much shorter period (3 years) than did the federal regional development programs in Canada (Vipond, 1989). The top-down approach was adopted again in 1987, when the MFP was proposed to serve as a Pacific center for the exchange of technology and culture, with input from not only national but international sources (Ministry of Interna- tional Trade and Industry [MITI], 1987). The objectives of the proposal will be identified and its performance evaluated.

The Bottom-Up Model

The bottom-up approach has emerged as a fundamental challenge to the top-down approach The large-scale projects (Economic Council of Canada [ECC], 1990; Filion, 1998; Ontario Ministry of Municipal Affairs and growth pole [OMMA], 1992). The large-scale projects and growth pole emphasis of top-down policies have emphasis of top-down been replaced in many countries with an emphasis on the indigenous potential of a community and policies have been its technological capability (Stöhr & Taylor, 1981). Increasing local processing or value-added replaced in many activities was often depicted as independent of global processes. Coffey and Polese (1984, 1985) countries with an proposed a stage model of local development based on local entrepreneurship and business expan- emphasis on the sion. Blakely (1989) asserted that the community economic development objectives of increased indigenous potential of a local control and greater equity could be achieved by the promotion of entrepreneurship. However, community and its Filion (1998) argued that the growing chorus of support for these bottom-up initiatives needs to be balanced with evaluations of their performance, given the difficulties in mobilizing sufficient technological capability. resources locally. The bottom-up approach was also incorporated in federal programs in the 1980s, as the Cana- dian government created the Community Futures Program to stimulate a bottom-up approach, based on the cooperation of several local communities to gain funding for community development. Similarly, the Australian government decided to work through existing local government authorities to influence regional development (Taylor & Garlick, 1989). An example was the federal government’s Country Centres Program, which used cross-sectoral liaison committees at the local level. In both cases, federal programs combined top-down funding with bottom-up implementation. More fundamentally, national groups such as the Economic Council of Canada joined local groups in calling for a shift to bottom-up strategies (ECC, 1990). Instead of a mandate defined by a national policy, objectives are determined at the local level, typically through a strategic economic planning process and the promotion of local-level networks, partnerships, and entrepreneurship (Bryant & Preston, 1987). An emphasis is placed on enhancing local human resources through training and increased participation, on building the capacity of local institutions, and on creating Parker / LOCAL-GLOBAL PARTNERSHIPS 153 innovative financing tools to provide greater access to financial capital (OMMA, 1992). The development of high-tech industries linked to local educational and research resources has also been advocated (Science Council of Canada [SCC], 1990). Entrepreneurship and other processes to increase the value of local resources are promoted as central features of this approach. An alternative form of the bottom-up or local economic development model emphasizes local initiatives and entrepreneurship set within the context of external processes and trends. Bryant and Preston (1987) and Albrechts, Moulaert, Roberts, and Swyngedouw (1989) depicted the local economic development process in Canada and Europe as emphasizing local capacity and initiative within the context of external forces, such as federal governments, transnational corporations, and globalization processes. The recognition of external factors enables the bottom-up approach to overcome the criticism that it fails to see beyond the community boundary and often results in wasteful duplication of effort. The case study selected to evaluate a bottom-up approach to high-tech development is the CTT.

CASE STUDIES

The two general models are examined by the use of two case studies located outside the global technology leaders of the United States, Japan, and Europe. Instead, Australia and Canada were chosen as countries trying to increase their technology base to counter their traditional reliance on natural resource extraction and processing industries and to augment their traditional small and domestically focused manufacturing base. Fears of job losses from restructuring, the hollowing out of old manufacturing centers, and the shift of employment to lower wage areas motivated the promotion of high-tech industries to counter these trends. Similar trends are faced by peripheral or older industrial regions in the United States, Japan, and Europe. A brief description of each case study will be provided and comparisons made. First, the origin, objectives, and initial evaluations of the two development initiatives will be compared. Interviews were held with officials in development agencies in each region to collect primary data. Secondary reports and data were also obtained from a range of state and local agencies. The combination of primary interview data, secondary reports, and institutional Web sites was used to provide verifica- tion of the activities and results reported. The general objectives for high-tech development in each region are identified and then compared with initial evaluations in the early 1990s. A brief review of the creation of new intellectual property as an indicator of capacity for high-tech development is provided, with U.S. patents used as a quantitative indicator. The link between research capacity at universities and technology transfer to industry is then considered. The formation of spin-off firms is examined as an indicator of the creation of high-tech firms under way in each region. A discussion of the differences and similarities found in the two regions follows.

MFP Origins and Initial Evaluations

In 1987, the Japanese Minister for International Trade and Industry suggested to his Australian counterpart, the Minister for Industry and Commerce, that Australia could follow the example of Japan’s technopolis program by establishing a Pacific center for the exchange of technology and culture (MITI, 1987). The proposed “Multi-Function Polis,” or MFP,would benefit both countries by providing Japan with access to new technologies at the research stage and a new model of high-amenity urban lifestyles, whereas Australia would benefit from the transfer of Japanese technologies to stimulate production and job creation. The needs of both countries were depicted as complementary, and the proposal received endorsement from both national governments (McCormack, 1990). A competition was held to determine where the MFP should be located, and in 1990, the South Australian capital, Adelaide (population 1.1 million), was selected. Adelaide offered a single 1,840-hectare site (the Gillman/Dry Creek site) for the project located 15 kilome- ters north of the central business district. The objectives of the MFP evolved from the initial Japanese proposal through a series of intergovernmental negotiations—first between the national governments of Japan and Australia, then 154 ECONOMIC DEVELOPMENT QUARTERLY / May 2001

between the Australian federal government and the state of South Australia (Hamnett, 1997). In 1992, a joint federal-state statement announced the project objectives to create or establish (a) a model of conservation of the natural environment and resources; (b) a model of environmentally sustainable development; (c) a model of equitable social and economic urban development; (d) a national focus for economic, scientific, and technological development of international signifi- cance; (e) leading centers of innovation in science, technology, education, and the arts; (f) a focus for international investment in new technologies; (g) a model of productive interaction among industry, R&D, education, and commercial interests; and (h) an international center of innovation and excellence in urban development (Commonwealth of Australia and State of South Australia [CASSA], 1992). Some Adelaide residents responded with criticism of the externally sponsored project (Harwood, 1990; J. Smith, 1990, 1992). Many community groups expressed concerns to the government- appointed MFP Adelaide Community Consultation Panel (MFPACCP, 1991b). The panel concluded that community views supported the concept, yet held serious objections to the proposed MFP urban development in Adelaide (MFPACCP, 1991a, p. 1). The conclusion reached by the panel—that the majority of the community saw the project as acceptable and that it should proceed—was challenged by J. Smith. Many of the submissions supported the MFP, provided that certain conditions were met. The panel recognized this support and made recommendations to meet many of the conditions. In contrast, J. Smith (1992) regarded the submissions as a rejection of the MFP because the conditions could not be met. Many environmental issues were considered during the assessment of the MFP proposal (South Australia Office of Planning and Urban Development [SAOPUD], 1992). The need to rectify the environmental damage already inflicted on the Gillman site presented both a problem and an opportunity. The problem was that the site appeared barren and unattractive, and it was perceived to be hard to attract investors. However, the problems of renovating damaged urban environments are worldwide, so the successful restoration of environmental quality on the site could demonstrate innovative environmental management, restoration services, and expertise that could be exported (Hamnett, 1997). One of the principal strategies proposed was to excavate recreational lakes on the site to provide storm water retention areas and to use the fill to construct urban village platforms for residential, industrial, and commercial use (SAOPUD, 1992). The proposed MFP development was to be innovative and provide high-technology housing for a population of 30,000 to 50,000, which would allow for the integration of residential, commercial, and industrial development. The Office of Planning and Urban Development concluded that the major potential environmental impacts could be managed and recommended approval of the proposed development (SAOPUD, 1992). The recession of the early 1990s further increased the interest of local and state governments in the MFP,as the Adelaide economy lagged behind that of most Australian capital cities. Perth over- took Adelaide as the fourth largest city in Australia. Population growth rates for the 1986-1996 decade showed the largest cities, Sydney and Melbourne, growing at a rate of 1% per annum, whereas Brisbane and Perth grew twice as fast (2% per annum). In contrast, Adelaide and Hobart lagged with a growth rate of 0.7% per annum. In 1992, the South Australian state government passed the MFP Development Corporation Act to move the project from the concept phase to real- ity (South Australia Parliament [SAP], 1992). Social and environmental concerns had been identified, but the MFP proposal was approved with the assurance that social and environmental problems would be resolved as the development proceeded.

CTT Origins and Initial Evaluations

Increased globalization of the economy and international competition through the reduction of trade barriers, especially under NAFTA, stimulated the formation of the CTT. In 1987, the economic development officers of the four neighboring cities (Cambridge, Guelph, Kitchener, and Waterloo) started the process to form the CTT to increase the international profile and com- petitiveness of their region. They recognized that new investment in any of the four cities would have positive effects on their own community through increased employment and local market Parker / LOCAL-GLOBAL PARTNERSHIPS 155 opportunities. The proximity of the cities creates a shared labor market with internal commuting. Kitchener is the largest city, with a 1996 population of 185,000. The other three cities each had a population of nearly 100,000, for a regional population of approximately 500,000. Access to the CTT is facilitated by its proximity to Toronto—the Toronto international airport is a 1-hour drive 1 away and downtown Toronto a 1 2-hour drive. The objectives of the CTT were based on the shared aspirations of the four cities. A joint CTT (1994) publication declared that cooperation and technology were the foundation for their combined economic growth. The shared goal was to promote the region as one economic unit and to draw on the complementary strengths of each city. The images created by promotional material included computer programmers creating revolutionary software, white coats in labs making microbiological breakthroughs, and state-of-the-art robotic assembly lines. These images represent the computer specialization at the University of Waterloo, the life sciences emphasis at the University of Guelph, and the advanced manufacturing systems used in some Cambridge and Kitchener plants. However, more than images would have to be created if the cities were to succeed in creating a dynamic, high-tech regional economy. The success of the region was chronicled in a series of reports (Essential Economics Corpora- tion [EEC], 1998; L. Smith, 1993, 1995). Between 1987 and 1996, the regional economy grew by 28%, whereas the Ontario economy as a whole grew by 18%. Employment growth in the region (17%, 1987 to 1996) outpaced Ontario (7%) by an even wider margin (EEC, 1998). A growing agglomeration of information technology firms was identified by several researchers (Bathelt & Hecht, 1990; Denomme, 1996; Jung, 1994). For example, between 1994 and 1997, the number of computer or peripheral device manufacturers (Standard Industrial Code [SIC] 3361 and 3362) rose from 10 to 17, and the number of computer service companies (SIC 7721) rose from 163 to 246 (EEC, 1998). This growth was expected to continue, as reported in a 1995 survey of science and technology firms in the city of Waterloo. Employment in the 63 responding firms averaged only 5 employees at start-up, but it grew to an average of 51 employees in 1995 and was expected to rise to an average of nearly 100 employees over the next 5 years (Whitney & Company, 1995). Overall, 92% of the firms expected to grow, with an estimated creation of 2,290 jobs in 50 of the respondent firms. The overall success of the CTT economy was argued to be based on six key factors: entrepreneurship, export focus, education, infrastructure, suppliers, and quality of life (Borovilos, cited in Lindsay & Lindsay, 1994, p. 8). Entrepreneurship grew rapidly, as indicated by the number of individuals reporting proprietorship as their occupation on income tax files (36,940 persons in 1995). The 72% increase in reported proprietorship over the 1985-1995 decade exceeded the 62% increase in Ontario as a whole (EEC, 1998). The small size of most operations in the CTT is highlighted by data from Statistics Canada’s Business Register: Of the 14,523 firms with a payroll remittance number in July 1997, 73% (10,446 firms) had 9 or fewer employees, whereas only 3% (393 firms) had more than100 employees (EEC, 1998). Entrepreneurship was particularly important in the high-tech sector, as demonstrated by 95% of the science and technology firms in the city of Waterloo having been established in the region (Whitney & Company, 1995). Wright (1991) reported similar results from a survey of 164 high-tech firms in Mississauga and the CTT. The factor most often cited for firm location was familiarity with the region (81% of respondents). This finding is interpreted as reflecting the role of entrepreneurs in the establishment of firms in the region in which they lived. Transportation (70%) and availability of skilled labor (64%) were also common responses and reflect the need for conventional location criteria to be met as well. How- ever, the availability of these resources in many communities enables the familiarity of entrepreneurs (for example, with the city in which they went to college) to be a determining factor in location decisions. Filion and Rutherford (1996) cast doubt on the assertion that the region’s manufacturing base is restructuring toward a high-tech “knowledge-intensive” future. The image of Ontario’s “economic miracle” region is based in part on a low unemployment rate. However, Rutherford (1995) noted that the low unemployment rate is achieved by a substantial decline in participation rates (especially among women) from prerecession record levels of 76% in 1986 to 72% in 1991. Despite this decline, participation rates were well above the provincial average (67%). Youth unemployment 156 ECONOMIC DEVELOPMENT QUARTERLY / May 2001

also remains problematic, as workers aged 15 to 24 suffered the greatest decline in employment during the 1990s recession. Furthermore, Zeidenberg (1995) asserted that nearly 20% of the region’s labor force is unemployed, when those receiving employment insurance and welfare are combined with those who have withdrawn from the labor market. The ability of the Waterloo regional economy to continue to outperform the provincial economy was also questioned. The Jung (1994) survey of 221 small and medium-sized firms in Kitchener and Waterloo did not identify significant interfirm cooperation at the local level. Instead, the firms were fully integrated into the southern Ontario industrial network and (to a lesser extent) into other northeast North American industrial regions. Key attributes of successful “flexible specialization” regions such as the Third Italy, Silicon Valley, and some industrial districts in Los Angeles are argued to be absent in the Waterloo Region. Intense regional linkages and cooperation among firms are emphasized in these successful regions as the means to downplay competition and to deploy joint product development and marketing (Scott, 1992; Storper & Scott, 1989). Networking among computer firms is acknowledged, but overall, Filion and Rutherford (1996) “conclude that not only is Waterloo Region at best weakly networked, it is wide open to fluctuations occurring within the Southern Ontario industrial belt, which is particularly sensitive to cycles affecting the car industry” (pp. 263-264). The debate over the performance of the case study regions can be advanced by examining some of the processes of technology creation in more detail.

Research Resources and Patent Performance

The ability to create new and more knowledge-intensive forms of technology is related to the education and research capacity of regions. The educational and research institutions in the CTT and MFP share several attributes. Three universities are located in each region, and they are com- plemented by additional specialized research and manufacturing institutions. The University of Adelaide, Flinders University, and the University of South Australia are all located in Adelaide. The University of South Australia’s Levels campus is adjacent to the expanded MFP/Technology Park site and has a tradition of working on applied projects of direct interest to industry. The Uni- versity of Adelaide has the strongest research reputation of the three universities and was repre- sented on the MFP Australia Board by its Vice Chancellor for Research. Total external research funding from government and industry sources to the University of Adelaide was approximately $30 million per year in the early 1990s (University of Adelaide, 1996). Flinders University is located in the southern part of Adelaide but participates in several joint research projects and cooperative research centers with the other universities and industrial partners. The three universities in the CTT are the University of Waterloo (engineering and computer science specialization), the University of Guelph (life sciences specialization), and Wilfrid Laurier University (business specialization). The three universities have a combined population of more than 45,000 students. External research funding to the University of Waterloo reached $50 to $60 million per year in the early 1990s, whereas the University of Guelph maintained very strong links with the federal and provincial departments of agriculture and agrichemical firms (Johnson, 1998). Numerous joint research and teaching initiatives have been formed between the universities. The need for special assistance to transfer technology from the university environment to commercial ventures is recognized at universities in both the CTT and MFP. The University of Adelaide incorporated Luminis Pty. Ltd. as its commercial development company to promote and to facilitate collaboration between the university and industry. Its objectives are to promote technology transfers, research opportunities, and consultancies and to provide project management. Since 1990, it has operated as a management company to encourage the commercial development of intellectual property and to hold equity interests in several university spin-off firms. The annual revenue generated through these subsidiaries and activities grew during the 1990s to reach $10 million (Luminis, 2000). Prior to gaining income from commercially successful inventions, the intellectual property rights to these inventions need to be established. The application for and issue of patents are a standard means to establish intellectual property rights. The largest commercial market for these inventions is in the United States, and many inventors apply to have their discoveries recognized there. Parker / LOCAL-GLOBAL PARTNERSHIPS 157

TABLE 1 U.S. Patents by Multi-Function Polis (MFP) and Canada’s Technology Triangle (CTT) Inventors, 1991-1995

MFP: Adelaide CTT: Cambridge, Guelph, Kitchener, Waterloo Assignee No. % No. %

University 4 14 23 8 Local spin-off 3 10 8 3 Other local firm 12 42 103 34 U.S. firm 3 10 90 30 Individual 4 14 74 24 Federal government 3 10 4 1 Total 29 100 302 100

SOURCE: U.S. Patent and Trademark Office (1996).

U.S. patent data thus provide a measure of the creation of new inventions and technology from vari- ous international as well as national sources. A comparison is provided for registered U.S. patents held by residents of MFP Australia’s host city (Adelaide) and the CTT cities (Waterloo, Guelph, Kitchener, and Cambridge) (see Table 1). Patents with an interest held by the Universities of Adelaide, Waterloo, and Guelph are identified as well as those by their spin-off companies. No U.S. patents were found under the name of the Universities of South Australia, Flinders, or Wilfrid Laurier during the study period. The assignees holding the rights to the patent are further divided into local firms, U.S. firms, individuals, or the federal government. Local firms and individuals account for 50% or more of the patents in each city. The role of U.S. firms is particularly strong in Guelph and Waterloo, where subsidiaries include a research function in their range of activities. Although Adelaide is a larger urban center, its residents hold fewer U.S. patents. This pattern is explained in part by the greater difficulty to pursue U.S. opportunities from Australia. To explore the potential for universities to contribute to local and regional economic development, one needs to look beyond aggregate patent numbers to the processes by which technology is transferred to local industry. Two of these processes, the formation of spin-off firms and the networking of research groups with companies, will be explored. The formation of spin-off companies is well recognized at the University of Waterloo, where more than100 spin-off firms have been identified and approximately 30 of them reported research links with the university (Technology Transfer and Licensing Office [TTLO], 1994). The University of Adelaide has also been active in this area, with several firms (Repromed, Integrated Silicon Design, Bresatec, GroPep, and Enterovax) being created as subsidiaries of Luminis. For a more detailed examination of the processes emphasized by the top-down approach in the MFP and the bottom-up approach in the CTT, a review will be made of recent changes in the information technology industry in each region. This bottom-up approach was built on links to local Information Technology From the Top Down: MFP education and research Information technology was one of the fastest growing industries in the 1980s and 1990s and is resources, as many firms considered central to the high-tech aspirations of both the MFP and the CTT. However, the either hired students or approach emphasized to develop the information technology industry differed sharply between the were created by students two areas. In the CTT, an emphasis was placed on small firm creation (entrepreneurship) and or faculty from local growth. This bottom-up approach was built on links to local education and research resources, as universities. . . . The many firms either hired students or were created by students or faculty from local universities. Ini- top-down approach to tial university research may have led to the establishment of the firm, or the firm could create part- stimulating the nerships through contract research at the university. In contrast, the top-down approach to information technology stimulating the information technology industry is to attract external funds to the region, typically industry is to attract from central government sources, or to attract external firms to the region. external funds to the The information technology industry in the MFP benefited directly from inputs from central region. government and external firms. The 1992 inclusion of Technology Park and Science Park as part of 158 ECONOMIC DEVELOPMENT QUARTERLY / May 2001

the MFP integrated the state government’s three major initiatives at promoting high-tech development in South Australia. Technology Park promoted itself as the oldest and most successful research park in Australia (MFP Australia, 1994b). Its initial success was strongly supported by defense expenditure and the establishment of defense-affiliated R&D firms that remained active throughout the 1990s. Local high-tech success was thus achieved by the infusion of federal funds in the form of defense contracts. The importance of defense funds in supporting high-tech firms was well documented in the United States during the rapid-growth phase of Silicon Valley and other nodes of high-tech firms. The information technology sector was identified as one of three priority sectors for promotion in South Australia. The IT (information technology) 2000 Vision called for South Australia to attract multinational information technology companies. These multinationals would then serve as the source of skill transfers to local firms (South Australia Economic Development Authority [SAEDA], 1994). In 1994, three major firms were attracted as part of this strategy: Motorola Aus- tralia, Australis Media, and Electronic Data Systems (EDS). Motorola decided to build its Austra- lian Software Development Center in Technology Park to service its worldwide business interests. Motorola represents the successful attraction of an international high-tech firm to the expanded MFP area (Technology Park). Australis Media Ltd. chose Technology Park as the site for its national customer service center to serve its pay-TV operations. Operations were projected to grow to support 1,000 jobs by the year 2000 (SAEDA, 1994), but the firm failed to gain the projected level of sales in the mid-1990s and was merged with Newscorp’s Foxtel in 1997 (Newscorp, 1997). EDS was the successful bidder to gain the state government contract for the outsourcing of its information and computer service needs ($565 million over 9 years) (“Best Government,” 2000). EDS and the state government agreed to jointly establish an Information Industries Development Center to “create a center of excellence in the software and services industries by providing market access, business advisory services, and technology support services” (MFP Australia, 1995, p. 16). However, rather than locate facilities on the MFP site as initially agreed, EDS decided to locate closer to government offices in the core of the city. Of the three firms linked to MFP promotional activities, Motorola invested as expected, whereas Australis Media did not achieve its commercial goals, and EDS located elsewhere in the city. On the broader urban development side, an information industries center was planned to serve as a focal point in the first stage of the MFP urban development (Mawson Lakes). It was designed to house a population of 10,000 adjacent to Technology Park and the Levels campus of the University of South Australia. Telstra, Australia’s leading telecommunications information services provider, is the initial provider of information infrastructure, with the community being serviced by an inter- active broadband infrastructure and a range of services and applications (MFP,1997b). In 1996, the state government decided to proceed with the urban development, and the “Smart City Australia” project was launched to attract more information technology firms (MFP, 1996b; MFP Australia, 1994a, p. 17). However, progress was slow. The above achievements were based on a top-down model in which development is achieved by inputs from central government and external firms investing from outside the region. Although the MFP emphasis was on this external attraction, it should be noted that local initiatives were also active. For example, the Signal Processing Research Institute was established in 1992 and is a joint venture between MFP Technology Park and the Universities of South Australia, Adelaide, and Flinders (MFP,1997a). Tenants include the Institute for Telecommunications Research, the Coop- erative Research Centre for Sensor Signal and Information Processing, and the Australian Infor- mation Technology Centre. Other university-linked research projects of commercial interest to the information technology industry included work on integrated circuit design and defense-related applications. Most projects are part of the ongoing R&D activities of researchers at the local universities and firms in the preexisting Technology Park and in general have little to do with MFP initiatives. The local research and commercialization process was also under way in the CTT, where it was given much greater recognition as a bottom-up form of economic development. Parker / LOCAL-GLOBAL PARTNERSHIPS 159

Information Technology From the Bottom Up: CTT

Information technology is a fast growing sector that trebled the national growth rate in the 1990s (Computer Technology Network [CTN], 1997). A key to success in this sector is the ability to sus- tain ongoing product innovation through scientific R&D. Most of these firms invest 10% or more of revenues in R&D, with the result that information technology firms account for 35% of industrial R&D in Canada or $1.8 billion annually (CTN, 1997). Many of the firms are high-growth and export oriented, with 90% of sales being outside of Canada. The common challenges faced by these firms have led them to seek local networking opportunities. An example of successful local networks is the CTN, which was formed in 1991 to facilitate the exchange of information among high-tech firms in the CTT. An initial meeting was held among representatives from the Waterloo-based spin-off firm, Mortice Kern Systems Inc. (MKS); the Information Technology Research Center at the University of Waterloo; the City of Waterloo; and the local office of the Ontario Ministry for Industry, Trade and Technology. Monthly breakfast meetings and special seminars are organized on topics such as software licensing, software copy- right, patent protection, finding partners, and obtaining investment funds (CTN, 1997). An electronic Internet directory is provided of the 60 companies in the CTT area engaged in continuous R&D related to the production of computer hardware, telecommunications hardware, or packaged software and services (CTN, 1997). A further 70 support companies are listed to identify a range of related services. These local networking activities were extended by the formation of Communitech in 1997 as the local technology association, with 145 member firms (Strathdee, 1999). The creation of the CTN and then Communitech was a natural evolution from networks formed earlier by university researchers and their company partners. An example of earlier network formation is the Institute for Computer Research (ICR), which was formed in 1982 to foster excellence in computer research at the University of Waterloo. It pro- motes synergy among researchers, provides efficient access to shared central hardware and software services, and serves as a focal point for research interaction with industry (ICR, 2000). The ICR has approximately 90 faculty members who are either individual members of ICR or members of 1 of the 14 formally federated groups within ICR. Each federated group is a team of researchers working on one or more related projects under a general title, such as computer communications, computer graphics, logic programming and artificial intelligence, pattern analysis, and machine intelligence (ICR, 2000). The ICR draws on public and private sector support to enhance the computer research environment at the University of Waterloo. The ICR also serves as a focus for interaction with industry. It maintains the Corporate Partner Program, through which it attempts to develop and maintain research relationships between university and industrial researchers. The partners include some of the largest Canadian and international information technology firms: Apple Canada, Bell Canada, Bull HN Information Systems, Digital Equipment of Canada, Hewlett-Packard (Canada), IBM Canada, the Mutual Group, NCR Canada, Northern Telecom Canada, and Watcom. An endow- ment fund is derived from Corporate Partners’ contributions and used to support weekly colloquia, an evening lecture series, the Distinguished Visitors Program, a modest program of grants to provide seed money for new and innovative projects, and postgraduate scholarships to attract the best students to computer-related academic programs (ICR, 2000). ICR regularly invites research pre- sentations and visits by industry and serves as an information and contact agent for such interactions. The major public sector support for the ICR is derived from the National Science and Engi- neering Research Council of Canada (NSERC) and its substantial Infrastructure Grant to operate a shared research support facility with three hardware and four software technicians (ICR, 2000). Within the ICR, each research group maintains its own network of public and private support. Some research projects are supported by NSERC grants, whereas others are funded by government departments, agencies, and a broad range of private firms. In some cases, research results have led to new products, which warranted the formation of a spin-off company in which researchers were 160 ECONOMIC DEVELOPMENT QUARTERLY / May 2001

TABLE 2 Selected Canada’s Technology Triangle (CTT) Technology Firms

Revenue, in Net Income, University Year Million $Can in Million $Can Firm Product Links Founded (fiscal year) (fiscal year)

Dalsa Inc. CCD image sensors UW 1980 38 (1999) 5.2 (1999) Spin-off 27 (1997) 3.4 (1997) Descartes Systems Supply chain Recruit students 1981 65 (2000) (40) (2000) Group software 30 (1998) (17) (1998) MKS (Mortice Internet and network Founders: UW 1984 29 (1998) 1.8 (1998) Kern Systems) software grads 21 (1997) 0.9 (1997) Open Text Knowledge management UW 1991 150 (2000) Corporation software Spin-off 33 (1997) (20) (1997) RIM (Research Wireless data products Research support 1984 120 (2000) 15 (2000) in Motion) 33 (1998) 0.5 (1998) Sybase (Watcom) Software application UW 1995 250 local employees tools Spin-off acquisition Virtek Laser projection UW 1986 16 (2000) 1.2 (2000) Spin-off 8 (1998) 1 (1998) Waterloo Maple Mathematical software UW 1988 10 (2000) Spin-off 8 (1996) 0.8 (1996)

SOURCE: Will (1998, 2000). NOTE: UW = University of Waterloo.

able to commercialize their products and hire management and financial specialists to expand corporate operations. Examples of successful spin-off firms whose annual sales grew to $10 million or more include Dalsa, MKS, Open Text, Virtek, Watcom (acquired by Sybase), and Waterloo Maple (see Table 2). Each of these firms grew out of labs where research projects had been funded by national research organizations as well as industry. The results of this university-based research gave rise to a spin-off firm, which then grew to supply a growing international market with exports often accounting for 80% to 90% of sales. Similar bottom-up or entrepreneurial initiatives started most of the science and technology firms operating in Waterloo (Whitney & Company, 1995). The small firms grew, and several raised capital through initial public offerings on the stock market. The wild enthusiasm for high-tech stocks caused the value of the shares in these companies to typically rise by several hundred percent in the late 1990s. This explosion of public interest in high-tech firms was highlighted by Research in Motion (RIM), whose shares rose to more than $200 in value in early 2000 and turned its CEO into a local billionaire (Crowley, 2000). The billionaire status changed when the share price fell a couple months later; however, the firm continued to develop its connections with the university and other local firms. RIM purchased five commercial buildings adjacent to the University of Waterloo as part of its expansion plans, and some local firms made new devices that were compatible with RIM’s wireless technology (Will, 2000). The focus on the growth of small firms risks overlooking the larger external firms that have chosen to locate in the CTT. Large American information technology firms (AT&T, Hewlett-Packard, NCR, and Raytheon) are also present in the CTT; however, these subsidiaries typically have weaker links with local universities than do the smaller local firms. Local vulnerability to changes from external decisions were highlighted by Hewlett-Packard’s decision to close its local division in 1998 (after building a new facility in 1996) as part of its North American restructuring (Will, 1998). Local development agencies place the greatest emphasis for future growth on the locally created firms. The experience of the CTT and MFP needs to be compared to determine whether the case studies adhere to the top-down and bottom-up models presented earlier.

DISCUSSION

To evaluate the effectiveness of alternate economic development approaches, one must first recognize the goals set and the means used to achieve these goals (Reese & Fasenfest, 1997). The MFP Parker / LOCAL-GLOBAL PARTNERSHIPS 161

TABLE 3 Summary of Multi-Function Polis (MFP) and Canada’s Technology Triangle (CTT) Attributes

MFP CTT

Year established 1987 1987 Initial sponsors Australian/Japanese governments Four city councils Principal objective Create model of high-tech and Promote single image of a high-tech sustainable urban development region Principal means to promote Attract external firms Promote networks and local spin-off information technology industry firms Examples of external firms Motorola Raytheon Australis Media NCR EDS (Electronic Data Systems) Hewlett-Packard Examples of university Integrated Silicon Design Virtek spin-off firms Bresatec Ltd. MKS Repromed Open Text 1997 events Funding cut New office opened

and CTT had significant differences in their goals and institutional arrangements (see Table 3). Unlike the MFP,the CTT had no development corporation with federal and state funding to support staff, research, administration, and marketing efforts. There was no International Advisory Board, as assembled for the MFP (MFP Australia, 1994a). No mandate was received from the federal government, and most important, there was no core site or physical separation from the local community. Indeed, the CTT has been called a virtual office with no substantial resources to achieve its goals. Instead, the CTT institutional structure consisted primarily of new combinations of existing organizations. For example, a combined economic development committee was formed with representatives from the economic development departments of the four cities. The provincial government gave a small initial grant toward new promotional material, and once established, the provincial and federal governments used the CTT name to promote and represent the region. The institutional initiative of forming the CTT was heralded by some as a symbol of firm and institutional networking (Crane, 1992). In contrast, Zeidenberg (1995) asserted that the CTT had neither the budget nor the capacity to develop networking or to access venture capital for small innovative firms. Although the formal CTT committee remained a joint marketing initiative of the four cities, the successful creation of the regional image has been used by other organizations to develop their own networks. For example, computer industry networks were not created or dictated by the CTT committee but were promoted as an example of membership across the region and as a means to facilitate interaction and exchanges among computer firms and related university and government partners. Similarly, local groups identified venture capital as a constraint to the expansion of new high-tech firms and then responded to this need. A private proposal for venture capital funds was advocated by the president of Zief Industries and presented to the federal government. Community response was demonstrated by the community loan fund coordinated by the Community Opportu- nities Development Agency (CODA), having subscribed more capital by mid-1996 than the com- parable Toronto community loan fund (Born, 1996). The major Canadian banks targeted the region as a priority area for investment in high-tech firms, with pilot programs for new lending criteria for these firms. The federal government initiated the Community Investment Program in 1996, and the CTT was selected as one of the pilot areas. Canada’s Technology Triangle Accelerator Network (CTTAN) was formed “to accelerate the growth of early stage companies by providing them with access to risk capital from local investors” (CTTAN, 1997). This program required the cooperative participation of industry, local government, and educational institutions, along with a commitment for local sources to replace the federal government as the source of operating funds over a 6-year period. In early 1999, CTTANwas merged with Communitech to help match new technology firms and venture capital. A similar labor-sponsored investment fund, Waterloo Ventures, was launched in 1999 (Strathdee, 1999). 162 ECONOMIC DEVELOPMENT QUARTERLY / May 2001

Despite the institutional differences, the MFP and CTT proposals shared several needs. Both urban centers needed to restructure their old manufacturing base and respond to the globalization of markets and increased free trade. Both needed to create employment opportunities to combat ris- ing unemployment during recessions. Local communities also wanted to improve their environ- The CTT and MFP mental quality and to clean up and redevelop old industrial lands. Overall, there was a desire to Australia were improve the quality of life and to improve access for diverse social groups. established in the same The CTT and MFP Australia were established in the same year, but their principal sponsors and year. . . . The narrow techniques of promoting development differed. The narrow objectives of the CTT were achieved as objectives of the CTT the three levels of government (local, provincial, and federal) all promoted the region, using the single name instead of the list of individual city names. However, local awareness of the new name were achieved as the remained limited, and calls were made for a more substantial organization. In 1997, a new CTT three levels of office was created, and in 1998, the Region of Waterloo decided to join the cities and establish an government (local, economic development office (Economic Development in Canada’s Technology Triangle provincial, and federal) [EDICTT]) to promote the interests of all four cities and the region together. all promoted the region, In contrast, the ambitious objectives of the MFP to create a new Pacific model of sustainable using the single name urban development could not be achieved in a short time with very limited resources. The develop- instead of the list of ment corporation formed to lead MFP activities found itself facing financial uncertainty when the individual city names. . . . Australian government announced that it would not extend funding beyond June 1996 (MFP, In contrast, the 1997a). The decisive year was 1997, as the state government first decided to expand the role of the ambitious objectives of MFP Development Corporation and then decided to abandon the MFP name altogether and to pro- the MFP to create a new mote development in Adelaide through a new agency. In 1998, the MFP Development Corporation Pacific model of was formally wound up and the land transferred to the Land Management Corporation. The failure to build a Pacific center for the exchange of technology and culture offers lessons to those seeking sustainable urban to promote high-tech development. The limitations and overlaps of the top-down and bottom-up development could not be models need to be reconsidered in light of the experience of these two regions. achieved in a short time MFP Australia represents a top-down approach to high-tech development and was initially criti- with very limited cized heavily. The perception that the MFP was a large external project about to transform part of resources. Australia eased as the economic boom of the 1980s was followed by the recession of the early 1990s and no foreign investment materialized. The recession also increased interest in projects with the potential to create jobs. The change in South Australia’s state government was potentially damaging, but the opposition, which had been very critical of the MFP, became supportive of the project when the opposition gained power. The state government increased its role as the principal source of funds for MFP Development Corporation operations in 1996. Additional project and capital funding was drawn from the federal government (Building Better Cities Program), local government (infrastructure), and industry (utilities and information technology infrastructure) (MFP, 1997a). The top-down approach of state initiatives to promote information technology industries by the attraction of external firms to the region succeeded in attracting Motorola, Australis Media, and EDS. However, the bottom-up process of spin-off firms being created by researchers at local universities (the University of Adelaide in particular) was also found in Adelaide. This demonstrates that bottom-up entrepreneurial processes are also under way in Adelaide and that the opportunity exists to link the two processes to enhance the ability of government to meet its objectives. Indeed, the emphasis of MFP activities shifted over time as the initial emphasis on external attraction was balanced by more recognition of the importance of local partners (MFP Australia, 1994a). The dis- banding of the International Advisory Board when the federal government cut its funds in 1996 further symbolized this shift. Two strategic decisions also created greater emphases on local firms and local research capacity: first, the selection of Silicon Valley as a model for MFP development and second, the adoption of strategies to form clusters of related firms and to promote their interaction (as recommended by Collaborative Economics, the Stanford Research Institute subsidiary con- tracted by MFP) (MFP, 1996a). Although the MFP changed to increase local input in the development process, the examination of the CTT as a rapidly growing region based on entrepreneurship and networking in the information technology industry overlooked many external factors. Investment that supported the reported high rates of economic growth included major external firms such as Toyota, which opened an Parker / LOCAL-GLOBAL PARTNERSHIPS 163

inputs outputs federal government external banks state government external firms

quality of life

local / regional wealth institutions employment

human and natural capital local resources: built and institutional capital

Figure 1: Local-Global Partnership Model automobile production plant in Cambridge in 1988 and then expanded it in the late 1990s. Even in Rather than considering the information technology industry, the successful networking among computer firms was not the top-down and restricted to local participants and local initiatives. The involvement of some of the leading com- bottom-up models as puter firms in the world was important to stimulate the achievements in research that led to the for- mutually exclusive, a mation of spin-off firms. Rather than considering the top-down and bottom-up models as mutually closer examination exclusive, a closer examination identifies elements of both models in operation in both case stud- identifies elements of ies. A hybrid model is thus proposed as a better means to represent local-global partnerships to suc- both models in operation cessfully promote high-tech development (see Figure 1). in both case studies. The local-global model draws strengths from both the top-down and bottom-up models and allows for flexible application in particular regions. The implicit argument is that neither external nor internal resources alone are sufficient to achieve high-tech development. MFP Australia could not succeed as a high-tech enclave based on the limited external funding offered by the federal government. Instead, it needed to make links with local research parks (merge with Technology Park and Science Park), universities (adjacent location to University of South Australia, representation on boards and committees), and community groups (representation on committees). Ironically, the inclusion of local partners became the only way for the MFP to survive when the federal government decided to withdraw its funding in 1996. The cutting of state government funds in 1997 then made future implementation of MFP urban development objectives entirely dependent on local government infrastructure and private development partners, who planned the Mawson Lakes urban development to meet environmental and social objectives developed through MFP initiatives. Similarly, local networks and research capacity were critical to the information technology achievements associated with universities and the firms at existing technology and science parks in the state. Conversely, the success of the computer industry network in the CTT is enhanced by its inclusion of external partners. Local actors took the lead role in starting research projects that attracted external funding from both public and private sectors, but the external inputs were of critical importance to undertake the research. New firms were started as inventions were patented and then commercialized in spin-off firms. Venture capital was found from both local and external sources. Networks were formed among university researchers and industry partners. Local production capacity grew; firms exported 80% to 90% of their output as production was aimed for international markets (Strathdee, 1999; Whitney & Company, 1995). The overall result was increased employment and growth in the regional economy based on the combination of local and external resources.

CONCLUSION

MFP Australia and the CTT share the objective to promote high-tech development but have very different structures and approaches. The MFP represents a top-down approach in which national 164 ECONOMIC DEVELOPMENT QUARTERLY / May 2001

and international proponents advocated the creation of a model high-tech center. In contrast, the CTT represents a bottom-up approach in which four small cities decided to recognize their complementary strengths and to cooperate in development efforts that would be mutually beneficial. Pop- ular evaluations of these initiatives in the mid-1990s concluded that the CTT was a success, whereas the MFP was a failure. The initial conclusion that a bottom-up approach is required to succeed overlooks many details. A more systematic review of MFP and CTT objectives and growth in the information technology industry found that the emergence of firms did not adhere strictly to the pattern of external firms being attracted to the MFP through its top-down initiatives and locally based firms only emerging in the CTT with its bottom-up focus. Instead, both types of firms were . . . it is the creation of found in both locations. networks that link local A review of some of the most successful elements of the CTT indicates that it is not local capac- groups to national and ity in isolation that has created high-tech growth and employment. Instead, it is the creation of net- international interests works that link local groups to national and international interests that has resulted in the greatest that has resulted in the success. Indeed, when these networks are examined in detail, their origins are found to precede the greatest success. official formation of the CTT. In this context, the CTT as an institution simply represents another manifestation of cooperation and collaboration among local institutions rather than being the cause of such cooperation. The formal creation of an independent CTT office and Communitech in 1997 represents a continuation of the process of building local networks that include external links. External links are an important component of the development process in the CTT. They include partnerships on individual research projects and extend to investment in manufacturing and development facilities, such as those owned by NCR, Hewlett-Packard, and Raytheon. Conversely, the MFP emphasis on the attraction of external firms overlooks the local networks formed by research groups at the three local universities and their collaboration with industry in several cooperative research centers. Local firms also form the clusters needed to attract related firms in the development strategies advocated by collaborative economics for MFP implementation. Indeed, local efforts to integrate education, high-tech employment, and residential areas with reduced environmental impacts have become the dominant feature of the MFP urban development at Mawson Lakes in Adelaide. The vulnerability of projects dependent on central government funds was highlighted when the federal government cut its funding in 1996 and the state government followed in 1997. The future of the MFP initiative thus became entirely dependent on local actors instead of its external initiators. The case studies thus suggest that the competing top-down and bottom-up models be replaced with an integrated model of local-global partnership as the preferred approach for high-tech development. Local capital resources (human, natural, built, and institutional) are combined with external resources from public and private sources to stimulate the development and production of new technologies. Communities can strengthen their capacity to participate in this process. Human capital can be improved through education, skill development, and increased participation. Natural capital is an important asset for attracting and retaining knowledge workers as part of the quality of life and sustainability of the community. Institutional capital can be improved by promoting new activities in existing institutions and by establishing new networks among private, educational, and public sector representatives. Built capital includes the built heritage of the community and can be strengthened through investment in specialized infrastructure and the use of existing assets to offer such programs as venture capital funds. The experiences of Australia’s MFP and the CTT in Canada thus offer lessons for other regions attempting to promote high-tech development. The trend toward an increased state role in high-tech development policy needs to be set in the context of both local and external resources, which are required to successfully promote these industries. Local initiatives can be built through entrepreneurship and the enhanced use of local capital, but significant external funds from public or private partners are required if the region is to progress up the established urban hierarchy of technology centers. The importance of high-tech industries may be overstated, as in the case of the CTT, where a vibrant information technology sector was found, but the rapid growth in the region overall was caused more by the success of its diverse manufacturing base than by high-tech industries in isolation. The vulnerability of high-tech promotion policies to changes in government policies was demonstrated by the MFP, where the federal and then state governments withdrew their Parker / LOCAL-GLOBAL PARTNERSHIPS 165 support, to leave the future of the project in the hands of local public-private partners. Neither top-down nor bottom-up approaches worked effectively in isolation. Instead, the case studies demonstrate that both local and external links were essential to form effective local-global partnerships for high-tech development.

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