What is a cluster and can you manufacture one?
No technical definition here. Essentially, an industrial cluster is a concentration of specific industries that leads to the development of a local supply chain and, ultimately value-added related activities. You might start with a few aquaculture sites and have to import virtually everything from fish feed to nets to technology and even specialized services. The idea goes that once you have a critical mass of aquaculture sites the supply chain starts to localize as local firms jump in and national/ international firms move facilities close to the industry. Further, local research organizations are tasked with solving big challenges or pursuing new experimental opportunities. Norway is an excellent example of this as a producer of specialized machinery, innovative technologies and services in support of aquaculture. The country does a lot of R&D in this area and is known throughout the world for its aquaculture and, despite having a fraction of Canada’s shoreline, has 10X aquaculture production by volume and growing.
I’m sure that people could provide dozens of reasons why Canada, let alone New Brunswick, hasn’t become the ‘Norway’ of North America but it hasn’t.
Scandinavia, like Canada, has a very significant forestry industry but individual country output pales compared to Canada. In fact, Canada ranks 2nd in the world, behind the Yanks, for timber production. Yet where do you think much of the machinery is manufactured to service the industry? Where are the specialists? Where are a number of the world’s top firms headquartered (e.g. Stora Enso and UPM)?
Of course there are endless examples. The question is how do clusters evolve and is there anything that can be done from a policy perspective to foster them?
New Brunswick built the most impressive business support services industry in North America in the mid-1990s through the early 2010s. As a share of GDP, share of employment, share of exports, no other province or state came close. At its peak the industry contributed nearly 8% of New Brunswick’s total non-refined oil exports. While employment has declined by something like 60% it still remains a major export sector contributing $1.2 billion in export revenue in 2021 or nearly 7% of total non-refined oil exports.
Why didn’t we see a whole cluster develop around “the most impressive business support services industry in North America”? Because of NBTel and some of its spun-out entrepreneurs we saw some software and services but today there is not much left.
Why didn’t the universities start doing related engineering, software and other technology research? The social sciences professors did - crapping on the industry for being low wage and creating an epidemic of carpal tunnel (BTW the total compensation per hour for the office administrative services sector went from $10/hour in 1997 to $56/hour in 2023 and for the business support services sector the increase went from $9.63/hour in 1997 to $37.83/hour in 2023 - if you don’t believe me UdeM professor, check Statistics Canada Table 36-10-0480-01).
As far as I know, there was no research into the use of new technology, no formal use of NB firms to beta test new ideas, no suppliers that got good here and went global, no college/university become known for training specialists, no leveraging of our bilingualism to test new services, etc.
Again, I’m sure that people could provide dozens of reasons why New Brunswick, hasn’t become the ‘Norway’ of business support services, but it hasn’t.
The question I have is are there policy tools that could encourage the emergence of, at least, mini-clusters?
I have told this story multiple times but, for me it never gets old. When I joined GNB in 2015 I asked around if there was any R&D going on related to maple syrup - in universities, research shops, large firms, etc. I was looking for anything from the nutraceutical opportunities to better ways to maximize the harvest. Everyone just shrugged.
So I googled it and go a hit.
There was university research into the nutraceutical potential of maple syrup in New Brunswick…..
New Jersey.
Researchers at Rutgers University in New Brunswick, New Jersey were studying maple syrup.
New Jersey.
If a cluster includes R&D, startups, supply chain development, building global champions, becoming globally known for turning out highly skilled talent related to the cluster, etc. are there policy tools and public investments that could animate an opportunity?
Asking for a friend.
Thank you, David - for the topic itself, and your reflections (frustrations) from a New Brunswick perspective. I had several arguments 5 years ago in the Leduc-Nisku area of Alberta, where an individual was promoting our 10(!) clusters. Definitions were incredibly strained, but it did bring thoughts, and then some actions, together about one that did exist - oil and gas supply and services - and a nascent one for value-added agriculture, specifically hemp.
Just throwing around the Cluster concept seemed to be a great means to access some senior government fund for their organization, but that was then end of the effort. Far better to concentrate on the gaps that may need filling (research, workforce development, etc.) to actually have a specific cluster, then promote it to the industry sector once you have an "unfair" competitive advantage. Meaning this is where the action is. Like mining supply and services in North Bay or Sudbury, Ontario, or Unmanned Vehicle Systems (or the latest label of same) in Medicine Hat, Alberta.