We are living in an era where trade is an integral part of economic activity. A big question for Ontario’s policy-makers is how to foster strong industries that can compete on the global stage.
Given the vastness of our province and its diverse industrial mix, it can be useful to approach this challenge by thinking about clusters. A cluster is a regional grouping of businesses and related institutions that compete and cooperate within closely related industries. Some popular examples of clusters in Ontario include hospitality and tourism in the Niagara Region and information and communications technology in the Toronto-Waterloo Region Corridor.
Clustering allows firms to take advantage of certain dependencies and complementarities, leading to what economists refer to as agglomeration economies. These benefits include attracting workers with industry-specific skills, taking advantage of shared inputs, sharing knowledge and diffusing technology, and lowering transportation costs (see Increasing Returns and Economic Geography by Paul Krugman). Agglomeration economies have been shown to increase patenting activity (a proxy for innovation), raise local wages and increase employment in cluster regions (see Clusters, Convergence, and Economic Performance by Mercedes Delgado et al.).
It is widely acknowledged that clusters contribute to economic prosperity, but there is a need to better understand how they develop, grow and scale. Understanding how clusters impact the diversity of people within their regional economies is equally as important, and will help encourage sustainable and equitable economic development.
Meaningful cluster analysis depends on detailed organizational data that includes geographic information. This is why we at MaRS Data Catalyst are uniquely positioned to study clusters within Ontario. MaRS Data Catalyst is a cross-functional analytics and research team that works closely with the provincial government, various foundations and enterprise data holders. Our mission is to turn data into insights that inform innovation policy and help entrepreneurs commercialize ideas that provide both social and economic benefit.
We work with a unique database that is the product of a data partnership with Ontario’s Regional Innovation Centres. The partnership is currently scaling to incorporate the whole network, from universities (via the Ontario Centres of Excellence and Campus-Linked Accelerators) to export-driven companies (through the Ontario Investment Office and Field Services), and from high-tech to main-street businesses (through Ontario’s Small Business Enterprise Centres). It also includes data from partners outside the Ontario Network of Entrepreneurs, including federal programs, Crunchbase, CB Insights, and the Canadian Venture Capital and Private Equity Association.
To date, we have collected up to five years of company-level data on more than 14,000 firms in Ontario. Our dataset includes basics such as annual revenue, revenue source (broken down by geographic region), number of public and private funding events, number of full- and part-time employees, address, postal code, and date of incorporation or acquisition. We also collect data on social and environmental impact, including non-financial motives for starting a company (such as access to clean water, conservation or sustainable energy), and methods for tracking social or environmental impact (GIIRS, B Corp etc.).
We have information on founder demographics, including the number of female founders, serial entrepreneurs, youth founders and founders born outside of Canada. We also have data on founders’ networks—that is, founders’ connections with other founders, investors, educational institutions, mentors, and other companies and support organizations—gathered as part of a survey we ran for the Global Entrepreneurship Research Network’s global Ecosystem Connections Mapping Project. Using our database, we can gain insight into various characteristics and drivers of clusters, particularly as they relate to newer and smaller innovative businesses that have been historically difficult to analyze due to lack of data.
Given our position as a research team that operates as the data gatekeepers for a network of entrepreneurs and ventures across the province, we have an opportunity to share insights about Ontario’s clusters. This blog post will be the first in our series on Regional Innovative Clusters—a data-driven exploration of clusters, which can be leveraged to inform public policy and identify opportunities for collaborative research projects. We will be posting on a quarterly basis, and we encourage readers to reach out to us with feedback and opportunities for collaboration with other research teams.