The need for benchmarking clusters

By Roger Voyer

Metropolitan clusters of economic activity now have the attention of politicians. The supporting bureaucracies, including local economic development officials, are attempting to measure how Canadian communities are fairing vis-à-vis others, nationally and internationally. Hence the search for benchmarking indicators that put the industrial clusters in a city in a good light to better attract investment.

In cluster benchmarking studies one indicator dominates; private sector employment. While it is an important indicator of the size of a cluster and hence its critical mass, it favours larger metropolitan areas. Even Canada’s largest cities do not compare that well with the largest cities in other countries when using this indicator because of their smaller size. The situation is even more pronounced for smaller cities.

Developing a Composite Index incorporating a number of indicators would be more representative of the capabilities and the dynamics of clusters. These indicators should include social as well as technical indicators, because, for example, high-tech workers are ‘footloose’ and tend to gravitate towards regions that have good social and cultural amenities at affordable costs.

The table below presents such indicators for the information and communications technology (ICT) clusters in a few North American metropolitan areas, using Montreal as the base. The first row presents the relative importance of employment. Using this indicator the ranking is San Francisco, New York, Toronto, Boston and Montreal. Adding other indicators, such as intensity (i.e.-ratio of ICT employment to total employment), operating costs, cost of living and quality of life, for example, changes the ranking to San Francisco, Toronto, Montreal, New York and Boston.

Adding an S&T infrastructure indicator (number of research centres) changes the rankings again to San Francisco, New York, Boston, Toronto and Montreal. This ranking, compared to the previous one, shows that, while the Canadian metropolitan areas provide good social, cost competitive environments, they lag in research capabilities.

Other indicators could be added to make up a robust Composite Index, such as export levels, distance to major markets and even the dependability of the electrical system. For Canada, the development of a Composite Index is important; otherwise the ranking of our clusters will always be behind others when using the single indicator of private sector employment.

While Toronto can boast being third in North America with some 148,000 people employed in ICT businesses, it will fall much further behind on a global basis when compared with larger metropolitan areas such as Tokyo, London, Paris and Bangalore, India among others. London and Paris, for example, have over 400,000 people employed in their respective ICT clusters, more than twice that in Toronto.

Hence, the importance of a Composite Index to give a truer representation of the capabilities of Canadian clusters.

Editor's Note : If you would like to suggest other indicators for use in cluster benchmarking studies, you can contact the author at roger.voyer@sympatico.ca.