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Jul 06, 2010

Re-Inventing Regional Economic Development

July 6, 2010

Mowat Centre highlights analysis by Neil Bradford & David A. Wolfe which examines Ontario’s changing role in economic development.

For most of Canadian history, southern Ontario has been the nation’s economic powerhouse with many strengths across sectors, cities, and communities. However, recent years have brought complex and large-scale challenges to the region. Continental free trade, the global financial crisis, and a volatile exchange rate now demand creative adaptation and sophisticated innovation from firms, workers, and institutions. The pressures are especially intense for traditional manufacturing and resource industries, and the people and places that depend on them.

The creation of the Federal Development Agency for Southern Ontario (FedDev) is a timely addition to the provincial economic landscape. As a new agency, equipped with federal resources, national networks, and a policy mandate to support economic and community innovation, FedDev can play an important role in ensuring broad-based, sustainable economic development throughout the region.

While FedDev emerges against a backdrop of scepticism about the value of regional policy and the contributions of Canadian regional development agencies (RDAs), we offer an alternative conception of how the federal government can work strategically and collaboratively with its provincial and local partners in charting a new approach to place-based, innovation-driven development for southern Ontario.

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Our strategic vision for the new agency flows from two research papers which assess the successes and failures of Canadian regional economic development policy in the past, as well as the new approaches to economic development occurring in the European Union, the United Kingdom and the United States.

Today, regional economic development (RED) is moving away from policy approaches which aim to equalize outcomes between regions through inter-regional redistributive programs that try to lure businesses to less prosperous regions. Instead successful RED invests in the strengths of all regions, particularly those assets that can be mobilized to create competitive advantages for the region globally.

Rather than dispersing its scarce resources through incremental or marginal add-ons to the existing stock of development supports, FedDev should focus on game-changing regional investments that lead to significant advances in business and community capacities for innovation and sustainability. Examples include technology-driven economic clusters, eco-industrial parks, and multi-community collaborations for renewable energy supply.

Such projects have transformative potential in all of southern Ontario’s regions, but progress depends on building strategic partnerships between governments and across public, private, and community sectors. Playing the role of catalyst and integrator, FedDev can become a valuable “change agency” in southern Ontario.

This approach to regional economic development is “place-based and innovation-driven”. It is embedded in local communities, leveraging local resources through targeted investments in knowledge networks that cross sectors and government departments. There are five specific lessons for Canada that emerge from our research, leading to recommendations for FedDev Ontario.

Regional economic development agencies should invest in the innovation related assets of each region, rather than on regional redistribution. Particular emphasis should be placed in investing in local assets that cannot be easily replicated or moved. FedDev’s investments need to be directed towards those clusters or corridors where the ability of local communities to successfully leverage these investments is greatest.

Policy alignment across levels of government and with civic actors to maximize returns and exploit local synergies and regional strengths is crucial. In practice this means that FedDev should align its initiatives with those of the province and local governments to leverage the impact of its investment. It should build partnerships with industry and educational institutions, venture capitalists and commercialization incubators, anchor firms and spin-off entrepreneurs, and skills centres and business associations.

Institutionalizing collaborative governance is crucial for success. A range of public, private and community actors, including provincial and municipal governments, must be formally involved in the process. So long as regional economic development agencies are embedded locally and networked externally, they can serve as the focal point in the multi-level governance system and help establish formal contractual agreements between actors.

In Southern Ontario, FedDev is only one of many actors in the RED space. As such, it must focus on transformative projects. It should adopt a “Go Big or Go Home” approach that makes high-impact investments to address next generation challenges and seed solutions to transform businesses and communities. In Ontario, these should complement key provincial strategies for economic growth, such as investing resources around clusters or corridors of innovation and sustainability in the knowledge economy

FedDev Ontario should benchmark progress against clear goals and encourage policy learning across regions, agencies, and communities. To ensure RED spending brings about positive and enduring change, government measurement and reporting must be rigorous and transparent.

In Canada cataloguing RED successes and failures, reporting on these, and learning from them has been insufficient in the past. Despite five decades of regional development effort, Canada lags behind other countries in its approach to evidence-based regional development policy making. FedDev should participate in a national conversation about how best to strengthen policy knowledge and learning. Transformative change always rests on a sound understanding of what to do and how to do it well.

Our strategic vision is built around these five themes: innovation, alignment, collaboration, transformation and learning. Guided by these principles, we believe FedDev and Canada’s other RDAs can be policy leaders in ensuring sustainable prosperity for cities and communities in all parts of the country.


Neil Bradford & David A. Wolfe

Release Date

July 6, 2010


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