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THE EVOLUTION AND STRUCTURE OF THE VANCOUVER
WIRELESS CLUSTER: GROWTH AND LOSS OF CORE FIRMS
Cooper H. Langford, Jaime R. Wood and Astrid Jacobson
INTRODUCTION.
Two cluster models (Wolfe and Gertler, 2003), representing distinct ends of a spectrum
of structures, are the regionally embedded and anchored structure on the one hand and the
entrepôt (Ryan and Phillips, 2003) on the other. In this second limit, explicit or codified
knowledge is imported by largely non-market mechanisms and local advantage arises
mainly from value added activities based on tacit knowledge. This second structure
seems the most appropriate for description of Western Canadian concentrations in
industries based on contemporary “transformative” (e.g. biotechnology, information
technology) science (Langford, Wood, and Phillips, 2002). In this context, the central
feature supporting competitive advantage is a rich local talent pool with its fund of tacit
knowledge. However, each of the industrial concentrations in Saskatoon, Calgary, and
Vancouver that have been examined exhibits a distinctive history that underlines the
complexity and historical path dependency of the clustering phenomenon (Langford et al,
2003). The case of wireless in Vancouver especially tests the resilience of the industry in
the region to the shock of the loss of anchor firms and raises questions about the precise
character and role of the “firms of global reach” emphasized in Porter’s (1998) model of
clusters. This chapter draws on two major quantitative studies described below and in
depth qualitative interviews1 with 20 current participants in the wireless industry in
Vancouver as well as a few veterans. In 2002, The Wireless Innovation Network of
British Columbia (WINBC) commissioned a survey of the Vancouver wireless industry
1 Interviews were conducted using the Innovation Systems Research Network interview guides.
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by Price WaterhouseCoopers (PwC) (2002). Nearly seventy companies contributed from
a database of 121 for a 55 percent response rate. Any total of wireless companies is fluid
and somewhat ambiguous since the boundary separating wireless from several related
activities is often unclear. However, the survey does provide a good initial description of
the industry.
The respondents to the PwC survey employed approximately 1500 people at the end of
2001 and expected to increase that number. Sixty-four percent of the respondents
reported revenues totaling $253 million for 2001. Revenue concentrated in a few firms
with the ten largest accounting for $240 million in of the total revenue. Estimates from
the second study (Greytek 2002) place the total industry revenues at over $350 million.
The companies are young, with 76 percent of respondents involved in the wireless
industry for less than five years. The work force is also young and well educated. Ninety-
one percent of companies reported an average age of 26 to 40 and 71 percent of
employees were educated to Bachelors level or higher. The firms are BC centric and
concentrate most of their employees in the region. Eighty-three percent report that more
than 50 percent of employees are based in BC. A later section on the background of
current firms describes some of the notable firms representative of the current industry
scope.
The snapshot of the industry presented by the PwC – WINBC survey suggests a newly
emerging concentration as yet awaiting the emergence of the firms of “global reach” that
are postulated in Porter’s (1998) theory as key elements of a cluster. However, this is far
from the case. Wireless in BC owes its origins to three major firms, the McDonald-
Detweiler descendent MDI-Motorola, Glenayre, and MPR. All three of these anchor
institutions have, essentially, been lost to the region or the industry (Canada West
Telecom Group – CWTG - 2003). Consequently, this case directly tests the critical issue
of the effect on the dynamics of a cluster of the loss of a first generation of core firms.
Vancouver’s wireless industry offers important insights into cluster dynamics and
provides an empirical test of the crucial question; can a cluster survive the loss of anchor
firms? In the Vancouver case, not one but almost all anchors were lost. Nevertheless, the
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industry is characterized by optimism for the future. Is Vancouver wireless now a
“cluster”, or are attitudes only a hope and a plan for a future recovery?
GENERAL INDUSTRY DESCRIPTION.
Caroline Lewko of the National Research Council’s Canadian Institute for Market
Intelligence (CIMI) developed a value chain diagram (WINBC (2002) - See Figure. 1)
and WINBC (2002) identifies 112 firms (along with a number of infrastructural
organizations in the categories at the bottom of this diagram).
Figure. 1 The wireless supply chain developed by WINBC.
The wireless supply chain diagram shows how the wireless industry stretches across the
range of activity from component fabrication to service delivery to consumers.
A recent Statistics Canada publication (Beckstead et al 2003) places the wireless industry
in the broader context of the region’s ICT industry dynamics from 1990 to 2000.
Vancouver is the third largest ICT employment centre in Canada with growth of 74
percent in the decade from 1990 to 2000. The national average increase in this decade
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was 73 percent and growth in the two other Canadian wireless centers was 40 percent in
Ottawa-Hull (4th in total) and 226 percent in Calgary (5th in total).
INDUSTRY HISTORY AND COMPOSITION.
The early history of Vancouver wireless is well told in the Greytek (2002) report, and
was corroborated by a number of our interviewees. We re-tell a large part of it here since
the report is not readily accessible. The origins of the cluster begin with three major
anchor firms with a rich history in wireless technology, industrial equipment, and
telecommunications. These anchors played a pivotal role in the recruitment and training
of hundreds of employees, some of whom would later spin out many of the firms in the
cluster today. The three firms were an innovator in mobile data technologies - Mobile
Data International (MDI), a major manufacturer of classical pagers that was at one time
Vancouver’s largest employer in electronics – Glenayre, and MPR Teltech, a creative
partnership between several players including a well known multinational (GTE) and BC
Telecom. To illuminate how a rich pool of wireless talent was recruited to and developed
in Vancouver, the story of each of these three is told separately here. At the same time,
these accounts show how largely external factors led to the loss of the anchoring role
these firms played.
MDI. Contemporary wireless technology emerged in the Vancouver area in the 1970s.
McDonald-Detweiller Associates (MDA) was a systems integrator with multi-million
dollar revenue who sought a government project directed under the Department of
Communications in support of wireless law enforcement technology. The targets were a
mobile terminal and radio modem. By 1978, MDA had succeeded brilliantly only to find
that the originator, the RCMP, was not interested in purchases. Left with a product for
which the market had to be invented, MDA spun off the technology to two local
entrepreneurs, Tom Purdy and Bill Thompson, who founded Mobile Data International
(MDI). MDI’s first customer was the Vancouver Police department and other police
departments followed: e.g., Ottawa, Toronto, Calgary, Dallas, and New York. However,
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growth depended on finding larger customers. At that time FedEx had just initiated the
promise of overnight delivery. This required a wireless parcel tracking system. They
turned to Motorola for a specialized wireless terminal for vehicles. Motorola declined to
do a custom design and offered an off the shelf product. FedEx was not satisfied with the
off the shelf product performance and initiated contacts with MDI to provide a
customized solution. Despite its small size, MDI won the FedEx business. Over the next
five years, FedEx effectively put MDI and BC on the map with an expenditure of over
$100 million to create a US nationwide wireless network.
MDI undertook R&D to develop a Public Data Network that would use a single
frequency to go beyond specialized networks open to owners of their own frequencies
and thereby to reach the mainline business customer and even the consumer with a data
network analogous to the cell phone voice network. In 1986 MDI installed a world first
network in Hong Kong to support betting at the Jockey Club. By this time MDI was a
world leader in wireless data with 300 employees and revenues approaching $50 million
per year. In 1988, MDI approached the government of Canada about leasing spectrum for
a national data network and contacted Bell Canada and Cantel. Bell launched a surprise
takeover bid for MDI hoping to gain control of the initiative and the technology.
Glenayre and Motorola also launched competing takeover bids. Ultimately, Motorola’s
deep pockets won in a hostile takeover and MDI became the wireless data group of
Motorola. Within Motorola, the group had a world mandate, but the threats of moves to
Chicago and disagreements over corporate philosophy launched departures and spin-off
formation. Several employee groups purchased lines of the business from Motorola and
eventually launched independent firms (see MPR account below). Nevertheless,
Motorola in Vancouver grew to 1000 employees and revenues of $100 million per year in
the 1990s. The Vancouver Motorola operation has recently been terminated with the
transfer of the balance of its activity to China. This appears to reflect a strategic decision
to minimize manufacturing cost. Although little information is directly available, it
appears that development work is being consolidated near corporate headquarters.
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Glenayre. The second major firm contributing to development of expertise in
Vancouver, Glenayre was founded in Vancouver in 1963 as a manufacturer of industrial
and educational equipment. A 1979 reorganization of the company led to focus on the
radiotelephone and pager business. Glenayre was the largest electronics manufacturer in
BC in 1990 with 600 employees. Pager design and manufacture provided a foundation for
development into the wider wireless field that emerged in Vancouver in the 1980s. Thus,
Glenayre recruited, and provided training for, a significant body of wireless talent. It sold
its manufacturing division to a US buyer in 1992. The collapse of the traditional pager
market in the face of cell phone competition led to a loss of 95 percent of the Vancouver
jobs by 2001. A number of former Glenayre employees launched entrepreneurial ventures
in wireless both before and after the collapse. Interviewees claim that as many as 20
Glenayre spin-offs are now present, although a number of companies include veterans of
more than one of the three original anchor firms.
MPR Teltech. The third major player, MPR-Teltech, was founded about the same time
that Glenayre re-focused to wireless (1979) with the involvement of BC Telecom (BC
Tel) and an international player, GTE Corp. It incorporated Microtel Pacific. At the
outset there were 200 employees. MPR actively recruited talent from outside Vancouver
(notably from the federal communications department) in a style consistent with the BC
Tel culture and enjoyed widespread international credibility from the involvement of
GTE. Some of its early wireless activity was in point to point microwave technologies. A
major development came with the opportunity to bid on the satellite communication
system for the DEW line radar system for NORAD. Despite competition from larger
bidders, MPR won the contract. MPR built the system and spun-out the builder of the
radar system as an independent subsidiary. By the mid 1980s, MPR had the largest
number of wireless engineers in the province. From the mid 1980s to the mid 1990s MPR
grew from a development organization to a stand alone profitable company in wireless
and broadband technologies. On the Motorola acquisition of MDI, the core team for
digital packet protocols moved to MPR. In 1992 the company had 650 employees. In this
period two notable current firms, PMC Sierra (a software specialist with offices in many
cities) and Sierra Wireless (a maker of wireless data devices and supporting software –
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see below) were spun out2. By 1996 employment had reached 800 and 200 employees
were involved in subsidiary firms owned, at least in part, by the MPR owners and
working in related projects.
In 1996, BC Tel and GTE sold off MPR, which resulted in the dissolution of the
company. In 1998 BC Tel merged with Telus Corporation. Telus has adopted a strategic
follower strategy that does not support the innovation and research thrusts of MPR. In
consequence of these several changes, most of the 650 jobs formerly at MPR in 1992
have been lost in the successor corporations. However, the Canada West Telecom Group
(2003) analysis attributes about 50 spin-offs to MPR.
It is clear that factors largely unrelated to the Vancouver environment were responsible
for the loss of the anchor firms to the cluster. The Motorola acquisition of MDI was an
effort to purchase a technology. Interest in moves to the headquarters area around
Chicago was expressed early and resistance from talented employees proved a major
barrier to this idea. Glenayre was the victim of a disruptive technology displacing its core
activity. MPR declined as changes in ownership changed technological strategies.
Interviewees strongly confirmed the historical accounts and more recent depictions of the
cluster brought forward from the Greytek (2002) report as well as the conclusions drawn
from WINBC and PwC surveys. Consistent with the WINBC diagram (Figure 1), the
current players in the cluster are involved in a variety of activities that span the industry.
Areas of activity include, for example, devices, for next generation wireless gaming, and
high-speed wireless data devices and networks; mobile software solutions; optical
infrared laser communications equipment; switching technology; and other service
provisions down the value chain to services to final consumers. This range of dynamic
activity in the cluster implies that the industry has a wide net of linkages locally and
globally that serve as fruitful inputs.
2 The Sierra name comes from investments by a California firm no longer involved. The two areindependent of each other.
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The following table that is drawn form public information describes some of the key
players in the Vancouver wireless cluster and lists their business activities. This listing is
not exhaustive, but it does represent well the current mix of activity. The twelve firms are
active “upstream” in the value chain serving mainly what the industry calls “enterprise”
customers, that is mainly medium to large businesses. It reveals a range of activity that
goes beyond the substantial wireless business that supports the wireless users of any large
urban centre, such as the telecommunication service providers.
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Table 1
Product profiles of twelve current Vancouver wireless firms that illustrate the diversity of
activity upstream in the value chain.
Nokia
Designs next generation wireless devices.
Closely link to games that form a part of
Vancouver’s new media cluster.
Telus Corporation
Major service provider.
Telos Technology
Developed carrier-class wireless softswitch
technology to smooth the transition of
wireless operators to next generation
wireless networks.
Sierra Wireless Inc.
Designs and manufactures wireless data
devices and enabling software including
wireless modems.
MDSI Mobile Data Solution
Develops wireless workforce management
software.
Spectrum Signal Processing Inc.
Designs and manufacturers signal
processing engines and subsystems for
wireless signal processing and packet
voice applications.
Infowave Software Inc.
Develops wireless technology that connects
mobile workers.
Norsat International Inc.
Designs and engineers satellite ground
equipment and infrastructure products for
digital video broadcasting and high-speed
data networks.
fSONA Optical Wireless
Designs and manufactures infrared laser
communications equipment for high-speed
wireless communications.
Colligo Networks Inc.
Develops portable peer-to-peer business
messaging and collaboration software.
McCarney Technologies
Developed an "Intelligent Vehicle Device"
that can prognosticate and offer “Impending
Failure Detection” in a moving vehicle or
dynamic power plant.
Soft Tracks Enterprises
Develops wireless payment
systems.
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One can trace first and second “generation” connections of the majority of the young
firms to key people who worked with the now absent “anchor firms’. As well, many
leaders of wireless creativity from those environments remain active in the local industry
as mentors, advisors, and even “angels” to new firms. An important aspect noted by one
well informed interviewee was that a number of senior people who came to Vancouver
with national and multinational players chose to remain in Vancouver, moving to local
firms and becoming leaders rather than accept the next promotion in the multinational.
Clearly, the original anchors created a talent pool that has remained in Vancouver to a
very significant degree. The numerous smaller and later firms that drew key people from
Glenayre range from Telelink Technologies in 1989 to Contec Innovations in 2000. One
of our interviewees spoke of the “…Glenayre people all around”. The major stream of
alumni from MDI (PricewaterhouseCoopers, 2003) includes Sierra Wireless, E-Dispatch
Wireless, Webtech Wireless, and Soft Tracks. The numerous contributions from MPR
with labs close to the university probably also led to the continuing stronger link in the
wireless industry to Simon Fraser University than to the University of British Columbia,
that was expressed in interviews. Important university contributions were people, not
intellectual property, because of excellent design capabilities.
STRATEGY AND INNOVATION.
Survival in the wireless industry with it short product life cycles depends on innovation.
Innovation is not a strategic option, but a core activity. Consequently, all of the firms
studied are actively innovative. To appreciate the character of the innovations, it is
necessary to identify the business focus of the firms. Forty-eight percent of respondents
to the WINBC survey report several products or service lines. Thirty-seven percent
provide “enterprise class solutions”, and sixty-seven percent report enterprises as the
target customer base. The most heavily populated category of the value chain
classification in Figure 1 is “enabling software and services” followed by the two
“infrastructure and devices” and “carrier class solutions”. It will be apparent that the
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output of the cluster is largely in intermediate products and that the work is focused on
systems integration. This reflects a strategy of drawing on the global pool of codified
knowledge and exploiting local skills, especially tacit, to add value through knowledge
production by creative “recombination of existing knowledge” (Gibbons et al, 1994).
More than fifty percent of interviewees report that their most important innovations in the
last three years represent “world firsts”. Innovations in ways of doing business were
essentially as prominent in the interviews as innovations in products. This is consistent
with the responses to the WINBC survey on questions about critical success factors.
Seventy-six percent reported ability to execute sales as critical where only twenty-five
percent mentioned R&D capacity. The overall content of the interviews tell us that this
does not mean these firms see R&D as unimportant. Rather, it suggests they have a high
level of confidence in their ability to accomplish technical innovation. In-house R&D
and marketing personnel were regularly identified as very important sources for
innovative ideas. Customers and competitors, mainly outside the Vancouver region, were
also positively rated.
Elsewhere (Langford et al 2002), we have suggested that Phillips’ (Ryan and Phillips
2003) “knowledge entrepot” concept applies to Western Canadian clusters in
transformative technologies such as contemporary ICT. The case was made for canola
biotechnology in Saskatoon, wireless in Calgary, and GPS in Calgary (Langford et al
2002). The argument suggests that the overwhelming bulk of explicit and fundamental
scientific knowledge is global and imported to the region with few barriers. Import occurs
via documents, movement of personnel in multi-site firms, and talent recruiting. The
local capacity to add value and gain regional competitive advantage lies primarily in the
diffusion of non-codified knowledge within a talent pool by the migration of workers
among firms that continually creates new close relationships and good industry
networking. On the basis of the competitive advantage from tacit knowledge, the cluster
can succeed as an exporter (commonly of intermediate products) into world markets. This
model is consistent with the emphases that emerged in the Vancouver interviews.
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The openness of the cluster with respect to the exchange of explicit, codified, knowledge
is demonstrated by an analysis of patterns of patent networks shown in Figure 2. These
data are drawn from the US patent office database record of citations to earlier patents3 in
the patents with Vancouver inventor names and assigned to the Vancouver firms named
below. The data show the geographical pattern of earlier inventors influencing the patents
obtained by three leading Vancouver firms. Motorola is a representative of a division of a
multinational and MDSI and Sierra Wireless represent two local firms in different areas.
Equally important is the location of the firms obtaining, and benefiting, from the earlier
patents that were drawn on by Vancouver inventors. These assignee locations are shown
in Figure 3
References Cited - Inventor Location
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
Motorola
MDSI
Sierra
Total Average
Motorola 10.7% 61.3% 25.1% 2.8%MDSI 38.9% 61.1% 5.6% 0.0%Sierra 11.7% 38.1% 42.9% 6.6%Total Average 13.0% 50.4% 32.2% 4.4%
California Other US Int'l Canada
Figure 2.. Location of inventors cited in patents by Vancouver inventors assigning to the
representative firms.
3 There were no citations to jorrnal publications found.
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References Cited - Assignee Location
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
Motorola
MDSI
Sierra
Total Average
Motorola 13.0% 64.1% 22.1% 1.5%MDSI 38.9% 55.6% 5.6% 5.6%Sierra 14.4% 40.9% 41.7% 3.0%Total Average 15.3% 52.7% 30.2% 2.5%
California Other US Int'l Canada
Figure 3 Location of assignee firms of patents later cited by Vancouver inventors. .
The background to the Vancouver patents is clearly not local. Canada in total plays a very
small role and the Vancouver share is negligible. California is significant as is the world
outside North America (Europe and Japan). The overall largest category is in the US
broadly. The explicit knowledge in patents is imported rather than local. Even the
corporate branches and subsidiaries of the Vancouver firms that are located elsewhere are
insignificant contributors. If the cluster is an open importer of explicit knowledge, does
that reflect a lack of Vancouver inventiveness in this explicit area? Such a conclusion is
not supported by data on citations of the Vancouver patents. First, it is found that there
are many citations to these patents, reflecting the significance of inventions coming out of
the Vancouver area. The average citation rate is 3.7 per patent. The geographical
distribution of inventors citing Vancouver patents was on average: 48.6 percent
California, 27.0 percent other US, 12.0 percent Asia, 10.4 percent Europe, 0.9 percent
other International (Australia & Israel), 0.7 percent Vancouver and 0.4 percent other
Canada. Clearly the influence of Vancouver explicit knowledge is geographically broad
and has been exported “largely without barriers”.
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SUPPLY CHAIN RELATIONSHIPS
Collaboration
Relations among suppliers, customers and competitors matter, particularly in the area of
collaboration where technical knowledge is shared. The WINBC survey highlights the
importance of collaboration both locally and non-locally. Responses from 46 companies
in the survey reported an average of eight collaborations with other companies and
institutions. The average breaks down into 2.8 with BC companies, 4.7 with companies
outside the region, 0.5 with universities, and 0.2 with research institutes. The high rate of
collaboration outside the region emphasizes the importance of linkages with major
players beyond Vancouver. The collaborations mentioned in the interviews typically
represented an effort to develop a joint market niche. Part of the reason for the high
collaboration rates may stem from the fact that few of the firms identify local competitors
and are therefore not threatened by collaborative activities.
Competitors
Many of the Vancouver companies face much larger firms as competition in the global
market. However, a few control a large market share. Several of these firms gain their
strength by identifying a specific niche market. Market intelligence is gained from two
main sources. One is marketing personnel and their contacts with customers. The other,
and important one, is the web. The competition in a shrinking global market drives
innovation by disseminating industry “buzz” (Maskell and Malmberg, 1999) via human
and technically networked channels. With the short product cycles of this industry, it is
important for firms to get performance information out to potential customers. Company
web sites play a major role in facilitating this task. These web sites are, of course, equally
accessible to competitors.
Customers
Target customer groups were identified in the WINBC survey. Sixty-seven percent of
respondents are targeting other companies, 45 percent targeting mobile operators, and 34
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percent targeting government bodies. This emphasizes the intermediate product character
of the industry in Vancouver. The WINBC survey respondents generate 61 percent of
income outside Canada. The US market is most important overall, but Europe and Asia
are quite important and South America is significant. In short, the market is global. A
number of interviewees did identify the advantage of having local customers in an early
stage for “beta-testing”. Some, however, have essentially no local customers and most
establish close relationships with distant ones. One interviewee laughed and said: “It is
actually the standing joke in the company that we don’t do any business in Vancouver or
for that matter not a hell of a lot in Canada. Most of our [business] – about 60 percent of
it - is done in the US, 20 percent in Europe and about 10 percent in Asia.” However, the
global business climate does not produce any strong temptation to relocate.
Suppliers
Except in the case of short-run sophisticated manufacturing, suppliers tend not to be
located in the region. Contract manufacturers who are available in close proximity do the
specialized manufacturing and technical integration work. Major component suppliers do
have local representatives. As expected the added barrier to face-to-face meeting creates
difficulties for some, but this is not a major or widespread concern. The improved
opportunities to learn from suppliers do not seem to be a factor in location decisions.
Several participants reported that the top three most important inputs for firms are
components, designs, and knowledge and information. This response underscores the
importance of access to a global marketplace.
REGIONAL CHARACTERISTICS AND INFRASTRUCTURE
Quality of life
The central theme of the comments about the advantages of locating a wireless firm in
Vancouver is the talent pool. One interviewee articulated its origins very well in relation
to the attractiveness of Vancouver.
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“One of the overwhelming things was the presence of the three companies I
identified, mainly two, Motorola and Glenayre, sources of highly qualified
personnel, and to a lesser extent MPR Teltech. They had created and imported
this nucleus of highly trained people who loved the scenery and the lifestyle and
didn’t want to move. That was the number one asset and if you score everything
on a scale from 1 to 100, they’re up in the 90’s and everything else on your list is
below 10.”
The Vancouver region is celebrated by all interviewees for the quality of life. Frequently
participants cited this factor as more important to decisions regarding business location
than type of business. In many cases entrepreneurs in the region are not willing to
relocate. In one interview it seemed that starting a business was simply a tactic for
remaining in the region.
The main thing is that we are all here and so none of us wanted to move away…
but we are here for a reason and that is because we like Vancouver.
Geographically, no one had done this in Canada yet - so even though this had
happened in the US and in Europe, no one has actually put something together
like this [company] that has worked. So why Vancouver and not Toronto and
Calgary for example, well, we are here and so Western Canada is our focus for
now.”
This participant found a niche market in the young western Canadian wireless industry.
Talent Pool
As noted above, the crucial talent pool is retained by the local quality of life. The only
problem identified with Vancouver as a business location is that housing costs are high
enough to inhibit recruiting senior management staff from outside. This presents an
interesting contrast to the observation that senior people who have come to Vancouver
with a national or multinational corporation tend to remain and join local firms. There is
one more point about the talent pool. Vancouver is relatively strong in other ICT areas
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(Beckstead et al, 2003), especially new media4. In general, Vancouver has a greater
concentration of ICT employment than the national average. There is overlap of skills
that enrich the already rich labour pool. One interviewee noted the importance of the
corporate web site and the value of finding a superior web designer.
The local talent pool and learning that occurred at Glenayre, MDI-Motorola, and MPR
represent a major path for knowledge flow, especially tacit knowledge. Most firms
interviewed hire experienced personnel from other local firms in wireless and other ICT
and related businesses. However, the local educational institutions (University of British
Columbia, Simon Fraser University, and BCIT) were frequently mentioned as important
resources for talent development and a regional advantage. One interviewee noted an
explicit strategy to hire a certain number of new graduates in order to bring in fresh
thinking. This implies the importance of inputs from the latest explicit knowledge from
the global basic knowledge system. Academic institutions can function as “intelligence
agencies” for that part of codified knowledge that tends not to flow through market
channels, especially not from customer preferences (Christensen, 2000). Transfer is most
often via people.
Service infrastructure
The Vancouver infrastructure of services including industry wise accountants, lawyers,
and patent agents is regarded as good. Transport is not seen as a problem, and access to
the Pacific Rim is noted as an advantage. As leading 19th century industries grouped
around rail lines, modern industries cluster near airports. This may account for the
significant concentration of firms in Richmond.
Finance
Finance is the problematic area. Securing funding in the start up phase was identified as
the second most important critical success factor in the WINBC survey. Studies across
Canada identify access to capital as a critical issue. There are local venture capital firms
4 See Smith et al (2004). “Cluster or Whirlwind? The New Media Industry in Vancouver” Chapter 9 inWolfe , D. and M. Lucas,. Eds. Clusters in a Cold Climate: Innovation Dynamics in a Diverse Economy.McGill-Queen’s University Press. Montreal.
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interested in wireless and “2nd generation” entrepreneurs with resources. However, most
interviewees, but not all, felt that there was a capital shortage. In the WINBC survey
respondents reported that almost half the funding had come from founders and
proprietors and that 2/3 of the funding to date has come from within BC. Forty-nine
percent had received less than $1 million to date and only 11 percent had received more
than $10 million. One quarter of firms has received funding from public markets and one
quarter has received funding from venture capital funds.
Public research institutes.
The collaboration data quoted above indicates some interaction with academic research.
Little emerged from the interviews suggesting that typical academic research connects
directly with the main concerns of these firms. This was cogently explained by one of the
interviewees.
“We never really expected and never got anything directly in terms of brand new
technologies. I don’t think anyone does [expect to get anything directly] in this
type of an industry, biotech maybe, but I think electronic engineering, especially
in consumer electronics or electronics that’s very standards-driven, as ours is,
[doesn’t]. The reason that [not] much room [exists] for the brilliant academic
new algorithm to be introduced and to do anything for you, [is that] you are
constrained by things like standards…”
The importance of standards and involvement with the international standards setting
process cannot be overemphasized with respect to wireless. Communication devices must
communicate with other communication devices. There are very strong “network effects”
(Arthur, 1996).
The initiative to create a wireless chair at Simon Fraser appears to be driven by interest in
training more than research. Again quoting an interviewee; “The primary goal…[with]..
the university is to make ourselves visible to the students and having them close by
certainly allows us to participate and keep a little bit of visibility among those
students...” The one government research institute program regularly mentioned was the
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NRC IRAP program. IRAP has provided advice and financial assistance to innovative
technical projects of SMEs. The Greytek (2002) study identified 55 firms benefiting from
IRAP projects. The only other government initiative mentioned with frequency
approaching (but not matching) IRAP was the SRED tax credits. However, it is important
to note that some small firms do not exploit SRED when they might because they find the
process too complicated. The results of our Vancouver interviews parallel those of our
Calgary study (Langford et al, 2003). The comments about the role of standards and the
contrast with biotechnology are of general significance. Also, interviews confirmed
Doutriaux’s (2003) suggestion that university-industry relationships are catalytic and not
drivers.
One provincially sponsored agency has played a role in wireless. This is the Advanced
Systems Institute (ASI) that funded university-industry collaborative projects and
scholarships. One ASI activity that does link local firms and university people, especially
students, is the annual exposition.
Industry Associations.
Two industry associations have been directly relevant to wireless firms. The senior
organization in both time and scope is the BC Technology Industries Association
(BCTIA). Relatively few of the wireless firms are official members of BCTIA (Greytek,
2002). However, they can participate in the wide variety of activities. The individual
most commonly identified as a leader supporting the industry was the director of BCTIA.
BCTIA was frequently identified as an important catalyst for mentoring relationships
between young and established firms and was commonly referred to as an important
industry leader.
The younger WINBC is more directly engaged with the firms. Recently, a consortium of
associations and agencies in the city has come together to develop a cluster promotion
strategy and wireless has been identified as one of the targets. Local trade shows such as
the annual ASI exposition provide a showcase for wireless firms. However, few
20
interviewees saw local shows as important. They chose trade shows that were most
immediately relevant to their specific business. These were mainly outside the region. As
it was summarized: “we go where we know we can get customers; if we can’t get
customers there we aren’t going to go.” The customers they seek are not common in
Vancouver.
THE PRESENT STATUS OF THE VANCOUVER WIRELESS INDUSTRY.
Vancouver wireless firms are embedded in a fairly rich environment of related talent. The
result of the activity of the previous leaders (MDI, Glenayre, and MPR) has ensured that
Vancouver has a specific wireless talent pool. This talent pool includes business as well
as technical know-how. Vancouver is a more favourable city for financing than, for
example, Calgary where a lot of investor seed money stays in the oil and gas industry.
Beyond this, the attraction of Vancouver as a location is remarkable. Current residents of
most cities describe their homes as favourable environments, but the specificity of the
argument for Vancouver is unusual. Evidence, such as the propensity of personnel
brought on assignments by multinational firms to choose to move to local firms rather
than to take a next step up that would take them away from Vancouver, speaks clearly.
Very recently, Vancouver agencies have undertaken vigorous cluster promotion
initiatives such as “Leading Edge BC” that includes wireless among five industries that
are strong in the region. All of these factors tend to compensate for the smaller scale of
wireless in Vancouver as compared to Ottawa and Calgary. As the WINBC survey
shows, the Vancouver firms expect continued growth.
Global reach.
The key question is whether Vancouver can maintain the required visibility (the “buzz”)
in the industry to lend credibility to Vancouver firms and to ensure they can get a hearing
in the profoundly global market. This is where the role of anchor firms of global reach is
usually considered critical. The loss of three large players would appear to seriously
undermine credibility. However, the mechanism of development of credibility may need
21
closer analysis. In a presentation, Norman Toms, CTO of Sierra wireless, expressed the
debt of current firms to the original anchors, but also the current strength.
The existence of a very entrepreneurial culture at MDI has been very important
in the development of the cluster. The presence of Motorola has in the past also
been a key factor by providing insight into a “bigger” world. The result has been
increased confidence in the US market and a more risk-tolerant entrepreneurial
culture”(Greytek, 2002)
What is the measure of the concept of “global reach” that Porter introduced? No doubt,
the Motorola activity in Vancouver had global reach. On the other hand, we have
suggested (Langford et al 2002) that Phillips’ “knowledge entrepot” concept applies to
Western Canadian high tech clusters including Vancouver wireless. One aspect of this
analogy to the traditional trade entrepot is the notion that the collective capacity for
adding value in a specific regional concentration is usually expressed in exporting
intermediate products to a world market. If the export is mainly intermediate products,
the required global reach may be narrower than that conventionally conceived.
Recognition by the key suppliers of final demand (wireless firms such as Erickson and
Nokia, or in a wider market, firms such as Intel and Microsoft) may be all that is
required. Visibility in the general business and financial community may not be critical.
Many of the current small and medium sized industry leaders do report strong links to the
major international servers of final demand. The Vancouver firms do play a role in
standards development, have influential patentable technologies, and enjoy important
strategic alliances. Thus, mid sized firms such as Sierra Wireless may provide the
required global reach. Further analysis of this issue will raise an interesting question in
the emerging mathematical domain of network theory (Barabasi, 2002). More concretely,
interviewees’ concerns for the future focused on financing of start-ups and maintaining a
good tax structure.
22
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