Cambridge Journal of Regions, Economy and Society 2010, 3, 139–152

doi:10.1093/cjres/rsp032
Advance Access publication 15 January 2010

The strategic management of core cities: Path

dependence and economic adjustment in resilient
regions

David A.Wolfe

Downloaded from http://cjres.oxfordjournals.org/ at Belgorod State University on February 10, 2014

Program on Globalization and Regional Innovation Systems, Munk Centre for International
Studies, 1 Devonshire Place, Toronto, Ontario M5S 3K7, david.wolfe@utoronto.ca.

Received on June 1, 2009; accepted on December 14, 2009

The evolutionary approach to economics hypothesizes that economies change in path-

dependent ways, shaped and constrained by past decisions, chance events and accidents of
history. These constraints make certain strategies easier to pursue and others less so. Re-
silient regions engage in collaborative processes to plan and implement change, within the
constraints endowed by their existing regional assets, including public and private research
infrastructure, and the infrastructure of regional institutions. This paper explores the way
these processes have played out in a two core cities in the province of Ontario, Ottawa and
Waterloo, over the past decade in response to two major external shocks.

Keywords: path dependence, strategic management, civic capital, regional resilience, Ontario, Canada
JEL Classifications: O18, R58

Introduction institutional makeup of the region, particularly the

The evolutionary approach to economics suggests
that economies change in path-dependent ways,
shaped and constrained by past decisions, chance
events and accidents of history. The trajectory of
specific regions and cities is rooted in a series of
economic, social and cultural factors that shape
their development over time. The presence, or ab-
sence, of key institutional endowments may affect
both their innovative capacity and their ability to
respond to external shocks, in other words, their
resilience. As regions and their core cities are buf-
feted by external shocks, ranging from macroeco-
nomic to technological to environmental changes,
their response is constrained by a combination of the
existing structure of their economies as determined
by past trajectories of development, the underlying
capacity to develop and exploit new forms of
knowledge, and critically, by the strategic choices
made in response to those shocks.
The way in which path-dependent trajectories of
development intersect with the strategic choices
made by core cities in regions influences their ca-
pacity to deal with external shocks. The economic
performance of regions through periods of disrup-
tive change depends on the institutional capacity of
those regions to manage the transition. The concept
of resilience has recently been introduced to analyse
the ability of regions to respond to these changes
and to compare how this varies across regions. Re-
gional resilience refers to ‘the ability to transform
regional outcomes in the face of a challenge’
(Chapple and Lester, 2007, 2). Core cities in

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Wolfe
resilient regions must be able to identify regional
assets through collaborative processes to plan and
implement effective change.
However, regions and cities cannot alter their
trajectory of development by fiat or an act of polit-
ical will. Their pattern of development is strongly
influenced by the industrial structure of their exist-
ing economy, as well as by the broader set of insti-
tutions that support those sectors. Those sectors in
which the urban economy has historically special-
ized will constrain its future ability to grow or cre-
ate opportunities for new sectors to emerge. The
basis on which those sectors emerge will be influ-
enced in turn by the capacity of regional firms and
institutions to develop and exploit new sources of
knowledge and the existing knowledge infrastruc-
ture, as well as the talents and skills of the work-
force. In the end, the past will strongly condition the
range of possibilities that lie open in the future.
Among the important factors influencing the
outcome are: the ability of regional and local gov-
ernments to build on specialized regional assets,
including public and private research infrastructure,
as well as unique concentrations of occupational
and labour market skills; the presence or absence
of ‘civic capital’ at the regional and local level, and
the ability of regional networks to work within and
across associational boundaries to support the for-
mulation and refinement of strategic management
policies in response to external shocks. This paper
explores the way these processes have played out in
two core cities, Ottawa and Waterloo, in the prov-
ince of Ontario over the past decade in response to
major external shocks—the post-2001 meltdown in
the telecom sector and the macroeconomic shock of
2008. Lessons will be drawn from this experience
for the factors that can contribute to regional resil-
ience elsewhere.
Path dependence and regional
resilience
The concept of regional resilience is associated with
a number of approaches in the social science liter-
ature, identified as equilibrium, path dependence,
systems and long-term perspectives. An equilib-
140
rium approach focuses on the ability of a regional
economy to maintain its pre-existing pattern of de-
velopment in the face of an exogenous shock or
return to a previous level of output and rate of
growth after being affected by such a shock. The
path-dependence approach starts from the assump-
tion of multiple potential points of equilibrium and
analyses how a particular economy gets locked into
a specific pattern of growth through a cumulative
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series of decisions over time. This perspective is
also concerned with how new paths are launched
and regions alter their trajectory of development.
The systems and long-term approaches focus on
how the persistence of a set of relationships among
a number of variables is conditioned by an under-
lying structure of relevant institutions (Chapple and
Lester, 2007; Hill et al., 2008).
This paper uses the path dependence approach to
develop an understanding of the concept of regional
resilience. Within evolutionary economics, the con-
cept of path dependence is used to explain why
certain technologies prevail in the competitive set-
ting of the marketplace, although they may not al-
ways be technologically superior. The evolutionary
approach suggests that technologies emerge and
become predominant through a series of past deci-
sions, random events and accidents of history. As
a result of these decisions, certain possibilities are
easier to pursue in the present and others less so.
When applied to regional and urban phenomena, it
suggests that the developmental path of a specific
city or region is rooted in a series of economic,
social and cultural factors in their past. The chal-
lenge is to reconcile the significance of random or
chance events in endowing a region with its indus-
trial structure and institutional capabilities, while
allowing for the role of political leadership in fash-
ioning subsequent changes in its broader institu-
tional structures and development strategies.
Paul David defines a path-dependent sequence of
economic change as one in which important influ-
ences upon the eventual outcome can be exerted by
temporally remote events, including those domi-
nated by chance elements, rather than systematic
forces. In such circumstances, ‘historical accidents’
can neither be ignored nor neatly quarantined. In

a dynamic process, positive feedbacks are gener-
ated by strong technical complementarities on the
supply side of markets, and/or the interdependence
of customer preferences on the demand side. He
insists that this does not mean that economic
outcomes are predetermined; rather he quotes from
Douglas North to demonstrate that ‘contingent
probabilistic events have a place throughout the
dynamic process’ (David, 1997, 17). North argues
that ‘‘At every step of the way, there were
choices—political and economic—that provided
real alternatives. Path dependence is a way to nar-
row conceptually the choice set and link decision
making through time. It is not a story of inevita-
bility in which the past neatly predicts the future’’
(North, 1990, 98–99) (emphasis added by David).
The related concept of increasing returns ex-
plains how positive feedback can amplify the
effects of small economic shifts in many areas of
economic activity. Once a set of chance events
pushes the technological trajectory of a new prod-
uct or process onto a certain path, the prevailing
technology may become locked-in due to the fact
that it was the first to gain wider acceptance in the
marketplace, that many supplying businesses, dis-
tribution networks, supporting technologies and
users, plus a large community of users and devel-
opers, all converged on its design. In effect, the
overall appeal and market dominance of the tech-
nology increases as this process unfolds (Arthur,
1988, 591). The key insights arising from this liter-
ature are summarized by Martin and Sunley as tech-
nological ‘lock-in’, dynamic increasing returns, and
institutional hysteresis. They warn that the key lim-
itation associated with this approach is that it ‘‘tells
us little about how new paths come into being’’
(2006, 407). The literature is more illuminating on
the question of how a new form of economic de-
velopment, structure or technology generates self-
reinforcing processes once selected, rather than
how they get selected in the first place.
Path dependence and regional development
The concepts of path dependence, increasing
returns and lock-in have obvious applications to
understanding the historical paths taken by regions
Strategic Management of Core Cities
and their core cities. During the early phase of tech-
nology development, many cities have the potential
to emerge as the location where a technology and its
corresponding industry take root. Once a city or
region establishes itself in a particular set of pro-
duction activities, its opportunities for continued
growth are reinforced by the impact of increasing
returns to the technological and institutional advan-
tages it enjoys. While this may be partly attributable
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to the success of a ‘lead’ anchor firm in the region,
such as Nortel in Ottawa or Research In Motion in
Waterloo, the process is reinforced by other factors
at work, including local collaborative institutions
and political alliances that support the emerging
industrial structure of the city or region. By the
same token, ailing places may face greater chal-
lenges in improving their fortunes when their prin-
cipal industries and technologies begin to decline.
Once a path-dependent trajectory of decline sets in,
the critical factor that determines a region’s resil-
ience is the capacity of local firms to shift to a new
or emerging set of production activities and the
extent to which its institutional structures support
that shift.
Economic geographers have elaborated on these
insights to extend the analysis of path-dependent
trajectories in regional development. Brian Arthur
analyses the way in which agglomeration external-
ities contribute to the concentration of firms in spe-
cific regions. His interest in the question grew out
of his fascination with Jane Jacob’s ‘‘haunting
accounts of places and regions that had got ‘passed
by’ historically in favour of other places and
regions that had got ahead merely, it seemed, be-
cause they had got ahead’’ (Arthur, 1994, xviii). He
set out to explain how one location pattern among
many possibilities might emerge. His model allows
for a simple notion of historical accident by assum-
ing that firms make locational decisions on an
individual and random basis. In an unbounded ag-
glomeration case, the random decision process
eventually locks into a situation where one location
enjoys a monopoly advantage, ‘‘(t)he process is
path-dependent . in that a slightly different
order-of-choice history early on could sway the out-
come to a different location becoming dominant.
141
Wolfe
An attractive location will likely be favoured by
many firms early in the choice order, and there-
fore it has a larger probability of predominating’’
(Arthur, 1994, 58–59).
Michael Storper highlights the contribution of
regionally based externalities to the process of in-
creasing returns. He notes that the technological
complementarities identified by evolutionary econ-
omists and the resulting positive feedbacks or
technological spillovers have a strong regional di-
mension. Knowledge spillovers in technological
development mean that technological competence
is frequently bundled in ensembles of related capa-
bilities—firms that master it are tightly integrated
into networks with other firms through formal
exchanges and ‘untraded interdependencies’, which
can confer advantages on certain regions that insu-
late them, at least temporarily, from market-based
competition. These include labour markets, public
institutions and locally or nationally derived rules
of action, customs, understandings or values
(Storper, 1997, 18–22). Maskell and Malmberg ex-
tend this point by arguing that the competitive suc-
cess of firms depends on distinctive, localised
capabilities. These capabilities arise from local
assets that are unique to the region, based on its
infrastructure and built environment, its endow-
ment of natural resources, the regionally specific
institutions and the available set of knowledge
and skills. A region’s institutional architecture
accumulates incrementally over time, becoming
part of its non-replicable asset base.
. it is the region’s distinct institutional endow-
ment that embeds knowledge and allows for
knowledge creation which . constitutes its
capabilities and enhances or abates the com-
petitiveness of firms in the region. The path–
dependent nature of such localised capabilities
makes them difficult to imitate and they thereby
establish the basis of sustainable competitive
advantage (Maskell and Malmberg, 1999, 181).
This point is picked up by Martin and Sunley
who view the extent and nature of this interlocked
relation between underlying technologies, eco-
142
nomic structures and institutional supports as
a key issue (Martin and Sunley, 2006, 413). The
path-dependent nature of development in regional
economies, involves not just the process by which
these interdependent subsystems co-evolve but also
the process by which new paths are created and
existing institutional ensembles begin to break
down and decay. Central to the question of regional
resilience is how adaptable these institutional
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ensembles are to changes in the principal industries
and technologies at the core of the region’s eco-
nomic structure. In particular, the key issue
concerns the ability of firms, industries and institu-
tions in a specific city or region to adapt their exist-
ing knowledge base and localised capabilities to the
generation and exploitation of new commercially
valuable sources of knowledge. ‘‘New paths do
not emerge in a vacuum, but always in the contexts
of existing structures and paths of technology, in-
dustry and institutional arrangements’’ (Martin and
Simmie, 2008, 186). Resilient regions are those
in which existing clusters of firms are able to
transition out of declining industries, while simul-
taneously exploiting the local knowledge infra-
structure to cultivate new, potential growth fields.
Social learning and the governance of
regional economies
Despite the constraints imposed by path-dependent
sequences of regional economic development,
examples abound of localities and regions that have
altered their developmental trajectory by improving
their endowment of institutional and cultural fac-
tors. They may differ in terms of their industrial
structure, the relative mix of industries on which
their success is based and the social or civic culture
that creates cohesion in the region or locality, but
they share in common a capability for reflexivity or
social learning. Increasingly, the challenge for both
public and private organizations is to structure
knowledge and intelligence in social ways, through
social learning, rather than on an individual basis
(Paquet, 1999; Wolfe and Gertler, 2002). Learning
is the capacity to improve present performance as
a result of experience through a redefinition of the

organization’s objectives and the modification of
behaviour and structures as a result of new circum-
stances (Paquet, 1997, 31). It is fundamentally a so-
cial cognitive process that depends upon the
interaction of geographically proximal actors to
develop new processes of adaptation.
This form of learning assumes that neither the
public sector nor private enterprises are the source
of all wisdom; rather, the process of institutional
adaptation demands an interactive form of learning
in which the means for communicating insights and
knowledge to all relevant actors in a regional econ-
omy is crucial for the outcomes. Whether the adapt-
ability of a city or region constitutes a dynamic
force for change or an ‘institutional drag’ depends
on the ability to replace inefficient norms and
practices with ones that facilitate the process of
economic change and social adaptation (Paquet,
1999). The ability to create effective linkages
among relevant institutions and actors at the local
and regional level is a key factor in the development
of effective policy and a prerequisite for regional
resilience. Yet, recognizing the importance of col-
laboration and coordination for reflexive policy de-
velopment is only part of the challenge; better
coordination requires an understanding of the con-
ditions that contribute to its emergence and devel-
opment. Policy outcomes depend on the interaction
among a wide range of social and economic actors,
including sub-national and local governments, the
private sector, voluntary, business and not-for-
profit organizations. This approach emphasizes
the processes of governing, rather than the exercise
of formal authority through organizational and ad-
ministrative structures. Governance ultimately
refers to self-organizing, inter-organizational net-
works (Rhodes, 1996, 660). Central to the concept
is the development of styles of governing in which
the boundaries between public and private actors
and even across different levels of government
become blurred.
For the public sector to operate in this mode of
governance, it must both establish the conditions
under which key actors at the community level
can engage in a consultative and interactive fashion
with government authorities, as well as learn to
Strategic Management of Core Cities
collaborate with these actors under a more distrib-
uted pattern of authority. This may involve the del-
egation of certain tasks from government agencies
to accredited business associations or community
organizations; it may even involve instances in
which these civic associations take the lead on im-
portant local initiatives. The sharing of power with
a broad range of actors creates the opportunity for
more meaningful dialogue to take place at the re-
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gional and local levels, which is central to the pro-
cess by which parties come to reinterpret
themselves and their relationships within the local
economy (Morgan and Nauwelaers, 1999, 12–13).
Civic capital and regional governance
Research on urban and regional development has
long been concerned with the factors that foster
more effective cooperation among civic actors at
the regional and local level. The concept of social
capital has been used to explain why some regions
are more successful in overcoming obstacles to
establishing cooperation than others. Social capital
is defined as the ‘‘social relations among agents,
resting upon social institutions that allow for coop-
eration and communication’’ (Lorenzen, 2007,
801). Lorenzen distinguishes between the business
realm and the civic realm of social relations. Busi-
ness relations include technological learning within
the firm and inter-firm trade and knowledge
exchanges. Civic relations include those that exist
between people in a community who interact with
each other through their involvement with schools,
various cultural and leisure activities and other civic
associations. The civic dimension of social capital
is particularly sensitive to geographic distance be-
cause many of the activities that enhance the
strength of civic relations are based on the specific
catchment area of a civic association or member-
ship in a cultural organization. These relations fre-
quently entail face-to-face meetings that are
constrained by distance (Lorenzen, 2007).
Building on this distinction between the business
and the civic dimensions of social capital, the con-
cept of civic capital is used to analyse the contribu-
tion that more cooperative forms of behaviour make
to the success of local and regional economies
143
Wolfe
(Wolfe and Nelles, 2008). Civic capital focuses on
the role that dense networks of civic associations
play within successful communities. It is defined as
a set of relations that emerges from interpersonal
networks tied to a specific region or locality and
contributes to the development of a common sense
of community based on a shared identity, set of
goals and expectations (Nelles, 2009).
The basis of civic capital is its urban orientation
and the quality of the networks that exist among
civic actors within the community. Civic capital is
generated within a city or region when key actors
formulate a common vision of their future and make
decisions about that future in a collaborative man-
ner. The concept of civic capital also pays close
attention to the role played by civic leaders in fos-
tering regional networks. Civic leaders, or civic
entrepreneurs, are critical in articulating a regional
vision and intensifying and formalizing collabora-
tive networks within and between communities.
However, the source of that leadership may vary.
In some regions, it comes from political institutions
or industry associations. In others, it originates with
an inspirational figure in a university setting or an-
chor firm that attracts or spins off like-minded indi-
viduals in other firms or industry associations.
These leaders understand the importance of collab-
oration and through their leadership bring various
groups of actors together to negotiate and agree on
regional goals. In doing so, they build civic capital
by creating the fora and the initiatives for different
segments of the local community to collaborate in
pursuing agreed upon goals (Henton et al., 1997,
31).
In regions characterized by higher degrees of
civic capital, the presence of an interlocked network
of collaborative institutions results in more effec-
tive governance. Collaborative institutions embody
values and attitudes that are intrinsic to the region
and help build civic capital. Successful regional
economies benefit from the presence of collabora-
tive institutions, which communicate the respective
needs of different community actors to each other,
establish local and regional priorities for economic
development and build effective bridges across dif-
ferent segments of the economic community. They
144
contribute to the articulation of a shared vision for
the economic community and the local economy
and build a consensus among key civic actors and
associations around that vision (Porter et al., 2001,
75). The emphasis on the role of local leaders in
building civic capital and creating collaborative
institutions underlines the importance of political
agency in charting new developmental pathways
for resilient regions; but even dynamic regions with
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the highest levels of civic capital are constrained by
their existing mix of industries and technological
capabilities. No region gets to wipe the slate clean
and start afresh.
Strategic management of regional
economies
The economic future of regions confronted with the
emergence of new technologies or the declining
competitiveness of their industrial structure de-
pends on the ability to mobilize their knowledge
assets and chart a new path forward. The response
adopted by many regions to the trend towards
knowledge-intensive production has been an in-
creased emphasis on ‘strategic management policy’
at the regional and urban level. This approach
involves ‘‘the development and enhancement of
factors of production that cannot be transferred
across geographic space at low cost’’ (Audretsch,
2002, 174). Rather than concentrating on the zero-
sum competition for inward investment, successful
places focus on generating new economic knowl-
edge that drives innovation and export success. As
Feldman and Martin note, most jurisdictions pursue
a strategy that is defined by the collective decisions
that actors within that jurisdiction make over time,
whether in coordination or not and whether articu-
lated or not. Successful jurisdictional strategies are
those that contribute to high and rising wages for
their workers over time. Jurisdictions can benefit
from creating an economic base with unique and
valuable assets that provides a differentiated advan-
tage over other jurisdictions, but ‘‘constructing
jurisdictional advantage takes the will of all the
actors—a consensus vision and vision of unique-
ness’’ (2005, 1245).

Variations in the ability of cities and regions to
mobilize knowledge resources and develop new in-
novative capacities are linked to ‘‘collaboration be-
tween agents and their ability to mobilize assets’’
and ‘‘the successful institutional arrangements
[that] often grow out of local agencies and endow-
ments’’ (Simmie and Wood, 2002, 149).
The theoretical foundation for this argument rests
on the approach to governance that emphasizes the
benefits of collaboration across different levels of
government and between public and private actors
at the local scale, as the most effective way for
achieving better policy alignment and sustaining
urban economic growth.
A key question is how to generate the right con-
ditions for devising strategic management policy at
the regional and local level. Much depends on the
ability of cities and regions to develop the organi-
zational capacity for formulating and implementing
new development strategies. Successful regions
must be able to engage in strategic planning exer-
cises that identify and cultivate their assets, under-
take collaborative processes to plan and implement
change and encourage a regional mindset that fos-
ters growth. The successful adoption of a strategic
management policy at the urban level requires not
just new types of policy but a new style of policy
development, deploying what Gertler and Wolfe
label ‘local social knowledge management’ exer-
cises (2004a). Such exercises are concerned with
identifying a city or region’s unique jurisdictional
assets that can support the development of its urban
economy. These can include knowledge economy
assets (such as workforce skills, knowledge and re-
search development, creativity, advanced telecom-
munications infrastructure, quality of place and
financial capital), collaborative institutions and
organizations (such as regional development organ-
izations, professional networks, research consortia
and entrepreneurial support networks) and the
regional mindset (values and attitudes).
Regional economic development processes are
fundamentally socially organized learning pro-
cesses involving learning by individuals, by firms
and by institutions. Successful strategic planning
exercises are demand and opportunity-driven, pro-
Strategic Management of Core Cities
mote innovative ideas in all aspects of regional eco-
nomic activity, facilitate relationship building and
create buy-in and are ongoing, iterative and non-
linear. Successful strategies are reflexive in that
they use their past experience to create a more
effective process—in other words, they involve
a degree of social learning. An essential criterion
for success is finding the appropriate mechanisms
to engage key members of the community in a sus-
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tained effort to advance its opportunities. Drawing
on their experience with community-based eco-
nomic development initiatives, Henton and his col-
leagues argue that what we have termed ‘civic’
capital is critical for the success of the most dy-
namic strategic management exercises. Civic
capital can be created, and the basis for doing so
is the establishment of collaborative networks be-
tween various elements of the business and civic
communities.
The presence of collaborative institutions and
organizations . greatly facilitates this environ-
ment. These alliances, networks and other
relationship–building mechanisms create con-
nections and linkages vital to economic
development in a technology–driven world.
Relationships matter (Montana et al., 2001, 10).
A number of additional obstacles lie in the path
of the successful implementation of bottom-up gov-
ernance development strategies. One of the limita-
tions faced by a governance-based approach is the
lack of financial resources to fully support the de-
sired initiatives. This problem can be compounded
by the absence of a formal tier of government insti-
tutions corresponding to the actual economic terri-
tory encompassed by the city region. Smaller and
less dynamic urban regions may also face a greater
challenge in accessing regional and national gov-
ernment resources or even gaining a significant
place on their respective policy agendas. An addi-
tional danger lies in zero-sum, competitive devel-
opment strategies through the use of financial
incentives and subsidies to attract investment away
from more established centres. Engaging in these
kinds of bidding wars can reduce the economic
145
Wolfe
benefit to the larger region or nation as a whole
(Rodrı́guez-Pose, 2008, 1037–39). Resilient regions
are better able to overcome these obstacles in formu-
lating strategies that support the co-evolution of their
industries and institutions along new development
paths.
Lessons from Ottawa and Waterloo,
Ontario
Ottawa and Waterloo are sites of two of the leading
high-technology clusters in Ontario, Canada’s larg-
est province and the centre of its greatest concen-
tration of economic activity (Lucas, Sands and
Wolfe, 2009). Ontario enjoyed a privileged eco-
nomic position during the post-war period, but has
experienced increasing economic volatility since the
recession of the early 1980s. This restructuring was
accentuated in the 1990s by Ontario’s deeper inte-
gration into the North American economy through
the North American Free Trade Agreement. Faced
with major declines in the number of firms in mature,
labour-intensive industries, the province came under
considerable pressure to reposition its economy and
to promote more knowledge-intensive activities in
industries such as information and communication
technologies (Gertler and Wolfe, 2004b; Pike
et al., 2006, 206–12). This strategy faced new chal-
lenges in the early 2000s in the wake of the telecom
bust. The ability to enhance civic capital at the re-
gional level and foster better governance mecha-
nisms are critical elements in helping Ontario’s
core cities respond to the cascading shocks that have
buffeted the provincial economy. The following case
studies draw upon an extensive series of interviews
conducted in both cities over the past decade as part
of a large collaborative research project on innova-
tion and creativity in Canadian cities. The interviews
followed a common semi-structured guide with
questions focused on the inter-relationships between
key public and private actors in the city involved in
economic development activities. The research
sought to assess the quality of civic capital present
in the local community and the degree to which
a strategic management approach had been adopted
in pursuit of local economic objectives.1
146
Both Ottawa and Waterloo benefited from the
transition to a more knowledge-intensive economy
as the relative size and international reach of their
technology clusters expanded from the early 1980s
onwards. Both were blessed with a strongly
endowed research infrastructure, national and pri-
vate research laboratories in the case of Ottawa and
strong post-secondary educational institutions in
Waterloo. However, both cities have been impacted
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by the economic aftershocks of the technology bub-
ble in 2001–2002 and the global financial crisis of
2008–2009. In each case, their ability to weather
the economic storms of the current decade has
benefited from a combination of strong entrepre-
neurial business leadership and building civic cap-
ital through effective governance mechanisms.
Each city was affected differently by the current
crisis, due to the collapse of Nortel in Ottawa and
the implosion of the automotive manufacturing
base, which still comprises a significant part of
the Waterloo economy (Holmes and Rutherford
(2008). Their resilience in face of the current crisis
is conditioned by a combination of the legacy of
their industrial structure and the strategies
being forged to support the further growth of
knowledge-intensive industries.
Associative regional governance in Ottawa
The origin of the high-tech cluster in Ottawa pro-
vides the classic illustration of a path-dependent
sequence of development. The decision by Northern
Electric (now Nortel) to establish a research facility
in Ottawa in the late 1950s was made after a judicial
decision in the US cut off its ready access to patents
from the Western Electric Co. It purchased a tract of
land on the outskirts of Ottawa as the home of Bell
Northern Research, because of the location of the
National Research Council laboratories and the
Department of Defence’s Communications Research
Centre in the nation’s capital, resulting in thousands
of industrial engineers, researchers and managers
moving into the region (Wolfe and Gertler, 2006).
Many of the leading entrepreneurs in the Ottawa
telecommunications and photonics clusters began
their careers as researchers for BNR. Both technical
and entrepreneurial talent left Nortel over the years

to form new firms in the region. One of the key
events in the region’s early history was the bank-
ruptcy of the semiconductor firm, Microsystems In-
ternational Ltd. (MIL) in 1975, which released
a significant number of skilled workers into the re-
gional economy, many of whom went on to found
new firms. More than 20 local start-ups emerged
from the collapse of MIL, including some of the
region’s leading firms, such as Mitel, Mosaid and
Calian (Harrison et al., 2004).
Since the 1980s, Ottawa has been characterized
by a high degree of civic capital. The relative suc-
cess in building this form of governance has been
noted by other cities, such as Waterloo, and there
have been some notable efforts to reproduce ele-
ments of the model. The distinguishing feature of
the Ottawa case is the strength of its local ‘institu-
tions of collaboration’ and the degree to which they
are integrated with the formal structures of regional
municipal government. The linchpin of these insti-
tutions is OCRI, the Ottawa Centre for Research
and Innovation, a not-for-profit organization
founded in 1983 as a collaborative effort among
partners from industry, the regional municipality,
local post-secondary institutions and federal labo-
ratories. OCRI currently has 625 members and
a budget of approximately $8 million, with 20%
funded by the City of Ottawa and the remainder
coming from a variety of sources including: munic-
ipal, federal and provincial government; member-
ship fees; professional development programs, and
private sector contributions. OCRI delivers a wide
range of economic development services to the lo-
cal economy and is involved in a dense network of
partnerships with many of the locally based federal
and provincial research and technology-based
organizations, including national research laborato-
ries and provincially funded research networks,
aimed at strengthening the region’s innovation
capabilities. Virtually all accounts of the rise and
growth of the Ottawa high-tech sector agree on the
fundamental role that OCRI has played in the pro-
cess since its inception (Chamberlin and de la
Mothe, 2003; Mallet, 2004; O’Sullivan, 2004).
Ottawa launched an innovative strategic manage-
ment exercise in the late 1990s in partnership with
Strategic Management of Core Cities
the Province of Ontario’s Office of Urban Eco-
nomic Development. OCRI was closely involved
with the resulting Economic Generators Initiative
led a group of public and private leaders committed
to advancing the local economy. The mandate of
the initiative was ‘‘to provide leadership and advice
at a strategic level, on action required to improve
and grow Ottawa’s economy’’ (ICF Consulting,
2000, i). Membership included the chairs of the
Downloaded from http://cjres.oxfordjournals.org/ at Belgorod State University on February 10, 2014
region’s business and economic development
agencies, and representatives of its municipal
council, the higher education sector and the busi-
ness community at large. The leadership under-
took a detailed study of the region’s ‘economic
generators’ and used the study to prepare a strate-
gic plan for the development of the key engines
driving the local economy. Three hundred individ-
uals participated in the work of the various groups
that formed the visioning exercise and formulated
33 specific goals to promote seven key clusters
identified as growth generators for the regional
economy.
The exercise produced a set of flagship initiatives
designed to work across the individual clusters to
benefit the regional economy as a whole. Unfortu-
nately, the report was released just as the high-tech
sector entered the post-2000 downturn. Despite the
recession, OCRI and the municipal council forged
ahead with some of the proposed initiatives. Among
those that came to fruition were measures to
strengthen the region’s biotechnology and photonics
clusters with the formation of the Ottawa Biotech-
nology Incubation Centre and the Photonics Fabri-
cation Centre, constructed through a partnership
between the National Research Council and Carleton
University. The telecom bust of 2001–2002 under-
mined much of the momentum generated through
the strategic planning exercise. An update of the first
report was released in January 2003, setting out
a strategy for strengthening the links between the
region’s research infrastructure—especially its
post-secondary education sector and national labora-
tories—and the local sources of enterprise within
existing and emerging clusters, but did not have
the same positive impact as the first one (ICF
Consulting, 2003, 3).
147
Wolfe
The twin crises of the past decade have revealed
Ottawa’s over-dependence on telecom-based tech-
nologies as a major weakness in its industrial struc-
ture. In response to the restructuring of the leading
telecom and photonics firms in the region, attention
shifted to the need for a series of training and labour
adjustment measures to relocate high-tech workers
who had lost their jobs with the region’s leading
telecom and photonics firms. Initiatives included:
O-Vitesse, a joint undertaking of the National Re-
search Council’s Regional Innovation Centre and
the region’s two universities to provide skill
upgrading for under-employed or unemployed,
often foreign, professionals (Chatbar, 2004); the
Ottawa Talent Initiative, organized by unemployed
high tech workers with federal and provincial gov-
ernment representatives and community organiza-
tions, as well as a more recent one to build linkages
between employers, immigrants agencies and other
stakeholders and expand employment opportunities
for skilled immigrants in Ottawa (Andrew and
Doloreux, 2008), and TalentWorks, launched under
the auspices of TOP and managed by OCRI, as
a community-based initiative to build Ottawa’s tal-
ent pool by providing integrated support to targeted
sectors (Paquet et al., 2004). While the extent and
diversity of these post-2002 initiatives reflects a cer-
tain degree of civic capital, the lack of integration
between the economic and labour market initia-
tives, as well as the failure to follow through on
the 2003 report reveals an inability to deliver on
the original intent of the strategic management
exercises due to a fragmentation of the respective
networks and lack of clear civic champions.
OCRI continues to be a cornerstone of the re-
gional economy and has sustained the intense level
of collaborative activities that have been its hall-
mark. However, current employment in the high-
tech sector languishes well below its peak in 2000
and labour shedding by leading ICT firms has
resulted in a more significant decline in earnings
for high-tech workers than any other ICT-intensive
region in the country (Frenette, 2007). It has led to
the formation of a large number of small start-ups
over the past decade, but it is too early to tell
whether any will enjoy the rapid rate of growth
148
experienced by an earlier generation of firms. The
collapse of Nortel in 2009 and the ensuing sale of
all its key divisions signal the loss of the lead an-
chor firm in the regional economy. Overall, the
Ottawa case provides a striking illustration of the
difficulties encountered by a region in overcoming
the legacy of an excessive reliance on a relatively
small number of industrial sectors, despite the
strong support of its civic governance institutions.
Downloaded from http://cjres.oxfordjournals.org/ at Belgorod State University on February 10, 2014
It confirms that the degree of resilience exhibited
by a regional economy is a product of both the
path-dependent nature of its industrial develop-
ment, as well as the capacity to forge regionally
based institutions of civic governance.
Promoting civic capital in Waterloo region
The technology sector in Kitchener–Waterloo–
Cambridge (Waterloo), located an hour west of
Toronto, is one of the most dynamic sources of
high-tech activity in Canada. Although its present
contours can be traced back to the formation of the
first software and computing firms in the 1970s, the
region has long been an important setting for
manufacturing in Southern Ontario. Kitchener–
Waterloo has been home to major national and in-
ternational corporations for more than a century,
from Dominion Electrohome Ltd. to present day
success, Research in Motion—manufacturer of the
iconic ‘Blackberry’. Although the region is only
about half the size of Ottawa, its more diverse in-
dustrial base, as well as the historical capacity of
some of its leading firms to transition from older
technologies to new ones, has been a continuing
source of regional resilience. Much of the success
of the region has been attributed to its highly en-
gaged civic associations and the proliferation of
mechanisms for strategic management and regional
governance.
The emergence of the high technology cluster in
the Waterloo region owes its success to critical
decisions taken by industrial leaders in the years
following World War II. Leading members of the
local community in Kitchener–Waterloo played
a prominent role in recognizing the need for more
technical education in the regional economy. They
proposed a unique solution in the form of The

Waterloo Plan, which called for the formation of an
engineering-focused university with a new ap-
proach to post-secondary education to be offered
on a cooperative basis with industry. In sharing
the burden of technical training with industry, the
university would be able to provide a greater depth
of education—both theoretical and practical—and
build a closer relationship with industry in order to
anticipate employment needs, secure additional
funding and ensure that classroom education
remained on the cutting edge. This proposal became
the basis for the University of Waterloo’s highly
successful cooperative education program, widely
regarded as the largest and the best university co-op
program in North America and a significant asset to
the region (Nelles et al., 2005).
The high technology sector in Waterloo grew out
of its strong industrial base in advanced
manufacturing, combined with the early focus of
the new university in engineering, math and com-
puter science. Waterloo’s first ICT firms emerged in
the 1970s when two of the early firms, WATCOM
and Dantec Electronic, were spun-off from the Uni-
versity. A subsequent generation of firms followed
in the 1980s, including Dalsa (1980), Virtek Vision
(1986) and Open Text (1989). Much of the spin-off
success is attributed to the university’s intellectual
property (IP) policy, which allows ownership of IP
to rest with the creator. Although the University
remains central to the continuing development of
the regional economy, its primary contribution is no
longer through the process of new firm formation,
as relatively fewer firms have spun out directly
since the late 1980s (Wolfe and Bramwell, 2008).
As is the case in Ottawa, Waterloo is marked by
both relatively strong regional governance and
dense civic capital, which has grown and intensified
over time. From the founding of the University of
Waterloo to the establishment of Canada’s Tech-
nology Triangle Inc. (CTT), Communitech and
the recent initiation of the Prosperity Forum, the
private sector has played an instrumental role in
local economic development. CTT was founded
in 1987 as the regional marketing association of
the three local municipalities, but evolved into
a public private partnership in 1999. It is widely
Strategic Management of Core Cities
regarded as one of the keystone organizations of
the region and its mandate has expanded to include
land use, infrastructure development and the inte-
gration of immigrants into the local community.
Communitech was established in 1997 with the
goal of facilitating the exchange of ideas and im-
proving relations between high technology compa-
nies. The group was formed as the CEOs of several
local technology firms discovered that they were
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facing similar challenges stemming from the weak
state of the regional ICT infrastructure. The associ-
ation currently supports the tech community with
a number of services such as Peer2Peer networking
events developed to provide a forum to discuss best
practices for industry leaders (CEOs, CIOs and
CTOs), management and technical professionals.
In addition to providing these direct services tar-
geted at its members, Communitech also plays
a larger role in supporting non-members in the tech
community as well as in local economic gover-
nance (Bramwell et al., 2008). Although CTT and
Communitech were established by different com-
munities of local actors to serve different purposes,
they have developed increasingly close ties over the
years and a better capacity for coordination.
The Prosperity Council, formed in 2003, is a rel-
atively new venture in regional governance. The
Prosperity Council comprises representatives of
the above two organizations plus the local Cham-
bers of Commerce. Together they represent more
than 3000 businesses in Waterloo region. Its goals
are to build a collaborative regional vision; brand
and market the region as a successful area for busi-
ness, arts and lifestyle; enhance regional health
institutions; strengthen local post-secondary institu-
tions, and create and fund a regional arts and culture
development and promotion body. The Prosperity
Council has been active recently in organizing to
promote the regional arts and cultural agenda. This
activity is indicative of the willingness of the pri-
vate sector to support regional cultural initiatives, as
well as a public willingness to see civic groups
drive the cultural agenda at the regional level.
While the post-2000 downturn in the ICT sector
had a negative impact on Waterloo, it has fared
better than the high-tech cluster in Ottawa due to
149
Wolfe
the more diversified industrial base of the regional
economy. A key feature of Waterloo’s resilience
has been the ability of local firms to recognize
emerging technology trends and to mobilize key
segments of the local business community, civic
associations and the regional research infrastructure
in support of new initiatives to capitalize on those
trends. The current recession has severely impacted
the more traditional manufacturing base in the
region. In response, the local municipalities have sup-
ported a number of measures to expand the post-
secondary institutions in the area of digital media.
The most recent measure involves linking a new
branch of the University of Waterloo in Stratford,
Ontario, with a strong focus on the creation of con-
tent for digital media with the parallel creation of
a Digital Media Convergence Centre in downtown
Kitchener and the attraction of federal funding for
a new Centre of Excellence, the Corridor for
Advancing Canadian Digital Media. The Centre re-
cently attracted a major investment from the pro-
vincial government as well. The vision of the
Centre of Excellence is to combine arts and cultural
content with digital media to develop innovative
ways to present and manipulate data and visualize
processes. It enjoyed initial support from the CEO’s
of key local firms, such as Open Text and Christie
Digital. The drive to secure a broad base of private
sector support that was a prerequisite for govern-
ment funding was led by Communitech.
These initiatives to reposition the region’s eco-
nomic base are an important indication of the extent
to which civic capital in Waterloo is a key factor in
the region’s resilience. The region is characterized
by a high degree of associative activity, civic en-
gagement, personnel overlap and well-developed
organizational linkages. Over time, the scope and
number of initiatives has increased and the range of
participation expanded to include a wider range of
actors. Despite the political fragmentation of the
region into a number of smaller municipalities,
civic capital is highly developed outside of the pub-
lic sector and serves to bridge the existing munici-
pal jurisdictions. Most of the key leaders, groups
and initiatives that have been influential in promot-
ing the regional agenda have emerged from the
150
private and higher education sectors, but all ac-
knowledge the high degree of networking and in-
teraction that exists across both public and private
sectors in support of the region’s economic future.
Conclusion
This paper has outlined the way in which two of the
core cities in Ontario have responded to the major
Downloaded from http://cjres.oxfordjournals.org/ at Belgorod State University on February 10, 2014
external economic shocks experienced since 2000.
The degree of resilience exhibited by each is a prod-
uct of their underlying industrial structures shaped
by a path-dependent process of economic develop-
ment, as well as the strategic responses framed by
key civic leaders working through their respective
institutions for regional governance. Each region is
a product of the particularly way in which their in-
dustries and institutions have co-evolved over time.
None are completely captive to the past trajectories
of economic development, but neither are they
completely free of that legacy. New pathways for
urban economic development can emerge through
the indigenous creation of new products or pro-
cesses, through the expansion of new areas of com-
petence or specialization in the urban economy,
through the progression along a value chain to
higher value added activities for existing industries
and through the re-location of existing firms and
industries into an existing urban economy. How-
ever, these emerging pathways are strongly influ-
enced by the existing mix of knowledge assets and
labour force skills within the local economy. The
key challenge is how firms, industries and institu-
tions in a particular region recombine their existing
knowledge base and localized capabilities to gener-
ate new commercially valuable sources of knowl-
edge.
The most effective strategies for regional resil-
ience rely on acquired levels of civic capital and the
existing endowment of regional institutions to chart
new paths forward, but they do not always do it in
equally effective manner. Among the factors that
determine their effectiveness are the ability to build
on specialized regional assets, including public and
private research infrastructure, as well as unique
concentrations of occupational and labour market

skills; the presence or absence of ‘civic capital’ at
the regional and local level, and the ability of local
firms and entrepreneurs to adjust their business
strategies in response to changing economic cir-
cumstances. Path dependence plays a role in deter-
mining the outcomes, but that role is contingent; it
is framed by the strategic choices of local actors and
the degree to which local institutional structures
constrain or support the realization of their goals.
The state of civic governance, particularly the pres-
ence of strong civic leadership, the ability to forge
cohesive coalitions and the capacity for undertak-
ing, and revisiting, focused strategic plans, will all
influence how these pathways to future economic
growth and development are shaped.
Endnotes
1 1235–1249.
More details on the design of the research projects and
conference papers and presentations resulting from the
case studies can be found online at: www.utoronto.ca/
isrn.
Acknowledgements
Funding Support: Research funding for this paper has
been provided by the Social Sciences and Humanities
Research Council of Canada under its Major Collabora-
tive Research Initiative Grant No. 412-2005-1001.
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