Anchors Away! The Evolution of an ICT Cluster After the Sinking of Its Flagship Company

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This study examines the transformation of an ICT cluster following the collapse of its leading company. Presented at the 4th Global Conference in Economic Geography, the research by Dieter F. Kogler and Gregory M. Spencer sheds light on the resilience and dynamics of regional innovation ecosystems in the aftermath of a major setback. The case study presented at the conference in Oxford, UK in April 2015 offers valuable insights into the strategies adopted by the cluster to navigate challenges and sustain growth.

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Anchors Away! The evolution of an ICT cluster after the sinking of its flagship company 4th Global Conference in Economic Geography Oxford, UK, April 19-24, 2015 Dieter F Kogler University College Dublin Gregory M Spencer University of Toronto

The spectacular rise and fall of Nortel Networks $1,000 200 $900 180 On January 14, 2009 Nortel files for bankruptcy in multiple jurisdictions and by 2010 has fewer than 2,000 employees $800 160 Nortel Share Price (USD) Millions of share traded $700 140 $600 120 At its peak in 2000 Nortel accounted for over one third of the total value of the TSX and employed nearly 100,000 people worldwide $500 100 $400 80 $300 60 $200 40 $100 20 $0 0 1975 1980 1985 1990 1995 2000 2005 2010

Local impact not as severe as expected 200 Ottawa-Gatinuea Index (1987 = 100) 175 150 125 100 75 50 1987 1992 1997 2002 2007 2012 Year GDP Employment MFG Employment GOV Employment

Nortel had a highly inventive history 600 In June 2011 over 6,000 of Nortel s patents were sold to a consortium of companies (Apple, EMC, Ericsson, Microsoft, RIM, and Sony) for over $4 billion 500 400 300 200 100 0 Nortel Patents by Grant Year

Research Questions How resilient was the Ottawa-Gatineau ICT cluster in response to the collapse of Nortel? What happened to Nortel s inventive capacity? Did it remain? Leave? Dissipate? What were the main sources of the ICT cluster s resiliency? Creative destruction/entrepreneurship? New entries (from elsewhere) Existing firms

Literature Building on the University of Ottawa study (Calof et al 2014) that investigated why Nortel collapsed this paper looks at the impact of the collapse (and why it wasn t as severe as may have been expected) Three related literatures Clusters & local ecosystems Evolutionary economic geography Local/regional resiliency Systems approach to understanding adaptive cycles panarchy as a way of understanding adaptive systems across multiple scales (Holling et al 2002) Source: resilience.org

Approach and Methods A case study approach using patent data in order to describe the evolution of the inventive capacity of the Ottawa-Gatineau ICT cluster through various stages Using Kogler s patent database for Canada (from USPTO) to track inventors who had at some point filed a patent for Nortel or one of its units/subsidiaries Identify where former Nortel inventors went during and after the company s collapse (i.e. new firms; existing firms; local/non- local) Classify assignees into categories (i.e. direct competitors, existing firms, startups)

Ottawa-Gatineau Inventor Population 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1982 1997 2010 1975 1976 1977 1978 1979 1980 1981 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2011 2012 Ottawa - Gatineau CAN - metropolitain inventors CAN - rural inventors Non-CAN co-inventors 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1979 1994 1975 1976 1977 1978 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Ottawa - Gatineau (Nortel) Ottawa - Gatineau (Other)

Nortel patents over time 700 600 500 400 300 200 100 0 Ottawa - Gatineau Canada (excl. Ottawa) United States Outside North America

Change in Nortel tech over time 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 370 455 379 709 398 375 385 361 257 714 174 704 439 327 707 OTHER 370 Multiplex communications 455 Telecommunications 379 Telephonic communications 709 Electrical computers and digital processing systems: multicomputer data transferring 398 Optical communications 375 Pulse or digital communications 385 Optical waveguides 361 Electricity: electrical systems and devices

Nortel Inventors Overall & Ottawa 450 400 350 300 250 200 150 100 50 0 1980 2003 1975 1976 1977 1978 1979 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2004 2005 2006 2007 2008 2009 2010 2011 2012 Nortel Ciena Corp. Avaya Inc. Other Research In Motion Apple Inc. LogicVision, Inc. Univ. of British Columbia Alcatel Lucent 350 300 250 200 150 100 50 0 2001 2004 1975 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2002 2003 2005 2006 2007 2008 2009 2010 2011 2012 Nortel Other Research In Motion Apple Inc. Alcatel Lucent Ciena Corp. Avaya Inc.

Identify local key competitors 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 1978 2001 1975 1976 1977 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Nortel Direct Competitors Other Direct Competitors include: Alcatel Lucent Research In Motion Ciba Mitel Networks Cisco Technology Ericsson MOSAID Technologies International Business Machines MagSil Apple Blackberry Altera

Lack of new firms 100 90 80 70 60 50 40 30 20 10 0 1980 1998 2005 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1999 2000 2001 2002 2003 2004 2006 2007 2008 2009 2010 2011 2012 First-time Assignee

Preliminary findings Nortel s collapse does not seem to have had a long-term negative impact on the inventive capacity of the Ottawa-Gatineau ICT cluster A large majority of former Nortel inventors who continued inventing in Ottawa-Gatineau did so for existing large companies in similar technologies We have found relatively few examples of successful attempts at start-ups from former Nortel inventors, particularly in similar technologies

Discussion and conclusions The resiliency of the Ottawa-Gatineau ICT cluster appears to be the combination of a diverse set of local competitors as well as a highly talented workforce Ottawa-Gatineau also ranks highly of quality of life measures Nortel s competitors bought many of their patents but also acquired much of the talent in some cases through acquisitions of Nortel s business units mitigating much of the disruption Little evidence of entrepreneurship as a source of resiliency Technology is capital intensive which may limit entrepreneurial possibilities Role of policy & government as a stabilizing factor (TBD) Next steps examining the impact on inventor relationships