Conditions for Developing High Value Added Forestry Niches in the Outaouais Region

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About this publication

Publication author : Université du Québec en Outaouais

Collaborator : Canada Economic Development for Quebec Regions

Publish date : January 14, 2013

Summary :

This article is intended to highlight the innovative potential of businesses in the wood processing industry of the Outaouais region. The study focuses on current strategies and challenges within the industry as well as on the accompanying regional structure.

Table of Contents

  1. Acknowledgements
  2. Executive Summary
  3. Introduction
  4. 1. Regional Innovation Systems
  5. 2. The Forestry and Wood Processing Industries in the Outaouais Region
  6. 3. Institutions in the Outaouais Region
  7. 4. Survey Methodology
  8. 5. Results of the Interviews Conducted with Businesses and Development Organizations in the Outaouais Region
  9. 6. Analysis of the Socio-economic and Cultural Environment of the Wood Industry RIS in the Outaouais Region
  10. Conclusion
  11. References

Acknowledgements

This study was made possible thanks to funding from Canada Economic Development (CED) and the Research Dean’s Office at the Université du Québec en Outaouais (UQO). We would like to thank the members of the Advisory Committee who provided feedback and comments all throughout our research. The members are Michel Bilodeau from Réseau des entreprises du secteur du bois de l’Outaouais (RESBO), and Jacques Ruel and Jean Laneville from CED. We would also like to underline the significant contribution of our two research assistants, Élodie Plassin and Simon Dominé, Master’s students in Développment territorial at UQO.

The information and opinions expressed in this study belong solely to the authors. They do not necessarily represent the point of view of Canada Economic Development

Martin Robitaille

Guy Chiasson

Executive Summary

Goal

This article is intended to highlight the innovative potential of businesses in the wood processing industry of the Outaouais region. The study focuses on current strategies and challenges within the industry as well as on the accompanying regional structure.

Theory

In order to better showcase the innovative potential within the wood industry, we used an analytical framework inspired by regional innovation systems (RIS). A regional innovation system is defined as a group of organisations (enterprises, research centres, development agencies, development institutions, higher education institutes, etc.) and individuals producing technological innovations on the basis of regular research and development and collective learning activities. (Doloreux, 2004) From this point of view, innovation stems from interaction between businesses, support organizations, and the socio-economic environment, through a collective learning of institutional practices that are facilitated by geographical proximity. Innovation is therefore perceived as an iterative and territorialized process that results from collective-learning forces facilitating access to different sources of information for businesses (Edquist 1997) and stimulating entrepreneurship. Similar to other work done on RISs, our study of the Outaouais region was done on three analytical levels: businesses, institutions, and the socio-economic environment, as a way of identifying not only progress but also road blocks to innovation in the wood industry. We have paid particular attention to the difficulties within the periphery of the majority of the Outaouais region.

Methodology

The study was initially conducted through the content analysis of documents and websites from different government support organisations. To obtain an extensive list of forestry businesses in the region, we consulted the LIC Outaouais (Liste des Industries et Commerces de l’Outaouais). The bulk of the field research was conducted through semi-structured interviews with businesses and support organizations in the wood industry of the region. We also met with 16 industry leaders in order to better understand their vision of innovation, their links to other businesses in the industry, and their use of innovation support. We also met with the majority of the forestry support organisations to better understand the workings behind the support given in the industry. Overall, these interviews allow us to identify the restrictions linked to the development of innovation in the wood industry and the challenges found during the setup of an RIS in the Outaouais region.

Results

Our analysis on the enterprise level found certain difficulties that are often associated, in the literature on RISs, with an unfavourable context in the peripheral regions. The interviewed businesses, even if they express a desire for partnership, have little mutual interaction. For the most part, the businesses are competing rather than cooperating and networking. The wide dispersion of the businesses, which are often quite small, over a large expanse of terrain hinders collaboration.

The ability to work together was more visible among the institutions. The interviewed players confirmed that the coordination amongst the various interviewees was very good and that they were starting to see interesting results. However, these players, by their own admission, still have difficulty partnering with businesses and more specifically, responding to the needs of small and medium businesses.

Difficulties can also be found at the socio-economic level. The interviewees reported a difficulty in finding qualified, trained workers and a weakness in the entrepreneurial culture of the Outaouais region.

In the final analysis, collaboration among the various institutional players in the area was the strong point in the innovation strategy of the Outaouais region. If these players were confronted with sizeable challenges at the level of enterprise dynamics, the collaboration between the institutional players still managed to produce remarkable results, as was the case with the Fortress factory and the industrial incubator project at the factory. Another example was the collaboration between the CLD, SADC, and the MRC in an attempt to promote a new wood-processing development in the Pontiac region.

In the wood industry of the Outaouais region, a regional innovation system is under construction. Until now, the construction of an RIS has mainly been undertaken by institutional players, and, taking into consideration the mentioned difficulties, the full integration of businesses remains a considerable challenge.

Introduction

The wood industry in the Outaouais region as elsewhere was significantly eroded by globalization. Because competition is increasingly characterized by technological advances in the lumber and pulp and paper sectors, adjusting production structures to meet the market has become essential to ensure the competitiveness of regional economies. As well, endogenous development strategies are being implemented at the regional level in order to develop a geographic concentration of economic activities that could respond to this shift and favour the new, high value added production types. The question of the impact of geographical concentration on innovative activities is at the heart of an abundant amount of theoretical literature written since the 1980s in Europe and North America. This literature focuses on regional innovation systems in general and their different applications (industrial districts, innovative environments, clusters, etc.). The theories have inspired numerous public policies allowing regions to re-launch their own development.

In this study, we focused on the Outaouais region and narrowed that focus to the niches of excellence created through the ACCORD project, that is, the manufacturing and processing of hardwood. The ACCORD project invited regions to create development strategies based on the niches of excellence established and implemented by industry leaders of the region. Under this program, the Outaouais region chose to continue to support the development of the forestry industry that has long been at the heart of the growth of the region and continues to be the driving force behind the development of three out of its five regional county municipalities. To do so, the region had no choice but to modernize the industry, with the direct or indirect participation of a group of industry leaders (business support institutions, research centres, etc.).

The study will focus on the development strategy of the Outaouais region in regards to the processing of hardwood. Through the implementation of an RIS-type structure in the region, we will also examine the development conditions of high value added forestry niches. The goal of the study is first to expand on the question of regional innovation systems in the context of a peripheral region that seeks to develop these niches. The study will then examine, through an analytic table of RIS’, the development of high value added forestry niches in the Outaouais region as well as see to what extent the regional government structure facilitates the development of new high value added manufacturing. The final goal of the study is to identify the conditions for the development of high value added forestry niches for the Outaouais region (secondary and tertiary wood processing).

The first step of the study consists of a review of literature on regional innovation systems. An analytical framework is used to facilitate the analysis of the strengths and weaknesses that impact the development of regional innovation in the forestry sector in the Outaouais region. We will then paint a picture of forestry businesses and of institutions in the region that support the development of this industry, after which we will explain our research methodology. A section of the article will be reserved for the results of interviews with the businesses and development organisations in the region. Finally, we will analyze these results to demonstrate the strengths and weaknesses of the RIS, all the while identifying the conditions to consolidate it.

We believe that this study will provide the keys to understanding the conditions required to develop forestry niches of excellence in the Outaouais region through innovation and growth of the value added in the secondary and tertiary wood processing industries.

1. Regional Innovation Systems

Regional innovation systems became a topic of interest in public policy and for researchers after two trends became apparent. The first was the recognition of innovation as a determining factor in economic growth. The second was the recognition that innovation is better stimulated at the regional level. Innovation becomes a territorialized process influenced by multiple factors such as local resources and the social and institutional context. The weight given to the interactions between industry players and their environment also gives the region a more interesting dynamic because it becomes a place where supply and demand intersect and the region is able generate its own resources (Malmberg and Maskell, 1997).

1.1 Defining an RIS

By and large, the agreed upon definition of an RIS is a group of organizations (enterprises, research centres, development agencies, development institutions, institutes of higher education, etc.) and individuals producing technological innovations based on regular research and development and collective-learning activities. (Doloreux, 2004) RISs also refer to geopolitical concentrations of businesses and public and semi-public organisations that produce innovation based on interactions and collective learning through common institutional practices. From this perspective, RISs are fully linked to the knowledge-based economy and the new notion of innovation as a result of a social and territorialized process. These works recognize the importance of interactions between industry leaders and their environment, as well as the importance of external factors that affect the production from particular territories. Innovation is therefore perceived as an iterative process that is a result of collective-learning forms that facilitate access to different sources of information for businesses (Edquist 1997). We should note that some of this information is costly and difficult to exchange (“sticky” knowledge) (Asheim and Isaken, 2002). However, by relying on these collective-learning forms, the geographically close businesses have more opportunity to exchange information, formally and informally and a higher chance of profiting from external economies.

Numerous authors have worked on the principal elements that constitute an RIS (Autio, 1998; Cooke and Leydesdorff, 2004; Todling and Trippl, 2005; Asheim et al., 2003). In order to better understand RISs, we can refer to the diagram below, adapted from the Conseil de la science et de la technologie du Quebec (2001).

Diagram 1: An Environment Favourable to Innovation

Three spheres can be distinguished here. The first consists of innovative enterprises, the second of knowledge institutions and organizations supporting innovative enterprises (R&D and technology transfer, innovation support, regional economic development agencies, technological support services, venture capital, and teaching and training), and the last, of the socio-economic and cultural environment in which the first two function.

Source: Adapted and translated from the Conseil de la science et de la technologie du Québec (2001)

There are three distinct spheres. The first sphere consists of innovative businesses. The second contains the knowledge and support organisations as well as institutions that support innovative businesses. The last sphere consists of the cultural and socio-economic environment in which the two previous spheres evolve. An RIS is made up of the interactions between the three spheres. The role played by the cultural, economic and institutional environments is just as important as that of the two previous spheres. Since businesses do not work in a vacuum, “innovation is a process based on relationships of proximity and so is influenced and stimulated by the cultural and socio-economic environment. This allows them to grow their ability for interactive learning, which facilitates intra-business interactions and external contributions that are necessary to innovation.” (translate from Doloreux and Dionne, 2007) The region assembles the conditions and resources necessary for innovation, and these in turn promote the area’s growth and economic development.

The competitive advantages in the region include, first and foremost, geographical proximity, which facilitates exchanges between the private and public sectors in the region while reducing the cost of these exchanges. Another advantage is geographic concentration, which allows businesses to reap the benefits of external factors such as skilled workers and production inputs (sub-contracting, innovation support and technological spin-offs). Social capital is also an advantage, as it ensures knowledge transfer and better innovation practices. Recognizing common values and mutual trust (common culture, same language, mutual respect and degree of loyalty) also enforces social capital. Ultimately, the role of the institutions in creating an environment favourable to innovation remains central to the analysis of an RIS.

1.2 Key Dynamic Processes of an RIS

In 1999, Howells proposed four key dynamic processes that make up an RIS. The first consists of a localized presence of (individual or collective) exchange and sharing mechanisms on innovation information. Informal exchange is difficult over long distances (Cooke and al, 2000), whereas with face-to-face contact, common values and mutual trust reinforce the communication (Lorenzen 2001; Asheim and Isaken, 2002). Localized research procedures also play an important role for small businesses, because the proximity to research organizations and businesses with a large concentration of knowledge will increase their potential for innovation and for joining dynamic networks. Equally important to an RIS is the presence of localized forms of interactive learning. The interactions that stem from innovation will allow businesses to become closer to clients, suppliers, research organizations and universities, all while creating innovation networks (Doloreux, 2003). The fourth key dynamic process is the presence of specific forms of innovation and technology use, in other words, the capacity for local and regional businesses and institutions to act as potential users of new innovations and technologies. The users will facilitate (unless they give up) the implementation of technological innovations, improving regional performance (Maskell, 2001).

These four dynamic processes are the general characteristics shared by all RISs. Note that very few regions actually employ all four processes, a fact which may be attributed to:

  1. A lack of population density or a weakness in the economic fabric;
  2. A lack of innovative dynamics in businesses and institutions;
  3. The very nature of economic activities that offer little value added;
  4. The absence of inter-industry dynamics (Doloreux, 2003; Morgen and Nauwalaers, 1999).

However, we cannot forget the role of extra-territorial relationships in the innovation process for businesses, institutions and territories (Bunnel and Coe, 2001; Doloreux, 2004; Simmie, 2003) because “innovative” businesses exploit both endogenous and exogenous resources and therefore develop localized (endogenous to the system) and non- localized competitive advantages. This is true, for example, of multinational corporations.

1.3 The Role of Institutions

Works on this topic have revealed two findings. The first is that institutional configuration influences the workings and capacity of a regional innovation system (Amable et al., 1997; Edquist and Johnson, 1997; Nelson and Winter, 1984). The second finding, from Edquist and Johnson (1997), is that the role of the institutions is to define new opportunities and to condition the system’s ability to generate new knowledge and innovations. Their role is essential because they must provide strategic information in order to reduce uncertainties related to the innovation process. They must also regulate potential conflict and cooperation between staff and organizations in order to establish an environment conducive to encouraging learning and innovation processes.

Certain authors have identified the elements required to maximize the institutions’ involvement, which is central in the make-up of an RIS. First and foremost, the institutions must put forward strategies to make or keep the regions competitive through a multitude of institutional processes favourable to innovation (Polèse and Sheamur, 2002). Each regional strategy must reflect the characteristics of the environment, as some distinctive features can become assets (Maskell et al., 1998; Tremblay et al., 2003). In addition, governments must establish the conditions necessary for the development of an RIS (Maillat and Kebir, 2001), which include infrastructure, taxes and business costs. Governments should also promote a common awareness among stakeholders and establish collective representations and practices of economic and technological development areas (Amin and Thrift, 1994). Defining and identifying RISs allows regions to envision development priorities and innovative partnerships that will encourage economic diversification (Courlet, 2001).

1.4 RISs in Peripheral Regions

Work on RISs focuses almost exclusively on urbanized regions in a metropolitan setting where it is easier to assemble the territorial conditions conducive to innovation (Asheim et al., 2003; Brouwer et al., 1999; Diez, 2000 and 2002; Doloreux, 2004; Harrison et al., 2004; Simmie et al., 2004). Population density, demographic diversity and organizational synergy in these regions help create a larger pool of knowledge likely to accelerate and strengthen technological development. Metropolitan areas are also conducive to innovation because of the concentration of R&D activities and major patents (Brouwer, 1999) found in the area. According to Malmberg and Maskell (1997), metropolitan regions offer innovative businesses essential advantages such as access to the market, sub-contractors, specialized workers, formal and informal networks, specialized services and more significant technological infrastructures.

Only a handful of studies have focused on peripheral regions. Some authors completely deny the existence of regional innovation systems in non-metropolitan areas, whereas others believe that peripheral zones are not very favourable environments for productive innovation (Cooke et coll., 2000; Todtling and Trippl, 2005). In reading works on non-metropolitan regions (Porter, 2004; Todling and Trippl, 2005; Asheim et al., 2003; Doloreux, 2003), we have identified a certain number of restrictions on developing an RIS in a peripheral region. The difficulties are as follows:

  1. A deficit of physical infrastructures, which triggers an increase in costs;
  2. Poorly developed institutional infrastructures for training and R&D;
  3. Limited access to venture capital and technology;
  4. A lack of qualified and specialized workers;
  5. A weak presence of knowledge-rich industries (mainly in manufacturing sectors with low knowledge intensity and where strategies are related to lower production costs);
  6. Insularity and regional isolationism (the competitiveness of the systems relies greatly on importing new information and ideas to generate a value added for exports).

Of course, these restrictions are considerable but they are not insurmountable, as David Doloreux and Steve Dionne (2007) showed in their study on the rural region of La Pocatière. In fact, these two researchers demonstrated that it was possible to develop an RIS in a peripheral region (agri-food industry) by identifying the most efficient type of innovation support in accordance with the characteristics of the target region and its barriers to innovation. According to Doloreux and Dionne, it must be noted that different types of RISs may exist in the region depending on local development issues, and that these innovation systems follow different trajectories and grow at varying rates based on their complexity and the problems they face.

To summarize this theoretical chapter on regional innovation systems, here in table form are the variables that are essential to the development of RISs and the restrictions linked to their being situated in a peripheral setting.

Table 1: Summary of the key variables and restrictions affecting the development of an RIS
A) Key Elements in the Development of an RIS
A1) Geographic proximity and concentration
A2) Strong relationship between regional and extraterritorial industries
A3) Strong relationship between industry and support institutions
A4) Implementation of institutional processes that favour innovation
A5) Social capital
B) Dynamic Processes of an RIS
B1) Mechanisms to exchange and share information on innovation
B2) Localized research procedures
B3) Localized interactive learning forms
B4) Localized forms of innovation and technology use
C) Peripheral Region Difficulties
C1) ) Lack of physical infrastructure
C2) Lack of institutional infrastructure for training, R&D and innovation support.
C3) Limited access to venture capital and technology
C4) Lack of qualified and skilled workforce
C5) Rarity of knowledge-rich industries
C6) Insularity and regional isolationism

Surveying the variables allow us to identify, in the next steps of the research, the key elements that will improve our grasp the situation of the Outaouais region with respect to the possible development of an RIS. Peripheral regions often lack resources in many domains and an analysis of RIS development must focus on these weaknesses in order for us to grasp the realities and particularities of the area. In the region, businesses and organizations, as we will see later, seem to face numerous barriers when it comes to innovation in the wood processing industry. All of these will be demonstrated through our analysis.

2. The Forestry and Wood Processing Industries in the Outaouais Region

The Outaouais forest covers 4.5% of the region and is made up of deciduous forest (the largest reserve in Quebec), mixed species (39% of the forest), and a softwood cover (17% of the forest) with more than 15 recorded types. Ownership of the forest is 75% public and 23% private (compared to 14% in all of Quebec). This variety offers promising diversification opportunities for the forestry industry.

2.1 The Forestry Industry—An Economic Pillar of the Region

The industrial sector of the Outaouais area is characterized by a concentration of forestry industries that specialize in the wood processing sector (North American Industry Classification System (NAICS): sector 321 for wood product manufacturing, 322 for pulp and paper manufacturing, and 337 for furniture and related product manufacturing). In 2003, before the forestry crisis decimated the industry, nine out ten of the largest manufacturing industries in the region were linked to forest products.

For a decade, the forestry industry has been going through an unprecedented crisis, and many jobs have been lost. ISQ data shows that since 2005, numerous businesses, paper product factories (321), and paper mills have closed their doors, and many workers have lost their jobs.

Graph 1: Number of employees in the manufacturing industry in the Outaouais region by NAICS sub-sector NAICS

This bar graph illustrates the decline in the number of wage earners in the paper and wood products industry.  The paper industry employed 1,797 workers in 2004, but only 916 in 2009. In the wood products industry, there were 1,307 workers in 2004, falling to 549 in 2009.

Source: Institut de la Statistique du Québec

The above graph illustrates the job losses. Examples are far from lacking: closing the Abitibi Bowater factory resulted in 300 lost jobs in Gatineau, and closing the Smurfit-Stone factory in Portages-du-Fort in Le Pontiac left 218 people without a job. Because of a lack of data, we had to limit our study to the number of employees in the wood-processing industry to the wood products (321) and paper (322) sub-sectors. The data is quite general, but the graph reveals a clear trend of job loss, in both the wood product and the paper sectors, over the last few years—and one that could be tragic if it’s not reversed. From 2004 to 2009, both NAICS sectors have seen a hemorrhaging of jobs, reporting losses totaling 42% and 50% respectively.

The primary employer in the Outaouais manufacturing sector is the paper sector, which had 916 jobs in 2009 (30% of the workforce in the manufacturing sector). Regional manufacturing production grew to $650 billion—53% from the paper sector, 14% from wood products, and 2.55% from printing and related sectors (323). The numbers that were available to us for sector 337 were from 2008 and they show that furniture and related products contributed 0.33% to the value added of the manufacturing sector. (ISQ)

In 1999, 9.8% of paper exports in Quebec came from the Outaouais region, which represented the fourth largest regional share. This sector is responsible for 62% of the total regional exports (mainly en route to the U.S.) and 64% of the value added (strong market opening). It is important to note that there are few businesses in the paper sector in the area. However, they are very productive thanks to large investments in advanced technology, which has allowed them to increase productivity. The paper sector is therefore a leader role in the region, but as shown in the Bourgogne Report (Laberge and Monahan, 2009), the pulp and paper industry is facing a decrease in product demand because of the growing use of electronic media. Converting paper mills to bio-refineriesNote 1 is an example of innovation in the primary stage of wood processing. This would allow pulp and paper mills to compete again in a new market.

Graph 2: Changes in of sales in the Outaouais manufacturing industries (by NAICS sub-sector) in thousands of dollars

This bar graph shows variations in sales figures for the paper and wood products sectors. In 2004, paper sales were $338,129. This rose to $381,594 in 2006, then collapsed over the 2007-2009 period, falling to $187,781 in 2009. For wood products, sales were $110,761 in 2004, but dipped slightly in 2005 ($93,573), recovering in 2006 ($96,844). They began a slide over the period from 2007 to 2009 ($74,429 in 2007, $58,313 in 2008 and $45,766 in 2009).

Source: Institut de la Statistique du Québec

The above graph of the changes of sales in the manufacturing industries confirms the crisis that is sweeping the forestry industry of the region. Once again, a lack of data restricts us from identifying the progression of sales in sector 337 (principally secondary and tertiary processing).

2.2 Secondary and Tertiary Wood Processing

Secondary and tertiary processing uses finished or semi-finished products to make new, value added products such as paper bags, stationery, coated or treated papers, floorboards, kitchen cupboards, furniture, and pallets.

One of the region’s problems is that its secondary and tertiary processing industry is underdeveloped. In fact, a large portion of the raw timber is exported before being undergoing high value added processing outside of the region. According to the Ministère des Ressources naturelles du Québec and other organizations, the potential for growth is undeniable because Quebec imports 482 million dollars’ worth of secondary and tertiary wood products per year. Certain businesses have been able to move to processing value added products, and make their industry profitable (Action Forêt Outaouais, 2005).

This major issue was the topic of many studies and development programs that culminated into the ACCORD project or the identification of niches of excellence in the wood industry in the Outaouais region, allowing this sector to endure despite the current crisis, and then to equip itself with long-term strategies for developing high value added products.

Numerous research centres and organizations actively contribute to the development of high value added niches in the wood industry of Quebec. One example is FP Innovations—a forestry research centre jointly funded by the Government of Canada and the industry—and especially Forintek, its wood products division, and PAPRICAN, its pulp and paper division. Business service organizations such as QWEB and the Réseau d’information sur les produits du bois, who favor commercial alliances and pooling of services, also develop niches of excellence. The Government of Quebec also created the Conseil de la recherche forestière du Québec (CRFQ) to determine the direction of research on resources and forestry products at the provincial level, while the “round tables on Research and Development and technology transfer” have been in place in the region since 1997 to define the needs of the businesses and see how they can met.

Developing niches of secondary and tertiary processing seems to be one of the preferred solutions to counteract the effects of the forestry crisis that has been hitting Canada for the past decade. In the study by Chiasson et al. (2010), innovative activities—secondary and tertiary processing—were better able to resist the crisis compared to so-called traditional activities (sawing and pulp and paper). This study reveals that for the entirety of Quebec, innovative activities are generating more wealth (GDP) while so-called traditional ones are creating less. Moreover, we can make one very interesting observation: unlike traditional forestry products, the price of high value added products are not dropping; rather they are increasing slightly and steadily. Furthermore, the share of high value added wood product exports is certainly increasing, in various ways depending on production, but the general trend is not slowing down.

These elements appear to support the development of new niches of excellence in the forestry industry of the Outaouais region in order to revitalize and reinvigorate the economy of rural areas.

2.3 Wood Businesses in the Outaouais Region

The businesses in this niche are, for the most part, quite small compared to those of other regions, but they are comparable to other RISs in Canada (Wolfe and Lucas, 2004). Of the 126 businesses that we studied, 66 work with fewer than 4 employees and 45 have fewer than 19 employees (see Graph 3). Therefore, 88% of the forestry businesses work with fewer than 19 employees.

Graph 3: Distribution of wood processing businesses by number of employees per RCM in the Outaouais region

This graph shows the geographical distribution of wood processing enterprises by number of employees. In Outaouais, 49% of wood processing operations have between 1 and 4 employees, spread among the MRCs as follows: 18% in Gatineau, 10% in Collines de l’Outaouais, 11% in Papineau, 6% in Vallée de la Gatineau and 4% in Pontiac. Outaouais wood processors employing 5 to 19 employees make up 31% of the sector, distributed among the MRCs as follows: 19% in Gatineau, 4% in Collines de l’Outaouais, 6% in Papineau and 2% in Vallée de la Gatineau. The 6% of enterprises in this sector with 20 to 49 employees are found in two MRCs: 5% in Gatineau and 1% in Papineau. Gatineau MRC has 3% of enterprises with 50 to 99 employees, while Papineau MRC has 1%, for a total of 4% in Outaouais. The 5% of wood processing enterprises with 100 to 199 employees are split among three MRCs: 3% in Gatineau, 1% in Papineau and 1% in Vallée de la Gatineau. Lastly, 1% of the enterprises in this sector have between 200 and 600 employees and are located in Vallée de la Gatineau MRC.

Source: Compiled and translated with data from LIC Outaouais.

Graph 4 represents the distribution of the wood processing businesses in the region. Businesses are not evenly distributed over the area. Gatineau has a large concentration of businesses that make wood products, furniture and related products. The regional county municipality of Les Collines-de-l’Outaouais on the other hand, stands out with its concentration of businesses that make furniture and related products. In the Papineau RCM, there are very few businesses (18 in total), but they represent every one of the wood-related NAICS sectors. The La Vallée-de-la-Gatineau RCM contains around a dozen businesses that make wood products and fewer than five in sector 337. The Le Pontiac RCM currently has very little manufacturing activity in wood processing.

Graph 4: Distribution of wood manufacturing businesses in the Outaouais region, by NAICS sub-sector (2010)

This graph breaks down enterprises among three wood processing activities: paper manufacturing, wood product manufacturing and fabrication of furniture and related products. In Gatineau, there are one paper manufacturer, 22 wood products companies and 30 enterprises making furniture and/or related products. Collines de l’Outaouais MRC has no paper mills, but it has 3 wood products enterprises and 13 makers of furniture and related products. Papineau has one enterprise in the first category, 11 in the second and 7 in the third. In the Vallée de la Gatineau, there is no paper producer, but there are 12 wood products enterprises and 4 makers of furniture and related products. Pontiac MRC has no paper producers, but has 2 wood product manufacturers and 3 makers of furniture and related products.

Source: Compiled with data from LIC Outaouais.

Graph 4 shows that Gatineau and the Papineau RCM are the most active, with the Les Collines-de-l’Outaouais RCM in third place. Graph 5, meanwhile, shows that manufacturers of furniture and related products stayed strong throughout the forestry crisis, contrary to the wood products sector. This trend allows us to conclude that businesses in the secondary and tertiary wood processing industry handled the crisis more effectively.

Graph 5: Changes in the number of manufacturing businesses in the Outaouais region by NAICS sub-sector

Graph 5 breaks down enterprises operating between 2004 and 2009 according to their manufacturing sector activity. The number of enterprises making wood products was 52 in 2004; this dropped to 47 in 2005, and there were only 44 in 2006. The situation stabilized at 38 enterprises for this activity over the period from 2006 to 2009. Paper manufacturing has been much more stable, with 9 enterprises in 2004, 8 during the years 2005 to 2008 and 7 in 2009. The furniture and related products sector had 32 enterprises in 2004. Two new enterprises appeared in 2005, bringing the total up to 34. This figure was maintained throughout 2006. Enterprises in this sector numbered 35 in 2007 and 36 in 2008, returning to 35 in 2009.

Source : Institut de la Statistique du Québec

The forestry industry in the Outaouais region is characterized by small businesses scattered unevenly throughout the area, as well as by low economic diversification in each RCM. The only exception is the Papineau RCM, which appears to have favoured diversification in recent years. This diversification is likely to continue with the arrival of the Fortress Specialty Cellulose Company.

In practice, are these businesses able to support an RIS in a peripheral region such as the Outaouais? If yes, under what conditions? This is what we sought to find out through interviews with entrepreneurs in the industry.

3. Institutions in the Outaouais Region

The section will assess the institutional framework in which the forestry companies progress. As we have already seen, for peripheral regions, the presence of a well-structured institutional environment is a determining factor in the development of an RIS, notably to identify the difficulties particular to peripheral regions.

3.1. Institutional System

3.1.1 Teaching and Training Establishments

The Outaouais region only has one university, the Université du Québec en Outaouais (UQO), which is more interested in resource management than applied research. However, a recent partnership between the UQO and the Institut québécois d’aménagement de la forêt feuillue (IQAFF) could potentially fill the void (program of the Institut des Sciences de la Forêt Feuillue TempéréeISFORT). There is also a college level teaching establishment, the Cégep de l’Outaouais, which has three training programs for occupations related to the pulp and paper, and the professional training centre Compétence Outaouais, which also offers training in the industry. In the wood industry, the region has three training centres for cabinetry and joinery, training for hand felling and skidding, and guide-outfitting training. We can conclude that the amount of training programs offered in relation to the jobs and “new jobs” of the forestry industry is relatively low in the region.

3.1.2 Venture Capital Firms

There are six venture capital firms in the Outaouais region. The largest is Investissement Québec, a partner of MDEIE, and the others are Société Générale de Financement du Québec (SGF), Financière Agricole du Québec (FAQ), Desjardins Funds, GE Capital and Fonds de solidarité FTQ. Of the six, Investissement Québec is very active, leading us to believe that there a good financial support.

3.1.3 Economic Development Agencies

The mission of Canada Economic Development (CED)—responsible for financing SADC (local organization) operating budgets— is “to promote the long-term economic development of the regions of Quebec by giving special attention to those where slow economic growth is prevalent or opportunities for productive employment are inadequate.” (Source: CED website) This mission is accomplished in partnership with the government of Quebec in order to correspond to the province’s plans or choices. The organization’s role is to support and finance start-up businesses as well as to facilitate the growth of businesses and the development of new technology, innovation, and production. The goal is to help businesses grow while creating and sustaining jobs.

At the provincial level, the Ministère du Développement économique, de l’Innovation et de l’Exportation (MDEIE) finances the operating budget of the centres locaux de développement (CLD), an important figure in the local community. The MDEIE is responsible for three aspects:

  1. Economic development, including industrial development and new environmental technology
  2. Development of foreign markets
  3. Innovation focused on industrial R&D (technological), except for university research.

The ministry is also responsible for the support of the ACCORD project niche creation (cooperating with and coaching entrepreneurs).

The Ministère des Ressources naturelles et de la Faune (MRNF) plays a crucial role in land development and is responsible for public forest management. The MRNF does not work directly in the secondary and tertiary stage wood processing levels, but it does ensure wood supply.

At the regional level, the Conférence régionale des élus de l’Outaouais (CREO) is an important stakeholder, with its Commission régionale sur les ressources naturelles et le territoire public de l’Outaouais (CRRNTO), which in recent years has become the regional venue for forestry cooperation in the public forum. This commission covers various sectors such as forestry, wildlife, recreation (including resorts), energy and mining.

Emploi-Québec plays an essential role through the Centres locaux d’emploi (CLE). Emploi-Québec’s mission includes sector support, during both positive and negative-growth periods. The CLEs help with planning, recruiting, training and supporting the workforce as well as helping unemployed workers find work in other sectors. The CLE’s partners are kept up-to-date on the marketable skills and workforce available.

3.1.4 Research Centres

The first research centre we will examine is Forintek (FP innovations’ Wood Products Division). Its “role is to support the forest product industry in optimizing manufacturing processes, extracting the highest value from the available resources and meeting customer's expectations of performance, durability and affordability.” (Source: Forintek website)

ForinTek’s activities include:

  • Support measures and industrial development strategies in Quebec. The MRNF implemented this program for high value added products around four sectors, two of which are directly linked to FPInnovations—the wood sector and industry modernization sector.
  • High value added products. Improving, developing, and evaluating product design and using wood waste. This also includes evaluating wood species and their possible uses. This measure also deals with helping to improve manufacturing procedures, with accessibility and with market potential.

In recent years, an advisory group on processing hardwoods was created to meet industry needs. Through this program and the Value to Wood program (financed by NRCan), FPInnovations offers direct technology transfer services, including the manufacturing of composite materials.

This program offers access to a multidisciplinary team as well as to pilot factories and product testing facilities (softwood and hardwood veneer, plywood, laminated particle board, oriented strand board, particle board, and medium-density fiberboard). The goal is to reduce production costs while maintaining product quality and homogeneity.

Thanks to this initiative, FPInnovations is able to keep an up-to-date database on a global level in order to guide the national research program based on market needs. Moreover, this allows for studies on specific markets and for competition analysis (openness to Asian and American markets).

The research programs under the PAPRICAN group (pulp and paper division of FPInnovations) are driven by the high-priority technical issues of the industry, such as product quality and value, cost competitiveness, environment and sustainability. The organization does research at competitive prices and provides valuable technology transfer to meet its members and partners’ strategic and short-term needs. Here are its various research programs and their objectives:

  • Fibre Supply and Quality: Capturing more value from fiber resources and enhancing performance of market pulps.
  • Chemical Pulping: Producing superior kraft pulps and the next generation of bleaching technologies.
  • Mechanical Pulping: Developing the next generation of superior-performance thermo-mechanical pulps.
  • Papermaking: Improving wet-end chemistry, designing and developing highly filled printing papers.
  • Product Performance: Getting the most from performance-related properties related to advances in surfaces, coatings and web structures.
  • Environment and Sustainability: Minimizing environmental impact, reducing atmospheric emissions, optimizing energy and resource recovery and the development of new forest-derived products. (Adapted from the PAPRICAN website)

L’Institut québécois d'aménagement de la forêt feuillue (IQAFF) is a private non-profit organization focused on applied research, development, and technology transfer. Its activities are mainly centered on hardwood forest management and silviculture in Quebec and Canada. The goal is to create concrete and innovative solutions for the various needs for knowledge in the forestry milieu (forestry industry, government agencies, forest managers, etc.) IQAFF is a close partner of the Université du Québec en Outaouais. (Translated from the IQAFF website) Its mission is to develop, distribute and promote the use of knowledge of the hardwood forests in order to support its sustainable development, as evidenced by the creation of the Institut des sciences de la forêt feuillue tempérée (ISFORT). ISFORT will encompass the IQAFF team at UQO, giving UQO a new research infrastructure. This project is financed by the MDEIE as is corresponds to the goals of the ACCORD program.

Since 1969, the Centre de recherche industrielle du Québec (CRIQ) has become an essential innovation and expertise centre in manufacturing technology, environment, information, and standardization. The centre plays a major role, as it lets industries stand out on the national and international levels. The CRIQ focuses on establishing close links with research centres, industrial associations, and the main economic development partners, putting them at the center of the needs of innovative businesses. The role of CRIQ is to contribute to the competitiveness of the industrial sectors in Quebec by supporting innovative businesses. The CRIQ provides information, expertise, and services that have various goals:

  • developing distinct, high value added products that meet market needs;
  • appropriating new technologies and “ways of doing things” to increase productivity and to position themselves with respect to global competition;
  • eco-efficient innovation for its products and procedures.

3.1.5 Business Technical Support and Service Organizations

The Réseau des entreprises du secteur du bois de l’Outaouais (RESBO) is a non-profit organization that brings together primary, secondary, and tertiary wood processing businesses in the Outaouais region. RESBO’s mission is to encourage discussion between businesses and organizations interested in developing a sector of excellence in wood production and manufacturing in the Outaouais area, in order to maximize the use and processing of value added products from forestry resources in a sustainable way. (Translated from RESBO website 2011)

The Quebec Wood Export Bureau (QWEB) is another non-profit organization whose mission is to promote the export of wood products from Quebec. It also plays the role of an intermediary through its services to foreign buyers in order to find new investors and to help them connect to Quebec suppliers of wood products. Additionally, the QWEB Regions Group works, through regional initiatives, to contribute to market development for SMEs. The Outaouais region is represented in the Regions Group by one representative from the Conférence Régionale des Élus de l’Outaouais (CREO) and one from RESBO.

3.1.6 Innovation Support Organizations

There are four organizations in the innovation support category whose activities are complementary. The first is CRNC-PARI; its goal is to develop multiple facets of technology businesses through promoting innovation in small and medium enterprises in Canada, developing technologies and helping to commercialize them efficiently on the global market. This is done through technical and commercial consulting services and through financial aid to small and medium enterprises in Canada.

The second organization is the Agence de développement de l’efficacité énergétique Québec (ADEEQ), which manages and encourages the development of new technologies or innovative processes. This organization has set up the Energy Innovation Assistance Program (PAIE), which aims to encourage the development of new technologies or innovative processes focusing on energy efficiency or emerging energy sources by financially supporting project developers who contribute actively at various stages of the innovation process. This program must focus on energy efficiency and new energy sources. There is also a manufacturing sector support program that seeks to promote sustainability and efficient energy use (reduce consumption of fuel, propane, etc.) as well as a program to reduce heavy fuel consumption and replace it with more environmentally friendly energy sources such as forestry biomass.

The third innovation support structure is the Association de recherche industrielle du Québec (ADRIQ). The ADRIQ is an important figure in the innovation network. This organization hosts a vast business network in order to support industrial innovation in Quebec and to promote partnerships among technological decision makers. ADRIQ uses various strategies. First, it influences policies and programs that favour technological innovation (notably R&D tax credits). Next, it stimulates networking among SMEs, large enterprises, funding agencies, and the experts needed to help grow innovative businesses in Quebec. Moreover, ADRIQ established the Prix Innovation, which showcases the successes and achievements of innovative businesses in Quebec during the biggest awards event in the innovation scene. Lastly, the association also caters to youth aged 14-19 interested in careers of the future in Techno Science.

ADRIQ is made up of more than 3000 organizations, including the leaders from each industrial sector significantly engaged in technological innovation (innovative businesses, research centres, consulting firms, financial institutions, teaching establishments, ministries and organizations). Two thousand of these are innovative businesses and research centres, of which 25% belong to industrial manufacturing sectors (aeronautics, textiles, transport, machining, equipment, furniture, housing) and 12% belong to resource sectors (metal, minerals, energy, forest, pulp and paper).

In conclusion, it appears that the Outaouais region has the institutions required to support the development of an RIS in the wood sector. However, the question of information exchange capacity and institution communication is still relevant, and even more so in a context of complicated multi-level governance (federal, provincial, and municipal), where forestry resource management is decentralized from provincial to regional, and where the forestry crisis is ongoing. We met with the leaders of these industries to attempt to obtain answers to this question of governance.

4. Survey Methodology

For this survey, we favoured a qualitative research methodology based on semi-structured interviews conducted with two populations—businesses in the wood industry in the Outaouais region and forestry industry support organizations. This decision was made for two reasons. On the one hand, through the interviews, we wanted to extract information-rich data on the specificities of each business and its innovation implementation strategies. We were also interested in the relationships between these two groups and other organizations in the region to properly support and structure the development of this innovation. As well, it was important to understand the relationships between the organizations in order to see how they support the development of businesses in the industry. On the other hand, based on our knowledge of the survey area (previous research), we knew that the field, made up of mostly small and medium enterprises, was quite unresponsive to quantitative surveys. We feared that this would result in a low percentage of respondents, given how few of them there are in the wood sector.

4.1 Selection of Businesses from the Sector

In order to identify and obtain data on all the businesses in the forestry industry, we used the LIC Outaouais (Liste des Industries et Commerce en Outaouais) database. We then focused on those that were of particular interest to us. We identified 191 forestry sector businesses from the LIC Outaouais list. Since our focus is on wood processing, we did not include the 54 logging businesses or the 11 industry support businesses, which gave us a total of 126 potential businesses on the regional scale to survey:

Moreover, we had to consider individual regional characteristics while determining our sample. To this end, we recognized certain factors that could influence the development of this RIS:

Initially, we attempted to contact all of the businesses by telephone or email to probe their interest in participating in the survey. Due to low receptivity on the part of these businesses, we were forced to change our strategy and to focus our efforts solely on the businesses in innovation mode, since these businesses were the most likely to be stakeholders in an RIS.

In order to identify these businesses, we asked our advisory board—made up of active members of the field—to compile a list of enterprises from the region that they considered innovative (in the broad sense). With the help of this list, we identified 15 businesses and then started making the necessary arrangements to meet with all of them. At the same time, we contacted some of the other businesses again in order to have a representative sample of these industries in the region. Unfortunately, however, the participation rate remained relatively low. We had to deal with a number of refusals: employers claimed that they “didn’t have enough time” or “weren’t interested”. Out of 126 businesses targeted, we were only able to meet with 16, or 12.7% of the region’s businesses. The majority of these businesses, however, were recognized as “innovative” by our key advisors and were thus more likely to understand the regional innovation support structure and have had previously come into contact with it. The sample size still enabled us find as much rich information on the difficulties encountered as on the progress achieved in implementing innovation in this sector.

The interviews were conducted in May and June of 2011 with executives and senior officers who were well-versed on the situation of their business. These interviews, which lasted an average of 75 minutes, allowed us to cover the following issues related to the development of an RIS in the Outaouais region:

4.2 Selection of Development Organizations

First, we used the Internet to identify support organizations. Once our list was complete, it was validated by one of our project advisory board members who is very active in the development of the wood-products industry.

Through one-hour interviews, we consulted ten people working closely with projects in this sector of the industry: eight representatives from the “development agency” category—DEC, MDEIE, MRNF, CREO, CRRNTO, CLE and two CLDs—as well as two representatives from the “support organization and technical support for businesses” category, RESBO and QWEB en Outaouais.

Based on key variables supporting the development of an RIS in the region, we established an interview grid with open-ended questions. Our hope was to better understand the relationships between the businesses and these organizations and the interactions between the organizations of the region that favoured development in the wood sector. The following issues were addressed during the semi-structured interviews:

On the whole, the organizations we interviewed were very receptive to our study and collaborated with enthusiasm. In several cases, the interviews lasted longer than the scheduled time, which allowed us to obtain more complete details on the situation of businesses in the industry, on their respective means of action with these businesses and on co-operation among organizations of the region to coordinate their respective activities.

Globally, even if we ran into some difficulties in recruiting businesses, we feel that the people we were able to interview in both groups provided us with considerable and relevant information for our analysis. On that note, in the field of qualitative analysis, it is generally considered that data saturation is achieved when information is repeated by several representatives, and this is what we saw among both the businesses and the development organizations that we interviewed.

In order to accurately reflect the reality of the survey field, the following section will outline the current portrait of the wood industry in the Outaouais region as it was painted by our interviewees. Section 6 will present a snapshot of the institutional setting and the development organizations of the region, including their fields of activity, in order to better illustrate the socio-economic environment that is favourable to the development of an RIS in the wood industry.

5. Results of the Interviews Conducted with Businesses and Development Organizations in the Outaouais Region

In this section, we will be discussing the information gathered during our interviews. We have divided the information into four subjects that stem directly from our analysis: businesses and innovation, the underlying institutional process, the collaboration among the region’s development organizations, and the socio-economic and cultural environment surrounding an RIS.

5.1 Innovation and Businesses in the Outaouais Region

With respect to the strong relationship between industries variable (variable A2 from table 1, page 12), the businesses as a whole showed a flagrant lack of partnership. Most of them admitted to us that they wished to work together; however, they all said that they were afraid of each other. With most of the businesses being in survival mode, it is understandable that the climate was not conducive to sharing. Not that there was more partnership in the past, quite the contrary, but since the situation was more favourable then, the need for partnership was less. Since the crisis unfolded, businesses have developed an instinct of withdrawal that blinds them to the possibility of getting through it together.

The disparity among sub-regions also plays a role: two RCMs have been recognized as resource regions, Le Pontiac and La Vallée-de-la-Gatineau. This status gives employers an edge by exempting them from payroll taxes. This situation causes problems because businesses that benefit from this tax advantage can sell basically the same products for 20% to 30% less than their competitors in the same territory. Producers from other RCMs feel aggrieved, citing “unfair competition on their own turf” (excerpt from an interview).

This question of partnership also affects the supply issue. The majority of businesses currently buy their wood from outside of the region not only for reasons of product availability, but also mainly because of lower costs. The businesses we interviewed unanimously admitted to sourcing product from outside of Quebec (very often from the United States). The fact that businesses do not procure local materials is a significant problem. Developing secondary and tertiary processing without local sourcing does not make sense for many of the business we interviewed. Since the species of wood in the Outaouais region are some of the richest, it is difficult to imagine sourcing product from outside the region. A global supply strategy would allow businesses to take action on the cost of raw materials. Such opinions have been held by people working in the wood products industry on multiple occasions. “We must develop a climate favourable to encouraging businesses to use the region’s resources.” Everyone agreed on the potential for development that using the regional species of wood presents.

In regards to the strong relationship between industry and support institutions variable (A3), the large majority of businesses we interviewed were well aware of the local and regional support organizations since they had benefited from their support programs, some on numerous occasions. Nevertheless, note that businesses that are not known for innovation operate in a different reality: these businesses are not very or not at all familiar with support organizations. Mainly small-scale, these businesses have a hard time “fitting” into program admission criteria.

As for the implementation of institutional processes that favour innovation variable (A4), the businesses we interviewed expressed a number of reservations concerning the support programs for various reasons. First and foremost, they criticized the administrative burden that weighs heavily on the management of these programs. Certain ministries centralize decision-making in Quebec City and Montreal, meaning that a project or an agreement that is approved in the Outaouais region cannot be validated without the consent of the administrative representative. This reduces the local representatives’ room to manoeuvre and, above all, significantly increases the time it takes for an agreement to be finalized. It seems like the appropriate time to mention that this administrative restriction was also brought up by people working within organizations, who believe that it “impedes the regional collective decision-making process”. Centralizing decision-making does not make it easier for regional organizations to partner up, rather quite the opposite. Some interviewees reported being denied by head office after having spent long hours working together on projects with other organizations in the region. Proposals have to be tweaked before they are finally accepted, which only prolongs the process for businesses that often need the resources allocated by these programs quickly to develop or even survive.

The businesses also complained about a lack of coordination in their project applications. In fact, when a business starts a project, it must meet all of its collaborators one at a time. If one of them changes their availability at the last minute, the business must restart its funding procedures. Some businesses suggested that they supported finding a way to gather all the potential financial partners involved in a project and have them discuss it together. We note that in the Le Pontiac RCM, this issue has been facilitated by the establishment of a roundtable for development organizations, where projects can be studied as a group in order to come to joint decisions about government aid. On top of this, businesses reported not being properly informed about the constant changes to support programs. It should be noted that this is the obstacle most often cited by the interviewees (businesses and organizations), since the perpetual change in programs results in a lack of understanding of the available support measures and the admission criteria. Entrepreneurs need to be made aware of all the conditions from the outset to be able to submit a project that meets expectations. There is government-funded aid available for up to 80% of the requested investment; however, businesses have to know about it. Improving circulation of information would save time, energy, and money; otherwise, it is counterproductive to the initial goals of these support programs, that is, to stimulate entrepreneurship through loans geared towards modernization, expansion and innovation projects.

Finally, programs are not well adapted to the regions. For the Outaouais region, for instance, where the RIS is primarily made up of SMEs (88% of the businesses have fewer than 19 employees), the minimum thresholds suggested by government aid programs are, in the majority of cases, too high for the SMEs to apply. The SACD and CLD programs are admittedly in a better position to help, but businesses wishing to benefit from a more specific type of aid, for the development of technological innovations, for example, are shut out, either because they do not meet the admission criteria or because they need smaller amounts and this option is not yet negotiable. The discourse on the side of the larger businesses is very different. They are more concerned with other aspects related to financing, like the possibility of financial help for R&D and market development, while help for concrete realization of innovative projects and the implementation of pilots projects is not offered.

To continue this illustration of the practical restrictions on innovation that these businesses are facing, let us look at the issue regarding the workforce (C4). The problem is huge, since the crisis forced a lot of workers from the wood sector to find jobs in other sectors. The problem today is that a large number of these workers left the region to find employment or changed careers and refuse to come back to the wood industry. This is a serious problem for businesses that wish to innovate because they have tremendous difficulty finding qualified workers. Some of the businesses we interviewed, even those considered to be less innovative, admitted having had to turn down contracts due to a lack of workers to complete the job. This brings us to another related difficulty reported by the businesses during the interviews: “we do not have enough available workers and even fewer whose training meet our needs”. This need for a qualified and skilled workforce brings us to another important variable—the institutional process related to innovation.

5.2 Innovation and the Institutional Process

Aside from RESBO and QWEB, all of the development organizations are essentially multi-sectoral; the wood industry is merely one of their numerous concerns. The wood processing industry is recognized as a niche of excellence, so the people we interviewed feel that a cooperative approach to wood processing in the Outaouais region needs to be developed. In fact, the large number of stakeholders in the forestry industry hinders the adoption of an integrated vision of its development. Certain players are well aware of this roadblock and have started thinking about creating a regional forestry roundtable devoted to the development of the wood industry. They believe that this roundtable will make it easier to identify the necessary improvements at the regional level and for sub-regions to avoid working in isolation. Remember that, as is highlighted in literature, innovation cannot only come from industries, and organizations must also innovate in their own way. Identifying wood processing as a niche of excellence must translate into concrete partnership initiatives by the industry’s support organizations. This transformation is well underway, as is demonstrated by the study on pulpwood conducted in partnership with the region’s organizations as well as experts from outside of the region. This study has been considered by many to be an innovative breakthrough in decision-making and a stepping stone for future collaboration.

To come back to the organizations interested specifically in wood processing, the RESBO is at the top of the list and must work hard to establish this extremely important bond between businesses and organizations of the region. It is at this level that the greatest need is felt. Businesses and stakeholders lack resources to raise awareness among businesses (C2) and inform them of the need to make changes to the way they operate and envisage the future, but also to help businesses find markets and contracts for their products. This work on awareness and encouragement of small and large forest industries has become more difficult because of the extent and fragmentation of the region. This scattering of businesses, which is outlined in several works on RISs, means that the efforts and resources allotted by the support structures must be greater, in order to compensate for this distance.

In conclusion, it is clear that there is a willingness among the region’s stakeholders to develop the entrepreneurial culture, which, for the development organizations we met with, remains the key to innovation. In the Outaouais region, the climate for development seems less favourable than in other regions in Quebec. The region’s history makes for a very weak entrepreneurial dynamic. The last report by the Fondation de l’entrepreneuriat (Riverin, Proulx and Pota, 2010), claims that “76.9% of 18- to 64-year-olds believe that being an entrepreneur is a desirable career, which is significantly less than the average in Quebec (81.0%). On top of this, 51.5% of parents of potential entrepreneurs favour an entrepreneurial career (founding one’s own business or working independently) compared to 56.8% for the entire province, and 24.7% of parents hope that their children will land government jobs, compared to 12.5% elsewhere in Quebec.” In the forestry sector, the entrepreneurial culture is very weak. This reality was often cited by the forestry businesses we interviewed as an impediment to the development of innovation. The forestry sector in the Outaouais region benefited from a stable economic development situation for decades, but this is no longer the case. Outside competition, price volatility of raw materials, and the forestry crisis are all reasons why adjustments to the market need to be made in order to revitalize the wood industry in the region and all the related spillovers.

The local economy, so heavily dependent on the tertiary sector as well as on federal and provincial jobs, must establish an entrepreneurial and innovative dynamic in the heart of the wood products industry, an industry which has made up the bulk of the manufacturing sector in the region for a long time. Nevertheless, the lack of an entrepreneurial culture remains an impediment to the development of the regional forestry innovation system.

5.3 Cooperation Among Regional Development Organizations

With respect to the operation of the partnership structure of support institutions, partnerships among organizations and institutions (A3) are strong. Information exchange and cooperation has existed for several years. Formal and informal exchanges take place naturally. Players do what they can with the programs that they manage within their organizations, all the while staying focused on a common objective: the development of the wood processing sector in the Outaouais region. There do not seem to be any considerable difficulties of co-existence between federal and provincial ministries and the regional organizations. As we discussed, there are different levels of programs, and according to their scale, norms are adapted in order to create a certain “horizontality,” which is usually seen as a strong verticality. There is a real collaborative effort made to iron out any possible friction and impacts of normative programs, despite their limited room to manoeuvre. For example, several interviewees and one business head brought up the remarkable cooperative effort made by all stakeholders (municipal, regional, provincial and federal) to implement plans and financing to launch Fortress in record time.

All of the organizations, no matter their scale of intervention, take part in various assemblies, with some participating in the Commission régionale sur les ressources naturelles et le territoire (CRRNTO). All five CLDs, Emploi-Québec, Tourisme Outaouais, and organizations working in related sectors are present. Multi-sectoral roundtable discussions are held and organization directors (DEC, MDEIE, Emploi-Québec, CRÉ, CRRNTO) meet every four to six weeks to discuss public and private projects in the Outaouais region (for all industry sectors).

The creation of an advisor position in secondary and tertiary processing is a good example of the partnership between organizations, as is the case for one business we interviewed that received funding thanks to the combined efforts of the MDEIE, DEC, and the Development Bank of Canada. We can also refer to a recent study on pulpwood that was conducted in partnership (RESBO, DEC, MRNF, MDEIE, CREO). These projects were all made possible thanks to close collaboration among various organizations having the sole goal of improving the wood processing industry.

To close the section on institutions and organizations, we can therefore point out the considerable effort made to encourage teamwork and partnership. Despite these admirable efforts, however, difficulties persist, most notably with the relationships between organizations and businesses. As we pointed out, the distances between businesses makes bringing businesses and organizations together more difficult, so substantial resources should be allotted to ensure collaboration.

5.4 The Socio-economic and Cultural Environment of the Wood Sector

Based on the interviews we conducted among businesses and development organizations, we will examine the dynamic and the interactions observed in the socio-economic environment of innovation in the Outaouais region on the basis of sharing and information mechanisms, research procedures, as well as localized interactive learning methods, and use of innovation.

5.4.1 Mechanisms to Exchange and Share Information on Innovation

As mentioned previously, support organizations meet regularly and learn to work together for the benefit of the industry. There are many mechanisms for exchanging and sharing information on innovation (B1). We noted that the same type of dynamic exists within businesses, albeit a more recent development. In fact, thanks to coaching programs by institutions, in particular RESBO, twenty businesses will meet around a table to exchange ideas and set up a common project with long-term financial commitments. This initiative is the start of an active dynamic in which mutual trust and partnerships are being constructed. Note also that support organizations contribute to the development of social capital (A5), which is one of the key variables to the development of an RIS.

5.4.2 Localized Research Procedures

Only one of our interviews with business leaders led us to believe that a dynamic on localized research does exist (B2). Only twice was reference made to a research and technology transfer centre during the interviews, and innovation support organizations never once mentioned having a partner. We can thus conclude that there is a lack of enthusiasm for an integral part of an RIS, but it is important to look at the issue from another perspective. It is true that R&D and technology transfer centres and innovation support organizations are poorly known, but this situation is due to the lack of an entrepreneurial culture in the region. The emergence of innovation in the region is mostly attributed to players outside of the region, which does not help to make their services visible to businesses. Before jumping to conclusions too quickly on the lack of localized research in the region, it is important to factor in that the creation of RESBO, in the wake of the ACCORD project, was intended to fill this gap. RESBO, presented above, works in support of the forestry industry. One of its major involvements is the implementation of a cooperative strategic plan for the promotion and commercialization of wood products in the Outaouais region. The primary focus of this partnership of 22 businesses is on revaluating its brand image, developing a communication platform, and developing new products and tools. Since the completion of this project, many ideas have taken shape. In a meeting between 40 leaders from the wood processing industry and support organizations, six major avenues and a new strategic plan were identified. The plan aims to “re-establish a modern industrial forestry clusterNote 2 to reinforce and diversify the industrial sector of the wood industry in the Outaouais region. These initiatives really illustrate the introduction of advances in localized research and learning processes.

5.4.3 Localized Interactive Methods of Learning

During the interviews with the organizations, we noticed a lack of cooperation between the region and certain RCMs. For instance, the Le Pontiac RCM, unaware of what was happening at the regional level, hired a consultant to carry out projects that overlapped those already undertaken on a larger scale. This lack of communication still demonstrates proactive behaviour by development workers, because in this RCM, which has been hit hard by the crisis, the organizations’ personnel are making use of the available resources. Hampered by a desperate shortage of entrepreneurs, the workers take it upon themselves to find entrepreneurs elsewhere, all the while trying to set up a collective between businesses in order to meet the realities of the region. For some time, a cooperation committee of directors and staff from support organizations has been meeting in the region to discuss funding projects to orient businesses towards innovation. It is undeniable that these initiatives, recent as they may be, demonstrate a genuine willingness in the region to develop partnership and improve the dynamic in the sub-regions.

5.4.4 Localized Methods of Using Innovation and Technology

As stated above, the Outaouais region is gradually depending more on technology and innovation in the forestry industry. This dynamic is currently in a developmental stage. Fortress Specialty Cellulose is an interesting example that incarnates innovation and advanced technology. The old Kraft (pulp and) paper mill was converted into Fortress Specialty Cellulose, which manufactures rayon. The Fortress incubator initiative would provide the Papineau RCM with an infrastructure promoting functional proximity, partnership, subcontracting, knowledge transfer and emulation. Even though this incubation project is still in the early stages, the presence of Fortress is a sign of hope that other local activities and businesses will take advantage of the opportunities stemming from this rayon mill and create new ones. This incubator is a fairly unique case, since the region’s forestry industry cannot count on very many regional platforms that enable the exchange of new technologies and production processes. As we mentioned above, very few small businesses do systematic research and development, and those who do primarily obtain their supplies from outside of the region. The institutions that support innovation claim to be well aware of this issue and working on implementing mechanisms to remedy it.

In conclusion, this section allowed us to outline the current dynamic surrounding the creation of an RIS in the wood industry in the Outaouais region. Several difficulties were identified in relationships among the sector’s businesses and in conciliating their needs with development organizations’ programs to support innovation. However, we see strong and cohesive involvement from development organizations to support the implementation of an RIS. Nevertheless, the question of favourable conditions to the development of an RIS in the secondary and tertiary sectors of the wood processing industry in the Outaouais region remains. We will attempt to answer this question in the following section.

6. Analysis of the Socio-economic and Cultural Environment of the Wood Industry RIS in the Outaouais Region

From the outset, it seems difficult to confirm the existence of a deeply rooted regional innovation system in the wood industry in the Outaouais region. However, we must recognize that a dynamic favourable to its implementation exists and has existed for the past few years. This section of the document will allow us to identify the strengths and weaknesses related to the components of this RIS and establish courses of action for its consolidation.

Wood processing is becoming increasingly important, as a number of results will attest and as we will see in this section. In order to better understand the dynamic present in this RIS, we will use figure 2, a diagram of an environment conducive to innovation in the Outaouais region, as the basis for our analysis. We will begin at the centre with innovative businesses.

Diagram 2: The Socio-Economic and Cultural Environment of the Wood Industry RIS in the Outaouais Region

Figure 2 recasts the diagram in Figure 1, adding the local actors in the sphere of knowledge institutions and organizations supporting innovative enterprises. For R&D and technology transfer, these are: CRIQ, FPInnovation, IQAFF and UQO. For innovation support, they are: Inno-Centre, NRC-IRAP, AEEQ and ADRIQ. Regional economic development organizations are: MDEIE, NRCAN, MRNF, CED, RBEC, CFDC and CLD. Technological support actors are: RESBO and QWEB. Financing and venture capital funds are represented by: SGF, FAQ, Investissement Québec, Fonds Desjardins, GE Capital, FTQ and BDC. Lastly, teaching and training establishments are: CFP, CÉGEP, CLE and UQO. These actors comprise the innovative enterprise sphere and are encompassed by the socio-economic and cultural environment sphere.

6.1 Challenges for Forest Industry Businesses

The core of an RIS is made up of innovative businesses. Here in the Outaouais region, the secondary and tertiary processing sector is still only marginal despite efforts made to change the situation. Recall that the list of innovative business provided by our key advisors allowed us to identify sixteen businesses in the Outaouais region out of a possible 126, or 11%. Affected by an unprecedented crisis, the forestry industry is proving slow to resume and especially to renew business practises. This weakness in innovation affects SMEs and larger players alike.

The spread of businesses over a large territory delays any in-depth transformation of the forest industry in the Outaouais region. If geographic concentration (A1) is a key factor for an RIS, we can conclude that the Outaouais region is at a disadvantage, given the split between the urban centre (Gatineau) and the rural RCMs. The regions’ forestry businesses are scattered over the enormous area of the region, and the Le Pontiac and La Vallée-de-la-Gatineau RCMs get by in relative isolation. Ottawa-Gatineau is the main area of growth in the Outaouais region. The city of Gatineau looks across the river, while the peripheral regions attempt to retain their inhabitants from moving to the big city.

As for geographic concentration, Gatineau has the most wood processing activity, followed by Les Collines-de-l’Outaouais, Papineau, La Vallée-de-la-Gatineau and lastly Le Pontiac. A strong relationship between regional and extra-territorial industries (A2) in the wood sector is certainly an issue in the development of an RIS. In this same regard, there is a weakness that seems to be directly linked to the forestry crisis that is making businesses close themselves off. The efforts made for the RESBO initiative have been identified and must be continued in order to better structure and support this network of businesses (A3 and B1).

In the absence of strong collaboration between existing businesses, the support institutions have to play a crucial role in creating favourable conditions to bolster functional ties between businesses and develop information exchange and sharing mechanisms. Here are two examples of the important roles that institutional partners can play. The first is the business incubator project in Thurso’s wood sector. This project relies on the presence of Fortress but also on efforts made by local and regional institutional players to create industrial knowledge transfer mechanisms (B4). The second example is the Le Pontiac RCM, which set up a cooperative coaching structure (RCM-CLD-SADC) for development projects.

As well, the question of a presence by knowledge-rich industries (C5) in peripheral regions is still relevant in the Outaouais region. Apart from a few examples such as Fortress and Lauzon, there needs to be an increase in industries and a diversification of the types of production in the area. As such, the paths examined in the region report on forest extractibles are avenues that need to be explored and followed.

6.2 The Business Support Network

In outlining a shape for an RIS, we highlighted the need for a strong relationship between businesses and support organizations (A3). It is clear that the link between businesses and development organizations can still be improved, especially in the case of SMEs, which represent the majority of businesses in the sector. Direct support (and backing) from entrepreneurs remains a key issue in a region where business resources are minimal and where innovation development assistance programs are complex and difficult to obtain for these SMEs.

That being said, because communication between the support institutions is good, strong and frequent, it is quite possible to establish better regional cooperation and intervene directly with the SMEs, supporting their development. This will mirror what was created, on a lesser scale, in Le Pontiac, where a joint analysis of development projects proposed by businesses considerably reduced the work needed to get them approved. Important initiatives emerged from this collaboration among support organizations in the region. For instance, a strategic development plan to use pulpwood encourages the organizations to work together on new industrial development projects. We could also mention the new economic development work group at the MRNF, which brings together regional organizations. It is clear that new initiatives are being born and need to be encouraged.

6.3 Innovation, R&D, Training and Regional Infrastructures

The implementation of institutional processes favourable to innovation (A4) is another component of an RIS. The presence of numerous programs and consulting services for businesses is a good indicator of the potential for regional initiatives and represents strength in the creation of an RIS in the wood sector. Nevertheless, innovation, R&D, and technology transfer support organizations are mostly found outside of the region and are less sensitive to the realities of the region. The need to expand the range of eligible businesses for innovation support programs, and to include SMEs, was an important issue for our interviewees.

At the regional level, there is a lack of institutional training, R&D and innovation support infrastructures (C2). The recent announcement of the creation of the Institut des sciences de la forêt feuillue tempérée (ISFORT) at the UQO will reinforce the forestry niche in the Outaouais region by supporting innovation through university education in forest management. It will also contribute to the development of expertise in the emerging area of temperate hardwood forests and their environment and development. This project falls in line with the Stratégie québecoise de la recherché et de l’innovation.

However, a trained workforce (C4) that fulfills the specific needs of businesses in the sector is a challenge in itself. The forestry crisis and negative perspectives for the sector’s development have not only had negative effects on the recruitment of businesses, but also on enrolments in teaching establishments of the region offering professional and technical training in the wood sector.

In this context, a regional strategy to enhance the value of training in the wood sector and to create close connections between businesses and teaching establishments is at the heart of concerns of the region’s stakeholders, since the workforce is a major issue in the development of an RIS.

Even though all of the characteristics of an RIS in the wood processing industry in the Outaouais region are not as developed as stakeholders and businesses would wish them to be, we can still conclude that the essential dynamics for its implementation do exist. However, continued sustained efforts will be required to improve the structure of the dynamics and networking of the region’s businesses to ensure implementation of the innovations necessary for their development.

Conclusion

The main focus for work on RISs remains the question of proximity, which is a key factor for the development of innovation and value added. In the works on RISs, proximity has two forms: geographic proximity, which makes communication easier among stakeholders (entrepreneurs, institutions, etc.), and functional proximity, or in other words, the development of a network in which these stakeholders can collaborate. Geographic proximity is seen as the element that allows for functional proximity. At first glance, proximity, whether geographic or functional, seems to pose a problem in the wood processing industry in the Outaouais region. As we know, the wood businesses in the area are widely dispersed throughout the region, and from what we gathered during our interviews, they have not created the networking opportunities required to build functional proximity.

The goal of the “hardwood forest” niche recognized by the region in the ACCORD project was to fill the lack of proximity and to set up a regional support structure for innovation in the wood industry. Our interviews showed that in various regards this institutional structure works quite well. The various organizations involved have developed cooperative practices with each other, including the multi-sectoral organizations. They seem to agree to prioritize innovation in the wood industry in the region. Despite being quite new, institutional governance has produced impressive results such as the study on pulpwood and others, which we have mentioned in this report.

However, the ability to bring businesses together and to coach them day-by-day in their innovative research remains a major problem. The problem is particularly pertinent for small businesses that are not able to provide the resources needed to set up projects or to meet the requirements of the programs. Evidently, there has been an effort to change this with ACCORD, but it seems that creating a solid link between the institutional support and the potential innovative businesses remains difficult. This illustrates that in the wood processing industry in the area, functional proximity does not arise spontaneously and significant effort is required for it to be created.

The difficulties in the region go hand in hand the weaknesses attributed to peripheral regions by the players who are interested in RISs. Like other peripheral regions, the Outaouais area is not an optimal location for an RIS strategy. However, considerable effort from the institutions, since the beginning of the ACCORD project, shows that even if these difficulties complicate the ability to create innovation, it is still possible. Our analysis has allowed us to see significant breakthroughs, notably in partnerships among institutions. In terms of functional proximity among businesses, developments are more recent and still quite fragile. The Fortress incubator is a good example of an infrastructure that allows collaboration between businesses in the rayon sector. For the regional innovation system to mature, it is important that similar initiatives take place in the production of cabinets, wood flooring or molding, which is what most of the SMEs in the Outaouais region produce. Efforts by the institutions in the regional system are going in the right direction, but progress is difficult, especially in a context where businesses are faced with major forestry and financial crises.

Our analysis shows that functional proximity is one of the major roadblocks to the construction of a sustained dynamic of innovation. Considerable effort to foster functional proximity between enterprises is required if we want to ensure the development of innovative wood processing in the Outaouais region.

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