Clusters in the Ontario and Central Zone economies

In its analysis of the Ontario economy, the Institute for Competitiveness and Prosperity reports that traded clusters constitute 41% of total provincial employment, with local industries responsible for 59% of all jobs in the province. This ratio is close to that for Canada as a whole (40% traded, 60% local), although the corresponding figures for the U.S. economy are 33% traded versus 67% local employment.5

These ratios suggest one further important point: although employment in locally oriented industries exceeds employment in traded sectors, most of the local demand for the goods and services produced by local industries originates ultimately with the income generated by a region's traded industries. The money that households spend on basic consumption goods and services, such as housing, clothing, food, transportation, and consumer services, flows from the traded sectors. This means that the long-run competitive success of any region is tied to its traded activities. For this reason, analysts of regional economic growth have tended to focus most of their attention on traded industries and clusters.

The Institute study analyzed 41 traded clusters, based on a method for identifying traded clusters in the United States.6 The study identified the top fifteen traded clusters in the Ontario economy (in descending order, based on employment share in 2000) as:

  • business services;
  • financial services;
  • automotive;
  • education and knowledge creation;
  • hospitality and tourism;
  • metal manufacturing;
  • transportation and logistics;
  • distribution services;
  • heavy construction services;
  • publishing and printing;
  • processed food;
  • entertainment;
  • building fixtures, equipment and services;
  • production technology;
  • jewelry and precious metals.7

Had this list been ordered on the basis of the value of output rather than numbers of jobs, several traded clusters that appear far down the list - such as information technology (16th), plastics (19th), communications equipment (21st), and pharmaceuticals and biotechnology (30th) - would have been more prominent. Moreover, an analysis of individual CMAs in Ontario shows that the rank of traded clusters varies, in line with their differing importance in each regional economy (see Table 1).

Table 1: Top Five Traded Clusters for Central Ontario CMAs

CMA and Traded Clusters



1 Business services


2 Financial services


3 Distribution services


4 Transportation and logistics


5 Publishing and printing



1 Automotive


2 Business services


3 Financial services


4 Metal manufacturing


5 Transportation and logistics



1 Metal manufacturing


2 Education and knowledge creation


3 Business services


4 Financial services


5 Processed food


St. Catharines-Niagara

1 Hospitality and tourism


2 Automotive


3 Metal manufacturing


4 Education and knowledge creation


5 Business services



1 Automotive


2 Education and knowledge creation


3 Business services


4 Metal manufacturing


5 Processed food


Source: Institute for Competitiveness & Prosperity, A View of Ontario: Ontario's Clusters of Innovation, and presentation by James Milway, Executive Director, to the Central Zone Smart Growth Strategy Sub-Panel, July 8, 2002.

Another recent study of the GTA economy that employed a cluster framework produced a longer and somewhat different list of the leading clusters in the Toronto region (including the Oshawa CMA).8 In this case, the selection of clusters was based on three criteria: (i) the "lead" industry in the cluster must produce goods and/or services that are consumed outside the region, (ii) the region must have a clear, historically based competitive advantage in the industry (indicated by a disproportionately high share of employment in the cluster industries), and (iii) the cluster must be a major employer in the region. The resulting list (in rough order of employment size) is as follows:

  • Business and professional services: advertising, personnel services, legal, accounting, professional services and consulting;
  • Financial services: banks, brokerages, investment banking, insurance;
  • Tourism: amusement and recreation, accommodation and hospitality;
  • Information technology and telecommunications: telecom equipment, computer hardware and peripherals, packaged software and software services, semiconductors and electronic components, telecom services;
  • Automotive: vehicle assembly and parts manufacturing;
  • Food and beverages: processed and packaged food/beverage production;
  • Media: film and television production and distribution, printing and publishing, new media, theatre;
  • Biomedical and biotechnology: including pharmaceuticals, medical devices;
  • Apparel and textiles: including designers, contractors;
  • Aerospace: aircraft assembly and parts manufacturing.

These lists suggest two important points. First, traded clusters, for both Ontario and the leading urban regions of the Central Zone, include both manufacturing and service industries.

Second, within each of these two broad categories, there is considerable variation in terms of knowledge intensity. Within manufacturing, for example, are high-tech clusters such as biomedical/biotechnology and information technology, as well as medium- to low-tech activities such as automotive, media, metal manufacturing, and food/beverage processing. Within services, some clusters are based on highly sophisticated scientific, professional, and technical expertise (such as business and professional and financial services, education and knowledge creation) while in others, such as tourism and hospitality, knowledge intensity is considerably lower. In between are clusters, such as distribution services or transportation and logistics, which make growing use of sophisticated hardware and software systems.

5. Ibid, p. 26.
6. Since the objective of the Institute's study was to compare Ontario's competitiveness to that of its most significant competitor states south of the border, there was a strong rationale to adopt a consistent set of traded clusters to facilitate a Canada-U.S. comparison. The initial "cluster mapping" for American states was performed by Michael Porter's Institute for Strategy and Competitiveness at the Harvard Business School.
7. Institute for Competitiveness and Prosperity, A View of Ontario: Ontario's Clusters of Innovation, p. 27.
8. ICF Consulting et al., Toronto Competes: An Assessment of Toronto's Global Competitiveness, 2000.